ONGC’s largest shareholder, Central government, has been looking at state-run companies including India’s biggest...
energy explorer to bridge its fiscal deficit. That’s left the company with depleting cash at a time when it has been ordered to boost investment to help cut the nation’s crude imports. ONGC paid Rs 426 billion last fiscal year as dividend to the government and to buy its stake in the refiner.
“ONGC is heavily leveraged now,” Aloke Kumar Banerjee, the PSU's former finance head, said in an interview. “It’s important for exploration companies to have sizable cash balance as buffer. It’s a high-risk business.”
ONGC's shares have fallen 17 per cent from a January high and ended last week at Rs 173.20.
ONGC aims to spend Rs 860 billion on 31 big projects to boost oil and gas production, according to its website. The company has started work on its largest-ever exploration project that will require investments of more than $5 billion over about four years.
Earlier this year, ONGC sold debt for the first time to pay for the Rs 369.2 billion acquisition of the government’s holding in refiner Hindustan Petroleum Corp (HPCL). Its capital expenditure swelled to a record Rs 729 billion in the year ended March as it also invested Rs 283.5 billion on exploration and production, and Rs 74.8 billion to buy a stake in a block operated by Gujarat State Petroleum Corp (GSPC), according to the company’s website.
ONGC has about Rs 250 billion of one-year loans maturing in January, according to company officials, who asked not to be identified as they are not allowed to speak to the media. It used up cash it had for capital expenditure and the acquisitions and needs about Rs 21 billion more for the final dividend payout for the year ended March, the officials said.
According to ONGC officials ONGC has no plans to raise more debt to fund its capital expenditure of Rs 320 billion in the current fiscal that started April 1. Cash flows through the year will suffice.
In the past, ONGC has been asked to share fuel subsidies by selling oil to refiners at a discount, a burden that was taken entirely off its back only in the year ended March 2017.
Despite these pressures ONGC ’s credit rating remains good, primarily because it is majority owned by the government, which means a sovereign assurance and easier access to the domestic banking system.