While Indian Oil Corporation (IOC) on Wednesday made a strong case for a higher compensation on account of its mounting under-recoveries on domestic sale of petrol and diesel, the Oil and Natural Gas Corporation (ONGC) said that sharing of losses of oil marketing firms (IOC, HPCL and BPCL) in the form of discounts on crude oil sales has resulted in under valuation of its shares.
Chairman and managing director, ONGC R S Sharma said, the corporation?s enterprise value is about $9 per barrel as against $13-14 for Cairn Energy.
?The global average for a company of size equivalent to us is anywhere close to $15-16,? he said.
The enterprise value is determined on the basis of oil and gas reserves of a company and is equal to the market capitalisation (about $70 billion for ONGC) divided by proven reserves (eight billion barrels of oil and oil-equivalent of gas in the case of ONGC).
ONGC has a market capitalisation of about Rs 2,76,000 crore, which is only next to private sector petrochemicals major Reliance Industries in India. Even though ONGC used to be bigger than RIL some months ago, currently RIL has a market cap over Rs 1,25,000 crore higher than ONGC. RIL has a market cap of over Rs 4,00,000 crore at present.
?Markets have realised that ONGC would not be able to get a high price realisation as it has to provide subsidised rates for cooking oil and LPG,? Sharma said while talking about the under valuation of the company?s shares. He said that in the second quarter, ONGC had to give $22 a barrel towards subsidy by selling crude at about $55 a barrel to state-run refiners. The company?s subsidy bill in the July-September quarter stood at about Rs 3,800 crore.
On its part, IOC said it is losing Rs 122 crore per day on fuel sales and will have to borrow Rs 3,000 crore a month to meet expenses if prices are not immediately increased.
?Our borrowings will go up at the rate of Rs 3,000 crore a month if retail prices of petrol, diesel, LPG and kerosene are not raised or a compensation package given to us,? IOC Chairman Sarthak Behuria told reporters on the sidelines of the Indo-African oil and gas conference.
Behuria said the company?s investment plans would be impacted if the government did not act immediately to help it. IOC is losing Rs 6.34 on sale of every litre of petrol, Rs 7.88 on diesel, Rs 212 per LPG cylinder and Rs 17 on a litre of kerosene. ?These losses are based on the October crude oil price average when the Indian basket was at $79.33 per barrel. Now Indian basket is at 89.36 dollar a barrel that will widen the losses,? he said. IOC?s current borrowings stand at Rs 2,8000 crore. ?This will increase at the rate of Rs 3,000 crore a month from November if nothing is done immediately,? he said.