High crude oil prices, restricted subsidy burden and a weak rupee have helped ONGC put up a strong show in the September 2011 quarter. Despite output remaining nearly the same, the company's sales grew 24 per cent (over the same quarter in the previous year) and profits grew much stronger — at above 60 per cent.
The subsidy burden on upstream companies during the quarter was restricted to one-third. This, along with the sharp 46 per cent rise in average crude oil price to $112 a barrel, saw ONGC's net realisation improve to $83.70 a barrel from $62.80 a year ago. Besides, the rupee's considerable fall against the dollar (down almost 9 per cent from September 2010) helped ONGC improve rupee realisation for its output.
Markets lukewarm
Aiding profit growth in the quarter was also a 25 per cent fall in depreciation cost. On a sequential quarter basis too, the company has posted impressive results and more than doubled its profits. The price hikes in diesel, LPG and kerosene, and duty cuts in late June helped the company to more than halve its subsidy burden from the June quarter.
Markets though seem lukewarm to ONGC's performance. Though the stock opened strongly in Tuesday's trade, it gave up most gains by close of the session.
Apprehensions of a repeat of FY-11 when the subsidy burden on upstream companies was increased in the last quarter from 33.3 per cent to 38.7 per cent, may have contributed to the muted response.
Also, reports that ONGC's long-delayed further public offer (FPO) might hit the market by the end of this calendar year, seems to have dampened interest in the stock. Public sector stocks have usually been beaten down below their FPOs.