The ONGC full form is Oil and Natural Gas Corporation Limited. It is the largest crude oil and natural gas company in India. It contributes to around 71% of India’s total crude oil production. It is one of the seven maharatnas of Indian CPSE.
History of ONGC
1955 – The department of Oil and Natural Gas was established under the Ministry of Natural Resources to improve the country’s oil and natural gas sector.
1956 – ONGC was restructured as a limited enterprise under the companies act.
1994 – ONGC became a public sector company and was renamed to Oil and Natural Gas Corporation (ONGC).
1997 – ONGC was recognised as a Navratna by the Government of India.
2002-03 ONGC Videsh Ltd. was formed as ONGC’s overseas subsidiary.
2010 – ONGC was conferred with Maharatna of Indian CPSE.
In 2019-20 – ONGC was listed as India’s largest profit-making PSU.
ONGC LOGO
Key Personnel at ONGC
Mr. Subhash Kumar – Chairman & Managing Director
Dr Alka Mittal – Director (HR)
Mr. Rajesh Kumar Srivastava – Director (Exploration)
Great Cash Conversion of Profits: ONGC has a great cash conversion ratio. It converts 77.73% of its operating earnings into operating cash flow. This implies a great working capital cycle and large cash flows for either funding growth or dividends. This will have a positive impact on shareholder returns.
CONS
Low Sustainable RoE: ONGC’s sustainable return on equity is lower than the expected cost of capital. This implies that the underlying business will destruct value over a period of time due to its inability to generate superior returns on capital.
Low Interest Coverage: ONGC has a low interest coverage ratio of 9.74 times which implies that a large portion of operating profits are getting attributed to payment of interest to debtholders. This can leave lower earnings and cash flows for equity shareholders.
Highly Cyclical Industry: ONGC operates in a highly cyclical industry with unpredictable earnings and cash flows. This can result in high stock price volatility and impact shareholders negatively.
Capital Intensive Business: ONGC has a low asset turnover ratio of 1.71. This has a negative impact on ROE. Also, due to low asset turnover ratio, business’s growth will need to be funded by either increasing borrowings or diluting shareholders. Both of these will have a negative impact on shareholders’ value.
Extremely Speculative Stock: ONGC’s stock is extremely speculative in nature and can negatively impact long-term shareholders.
Competitor Analysis of ONGC (As on 9th September 2021)
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