• ONGC’s work not curtailed due to shortage of funds: Pradhan

    Oil Minister Dharmendra Pradhan today defended Oil and Natural Gas Corporation’s financial position, saying that the company has maintained its activity level and no activity was put on hold last financial year (2018-2019) due to shortage of funds.

    He also said the acquisition of Hindustan Petroleum (HPCL) and Gujarat State Petroleum Corporation’s block by ONGC were made to add more value and growth to the business as well as due to the potential benefit from vertical integration and the synergies arising out of acquisition of a downstream oil refining and marketing company.

    Replying to a question in Parliament Pradhan also denied any negative impact on ONGC’s finances due to share-buy backs and double dividend payout.

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    The company had last year acquired the government’s 51.1 per cent share in HPCL for Rs 36,915 crore. The acquisition was funded through internal accruals of Rs 12,034 crore and the balance Rs 24,881 crore through commercial borrowings. The company, had also acquired GSPC’s blocks for Rs 7,560 crore which was funded through borrowings.

    The acquisitions have hit the company’s cash reserves and working capital resulting in a leveraged balance sheet.

    ONGC’s cash reserve dropped to Rs 170 crore at the end of September 2018 from Rs 13,646 crore in September 2017 and Rs 1,000 crore in March 2018. The cash reserves grew to Rs 504 crore during the fourth quarter (January-March) of last financial year. ONGC’s working capital also became negative at Rs 27,000 crore as of March 31, 2018.

    The company’s balance sheet had Rs 25,000 crore of borrowings at the end of March 2018 due to HPCL acquisition, interim dividend pay outs and a Rs 4,022 crore share buyback program. It managed to bring down this liability to Rs 14,000 crore at the end of September 2018. However, the company’s short-term borrowings shot up again to Rs 21,594 crore by the end of March 2019.

    Pradhan while replying to a question in the upper house also denied aggravating ONGC’s precarious situation due to share-buy backs and double dividend payments.

    Pradhan informed ONGC declared a dividend of 140 per cent of paid up capital amounting to Rs 8,806 crore last financial year as compared to 132 per cent amounting to Rs 8,470 crore in the year before that. He added that ONGC bought back equity shares amounting to Rs 4,022 crore.

    However, a senor ONGC executive told ETEnergyWorld last month the upstream player could have brought down its short-term debt to Rs 11,000 crore as compared to Rs 21,594 crore posted in the fourth quarter if it had not been urged by the government to pay double dividend and share buy backs.

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