Oil sustaining above $100 levels is one of India’s biggest concerns for India today. Not just in terms of inflation or GDP forecast, but also the balance sheet risk it poses for companies, especially in the Oil & Gas sector. Ambit Institutional Equities, in its report dated March 23, calls it an ‘energy shock’. They have turned ‘Sellers’ on OMCs as a result of the risk arising from elevated oil prices till FY30. The current pecking order of preference across the oil and gas sector is RIL>Upstream>gas utilities = CGDs>OMCs.
Ambit raises Brent crude estimates, cuts target price by 45-57%
According to them, high oil prices coupled with insufficient government relief and rupee depreciation is a concern. They have revised their new integrated margin assumption to Rs 3-5/litre between FY27- FY30 compared to estimates of Rs 6-8/litre earlier. This has resulted in 45-57% target price cuts for OMCs. In comparison, their new Brent crude oil estimates have led to upgrades to ONGC & Oil India targets by 4-6%. The brokerage house added that optimism for the gas sector has also reduced.
Ambit has raised its Brent crude oil estimates to $85/bbl in FY27 from $65/bbl, followed by $5/bbl reduction to $70/bbl till FY30. “We also factor in one-year delay to the gas glut (H2FY29). This shift is underpinned by the supply disruption at Qatar’s Ras Laffan, alongside persistent EU restocking demand and a strategic reconsideration of new regasification capacities,” they added. They believe this crisis “threatens to undermine the emergence of gas as a transition fuel.”
RIL, upstream oil companies ‘only winners’
The Ambit report pointed out that “RIL and upstream are the only winners.” Even after windfall taxes, they expect upstream companies to be winners as they “benefit from higher realisation of $70/bbl vs $60-65, pre-2026 war and the rupee depreciation.”
They pointed out that the Reliance-Texas blueprint is “a geopolitical hedge.” Reliance Industries has partnered with America First Refining (AFR) to develop a 160,000- barrel-per-day refinery in Brownsville, Texas, with operations targeted for 2029. “The $300 billion deal represents the cumulative 20-year commercial flow. A $125 billion purchase of 1.2 billion barrels of US shale oil and $175 billion in refined output. Reliance was chosen as a partner primarily for its technical expertise, scale, and commitment to clean operations.”
Ambit on ONGC: ‘Buy”
In the list of upstream oil companies, Ambit has a ‘Buy’ on ONGC. They believe that the “windfall tax fear is overdone.” According to the brokerage house, the current geopolitical uncertainty, supply disruptions, and near-term elevated demand “lead us to raise our near-to-medium-term crude oil estimates to $85-$70/bbl from $65/bbl for FY27-FY30.”
Ambit has also increased gas realisations for new-well gas, in line with the expected increase in the Indian crude basket. Due to the above changes, they have increased the target price for ONGC by 3% Rs 324 per share. This implies 20% upside potential for ONGC share price from current levels.
Ambit on Oil India: ‘Buy’
Oil India too has been rated ‘Buy’ with a target price of Rs 601 per share. The changes in refining hedge, current geopolitical uncertainty, supply disruptions, and near-term elevated demand have led them to increase the target price for Oil India by 6% and the current target implies about 26.8%.
Ambit on key gas stocks
In the pecking order, gas utilities follow upstream oil companies. Ambit has a Buy rating on key plays like GAIL, Petronet LNG. They have a ‘Buy’ on city gas distributors too. Here is a detailed analysis –
Ambit on GAIL: ‘Buy’
Ambit has a ‘Buy’ with a target price of Rs 217. This implies % upside for the GAIL share price from current levels. This implies almost 56% upside potential, though they have lowered the target price by 4% from earlier levels.
According to Ambit, the current turmoil in the Middle East has put 25% of GAIL’s marketing volumes and 30% of its transmission volumes at risk. Consequently, “they have moderated FY27 and FY28 transmission volume assumptions to 125/135 mmscmd from 135/145 mmscmd and reduced the overall transmission volume growth CAGR for FY26-FY30 by 200 bps to 5%.”
GAIL could also see potential windfall gains from marketing, which could pose upside risks to our conservative PAT estimates. Our TP of 217 implies a valuation of 8.7x FY28E EV/EBITDA and 1.8x FY28E P/B.
Ambit on Petronet LNG: ‘Buy’
Ambit estimates that the current Middle East turmoil has put 45% of Petronet LNG’s overall volumes at risk, as Qatar Energy announced force majeure. They believe that it may take “3 months” for Petnet LNG to “receive any volumes from Qatar.”
As a result they have moderated the target for Petronet LNG share price by 8% to Rs 396 per share. This still implies about 58% upside from current levels.
Ambit on IGL: ‘Buy’
It’s a ‘Buy’ for Indraprastha Gas too. Ambit has a target of Rs 243 for the IGL share price, implying 63% upside potential still.
With 45% of sourcing capped and 80% of volumes driven by the priority sector, the impact on IGL remains marginal. They have moderated Q4FY26 volumes by 5% and trimmed EBITDA margin estimates amid rising crude oil prices and gas costs. Despite these headwinds, they maintained the ‘Buy’ rating.
Ambit on Mahanagar Gas: ‘Buy’
For the Mahanagar Gas share price, the Ambit target is Rs 1,370. This implies 45% upside from current levels.
For MGL too they have maintained the ‘Buy’ rating despite EPS moderation of 5–7% for FY27–FY28. Additionally, long-term margin assumptions have been trimmed following a 1-year delay in the anticipated gas glut, now expected in H2FY29.
Ambit on Gujarat Gas: ‘Buy’
Ambit analysis indicated that Gujarat Gas or GGL has 70% of exposure to I&C volumes. This saw 20-100% curtailment and the company has significantly higher exposure compared to other retail City Gas distributors.
They cut the target price by 11% but despite these headwinds, they maintained the ‘Buy’ ratin due to the expectation of Morbi ramp-up in H2FY27/FY28. The revised target for Gujarat Gas share price is Rs 457. This implies 38% upside potential.
Ambit on OMCs: Turn ‘Sell’ers
The OMC space has seen significant target price downgrade from Ambit.
They have downgraded IOC share price by 45% and have a ‘Sell’ call. It is a ‘Sell’ for BPCL too driving a 42% downward revision to the target price. The downward revision in target price is maximum in HPCL. It has been revised down by 57% with a ‘Sell’ recommendation.
The key upside risks include higher-than-expected reduction in excise duties. The Middle East conflict has since driven up crude oil prices and crack spreads for petrol and diesel. The brokerage house expect this supply dislocation to sustain high prices, compressing marketing and integrated margins in the near term.
How to future proof from energy shocks
The report pointed out that the Government’s energy transition and decarbonisation push may be “delayed.” They believe the political reality following the 2024 Lok Sabha and fiscal pressures from rupee depreciation “prevent the government from being generous with relief for OMCs.” Ambit highlighted that the “government could encourage Oil & Gas companies to sign long-term sourcing/investment deals with the US, like Reliance.”
This, they believe, “will achieve the twin objectives of India fulfilling its bilateral trade commitments with the US and the latter improving its trade balance and securing long-term customers for its energy.”
Conclusion
Moreover, they believe adverse macros are likely to keep valuations in check. Overall, Ambit believes that upstream oil companies and Reliance Industries are the potential gainers in a situation where crude prices stay elevated for an extended period.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.
