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State-run Oil and Natural Gas Corporation Ltd (ONGC) and its subsidiary ONGC Videsh have witnessed a ratings downgrade with a negative outlook, courtesy a similar Indian sovereign rating.

Fitch Ratings has assigned 'BBB-' rating on ONGC's Long-Term Foreign-Currency Issuer Default Rating (IDR) and US dollar senior unsecured notes and on the foreign-currency guaranteed notes issued by ONGC Videsh, ONGC Videsh Vankorneft Pte Ltd, along with the medium-term note programme co-issued by the three entities.

"ONGC's ratings are constrained by the ratings of the state of India (BBB-/Negative), its majority owner, according to Fitch's Government-Related Entities Rating Criteria, and the Negative Outlook reflects that of the Indian sovereign," Fitch said in a statement.

Fitch had assessed ONGC's Standalone Credit Profile (SCP) at 'bbb+', reflecting its scale as the largest oil and gas (O&G) producer in India, significant reserves and production and a diversified business model comparable with that of peers rated in the 'A' category by Fitch, counterbalanced by a moderate financial profile.

It said that ONGC's status, ownership and control by the sovereign is "strong" due to the state's majority ownership and board appointments.

ONGC has not received any tangible financial support recently given its strong Standalone Credit Profile (SCP), the ratings agency noted.

"However, we expect it to receive support, if needed, due to its importance for India's energy security as the largest national upstream company and third-largest refiner and marketer of petroleum products. It has also received indirect state support for its overseas upstream acquisitions," it said.

It noted that the outlook is negative and positive rating action cannot be expected. The outlook will be revised to stable if the sovereign's outlook is revised to stable, Fitch added.