A SUMMER TRAINING REPORT

ON
RATIO ANALYSIS
AT
INDIAN OIL CORPORATION LIMITED
Submitted for partial fulfillment for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
OF
GGSIP UNIVERSITY

SUBMITTED BY:
VARDAAN SHARMA
(10912303915)
UNDER THE GUIDANCE OF
MR NISHANT KUMAR

DELHI INSTITUTE OF ADVANCED STUDIES

(Affiliated to Guru Gobind Singh Indraprastha University)
PLOT NO 6, SECTOR-25, ROHINI, NEW DELHI 110085

DECLARATION
I hereby declare that the Project report titled RATIO ANALYSIS Of INDIAN OIL CORPORATION
LIMITED is my original work and has not been published or submitted for any degree, diploma or other
similar titles elsewhere. This has been undertaken for the purpose of partial fulfillment of requirement for the
award of the degree of Master of Business Administration (M.B.A).

Signature of the Student:

Place: NEW DELHI
Date:

ACKNOWLEDGEMENT

Every project starts with a little information but its effect is accomplished
Only with enormous effects and tremendous support and guidance.
This project, though an individual project, wouldnt have been possible without the constant help and guidance
of a few individuals whose support has been vital to the completion of the project.
At the outset, I would like to thank Mr. Sejal Kolhatkar ( Deputy Finance Manager) in Indian oil corporation
limited, Scope complex core-2 ; New Delhi ,for providing me the opportunity to do a project at Indian Oil
Corporation limited.
I express my sincere gratitude to our faculty of management of Delhi Institute Of Advanced Studies who was
abundantly helpful and offered invaluable assistance, support and guidance. Without whose knowledge and
assistance this report would not have been successful.

TABLE OF CONTENTS
SR.NO

PARTICULARS

PAGE NO.

DECLARATION

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

1.

INTRODUCTION

2.

COMPANY OVERVIEW

3.

LITERATURE REVIEW

23

4.

RESEARCH METHODOLOGY

26

5.

COMPANY ANALYSIS

28

6.

FINDINGS & CONCLUSION

44

7.

SUGGESTIONS & LIMITATIONS

46

8.

BIBLIOGRAPHY

48

PERFORMANCE APPRAISAL
ATTENDANCE SHEET
EVALUATION SHEET

EXECUTIVE SUMMARY

This project seeks to evaluate the ratio analysis at Indian Oil Corporation along with a financial statement
analysis in understanding the profitability, liquidity & efficiency of the firm.
Indian Oil has around 500 locations around India which serve as an outlet for the finished products.
This project provides an understanding to financial statement and ratio analysis to Indian Oil at various
locations.
A financial statement analysis of the firm so as to identify its financial strengths and weaknesses based on a
ratio analysis model.

INTRODUCTION

INTRODUCTION
Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the
firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.
There are various methods or techniques that are used in analyzing financial statements, such as comparative
statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis,
and ratios analysis.
Financial statements are prepared to meet external reporting obligations and also for decision making purposes.
They play a dominant role in setting the framework of managerial decisions. But the information provided in
the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements
alone. However, the information provided in the financial statements is of immense use in making decisions
through analysis and interpretation of financial statements.
The technique of financial statement analysis used by me in this project is ratio analysis.
Ratio Analysis
A ratio analysis is a quantitative analysis of information contained in a companys financial statements. Ratio
analysis is based on line items in financial statements like the balance sheet, income statement and cash flow
statement; the ratios of one item or a combination of items - to another item or combination are then
calculated. Ratio analysis is used to evaluate various aspects of a companys operating and financial
performance such as its efficiency, liquidity, profitability and solvency. The trend of these ratios over time is
studied to check whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of comparative valuations. Ratio
analysis is a cornerstone of fundamental analysis.
( http://www.investopedia.com/terms/r/ratioanalysis.asp )

Profitability Ratios:
Profitability ratios are a class of financial metrics that are used to assess a business's ability to generate
earnings compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or relative to the same ratio from
a
previous
period
indicates
that
the
company
is
doing
well.

.Profitability ratios measure the results of business operations or overall performance and effectiveness of the
firm. Some of the most popular profitability ratios are as under:

Gross profit ratio

Net profit ratio
Operating ratio
Expense ratio
Return on shareholders investment or net worth
Return on equity capital
Return on capital employed (ROCE) Ratio
Dividend yield ratio
Dividend payout ratio
Earnings Per Share Ratio
Price earning ratio
(http://www.investopedia.com/terms/p/profitabilityratios.asp)

Liquidity Ratios:
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the
calculation of metrics including the current ratio, quick ratio and operating cash flow ratio. Current
liabilities are analyzed in relation to liquid assets to evaluate the coverage of short-term debts in an
emergency. Bankruptcy analysts and mortgage originators use liquidity ratios to evaluate going concern
issues, as liquidity measurement ratios indicate cash flow positioning.
Liquidity ratios measure the short term solvency of financial position of a firm. These ratios are calculated to
comment upon the short term paying capacity of a concern or the firm's ability to meet its current obligations.
Following are the most important liquidity ratios.
Current ratio
Liquid / Acid test / Quick ratio
(http://www.investopedia.com/terms/l/liquidityratios.asp)

Activity Ratios:
Operational efficiency and profitability are the primary objectives of a business. Measuring the ability of a company to
achieve such objectives can be difficult, unless you use financial analysis tools such as activity ratios. Business managers
who understand and use these ratios have an edge over those who dont

Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed.
These ratios are also called turnover ratios because they indicate the speed with which assets are being turned
over into sales. Following are the most important activity ratios:

Inventory / Stock turnover ratio

Debtors / Receivables turnover ratio
Average collection period
Creditors / Payable turnover ratio
Working capital turnover ratio
Fixed assets turnover ratio
Over and under trading
(http://smallbusiness.chron.com/activity-ratios-57298.html)

Long Term Solvency or Leverage Ratios:

Long term solvency or leverage ratios convey a firm's ability to meet the interest costs and payment schedules
of its long term obligations. Following are some of the most important long term solvency or leverage ratios.

Debt-to-equity ratio
Proprietary or Equity ratio
Ratio of fixed assets to shareholders funds
Ratio of current assets to shareholders funds
Interest coverage ratio
Capital gearing ratio
Over and under capitalization

Limitations of Financial Statement Analysis:

Companies rely on a mixture of owners' equity and debt to finance their operations. A leverage ratio is any
one of several financial measurements that look at how much capital comes in the form of debt (loans), or
assesses the ability of a company to meet financial obligations.

Although financial statement analysis is highly useful tool, it has two limitations. These two limitations involve
the comparability of financial data between companies and the need to look beyond ratios.
(http://www.investopedia.com/terms/l/leverageratio.asp)
9

Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis. The major benefit is that the investors get
enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory
authorities like International Accounting Standards Board can ensure whether the company is following
accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze
the taxation due to the company. Moreover, company can analyze its own performance over the period of time
through financial statements analysis.

COMPANY OVERVIEW

Indian Oil began operations in 1958 as

Indian Oil Company Ltd.
The Indian Oil Corporation was formed
in 1964, with the merger of Indian
Refineries Ltd.
Recently Indian Oil Corp (IOC) has
raised $500 million by selling 10-year
dollar-denominated bonds, its fourth
such issue overseas in the last three and a half years.
In 2003, its Gujarat Refinery was awarded the "Best of all" Rajiv Gandhi National Quality Award.
The company is mainly controlled by Government of India which owns approx. 58.57% shares in the company.
It is one of the seven Maharatna status companies of India, apart from :

Coal India Limited

NTPC Limited
Oil and Natural Gas Corporation
Steel Authority of India Limited
Bharat Heavy Electricals Limited
Gas Authority of India Limited.

10

Indian Oil operates the largest and the widest network of fuel stations in the country, numbering about 20,575
(16,350 regular ROs & 4,225 Kisan Seva Kendra).
It has also started Auto LPG Dispensing Stations (ALDS).
It supplies Indane cooking gas to over 66.8 million households through a network of 5,934 Indane distributors.
Indian Oil and its subsidiaries account for a 49% share in the petroleum products market, 31% 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 22 refineries with a combined refining
capacity of 65.7 million metric tonnes per year.
(http://www.business-standard.com/company/i-o-c-l-12002/information/company-history)

CONTRIBUTION TOWARDS GOVERNMENT

Indian Oil Corporation (IndianOil) is India's largest commercial enterprise, with a sales turnover of Rs.
3,99,601 crore (US$ 61 billion) and profits of Rs. 10,399 crore (US$ 1,589 million) for the year 2015-16.

BRIEF DESCRIPTION OF INDIAN OIL COMPANY

Indian Oil Logo

Traded as

Bringing Energy to Life

: BSE: 530965 NSE: IOC

Industry

Oil and gas

Founded

1964

Headquarters

New Delhi, India

Area served

India
11

Key people

MR. B. ASHOK (Chairman)

Products

Fuels, lubricants, petrochemicals

Revenue

445,526 crore (US$66 billion) (2015)

Operating income
Profit

10,550 crore (US$1.6 billion) (2015)

10,399.03 crore (2015-2016)

Total assets

128,059 crore (US$19 billion) (2015)

Owner(s)

Government of India

Employees

34,659 (2016)

(https://www.iocl.com/aboutus/profile.aspx)

INTERNATIONAL RANKING:
Indian Oil Corporation (IndianOil) is Indias Largest Commercial Enterprise, with a net profit of 103.99
billion(US$1.5 billion) for the financial year 2015-16.
Standing true to its corporate vision of being The Energy of India, IndianOil has been successfully meeting the
energy demands of India for more than five decades. Being Indias flagship national oil company, IndianOil
with a work-force of 33,000 efficient minds is living their vision of becoming a globally admired company. It
is the leading Indian Corporate in Fortunes prestigious Global 500 listing of worlds largest corporates at
161st position for the year 2016.
IndianOil's business interests overlap the entire hydrocarbon value-chainfrom refining, pipeline transportation
and marketing of petroleum products to exploration & production of crude oil. And from marketing of natural
gas to petrochemicals. Also, IndianOil has ventured into alternative energy and globalisation of downstream
operations. With subsidiaries in Sri Lanka, Mauritius and the UAE, IndianOil is scouting for new business
opportunities in the energy markets across Asia and Africa. It has also formed about 20 joint ventures with
reputed business partners from India and abroad to pursue diverse business interests.
It is the fifth most valued brand in India according to an annual survey conducted by Brand Finance and The
Economic Times in 2010.(https://en.wikipedia.org/wiki/Indian_Oil_Corporation)

PRODUCTS AND SERVICES

12

Refinery

P&S Products

Barauni

Carbon Black Feedstock (CBFS), Raw Petroleum Coke (RPC), Sulphur

Digboi

Paraffin Wax

Guwahati

Raw Petroleum Coke (RPC)

Haldia

CBFS, Jute Batching Oil (JBO), Micro Crystalline Wax (MCW), Mineral
Turpentine Oil (MTO), Sulphur

Koyali

LABFS, Mineral Turpentine Oil (MTO), Sulphur, Toluene

Mathura

Propylene, Sulphur

Panipat

Benzene, Mineral Turpentine Oil (MTO), Petcoke, Sulphur

Indian Oil is not only the largest commercial enterprise in the country it is the flagship corporate of the Indian
Nation. Besides having a dominant market share, Indian Oil is widely recognized as Indias dominant energy
brand and customers perceive Indian Oil as a reliable
symbol for high quality products and services.
Major Products of IOCL are:

Auto LPG
Aviation Turbine Fuel
Bitumen
High Speed Diesel
Industrial Fuels
Liquefied Petroleum Gas

Lubricants & Greases

Marine Fuels
MS Gasoline
Petrochemicals
Crude Oil
Superior Kerosene Oil

BRANDS

Indane Gas

Domestic and Industrial Gas

Auto Gas Automotive Natural Gas
Xtra Premium Automotive Premium Petrol
Xtra Mile Automotive Premium Diesel
Servo Lubricants and Greases
Propel Petrochemicals
Indian Oil Aviation - Aviation fuel
LNG at Doorstep LNG by cryogenic transportation
(https://www.iocl.com/products/SpecialProducts.aspx)

13

OPERATIONS:

Refineries : IOCL has various refineries across India.

In Assam

Digboi Refinery is India's oldest refinery and was commissioned in 1901. Originally a part of Assam Oil
Company, it became part of Indian Oil in 1981. Its original refining capacity had been 0.5 MMTPA since , 1901.
Modernization project of this refinery was completed by 1996 and the refinery now has an enhanced capacity of
0.65 MMTPA. UOP licensed the technology for the Coking process in this refinery.
Guwahati Refinery, the first public sector refinery of the country, was built with Romanian collaboration and
was inaugurated on 1 January 1962. Its capacity is 1 MMTPA.
Bongaigaon Refinery became the eighth refinery of Indian Oil after merger of Bongaigaon Refinery &
Petrochemicals Limited w.e.f. 25 March 2009. It is located at Dhaligaon in Chirang district of Assam, 200 km
west of Guwahati.

In Bihar

Barauni Refinery, in Bihar, was built in collaboration with Russia and Romania. It was commissioned in 1964
with a capacity of 1 MMTPA. Its current capacity is 6 MMTPA.

In Gujarat

Gujarat Refinery, at Koyali (near Vadodara) in Gujarat, is Indian Oils second largest refinery. The refinery was
commissioned in 1965. It also houses the first hydro cracking unit of the country. Its present capacity is 13.70
MMTPA.

In West Bengal

Haldia Refinery is the only coastal refinery of the Corporation, situated 136 km downstream of Kolkata in the
Purba Medinipur (East Midnapore) district. It was commissioned in 1975 with a capacity of 2.5 MMTPA, which
has since been increased to 7.5 MMTPA.

In Uttar Pradesh
14

Mathura Refinery was commissioned in 1982 as the sixth refinery in the fold of Indian Oil and with an original
capacity of 6.0 MMTPA. Located strategically between Delhi and Agra, the capacity of Mathura refinery has
been increased to 8.8 MMTPA.

In Haryana

Panipat Refinery is the seventh and largest refinery of Indian Oil. The original refinery with 6 MMTPA capacity
was built and commissioned in 1998. Panipat Refinery has since expanded its refining capacity to 12 MMTPA.
There are plans to further expand the capacity to 21 MMTPA.

In Odisha (Orissa)

Paradip Refinery - The commissioning of 15 million tonnes per annum refinery in November 2012 has been
delayed and is now expected to be operational only in September 2013.
(https://www.iocl.com/services/PipelineOperationMaintenance.aspx)
COMPETITORS:
Indian Oil Corporation has two major domestic competitors, Bharat Petroleum and Hindustan Petroleum.
Both are state-controlled, like Indian Oil Corporation. There are two private competitors: Reliance
Industries and Essar Oil.

LISTING AND SHAREHOLDING:

Indian Oils equity shares are listed on the Bombay Stock Exchange and National Stock Exchange of India.
As on 23 August 2015, the promoters Government of India held approx. 58.57% of the shares in Indian Oil.
ONGC held approx. 10% of the shares. Remaining 31% of the shares are held by others.

Shareholders (as on 23-Aug-2015) Shareholding:

Promoter Group (Government of India)

58.57%

private single body

40.13%

Insurance Companies

01.50%

Individual shareholders

0.83%
15

Trusts
Foreign Institutional Investors (FII)

0.42%
0.13%

Others

0.07%

Total

100.0%

(https://www.iocl.com/InvestorCenter/ShareholdingPattern.aspx)

OBJECTIVES OF INDIAN OIL:

IOCL has defined its objectives for succeeding in its mission. These objectives are:

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 laying 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.

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 minimize 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 Indias
policy of liberalization and reforms.
16

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.

VISION OF IOCL
A major diversified, transnational, integrated energy company, with national leadership and a strong
environment conscience, playing a national role in oil security & public distribution.

MISSION OF IOCL
IOCL has the following mission:

To achieve international standards of excellence in all aspects of energy and diversified business with
focus on customer delight through value of products and services and cost reduction.

To maximize creation of wealth, value and satisfaction for the stakeholders.

To attain leadership in developing, adopting and assimilating state-of- the-art technology for competitive
advantage.

To provide technology and services through sustained Research and Development.

To foster a culture of participation and innovation for employee growth and

To cultivate high standards of business ethics and Total Quality Management for a strong corporate
identity and brand equity.

To help enrich the quality of life of the community and preserve ecological balance and heritage through
a strong environment conscience.

contribution.

17

MAJOR DIVISION OF IOCL:

IOCL

DESCRIPTION:
Indian Oil Corporation Limited (Indian Oil) owns and operates a network of crude oil and petroleum product
pipeline in India.
The Refineries Division is focused on managing the public sector refineries and the Marketing Division is
focused on distribution not only the entire production of public sector refineries but also the deficit products
imported.
It is organized in two segments: sale of petroleum products, and other businesses, which comprises sale of
imported crude oil, sale of gas, petrochemicals, explosives and cryogenics, wind mill power generation and oil
and gas exploration activities jointly undertaken in the form of unincorporated joint ventures.

18

BUSINESS MODEL OF IOCL:

IOCL has its presence in all spheres of downstream operations.

ORGANIZATIONAL STRUCTURE

The whole of Indian Oil Corporation (IOC) works under Corporate Office located at New Delhi.

19

It follows hierarchical structure where the decision flows from top to bottom and the data flows from bottom to
top.
Under the corporate office there are 5 divisions namely Pipelines,
Refineries,
R&D,
Marketing
&
Assam oil division.
The Marketing division located at Mumbai co-ordinates with the regional offices i.e. North, South, East & West
Region office, the other Divisional Offices & SBI for decisions regarding investments.
The Regional offices co-ordinates with respective state office that in turn co ordinates with respective location
offices.

CORPORATE OFFICE
NEW DELHI

R&D
Division
(Noida)

NR
(New Delhi)

Pipeline
Division
(New Delhi)

Refineries
Division
(Mumbai)

ER
WR
(Kolkata) (Mumbai)

Marketing
Division

Assam oil
Division

SR
(Chennai)

RESPECTIVE STATE OFFICE

20

RESPECTIVE LOCATION OFICE

21

LITERATURE REVIEW

22

LITERATURE REVIEW

Gopinathan Thachappilly (2009), in this articles he discuss about the Financial Ratio Analysis for Performance
evaluation. Its analysis is typically done to make sense of the massive amount of numbers presented in company
financial statements. It helps to evaluate the performance of a company, so that investors can decide whether to
invest in that company. Here we are looking at the different ratio categories in separate articles on different
aspects of performance such as profitability ratios, liquidity ratios, debt ratios, performance ratios, investment
evaluation ratios.
James Clausen (2009), He state that the Profitability Ratio Analysis of Income Statement and Balance Sheet
Ratio analysis of the income statement and balance sheet are used to measure company profit performance. He
said the learn ratio analyses of the income statement and balance sheet. The income statement and balance sheet
are two important reports that show the profit and net worth of the company. It analyses shows how the well the
company is doing in terms of profits compared to sales. He also shows how well the assets are performing in
terms of generating revenue. He defines the income statement shows the net profit of the company by
subtracting expenses from gross profit (sales cost of goods sold). Furthermore, the balance sheet lists the
value of the assets, as well as liabilities. In simple terms, the main function of the balance sheet is to show the
companys net worth by subtracting liabilities from assets. He said that the balance sheet does not report
profits, theres an important relationship between assets and profit. The business owner normally has a lot of
investment in the companys assets.
Jo Nelgadde (2009), He said that learn how to perform inventory analysis and inventory turnover analysis to
better understand a business as well as to identify effective inventory management. He analyzing a companys
financial performance definitely includes performing inventory analysis. He know that there are three types of
business inventory: Raw Materials (RM),Work-In-Progress (WIP),Finished Goods (FG).He give idea two types
formula of ratio such as Inventory Turnover = Cost of Goods Sold / Average Inventory, Average age of
Inventory = 360 days / Inventory Turnover
James Clausen (2009), He denotes that about the total asset ratio. The calculation uses two factors, total revenue
and average assets to determine the turnover ratio. When calculating for a particular year, the total revenue for
that year is used. Instead of using the year ending asset total from the balance sheet, a more accurate picture
23

would be to use the total average assets for the year. Once the average assets are determined for the same time
period that revenue is compared, the formula for calculating the asset turnover ratio is. Total Revenue / Average
Assets = Asset Turnover Ratio
Lucia Jenkins (2009), Understanding the use of various financial ratios and techniques can help in gaining a
more complete picture of a company's financial outlook. He thinks the most important thing is fixed cost and
variable cost. Fixed costs are those costs that are always present, regardless of how much or how little is sold.
Some examples of fixed costs include rent, insurance and salaries. Variable costs are the costs that increase or
decrease in ratios proportion to sales.
Ho and Zhu (2010) have reported that the evaluation of a companys performance has been

focusing the

operational effectiveness and efficiency, which might influence the companys survival directly. Furthermore,
Gopinathan (2012) has presented that the financial ratios analysis can spot better investment options for
investors as the ratio analysis measures various aspects of the performance and analyzes fundamentals of a
company or an institution. Andrew and Schmidgall (2008) in their study classified financial ratios into five
categories liquidity ratios, solvency ratios, activity ratios, profitability ratios, and operating ratios. They
indicated that financial ratios themselves do not provide valuable information about a firms performance,
Andrew (2008) in his study conducted on automobile industry investigated the leverage ratio of companies and
suggested that a value-maximizing capital structure.
Hitchings (2013), in his study realized that ratio analysis is a sensitive and valuable tool in credit assessment
which is to forecast the ability of a borrower to meet its debt obligations.
Zopounidis (2000) in his study proposed methodological framework based on financial ratio analyses for
estimating small and medium size enterprises performance, Hsieh and Wang (2001) in their study examined and
stressed the need of selecting relevant financial ratios for the purpose of analysis. They proposed new approach
for finding useful financial ratio and also emphasized that industry differs in product, in size and have its own
unique business practices and internal and external environment thus financial ratio analysis should be
according to industry which suit it the most.
Dr. Sugan C.Jain (2002) in his study examined the performance of automobile industry. He used composite
index approach to analyze the operational efficiency and profitability and suggested to strengthening the
soundness, profitability improvisation, working capital and in the performance of fixed assets. Harrision (2003)
conducted study and argued that financial ratio analyses are very useful. During his study he found that

24

financial ratios analysis are also effective in automobile industry, it guide governing body to determine effective
and efficient strategies and identify the weak areas which need attention.
Chen and Shimerda (1981) in their study noted that there are 41 different financial ratios which were earlier
used sufficiently in studies and conclude that it is difficult to select ratio with the approximate and absolute
factors loading as the representative financial ratio for the observed factors. Virtanen and Yli-Olli (1989) in their
study tested the temporal behavior of financial ratio distributions and found that business cycle affects the cross
sectional financial ratio distributions. Tippett (1990) in his study examined models financial ratio in terms of
stochastic processes and reveled that in general inference normality will be the exception rather than the rule.

25

OBJECTIVE &
RESEARCH METHODOLOGY

26

OBJECTIVES
OBJECTIVES OF THE REPORT

To get an exposure of the actual working environment within a multi-national.

To thoroughly understand the financial statement and ratio analysis at Indian Oil.

Evaluate the contents of Indian Oil Corporation Limited Financial Statements.

Measure Indian Oil Corporation Limiteds Profitability, Efficiency & Liquidity position.

RESEARCH METHODOLOGY
The study conducted is investigative in nature that is to say it probes into the Finance department at Indian Oil
corporation figuring out its major functions with the help of secondary sources of data available from the
department itself. The core concept underlying research is its methodology. The methodology controls the study,
dictates the acquisition of the data, and arranges them in logical relationships, sets up a means of refining the
raw data, contrives an approach so that the meanings that lie below the surface of those data become manifest,
and finally issue a conclusion or series of conclusions that lead to an expansion of knowledge. The entire
process is a unified effort as well as an appreciation of its component parts.

Major Parameters of the Methodology Include:

Data Collection (Cash Flow Statements, Income Statements, Balance Sheets etc)

Information collected from internal guide and finance manager. Primary data is first hand information.

Analyzing and interpreting the information available in the financial statements and drawing meaningful
conclusions from them.

27

DATA ANALYSIS

28

COMPANY ANALYSIS
IOCL REFINERIES DIVISION
Born from the vision of achieving self-reliance in oil refining and marketing for the nation, Indian Oil has
gathered a luminous legacy of more than 100 years of accumulated experiences in all areas of petroleum
refining by taking into its fold, the Digboi Refinery commissioned in 1901.
Indian Oil controls 10 of Indias 22 refineries. The group refining capacity is 65.7 million metric tones per
annum (MMTPA) or 1.30 million barrels per day -the largest share among refining companies in India. It
accounts for 31% share of national refining capacity.

Figure 1.7 IOCLs Refinery Wise Installed Capacity

Figure1.8 IOCLs Region Wise Installed Capacity

Born from the vision of achieving self-reliance in oil refining and marketing for the nation, IndianOil has
gathered a luminous legacy of more than 100 years of accumulated experiences in all areas of petroleum
refining by taking into its fold, the Digboi Refinery commissioned in 1901.
IndianOil controls 11 of Indias 23 refineries. The group refining capacity is 80.7 million metric tonnes per
annum (MMTPA) - the largest share among refining companies in India. It accounts for 35% share of national
refining capacity.
The strength of IndianOil springs from its experience of operating the largest number of refineries in India and
adapting to a variety of refining processes along the way. The basket of technologies, which are in operation in
IndianOil refineries include: Atmospheric/Vacuum Distillation; Distillate FCC/Resid FCC; Hydrocracking;
Catalytic Reforming, Hydrogen Generation; Delayed Coking; Lube Processing Units; Visbreaking; Merox
Treatment; Hydro-Desulphirisation of Kerosene&Gasoil streams; Sulphur recovery; Dewaxing, Wax Hydro
finishing; Coke Calcining, etc.
The Corporation has commissioned several grassroots refineries and modern process units. Procedures for
commissioning and start-up of individual units and the refinery have been well laid out and enshrined in various
customised operating manuals, which are continually updated.
29

IndianOil refineries have an ambitious growth plan for capacity augmentation, de-bottlenecking, bottom
upgradation and quality upgradation.
On the environment front, all IndianOil refineries fully comply with the statutory requirements. Several Clean
Development Mechanism projects have also been initiated. To address concerns on safety at the work place, a
number of steps were taken during the year, resulting in reduction of the frequency of accidents.
Innovative strategies and knowledge-sharing are the tools available for converting challenges into opportunities
for sustained organisational growth. With strategies and plans for several value-added projects in place,
IndianOil refineries will continue to play a leading role in the downstream hydrocarbon sector for meeting the
rising energy needs of our country. (https://www.iocl.com/aboutus/refineries.aspx)

30

TABULATION AND FINIDINGS

OPERATIONAL EFFICIENCY

Figure: 1.10 Refinery Wise Throughputs

Figure 1.11 Refinery Wise Capacity utilization

The overall capacity utilization of IOC refineries has been more than 100% for fifth consecutive year since
2008-09 and the capacity utilization at Mathura, Digboi, Panipat and Barauni has also been more than 100%.
Throughput* of refineries has decreased from 55.621 MMT in 2011-12 to 54.650 MMT in 2012-13, a decrease
of .970 MMT or 1.75% over the previous year.
Reasons for lower throughput and fall in capacity utilization (refer Fig.):

Planned idling of some crude units due to shut down of major units i.e. DCU etc. during jan-feb13
resulted in a decrease of 1.01MMT in throughput and 8% in cap. Utilization.
Planned idling of CDU unit for revamp shutdown at Guwahati caused a fall of 10% in capacity
utilization.
Capacity utilization fell down by almost 8% at Haldia refinery due to eastern power grid failure.

Figure 1.12 Distillate Yield (in %)

31

Figure: 1.13 Fuel & Loss (in %)

Overall distillate yield %* in 2012-13 has improved from 2011-12 by 03. Individually too it has improved at
Barauni, Gujarat, Haldia, Digboi, BGR and Panipat Refineries (refer Fig.).
Fuel & loss %* of IOC refineries has remained at 9.1% for 2012-13 like 2011-12. It has remained at the same
level despite decrease in Thput. Normally when throughput is low the fuel & loss increases as there will always
be a fixed minimum % of fuel & loss for a given installed capacity. Also there will be increase in per unit fixed
cost due to underutilization of installed capacity.
(https://www.iocl.com/services/RefineryOMManagement.aspx)
INCOME STATEMENT FOR THE YEAR ENDED 31ST MARCH 2015
PERFORMANCE REVIEW
FINANCIAL

2015-16

2014-15

US$ million Rs. in Crore

US$ Million Rs. in Crore

Turnover
(Inclusive of
Excise Duty &
Sale of Services)

61,045

399,601

73,701

450,756

(Profit Before
Exceptional
Items, Finance
Cost, Tax,
Depreciation &
Amortisation)

3,411

22,329

2,337

14,291

Finance Cost

459

3,000

562

3,435

Depreciation

741

4,853

741

4,529

Profit Before Tax &

Exceptional items

2,211

Exceptional Items

209

Profit Before Tax

2,420

EBITDA

Tax Provision

831

14,476
1,364
15,840
5,441

1,034

6,327

273

1,668

1,307

7,995

445

2,722

32

Profit After Tax

Balance Brought
Forward from
Last Year

1,589

10,399

862

5,273

Interim Dividend
paid

204

1,335

Proposed Final
Dividend

315

2,064

262

1,602

Corporate Dividend
Tax

104

680

53

326

Insurance Reserve
(Net)

20

Bond Redemption
Reserve

110

CSR Reserve (Net)

(2)

(15)

General Reserve

855

5,598

Less:Appropriations

Balance Carried to
Next Year

20

717

113

694

(1)

431

2,632

SHARE VALUE
2015-16

2014-15

Us$

Rs.

US$

Rs.

Cash Earnings
Per Share

0.96

62.82

0.66

40.37

Earnings Per Share

0.65

42.83

0.36

21.72

Book Value Per Share

4.60

304.57

4.48

279.95

Note: Exchange Rate used:For 2015-16: Average Rate 1 US$ = Rs. 65.46 and Closing Rate 1 US$ =

33

Rs. 66.26 as on 31.03.2016

For 2014-15: Average Rate 1 US$ = Rs. 61.16 and Closing Rate 1 US$ =
Rs. 62.51 as on 31.03.2015
PHYSICAL
MILLION TONNES
2015-16

2014-15

Refineries Throughput

56.69

53.59

Pipelines Throughput

79.82

Product Sales (inclusive of Gas, Petrochemicals & Exports)

75.68

80.72 76.51

(http://economictimes.indiatimes.com/indian-oil-corporation-ltd/directorsreport/companyid-11924.cms)

PROFITABILITY RATIOS FOR THE YEAR ENDING 31ST March,2015

(Figures in Crores)

Gross Profit Ratio:

Indicates the relationship between net sales revenue and the cost of goods sold.
Gross
Net Sales

Profit

15840 x 100 = 3.96

34

399601
The gross profit margin has fallen marginally from last year due to the rise in the cost of expenditure incurred.
Net Profit Ratio:
A measure of net income Rupees generated by each Rupee of sales.
Net Income x 100
Net Sales
10399 x 100 = 2.60
399601

* Refinements to the net income figure can make it more accurate than this ratio computation. They could
include removal of equity earnings from investments, "other income" and "other expense" items as well as
minority share of earnings and nonrecurring items.
The Net profit margin has fallen considerably due to the fall in gross profit margin and fulfillment of other
obligations by IOCL.
The rising profitability of Indian oil is affected due to high level of global crude oil prices

The future profitability prospects of Indian oil are assured by:

Issue of Special Oil bonds in lieu of part under recoveries (bonds sanctioned: 20011-12 - Rs 13943 cr,
20013-1014 Rs 18,997 cr)
Rationalization of duties.
Indian Oils huge expansion, diversification & globalization plans.

Operating Income Margin:

A measure of the operating income generated by each rupee of sales.
Operating Income x 100
35

Net sales
22329 x 100 = 5.58
399601
Operating Expense Ratio:
Measures the relationship between the admin, selling & distribution expenses to the ratio of Net sales.
This stands at a high percentage as compared to previous years because of higher acquisition cost and
manufacturing within all the four regions.

A business that has a high return on equity is more likely to be one that is capable of generating cash internally.
For the most part, the higher a company's return on equity compared to its industry, the better. The Industrial
ROE is placed at 5%. Indian Oil is performing at below the industrial trends, which means that in order to
generate higher wealth, they need to generate higher ROE.

Earnings Per Share:

This measures the managements success in achieving profits for the owners.
Profit After Tax Preference Dividend
No. of Equity Shares
10399-3399
13045
=42.83
Dividend Yield Ratio:
This measures the relationship between cash dividends paid to common shareholders and the market price per
share of common stock.
Dividend Per Share
Market Price per share
Price Earning Ratio:
This measures how much the investors are willing to pay per rupee of reported profits.
Market price of Share
Earning per Share
=42.83
36

65.46
=.654
This figure measures the investors expectations and the market appraisal of the performance of IOCL. This
ratio is used by many security analysts in the Indian market to assess a firm performance as expected by the
investors.

LIQUIDITY RATIOS FOR THE YEAR ENDING 31ST MARCH 2015

(Figures in Crores

Acid Test ratio:

A measurement of the liquidity position of the business. The quick ratio compares the cash plus cash
equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio
and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation.
Consequently, a business's quick ratio will be lower than its current ratio. It is a stringent test of liquidity.

The ideal Quick ratio for any firm is 1:1. Indian Oil fails to achieve that target by a huge margin.
Inventory Turnover Ratio:
This rate measures how fast the merchandise is moving. Indian oil requires huge working capital requirement
(mainly in the form of inventory) for running the business as well as for maintaining countrys oil security.

Debtors Turnover Ratio:

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm.
In simple words it indicates the number of times average debtors (receivable) are turned over during a year.
Working Capital Turnover ratio:
The Working Capital Turnover ratio measures the company's Net Sales from the Working Capital generated.

Capital Gearing Ratio:

A general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed
funds. Gearing is a measure of financial leverage, demonstrating the degree to which a firm's activities are
funded by owner's funds versus creditor's funds.

37

The above figure states that IOCL has a safety margin of 39 % available to the creditors of the firm. That is to
say, IOCL will be able to meet the creditors obligations even if the value of its assets decline by 39 %. This
kind of a structure is suitable for a firm like IOCL, as it has neither a high capital gearing ratio which sometimes
leads to inflexibility in the operations of the firm as the creditors might exercise pressure in the working of the
management nor is it too low which would indicate poor cash management.

(http://www.moneycontrol.com/financials/indianoilcorporation/ratios/IOC)

38

FINDINGS

FINDINGS
1. Operating Income Margin is 5.58 which is a measure of the operating income generated
by each rupee of sales.
39

2. Earnings Per Share is 42.83 which measures the managements success in achieving
profits for the owners
3. Price Earning Ratio is 0.654 which measures how much the investors are willing to pay
per rupee of reported profits.

40

CONCLUSION

CONCLUSION

41

By various field studies, data analysis was done to assess the ratio analysis. It can be safely concluded that
the operations of IOCL is financially feasible yielding positive results.

42

SUGGESTIONS &
LIMITATIONS

SUGGESTIONS

1. . Increase presence in the southern part of the country.

43

2. More technologically advanced refineries to be able to process cheap sulphur crude oil and improve
competitive position with other private and players.

3. Increase

installed

capacity

of

the

refineries

to

discount

upon

economies

of

scale.

LIMITATIONS

1. As the data are secondary data so the reliability of the result depends upon the reliability of the data
published.
2. Lack of accessibility.
3. Insufficient data on the site.
4. Unprecedented changes in Govt. policies are not considered in the project.
5. Natural calamite not included in this project.
6. Management generally not willing to reveal their internal strategy to combat with the competitor. So, the
future effect of those strategy is not known

44

REFERENCES

REFERENCES

45

1. R.P. Rustagi(2009),Financial Management theory, concepts and problems,

3rdedition,India,page605-690..
2. T.S Gerewal (2006), Accounting Ratios , Revised Edition 2006,India, page 4.14.72
3. http://www.jubl.com/
4. www.icra.in
5. www.ebsco.com
6. www.edwiess.in
7. www.moneycontrol.com/
8. www.investopedia.com
9. http://wiki.answers.com
10. http://www.rushabhinfosoft.com/Webpages/BHTML/CH-36.HTM
11. www.money.msn.com
12. http://financial-dictionary.thefreedictionary.com

46