ONGC Beats Tata Steel, TCS to Become India’s 2nd Most Profitable Company

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ONGC Beats Tata Steel, TCS to Become India’s 2nd Most Profitable Company
01 Jun 2022
6 min read

News Synopsis

In FY22, state-owned oil explorer Oil and Natural Gas Corporation ONGC outperformed two Tata group companies, TCS and Tata Steel, to become India's second most profitable company after Reliance Industries. Its record profits came despite a drop in output over the previous 11-18 quarters, ageing fields, and a lack of new discoveries. However, crude oil prices have risen to nearly $140 per barrel, making even its limited output very valuable. ONGC accounts for 70% of India's total oil and gas production.

“A rally in global crude oil and natural gas prices is a key driving factor behind ONGC’s profitability,” said a report by YES Securities. It also stated that any decrease in crude prices will have an impact on its cash flows because its capex requirements are very high to maintain production in its ageing fields.

ONGC reported a net profit of 40,305 crore for FY22, easily surpassing Tata Steel. In terms of profits, it also outperformed one of India's most valuable companies, TCS, after crude oil prices skyrocketed.

As expected, this increase in profitability may be unsustainable, especially since analysts believe that Russia-Ukraine tensions will ease, bringing the price of crude down.

TWN Opinion