Oil India, ONGC tank up to 33% in 1 week on windfall tax, fall in Brent oil

Oil India was down 8 per cent at Rs 176, while ONGC shed 6 per cent in traes on Wednesday.

oil prices
SI Reporter Mumbai
3 min read Last Updated : Jul 06 2022 | 11:15 AM IST
Shares of state-owned oil exploration & production companies Oil India and Oil Natural Gas Corporation (ONGC) continued to reel under selling pressure, and fell up to 8 per cent on the BSE in Wednesday’s intra-day trade. The fresh fall was on account of sharp decline in Brent crude prices on Tuesday, as concerns of possible global recession trgigered fears of curtailed fuel demand,  outweighing supply disruption fears.

Oil India was down 8 per cent at Rs 175.85 on the BSE in intra-day trade today. In the past one week, Oil India has tanked 33 per cent after the government on July 1 imposed a special additional excise duty of Rs 23,250 per tonne on crude oil production. With the recent one week decline, the stock has now corrected 43 per cent from its 52-week high of Rs 306 touched on June 9, 2022.

ONGC, which was down 6 per cent at Rs 119.80 in intra-day today, has slipped 21 per cent in the last one week. The stock plunged 38 per cent from its 52-week high of Rs 194.60 touched on March 8, 2022. In comparison, the S&P BSE Sensex was up nearly 1 per cent in past one week.

However, oil prices rose as much as nearly 3 per cent on Wednesday before paring some gains as investors piled back into the market after a heavy rout in the previous session, with supply concerns returning to the fore even as worries about a global recession linger, the Reuters reported. CLICK HERE FOR REPORT

On July 1, the government announced export taxes and imposed restrictions on exports of petrol, diesel and aviation turbine fuel (ATF) in order to secure supplies of these products domestically at a time when exports are becoming highly remunerative. Similarly, given the sharp surge in oil prices, the government also levied a special additional excise duty (SAED) on production of crude oil.

Analysts at Motilal Oswal Financial Services have cut the realizations of ONGC and Oil India to USD60/bbl each for 2Q-3QFY23 and leave the same unchanged for 4QFY23 onwards. “We also assume that the royalty and cess would be calculated on the realized price and the benchmark. At USD100/bbl, these two would be equivalent to the additional reduction in realization by USD12/bbl. As a result, we cut our EPS of ONGC/Oil India by 29 per cent/25 per cent for FY23E, respectively,” the brokerage firm said.

Investors had remained wary of some form of windfall taxation on both ONGC and Oil India. As a result of the same, we had been valuing the stocks at 3.5x and 5.9x standalone P/E, respectively. Now that the clarity has emerged on that front, we cut the realizations for the companies keeping our multiples unchanged at 3.5x/5.9x, for ONGC/Oil India, respectively, the brokerage firm said.


One subscription. Two world-class reads.

Already subscribed? Log in

Subscribe to read the full story →
Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

Topics :Buzzing stocksONGCOIL IndiaMarket trendsCrude Oil PricePetroleum sectorpetrol

Next Story