ONGC FPO Review

 

ONGC (Oil & Natural Gas Corporation India) FPO Review

ONGC is a government sector oil and gas company of India. It is a Fortune 500 company of the world ranked 152 according to Forbes. It amounts for 77% of India’s crude oil production and 81% of natural gas production.

This company is already listed on the stock exchange. However, in 2010, the government of India is planning to launch its follow on offer (FPO) to divest it more.

Most probably the FPO will hit the Indian market in April 2011. Right now government of India is holding 74% stake in the company. And through FPO, it is planning to sell 5% stake to raise around Rs.8000-14,000 crores.

Recently, The government has approved splitting each share of Oil & Natural Gas Corp (ONGC) into two, making it attractive and affordable for retail investors.

This is really a great move by ONGC. Because of the share split, the price of the shares will be halved and that’s why ONGC will become more affordable to the retail investors.

This shows that the government is really interested about the retail investors participation. I will give this FPO 4 out of 5 stars.

This is because it is India’s largest oil and natural gas sector company (Another is Reliance Industries). And the fundamentals of the company are strong. So one can go for it.

I have deduct 1 star because this is I think not a very lucrative investment for the young investors who are in their twenties and early thirties. This is because ONGC is already an ultra-large cap company and that’s why it won’t appreciate like midcap companies and give you outstanding returns.

So if you are in your young age than you should invest in more aggressive midcap companies having excellent growth potential. I am not saying that there is no growth opportunity in ONGC. But I am saying that ONGC is giant and that’s why the growth opportunity will be slow.