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Kotak: Oil India's Valuation Premium Over ONGC "Indefensible" Despite Near-Term Gains
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CNBC TV18•23-09-2026, 13:23
Kotak: Oil India's Valuation Premium Over ONGC "Indefensible" Despite Near-Term Gains
- •Kotak Institutional Equities finds Oil India's significant valuation premium over ONGC unjustified, despite both benefiting from higher global crude and gas prices.
- •Oil India has outperformed ONGC by 15 percentage points since February 2026, partly due to a broader preference for mid-cap stocks and strong inflows into mid-cap funds.
- •Oil India is projected to have stronger near-term crude oil volume growth (13.8% in FY27) compared to ONGC (2.4%), contributing to a better short-term earnings outlook.
- •Kotak argues ONGC has a stronger long-term outlook due to higher reserves-to-production ratios, better net realizations, stronger return ratios, and superior cash conversion.
- •Oil India's domestic operations trade at 7.7x one-year forward P/E, significantly higher than ONGC's 3.4x, a premium Kotak believes implies an unwarranted market perception of more durable earnings for Oil India.
Key Questions Answered
Kotak notes that while Oil India enjoys a near-term volume advantage and mid-cap preference inflows, ONGC features stronger long-term production reserves, higher return ratios, and better cash conversion, making Oil India's higher valuation multiple difficult to justify.
Kotak estimates that Oil India's total sales volumes will grow by 13.8% from 5.7 mn toe in FY26 to 6.5 mn toe in FY27, whereas ONGC's sales volumes are projected to increase by 2.4% from 41 mn toe to 42 mn toe over the same period.
At the end of FY26, ONGC's oil reserves-to-production ratio stood at 13.6 times compared to Oil India's 8.3 times, while the natural gas ratios were 13.3 times for ONGC and 11.1 times for Oil India.
