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Issuer Credit Research

Issuer Flash: Oil and Natural Gas Corporation Limited

Issuer Flash: Oil and Natural Gas Corporation Limited

Report date: 2026-05-27 Event date: 2026-05-26 Event title: FY2026 Results

1. Flash Conclusion

ONGC announced its full-year FY2026 results on 26 May 2026. The results support the core assessment set out in the issuer_summary updated on the same day: ONGC remains a low-leverage domestic upstream core issuer with very strong ties to the Government of India. At the same time, profitability in the standalone upstream business softened due to lower crude oil realisations and a modest decline in production volumes, so the results are not strong enough to argue for a further strengthening of the credit profile.

The credit read-through has two layers. On a standalone basis, both revenue and profit after tax declined year on year, but financial leverage remained very low. On a consolidated basis, improvements at HPCL, MRPL, OPaL and the overseas upstream subsidiary supported higher profit attributable to owners of the parent and stronger operating cash flow.

For foreign-currency bonds, however, the results do not resolve all credit questions. The maintenance of production from mature oil and gas fields, crude oil and gas prices, government-driven dividends, taxation and price regulation, and guarantees or contingent liabilities related to overseas subsidiaries and joint ventures all remain areas requiring further monitoring.

2. What Was Announced

ONGC’s board of directors approved the audited standalone and consolidated financial statements for the year ended March 2026 on 26 May 2026, and recommended a final dividend of INR 1 per share, subject to shareholder approval. Total dividends for FY2026 amounted to INR 16,669 crore, with a payout ratio of approximately 51%.

In the standalone results, revenue from operations was INR 132,508 crore and profit after tax was INR 32,894 crore, down 3.9% and 7.6% year on year, respectively. The main drivers were lower crude oil realisations from nominated blocks and a modest decline in domestic production volumes.

In the consolidated results, revenue from operations was INR 662,247 crore and profit after tax was INR 49,793 crore. Profit attributable to owners of the parent was INR 41,424 crore, which should be distinguished from consolidated profit after tax itself. Improvements at HPCL, MRPL, OPaL and ONGC Videsh offset weakness in the standalone upstream business.

On the production side, standalone crude oil production was 18.355 MMT and standalone natural gas production was 19.533 BCM, both modestly lower year on year. The board also approved a guarantee of up to USD 325 million to be provided by ONGBV to the BC-10 operator in respect of OCL’s decommissioning obligations.

3. Credit Read-Through

The most important point in the results is that they confirm both softness in the standalone upstream business and improvement in the consolidated group. Standalone revenue from operations and profit declined, but total debt was only INR 7,823 crore and the debt-to-equity ratio remained at 0.02x.

On a consolidated basis, total debt was INR 142,055 crore and the debt-to-equity ratio was 0.35x. The financial burden is heavier than at the standalone level, but the recovery in downstream earnings supported group profitability and cash flow.

For dividends, it is necessary to distinguish between the company-disclosed total annual dividend of INR 16,669 crore and dividend payments of INR 16,980 crore shown in the cash flow statement. Dividends point to capital return pressure as a government-related issuer.

At the same time, the audited financial statements also show several contingent liabilities and overseas-business-related issues. In relation to DGH claims concerning Panna-Mukta and Mid & South Tapti, ONGC’s share of INR 15,225 crore is disclosed as a contingent liability. Joint-operator shares and penalties related to service tax and GST on royalty, PIVSA dividend receivables, invocation of bank guarantees in the Bangladesh business, Mozambique LNG-related expenditure, and the OCL guarantee are also items that illustrate the group’s complexity.

Taking these points together, the results are modestly supportive for ONGC’s credit profile, but not sufficient on their own to change the rating or spread assessment. For domestic rupee-denominated debt, the key factors remain the company’s ties with the government, its core role in domestic production, and low standalone leverage. For foreign-currency debt, it remains necessary to review separately the India sovereign rating constraint, the presence or absence of a parent guarantee, the debt and guarantee perimeter of overseas subsidiaries, and the specificity of liquidity support.

4. Key Numbers

Metric FY2026 FY2025 Interpretation
Consolidated profit after tax INR 49,793 crore INR 38,329 crore Increased on improvement in downstream, overseas and associate companies
Profit attributable to owners of the parent INR 41,424 crore n.a. Metric to view as profit attributable to ordinary shareholders
Standalone operating cash flow INR 69,272 crore INR 68,438 crore Underlying capacity to support dividends and investment
Consolidated operating cash flow INR 112,719 crore INR 90,856 crore Improved at the group level
FY2026 annual dividend INR 16,669 crore n.a. Indicates capital return pressure as a government-related issuer

5. What To Watch Next

In the FY2026 integrated annual report, the key items to review are debt maturities, undrawn committed lines, foreign-currency debt and hedging, capital investment, and details related to subsidies, taxes and royalties. On production, the focus is on the Daman Upside Development Project, KG-98/2 and recovery at Mumbai High. For contingent liabilities and overseas businesses, progress should be monitored on Panna-Mukta and Mid & South Tapti, royalty-related tax matters, PIVSA, Bangladesh, Mozambique LNG and the OCL guarantee. In rating-agency updates, the main areas to watch are S&P’s standalone credit profile assessment, the India sovereign rating constraint and the treatment of government support.

6. Sources