ONGC, India’s largest oil refiner has disappointed its investors with 53% lower profits for the final quarter of FY23 due to higher expenses and more exceptional items.

For the quarter that ended in March 2023, the company reported revenues of Rs 1.64 lakh crores, up 5% YoY but down 3% sequentially. Revenues from offshore explorations and refining improved significantly as the total income improved by 5% to 1.67 lakh crores. 

During the quarter, the company saw a sharp spike in exceptional expenses, which grew over three-fold to Rs 7,445 crores. Consequently, profit dropped 53% to Rs 5,701.46 crores from Rs 12,061.44 crores reported in Q4FY22.

For FY23, the company's revenues improved by 29% to Rs 6.84 lakh crores. During the year, Indian operations saw robust growth. Offshore exploration and production (E&P) revenues improved by 44% while its onshore E&P grew by 33%. Refining revenues remained the highest contributor to company revenues, contributing almost 78% of Total Revenues.

Expenses spiked sharply during the year as the cost of raw materials & purchase costs, the highest expenses of the refiner, surged 73% and 18% respectively. Moreover, the company had to write off major exploration costs during the year as the amount of the same spiked by 73% during the year. Total expenses grew 32% to Rs 6.42 lakh crores.

Higher expenses ate into the benefit of higher revenues as the operating margin declined over 300 bps to 8.63%. Consequently, net profits fell 34% to Rs 32,778 crores against Rs 49,294 crores reported in FY22.

The Board has recommended a final dividend of 10% or Rs 0.5 per share, translating to a 225% dividend payment for FY23. The stock of ONGC closed at Rs 163.75 per share, down 1.4% on Friday.