ONGC Buyback

ONGC  had informed on 14-12-18  that the meeting of the Board of Directors of the Company is scheduled on 20/12/2018,inter alia, to consider and approve  to consider the proposal for buyback of the fully paid-up equity shares of the Company. ONGC  Buyback as approved by its Board of Directors on 20th  December, 2018 Buyback of equity shares of the Company not exceeding 25,29,55,974 equity shares of the Company at the price of  Rs. 159 (Rupees one hundred and fifty-nine only)per equity share payable in cash for an aggregate consideration not exceeding Rs. 4022 Crore (Rupees four thousand and twenty-two crore only).  ONGC buyback represents approximately 1.97% of the total paid-up share capital of the Company and is on a proportionate basis under “Tender Offer” route.

See List of all Forthcoming and Recent Buybacks

Latest Updates:

  • ONGC tendering ratio was ~21% only which resulted in 100% Acceptance ratio in Retail option of Buyback
  • Seems ONGC Buyback has resulted in 100% buyback for retail
  • ONGC Buyback Live Bidding on NSE
  • ONGC Buyback Opens 29-1-19 to 11-02-19
  • ONGC Entitlement Ratio is 26.55%
  • Record date for share buyback fixed at 04-01-19

ONGC  Buyback 2018

The details of ONGC  buyback are given in the table below.

Particulars
Buyback 2018
Announcement 14-12-18
MP a day befo148.5
Board meeting 20-12-18
Buy Back Type Tender Offer
Buy Back Price159
MP bef BM148
MP aft BM148.1
% Premium on MP7.07%
BuyBack in Rs. Crore4022.00
Buy Back ( Shares)252,955,974
Equity Capital in cr6416.62
Tot No. of shares12,833,235,180
FV in Rs.5
Govt Holding in co.67.48
Individual Holding 15.73
% Buyback1.97%
Record Date04-01-19
Shrs reserved for Retail 37,943,396
Buyback Issue Date29-01:11-02-19
Shares on RD Buyback142,925,538
Buyback Entitlement26.55%
Shrs Tendered - retail29,645,437
Tendering ratio20.74%
Retail response78.13%
Aceeptance %100%
ONGC Buyback: Estimate of Acceptance Ratio:

This framework is based on estimation of shareholding of ONGC shareholders  who hold around 1500 number of shares. To this we have added estimates for
1) Few additional purchase  of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by Arbitrage investors.

Based on approximations indicated above, the entitlement ratio forIEX Buyback is not expected to be high. Considering a av. tendering ratio, under normal circumstances ONGC Buyback could have an acceptance ratio of  35-50% depending on how much new arbitrage investors buy into the stock.  Subsequently ONGC saw less arbitrage activity due to which Acceptance Ratio is now estimated to be between 50-70%.

Estimated Returns for ONGC Buyback

The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback.  Investors may kept in mind that stock markets are quite volatile at this  juncture and there are many political and other uncertainties related to international markets. We have depicted  estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.

Shares Purchased
1260
Nos.
Buyback Price159
A) Abs Returns
MP taken147.2
Investment185472
Pr aft buybk
Acceptance%138140144
50%0.88%1.56%2.92%
60%2.31%2.85%3.94%
70%3.74%4.14%4.96%

This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in  any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts.

 Buyback of Shares: A Primer for Retail Investors

ONGC: Bonus and Dividends

Bonus in Oct 2016. 1:2  of Rs. 5 each equity share
Dividends:  in FY17-18, ONGC  declared equity dividend of 132.00% amounting to Rs 6.6 per share. This translated to dividend yield of 4.5%.

About ONGC

  • Oil and Natural Gas Corporation Limited is a global energy holding company
  • ONGC is the largest crude oil and natural gas Company in India, contributing around 70 per cent to Indian domestic production
    and has a market share of 97 percent.
  • ONGC  ranks 11th among global energy majors as large Natural Gas company.  ONGC ranks 18th in ‘Oil and Gas operations’ and 183rd overall in Forbes Global 2000.
  • ONGC Videsh is a wholly owned subsidiary of Oil and Natural Gas Corporation Limited (ONGC), the National Oil Company of India, and is India’s largest international oil and gas Company. ONGC Videsh has participation in 41 projects in 20 countries namely Azerbaijan, Bangladesh, Brazil, Colombia, Iraq, Israel, Iran, Kazakhstan, Libya, Mozambique, Myanmar, Namibia, Russia, South Sudan, Sudan, Syria, United Arab Emirates, Venezuela, Vietnam and New Zealand.

ONGC : Price Trend, Summary of Financials

ongc price chart

Quarterly Results:

ParameterFigures
Market Cap (in ₹ Cr.)190,253
CMP148.25
BV158.71
P/ BV0.93
FV5
Price To Earnings (P/E) Ratio7.51
OPM46.27
PAT Margin (%)23.04
ROCE (%)15.03
Total Debt to Equity (D/E) Ratio0.13


Assessment: ONGC Buyback

  • ONGC is virtually debt free despite having taken over HPCL stake
  • ONGC Stock is providing a dividend yield of 4.45%.
  • ONGC declared good Q2FY19 prices aided by rising crude oil price. 
  • ONGC’s net profit stood at Rs 8,265 crore in the quarter ended 30 September, compared with Rs 5,130 crore a year earlier.
    Income from operations rose 47.5% to Rs 27,989 crore.
  • Company has been maintaining a healthy dividend payout of 70%
  • ONGC is also considering listing of ONGC Videsh on domestic exchanges.
  • Market has been  concerned about the possible subsidy share in the election year, which is  likely to get away with expected fall in oil prices.
  • ONGC  buyback plan is likely to increase its overall indebtedness and thus is not positive for stock price.
  • ONGC is likely to defer dividend on account of buyback.
  • Though ONGC price is suppressed being an election years, purely based on issue size, buyback price there is only a little attraction for arbitrage investors at this price ( See latest comments as due to Little arbitrage interest ONGC buyback has turned attractive).  However if ONGC is able to maintain a reasonable price post buyback as it is in F&O & its ability to post good numbers, the returns may increase marginally.
  • LATEST: ONGC saw less arbitrage activity due to which Acceptance Ratio is now estimated to be between 50-70% and those who bought for buyback are expected to gain.
  • These are my estimates only and please do your own diligence in this matter as even what may appear as totally safe arbitrage investments in stock markets have inherent risks.

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. Further the data in the post is prone to errors.