24
Sep
11

Not a positive news for ONGC..

If this piece of news is correct http://www.business-standard.com/india/news/finmin-wants-ongc-others-to-pay-rs-56700-cr-fuel-subsidy/147052/on, then it will be detrimental for upstream companies. It will be suicidal for ONGC. In the last financial year FY10-11, ONGC paid Rs. 24,892 crore as subsidy. As per this news, ONGC subsidy share would increase to Rs 47,640 crore this fiscal. Till now, market was under impression that upstream companies would share one-third of Rs. 1.14 lakh crore subsidy. But it seems the Finance Ministry wants upstream companies to share one-third subsidy of Rs. 1.71 lakh crore, which was the subsidy amount before June duty cuts and fuel price hike. It goes without saying that it would be body blow for ONGC. I guess a lot of investors would have cried foul if this subsidy hike would have happened after FPO. After this subsidy hike, it would be difficult for government to come with FPO price more than 230-240. It might be a possibility that the government scraps FPO altogether after its antics. In Q4, FY11 also government arbitrarily increased upstream subsidy share from 33% to 38.8%. Its time to stay miles away from ONGC on long side. Government just want to reduce its share of subsidy so you never know what is the next googly. I have written ONGC October series 300 calls. Given all the negative sentiment around market in general and ONGC in particular, it would be difficult for ONGC to move up sharply from current levels. But one has to watch crude price level, if it corrects sharply, it might make the case for ONGC not falling sharply either. INR has depreciated recently, nullifying any kind of positive impact of crude price fall.

Advertisements

0 Responses to “Not a positive news for ONGC..”



  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


September 2011
M T W T F S S
« Aug   Oct »
 1234
567891011
12131415161718
19202122232425
2627282930  

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 232 other followers

Archives

Top Posts & Pages


%d bloggers like this: