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JPMorgan gives ONGC the thumbs down as shares fall further after windfall tax

The government on Friday surprised investors after imposing a $240 per tonne special additional excise duty on crude oil production in the country

Mumbai / July 04, 2022 / 10:50 IST
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Shares of Oil & Natural Gas Corporation (ONGC) extended their decline on July 4 after falling more than 13 percent on Friday as brokerage firm JPMorgan India downgraded the stock in the wake of the new windfall tax.

The government on Friday surprised investors after imposing a $240 per tonne special additional excise duty on crude oil production in the country. The imposition of the special tax comes in the wake of global crude oil prices surging to eight year highs in recent months.

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Brokerage firm JPMorgan downgraded its rating on the stock to ‘neutral’ from ‘buy’ earlier and cut its price target 26 percent to Rs 155 as it sees sharp cut in earnings estimate going ahead.

The brokerage said that the fixed additional tax is sharply negative for the stock. Analysts believe that the tax will impose a heavy burden on ONGC given that it is a fixed quantum instead of an ad valorem tax that depends on the actual sales of the company.