A report on the study of FINANCIAL MANAGEMENT PROJECT

COMPANY ANALYSIS: Oil &Natural Gas Corps Ltd

By :Vrusti .Rao Sem II Roll no :12084 G.H.Patel P.G.Institute of Business Management Sadar Patel University Vallabh Vidhyanagar

Preface
Financial management is the subject which teaches us the current scenarios which are prevailing in the industries and which are helpful I understanding the Indian market .I got an opportunity to analyse the financial reports of a large scale manufacturing industry I got to know the current trends and challenges faced by Oil &Natural Gas Corps Ltd after doing the study on the financial statements of the company. The study report will definitely help me in understanding various wide concepts of large scale industry or a listed firm .which form an essential part of my study.

Acknowledgement
I would like to express my sincere to gratitude and appreciation Dr P.K.Priyan, our respected faculty for providing his regular guidance and suggestions during the whole project length .Without his continuous support and guidance, this project would not have been realised. Last but not the least; we are grateful to the college G.H.Patel Institute of Business Management, for providing us an opportunity to put the theoretical inputs gathered at the Institute to practise.

Tables of Contents
Sr no 1 Particulars Page no

Introduction of the study

Overview of Indian economy

Overview of the Industry

Overview of the Company

Analysis of Financial Statement

5.1

Ratio Analysis

5.2

Cash flow statements

5.3

DuPont chart

Conclusion

Bibliography

Annexures

Introduction of the study

The selection of company is ONGC limited for A Study of financial statement analysis was on criteria of the availability of the informational inputs required for the study. As the company is listed company all the necessary information was available from Annual Reports published by the company online on its website. In this report I have worked out various ratios such as Solvency ratio, Turnover ratio, Profitability ratio, Leverage ratio & coverage ratio apart from ratio analysis Cash flow statements &DuPont analysis of the company over a period of 10 years to know the financial Trends at ONGC Limited. Objectives of the study To study the financial statements of the company. Work out all the possible ratios. Preparation Of the cash flow statements to know about the cash consumed /released by various decisions. Carry out the DuPont analysis. Methodology Research design:-Exploratory. Source:-Secondary sources. Hypothesis: Null Hypothesis:-The Company is good at all financial fronts. Alternate Hypothesis:-The Company is not performing well on the financial grounds. Limitations Non availability of information on the grounds of confidentially. Lack of knowledge for using of using various statistical softwares for carrying out the analysis.

Indian Economy Overview

Indian economy is growing, despite the economic crisis that engulfed the world, stated Mr Anand Sharma, Union Minister for Commerce, Industry and Textiles, Government of India, while addressing a session at the 11thPravasi Bharatiya Divas 2013. Mr Sharma further highlighted that the national investment rate is around 33-34 per cent, and is expected to increase to 36 per cent by the end of 12th Five Year Plan (2012-17). India has been adjourned the fifth best country in the world for dynamic growing businesses, as per the Grant Thornton Global Dynamism Index. The index gives a reflection of how suitable an environment the country offers for dynamic businesses. Indian tax climate was also considered to be reasonably favourable and India continued to be an attractive investment destination, according to a survey conducted by Deloitte Touche Tohmatsu Ltd (Deloitte). Moreover, India was ranked fourth on Ernst & Young's (E&Y) renewable attractiveness index, second on the solar index, and third on the wind index, as per the latest study by E&Y and UBM India Pvt Ltd. The Economic Scenario India is expected to be the second largest manufacturing country in the next five years, followed by Brazil as the third ranked country, according to Deloitte. Some of the other important economic developments in the country are as follows:

The HSBC's Services Purchasing Managers' Index (PMI) touched a 12 month high at 57.5 points in January 2013 as compared to 55.6 in December 2012 The net direct tax collections in India rose by 13.70 per cent to record Rs 368,322 crore (US$ 67.96 billion) during April-December 2012, as compared to Rs 323,956 crore (US$ 59.77 billion) during the corresponding months in 2011 Indian companies have raised US$ 4.29 billion, through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) in October 2012, to fund modernisation, foreign acquisitions, import of capital goods and onward lending The total value of private equity (PE) and mergers & acquisitions (M&A) deals in November 2012 increased five-fold to US$ 10.1 billion, as per a study by Grant Thornton India. The total value of PE deals in November 2012 rose to US$ 39 billion from US$ 0.4 billion in November 2011, indicating that PE players preferred concentrated exposure to their value investments The cumulative amount of foreign direct investments (FDI) equity inflows into India were worth US$ 187,804 million between April 2000 to December 2012, while FDI equity inflow during April 2012 to December 2012 was recorded as US$ 16,946 million, according to the latest data published by Department of Industrial Policy and Promotion (DIPP)

Foreign institutional investors (FIIs) made a net investment of US$ 68.46 million in the equity market and US$ 14.92 million in the debt market upto February 18, 2013, according to data released by the Securities and Exchange Board of India (SEBI)

Industry Overview Oil & Petroleum Industry in INDIA

Since independence, India has achieved a good measure of self sufficiency in the manufacture of a variety of basic and capital goods .the output of the major industries includes oil and petroleum ,aircraft, ships, cars, chemicals etc .The economic reform process set in motion since mid 1991 has further put the economy on a fast truck. E and P sector India Exploration activity started in India way back in 1866 in the north eastern state of Assam, just seven after drilling of the first oil well in Pennsylvania, USA .For about a century the E&P activity was restricted to the north east part of the country and till early 1960s the total crude production India was only about 10000bpd. Thereafter large numbers of fields have been discovered both inland and off shore. Burmah oil was the only company engaged in E&P.With the demand growing, the government recognised the need to explore hydrocarbon resources and accordingly set up Oil & Petroleum Industry in INDIA in 1956. Burmah oil was also merged with Oil & Petroleum Industry in INDIA, this was however taken over by GOI in 1981.ONGC was converted into public LTD company in 1993.ONGC and oil enjoy the status of national oil companies and have duopoly with about 90% and 10% share respectively.

The Petroleum Industry

The seeking and production of crude oil and natural gas are generally referred to as exploration and production phase of the total grant of function of the petroleum industry. A divide has thus been made in the petroleum industry. A divide has thus been made in the petroleum industry between the function relating to exploration and production of crude oil and natural gas which is referred to upstream, and refining transportation and marketing to the end consumer which is referred to as down stream.

Primary function of petroleum industry

Each of the primary function of the petroleum industry have been broken down into a number of subsidiary functions .thus the exploration and production phase consist of six separates and distinct operations. Pre-exploration, Exploration, Appraisal, Development, Production, Transportation.

OIL and Natural Gas

To find oil and natural gas, companies drill through the earth to the deposits deep below the surface. The oil and natural gas are then pumped from below the ground by rigs. They then usually travel through pipes.

OIL
Oil accounts 30% of total energy consumption .The majority of Indias roughly 5.4 barrels in oil reserves are located at Bombay high, upper Assam,Cambay,Cauvery basins.India is attempting to limit its dependence on oil imports somewhat by expanding domestic exploration and production. To this end the Indian government is pursuing the new exploration licensing policy, first announced in1997.

Natural Gas
Indian consumption of natural gas has risen faster than any other fuel in recent years .Most of Indias current natural gas production takes place in the Bombay high basin and the state of Gujarat.

Company overview 1947 1960

During pre-independence, the Assam Oil Company in the North-Eastern and Attock Oil company in North-Western part of undivided India were the only oil companies producing oil in the country. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources. After independence, the Government realized the importance of oil and gas for rapid industrial development and its strategic role in defence. Consequently, while framing the Industrial Policy Statement of 1948, the development of the hydrocarbon industry in the country was considered to be of utmost necessity. Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. Assam Oil Company was producing oil at Digboi, Assam (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of Public Sector development. With this objective, an Oil and Natural Gas Directorate was set up in 1955 under the then Ministry of Natural Resources and Scientific Research. The department was constituted with a nucleus of geoscientists from the Geological survey of India. A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural Resources, visited several countries to study the oil industry and to facilitate the training of Indian professionals for exploring potential oil and gas reserves. Foreign experts from USA, West Germany, Romania and erstwhile USSR visited India and helped the government with their expertise. Finally, the visiting Soviet experts drew up a detailed plan for geological and geophysical surveys and drilling operations to be carried out in the 2ndFive Year Plan (1956-57 to 1960-61). In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry amongst the Schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state. Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with limited financial and administrative powers to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of Parliament, which enhanced powers of the commission further. The main functions of the

Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programmes for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central Government may, from time to time, assign to it". The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

1961 1990
Since its inception, ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. In the inland areas, ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both inland and offshore). ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay High, now known as Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the country. Subsequently, over 5 billion tonnes of hydrocarbons, which were present in the country, were discovered. The most important contribution of ONGC, however, is its self-reliance and development of core competence in E&P activities at a globally competitive level.

After 1990
The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees. During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each other's stock. This paved the way for long-term strategic alliances both for the domestic and overseas business opportunities in the energy value chain, amongst themselves. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came down to 84.11 per cent. In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into the downstream sector. ONGC has also entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL). ONGC has made major investments in Vietnam, Sakhalin, Columbia, Venezuela, Sudan, etc. and earned its first hydrocarbon overseas revenue from its investment in Vietnam.

Synopsis
ONGC was set up under the visionary leadership of Pandit Jawahar Lal Nehru. Pandit Nehru reposed faith in ShriKeshavDevMalviya who laid the foundation of ONGC in the form of Oil and Gas division, under Geological Survey of India, in 1955. A few months later, it was converted into an Oil and Natural Gas Directorate. The Directorate was converted into Commission and christened Oil & Natural Gas Commission on 14th August 1956. In 1994, Oil and Natural Gas Commission was converted in to a Corporation, and in 1997 it was recognized as one of the Navratnas by the Government of India. Subsequently, it has been conferred with Maharatna status in the year 2010. Over 56 years of its existence ONGC has crossed many a milestone to realize the energy dreams of India. The journey of ONGC, over these years, has been a tale of conviction, courage and commitment. ONGCs superlative efforts have resulted in converting earlier frontier areas into new hydrocarbon provinces. From a modest beginning, ONGC has grown to be one of the largest E&P companies in the world in terms of reserves and production. ONGC as an integrated Oil & Gas Corporate has developed in-house capability in all aspects of exploration and production business i.e., Acquisition, Processing & Interpretation (API) of Seismic data, drilling, work-over and well stimulation operations, engineering & construction, production, processing, refining, transportation, marketing, applied R&D and training, etc. Today, Oil and Natural Gas Corporation Ltd. (ONGC) is, the leader in Exploration & Production (E&P) activities in India having 72% contribution to Indias total production of crude oil and 48% of natural gas. ONGC has established more than 7 Billion Tonnes of in-place hydrocarbon reserves in the country. In fact, six out of seven producing basins in India have been discovered by ONGC. ONGC produces more than 1.27 million Barrels of Oil Equivalent (BOE) per day. It also contributes over three million tonnes per annum of Value-Added-Products including LPG, C2 - C3, Naphtha, MS, HSD, Aviation Fuel, SKO etc.

2000 to present
In 2003, ONGC Videsh acquired Talisman Energy's 25% stake in the Greater Nile Oil project.[6] In 2006 a commemorative coin set was issued to mark the 50th anniversary of the founding of ONGC, making it only the second Indian company (State Bank of India being the first) to have such a coin issued in its honour. In 2011, ONGC applied to purchase of 2000 acres of land at Dahanu to process offshore gas.[7] ONGC Videsh, along with Statoil ASA (Norway) and Repsol SA (Spain), has been engaged in deepwater drilling off the northern coast of Cuba in 2012 On 11 August 2012, ONGC announced that it had made a large oil discovery in the D1 oilfield off the West coast of India, which will help it to raise the output of the field from around 12,500 barrels per day (bpd) to a peak output of 60,000 bpd.

In November 2012, ONGC Videsh agreed to acquire ConocoPhillips' 8.4% stake in the Kashagan oilfield in Kazakhstan for around US$5 billion, in ONGC's largest acquisition to date. The acquisition is subject to the approval of the governments of Kazakhstan and India and also to other partners in the Caspian Sea field waiving their pre-emption rights.

ONGC Videsh
ONGC Videsh Limited (OVL) is the international arm of ONGC. It was rechristened on 15 June 1989. It currently has 14 projects across 16 countries. Its oil and gas production reached 8.87 MMT of O+oEG in 2010, up from 0.252 MMT of O+OEG in 2002/03.

ONGC Tripura Power Company

ONGC Tripura Power Company Ltd (OTPC) is a joint venture which was formed in September 2008 between ONGC, Infrastructure Leasing and Financial Services Limited and the Government of Tripura. It is developing a 726.6 MW CCGT thermal power generation project at Palatana in Tripura which will supply electricity to the power deficit areas of the north eastern states of the country.

Profile

Global Ranking Only Indian energy major in Fortune's Most Admired List 2012 under 'Mining, Crude Oil Production' category. It is ranked 171st in Forbes Global 2000 list of the World's biggest companies for 2012 based on Sales (US$ 26.3 billion), Profits (US$ 5 billion), Assets (US$ 51 billion) and Market Capitalization (US$ 46.6 billion). ONGC has been ranked 39th among the world's 105 largest listed companies in 'transparency in corporate reporting' by Transparency International making it the most transparent company in India. ONGC is India's Most Valuable Public Sector Enterprise The Company won Petrofed Oil & Gas Industry Awards 2011 in three categories "Environmental Sustainability: Company of the Year", "Human Resource Management: Company of the Year" and "Innovator of the Year: Team (Won by IOGPT)". It was bestowed with "Most Attractive Employer" Award in Randstad Awards 2011 Won "Golden Peacock Award for Sustainability" for the year 2011 Awarded with the Gold Trophy of SCOPE Meritorious Award for "Environmental Excellence & Sustainable Development" for the Year 2010-11 by former President Smt. Pratibha Devisingh Patil Anointed "Outstanding PSU of the Year" at AIMA Managing India Awards 2012 Awarded the Best overall Performance PCRA Award in the Upstream Sector (Oil & Gas) for 3rd consecutive year Awarded the "ICSI National Award for Excellence in Corporate Governance for 2011"Certificate of Recognition Awarded NIPM National Award for Best HR Practices 2011 Adjudged amongst 20 Top Companies for Leaders 2011 in Aon Hewitt Awards "Best Enterprise Award" for the organization in the Maharatna and Navaratna Category at the 22nd National Meet of Women in Public Sector (WIPS) It was bestowed with Safety Innovation Award 2011 in the Oil & Gas sector for innovative safety
measures

Vision & Mission

To be global leader in integrated energy business through sustainable growth, knowledge excellence and exemplary governance practices. World Class Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people. Imbibe high standards of business ethics and organizational values. Abiding commitment to safety, health and environment to enrich quality of community life. Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people. Strive for customer delight through quality products and services. Integrated In Energy Business Focus on domestic and international oil and gas exploration and production business opportunities. Provide value linkages in other sectors of energy business. Create growth opportunities and maximize shareholder value. Dominant Indian Leadership Retain dominant position in Indian petroleum sector and enhance India's energy availability.

People

Our People "Not only had India... set up her own machinery for oil exploration and exploitation... an efficient oil commission had been built where a large number of bright young men and women had been trained and they were doing good work." - Pandit Jawahar Lal Nehru, India's first Prime Minister to Lord Mountbatten, on ONGC (1959).

Today, ONGC is the flagship company of India; and making this possible is a dedicated team of nearly 33,000 professionals who toil round the clock. It is this toil which amply reflects in the aspirations and performance figures of ONGC. The company has adopted progressive policies in scientific planning, acquisition, utilization, training and motivation of the team. At ONGC, everybody matters, every soul counts. ONGC has a unique distinction of being a company with in-house service capabilities in all the activity areas of exploration and production of oil & gas and related oil-field services. Needless to emphasize, this was made possible by the men & women behind the machine. Over 18,000 technically-competent experienced scientists, engineers and specialist professionals, mostly from distinguished Universities / Institutions of India and abroad form the core of our executive profile. They include geologists, geophysicists, geochemists, drilling engineers, reservoir engineers, petroleum engineers, production engineers, engineering & technical service providers, financial and human resource experts and IT professionals. HR Vision, Mission & Objectives HR Vision "To build and nurture a world class Human capital for leadership in energy business". HR Mission "To adopt and continuously innovate best-in-class HR practices to support business leaders through engaged empowered and enthused employees". HR Objectives Enrich and sustain the culture of integrity, belongingness, teamwork, accountability and innovation. ONGC Group of Companies

Organizational Chart

Company profile
Establishment year:1956 Registered office:-Vasudhara Bhavan, Aliavar Jung Marg, Bandra East, Mumbai 400051. Website : www.ongcindia.com

Directors The Company is managed by the Board of Directors, which formulates strategies, policies and reviews its performance periodically. The Chairman& Managing Director (CMD) and Six Whole-Time Directors viz. Director (Onshore), Director (Technology & Field Services), Director (Finance), Director (Offshore), Director (Exploration) and Director (Human Resource), manage the business of the Company under the overall supervision, control and guidance of the Board. The Board of Directors has an adequate combination of Executive (Functional) and Nonexecutive Directors. As on 11th December, 2012,the Board of Directors had 14 members, comprising of 6 Functional Directors (including the Chairman & Managing Director) and 8 Non-executive Directors (comprising 2 part-time official nominee Director and 6 part-time non-official Directors) nominated by the Government of India. To share the global experience and business strategies, Managing Director, ONGC Videsh Limited (OVL) is a permanent invitee to the meetings of the Board.

Sudhi.Vasudeva Chairman & Managing Director.

S.V.Rao Director (Exploration)

K.S.Jamestin Director (HR)

A.K.Banerjee Director (Finance)

Company secretary

Sonam. Gupta
Bankers State Bank of India

Competitive Strength

All crudes are sweet and most (76%) are light, with sulphur percentage ranging from 0.02-0.10, API gravity range 26-46 and hence attract a premium in the market. Strong intellectual property base, information, knowledge, skills and experience Maximum number of Exploration Licenses, including competitive NELP rounds. ONGC has bagged 121 of the 235 Blocks (more than 50%) awarded in the 8 rounds of NELP. ONGC owns and operates more than 26,600 kilometers of pipelines in India, including sub-sea pipelines. No other company in India operates even 50 per cent of this route length. Corporate Social Responsibility In recognition of its role as a 'responsible leader', ONGC continues its quest to make positive, tangible difference in the lives of the vulnerable and disadvantaged. With a business paradigm that is based on an interconnected vision - of people's welfare, societal growth and environmental conservation, ONGC in 2011-12 continued to cater to the developmental needs across the following focus areas:

Education including vocational courses; Health Care; Entrepreneurship (self-help & livelihood generation) schemes; Infrastructure support roads, bridges, Schools, hospitals in around our operational areas Environment protection, ecological conservation, promotion; Protection of heritage sites, UNESCO heritage monuments etc.; Promotion of artisans, craftsman, musicians, artists etc. for preservation of heritage, art & culture

Financial analysis of the company

Analysis of the Financial Statements of the company. The basic financial statements on which the analysis are carried down are , Balance sheet: is a statement which shows sources and application of funds .It also shows the combinations of owned and owed funds. The equation of balance sheet is Assets=Liablities+Owners equity Income statement: is the summary of the expenses incurred and the income generated the net off both is termed as the operating profits of the firm . Cash flow: basically answers to the question that whether the operations of business has provided cash or consumed cash?
Simply having a balance sheet is of no use. So the analysis of balance sheet should be

done so that the investors are able to critically evaluate the company and can take the decision related to investing their money. The most widely used method is ratio analysis as the computational aspect is much easy and the person can easily get the knowledge of the trend that is continuing in that company. The variable are derived basically from following sources Balance sheet P/L Share market

4.1) Ratios Analysis Traditionally the ratios were grouped into three categories on the basis of the figures are taken for computing the ratios. The ratios according to this traditional classification are:Revenue statement ratios: These are the ratio computed on the basis of items taken from P/L a/c. Balance sheet ratios: The two items are taken from the balance sheet to compute ratio. Composite ratio: Here the ratio shows the relationship between one item taken from balance sheet and other from balance sheet and other from P/L a/c. But as on today the ratios can also be divided in the following parts; Profitability ratios Liquidity ratios Long term solvency ratios Coverage ratios Activity ratios

Conclusion
ONGC group's turnover during 2011-12 has been Rs. 150,185 Crore with net profit of Rs. 28,144 Crore. ONGC paid the highest-ever dividend of Rs. 8,342 Crore. The Net Worth of ONGC Group of companies is Rs. 135,266 Crore. During 2011-12, the turnover of ONGC (on standalone basis) has been Rs. 76,887 Crore with net profit of Rs.25,123 Crore; the highest-ever despite sharing under-recovery of Rs.44,466 Crore to the Oil Marketing Companies (OMCs) as per the instructions of the Government of India. Net worth of ONGC (on standalone basis) has been Rs.1,11,784 Crore. OVL's consolidated gross revenue increased by 21% from Rs. 18,671 Crore during 2010-11 to Rs.22,637 Crore during 2011-12 and consolidated net profit increased by 1% from Rs. 2,621 Crore during 2010-11 to Rs. 2,721 Crore during 2011-12. The turnover of MRPL has been Rs.52,207 Crore, up 19% from Rs.43,800 Crore and net profit has been Rs.909 Crore during 2011-12.

Bibliography
Websites : www.ongcindia .com www.fact-index.com www.petroleum.nic.in Books;Prasanna Chandra ,financial management theory and practices sixth edition page no 41 to 69,Tata McGraw Hill Publishing company Limited,New delhi ,2007 I M Pandey, financial management ninth edition page no 489 to 555, vikas publishing house pvt ltd, noida,2004.