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Refineries Group 12

Refineries Group 12

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Published by: Nirankar Royal on Feb 13, 2012
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Indian Oil Corporation Ltd. is India's largest company by sales with a turnover of Rs. 3,28,744 crore ($ 72,125 million) and profit of Rs. 7445 crore ($ 1,633 million) for the year 2010-11. Indian Oil is the highest ranked Indian company in the latest Fortune ‘Global 500’ listings, ranked at the 98th position. Indian Oil's vision is driven by a group of dynamic leaders who have made it a name to reckon with.

Distinctions of IOCL• • • • • • • • • • • • IndianOil tops Fortune India 500 list IndianOil features in Platts Global Energy Top 50 companies IndianOil features in BT500 IndianOil in BW500 list of biggest companies IndianOil breaks into Top 100 of Fortune Global listing, ranked 98th IndianOil: One of ‘The Best Companies to Work For’ IndianOil in Top Ten of the Most Recognised & Respected Indian MNCs IndianOil tops ‘BS 1000’ rankings IndianOil - One of the Best Companies to Work For: BT Survey IndianOil tops the Fortune India 500 Rankings IndianOil in top five in Business India's Super 100 IndianOil is India’s Biggest Company: ET 500


Innovative strategies and knowledgesharing are the tools available for converting challenges into opportunities for sustained organisational growth. Indian Oil has gathered a luminous legacy of more than 100 years of accumulated experiences in all areas of petroleum refining by taking into its fold. The Corporation has commissioned several grass root refineries and modern process units. Naphtha Cracker and Polymer Complex at Panipat. The strength of Indian Oil springs from its experience of operating the largest number of refineries in India and adapting to a variety of refining processes along the way. resulting in reduction of the frequency of accidents.30 million barrels per day -the largest share among refining companies in India. Wax Hydro finishing. Visbreaking. HydroDesulphirisation of Kerosene& Gasoil streams. Several Clean Development Mechanism projects have also been initiated. bottom upgradation and quality upgradation. Hydro cracking. Merox Treatment. . Indian Oil controls 10 of India’s 20 refineries. Dewaxing. The group refining capacity is 65. Indian Oil refineries have an ambitious growth plan with an outlay of about Rs. Distillate FCC/Resid FCC. among others. Coke Calcining.7 million metric tonnes per annum (MMTPA) or 1. Sulphur recovery. Lube Processing Units. 55. all Indian Oil refineries fully comply with the statutory requirements. which are in operation in Indian Oil refineries include: Atmospheric/Vacuum Distillation. Delayed Coking. Hydrogen Generation. Panipat Refinery expansion from 12 MMTPA to 15 MMTPA. Catalytic Reforming. It accounts for 34. Procedures for commissioning and start-up of individual units and the refinery have been well laid out and enshrined in various customized operating manuals. the Digboi Refinery commissioned in 1901. On the environment front. a number of steps were taken during the year.000 crore for capacity augmentation. Major projects under implementation include a 15 MMTPA grassroots refinery at Paradip. which are continually updated. To address concerns on safety at the work place. de-bottlenecking.REFINING Born from the vision of achieving self-reliance in oil refining and marketing for the nation. The basket of technologies.8% share of national refining capacity. etc. Orissa.

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Shale Gas Buys in the USA.It recently sold a stake in its valuable Godavari Basin to BP for a whopping $7.Extremely cash rich with a horde of more than $15 billion.Communications (buying of wirelss broadband spectrum).532 cr (Rs 2. The group's activities span exploration and production of oil and gas. retail and special economic zones.Hospitality (Buying up stakes in Hotel Companies). fibre intermediates.37 cr (Rs 3.898 cr (Rs 158.98 billion) M-cap: Rs 322. The company is also one of the biggest exporters in India with one of the largest petrochemical and oil refining complexes in the world at Jamnager. Reliance is also a Fortune Global 500 company.139. it has started on empire building through ventures in Finance ( DE Shaw) .145. petrochemicals (polyester.5 billion. petroleum refining and marketing.32 billion) Profit: Rs 15.RELIANCE INDUSTRIES One of India's largest private sector enterprises. Turnover: Rs 214. textiles.22 trillion) BHARAT PETROLEUM . plastics and chemicals).

304. It has two major refineries producing a wide variety of petroleum fuels & specialties. A Fortune Global 500 company. The company’s low margins and abysmal stock price performance is due to the government control which forces it to sell at below cost leading to huge losses and curtails capex for growth. (East Coast).36 crore (Rs Turnover: Rs 1. inland relay depots & retail outlets.32 billion) M-cap: Rs 24.26 trillion) Profit: Rs 1. Bharat Petroleum produces a diverse range of products.632.13 trillion) Profit: Rs 1.75 trillion) M-cap: Rs 13.93 crore (Rs 133.29 cr (Rs 14. Turnover: Rs 1. LPG bottling plants. it deals with retailing of petroleum products. one in Mumbai (West Coast) and the other in Vishakapatnam.367. A mega PSU with Navaratna status. aviation service stations.310. HPCL accounts for about 20 per cent of the market share and about 10 per cent of India's refining capacity with two coastal refineries. HPCL’s vast marketing network consists of its zonal & regional offices facilitated by a supply & distribution infrastructure comprising terminals.88 crore (Rs 243.6% in Dec’10.92 crore (Rs 1. from petrochemicals and solvents to aircraft fuel and speciality lubricants and markets them to hundreds of industries and several international and domestic airlines. Despite noises of liberalization. HPCL accounts for about 20% of the market share and about 10% of the nation’s refining capacity. nothing has come about with increased global crude prices increasing the losses greatly.000 crores with a net profit margin of 0. The revenue earned was around Rs.Bharat Petroleum Corporation Ltd is one of the largest state-owned oil and gas companies in India.67 billion) ESSAR OIL LIMITED . pipeline networks. 34. lube and LPG distributorships.10 billion) HINDUSTAN PETROLEUM CORP Hindustan Petroleum Corporation Ltd is one of the major integrated oil refining and marketing companies in India.34 cr (Rs 1.475.

ADANI POWER Market cap (Rs Cr) 14. low-cost. and oil and gas industries with existing operations and projects under development in both. AWEL aims to be a medium sized Oil & Gas company with exploration & production assets globally. one in Cambay Baisn (CB-ONN-2004/5) and the other in Assam-Arakan Basin (AA-ONN-2004/4). AWEL has been awarded an offshore Block (Block 5) in Gulf of Suez. .73 Adani Welspun Exploration Limited (AWEL) is a joint venture (JV) company between Ahmedabad based Adani Group and Mumbai based Welspun Group to undertake upstream oil & gas business. while Welspun Group holds 35% through Welspun Natural Resources Pvt. In this JV.. We have an established track-record and assets worth US$12 billion across the power and oil and gas industries Essar Energy's operations straddle the global power. Essar Energy is a world-class. AWEL was awarded another Block in Mumbai offshore (MB-OSN-2005/2). Egypt in consortium with GSPC. close to Tapti fields. AWEL has a strong and experienced management and technical team in place and has already built a prospective portfolio of onshore. Recently. where the company is the operator with 100 % working interest. Hindustan Petroleum Corporation. Bharat Petroleum Corporation for sharing product infrastructure and off take. AEL & WGSRL are listed on various Stock Exchanges. integrated energy company focused on India and positioned to capitalize on India’s rapidly growing energy demand. Adani Group holds 65% through its flagship company Adani Enterprises Limited (AEL). The company has agreement with a number of oil companies like Indian Oil Corporation.442. in NELP-VII bid round. Ltd.Essar has made their mark in a number of industries in India and they offer a wide range of products to bulk customers in the transportation and industrial sector. a subsidiary of its flagship company Welspun Gujarat Stahl Rohren Limited (WGSRL). AWEL had successfully won two onland exploration Blocks with majority shareholding (90%) in NELP-VI bid round. AWEL has two more concessions (L39/48 & L22/50) with 100 % operating interest in onshore Thailand. offshore and international assets.

43722 1 8.27778 3 .(incrore ANALYSIS 2010-11 Sales(million tonnes) PBIT(in crore) PBT 72.9. PBT=14106 5.92 11769 9096 ) 2009-10 69. PBIT=15632.75957 DOL DFL DTL 4 1.92 15632 14106 For levels Q=61.

Hence. The debt is almost as high as 57837.”If the situation does not improve. Degree of Combined Leverage (DCL) DCL or DTL has a value which shows that IOCL’s business is highly risky with maximum part of it attributed to DOL. ANALYSIS OF THE CAPITAL STRUCTURE OF IOCL FROM 20062011 YEAR 2010-11 The company is very high on debt for this financial year. It uses more of its fixed assets. it would be difficult for IOCL to cut expenses to adjust to a change in demand. It shows the changes in EPS relative to EBIT. So. Hence. real estate and distribution networks. if business conditions are unchanged. Degree of financial leverage (DFL) DFL of value greater than 1 shows that financial leverage exists in IOCL. higher EPS will result when debt is added to the capital structure. if there is a downturn in the economy. it has a high DOL. A large part of the capital structure of IOCL consists of debt which shows that financial leverage of greater than 1 is reasonable. IOCL invests more in risky assets. we may not be left with money to import crude . Low DFL as compared to DOL shows that IOCL tries to maintain its risk or tries not to increase its risk to compensate for high DOL.61. This means more fixed costs to IOCL. With a lot of costs tied up in machinery.Degree of operating leverage (DOL) Degree of operating leverage (DOL) of value greater than 5 shows that a slight change in sales provides a high degree of change in PBIT. This also indicates that IOCL has a higher proportion of fixed costs as compared to the variable costs. plants. they can plummet. earnings don't just fall.

However. YEAR 2007-08 . chairman and managing director. YEAR 2008-09 Increased borrowings to fund under-recoveries have skewed the ratio. HPCL.e .88:1 in financing its growth with debt. director (Finance).” said RS Butola. the situation is improving now and the picture at the close of this fiscal should be different.This can result in volatile earnings as a result of the additional interest expense.from the international market and we will have to shut some of our refineries.“The high debt-equity ratio was due to the losses we incurred in the form of under-recoveries and we had to borrow heavily.” said B Mukherjee. Indian Oil. YEAR 2009-10 As the ratio is higher we can say that Indian Oil has been aggressive i.

411.95 2427.168.78 17.00 89.the company had to take recourse to higher borrowings.Indian Oil Corporation (IOC) has seen a sharp increase in the debt-equity ratio during the first three quarters of the current year as they increased borrowing to fund record underrecoveries.93 26.78 .42 6.39 27.78:1.45 21292. As the government bonds issued to IOC as compensation for the under-recoveries in kerosene and LPG were released only towards the fag end of the financial year.37 1.13 18.415. The company’s debt-equity ratio has improved to 0.43 409.9: 1 in 2005-06.95 Retained earnings 4.192. Year 200607 200708 200809 200910 201011 Equity Capital 1.80 36544.406.00 4779 Secured loans 5.27 29.83 Unsecured loans 21.273.886.since a lot of borrowing was done by IOCL for their expansion plans in the US.01 1.78: 1 during 2006-07 from 0.565.192.00 1. YEAR 2006-07 The debt equity ratio in this year is high .292.671.382.107.37 2427.


YEAR 2007-08 YEAR 2006-07 .

The dividend policy of a company should aim at shareholder-wealth maximization but it also moves according to the sentiments of the market as well as to the prospects of the company as Indian Oil Corporation Limited is doing from last many of years to provide wealth maximization to the shareholders with providing dividends as well as the prices of their shares in stock market has also been increasing which is benefitting the owners with capital gains in their shares. Indian Oil Corporation has declared an equity dividend of 95.DIVIDEND POLICY OF IOCL The term dividend refers to that part of profit (after tax) which is distributed to the shareholders who are the real owners of the company. The dividend policy of a company refers to the views and policies of the management with respect of distribution of dividends. For the year ending March 2011. The amount which is undistributed part rest out of the profits of the company is known as Retained earnings.00% amounting to Rs 9.5 per share.60 this results in . lower will be retained earnings. At the current share price of Rs 252. Higher the dividend payout.

85 651. the market price of IOCL shares dipped in the next 3 days.0207428 69.55 10/26/2009 655 10/23/2009 659 10/22/2009 654.5 10/20/2009 630 After the issue of bonus shares. it announced a cash dividend of 130% which indicate that it had more than enough amount of cash reserves.374 1168.8 664 643 Low 640. IOC L Number of shares PAT(in crore) Earning per share Dividend per share Dividend payout ratio Retention Rate 2 1 -1 00 1 2 0 -1 09 0 2 0 -0 08 9 2 0 -0 07 8 2 0 -0 06 7 2427.2 659.76%.3 11.8 641.8822676 30.2 647.1 659.a dividend yield of 3.9792572 30. for 2009-10.58156398 70. it flowed under negative sign.35 650 643.68540678 90.8 -6.39610726 64.374 1192. After the announcement of record date.5 5.40641686 BONUS SHARES IOCL announced bonus issue with ratio 1:1 with record date set on 30th October 2009.1 645 630 Close 648 650. .012 7445.5 19 30.418436019 29.7 10/21/2009 645. as shown Differenc Date Open High 666.59358314 69.0953544 24.55 e -7 -8.The company has a good dividend track report and has consistently declared dividends for the last 5 years.85 6.74055959 58.6656804 42.1177324 69.952 1192.48 10220.952 2427.55 2950 6963 7499 30. the share price got affected and after 2 days.2031075 9.31459322 9. At the same time.5 13 7. 2009. It was announced on 20th October.

there is no effect on market capitalization or the wealth of the shareholders in terms of increasing number of shares because the price got reduced and the value of their holdings still have the same value. DIVIDENDS PAID BY THE COMPANY OVER THE LAST 5 YEARS YEAR 2011 2010 2009 2008 2007 2006 2006 MONTH May May May May May Dec May DIVIDEND(%) 95 130 75 55 130 60 125 WORKING CAPITAL MANAGEMENT OF IOCL .Hence.

58132 9 79.81916 9 100.4800 7 7.2010-11 Ratio 2009-10 2008-09 18.1619 2007-08 33. This shows that IOCL has not been able to convert its most of the raw materials into finished goods in the last two years.4667 1 8. ACCOUNTS RECEIVABLE PERIOD The figures show that IOCL provides a very small credit period to its debtors.54788 4 2006-07 23.47983 6 3.690873 3.1524 8 6.06105 7 89.4523 3 8.4791 1 INVENTORY TURNOVER RATIO Inventory turnover ratio has been decreasing for the two years and the inventory has also been increasing for the last two years. .503867 2 6.4079 13.04385 90.1046 6 1 13.1706 7.79281 5.91790 9 93. This shows a decrease in the efficiency in converting fixed assets to finished goods.308485 3 7.83098 5 5. This may be due to lack of technology or other environmental issues.2605 71. It is an extremely good receivable period as it has been able to operate in the highly competitive market even after giving small credit period.871 7. FIXED ASSET TURNOVER RATIO This ratio increased from 2006-07 to 2008-09 but began decreasing 2009-10 onwards.07854 3 4.59624 2 98.48782 9 4.8780 9 8.84415 99.981 Operating Cycle 111.4743 3 Working Capital Turnover Fixed Asset Turnover Ratio Inventory Turnover Ratio Inventory Period(days) Accounts Receivable Period(days) 104.

OPERATING CYCLE Due to a decrease in inventory turnover ratio. it can be seen that all the companies other than Adani have provided small credit period which indicate that it is a highly competitive market. ACCOUNTS RECEIVABLE PERIOD In the past three years. BPCL and HPCL may have better technologies to do so. This could be the result of decrease in demand of petroleum products or some other external environmental issues like government laws. OPERATING CYCLE . This shows that companies are not able to convert their raw materials into finished goods. This increases the overall operating cycle. COMPARISON WITH COMPETITORS Inventory Turnover Ratio It can be seen that this ratio has been decreasing for all the companies. there is an increase in inventory period. FIXED ASSET TURNOVER RATIO The graph indicates that BPCL and HPCL are more efficient than IOCL in using their fixed assets.

This is due to low inventory turnover ratios in the past years which increases its inventory period. .Adani has shown long operating cycle in the past two months.

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