Synopsis: Kotak Institutional Equities upgraded ONGC to ‘Buy’ with a ₹375 fair value with an and a 41% upside potential, highlighting higher crude price assumptions, better realisations from new production, stable regulations, operational recovery, and volume growth, and the stock offers direct exposure to global oil prices.
The shares of a Large-Cap company specialising in the exploration, development, and production of crude oil and natural gas are in focus as Kotak Institutional Equities upgrades the stock to ‘Buy’ from the earlier ‘Add’.
With a market capitalization of Rs. 3,33,566.10 crores in the day’s trade, the shares of Oil and Natural Gas Corporation Ltd rose upto 0.5 percent, making a high of Rs. 265.95 per share compared to its previous closing price of Rs. 264.70 per share.
What Happened
Oil and Natural Gas Corporation Ltd, engaged in the exploration, development, and production of crude oil and natural gas, is in focus after Kotak Institutional Equities upgrades the stock to ‘Buy’ from the earlier ‘Add’. The brokerage has also raised its fair value to Rs 375 from the earlier Rs 280, pointing to improved earnings visibility, which indicates an upside potential of 41 percent from the previous day’s close.
Reason for the Target:
Favourable Crude Price Assumptions: Kotak’s higher crude oil price assumptions ($85/bbl for FY27 and $75/bbl for FY28) indicate a more optimistic outlook for global energy markets. Since oil prices directly impact ONGC’s revenue, these elevated assumptions suggest stronger earnings potential. Higher benchmark prices typically flow through to realisations, improving profitability and cash flows.
Higher Realisations from New Production: ONGC’s increasing share of output from newer, market-linked wells allows it to sell oil at prices closer to global benchmarks. This reduces dependence on older fields that may have regulated or discounted pricing. As a result, the company can achieve better margins and improved overall profitability.
Lower Regulatory Overhang: Recent policy shifts suggest reduced risk of aggressive government intervention, such as windfall taxes during periods of high crude prices. This improves earnings visibility and lowers uncertainty for investors. A stable regulatory environment makes ONGC’s cash flows more predictable and enhances investor confidence.
Operational Recovery and Volume Growth: Production growth from key assets like KG-98/2, Mumbai High, and western offshore fields is expected to boost overall output. Recovery in mature fields combined with contributions from new projects can drive steady volume expansion. Additionally, improvements in gas production provide another source of revenue diversification.
Reasonable Valuation and Upside Potential: Despite recent gains in oil prices, ONGC’s stock is still considered reasonably valued compared to its earnings potential. With improving fundamentals and clearer earnings visibility, there is scope for valuation re-rating. This creates potential upside for investors if performance continues to strengthen.
Direct Play on Global Oil Prices: ONGC acts as a direct beneficiary of rising global crude prices because its revenues are closely linked to them. In times of geopolitical uncertainty or supply constraints, oil prices tend to rise, which can significantly boost ONGC’s earnings. This makes the stock an attractive option for investors looking to gain exposure to global energy trends.
Financials & Others
The company’s revenue rose by 0.13 percent from Rs. 167,213 crores in December 2024 to Rs. 167,423 crores in December 2025. Meanwhile, Net profit rose from Rs. 9,747 crores to Rs. 11,946 crores in the same period.
The company delivers moderate profitability with a Return on Capital Employed (ROCE) of 12.0% and Return on Equity (ROE) of 10.6%, indicating steady but not exceptional returns. Its debt-to-equity ratio of 0.48 reflects a balanced capital structure, suggesting manageable leverage and relatively low financial risk.
It is currently trading at 0.89x its book value, indicating it may be undervalued relative to its net assets. It also offers an attractive dividend yield of 4.67%, providing steady income to investors. Additionally, the company has maintained a healthy dividend payout ratio of 37.9%, reflecting a balanced approach between rewarding shareholders and retaining earnings for future growth.
Oil and Natural Gas Corporation Ltd (ONGC) is India’s largest oil and gas exploration and production company. Founded in 1956, it is a state-owned enterprise under the Ministry of Petroleum and Natural Gas, Government of India. The company is headquartered in Dehradun and plays a crucial role in India’s energy sector by exploring, drilling, and producing crude oil and natural gas both onshore and offshore.
Being an integrated oil and gas corporation with dynamic in-house capabilities across all aspects of exploration and production, ONGC contributes approximately 72.8% of India’s crude oil and around 55.8% of its natural gas production. Its structured and holistic approach ensures that the company plays a significant role in establishing the Maharatna as a cornerstone of India’s energy sector.
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