ONGC board approved Rs.10,501 crore investment in ONGC Petro additions

Oil and Natural Gas Corporation (ONGC) is making to news in the petrochemical sector with its recent board approval for a major Rs.10,501 crore investment in ONGC Petro Additions Limited (OPaL). This investment will unfold in one or more parts, showing ONGC ramping up its stake in OPaL. Just last September, the board greenlit a sustainable capital restructuring plan for OPaL, bringing out the importance of this joint venture.

Details of the Investment

OPaL is a joint venture that includes ONGC, GAIL (India) Ltd., and GSPC, with shareholdings of 49.36%, 49.21%, and 1.43%, respectively. This mega petrochemical complex features a dual-feed cracker and downstream polymer units, making it a big player in using naphtha from ONGC’s Hazira and Uran plants, along with C2+ streams from the Dahej Extraction Plant. It’s not just about local business, OPaL has its sights set on the world, exporting products to over 50 countries and serving as a key tenant in the Dahej PCPIR in Gujarat.

The government has also given ONGC a go-ahead for this cash infusion, which involves converting Rs.7,778 crore worth of compulsorily convertible debentures (CCDs) and a remaining Rs.86 crore for share warrants. All told ONGC’s total financial commitment to OPaL hits Rs.18,365 crore, giving them a hefty 95.69% stake and turning OPaL into a subsidiary.

What’s Next for ONGC?

With this investment, ONGC plans to boost profitability at OPaL and has secured the ability to allocate 50% of gas production from new wells to support its operations, at a price that’s 20% above the APM price of natural gas. In addition to the investment, ONGC has appointed Arunangshu Sarkar as a key managerial personnel.

Conclusion: Wrapping Up, despite facing a 15.09% dip in standalone net profit for Q1FY25, ONGC’s move into OPaL shows its optimistic outlook for the coming years. The stock has shown good growth of around 45% since the start of the year, with most analysts favoring a ‘buy’. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.