Despite record profit, ONGC forward valuation lowest in 14 years

New Delhi: Even as Oil and Natural Gas Corp (ONGC) is set to post a record profit, 12-month forward valuation of the largest oil explorer in the country for this fiscal based on price-to-book, price-to-earnings and enterprise value-to-Ebitda are at its lowest in around 14 years. However, it is set to report a net profit of over Rs 27,000 crore, the highest since its listing. Investors are concerned that populist measures prior to the General Elections are likely to compel ONGC to take up a part of the subsidy burden. Despite crude oil prices surging over in 2018, the government had kept petroleum subsidy at Rs 24,833 crore for this financial year. The Centre has earned approximately Rs 32,400 crore in four tranches — two each via Bharat 22 ETF and CPSE ETF.

Govt increased LPG, kerosene prices

ONGC does not believe the government will ask them to share the subsidy burden. The government has increased liquefied petroleum gas (LPG) and kerosene prices since the start of FY19. To meet its fiscal deficit target in the financial year 2019, the government might roll over the subsidy burden to the next fiscal. The budgeted petroleum subsidy for the financial year 2020 is Rs 37,478 crore as crude prices are likely to stay stable. ONGC's gas production has grown in the last three financial years at least and the company expects a 4 percent growth for the next fiscal over the last year. Crude oil production, having plunged in the past few years, will possibly grow in the next fiscal, management estimates said.