Two top gainers amongst the large cap stocks on Thursday were ONGC and Oil India. Both the companies saw their share prices soar by 8-9 per cent — following the government’s decision to raise natural gas prices. These companies produce over 50 million cubic meters/day of natural gas which will now be sold at $4.2/unit instead of the earlier price of $1.9/unit. Analysts estimate that this can push up the profits of both the firms by up to 20 per cent.
ONGC and Oil India already produce natural gas from existing fields. The extra price will straighaway add to their revenues and margins. Brokerage house Anand Rathi estimates that ONGC’s FY11 net profit would increase by 22 per cent. The corresponding figure for Oil India is 18 per cent, according to the brokerage.
Another brokerage, Ambit, has estimated that the price hike will add Rs 5,800 crore to the pre-tax profit of ONGC. Factoring in corporate tax, the net profit is likely to go up by Rs 4,000 crore.
The government’s move to revise gas prices could mean that deregulation of petrol and diesel prices could be next on the agenda, says India Infoline.
The empowered group of ministers is scheduled to meet in early June to decide on auto fuel prices. Discussion on the recently released Parikh Committee report on oil prices is on the agenda of the meeting.