The share price of Oil and Natural Gas Corporation (ONGC) today closed at a two-year high on hopes of divestment by the Central government.
The share ended 20 per cent up at Rs 214.55 on the Bombay Stock Exchange. Over 2.06 lakh shares changed hands.
ONGC had jumped to Rs 178.80 on February 12 from Rs 138.05 on January 25. Traded volumes had touched a high of 1.48 lakh shares on February 6 and a low of 1,728 on January 28.
More From This Section
Analysts said that with all public sector stocks moving up on hopes of disinvestment, there is speculation that the government will bring down its stake in ONGC as well.
According to analysts, the government had earlier said that it would not sell its stake in ONGC and Indian Oil Corporation as they are strategic investments.
But the market is strife with speculation that the government may at least bring down its stake in ONGC without giving up management control.
However, one analyst pointed out that ONGC is an illiquid stock and any modest purchase could lead to a spurt in the scrip. He said some funds or institutions are probably buying the stock.
Set up in 1956, ONGC is engaged mainly in exploration, development and production of crude oil, natural gas and a few value-added products.
The company is India's largest producer of crude oil, natural gas and LPG. Crude oil constitutes about 60 per cent of ONGC's total revenues, natural gas follows with 25 per cent, naphtha, LPG, C2/C3 and kerosene contribute the balance with respective shares of 7 per cent, 5 per cent, 2 per cent and 1 per cent.
The company's earnings are currently insulated from the vagaries of global crude oil prices. As per the government's policy, price payable to ONGC was supposed to be increased every year between 1997-98 and 2001-02 to reach international levels with a floor of Rs 3,469 per mt and a ceiling of Rs 5,570 per mt.
However, from April 2002, with the dismantling of the administered price mechanism, ONGC is supposed to be able to charge as per international pricing.
At present, domestic natural gas has a price ceiling fixed at 75 per cent of import parity price of fuel oil. This ceiling of Rs 2,850 per million cubic meter is less than 50 per cent of international natural gas prices. However, it is expected to continue to get a capped fixed price for natural gas.