S&P Global Ratings Projects 15-20% EBITDA Growth for ONGC by FY27

Oil and Natural Gas Corp Ltd (ONGC) is poised for an operating recovery over the next six to nine months. According to a report released by S&P Global Ratings on Monday, the growth will be supported by higher earnings from its core oil and gas production business and a turnaround in its downstream refining operations.

The ratings agency expects ONGC's consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) to rise 15 to 20 per cent. This will bring estimated earnings to between ₹1.3 lakh crore and ₹1.4 lakh crore in the financial year ending March 2027. The increase is driven primarily by upstream operations benefiting from elevated crude prices.

S&P expects the state-run energy producer to maintain quarterly domestic oil and gas production of about 10 million tonne, which is equivalent to 73.5 million barrels of oil. This output is projected to support a quarterly EBITDA of ₹25,000 crore to ₹30,000 crore.

The agency assumes Brent crude will average $95 a barrel for the remainder of 2026 before declining to $80 a barrel in 2027. While this forecast implies continued support for ONGC's exploration and production earnings, a subsequent decline in oil prices could moderate that contribution. Despite this, ONGC's funds from operations-to-debt ratio could improve to about 60 per cent over the next 12 to 24 months, providing a substantial cushion against S&P's 40 per cent threshold for a 'BBB+' standalone credit profile.

S&P noted that the report does not constitute a rating action. ONGC's ratings remain constrained by India's sovereign credit ratings of BBB/Stable/A-2.

The improvement in ONGC's downstream business is expected to provide an additional earnings boost after losses at its refining subsidiaries weighed heavily on group performance in the June quarter. Hindustan Petroleum Corp Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL), ONGC's downstream subsidiaries, reported a combined EBITDA of ₹12,000 crore for the quarter ended September 30. This reversed a negative EBITDA of about ₹17,500 crore in the preceding quarter.

The June-quarter performance had been significantly affected by the Middle East conflict, which disrupted energy markets and increased costs across the oil supply chain. Moving forward, S&P expects improving refining margins and lower losses at HPCL to underpin downstream EBITDA of about ₹17,000 crore in fiscal 2027. Although this accounts for only about 13 per cent of consolidated EBITDA, the agency cautioned that significant downstream losses can materially weaken group earnings, as they did in fiscal 2023.

HPCL is expected to benefit from higher selling prices for refined fuels relative to procurement costs, as well as lower excise duties on fuel sales since March 2026. This recovery in refining provides a second earnings lever for ONGC, complementing its exposure to upstream oil and gas production.

Despite the stronger earnings outlook, S&P expects ONGC's consolidated operating cash flow to decline to ₹75,000 crore to ₹80,000 crore in fiscal 2027, down from ₹1.1 lakh crore in fiscal 2026. The anticipated decline reflects higher working capital requirements associated with elevated oil and fuel prices, particularly within the downstream business.

"The projected earnings growth for ONGC highlights the importance of balancing core upstream production with downstream refining stability. While elevated crude prices provide a strong buffer for exploration activities, managing working capital and refining margins will be critical for long-term cash flow management. Investors should closely monitor how external geopolitical factors and commodity price fluctuations impact state-run energy portfolios moving toward fiscal 2027." — Dr. Shishir Gupta, Founder & CEO, StartupLanes