Comments
Moody’s Investors Service has affirmed Oil and Natural Gas Corporation (ONGC)’s Baa1 rating. A Moody’s statement said that it has affirmed ONGC’s local and foreign currency issuer ratings, and the Baa1 ratings on the senior unsecured bonds guaranteed by ONGC and issued by ONGC Videsh Limited and ONGC Videsh Vankorneft Pte. Ltd.
“The ratings affirmation reflects our expectation that ONGC's credit metrics, which have improved over the last 12 months because of the high net realized oil price, will remain appropriate for its ratings,” said Vikas Halan, a Moody's Senior Vice President.
“Based on an average net realized oil price assumption of $65 per barrel, we expect that the company's earnings for fiscal 2020 will be broadly in line with fiscal 2019,” he added.
These ratings are primarily driven by its standalone credit profile, as captured in its Baa1 Baseline Credit Assessment (BCA). ONGC’s BCA reflects credit metrics that have improved but will remain constrained by volatile — although rangebound — oil prices and high shareholder returns. It also reflects ONGC’s position as the largest integrated oil and gas company in India with significant reserves, production and crude distillation capacity, and substantial operating cash flow generation capacity.
The BCA also incorporates Moody's expectation that the company will not be asked to share fuel subsidies, as long as oil prices stay below $ 70 per barrel.
Highlighting some concern, Moody’s said, ONGC generates sufficient cash flow to fund its capital spending and shareholder returns. However, the company's cash and cash equivalents of ₹ 102 billion as of March 31, 2019 are insufficient to cover its debt maturing over the next 12 months of ₹ 545 billion.
Of this, about ₹ 255 billion represents working capital loans and scheduled debt maturities at its subsidiaries– HPCL and Mangalore Refinery and Petrochemical Limited– and are not guaranteed by ONGC. Of the remaining ₹ 290 billion, ONGC has already repaid or refinanced about ₹ 100 billion as of July 15, 2019.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.