iocl
DESCRIPTION
IOCLTRANSCRIPT
1
INTRODUCTION OF THE TOPIC
RATIO ANALYSIS
Ratio analysis is a technique of determining numerical relationship based on financial
Statements. It is a tool which is used by various companies for conducting analysis for benefit
of investors and company. Ratio analysis is used to obtain information regarding company‘s
financial conditions in key areas. In addition, ratios can be used in a form of trend analysis to
identify areas where performance has improved or deteriorated over time. The ratio‘s are
calculated for the current year and compared with the company‘s previous year‘s
performance. Ratio is not used only by the company but also by others. Financial analysis is
the process of identifying the financial strengths and weaknesses of the firm by properly
establishing relationships between the items of:
The balance sheet
The profit and loss account
USERS OF FINANCIAL STATEMENT ANALYSIS:
The main users of financial statement analysis are as follows:
Executives: - To formulate policies.
Bankers: - To establish basis for Granting Loans.
Institutions Auditors: - To extend Credit facility to business.
Investors: - To assess the prospects of the business and to know whether they can get
a good return on their investment.
Accountants: - To study the statement for comparative purposes.
Government Agencies: - To study from an angle of tax collection duty etc.
ADVANTAGES OF RATIO ANALYSIS
The advantages derived by an enterprise by the use of accounting ratios are:
1) Useful in analysis of financial statements:
Bankers, investors, creditors, etc analysis balance sheets and profit and loss accounts
by means of ratios.
2) Useful in simplifying accounting figures:
Accounting ratio simplifies summarizes and systematizes a long array of
2
Accounting figures to make them understandable. In the words of Biramn
and Dribin, ― Financial ratios are useful because they summarize briefly the
results of detailed and complicated computation‖
3) Useful in judging the operating efficiency of business:
Accounting Ratio are also useful for diagnosis of the financial health of the enterprise.
This is done by evaluating liquidity, solvency, profitability etc. Such an evaluation
enables management to access financial requirements and the capabilities of various
business units.
4) Useful for forecasting:
Helpful in business planning, forecasting. What should be the course of action in the
immediate future is decided on the basis of trend ratios, i.e., ratio calculated for
number of years.
5) Useful in locating the weak spots:
Locating the weak spots in the business even though the overall performance may
quite good. Management cab then pay attention to the weakness and take remedial
action. For example if the firm finds that the increase in distribution expense is more
than proportionate to the results achieved, these can be examined in detail and depth
to remove any wastage that may be there.
6) Useful in Inter-firm and Intra-firm comparison:
A firm would like to compare its performance with that of other firms and of industry
in general. The comparison is called inter-firm comparison. If the performance of
different units belonging to the same firm is to be compared, it is called intra-firm
comparison. Such comparison is almost impossible without accounting ratios. Even
the progress of a firm from year to year cannot be measured without the help of
financial ratios. The accounting language simplified through ratios is the best tool to
compare the firms and divisions of the firm.
LIMITATIONS OF FINANCIAL RATIO ANALYSIS:
1) False Results:
If Financial Statements are not correct Financial Ratio Analysis will also be correct.
2) Different meanings are put on different terms:
3
Elements and sun-elements are not uniquely defined. An enterprise may work out
ratios on the basis of profit after Tax and interest while others work on profit before
interest and Tax .So, the Ratios will also be different so cannot be compared. But
before comparison is to be done the basis for calculation of ratio should be same.
3) Not comparable if different firm‘s follow different accounting Policies.
Two enterprises may follow different Policies like some enterprises may charge
depreciation at straight line basis while others charge at diminishing value. Such
differences may adversely affect the comparison of the financial statements.
4) Affect of Price level changes:
Normally no consideration is given to price level changes in the accounting variables
from which ratios are computed. Changes in price level affect the comparability of
Ratios. This handicaps the utility of accounting ratios.
5) Ignores qualitative factors:
Financial Ratios are on the basis of quantitative analysis only. But many times a
qualitative fact overrides quantitative aspects.
For Example: Loans are given on the basis of accounting Ratios but credit
Ultimately depends on the character and managerial ability of the borrower.
Under such circumstances, the conclusions derived from ratio analysis
would be misleading.
6) Ratios may be worked out for insignificant and unrelated figures.
Example: A ratio may be worked out for sales and investment in govt. securities.
Such ratios will only be misleading. Care should be exercised to work out ratios
between only such figures which have cause and effect relationship. One should be
reasonably clear as to what the cause is and what the effect is.
7) Difficult to evolve a standard Ratio:
It is very difficult to evolve a standard ratio acceptable at all times as financial and
economic scenarios are dynamic. Again the underlying conditions for different firms
and different industries are not similar, so an acceptable standard ratio cannot be
evolved.
8) Window Dressing:
Financial Ratios will be affected by window dressing. Manipulations and window
dressings affect the financial statements so they are going to affect the of ratios also.
Therefore a particular ratio may not be a definite indicator of good or bad
management.
4
9) Personal Bias:
Ratios have to be interpreted, but different people may interpret same ratios in
different ways. Ratios are only tools of financial analysis but personal judgment of the
analyst is more important. If he does not possess requisite qualifications or is biased
in interpreting the ratios, the conclusions drawn prove misleading.
TYPES OF RATIO
Table.1
1. LIQUIDITY RATIO
Liquidity ratio refers to the company‘s ability to meet its short term debt. The investors are
interested in the liquidity ratio of the company as the company with low liquidity ratio face
problem in meeting their debts. Bankers before providing loans to the companies take a close
look at liquidity ratio of the firm to see whether they will be able to return back the money
5
with interest or not. While liquidity ratios are most helpful for short-term creditors/suppliers
and bankers, they are also important to financial managers who must meet obligations to
suppliers of credit and various government agencies. Normally a company having higher
liquidity ratio implies that the firm is in a healthy position to cover the short term liabilities of
the company.
There are two types of liquidity ratio
Table.2
Current ratio:
The current ratio can give a sense of the efficiency of a company's operating cycle or its
liability to turn its product into cash. The current ratio indicates a company's ability to meet
short-term debt obligations. The current ratio measures whether or not a firm has enough
resources to pay its debts over the next 12 months. Companies that have trouble getting paid
on their receivables or have long inventory turnover can run into liquidity problems because
they are unable to alleviate their obligations. It compares a firm‘s current assets to its current
liabilities. This ratio is very important ratio which gives an indication of the firm‘s market
liquidity and ability to meet creditor‘s demands. The acceptable range is between 1.5to2. If
ratio exceeds 2: 1 it indicates poor use of current assets, such as holding excessive stocks or
cash.
The formula to calculate current ratio is as follows
Current Asset
Current Ratio = _______________________
Current Liabilities
Liquidity Ratio
Current Ratio
Quick Ratio
6
Quick ratio:
The essence of this ratio is a test that indicates whether a firm has enough short-term assets to
cover its immediate liabilities without selling inventory. In simple words, it helps to know
whether the firm is able to meet its short term liabilities with its most liquid assets or not. The
quick- asset test ratio is more accurate measure of liquidity of the company as it excludes
inventory from the current assets which is difficult to convert into cash immediately. It is
seen as a sign of company‘s strength or weakness. There are two terms of liquid asset and
liquid liabilities in this formula, Liquid asset is all current assets except the inventories and
prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities
include all current liabilities except bank overdraft and cash credit since they are not required
to be paid off immediately.
Liquid Asset
Quick Ratio = ____________________
Current Liabilities
2. PROFITABILITY RATIO
Table.3
Gross profit ratio:
The gross profit ratio is used to find out how much profit a business makes on its cost of
sales. In simple words, it is an idea that tells us the gross profit a business is earning. Gross
profit is the profit we earn before we take off any administration costs, selling costs and so
on. Gross profit margin measures company's manufacturing and distribution efficiency during
the production process. It is a measurement of how much from each dollar of a company's
revenue is available to cover overhead, other expenses and profits. High ratios are favorable
in this, since it indicates the business is earning a good return on the sale of its merchandise.
Profitability Ratio
Gross Profit Ratio
Net Profit Ratio
Earning Per Share
7
But gross margin ratio analysis may mean different things for different kinds of businesses.
For example, in case of a large manufacturer, gross margin measures the efficiency of
production process. For small retailers it gives an impression of pricing strategy of the
business.
Gross Profit
Gross Profit Ratio = _________________ X 100
Net Sales
Net profit ratio
Net profit ratio tells us what portion of sales are available to the equity shareholders after
deducting all the expenses. The higher the ratio higher is the profitability of the firm. Net
profit margin is important for not only investors but also for the management, the investors
are more interested in this ratio as it tells them profitability of the company whereas the
managements interests in it because it helps them framing policies and taking important . The
higher the margin is, the more effective the company is in converting revenue into actual
profit. It is normally advisable to have improved net margins compared to the previous
periods. If the margins are not improved, it calls for careful analysis to find out the reasons
behind the decline.
Net Profit after Tax
Net Profit Ratio = ___________________ X 100
Net Sales
Earnings per share:
Earnings per share are generally considered to be the single most important ratio in
Determining a share's price. It is an indicator of a company‘s profitability. This ratio is
considered while choosing good investments. It tells us what the earning of the share is. For
checking the profitability of the company the experts considers the earning of past years
earning per share ratio. This is, perhaps, the fundamental investor ratio.
The term earning per share represents the position of a company‘s earning, net of taxes and
8
preferred stock dividends that is allocated to each share of common stock.
The formula of earning per share is:
N.P.A.T. - Preference Dividend
EPS = _________________________________
Number of equity shares Outstanding
3. SOLVENCY RATIOS:
Table.4
Solvency ratio is concerned with the relationship between the long terms liabilities that a
business has and its capital employed. The idea is that this relationship ought to be in balance.
It is a general term describing a financial ratio that compares some form of owner's equity (or
capital) to borrowed funds. The shareholders and lenders of long term loans may be
interested in this ratio
Debt Equity ratio:
Debt equity ratio measures the company‘s financial leverage. This ratio helps us to tell that
what proportion of shareholders funds and debt is used by the company to finance its assets.
This ratio shows the investment of shareholders in compare to the creditors. If there are
outside liability is much more than its shareholders fund it means that the company is
Solvency Ratio
Debt Equity Ratio
ProprietaryRatio
9
dependent on the debt holders for money and the shareholders will resist it as it will have
effect on their dividends. Share holders are given what is left out after giving it to debt
holders and preference share holders, if more debt is employed in the company then they will
have to sacrifice on part of the dividend. And if the dividends are less than the share holder‘s
equity this will mean that they are not raking proper advantage of their borrowing power.
Note: (External liabilities = all types of liabilities)
The formula of Debt-Equity ratio is as follows:
External Liabilities
Debt Equity Ratio= ______________________
Shareholder‘s fund
Proprietary ratio:
Proprietary ratio is a ratio which measures the relationship between equity fund and total
assets. And shows the extent to which the owner s‘ fund are sunk in assets or different kinds
of it.
Total Equity
Proprietary Ratio= _____________________________
Debt + Equity or [Total assets]
4. ACTIVITY RATIO:
Activity ratio is ratio with which we measure the efficiency of how the business uses its
assets. It is a ratio which tells us how quickly a company can convert certain assets into cash.
Companies will typically try to turn their production into cash or sales as fast as possible
because this will generally lead to higher revenues. Such ratios are frequently used when
performing fundamental analysis on different companies.
Activity ratios are used to measure the relative efficiency of a company based on its use of its
assets. These ratios are important in determining whether a company's management is doing a
10
good enough job of generating revenues, cash, etc. from its resources.
Table.5
Fixed Asset Turn Over Ratio
The fixed assets turnover ratio shows how much the company has invested in fixed assets
such as land, buildings, and equipment to generate sales. It shows how the company uses its
fixed assets to generate sales. A higher fixed asset turnover ratio means that the company has
been more efficient in utilizing its investments in fixed assets to generate revenue, whereas a
low fixed assets turnover implies that a firm has too much investment in fixed assets relative
to sales; it is basically a measure of productivity.
The formula is as follows:
Net Sales
Fixed Asset Turnover Ratio= ______________
Fixed Assets
Current Asset Turn Over ratio:
Current asset turnover ratio is almost like the fixed asset turnover ratio, it calculates the
capability of organization to earn sales with current assets. So it indicates with what ratio.
Current assets are turned over in the form of sales. This ratio indicates how well a company
generates sales revenue from the current assets. The higher the ratio the better it is for the
company as it shows that the company uses its assets in the most efficient manner possible.
Accountants generally compute the current assets turnover ratio on a monthly basis but it
can be computed on yearly basis also.
Activity Ratio
Fixed Asset TurnoverRatio
Current Asset Turnover Ratio
Working Capital Turnover Ratio
11
This ratio is calculated as
Net Sales
Current Asset Turn Over Ratio= _________________
Current Assets
Working Capital Turn Over Ratio
As its name suggests it is the relationship between turnover and working capital. It is a
measurement comparing the depletion of working capital to the generation of sales over a
given period. This provides some useful information as to how effectively a company is using
its working capital to generate sales.
A company uses working capital to fund operations and purchase inventory. These
Operations and inventory are then converted into sales revenue for the company. The
working capital turnover ratio is used to analyze the relationship between the money used to
fund operations and the sales generated from these operations.
The formula related is:
Net Sales
Working Capital Turn Over Ratio= ________________________
Working Capital
12
INTRODUCTION OF THE COMPANY
Indian Oil is India's flagship national oil company with business interests straddling the entire
hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum
products to exploration & production of crude oil & gas, marketing of natural gas and
petrochemicals. It is the leading Indian corporate in the Fortune 'Global 500' listing, ranked at
the 83rd position in the year 2012.
With over 34,233-strong workforce, Indian Oil has been helping to meet India‘s energy
demands for over half a century. With a corporate vision to be the Energy of India, Indian Oil
closed the year 2011-12 with a sales turnover of Rs. 4,09,957 crore ($ 85,550 million) and
profits of Rs. 3,955 crore ($ 825 million).
At Indian Oil, operations are strategically structured along business verticals - Refineries,
Pipelines, Marketing, R&D Centre and Business Development – E&P, Petrochemicals and
Natural Gas. To achieve the next level of growth, Indian Oil is currently forging ahead on a
well laid-out road map through vertical integration— upstream into oil exploration &
production (E&P) and downstream into petrochemicals – and diversification into natural gas
marketing and alternative energy, besides globalization of its downstream operations. Having
set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), Indian Oil is
simultaneously scouting for new business opportunities in the energy markets of Asia and
Africa.
13
REACH AND NETWORK
Indian Oil and its subsidiary (CPCL) account for over 49% petroleum products market share,
31% national refining capacity and 71% downstream sector pipelines capacity in India.
The Indian Oil Group of companies owns and operates 10 of India's 22 refineries with a
combined refining capacity of 65.7 million metric tones per annum (MMTPA, .i.e. 1.30
million barrels per day approx.). Indian Oil‘s cross-country network of crude oil and product
pipelines spans 11,163 km with a capacity of 77.258 MMTPA of crude oil and petroleum
products and 10 MMSCMD of gas. This network is the largest in the country and meets the
vital energy needs of the consumers in an efficient, economical and environment-friendly
manner.
14
It has a portfolio of powerful and much-loved energy brands that includes Indane LPGas,
SERVO lubricants, XtraPremium petrol, XtraMile diesel, PROPEL & petrochemicals, etc.
Validating the trust of 66.8 million households, Indane has earned the coveted status of
'Super brand' in the year 2009.
Indian Oil has a keen customer focus and a formidable network of customer touch-points
dotting the landscape across urban and rural India. It has 20,575 petrol and diesel stations,
including 4,225 Kisan Seva Kendra‘s (KSKs) in the rural markets. With a countrywide
network of over 38,000 sales points, backed for supplies by 139 bulk storage terminals and
depots, 3,960 SKO/LDO dealers (60% of the industry), 96 aviation fuel stations and 89
LPGas bottling plants, Indian Oil services every nook and corner of the country. Indane is
present in almost 2764 markets through a network of 5,934 distributors (51.6% of the
industry). About 7780 bulk consumer pumps are also in operation for the convenience of
large consumers, ensuring products and inventory at their doorstep.
Indian Oil‘s ISO-9002 certified Aviation Service commands an enviable 63% market share in
aviation fuel business, successfully servicing the demands of domestic and international flag
carriers, private airlines and the Indian Defence Services. The Corporation also enjoys a 65%
share of the bulk consumer, industrial, agricultural and marine sectors.
With a steady aim of maintaining its position as a market leader and providing the best
quality products and services, Indian Oil is currently investing Rs. 47,000 crore in a host of
15
projects for augmentation of refining and pipelines capacities, expansion of marketing
infrastructure and product quality up gradation.
ORIGIN OF IOCL
Indian Oil Corporation Limited is an Indian state-owned oil and gas company
headquartered at Mumbai, India. It is India‘s largest commercial enterprise, ranking 125th on
the Fortune Global 500 list in 2010. Indian Oil and its subsidiaries account for a 47% share in
the petroleum products market, 34.8% share in refining capacity and 67% downstream sector
pipelines capacity in India. The Indian Oil Group of Companies owns and operates 10 of
India's 19 refineries with a combined refining capacity of 65.7 million metric tons per year.
Indian Oil operates the largest and the widest network of fuel stations in the country,
numbering about 17606 (15557 regular ROs & 2049 Kissan Sewa Kendra). It has also started
Auto LPG Dispensing Stations (ALDS). It supplies Indane cooking gas to over 47.5 million
households through a network of 4,990 Indian distributors.
In addition, Indian Oil‘s Research and Development Center (R&D) at Faridabad supports,
develops and provides the necessary technology solutions to the operating divisions of the
corporation and its customers within the country and abroad. Subsequently, Indian Oil
Technologies Limited - a wholly owned subsidiary, was set up in 2003, with a vision to
market the technologies developed at Indian Oil‘s Research and Development Center. It has
been modeled on the R&D marketing arms of Royal Dutch Shell and British Petroleum.
The Indian Oil Corporation Ltd. operates as the largest company in India in terms of
turnover and is the only Indian company to rank in the Fortune "Global 500" listing.
India‘s flagship national oil company and downstream petroleum major, Indian Oil
Corporation Ltd. (Indian Oil) is celebrating its Golden Jubilee during 30th June - 1st
September 2009.
Established as an oil marketing entity on 30th June 1959, Indian Oil Company Ltd.
was renamed Indian Oil Corporation Ltd. on 1st September 1964 following the
merger of Indian Refineries Ltd. (established in August 1958) with it.
16
17
VISION WITH VALUES
18
VISION
A major diversified, transnational, integrated energy company, with national leadership and
a strong environment conscience, playing a national role in oil security and public
distribution. Indian Oil operates under the aegis of the Ministry of Petroleum &
Natural Gas (MOP&NG), Government of India.
VALUES
Indian Oil nurtures the core values of CARE, INNOVATION, and PASSION& TRUST
across the organization in order to deliver value to its stakeholders.
Care Stands for Concern, Empathy, Understanding, Co-operation, and Empowerment.
Innovation Stands for Creativity, Ability to learn, Flexibility, Change.
Passion Stands for Commitment, Dedication, Pride, Inspiration, Ownership, and Zeal & Zest.
Trust Stands for Delivered promises, Reliability, Dependability, Integrity, Truthfulness,
Transparency.
OBJECTIVES & OBLIGATIONS
OBJECTIVES
To serve the national interests in oil and related sectors in accordance and consistent
with Government policies.
To ensure maintenance of continuous and smooth supplies of petroleum products by
way of crude oil refining, transportation and marketing activities and to provide
appropriate assistance to consumers to conserve and use petroleum products
efficiently.
To enhance the country's self-sufficiency in crude oil refining and build expertise in
lying of crude oil and petroleum product pipelines.
To further enhance marketing infrastructure and reseller network for providing
assured service to customers throughout the country.
To create a strong research & development base in refinery processes, product
formulations, pipeline transportation and alternative fuels with a view to
minimizing/eliminating imports and to have next generation products.
19
To optimize utilization of refining capacity and maximize distillate yield and gross
refining margin.
To maximize utilization of the existing facilities for improving efficiency and
increasing productivity.
To minimise fuel consumption and hydrocarbon loss in refineries and stock loss in
marketing operations to effect energy conservation.
To earn a reasonable rate of return on investment.
To avail of all viable opportunities, both national and global, arising out of the
Government of India‘s policy of liberalization and reforms.
To achieve higher growth through mergers, acquisitions, integration and
diversification by harnessing new business opportunities in oil exploration &
production, petrochemicals, natural gas and downstream opportunities overseas.
To inculcate strong ‗core values‘ among the employees and continuously update skill
sets for full exploitation of the new business opportunities.
To develop operational synergies with subsidiaries and joint ventures and
continuously engage across the hydrocarbon value chain for the benefit of society at
large.
OBLIGATIONS
Towards customers and dealers: - To provide prompt, courteous and efficient
service and quality products at competitive prices.
Towards suppliers: - To ensure prompt dealings with integrity, impartiality and
courtesy and help promote ancillary industries.
Towards employees: - To develop their capabilities and facilitate their advancement
through appropriate training and career planning. To have fair dealings with
recognized representatives of employees in pursuance of healthy industrial relations
practices and sound personnel policies.
Towards community: - To develop techno-economically viable and environment-
friendly products. To maintain the highest standards in respect of safety, environment
protection and occupational health at all production units.
20
Towards Defence Services: - To maintain adequate supplies to Defence and other
Para-military services during normal as well as emergency situations.
FINANCIAL OBJECTIVES
To ensure adequate return on the capital employed and maintain a reasonable annual
dividend on equity capital.
To ensure maximum economy in expenditure.
To manage and operate all facilities in an efficient manner so as to generate adequate
internal resources to meet revenue cost and requirements for project investment,
without budgetary support.
To develop long-term corporate plans to provide for adequate growth of the
Corporation‘s business.
To reduce the cost of production of petroleum products by means of systematic cost
control measures and thereby sustain market leadership through cost competitiveness.
To complete all planned projects within the scheduled time and approved cost.
GROUP COMPANIES
Indian Oil is currently metamorphosing from a pure sectoral company with dominance in
downstream in India to a vertically integrated, transnational energy behemoth. The
Corporation is already on the way to becoming a major player in petrochemicals by
integrating its core refining business with petrochemical activities, besides making large
investments in E&P and import/marketing ventures for oil & gas in India and abroad.
Lanka IOC PLC
21
Indian Oil (Mauritius) Ltd.
IOC Middle East FZE
Chennai Petroleum Corporation Ltd. (CPCL)
Indian Oil - CREDA Biofuels Limited
22
JOINT VENTURES
Name of JV Date of
Incorporatio
n
Promoters
& Equity
Area(s) of
Operation
Avid-Oil India Pvt. Ltd.
04.11.1993 NYCO SA,
France and
Balmer
Lawrie &
Co. Ltd.
To blend,
manufacture
and sell
synthetic, semi
synthetic and
mineral based
lubricating
oils, greases
and hydraulic
fluids, related
products and
specialties for
Defence and
Civil Aviation
uses.
Delhi Aviation Fuel Facility Pvt. Ltd 28.03.2010 DIAL &
BPCL
For designing,
developing,
construction,
operation,
management,
maintenance
and transfer of
Aviation Fuel
Facility for T3
Terminal at
Delhi Airport
Green Gas Ltd. 07.10.2005 GAIL City Gas
23
(India) Ltd. Distribution in
Lucknow and
Agra.
Indo Cat Pvt. Limited 01.06.2006 Interact,
USA
Manufacturing
& marketing
of FCC
catalysts and
additives.
IOT Infrastructure
& Energy Services Ltd.
28.08.1996 Oil tanking
GmbH,
Germany.
To build and
operate
terminalling
services for
petroleum
products.
Indian Oil PETRONAS Private Ltd.
03.12.1998 PETRONAS
, Malaysia
To construct
and import
facilities for
LPG import at
Haldia and to
engage in
parallel
marketing of
LPG.
Indian Oil Skytanking Limited
21.08.2006 IOT
Infrastructur
e & Energy
Services
Ltd.,
Skytanking
GmbH,
Germany.
Design,
finance,
construct,
operate &
maintain
aviation fuel
facility
projects.
24
Indian Synthetic Rubber Limited
06.07.2010 TSRC
Taiwan &
Marubeni
Japan
Implementatio
n of Styrene
Butadiene
Rubber Project
at Panipat
Indian Oil Ruchi Biofuels LLP 28.05.2010 Ruchi Soya Implementatio
n of Bio-diesel
value-chain
project in the
state of Uttar
Pradesh
Lubrizol India Private Limited
01.04.2000 Lubrizol
Inc., USA
To
manufacture
and market
chemicals for
use as
additives in
fuels,
lubricants and
greases.
NPCIL-Indian Oil Nuclear Power
Corporation Limited
06.04.2011 Nuclear
Power
Corporation
of India
Limited
For developing
and operating
Nuclear Power
Plants for
harnessing and
developing
nuclear energy
for generating
electricity
25
Petro net LNG Limited
02.04.1998 Bharat
Petroleum
Corporation
Ltd., Oil &
Natural gas
Corporation
Ltd., GAIL
(India) Ltd,
Gaz de
France,
ADB
Development
of facilities for
import and
regasification
of LNG at
Dahej and
Kochi.
Petronet India Limited
26.05.1997 Bharat
Petroleum
Corp. Ltd.,
Hindustan
Petroleum
Corp. Ltd.,
Reliance
Ind. Ltd,
Infrastructur
e Leasing &
Financial
Services
Ltd. Trust
Company
Limited,
ICICI Bank
Ltd., State
Bank of
India., Essar
Oil Limited.
To implement
petroleum
products,
pipeline
projects
through
Special
Purpose
Vehicles.
Table.6
26
GOLDEN JUBILEE CELEBRATIONS
50 Golden Years in the Service of the Nation
India‘s flagship national oil company and downstream petroleum major, Indian Oil
Corporation Ltd. (Indian Oil) is celebrating its Golden Jubilee during 30th June - 1st
September 2009.
Established as an oil marketing entity on 30th June 1959, Indian Oil Company Ltd. was
renamed Indian Oil Corporation Ltd. on 1st September 1964 following the merger of Indian
Refineries Ltd. (established in August 1958) with it. The integrated refining & marketing
entity has since grown into the country‘s largest commercial enterprise and India‘s No.1
Company in the prestigious Fortune ‗Global 500‘ listing of the world‘s largest corporate,
currently at the 116th position.
27
INDIAN OIL TODAY
From a fledgling company with a net worth of just Rs. 45.18 crore and sales of 1.38 million
tones valued at Rs. 78 crore in the year 1965, Indian Oil has since grown over 3000 times
with a sales turnover of Rs. 285,337 crore, the highest–ever for an Indian company, and a net
profit of Rs. 2,950 crore .
Set up with the mandate of achieving self-sufficiency in refining and marketing operations
for a nascent nation set on the path of economic growth and prosperity, Indian Oil today
accounts for nearly half of India‘s petroleum consumption, reaching precious petroleum
products to millions of people every day through a countrywide network of around 35,000
sales points. They are backed for supplies by 167 bulk storage terminals and depots, 101
aviation fuel stations and 89 Indane LPG bottling plants. Indian Oil sold 62.6 million tones of
petroleum products, including 1.7 million tones of natural gas.
28
PROFILE OF CHAIRMAN
Shri. R.S. Butola
Chairman,
Indian Oil Corp. Ltd.
Mr. R.S. Butola is the Chairman of Indian Oil Corporation Ltd., India‘s flagship oil & gas
major and the largest commercial enterprise in India. He also heads Indian Oil‘s group
companies - Chennai Petroleum Corporation Ltd. and IOT Infrastructure & Energy
Services Ltd. – and industry organizations such as Petroleum Federation of India
(Petrified).
In a career spanning almost three decades, out of which two decades are in the
hydrocarbon industry, Mr. Butola has gained versatile experience in all facets of
hydrocarbon industry ranging from project development and execution to commercial
closures.
Before joining Indian Oil, Mr. Butola was the Managing Director of ONGC Videsh Ltd.
(OVL). Under his stewardship, OVL built a formidable E&P portfolio comprising both
discovered and producing assets in over 15 countries.
At Indian Oil, Mr. Butola is spearheading an enterprise wide exercise aimed at
strengthening internal systems by optimising the supply chain and achieving zero process
interruption. He is navigating the Company in times of unprecedented challenges being
faced by oil & gas companies with particular focus on building bench strength in its core
businesses besides acquiring competencies to manage new businesses such as E&P,
Nuclear energy, renewable, etc.
Mr. Butola is widely travelled, an avid reader and an astute thinker in the energy industry
with a rare insight into both upstream and downstream sectors.
29
CORPORATE STRUCTURE
Table.7
Indian Oil Corporation Ltd.
Rearch & Development
Pipeline Marketing
Head office
(Mumbai)
Northen Region Office (Delhi)
Delhi state office
(Delhi)
Rajasthan State office
(Jaipur)
Punajb State office
(Chandigarh)
Terminals
(Petrol & Diesel)Depot
Plants
(Gas)
Devisional office (for terminals &
depot)
Area office
(for plants)
Utter Pradesh State office-I
(Lucknow)
Utter Pradesh State office-II
(Noida)
Refinery
30
PRODUCTS AND BRANDS
Indian Oil is not only the largest commercial enterprise in the country but also it is the
flagship corporate of the Indian Nation. Besides having a dominant market share, Indian Oil
is widely recognized as India‘s dominant energy brand and customers perceive Indian Oil as
a reliable symbol for high quality products and services.
Benchmarking Quality, Quantity and Service to World-class standards is a philosophy that
Indian Oil adheres to so as to ensure that customers get a truly global experience in India.
Indian Oil is a heritage and iconic brand at one level and a contemporary, global brand at
another level. While quality, reliability and service remains the core benefits to the
customers.
Our Retail Brand template of XtraCare (Urban), Swagat (Highway) and Kisan Seva Kendra‘s
(Rural) are widely recognized as pioneering brands in the petroleum retail segment. Indian
Oil‘s leadership extends to its energy brands - Indane LPG, SERVO Lubricants, Autogas
LPG, XtraPremium Branded Petrol, XtraMile Branded Diesel, XtraPower Fleet Card, Indian
Oil Aviation and XtraRewards cash customer loyalty programmed.
Autogas
Indian Oil Aviation Service
Bitumen
High Speed Diesel
Bulk / Industrial Fuel
Indane Gas
SERVO Lubricants & Greases
Marine Fuels & Lubricants
MS / Gasoline
Petrochemicals
Special Products
Superior Kerosene Oil
Crude Oil
31
MAIN PRODUCT RANGE
HSD High Spirit Diesel
MS Motor Spirit
SKO (PDS) Superior Kerosene Oil
Bitumen Material used to lay down roads
Naphtha Furnace oil
ATF Aviation Turbine Fuel
LPG Liquefied Petroleum Gas
LUBE Lubricant Oil
Table.8
DDIIEESSEELL//GGAASS OOIILL ((HHSSDD))
Petroleum derived diesel (called as petrodiesel) named as HSD (High Spirit Diesel) is a
mixture of straight run product with varying amount of selected cracked distillates and is
composed of saturated hydrocarbons and aromatic hydrocarbons.
Diesel is used in diesel engines, a type of internal combustion engine. Diesel engines are used
in cars, motorcycles, boats and locomotives. Automotive diesel fuel serves to power trains,
buses, trucks, and automobiles, to run construction, petroleum drilling and other off-road
equipment and to be the prime mover in a wide range of power generation & pumping
applications.
PETROL/GASOLINE (MS)
Gasoline named as MS (Motor Spirit) is a complex mixture of relatively volatile
hydrocarbons that vary widely in chemical & physical properties and are derived from
fractional distillation of crude petroleum with a further treatment mainly in terms of
improvement of its octane rating.
An oxygenate is an oxygen-containing, ash less organic compound (such as an alcohol or
ether) which can be used as a fuel or fuel supplement. Motor gasoline is sold at retail outlets
where it is directly delivered into the automobile tank. The Indian Standard governing the
32
properties of motor gasoline & gasoline-oxygenate blends is IS 2796: 2000 (3rd Rev).
In view of the auto fuel policy issued by Govt. of India, more & more stringent specifications
(equivalent to Euro II, Euro III, and Euro IV) are being made applicable for the gasolines
being marketed in India. This has led to reduction of environmentally polluting factors in
gasolines.
XTRAPREMIUM
Indian Oil‘s XTRAPREMIUM is India‘s leading branded petrol boosted with new-generation
multifunctional additives known as friction busters that prevent deposition in the combustion
chamber. XTRAPREMIUM is custom-designed to deliver higher mileage, better pick-up, and
faster acceleration, enhanced engine cleanliness, minimizes exhaust emissions, restores peak
engine power, and reduces maintenance cost.
XTRA PREMIUM is a sought-after fuel among discerning motorists, and owners of new-
generation, high-performance cars have endorsed its unmatched performance.
In terms of fuel system cleanliness XTRAPREMIUM is hugely superior to any other
alternative fuel in this segment, with the additional benefit of fuel efficiency through the
friction modifier. The additive package contains proprietary components, including a
detergent dispersant, a friction modifier and a corrosion inhibitor, as a perfectly optimized
formulation in synthetic carrier oil.
The detergent dispersant cleans the fuel system and the friction modifier drastically reduces
friction in the non-lubricated engine area, thereby contributing to fuel economy.
33
XTRAMILE
Indian Oil‘s XTRAMILE Super Diesel, the leader in the branded diesel segment, is blended
with world-class multi-functional fuel additives. Commercial vehicle owners choose
XTRAMILE because they see a clear value benefit in terms of superior extra mileage, greater
acceleration, lower maintenance costs, faster pick-up, longer engine life, eliminates engine
knockings and improved engine protection. A growing section of customers who own diesel
automobiles, both in the ‗lifestyle‘ and ‗passenger‘ category, prefer XTRAMILE as a fuel for
its added and enhanced performance. XTRAMILE has brought in a huge savings in the high
mileage commercial vehicles segment. Transport fleets that operate a large number of trucks
crisscrossing the country are using XTRAMILE to benefit from higher mileage and reduced
maintenance costs.
SERVO
Indian Oil's SERVO range of lubricants reigns as the undisputed market leader in the Indian
lubricants market. Known for its cutting-edge technology and high-quality products, SERVO
backed by Indian Oil's pioneering R&D, extensive blending and distribution network,
34
sustained brand enhancement and new generation packaging is a one-stop shop for
complete lubrication solutions in the automotive, industrial and marine segments.
In the retailing segment, besides Indian Oil petrol stations, SERVO range of lubricants is
available through a network of SERVO press stations, bazaar outlets and thousands of
auto spare parts shops across the country. The SERVO range includes over 500 lubricants
and 1200 formulations encompassing literally every lubricant requirement.
The SERVOXpress is a one-stop shop for quick, easy and convenient auto care, providing
customers with a refreshing experience. The SERVOXpress stations have facilities for oil
change, tyre/battery checkups, A/C service, vacuum cleaning, perfuming, and
upholstery cleaning, polishing and lamination installation too.
INDANE LPG GAS
Indane is today one of the largest packed-LPG brands in the world. Indian Oil pioneered the
launch of LPG in India in the 1970s and transformed the lives of millions of people with the
introduction of the clean, efficient and safe cooking fuel. LPG also led to a substantial
improvement in the health of women in rural areas by replacing smoky and unhealthy
chullahs with Indane. It is today a fuel synonymous with safety, reliability and convenience.
Indian Oil‘s Indane LPG gas is used in 40 million homes as cooking fuel and commands
over48% market share in India.
35
Commercial LPG
Besides supplying domestic Indane LPG cylinders to households, Indian Oil also markets
commercial LPG cylinders in 19 Kg and 47.5 Kg capacity. The commercial LPG cylinders
are available at market rates and customers can avail of the superior energy efficiency of LPG
in their commercial establishments like canteens, hotels or even in industrial and fabrication
works like cutting, welding, heating etc. Besides the regular Indane LPG cylinders that are
delivered to doorsteps, Indian Oil also offers reticulated LPG systems for large residential
apartment complexes and establishments. Such systems are cost effective and the gas lines
laid to individual homes draw from a bank of LPG cylinders stored safely in a dedicated
place in the building.
INDIAN OIL AVIATION SERVICES
Indian Oil Aviation Service is a leading aviation fuel solution provider in India and the most-
preferred supplier of jet fuel to major international and domestic airlines. Between one
36
sunrise and the next, Indian Oil Aviation Service refuels over 1500 flights – from the bustling
metros to the remote airports linking the vast Indian landscape, from the icy heights of Leh
(the highest airport in the world at 10,682 ft) to the distant islands of Andaman
&Nicobar.Indian Oil Aviation services have a market share of 65% with a network of 101
Aviation Fuel Stations (AFS) meets complete aviation fuel requirement of the Defense
services.
AUTO GAS
Autogas (LPG) is a clean, high octane, abundant and eco-friendly fuel. It is obtained from
natural gas through fractionation and from crude oil through refining. It is a mixture
of petroleum gases like propane and butane. The higher energy content in this fuel
results in a 10%reduction of CO2 emission as compared to MS.
Autogas is a gas at atmospheric pressure and normal temperatures, but it can be liquefied
when moderate pressure is applied or when the temperature is sufficiently reduced. This
property makes the fuel an ideal energy source for a wide range of applications, as it can be
easily condensed, packaged, stored and utilized. When the pressure is released, the liquid
makes up about 250 times its volume as gas, so large amounts of energy can be stored and
transported compactly.
The use of LPG as an automotive fuel has become legal in India with effect from April 24,
2000. The fuel is marketed by Indian Oil under the brand name ‗AutoGas‘.IndianOil has
setup 316 Auto LPG Dispensing Stations (ALDS) covering 173 cities across India."
Autogas impacts greenhouse emissions less than any other fossil fuel when measured through
the total fuel cycle. Conversion of petrol to Autogas helps substantially reduce air pollution
caused by vehicular emissions. The saving on account of conversion to Autogas in
37
comparison to petrol is about 35-40%. Low filling times and the 35-40% saving is a reason
enough for a consumer to convert his vehicle to Autogas.
SWOT ANALYSIS OF IOCL
Opportunity:
The IOCL has much opportunity in the present market conditions. This is
Because the petroleum products are become a need for everyone and still contains a lot of
scope for customization. The various opportunities are listed below.
Since the company has the maximum no. Of out lets and also the maximum no. Of
refineries in India, it can very easily go for extension at any point of time, and can
introduce any new products, which will get support from its huge market network.
The company can make the buying process more easy for the customers, by implying
Many more schemes in the range of XTRAPOWER AND XTRAREWARD.
The company can think over the issue to build its own pipelines, so that it will be a
Independent player and it will also support its aviation fuel supply.
Company have a great scope in E&P. It is already involves in E&P but only in a very
Limited scale.
Threats
Since the company is the market leader in the field, so have maximum threats
From the other players and many other issues. The lists of threats are given below.
The foreign players with more advanced technology are the biggest treat
For the company.
The crude oil supply is also a big issue in front of the company, because
the company cannot fix its price and so, some time had operated in loss
also. It is the biggest problem because the maximum part of their crude is
been imported.
In future the market will welcome more private players, which will eat up
Its market share.
38
If the Govt. Policies allow the private players to set their own price, the
Private Player can seriously harm the market share of IOCL.
Internal environment
Strengths
IOC controls 10 refineries, by virtue of which it has a total share of around 40% of
India‘s overall refining capacity. IOC has also acquired equity stakes in CPCL and
BRPL, and in 2001, these refineries became subsidiaries of IOC.
58% of IOC‘s refining capacity is located in the Northern and Western regions, which
are high demand and high growth areas.
Although its refineries are located the interior of the country and not near the major
ports IOC has a very strong distribution network by virtue of having a share of 48% in
the country‘s product pipelines. The total capacity of these product pipelines is
49.79MMT.
IOC also acquired management control of the marketing company IBP, thereby
strengthening its position in these activities. It also has a dominant share in all
segments in terms marketing infrastructure. Its network includes 19830 retail outlets,
8000 LPG distributors, and 6492 kerosene/LDO dealers.
By virtue of entering into extensive joint venture agreements, and of its own
initiatives well, the company has a presence in various other related activities such as
petroleum storage, pipelines, lube additives, exploration, petrochemicals, gas, training
and consultancy, etc.
The company has already entered overseas markets such as Sri Lanka, Maldives, and
Oman and is presently considering entering Turkey through a JV. The company is in
talks with Caliak of Turkey to set up a 10 million TPA grassroots refinery with an
investment of $2 billion and establish retail business. IOC is also weighing the
possibility of entering Indonesia.
IOC has also started exploring the overseas markets for increasing its scope of
operations. Its interests include downstream activities in Sri Lanka, Maldives, Oman,
and Nepal; interest in the lubes business in Maldives, Dubai, Bangladesh, Sri Lanka,
etc; among others.
39
Weakness
The company is the market leader in the industry, but still it had much weakness.
The list is given below.
The major weakness for the company is the R&D. The company starts working on it.
The petrochemical product development technology is another weakness for the
company.
The technological drawback, as compared to some major foreign player is another
weakness for the company
40
OBJECTIVE OF THE STUDY
Following are the objectives on which I have focused upon in the project.
To have a deeper analysis of the liquidity, profitability and activity level of INDIAN
OIL CORPORATION LIMITED.
To study financial soundness and operational efficiency of INDIAN OIL
CORPORATION LIMITED.
To see how well the company is making use of its funds and how much is it
dependent on outsiders.
To study how fast the stock is moving through the firm and generating sale.
To study the economy and efficiency in the collection of amount due from customer.
To study the working capital turnover ratio.
To study the number of time the creditors are turnover in relation to purchase
41
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve research problem. It may be
understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them.
It is necessary for the researcher to know not only need to know how to develop certain
indices or tests, how to calculate, how to apply particular research techniques, but they also
need to know which of these methods or techniques ,are relevant and which are not, and what
would they indicate and why.
The research frame for the study is detailed below. It is necessary to explain the
methodology for the research work done. The purpose of research is to discover answers to
question through some specific procedure.
The aim of research is to find out the truth which is hidden or which has not been discovered
as yet. While conducting this research I have mainly used secondary data only.
. In order to facilitate the presentation this chapter is divided into following section.
Defining the problem: It is said,‖A problem well defined is half solved‖. The step is
to define the project under study and deciding the research objective.
Selection method: The present study is subjected to experimentation on the basis of
past results. No survey method was adopted to carry out the research.
Preparing research design: A research design is the arrangement of conditions for
collecting and analysis of data in a manner that aims to combine relevance to the
research purpose. Research Design is the conceptual structure within which research
is conducted. Research design includes the outline of what the researcher will do from
writing the hypothesis and its operational implications to the final analysis of data. A
research design is the framework of the study and used as a guide in collecting and
analyzing the data.
Determining sample design:
42
Universe: All the items under consideration in any field of inquiry constitute a
‗universe‘ or ‗population‘. The relevant universe in this case is oil companies and
it consists of other companies where a comparative study was conducted.
Sample: the sample is Indian oil and its different ratios that are to be analyzed and
major competitor of IOCtl.
Sampling Technique: the technique used are ratios and their analysis with the
past year and comparative balance sheets and income statements.
Data Collection: There are two sources of data collection:
Primary Sources: Primary Data is the data collected from the original source. In
my study primary data was not used as it is related to past results.
Secondary sources: Secondary Data is the one which has already been collected
by someone else and some other person is using that information. The source of
secondary data was books and web sites related to the company and the Balance
sheets of last few years have been used in my study.
Sources of secondary data:
1. Most of the calculations are made on the financial statements of the company
provided statements.
2. Referring standard texts and referred books collected some of the information
regarding theoretical aspects.
3. Method- to assess the performance of the company method of observation of the work
in finance department in followed.
43
ANALYSIS AND INTERPRETATION
1. LQUIDITY RATIO
Current ratio:
Current Asset
Current Ratio = _______________________
Current Liabilities
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Current Assets 53506.1 45234.5 60971.5 84903.1 117627
Current
Liability
40499.1 41493.7 51090.5 67204.6 81659.1
Current Ratio 1.32 1.09 1.19 1.26 1.44
Table.9
Figure.1
1.32
1.09
1.19 1.26
1.44
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Current Ratio
Current Ratio
44
Interpretation:
Current ratio is computed by dividing current assets by current liabilities. The ratio is mainly
used to give an idea of the company's ability to pay back its short term liabilities (debt and
payables) with its short-term assets (cash, inventory, receivables). Generally, the current ratio
of 2:1 is considered as satisfactory but still this cannot give the business a green signal. In
case of Indian Oil Corporation Ltd current ratio for 5 year (2008-1.32, 2009-1.09, 2010- 1.19,
2011-1.26, 2012-1.44) is near to 2 which suggests that the company is able to pay off its
obligations but will face little problem in doing so. We have also observed that the ratio was
almost same in all the years except in March‘09 where it dropped to 1.09 due to decrease in
current assets (from 53506.07 to 45234.47) and increase in current liabilities (from 40499.06
to 41493.74) but soon after that i.e. in 2010 the ratio recovered and reached 1.44 (highest till
date) in 2012.
It is generally seen that, the higher the current ratio, the more capable the company is of
paying its short term debts, but low current ratio does not show that the firm will go bankrupt.
Quick ratio:
Liquid Asset
Quick Ratio = ____________________
Current Liabilities
Table.10
MAR’08 MAR’09 MAR’10 MAR’11 MAR'12
Quick Assets 22564.59 20084.87 24567.4 35618.56 60797.99
Current
Liability 40499.06 41493.74 51090.52 67204.64 81659.12
Quick Ratio 0.55 0.47 0.45 0.51 0.74
45
Figure.2
Interpretation:
The acid-test ratio is more powerful than the current ratio; this is because the current ratio
includes inventory assets which may not be able to convert into cash quickly. It is said that
Companies with ratios of less than 1 cannot pay their current liabilities. In Indian Oil
Corporation Ltd the acid-test ratio is less than the industry standard which means that the
company may face problems in returning off the debts. When I compared the current assets
to liquid assets I found that the current assets are highly dependent on inventory. For
example in 2012 currents assets were 117627.19 where as the quick assets were 60797.99
this shows that the company has invested a huge amount of money on inventory. Whereas if
we talk about the ratio all are less than 1 but over the years it has improved from 0.54 in
March‘08 to 0.74 in March‘12 which is a good sign for the company.
2. PROFITABILITY RATIO
Gross profit ratio:
Gross Profit
Gross Profit Ratio = _________________ X 100
Net Sales
0.55
0.470.45
0.51
0.74
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Quick Ratio
Quick Ratio
46
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Gross Profit 8583.37 10626.49 11855.28 8046.57 13559.83
Net Sales 247359.24 307123.99 269438.08 331134.85 438829.68
Gross Profit Ratio 3.47 3.46 4.4 2.43 3.09
Table.11
Figure.3
Interpretation:
The gross profit ratio is calculated using gross profit divided by net sales, in this higher ratio
will mean that more amount of profit is earned which is favorable for the company as more
profit will be available to cover non – production cost. In this case the gross profit ratio is
satisfactory as it is a big company and even if the gross profit ratio ranges between 2 – 4 we
will consider it good., this indicates that the company is efficiently uses its labour. Here a
higher ratio is an indication of good management as the firm is successful in producing
products at a lower cost.
3.47 3.46
4.4
2.43
3.09
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Gross Profit Ratio
Gross Profit Ratio
47
Net profit ratio
Net Profit after Tax
Net Profit Ratio = ___________________ X 100
Net Sales
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Profit after tax 6703.43 2395.84 10998.68 8085.62 4265.27
Net Sales 247359.24 307123.99 269438.08 331134.85 438829.68
Net Profit Ratio 2.71 3.46 4.08 2.44 0.97
Table.12
Figure.4
Interpretation:
Generally, Net Profit = Gross Profit – Expenses
This ratio is so important because it tells us the amount of net profit per one dollar of the
turnover (sales) a business has earned. That is, after taking account of the cost of sales, the
administration costs, the selling and distributions costs and all other costs, the net profit is
the profit that is left, out of which they will pay interest, tax, dividends and so on.
2.71
3.46
4.08
2.44
0.97
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Net Profit Ratio
Net Profit Ratio
48
In the chart above the net profit ratio for the first three years is satisfactory but after March
2010 it started decreasing and decreased to 0.97 which is very less this is because of
decrease in net profit.
Earnings per share:
N.P.A.T. - Preference Dividend
EPS = _________________________________
Number of equity shares Outstanding
MAR’08 MAR'09 MAR'10 MAR'11 MAR'12
NPAT 2599400000 1071319000 7830720000 4225980000 3954620000
NO. Of shares o/s 2427952482 2427952482 2427952482 2427952482 2427952482
Earnings Per
Share 10.71 44.12 32.25 17.41 16.29
Table.13
Figure.5
Interpretation:
Earnings per share as mentioned above are a ratio in which we find out how much a single
share earns. In the case of Indian oil Corporation Ltd we can see that the company‘s EPS in
10.71
44.12
32.25
17.41 16.29
0
5
10
15
20
25
30
35
40
45
50
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Earning Per Share
Earning Per Share
49
March 2008 was lowest (10.71) then it increased and became highest of all years due to
increase in net profit after tax, but soon after that it dropped to 33.25 and eventually the per
share earnings dropped to 16.29.
3. SOLVENCY RATIOS:
Debt Equity ratio:
External Liabilities
Debt Equity Ratio= ______________________
Shareholder‘s fund
Table.14
Figure.6
Interpretation:
Debt equity ratio includes shareholders‘ fund is the share capital plus reserves and
surpluses. In case we can say that in 2008 the debt –equity ratio is 0.86 which indicates that
the equity is more than the debt whereas in 2009 and 2011 both are almost the same. The
ideal ratio of debt equity is 2:1 which indicates that for every one rupee of equity fund you
0.86
1.020.88
0.95
1.22
0
0.2
0.4
0.6
0.8
1
1.2
1.4
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
DEBT EQUITY RATIO
DEBT EQUITY RATIO
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
External liabilities 35523.17 44972.06 44566.25 52733.87 70323.93
Shareholder funds 41086.25 44003.26 50552.83 55332.32 57876.7
Debt equity ratio 0.86 1.02 0.88 0.95 1.22
50
can take two rupees as borrowings. Here the ratio is suitable for the company.
Proprietary ratio:
Total Equity
Proprietary Ratio= _____________________________
Debt + Equity (total assets)
Table.15
Figure.7
Interpretation:
The proprietary ratio is calculated by dividing the share holders fund by total assets. In case
of Indian oil corporation ltd the shareholder‘s fund is less than the total assets which is why
the ratio is less than 1 this means that a part of the assets is financed by creditors. The ideal
0.53
0.49
0.53
0.51
0.45
0.4
0.42
0.44
0.46
0.48
0.5
0.52
0.54
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Proprietary Ratio
Proprietary Ratio
MAR’08 MAR’09 MAR’10 MAR’11 MAR’12
Total Equity 41086 44003 50553 55332 57877
Debt Equity 76609 88975 95119 108066 128201
Proprietary Ratio 0.53 0.49 0.53 0.51 0.45
51
ratio is 0.5:1 and in the above chart the ratio is either greater than or near to 0.5 which means
it is satisfactory.
4. ACTIVITY RATIO:
Fixed Asset Turn Over Ratio
Net Sales
Fixed Asset Turnover Ratio= _________________
Fixed Assets
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Net Sales 247359.24 307123.99 269438.08 331134.85 438829.68
Fixed Asset 56474.71 61671.48 71279.92 91727.11 118282.93
Fixed Asset Turnover
Ratio 4.38 4.98 3.78 3.61 3.71
Table.16
Figure.8
Interpretation:
A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales
with the minimum investing in fixed assets. As in case of Indian Oil Corporation ltd we can
see that with the increase in sales the fixed assets has also increased in greater proportion that
4.38
4.98
3.78 3.61 3.71
0
1
2
3
4
5
6
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Fixed Asset Turnover Ratio
Fixed Asset Turnover Ratio
52
is why after 2009 it started decreasing the company is making unnecessary investment in
fixed assets, but from 2010-2012 it is almost the same.
Current Asset Turn Over ratio:
Net Sales
Current Asset Turn Over Ratio= _________________
Current Assets
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Net sale 247359.24 307123.99 269438.08 331134.85 438829.68
Current assets 53506.07 45234.47 60971.48 84903.08 117627.19
Current assets
turnover ratio 4.62 6.79 4.42 3.90 3.73
Table.17
Figure.9
Interpretation:
The current asset turnover ratio is calculated by dividing net sales by current assets.
A higher current assets turnover ratio represents that the company is more desirable
since it indicates the better financial position of company and better utilization of
4.62
6.79
4.423.9
3.73
0
1
2
3
4
5
6
7
8
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
CURRENT ASSETS TURNOVER RATIO
CURRENT ASSETS TURN OVER RATIO
53
these current assets. The chart above shows that in March 2009 it has improved but
then after that it started decreasing and reached 3.73 in March 2012.
Working Capital Turn Over Ratio
Net Sales
Working Capital Turn Over Ratio= ________________________
Working Capital
MAR’08 MAR’09 MAR’10 MAR’11 MAR’12
Net Sale 247359.24 307123.99 269438.08 331134.85 438829.68
Working Capital 13007.01 13740.73 9880.96 17698.44 35968.07
Working Capital
Turnover Ratio
19.02 22.35 27.27 18.71 12.20
Table.18
Figure.10
19.02
22.35
27.27
18.71
12.2
0
5
10
15
20
25
30
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12
Working Capital Turnover Ratio
54
Interpretation:
A high or increasing working capital turnover is usually a positive sign, showing the
company is better able to generate sales from its working capital. In the above chart we can
see that the ratio increases till 2010, but then it decreases after that which is due to increase
in working capital. The company is in better position if it uses its minimum working capital
to generate maximum sales.
55
LIMITATIONS OF THE STUDY
Time being less having a complete detailed study of the company, only the relevant and
important areas have been highlighted. All possible effort has been made to study the topic of
Ratio Analysis completely, justify.
As this is the public firm so data provided to me is secondary data.
Findings and conclusion as per my limited knowledge.
Time is big constraint to study the project in sufficient detail.
56
FINDINGS & CONCLUSION
It is evident from the above analysis that IOCL follows a conservative policy i.e. a
greater amount of investment in current assets.
As per the latest results of March 2011 the total current assets of IOCL stood at
Rs.65598 crores.
Thus it is evident that though IOCL maintains a high liquidity but at the same time it
incurs a loss.
This is also due to discrepancies between the international market price of crude oil
and government controlled domestic prices.
As IOCL being a public enterprise, it has to follow the government‘s orders and
cannot increase the prices of its products to international market rates.
Hence, it should focus on improving its working capital condition by reducing
investments in current assets thereby reducing its losses.
57
SUGGESTIONS
From the entire analysis what Indian Oil can do is simply strengthening their marketing
efforts and creates more demand for their product and also tries to use optimum level
of inventory. Besides they can implement certain plans so as to develop their business in
future. After doing the project the recommendation to IOCL may be to sustain with dignity as
discussed below:
It should increase sales so that inventory turnover ratio is improved and better return
achieved.
IOCL should concentrate on Brand Building and make all brands as successful as
Servo.
IOCL should approach Government to allow it to increase the prices of regulated
products especially LPG (Domestic) has to be marginally increased so that loss on
account of that is reduced. This is because loss per unit of LPG (Domestic) is highest
among the other products. Besides that Government of India should also consider the
better pricing policies to prevent loss of Indian oil companies. The recommended
policies may be:
By introducing differential rates to different income groups in the society for same
product. For e.g. high rate of LPG cylinder (domestic) to high income groups and
subsidized rate to low income groups.