My BPCL

INTRODUCTION
As a part of our curriculum, we are doing a project which is basically an Analysis of Bharat Petroleum Corporation Ltd. (BPCL). The Analysis has been done on the front of financial concepts. We have taken into consideration the data of last 5 years (2007-08 to 2011-12) from the financial statements of the companies. As a part of our project we took training in Ashok AutoMobiles. Ashok Automobiles is a BPCL retail outlet and it started in the year 2009 with its M.D Mr. Ashok Kumar Yadav and Mr. Sunil Kumar Gautam as its Manager. The products of Ashok Automobile are Petrol, Diesel and Mobile oil with turnover of Rs. 4.00 corer per annum. Industry Overview: Oil and gas sector is one of the key catalysts in fuelling the growth of Indian economy. With a 1.2 billion population and an economy that has consistently at approximately 8 per cent annually, India's energy needs are increasing fast, warranting a robust demand for oil and natural gas in the country. India has emerged as the 5th largest refining country in the world, accounting for 4 per cent of the world's refining capacity. India exported 50 million tones (MT) of refined petroleum products during 2011-12. With our refining capacity increasing further, this figure is likely to touch about 70 MT by 2014, making India one of the world's major exporters of petroleum products. The share of oil and natural gas in India's total primary energy demand is 40 percent. The planned investments span across the oil and gas. India will account for 12.4 per cent of Asia Pacific regional oil demand by 2015, while satisfying 11.2 per cent of the supply. In addition, India is also the world's fourth largest importer of oil. The petroleum and natural gas industry in India has attracted foreign direct investment (FDI) worth US$ 3.280.72 million from April 2000 to September 2011, according to the data provided by Department of Industrial Policy and Promotion (DIPP). The Department further recorded US$ 144 million during AprilSeptember 2011-12, in the industry.
FINANCIAL MANAGEMENT IN
BPCL: Vision
We are a leading energy company with global presence through sustained aggressive growth and high profitability
We are the first choice of customers, always We exploit profitability growth opportunity outside energy We are the most environment friendly company We are a great organization to work for We are a learning organization We are a model corporate entity with social responsibility
Early History - Dawn of a New Era

Do take some time off for a brief interlude with the past, as we take you back in time to the evolution of Bharat Petroleum Corporation Limited. A new chapter in the history of Indian industry. Petroleum (derived from Latin Petra - rock and oleum - oil) first came up in wells drilled for salt. People found it useful as illuminating oil and the demand for it steadily increased. Samuel Kier, a Pittsburgh druggist, bottled and marketed Petroleum as medicinal cure. To market a deodorized variant, he designed the first primitive refinery in 1852, which was a huge improvised kettle, connected to a metal tank. 'Colonel' Edwin Drake and 'Uncle' Billy Smith drilled a well with the specific objective of finding oil, and on 27th August 1859, they 'struck oil' at Titusville, in North Western Pennsylvania, USA, at a depth of 69.5 ft.
From Nothing to Gold

The 1860s saw vast industrial development. A lot of petroleum refineries also came up. An important player in the South Asian market then was the Burmah Oil Company. Though incorporated in Scotland in 1886, the company grew out of the enterprises of the Rangoon Oil Company, which had been formed in 1871 to refine crude oil produced from primitive hand dug wells in Upper Burma.
FINANCIAL MANAGEMENT IN BPCL
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The search for oil in India began in 1886, when Mr. Goodenough of McKillop Stewart Company drilled a well near Jaypore in upper Assam and struck oil. In 1889, the Assam Railway and Trading Company (ARTC) struck oil at Digboi marking the beginning of oil production in India.
While discoveries were made and industries expanded, John D Rockefeller together with his business associates acquired control over numerous refineries and pipelines to later form the giant Standard Oil Trust. The largest rivals of Standard Oil - Royal Dutch, Shell, Rothschilds - came together to form a single organization: Asiatic Petroleum to market petroleum products in South Asia. In 1928, Asiatic Petroleum (India) joined hands with Burmah Oil Company - an active producer, refiner and distributor of petroleum products, particularly in Indian and Burmese markets. This alliance led to the formation of Burmah-Shell Oil Storage and Distributing Company of India Limited.
The Pioneering Spirit - Burmah Shell Marketing

A pioneer in more ways than one, Burmah Shell began its operations with import and marketing of Kerosene. This was imported in bulk and transported in 4 gallon and 1 gallon tins through rail, road and country craft all over India. The company took up the challenge of reaching out to the people even in the remote villages to ensure every home had its supply of kerosene. The development and promotion of efficient keroseneburning appliances for lighting and cooking was an important part of kerosene selling activity. With motor cars, came canned Petrol, followed by service stations. In the 1930s, retail sales points were built with driveways set back from the road; service stations began to appear and became accepted as a part of road development. After the war Burmah Shell established efficient and up-todate service and filling stations to give the customers the highest possible standard of service facilities. On 15th October 1932, when civil aviation arrived in India, the company had the honor of fuelling J.R.D. Tata's historic solo flight in a single engined de Havillian Puss Moth from Karachi to Bombay (Juhu) via Ahmadabad. Thirty years later, i.e. in 1962, Burmah Shell again had the privilege to fuel JRD Tata's re-enactment of the original flight. Burmah Shell also fuelled flying boats, which carried airmail at slightly higher rates than sea transport, at several locations. As a true pioneer would, the company introduced LPG as a cooking fuel to the Indian home in the mid-1950s. And all along, it went beyond selling petroleum, to educate the customer. Besides selling Bitumen, the company pioneered desert road construction, training road engineers. It provided free
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technical services to industrial customers - big and small - and it became a part of the company's culture.
On Stream - The Burmah Shell Refinery

An agreement to build a modern refinery at Trombay, Bombay was signed between the Burmah Shell group of companies and the Government of India on 15th December 1951. Burmah Shell Refineries Limited was incorporated as a private limited company under the Indian Companies Act on 3rd November 1952, and work began on the marshland of Trombay at Bombay. Man and machine worked relentlessly, and soon the swamps gave way to towers and tanks of steel, and miles of pipeline. The refinery on 454 acres of land at village Mahul went on-stream on 30th January 1955, one year ahead of schedule. Dr. S. Radakrishnan, Vice President of India, declared the 2.2 MMTPA (Million Metric Tones Per Annum) Refinery open on 17th March 1955. It was then the largest refinery in India then. With this infrastructure, free India moved one step closer to self-reliance.
From Burmah Shell to Bharat Petroleum

On 24th January 1976, the Burmah Shell Group of Companies was taken over by the Government of India to form Bharat Refineries Limited. On 1st August 1977, it was renamed Bharat Petroleum Corporation Limited. It was also the first refinery to process newly found indigenous crude (Bombay High), in the country.
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Bharat
Petroleum
Corporation
Limited (BPCL)
is
an
Indian
state-
controlled oil and gascompany headquartered in Mumbai, Maharashtra. BPCL has been ranked 225th in theFortune Global 500 rankings of the world's biggest corporations for the year 2012.
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History
In 1989 during vast industrial development, an important player in the South Asian market was the Burmah Oil Company. Though incorporated in Scotland in 1886, the company grew out of the enterprises of the Chef Rohit Oil Company, which had been formed in 1871 to refine crude oil produced from primitive hand dug wells in Upper Burma. In 1928, Asiatic Petroleum Company (India) started cooperation with Burma oil company. This alliance led to the formation of Burmah-Shell Oil Storage and Distributing Company of India Limited. Burmah Shell began its operations with import and marketing of Kerosene. On 24 January 1976, the Burmah Shell was taken over by the Government of India to form Bharat Refineries Limited. On 1 August 1977, it was renamed Bharat Petroleum Corporation Limited. It was also the first refinery to process newly found indigenous crudeBombay High. In 2003, following a petition by the Centre for Public Interest Litigation, the Supreme Court restrained the Central government from privatizing Hindustan Petroleum and Bharat Petroleum without the approval of Parliament. As counsel for the
CPIL, RajinderSacharand PrashantBhushan said that the only way to disinvest in the companies would be to repeal or amend the Acts by which they were nationalized in the 1970s. As a result, the government would need a majority in both houses to push through any privatization.
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Operations
Bharat Petroleum owns Mumbai Refinery and Mathura Refineries with a capacity of 12 and 9.5 million metric tones per year.
Products Imports
BPCL imports products depending upon the domestic demand supply scenario. BPCL on a regular basis imports its LPG requirements mainly from the Middle East. Occasional there are import requirements of Gasoil, Kerosene, Gasoline and Base Oil. for General Term & Condition (GTC) for FOB Product Exports
Exports
BPCL exports products from its refineries on a regular basis. The products which are exported regularly are Fuel Oil, Naphtha and Base Oil (Group II). Products exports are done on both FOB and CFR basis. Both import and export of products are done through tender. Tender invitations are only sent to counterparties who are registered with BPCL. Companies interested in registering with BPCL for buying/supplying products,
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OIL INDUSTRY PLAYERS

Ministry of Petroleum and Natural gas UPSTREAM Exploration and Production DOWNSTREAM Refining and Marketing INDUSTRY BODIES
ONGC
Indian Oil
Bharat Petroleum
Petroleum Planning & Analysis Cell
OVL
IBP, CPCL, BRPL
KRL, NRL
Centre for High Technology
OIL INDIA LIMITED
MRPL
HINDUSTAN PETROLEUM
PCRA
Pvt. E & P Companies
RELIANCE INDUSTRIES LTD.
GAIL Gas Transportation & Petrochem PETRO FED
Other Private Cos. Oil & Gas Marketing
Oil Industry Safety Directorate
Petroleum India International
Engineers India Ltd.
Director General of Hydrocarbon
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COMPETITIVE ANALYSIS 1. Hindustan Petroleum Corporation (HPCL)
HPCL is a Fortune 500 company, with an annual turnover of over Rs 1,03,837 Crores ($25,142 Millions) during FY 2008-09, 16% Refining & Marketing share in India and a strong market infrastructure. Corresponding figures for FY 2006-07 are: Rs 91,448 crores ($20,892Million).The Corporation operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 5.5 MMTPA capacity and the other in Vishakapatnam, (East Coast) with a capacity of 7.5 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is progressing towards setting up of a refinery in the state of Punjab in the joint sector.
2. Mangalore Refinery & Petrochemicals (MRPL)
Set up as a joint venture between HPCL and the Aditya Birla group in 1988 as a standalone refinery, MRPL is now a subsidiary of ONGC, which has a 71% holding in it, and is also planning to buy out the balance HPCL stake. ONGC is expanding the scope of its operations to become an integrated player. The acquisition of MRPL was in order to facilitate its entry in the downstream industry. Apart from MRPL, ONGC is also having a mini plant, with a capacity of 0.13 lack tonnes. Moreover, the company also is working on plans to enter the marketing and retailing businesses. The company hopes to put in place a retail network of 1700 outlets in place over the next 3-4 years. The company is anticipated to take advantage of its real estate throughout the country for this purpose.
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OBJECTIVES GOALS AND OBLIGATIONS OBJECTIVES

To serve the national interests in the oil and related sectors in accordance and consistence with government policies.
To ensure and maintain continuous and smooth supplies of petroleum products by way of crude refining, transportation and marketing activities and to provide appropriate assistance to the consumer to conserve and use petroleum products efficiently.
To earn a reasonable rate of interest on investment.
To work towards the achievement of self-sufficiency in the field of oil refining by setting up adequate capacity and to build up expertise in the laying of crude and petroleum product pipelines.
To create a strong research and development base in the field of oil refining and stimulate the development of new product formulations with a view to minimize their imports and to have next generation products.
To maximize utilization of the existing facilities in order to improve efficiency and increase productivity.
To optimize utilization of its refining capacity and maximize distillate yield from refining of crude oil to minimize foreign exchange outgo.
To minimize fuel consumption in refineries and stock losses in marketing operations to affect energy conservation.
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To further enhance distribution network for providing assured service to customers throughout the country through expansion of reseller network as per marketing plan/government approval.
To avail all viable opportunities, both national and global, arising out of the liberalization policies being pursued by the Government of India.
To achieve higher growth through integration, mergers, acquisitions and diversification by harnessing new business opportunities like petrochemicals, power, lubricant business, consultancy abroad, exploration and production.
FINANCIAL OBJECTIVES
To ensure adequate return on capital employed and maintain a reasonable annual dividend on its equity capital.
To ensure maximum economy in expenditure.
To generate sufficient internal resources for partly/wholly financing expenditure on new capital projects. To develop long term corporate plans to provide adequate growth of activities of the corporation. To continue to make an effort in bringing reduction in the cost of production of petroleum products by means of systematic cost control.
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FINANCIAL GOALS
To inculcate cost consciousness in user departments. Proper implementation of financial control and submission of MIS (Monthly Information Statements) in time. To keep the level of inventories below the level fixed by the Board of Outstanding Debts, loans & advances and claims at bare minimum. Ensure payment on due date to various agencies. Monitor capital expenditure to ensure completion within stipulated time and cost.
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OBLIGATIONS
Towards customers and dealers: To provide efficient service and quality products at
competitive prices.
Towards suppliers: To ensure prompt dealings with integrity, impartiality and courtesy and
help to promote ancillary industries.
Towards employees: To develop their capabilities and facilitate advancement through

appropriate training and career planning. To have fair dealings with recognized representatives of employees in pursuance of healthy industrial relation practices and sound personal policies.
Towards community: To develop economically viable and environment friendly products.

To maintain the highest standards in respect of safety, environment protection and occupational health at all production unitS.
Towards defence services: To maintain adequate supplies to defence and other para-military
services during normal as well as emergency situations.
As a part of our curriculum, we are doing a project which is basically an Analysis of Bharat Petroleum Corporation Ltd. (BPCL). The Analysis has been done on the front of financial concepts. We have taken into consideration the data of last 5 years (2006-07 to 2010-11) from the financial statements of the companies.
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OBJECTIVES OF THE STUDY
The study has mainly been conducted:

To understand the concept of financial management and its technique. To assess its importance in an organization in general To understand and analyze the function of financial management at BPCL LTD in particular
keeping in mind the hierarchy for such activities To understand the policy framework under which financing is carried out. To understand the various steps in the process of managing the finance. To understand the relative importance of various expenditures from an overall point of view To be able to recognize the high-variance, high-contribution areas to take corrective action or modify the financing structure. To undergo a comparative analysis for capital and revenue expenditures to form specific trends To interpret the results thereof and to reach at some conclusion To assess the effectiveness of BPCL Ltd in handling this function To understand the practical difficulties faced in the financing & finally, to study the
overall objectives and obligations of the company
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RESEARCH METHODOLOGY
Research Methodology To understand Indian Gas Industry and assess the contribution of BPCL LTD in Industry. To understand different type of budgets prepared in BPCL Ltd. To determine estimated revenue expenditure and PAT for different financial years. To understand budgeting process in BPCL LTD To understand use of SAP in budgeting process of BPCL LTD.
Method of Data Collection The present study is based on secondary published and un published data collected from financial documents, annual reports of GAIL, PNGRB documents, MINISTRY of Oil and PETROLEUM and NATURAL GAS etc. the study focuses on the budgeting control and process in BPCL LTD and uses various statistical and financial tools and advance tools of Microsoft Excel. LIMITATION OF STUDY Time Constraint Six weeks had been found to be inadequate together much information about the financial operations of the company. Unable to Extract Figure of Variances and some other Financial Data This is because the management refused to extend such confidential data, as that might create problem for the company in the future. Problem of Availability of Information As BPCL Ltd is one of the public sector unit thus some sort of confidentiality is maintained in available information.
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Capital Structure Theory

The value of a firm depends upon its expected earnings stream and the rate used to discount the stream. The capital structure of a firm can affect this value by changing either expected earnings or cost of capital or both. But the effect of leverage on the value of the firm is not very clear.
NET INCOME APPROACH: (Kd<Ko<Ke) According to this approach, the cost of equity (Ke) and the cost of Debt (Kd) are assumed to remain unchanged and they are independent of the Capital Structure. But the Average Cost of Capital (Ko) changes with the change in the leverage (Debt-Equity ratio).
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Actual (In Crs.) 2012 Net Operating Income Interest on Debt Equity Earnings Cost Of Equity (Ke) Cost Of Debt (Kd) Market Value Of Equity (E) Market Value Of Debt (D) Total Value Of Firm (V) 28516.18 32054.38 12695.69 29035.58 27103.15 18971.87 22195.2 21171.41 15022.38 10829.24 9544.31 9859.18 -8475.72 14013.20 16273.91 2411.15 1,100.78 1310.37 13.73% 6% 2011 2364.55 1,010.95 1353.60 13.73% 5% 2010 1002.71 2,166.37 -1163.66 13.73% 10% 2009 2596.39 672.47 1923.92 13.73% 4% 2008 2766.99 532.69 2234.30 13.73% 5%
Cost Of Capital (Ko)
8.46%
7.38%
7.90%
8.94%
10.21%
Total Debt
18971.87
22195.20
21171.41
15022.38
10829.24
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` 2012 Net Operating Income Interest on Debt Equity Earnings Cost Of Equity (Ke) Cost Of Debt (Kd) Market Value Of Equity (E) Market Value Of Debt (D) Total Value Of Firm (V) 17562.03 17222.61 7303.41 18911.25 20153.85 0 0 0 0 0 17562.03 17222.61 7303.41 18911.25 20153.85 2,411.15 0.00 2411.15 13.73% 6% 2011 2,364.55 0.00 2364.55 13.73% 5% 2010 1,002.71 0.00 1002.71 13.73% 10% 2009 2,596.39 0.00 2596.39 13.73% 4% 2008 2,766.99 0.00 2766.99 13.73% 5%
Cost Of Capital (Ko)
13.73%
13.73%
13.73%
13.73%
13.73%
Total Debt
0.00
0.00
0.00
0.00
0.00
Analysis: BPCL have Debt in their Capital structure. So, keeping other things constant, we will now consider a hypothetical situation in which the companyhas all equity financed. This is done to show that the company having no debt in their capital structure will have a higher average cost of capital in contrast to the firm having some amount of debt. Now, from our calculations, we can analyze that if BPCLdoes not use debt then its Ko (for 2012) is13.73% , whereas if it had used debt (like the actual scenario) then its Kois8.46%,. So, it had used a very small portion of debt but the effect was that the companys Ko was reduced, which is the ultimate objective of any company. Same thing is seen for the earlier years also.
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Conclusion: So, we can conclude that NI approach holds true for all three our companies and given the companys policies, they should try to minimize their cost of capital.
NET OPERATING INCOME APPROACH: According to this approach, the overall capitalization rate (Ko) and the cost of debt (Kd) remain constant for all degree of leverage. The rationale behind this theory is that if the companies increase the debt proportion in their capital structure, then this risk will be compensated by the increase in the required rate of return of the equity shareholders (Ke).
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Actual (In Crs.) 2012 Net Operating Income Overall Rate (Ko) Total Value Of Firm (V) Interest on Debt Cost Of Debt (Kd) Market Value Of Debt (D) Market Value Of Equity (E) Equity Earnings 9544.31 1310.37 9859.18 1353.60 -8475.72 -1163.66 14013.20 1923.92 16273.91 2234.30 Capitalization 8.46% 28516.18 1,100.78 6% 18971.87 7.38% 32054.38 1,010.95 5% 22195.20 7.90% 12695.69 2,166.37 10% 21171.41 8.94% 29035.58 672.47 4% 15022.38 10.21% 27103.15 532.69 5% 10829.24 2411.15 2011 2364.55 2010 1002.71 2009 2596.39 2008 2766.99
Cost Of Equity (Ke)
13.73%
13.73%
13.73%
13.73%
13.73%
Total Debt
18971.87
22195.20
21171.41
15022.38
10829.24
Suppose debt interest increase 2012 Net Operating Income Overall Capitalization Rate (Ko) Total Value Of Firm (V) Interest on Debt Cost Of Debt (Kd) Market Value Of Debt (D) Market Value Of Equity (E) Equity Earnings 7834.26 1211.15 7904.10 1264.55 -7827.10 -1097.29 13398.21 1896.39 14905.54 2166.99 8.46% 28516.18 1200.00 6% 20681.92 7.38% 32054.38 1100.00 5% 24150.27 7.90% 12695.69 2100 10.23% 20522.79 8.94% 29035.58 700 4.48% 15637.38 10.21% 27103.15 600 4.92% 12197.61 2411.15 2011 2364.55 2010 1002.71 2009 2596.39 2008 2766.99
Cost Of Equity (Ke)
15.46%
16.00%
14.02%
14.15%
14.54%
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Analysis: Keeping other things constant, we have our actual company data and we have taken a hypothetical situation wherein the amount of debt used by the company has increased. This will show us how the Ke increases, if we go on increasing the debt portion. Now, from our calculations, we can analyze that if BPCL uses more debt i.e., the interest amount increase from 110.76 crores to 1200.00 crores, then Ko, Kd remaining constant, the Ke of the company increases from 13.73% to 15.46% (for 2011). Conclusion: So we can conclude that NOI approach holds true for our companies and the risk will be adjusted by increase in Ke.
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TREND ANALYSIS
1. Current Ratio: - A current ratio greater than 1 indicates company is in a good position to get rid of its short-term liabilities immediately.
BPCL- Here over the last 5 years we see that current ratio is more than 1, which is considered as healthy for business. However the highest ratio was obtained in the year 2011 (1.37) and in 2011 it declined to 1.25.
Current Ratio Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
1.257192 1.376669 1.191493 1.351636 1.209076
1.4 1.35 1.3 1.25 1.2 1.15 1.1 1.05 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 BPCL
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2. Quick Ratio: - Quick ratio does not involve available inventories and hence a more appropriate measure of companys ability to meet its current liability. It uses the immediate liquid assets available to the company. A ratio greater than 1 shows the ability of the company to immediately meet the current liabilities when required.
BPCL- Clearly for all the 5 years the quick ratio is less than 1. There has been a decline in ratio from 0.67 in 2010 to 0.55 in 2011.
Quick Ratio 2012 2011 2010 2009 2008
0.556998 0.674506 0.659675 0.624368 0.44081
0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2012 2011 2010 2009 2008 BPCL
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3. Absolute Quick Ratio: - An absolute quick ratio greater than 0.5(50%) is considered good enough because it even eliminates accounts receivables.
BPCL- Here for all the 5 years we see that the ratio is less than 0.5 thus it shows that less availability of cash, bank and marketable securities. Absolute Ratio 2012 0.0173 2011 0.019985 2010 0.034412 2009 0.065951 2008 0.076635
0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2012 2010 2011 2009 2008 BPCL
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4. Debt-equity ratio: - It shows what proportion of debt and equity the company is using to finance its assets.
BPCL- It clearly shows that ratio is greater in 2010(1.74) than 2011(1.69) and 2012(1.34). It shows the company relied heavily in financing its fund through debt in 2010 compared to that in 2011 and 2012.
Debt-Equity Ratio 2012 1.34958 2011 1.696011 2010 1.745648 2009 1.286512 2008 1.05409
2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2012 2011 2010 2009 2008 BPCL
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5. Proprietary Ratio: - Proprietary ratio highlights the financial position of the company and therefore Proprietary ratio can be interpreted as good if it is high because a higher proprietary ratio would imply that company has enough capital to repay its creditors whenever the creditors make any such demand.
BPCL- Highest ratio was obtained in the year 2008(0.30). .
Proprietory Ratio 2012 0.25105 2011 0.24566 2010 0.256029 2009 0.273072 2008 0.304319
0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2012 2011 2010 2009 2008 BPCL
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6. Interest Coverage Ratio: - it shows how easily a company can pay interest on outstanding debt. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.
BPCl- Here except for 2010(1.46) in all other years the ratio is more than 3.
Interest Coverage Ratio 2012 3.1904 2011 3.338939 2010 1.462853 2009 4.860975 2008 6.194372
7 6 5 4 3 2 1 0 2012 2011 2010 2009 2008 BPCL
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7. Inventory Ratio: - A ratio showing how many times a company's inventory is sold and replaced over a period.
BPCL- Here we see a high ratio in the year 2008(21.03) compared to other years.
Inventory Ratio 2012 10.6746 2011 12.74447 2010 14.57726 2009 10.85444 2008 21.0349
25
20
15 BPCL 10
0 2012 2011 2010 2009 2008
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8. Debtor Turnover Ratio: - Debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors.
BPCL- Here in the year 2008(127.15) the highest ratio has been obtained as compared to other years.
Debtor Turnover Ratio 2012 56.654 2011 59.56668 2010 88.36557 2009 70.48043 2008 127.1547
140 120 100 80 60 40 20 0 2012 2011 2010 2009 2008 BPCL
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9. Creditor Turnover Ratio: - It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company.
BPCL- Here in 2008(15.71) we observe a high ratio than other years.
Creditor Turnover Ratio 2012 7.2058 2011 7.676383 2010 8.887069 2009 7.858434 2008 15.71678
18 16 14 12 10 8 6 4 2 0 2012 2011 2010 2009 2008 BPCL
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Gross Profit Ratio 10. Fixed Asset Turnover Ratio: - Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.
BPCL- Comparatively to the other years 2010(9.573) has a high ratio thus denoting intensive utilization than other years.
Fixed Assets Turnover Ratio 2012 8.87049 2011 7.52233 2010 9.573688 2009 8.653698 2008 8.159695
12 10 8 6 4 2 0 2012 2011 2010 2009 2008
BPCL
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2012 0.02695
2011 0.02962
2010 0.015502
2009 0.033524
2008 0.03802
11. Gross Profit Ratio: - A higher gross profit ratio represents higher gross profit to net sales.
BPCL- Clearly it states that in 2008(0.038) the ratio is highest and then it gradually declines over the next 4 years. As compared to 2011(0.029) there is a decline in ratio in 2012(0.026).
Net Profit Ratio 2012 0.01025 2011 0.01263 2010 0.005489 2009 0.014342 2008 0.018699
0.04 0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2012 2011 2010 2009 2008 BPCI
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12. Net Profit Ratio: - If the net profit is high, the firm will be able to achieve a satisfactory return on its investment.
BPCL- Higher the ratio higher is the profitability. Clearly it states that in 2008(0.018) is the highest and the lowest in 5 years has been observed in the year 2010(0.005).
0.02 0.018 0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2012 2011 2010 2009 2008 BPCI
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13. Operating Profit Ratio: - Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns.
Operating Profit Ratio 2012 2011 2010 0.031661 2009 0.039626 2008 0.043537
0.03424 0.03792
0.05 0.045 0.04 0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2012 2011 2010 2009 2008 BPCL
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14. Return on Capital Employed: - OCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.
BPCL- Here highest ROCE has been observed in the year 2008(0.156) amongst all the years.
Return on Capital Employed 2012 2011 2010 0.095169 2009 0.122433 2008 0.156362
0.10633 0.09567
0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2012 2011 2010 2009 2008 BPLC
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15. Return on Net worth Capital: - A measure of how effectively a company uses the money (borrowed or owned) invested in its operations.
BPCL- Here we see that almost a steady return with less fluctuation has been observed except the year 2010(2.03)
Return on Net Worth Capital 2012 2011 2010 2.035459 2009 4.371743 2008 4.993832
4.27803 4.25297
6 5 4 3 2 1 0 2012 2011 2010 2009 2008
BPLC
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Return on Equity 2012 2011 2010 0.060677 2009 0.135359 2008 0.17574
0.11002 0.1175
16. Return On Equity: - Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Returns between 15-20 % are considered satisfactory.
BPCL- It is obtained in the year 2008(17%) where as a dissatisfactory result has been viewed in the year 2010(6%)
0.2 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2012 2011 2010 2009 2008 BPCI
Page 36
17. P/E Ratio: - A valuation ratio of a company's current share price compared to its per-share earnings. In general, a high P/E suggests that investors are expecting higher
earnings growth in the future compared to companies with a lower P/E ratio.
BPCL- Here we see highest ratio has been obtained in the year 2010(18.504) which means people were expecting a greater return in the future.
P/E Ratio 2012 2011 2010 18.50453 2009 9.407058 2008 6.052502
14.2894 12.1492
20 18 16 14 12 10 8 6 4 2 0 2012 2011 2010 2009 2008 BPCL
Page 37
ANALYSIS OF FUNDS FLOW STATEMENT Funds flow statement is useful for long term analysis. Such an analysis is of great help to management, shareholders, creditors, brokers etc. 1. The fund flow statement helps in answering the following question: a. Where have the profit gone? b. Why there is an imbalance existing between liquidity position and profitability position of the company? c. Why is the concern financially solid in spite of losses?
2. A projected funds flow statement can be prepared and resources can be properly allocated after an analysis of the present state of affairs. The optimal utilization of available funds is necessary for the overall growth of the company. The funds flow statement prepared in advance gives a clear cut direction to the management in this regard.
3. The funds flow statement analysis helps the management to test whether the working capital has been effectively used or not and whether the working capital has been effectively used or not and whether the working capital level is adequate or inadequate for the requirement of business. In case of BPCL we can observe that there is an increase in the current assets from 2010 to 2011 and this led to an increase in the working capital. But, there has been a greater proportion of increase in the current liabilities .Therefore, there is a net decrease in the working capital from 2010 to 2011. The net decrease in the working capital means i.e. when changes in working capital is negative, the company is investing heavily in its current assets, or else drastically reducing its current liabilities. 4. The funds flow statement analysis helps the investors to decide whether the company has managed funds properly. It also indicates the credit worthiness of a company which helps the lenders to decide whether to lend money to the company or not. It helps management to take policydecisions and to decide about the financing policies and capital expenditure programmed for future.
FINANCIAL MANAGEMENT IN BPCL Page 38
Statement of change in working Capital Particulars Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Current Liabilities 15,375.08 12,028.86 3346.22 2,664.42 379.97 9,186.36 2,662.68 342.36 8,550.03 1.74 37.61 636.33 4021.9 2011 2010 change
27,605.83 23583.93
Current Liabilities Provisions 18,788.29 14,550.56 4237.73 3,170.03 2,580.59 -589.44 Total Current Liabilities 21958.32 17131.15 4827.17 0
Increase/Decrease in working capital -805.27
Funds from Operations Particulars Amount
Reserves total add:depreciation div paid deferred tax Extraordinary item

970.91 1591.73 506.16 148.24 131.8

Page 39
TOTAL
3348.84
Fund flows Application Sources of funds Amount funds secured loans Investments Funds operations Unsecued loans Capital WIP change in working cap 805.27 from 3348.84 3187.44 1505.52 gross block Extraordinary item 131.8 3921.71 Dividend paid 506.16 2123.37 of Amount 6410.77 Column1
TOTAL
10970.44
TOTAL
10970.44
DIVIDEND POLICY Essence of Dividend Policy: If the company is confident of generating more than market returns then only it should retain higher profits and pay less as dividends (or pay no dividends at all), as the shareholders can expect higher share prices based on higher RoI of the company. However, if the company is not confident of generating more than market returns, it should pay out more dividends (or 100% dividends). This is done for two reasons. One, the shareholders prefer early receipt of cash (liquidity preference theory) and second, the shareholders can invest this cash to generate more returns (since market returns are expected to be higher than returns generated by the company). Over the years, various models have been developed that establish the relationship between dividends and stock prices.
Page 40
ANALYSIS OF THE WALTER MODEL Every firm faces a situation where it has to decide whether to plough back profits and re-invest or distribute them to shareholders in the form of dividends. The optimal payout ratio of BPCL is increasing because as the rate of return is lesser than the cost of capital, it implies that the company does not have good investments and opportunities are not there to earn higher returns than available in the market. It is not beneficial for the company as well as its shareholders to invest in new projects. The shareholders, instead, can invest their money somewhere else. Same thing is seen for previous years also.
ANALYSIS OF THE GORDON MODEL
This model supports the view that the dividend policy of a company has a bearing on its share valuation. It assumes that the investors are rational and risk-averse. Based on the models assumptions, we can see that,BPCL(r<k i.e., 8.19% < 13.73%) is a Declining Firm. The optimal payout ratio of BPCL is increasing. The reason being that the price of the share is arrived at by discounting the dividend income and if the future dividends are at stake for the investors as r<k, then it makes sense to have a low retention ratio. Thus the investors will discount the income with a large factor and they will opt for the time value of money. So, the share price will be low but the investors are getting compensated through current income.
Conclusion: From our calculations and analysis, it can be observed that when the return on investment is greater than the cost of capital, then there is an inverse relation between the value of a share and the pay-out ratio. Walter Model Year 2012 Dividend Per Share 140.00 2011 140.00 2010 70.00 2009 40.00 2008 160.00
EPS
42.78008 42.52948 20.35447 43.71717 49.93803 6.55% 8.91% 9.95% 11.26%

Page 41
Internal rate of return (r 8.19%

) Cost Of equity(Ke) 13.73% 13.73% 13.73% 13.73% 13.73%
Market Price of share
597.55
681.12
275.15
310.98
507.79
GORDAN MODEL Year 2012 Dividend Share dividend out ratio Retention Ratio pay 33% 67% 33% 67% 34% 66% 9.15% 91% 32.04% 68% Per 140.00 140.00 70.00 40.00 160.00 2011 2010 2009 2008
EPS Internal rate of return (r ) Cost equity(Ke) Of
42.7800773
42.52948 20.35447 43.71717 49.93803
8.19%
6.55%
8.91%
9.95%
11.26%
13.73%
13.73%
13.73%
13.73%
13.73%
Market
Price 126.69
120.96
65.64
31.21
158.09
Page 42
of share
Page 43
Year
12-Mar
11-Mar
10-Mar
09-Mar
08-Mar
Sales Turnover Excise Duty Net Sales
163218.21 12317.36 150900.85
131499.72 9735.01 121764.71
145392.07 11329.13 134062.94
121684.07 11475.94 110208.13
107452.27 10895.42 96556.85
Net Profit Interest Tax Fringe Benefit tax Deferred Tax
1546.68 1100.78 716.23 0.00 148.24
1537.62 1010.95 1130.18 0.00 -303.25
735.90 2166.37 495.69 13.25 -242.13
1580.56 672.47 889.73 15.30 110.80
1805.47 532.69 923.04 11.73 26.75
EBIT EPS
3511.93 42.78
3375.50 42.53
3169.08 20.35
3268.86 43.72
3299.68 49.94
% change in EBIT % change in sales % change in EPS
4% 24% 1%
7% -9% 109%
-3% 22% -53%
-1% 14% -12%
N.A. N.A. N.A.
Degree of Operating Leverage Degree of Financial Leverage Degree Leverage of Total 0.02 -11.88 -2.47 -0.88 N.A. 0.15 16.73 17.51 13.34 N.A. 0.17 -0.71 -0.14 -0.07 N.A.
Profit Before Tax Tax Interest Internal rate of return ( r
2,411.15 716.23 1,100.78
2,364.55 1,130.18 1,010.95
1,002.71 495.69 2,166.37
2,596.39 889.73 672.47
2,766.99 923.04 532.69
0.081852 0.065479 0.089115 0.099541 0.112622
Page 44
Leverages DOL
A type of leverage ratio summarizing the effect a particular amount of operating leverage has on a company's earnings before interest and taxes (EBIT). Operating leverage involves using a large proportion of fixed costs to variable costs in the operations of the firm. The higher the degree of operating leverage, the more volatile the EBIT figure will be relative to a given change in sales, all other things remaining the same. For BPCL, after measuring DOL at various levels of output, where theoretically DOL is undefined at operating breakeven point. DOL is negative from 2008 to 2010; this means that it is less than its operating breakeven point.. (This does not imply that an increase in Q (sales) will lead to a decrease in EBIT). However, DOL is positive in rest of the years i.e. is greater than operating breakeven point. A large or positive DOL means increase in level of output will increase the level of operating income; means small fluctuations in output will produce large fluctuations in operating income.
DFL
A leverage ratio summarizing the affect a particular amount of financial leverage has on a company's earnings per share (EPS). Financial leverage involves using fixed costs to finance the firm, and will include higher expenses before interest and taxes (EBIT). The higher the degree of financial leverage, the more volatile EPS will be, all other things remaining the same. Each level of EBIT has a different DFL. DFL is undefined at financial breakeven point. BPCL is in good position.
DTL
By combining the degree of operating leverage with the degree of financial leverage we obtain the degree of total leverage (DTL). If a firm has a high amount of operating leverage and financial leverage, a small change in sales will lead to a large variability in EPS or we can say that it is the percentage change in net income that is associated with a given percentage change in sales.
Investing in BPCLis a good option
Page 45
Du Pont Analysis
The system identifies profitability as being impacted by three different levels:
1. Earnings & efficiency in earnings- EARNINGS 2. Ability of your assets to be turned into profits- TURNINGS 3. Financial leverage- LEVERAGE
This analysis technique is called the "DuPont Formula". The DuPont Formula shows the interrelationship between key financial ratios.
Profit After Tax / Profit Before Tax (tax burden) Profit Before Tax / Profit Before Interest Tax (interest burden) Profit Before Interest Tax / Sales (operating efficiency) Sales Assets / Assets (Asset t/o) / Equity (leverage)
By using the DuPont equation, an analyst can easily determine what processes the company does well and what processes can be improved. Interest burden is high than we have to check the Debt is proper utilized in a company. Operating efficiency says that efficiency of the company controlling the cost and expenses associated with the business. Asset turnover ratio measures the efficiency with which a company deploys its assets to generate the sales. Furthermore, ROE represents the profitability of funds invested by the owners of the firm.
Page 46
Particulars \ Year
2012
2011
2010
2009
2008
Net Sales PBDIT Other Written Off Depreciation PBIT Interest PBT Reported Net Profit Average Assets Equity
150900.85 5,167.33 0 1,655.40 3,511.93 1100.78 2411.15 1,546.68 17011.56 14057.62
121764.71 4,617.82 0 1,242.32 3,375.50 1010.95 2364.55 1,537.62 16187.1 13086.71
134062.94 4,244.61 0 1,075.53 3,169.08 2166.37 1002.71 735.90 14003.27 12128.11
110208.13 4,367.07 0 1,098.21 3,268.86 672.47 2596.39 1,580.56 12735.38 11676.83
96556.85 4,203.79 0 904.11 3,299.68 532.69 2766.99 1,805.47 11833.39 10273.54
PAT/PBT(taxburden) PBT/PBIT(int burden) PBIT/Sales(opeeff) Sales/Assets(aseet t/o) Assets/Equity(leverage) Return (ROE) On Equity
0.641469838 0.686559812 0.023273096 8.870488656 1.210130876
0.65028018
0.733911101 0.608752922 0.794279963
0.652503 0.838563 0.034173 8.159695 1.151832
0.700503629 0.31640413
0.027721497 0.023638748 0.029660788 7.522330127 9.573688146 8.653697809 1.23691134 1.154612714 1.090653885
0.110024314
0.117494771 0.06067722
0.135358655
0.17574
PAT/PBT 2012 2011 2010 0.733911101 2009 2008
0.64146984 0.65028018 PBT/PBIT

0.608752922 0.652503262
Page 47
2012 0.68655981
2011 0.70050363
2010 0.31640413
2009 0.794279963
2008 0.838563133
Page 48
COMMON-SIZE STATEMENT
Balance Sheet (Rs in Crs)

Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans
Mar 07
Mar 08
Mar 09
Mar 10
Mar 11
Mar 12
361.54 9,912.00 0 0 10,273.54 0 2,593.96 8,235.28
361.54 11,315.30 0 0 11,676.84 0 2,730.21 12,292.17
361.54
361.54
361.54
361.54
11,766.57 12,725.17 0 0 0 0
13,696.08 15339.61 0 0 14,057.62 15701.15 0 4,033.10 14,938.77
12,128.11 13,086.71 0 3,661.60 0 10,443.87
17,509.81 11,751.33
Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Advances Inventories Sundry Debtors
10,829.24 21,102.78
15,022.38 26,699.22
21,171.41 22,195.20 33,299.52 35,281.91
18,971.87 21248.49 33,029.49 36949.64
19,457.58
21,500.93
22,522.33 25,412.52
29,334.23 32854.34
8,476.53 0 371.82 0 852.34 8,294.90 Loans &
9,532.26 0 420.91 0 766.71 10,318.21
10,556.54 11,743.17 0 499.83 0 2,037.48 0 646.64 0 2,517.75
13,334.90 14935.09 0 1,498.70 0 1,012.23 2024.58 17919.25
18,078.38 13,501.33
11,377.96 12743.32
Assets,
8,661.26 1,518.73
10,603.84 1,608.61
6,823.92 1,425.67
12,028.86 2,662.68
15,375.08 17220.09 2,664.42 2984.15

Page 2
Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets
863.97 2,586.90 13,630.86
961.59 6,533.32 19,707.36
441.55 6,597.28
342.36 8,550.03
379.97 9,186.36
425.57 10288.72
15,288.42 23,583.93
27,605.83 30918.53
11,273.78 1,073.16 12,346.94 5,647.51
14,580.37 986.26 15,566.63 6,452.78
12,831.31 17,131.15 1,712.44 2,580.59
21,958.32 24593.32 3,170.03 3550.43
14,543.75 19,711.74 2,457.11 6,452.78
25,128.35 28143.75 5,647.51 2774.78
298.16 1,680.75 -1,382.59 21,102.78
303.87 1,785.24 -1,481.37 26,699.21
623.57 1,862.81
1,044.18 1,903.48
1,052.66 2,060.20 -1,007.54 33,029.49

Page 3
-1,239.24 -859.3 33,299.52 35,281.91
-1128.44
Contingent Liabilities
2,810.81 63605.67 63964.95 -359.28
3,075.10
3,775.80
8,082.44
9,138.96
Page 4
COMPARATIVE STATEMENTS Comparative Balance Sheet
Per 2012 Liabilities Capital Current Liabilities Long-term liabilities Share Capital Reserves Total 18788.29 18971.87 361.54 13696.08 51817.78 14550.56 22195.2 361.54 12725.17 49832.47 4237.73 -3223.33 0 970.91 1985.31 and 2011 Change Change
Cent 2011 2010 Change PerCent Change
29.12417117 -14.52264454 0 7.62983913 3.983968685
14550.56 22195.2 361.54 12725.17 49832.47
11118.87 21171.41 361.54 11766.57 44418.39
3431.69 1023.79 0 958.6 5414.08
30.86365791 4.835719492 0 8.146809138 12.18882539
Assets Current Assets Net Fixed Assets Other Assets Total 27605.83 15999.33 0 43605.16 23583.93 13669.35 0 37253.28 4021.9 2329.98 0 6351.88 17.05356147 17.04528745 0 17.05052548 23583.93 13669.35 0 37253.28 15288.42 11965.79 0 27254.21 8295.51 1703.56 0 9999.07 54.26008705 14.23692042 0 36.68816671
Page 5
Comparative Financial Statement analysis provides information to assess the direction of change in the business. Financial statements are presented as on a particular date for a particular period. The financial statement Balance Sheet indicates the financial position as at the end of an accounting period . But financial managers and top management are also interested in knowing whether the business is moving in a favourable or an unfavourable direction. For this purpose, figures of current year have to be compared with those of the previous years. In analyzing this way, comparative financial statements are prepared.
Comparative Financial Statement Analysis is also called as Horizontal analysis. The Comparative Financial Statement provides information about two or more years' figures as well as any increase or decrease from the previous year's figure and it's percentage of increase or decrease. This kind of analysis helps in identifying the major improvements and weaknesses.
In this we can see that there has been a negative change in long term liabilities in year 2010-11 whereas, it was positive in year 2009-10, which implies that company has taken less debt and hence is less leveraged. Also reserves are less in current year which shows that the reserves have been used either in paying off more dividend or other financing options available for the company. Also current assets are reduced drastically from 54% to 17%, which means that accounts receivables are collected more and the company is more liquid in the current situation.
Profit & Loss Account
% as sales Mar '12 turnover Mar '11
as
sales
turnover
12 mths (in crores) Income 163218.2 Sales Turnover Excise Duty 1 12317 150900.8 Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Manufacturing 870.31 3218.33 1281.35 0 149481.8 Total Expenses 7 Mar '12 91.58% 0.53% 1.97% 0.79% 0.00% 140835.5 475.89 2800.49 5 1754.97 1993.38 154649.2 92.45% 1.08% 1.22% 94.75% 0.00% 86.29% 0.29% 1.72% 100% 7.55%
12 mths (in crores)
131499.72 9735.01
100% 7.40%
121764.71 2240.24 3772.45 127777.4
92.60% 1.70% 2.87% 97.17% 0.00%
115001.66 237.12 2139.63
87.45% 0.18% 1.63%
838.11 3025.23 1917.83 0
0.64% 2.30% 1.46% 0.00%
123159.58 Mar '11
93.66%
12 mths
12 mths
0.00% Operating Profit Interest PBDT Depreciation Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Dividend Preference Dividend Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 5167.33 1100.78 4066.55 1655.4 2411.15 -131.8 2542.95 716.23 1546.68 506.16 0 40.81 140 388.83 3.17% 0.67% 2.49% 1.01% 1.48% -0.08% 1.56% 0.44% 0.95% 0.31% 0.00% 0.03% 0.09% 0.24% 4617.82 1010.95 3606.87 1242.32 2364.55 -113.71 2478.26 1130.18 1537.62 506.16 0 40.52 140 361.97
0.00% 3.51% 0.77% 2.74% 0.94% 1.80% -0.09% 1.88% 0.86% 1.17% 0.38% 0.00% 0.03% 0.11% 0.28%
Balance Sheet as % of total Mar '12 as % of total liabilities Mar '11 liabilities
12 mths (in crores) Sources Funds Equity Share Capital Share Application 0 0.00% 361.54 1.09% Of
12 mths (in crores)
361.54
1.02%
0.00%
Page 2
Money Preference Share Capital Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 33029.49 Mar '12 100% 35281.91 Mar '11 100% 14938.77 18971.87 45.23% 57.44% 11751.33 22195.2 33.31% 62.91% 4033.1 12.21% 10443.87 29.60% 0 13696.08 14057.62 0.00% 41.47% 42.56% 0 12725.17 13086.71 0.00% 36.07% 37.09%
12 mths
12 mths
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and 379.97 1.15% 242.36 0.69% 2664.42 8.07% 2662.68 7.55% 1012.23 11377.96 15375.08 3.06% 34.45% 46.55% 2517.75 13501.33 12028.86 7.14% 38.27% 34.09% 13334.9 15999.33 40.37% 48.44% 11743.17 13669.35 33.28% 38.74% 29334.23 88.81% 25412.52 72.03%
Bank Balance Total Current Assets Loans
27605.83 and 9186.36
83.58% 27.81%
23583.93 8550.03
66.84% 24.23%
Page 3
Advances Total Loans &Advances Deffered Credit Current Liabilities Provisions Total CL & 21958.32 66.48% 17131.15 48.56% 18788.29 3170.03 56.88% 9.60% 14550.56 2580.59 41.24% 7.31% 2060.2 6.24% 1903.48 5.40% 36792.19 111.39% 32133.96 91.08% CA,
Provisions Net Current
Assets Miscellaneou s Expenses Total Assets
5647.51
17.10%
6452.78
18.29%
0 33029.49
0.00% 100.00% 0.00%
0 35281.91
0.00% 100.00% 0.00%
Contingent Liabilities 9138.96 27.67% 8082.44 22.91%
Page 4
Common Size Income Statement:

In common size statements the sales figure is taken as 100 and all other figures of cost & expenses are expressed as percentage to sales. when other costs & expenses are reduced from sales figure of 100, the balance in figure is taken as net profit. This reveals the efficiency of the firm in generating revenue which leads to profitability. Thus from our common size income statement we can interpret that although our operating profit has been increased from 4617.82 to 5167.33 but the profit profit margin has decreased from 3.51% to 3.17%. This reveals that the firm is not efficient in generation the revenues.
Page 5
Common size Balance Sheet:

Common size balance sheet reveals the proportion of fixed assets to current assets, composition of fixed assets and current assets, proportion of long term funds to current liabilities and provisions , composition of current liabilities etc. It highlights the long term health and solvency , ability to meet short term obligation and liquidity position of the enterprise. Production has increased because of increase in investment in fixed Assets and Raw material which has increased the overall productivity thus increases the overall profit from 4617.82 to 5167.33 Company has improved its financial position since it has maintained the same equity level and reduced the total debt. The company return on equity has decreased from 0.117 to 0.110.
WORKING CAPITAL
2012 1 Raw material conversion period Raw material consumption Raw material consumption per day Raw material inventory 139572.16 113775.3 124043 388 4009.33 316 345 99286.15 89147.96 276 248 2011 2010 2008 2007
2745.99 1519.63 3757.88 1457.47 9 4 14 6
Raw material inventory holding days 10
Work-in-process conversion period Cost of production Cost of production per day 145066.18 116747.5 126849.4 101166.2 90788.44 403 324 352 281 252
Page 6
Work-in-process inventory work in process inventory holding days
1031.25
728.18
485.52
565.92
479
Finished Goods conversion period Cost of goods sold Cost of goods sold per day Finished goods inventory 143318.2 398 10131.47 112995.3 128344.9 101645.6 90598.58 314 357 282 252
8383.49 4631.3 27 13
6126.78 6606.19 22 26
Finished goods inventory holding day 25
Collection Period Credit sales Sales per day Debtors Debtors outstanding days 1,47,817.88 117938.4 133605.8 105061.4 93659.74 411 2664.42 6 328 371 292 260
2662.68 1425.67 1608.61 1518.73 8 4 6 6
Creditors Deferral Period Credit purchases Purchases per day Creditors Creditors outstanding days 140835.5 391 10939.47 28 115001.7 121804.7 101586.6 88593.77 319 338 282 246
8359.97 6214.58 8651.35 5958.71 26 18 31 24
Gross Operating Cycle 1 Inventory Conversion Period
Page 7
raw material work-in -process finished goods 38 2 3 4 5 Debtors collection period Gross Operating Cycle Creditors Payment Period Net Operating cycle 6 44 28 16 38 8 46 26 20 19 4 23 18 5 37 6 43 31 12 34 6 40 24 16
Raw material Conversion Raw material conversion period was lowest in the year 2010, i.e. of 4 days as compared to other years. Whereas in 2009, it was of 14 days, this means that the company was able to manage its total cost in maintaining the inventory, which includes carrying cost, ordering cost, and the cost occurred due to obsolescence and we can easily say that, the company could easily manage ita raw material conversion period. Work-in-process The least work-in-process period was in year 2010 this means that the company was very efficient in utilizing its raw material in the manufacturing process. Since, the highest number of days are in the year 2012, so the company needs to look after the following issues like technological revamping increase investment adding in capacity, etc. Finished goods The conversion period was lowest in the year 2010, i.e. 13 days and maximum in the year 2011, i.e.27 days it means 2010 was best as Fixed Goods were easily converted into sales which shows that the company was efficient in forecasting its projected demand and to have adequate inventory with them so as not to loose customers to competitors. This also shows that the inventory conversion period was also as company could easily generate sales. One reason could be a conscious policy decision to avoid stock out situation and carrying more finished good inventory to expand sales.
FINANCIAL MANAGEMENT IN BPCL Page 8
Debtor collection In 2010, the debtor collection period was of 4 days, which is lowest as compared to the other 4 years. From this we can conclude that that the company have enough liquidity with it as it will easily receive its account receivables and can use it somewhere else. In 2011, it was maximum of 8 days, i.e. cash was released a little later which can cause a problem in the working capital management of the company. Creditors Collection Period It was minimum in 2010, i.e. 18 days and max. In 2009 , i.e. of 31 days. For a company, large collection period is preferable as we have to pay after long period of time and we can have the liquidity for larger period. Inventory Conversion period The lesser the inventory conversion period, the more its good for the company as it saves costs on number of factors and we can see that in 2010, it was minimum of 19 days as compared to 31 days in 2012. This shows that company could easily manage its operation in 2011. Net Operating cycle Net Operating cycle was lowest in the year 2010 which means that the company was doing fairly well even by locking up of less inventory which is a good cost cutting measure. Thus improvising their operations reducing cost of production and ultimately having a competitive edge.
Page 9
Balance Sheet of Bharat Petroleum Corporation------------------- in Rs. Cr. ----ANNEXURS
Mar '12 12 months Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 361.54 361.54 0.00 0.00 13,696.08 0.00 14,057.62 4,033.10 14,938.77 18,971.87 33,029.49 Mar '12 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits 29,334.23 13,334.90 15,999.33 1,012.23 11,377.96 15,375.08 2,664.42 379.03 18,418.53 10,239.02 0.94
Mar '11 12 months
Mar '10 12 months
Mar '09
Mar '08
12 months 12 months
361.54 361.54 0.00 0.00 12,725.17 0.00 13,086.71 10,443.87 11,751.33 22,195.20 35,281.91 Mar '11 12 mths
361.54 361.54 0.00 0.00 11,766.57 0.00 12,128.11 3,661.60 17,509.81 21,171.41 33,299.52 Mar '10 12 mths
361.54 361.54 0.00 0.00 11,315.30 0.00 11,676.84 2,730.21 12,292.17 15,022.38 26,699.22 Mar '09 12 mths
361.54 361.54 0.00 0.00 9,912.00 0.00 10,273.54 2,593.96 8,235.28 10,829.24 21,102.78 Mar '08 12 mths
25,412.52 11,743.17 13,669.35 2,517.75 12,201.32 12,028.86 2,662.68 341.43 15,032.97 10,894.22 0.93 25,928.12
22,522.33 10,556.54 11,965.79 2,037.48 16,715.19 6,823.92 1,425.67 440.62 8,690.21 8,584.04 0.93 17,275.18
21,500.93 9,532.26 11,968.67 766.71 9,358.01 10,603.84 1,608.61 960.67 13,173.12 7,797.30 0.92 20,971.34
19,457.58 8,476.53 10,981.05 852.34 7,385.42 8,661.26 1,518.73 863.05 11,043.04 3,797.44 0.91 14,841.39
Page 10
Total CA, Loans & Advances 28,658.49

Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
0.00 20,848.49 3,170.03 24,018.52 4,639.97 0.00 33,029.49 9,943.94 388.82
0.00 16,454.04 2,580.59 19,034.63 6,893.49 0.00 35,281.91 9,382.97 361.97
0.00 12,981.68 1,712.44 14,694.12 2,581.06 0.00 33,299.52 5,862.61 335.45
0.00 15,379.36 986.15 16,365.51 4,605.83 0.00 26,699.22 5,083.23 322.97
0.00 11,881.37 1,076.07 12,957.44 1,883.95 0.00 21,102.76 3,590.62 284.16
Profit & Loss account of Bharat Petroleum Corporation Mar '12 12 months Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Expenses Manufacturing 141,028.03 475.89 2,802.85 410.13 113,884.03 237.12 2,141.12 384.72 3,186.95 888.34 0.00 120,722.28 Mar '10 12 mths 3,484.65 163,218.36 12,380.03 150,838.33 1,321.04 2,056.05 154,215.42 131,499.81 11,282.73 120,217.08 1,190.10 3,989.85 125,397.03 Mar '11 12 months
------------------- in Rs. Cr. ----Mar '10 Mar '09 Mar '08
12 months 12 months 12 months
145,392.07 121,684.07 107,452.27 11,318.64 11,475.94 10,895.42
134,073.43 110,208.13 96,556.85 -298.74 -1,575.88 1,091.63 -392.50 550.99 205.45
132,198.81 110,907.26 97,313.29
121,991.29 101,743.99 88,745.19 67.17 1,884.88 347.09 2,870.03 796.46 0.00 61.75 1,297.21 229.54 2,508.57 823.61 0.00 66.64 1,003.70 243.43 2,365.31 620.23 0.00
Selling and Admin Expenses 3,331.54 Miscellaneous Expenses 1,335.33
Preoperative ExpCapitalised 0.00 Total Expenses 149,383.77 Mar '11 12 mths Operating Profit 3,510.61
127,956.92 106,664.67 93,044.50 Mar '09 12 mths 4,540.63 Mar '08 12 mths 3,150.96 Mar '07 12 mths 3,717.80
Page 11
PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items
4,831.65 1,100.78 3,730.87 1,655.40 0.00 2,075.47 247.45
4,674.75 1,010.95 3,663.80 1,242.32 0.00 2,421.48 -60.11 2,361.37 823.75 1,537.62 6,838.25 0.00 506.16 72.77
4,241.89 2,166.37 2,075.52 1,075.53 0.00 999.99 -2.97 997.02 261.12 735.90 5,965.63 0.00 253.08 31.45
4,242.59 672.47 3,570.12 1,098.21 0.00 2,471.91 118.65 2,590.56 1,010.00 1,580.56 4,920.68 0.00 144.62 9.16
4,268.79 477.35 3,791.44 904.11 0.00 2,887.33 -126.50 2,760.83 955.33 1,805.48 4,299.32 0.00 578.47 91.87
PBT (Post Extra-ord Items) 2,322.92 Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 3,615.42 42.78 140.00 388.82 776.24 1,546.68 8,355.74 0.00 506.16 71.08
3,615.42 42.53 140.00 361.97
3,615.42 20.35 70.00 335.45
3,615.42 43.72 40.00 322.97
3,615.42 49.94 160.00 284.16
Cash Flow of Bharat PertoleumCorporatio----------------- in Rs. Cr. -Mar '12 12 Mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents 2422.74 4206.31 627.00 Mar '11 12 Mths 2421.48 -1515.15 1538.43 Mar '10 12 Mths 1017.57 6212.34 -9908.75 Mar '09 12 Mths 2471.91 417.13 -3553.95 Mar '08 12 Mths 2887.95 4646.65 -5899.60
-1817.00
652.09
-2285.32
-197.74
-323.65
3016.31
675.37
-5981.73
-3334.56
-1576.59 -6228.52
-16446.03 -17121.40 -11139.67 -7805.11
Page 12
Closing Cash & Cash Equivalents
-13429.72 -16446.03 -17121.40 -11139.67 -7805.11
BIBLIOGRAPHY
Annual Report of BPCL
www.Moneycontrol.com
www.Wikipedia.com
http://www.oilrefiniries.com
www.capitaline.com
Corporate Finance by Ross Westerfield Jess
Page 13
CONCLUSION
With the project entitled Financial management BPCL Ltd., we can conclude that finance management is one of the essential processes in any Organization whether it is Public Sector Unit or Private concern. As with the help of proper financing we can calculate estimated expenditure Revenues and Profit for the future period of time. Any company lacking proper finance management cannot run long way.A Company for its smooth running must try to minimize its cost of capital. It should properly analysis its Fund flow Statement and understand the essence of Dividend Policy. It should ensure adequate return on capital employed and maintain a reasonable annual dividend on its equity capital. Financial plans should be able to generate sufficient internal resources for partly/wholly financing expenditure on new capital projects.
Page 14

My BPCL

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INTRODUCTION

Early History - Dawn of a New Era

From Nothing to Gold

FINANCIAL MANAGEMENT IN BPCL

The Pioneering Spirit - Burmah Shell Marketing

FINANCIAL MANAGEMENT IN BPCL

On Stream - The Burmah Shell Refinery

From Burmah Shell to Bharat Petroleum

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

OIL INDUSTRY PLAYERS

Petroleum Planning & Analysis Cell

IBP, CPCL, BRPL

Centre for High Technology

OIL INDIA LIMITED

Pvt. E & P Companies

RELIANCE INDUSTRIES LTD.

GAIL Gas Transportation & Petrochem PETRO FED

Other Private Cos. Oil & Gas Marketing

Oil Industry Safety Directorate

Petroleum India International

Engineers India Ltd.

Director General of Hydrocarbon

FINANCIAL MANAGEMENT IN BPCL

COMPETITIVE ANALYSIS 1. Hindustan Petroleum Corporation (HPCL)

2. Mangalore Refinery & Petrochemicals (MRPL)

FINANCIAL MANAGEMENT IN BPCL

OBJECTIVES GOALS AND OBLIGATIONS OBJECTIVES

To earn a reasonable rate of interest on investment.

FINANCIAL MANAGEMENT IN BPCL

To ensure maximum economy in expenditure.

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

Towards employees: To develop their capabilities and facilitate advancement through

Towards community: To develop economically viable and environment friendly products.

FINANCIAL MANAGEMENT IN BPCL

OBJECTIVES OF THE STUDY

The study has mainly been conducted:

overall objectives and obligations of the company

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

Capital Structure Theory

FINANCIAL MANAGEMENT IN BPCL

Cost Of Capital (Ko)

FINANCIAL MANAGEMENT IN BPCL

Cost Of Capital (Ko)

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

Cost Of Equity (Ke)

Cost Of Equity (Ke)

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

1.257192 1.376669 1.191493 1.351636 1.209076

FINANCIAL MANAGEMENT IN BPCL

Quick Ratio 2012 2011 2010 2009 2008

0.556998 0.674506 0.659675 0.624368 0.44081

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

FINANCIAL MANAGEMENT IN BPCL

BPCL- Highest ratio was obtained in the year 2008(0.30). .

FINANCIAL MANAGEMENT IN BPCL

7 6 5 4 3 2 1 0 2012 2011 2010 2009 2008 BPCL