New Delhi: India’s biggest state-run explorer, Oil and Natural Gas Corp. Ltd(ONGC) fell in Mumbai trading on Thursday after Goldman Sachs said the government took $20 billion (Rs1.04 trillion) cash from the company without consulting minority shareholders. ONGC has denied the allegations. ONGC shares dropped 4% to Rs637.15 before ending down 1.9% at Rs651.85 a share on the Bombay Stock Exchange on Thursday.
Rumour: ONGC’s R.S. Sharma. Harikrishna Katragadda / Mint
“The allegations in the report are biased and the numbers need to be checked,” ONGC chairman R.S. Sharma said over telephone from New Delhi. “At no stage has ONGC compromised on corporate governance issues.”
Sharma said he doesn’t know how the Goldman report arrived at the $20 billion figure.
“Since 2003-04, the promoter (government, which owns a 74% stake) has taken away cash from the company on a quarterly basis for subsidising loss-making state-owned downstream companies,” analysts Nilesh Banerjee, Karthik Bhat and Durga Dath said in a note to clients on Thursday. “So far, ONGC’s promoters have taken cash of almost $20 billion from the company without consulting the minority shareholders. Despite repeated objections raised by investors and most recently by independent directors on ONGC’s board, there has not been headway on this issue.”
Goldman Sachs also said it had cut its earnings estimates on ONGC by 15% for this fiscal due to falling volumes and higher costs. It also lowered its per share earnings forecast by 6-7% for the next two years, citing concerns about overseas growth strategy and poor prospects from its domestic fields. “Fifteen major fields of ONGC, which have been productive for 25-30 years, accounted for 77% of ONGC’s total production in 2007-08 and have now started showing signs of decline,” Goldman Sachs said.
The company’s expensive purchase of Russia-focused Imperial Energy Corp. Plc. for £1.3 billion (Rs9,568 crore), a price agreed upon when oil was around $130 a barrel against well below $50 now, was a political decision, it said. Bloomberg
(‘PTI’ and ‘Reuters’ contributed to this story.)