Year

2012

INTRODUCTION TO
OIL AND GAS CORPORATION
LIMITED (ONGC)

1.1

1.2

1.3

1.4

HISTORY OF ONGC
BASIC INFORMATION
ONGC VISION AND MISSION
STATEMENT
ASSETS/BASINS/PLANTS/INSTITUTE

1.5

SWOT ANALYSIS OF ONGC

1.6

SUBSIDIARIES AND JOINT

VENTURE

1.7

1.8

1.9

BOARD OF DIRECTORS
ONGC STRUCTURE
ABOUT MEHSANA ASSET

OIL AND NATURAL GAS CORPORATION

LTD

INTRODUCTION
1.1

HISTORY OF ONGC

1947-1960
During the pre-independence period, the Assam Oil Company in the north-eastern and
Attack Oil company in north-western part of the undivided India were the only oil
companies producing oil in the country, with minimal exploration input. The major
part of Indian sedimentary basins was deemed to be unfit for development of oil and
gas resources.
After independence, the national Government realized the importance 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 petroleum 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. In Assam, the Assam Oil Company was producing oil at Digboi
(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 newly discovered large fields Naharkatiya and Moran in Assam. In West
Bengal, the Indo-Stan vac 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 the Public Sector development. With this
objective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as a
subordinate office 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.
2

A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural
Resources, visited several European countries to study the status of oil industry in
those countries and to facilitate the training of Indian professionals for exploring
potential oil and gas reserves. Foreign experts from USA, West Germany, Romania
and erstwhile U.S.S.R 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 2nd Five Year
Plan (1956-57 to 1960-61).
In October 1959, the Commission was converted into a statutory body by an act of the
Indian Parliament, which enhanced powers of the commission further. The main
functions of the Oland Natural Gas Commission subject to the provisions of the Act
were "to plan, promote, organize and implement programs 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 toderegulate and de-licenses the core sectors (including petroleum sector) with
partial disinvestments of government equity in Public Sector Undertakings and other
measures. As consequence thereof, ONGC was re-organized as a limited Company
under the Companys 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 itsshares 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 crossholding 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 come 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 will soon be entering into the retailing
business. ONGC has also entered the global field through its subsidiary, ONGC
Videsh Ltd. (OVL). ONGC has made major investment in Vietnam, Sakhalin Sudan
and earned its first hydrocarbon revenue from its investment in Vietnam.

1.2 BASIC INFORMATION

Company name: Oil & Natural Gas Corporation Limited.
Incorporation year: 1959
Ownership: Central Govt. Commercial Enterprises.
Main Activity: Exploration & Production of Oil and Gas
Registered office: jeevan bharti tower-2,124-indian chowk, Connaught
place, new delhi-110001

Address: ONGC limited KDMbhavan palavasana near palavasna chokdi

mehsana

Bankers: state bank of India

1.3 ONGC VISION AND MISSION STATEMENT

1.3.1 COMPANYS VISION

To be a world class Oil & Gas Company Integrated in energy business with
dominant Indian leadership and global presence.

Motto
Provide quality services with efficiency and transparency.

1.3.2 MISSION
World Class

Dedication towards leveraging competitive advantages in R&D and

technology with involved people.

Imbibing high standards of business ethics and organizational values.

Abiding commitment to health, safety and environment to enrich quality of

community life.

Fostering a culture of trust, openness and mutual concern to make working

stimulating & challenging experience for our people.
5

Striving for customer delight through quality products and services

1.3.3 INTEGRATED IN ENERGY BUSINESS

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

1.3.4 STRATEGIC VISION: 2001-2020

To focus on core business of E&P, ONGC has set strategic objectives of:

Doubling reserves (i.e. accreting 6 billion tones of O+OEG).

Improving average recovery from 28 per cent to 40 per cent.

Tie-up 20 MMTPA of equity Hydrocarbon from abroad.

The focus of management will be to monetize the money.

1.3.5 GLOBAL RANKING

It is Asias best Oil & Gas Company, as per a recent survey conducted by USbased magazine Global Finance.

It is placed at the top of all indian corporte listed in forbes 400 global
corporate (rank 133 rd) and financial times global 500(rank 326th),by market
capitalization.

It is recognized as the Most Valuable Indian Corporate, by Market

Capitalization, Net Worth and Net Profits, in current listings of Economic
Times 500 (4th time in a row), Business Today 500, Business Baron 500 and
Business Week.

It is targeting to have all its installations (offshore and onshore) accredited

(certified) by March 2005. This will make ONGC the only company in the
world in this regard.

It owns and operates more than 11000 kilo meters of pipelines in India,
including nearly 3200kilometers of sub-sea pipelines. No other company in
India operates even 50 per cent of this route length.

Crossed the landmark of earning Net Profit exceeding Rs.10, 000 Core, and
the first to do so among all Indian Corporate, and a remarkable Net Profit to
Revenue ratio of 29.8 per cent. The growth in ONGC's profits is not solely due
to deregulation in crude prices in India, as deregulation has affected all the oil
companies, upstream as well as downstream, but it is only ONGC which has
exhibited such a performance (of doubling turnover and profits). Has paid the
highest-ever dividend in the Indian corporate history.

Its 10 per cent equity sale (India's highest-ever equity offer) received
unprecedented Global Investor recognition. This was a landmark in Indian
equity market, establishing beyond doubt, the respect ONGC's professional
management commands among the global investor community. According to a
report published in 'The Asian Wall Street Journal (Hong Kong)',ONGC's
Public Issue brought in 20 Foreign Institutional Investors (FIIs) to India, as (it
was reported), 'they could not ignore the company representing India's energy
security'.

1.3.6 Ongcs pioneering efforts

Ongc is the only fully integrated petroleum company in india, operating along the
entire hydrocarbon value chain:

Holds largest share (57.2%) of hydrocarbon acreages in India.

Contributes over 84% of Indias oil &gas production.

Every sixth LPG cylinder comes from ONGC.

About one-tenth of Indian refining capacity.

Created a record of sorts by turning Mangalore Refinery in petrochemicals

limited around from being a stretcher case for referral to BIFR to among the
BSE top 30, within year.

Owns 23% OF Mangalore-Hasan-Bangalore product pipeline (MHBPL),

connecting MRPL to the Karnataka hinterland

1.4

ASSETS/BASINS/PLANTS/INSTITUTES
Assets/Plants

Mumbai High Asset, Mumbai

Neelam & Heera Asset Mumbai

Bassein & Satellite Asset, Mumbai

Uran Plant, Uran

Hazira Plant, Hazira

Ahmedabad Asset, Ahmedabad

Ankleshwar Asset, Ankleshwar

Mehsana Asset, Mehsana

Rajamundry Asset, Rajamundry

Karaikal Asset, Karaikal

Assam Asset, Assam

Tripura Asset, Agartala

Basins

Western Offshore Basin, Mumbai

Western Onshore Basin, Baroda

K. G. Basin, Rajahmundry

Cauvery Basin, Chennai

Assam & Assam-Ark an Basin, Jorhat

CBM- BPM Basin, Kolkata

Frontier Basin, Dehradun

Plants

Uran Plant, Uran

Hazira Plant, Hazira

 Region

Mumbai Region, Mumbai

W est ern R egi on, Ba roda

Eastern Region, Nazira

Southern Region, Chennai

Central Region, Kolkata

Institutes

Keshava Deva Malaviya Insti. of Petroleum Exploration (KDMIPE),Dehradun

Institute of Drilling Tech., (IDT), Dehradun

Institute of Reservoir Studies, Ahmedabad

Institute of Oil & Gas Production Tech., Navi Mumbai

Institute of Engineering & Ocean Tech.,, Navi Mumbai

Geo-data Processing & Interpretation Center (GEOPIC), Dehradun

ONGC Academy, Dehradun

Institute of Petroleum Safety, Health & Envi. Management, Goa

Institute of Biotechnology & Geotectonic Studies, Jorha

School of Maintenance Practices, Baroda

Regional Training Insti., Navi Mumbai, Chennai, Sivasagar & Baroda

Services

Chief Drilling Services, Mumbai

Chief Well Services , New Delhi

Chief Geo-Physical Services, Dehradun

Chief Logging Services, Mumbai

Chief Engineering Services, Mumbai

Chief Offshore Logistics, Mumbai

Chief Technical Services, Dehradun

Chief Info-com Services, New Delhi

Chief Corporate Planning, New Delhi

Chief Human Resource Development, Dehradun

9

Chief Employee Relations, Dehradun

Chief Security, New Delhi

Company Secretary, New Delhi

Chief Marketing, New Delhi

Head Corporate Affairs & Co-ordination, New Delhi

Head Corporate Communication, New Delhi

Chief Material Management, Dehradun

Chief Health, Safety & Environment, Mumbai

Head Legal, New Delhi

Chief Medical, Dehradun

Chief Internal audit, New Delhi

Head Commercial, New Delhi

Chief Exploration & Development, Dehradun

1.5 SWOT ANALYSIS OF ONGC

1) STRENGTHS

O.N.G.C LTD is perceived to be the leader in oil production industry.

It has a very efficient and professional management team.

Being an international company has sufficient resources and capital to invest.

O.N.G.C has ISO-9001 & ISO 14001 registration.

2) WEAKNESS

O.N.G.C is facing difficulties to produce oil from aging reservoirs.

3) OPPURTUNITY

Energy utilization of buried coal resource (700 -1700M), estimated 63BT

Equivalent to15000 BCM.

4) THREATS

Security of personnel & property especially crude oil continues to be a cause

of concern in certain area.

Some exploration Campaign Company involves high technology, high

technology, high investment and high risks.

10

ONGC OFFICE ALL OVER INDIA

(DRAW NO.1 ONDC OFFICE ALL OVER INDIA)

11

The Road Ahead

ONGC is entering LNG (re-gasification), Petrochemicals, power generation, as well
as crude and gas shipping, to have presence along the entire hydrocarbon value chain.
While remaining focused on the core business of Oil & Gas E&P, it is also looking at
the future promoting and applied R&D in alternate fuels (which can be commercially
brought to marked).these efforts in integration are basically to exploit the core
competency of the organization knowledge of hydrocarbon, gained over the five
decades.

New Business
ONGC has also ventured in Coal Bed Methane (CBM) and Underground Coal
Gasification (UCG); CBM production would commence in 2006-07 and UCG in
2008-09.
ONGC is also looking at Gas Hydrates, as it is one possible source that could make
India self sufficient in energy, on a sustained basis.

12

1.6

SUBSIDIARIES AND JOINT VENTURE

1.6.1 SUBSIDIARIES
1.6.1.1 ONGC Videsh Ltd.(OVL)
ONGC Videsh ltd is the wholly subsidiary of ONGC
OVL is the first Indian company to produce oil & gas overseas.
OVL today is the Second largest E&P Company in India, second only to ONGC
inters of Oil & Gas reserves. It has 12 overseas assets and is actively seeking more
opportunities. OVLs efforts have been supported wholeheartedly by the Govt. of
India, which has allowed OVL single window clearance for overseas upstream
projects irrespective of investments involved.
OVL has been designated as the Indian Nodal Agency for overseas petroleum
business and is maintained as a permanent participant in all concerned bilateral
interaction and joint working groups of Govt. of India. The strategic objective of
parent company ONGC and the Govt of India provide the basis for the strategic
direction of OVL. Taking into account the industry environment and other influencing
factors, both internal and external, strategic direction has been formulated, which is
re-evaluated on a continuous basis given the rapidly changing nature of the global
petroleum industry to better adapt to the scenario.
The functional directors of ONGC serve as the directors on the OVL board as well,
thus inducing cohesion of the corporate objectives and goal congruence in both
organizations.
OVL follows meritocracy and draws its human resource from the parent company,
were the functional directors are consulted for selection. The finance for the operation
is provided by ONGC in form of Loans, interest free advances and equity.

13

1.6.1.2 Mangalore Refinery and Petrochemicals Ltd (MRPL)

MRPL, a subsidiary of ONGC has turned back to a profit making company just inthe
3rd after ONGC management control. ONGCs shareholding has increased from51%
to 71.62% in June July 2003 through the buy-back of lenders equity at par, under the
mutually agreed Debt Restructuring Package.
MRPL has showed excellent performance in the very first year of its operation as
subsidiary of ONGC. The performance in 2003-04 under all parameters was better
than the projection made at the time of the acquisition. It earned net profit of Rs,
4594.15 million as against a net loss of Rs.4118.06 million in previous year. MRPL is
no longer a potentially sick company as its accumulated losses have gone down below
50% of the net worth on 31st March 2004. MRPL was awarded highest Five Star
rating the British Safety Council. It is the third refinery in India to get this prestigious
certification.
Equity shares of MRPL are now traded under A category of Mumbai Stock
Exchange (BSE) from 1st March 2004. The Market capitalization of MRPL on the
BSEtouched Rs.100 billion mark on 7Th January, 2004.
MRPL exported products (Motor Spirit, Naphtha, Reformate, HSD, ATF, FO, LSHS)
worth Rs.44720 million during the year (up 133.77% from Rs.19130 million) and has
emerged as the second largest export of petroleum products.
MRPL has entered in MOU with ONGC for purchase of Mumbai High Crude at arms
length price.

1.6.2 JOINT VENTURESP

1.6.2.1 Petro net LNG Ltd.(PIL)
Petro net LNG Ltd, a joint venture co-promoted by ONGC completed t he
construction of India first LNG terminal at Dahej on time, and the facility was
dedicated to the nation on 9th February, 2004. Commercial sale of re-gasified LNG
from Dahej terminal has already commenced. PLL also achieved financial closure.
14

1.6.2.1 Petro net MHB Limited

ONGC has acquired 23% equity in Petro net MHB Ltd, which is successfully
operating the 362.3km product pipeline from Mangalore (MRPL) to Bangalore via
Hassan.
1.6.2.3 ONGC International Private Limited (ONGIO)
This 50-50 JV with Indian Oil Corporation Ltd (IOCL),in corporate on 8th June 2001
has incurred cumulative loss of Rs. 30.1 million till 31 st March, 2004. Given
lukewarm co- promoter support, it was decided by the ONGC Board of
Director to withdraw from the JV which is to be dissolved. However, the
Department of Company Affair has not accepted application to wind up the
ONGIO under section 560 of the Companies Act 1956, on the ground that it
had carried on business during the year 2003-04. Hence, it will continue to exit
without any activities till it is finally wound up.
1.6.2.4 Pawan Hans Helicopters Ltd. (PHHL)
ONGC invested in 21.5% of equity capital of PHHL which provides Helicopter
services primarily to ONGC.

15

1.6.1 ONGC GROUP OF COMPANIES

(DRAW NO: 2ONGC GROUP OF COMPANIES)

16

1.7 BOARD OF DIRECTORS

Mr. R.S.Sharma
Chairman & Managing Director
Mr.D.K.Sharaf Director (Finance)
Dr.A.K.Balyan Director (HR)
Mr.A.K.Hazarika Director (Onshore)
Mr.N.K.Mitra Director (Offshore)
Mr.P.K.Deb Director
Mr. Sunjoy Joshi Director
Mr.M.M.ChitaleDirector
Mr.Rajesh V. Shah Director
Mr. U. Sundararajan Director
Mr.N.K.Nayyar Director
Mr.P.K.Sinha Director

17

1.8 ONGC Organogram

(Crc structure)

(DRAW NO:3 ONGC STRUCTURE)

18

1.9 ABOUT MEHSANA ASSET:

Mehsana asset is the largest oil production onshore asset. mehsana tectonic block is
fairly well exploration productive block of north combat with nearly four decades
exploration history. The exploration, development & exploration activities are being
undertaken in asset intended. The earliest success was achieved in 1967 with
discovery of north kadi field, largest oil block of mehasana block. Oil in mehsana
block is heavy as well as light.
The oil field with low gravity API gravity & high viscosity are santhal, balol, and
becharaji & lanva. Oil field with moderate API gravity is north kadi, shobhasan,
jotana,nandasan, linch & langnaj.
Mehsana block encompasses 6000square kilometres. Exploration success for large &
small fields came about simultaneously in the first decades. So far 28 filed have been
discovered. The peak production was achieved in the 22nd year of it existence. The
decline has been arrested & now production has been increasing from 1999. The
revival has achieved through better reservoir management, implementation of
different IOR & EOR.
Exploration todays focused on subtle traps of & small amplitude entrapment
situation. Current effort is best with problem related to shield of middle scone market
especially thick coals, which tends to mask seismic reflection from deeper section.
The major oil field of mehsana asset have been operating for last 25 year.80% of well
operate of artificial lift. About 400 works over operation are carried ot every year.
Despite problems related to aging, asset has between able to pag down the sick well
inventory well under control.
As a mehsana of build up to date for future coal bed methane exploration, a number of
coal cores have taken from shobhasan filed as a part of R & D efforts, this however
will go a long way in chalking out strategy for CBM exploration. Two wells drilled
for underground coal gasification in mehsana city were evaluated for utility
exploration of UCG. it is estimated that the asset has 63 billons tones of local reserves
at the depth of 700 to 1700 masters with expected producible energy of 15000 BCM.

19

The mehsana project came into 7th nov 1967 when it has bifurcated from Ahmadabad
to facilitate administrative & operational convenience.

First well drilled mehsana structure-1 spudded on 20-04-1964.

First oil well drilled-mehsana 2. Deepest well drilled south warasan-I depth
5000M>

Oldest formation encountered granite basement well serau east-I.

Deepest oil zone drilled -2198-2208m well mehsana II.

Shallowest oil zone drilled 1790-1794m well langhanaj-II

First hydrocarbon bearing filed mnsa-II

First EOR scheme balol instu combustion pilot project 15.03.1990

First coal bed methane exploration well shobhasan 17.02.1991.

20

Year
2012
a

BRIEF OVERVIEW OF FINANCE

DEPARTMENT

2.1
2.2

2.3

MEHSANA FINANCE
DEPARTMENT STRUCTURE

INTRODUCTION OF VARIOUS
FINANCE SECTIONS

FINANCIAL INFORMATION OF
THE COMPANY

21

OIL AND NATURAL GAS CORPORATION

LTD

2.1) MEHSANA FINANCE DEPARTMENT

STRUCTURE

GENERALMANAGER(
F&A))

CHIEFMANAGER(F&A)

INCHARG
ECENTR
ALA/C

INCHARG
E
ASSETA/C

INCHARG
ECOSTIN
G/WELLS
/IUT

INCHARG
ECASH/B
ANK

INCHARG
EPREAUD
IT

INCHARG
EBUDGE
T

(DRAW NO:4 MEHSANA FINANCE DEPARTMENT STRUCTURE)

22

INCHARG
E PCS

2.2) INTRODUCTION OF VARIOUS FINANCE

SECTIONS
2.2.1 BUDGET SECTION:
Introduction
Under the guidance of Mr. Vishal sir. I came to realize the importance of budgeting.
In ONGC, the budget section plays a very important and crucial role. The reason is
that whenever there is requirement of any kind of material or service, proper
arrangement of fund is required and for that purpose budgeting is done. Due to
restriction on number of pages for project report, every detail of budget is not
covered.
Budgetary controls definition
Budgetary control is a technique whereby actual utilization is compared
with budgets to make the budget an effective financial control tool. Any
differences/ variances are the responsibility of k e y individuals who can either
exercise control action or revise the original budgets after providing necessary
justifications to the top management. Budgetary control is defined by the Institute of
Cost and Management Accountants (CIMA) as: The establishment of budgets relating
the responsibilities of executives to the requirements of a policy, and the continuous
comparison of actual results with budgeted results, either to secure by individual
action the objective of that policy, or to provide a basis for its revision
Budgeting Process in ONGC
General Functioning or System or working of F&A department (especially in respect
of Budgeting)
Before moving forward it is important to know about the Budget Software known as
Budget Manual which is used for the budget data entry prior uploading of final data
into SAP
The method use by ONGC is ACTIVITY BASE BUDGET. This budget done by the
various departments like drilling department, surface department, MM department,
23

logging department etc. according their future needs and at last the club it in to the
actual budget.

2.2.2 CASH AND BANK SECTION

This section is responsible for the receipts and payments either in cash or cheque or
by any other form. This section is also responsible for the custody of cash, documents
in respect of investments of corporation money and other important documents. Major
activities perform by cash & bank section

Cash withdrawal from bank.

Cash payments and receipts.

Payments and receipts(other than cash)

Cheque management

Regular payments on behalf of employees.

Remittance of tax deducted at source.

Dispatch of released payments.

Liquidity for cast and fund management.

MIS activities.

In ONGC the vendors payments are done by the Mumbai headquarter

And employees salaries are done by the Dehradun headquarter.

Various fees for issuing tender forms to our suppliers are collected by cash
and bank section.

Earnest money deposit(EMD)

Security deposit (SD)

2.2.3 PRE AUDIT SECTION

This section is also known as accounts payable section. The section is divided into
two parts one is pre-audit supply cell and other is pre-audit service contract cell.
Pre-audit is also known as voucher-audit or administrative audit and denotes scrutiny
&examination, before releasing the payments. Types of Bills:

Suppliers Bills

Contractors Bills

24

Miscellaneous payments the scope of Pre-audit also includes scrutiny of receipts of

the corporation. Activities normally regarded as pre-audit receipt-accounting for
incoming cash, such as:

Initial public offering (IPO)

Bank drafts/bankers cheque

Bank guarantees.

Receipts of FDR kept as security deposits with GEB, irrigation department.

Logistics invoice verification (LIV) with the integrated network of SAP being
used during verification find out any error in the documents before payments
are made and deal with it.

2.2.4 PERSONAL CLAIM SECTION

This section deals with policies, procedures, controls, roles and responsibilities related
to accounting for employee related payments, recoveries, corresponding statutory
payments &compliances. The process explained in this section covers payments
to/recoveries from:

Regular employees of ONGC;

Graduate Engineering Trainees (GET)/Management Trainees (MT)

Retired employees; and

Term based employees, (for example employees on deputation)Payments to regular

employees include monthly salary payments, off-cycle payments (for example holiday
home, briefcase payments etc.), loans & advances. GET/MT are paid as per their
terms of employment. Retired employees are paid medical expense reimbursements as
per HR policy. Recoveries from regular employees include House Rent Recovery
(HRR), Association of Scientific and Technical Officers (ASTO) union recoveries,
recoveries of loans &advances etc.

Main Role of PCS Section

Updating employee payroll data at the time of joining.

Accounting of various employee related payments.

Accounting for full & final settlement on separation of employees.

Payment to retired employees.

25

Inter unit transfers and deputations to/from the Company.

Tax Deducted at Source deductions and deposits

Accounting for retirement benefits and related employee benefits.

2.3) FINANCIAL INFORMATION OF THE COMPANY

2.3.1 Accounting policies
The company follows the accrual method of accounting. The company has followed
the entire applicable accounting standards mad mandatory by institute of chartered
accountants of India.
2.3.2 Equity capital
The fully paid up equity capital of the company was as. During the year under review
there was no change in the equity capital structure of there is no issued preference
capital in sterling ceramic ltd. There is no warrant waiting to be covered into equity.
Nearly percent of company equity is comprised of bonus shares. The company last
made a bonus issue in issuing two bonus shares for one share held in the company.
2.3.3 Loans
Oil and natural gas corporation ltd loan fund decreased form in the previous year to
during the year. During the current year the ratio of secured long term funds to
tangible net worth increased to in the previous year.
2.3.4 Fixed assets
The gross and net block of the company as on were and respectively. Plant and
machinery constituted of the gross block and net block respectively.
2.3.5 Depreciation
Depreciation accounted for in the current year compared to in the previous year
compared to in the previous year. There is no change in the accounting policy for
depreciation over the last year.

26

2.3.6 Corporate tax

In view of loss during the year under review, the company has not provided for any
tax liability this year also.
2.3.7 Debtors
During the year under the review the sundry debtors were compared to in the previous
year representing of sales compared to of sales In the previous year. The sundry
debtors are net of provision for doubtful debts of the increase in sundry debtors are
due to market conditions.
2.3.8 Inventories
Inventories decreased from in the previous year to during the current year to during
the current year. Of this finished goods, raw material and spares inventory of stock in
process however increased.
2.3.9 Working capital
The working capital gap during the current year was lower at which is lower than in
tha previous year. The working capital of is founded by bank borrowing to the extent
of and the balance is founded out of companys own resource. Each rupee of working
capital generated of gross turnover in the current year compared to in the previous
year. Oil and natural gas corporation ltd shall continue to make to further improve
working capital management by stricter control over inventories and book debts.
2.3.10 Reserves
Oil and natural gas corporation ltd reserves stood at as on nearly per cent of the
companys reserves were earned. Per cent comprised capital reserves. There were no
revaluation reserves as on. During the year under review a Sam of representing items.

27

Year
2012

BALANCESHEET
ANALYSIS

3.1

INTRODUCTION TO
BALANCESHEET

BALANCE SHEET

3.2

28

OIL AND NATURAL GAS CORPORATION

LTD

3.1

INTRODUCTION TO BALANCESHEET

A balance sheet is a list of assets and liabilities and claims of a business at some
specific point of time and is prepared from an adjusted Trial Balance. It shows the
financial position of a business by detailing the source of funds and utilization of
these funds. Balance Sheet shows the assets and liabilities grouped, properly
classified and arranged in a specific manner.

USES OF BALANCE SHEET

It enables us to ascertain the proprietary interest of a person or business

organization.

It enables us to calculate the actual capital employed in the business.

The lender can ascertain the financial position of the business.

It may serve as the basis for determining purchase consideration of the

business.

Different ratio can be calculated from the Balance Sheet and these ratios can
be utilized for better management of the business.

LIMITATION OF BALANCE SHEET

Fixed assets are shown in the Balance Sheet as historical costless

depreciation up-to-date. A conventional Balance Sheet can not reflect
the true value of these assets. Again intangible assets are shown in the
Balance Sheet at book values which may bear no relationship to the
market values.

Sometimes, balance sheet contains some assets which c o m m a n d n o

market value such as expense, debenture discount etc. the inclusion of
these assets unduly inflate the total value of assets.

The balance sheet can not reflect the value of certain factors such as skill and
loyalty of staff.

29

3.2 BALANCE SHEET

BALANCE SHEET OF ONGCAS ON 31ST MARCH
Balance Sheet

------------------- in Rs. Cr. ------------------Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

12 mths

12 mths

12 mths

12 mths

12 mths

4,277.76

2,138.89

2,138.89

2,138.89

2,138.89

4,277.76

2,138.89

2,138.89

2,138.89

2,138.89

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Reserves

93,226.67

85,143.72

76,596.53 68,478.51 59,785.04

Revaluation

0.00

0.00

0.00

Networth

97,504.43

87,282.61

78,735.42 70,617.40 61,923.93

Secured Loans

0.00

0.00

0.00

Unsecured

17,564.26

16,405.64

16,035.70 12,482.71 15,109.07

Total Debt

17,564.26

16,405.64

16,035.70 12,482.71 15,109.07

Total Liabilities

115,068.69 103,688.25 94,771.12 83,100.11 77,033.00

Sources Of Funds
Total Share
Capital
Equity Share
Capital
Share
Application
Money
Preference
Share Capital

0.00

0.00

Reserves

0.00

0.00

Loans

Application Of Funds
Gross Block

80,938.60

71,553.78

61,355.61 57,463.78 52,038.07

Less: Accum.

62,299.05

55,905.28

50,941.23 46,945.77 43,198.95

18,639.55

15,648.50

10,414.38 10,518.01 8,839.12

Depreciation
Net Block

30

Capital Work in

65,354.44

56,073.25

52,923.19 41,154.63 37,794.16

Investments

5,332.84

5,772.03

5,090.32

5,899.50

5,702.05

Inventories

4,118.98

4,678.57

4,060.67

3,480.64

3,033.76

Sundry Debtors

3,845.90

3,058.64

4,083.80

4,360.37

2,759.44

Cash and Bank

356.55

282.85

161.48

269.22

27.42

8,321.43

8,020.06

8,305.95

8,110.23

5,820.62

64,693.91

63,721.90

55,964.02 38,906.53 58,710.79

Fixed Deposits

22,090.00

17,948.18

18,934.74 22,148.43 19,253.37

Total CA, Loans

95,105.34

89,690.14

83,204.71 69,165.19 83,784.78

Deffered Credit

0.00

0.00

0.00

Current

35,384.31

27,244.53

26,854.11 22,482.94 19,835.99

Provisions

34,775.19

37,092.46

30,657.98 21,828.17 39,765.20

Total CL &

70,159.50

64,336.99

57,512.09 44,311.11 59,601.19

24,945.84

25,353.15

25,692.62 24,854.08 24,183.59

796.03

841.32

650.61

Progress

Balance
Total Current
Assets
Loans and
Advances

& Advances
0.00

0.00

Liabilities

Provisions
Net Current
Assets
Miscellaneous

673.90

514.06

Expenses
Total Assets

115,068.70 103,688.25 94,771.12 83,100.12 77,032.98

Contingent

38,979.63

39,178.54

36,024.57 26,006.73 34,157.17

113.97

408.08

368.12

Liabilities
Book Value (Rs)

Table no:1

31

330.16

289.52

INTERPRETATION: The balance sheet is the statement showing the increase or decrease in the
assets and liabilities. This indicates the change in capital structure as well as
increase or decrease in assets.
Owners fund increases by 2138.87 Crore in 2011 as compared to base year
2007. The reserves & surplus is also get increase in last four years very
rapidly. It increases by 33441.63 Crore in 2011 as compared to base year
2007.
Proportion of the debt in capital structure is decrease that is in2007borrowing
debt is 15,109.07 Crore and in 2008 debt is 12,482.71 Crore. So, it is decrease
by 96.43.after next three year continues increase.
The balance sheet also shows the balance of assets and other investment made
by the company. The gross fixed assets are increased in 2008 by 1678.90
Crore as compared to previous year 2007.
The investment is also increase in 2008 by 197.45 Crore as compared to
previous year. After the investment is also decreases in 2009 by 800.18 crore
as compared to previous year. And in 2010 it is increase than 2009 after than it
is a decrease in 2011 by439.19 crore. The overall inventory turnover ratio
shows the good position of the company is good.
We also conclude that the liquid position of the company is good because
Current Assets are increase year by year.

32

INVESTMENT CHART:-

Investments
6,000.00
5,800.00

5,899.50
5,772.03

5,702.05

5,600.00
5,332.84

5,400.00
5,200.00

Investments

5,090.32

5,000.00
4,800.00
4,600.00
2007

2008

2009

2010

2011

Chart no:1

INTERPRETATION: The investment is also increase in 2008 by 197.45 Crore as compared to

previous year. After the investment is also decreases in 2009 by 800.18 crore
as compared to previous year. And in 2010 it is increase than 2009 after than it
is a decrease in 2011 by439.19 crore as compare to previous year. The overall
inventory turnover ratio shows the good position of the company is good.

33

Year
2012

PROFIT AND
ANALYSIS

LOSS

ACCOUNT

4.1
4.2

INTRODUCTION TO PROFIT AND

LOSSACCOUNT

PROFIT & LOSS ACCOUNT

34

OIL AND NATURAL GAS CORPORATION

LTD

4.1) INTRODUCTION TO PROFIT AND LOSSACCOUNT

The Profit & Loss account is also known as the income statement. It can be defined as
a report that summaries the revenues and expenses of an accounting period to reflect
the changes in various critical areas of firms operation. It is of greatest interest and
import and importance to end-users of accounting statements because it enables them
to ascertain whether the business operations have been profitable or not during that
particular period.
The important destination between the balance sheet and income statement is for a
period of one year. The two broad categories of item shown in the income statement
are revenue and expenses. Revenues derived from a companys operation say
manufacturing and selling products. During transaction business has also incurred
revenues other than main business operation. Expenses are occurred in day-to-day
transactions.
Here, expenses regarding manufacturing activities, office and administrative expenses
are considered. By deducting total expenses from total revenue we get profit
and by deducting total revenue from total expenses we get total loss. Income tax
amount is also decided by profit that incurred in business with help of this statement.

35

4.2 )PROFIT & LOSS ACCOUNT

Profit & Loss account

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other
Manufacturing
Expenses
Selling and Admin
Expenses
Miscellaneous
Expenses
Preoperative Exp
Capitalised
Total Expenses

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord
Items)
Tax
Reported Net
Profit(PAT)
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend
Tax

------------------- in Rs. Cr. ------------------Mar '11

12 mths

Mar '10
12 mths

Mar '09
12 mths

Mar '08
12 mths

Mar '07
12 mths

66,487.19
322.85
66,164.34
5,028.07
12.91
71,205.32

60,470.18
218.41
60,251.77
3,615.96
118.04
63,985.77

64,342.28
338.29
64,003.99
4,085.59
81.10
68,170.68

60,466.48
401.38
60,065.10
4,228.63
114.11
64,407.84

57,190.17
276.73
56,913.44
3,107.05
-19.73
60,000.76

2,790.68
285.60
6,445.18
32,098.77

2,431.88
260.38
5,618.16
26,652.82

10,905.51
270.79
4,536.80
19,578.49

8,424.32
317.15
5,843.27
17,184.51

8,177.22
320.28
3,974.79
15,616.76

-16,565.10

-4,470.78

-2,328.21

-560.70

492.78

13,243.69
947.65

1,011.04

983.74

1,079.27

0.00

0.00

0.00

0.00

0.00

25,547.91

22,667.20

31,831.85

30,424.78

28,607.62

Mar '11
12 mths
40,629.34
45,657.41
11,133.34
34,524.07
6,835.01
0.00
27,689.06
547.70
28,236.76

Mar '10
12 mths
37,702.61
41,318.57
11,276.89
30,041.68
5,242.66
0.00
24,799.02
183.99
24,983.01

Mar '09
12 mths
32,253.24
36,338.83
8,485.40
27,853.43
4,355.62
0.00
23,497.81
790.68
24,288.49

Mar '08
12 mths
29,754.43
33,983.06
5,016.88
28,966.18
3,915.77
0.00
25,050.41
607.25
25,657.66

Mar '07
12 mths
28,286.09
31,393.14
3,724.81
27,668.33
3,292.80
0.00
24,375.53
-564.27
23,811.26

9,177.53

8,258.73

8,437.78

8,941.85

8,041.02

18,924.00

16,767.56

16,126.32

16,701.65

15,642.92

22,757.23
0.00
7,486.05
1,215.65

20,235.33
0.00
7,058.28
1,161.56

20,926.34
0.00
6,844.39
1,163.20

22,000.46
0.00
6,844.39
1,163.20

20,430.40
0.00
6,630.51
1,012.51

36

Per share data (annualised)

Shares in issue (lakhs) 85,554.90
Earning Per Share
22.12
(Rs)
Equity Dividend (%)
335.00
Book Value (Rs)
113.97

21,388.73
78.39

21,388.73
75.40

21,388.73
78.09

21,388.73
73.14

330.00
408.08

320.00
368.12

320.00
330.16

310.00
289.52

Table no:2

PAT CHART :Rs. cr

PAT
20,000.00

15,642.92

16,701.65

16,126.32

18,924.00
16,767.56

15,000.00
10,000.00
pat
5,000.00
0.00
2007

2008

2009

Chart no:2

37

2010

2011

INTERPRETATION:The profit and loss account of the company shows the overall income and
expenditure, made by the company in a particular time period. The difference between
the debit and credit side of the P&L account, shows the net profit or net loss.
Here, the profit and loss account of the company shows the satisfactory level but as
compared to previous year the expenses of the company is increases. Here the
sales turnover is increase year by year. The operating income in 2010 is 60,470.18
and now it is increase by 6017.01 Crore Rs. in 2011. So, by this way the net
profit of the company is increase by 2156.44 in 2011 as compared to previous year.
While on the other side the expenditure shows the expenses meet by the company in a
particular period. The expenditure met by the company is highest in 2009, while in
other year the expenditure of the company are increases. T h e overall analysis of
the expenditure side of the company shows the average increase in expenses of the
company.
After analyzing the income and expenditure side of the company, there is difference
between both sides which is known as the net profit / loss. The net profit of the
company shows an overall increase year by year. In 2007 it is 15,642.92Crore Rs. and
now itis increasing and in 2011 it is 18,924.00 Cr.

38

Year
2012

THEORETICAL BACKGROUND
OF WORKING CAPITAL

MANAGEMENT

5.1

5.2
5.3
5.4
5.5
5.6
5.7

MEANING OF WORKING CAPITAL

CONCEPT OF WORKING CAPITAL
TYPES OF WORKING CAPITAL
NEED FOR WORKING CAPITAL
DETERMINENTS OF WORKING CAPITAL
MEANING AND NATURE OF WORKING
CAPITAL MANAGEMENT
WORKING CAPITAL ANALYSIS

39

OIL AND NATURAL GAS CORPORATION

LTD

5 .1 MEANING OF WORKING CAPITAL:-

In simple words working capital means that which is issued to carry out the day to day
operations of a business. Capital required for a business can be classified under two
main categories
Fixed capital

Working capital

Every business needs funds for two purposes, for its establishment and to carry on its
day to day operations. Long term funds are required to create production facilities
through purchase of fixed assets such as plant and machinery, land, building, furniture
etc. Investment in these assets represents that part of firm capital, which is blocked on
a permanent or fixed basis called fixed capital. Funds are also needed for short term
purposes i.e. for the purchase of raw material, payment of wages and other day to day
operations of business. These funds are known as working capital. In other words,
working capital refers to that firms Capital, which is required for short term assets
or current assets. Funds thus invested in current assets keep revolving last and being
constantly converted into cash and this cash flow is again converted into other current
assts. Hence it is known as circulating or short term capital.

40

5.2 CONCEPT OF WORKING CAPITAL

5.2.1 Gross Working Capital

It is simply called working capital refers to the firms investment in current assets so
the total current assets of the firm are known as gross working capital.

5.2.1 Net Working Capital

It represents the difference between current assets and current liabilities. Net working
capital may be positive or negative. Positive net working capital is that when current
assets are more than current liabilities. But when current liabilities become more than
current assets than it is negative working capital.
In brief we can say that working capital is too much necessary for the smooth
functioning and proper utilization of fixed assets.

5.3 TYPES OF WORKING CAPITAL

5.3.1

Permanent Working Capital:

As the operating cycle is a continuous process so the need for working capital also
arises continuously. But the magnitude of current assets needed is not always same; it
increases and decreases over time. However there is always a minimum level of
current assets. This level is known as permanent or fixed working capital.
In ONGC maintain the Permanent working capital of the raw material as a 1/3 of total
raw material and 10% work in process and finished goods of the total production.
20% cash balance maintain as permanent in the profit.

5.3.2

Temporary Working Capital:

The extra working capital needed to support the changing production and sales
activities, is called variable or functioning or temporary working capital.

41

For hear ONGC purchase raw material as a plastic for manufacturing pipes in
particular season and have to employ additional labour to process it. They must meet
this requirement for providing additional funds. Another aspect of temporary working
capital. Last year suddenly increase the demand of final product so at that time require
extra fund its called the special working capital.
Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the
business. This can
Be shown in the following diagram:-

Temporary capital

Amount Of Working Capital

Permanent Capital

Time
(DRAW NO: 5 TEMPORARY WORKING CAPITAL)

5.4 NEED FOR WORKING CAPITAL

The need for working capital cannot be overemphasized. The need of working capital
arises due to the time gap between production and realization of cash from sales. So
the working capital or investment in current assets becomes necessary need for
working capital. It arises due to following reasons:-

42

5.4.1 OPERATING CYCLE

Operating cycle is the time duration requires for converting sales into
cash after the conversion of resources into inventories.

First of all a firm purchase Raw Material, then after some processing it is converted
into workinprogress and after this further processing is done to convert workin
progress in finished goods. After the raw material is converted into finished goods,
sales are made. Sales are no always full cash sales; there are credit sales also. These
credit sales after some period are converted into cash. So the whole process takes the
time. This time taken is known as the length of operating cycle. So operating cycles
includes:1.

Raw Material conversion period (RMCP)

2.

Workin progress conversion period (WIPCP)

3.

Finished goods conversion period (FCP)

4.

Debtors Conversion period (DCP)

So operating cycle can be known as following:Raw Material

Work in Progress
Cash Collection
from Debtors

Sales
Finished Goods

Credit Sales

Cash Sales

(DRAW NO:6 OPERATING CYCLE)

43

If the length of the operating cycle has short length period then less working capital is
required. So working capital requirement is directly related with operating cycle.
Operating cycle may be of two types
1.

Gross Operating cycle

2.

Net operating cycle

1. Gross Operating cycle

Gross Operating cycle is the total time period from the conversion of Raw Material
into finished goods and finished goods into sales and then sales into cash.
GOC =RMCP + WIPCP + FCP + DCP

2. Net Operating Cycle

As we provide period to debtors for the payments, our creditors also provide period to
us for payment to them. So this reduces our requirement of working capital. This also
affects the operating cycle. Operating cycles length reduces with so many days as
provided by the creditors to us. The difference between gross operating cycle and
period allowed by the creditors for payment is known as net operating cycle
NOC = GOC CPP

5.4.2 WORKING CAPITAL REQUIREMENT FOR THE ANTICIPATED

NEEDS FOR FUTURE
These needs may be of Raw Material or Finished Goods. Sometimes because of nonavailability of Raw Material or due to seasonal availability of Raw Material some
advances stock of Raw Material becomes necessary for company. In the similar way
due to sudden arise of demand of finished goods in future more finished goods are
kept in stock. For both reasons more working capital is required because funds will be
involve in these safeties stocks.

44

5.5. DETERMINENTS OF WORKING CAPITAL

Followings are the main determinants of working capital.
5.5.1

Nature and Size of Business :

The working capital of a firm basically depends upon nature of its business for e.g.
Public utility undertakings like electricity; water supply needs very less working
capital because offer only cash sales whereas trading & financial firms have a very
less investment in fixed assets but require a large sum of money invested in working
capital.
The size of business also determines working capital requirement and it may be
measured in terms of scale of operations. Greater the size of operation, larger will be
requirement of working capital. Hear ONGC company for manufacturing products not
to the service so require to working capital high in compare to public ltd. Company.
5.5.2

Manufacturing Cycle:

The manufacturing cycle also creates the need of working capital. Manufacturing
cycle starts with the purchase and use of Raw Material and completes with the
production of finished goods. If the manufacturing cycle will be longer more working
capital will be required or vice versa.
In oil and gas corporation ltd. Production Cycle works better and manufacturing
process works fast, so no other costs are incurred in the time of production.
5.5.3

Seasonal variation:

In certain industries like ONGC raw material is not available throughout the year.
They have to buy raw material in bulk during the season to ensure an uninterrupted
flow and process them during the year. Generally, during the busy season, a firm
requires large working capital than in the slack season.

45

5.5.4

Production Policy:

Production policy also determines the working capital level of a firm. If the firm has
steady production policy, it may require need of continuous working capital. But if
the firms adopt a fluctuating production policy means to produce more during the lead
demand season then the more working capital may require at that time but not in other
period during a financial year. So the different productions policy arise different type
of need of working capital.
If the policy is to keep production steady by accumulate inventories it will require
higher working capital.
Oil and gas corporation ltds Production policy is not steady so Requirement of
working capital is less.
5.5.5 Firms Credit Policy:
The firms credit policy directly affects the working capital requirement. If the firm
has liberal credit policy, hence the more credit period will be provided to the debtors
so this will lead to more working capital requirement. With the liberal credit policy
operating cycle length increases and vice versa.
Oil and gas corporation ltd Credit Policy for collection toward the debtor for giving 2
or 3 weeks for credit sales in the limit of 2 lakh. Above the 2 lakh give credit for 1
month.
5.5.6 Sales Growth:
Working capital requirement is directly related with sales growth. If the sales are
growing, more working capital will be needed due to arises need of more Raw
Material,

finished goods and credit sales. Hear, ONGC Sales growth is increase in

year by year so require more working capital.

5.5.7 Business Cycle:
Business cycle refers to alternate expansion and contraction in general business. In a
period of boom, larger amount of working capital is required where as in a period of
depression lesser amount of working capital is required. ONGC Position is growth
stage. So require working capital is high.
46

5.5.8 Price Level Changes:

Changes in the price level also effects the working capital requirements. Generally,
the rising prices will require the firm to maintain larger amount of working capital as
more funds will be required to maintain the same current assets.
5.5.9 Other Factors:
Certain other factors such as operating efficiency, management ability, irregularities
of supply, import policy, asset structure, importance of labour, banking facilities, time
lag. Etc. also influence the requirement of working capital.
So these are the main determinants of working capital. The importance of influence of
these determinants on working capital may differ from firm to firm

5.6 MEANING AND NATURE OF WORKING CAPITAL

MANAGEMENT
The management of working capital is concerned with two problems that arise in
attempting to manage the current assets, current liabilities and the inter relationship
that asserts between them.
The basic goal is working capital management is to manage current assets and current
liabilities of a firm in such a way that a satisfactory of optimum level of working
capital is maintained i.e. it is neither inadequate nor excessive. This is so because both
inadequate as well as excessive working capital position is bad for business.

5.7 MAJOR DECISIONS IN WORKING CAPITAL

MANAGEMENT
There are two major decisions management relating to working capital management:1.

What should be ratio of current assets to sales?

2.

What should be the appropriate mix of short term financing and long term
financing for financing these current assets?

5.7.1 Current assets in relation to sales

If the firm can forecast accurately the factors, which effect the working capital, the
investment in current assets, can be designed uniquely? When uncertainty
characteristics the above factors, as it usually does the investment in current assets
47

cannot be specified uniquely. In case of uncertainty, the outlay on current assets

should consist of base component meant to meet normal requirement and a safety
component meant to cope with unusual requirement. The safety component depends
upon low conservative or aggressive in the current assets policy of a firm. If the firm
purchases a very conservative current asset policy it would carry a high level of
current assets in relation to sales. If a firm adopts a moderate current assets policy it
would carry moderate level of current assets in relation to sales, finally is a firm
follows a highly aggressive current assets policy, it would carry a low level of current
assets in relation to sales.
5.7.2 Determining a Short Term and Long Term Financing Mix for Financing of
current assets

There are three approaches in this regard, which are discussed below:

5.7.2.1 HEDGING APPROACH

This approach is also called matching approach. In this approach there is a proper
matching of expected life of asset with the duration of fund. Usually, according to this
approach long-term sources are used for financing permanent current assets and fixed
assets & short-term sources are used for financing temporary current assets:
Temporary current assets
Short term financing

Assets
Permanent current assets
Fixed Assets
Term financing

Long term financing

Time

DRAW NO:7 HEDGING APPROACH

48

5.7.2.2 CONSERVATIVE APPROACH

In this approach there is more reliance on long-term financing in comparison to shortterm financing. Even some part of the temporary current comparison to finance from
long-term sources because long-term sources are less risky in comparison to shortterm source
Temporary Current Assets
Short-term financing

Assets
Permanent Current Assets

Long-term financing

Fixed Assets

Time
(DRAW NO:8 CONSERVATIVE APPROACH)

5.7.2.3 AGGRESSIVE APPROACH

In this approach there is more reliance on short term financing and even a part of
permanent current assets is financed from short-term finance.
Temporary current assets

Short term financing

Assets
Permanent current assets

Long term financing

Fixed Assets
Time

(DRAW NO:9 AGGRESSIVE APPROACH)

In Oil and gas corporation ltd, the current assets are financed from short term sources
as well as long term sources, so they follow conservative approach.
49

5.8 WORKING CAPITAL ANALYSIS

5.8.1. ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN
WORKING CAPITAL
SCHEDULE OF CHANGES IN WORKING CAPITAL
(RS.cr)
PARTICULARS
CURRENT
ASSETS:
Inventories
S. debtors
Cash & Bank
Balances
Loans &
Advances
Total current
assets (A)
CURRENT
LIABILITIES:
Liabilities&
provision
Total current
liabilities (B)
Working capital
(A-B)
Net increase in
working capital

2011

2010

INCREASE

4,118.98
3,845.90
356.55

4,678.57
3,058.64

64,693.91

63,721.90

73,015.34

71741.96

70,159.50

64,336.99

70,159.50

64,336.99

2855.84

7404.97

DECREASE

5559.59
787.26
73.7

282.85

972.01

5822.51

7655.48

FOR YEARS 2011 AND 2010

As we have a look on the schedule of changes in working capital for the company
over the years 2010 and 2011, we find that, among in current assets, Loan &
Advances, sundry debtors and Cash &Bank Balance have shown increment from year
2010 to year 2011. The inventories have got decreased in the same years. Among the
current liabilities, liabilities& Provision have increase. So the overall net working
capital has decreased.

50

(RS. Cr)

PARTICULARS
CURRENT ASSETS:
Inventories
S. debtors
Cash & Bank
Balances
Loans & Advances

2009

2008

INCREASE

4,060.67
4,083.80

3,480.64
4,360.37

580.03

161.48

269.22

55,964.02

38,906.53

Total current
assets (A)
CURRENT
LIABILITIES:
Liabilities&
provision
Total current
liabilities (B)
Working capital
(A-B)
Net increase in
working capital

64269.97

47016.76

57,512.09

44,311.11

57,512.09

44,311.11

6757.88

2705.65

DECREASE

276.57
107.74
17057.49

13200.98

30838.5

FOR YEARS 2009 AND 2008

As we have a look on the schedule of changes in working capital for the company
over the years 2008 and 2009, we find that, among in current assets, Loan &
Advances, and Cash &Bank Balance, inventories have shown increment from year
2008 to year 2009. The sundry debtors have got decreased in the same years. Among
the current liabilities, liabilities& Provision have increase. So the overall net working
capital has increase.

51

(Rs.cr)

PARTICULARS
CURRENT
ASSETS:
Inventories
S. debtors
Cash & Bank
Balances
Loans &
Advances
Total current
assets (A)
CURRENT
LIABILITIES:
Liabilities&
provision
Total current
liabilities (B)
Working capital
(A-B)
Net increase in
working capital

2008

2007

INCREASE

3,480.64
4,360.37

3,033.76
2,759.44

269.22

27.42

446.88
1600.93
241.8

38,906.53

58,710.79

47016.76

64531.41

44,311.11
44,311.11
2705.65

DECREASE

19804.26

59,601.19

15290.08

59,601.19
4930.22
2047.81

FOR YEARS 2007 AND 2008

As we have a look on the schedule of changes in working capital for the company
over the years 2007 and 2008, we find that, among in current assets, sundry debtors,
Cash &Bank Balance, inventories have shown increment from year 2007 to year
2008. The Loan & Advances and have got decreased in the same years. Among the
current liabilities, liabilities& Provision have decrease. So the overall net working
capital has decrease.

52

Year
2012

MANAGEMENT OF
INVENTORY

6.1

NATURE OF INVENTORIES

6.2

OBJECTIVES OF INVENTORY
MANAGEMAENT

6.3

ANALYSIS OF EFFICIENCY OF
INVENTORY MANAGEMENT IN ONGC

53

OIL AND NATURAL GAS CORPORATION

LTD

6 MANAGEMENT OF INVENTORY
Inventory is very important part of current assets. Approximately 60% part of current
assets is inventories. So the proper management of inventory is required for
successful working capital management. As the larger amount of funds is involved in
the inventories, so it must be carried with care for proper utilization of funds.

6.1) Nature of Inventories

In inventories we include:
(a)

Raw Material: There are those basic inputs which are converted into work-inprogress after the manufacturing process. ONGC purchased Raw materials as
a Rough Plastic for production and storage purpose.

(b)

Work-in-Progress: These inventories are semi-manufactured products. These

products are those which are ready for sale. Product as a pipes, pumps,etc.

(c)

Finished Goods: These are completely manufactured products. These

products are those which are ready for sale. In ongc finished product of pipe,
pumps and etc.
Here is one another type of inventory also which is not directly related with
production but facilitate in production process. These inventories are known
as supplies. Cleaning material, oil, fuel, electric tube etc are the supplies.

6.2) OBJECTIVES OF INVENTORY MANAGEMENT

There are so many objectives of inventory management. These objectives may differ
from firm to firm. The main objectives of inventory management are:
To make adequate investment in inventories so that funds can be best utilized.
Smooth production in present and future.
Time availability of inventories.
Smooth and uninterrupted sale processes.
Minimize the cost related with inventories.
To meet the future price change.
To get adequate return on investment.
54

6.3) ANALYSIS OF EFFICIENCY OF INVENTORY

MANAGEMENT IN ONGC
INVENTORY TURNOVER RATIO
It indicates the number of times the stock has been turned over during the period and
evaluates the efficiency with which the firm is to manage inventory. A high inventory
turnover indicates efficient management of inventory because more frequently the
stocks are sold; the lesser amount of money is required to finance the inventory.
Formula: Cost of Goods sold/ Average inventory
Cost of Goods Sold (COGS)
------------------- in Rs. Cr. -------------------

Particular

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Gross Profit

45657.41

41318.57

36338.83

33983.06

31393.14

COGS

20506.93

18933.20

27665.16

26082.04

25520.30

Average Inventory:
(Rs.cr)
Particular

2010-11

2009-10

2008-09

2007-08

2006-07

Opening Stock

4678.57

4060.67

3480.64

3033.76

2512.34

Closing Stock

4118.98

4678.57

4060.67

3480.64

3033.76

Average Inventory

4398.78

4369.62

3770.66

3257.2

2923.05

55

Inventory Turnover Ratio:

Particular

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

COGS

20506.93

18933.20

27665.16

26082.04

25520.30

Avg. Inventory

4398.05

4369.62

3770.66

3257.2

2923.05

4.33

7.34

8.00

8.73

Inventory Turnover 4.66

Ratio

Table no:3

Inventory Turnover Ratio

9
8
7
6
5
4
3
2
1
0

7.34
4.66

8.73

4.33
Inventory
Turnover
Ratio

2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:3
Analysis:

The inventory turnover ratio is increasing in the year 2007 after next year in
2008 and 2009 and 2010 it is consistently decreasing. Which indicates that its
performance in terms of generating cash flow is decreasing in this year
because the companies cash flow has blocked in inventories? However, in
2011 the ratio increased by 0.33 than previous year, which is a positive sign.

56

Year
2012

RATIO ANALYSIS

7.1

7.2

UTILITY OF RATIO ANALYSIS

CLASSIFICATION OF RATIO

57

OIL AND NATURAL GAS CORPORATION

LTD

7. RATIO ANALYSIS
Ratio analysis is a widely used tool for financial analysis. It is defined as the
systematic use of ratio to interpret the financial statement, so that the strength and
weakness of a firm as well as its historical performance and current financial
condition can be determined. The term ration refers to the numerical and quantitative
relationship between two items/variables. The relationship can be expressed as:1. Percentage
2. Fraction
3. P roport i on of num bers
The rational of ratio analysis lies in the fact that it makes related information
comparable. A single figure by itself has no meaning but when expressed in
terms of a related figure, it yields significant inferences.
Ratio analysis thus, a quantitative tool enables analysis todraw quantitative answers
such as:

Is the net profit adequate?

Are the assets being used efficiently?

Is the firm solvent?

Can the firm meet its current obligations and so on?

7.1) UTILITY OF RATIO ANALYSIS

The use of ratio was started by banks for ascertaining the liquidity and profitability of
the companys business for the purpose of advancing loan to them. It gradually
become popular and other creditors began tousl e them profitably. Now even the
investor calculates ratio from t he published account of the company before investing
their savings. The ratio analysis provides useful information to management, which
would help them in taking important policy decision. Diverse group of people make
use of ratios, to determine the particular aspect of the financial position of the
company, in which they are interested.

58

7.1.1) Profitability
Useful information about the trend of profitability is available from the profitability
ratios. The gross profit ratio, net profit ratio and ratio of return on investment give a
good idea of profitability of business.
7.1.2) Liquidity
In fact, the use of this ratio is to ascertain the liquidity of the busi ness. T he current
ratio and liquid ratio will tell whether the business will be able to meet its current
liabilities as and when they mature.
7.1.3) Efficiency
The turnover ratio are excellent guides to measures the efficiency of managers. For
e.g. the stock turnover will indicate how efficiency the sales are being made, the
debtors turnover shows the efficiency of collection department and assets are used in
business.
7.1.4) Inter- firm comparison
The absolute ratio of the firm are not of much use, unless they are compared with
similar ratio of other firm belongs to the same industries.
7.1.5) Indicate Trend
The ratio of the last three to five years will indicate the trend in the respective fields.
7.1.6) Useful for budgetary Control
Regular budgetary reports are prepared in business where the system of budgetary
control in use. If various ratios are prepared in these reports, it will give a fairly good
idea about various aspect of financial position.
7.1.7) Useful for decision making
Ratios guide the management in making some of the important decision.

59

7.2) CLASSIFICATION OF RATIO

Ratios can be classified into four broad groups:7.2.1. Liquidity Ratio
7.2.2. Leverage / Capital structure Ratio
7.2.3. Profitability Ratio
7.2.4. Activity / Efficiency Ratio
7.2.1) LIQUIDITY RATIOS
Liquidity is the most important factor in successful financial management. A
firm should have enough money to meets its short-term liabilities, as and when they
become due for payment. If affirm fails to meet its short term liabilities frequently, its
prestige and creditworthiness would be adversely affected. A very high degree of
liquidity is also bad; idle assets earn nothing. Therefore it is necessary to strike a
proper balance between high liquidity and lack of Liquidity.

7.2.1.1) Current Ratio:

This most widely used ratio shows the proportion of current assets to current
liabilities. It is also known as Working Capital Ratio. It is a measure of short term
financial strength of business a n d shows whether the business will able to meet its
current liabilities. Generally, it is believed that ratio of 2:1 is good and shows a
comfortable working capital position. But this ratio i s differing company by
company. The formula for calculating these ratios as under:-

Current Ratio =

Current Assets
Current Liabilities

60

Current assets:

Particulars

2010-11

2009-10

2008-09

2007-08

(Rs. in cr)
2006-07

Inventories

4118.98

4678.57

4060.67

3480.64

3033.76

Debtors

3845.90

3058.64

4083.80

4360.37

2759.44

Cash / bank balance

356.55

282.85

161.48

269.22

27.22

Loans / Adv.

64693.91

63721.90

55964.02

38906.53

58710.79

Fixed Deposites

22090

17948.18

18934074

22148.43

19253.37

Total Current Assets

95105.34

89690.14

83204.71

69165.19

83784.78

Current liabilities:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Liabilities

35384.31

27244.53

26854.71

22482.94

19835.99

Provisions

34775.19

37092.46

30657.98

21828.17

39765.20

Total Current 70159.50

64336.99

57512.09

44311.11

59601.19

Liabilities

Current Ratio:

Particular

2010-11

2009-10

2008-09

2007-08

(RS .cr)
2006-07

Current Assets

95105.34

89690.14

83204.71

69165.19

83784.78

Current Liabilities

70159.50

64336.99

57512.09

44311.11

59601.19

Current Ratio

1.36

1.39

1.45

1.56

1.41

Table no:4
61

Current Ratio
1.56

1.6
1.55
1.45

1.5
1.45
1.4

1.36

1.41

1.39

Current
Ratio

1.35
1.3
1.25
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:4
INTERPRETATION: This calculation implies that the fluctuation in the current ratio. As compared
to previous year the current years ratio shows the better liquidity position.
In 2007 this ratio is 1.41:1 and in 2008 the ratio is 1.56:1 which shows
increase in liquidity. The reason behind that cash balance and receivable is
increasing. But after next three year the ratio is contently decrease.

62

7.2.1.2) Acid Test / Quick Ratio

The Acid test ratio is the ratio between quick current assets and current liabilities and
is calculated by dividing the quick assets by the liquid liabilities. Most people believe
that liquid ratio is acid test ratio, but sometimes business is able to repay its liquid
quick assets. The reason behind that is emergency requirement cash and business
cannot get it from debtors, so quick assets include cash balance +investment
certificate that can be immediately transferable into cash. The satisfactory ratio is 1:1
but lower limit is 0.5:1. Here quick assets do not include stock.
Quick Ratio = Quick Assets (Current assetsInventories)
Current Liabilities

Quick Assets:

Particulars
Total

2010-11

Current 95105.34

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

89690.14

83204.71

69165.19

83784.78

Assets
Inventories

4118.98

4678.57

4060.67

3480.64

3033.76

Quick Assets

90986.36

85011.57

79144.04

65684.55

80751.02

Quick liabilities:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Total Quick Liabilities

70159.50

64336.99

57512.09

44311.11

59601.19

63

Quick Ratio:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Quick assets

90986.36

85011.57

79144.04

65684.55

80751.02

Quick liabilities

70159.50

64336.99

57512.09

44311.11

59601.19

Quick Ratio

1.30

1.32

1.38

1.48

1.35

Table no:5

Quick ratio
1.48

1.5
1.45
1.38

1.4
1.35

1.3

1.35

1.32

Quick ratio

1.3
1.25
1.2
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:5
INTERPRETATION: So, as per the current year ratio of the company is up to some extent
satisfactory. This ratio shows the repay ability of the company which is
satisfactory as per lower level all over the year. As compared to previous year
in current year it is not good. In 2009-10 it is 1.32:1 and in current year it is
1.30:1.

64

7.2.2) CAPITAL STRUCTURE/LEVERAGE RATIO

The second category of financial ratios is leverage or capital structure ratios.
The long term creditors would judge the soundness of a firm on the basis of the long
term financial strength measured in terms of its ability to pay the interest
regularly as well as repay the instalment of the principal of due dates or in
one lump sum at the time of maturity.
7.2.2.1) Debt Ratio:
Debt Ratio may be used to analyze the long-term solvency of a firm. The firm may be
interested in knowing the proportion of the interest-bearing debt (also called funded
debt) in the capital structure.

Debt ratio=

Total debt
Capital Employed

Capital employed = Share Holders Funds + Total Debt

Total Debts:
Particulars

2010-11

Secured Loans

2009-10

2008-09

2007-08

(Rs.cr)
2006-07
-

Unsecured Loans

17564.26

16405.64

16035.70

12482.71

15109.07

Total Debts

17564.26

16405.64

16035.70

12482.71

15109.07

Capital Employed:
(Rs.cr)
Particulars

2010-11

Share Holders 97504.43

2009-10

2008-09

2007-08

2006-07

87282.61

78735.42

70617.40

61923.93

funds
Total Debts

17564.26

16405.64

16035.70

12482.71

15109.07

Capital

115068.69

103688.25

94771.12

83100.11

77033.00

Employed

65

Debt Ratio:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

TD

17564.26

16405.64

16035.70

12482.71

15109.07

CE

115068.69

103688.25

94771.12

83100.11

77033.00

Debt Ratio:

0.15

0.16

0.17

0.15

0.20

Table no: 6

Debt Ratio
0.2
0.15

0.16

0.2

0.17
0.15

0.15
0.1
Debt
Ratio:

0.05
0
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:6

INTERPRETATION: The debt ratio is continuously decreasing from 2009 to 2011. Because increase
in CE more than total debt. In ONGC Company Capital Employed is more
than the Total debts. So the ratio is decreasing from 0.16 to 0.15.

66

7.2.2.2) Debt-Equity Ratio

The ratio establishes a relationship between long term debts and shareholders funds.
It reflects the relative claims of creditors and shareholders against the assets of the
firm and in other terms it indicates the relative proportion of debt and equity in
financing the assets of the firm.

Debt equity ratio=

Long term Debt

Shareholders funds

Long-Term Debt

Particulars

2010-11

2009-10

Unsecured Loans

17564.26

16405.64

Total

17564.26

16405.64

Secured Loans

2007-08

(Rs.cr)
2006-07

16035.70

12482.71

15109.07

16035.70

12482.71

15109.07

2008-09

Shareholders Fund:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Share Capital

4277.76

2138.89

2138.89

2138.89

2138.89

and 93226.67

85143.72

76596.42

68478.51

59785.04

97504.43

87282.61

78735.42

70617.40

61923.93

Reserves
Surplus
Total

67

Debt-Equity Ratio:

Particulars
Total

2010-11

Long- 17564.26

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

16405.64

16035.70

12482.71

15109.07

87282.61

78735.42

70617.40

61923.93

0.19

0.20

0.18

0.24

term Debt
Total

Share 97504.43

holders Fund
0.18

Debt-Equity
Ratio

Table no:7

Debt-Equity Ratio
0.24

0.25
0.18

0.2

0.19

0.2

0.18

0.15
Debt-Equity
Ratio

0.1
0.05
0
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:7

INTERPRETATION: The ONGC has debt equity ratio indicate, numerator is an equity part while
denominator is a debt part. So we can easily say that equity part is more than
debt part.

68

7.2.2.3) Capital Employed to Net worth Ratio:

There is yet another alternative way of expressing the basic relationship between debt
and equity. One may want to know: How much funds are being contributed together
by lenders and owners for each rupee of the owners contribution?

Formula: Capital Employed (C.E.)

Net worth (N.W.)
Capital Employed:

Particulars

2010-11

Share Holders 97504.43

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

87282.61

78735.42

70617.40

61923.93

funds
Total Debts

17564.26

16405.64

16035.70

12482.71

15109.07

C.E.

115068.69

103688.25

94771.12

83100.11

77033.00

Net Worth:
Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Share Capital

4277.76

2138.89

2138.89

2138.89

2138.89

and 93226.67

85143.72

76596.42

68478.51

59785.04

97504.43

87282.61

78735.42

70617.40

61923.93

Reserves
Surplus
Total

69

Capital Employed to Net worth Ratio:

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

C.E.

115068.69

103688.25

94771.12

83100.11

77033.00

NW

97504.43

87282.61

78735.42

70617.40

61923.93

Capital

1.18

1.19

1.20

1.18

1.24

Particulars

Employed

to

Net worth Ratio

Table no: 8

Capital Employed to Net worth

Ratio
1.24

1.24
1.22
1.2

1.2
1.19
1.18

Capital
Emplo
yed to
Net
worth
Ratio

1.18

1.18
1.16
1.14
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no: 8

INTERPRETATION: From the above graph, we can say that in the company, total external
contribution is increasing year by year. The ratio increases after the year by
year from 1.18 to 1.20 due to increase in C.E. The Reason of increment is
Capital Employed is more than the Net Worth. But unfortunately in 2010 and
2011 the capital employed to net worth ratio is decrease.

70

7.2.2.4) Total Liabilities to Total Assets Ratio:

Current liabilities are generally excluded from the computation of leverage ratios. One
may like to include them on the ground that they are important determinants of the
firms financial risk since they represent obligations and expert pressure on the firm
and restrict its activities.

Formula:

Total liabilities (TL)

Total Assets (TA)

Total Liabilities:
Particular

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Current

70159.50

64336.99

57512.09

44311.11

59601.19

17564.26

16405.64

16035.70

12482.71

15109.07

87723.76

80742.63

73547.79

56793.82

74710.26

Liabilities
Secured

Loans
Unsecured
Loans
Total

Total Assets:
Particular

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Fixed Assets

18639.55

15648.50

10414.38

10518.01

8839.12

Current Assets

95105.34

89690.14

83204.71

69165.19

83784.78

Total

113744.89

105338.64

93619.09

79683.2

92623.9

71

Total Liabilities to Total Assets Ratio:

Particular

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

TL

87723.76

80742.63

73547.79

56793.82

74710.26

TA

113744.89

105338.64

93619.09

79683.2

92623.9

Total

0.771

0.767

0.786

0.713

0.807

Liabilities
Total

to

Assets

Ratio

Table no:9

Total Liabilities to Total Assets Ratio

0.85
0.8

0.807
0.771

0.767

0.786

0.75

0.713

Total
Liabilities
to Total
Assets

0.7
0.65
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no: 9
INTERPRETATION: IN The Analysis the ratio is continuously increasing and decreasing by year to
year. But in 2011 the Total Liabilities to Total Assets Ratio is increase than
previous year. The Reason of increment is Total Assets are more than total
liabilities and increasing year by year.

72

7.2.3) PROFITABILITY RATIO

Profit is the main objective of any business enterprise. Besides, profitability is the
measure of efficiency. The owners invest their funds in expectation of receiving
reasonable return. Hen c e profitability ratios are very important from the view point
of various shareholders.
7.2.3.1) Gross Profit Ratio
Gross profit margin ratio reflects the efficiency with which management produces
each unit of product. It expressing t h e relationship between Gross Profit earned to
Net Sales. This ratio usually expressed as percentage

Gross profit ratio = Gross Profit 100

Sales

Gross Profit Ratio:

(Rs.cr)

Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Gross Profit

40629.34

37702.61

32253.24

29754.43

28286.09

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

62.58

50.39

49.54

49.70

Gross

Profit 61.41

Ratio
Table no:10

73

Gross Profit Ratio

70

61.41

62.58
49.54

50.39

60

49.7

50
40
Gross
Profit
Ratio

30
20
10
0
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:10

INTERPRETATION: Gross profit ratio shows the relation between gross profit and sales. That
means how much proportion of gross profit in sales. This ratio is decrease in last
year compared to previous year. It is 1.17. From the above data we get Gross Profit
of 2007, 2008, 2009, 2010, and 2011 are 49.7, 49.54, 50.39, 62.58, and 61.41.
In 2008 gross profit ratio is increase from 49.54 to 50.39 in 2009; gross profit
ratio is increase from 50.39 to 62.58. In 2010.

74

7.2.3.2) Net Profit Ratio

Net Profit is obtained when operating expense, interest and taxes are subtracted from
the gross profit. The net profit ratios measured by dividing PAT (Profit After tax) by
sales. This ratio indicates the firms capacity to withstand adverse economic
conditions.
Net Profit Ratio=

PAT
Sales

X 100

Net Profit Ratio:

Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

N.P.

18924

16767.56

16126.32

16701.65

15642.92

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Net Profit Ratio

28.60

27.83

25.20

27.81

27.49

Table no:11

Net Profit Ratio

29

28.6
27.81

27.83

28

27.49

27
26

25.2

Net Profit
Ratio

25
24
23
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:11
Interpretation: Net profit ratio shows the relationship of PAT with the sales. This ratio is in
2007, it is 27.49%, in 2008 it is 27.81%, in 2009 it is 25.20%, in 2010 it is
27.83%, in 2011 it is 28.60% which means PAT is always near to 25% to
30%. Because of Tax charges is increasing year by year.
75

7.2.3.3) Return on Total Investment

Profitability ratio can also be computed by relating the profit of a company to its total
assets. The ROA may also be called profit to asset ratio. This ratio can be
computed by dividing the PAT by total assets.

Return on Total Investment = PAT X 100

Total Assets

Return on Investment Ratio:

Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

PAT

18924

16767.56

16126.32

16701.65

15642.92

T.A

115,068.70

103,688.25

94,771.12

83,100.12 77,032.98

16.17

17.01

20.09

Return on Total 16.44

Investment

Table no:12

76

20.30

Return on Total Investment

25
20

20.3

20.09
16.44

16.17

17.01

15
Return on Total
Investment

10
5
0
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:12

INTERPRETATION: This ratio shows companys profit earned on the total investment made in the
company. This ratio is increase in current ye a r. In 2011 it is 16.44%
and now it is 16.17% in 2010.Because of total assets is decreased compared to
previous year. It is good for the company. But in 2008 the investment is increase than
2009. It is a 20.09 to 17.01.so it is a 3.08% decrease.

77

7.2.3.4) Earning Per Share:

Financial analyst regards the earning per share as an important measure of
profitability. EPS measures the profit available to the equity shareholders on a per
share basis that is the amount that they can get on every share held. It is computed by
dividing the PAT to the No. of equity share.

Earnings Per Share = Profit After Tax

No. of equity share
Earnings per Share
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

PAT

18924

16767.56

16126.32

16701.65

15642.92

Equity share

4,277.76

2,138.89

2,138.89

2,138.89

2,138.89

7.83

7.53

7.80

7.31

Per 4.42

Earning
Share

Table no:13

Earning Per Share

7.83

7.8

7.53

7.31

7
6
5

4.42

4
Earning
Per Share

3
2
1
0
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:13
INTERPRETATION: The earning per share is increases and decreases to year by year. If we can see
in the figure. But in 2010&2011 EPS is decreases because equity share is a
more than PAT. It is a 3.41% decreases. It is good for shareholders. They get
good return.
78

7.2.4.) ACTIVITY RATIO

The activity ratio measures the efficiency with which assets are being used in
business. They are also known as Turnover Ratio. The efficiency with which the
assets are used would be reflected in the speed and rapidly with which assets are
converted into sales. The greater the rate of turnover or conversation, the more
efficient is the utilization / management, other things being equal.
7.2.4.1 Assets Turnover Ratio:
A firms ability to produce a large volume of sales for a given amount of net assets is
the most important aspect of its operating performance. Unutilized assets increase the
firms need for costly financing as well as expenses for maintenance and upkeep. The
net assets turnover should be interpreted cautiously.
Formula: Sales
Net Assets

Sales:
Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Net Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Net Assets:
Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Fixed Assets

18639.55

15648.50

10414.38

10518.01

8839.12

Net Current Assets

24945.84

25353.15

25692.62

24854.08

24183.59

Net Assets

43585.39

41001.65

36107

35372.09

33022.71

79

Assets Turnover Ratio:

(Rs.cr)
Particular

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

N.A.

43585.39

41001.65

36107

35372.09

33022.71

1.47

1.77

1.70

1.72

Assets Turnover 1.52

Ratio

Table no:14

Assets Turnover Ratio

1.7

1.77

2
1.52

1.72

1.47

1.5
1

Assets
Turnover
Ratio

0.5
0
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:14
INTERPRETATION: Here, we have taken as assets turnover as base. The total assets turnover is
increasing year by year till 2011. The investment in net assets in 2007 it is
33022.71 and in 2011 it is 43585.39.which was approximately 10562.69 cr
increase. The company is using the assets efficiently thats why the ratio is
increasing trend.

80

7.2.4.2) Total Assets Turnover Ratio:

The amounts invested in business are invested in all assets jointly and sales
are affected through them to earn profits. So In order to find out relation
between total assets to sales. Total assets include net fixed assets and current assets.
Total Assets Turnover Ratio = Sales
Total Assets

Sales:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Total Assets (T.A.):

(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Fixed Assets

18639.55

15648.50

10414.38

10518.01

8839.12

Current Assets

95105.34

89690.14

83204.71

69165.19

83784.78

Total

113744.89

105338.64

93619.09

79683.2

92623.9

Total Assets Turnover Ratio:

Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

T.A.

113744.89

105338.64

93619.09

79683.2

92623.9

0.572

0.684

0.754

0.614

Total

Assets 0.582

Turnover Ratio

Table no:15
81

Total Assets Turnover Ratio

0.8
0.7

0.684
0.582

0.754
0.614

0.572

0.6
0.5
0.4
Total Assets
Turnover Ratio

0.3
0.2
0.1
0
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:15
INTERPRETATION: Here, we have taken as total assets as base. The total assets turnover is
increasing year by year till 2011. The investment in assets in 2011it is
113744.89and in 2007 it is 92623.9.which was approximately 21120.99 cr
increase. But the total asset of 2007 is a increase than 2011. The company is
using the assets efficiently thats why the ratio is increasing trend.

82

7.2.4.3) Fixed Assets Turnover Ratio:

Here we have also taken fixed assets as base. To ascertain the efficiency and
profitability of business of business, the total fixed assets are compared to sales. This
ratio can be finding out by dividing sales with the total fixed assets. The more the
sales in relation to amount invested in fixed assets, the more efficient is the use of
fixed assets.
Fixed Assets Turnover Ratio = Net Sales
Fixed Assets
Sales:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Net Fixed Assets:

(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Fixed Assets

18639.55

15648.50

10414.38

10518.01

8839.12

Fixed Assets Turnover Ratio:

(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

N.F.A.

18639.55

15648.50

10414.38

10518.01

8839.12

3.85

6.15

5.71

6.44

Fixed

Assets 3.55

Turnover Ratio

Table no:16
83

2006-07

Fixed Assets Turnover Ratio

6.15

6.44

5.71

6
5

3.55

3.85

4
3

Fixed Assets
Turnover
Ratio

2
1
0
2010-11

2009-10

2008-09

2007-08

2006-07

Chart no:16
INTERPRETATION: This ratio shows an efficiently and profitability of the business . The overall
result of this ratio shows year by year fluctuating decreasing. This show the
fixed assets are being used effectively to earn profits in the business. We can
show in the graph. In 2007 the Fixed Assets Turnover Ratio is increase. It is
6.44 after next year it is a decrease. It is a 5.71.In 2009 the Fixed Assets
Turnover Ratio is increase. It is 6.15 after in 2010 and 2011 it is consistory
decrease if show in figure.

84

7.2.4.4) Current Assets Turnover

Current assets turnover ratio indicates productivity ratio, which measures the output,
produced from the given input employed. Current Assets are inputs, which can be
converted in to cash quickly. Higher the current assets turnover ratio, higher the
liquidity of the firm.
Current Assets Turnover =

Sales
Current Assets

Current Assets Turnover:

(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

C.A.

95105.34

89690.14

83204.71

69165.19

83784.78

0.67

0.77

0.87

0.68

Current

Assets 0.69

Turnover

Table no:17

85

Current Assets Turnover

0.87

1
0.8

0.69

0.77

0.68

0.67

0.6
0.4

Current
Assets
Turnover

0.2
0
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:17
INTERPRETATION:

From the above graph, we can say that in the year 2006-07 the ratio is 0.68.
while in the year 2007-08 it increases and reaches to 0.87 which is due to
increase in firms current assets than sales while in year 2008-09 it is
decreased and reaches to 0.77 and also decreases in 2009-10. Which is due to
increase in current assets is more than the firms sales. So the current Assets
turnover ratio is favourable for this year but in compare of year2006-07 to
2008-09 it is unfavourable.

86

7.2.4.5) Working Capital Turnover Ratio:

The Working Capital Turnover ratio measures the company's Net Sales from the
Working Capital generated. A company uses working capital (current assets - current
liabilities) 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.

Working Capital Turnover Ratio= Net Sales

Working Capital
Working Capital = Total Current Assets Total Current Liabilities

NET SALES:
(Rs.cr)
Particulars

2010-11

2009-10

2008-09

2007-08

2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

WORKING CAPITAL:

(Rs.cr)
Particulars
Total

2010-11

2009-10

2008-09

2007-08

2006-07

Current 95105.34

89690.14

83204.71

69165.19

83784.78

Current 70159.50

64336.99

57512.09

44311.11 59601.19

25353.15

25692.62

24854.08

Assets
Total
Liabilities
Working Capital

24945.84

87

24183.59

Working Capital Turnover Ratio:

Particulars

2010-11

2009-10

2008-09

2007-08

(Rs.cr)
2006-07

Sales

66164.34

60251.77

64003.99

60065.10

56913.44

Working Capital

24945.84

25353.15

25692.62

24854.08

24183.59

2.38

2.49

2.42

2.35

Working Capital 2.65

Turnover Ratio

Table no:18

Working Capital Turnover Ratio

2.65
2.7
2.6
2.5

2.49
2.38

2.42
2.35
Working
Capital
Turnover Ratio

2.4
2.3
2.2
2010-11 2009-10 2008-09 2007-08 2006-07

Chart no:18

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. Either the company has been able to gain more Net Sales with the
same or smaller amount of Working Capital, or it has been able to reduce its
Working Capital while being able to maintain its sales. In the above graph the
ratio increase year by year, In year 2011 Ratio is 2.65.and in year 2010 it
decrease in 2.38.The Reason Behind of increase in working capital.

88

Year
2012

CONCLUSION

89

OIL AND GAS CORPORATION LIMITED

Conclusion
It was a great experience to undertake industrial visit at ONGC MEHSANA ASSET
because I learned lot new things regarding my studies. I also got useful insights
regarding financial analysis of this organization and about their proceedings and also
its general background. I also got useful information about how the theory part pf
business management is actually practiced. This kind of industrial visit definitely
helps me to grasp and digest the knowledge of business administration and
management.
After studying the detail of O.N.G.C LTD I reached at conclusion that O.N.G.C has
achieved its entire desire goal with its hard work and unique idea. O.N.G.C is having
a good manpower and provides good facilities to their employees. The majority of the
company's profitability ratios show an increasing trend. The performance of the
company can be considered as satisfactory. As per my opinion that O.N.G.C LTD has
a wide scope to develop in coming years

90

Year
2012

BIBLIOGRAPHY

91

OIL AND NATURAL GAS CORPORATION

LTD

Biblography
1) Annual Report of the company of 2007-2011.

2) Websites:www.ongcindia.com
www.google.com
www.kotaksecurities.com
www.moneycontrol.com
3) Book:Financial Accounting, 3rd Edition, PHI Learning Pvt. Ltd.,
Author- R. Narayanswamy, Part III, Chapter11, Financial Statement
Analysis

92