Why ONGC Share Price is Falling

On 1 July 2022, Indian share markets fell for the third day in a row.

Amid this decline, shares of oil & gas companies also fell. All the gains made by energy companies eroded within a day.

Shares of Reliance fell 8% while shares of Oil India fell by a whopping 15%.

Among these stocks was also ONGC. The company's shares fell by 13% in a single day.

So, what led to this downfall?

On 1 July 2022, the Government of India announced that it would impose taxes on the export of petrol, diesel, and jet fuel shipped overseas by Indian firms.

It would levy a tax of Rs 6 per litre on exports of petrol and ATF (Aviation Turbine Fuel) and a tax of Rs 13 per litre on the export of diesel in the country.

This step was taken to ease the shortage of fuel in India.

You see, many parts of India, such as Gujarat, Rajasthan, and Madhya Pradesh, have been out of fuel for months as refineries have increased their exports to Europe and the US amid the Russia-Ukraine war.

This has led to a shortage in Indian markets.

The government then further announced a windfall tax on oil-producing companies. A windfall tax is a higher tax levied on the gains of certain companies.

The government said it would implement an additional cess of Rs 23,230 per barrel on domestic crude oil production.

Domestic suppliers of crude oil have been selling crude oil at international prices. This has led to a windfall gain by the producers due to an increase in realizations.

This can be seen in the latest quarterly results of ONGC.

For the March 2022 quarter, the company's revenue rose 37% YoY. It also reported a 10% YoY increase in net profit as it benefitted from the surge in oil prices.

How shares of ONGC have performed recently

Post the announcement, ONGC's share price fell over 13% to Rs 131. Over the last month, the stock is down by almost 16%.

However, shares of the company are up by 5.8% in the last year.

The company touched its 52-week high of Rs 194.9 on 8 March 2022 and 52-week low of Rs 108.5 on 23 August 2021.

Currently the company is trading at a PE (Price to Earning) multiple of 3.3 times. It is trading lower than its industry PE of 5.26 times, and is currently undervalued.

About ONGC

ONGC is the biggest publicly traded oil and gas production and exploration company in India. The company produces 70% of India's crude oil. This is almost equivalent to 57% of the overall demand in the country.

It also produces 84% of India's natural gas.

ONGC is under the ownership of the Ministry of Petroleum and Natural Gas and the Government of India.

In 26 sedimentary basins in India, it is engaged in hydrocarbon exploration and exploitation. It owns and operates over 11,000 km of pipelines in the country.

T know more about ONGC, check out ONGC's financial factsheet and its latest quarterly results.

You can also compare ONGC with its peers:

ONGC vs Oil India

ONGC vs Hindustan Oil Exploration

ONGC vs Asian Energy Services

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