ONGC to raise ₹5000 crore through NCDs

ICRA Ratings has assigned AAA stable rating to Oil and Natural Gas Corporation Ltd's (ONGC's) ₹5000 crore non-convertible debentures (NCDs) due to ONGC's dominant market position in the domestic crude oil and natural gas production business with large proved reserves.

The rating agency has considered the consolidated financials of the ONGC, including ONGC Videsh Limited (OVL), Mangalore Refinery and Petrochemicals Limited (MRPL), Hindustan Petroleum Corporation Limited (HPCL) and some of the special purpose vehicles undertaking forward integration projects, to the extent of any financial commitments made to the stakeholders.

This marks ICRA's outlook revision on ONGC group to stable from negative on account of recovery in crude oil prices from the lows of about $20 per barrel during April end to about $40 per barrel currently along with recovery in crude oil demand with the easing of lockdowns globally.

ONGC accounted for nearly 62% of the country’s crude oil production and nearly 75% of its natural gas production in FY2019.

The company has explored 19 out of these 26 sedimentary basins of the country for their hydrocarbon potential via seismic survey and/or drilling and has established seven producing basins till date including Mumbai offshore, Cambay, Rajasthan, Cauvery, Krishna-Godavari, Assam-Arakan and Upper Assam.

ICRA said that ONGC’s financial position remains strong owing to its robust profitability (operating profitability of 14.4% in FY2020 based on gross revenue), comfortable debt protection metrics with interest coverage of 8.7 times in FY2020).

"The company enjoys significant financial flexibility, given its large liquid investments, ability to raise both debt and equity capital from the capital markets at finer rates and the large value of its investments in IOC and GAIL (market value of the investments estimated at around Rs. 13,373 crore as on July 16, 2020)," said ICRA.