Oil and Natural Gas Corporation Ltd. on Tuesday said it continues to have strong financial position and sufficient funds to meet current and future capex needs, as it sought to allay concerns over its finances after successive acquisitions and government demands drained its cash reserves.
From a zero-debt company, ONGC had to resort to borrowings in the past couple of years after the government asked it to acquire state-run refiner Hindustan Petroleum Corporation Ltd., pay record dividend and conduct share buybacks.
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Reacting to reports on its ability to meet capex needs, ONGC in a statement said "it has strong financials in place to finance its projects, both ongoing as well as upcoming ones".
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"The company's operational plans and expenditure thereon have also been in line with its requirement," ONGC said in the statement. "There is no plan or item of expense that had to be deferred due to paucity of funds/resources."
In 2017, ONGC bought GSPC Ltd.'s 80 percent stake in a deep-water gas block in the KG Basin for Rs 7,738 crore. In January 2018, it acquired the government's holding in HPCL for Rs 36,915 crore.
In the fiscal year ended March 31, 2019, it paid hefty dividend to shareholders and completed a Rs 4,022 crore share buyback. The government was the biggest beneficiary of both dividend payout and the buyback.
These acquisitions and payouts to the government have eroded ONGC cash reserves, which was about Rs 13,000 crore a couple of years back and has loaded its balance sheet with a debt of about Rs 20,000 crore.
"Mergers and acquisitions are business decisions which have been taken by the companies to foster growth and true value accretion from such ventures gets reflected over a period of time,” said the state-run firm in the statement. “The acquisitions made by ONGC are going to strengthen the company's growth trajectory.”
ONGC, on a standalone basis, has "a very conservative debt-equity ratio which compares favourably with global benchmarks”, the statement added.
The company's rating is also very strong compared with peers, ONGC said, adding that it's the largest integrated oil company in the country with a strong presence in the entire hydrocarbon value chain.
"The company has also been relentlessly striving to strengthen its operations in line with the energy needs of the country.”
"Relentless efforts on the part of ONGC management are expected to translate into strong performance not only for its upstream business but—going by the results of some of the joint ventures in pipeline and petrochemicals—the downstream units are also expected to contribute through their stronger results," it said in the statement.
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