ONGC beats Tata Steel, TCS to become India’s second most profitable company – but Russian tires could spoil the party


  • Rising crude oil and gas prices over the past few quarters due to supply-side constraints, led by Russia’s crisis in Ukraine, have taken advantage of the oil producer to make more money.
  • ONGC joins the elite club of the most profitable companies in India as it makes a profit of ₹40,305 crore in FY22.
  • The oil producer has surpassed Tata Steel, TCS and HDFC Bank to reach the second position in which Reliance Industries holds the top position.

State oil explorer ONGC defeated two Tata group companies – TCS and Tata Steel to become India’s second most profitable company in FY22 after Reliance Industries.

The record profits were made despite a decline in production in the last 11-18 quarters, aging fields and lack of new discoveries. However, the price of crude oil rose to nearly $140 a barrel, making even the low production very valuable. ONGC contributes to 70% of the total oil and gas production in India.

“A rise in global crude oil and natural gas prices is a key driver of ONGC’s profitability,” according to a report from YES Securities. It added that any moderation in crude oil prices will affect its cash flows as capital requirements are very high to maintain production in its aging fields.

ONGC reported a net profit of ₹40,305 crore for FY22, outperforming Tata Steel by a decent margin. It also beat one of India’s most valuable companies – TCS in terms of profits – after the price of crude oil skyrocketed.

Taxes, sanctions and more to affect ONGC’s profitability

As expected, this increase in profitability could be unsustainable, especially as analysts believe that tensions between Russia and Ukraine could ease, cooling the rising oil price. “ONGC’s performance will depend on how long geopolitical tensions last, as gains are directly related to the price of crude oil,” Sanjiv Bhasin, executive vice president, markets & corporate affairs at India Infoline, told india. Bhasin believes these tensions will ease by mid-July.

Once crude oil prices drop, so will ONGC on the list of most profitable companies.

“Brent will not sustain the $110 level. One or two years later, Brent will cool down. The two-year futures market is also showing prices falling by about $80-$90 a barrel, so that will definitely impact the margins for ONGC,” Anshuman Khanna, the founder of Valpro, told India.

While the benefits of the war may soon disappear, its effects — such as sanctions against Russia — could persist and negatively affect the fate of the ONGC.

ONGC beats Tata Steel, TCS to become India's second most profitable company - but Russian tires could spoil the party

The Russian Connection

ONGC’s international arm, ONGC Videsh, owns interests in multiple energy assets in Russia. One of the country’s gas-producing assets, Sakhalin-I, has already shown signs of trouble when US Major Exxon said it would leave the bloc. ONGC has a 20% stake in it, along with interests in Sakhalin II and Vankor fields in Siberia. “Russian assets face two problems — one is the fact that Russian crude is traded at a discount of about $10-$20 to Brent and a second problem is the repatriation of Russian dividends from these assets due to sanctions. It’s a real risk that could jeopardize their entire Russian investment,” Anshuman Khanna, the founders of Valpro, told

The Indian government is also not letting the state oil explorer profit from his profits. It is believed to collect some of it in the form of a
windfall tax on oil producing companies. Analysts at Citi call this fiscal threat an overhang.

There is speculation that the government could impose a 25% tax on the profits of oil and gas-producing companies, as the price of crude oil has risen by more than 50% by 2022.

The stock has risen over the past year, but does not reflect the positive impact of crude oil on earnings. Sanctions risk and taxes make the short-lived story of profitability even less attractive to investors.

ONGC beats Tata Steel, TCS to become India's second most profitable company - but Russian tires could spoil the party

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Indian companies raised $14 billion through IPOs and their i-bankers earned $300 million in fees