ONGC shares hit year high on hopes of cut in royalty payment

MUMBAI: Shares of ONGC on Monday hit a year high at Rs 1,360, amid reports that the government may allow the company to restrict total royalty obligation to 30 per cent on revenues earned from the oil blocks owned by Cairn India.

Oil And Natural Gas Corporation (ONGC) today shot up 2.03 per cent to settle at Rs 1,344.45 on the Bombay Stock Exchange. During the day, the scrip jumped over 3 per cent to touch a 52-week high level at Rs 1,360.

"Restricting the royalty burden to 30 per cent will come as a major relief to ONGC shareholders and remove an overhang from the stock," Angel Broking said in a note.

On the National Stock Exchange, shares of the oil explorer closed at Rs 1342.70, up nearly 2 per cent.

In terms of volume, over 22 lakh shares of the company changed hands on the two bourses.

According to the reports, ONGC was making just $2 per barrel from the oil blocks because of its high royalty payment.

The approval will help it save an annual outgo of $350 million in royalty payment, it added.

In the last trading session, the stock had risen nearly 3 per cent on making a new oil discovery in Gujarat. The company was also the top performer in terms of market capitalisation last week.

The Centre will compensate the Rajasthan government for the remaining amount though the modalities of the compensation have not yet been finalised, it said.