Why ONGC Share Price is Falling

In November 2022, we wrote to you about why ONGC's share price was falling. Soon after that situation took a favourable turn for ONGC, as its share price embarked an upward trajectory. In the last six months, ONGC's share price recorded a growth of 13.7%.

The rise in share price was driven by a decrease in windfall taxes and improved quarterly results for December 2022 quarter. Recently, on 12 May 2023, ONGC's share price hit a 52-week high price of Rs 168.9.

However, the upward trajectory came to an end today as ONGC's share price fell by 2.7% today.

So what changed for ONGC?

Read on to find out the factors behind the ONGC downtrend today.

#1 Poor quarterly results

On 26 May 2023, ONGC reported disappointing quarterly results which pushed ONGC's share price down the hill.

For the March 2023 quarter ONGC reported revenue from operations of Rs 1,640.7 billion (bn), up 5% YoY compared to Rs 1,559.5 bn reported in the year-ago period.

The net profit for the quarter stood at Rs 57 bn, marking a 53% YoY decrease from Rs 120.6 bn in the corresponding quarter last year. This decline was due to a provision made by the company after reviewing the entire issue of disputed service tax and goods and services tax (GST) on royalty.

During the March 2023 quarter, the company provided Rs. 121.1 bn for the above-mentioned purpose as a prudent and conservative practice. The provision was created for the period from 1 April 2016 to 31 March 2023 inclusive of interest.

The above adjustment adversely impacted the profitability for Q4.

Also, on the operating front, earnings before interest, taxes, depreciation, and amortisation (EBITDA) declined 14.6% YoY to Rs 210 bn. This decline was driven by the higher cost of raw materials.

Despite the challenging financial performance, the company's board announced a final dividend of Rs 0.5 per equity share for the financial year 2022-23.

ONGC has paid the highest-ever total dividend for the financial year 2023 at 225% amounting to Rs 11.25 per share.

#2 Consistent FII selling

Another reason behind the decline is continuous selling by foreign institutional investors (FIIs).

FIIs have continuously sold stakes from ONGC in the last three quarters. FII holding stood at 9.9% in the June 2022 quarter. It now stands at 7.9%.

Look at the table below.

FII's Holding in ONGC (June 2022 - March 2023)

Quarter ending	Jun-22	Sep-22	Dec-22	Mar-23
Total FII holding (%)	9.97	8.96	8.43	7.97

Data Source: Ace Equity

Bumper oil field discoveries

ONGC made quite a bit of discovery in 2022-23.

ONGC declared a total of 8 discoveries (5 on land and 3 offshore) during the financial year 2022-23 in its operated acreages. Out of these, 3 (2 on land and 1 offshore) are prospects and 5 (3 on land and 2 offshore) are pools.

Out of eight discoveries notified during the year, three discoveries viz. Mandapeta-60, Kesanapalli West Deep-7 and Hatipoti-1 have been monetized by ONGC during the year itself.

The discoveries for Q1 of the financial year 2023-24 are also decent. ONGC has notified two new prospect discoveries so far (both in offshore OALP blocks).

How ONGC shares performed recently

ONGC's share price fell by 4.2% in the past five days. In the last month, it was down by 2.9%.

However, in 2023 so far ONGC is up 5.8%. In the last one year, it is trading up by 10.5%

ONGC touched its 52-week high of Rs 168.9 on 12 May 2023. Its 52-week low was Rs 119.8 touched today on 06 July 2022.

Currently, the company is trading at a PE (Price to Earning) multiple of 5.3 times. It is trading lower than its industry PE of 14.7 times, and it may be currently undervalued.

About ONGC

ONGC is the biggest publicly traded oil and gas production and exploration company in India. The company produces 70% of India's crude oil. This is almost equivalent to 57% of the overall demand in the country.

It also produces 84% of India's natural gas.

ONGC is under the ownership of the Ministry of Petroleum and Natural Gas and the Government of India.

In 26 sedimentary basins in India, it is engaged in hydrocarbon exploration and exploitation. It owns and operates over 11,000 km of pipelines in the country.

To know more about ONGC, check out ONGC's financial factsheet and its latest quarterly results.

You can also compare ONGC with its peers:

ONGC vs Oil India

ONGC vs Hindustan Oil Exploration

ONGC vs Asian Energy Services

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