Chennai Petroleum Corporation Ltd Management Discussions

Global Economic performance and Outlook

The global macroeconomic environment during FY 2025-

26 was characterized by moderating growth amidst heightened geopolitical tensions, evolving trade dynamics, and persistent economic uncertainties. Global GDP growth is projected at 3.1% by IMF in 2026, compared to 3.4% in 2025, reflecting the impact of geopolitical conflicts, trade disruptions, and policy uncertainties across major economies. Nevertheless, global economic activity remained resilient despite challenges arising from the Middle East conflict, the ongoing Russia–Ukraine war, supply chain realignments, and volatile commodity markets. While inflationary pressures moderated across several regions, they remained relatively sticky due to evolving trade dynamics and an uptick in key commodity prices. Growth in advanced economies continued to be constrained by relatively tight financial conditions, weak manufacturing activity, and subdued investment sentiment, while emerging economies remained the principal drivers of global growth, led by India and China. Central banks across major economies continued their policy easing cycle during the year; however, a more cautious stance emerged towards the latter part of CY 2025 as inflation risks persisted and the scope for further monetary easing narrowed.

Trends in the Global Energy Sector

Trade uncertainties and ongoing regional conflicts continued to weigh on global trade flows, investment decisions, and market sentiment. Against this backdrop, global energy markets remained highly sensitive to geopolitical developments and supply-side uncertainties. Global energy demand growth moderated to approximately 1.3% in 2025 from 2.0% in 2024, reflecting slower economic momentum and improving energy efficiency. Crude oil prices witnessed significant volatility during the year, driven by changing demand expectations, OPEC+ production decisions, and concerns over potential supply disruptions in key producing regions. Towards the end of FY 2025-26, escalating tensions in the Middle East resulted in significant disruptions to energy markets, pushing Brent crude prices from around US$70 per barrel towards US$100 per barrel and reintroducing concerns over inflationary pressures on a slowing global economy.

Chart 1: Global Growth Outlook Projections (Real Gross Domestic Product (GDP), Y-o-Y Change in %)

Data for Graph: Global energy demand Total energy supply (EJ)

Growth rate (%)

Global Oil Market Outlook

Global oil demand continued to grow during FY 2025-26, albeit at a slower pace than in the immediate post-pandemic years. According to the International Energy Agency (IEA), global oil demand averaged about

103.8 million barrels per day (MBPD) in 2025, up by approximately 0.8 MBPD over 2024. Demand growth was driven primarily by non-OECD economies, particularly India, supported by strong economic activity, rising mobility, aviation growth, and industrial expansion. In contrast, oil demand growth in China moderated amid slower economic growth and increasing electrification of transport.

The IEA projects global oil demand to reach around

104.5 MBPD in 2026, with non-OECD Asia remaining the principal source of incremental demand. Petrochemical feedstocks are expected to account for an increasing share of future demand growth.

On the supply side, robust production growth from non-OPEC+ countries, including the United States, Brazil, Guyana, Canada, and Norway, helped maintain adequate market supplies despite OPEC+ production management measures. Brent crude prices averaged around US$70–75 per barrel during much of 2025 but experienced significant volatility towards the end of FY 2025-26 due to escalating geopolitical tensions in the Middle East, with prices approaching US$90–100 per barrel during periods of heightened uncertainty.

The outlook for FY 2026-27 remains uncertain. While the IEA expects oil markets to remain broadly well supplied, supported by continued non-OPEC production growth and moderating demand growth, geopolitical tensions, OPEC+ policy decisions, trade developments, and supply chain disruptions are expected to remain key drivers of crude oil prices. The refining sector is likely to face continued volatility in crude prices, product margins, freight rates, and trade flows, necessitating agile crude sourcing and operational strategies.

Global oil demand growth by sector, 2021-2025

Global Emissions and Energy Transition Outlook

Global energy-related carbon dioxide (CO₂) emissions growth moderated to around 0.4% in 2025, reflecting the increasing contribution of cleaner energy sources and energy efficiency improvements across major economies. The deployment of clean energy technologies since 2019

is estimated to have avoided nearly 3 billion tonnes of CO₂ emissions annually, equivalent to around 8% of global emissions with governments and industries increasingly focusing on decarbonisation strategies such as carbon reduction targets, clean mobility adoption, industrial energy efficiency, battery storage systems and investments in sustainable infrastructure to mitigate climate change and achieve long-term net-zero ambitions.

Indias Role in Global Energy Transition and Climate Leadership

India continues to play a significant and increasingly influential role in the global energy transition while maintaining one of the lowest per-capita emissions among major economies. India has committed to achieving net-zero emissions by 2070 and is rapidly expanding its renewable energy and clean fuel ecosystem to support sustainable growth.

Notwithstanding the initiatives towards energy transition, the imperatives of energy security have necessitated the continued consumption of conventional energy in India. The country is expected to become the largest contributor to global oil demand growth between 2023 and 2030, accounting for more than one-third of global oil demand growth during the period, while simultaneously accelerating investments in clean energy technologies. Indias strategic approach towards balancing climate commitments with energy security, industrial growth and developmental priorities is through large-scale renewable energy deployment and low-carbon transition initiatives. India has emerged as a global leader in climate action through initiatives such as the International Solar Alliance, expansion of solar and wind capacity, ethanol blending programmes and promotion of sustainable mobility solutions, positioning itself as a key driver of inclusive and development-oriented energy transition among emerging economies.

Indias Growth Momentum: Powering Economic Expansion and Energy Transformation

Despite global geopolitical uncertainties, volatile trade conditions and financial market disruptions, the Indian economy has maintained growth momentum aided by stable macroeconomic fundamentals, fiscal consolidation efforts and improving industrial and logistics infrastructure. The Economic Survey 2025-26 observed that Indias medium-term growth potential has strengthened due to structural reforms, public capital expenditure and improvements in productive capacity. The petroleum and energy sector also reflected the strength of economic activity, with growth in transportation and aviation fuel demand indicating rising mobility, industrial expansion and increasing consumption trends across sectors.

Chart 1: Trend in Real Indian GDP Growth Rate

Source: MOSPI, RBI;

Note: FRE- First Revised Estimates, SAE- Second Advanced Estimates; The trend for FY23-FY26 is based on new series base year 2022-23.

GDP Growth Outlook

The Reserve Bank of India (RBI) projects real GDP growth at 6.9% for 2026–27, supported by sustained momentum in the services sector, strong reservoir levels aiding the agricultural sector, and private consumption expected to remain uplifted by discretionary spending. The Indian government is also working towards minimizing supply chain disruptions in critical sectors to ensure limited interruptions.

Elevated energy and other commodity prices, together with disruptions in the Strait of Hormuz, are expected to weigh on growth during the year. To mitigate these risks, the government is undertaking measures to minimize the impact of supply chain disruptions on critical sectors and maintain continuity with limited interruptions.

Table 2: RBIs GDP Growth Outlook (Y-o-Y %)

Indias long-term energy outlook remains structurally strong driven by rapid urbanisation, industrialisation, expanding middle-class consumption and increasing mobility demand. It is observed that India is expected to emerge as the largest contributor to global oil demand growth over the remainder of the decade, reflecting the countrys growing role in the global energy landscape.

Indias Crude Basket

India remains one of the worlds largest crude oil importers, with imported crude accounting for over 85% of domestic crude oil requirements. Consequently, the composition of Indias crude import basket plays a critical role in determining refinery economics and energy security.

During FY 2025-26, India continued to diversify its crude sourcing strategy by procuring crude oil from a broad range of geographies, including the Middle East, Russia, Africa, North America and Latin America. This diversified procurement approach enabled refiners to optimize feedstock costs, reduce supply concentration risks and enhance supply chain resilience amidst changing geopolitical conditions.

Russian crude continued to remain an important component of Indias import basket owing to its competitive pricing and availability, while traditional suppliers such as Iraq, Saudi Arabia and the United Arab Emirates maintained a significant share of total imports. The diversification of crude sources has enabled Indian refiners to optimise crude selection based on quality, pricing, logistics and refinery configuration requirements.

Source: RBI; Note: P-Projected

The trend for FY23-FY26 is based on new series base year 2022-23.

Average Indian Crude basket $/bbl

Note: The composition of Indian Basket of Crude represents Average of Oman & Dubai for sour grades and Brent (Dated) for sweet grade in the ratio of crude processed during previous and the current financial year is at 78.71:21.29 (Till February 2026) & 38.98:61.02 for March 2026 (Previous year : 78.50:21.50) respectively.

Simultaneously, India is pursuing a balanced energy transition strategy focused on energy security, affordability and sustainability through refinery expansions, diversification of crude sourcing, cleaner fuels, biofuels and renewable energy integration. The transition towards cleaner energy systems, coupled with increasing emphasis on energy efficiency and low-carbon technologies, is expected to play a critical role

in shaping Indias future energy ecosystem and supporting its net-zero ambitions.

While global crude oil price volatility and geopolitical tensions continue to pose external risks, Indias diversified energy strategy, investments in strategic reserves and focus on decarbonisation position the country favourably for long-term energy resilience.

CPCLs Performance in FY 2025-26

Crude Sourcing and Feedstock Flexibility

For CPCL, the ability to process a diverse range of crude grades enhances operational flexibility and supports margin optimization. During FY 2025-26, the Company strengthened its crude sourcing strategy through greater feedstock diversification and successfully handled nine Very Large Crude Carrier (VLCC) cargoes, improving logistics efficiency and procurement economics.

As part of its crude slate optimization efforts, CPCL successfully trial-processed and commercialized six new crude grades—WTI Midland (USA), Qatar Marine (Qatar), Nile Blend (Sudan), Sarir/Messla Blend (Libya), Sankofa (Ghana), and Rabi Blend (Gabon). This expanded crude basket has enhanced supply security, reduced dependence on specific geographies, and provided greater opportunities to optimize crude costs and refining margins.

The Companys continued focus on sourcing diversification and crude flexibility has strengthened its ability to respond to evolving market conditions, mitigate supply-side risks, and maximize value realization from refining operations.

Product Portfolio

Chennai Petroleum Corporation Limited (CPCL) has a diversified product portfolio comprising transportation fuels, petrochemicals, industrial products, and specialty products, catering to both domestic and export markets. The Company markets approximately 92% of its production through IndianOils extensive marketing network, while the remaining 8% is directly marketed by CPCL.

Best ever Physical Performance across Production and Energy Parameters

CPCL achieved the best ever Crude Throughput of

11.71 MMTPA in FY 2025-26, against the nameplate capacity of 10.5 MMTPA. During this period, the company also achieved record distillate yield of 79.1%. On the energy front, CPCL posted significant improvement in Fuel & Loss as well as Specific Energy Consumption.

The outstanding physical performance has had a positive impact on the companys bottom line.

Financial Performance

The financial performance of the Company during FY 2025-26 reflected a significant improvement over the previous year, supported by enhanced operational performance, improved refining margins and prudent financial management.

The Standalone Financial Performance of the Company is summarized below:

? in Crore

Particulars	2025-26	2024-25	Variation positive/(Negative)
Revenue from Operations	78611	71050	7561
EBITDA	4852	1060	3792
Profit Before Tax	4122	208	3914
Profit After Tax	3062	174	2888
Cash Flow from Operating Activities	3913	1344	2569
Borrowings	1951	3100	(1149)

Standalone Financial Performance

Product crack spreads improved materially in FY 2025–26, supported by tighter global balances, supply disruptions and strong transport fuel demand. MS and HSD cracks averaged ~USD 10.4/bbl and ~USD 21.0/bbl, respectively (vs. USD 6.8/bbl and USD 10.6/bbl in FY 2024–25), with elevated diesel cracks driving refining margins.

Reflecting this environment, the Companys GRM rose to USD 9.28/bbl (FY 2024–25: USD 4.22/bbl), aided by stronger cracks, optimized crude sourcing and improved operational efficiency.

Overall, FY 2025–26 marked a strong turnaround, with improved profitability, robust cash flows and lower leverage.

CPCL GRM Comparison vs Benchmark

Consolidated Financial Performance

The Company has strategic interests in joint ventures/ associates that complement and strengthen its business portfolio. The 2 joint ventures includes Indian Additives Limited and National Aromatics and Petrochemical Corporation Limited (non-operational) and one associate Cauvery Basin Refinery and Petrochemicals Limited (Units under construction), which are accounted for using the equity method.

The Net Profit for group for current year is ?3,103 Crore, up from ?214 Crore in previous year due to same factors which contributed to increased profitability on standalone basis.

Detailed financial indicators and ratios for the last ten years are provided in the "10 Year Profile" section forming part of the Integrated Annual Report and the reasons for variation is provided in Note 43 of Standalone Financial Statements.

Internal Control Systems and their Adequacy

The Company maintains a robust internal control framework comprising well-defined policies, procedures, delegations, and manuals to ensure efficient operations, asset safeguarding, reliable financial reporting, and regulatory compliance. The framework is regularly reviewed to address evolving business needs and risks.

The control environment includes entity-level, process, operational, anti-fraud, and IT controls, aligned with the Companys scale and complexity. An independent Internal Audit function, reporting to the Managing Director, operates under a risk-based plan approved by the Audit Committee, with regular monitoring of audit findings and corrective actions.

Internal financial controls are also reviewed by Statutory Auditors under the Companies Act, 2013. The Audit Committee periodically evaluates control effectiveness, audit outcomes, and financial reporting.

Based on these reviews, Management considers the internal control systems to be adequate and effective, providing reasonable assurance on operational efficiency, asset protection, fraud prevention, and financial reporting accuracy.

Research & Development

R&D remained a key enabler of operational excellence, product diversification, and competitiveness. In FY 2025–26, the DSIR-recognized R&D Centre recorded its highest-ever spend of ?17.84 crore (up 40%), focusing on innovation, process optimization, and sustainable technologies.

The Company strengthened the CPCL-IIT Madras Research Cell with programmes in carbon capture, ATF mercaptan removal technology, membrane development technologies and lube additives. Initiatives were aimed at value maximization, product quality improvement, and sustainability, supported by enhanced analytical capabilities and filing of three patents during the year.

Human Resources and Industrial Relations

The Company regards its employees as a key driver of sustainable growth and focuses on building a high-performance culture centred on engagement, continuous learning, innovation, and adaptability.

It invests in talent development and future-ready capabilities through structured training, leadership programmes, digital learning, and cross-functional exposure, with emphasis on areas such as digital transformation, AI, analytics, sustainability, and energy transition.

Integrated HR practices covering talent management, performance, succession planning, and leadership development ensure a strong talent pipeline and organizational continuity. The Company continues to foster an inclusive, collaborative work environment with a focus on employee well-being, while maintaining cordial industrial relations.

The Company has maintained harmonious and constructive industrial relations, supported by transparent communication and regular engagement with employee representatives. Structured interactions enable discussions on productivity, safety, and employee welfare, fostering a collaborative work culture and strong alignment with organizational goals.

Industrial relations remained stable and cordial throughout the year, reflecting mutual trust and partnership between Management and employees. As on 31 March 2026, the Company had a workforce of 1,403 employees, including 87 women, comprising 739 Executives and 664 Non-Executives.

Outlook for FY 2026-27

For the domestic refining industry, FY 2026-27 presents a mixed outlook. While Indias structural demand growth remains supported by economic expansion, urbanization, and increasing mobility, refining margins may be influenced by:

Volatility in international crude oil and petroleum product prices;

Potential supply disruptions from key crude-producing regions;

Government policy interventions, including Special Additional Excise Duty (SAED) and other fiscal measures;

Fluctuations in petrochemical feedstock prices and demand;

Exchange rate movements and freight cost volatility.

Against this backdrop, CPCL will continue to focus on operational excellence, crude basket diversification, feedstock flexibility, energy efficiency, digital transformation, and disciplined cost management to enhance resilience and sustain profitability. The Companys ability to process a wide range of crude oils, optimize product yields, and respond swiftly to changing market conditions will remain critical in navigating the uncertainties of FY 2026-27 and delivering long-term value to stakeholders.

For India, crude oil import dependence is expected to remain significant, necessitating continued emphasis on supply diversification, strategic reserves, and refinery flexibility.

The Companys ongoing investments in refinery modernization, energy efficiency, digitalization, and sustainability initiatives are expected to strengthen its resilience and support long-term growth in a challenging market environment.

Assessing CPCLs Strategic Landscape

The outlook for FY 2026–27 points to a business environment characterized by demand growth, volatility in crude oil and product prices, supply-side uncertainties, energy transition imperatives and evolving policy developments. In this context, the strategic priorities outlined below demonstrate how CPCL is positioning itself to navigate these external dynamics through operational agility, portfolio optimization, enhanced risk resilience, growth-oriented investments and responsible business practices. Accordingly, these strategic initiatives may be viewed as CPCLs response framework to the opportunities and challenges anticipated during FY 2026–27.

Addressing Sectoral Challenges

CPCL continues to adopt a proactive and multi-pronged approach to address the evolving challenges facing the refining sector. In response to volatile crude oil prices, changing product demand patterns and increasing competitive pressures, the Company focuses on enhancing operational flexibility, improving energy performance and strengthening cost competitiveness. Continuous efforts towards crude basket optimization, yield improvement, digital process monitoring and reliability enhancement enable the Company to maintain resilience in a dynamic market environment.

To address emerging risks associated with energy transition, climate change, water availability, cybersecurity and evolving environmental regulations, CPCL continues to strengthen its risk management framework and invest in technology upgradation, emission reduction initiatives and sustainable refinery operations. The Company remains committed to enhancing operational reliability and maintaining compliance with increasingly stringent regulatory and stakeholder expectations.

Unlocking Future Opportunities

CPCL is strategically positioned to capitalize on Indias strong energy demand outlook and the evolving opportunities across the downstream hydrocarbon value chain. The Company continues to pursue value maximization through improved distillate realization, enhanced energy efficiency and digital transformation initiatives. Strategic investments such as the Group II/III Lube Oil Base Stocks (LOBS) Project are expected to strengthen product diversification and expand the Companys presence in high-value specialty segments.

The Companys entry into the retail marketing segment marks a significant milestone in enhancing value chain integration and establishing a direct interface with customers. In addition, continued focus on R&D, process innovation, specialty products, sustainability initiatives and low-carbon technologies provides avenues for long-term growth and strengthens the Companys preparedness for the evolving energy landscape.

Sustaining Competitive Strength

CPCL possesses a strong operational foundation supported by consistent refinery performance, high operational availability, improving energy efficiency indicators and a healthy financial position. The Companys integrated refining infrastructure, experienced technical workforce and focus on process optimization have enabled stable and efficient operations even during periods of global market volatility. Organization continues to demonstrate operational resilience through improved crude throughput, enhanced distillate yield and sustained energy conservation initiatives reflected in best achieved figures of physical performance and energy efficiency.

The company benefits from its strategic location, established logistics and marketing linkages, diversified crude processing capability and access to growing domestic fuel markets. CPCLs emphasis on energy management, reliability improvement, safety systems and operational excellence enhances its competitiveness in a challenging refining environment. Further, the Companys continuous focus on cost optimization, digitalization, environmental compliance and sustainable operations strengthens its long-term operational capability.

CPCL is pursuing strategic growth initiatives through the implementation of the Group II/III Lube Oil Base Stocks (LOBS) Project at the Manali Refinery at a cost of ?1,620 Crore with a capacity of 256 TMTPA. The project is expected to enhance product diversification, strengthen value addition, and support the Companys long-term growth by expanding its presence in the high-value lubricant base oil segment.

Indias strong macroeconomic growth outlook, expanding transportation demand, industrialization and rising energy consumption also provide a supportive environment for CPCLs business operations.

Resilience at the Core – Through Robust Risk Management Framework

CPCL has established a robust enterprise-wide risk management framework to identify, assess, monitor and mitigate strategic, operational, financial and compliance risks. Key risks, including refining margin volatility, crude supply disruptions, project execution challenges, environmental compliance requirements, energy transition developments and cybersecurity threats, are subject to continuous review and mitigation through structured governance mechanisms.

The Company closely monitors commodity price movements, policy and regulatory developments, water security and climate-related risks to enhance business resilience and continuity. Safety remains a core focus area, supported by rigorous training, emergency preparedness,

Behaviour-Based Safety (BBS) initiatives and continuous improvement in operational practices. The Company also maintains proactive oversight over cybersecurity, commodity price volatility, policy developments, water security and climate-related risks to enhance organizational preparedness and business continuity. Through proactive risk management and strong governance, CPCL remains well-positioned to address emerging challenges and support sustainable long-term growth.

Foray into Fuel Retailing

CPCLs entry into the retail marketing segment represents a transformational step in the Companys growth journey. The phased development of retail outlets is expected to strengthen downstream integration, enhance market visibility and provide additional avenues for value creation. By establishing a direct interface with consumers, the Company seeks to strengthen its presence in Indias expanding transportation fuel market.

Going forward, CPCL intends to progressively expand its retail footprint while leveraging digital technologies, superior customer experience and operational excellence to build a competitive retail network. The initiative complements the Companys broader objective of diversifying revenue streams and strengthening its downstream business portfolio.

Sustaining Responsible Business Practices

Sustainability remains integral to CPCLs long-term growth strategy. The Company has adopted a roadmap towards achieving Net Zero emissions by 2046 in alignment with the sustainability vision of Indian Oil. To support this transition, CPCL is pursuing a multi-dimensional decarbonization strategy encompassing renewable energy integration, greater utilization of cleaner fuels, energy efficiency improvement and deployment of advanced emission reduction technologies. CPCL continues to reinforce its commitment towards responsible business practices through sustained focus on safety, environment, corporate governance, social responsibility and inclusive growth.

Operational safety and employee welfare remain core priorities, supported by a strong safety culture and robust governance mechanisms.

The Company continues to strengthen its environmental stewardship through green belt development, resource conservation initiatives and gradual adoption of emerging technologies such as green hydrogen and renewable power. These initiatives reflect CPCLs commitment towards balancing growth with environmental responsibility and advancing sustainable refinery operations.

CPCL remains committed to creating long-term socio-economic value through community development initiatives, employee well-being and responsible procurement practices.

Continued emphasis on MSME participation, support to local communities and stakeholder engagement reflects the Companys commitment to inclusive and equitable growth.

CPCL has achieved an impressive ESG score of 60 in the S&P Global Corporate Sustainability Assessment, reflecting its strong commitment towards environmental stewardship, social responsibility and robust governance practices.

These sustained efforts towards operational excellence, corporate governance, safety, sustainability and innovation have enabled the CPCL to receive several recognitions and industry accolades, reaffirming its commitment to responsible growth and continuous improvement.

Cautionary Statement

This Management Discussion and Analysis contains forward-looking statements relating to the companys objectives, expectations, or forecasts, as defined under applicable securities laws and regulations. Actual outcomes may differ materially from those anticipated due to various critical factors. These include fluctuations in global and domestic demand-supply conditions affecting product prices, availability, and cost of inputs, changes in government policies or tax laws, macroeconomic developments, litigation, and industrial relations.