India’s Oil and Natural Gas Corp (ONGC), which once had $4.3 billion of funds, is now bleeding cash.
The state-run company’s cash reserves have shrunk by more than 90 per cent in the past year, after it was ordered to purchase the administration’s stake in a refiner and it paid a record dividend. ONGC’s reserves dropped to about 10 billion rupees (Dh543.5 million) as on March 31 from nearly 130bn rupees a year earlier, according to data complied by Bloomberg.
ONGC’s largest shareholder, Prime Minister Narendra Modi’s government, has been tapping state-run companies including India’s biggest energy explorer to bridge its fiscal deficit. That’s left the company with depleting cash at a time when it has been ordered to boost investment to help cut the nation’s crude imports. ONGC paid 426bn rupees last fiscal year as dividend to the government and to buy its stake in the refiner.
“ONGC is heavily leveraged now,” Aloke Kumar Banerjee, the company’s former finance head, said in an interview. “It’s important for exploration companies to have sizable cash balance as buffer. It’s a high-risk business.”
The energy explorer’s shares have fallen 17 per cent from a January high. They dropped as much as 0.6 per cent in Mumbai at 9:51am in Mumbai, while the benchmark S&P BSE Sensex gained 0.4 per cent. The company’s spokesman declined to comment on its falling cash levels.
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ONGC aims to spend 860bn rupees on 31 big projects to boost oil and gas production, according to its website. The company has started work on its largest-ever exploration project that will require investments of more than $5bn over about four years.
Earlier this year, ONGC sold debt for the first time to pay for the 369.2bn rupee acquisition of the government’s holding in refiner Hindustan Petroleum. Its capital expenditure swelled to a record 729bn rupees in the year ended March as it also invested 283.5bn rupees on exploration and production, and 74.8bn rupees to buy a stake in a block operated by Gujarat State Petroleum, according to the company’s website.
ONGC has about 250bn rupees of one-year loans maturing in January, according to company officials, who asked not to be identified as they are not allowed to speak to the media. It used up cash it had for capital expenditure and the acquisitions and needs about 21bn rupees more for the final dividend payout for the year ended March, the officials said.
The company officials said that ONGC has no plans to raise more debt to fund its capital expenditure of 320bn rupees in the current fiscal that started April 1. Cash flows through the year will suffice, they said.
In the past, ONGC has been asked to share fuel subsidies by selling oil to refiners at a discount, a burden that was taken entirely off its back only in the year ended March 2017.
Despite these pressures ONGC ’s credit rating remains good, primarily because it is majority owned by the government, which means a sovereign assurance and easier access to the domestic banking system.
Moody’s Investors Service has a very high investment grade rating on ONGC, Vikas Halan, senior vice president at the ratings company said in an interview. “In terms of financial ability, they have access to the banking sector in India unlike anybody else.”
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In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
UAE currency: the story behind the money in your pockets
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The specs: 2018 Maxus T60
Price, base / as tested: Dh48,000
Engine: 2.4-litre four-cylinder
Power: 136hp @ 1,600rpm
Torque: 360Nm @ 1,600 rpm
Transmission: Five-speed manual
Fuel consumption, combined: 9.1L / 100km
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Tips for entertaining with ease
· Set the table the night before. It’s a small job but it will make you feel more organised once done.
· As the host, your mood sets the tone. If people arrive to find you red-faced and harried, they’re not going to relax until you do. Take a deep breath and try to exude calm energy.
· Guests tend to turn up thirsty. Fill a big jug with iced water and lemon or lime slices and encourage people to help themselves.
· Have some background music on to help create a bit of ambience and fill any initial lulls in conversations.
· The meal certainly doesn’t need to be ready the moment your guests step through the door, but if there’s a nibble or two that can be passed around it will ward off hunger pangs and buy you a bit more time in the kitchen.
· You absolutely don’t have to make every element of the brunch from scratch. Take inspiration from our ideas for ready-made extras and by all means pick up a store-bought dessert.
