HSBC has downgraded its rating on Oil and Natural Gas Corporation (ONGC) to ‘Reduce,’ setting a target price of ₹235. This decision reflects concerns about the impact of declining oil prices on ONGC’s earnings and the viability of future projects.
The brokerage highlighted that falling oil prices are exposing vulnerabilities in ONGC’s earnings potential. Additionally, the company faces declining production rates and has recently reduced guidance for its Krishna-Godavari (KG) field, raising concerns about its operational performance.
Another significant worry for HSBC is the anticipated increase in capital expenditure (capex) intensity, which could further strain ONGC’s financials. The performance of ONGC’s subsidiaries is also under scrutiny, as weaker results from these units could impact the company’s ability to sustain dividends.
In light of these factors, HSBC finds it increasingly difficult to maintain a bullish outlook on ONGC, advising caution for investors.
