With the recent request by Indian Election commissionaire to Oil Ministry to defer the fuel price till elections get over have given the hiccups to the industry and to the investors.

Last year ONGC reported a Net Profits of Rs 23,990 crore (EPS = Rs 28.31) with total revenues of Rs 162,386 crore. This industry and especially ONGC is witnessing a growth in range of 8% – 10% in its revenues annually.

With the slowdown in the economy ONGC has not witnessed that growth or we can say any growth at all this year. There are all together 42 analysts who keep close eye on the ONGC’s activities and are expecting its earnings for the March end 2014 in the range of Rs 34.40 – 25.10 per share.

There is no way ONGC will achieve Rs 34.40 for the 2014 year. It looks they will end up in range of Rs 28 – Rs 30 per share.

A new price regime was supposed to be implemented by all the public & private sector gas producers and that translates to a new price which is almost double ($8.30) to the original price($4.20) of gas in the country.

Almost 35% revenues of ONGC comes from the sale of gas. If this new price regime would have kick started from next month then ONGC’s expected revenues would have grown by almost 25% -30% and its profits after tax would have jumped up by almost 35% – 40% for the year end 2015.

Many analysts were expecting its 2015 earnings in the range of Rs 44 – Rs 29. The upper limit of expected earnings looks too optimistic because ONGC also shares subsidies with Government of India. Many analysts including us were expecting its 2015 earnings in the range of Rs 36 – Rs 40.

Two things can happen from here on if this new price regime does not take in effect from 1st April, either it will start after election (after 2 months) or the new government which comes into power and does not support it and takes hands off permanently from this law.

If it is the matter of 2 months only then we can still expect ONGC’s 2015 earnings in range of Rs 34 – Rs 35per share. And if it is the worst case scenario then we are looking its earnings in range of Rs 29 – Rs 31.

We expect its 2014 expected value to be in range of Rs 203,000 – 210,000 crore (Rs 237 – Rs 246 per share). Our range for 2015 is now around Rs 216,000 – 246,000 crore (Rs 252 – Rs 288 per share).

If Oil Ministry rejects EC’s plea and new prices kick in from the 1st April then our 2015 expected value for ONGC is Rs 295,000 crore (Rs 341 per share) and today it is trading around Rs 269,000 crore.

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