Numaligarh Refinery Expansion And Gas Pipelines Will Shape Future Energy

Key Takeaways

• Expansion in upstream production, refinery, and gas infrastructure is set to boost revenues, margins, and resolve capacity bottlenecks.
  
• Diversification into renewables and policy support enhances earnings resilience and long-term operational stability.
  
• Persistent low oil prices, operational challenges, and geopolitical risks threaten profitability, restrict growth opportunities, and could weaken Oil India's long-term earnings and cash flow stability.

Catalysts

Engages in the exploration, development, and production of crude oil and natural gas in India.

• Oil India is expanding upstream production through new well drilling and field development, targeting significant increases in crude oil and natural gas output over the next two years, which is expected to drive higher top-line revenue growth.
  
• Substantial capital expenditure and progress on Numaligarh Refinery's expansion and new petrochemical units are set to support higher capacity utilization and product throughput from late FY26, benefitting group revenues and margins as new capacity ramps up.
  
• Accelerating investment and execution of gas pipeline and evacuation infrastructure (including IGGL and DNPL lines) will unlock stranded gas reserves and enable increased gas sales into new and existing markets, directly supporting multi-year growth in gas revenues and reducing volume bottlenecks.
  
• Diversification into renewables and compressed biogas (CBG), with significant projects and a net zero target by 2040 (including 1.9 GW of solar to be commissioned by March 2026 and 25 CBG plants in progress), is set to broaden the earnings base and support margin resilience against long-term fossil fuel regulatory and demand risks.
  
• Ongoing government focus on national energy security and supportive policies for domestic energy players (such as preferential offtake, guaranteed local consumption, and regulatory backing for pipeline connectivity) provides operational stability and visibility into cash flows, supporting potential rerating of the company's earnings multiple.

Oil India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Oil India's revenue will decrease by 12.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 20.3% today to 36.8% in 3 years time.
• Analysts expect earnings to reach ₹78.7 billion (and earnings per share of ₹47.7) by about August 2028, up from ₹65.6 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₹102.0 billion in earnings, and the most bearish expecting ₹69.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.4x on those 2028 earnings, up from 10.1x today. This future PE is lower than the current PE for the IN Oil and Gas industry at 17.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.67%, as per the Simply Wall St company report.

Oil India Future Earnings Per Share Growth

Risks

• Persistently low crude oil prices, as seen by a 22% YoY decline in realizations and management's outlook of $65–$70/bbl going forward, could structurally depress Oil India's revenues, compress margins, and reduce its earnings power over time.
  
• Ongoing provision expenses and write-downs from underperforming or abandoned international E&P investments (e.g., Bangladesh and Gabon blocks) signal elevated exploration risk and could further increase costs, hurting net margins and long-term return on capital.
  
• Difficulties in gas evacuation and monetization, including regulatory bottlenecks, lack of pipeline/common carrier approvals, and delays in city gas (CGD) development in the Northeast, may prevent Oil India from capturing higher premium gas prices, limiting future revenue and profit growth from its large gas reserves.
  
• Slow pace of renewable/alternative energy ramp-up and operational dependency on aging and mature oil & gas fields-where organic production growth is modest and incremental output comes at higher cost-could weigh on long-term production growth and net margins as global energy transition accelerates.
  
• Heightened exposure to geopolitical and payment risk from overseas assets (especially in Russia), alongside increased ESG and regulatory scrutiny, could restrict access to capital, impact dividend flows, and constrain investment in future growth, adversely impacting future earnings and cash flows.

Valuation

• The analysts have a consensus price target of ₹508.389 for Oil India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹755.0, and the most bearish reporting a price target of just ₹305.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹214.3 billion, earnings will come to ₹78.7 billion, and it would be trading on a PE ratio of 15.4x, assuming you use a discount rate of 13.7%.
• Given the current share price of ₹408.0, the analyst price target of ₹508.39 is 19.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.