ongc - business standardbsmedia.business-standard.com/_media/bs/data/market... · 2016. 7. 13. ·...

7 November 2015

2QFY16 Results Update | Sector: Oil & Gas

ONGC

Harshad Borawake ([email protected]); +91 22 3982 5432

Rajat Agarwal ([email protected]); +91 22 3982 5558

BSE SENSEX S&P CNX CMP: INR252 TP: INR330 (+31%) Buy 26,265 7, 954

Bloomberg ONGC IN

Equity Shares (m) 8,555.5

M.Cap INR b/USD b 2,155/33

52-Week Range (INR) 459 / 264 1, 6, 12 Rel. Per (%) 4/-1/-32 Avg Val,INRm 1418 Free float (%) 31.1

Financials & Valuation (INR b)

Y/E MAR 2015 2016E 2017E

Sales 1,591 1,415 1,566

EBITDA 517 513 579

PAT 172 199 253

EPS (INR) 20.8 23.0 29.2

EPS Gr. (%) -34.8 15.8 27.2

BV/Sh.(INR) 215 230 249

RoE (%) 10.0 10.3 12.2

RoCE (%) 9.3 8.7 10.3

P/E (x) 12.1 11.0 8.6

P/BV (x) 1.2 1.1 1.0

Estimate change

TP change

Rating change

EBITDA beat led by higher realisations; direct play on crude, valuation undemanding ONGC’s 2QFY16 revenues were marginally ahead of estimates at INR206b (est INR198b; +1% YoY, -9% QoQ) led by higher gross realizations (at USD51.2/bbl vs est of USD50.2/bbl) and marginally higher oil sales. EBITDA stood at INR104b (est INR99b; -20% YoY, -28% QoQ). PAT was boosted by higher other income at INR12.5b (est 9.3). While the current low crude price will weigh heavy on the stock, ONGC’s earnings are now a direct play on oil price. Buy. 2QFY16 net realization at USD48.8/bbl (v/s 41.4 in 2QFY15 and 58.9 in 1QFY16):

2QFY16 gross realization was at USD51.2/bbl and post USD2.4/bbl subsidy net realization stood at USD48.8. 2HFY16 gas price will be USD4.2/mmbtu (net) v/s USD5.1/mmbtu in 1HFY16.

2QFY16 D,D&A remained in-line at INR46.1b (+5.5% YoY, +0.6% QoQ) and increased v/s 2QFY15 due to higher depletion.

Production, sales largely in-line: 2QFY16 Oil sales stood were marginally ahead of estimates at 6.2mmt (+3% YoY and QoQ) and gas sales at 4.3bcm (flat YoY, -3% QoQ). OVL’s 1HFY16 production stood at 4.5mmtoe (+4% YoY). FY16 production, ONGC is targeting standalone production at 22.7mmt and 26.5mmt (incl. JVs) in oil and about 25.1bcm in gas. In the next year standalone oil production is targeted at 23.5mmt.

Subsidy to remain minimal: For FY16, the government has indicated that it will pay for LPG DBTL subsidy of INR18/kg (INR256/cylinder vs current INR127) and pay INR12/ltr in kerosene v/s the current loss of INR13/ltr. Incremental loss to be borne by upstream and we model the same.

Valuation and view: The stock trades at 8.6x FY17E EPS of INR29.2 and has an implied dividend yield of 3-4%. We revise our SOTP-based target price stands at INR330. While the subsidy sharing has become very low, benign oil prices will heavy on the stock. Valuations remain undemanding. Maintain Buy.

Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

http://www.motilaloswal.com/Institutional-Equities�

7 November 2015 2

ONGC

Exhibit 1: ONGC (standalone): Quarterly performance snapshot

1QFY16

1QFY16

INR B 2QFY15 2QFY16 YoY (%) QoQ (%) Comments Gross Realization (as reported)

In USD/bbl trems 102.1 63.8 51.2 -49.8 -19.7 USD gross realization down YoY and QoQ

In INR/bbl terms 6,178.9 4,064.1 3,330.6 -46.1 -18.0 INR gross realization down YoY and QoQ

Oil (pre-subsidy) 276.1 173.7 146.5 -47.0 -15.7

Less: Subsidy -136.4 -11.3 -6.0 -95.6 -47.4 Subsidy sharing reduces significantly YoY / QoQ

A. Oil (net sales) 139.7 162.4 140.5 0.6 -13.5 QoQ and YoY increase led by higher net realization

B. Gas 41.5 50.9 50.9 22.7 0.0 YoY increase led by higher gas price

C. VAP and others 22.4 13.7 14.2 -36.6 3.8

Total Net sales (A + B + C) 203.6 227.0 205.6 1.0 -9.4

RM & purchases 3.6 0.2 4.3 19.2 2,098.7

Staff Cost 4.6 4.8 4.5 -0.6 -4.8

Staturoy levies 54.5 56.6 52.8 -3.2 -6.8

Other Expenditure 32.4 45.4 40.1 23.8 -11.6 Sharp increas in opex on YoY basis led by workover wells and Cluster 7 FPSO start

Total Expenditure 95.1 107.0 101.7 7.0 -4.9

EBITDA 108.5 120.0 103.9 -4.3 -13.4

Interest 0.0 0.0 0.0 -107.1 -100.3

D, D & A 43.7 45.8 46.1 5.5 0.6

Other Income 14.5 9.4 12.5 -13.4 34.0 Large QoQ increase boosted by dividend and interest income

Profit before tax 79.4 83.5 70.4 -11.3 -15.7

Total tax 24.9 28.9 22.0 -11.8 -24.0

Effective tax rate (%) 31.4 34.6 31.2 -0.6 -9.9

Adj. Net Profit 54.4 54.6 48.4 -11.1 -11.3

Source: Company, MOSL

2QFY16 subsidy at INR 5.9b; net realization at USD48.8/bbl ONGC’s subsidy payout stood at INR 5.9b in 2QFY16. The subsidy continued to

be ad-hoc, however recent govt. statement indicate better days from ONGC as subsidy is likely to be nil at the current low oil prices.

Exhibit 2: ONGC - 2QFY16 Net realization at USD48.8/bbl


50 56 55 50 69 47 34 43 58 56 58 51 48 63 65 39 48 83 45 44 47 47 48 51 40 45 46 33 47 41 36 56 59 49

22 22 37 51

57

73

25 4 2 14

19 28 33 16 24 70 73

33

67 77 63 63 62 63 63 64 62 74

62 61 40

0

5 2

72 78 91

100

126 119

59 48

61 71 77 79 81 79

89 109

121 116 111 122

110 110 110 114 103 109 108 107 109 102

76 56 64

51

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Net Realization Subsidy Burden Gross Realization

7 November 2015 3

ONGC

Exhibit 3: 2QFY16 subsidy at INR5.9b; @USD2.4/bbl subsidy (INRb)


Exhibit 4: FY16/FY17 subsidy excludes LPG as now shifted to DBTL


36 38 61

85 98

127

49

9 4

26 35 50 55

30 42

121 120

57

125

142

123

123

124

123

126

138

138

162

132

136

95

0 12 6



7 November 2015 4

ONGC

Exhibit 5: Oil production (incl. JV) up 2.3% YoY and up 1.5% QoQ (mmt)

Exhibit 6: Gas production (incl. JV) down flat YoY and down 2.0% QoQ (bcm)

Exhibit 7: Oil + Gas production down 1.5% YoY and flat QoQ (mmtoe)

Exhibit 8: Oil sales (incl. JV) up 2.5% YoY and up 3.5% QoQ (mmt)


0.5

0.5

0.5

0.5

0.4

0.4

0.5

0.5

0.4

0.4

0.5

0.5

0.

6

0.7

0.

8

0.8

0.8

0.8

0.8

0.8

0.9

0.9

0.9

0.9

0.9

0.9

1.0

0.9

0.9

0.9

1.0

0.9

0.9

0.9

6.4

6.5

6.6

6.5

6.4

6.4

6.5

6.0

6.1

6.3

6.1

6.2

6.1

6.2

6.2

6.0

5.9

6.0

6.0

5.8

5.6

5.6

5.7

5.6

5.6

5.6

5.6

5.5

5.5

5.6

5.7

5.5

5.6

5.7

6.9

7.0

7.1

7.0

6.8

6.9

7.0

6.5

6.6

6.6

6.6

6.7

6.6

6.9

7.0

6.8

6.8

6.8

6.7

6.6

6.5

6.5

6.6

6.5

6.5

6.5

6.5

6.5

6.4

6.4

6.6

6.5

6.5

6.6



JV ONGC Total (incl. JV)

0.6

0.6

0.8

0.8

0.8

0.8

0.8

0.7

0.

6

0.6

0.6

0.7

0.7

0.5

0.6

0.6

0.6

0.6

0.5

0.5

0.5

0.5

0.4

0.4

0.4

0.4

0.4

0.4

0.4

0.3

0.4

0.4

0.3

0.3

5.5

5.7

5.8

5.4

5.6

5.7

5.7

5.5

5.8

5.9

5.9

5.6

5.8

5.8

5.8

5.7

5.6

5.8

5.9

6.0

5.9

5.9

5.9

5.8

5.8

5.8

5.9

5.8

5.7

5.3

5.6

5.4

5.5

5.3

6.1

6.4

6.5

6.1

6.4

6.4

6.5

6.2

6.4

6.5

6.5

6.3

6.4

6.3

6.4

6.3

6.2

6.4

6.4

6.6

6.4

6.4

6.3

6.2

6.2

6.2

6.3

6.2

6.0

5.7

6.0

5.8

5.8

5.7




6.1

6.4

6.5

6.1

6.4

6.4

6.5

6.2

6.4

6.5

6.5

6.3

6.4

6.3

6.4

6.3

6.2

6.4

6.4

6.6

6.4

6.4

6.3

6.2

6.2

6.2

6.3

6.2

6.0

5.7

6.0

5.8

5.8

5.7

6.9

7.0

7.1

7.0

6.8

6.9

7.0

6.5

6.6

6.6

6.6

6.7

6.6

6.9

7.0

6.8

6.8

6.8

6.7

6.6

6.5

6.5

6.6

6.5

6.5

6.5

6.5

6.5

6.4

6.4

6.6

6.5

6.5

6.6

13.0

13.4

13.6

13.1

13.2

13.3

13.4

12.6

12.9

13.1

13.1

12.9

13.0

13.1

13.4

13.1

12.9

13.2

13.1

13.1

13.0

12.9

12.9

12.7

12.7

12.7

12.8

12.6

12.5

12.1

12.6

12.3

12.3

12.3



Gas (bcm) Oil (mmt) Total (mmtoe)

0.5

0.5

0.4

0.5

0.4

0.4

0.4

0.5

0.4

0.4

0.4

0.5

0.4

0.7

0.7

0.8

0.7

0.8

0.7

1.1

1.1

1.2

1.1

1.1

1.1

1.2

1.2

1.2

1.2

1.1

1.2

1.1

1.1

1.0

5.4

5.6

5.6

5.6

5.5

5.3

5.3

5.1

5.0

5.2

5.3

5.2

4.9

5.3

5.1

5.1

4.9

5.0

4.9

4.8

4.8

4.7

4.9

4.8

4.8

4.6

4.7

4.7

4.7

4.9

5.0

4.9

4.9

5.0

5.9

6.1

6.0

6.1

5.9

5.7

5.7

5.6

5.5

5.6

5.7

5.7

5.3

5.9

5.9

5.8

5.7

5.8

5.6

5.9

5.9

5.9

6.0

5.9

5.9

5.8

6.0

5.9

5.9

6.0

6.2

6.0

6.0

6.0




7 November 2015 5

ONGC

Exhibit 9: Gas sales (incl. JV) flat YoY and down 3.1% QoQ (bcm)


Exhibit 10: Oil + Gas Sales up 1.2% YoY and flat QoQ (mmtoe)


Exhibit 11: D,D&A (incl. write-off) lower led by lower well write-offs (INRb)


0.6

0.6

0.7

0.8

0.7

0.8

0.7

0.6

0.6

0.6

0.6

0.

6

0.6

0.4

0.5

0.5

0.5

0.5

0.5

0.5

0.4

0.4

0.4

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

4.5

4.6

4.6

4.1

4.4

4.5

4.5

4.3

4.5

4.6

4.7

4.4

4.5

4.6

4.6

4.5

4.4

4.5

4.5

4.8

4.7

4.7

4.6

4.6

4.6

4.6

4.6

4.6

4.4

4.1

4.2

4.1

4.2

4.1

5.0

5.2

5.3

4.9

5.2

5.2

5.2

4.9

5.1

5.2

5.3

5.0

5.2

5.0

5.1

5.0

4.9

5.1

5.0

5.2

5.1

5.1

5.0

5.0

4.9

4.9

4.9

4.9

4.7

4.3

4.5

4.4

4.4

4.3




5.0

5.2

5.3

4.9

5.2

5.2

5.2

4.9

5.1

5.2

5.3

5.0

5.2

5.0

5.1

5.0

4.9

5.1

5.0

5.2

5.1

5.1

5.0

5.0

4.9

4.9

4.9

4.9

4.7

4.3

4.5

4.4

4.4

4.3

5.9

6.1

6.0

6.1

5.9

5.7

5.7

5.6

5.5

5.6

5.7

5.7

5.3

5.9

5.9

5.8

5.7

5.8

5.6

5.9

5.9

5.9

6.0

5.9

5.9

5.8

6.0

5.9

5.9

6.0

6.2

6.0

6.0

6.0

10.9

11.3

11.3

11.0

11.1

10.9

10.9

10.5

10.6

10.7

10.9

10.7

10.5

11.0

11.0

10.8

10.6

10.9

10.7

11.2

11.0

10.9

11.1

10.8

10.9

10.7

10.9

10.8

10.6

10.4

10.7

10.4

10.4

10.3



Gas (bcm) Oil (mmt) Total (mmtoe)

0

20

40

60

80



Depletion Depreciation Dry Wells Survey Others Average

7 November 2015 6

ONGC

Valuation and view While near term lower oil prices is a key concern, we remain positive on ONGC

due to (1) likely increase in net realization led by lower subsidy, (2) further benefits from kerosene reforms and (3) reasonable valuations. Likely subsidy rationalization will increase earnings predictability and valuation.

Key things to watch are: (1) likely subsidy rationalization and (2) production growth.

Key risks include delays in new project execution, continued ad-hoc subsidy sharing and royalty issue overhang.

The stock trades at 8.6x FY17E EPS of INR29.2 and has an implied dividend yield of 3-4%. We revise our SOTP-based target price stands at INR330. While the subsidy sharing has become very low, benign oil prices will heavy on the stock. Valuations remain undemanding. Maintain Buy.

Exhibit 12: ONGC: Valuation Summary Methodology Fair Value Remarks DCF (WACC: 11.8%) 314 11.8% WACC EV/EBITDA (4.5x) 349 4.5x FY17 Cons. EBITDA P/E (10x) 329 10x FY17E Adj. Cons. EPS Average 330


Exhibit 13: ONGC: Key Assumptions Year End: March 31 (INRm) FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Exchange Rate (INR/USD) 44.3 45.3 40.2 45.8 47.5 45.7 47.9 54.5 60.6 61.1 65.0 67.0 APM Gas Price

(USD/mmbtu) 1.9 2.0 2.3 2.0 1.9 3.9 4.2 4.2 4.2 4.8 4.7 4.2 Brent crude price (USD/bbl) 58.0 64.5 82.3 84.8 69.7 86.5 114.5 110.6 107.8 86.0 54.5 60.0

Production Details (mmtoe) Domestic Oil Prodn (mmt) 26.2 27.9 27.9 27.1 26.5 27.3 27.0 26.1 26.0 25.9 26.5 27.3

Domestic Gas Prodn (bcm) 25.0 24.9 25.1 25.4 25.6 25.3 25.5 25.3 24.9 23.7 23.2 24.3 Domestic Prodn (mmtoe) 51.2 52.8 53.1 52.6 52.1 52.6 52.5 51.5 50.9 49.6 49.7 51.6 OVL Production (mmtoe) 6.3 8.0 8.8 8.8 8.9 9.4 8.8 7.3 8.3 8.5 8.8 9.6 Group Production (mmtoe) 57.5 60.8 61.9 61.3 60.9 62.1 61.2 58.7 59.2 58.2 58.5 61.1 Subsidy Sharing (INRb)

ONGC Subsidy 120 170 220 282 116 249 445 494 564 363 38 58 Oil Price Realization (USD/bbl)

Gross 59.7 66.3 85.5 88.0 71.7 89.4 117.4 110.5 106.7 86.0 55.5 60.0 Upstream Discount 17.3 22.1 32.6 39.6 15.7 35.6 62.4 62.9 65.8 40.9 3.8 5.6 Net 42.3 44.2 52.9 48.5 56.0 53.8 55.0 47.6 41.0 45.1 51.7 54.4

Cons EPS Break-up (INR/sh)

EPS (Standalone) 16.9 18.3 19.5 18.9 19.6 20.4 26.8 24.5 25.5 20.7 22.1 25.7 EPS (OVL) 1.1 1.9 2.8 3.3 2.4 3.0 3.2 4.6 5.2 2.3 0.8 1.0 EPS (MRPL & Others) 0.0 0.5 0.9 0.9 0.6 1.1 0.4 (0.8) (0.0) (2.2) 0.1 2.5

EPS (Consolidated) 18.0 20.8 23.2 23.1 22.7 24.5 30.4 28.3 30.6 20.8 23.0 29.2


7 November 2015 7

ONGC

ONGC: Story in charts

Exhibit 14: Despite ad-hoc subsidy, last 10 yr EPS CAGR at ~10% (INR)


Exhibit 15: Impressive RRR of >1 in last eight years


Exhibit 16: Expect Production increase led by development project


Exhibit 17: Expect Production increase led by IOR / redevelopment projects


Exhibit 18: Expect domestic production uptick in coming years (mmt)


Exhibit 19: Recent acquisitions to lead OVL to next growth phase (mmt)


18.0 20.8

23.2 23.1 22.7 24.5

30.4 28.3

30.6

20.8 23.0

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

15 15 15 16 16 16 16 16 17 15

1.0 1.1 1.4 1.3

1.4

1.7 1.8 1.8 1.8 1.7

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Reserves/ Production (Years) RRR (x) - Actual

27.1 26.5 27.3 27.0 26.1 26.0 25.9 26.5 27.3

25.4 25.6 25.3 25.5 25.3 24.9 23.7 23.2 24.3

52.6 52.1 52.6 52.5 51.5 50.9 49.6 49.7 51.6

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Oil Prodn (mmt) Gas Prodn (bcm) Oil + Gas (mmtoe)

3.9 5.1

6.3

8.0 8.8 8.8 8.9

9.4 8.8

7.2 8.2

9.1 9.5

FY04 FY06 FY08 FY10 FY12 FY14 FY16E

Vietnam

Sakhalin-1

GNOP, Sudan

5A Sudan

Colombia

Venezuela

Imperial

Brazil BC-10

Myanmar

Carabobo

Azerbaijan

7 November 2015 8

ONGC

ONGC: Story in charts

Exhibit 20: Under-recoveries decline significantly, LPG now under DBTL and to be fully shared by the government


Exhibit 21: Leading to increase in net realization (USD/bbl)


Exhibit 22: Sharing formula earlier proposed (as circulated in media reports) Brent price

(A) Subsidy sharing (%) Incremental

crude price Subsidy on

incremental realization

Incremental Subsidy

Cumulative subsidy

(B)

Net realization (A) less (B)

60 0% 60.0 65 85% on incremental realization 5.0 85% 4.3 4.3 60.8 70 85% on incremental realization 5.0 85% 4.3 8.5 61.5 75 85% on incremental realization 5.0 85% 4.3 12.8 62.3 80 85% on incremental realization 5.0 85% 4.3 17.0 63.0 85 85% on incremental realization 5.0 85% 4.3 21.3 63.8 90 85% on incremental realization 5.0 85% 4.3 25.5 64.5 95 85% on incremental realization 5.0 85% 4.3 29.8 65.3

100 85% on incremental realization 5.0 85% 4.3 34.0 66.0 105 90% on incremental realization 5.0 90% 4.5 38.5 66.5 110 90% on incremental realization 5.0 90% 4.5 43.0 67.0

Source: Industry reports, MOSL

Exhibit 23: Value ONGC at INR330/sh

Methodology Fair Value Remarks

DCF 314 11.8% WACC

EV/EBITDA 349 4.5x FY17 Cons. EBITDA

P/E 329 10x FY17E Adj. Cons. EPS

Average 330


Exhibit 24: ONGC 1 Yr Fwd P/E Chart


523 93

348 819 915

628

109 0

282

174

200

278 296

306

248 145

176

143

205

284 399

465

366

0

1,033

461

780

1,385 1,610

1,399

723

145

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E

Petrol Diesel Kerosene LPG Total

48 56 54 55 48 41 45 52 54

40 16 36

62 63 66 41

4 6

88 72

89

117 111 107

86

56 60

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Net Upstream Discount Gross

9.0

19.8

11.0

10.3 7.2 6

9

12

15

18

21

Oct

-05

Jan-

07

Apr-

08

Jul-0

9

Oct

-10

Jan-

12

Apr

-13

Jul-1

4

Oct

-15

PE (x) Peak(x) Avg(x)

Median(x) Min(x)

7 November 2015 9

ONGC

Financials and valuations

Consolidated Income Statement

(INR Billion) Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E Net Sales 1,018 1,176 1,464 1,624 1,745 1,591 1,415 1,566 Growth (%) -2.7 15.6 24.4 11.0 7.4 -8.8 -11.0 10.7 Government Levies 166 192 231 257 262 255 246 263 Other Operating Costs 402 483 655 818 893 819 656 724 Total Operating Costs 568 676 886 1,075 1,155 1,074 902 987 EBITDA 449 500 578 549 590 517 513 579 % of Net Sales 44.2 42.5 39.5 33.8 33.8 32.5 36.2 37.0 Interest 5 4 4 5 6 29 28 26 D,D&A 187 206 234 231 251 292 230 227 Other Income 53 69 58 55 69 78 47 44 Prov, wrtie-offs prior period 6 16 -31 0 2 5 0 0 PBT 304 343 428 367 405 269 302 370 Tax 107 115 144 128 128 97 104 117 Rate (%) 35 33 34 35 32 36 34 32 PAT 197 228 284 240 277 172 199 253 Adj PAT 197 213 263 240 264 172 199 253 Growth (%) -2.1 8.1 23.3 -8.8 9.9 -34.8 15.8 27.2 Minority int., assoc profits 3 4 3 -2 1 -7 2 3 Net Profit post MI 194 210 260 242 262 179 197 250

2831% Balance Sheet

(INR Billion) Y/E March 2010 2011 2012 2013 2014 2015E 2016E 2017E Share Capital 21 43 43 43 43 43 43 43 Reserves 984 1,103 1,322 1,483 1,679 1,797 1,924 2,084 Net Worth 1,006 1,145 1,364 1,525 1,722 1,840 1,967 2,126 Debt 63 63 152 205 456 462 462 462 Deferred Tax 103 112 122 142 179 181 193 197 Liability for Abandonment 175 199 204 207 274 196 196 196 Minority Interest 16 20 22 19 29 23 25 29 Capital Employed 1,362 1,539 1,865 2,099 2,659 2,701 2,843 3,010 Gross Fixed Assets 902 999 1,114 1,235 1,409 1,528 1,606 1,685 Less: Depreciation 658 731 806 827 946 1,036 1,135 1,220 Capital WIP 176 274 380 397 538 309 384 459 Net Fixed Assets 420 542 688 805 1,001 801 855 924 Producing Properties 512 572 608 705 913 1,025 1,185 1,361 Pre-producing Properties 80 102 117 136 182 191 186 188 Investments (incl. mkt. sec.) 52 34 29 21 47 381 391 401 Goodwill 95 90 78 83 184 75 71 67 Cash & Bank Balances 224 287 374 303 366 363 299 211 Inventories 82 86 132 128 148 107 109 112 Sundry debtors 71 98 117 154 160 135 133 143 Loans & Advances 121 110 130 142 170 173 176 179 Other Current Assets 8 9 44 51 71 37 37 37 Total Curr. Assets 506 590 797 777 915 816 754 682 Current Liabilities 227 340 390 373 544 543 553 565 Provisions 75 51 61 56 39 38 40 43 Total current liabilities 302 391 452 430 583 582 593 608 Net Curr. Assets 204 198 345 347 332 234 161 74 Total assets 1,362 1,539 1,865 2,099 2,659 2,701 2,843 3,010 E: MOSL Estimates

7 November 2015 10

ONGC

Financials and valuations

Ratios

Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E

Basic (INR)

EPS 22.7 24.5 30.4 28.3 30.6 20.8 23.0 29.2 Cash EPS 45.9 49.6 58.2 57.2 64.7 55.3 53.5 58.3 Book Value 117.5 133.9 159.5 178.3 201.2 215.1 229.9 248.5 DPS 8.0 9.0 9.8 9.5 9.5 6.0 7.0 9.0 Payout (incl. div tax) 41.6 56.2 32.8 45.4 36.8 33.6 35.6 36.0

Valuation (x)

P/E 11.1

8.3 8.9 8.2 12.1 11.0 8.6

Cash P/E 5.5

4.3 4.4 3.9 4.6 4.7 4.3 EV / EBITDA 4.3

3.5 4.0 4.0 4.0 4.1 3.8

EV / Sales 1.9

1.4 1.3 1.4 1.3 1.5 1.4 Price / Book Value 2.1

1.6 1.4 1.3 1.2 1.1 1.0

Dividend Yield (%) 3.3

3.9 3.8 3.8 2.4 2.8 3.6 EV/BOE (USD, 1P basis) 5.9

6.1 5.8 5.7 4.9 4.7 4.8

Profitability Ratios (%)

RoE 20.2 19.5 20.7 16.8 16.3 10.0 10.3 12.2 RoCE 19.4 18.8 19.4 15.2 13.9 9.3 8.7 10.3

Turnover Ratios

Debtors (No. of Days) 26 26.2 26.8 30.5 32.9 33.9 34.7 32.2 Fixed Asset Turnover (x) 2.6 2.4 2.4 2.2 1.9 1.8 1.7 1.8

Leverage Ratio

Net Debt / Equity (x) -0.2 -0.2 -0.1 0.0 0.1 -0.1 0.0 0.0

Cash Flow Statement

(INR Billion) Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E OP/(Loss) before Tax 304 343 428 367 394 274 303 370 DD & A 89 114 129 121 233 199 207 192 Other op. expenses -8 4 107 95 -32 0 0 0 Direct Taxes Paid -77 -105 -119 -124 -106 -94 -92 -113 (Inc)/Dec in Wkg. Capital -16 70 -71 -12 42 96 9 0 CF from Op. Activity 292 425 475 447 532 474 427 448

(Inc)/Dec in FA & CWIP -213 -277 -393 -423 -616 -344 -411 -435 Free Cash Flow 79 148 82 24 -84 130 16 13 (Pur)/Sale of Investments 2 33 3 11 -21 0 -10 -10 Inc from Invst 0 0 0 0 0 0 0 0 CF from Inv. Activity -211 -244 -390 -412 -636 -344 -421 -446

Issue of Shares 3 4 0 2 2 0 0 0 Inc / (Dec) in Debt -3 0 92 -3 247 -73 0 0 Dividends Paid (incl.tax) -81 -118 -85 -110 -98 -60 -70 -90 Interest paid incl. other -2 -4 -4 -7 1 0 0 0 CF from Fin. Activity -83 -118 2 -118 152 -133 -70 -90

Inc / ( Dec) in Cash -2 63 86 -83 48 -3 -64 -88 Add: Opening Balance 226 224 287 373 302 366 363 299 Closing Balance 224 287 373 302 366 363 299 211

7 November 2015 11

ONGC

Corporate profile Exhibit 1: Sensex rebased

Source: MOSL/Bloomberg

Exhibit 2: Shareholding pattern (%)

Sep-15 Jun-15 Sep-14

Promoter 68.9 68.9 68.9

DII 6.4 7.2 7.2

FII 11.1 10.4 10.4

Others 13.6 13.4 13.5

Note: FII Includes depository receipts Source: Capitaline

Exhibit 3: Top holders Holder Name % Holding

Life Insurance Corporation Of India 8.2 Indian Oil Corporation Ltd. 7.7 Gail (India) Ltd. 2.4

Source: Capitaline

Exhibit 4: Top management Name Designation

D K Sarraf Chairman & Managing Director

Source: Capitaline

Exhibit 5: Directors Name Name A K Srinivasan Ajay Kumar Dwivedi Atreyee Das U P Singh

Desh Deepak Misra T K Sengupta

Ved Prakash Mahawar Shashi Shanker

K Narasimha Murthy

*Independent

Exhibit 6: Auditors Name Type Dhananjay V Joshi & Associates Cost Auditor G D Apte & Co Statutory Khandelwal Jain & Co Statutory Lodha & Co Statutory Mehra Goel & Co Statutory

Source: Capitaline

Exhibit 7: MOSL forecast v/s consensus EPS (INR)

MOSL forecast

Consensus forecast

Variation (%)

FY16 23.0 27.7 -16.9 FY17 29.2 31.0 -5.9

Source: Bloomberg

200

250

300

350

400

450

500

Nov-14 Mar-15 Jul-15 Nov-15

ONGC Sensex Company description ONGC, a Fortune 500 company, is an eminent exploration and production (E&P) company in India. With over 300 discoveries, it has established in-place reserves of 6.9b ton of oil equivalent (btoe), with ultimate reserves of 2.4btoe. It currently accounts for ~68% of India's domestic oil and gas production. Through its 100% subsidiary ONGC Videsh Limited (OVL), it has equity investments in E&P blocks in 16 countries. Downstream presence is marked through its subsidiary (71.6% stake), MRPL.

7 November 2015 12

ONGC

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