ONGC rallies as government revised windfall tax which it levied at the start of this month

On July 20, at 2:16 pm, the shares of ONGC are up 4.16%.

The central government cuts its windfall tax on exports of petrol by Rs 2 per litre from Rs 6 per litre to Rs 4 per litre. The tax on diesel exports was also reduced from Rs 13 to Rs 11 per litre. This revision in windfall tax was fueled by reduction in the international prices for crude oil. In the month of July, the crude prices corrected steeply due to recessionary concerns in the developed economies like Europe and US.

Windfall tax was levied by the government at the start of this month to curb down domestic fuel price by dis-incentiving fuel exports like ONGC, Reliance, and Chennai Petroleum to export oversee by imposing higher export tax to easy burden on common people for fueling their gas tanks.

However, due to recent sharp correction in international oil prices, domestic prices have reduced. Hence, effective from July 20, the government has lowered windfall tax. This action has led to positive impact on the shares of ONGC today, trading 4.16% higher at Rs 132.75. On July 20, the stock opened at Rs 134.7 and made an intraday high and low of Rs 136.4 and Rs 132.4.

ONGC is India’s largest natural gas and crude oil company, contributing about 71% to the India’s total crude oil and around 84% to natural gas production in India. ONGC cliental include companies like IOC, BPCL, HPCL which use crude oil as a raw material to produce petrol, diesel, kerosene, and cooking gas (LPG).

Talking about financial ratios, the company has a ROE, ROCE, and dividend yield of 19.6%, 16.8%, and 5.41%, respectively. The company is trading at 0.66 times its book value with a PE multiple of 3.58x.

ONGC belongs to BSE group ‘A’ and has a market capitalization of Rs 168,198 crore. The stock has a 52-week high and low of Rs 194.6 and Rs 108.5.