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ONGC set to get 10% return on Cairn fields

07 Dec 2010 Evaluate

The government has agreed in principle to ensure a minimum 10% return on investment (RoI) to ONGC in Cairn India’s Rajasthan blocks, boosting the firm’s valuation ahead of its follow-on public offering and removing a big obstacle for the $9.6-billion Cairn-Vedanta deal.

The state-run explorer has been losing money from these blocks, as it has to bear the entire royalty burden, and has been using the deal to negotiate better terms for itself. The government may transfer a part of its own share of profit from the blocks to help ONGC, but this would require the approval of the finance ministry because it would be a direct subsidy from the government.

This will come as an upside for investors ahead of the FPO as the Rajasthan blocks will generate more revenues in the years to come. A positive return for ONGC would help the Cairn-Vedanta deal as well as ONGC’s concerns would be addressed without making any changes for Cairn India materially.

ONGC Share Price

284.25 0.90 (0.32%)
21-Apr-2026 10:31 View Price Chart
Peers
Company Name CMP
ONGC 284.25
Oil India 468.95
Jindal Drilling&Inds 542.50
Deep Industries 478.05
Asian Energy Service 313.45
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