IOCL – An Overview
Indian Oil is India’s flagship national oil company with business interests straddling the entire hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum products to natural gas and petrochemicals.
It is the leading Indian corporate in the Fortune ‘Global 500′ listing, ranked at 98 by sales turnover for the year 2011. IndianOil and its subsidiaries have a dominant share of the petroleum products market, national refining capacity and downstream sector pipelines capacity in India. With over a 34,000-strong workforce, IndianOil has been helping meet India’s energy demands for over five decades now. At IndianOil, operations are strategically structured along business verticals – Refineries, Pipelines, Marketing, R and Business Development – E, Petrochemicals and Natural Gas.
IndianOil controls 10 of India’s 20 refineries with a group refining capacity of 65. 7 MMTPA. Its cross-country network of crude oil, product and gas pipelines, spanning 10,899 km with a capacity of 75. 2 MMTPA, is the largest in the country. With a throughput of 68. 5 million tonnes, it meets the vital energy needs of the consumers in an efficient and environmentfriendly manner. The company recorded revenues of INR 2,710,736. 2 million (approximately $56,925. 5 million) in the financial year ended March 2010 (FY2010), a decrease of 5% compared to FY2009.
The operating profit of the company was INR 157,161. 4 million (approximately $3,300. 4 million) in FY2010, an increase of 99% over FY2009. The net profit was INR102,205. 5 million (approximately $2,146. 3 million) in FY2010, compared to INR29,495. 5 million (approximately $619. 4 million) in FY2009. 2. Business Description Indian Oil Corporation Limited (IOCL) is one of India’s largest oil companies. IOCL along with its subsidiaries account for over 48% petroleum products market share, 34. 8% national refining capacity, and 71% downstream sector pipelines capacity in India.
IOCL operates through two business divisions: petroleum products and other businesses. The petroleum products division engages in refining of crude oil and sale of refined and processed oil products. IOCL engages in limited upstream activities. It procures most of its requirements of crude oil from the international energy market. The company operates refineries and a retail network for sale of processed oil. The company owns and operates 10 of India’s 20 refineries with a combined refining capacity of 65. 7 million metric tonnes per annum (MMTPA), which is equivalent to 1. million barrels per day. IOCL operates a cross- country network of crude oil and product pipelines, spanning 10,899 km and the largest in the country. IOCL operates a network of 18,643 petrol and diesel stations, including 2,947 Kisan Seva Kendras (KSKs) in the rural markets. With a countrywide network of 35,600 sales points, backed for supplies by 140 bulk storage terminals and depots, 98 aviation fuel stations, and 88 LPG bottling plants, IOCL services the entire country. Through Indane, IOCL is present in almost 2,764 markets through a network of 5,095 distributors.
About 7,593 bulk consumer pumps are also in operation for the convenience of large consumers. IOCL exports a part of its products to Bangladesh, Nepal, Sri Lanka, and Pakistan. The company has overseas marketing ventures with two subsidiaries in Sri Lanka and Mauritius, and a regional office at Dubai in the United Arab Emirates. It also provides technical and manpower support services to overseas companies such as Emirates National Oil Company (ENOC), Kenya Pipeline Company, and Aden Refinery of Yemen.
Aviation Service, a subsidiary of the company, has over 63% market share in aviation fuel business in India. It provides aviation fuel to domestic and international flag carriers, private airlines, as well as the Indian Defense Services. IOCL also engages in the bulk consumer business, including that of railways, state transport undertakings, and the industrial, agricultural, and marine sectors. The company engages in exploration and production of oil in collaboration with other Indian oil companies such as Oil India and Oil & Natural Gas Corporation.
IOCL has nonoperator participating interest in seven oil and gas blocks awarded under various new exploration licensing policy (NELP) rounds and two coal bed methane blocks in India. It also has participating interest in an onshore block in Assam and Arunachal Pradesh. The company is also active in Libya, Iran, Nigeria, Yemen, and Gabon. Overall, IOCL has 11 domestic exploration blocks, including two blocks where gas discoveries have been made and nine overseas exploration blocks, and the Farsi block in Iran where commerciality of gas discovery has been established.
IOC sources its requirements of crude oil from different parts of the world, including the Far East, Gulf region, Mediterranean, West Africa, and Latin America. The company’s other businesses division comprises sale of imported crude oil, sale of gas, petrochemicals, explosives and cryogenics, wind mill power generation, and oil and gas exploration activities undertaken through joint ventures. 3. Key Financial Indicators 3. 1 Debt-Equity Ratio Mar11 0. 92 Mar10 0. 95 Mar09 0. 95 Mar08 0. 82 Mar07 0. 83 Mar06 0. 79 Mar05 0. 6 Mar04 0. 64 Mar03 0. 98 Mar02 1. 27 Debt-Equity Ratio Debt-Equity Ratio 1. 4 1. 2 1 0. 0. 6 0. 4 0. 2 0 Debt-Equity Ratio It is a measure of a company’s financial leverage calculated by dividing its total liabilities by stockholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders.
However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt equity ratio for IOCL has been constant in the recent years indicating that the company is doing well in handling its debt. 3. 2 Long Term Debt-Equity Ratio Mar11 0. 39 Mar10 0. 42 Mar09 0. 39 Mar08 0. 36 Mar07 0. 43 Mar06 0. 38 Mar05 0. 29 Mar04 0. 36 Mar03 0. 47 Mar02 0. 48 Long Term DebtEquity Ratio Long Term Debt-Equity Ratio 0. 6 0. 5 0. 4 0. 3 0. 0. 1 0 Long Term Debt-Equity Ratio The amount of long term debt on a company’s balance sheet is crucial. It refers to money the company owes that it doesn’t expect to pay off in the next year. Long term debt consists of things such as mortgages on corporate buildings and / or land, as well as business loans. When debt shrinks and cash increases, the balance sheet is said to be “improving”. When it’s the other way around, it is said to be “deteriorating”. Companies with too much long term debt will find themselves overwhelmed with interest payments, a risk of having too little working capital, and ultimately, bankruptcy.
The Long Term Debt Equity ratio of the company has been constant around 0. 4 indicating sustainable performance. 3. 3 Current Ratio Mar11 0. 84 Mar10 0. 74 Mar09 0. 76 Mar08 0. 84 Mar07 0. 85 Mar06 0. 88 Mar05 0. 9 Mar04 0. 9 Mar03 0. 79 Mar02 0. 79 Current Ratio Current Ratio 1 0. 9 0. 8 0. 7 0. 6 0. 5 0. 4 0. 3 0. 2 0. 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Current Ratio It measures the liquidity position of the company and is utilised for making analysis of the short term financial position. It is calculated by dividing the total of the current assets by total of the current liabilities.
A high current ratio indicates that the company has the ability to pay its current liabilities in a short span of time. Whereas, a low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. The Current Ratio for IOCL has been fairly constant over the period 2002-11 with a minimal excess of current liabilities over the current assets. 3. 4 Quick Ratio Mar11 Quick Ratio 0. 51 Mar10 0. 45 Mar09 0. 47 Mar08 0. 54 Mar07 0. 47
Mar06 0. 5 Mar05 0. 56 Mar04 0. 55 Mar03 0. 56 Mar02 0. 49 Quick Ratio 0. 6 0. 5 0. 4 0. 3 0. 2 0. 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Quick Ratio Liquid Ratio, which is also as Liquidity Ratio, Acid Test Ratio and Quick Ratio. It is the ratio of liquid assets to current liabilities. Liquid ratio portrays liquidity of the company better than the current ratio as it does not take the inventories and prepaid expenses as a part of current assets. Liquidity refers to the ability of a firm to pay its short term liabilities.
It measures the company’s capacity to pay the current liabilities immediately. Usually a high liquid ratio indicates that the concern is more liquid and that it can meet its current or liquid liabilities with ease. Whereas, a low liquid ratio represents that the liquidity position is not good. Similar to Current Ratio, the Quick Ratio of IOCL has been fairly constant. 3. 5 Fixed Assets Turnover Ratio Mar- Mar11 10 4. 32 4. 33 Mar09 5. 53 Mar08 4. 84 Mar07 4. 84 Mar06 4. 61 Mar05 4. 03 Mar04 3. 8 Mar03 3. 88 Mar02 4. 05 Fixed Assets Fixed Assets 6 5 4 3
Fixed Assets 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fixed assets turnover ratio is also known as Sales to Fixed Assets ratio. This ratio measures the efficiency and profit earning capacity of the company. Higher the ratio, greater is the utilization of the fixed assets. Lower ratio, the lesser the fixed assets are used. IOCL has maintained a healthy Fixed Asset Turnover ratio indicating efficient utilization of its fixed assets. 3. 6 Inventory Turnover Ratio Mar11 8. 34 Mar10 9. 46 Mar09 11. 76 Mar08 9. 72 Mar07 9. 73 Mar06 8. 81 Mar05 8. 2 Mar04 9. 26 Mar03 10. 15 Mar02 11. 17 Inventory Inventory 14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Inventory Inventory turnover ratio, which is otherwise known as stock turnover ratio, shows the relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times. It indicates the number of times the inventory has been sold during the period and showcases the efficiency with which a firm manages its inventory.
Inventory turnover ratio measures the velocity of conversion of stock into sales. The Inventory Turnover Ratio of IOCL has been constant with a slight increase in year 2009. 3. 7 Debtors Turnover Ratio Mar11 48. 7 Mar10 49. 62 Mar09 51. 7 Mar08 39. 87 Mar07 35. 47 Mar06 31. 13 Mar05 31. 79 Mar04 33. 6 Mar03 31. 24 Mar02 26. 74 Debtors Debtors 60 50 40 30 Debtors 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 This indicates the speed at which the debt to the company is collected from its debtors and the number of times the average debtors are turned over during a year.
The higher the value of the debtors turnover ratio, the more efficient is the management of the sundry debtors and more liquid the debtors are and a low debtors turnover ratio implies otherwise. The Debtors turnover ratio of IOCL has shown a healthy growth over the period 2002-11 indicating efficient is the management of the sundry debtors. 3. 8 Interest Coverage Ratio Mar11 4. 37 Mar10 9. 97 Mar09 2. 29 Mar08 7. 34 Mar07 6. 66 Mar06 7. 37 Mar05 10. 86 Mar04 21. 58 Mar03 11. 31 Mar02 3. 93 Interest Cover Ratio Interest Cover Ratio 25 20 15 Interest Cover Ratio 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes (EBIT) of one period by the company’s interest expenses of the same period: Interest Coverage Ratio = EBIT/Interest Expense The Interest Coverage Ratio for IOCL has decreased from 21. 58% in 2004 to 4. 37 % indicating increasing debt expense 3. 9 Operating Profit Margin Mar11 3. 8 Mar10 5. 6 Mar09 4. 4 Mar08 4. 56 Mar07 4. 97 Mar06 4. 46 Mar05 5. 32 Mar04 8. 86 Mar03 8. 83 Mar02 6. 66 Operating Profit Margin (%) Operating Profit Margin(%) 0 9 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Operating Profit Margin(%) The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It is expressed as a percentage of sales and shows the efficiency of a company controlling the costs and expenses associated with business operations and the efficiency of the company to convert its sales into profits through its regular business operations. Phrased more simply, it is the return achieved from standard operations and does not include unique or one time transactions.
It has been continuously decreasing for IOCL after 2004 with slight increase in 2010 which may be attributed to stabilization of economy and rise in Oil demand post-recession. 3. 10 Profit Before Interest And Tax Margin or EBIT Mar11 2. 41 Mar10 4. 35 Mar09 3. 43 Mar08 3. 43 Mar07 3. 74 Mar06 3. 18 Mar05 3. 8 Mar04 7. 19 Mar03 7. 23 Mar02 5. 24 Profit Before Interest And Tax Margin or EBIT (%) Profit Before Interest And Tax Margin(%) 8 7 6 5 4 3 2 1 0 Profit Before Interest And Tax Margin(%) An indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest.
EBIT is also referred to as “operating earnings”, “operating profit” and “operating income”, as you can re-arrange the formula to be calculated as follows: EBIT = Revenue -Operating Expenses Also known as Profit Before Interest & Taxes (PBIT), and equals Net Income with interest and taxes added back to it. In other words, EBIT is all profits before taking into account interest payments and income taxes. An important factor contributing to the widespread use of EBIT is the way in which it nulls the effects of the different capital structures and tax rates used by different companies.
By excluding both taxes and interest expenses, the figure hones in on the company’s ability to profit and thus makes for easier cross-company comparisons. The EBIT ratio for IOCL has decreased significantly from 2003 level of 7. 23 to only 2. 41 in 2011. 3. 11 Gross Profit Margin Mar11 2. 43 Mar10 4. 4 Mar09 3. 46 Mar08 3. 47 Mar07 5. 09 Mar06 4. 68 Mar05 5. 66 Mar04 9. 22 Mar03 9. 12 Mar02 6. 1 Gross Profit Margin (%) Gross Profit Margin(%) 10 9 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gross Profit Margin(%)
It is a financial metric used to assess a firm’s financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins. As depicted in the graph below, the Gross Profit Margin had been decreasing from 9. 22% on 2004 to around 2. 43% in 2003. This can be attributed to the rising global oil prices per barrel. 3. 12 Net Profit Margin Mar11 2. 22 Mar10 3. 4 Mar09 0. 95 Mar08 2. 78 Mar07 3. 43 Mar06 2. 78 Mar05 3. 48 Mar04 5. 94 Mar03 5. 54 Mar02 2. 81 Net Profit Margin (%) Net Profit Margin(%) 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net Profit Margin(%) A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0. 20 for each dollar of sales. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control. The net profit margin earned by the company had been decreasing from 2004 to 2009 and then has increased which may be attributed the rising global oil demand post-recession. . 13 Return On Capital Employed Mar11 10. 32 Mar10 15. 83 Mar09 14. 64 Mar08 14. 06 Mar07 15. 97 Mar06 12. 6 Mar05 14. 92 Mar04 26. 79 Mar03 27. 42 Mar02 18. 6 ROCE (%) Return On Capital Employed(%) 30 25 20 15 Return On Capital Employed(%) 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 The ROCE definition is a measure of the returns a company derives from its capital. It is calculated as profit before interest and taxes divided by tangible capital employed. The resulting ROCE ratio presents how efficient capital is being used to generate pre-tax profit.
Pre-tax operating earnings are often called Earnings Before Interest and Taxes (EBIT). Interest is excluded as companies can operate with different levels of debt. The interest charges on this debt can and does skew the comparative earnings of a company. Also, companies can operate with different tax levels which can also skew the comparative earnings of a company. Removing these two financial line items gives us a better measure of the operating profits generated by the company. We find that return to capital employed has reduced in the recent years. This shows that the company is not getting good return on its invested capital. . 14 Return On Net Worth Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar11 10 09 08 07 06 05 04 03 02 Return On Net Worth(%) 13. 45 20. 22 6. 71 16. 99 21. 51 16. 77 18. 82 30. 39 32. 31 18. 84 Return On Net Worth(%) 35 30 25 20 15 10 5 0 Return On Net Worth(%) It is the relationship between net profit (after interest and tax) and shareholder’s/proprietor’s fund. This ratio establishes the profitability from the share holders’ point of view. It is the ratio of net profit to shareholder’s investment. It is the relationship between net profit (after interest and tax) and shareholder’s/proprietor’s fund.
This ratio establishes the profitability from the share holders’ point of view. The ratio is generally calculated in percentage. The graph of this ratio has come down to 13. 45 % from its peak of 32. 31% in 2003. This shows that return on net worth has decreased which implies lesser profitability from the shareholders point of view. 3. 15 Earnings Per Share Mar11 30. 67 Mar10 42. 1 Mar09 24. 74 Mar08 58. 39 Mar07 64. 21 Mar06 42. 08 Mar05 41. 88 Mar04 59. 97 Mar03 78. 53 Mar02 37. 05 Earnings Per Share Earnings Per Share 90 80 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Earnings Per Share
It is the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company’s profitability. It is calculated as: EPS = Net Income – Dividend on Preferred Stocks Average Outstanding Shares When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. 3. 16 Book Value Mar11 227. 9 Mar10 208. 21 Mar09 368. 86 Mar08 344. 58 Mar07 298. 22 Mar06 250. 88 Mar05 222. 47 Mar04 197. 32 Mar03 243. 08 Mar02 196. 63 Book Value Book Value 400 350 300 250 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Book Value It indicates a company’s common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill.
This is how much the company would have left over in assets if it went out of business immediately. Since companies are usually expected to grow and generate more profits in the future, market capitalization is higher than book value for most companies. Since book value is a more accurate measure of valuation for companies which aren’t growing quickly, book value is of more interest to value investors than growth investors. The book value of IOCL has increased been increasing till 2009 indicating higher confidence of the investors in the company.
The subsequent reduction in book value can be attributed to post effects of global recession. 3. 17 Price Earning (P/E) Mar11 11. 45 Mar10 7. 42 Mar09 16. 53 Mar08 7. 72 Mar07 6. 54 Mar06 14. 48 Mar05 11. 01 Mar04 8. 66 Mar03 3. 08 Mar02 5. 4 Price Earning (P/E) Price Earning (P/E) 18 16 14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Price Earning (P/E) The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular metric of stock analysis, although it is far from the only one that an investor should consider.
The P/E is one of those numbers that investors throw around with great authority as if it told the whole story. Of course, it doesn’t tell the whole story (if it did, we wouldn’t need all the other numbers. ) The P/E ratio has been fluctuating over the years, and was particularly high in 2009. This can be attributed to the recovery in financial markets across the world. 3. 18 Price to Book Value Mar11 1. 47 Mar10 1. 43 Mar09 1. 05 Mar08 1. 29 Mar07 1. 34 Mar06 2. 33 Mar05 1. 97 Mar04 2. 51 Mar03 0. 96 Mar02 1. 02 Price to Book Value ( P/BV) Price to Book Value ( P/BV) 3 2. 5 2 1. 5 1 0. 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Price to Book Value ( P/BV) It is a ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share. It is also known as the “price-equity ratio. A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. This ratio also gives some idea of whether the investor is paying too much for what would be left if the company went bankrupt immediately. 4.
Comparison of IOCL financial ratios with Refinery Industry Key Financial Indicators – IOCL Mar11 Liquidity Ratios Debt-Equity Ratio Long Term DebtEquity Ratio Current Ratio Quick Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio Profitability Ratios Operating Profit Margin (%) Profit Before Interest And Tax Margin (%) Gross Profit Margin (%) Net Profit Margin (%) ROCE (%) RONW (%) Earnings Per Share Book Value 0. 92 0. 39 0. 84 0. 51 Mar10 0. 95 0. 42 0. 74 0. 45 Mar09 0. 95 0. 39 0. 76 0. 47 Mar08 0. 82 0. 36 0. 84 0. 54 Mar07 0. 83 0. 43 0. 85 0. 47 Mar06 0. 79 0. 38 0. 8 0. 5 Mar05 0. 6 0. 29 0. 9 0. 56 Mar04 0. 64 0. 36 0. 9 0. 55 Mar03 0. 98 0. 47 0. 79 0. 56 Mar02 1. 27 0. 48 0. 79 0. 49 4. 32 8. 34 48. 7 4. 37 4. 33 9. 46 49. 62 9. 97 5. 53 11. 76 51. 7 2. 29 4. 84 9. 72 39. 87 7. 34 4. 84 9. 73 35. 47 6. 66 4. 61 8. 81 31. 13 7. 37 4. 03 8. 92 31. 79 10. 86 3. 8 9. 26 33. 6 21. 58 3. 88 10. 15 31. 24 11. 31 4. 05 11. 17 26. 74 3. 93 3. 8 2. 41 5. 6 4. 35 4. 4 3. 43 4. 56 3. 43 4. 97 3. 74 4. 46 3. 18 5. 32 3. 8 8. 86 7. 19 8. 83 7. 23 6. 66 5. 24 2. 43 2. 22 10. 32 13. 45 4. 4 3. 74 15. 83 20. 22 3. 46 0. 95 14. 64 6. 71 3. 47 2. 78 14. 06 16. 99 5. 09 3. 3 15. 97 21. 51 4. 68 2. 78 12. 6 16. 77 5. 66 3. 48 14. 92 18. 82 9. 22 5. 94 26. 79 30. 39 9. 12 5. 54 27. 42 32. 31 6. 1 2. 81 18. 6 18. 84 30. 67 42. 1 24. 74 58. 39 64. 21 42. 08 41. 88 59. 97 78. 53 37. 05 227. 9 208. 21 368. 86 344. 58 298. 22 250. 88 222. 47 197. 32 243. 08 196. 63 Key Financial Indicators -Industry (Refineries) Year No. Of Companies Liquidity Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio PBIDTM (%) PBITM (%) PBDTM (%) CPM (%) APATM (%) ROCE (%) RONW (%) 2011 1 0. 66 0. 48 0. 97 0. 3. 92 11. 56 11. 84 15. 92 10. 66 15. 02 13. 1 7. 84 9. 01 11. 03 2009 10 0. 84 0. 55 0. 86 3. 6 12. 04 44. 54 3. 21 5. 49 4. 18 4. 19 3. 58 2. 27 10. 92 10. 9 2008 15 0. 72 0. 45 0. 89 3. 46 9. 89 38. 18 9. 17 7. 05 5. 64 6. 44 5. 3 3. 88 15. 21 18. 02 2007 18 0. 69 0. 43 0. 87 3. 41 10. 45 38. 68 8. 87 7. 28 5. 74 6. 63 5. 39 3. 85 17. 45 19. 8 2006 19 0. 67 0. 41 0. 93 3. 34 9. 82 32. 44 8. 21 6. 01 4. 48 5. 46 4. 67 3. 14 13. 98 16. 35 2005 14 0. 61 0. 38 0. 95 3. 2 10. 17 31. 65 9. 19 8. 01 6. 12 7. 35 6. 17 4. 28 19. 17 21. 54 2004 17 0. 72 0. 51 0. 96 2. 79 9. 65 30. 44 10. 22 10 7. 93 9. 2 7. 24 5. 17 22. 41 25. 07 2003 17 0. 95 0. 71 0. 96 2. 73 10. 46 29. 51 6. 1 9. 35 7. 32 8. 15 6. 46 4. 43 19. 25 22. 63 2002 14 1. 09 0. 75 0. 97 2. 62 10. 67 28. 21 3. 1 8. 22 6 6. 29 4. 97 2. 75 14. 06 13. 5 5. Analysis of Director’s Report and MDA 5. 1. Analysis of Director’s Report and MDA for 2006-07 Overall performance of the company ? The turnover (inclusive of excise duty) of IndianOil for the year ended 31st March, 2007 was Rs. 2,20,779 crore as compared to Rs. 1,83,172 crore in the previous year. The total sales of petroleum products (including natural gas) for 2006-07 were 57. 7 MMT as against 49. 61 MMT (excluding IBP sales) during 2005-06. Gross profit for the year 2006-07 was recorded to be 14,622 Profit Before Tax: The Corporation’s Profit Before Tax was Rs. 10,485 crore during 2006-07 as compared to Rs. 6,706 crore in 2005- 06. The profit for 2006-07 includes a profit of Rs. 3,225 crore on sale of 20% equity holding in Oil & Natural Gas Corporation Ltd. (ONGC) and provision of Rs. 1,319 crore for diminution in investments in erstwhile IBP, which is vested in a Trust formed consequent to the amalgamation, while the profit for 2005-06 included a profit of Rs. 38 crore on sale of 50% equity holding in GAIL (India) Ltd. IndianOil paid dividend of 189% on the enhanced share capital consequent to the merger of IBP Co. Ltd. Dividend amounted to Rs. 1,550 crore Profit after Tax: IndianOil earned a Profit After Tax of Rs. 7,499 crore for the financial year 2006-07 as compared to Rs. 4,915 crore in 2005-06. Depreciation & Amortisation: Depreciation for the financial year 2006-07 was Rs. 2,632 crore as against Rs. 2,203 crore in the previous year. The increase in depreciation in 2006-07 is mainly due to capitalisation of Panipat Refinery expansion project and the PX/PTA plant.
Interest (Net)
Interest Expenditure (Net) of the Corporation for the year 2006-07 was Rs. 675 crore, as against Rs. 816 crore in 2005-06. Borrowings: The borrowings of the Corporation as on 31st March, 2007 were Rs. 27,083 crore as compared to Rs. 26,404 crore as on 31st March, 2006. The Total Debt to Equity ratio as on 31st March, 2007 works out to 0. 78:1 as against 0. 90:1 as on 31st March, 2006 and the Long Term Debt to Equity ratio stands at 0. 31:1 as on 31st March, 2007 as against 0. 39:1 as on 31st March, 2006. Capital Assets: Gross Fixed Assets (including Capital Work in Progress) increased from Rs. 3,341 crore as on 31st March, 2006 to Rs. 59,232 crore as on 31st March, 2007. Investments: Investments, including advances for investment, as on 31st March, 2007 were Rs. 19,998 crore as compared to Rs. 14,526 crore as on 31st March, 2006. The changes in investments during the year are mainly on account of sale of 20% equity holding in ONGC, transfer of investment in erstwhile IBP to a Trust subsequent to amalgamation, impact of investments held by erstwhile IBP and net increase in Government of India Special Oil Bonds. ? ? ? ? ? ? ? ? ? ? ? Earnings Per Share for the year 2006-07 work out to Rs. 62. 90 as compared to Rs. 2. 08 in the previous year. Cash Earnings Per Share for the current year work out to Rs. 84. 97 as compared to Rs. 60. 94 in the previous year. Book Value per share was Rs. 292. 34 Mergers and Acquisitions 1. IBP Co. Ltd. The Ministry of Company Affairs (the competent authority to approve mergers of Government Companies) accorded sanction to the Scheme of Amalgamation of IBP Co. Ltd. with IndianOil. The merger became effective on 2nd May, 2007 with the filing of the Order with the Registrar of Companies. Consequently, IBP Co. Ltd. ceased to exist effective 2nd May, 2007. 2. Bongaigaon Refinery & Petrochemicals Ltd. BRPL) The Board of Directors of IndianOil and BRPL have accorded approval to the Scheme of Amalgamation and have recommended a swap ratio of 4:37, i. e. , 4 fully paid equity shares of Rs. 10/- each of IndianOil for every 37 fully paid equity shares of Rs. 10/- each of BRPL. However, its approval was still awaited. Global Outlook The Indian crude oil basket recorded a high of US$ 71 per barrel during August 2006. Later, during the year, a warm winter in the US, among other factors, led to a decline in crude oil prices, and the Indian basket touched 79 a low of US$ 53 per barrel in January 2007.
However, this respite did not last long. Prices hardened once again to US$ 60 per barrel in March 2007 and thereafter touched an all-time high of over US$ 74 per barrel in July 2007. With fossil fuels continuing to be the dominant source of energy in the immediate future, capital expenditure by petroleum majors across the globe in upgrading infrastructure in upstream, refining and pipelines segments remains a major challenge, particularly in the face of geo-political uncertainties in several parts of the world.
Legislations
The long-awaited Petroleum & Natural Gas Regulatory Board Act was enacted on 3rd April, 2006. As per this legislation, a Petroleum & Natural Gas Regulatory Board was set up to oversee and regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum products and natural gas in all parts of the country. It promotes competitive market. Challenges According to the Management Discussion & Analysis, the foremost challenge IndianOil faces is in transforming into the least-cost supplier – delivering quality products and services to customers at the lowest cost.
Other major challenges include optimization of refining processes, logistics & supply chain management; forging partnerships and strategic alliances across the entire value chain of the oil & gas business; timely execution and safe commissioning of projects; consolidation of retail and direct consumer businesses through better offerings to customers; retention of skilled manpower; and enhancing profitability, which is currently being compromised due to incomplete pass-through to customers due to price control on the four principal products. 5. 2. Analysis of Director’s Report and MDA for 2007-08 Overall performance of the company ?
Turnover
The turnover (inclusive of excise duty) of IndianOil for the year ended 31st March, 2008 was Rs. 2,47,479 crore as compared to Rs. 2,20,779 crore in the previous year. The total sale of petroleum products (including natural gas) for 200708 was 62. 62 MMT, as against 57. 97 MMT during 2006-07. Profit Before Tax: The Corporation’s Profit Before Tax was Rs. 10,080 crore during 2007-08 as compared to Rs. 10,485 crore in 2006-07. Profit After Tax: The Corporation has earned a Profit After Tax of Rs. 6,963 crore during the current financial year as compared to Rs. 7,499 crore in 2006-07.
Depreciation & Amortisation
Depreciation for the year 2007-08 was Rs. 2,708 crore, as against Rs. 2,632 crore for the year 2006-07. Interest (net): Interest Expenditure (net) of the Corporation for the current yearwas Rs. 408 crore, as against Rs. 675 crore during 2006-07. Borrowings: The borrowings of the Corporation as on 31st March, 2008 were Rs. 35,523 crore as compared to Rs. 27,083 crore as on 31st March, 2007. The Total Debt to Equity ratio as on 31st March, 2008 works out to 0. 86:1 as against 0. 78:1 as on 31st March, 2007 and the Long Term Debt to Equity ratio stands at 0. 28:1 as on 31st March, 2008 as against 0. 1:1 as on 31st March, 2007. Capital Assets: Gross Fixed Assets (including Capital Work in Progress) increased from Rs. 59,232 crore as on 31st March, 2007 to Rs. 66,002 crore as on 31st March, 2008. Investments: Investments, including advances for investment, as on 31st March, 2008 were Rs. 21,546 crore as compared to Rs. 19,998 crore as on 31st March, 2007. The changes in investments during the year are mainly on net increase in Government of India Special Oil Bonds. The aggregate market value of the Quoted Investments as on 31st March, 2008, i. e. , investments made in Oil & Natural Gas Corporation Ltd. GAIL (India) Ltd. , Chennai Petroleum Corporation Ltd. , Bongaigaon ? ? ? ? ? ? ? ? ? ? Refinery & Petrochemicals Ltd. , Petronet LNG Ltd. and Lanka IOC Ltd. , is Rs. 21,438 crore (as against the cost price of Rs. 2,854 crore). This includes Rs. 880 crore in equivalent Indian currency in respect of Lanka IOC, which is quoted on the Colombo Stock Exchange, Sri Lanka. Net Current Assets: Net Current Assets as on 31st March, 2008 were Rs. 18,350 crore, as against Rs. 9,351 crore as on 31st March, 2007. Earnings Per Share: Earnings Per Share for the year 2007-08 work out to Rs. 58. 39 as compared to Rs. 2. 90 in the previous year. Cash Earnings Per Share for the current year work out to Rs. 81. 10 as compared to Rs. 84. 97 in the previous year. Book Value per Share was recorded at Rs. 344. 58 Global Outlook The slowdown in the advanced economies came in the face of a major financial crisis triggered by the sharp drop in market valuations of US sub-prime mortgage-backed securities. The ripples spread across all the segments in the financial markets. Further, it had repercussions on the commodity markets too, with flight of money from the weakening financial markets to commodity markets.
Challenges With increasing globalization and competition in the sector, the challenge for IndianOil remains the same which is transforming into the least cost supplier of quality products and services to customers 5. 3. Analysis of Director’s Report and MDA for 2008-09 Overall performance of the company ? Turnover: The turnover (inclusive of excise duty) of IndianOil for the year ended 31st March, 2009 was Rs. 2,85,337 crore as compared to Rs. 2,47,457 crore in the previous year. The total sales of petroleum products (including natural gas) for 2008-09 were 66. 17 MMT as against 62. 62 MMT during 2007-08.
Profit Before Tax
The Corporation’s Profit Before Tax was Rs. 4,329 crore during 2008-09 as compared to Rs. 10,080 crore in 2007-08. Profit After Tax: The Corporation has earned a Profit After Tax of Rs. 2,950 crore during the current financial year, compared to Rs. 6,963 crore in 2007-08. Depreciation & Amortisation: Depreciation for the year 2008-09 was Rs. 3,038 crore as against Rs. 2,708 crore for the year 2007-08. Interest(net): Interest Expenditure (net) of the Corporation for the current year was Rs. 2,560 crore, as against Rs. 404 crore during 2007-08. Borrowings: The borrowings of the Corporation as on 31st March, 2009 were Rs. 4,972 crore as compared to Rs. 35,523 crore as on 31st March, 2008. The Total Debt to Equity ratio on 31st March, 2009 works out to 1. 02:1 as against 0. 86:1 as ? ? ? ? ? ? ? ? ? ? on 31st March, 2008 and the Long Term Debt to Equity ratio stands at 0. 36:1 as on 31st March, 2009 as against 0. 28:1 as on 31st March, 2008. Capital Assets: Gross Fixed Assets (including Capital Work in Progress) increased from Rs. 66,002 crore as on 31st March, 2008 to Rs. 80,531 crore as on 31st March, 2009. Investments: Investments, including advances for investment, as on 31st March, 2009 were Rs. 32,250 crore as compared to Rs. 1,546 crore as on 31st March, 2008. The changes in investments during the year are mainly on net increase in Government of India Special Oil Bonds. The aggregate market value of the Quoted Investments as on 31st March, 2009, i. e. , investments made in ONGC, GAIL, Chennai Petroleum Corporation Ltd. , Petronet LNG Ltd. and Lanka IOC Plc. , is Rs. 15,319 crore (as against the cost price of Rs. 2,705 crore). Net Current Assets: Net Current Assets as on 31st March, 2009 were Rs. 9,177 crore, as against Rs. 18,350 crore as on 31st March, 2008. Earnings Per Share: Earnings Per Share for the year 2008-09 work out to Rs. 24. 0 as compared to Rs. 58. 39 in the previous year. Cash Earnings per Share for the current year work out to Rs. 49. 32, compared to Rs. 81. 10 in the previous year. Book Value per Share was recorded at Rs. 362. 43 Global Outlook The world economy plunged further down, for the first time since the Great Depression of 1930s. The advanced economies across the globe slipped into recession, the emerging economies, which until last year were soaring, slowed down abruptly and the underdeveloped economies of Asia & Africa too were not spared. The Indian basket of crude oil touched $ 142. 04 per barrel on 3rd July 2008 before plunging to $ 35. 3 per barrel on 24th December, 2008. Although there was a steady fall in international oil prices since August 2008, the average price of the Indian basket during 2008-09 was still high at $ 83. 57 per barrel, against the average price of $ 79. 25 per barrel in 2007-08. The domestic consumers were shielded from the spiraling crude oil prices in the initial half of the year. However, when the crude prices fell, the government reduced the prices of petrol and diesel twice, by Rs. 5 per litre and Rs. 2 per litre respectively on 6th December, 2008 and 29th January, 2009. Further, domestic LPG prices were also reduced by Rs. 5 per cylinder effective 29th January, 2009. Challenges The Corporation aims at minimizing operational costs for maximization of margins. In this context, the Corporation constantly strives to optimize its refining process, logistics and supply chain management, timely execution and safe commissioning of projects & retention of skilled manpower. 5. 4. Analysis of Director’s Report and MDA for 2009-10 Overall performance of the company ? Turnover: The turnover of the Corporation (inclusive of excise duty) for the year ended March 31, 2010 was Rs. 2,71,074 crore as compared to Rs. 2,85,398 crore in the previous year.
The total sales of products (including gas and petrochemicals) for 2009-10 were 69. 92 MMT as against 66. 76 MMT during 2008-09. Profit Before Tax: The Corporation has earned a Profit Before Tax of Rs 14,106 crore in 2009-10 as compared to Rs. 4,329 crore in 2008-09. Profit After Tax: The Corporation has earned a Profit After Tax of Rs. 10,221 crore during the current financial year as compared to Rs. 2,950 crore in 2008-09. Depreciation & Amortisation: Depreciation for the year 2009-10 was Rs. 3,240 crore as against Rs. 3,038 crore for the year 2008-09. Interest (net): Net Interest Income of the Corporation for the current year was Rs. 46 crore as against net interest expenditure of Rs. 2,560 crore during 2008-09. Borrowings: The borrowings of the Corporation were Rs. 44,566 crore as on March 31, 2010 as compared to Rs. 44,972 crore as on March 31, 2009. The Total Debt to Equity ratio as on 31st March, 2010 works out to 0. 88:1 as against 1. 02:1 as on 31st March, 2009 and the Long Term Debt to Equity ratio stands at 0. 36:1 as on 31st March, 2010 as against 0. 36:1 as on 31st March, 2009. Capital Assets: Gross Fixed Assets (including Capital Works in Progress) increased from Rs. 80,485 crore as on 31. 03. 2009 to Rs. 93,358 crore as on 31. 03. 2010.
Investments
Investments as on 31st March, 2010 were Rs. 22,370 crore as compared to Rs. 32,232 crore as on 31st March, 2009. The decrease in investments during the year is mainly due to sale of Government of India Special Oil Bonds. The aggregate market value of quoted investments as on 31st March, 2010, i. e. , investments made in ONGC Ltd. , GAIL (India) Ltd. , Oil India Ltd. , Chennai Petroleum Corporation Ltd. , Petronet LNG Ltd. and Lanka IOC Plc. , is Rs. 23,844 crore (as against the acquisition price of Rs. 3,828 crore). Net Current Assets: Net Current Assets stood at Rs. 14,637 crore as on March 31, 2010 as against Rs. ,260 crore as on March 31, 2009. Earnings Per Share: Earnings Per Share works out to Rs. 42. 10 for the current year as compared to Rs. 12. 15 in the previous year. Book Value per Share was recorded at Rs. 208. 21 ? ? ? ? ? ? ? ? ? ? Global Outlook During the course of the year, international economic conditions exhibited a marked improvement with the global economy getting into an early recovery mode. The vital statistics of the engine of the world economy entered the positive territory. After June 2009, world trade flows entered into an expansionary mode after declining for several months and GDP growth turned positive.
A corrective policy action on both fiscal & monetary fronts has been at the very core of the recovery witnessed. Indian economy has been amongst the first economies to emerge out of the grips of recessionary forces in an incredible recovery led by the industrial and services sectors. Trade flows, which had been one of the foremost channels of transmission of global recession to India, returned to a more progressive mode in the latter part of the year, after a prolonged period of contraction. After exhibiting the highest intra-year volatility in 2008-09, and touching a rock bottom of US$ 0/barrel in 2008, international crude oil prices gradually firmed up since March 2009 and had risen by 69% on year-on-year basis in March 2010. Challenges After the global recession, the Corporation now focuses on the importance of sustainable development and its role in the way corporates conduct business. The Corporation is focused on the need to integrate sustainability in our core business function. While many initiatives are already underway, the Corporation intends to undertake a companywide environmental mapping exercise. 5. 5. Analysis of Director’s Report and MDA for 2010-11 Overall performance of the company ?
Turnover:The turnover of your Corporation (inclusive of excise duty) for the year 2010-11 was Rs. 3,28,744 crore as compared to Rs. 2,71,095 crore in the previous year, registering an increase of 21. 3%. The total sales of products (including gas and petrochemicals) for 2010-11 were 72. 92 MMT as against 69. 92 MMT during 200910, registering an increase of 4. 3%. Profit Before Tax: The Corporation has earned a Profit Before Tax of Rs. 9,096 crore in 2010-11 as compared to Rs. 14,106 crore in 2009-10, registering a decrease of 35. 5%. Profit After Tax: The Corporation has earned a Profit After Tax of Rs. ,445 crore during the current financial year as compared to Rs. 10,221 crore in 2009-10 , registering a decrease of 27. 2%. Depreciation & Amortisation: Depreciation for the year 2010-11 was Rs. 4,567 crore as against Rs. 3,240 crore for the year 2009-10. Interest (Net): Net Interest Expenditure of the Corporation for the current year was Rs. 1,121 crore as against net interest income of Rs. 446 crore during 2009-10. Borrowings: st The borrowings of your Corporation were Rs. 52,734 crore as on March 31 , 2011st as compared to Rs. 44,566 crore as on March 31 , 2010. The ? ? ? ? ? ? ? ? ? ?
Total Debt to Equityst ratio as on 31 March, 2011 works out to 0. 95:1 as against 0. 88:1 as on st 31 March, 2010 and the Long Term Debt to Equity ratio stands at 0. 34:1 as on st st 31 March, 2011 as against 0. 36:1 as on 31 March, 2010. Capital Assets: Gross Fixed Assets (including Capital Works in Progress) increased from Rs. 93,358 crore as on 31. 03. 2010 to Rs. 1,05,785 crore as on 31. 03. 2011. Investments: Investments as on 31 March, 2011 were Rs. 19,545 crore as compared to Rs. 22,370 st crore as on 31 March, 2010. The decrease in investments during the year is mainly due to sale of Government of India Special Oil Bonds.
The aggregate market value of quoted investments as on 31 March, 2011, i. e. , investments made in ONGC Ltd. , GAIL (India) Ltd. , Oil India Ltd. , Chennai Petroleum Corporation Ltd. , Petronet LNG Ltd. and Lanka IOC Plc. , is Rs. 25,141 crore (as against the acquisition price of Rs. 3,828 crore). Net Current Assets: Net Current Assets stood at Rs. 24,008 crore as on March 31 , 2011 as against Rs. 14,637 crore as on March 31 , 2010. Earnings Per Share: Earnings Per Share works out to Rs. 30. 67 for the current year as compared to Rs. 42. 10 in the previous year. Book Value per Share was recorded at Rs. 27. 90 Global Outlook The weak sovereign balance sheets in the Euro area and a fragile financial system in the advanced economies pose a risk to growth, with widespread repercussions across the world. The rising crude oil prices and other commodity prices pose a major downside risk and rising inflation is one of the major threats, especially in India and other emerging economies. Driven by economic recovery, global energy consumption recorded the strongest growth since 1973. In 2010, world oil consumption rebounded at around 88 million barrels per day exceeding its pre-crisis peak, growing by 3. % on a year-on-year basis. Challenges Numerous challenges remain in front of the company. Major challenges among them are: ? ? ? ? ? ? ? Growing Gas Supply Opportunities Alternative Energy Space Research & Development Sustainable Development Widening Scope of MoU Human Capital Challenge Challenge of Policy Regime and High Prices 6. Analysis of Auditor’s Report (2010-11) Auditors’ Report is the expression of independent opinion on the financial statements of a company. The auditing of IOCL was conducted by V. K. DHINGRA & CO. , PKF SRIDHAR & SANTHANAM & B. M. CHATRATH & CO. in the year 2011.
Following important inferences can be drawn by going through the Auditors’ Report of IOCL: 1) The audits are conducted in accordance to the generally accepted standards in India 2) Audits are conducted to obtain reasonable assurance about whether the financial statements are free of material misstatement 3) The auditors check whether the financial statements are in agreement with the books of account 4) An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation 5) Auditors’ Report is based on the explanation and information given by the company to the auditors 6) The auditors also give their opinion on whether the company has complied with the directives issued by Reserve Bank of India or any other relevant provisions of other acts Important Information from the Auditor’s Report in 2011 annual report are summarised below. The auditors say that according to the information and explanation provided to them: 1) IOCL is maintaining proper records 2) The frequency of physical verification of inventory and procedures followed by the management are reasonable and IOCL is maintaining proper records of inventory 3) IOCL has been able to successfully maintain its internal control & audit systems 4) IOCL has neither granted nor taken any loan or advances from any financial institution, company, firm or any other source mentioned under 301 of The Companies Act, 1956.
Also, the company has not given any guarantee for any loans 5) IOCL has not raised any money through public issues or accepted any deposits from the public 6) IOCL has no dues in wealth tax on account of any dispute or excise, sales, customs, income and service tax 7) IOCL does not have any accumulated losses and has not incurred any cash losses in the financial year 8) IOCL has not defaulted in repayment of dues to any financial institutions or bank or debenture holders 9) Financial statements of IOCL comply with the generally accepted standards in India An important change in the Auditors’ Report came when the Central Government, in consultation with ICAI, issued a new order u/s. 227 (4A) called the Companies (Auditor’s
Report) Order, 2003 also known as CARO or CARO-2003. I came into force from 1st July 2003. The Order contains certain matters (except of those categories of companies specifically exempted under the Order) on which the auditors of the company have to make statements in their Auditors’ Report It is important to note that auditors broadly review the books of accounts. Financial statements are the responsibility of the company and auditors only express their opinion on these financial statements based in their audits. Since Auditors’ Report is based on the verification and examination of records and pertinent documents provided by the company, it is not a guarantee of accuracy and correctness.
Also, the auditors cannot be held liable for issuing a wrong report because it is merely and opinion of on financial statement presented to him. 7. Du-Pont Analysis The Du-Pont ratio analysis is a combination of financial ratios in a series in order to assess the investment returns of the company. It combines the financial ratios of both the Income Statement as well as the Balance Sheet in order to assess either the Return on Equity or the Return on Investment. One of the Plus points of this method is that it provides a clear understanding of how the company generates its return. This analysis provides an insight into the importance of asset turnover as well as sales to overall return.
RoNW = PAT / Net Worth = PAT SALES x SALES ASSETS x ASSETS NET WORTH Return on sales (ROS) Asset Utilization Leverages This formula shows the relationship of profit margin and turnover how these two complement each other. The Du-Pont ratio divides the Return on equity into three parts: Net Profit Margin, total asset turnover, and the company s use of leverage referred to as Equity Multiplier also. The RoE breakup for IOCL has been given in the table below: Mar11 4. 58 3. 31 0. 15 45. 55 1. 95 14. 06 Mar10 6. 49 3. 06 0. 2 54. 06 1. 88 21. 62 Mar09 3. 41 3. 71 0. 13 26. 26 2. 02 8. 36 Mar08 5. 32 3. 53 0. 19 48. 42 1. 86 18. 34 Mar07 6. 13 3. 86 0. 24 51. 33 1. 77 19. 35 Mar06 5. 17 3. 46 0. 18 49. 5 1. 9 17. 78 Mar05 5. 62 3. 55 0. 2 56. 66 1. 67 19. 95 Mar04 8. 98 3. 81 0. 34 58. 2 1. 53 33. 38 Mar03 8. 77 3. 73 0. 33 56. 17 1. 76 35. 72 Mar02 6. 56 3. 36 0. 22 38. 21 2. 24 18. 44 PBDIT/Sales(%) Sales/Net Assets PBDIT/Net Assets PAT/PBDIT(%) Net Assets/Net Worth ROE(%) Sales Rs. 3,02,954. 37 3,36,866. 71 EBIT Rs. 11,839. 40 Net Profit Rs. 7,519. 19 Profit Margin (%) 2. 48 Taxes Rs. 1,650. 38 Sales Rs. 3,02,954. 37 Assets/Equity 1. 95 Interest paid Rs. 2,669. 83 Total Rs. Other Income Rs. 33,912. 34 Operating Expenses Rs. 3,20,480. 64 Total Expenditure Rs. 3,25,027. 31 Depreciation Rs. 4,546. 67 ROE 14. 3715 ROA (%) 7. 37 Cash Rs. 1,294. 2 Fixed Assets Rs. 57,189. 02 Sales Rs. 3,02,954. 37 Assets Turnover Ratio Rs. 2. 97 Recievables Rs. 8,869. 65 Current Assets Rs. 83,321. 18 Working Capital Rs. 24,007. 78 Total Assets Rs. 1,16,502. 42 Inventories Rs. 49,284. 52 Current Liabilties Rs. 59,313. 40 Other Assets Rs. 1,206. 03 The detailed decomposition of the RoE for the year 2011 has been shown below: Loans & Advances Rs. 22,666. 56 8. Growth Drivers and Risk Factors Strengths ? Strong market position ? Strong downstream asset infrastructure ? Strong research and development (R&D) capabilities Opportunities ? The Carabobo-1 project ? Investments in developing biofuel projects ?
Investments in alternate energy Weaknesses
Weak upstream operations ? Low safety measures Threats ? Rising petrochemical supply in the Middle East ? Intense competition Strengths: Strong market position IOCL owns and operates 10 of India’s 20 refineries, with a combined refining capacity of 65. 7 million tons per annum (1. 3 million barrels per day). The company accounts for 48% of petroleum products market share, 34. 8% national refining capacity, and 71% downstream sector pipeline capacity in India. IOCL’s aviation service commands over 63% market share in aviation fuel business. IOCL exports a part of its products to Bangladesh, Nepal, Sri Lanka, and Pakistan.
The company’s leading market position gives it a competitive edge with a strong brand image. Strengths: Strong downstream asset infrastructure IOCL has strong downstream asset infrastructure, in terms of the number of refineries, the size of its retail network, as well as the size of its pipeline network. The company operates most of the refineries in India. The company owns and operates 10 of India’s 20 refineries with a combined refining capacity of 65. 7 million tons per annum (1. 3 million barrels per day), which represents 34. 8% of India’s total refining capacity. These include two refineries of subsidiary Chennai Petroleum Corporation (CPCL).
The company also operates crosscountry crude oil and product pipeline network spanning 10,899 kms reaching 56. 8 million households. Strengths: Strong research and development (R) capabilities IOCL has strong research and development (R) capabilities. The company conducts research to develop new products and improve existing products, as well as to enhance manufacturing and production methods and improve service. IOCL’s R&D Centre has made successful developments in lubricants formulation, refinery processes, pipeline transportation, and alternative fuels. IndianOil Technologies, a wholly-owned subsidiary, commercializes the innovations and technologies developed by IOCL’s R Centre.
Weakness: Weak upstream operations IOCL has limited upstream operations. Although the company has 11 domestic exploration blocks and nine overseas exploration blocks and the Farsi block in Iran, these oil and gas assets only provide a miniscule part of the company’s crude oil requirement. IOCL sources a major portion of its crude oil requirement from different parts of the world, including the Far East, Gulf region, Mediterranean, West Africa, and Latin America. The company’s dependence on external sources for its crude oil requirement exposes it to risks arising from fluctuating crude oil prices. IOCL’s weak upstream operations therefore increase its business risks.
Weakness: Low safety measures IOCL has to work towards improving its safety measures at all levels. In 2009, the company witnessed a fire accident in fuel storage and distribution terminal on the outskirts of Jaipur, India. Further, in 2010, IOCL had a minor fire accident at the catalyst area of the polypropylene unit at the Panipat naphtha cracker. In January 2011, a fire broke at IOCL’s lube blending plant at Taloja in Navi Mumbai. IOCL has to take strong action to strengthen its safety systems so as to minimize the risk of such incidents, as occurrences of such incidents can adversely impact the company’s operations as well as its financials.
Opportunities: The Carabobo-1 project IOCL signed a joint venture agreement with the Corporacion Venezolana del Petroleo (CVP) for the development and production from Carabobo-1 Project, in Orinoco Region of Venezuela in May 2010. The new joint venture is called PetroCarabobo. This investment is IOCL’s largest exploration and production (E) investment till date, and holds immense potential to contribute to the company’s revenues in mid-term to long term. Opportunities: Investments in developing biofuel projects IOCL is looking at bio-diesel as an important source of alternative fuel. The company has been working towards developing biofuel projects in India. IOCL signed a memorandum of understanding (MoU) with PA of Florida to collaborate on biodiesel production from microalgae, in October 2009.
In March 2010, IOCL entered into a limited liability partnership agreement with Ruchi Soya Industries, a leading manufacturer of edible oils. Further in March 2010, IOCL signed a MoU with Honeywell International for collaboration on research and development for a range of biofuels technologies and projects in India. IOCL also aims to become the leader in commercial bio-diesel production from jatropha. With over 1,000 hectares of wasteland under jatropha plantation in the states of Chattisgarh and Madhya Pradesh, IOCL is one of the major captive energy crop plantation companies in the country. Opportunities: Investments in alternate energy IOC has been exploring commercial ventures in all forms of alternate energy including, nuclear, solar, wind, and bio-fuels.
The company signed a MoU with the Nuclear Power Corporation of India (NPCIL) for investing in the nuclear energy sector in India, in November 2009. IOC will be a partner for the equity portion of the investments being made in the three major nuclear power projects at Kakrapur (1,400 MW), Kudankulam (2,000 MW), and Jaitapur (3,300 MW). Threats: Rising petrochemical supply in the Middle East It is estimated that 4. 5 million tons and four million tons of additional capacity will start up in the Middle East over the next two years. Vast oil and gas reserves provide Middle East producers with a cost advantage over producers in other parts of the world. As a result, IOCL could face competition from low-cost petrochemical products from the Middle East, in India, and international markets.
Threats: Intense competition IOCL faces intense competition from other national and local companies such as Bharat Petroleum Corporation, Castrol India, GAIL (India), Hindustan Petroleum Corporation, Mangalore Refinery and Petrochemicals, and Royal Dutch Shell. In addition, deregulation of the downstream segment has led to the entry of private sector companies such as Reliance Industries into this market segment. 9. Bibliography 1. Online Resources: a. http://www. capitaline. com/ b. http://www. moneycontrol. com/ c. http://360. datamonitor. com d. http://www. investopedia. com e. CMIE Databases 2. IOCL annual report 2005-06 3. IOCL annual report 2006-07 4. IOCL annual report 2007-08 5. IOCL annual report 2008-09 6. IOCL annual report 2009-10 7. IOCL annual report 2010-11
