Better Oil Stock: ONGC vs Oil India

ONGC: Oil & Natural Gas Corporation (ONGC) is one of India's largest government-owned oil and gas explorer and producer.

It contributes around 70-75% of India's domestic crude oil production and a significant share of natural gas output.

ONGC Videsh, a Miniratna company, is its wholly owned subsidiary and overseas arm.

In recent years, ONGC has made rapid strides not only in the oil and gas exploration business, but also in renewables.

It's doing so with its fully owned subsidiary ONGC Green, which has acquired PTC Energy, and added several wind plant capacities.

Oil India: Incorporated in 1889, Oil India is a fully integrated exploration and production company and the second largest national oil and gas entity in India.

It is a state-owned enterprise of the government, which holds about 57% equity stake, under the administrative control of the Ministry of Petroleum and Natural Gas.

Through its various subsidiaries, joint ventures and associates, Oil India has diversified its presence across the entire value chain in the hydrocarbon sector.

It directly or indirectly has presence in refining, petrochemicals, oil and gas transportation, city gas distribution, renewable energy and green energy initiatives.

The company is structurally important for India as the sector remains crucial for the government. In FY25, it contributed to around 11% of India's crude oil production.

Revenue Growth

ONGC: Over the past 5 years, ONGC's revenue has grown at a CAGR of 9% and 8% over a 3-year period.

Since ONGC's operational efficiency is linked to crude prices, it has mostly seen volatile years in between as it's an upstream producer. That makes ONGC a direct beneficiary of higher crude prices.

Oil India: For Oil India, its 5-year sales CAGR stands at 12% while over the 3-year period, it has grown at 10%.

The company has taken continuous capital expenditure for its operations which has ensured stability in the volumes of oil and gas extracted, despite a natural decline with aging of wells.

So in terms of revenue growth, Oil India races ahead of ONGC.

Profit Growth

ONGC: Over the past 5 years, ONGC's profit has grown at a CAGR of 27%.

This performance was made possible by the strong show put in by its downstream subsidiaries, such as HPCL and MRPL, which benefited from improved refining margins, while the upstream parent faced price headwinds.

Oil India: For Oil India, profit growth has remained muted. Over 3 years, the numbers look flat while over a 5-year period, the profit has expanded at a CAGR of 7%.

The rise seen in both crude as well as natural gas prices during this period has somewhat improved its profitability but the performance has normalised since then.

In terms of profit growth, ONGC races ahead.

Return Ratios

ONGC: Coming to return ratios, both companies have commanded strong return ratios.

Over the 5-year period, ONGC's return on equity (ROE) and return on capital employed (ROCE) have averaged 14% and 16% respectively.

Oil India: For Oil India, the ROE and ROCE have averaged 19% and 17% during the same time period.

So Oil India takes the lead here over a 5-year period.

Valuations

ONGC: At the current price of Rs 287, ONGC trades at a PE multiple of 9.5. Its median 5-year average PE has remained around 7.1 while 10-year median PE comes to 8.2.

As far as price to book value is concerned, the stock trades at a PB ratio of 1.1, very close to its 10-year median range and above its 5-year range of 0.8.

ONGC's dividend yield has also remained in the range of 4-6% over the past 5-years.

Oil India: Coming to Oil India's valuations, at the current price of Rs 480, it trades at a PE multiple of 13.4. The 5-year median average has been 5.6 and the 10-year range has been around 8.6.

On the book value front, Oil India's PB multiple of 1.4 is above its 10-year median of 0.9 and its 5-year median of 1.

Lastly, Oil India has commanded dividend yields ranging from 4-7% over the past 5 years.

Growth Plans

Both have some serious plans when it comes to capex and exploration.

ONGC: The company is undertaking the drilling of the first stratigraphic well in ultra-deep-water region of Andaman Basin. The well was spudded earlier this year in January.

The company's western offshore Daman upside development project is also nearing starting of gas production. ONGC will see as many as four major infrastructure projects nearing completion.

ONGC is also making significant progress in the renewable segment.

The company has recently acquired PTC Energy, now rebranded as OGL One Limited, bringing seven wind power plants with a total capacity of 288.8 MW across Madhya Pradesh, Karnataka, and Andhra Pradesh into its portfolio.

Meanwhile, ONGC Videsh also remains in the mix which has successfully maintained steady operational performance despite geopolitical challenges and the decline of mature fields.

Oil India: Oil India is constantly on the lookout to expand its reach. It recently did so by going international and exploring interest in oil and energy blocks across seven countries.

It has also strategically invested in Numaligarh Refinery to diversify its presence in the oil refining segment. This refinery is among the most efficient refineries in India having a high distillate yield and energy efficiency.

The company is also conducting pilot studies and feasibility assessments for carbon capture utilisation (CCU), and storage (CCUS) and Carbonated Water Injection (CWI) technology.

Overall, it is undertaking a multilayered expansion, which includes pipeline capacity increases for product transport, joint ventures & MoUs for new refinery and petrochemical infrastructure, upgrading and increasing refinery throughput capacity and strategic growth into downstream value chains and gas distribution networks.

ONGC vs Oil India: Which is Better?

In terms of revenue and return ratios, Oil India looks better placed.

Meanwhile, ONGC has been able to convert that profits better and has substantially higher growth rates compared to Oil India.

On valuations, ONGC looks better placed than Oil India.

Overall, both the companies occupy critical positions in India's energy ecosystem, but they play very different roles.

Either way, both companies remain deeply tied to India's long-term energy story and will likely continue playing a central role as India balances energy security, fuel demand, and the transition towards cleaner energy.

Happy investing.

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