GICS Industry : Oil, Gas & Consumable Fuels l Sub Industry : Oil & Gas Exploration & Production

l Website : www.ongcindia.com

Oil & Natural Gas Corporation Ltd

Key Stock Indicators

NSE Ticker : ONGC CMP (as on 20 Dec 2010—Rs/share): 1304.5 Shares outstanding (mn) : 2138.9
Bloomberg Ticker : ONGC:IN 52-week range up to 20 Dec 2010 (Rs)(H/L): 1458.05/1002.50 Free Float (%) : 25.9
Face value / Share: 10.0 Market Cap as on 20 Dec 2010 (Rs mn): 2,790,052 Average daily volumes (12 months) : 996,945
Div. Yield (%): 2.5 Enterprise Value as on 20 Dec 2010 (Rs mn): 2,628,879 Beta (2 year) : 0.9

Oil & Natural Gas Corporation Ltd (ONGC) is India’s largest oil and gas company, accounting for 76%
of the country’s oil and gas production. The Government of India is the majority shareholder, with a Key Financial Indicators
74% equity stake. ONGC has a presence in the refining segment through its subsidiary MRPL Mar-08 Mar-09 Mar-10
(Mangalore Refinery and Petrochemicals). The company has acquired equity interest in gas
Revenue (Rs mn) 1,198,860.8 1,330,689.4 1,146,352.0
pipelines and LNG import terminals as well. It is also expanding its overseas footprint in
exploration via a series of acquisitions through its wholly owned subsidiary ONGC Videsh Ltd (OVL). EBITDA ma rgins (%) 32.5 30.2 35.3
PAT (Rs mn) 202,231.8 201,700.3 197,353.9
KEY HIGHLIGHTS PAT ma rgins (%) 16.9 15.2 17.2
Gea ring (x) - 0.1 0.1
Largest crude oil producer in India; production from OVL substantial
EPS (Rs /s ha re) 94.6 94.3 92.3
ONGC is the largest producer of crude oil in India. In 2009-10, it produced 24.7 mmt of crude oil on PE (x) 10.4 8.3 14.1
a standalone basis – 73% of total India’s crude oil production of 33.7 mmt. On a consolidated basis P/BV (x) 2.8 2.0 3.0
(including joint venture and OVL’s production), it produced 33.0 mmt of crude oil in 2009-10. RoCE (%) 39.5 36.2 29.0
However, ONGC’s crude oil production from domestic fields is on the decline considering most of
RoE (%) 28.9 25.6 22.7
its field has reached maturity. Thus, in 2009-10 ONGC’s overall production declined 2.2 per cent (y-
o-y). In a move to arrest the decline in its crude oil production from matured fields, ONGC is EV/EBITDA (x) 4.8 3.8 6.5
implementing IOR/EOR programs. n.m. : Not meaningful

Amongst the largest producer of natural gas in India Shareholding (As on September 30, 2010)
FII
In 2009-10, ONGC produced 23.1 bcm of natural gas on a standalone basis – 49% of India’s total 5% DII
natural gas production of 47.5 bcm. On a consolidated basis (including joint venture and OVL’s 8%
production), it produced 28.0 bcm of natural gas in 2009-10. In 2009-10, ONGC’s natural gas Others
production from domestic fields increased by 2.8 per cent (y-o-y). 13%

Largest E&P acreage holder in India

ONGC, in its portfolio, owns over 50% of the NELP acreage. Out of the total 235 blocks awarded in
the 8 NELP rounds, ONGC won 120, i.e. 51 per cent. In terms of producing assets, ONGC has 65% of
total producing asset acreage, while in terms of exploration assets, the company owns 51% of the
total exploration assets acreage.

KEY RISKS Promoter

74%
• Government policy on import duty structure and pricing of domestic sales of crude oil, Indexed price chart
petroleum products and natural gas.
(index) ('000)
• Government policy on subsidy sharing by upstream companies. 140 6000
120 5000
Stock Performances vis-à-vis market 100
4000
Returns (%) 80
3000
60
YTD 1-m 3-m 12-m
2000
40
ONGC 23 3 -5 12 1000
20
NIFTY 12 -1 2 18 0 0
Jul-10
Feb-10

Sep-10
Jan-10
Dec-09

Jun-10
May-10

Aug-10

Oct-10
Nov-10
Apr-10
Mar-10

Note:
1) YTD returns are since April 1, 2010 to Dec 20, 2010.
2) 1-m, 3-m and 12-m returns are up to Dec 20, 2010. Volumes (RHS) ONGC NIFTY

CRISIL COMPANY REPORT | 1

Oil & Natural Gas Corporation Ltd
BACKGROUND

ONGC is the largest E&P player in India, with a market share of 73% in terms of crude oil production. Oil and gas contributed 86% to the company’s gross sales (standalone)
in 2009-10. ONGC also has a presence in the domestic refining space through its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), wherein it holds a 72%
stake. The current capacity of MRPL is 11.82 million tonnes per annum (mmtpa), which is expected to increase to 15 mmtpa by 2012. Additionally, ONGC through its wholly
owned subsidiary ONGC Videsh Ltd has been actively undertaking overseas E&P activities. Currently, OVL is in the process of executing 40 projects across 15 countries.

ONGC also has a presence in sectors like power, petrochemicals, LNG etc through various joint ventures. It holds a 50% equity stake in the ONGC Tripura Power Company
Ltd (OTPC) joint venture, which plans to set up a 726.6 MW (363.3x2) gas based combined cycle power plant at Pallatana, Tripura. This project is aimed at monetising
ONGC’s idle gas assets in Tripura, and the first phase of it is likely to be completed by December 2011. ONGC has also set up 51 MW wind power farms near Bhuj, Gujarat.
In petrochemicals, ONGC has formed a joint venture called ONGC Petro-additions Ltd (OPaL) with a 26% equity stake. The firm aims to set up a mega petrochemical
complex comprising 1.1 mmtpa ethylene cracker and global scale polymer units within the Dahej SEZ as a step towards downstream integration. Additionally, ONGC holds a
12.5% equity stake in Petronet LNG Ltd.

COMPETITIVE POSITION

Peer Comparison
ONGC OIL HOEC CAIRN India
Mar-10 Mar-10 Mar-10 Mar-10
Revenue (Rs mn) 1,146,352.0 78,152.9 1,747.0 22,007.4
EBITDA ma rgins (%) 35.3 52.7 63.4 29.2
PAT (Rs mn) 197,353.9 26,104.3 440.3 10,511.1
PAT ma rgins (%) 17.2 33.4 25.2 47.8
Gea ring (x) 0.1 - 0.6 0.4
EPS (Rs /s ha re) 92.3 108.6 3.4 5.5
PE (x) 14.1 12.6 59.8 59.4
P/BV (x) 3.0 2.4 2.4 7.3
RoCE (%) 29.0 31.0 4.7 6.6
RoE (%) 22.7 22.6 4.1 13.1
EV/EBITDA (x) 6.5 5.9 28.9 101.1
n.m: Not meaningful

FINANCIAL PROFILE Key Financial Indicators

Lower international petroleum prices reduces revenue, but lower subsidy Units Mar-08 Mar-09 Mar-10
improves profitability Revenue Rs mi l li on 1,198,860.8 1,330,689.4 1,146,352.0
ONGC’s operating income declined by 14% y-o-y on the back of lower revenue EBITDA ma rgins Per cent 32.5 30.2 35.3
generation from its refining business. Revenues from its refining business declined PAT Rs mi l li on 202,231.8 201,700.3 197,353.9
as international petroleum product prices shrunk. However, the company’s
operating profit rose marginally by 1% y-o-y in 2009-10 due to lower subsidy PAT ma rgins Per cent 16.9 15.2 17.2
burden following a decline in oil prices. ONGC has been sharing subsidy on account Revenue growth Per cent 18.8 11.0 -13.9
of under-recoveries of national oil marketing companies (OMC’s) on petroleum
products. The operating profit margin of the company increased from 30.2% in EBITDA growth Per cent 12.9 3.0 0.8
2008-09 to 35.3% in 2009-10. PAT growth Per cent 13.1 -0.3 -2.2
Gea ring Times 0.0 0.1 0.1
RoCE Per cent 39.5 36.2 29.0
RoE Per cent 28.9 25.6 22.7

CRISIL COMPANY REPORT | 2

Oil & Natural Gas Corporation Ltd
INDUSTRY PROFILE

Crude Oil

Domestic crude oil production rose from 6.8 million tonnes in 1970-71 to 33.0 million tonnes in 1990-91, thanks to the new oilfield discoveries from exploration activities in
1960-90. However, since 1987 no new oilfields (except for Cairn India’s Rajasthan fields) have been discovered, because of which, domestic production has stagnated at 31-
34 MT till date, which has also led to significant increase in India’s dependence on crude oil import. The domestic crude oil demand-supply gap stood at an estimated 147
million tonnes (81 per cent of demand) in 2009-10. Domestic crude oil production sufficed for just 19 per cent of demand at 33.7 million tonnes. The government, through
the introduction of New Exploration Licensing Policy (NELP) in 1997-98, has made some efforts to increase crude oil production in the country by encouraging exploration
activity and private sector participation. Subsequently, eight rounds under NELP have been conducted.

PSU oil exploration and production companies have to share subsidy burden on petroleum products which caps their profitability in case of rise in crude oil prices. Dated
Brent crude oil prices declined from $97.6 per barrel in 2008 to $61.9 per barrel in 2009 due to slow down in global economies. However, they were significantly above
their recent lows of $34 per barrel recorded on 24th December 2008. The recovery in global economic growth coupled with increasing dependence on crude oil from the
Organization of the Petroleum Exporting Countries (OPEC) has led to rise in crude oil price in from 2010 which averaged at $79 per barrel during January-November 2010.

Oil and gas exploration

Domestic crude oil production rose from 6.8 MMT in 1970-71 to 33.0 million metric tonnes (MMT) in 1990-91. However, since 1987 no new oilfields (except for Cairn
India’s Rajasthan fields) have been discovered, because of which, domestic production has stagnated at 31-34 MT till date.

NELP was formulated in 1997-98 to encourage exploration activity and private sector participation in order to raise crude oil production in the country. The fiscal terms
offered under the NELP rounds are attractive to augment investments - investors have been offered tax holiday for 7 years from the beginning of commercial production of
crude oil. Subsequently, eight rounds under NELP have been conducted. A total of 126 discoveries have been made till date, of which 32 pertain to the pre-NELP period and
3 from the small and medium sized fields offered in 1992-93 and the remaining 70 pertain to the NELP blocks. The success of NELP is evident from the increase in the
average accretion to in-place reserves, from 176.1 million metric tonnes (MMT) till 1999-2000 to 337.6 MMT till 2008-09. However, exploration stage is more risky as
compared to production stage since there is high probability of misses and the gestation period is also very long.

CRISIL COMPANY REPORT | 3

Oil & Natural Gas Corporation Ltd
ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10
Net Sales 1,184,597.8 1,318,250.6 1,128,286.7 Equity share capital 21,534.7 21,388.9 21,388.9
Operating Income 1,198,860.8 1,330,689.4 1,146,352.0 Reserves and surplus 737,131.3 792,875.3 903,142.4
Tangible net worth 758,666.0 814,264.1 924,531.3
EBITDA 389,855.1 401,509.4 404,697.7 Deferred tax liablity:|asset| 87,375.5 92,230.8 102,912.2
EBITDA Margin 32.5 30.2 35.3 Long-term debt 8,935.2 9,508.6 41,118.7
Short-term-debt 499.6 56,082.7 21,550.6
Depreciation 109,455.4 115,817.9 130,931.8 Total debt 9,434.7 65,591.3 62,669.3
Interest 2,152.7 14,101.0 -5,648.7 Current liabilities 167,223.4 200,232.0 226,320.2
Other Income 28,834.4 35,720.2 22,318.9 Total provisions 197,237.3 253,608.8 250,246.8
Total liabilities 1,219,936.9 1,425,927.0 1,566,679.8
PBT 311,912.9 316,257.6 304,668.2 Gross block 1,490,943.4 1,692,365.8 1,926,861.1
PAT 202,231.8 201,700.3 197,353.9 Net fixed assets 705,138.7 896,934.1 1,015,120.5
Investments 47,024.8 38,987.1 58,651.2
PAT Margin 16.9 15.2 17.2 Current assets 467,773.5 490,005.9 492,908.1
Receivables 70,469.4 71,813.5 71,423.5
No. of shares (Mn No.) 2138.9 2138.9 2138.9 Inventories 72,984.8 65,423.9 82,400.1
Cash 250,558.5 225,955.6 223,842.3
Earnings per share (EPS) 94.6 94.3 92.3 Total assets 1,219,937.0 1,425,927.1 1,566,679.8

Cash flow Ratio

(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10
Pre-tax profit 307,081.4 307,310.8 301,733.5 Revenue growth (%) 18.8 11.0 -13.9
Total tax paid -103,424.2 -109,702.0 -96,633.0 EBITDA growth(%) 12.9 3.0 0.8
Depreciation 109,455.4 115,817.9 130,931.8 PAT growth(%) 13.1 -0.3 -2.2
Change in working capital -12,767.5 42,544.8 17,710.7
EBITDA margins(%) 32.5 30.2 35.3
Cash flow from operating activities 300,345.1 355,971.5 353,743.0 Tax rate (%) 33.1 35.1 31.4
Capital Expenditure -156,914.6 -396,282.3 -231,093.5 PAT margins (%) 16.9 15.2 17.2
Investments and others -10,999.5 8,037.8 -19,664.1
Dividend payout (%) 33.8 33.9 35.8
Cash flow from investing activities -167,914.1 -388,244.5 -250,757.6 Return on Equity (%) 28.9 25.6 22.7
Equity raised/(repaid) 0.0 0.0 0.0 Return on capital employed (%) 39.5 36.2 29.0
Debt raised/(repaid) -6,570.5 56,156.6 -2,922.1
Dividend (incl. tax) -80,457.4 -80,461.4 -82,575.0 Gearing (x) 0.0 0.1 0.1
Others (incl extraordinaries) -1,683.2 31,975.0 -19,601.7 Interest coverage (x) 181.1 28.5 0.0
Debt/EBITDA (x) 0.0 0.2 0.2
Cash flow from financing activities -88,711.1 7,670.2 -105,098.8
Change in cash position 43,719.9 -24,602.8 -2,113.4 Asset turnover (x) 0.8 0.8 0.6
Opening cash 206,756.0 250,558.5 225,955.6 Current ratio (x) 1.4 1.0 1.0
Closing cash 250,558.5 225,955.6 223,842.3 Gross current assets (days) 131 122 142
n.m : Not meaningful;

QUARTERLY RESULTS

Profit and loss account

(Rs million) Sep-10 % of Rev Sep-09 % of Rev Jun-10 % of Rev Sep-10 % of Rev Sep-09 % of Rev
No of Months 3 3 3 6 6
Revenue 193,364.6 100.0 163,308.8 100.0 142,302.2 100.0 335,666.8 100.0 322,549.6 100.0
EBITDA 122,279.9 63.2 99,737.9 61.1 86,004.2 60.4 208,284.1 62.1 205,195.7 63.6
Interes t 9.1 0.0 35.4 0.0 27.6 0.0 36.7 0.0 96.4 0.0
Depreci a tion 44,000.7 22.8 23,560.6 14.4 31,142.7 21.9 75,143.4 22.4 55,349.7 17.2
PBT 78,270.1 40.5 76,141.9 46.6 54,833.9 38.5 133,104.0 39.7 149,749.6 46.4
PAT 53,887.7 27.9 50,896.4 31.2 36,611.4 25.7 90,499.1 27.0 99,375.6 30.8

CRISIL COMPANY REPORT | 4

Oil & Natural Gas Corporation Ltd
FOCUS CHARTS & TABLES

Rs mn Quarterly sales & y-o-y growth Per cent Rs mn Quarterly PAT & y-o-y growth Per cent
250,000 50 70,000 80
40 60,000 60
200,000
30 50,000 40
150,000 20
40,000 20
10
30,000 0
100,000 0
20,000 -20
-10
50,000 10,000 -40
-20
0 -30 0 -60

Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Sep-08

Sep-09

Sep-10
Mar-08

Mar-09

Mar-10
Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Sales Sales growth y-o-y (RHS) Mar-10 Net Profit Net profit growth y-o-y (RHS)

Rs/share EPS Per cent Movement in operating and net margins

35 80
30 70
60
25
50
20
40
15 30
10 20
5 10
0
0

Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Mar-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

OPM NPM

Shareholding Pattern (Per cent) Board of Directors

Dec 2009 Mar 2010 Jun 2010 Sep 2010 Director Name Designation
Promoter 74.1 74.1 74.1 74.1 Ra dhey Shya m Sha rma (Mr.) Executive Cha irma n & Ma na gi ng
FII 4.5 4.2 4.2 4.6 Director
DII 7.7 8.0 8.0 7.8 Sri ni va s a n Ba la cha ndra n (Mr.) Non-Executi ve Di rector
Others 13.7 13.7 13.6 13.5 Sudhi r Bha rga va (Mr.) Nominee Di rector-Goi
Uda ykri s hna Ni tya na nd Bos e (Mr.) Director
Ani ta Da s (Ms .) Non-Executi ve Di rector
Aji t Kuma r Ha za ri ka (Mr.) Director
Sa ntos h Na uti ya l (Mr.) Non-Executi ve Di rector
Dines h Kuma r Pa nde (Mr.) Director
Subra ma ni a m Sri niva s Ra js eka r Non-Executi ve Di rector
(Mr.)
Dines h Kuma r Sa rra f (Mr.) Director
Loretta Ma rya nn Va s (Ms .) Nominee Di rector-Goi
Sudhi r Va s udeva (Mr.) Director

Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

Disclaimer
This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as
such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment,
legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial
liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or
redistributed or communicated directly or indirectly in any form to any other person – especially outside India or published or copied in whole or in part, for any purpose.

CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please
contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

CRISIL COMPANY REPORT | 5