Fitch Ratings has upgraded the Standalone Credit Profile (SCP) of Oil and Natural Gas Corporation (ONGC) to 'bbb+' from 'bbb', while affirming the company's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable outlook.
Key Drivers of the Upgrade
According to Fitch, the upgrade reflects its expectation that ONGC's EBITDA net leverage will remain well below the 2.0x threshold, despite higher capital expenditure plans. The ratings agency stated, “Fitch Affirms Oil and Natural Gas Corporation at 'BBB-'/Stable; Raises SCP to 'bbb+'.”
Fitch expects ONGC's production decline to be arrested amid higher crude oil prices, while its vertically integrated operations will help maintain stable earnings over the next two years. The agency forecasts ONGC's EBITDA to remain at around Rs 940 billion annually over the next two years, compared with an estimated Rs 950 billion for the financial year ended March 2026.
Integrated Business Model Reduces Volatility
Fitch highlighted that ONGC's integrated business model, spanning upstream oil and gas production as well as refining, marketing, and petrochemicals through its subsidiaries, helps reduce earnings volatility. The agency expects downstream earnings to decline in FY27 because of lower marketing profits resulting from stickier retail fuel prices. However, this is expected to be offset by stronger upstream earnings supported by its assumption of a higher Brent crude oil price of USD 81.5 per barrel in FY27 compared with USD 68.4 in FY26, amid the Iran conflict.
For FY28, Fitch expects Brent crude prices to ease to USD 63.8 per barrel, which may lower upstream earnings, while downstream profitability is expected to improve as lower fuel, feedstock, and power costs support refining and marketing margins.
Financial Profile Remains Strong Despite Capex
Despite higher capital expenditure and expected negative free cash flow over the next few years, Fitch believes ONGC's financial profile will remain strong. The agency expects the company's EBITDA net leverage to rise to around 1.5x by FY28 from an estimated 1.1x in FY26, while remaining consistent with its upgraded standalone credit profile.
Strategic Importance to India's Energy Security
Fitch also noted ONGC's strategic importance to India's energy security. The company accounts for around two-thirds of the country's domestic oil and gas production and remains India's largest upstream oil and gas producer, as well as the third-largest refiner and marketer of petroleum products.
