Issuer Summary: ONGC

Report date: 2026-05-27
Issuer: Oil and Natural Gas Corporation Limited
Relevant bond issuer: Oil and Natural Gas Corporation Limited. Subsidiary or associate debt should be assessed separately after confirming explicit ONGC guarantees, payment support mechanisms, ranking and bond-specific legal terms.
Latest regular disclosure used: Audited standalone and consolidated financial results for the financial year ended 31 March 2026, approved by the board on 2026-05-26.

1. Business Snapshot and Recent Developments

Oil and Natural Gas Corporation Limited (ONGC) is a Maharatna CPSE majority-owned by the Government of India and is the core state-owned upstream company supporting India’s domestic crude oil and natural gas production. In credit analysis, ONGC should not be treated simply as a resource company, but as a quasi-sovereign operating company deeply embedded in India’s energy security, domestic upstream investment, gas supply, downstream fuel supply and government revenue. In its FY2024-25 annual report, ONGC stated that it accounted for 72.8% of India’s domestic crude oil production, 55.8% of natural gas production and 63.3% of total domestic hydrocarbon production. This company profile remains unchanged after the FY2026 results.

ONGC, however, is not the government itself. Government of India ownership, Maharatna CPSE status and the extraordinary support incorporated by rating agencies are not the same as an explicit government guarantee on every individual debt obligation. Domestic AAA ratings on domestic NCDs and bank facilities, S&P’s foreign-currency BBB/Stable rating, guarantees or payment support related to subsidiary OPaL or overseas subsidiaries, and the treatment of OVL or subsidiary-issued debt each involve different legal claims and risks. Investors should not jump from “government-related” to “safe”, but should confirm the issuer, guarantor, payment ranking, governing law and the presence or absence of a government guarantee for each instrument.

The business structure looks very different on a standalone and consolidated basis. Standalone ONGC is centred on domestic upstream E&P, natural gas, value-added products such as LPG and naphtha, and the development and exploration of domestic assets. On a consolidated basis, the group also includes overseas E&P through ONGC Videsh Limited (OVL), refining and marketing through Hindustan Petroleum Corporation Limited (HPCL), coastal refining and petrochemicals through Mangalore Refinery and Petrochemicals Limited (MRPL), petrochemicals through ONGC Petro additions Limited (OPaL), and renewable energy through ONGC Green Limited (OGL). Standalone ONGC should therefore be read as a “low-leverage core domestic upstream company”, while the consolidated group should be read as a “state-owned integrated energy group with upstream at its core, but also including downstream, petrochemicals, overseas assets and renewables”.

The audited FY2026 results announced on 26 May 2026 made the distinction between standalone and consolidated results even clearer. On a standalone basis, FY2026 revenue declined 3.9% to INR132,508 crore from INR137,846 crore in FY2025, and net profit declined 7.6% to INR32,894 crore from INR35,610 crore in FY2025. The main reason was the decline in the full-year realised price for nominated crude to USD68.40/bbl from USD76.90/bbl in FY2025. On a consolidated basis, however, while revenue was broadly flat at INR662,247 crore, net profit increased 29.9% to INR49,793 crore from INR38,329 crore in FY2025. That said, profit attributable to owners of the parent was INR41,424 crore, with a large non-controlling interest component. The improvement in the broader group, including downstream refining and marketing, MRPL, OPaL and share of associates’ profit, more than offset the weakness in the standalone upstream business, but not all of that improvement is directly attributable to creditors of the parent.

These results add two updates to ONGC’s credit analysis. First, the oil price sensitivity of the standalone upstream business remains. In FY2026, while ONGC retained its status as a core domestic company, standalone profit declined due to lower crude realisations, a small decline in crude and gas production, and the burden of exploration expenses, depreciation and other costs. Second, the integrated effect of the consolidated group did in fact support earnings. HPCL’s refining and marketing, MRPL’s GRM recovery, OPaL’s move to positive EBITDA, OVL’s profit improvement and OGL’s expansion show that consolidated credit cannot be explained by the standalone upstream business alone.

However, it would also be premature to read the consolidated improvement directly as stronger protection for bondholders. Downstream, petrochemicals and overseas E&P supplement earnings, but they also bring in policy-based sales, LPG compensation, refining margins, inventory, petrochemical cycles, overseas geopolitics, guarantees and capital support. Consolidated operating cash flow in FY2026 was strong at INR112,719 crore, but investing cash flow was an outflow of INR57,676 crore and financing cash flow was an outflow of INR56,331 crore; dividends paid under the cash flow statement were INR16,980 crore. This differs conceptually from the company-announced total FY2026 dividend of INR16,669 crore, but both represent large cash outflows from a bondholder perspective. How strong operating cash flow is allocated among investment, dividends, debt repayment and support for subsidiaries and associates will be the central issue going forward.

ONGC’s company profile as of the FY2026 results is as follows.

2. Government Linkage and Policy Role

The first pillar of ONGC’s credit profile is its deep relationship with the Government of India. CARE, ICRA, India Ratings and S&P all place the company’s government ownership, strategic importance and role in domestic energy supply at the centre of their ratings. In October 2025, S&P affirmed ONGC’s long-term issuer rating and senior unsecured note rating at BBB, and assessed the likelihood of government support as “extremely high”. At the same time, S&P viewed ONGC’s stand-alone credit profile as bbb+, while constraining the rating at the level of the India sovereign rating. This shows that, even where ONGC’s underlying creditworthiness is strong, its foreign-currency bonds cannot be fully separated from the sovereign and government-intervention risk.

There are multiple channels of government support. In normal conditions, government ownership, top-tier domestic ratings, access to public-sector banks and the domestic bond market, policy priority, and government involvement in gas pricing, royalties, taxation and dividend policy support funding and the operating environment. Under stress, the government has strong incentives to preserve group credit through fuel prices, LPG compensation, taxation, exploration policy, subsidiary restructuring, capital support, bank credit and transactions among state-owned enterprises. In deep stress, because the company’s production and procurement functions have a significant impact on India’s energy security, the likelihood of support is higher than for an ordinary private E&P company.

At the same time, proximity to the government is also a constraint. The government influences ONGC’s strategy, acquisitions, capital expenditure, dividends, tax burden and pricing policy. In high oil price periods, policy-driven government take such as SAED or windfall tax can constrain earnings upside. In low oil price periods, standalone upstream earnings can be pressured, while downstream subsidiaries may benefit. Government support creates a credit floor, but it is not always neutral for creditors through shareholder distributions and policy burdens.

The FY2026 results also showed this government link through capital allocation. The company recommended a final dividend of INR1/share, and together with an interim dividend of INR12.25/share already paid, set the total FY2026 dividend at INR13.25/share, or INR16,669 crore in aggregate. The company disclosure indicates a dividend payout ratio of around 51%. This is absorbable while operating cash flow remains strong on both a standalone and consolidated basis, but bondholders need to keep monitoring how far dividends to government-related shareholders are prioritised relative to capex for mature fields, overseas E&P, downstream and petrochemical support, and debt repayment.

The government link should be separated into issuer credit, rating-agency support incorporation and the legal protection of individual bonds. First, support expectations at the issuer-credit level are very strong. Second, the support incorporated by rating agencies is reflected in domestic AAA/A1+ ratings and S&P’s government-support assessment. Third, the legal protection of an individual bond can only be confirmed through the prospectus, guarantee agreements and payment mechanisms. This report treats the first and second items as strong credit enhancements, while leaving the third as an unverified item to be checked instrument by instrument.

3. Industry Position and Franchise Strength

ONGC’s industry position is dominant in India. Domestic crude oil production in FY2025 was 28.6MMT, of which ONGC’s crude oil production was 20.89MMT, accounting for more than 70% of domestic production. The company also accounts for more than half of domestic natural gas production. The annual report stated that ONGC group oil and gas production in FY2025 was 51.4MMTOE, down slightly from 52.3MMTOE in FY2024. Looking only at volumes, depletion pressure remains, but the company’s position as the core domestic upstream player has not changed.

FY2026 production performance shows both the company’s strengths and constraints. Standalone ONGC crude oil production was 18.355MMT, down slightly from 18.558MMT in FY2025. Standalone natural gas production was also 19.533BCM, down slightly from 19.654BCM in FY2025. The company explained this by referring to geological complexity at KG-98/2, the impact of the Middle East situation on pipeline replacement and DUDP in the Western Offshore, ongoing connection work for existing wells, and temporary effects from work on compressors and turbines. This shows that, even for the domestic leader, maintaining volumes is not easy in mature fields and complex offshore development.

At the same time, exploration and production-enhancement measures are progressing. The company stated that, in the first year of TSP-1, under which BP was appointed as technical service provider for Mumbai High, crude oil production reached 102% and gas production 108% of target benchmarks, and that BP’s appointment is being expanded across the Western Offshore. The Daman Upside Development Project (DUDP) has commenced production, and the company expects incremental production equivalent to around 9% of ONGC’s current gas production. In the Western Offshore, a project of around INR33,075 crore is under way, and under DeepX the company intends to accelerate deepwater exploration.

On reserves, FY2026 saw a large increase in 2P reserve additions. ONGC-operated domestic areas added 44.01MMTOE, domestic JV interests added 0.85MMTOE, and total domestic additions were 44.86MMTOE. OVL’s overseas asset share was 54.31MMTOE, bringing the group total to 99.17MMTOE. The 2P reserve replacement ratio for ONGC-operated domestic areas was 1.17x. This is positive for maintaining the long-term resource base, but additional reserves do not immediately translate into production or operating cash flow. They only affect credit quality after going through development, regulation, service-company availability, geopolitics and capital allocation.

Note: The long-term group and standalone trends for FY2021-FY2025 are from the FY2024-25 annual report; the FY2026 standalone, OVL and 2P reserve-addition figures are from the 26 May 2026 press release.

4. Segment Assessment

Standalone domestic upstream is the core of ONGC’s credit profile. Crude oil and natural gas sales are affected by oil prices, gas prices, royalties, cess, SAED, foreign exchange, exploration expenses, depletion and depreciation, and development investment. In FY2026, standalone revenue was INR132,508 crore, net profit was INR32,894 crore and D/E was 0.02x. The standalone upstream business remains low-leverage and highly profitable. However, FY2026 revenue and profit declined due to lower crude realisations and a small decline in production; viewed only through the standalone upstream business, it is difficult to say that credit headroom expanded relative to FY2025.

Natural gas is more affected by policy pricing than crude oil. The FY2026 price for nominated gas was USD6.60/mmbtu, slightly above USD6.50/mmbtu in FY2025, but the new well gas price declined to USD8.08/mmbtu from USD9.12/mmbtu in FY2025. Even so, the company stated that new well gas revenue in FY2026 was INR6,678 crore, generating additional revenue of INR1,223 crore compared with the APM price and accounting for more than 21% of nominated gas portfolio revenue. This shows that the domestic gas pricing framework supports ONGC’s project economics, while also indicating that changes to the framework directly affect results.

OVL is responsible for the group’s overseas upstream portfolio. OVL production in FY2026 was 9.671MMTOE, down from 10.278MMTOE in FY2025. The company cited geopolitics in the Middle East and South Sudan, production stoppage in Vietnam and lower production at Sakhalin as the main reasons, and explained that Sakhalin has returned to normal. FY2026 revenue was INR8,443 crore and PAT was INR1,152 crore, improving from PAT of INR428 crore in FY2025. OVL has resource-diversification and diplomatic value, but it is also a channel through which sanctions, remittance restrictions, political instability, capital controls, impairments and guarantees can affect group credit.

HPCL and MRPL were major supports for the consolidated results. In FY2026, HPCL achieved record refinery throughput of 26.04MMT, record sales volume of 51.45MMT and record LPG sales of 9.41MMT, with GRM improving to USD8.79/bbl from USD5.74/bbl in FY2025. HPCL standalone PAT rose sharply to INR17,175 crore from INR7,365 crore in FY2025. MRPL’s throughput declined to 17MMT in FY2026 from 18.18MMT in FY2025, but GRM improved to USD9.22/bbl from USD4.45/bbl, and PAT increased significantly to INR1,931 crore from INR51 crore in FY2025. The consolidated refining and marketing segment profit was INR28,664 crore in FY2026, well above INR12,401 crore in FY2025.

OPaL improved in FY2026, although petrochemical risk remains. OPaL’s revenue declined slightly to INR14,214 crore from INR14,804 crore in FY2025, but EBITDA turned positive at INR1,207 crore from negative INR203 crore in FY2025. The petrochemical segment result in consolidated segment reporting remained negative at INR382 crore, but improved from a loss of INR1,874 crore in FY2025. OPaL remains in the process of improvement, including capital restructuring, exit of the C2-C3 plant from the SEZ, renegotiation of existing debt, and the shutdown and restart of the PP plant during FY2025-26, leaving both subsidiary-support and operating risks.

OGL is not yet large enough to drive group credit, but it shows a new direction in capital allocation. OGL’s consolidated revenue was INR298 crore in FY2026 and net profit was INR85 crore, up from revenue of INR14 crore and a loss of INR19 crore in FY2025. Ayana Renewables added 839MW in operating capacity, taking operating capacity to 3GW. Renewable energy should support business diversification over the long term, but in the near term capex, acquisitions, JVs, power prices and execution risk need to be monitored.

5. Financial Profile and Analysis

ONGC’s financial profile remains very strong on a standalone basis and, based on published financial metrics, conservative on a consolidated basis as well. However, FY2026 showed different directions for the standalone upstream business and the consolidated group. Standalone revenue and profit declined, while consolidated profit increased and leverage improved. Credit analysis should not focus on only one of the two, but should consider standalone low leverage and consolidated business diversification and subsidiary risk at the same time.

Standalone FY2026 revenue was INR132,508 crore and net profit was INR32,894 crore. Both declined from FY2025 revenue of INR137,846 crore and net profit of INR35,610 crore. Operating cash flow was INR69,272 crore, down from INR73,010 crore in FY2025, but the absolute level remains large. Investing cash flow was an outflow of INR38,760 crore, narrower than the INR46,789 crore outflow in FY2025. Simple FCF, calculated by subtracting investing cash flow from operating cash flow, was INR30,512 crore, sufficient to absorb dividend payments of INR16,980 crore.

The standalone balance sheet is highly conservative. At FY2026 year-end, net worth was INR331,770 crore, debt outstanding was INR7,823 crore, D/E was 0.02x and the current ratio was 1.66x. Total debt to total assets of INR461,276 crore was 0.02x, meaning that viewed on a standalone basis there is almost no leverage concern. Cash and cash equivalents were small at INR83.5 crore, but other bank balances were INR28,577 crore and current assets were INR61,802 crore, so standalone liquidity also appears strong from the financial statements.

Consolidated FY2026 revenue was broadly flat at INR662,247 crore, while net profit increased significantly to INR49,793 crore. Consolidated operating cash flow was INR112,719 crore, a large increase from INR90,856 crore in FY2025. Investing cash flow was an outflow of INR57,676 crore and financing cash flow was an outflow of INR56,331 crore. On a consolidated basis, capex, exploration and development, support for associates and JVs, debt repayment and dividends all run in parallel; strong operating cash flow is therefore important, but the use of cash is also broad.

The consolidated balance sheet also improved. At FY2026 year-end, total assets were INR791,905 crore, total liabilities were INR382,212 crore and net worth was INR409,693 crore. Debt outstanding was INR142,055 crore, down from INR153,556 crore in FY2025. D/E was 0.35x, debt to total assets was 0.18x and the current ratio was 0.84x. The consolidated current ratio is below 1x and thinner than the standalone figure because it includes refining, marketing, working capital and short-term borrowings. Given the strength of operating cash flow and market access, short-term liquidity is difficult to identify as the main credit constraint at present, but the debt maturity schedule, undrawn bank lines and foreign-currency debt and hedging have not been confirmed; short-term refinancing resilience remains an item for the next review.

The important point in these tables is that FY2026 cannot be reduced to a simple split of “standalone weaker, consolidated stronger”. The standalone profit decline shows upstream sensitivity to oil prices and volumes. The consolidated improvement was supported by the downstream recovery at HPCL/MRPL and improvement at OPaL, but those businesses will remain cyclical. The reassuring factors for bondholders are that standalone leverage is extremely low and consolidated debt also declined. The caution is that, because the group simultaneously carries dividends, capex, subsidiary support, overseas E&P and contingent liabilities, the allocation of operating cash flow needs to be monitored continuously.

6. Structural Considerations for Bondholders

For bondholders, the most important point is to distinguish ONGC’s parent issuer credit from the legal protection of individual bonds. ONGC itself is a core energy company linked to the Government of India, with domestic AAA/A1+ ratings, low standalone leverage and strong market access. At the same time, government-support expectations do not mean direct government debt. Whether a particular bond has a government guarantee, an ONGC guarantee, a subsidiary guarantee, is unsecured, or has security, subordination, cross-default or change-of-control clauses needs to be confirmed in the individual issuance documents.

The FY2026 board disclosure confirmed several structural issues. The company had unsecured NCDs of INR1,000 crore as of 31 March 2026 and explained that, because they are unsecured, the security cover certificate under SEBI regulations is not applicable. This indicates that the parent NCDs are not protected by security and depend on issuer credit and market access.

For overseas subsidiary-related matters, the board approved a related-party transaction under which ONGC Nile Ganga BV (ONGBV) guarantees abandonment liabilities of ONGC Campos Ltda. (OCL) up to USD325mn to Shell Brasil Petróleo Ltda., the BC-10 operator. The amount itself appears manageable relative to the size of the ONGC group, but this shows a channel through which abandonment, decommissioning and environmental obligations in overseas E&P can turn into guarantees or support from the parent side.

For Mozambique Area-1 as well, implementation of the AssetCo structure and extension of the validity period of ONGC’s existing Debt Service Undertaking (DSU) were presented as shareholder-approval items. The company stated that, after the lifting of force majeure, work toward construction of the first two trains of 13.12MMTPA for Mozambique LNG is progressing. Project restart could contribute to long-term value recovery at OVL, but from a credit perspective it involves development funding, guarantees, DSUs, geopolitics, security and construction risk.

Contingent liabilities are also important. The FY2026 results notes continue to disclose arbitration and litigation related to the PSCs for Panna-Mukta and Mid & South Tapti, tax and legal interpretation issues, and pre-existing liabilities, including a DGH demand relating to ONGC’s share of INR15,225 crore disclosed as a contingent liability. This is a representative disclosed amount and does not represent the upper bound of all structural risks. The company also disclosed INR6,683 crore as a contingent liability related to Service Tax/GST on royalty, which it treats as the responsibility of JV partners, and INR2,187 crore in penalties and other items. In addition, there are multiple overseas E&P and dispute-related issues, including a DGFT refund receivable of INR2,088 crore, a PIVSA dividend receivable in Venezuela of INR5,025 crore and a provision of INR2,777 crore against it, invocation of bank guarantees in Bangladesh, force-majeure-period costs at Mozambique Area-1 and extension of DSUs. These do not immediately indicate a liquidity crisis, but should be viewed as channels that could consume the headroom created by low standalone leverage.

In the FY2026 results, the audit opinions were unmodified on both standalone and consolidated financial statements. At the same time, the results are subject to CAG review, and the notes state that the results were approved by the board when there were no independent directors on the board after the expiry of their term on 27 March 2026. This does not immediately damage credit quality, but it is a governance and regulatory-compliance point for a listed state-owned enterprise.

7. Capital Structure, Liquidity and Funding

ONGC’s capital structure differs substantially between standalone and consolidated levels. Standalone ONGC is an upstream parent company that is close to debt-free. At FY2026 year-end, standalone debt outstanding was INR7,823 crore, net worth was INR331,770 crore and D/E was 0.02x. Standalone operating cash flow was INR69,272 crore, and remained positive even after deducting investing cash outflow of INR38,760 crore. Viewed on a standalone basis, ONGC has very strong debt tolerance for an ordinary operating company.

On a consolidated basis, debt is much larger because HPCL, MRPL, OVL, OPaL and others are included. FY2026 year-end consolidated debt outstanding was INR142,055 crore, down from INR153,556 crore in FY2025. Consolidated D/E was 0.35x and debt to total assets was 0.18x. The absolute amount is large, but leverage is not excessive for an integrated energy group. The improvement in consolidated operating cash flow to INR112,719 crore also supports debt repayment and investment funding.

In liquidity terms, standalone liquidity is strong with a current ratio of 1.66x, while the consolidated current ratio is below 1x at 0.84x. This reflects a group structure that includes downstream marketing and refining, inventories, trade payables, short-term borrowings and working capital. Consolidated short-term borrowings were INR48,232 crore and non-current borrowings were INR93,823 crore, making access to short-term markets, banks and the domestic bond market important. Still, given consolidated operating cash flow and high government-related ratings, short-term refinancing is difficult to identify as the main risk at present. However, because the maturity schedule, undrawn committed lines and foreign-currency debt and hedging have not been confirmed, short-term refinancing resilience should be verified in the next update.

The central capital-allocation issues are capex and dividends. Standalone investing cash flow outflow in FY2026 was INR38,760 crore, while consolidated investing cash flow outflow was INR57,676 crore. The company stated that a project of INR33,075 crore is in progress in the Western Offshore, and it is also carrying DUDP, the KG basin, DeepX, renewables and the Dahej port JV. The company-announced total FY2026 dividend was INR16,669 crore, while dividends paid under the cash flow statement were INR16,980 crore; the concepts differ, but both are absorbable relative to operating cash flow. However, in a scenario where low oil prices, production delays and subsidiary support overlap, dividend policy could constrain debt reduction and investment headroom.

In summary, the FY2026 funding profile is that standalone ONGC is “an issuer with low leverage and operating cash flow that absorbs investment and dividends”, while the consolidated group is “a refinancing-type group with strong operating cash flow and reduced debt, but also including downstream, overseas, petrochemical and renewable investments”. Investors should value the strength of the standalone profile while also confirming the channels through which funding needs at consolidated subsidiaries could spill over into parent cash.

8. Policy, Tax and Regulatory Risk

Because ONGC is a government-related company, policy can be both support and constraint. The natural gas pricing framework, premium for new well gas, royalties, cess, SAED, fuel-pricing policy, LPG compensation and dividend policy all directly affect earnings and cash flow. In FY2026, new well gas revenue was disclosed at INR6,678 crore and additional revenue versus the APM price at INR1,223 crore, confirming a concrete channel through which policy pricing supports upstream investment economics.

In May 2026, multiple media reports stated that the Government of India had rationalised the upstream royalty framework and reduced royalty burdens on crude oil, natural gas and condensate. Directionally, this is positive for the upstream economics of ONGC and Oil India and could support domestic exploration and development investment. However, as of the preparation of this report, the applicable fields, contract categories, application by onshore/offshore/deepwater category, quantitative effect on ONGC’s results and the company’s own formal comment have not been confirmed. Therefore, in the credit view, it is treated as a candidate positive policy change, but the amount of benefit to profit and cash flow remains an unverified item.

Policy risk also remains in the opposite direction. In periods of high oil prices, the government could absorb upside earnings through SAED or similar windfall taxes, dividend demands or pricing-framework changes for consumer, fiscal or inflation-policy reasons. In periods of low oil prices, standalone upstream profit declines, while downstream subsidiary margins may improve, but fuel-pricing policy or LPG under-recoveries may constrain downstream earnings. Proximity to the government reduces default risk, but also constrains cash-flow discretion.

On the regulatory and governance side, the FY2026 results being subject to CAG review and the note on the absence of independent directors on the board are also points to note. Oversight and disclosure as a state-owned enterprise are substantial, but decisions are not made purely according to the economic rationality of shareholders and creditors in the same way as in a private company. For a quasi-sovereign issuer, changes in government policy, regulation, oversight and capital allocation need to be followed with the same weight as financial numbers.

9. Rating Agency View

Domestic rating agencies’ views are broadly aligned. On 8 October 2025, CARE reaffirmed bank facilities, NCDs, CPs and other instruments at CARE AAA; Stable / CARE A1+. The rating rationale is based on majority GoI ownership, strategic importance to energy security, dominant position in domestic E&P, long operating track record, solid profitability, low gearing and healthy debt protection metrics. Constraints are E&P-inherent risk, regulatory risk, OVL’s geopolitical risk and large capex for reserve replacement.

On 19 March 2026, ICRA reaffirmed INR8,500 crore of NCDs at [ICRA]AAA (Stable) and withdrew some zero-outstanding or unissued programmes. ICRA cited ONGC’s dominant position in domestic crude oil and natural gas production, large proven reserves, competitive cost structure, stable subsidiary performance, healthy financial profile, and financial flexibility from sovereign ownership and strategic importance. Constraints include reserve replacement, mature fields, geological, technical and execution risks in E&P, commodity prices and OVL geopolitics.

On 8 November 2024, India Ratings affirmed NCDs, working capital limits, commercial paper and other facilities at IND AAA/Stable / IND A1+. Ind-Ra incorporates ONGC’s strong legal, operational and strategic links with the GoI, consolidation of OVL, MRPL, OPaL and others, dividends from HPCL and other subsidiaries, and subsidiary support by ONGC. This shows that domestic ratings heavily incorporate not only the standalone profile, but also group support and government linkage.

S&P is the most important reference point for foreign-currency bond investors. On 14 October 2025, it affirmed ONGC at BBB/Stable, with an SACP of bbb+ and an “extremely high” likelihood of government support. At the same time, the rating is constrained at the India sovereign level. In S&P’s view, even if ONGC’s underlying creditworthiness is stronger than the sovereign, the foreign-currency rating cannot be raised due to government intervention and the sovereign rating constraint. Domestic AAA ratings therefore should not be mechanically translated into foreign-currency bond spreads.

Rating-agency comments after the FY2026 results have not been confirmed as of the preparation of this report. Looking only at the numbers, the standalone profit decline is a point of caution, but low standalone leverage, higher consolidated profit, lower consolidated debt and improved operating cash flow are not major negative rating factors. At the same time, subsidiary support, the Mozambique DSU, the BC-10 guarantee, the Panna-Mukta dispute, OPaL and the treatment of the royalty-framework change should be confirmed in the next rating review.

10. Credit Positioning

Within Indian quasi-sovereigns, ONGC should be placed at the core of “operating-company energy quasi-sovereigns”, not “policy finance”. Policy-finance or government-related funding companies such as PFC, REC, IRFC and EXIM India have asset and liability structures and proximity to the government that are relatively financial in nature. Power Grid and NTPC depend on regulation, PPAs and the power framework. ONGC has physical resources, oil and gas prices, exploration and development, downstream policy and overseas E&P, and therefore even among government-related issuers it is an issuer for which commodity-price and execution risks need to be additionally checked.

Within oil and gas, natural comparables include Indian Oil, BPCL, HPCL, MRPL, Oil India, Reliance and Petronet LNG. Indian Oil and HPCL are significantly affected by downstream marketing, refining and fuel-price policy. MRPL is a high-complexity refinery receiving parent support as an ONGC subsidiary. Oil India is an upstream peer, but ONGC is larger in scale and policy positioning. Reliance is a large private integrated company with significant business diversification, but has different government-support expectations. Petronet LNG has a different contract and utilisation-risk profile as LNG receiving infrastructure. Qualitatively, ONGC’s government support and low standalone leverage are strong positives, while commodity prices, development execution, overseas E&P and subsidiary support are risks that should be assessed separately from policy-finance-type quasi-sovereigns.

In global comparison, S&P views ONGC in the context of government-related energy issuers such as PTT, CNPC, Pertamina and Pemex. ONGC is not a rescue-dependent issuer with weak standalone financials like Pemex, and its SACP is strong at bbb+. At the same time, it does not carry the same international rating level as a massive state-owned integrated upstream and downstream company such as CNPC, and is constrained by the India sovereign rating. Like PTT and Pertamina, the government is involved through energy policy, but ONGC is characterised by the low substitutability of its domestic upstream role and downstream integration through HPCL.

This report does not obtain live spreads, OAS, CDS or same-tenor bond prices, so it does not make a rich/cheap judgement. Investment analysis should compare ONGC with India sovereign, Indian Oil, HPCL, Oil India, Power Grid, NTPC, PFC, REC, Petronet LNG, PTT and Pertamina on the same currency, same tenor and same ranking basis. In domestic rupee bonds, AAA and government-related demand are highly relevant, while in foreign-currency bonds, India sovereign risk, government intervention, commodity prices, issuance size and liquidity need to be separated.

11. Key Credit Strengths and Constraints

The greatest strength is ONGC’s low substitutability in India’s domestic upstream sector. ONGC is the core of India’s domestic crude oil and natural gas production, and any disruption to its investment, operations or funding would have broad implications for India’s import-dependence reduction, domestic gas supply, upstream technology, human capital and resource policy. The government has a very strong incentive to maintain the company’s credit standing.

The second strength is the standalone financial profile. FY2026 standalone D/E of 0.02x, debt outstanding of INR7,823 crore, net worth of INR331,770 crore and current ratio of 1.66x are extremely conservative even for an ordinary operating company. FY2026 profit declined, but net profit of INR32,894 crore and operating cash flow of INR69,272 crore remain substantial. Domestic rating agencies maintain AAA/A1+ not only because of government support, but also because of standalone financial headroom.

The third strength is earnings support from the consolidated group. In FY2026, standalone upstream profit declined, while consolidated net profit increased to INR49,793 crore and consolidated debt declined. HPCL, MRPL, OPaL, OVL and OGL each carry risks, but in FY2026 multiple subsidiaries across downstream, petrochemicals, overseas and renewables improved and partly offset standalone upstream oil-price sensitivity.

The largest constraint is execution in production and reserve replacement. The extent to which natural decline at mature assets can be offset by KG-98/2, DUDP, Mumbai High redevelopment, Western Offshore, DSF II, Andaman and OALP acreage will drive medium- to long-term standalone credit quality. FY2026 2P reserve additions improved, but crude oil and gas production still declined slightly. Even when reserves are large, turning them into production requires investment, technology, service companies, regulation and execution.

The second constraint is policy risk. There are positive policies such as royalty reduction, but SAED reintroduction, gas-pricing changes, dividend demands, LPG compensation, fuel-price suppression and tax changes affect earnings and cash flow. Government linkage is a credit enhancement, but also a channel for government intervention.

The third constraint is subsidiary, overseas and petrochemical risk. OVL geopolitics, the downstream cycle at HPCL/MRPL, OPaL’s support needs, petrochemical market conditions, and impairment or delays at overseas projects are consolidated risks that are not visible from standalone upstream alone. FY2026 improvement is positive, but if a cycle reversal, guarantees and DSUs, abandonment liabilities and contingent liabilities overlap, they could consume the headroom created by low standalone leverage.

12. Downside Scenarios and Monitoring Triggers

The most realistic downside scenario is a simultaneous decline in crude and gas prices and production. In the standalone upstream business, lower selling prices directly affect profit. If natural decline in mature fields proceeds faster than expected and ramp-up at KG-98/2, DUDP, Mumbai High redevelopment, DSF II and other projects is delayed, lower prices and lower volumes would overlap. The first indicators to watch are standalone crude and gas production, realised prices, new well gas revenue, reserve replacement ratio and capex progress.

The second downside scenario is government policy absorbing upside earnings. If SAED or similar windfall taxes are reintroduced during periods of high oil prices, the gas-pricing framework becomes less favourable, dividend demands increase and the effect of royalty rationalisation is limited, cash flow may not rise as much as headline oil prices suggest. Issuers with strong government-support expectations may also be more exposed to government involvement in profit allocation.

The third downside scenario is consolidated downstream and petrochemical risk. If lower GRMs at HPCL/MRPL, LPG under-recoveries, fuel-price suppression, inventory valuation losses, OPaL petrochemical weakness or additional support overlap, consolidated profit and liquidity could deteriorate even if the standalone upstream business remains firm. The FY2026 downstream and petrochemical improvement was large, but it is cyclical. In particular, if guarantees, capital injections or support for OPaL or HPCL increase, creditors of the ONGC parent need to assess constraints on the use of standalone cash.

The fourth downside scenario is OVL geopolitical and overseas project risk. Sanctions, political instability, operating stoppages, capital controls, resource nationalism, delays in large projects such as Mozambique, impairments, abandonment obligations and dividend-remittance restrictions could affect consolidated financials. FY2026 disclosures still contain multiple overseas E&P-specific issues, including Sakhalin, South Sudan, Vietnam, Mozambique, the BC-10 guarantee and PIVSA-related items.

The fifth downside scenario is a deterioration in the sovereign or government-support assessment. Domestic AAA is very strong, but foreign-currency bonds are affected by the India sovereign rating, fiscal conditions, foreign-currency liquidity, the rupee and government-intervention risk. Because S&P’s rating is constrained at the sovereign level, a downgrade of India sovereign could directly affect ONGC’s foreign-currency bond rating. In addition, if the GoI stake falls below 51%, that would touch rating sensitivities for CARE and other domestic agencies.

Credit View and Monitoring Focus

ONGC’s current credit quality should be treated in domestic bonds as a very strong AAA/A1+ quasi-sovereign-type credit, and its standalone financial profile is also strong with low leverage. In foreign-currency bonds, consistent with S&P’s BBB/Stable rating, India sovereign risk, government intervention, commodity prices and individual bond terms should be assessed separately. The direction of credit quality is flat to slightly weaker in the standalone upstream business due to lower oil prices and a small production decline, but at the consolidated level, FY2026 downstream, petrochemical and associate improvements and strong operating cash flow provide support, meaning the overall direction is not one of rapid deterioration. The probability of a sharp change in level or direction is not high in normal conditions, but if a sovereign downgrade, sharp oil-price decline, major project delays, a sharp increase in subsidiary support and policy-taxation deterioration occur together, foreign-currency bond valuations and spreads could move faster than standalone financials.

The first basis for this view is ONGC’s low substitutability in India’s domestic upstream sector. ONGC is the largest domestic crude oil and natural gas producer and is an essential vehicle for the Government of India to reduce import dependence, maintain domestic resource development and promote a gas-based economy. The government has a strong incentive to maintain the company’s credit standing, and rating agencies also assess the likelihood of support as high.

The second basis is the strength of the standalone financial profile. FY2026 standalone D/E of 0.02x, debt outstanding of INR7,823 crore, net worth of INR331,770 crore and current ratio of 1.66x indicate a strong balance sheet even without government support. FY2026 standalone profit declined, but net profit of INR32,894 crore and operating cash flow of INR69,272 crore are large and do not indicate immediate pressure from dividends and investment.

The third basis is the group’s integrated policy importance and earnings diversification. HPCL, MRPL, OPaL, OVL and OGL each carry risk, but by spanning upstream, downstream, petrochemicals, overseas resources and renewables, ONGC is embedded more deeply in the Government of India’s energy value chain. FY2026 consolidated profit growth and consolidated debt reduction showed that there are periods when the group can absorb profit weakness in the standalone upstream business. However, because consolidated PAT also includes a large non-controlling interest component, profit attributable to the parent, cash upstreaming from subsidiaries to the parent, and guarantee and support burdens need to be assessed separately.

At the same time, investors should not treat ONGC as if it were a government-guaranteed bond. Domestic AAA provides a strong credit floor, but foreign-currency bonds are constrained by the India sovereign rating. For subsidiary or associate bonds, the presence or absence of an ONGC guarantee, payment mechanism and legal claim differ by instrument. FY2026 disclosures also include many items requiring individual structural verification, such as unsecured NCDs, the BC-10 guarantee, the Mozambique DSU and the Panna-Mukta dispute. Relative-value analysis should compare ONGC with India sovereign, Indian Oil, HPCL, Oil India, Power Grid, NTPC, PFC, REC, PTT and Pertamina on the same currency, same tenor and same ranking basis.

The credit view would improve if operating cash flow remains strong from FY2027 onward, debt does not increase even after capex and dividends, KG-98/2, DUDP, Mumbai High redevelopment and other projects contribute to production, the effect of royalty rationalisation is confirmed, and additional support for OPaL/HPCL/MRPL/OVL is contained. Conversely, it would deteriorate if lower oil prices, production decline, renewed increases in government take, subsidiary support, OVL geopolitics, a sovereign downgrade and weak individual bond terms appear at the same time.

Ultimately, ONGC is not “a weak state-owned company dependent on government-support expectations”, but “a core state-owned energy company with strong standalone financials, but constrained in foreign-currency bonds by sovereign risk and policy intervention”. This distinction is central to investment analysis. In domestic bonds, it is relatively easy to assess the company as a defensive high-rated issuer, but in foreign-currency bonds, investors should confirm whether spreads sufficiently compensate for sovereign risk, commodity prices, government policy, subsidiary support and the presence or absence of explicit bond guarantees.

Short Summary & Conclusion

ONGC is a Maharatna CPSE majority-owned by the Government of India and is a quasi-sovereign state-owned energy issuer at the core of domestic crude oil and natural gas production. In FY2026, the standalone upstream business reported lower profit due to lower oil prices and a small production decline, while on a consolidated basis net profit and operating cash flow were strong and consolidated debt declined, supported by improvements at HPCL, MRPL, OPaL, associates and others. However, because consolidated profit includes a large non-controlling interest component, profit attributable to the parent and cash upstreaming to the parent need to be confirmed separately. Domestic AAA/A1+, low standalone leverage and strong government-support expectations create a strong credit floor, but in foreign-currency bonds, India sovereign risk, government taxation, overseas E&P, subsidiary support and the presence or absence of explicit guarantees need to be assessed separately.

13. Sources

Primary company and exchange sources

• Oil and Natural Gas Corporation Limited, Financial Results for the Financial Year ended 31.03.2026, BSE filing dated 2026-05-26. Used to confirm FY2026 standalone and consolidated profit and loss, balance sheet, cash flow, segments, dividends, audit opinions, notes, NCDs and related-party transactions. Local saved location: issuer_summary/issuers/ongc/data/ongc_fy2026_financial_results_bse_20260526.pdf. URL: https://www.bseindia.com/xml-data/corpfiling/AttachLive/26b495d6-df81-4f00-8f08-13578afb27f9.pdf
• Oil and Natural Gas Corporation Limited, ONGC declares results for Q4 FY'26; surge in consolidated net profit by 53% and standalone net profit by 3%, Highest ever total dividend of Rs. 16,669 crore, BSE filing dated 2026-05-26. Used to confirm results highlights, production, new well gas, DUDP, BP TSP, 2P reserve additions and subsidiary highlights. Local saved location: issuer_summary/issuers/ongc/data/ongc_q4_fy2026_press_release_bse_20260526.pdf. URL: https://www.bseindia.com/xml-data/corpfiling/AttachLive/ab54e580-0a97-478f-b10e-8c3e3adf8330.pdf
• Oil and Natural Gas Corporation Limited, Integrated Annual Report 2024-25, exchange-distributed PDF, accessed 2026-05-12. Used to confirm business overview up to FY2025, government relationship, standalone and consolidated financials, production, reserves, capex and exchequer contribution.
• Oil and Natural Gas Corporation Limited, Q3 / nine months FY2025-26 press release dated 2026-02-12, exchange-distributed PDF. Used for comparison of 9M FY2026 standalone and consolidated gross revenue, net profit, crude realisations, gas prices, production and major project updates.

Rating and policy sources

• CARE Ratings, Oil and Natural Gas Corporation Limited rating rationale, 2025-10-08. Used to confirm domestic ratings, GoI support, FY2025 financials, liquidity, capex, and regulatory, E&P and OVL risks.
• ICRA, Oil and Natural Gas Corporation Limited: Ratings reaffirmed and withdrawn, 2026-03-19. Used to confirm NCD ratings, 9M FY2026, project progress, reserves and production, Mozambique and other items.
• India Ratings and Research, Oil and Natural Gas Corporation Limited rating action, 2024-11-08. Used to confirm domestic ratings, government link, subsidiary consolidation, treatment of OPaL and liquidity.
• S&P Global Ratings, "ONGC 'BBB' Rating Affirmed; Likelihood Of Government Support Raised To Extremely High; Outlook Stable", 2025-10-14. Used to confirm foreign-currency rating, SACP, likelihood of government support and sovereign constraint.
• Indian media reports on upstream royalty rationalisation dated 2026-05-12, including Business Standard, Economic Times, Moneycontrol and Times of India. Used to confirm the direction of royalty rationalisation reportedly based on a 2026-05-08 notification. Official notification, company comment and quantitative effect remain unconfirmed.

Internal project sources

• issuer_summary/issuers/ongc/data/ongc_core_metrics_20260527.json
• issuer_summary/issuers/ongc/working/ongc_20260527_writing_plan.md
• issuer_summary/issuers/ongc/current/ongc_issuer_summary_20260512.md

Unverified / Pending

1. FY2025-26 integrated annual report: FY2026 audited results have been confirmed, but the full annual report, detailed reserves, business-by-business plans and detailed MD&A have not been confirmed.
2. May 2026 royalty rationalisation: Official notification, applicable fields, application by onshore/offshore/deepwater category, contract type and company-level quantitative effect have not been confirmed.
3. Individual bond terms: For each bond of ONGC parent, OVL and other subsidiaries/associates, government guarantee, ONGC guarantee, negative pledge, cross default, change of control, taxation, governing law and pari passu status have not been confirmed.
4. Debt maturity, bank lines and hedging: Total debt and short-term borrowings have been confirmed from the FY2026 financial statements, but detailed maturity schedule, undrawn committed lines, foreign-currency debt and hedging have not been confirmed.
5. Recovery and remittance restrictions in overseas E&P: Final terms for Russia sanctions, Vankorneft dividends, Venezuela/PIVSA receivable, Bangladesh bank guarantees and the Mozambique Area-1 support scheme have not been confirmed.
6. Rating-agency updates after FY2026 results: This report uses existing CARE, ICRA, Ind-Ra and S&P materials. Rating actions after the FY2026 results have not been confirmed.
7. Live spreads: Same-currency and same-tenor spread comparisons with India sovereign, Indian Oil, HPCL, Oil India, Power Grid, NTPC, PFC, REC, PTT and Pertamina have not been conducted.