INTRODUCTION OF THE TOPIC

RATIO ANALYSIS
Ratio analysis is a technique of determining numerical relationship based on financial Statements. It is a tool which is used by various companies for conducting analysis for benefit of investors and company. Ratio analysis is used to obtain information regarding companys financial conditions in key areas. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. The ratios are calculated for the current year and compared with the companys previous years performance. Ratio is not used only by the company but also by others. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of: The balance sheet The profit and loss account

USERS OF FINANCIAL STATEMENT ANALYSIS:

The main users of financial statement analysis are as follows: Executives: - To formulate policies. Bankers: - To establish basis for Granting Loans. Institutions Auditors: - To extend Credit facility to business. Investors: - To assess the prospects of the business and to know whether they can get a good return on their investment. Accountants: - To study the statement for comparative purposes. Government Agencies: - To study from an angle of tax collection duty etc.

ADVANTAGES OF RATIO ANALYSIS

The advantages derived by an enterprise by the use of accounting ratios are: 1) Useful in analysis of financial statements: Bankers, investors, creditors, etc analysis balance sheets and profit and loss accounts by means of ratios. 2) Useful in simplifying accounting figures: Accounting ratio simplifies summarizes and systematizes a long array of
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Accounting figures to make them understandable. In the words of Biramn and Dribin, Financial ratios are useful because they summarize briefly the results of detailed and complicated computation 3) Useful in judging the operating efficiency of business: Accounting Ratio are also useful for diagnosis of the financial health of the enterprise. This is done by evaluating liquidity, solvency, profitability etc. Such an evaluation enables management to access financial requirements and the capabilities of various business units. 4) Useful for forecasting: Helpful in business planning, forecasting. What should be the course of action in the immediate future is decided on the basis of trend ratios, i.e., ratio calculated for number of years. 5) Useful in locating the weak spots: Locating the weak spots in the business even though the overall performance may quite good. Management cab then pay attention to the weakness and take remedial action. For example if the firm finds that the increase in distribution expense is more than proportionate to the results achieved, these can be examined in detail and depth to remove any wastage that may be there. 6) Useful in Inter-firm and Intra-firm comparison: A firm would like to compare its performance with that of other firms and of industry in general. The comparison is called inter-firm comparison. If the performance of different units belonging to the same firm is to be compared, it is called intra-firm comparison. Such comparison is almost impossible without accounting ratios. Even the progress of a firm from year to year cannot be measured without the help of financial ratios. The accounting language simplified through ratios is the best tool to compare the firms and divisions of the firm.

LIMITATIONS OF FINANCIAL RATIO ANALYSIS:

1) False Results: If Financial Statements are not correct Financial Ratio Analysis will also be correct. 2) Different meanings are put on different terms:

Elements and sun-elements are not uniquely defined. An enterprise may work out ratios on the basis of profit after Tax and interest while others work on profit before interest and Tax .So, the Ratios will also be different so cannot be compared. But before comparison is to be done the basis for calculation of ratio should be same. 3) Not comparable if different firms follow different accounting Policies. Two enterprises may follow different Policies like some enterprises may charge depreciation at straight line basis while others charge at diminishing value. Such differences may adversely affect the comparison of the financial statements. 4) Affect of Price level changes: Normally no consideration is given to price level changes in the accounting variables from which ratios are computed. Changes in price level affect the comparability of Ratios. This handicaps the utility of accounting ratios. 5) Ignores qualitative factors: Financial Ratios are on the basis of quantitative analysis only. But many times a qualitative fact overrides quantitative aspects. For Example: Loans are given on the basis of accounting Ratios but credit Ultimately depends on the character and managerial ability of the borrower. Under such circumstances, the conclusions derived from ratio analysis would be misleading. 6) Ratios may be worked out for insignificant and unrelated figures. Example: A ratio may be worked out for sales and investment in govt. securities. Such ratios will only be misleading. Care should be exercised to work out ratios between only such figures which have cause and effect relationship. One should be reasonably clear as to what the cause is and what the effect is. 7) Difficult to evolve a standard Ratio: It is very difficult to evolve a standard ratio acceptable at all times as financial and economic scenarios are dynamic. Again the underlying conditions for different firms and different industries are not similar, so an acceptable standard ratio cannot be evolved. 8) Window Dressing: Financial Ratios will be affected by window dressing. Manipulations and window dressings affect the financial statements so they are going to affect the of ratios also. Therefore a particular ratio may not be a definite indicator of good or bad management.
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9) Personal Bias: Ratios have to be interpreted, but different people may interpret same ratios in different ways. Ratios are only tools of financial analysis but personal judgment of the analyst is more important. If he does not possess requisite qualifications or is biased in interpreting the ratios, the conclusions drawn prove misleading.

TYPES OF RATIO

Table.1
1. LIQUIDITY RATIO Liquidity ratio refers to the companys ability to meet its short term debt. The investors are interested in the liquidity ratio of the company as the company with low liquidity ratio face problem in meeting their debts. Bankers before providing loans to the companies take a close look at liquidity ratio of the firm to see whether they will be able to return back the money
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with interest or not. While liquidity ratios are most helpful for short-term creditors/suppliers and bankers, they are also important to financial managers who must meet obligations to suppliers of credit and various government agencies. Normally a company having higher liquidity ratio implies that the firm is in a healthy position to cover the short term liabilities of the company. There are two types of liquidity ratio

Liquidity Ratio

Current Ratio
Quick Ratio
Table.2

Current ratio:

The current ratio can give a sense of the efficiency of a company's operating cycle or its liability to turn its product into cash. The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. It compares a firms current assets to its current liabilities. This ratio is very important ratio which gives an indication of the firms market liquidity and ability to meet creditors demands. The acceptable range is between 1.5to2. If ratio exceeds 2: 1 it indicates poor use of current assets, such as holding excessive stocks or cash. The formula to calculate current ratio is as follows Current Asset Current Ratio = _______________________ Current Liabilities

Quick ratio:

The essence of this ratio is a test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. In simple words, it helps to know whether the firm is able to meet its short term liabilities with its most liquid assets or not. The quick- asset test ratio is more accurate measure of liquidity of the company as it excludes inventory from the current assets which is difficult to convert into cash immediately. It is seen as a sign of companys strength or weakness. There are two terms of liquid asset and liquid liabilities in this formula, Liquid asset is all current assets except the inventories and prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities include all current liabilities except bank overdraft and cash credit since they are not required to be paid off immediately. Liquid Asset Quick Ratio = ____________________ Current Liabilities

2. PROFITABILITY RATIO

Gross Profit Ratio

Profitability Ratio Net Profit Ratio Earning Per Share
Table.3 Gross profit ratio: of

The gross profit ratio is used to find out how much profit a business makes on its cost

sales. In simple words, it is an idea that tells us the gross profit a business is earning. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. Gross profit margin measures company's manufacturing and distribution efficiency during the production process. It is a measurement of how much from each dollar of a company's revenue is available to cover overhead, other expenses and profits. High ratios are favorable in this, since it indicates the business is earning a good return on the sale of its merchandise.
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But gross margin ratio analysis may mean different things for different kinds of businesses. For example, in case of a large manufacturer, gross margin measures the efficiency of production process. For small retailers it gives an impression of pricing strategy of the business.

Gross Profit Gross Profit Ratio = _________________ X 100 Net Sales

Net profit ratio

Net profit ratio tells us what portion of sales are available to the equity shareholders after deducting all the expenses. The higher the ratio higher is the profitability of the firm. Net profit margin is important for not only investors but also for the management, the investors are more interested in this ratio as it tells them profitability of the company whereas the managements interests in it because it helps them framing policies and taking important . The higher the margin is, the more effective the company is in converting revenue into actual profit. It is normally advisable to have improved net margins compared to the previous periods. If the margins are not improved, it calls for careful analysis to find out the reasons behind the decline.

Net Profit after Tax Net Profit Ratio = ___________________ X 100 Net Sales

Earnings per share:

Earnings per share are generally considered to be the single most important ratio in Determining a share's price. It is an indicator of a companys profitability. This ratio is considered while choosing good investments. It tells us what the earning of the share is. For checking the profitability of the company the experts considers the earning of past years earning per share ratio. This is, perhaps, the fundamental investor ratio. The term earning per share represents the position of a companys earning, net of taxes and

preferred stock dividends that is allocated to each share of common stock.

The formula of earning per share is:

N.P.A.T. - Preference Dividend EPS = _________________________________ Number of equity shares Outstanding

3. SOLVENCY RATIOS:

Solvency Ratio

Debt Equity Ratio Proprietary Ratio

Table.4

Solvency ratio is concerned with the relationship between the long terms liabilities that a business has and its capital employed. The idea is that this relationship ought to be in balance. It is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. The shareholders and lenders of long term loans may be interested in this ratio

Debt Equity ratio:

Debt equity ratio measures the companys financial leverage. This ratio helps us to tell that what proportion of shareholders funds and debt is used by the company to finance its assets. This ratio shows the investment of shareholders in compare to the creditors. If there are outside liability is much more than its shareholders fund it means that the company is
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dependent on the debt holders for money and the shareholders will resist it as it will have effect on their dividends. Share holders are given what is left out after giving it to debt holders and preference share holders, if more debt is employed in the company then they will have to sacrifice on part of the dividend. And if the dividends are less than the share holders equity this will mean that they are not raking proper advantage of their borrowing power.

Note: (External liabilities = all types of liabilities)

The formula of Debt-Equity ratio is as follows:

External Liabilities Debt Equity Ratio= ______________________ Shareholders fund

Proprietary ratio:

Proprietary ratio is a ratio which measures the relationship between equity fund and total assets. And shows the extent to which the owner s fund are sunk in assets or different kinds of it.

Total Equity Proprietary Ratio= _____________________________ Debt + Equity or [Total assets]

4. ACTIVITY RATIO: Activity ratio is ratio with which we measure the efficiency of how the business uses its assets. It is a ratio which tells us how quickly a company can convert certain assets into cash. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. Such ratios are frequently used when performing fundamental analysis on different companies. Activity ratios are used to measure the relative efficiency of a company based on its use of its assets. These ratios are important in determining whether a company's management is doing a
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good enough job of generating revenues, cash, etc. from its resources.

Fixed Asset TurnoverRatio Current Asset Turnover Ratio Working Capital Turnover Ratio
Table.5

Activity Ratio

Fixed Asset Turn Over Ratio

The fixed assets turnover ratio shows how much the company has invested in fixed assets such as land, buildings, and equipment to generate sales. It shows how the company uses its fixed assets to generate sales. A higher fixed asset turnover ratio means that the company has been more efficient in utilizing its investments in fixed assets to generate revenue, whereas a low fixed assets turnover implies that a firm has too much investment in fixed assets relative to sales; it is basically a measure of productivity. The formula is as follows:

Net Sales Fixed Asset Turnover Ratio= ______________ Fixed Assets

Current Asset Turn Over ratio:

Current asset turnover ratio is almost like the fixed asset turnover ratio, it calculates the capability of organization to earn sales with current assets. So it indicates with what ratio. Current assets are turned over in the form of sales. This ratio indicates how well a company generates sales revenue from the current assets. The higher the ratio the better it is for the company as it shows that the company uses its assets in the most efficient manner possible. Accountants generally compute the current assets turnover ratio on a monthly basis but it can be computed on yearly basis also.

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This ratio is calculated as

Net Sales Current Asset Turn Over Ratio= _________________ Current Assets

Working Capital Turn Over Ratio

As its name suggests it is the relationship between turnover and working capital. It is a measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. A company uses working capital to fund operations and purchase inventory. These Operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. The formula related is: Net Sales Working Capital Turn Over Ratio= ________________________ Working Capital

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INTRODUCTION OF THE COMPANY

Indian Oil is India's flagship national oil company with business interests straddling the entire hydrocarbon value chain from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural gas and petrochemicals. It is the leading Indian corporate in the Fortune 'Global 500' listing, ranked at the 83rd position in the year 2012. With over 34,233-strong workforce, Indian Oil has been helping to meet Indias energy demands for over half a century. With a corporate vision to be the Energy of India, Indian Oil closed the year 2011-12 with a sales turnover of Rs. 4,09,957 crore ($ 85,550 million) and profits of Rs. 3,955 crore ($ 825 million).

At Indian Oil, operations are strategically structured along business verticals - Refineries, Pipelines, Marketing, R&D Centre and Business Development E&P, Petrochemicals and Natural Gas. To achieve the next level of growth, Indian Oil is currently forging ahead on a well laid-out road map through vertical integration upstream into oil exploration & production (E&P) and downstream into petrochemicals and diversification into natural gas marketing and alternative energy, besides globalization of its downstream operations. Having set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), Indian Oil is simultaneously scouting for new business opportunities in the energy markets of Asia and Africa.

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REACH AND NETWORK

Indian Oil and its subsidiary (CPCL) account for over 49% petroleum products market share, 31% national refining capacity and 71% downstream sector pipelines capacity in India.

The Indian Oil Group of companies owns and operates 10 of India's 22 refineries with a combined refining capacity of 65.7 million metric tones per annum (MMTPA, .i.e. 1.30 million barrels per day approx.). Indian Oils cross-country network of crude oil and product pipelines spans 11,163 km with a capacity of 77.258 MMTPA of crude oil and petroleum products and 10 MMSCMD of gas. This network is the largest in the country and meets the vital energy needs of the consumers in an efficient, economical and environment-friendly manner.

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It has a portfolio of powerful and much-loved energy brands that includes Indane LPGas, SERVO lubricants, XtraPremium petrol, XtraMile diesel, PROPEL & petrochemicals, etc. Validating the trust of 66.8 million households, Indane has earned the coveted status of 'Super brand' in the year 2009.

Indian Oil has a keen customer focus and a formidable network of customer touch-points dotting the landscape across urban and rural India. It has 20,575 petrol and diesel stations, including 4,225 Kisan Seva Kendras (KSKs) in the rural markets. With a countrywide network of over 38,000 sales points, backed for supplies by 139 bulk storage terminals and depots, 3,960 SKO/LDO dealers (60% of the industry), 96 aviation fuel stations and 89 LPGas bottling plants, Indian Oil services every nook and corner of the country. Indane is present in almost 2764 markets through a network of 5,934 distributors (51.6% of the industry). About 7780 bulk consumer pumps are also in operation for the convenience of large consumers, ensuring products and inventory at their doorstep. Indian Oils ISO-9002 certified Aviation Service commands an enviable 63% market share in aviation fuel business, successfully servicing the demands of domestic and international flag carriers, private airlines and the Indian Defence Services. The Corporation also enjoys a 65% share of the bulk consumer, industrial, agricultural and marine sectors.

With a steady aim of maintaining its position as a market leader and providing the best quality products and services, Indian Oil is currently investing Rs. 47,000 crore in a host of
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projects for augmentation of refining and pipelines capacities, expansion of marketing infrastructure and product quality up gradation.

ORIGIN OF IOCL
Indian Oil Corporation Limited is an Indian state-owned oil and gas company headquartered at Mumbai, India. It is Indias largest commercial enterprise, ranking 125th on the Fortune Global 500 list in 2010. Indian Oil and its subsidiaries account for a 47% share in the petroleum products market, 34.8% share in refining capacity and 67% downstream sector pipelines capacity in India. The Indian Oil Group of Companies owns and operates 10 of India's 19 refineries with a combined refining capacity of 65.7 million metric tons per year. Indian Oil operates the largest and the widest network of fuel stations in the country, numbering about 17606 (15557 regular ROs & 2049 Kissan Sewa Kendra). It has also started Auto LPG Dispensing Stations (ALDS). It supplies Indane cooking gas to over 47.5 million households through a network of 4,990 Indian distributors. In addition, Indian Oils Research and Development Center (R&D) at Faridabad supports, develops and provides the necessary technology solutions to the operating divisions of the corporation and its customers within the country and abroad. Subsequently, Indian Oil Technologies Limited - a wholly owned subsidiary, was set up in 2003, with a vision to market the technologies developed at Indian Oils Research and Development Center. It has been modeled on the R&D marketing arms of Royal Dutch Shell and British Petroleum.

The Indian Oil Corporation Ltd. operates as the largest company in India in terms of turnover and is the only Indian company to rank in the Fortune "Global 500" listing. Indias flagship national oil company and downstream petroleum major, Indian Oil Corporation Ltd. (Indian Oil) is celebrating its Golden Jubilee during 30th June - 1st September 2009.

Established as an oil marketing entity on 30th June 1959, Indian Oil Company Ltd. was renamed Indian Oil Corporation Ltd. on 1st September 1964 following the merger of Indian Refineries Ltd. (established in August 1958) with it.

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VISION WITH VALUES

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VISION A major diversified, transnational, integrated energy company, with national leadership and a strong environment conscience, playing a national role in oil security and public distribution. Indian Oil operates under the aegis of the Ministry of Petroleum & Natural Gas (MOP&NG), Government of India. VALUES Indian Oil nurtures the core values of CARE, INNOVATION, and PASSION& TRUST across the organization in order to deliver value to its stakeholders. Care Stands for Concern, Empathy, Understanding, Co-operation, and Empowerment. Innovation Stands for Creativity, Ability to learn, Flexibility, Change. Passion Stands for Commitment, Dedication, Pride, Inspiration, Ownership, and Zeal & Zest. Trust Stands for Delivered promises, Reliability, Dependability, Integrity, Truthfulness, Transparency.

OBJECTIVES & OBLIGATIONS

OBJECTIVES

To serve the national interests in oil and related sectors in accordance and consistent with Government policies.

To ensure maintenance of continuous and smooth supplies of petroleum products by way of crude oil refining, transportation and marketing activities and to provide appropriate assistance to consumers to conserve and use petroleum products efficiently.

To enhance the country's self-sufficiency in crude oil refining and build expertise in lying of crude oil and petroleum product pipelines.

To further enhance marketing infrastructure and reseller network for providing assured service to customers throughout the country.

To create a strong research & development base in refinery processes, product formulations, pipeline transportation and alternative fuels with a view to minimizing/eliminating imports and to have next generation products.
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To optimize utilization of refining capacity and maximize distillate yield and gross refining margin.

To maximize utilization of the existing facilities for improving efficiency and increasing productivity.

To minimise fuel consumption and hydrocarbon loss in refineries and stock loss in marketing operations to effect energy conservation.

To earn a reasonable rate of return on investment. To avail of all viable opportunities, both national and global, arising out of the Government of Indias policy of liberalization and reforms.

To achieve higher growth through mergers, acquisitions, integration and diversification by harnessing new business opportunities in oil exploration & production, petrochemicals, natural gas and downstream opportunities overseas.

To inculcate strong core values among the employees and continuously update skill sets for full exploitation of the new business opportunities.

To develop operational synergies with subsidiaries and joint ventures and continuously engage across the hydrocarbon value chain for the benefit of society at large.

OBLIGATIONS

Towards customers and dealers: - To provide prompt, courteous and efficient service and quality products at competitive prices.

Towards suppliers: - To ensure prompt dealings with integrity, impartiality and courtesy and help promote ancillary industries.

Towards employees: - To develop their capabilities and facilitate their advancement through appropriate training and career planning. To have fair dealings with recognized representatives of employees in pursuance of healthy industrial relations practices and sound personnel policies.

Towards community: - To develop techno-economically viable and environmentfriendly products. To maintain the highest standards in respect of safety, environment protection and occupational health at all production units.

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Towards Defence Services: - To maintain adequate supplies to Defence and other Para-military services during normal as well as emergency situations.

FINANCIAL OBJECTIVES

To ensure adequate return on the capital employed and maintain a reasonable annual dividend on equity capital.

To ensure maximum economy in expenditure. To manage and operate all facilities in an efficient manner so as to generate adequate internal resources to meet revenue cost and requirements for project investment, without budgetary support.

To develop long-term corporate plans to provide for adequate growth of the Corporations business.

To reduce the cost of production of petroleum products by means of systematic cost control measures and thereby sustain market leadership through cost competitiveness.

To complete all planned projects within the scheduled time and approved cost.

GROUP COMPANIES
Indian Oil is currently metamorphosing from a pure sectoral company with dominance in downstream in India to a vertically integrated, transnational energy behemoth. The Corporation is already on the way to becoming a major player in petrochemicals by integrating its core refining business with petrochemical activities, besides making large investments in E&P and import/marketing ventures for oil & gas in India and abroad.

Lanka IOC PLC

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Indian Oil (Mauritius) Ltd.

IOC Middle East FZE

Chennai Petroleum Corporation Ltd. (CPCL)

Indian Oil - CREDA Biofuels Limited

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JOINT VENTURES

Name of JV

Date of Incorporatio n

Promoters & Equity

Area(s) of Operation

Avid-Oil India Pvt. Ltd.

04.11.1993

NYCO SA, France and Balmer Lawrie & Co. Ltd.

To blend, manufacture and sell synthetic, semi synthetic and mineral based lubricating oils, greases and hydraulic fluids, related products and specialties for Defence and Civil Aviation uses.

Delhi Aviation Fuel Facility Pvt. Ltd

28.03.2010

DIAL BPCL

& For designing, developing, construction, operation, management, maintenance and transfer of Aviation Fuel Facility for T3 Terminal at Delhi Airport

Green Gas Ltd.

07.10.2005
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GAIL

City Gas

(India) Ltd.

Distribution in Lucknow and Agra.

Indo Cat Pvt. Limited

01.06.2006

Interact, USA

Manufacturing & of catalysts additives. marketing FCC and

IOT & Energy Services Ltd.

Infrastructure 28.08.1996

Oil tanking To build and GmbH, Germany. operate terminalling services petroleum products. for

Indian Oil PETRONAS Private Ltd.

03.12.1998

PETRONAS , Malaysia

To and

construct import for

facilities

LPG import at Haldia and to engage parallel marketing LPG. Indian Oil Skytanking Limited 21.08.2006 IOT Infrastructur Design, finance, of in

e & Energy construct, Services Ltd., Skytanking GmbH, Germany.

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operate maintain aviation facility projects.

&

fuel

Indian Synthetic Rubber Limited

06.07.2010

TSRC Taiwan Marubeni Japan

Implementatio & n of Styrene Butadiene Rubber Project at Panipat

Indian Oil Ruchi Biofuels LLP

28.05.2010

Ruchi Soya

Implementatio n of Bio-diesel value-chain project in the state of Uttar Pradesh

Lubrizol India Private Limited

01.04.2000

Lubrizol Inc., USA

To manufacture and market

chemicals for use additives fuels, lubricants and greases. NPCIL-Indian Oil Nuclear Power 06.04.2011 Corporation Limited Nuclear Power Corporation of Limited For developing and operating Nuclear Power for as in

India Plants

harnessing and developing nuclear energy for generating electricity

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Petro net LNG Limited

02.04.1998

Bharat Petroleum Corporation

Development of facilities for import and

Ltd., Oil & regasification Natural gas of Corporation LNG at and

Dahej

Ltd., GAIL Kochi. (India) Ltd, Gaz France, ADB Petronet India Limited 26.05.1997 Bharat Petroleum Corp. Ltd., Hindustan Petroleum Corp. Ltd., Reliance Ind. Ltd, Infrastructur e Leasing & Financial Services Ltd. Trust Company Limited, ICICI Bank Ltd., State Bank of India., Essar Oil Limited. Table.6 To implement petroleum products, pipeline projects through Special Purpose Vehicles. de

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GOLDEN JUBILEE CELEBRATIONS

50 Golden Years in the Service of the Nation

Indias flagship national oil company and downstream petroleum major, Indian Oil Corporation Ltd. (Indian Oil) is celebrating its Golden Jubilee during 30th June - 1st September 2009.

Established as an oil marketing entity on 30th June 1959, Indian Oil Company Ltd. was renamed Indian Oil Corporation Ltd. on 1st September 1964 following the merger of Indian Refineries Ltd. (established in August 1958) with it. The integrated refining & marketing entity has since grown into the countrys largest commercial enterprise and Indias No.1 Company in the prestigious Fortune Global 500 listing of the worlds largest corporate, currently at the 116th position.

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INDIAN OIL TODAY

From a fledgling company with a net worth of just Rs. 45.18 crore and sales of 1.38 million tones valued at Rs. 78 crore in the year 1965, Indian Oil has since grown over 3000 times with a sales turnover of Rs. 285,337 crore, the highest ever for an Indian company, and a net profit of Rs. 2,950 crore .

Set up with the mandate of achieving self-sufficiency in refining and marketing operations for a nascent nation set on the path of economic growth and prosperity, Indian Oil today accounts for nearly half o f Indias petroleum consumption, reaching precious petroleum products to millions of people every day through a countrywide network of around 35,000 sales points. They are backed for supplies by 167 bulk storage terminals and depots, 101 aviation fuel stations and 89 Indane LPG bottling plants. Indian Oil sold 62.6 million tones of petroleum products, including 1.7 million tones of natural gas.

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PROFILE OF CHAIRMAN

Shri. R.S. Butola Chairman, Indian Oil Corp. Ltd. Mr. R.S. Butola is the Chairman of Indian Oil Corporation Ltd., Indias flagship oil & gas major and the largest commercial enterprise in India. He also heads Indian Oils group companies - Chennai Petroleum Corporation Ltd. and IOT Infrastructure & Energy Services Ltd. and industry organizations such as Petroleum Federation of India (Petrified). In a career spanning almost three decades, out of which two decades are in the hydrocarbon industry, Mr. Butola has gained versatile experience in all facets of hydrocarbon industry ranging from project development and execution to commercial closures. Before joining Indian Oil, Mr. Butola was the Managing Director of ONGC Videsh Ltd. (OVL). Under his stewardship, OVL built a formidable E&P portfolio comprising both discovered and producing assets in over 15 countries. At Indian Oil, Mr. Butola is spearheading an enterprise wide exercise aimed at strengthening internal systems by optimising the supply chain and achieving zero process interruption. He is navigating the Company in times of unprecedented challenges being faced by oil & gas companies with particular focus on building bench strength in its core businesses besides acquiring competencies to manage new businesses such as E&P, Nuclear energy, renewable, etc. Mr. Butola is widely travelled, an avid reader and an astute thinker in the energy industry with a rare insight into both upstream and downstream sectors.

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CORPORATE STRUCTURE

Indian Oil Corporation Ltd.

Rearch & Development

Pipeline

Marketing

Refinery

Head office (Mumbai)

Northen Region Office (Delhi)

Delhi state office (Delhi)

Rajasthan State office (Jaipur)

Punajb State office (Chandigarh)

Utter Pradesh State office-I (Lucknow)

Utter Pradesh State office-II (Noida)

Terminals (Petrol & Diesel)

Depot

Plants (Gas)

Devisional office (for terminals & depot)

Area office (for plants)

Table.7

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PRODUCTS AND BRANDS

Indian Oil is not only the largest commercial enterprise in the country but also it is the flagship corporate of the Indian Nation. Besides having a dominant market share, Indian Oil is widely recognized as Indias dominant energy brand and customers perce ive Indian Oil as a reliable symbol for high quality products and services.

Benchmarking Quality, Quantity and Service to World-class standards is a philosophy that Indian Oil adheres to so as to ensure that customers get a truly global experience in India. Indian Oil is a heritage and iconic brand at one level and a contemporary, global brand at another level. While quality, reliability and service remains the core benefits to the customers. Our Retail Brand template of XtraCare (Urban), Swagat (Highway) and Kisan Seva Kendras (Rural) are widely recognized as pioneering brands in the petroleum retail segment. Indian Oils leadership extends to its energy brands - Indane LPG, SERVO Lubricants, Autogas LPG, XtraPremium Branded Petrol, XtraMile Branded Diesel, XtraPower Fleet Card, Indian Oil Aviation and XtraRewards cash customer loyalty programmed.

Autogas Indian Oil Aviation Service Bitumen High Speed Diesel Bulk / Industrial Fuel Indane Gas SERVO Lubricants & Greases Marine Fuels & Lubricants MS / Gasoline Petrochemicals Special Products Superior Kerosene Oil

Crude Oil

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MAIN PRODUCT RANGE

High Spirit Diesel Motor Spirit Superior Kerosene Oil Material used to lay down roads Furnace oil Aviation Turbine Fuel Liquefied Petroleum Gas Lubricant Oil
Table.8

HSD MS SKO (PDS) Bitumen Naphtha ATF LPG LUBE

DIESEL/GAS OIL (HSD)

Petroleum derived diesel (called as petrodiesel) named as HSD (High Spirit Diesel) is a mixture of straight run product with varying amount of selected cracked distillates and is composed of saturated hydrocarbons and aromatic hydrocarbons. Diesel is used in diesel engines, a type of internal combustion engine. Diesel engines are used in cars, motorcycles, boats and locomotives. Automotive diesel fuel serves to power trains, buses, trucks, and automobiles, to run construction, petroleum drilling and other off-road equipment and to be the prime mover in a wide range of power generation & pumping applications.

PETROL/GASOLINE (MS)
Gasoline named as MS (Motor Spirit) is a complex mixture of relatively volatile hydrocarbons that vary widely in chemical & physical properties and are derived from fractional distillation of crude petroleum with a further treatment mainly in terms of improvement of its octane rating. An oxygenate is an oxygen-containing, ash less organic compound (such as an alcohol or ether) which can be used as a fuel or fuel supplement. Motor gasoline is sold at retail outlets where it is directly delivered into the automobile tank. The Indian Standard governing the

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properties of motor gasoline & gasoline-oxygenate blends is IS 2796: 2000 (3rd Rev). In view of the auto fuel policy issued by Govt. of India, more & more stringent specifications (equivalent to Euro II, Euro III, and Euro IV) are being made applicable for the gasolines being marketed in India. This has led to reduction of environmentally polluting factors in gasolines.

XTRAPREMIUM

Indian Oils XTRAPREMIUM is Indias leading branded petrol boosted with new-generation multifunctional additives known as friction busters that prevent deposition in the combustion chamber. XTRAPREMIUM is custom-designed to deliver higher mileage, better pick-up, and faster acceleration, enhanced engine cleanliness, minimizes exhaust emissions, restores peak engine power, and reduces maintenance cost. XTRA PREMIUM is a sought-after fuel among discerning motorists, and owners of newgeneration, high-performance cars have endorsed its unmatched performance.

In terms of fuel system cleanliness XTRAPREMIUM is hugely superior to any other alternative fuel in this segment, with the additional benefit of fuel efficiency through the friction modifier. The additive package contains proprietary components, including a detergent dispersant, a friction modifier and a corrosion inhibitor, as a perfectly optimized formulation in synthetic carrier oil. The detergent dispersant cleans the fuel system and the friction modifier drastically reduces friction in the non-lubricated engine area, thereby contributing to fuel economy.

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XTRAMILE

Indian Oils XTRAMILE Super Diesel, the leader in the branded diesel segment, is blended with world-class multi-functional fuel additives. Commercial vehicle owners choose XTRAMILE because they see a clear value benefit in terms of superior extra mileage, greater acceleration, lower maintenance costs, faster pick-up, longer engine life, eliminates engine knockings and improved engine protection. A growing section of customers who own diesel automobiles, both in the lifestyle and passenger category, prefer XTRAMILE as a fuel for its added and enhanced performance. XTRAMILE has brought in a huge savings in the high mileage commercial vehicles segment. Transport fleets that operate a large number of trucks crisscrossing the country are using XTRAMILE to benefit from higher mileage and reduced maintenance costs.

SERVO

Indian Oil's SERVO range of lubricants reigns as the undisputed market leader in the Indian lubricants market. Known for its cutting-edge technology and high-quality products, SERVO backed by Indian Oil's pioneering R&D, extensive blending
33

and

distribution

network,

sustained

brand

enhancement

and

new generation packaging is a one-stop shop for

complete lubrication solutions in the automotive, industrial and marine segments. In the retailing segment, besides Indian Oil petrol stations, SERVO range of lubricants is

available through a network of SERVO press stations, bazaar outlets and thousands of auto spare parts shops across the country. The SERVO range includes over 500 lubricants and 1200 formulations encompassing literally every lubricant requirement. The SERVOXpress is a one-stop shop for quick, easy and convenient auto care, providing customers with a refreshing experience. The SERVOXpress stations have facilities for oil change, tyre/battery checkups, A/C service, vacuum cleaning, perfuming, and

upholstery cleaning, polishing and lamination installation too.

INDANE LPG GAS

Indane is today one of the largest packed-LPG brands in the world. Indian Oil pioneered the launch of LPG in India in the 1970s and transformed the lives of millions of people with the introduction of the clean, efficient and safe cooking fuel. LPG also led to a substantial improvement in the health of women in rural areas by replacing smoky and unhealthy chullahs with Indane. It is today a fuel synonymous with safety, reliability and convenience. Indian Oils Indane LPG gas is used in 40 million homes as cooking fuel and commands over48% market share in India.

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Commercial LPG

Besides supplying domestic Indane LPG cylinders to households, Indian Oil also markets commercial LPG cylinders in 19 Kg and 47.5 Kg capacity. The commercial LPG cylinders are available at market rates and customers can avail of the superior energy efficiency of LPG in their commercial establishments like canteens, hotels or even in industrial and fabrication works like cutting, welding, heating etc. Besides the regular Indane LPG cylinders that are delivered to doorsteps, Indian Oil also offers reticulated LPG systems for large residential apartment complexes and establishments. Such systems are cost effective and the gas lines laid to individual homes draw from a bank of LPG cylinders stored safely in a dedicated place in the building.

INDIAN OIL AVIATION SERVICES

Indian Oil Aviation Service is a leading aviation fuel solution provider in India and the mostpreferred supplier of jet fuel to major international and domestic airlines. Between one

35

sunrise and the next, Indian Oil Aviation Service refuels over 1500 flights from the bustling metros to the remote airports linking the vast Indian landscape, from the icy heights of Leh (the highest airport in the world at 10,682 ft) to the distant islands of Andaman &Nicobar.Indian Oil Aviation services have a market share of 65% with a network of 101 Aviation Fuel Stations (AFS) meets complete aviation fuel requirement of the Defense services.

AUTO GAS

Autogas (LPG) is a clean, high octane, abundant and eco-friendly fuel. It is obtained from natural gas through fractionation and from crude oil through refining. It is a mixture of petroleum gases like propane and butane. The higher energy content in this fuel

results in a 10%reduction of CO2 emission as compared to MS. Autogas is a gas at atmospheric pressure and normal temperatures, but it can be liquefied when moderate pressure is applied or when the temperature is sufficiently reduced. This property makes the fuel an ideal energy source for a wide range of applications, as it can be easily condensed, packaged, stored and utilized. When the pressure is released, the liquid makes up about 250 times its volume as gas, so large amounts of energy can be stored and transported compactly. The use of LPG as an automotive fuel has become legal in India with effect from April 24, 2000. The fuel is marketed by Indian Oil under the brand name AutoGas.IndianOil has setup 316 Auto LPG Dispensing Stations (ALDS) covering 173 cities across India." Autogas impacts greenhouse emissions less than any other fossil fuel when measured through the total fuel cycle. Conversion of petrol to Autogas helps substantially reduce air pollution caused by vehicular emissions. The saving on account of conversion to Autogas in
36

comparison to petrol is about 35-40%. Low filling times and the 35-40% saving is a reason enough for a consumer to convert his vehicle to Autogas.

SWOT ANALYSIS OF IOCL

Opportunity:

The IOCL has much opportunity in the present market conditions. This is Because the petroleum products are become a need for everyone and still contains a lot of scope for customization. The various opportunities are listed below. Since the company has the maximum no. Of out lets and also the maximum no. Of refineries in India, it can very easily go for extension at any point of time, and can introduce any new products, which will get support from its huge market network. The company can make the buying process more easy for the customers, by implying Many more schemes in the range of XTRAPOWER AND XTRAREWARD. The company can think over the issue to build its own pipelines, so that it will be a Independent player and it will also support its aviation fuel supply. Company have a great scope in E&P. It is already involves in E&P but only in a very Limited scale.

Threats

Since the company is the market leader in the field, so have maximum threats From the other players and many other issues. The lists of threats are given below. The foreign players with more advanced technology are the biggest treat For the company. The crude oil supply is also a big issue in front of the company, because the company cannot fix its price and so, some time had operated in loss also. It is the biggest problem because the maximum part of their crude is been imported. In future the market will welcome more private players, which will eat up Its market share.

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If the Govt. Policies allow the private players to set their own price, the Private Player can seriously harm the market share of IOCL. Internal environment

Strengths

IOC controls 10 refineries, by virtue of which it has a total share of around 40% of Indias overall refining capacity. IOC has also acquired equity stakes in CPCL and BRPL, and in 2001, these refineries became subsidiaries of IOC.

58% of IOCs refining capacity is located in the Northern and Western regions, which are high demand and high growth areas. Although its refineries are located the interior of the country and not near the major ports IOC has a very strong distribution network by virtue of having a share of 48% in the countrys product pipelines. The total capacity of these product pipelines is 49.79MMT.

IOC also acquired management control of the marketing company IBP, thereby strengthening its position in these activities. It also has a dominant share in all segments in terms marketing infrastructure. Its network includes 19830 retail outlets, 8000 LPG distributors, and 6492 kerosene/LDO dealers.

By virtue of entering into extensive joint venture agreements, and of its own initiatives well, the company has a presence in various other related activities such as petroleum storage, pipelines, lube additives, exploration, petrochemicals, gas, training and consultancy, etc.

The company has already entered overseas markets such as Sri Lanka, Maldives, and Oman and is presently considering entering Turkey through a JV. The company is in talks with Caliak of Turkey to set up a 10 million TPA grassroots refinery with an investment of $2 billion and establish retail business. IOC is also weighing the possibility of entering Indonesia.

IOC has also started exploring the overseas markets for increasing its scope of operations. Its interests include downstream activities in Sri Lanka, Maldives, Oman, and Nepal; interest in the lubes business in Maldives, Dubai, Bangladesh, Sri Lanka, etc; among others.

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Weakness

The company is the market leader in the industry, but still it had much weakness. The list is given below. The major weakness for the company is the R&D. The company starts working on it. The petrochemical product development technology is another weakness for the company. The technological drawback, as compared to some major foreign player is another weakness for the company

39

OBJECTIVE OF THE STUDY

Following are the objectives on which I have focused upon in the project.

To have a deeper analysis of the liquidity, profitability and activity level of INDIAN OIL CORPORATION LIMITED. To study financial soundness and operational efficiency of INDIAN OIL CORPORATION LIMITED. To see how well the company is making use of its funds and how much is it dependent on outsiders. To study how fast the stock is moving through the firm and generating sale. To study the economy and efficiency in the collection of amount due from customer. To study the working capital turnover ratio.

To study the number of time the creditors are turnover in relation to purchase

40

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve research problem. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them. It is necessary for the researcher to know not only need to know how to develop certain indices or tests, how to calculate, how to apply particular research techniques, but they also need to know which of these methods or techniques ,are relevant and which are not, and what would they indicate and why. The research frame for the study is detailed below. It is necessary to explain the methodology for the research work done. The purpose of research is to discover answers to question through some specific procedure. The aim of research is to find out the truth which is hidden or which has not been discovered as yet. While conducting this research I have mainly used secondary data only. . In order to facilitate the presentation this chapter is divided into following section. Defining the problem: It is said,A problem well defined is half solved. The step is to define the project under study and deciding the research objective. Selection method: The present study is subjected to experimentation on the basis of past results. No survey method was adopted to carry out the research. Preparing research design: A research design is the arrangement of conditions for collecting and analysis of data in a manner that aims to combine relevance to the research purpose. Research Design is the conceptual structure within which research is conducted. Research design includes the outline of what the researcher will do from writing the hypothesis and its operational implications to the final analysis of data. A research design is the framework of the study and used as a guide in collecting and analyzing the data. Determining sample design:

41

 Universe: All the items under consideration in any field of inquiry constitute a universe or population. The relevant universe in this case is oil companies and it consists of other companies where a comparative study was conducted. Sample: the sample is Indian oil and its different ratios that are to be analyzed and major competitor of IOCtl. Sampling Technique: the technique used are ratios and their analysis with the past year and comparative balance sheets and income statements.

Data Collection: There are two sources of data collection: Primary Sources: Primary Data is the data collected from the original source. In my study primary data was not used as it is related to past results. Secondary sources: Secondary Data is the one which has already been collected by someone else and some other person is using that information. The source of secondary data was books and web sites related to the company and the Balance sheets of last few years have been used in my study.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of the company provided statements. 2. Referring standard texts and referred books collected some of the information regarding theoretical aspects. 3. Method- to assess the performance of the company method of observation of the work in finance department in followed.

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ANALYSIS AND INTERPRETATION

1. LQUIDITY RATIO
Current ratio:

Current Asset Current Ratio = _______________________ Current Liabilities

MAR'08 Current Assets Current Liability Current Ratio 1.32 53506.1 40499.1

MAR'09 MAR'10 MAR'11 45234.5 41493.7 60971.5 51090.5 84903.1 67204.6

MAR'12 117627 81659.1

1.09 Table.9

1.19

1.26

1.44

Current Ratio
1.6
1.4 1.2 1 0.8 0.6 0.4 0.2 0 MAR'08 MAR'09 MAR'10 MAR'11 MAR'12 Current Ratio 1.32 1.09 1.19 1.26 1.44

Figure.1

43

Interpretation: Current ratio is computed by dividing current assets by current liabilities. The ratio is mainly used to give an idea of the company's ability to pay back its short term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). Generally, the current ratio of 2:1 is considered as satisfactory but still this cannot give the business a green signal. In case of Indian Oil Corporation Ltd current ratio for 5 year (2008-1.32, 2009-1.09, 2010- 1.19, 2011-1.26, 2012-1.44) is near to 2 which suggests that the company is able to pay off its obligations but will face little problem in doing so. We have also observed that the ratio was almost same in all the years except in March09 where it dropped to 1.09 due to decrease in current assets (from 53506.07 to 45234.47) and increase in current liabilities (from 40499.06 to 41493.74) but soon after that i.e. in 2010 the ratio recovered and reached 1.44 (highest till date) in 2012. It is generally seen that, the higher the current ratio, the more capable the company is of paying its short term debts, but low current ratio does not show that the firm will go bankrupt.

Quick ratio:

Liquid Asset Quick Ratio = ____________________ Current Liabilities

MAR08 Quick Assets Current Liability Quick Ratio 40499.06 0.55 22564.59

MAR09 20084.87

MAR10 24567.4

MAR11 35618.56

MAR'12 60797.99

41493.74 0.47 Table.10

51090.52 0.45

67204.64 0.51

81659.12 0.74

44

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 MAR'08 MAR'09 0.55 0.47

Quick Ratio
0.51 0.45

0.74

Quick Ratio

MAR'10

MAR'11

MAR'12

Figure.2 Interpretation: The acid-test ratio is more powerful than the current ratio; this is because the current ratio includes inventory assets which may not be able to convert into cash quickly. It is said that Companies with ratios of less than 1 cannot pay their current liabilities. In Indian Oil Corporation Ltd the acid-test ratio is less than the industry standard which means that the company may face problems in returning off the debts. When I compared the current assets to liquid assets I found that the current assets are highly dependent on inventory. For example in 2012 currents assets were 117627.19 where as the quick assets were 60797.99 this shows that the company has invested a huge amount of money on inventory. Whereas if we talk about the ratio all are less than 1 but over the years it has improved from 0.54 in March08 to 0.74 in March12 which is a good sign for the company.

2. PROFITABILITY RATIO

Gross profit ratio:

Gross Profit Gross Profit Ratio = _________________ X 100 Net Sales

45

MAR'08 Gross Profit Net Sales Gross Profit Ratio 8583.37 247359.24 3.47

MAR'09 10626.49 307123.99 3.46 Table.11

MAR'10 11855.28 269438.08 4.4

MAR'11 8046.57 331134.85 2.43

MAR'12 13559.83 438829.68 3.09

Gross Profit Ratio

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 MAR'08 MAR'09 MAR'10 MAR'11 MAR'12 2.43 Gross Profit Ratio 3.47 3.46 3.09 4.4

Figure.3

Interpretation: The gross profit ratio is calculated using gross profit divided by net sales, in this higher ratio will mean that more amount of profit is earned which is favorable for the company as more profit will be available to cover non production cost. In this case the gross profit ratio is satisfactory as it is a big company and even if the gross profit ratio ranges between 2 4 we will consider it good., this indicates that the company is efficiently uses its labour. Here a higher ratio is an indication of good management as the firm is successful in producing products at a lower cost.

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Net profit ratio

Net Profit after Tax Net Profit Ratio = ___________________ X 100 Net Sales

MAR'08 Profit after tax Net Sales Net Profit Ratio 6703.43 247359.24 2.71

MAR'09 2395.84 307123.99 3.46

MAR'10 10998.68 269438.08 4.08

MAR'11 8085.62 331134.85 2.44

MAR'12 4265.27 438829.68 0.97

Table.12

Net Profit Ratio

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 MAR'08 MAR'09 MAR'10 MAR'11 MAR'12 0.97 Net Profit Ratio 2.71 2.44 3.46 4.08

Figure.4 Interpretation: Generally, Net Profit = Gross Profit Expenses This ratio is so important because it tells us the amount of net profit per one dollar of the turnover (sales) a business has earned. That is, after taking account of the cost of sales, the administration costs, the selling and distributions costs and all other costs, the net profit is the profit that is left, out of which they will pay interest, tax, dividends and so on.

47

In the chart above the net profit ratio for the first three years is satisfactory but after March 2010 it started decreasing and decreased to 0.97 which is very less this is because of decrease in net profit.

Earnings per share:

N.P.A.T. - Preference Dividend EPS = _________________________________ Number of equity shares Outstanding

MAR08 NPAT NO. Of shares o/s Earnings Per Share 10.71 2599400000 2427952482

MAR'09 1071319000 2427952482

MAR'10 7830720000 2427952482

MAR'11 4225980000 2427952482

MAR'12 3954620000 2427952482

44.12 Table.13

32.25

17.41

16.29

Earning Per Share

50 45 40 35 30 25 20 15 10 5 10.71 17.41 Earning Per Share 16.29 32.25 44.12

0
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12

Figure.5 Interpretation: Earnings per share as mentioned above are a ratio in which we find out how much a single share earns. In the case of Indian oil Corporation Ltd we can see that the companys EPS in
48

March 2008 was lowest (10.71) then it increased and became highest of all years due to increase in net profit after tax, but soon after that it dropped to 33.25 and eventually the per share earnings dropped to 16.29.

3. SOLVENCY RATIOS:

Debt Equity ratio: External Liabilities Debt Equity Ratio= ______________________ Shareholders fund MAR'08 MAR'09 44972.06 44003.26 1.02 Table.14 MAR'10 44566.25 50552.83 0.88 MAR'11 52733.87 55332.32 0.95 MAR'12 70323.93 57876.7 1.22

External liabilities Shareholder funds Debt equity ratio

35523.17 41086.25 0.86

1.4 1.2 1 0.8 0.6 0.4 0.2 0 MAR'08

DEBT EQUITY RATIO

1.22 1.02 0.86 0.88 0.95

DEBT EQUITY RATIO

MAR'09

MAR'10

MAR'11

MAR'12

Figure.6 Interpretation: Debt equity ratio includes shareholders fund is the share capital plus reserves and surpluses. In case we can say that in 2008 the debt equity ratio is 0.86 which indicates that the equity is more than the debt whereas in 2009 and 2011 both are almost the same. The ideal ratio of debt equity is 2:1 which indicates that for every one rupee of equity fund you
49

can take two rupees as borrowings. Here the ratio is suitable for the company.

Proprietary ratio:

Total Equity Proprietary Ratio= _____________________________ Debt + Equity (total assets)

MAR08 MAR09 MAR10 MAR11 MAR12 Total Equity Debt Equity Proprietary Ratio 41086 76609 0.53 44003 88975 0.49 Table.15 50553 95119 0.53 55332 108066 0.51 57877 128201 0.45

Proprietary Ratio
0.54 0.52 0.5 0.48 0.46 0.44 0.42 0.4 MAR'08 MAR'09 MAR'10 MAR'11 MAR'12 0.45 Proprietary Ratio 0.49 0.53 0.53 0.51

Figure.7 Interpretation: The proprietary ratio is calculated by dividing the share holders fund by total assets. In case of Indian oil corporation ltd the shareholders fund is less than the total assets which is why the ratio is less than 1 this means that a part of the assets is financed by creditors. The ideal

50

ratio is 0.5:1 and in the above chart the ratio is either greater than or near to 0.5 which means it is satisfactory.

4. ACTIVITY RATIO:

Fixed Asset Turn Over Ratio

Net Sales Fixed Asset Turnover Ratio= _________________ Fixed Assets

MAR'08 Net Sales Fixed Asset Fixed Asset Turnover Ratio 4.38 247359.24 56474.71

MAR'09 307123.99 61671.48

MAR'10 269438.08 71279.92

MAR'11 331134.85 91727.11

MAR'12 438829.68 118282.93

4.98 Table.16

3.78

3.61

3.71

Fixed Asset Turnover Ratio

6 5 4 3 2 1 4.98 4.38 3.78

3.61

3.71 Fixed Asset Turnover Ratio

0
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12

Figure.8 Interpretation: A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales with the minimum investing in fixed assets. As in case of Indian Oil Corporation ltd we can see that with the increase in sales the fixed assets has also increased in greater proportion that
51

is why after 2009 it started decreasing the company is making unnecessary investment in fixed assets, but from 2010-2012 it is almost the same.

Current Asset Turn Over ratio: Net Sales Current Asset Turn Over Ratio= _________________ Current Assets

MAR'08 Net sale Current assets Current assets turnover ratio 4.62 247359.24 53506.07

MAR'09 307123.99 45234.47

MAR'10 269438.08 60971.48

MAR'11 331134.85 84903.08

MAR'12 438829.68 117627.19

6.79 Table.17

4.42

3.90

3.73

CURRENT ASSETS TURNOVER RATIO

8

7
6 5 4 3 2 1 0 4.62

6.79

4.42

3.9

3.73

CURRENT ASSETS TURN OVER RATIO

MAR'08 MAR'09 MAR'10 MAR'11 MAR'12

Figure.9 Interpretation: The current asset turnover ratio is calculated by dividing net sales by current assets. A higher current assets turnover ratio represents that the company is more desirable since it indicates the better financial position of company and better utilization of

52

these current assets. The chart above shows that in March 2009 it has improved but then after that it started decreasing and reached 3.73 in March 2012.

Working Capital Turn Over Ratio

Net Sales Working Capital Turn Over Ratio= ________________________ Working Capital

MAR08 Net Sale Working Capital Working Capital Turnover Ratio 247359.24 13007.01 19.02

MAR09 307123.99 13740.73 22.35

MAR10 269438.08 9880.96 27.27

MAR11 331134.85 17698.44 18.71

MAR12 438829.68 35968.07 12.20

Table.18

Working Capital Turnover Ratio

30 25 20 19.02 15 10 5 22.35 18.71 12.2

27.27

0
MAR'08 MAR'09 MAR'10 MAR'11 MAR'12

Figure.10

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Interpretation: A high or increasing working capital turnover is usually a positive sign, showing the company is better able to generate sales from its working capital. In the above chart we can see that the ratio increases till 2010, but then it decreases after that which is due to increase in working capital. The company is in better position if it uses its minimum working capital to generate maximum sales.

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LIMITATIONS OF THE STUDY

Time being less having a complete detailed study of the company, only the relevant and important areas have been highlighted. All possible effort has been made to study the topic of Ratio Analysis completely, justify. As this is the public firm so data provided to me is secondary data. Findings and conclusion as per my limited knowledge. Time is big constraint to study the project in sufficient detail.

55

FINDINGS & CONCLUSION

It is evident from the above analysis that IOCL follows a conservative policy i.e. a greater amount of investment in current assets. As per the latest results of March 2011 the total current assets of IOCL stood at Rs.65598 crores. Thus it is evident that though IOCL maintains a high liquidity but at the same time it incurs a loss. This is also due to discrepancies between the international market price of crude oil and government controlled domestic prices. As IOCL being a public enterprise, it has to follow the governments orders and cannot increase the prices of its products to international market rates. Hence, it should focus on improving its working capital condition by reducing investments in current assets thereby reducing its losses.

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SUGGESTIONS

From the entire analysis what Indian Oil can do is simply strengthening their marketing efforts and creates more demand for their product and also tries to use optimum level of inventory. Besides they can implement certain plans so as to develop their business in future. After doing the project the recommendation to IOCL may be to sustain with dignity as discussed below: It should increase sales so that inventory turnover ratio is improved and better return achieved. IOCL should concentrate on Brand Building and make all brands as successful as Servo. IOCL should approach Government to allow it to increase the prices of regulated products especially LPG (Domestic) has to be marginally increased so that loss on account of that is reduced. This is because loss per unit of LPG (Domestic) is highest among the other products. Besides that Government of India should also consider the better pricing policies to prevent loss of Indian oil companies. The recommended policies may be: By introducing differential rates to different income groups in the society for same product. For e.g. high rate of LPG cylinder (domestic) to high income groups and subsidized rate to low income groups.

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