TERM PAPER OF FINANCIAL MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

SUBMITTED TO: BY: Ms. NITIKA SEHGAL SHARMA

SUBMITTED NITIN ROLL NO RSI903B30

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REG. NO.10904136 M.B.A 2ND SEM

ACKNOWLEDGMENT

The most precious moments are those when we get an opportunity to remember and thank everyone who has in some way or the other motivated and facilitated us to achieve our goals. First of all I thank to GOD ALMIGHTY for giving me power to pen down the term paper in present shape. I thank the entire teaching staff especially Ms. NITIKA SEHGAL for sharing her valuable knowledge with us & for providing her able guidance and support. I also thank to my classmate who every time helped me out and encouraged me for carrying out the task. I fall short of words to thank my family, who stood beside me while completion of my task. NITIN SHARMA

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INDEX
INTRODUCTION HISTORY MANAGEMENT – ONGC PROFIT AND LOSS ACCOUNT COMPITITORS ONGC PERFORMANCE GRAPH CAPITAL STUCTURE ANALYSIS BINLOGRAPHY 4 5-6 7 8-9 10-11 12 13 14 15

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INTRODUCTION
Oil and Natural Gas Corporation

Oil and Natural Gas Corporation Limited (ONGC) (incorporated on 23 June 1993) is an Indian public sector oil and gas company. It is a Fortune Global 500 company ranked 152nd, and contributes 77% of India's crude oil production and 81% of India's natural gas production. It is the highest profit making corporation in India. It was set up as a commission on 14 August 1956. Indian government holds 74.14% equity stake in this company. ONGC is one of Asia's largest and most active companies involved in exploration and production of oil. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India. It produces about 30% of India's crude oil requirement. It owns and operates more than 11,000 kilometres of pipelines in India

International rankings
• • • •

ONGC has been ranked at 198 by the Forbes Magazine in their Forbes Global 2000 list for the year 2007. ONGC has featured in the 2008 list of Fortune Global 500 companies at position 335, a climb of 34 positions from rank of 369 in 2007. ONGC is ranked as Asia’s best Oil & Gas company, as per a recent survey conducted by US-based magazine ‘Global Finance’ 2nd biggest E&P company (and 1st in terms of profits), as per the Plats Energy Business Technology (EBT) Survey 2004

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• •

Ranks 24th among Global Energy Companies by Market Capitalization in PFC Energy 50 (December 2004). Economic Times 500, Business Today 500, Business Baron 500 and Business Week recognizes ONGC as most valuable Indian corporate, by Market Capitalization, Net Worth and Net Profits.

HISTORY
1947--1960
During the pre-independence period, the Assam Oil Company in the northeastern and Attock Oil company in northwestern 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 defense. 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-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among the schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state. Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as

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subordinate office of the Government, to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programmers 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 AFTER 1990 The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees. In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into

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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 investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment in Vietnam.

MANAGEMENT – ONGC
NAME DESIGNATION

R S Sharma A K Hazarika U N Bose Sudhir Vasudeva S S Rajsekar Santosh Nautiyal R S Butola A K Balyan

Chairman and Managing director Director Director Director Director Director Director Director

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D K Pande D K Sarraf L M Vas S Balachandran Anita Das

Director Director (FINANCE) Director Director Non Official Part Time Director

PROFIT AND LOSS ACCOUNT
Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '05

Mar '06

Mar '07

Mar '08

Mar '09

12 mths

12 mths

12 mths

12 mths

12 mths

Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income 46,848.44 48,536.43 57,190.17 60,466.48 64,342.28 689.04 546.69 276.73 401.38 338.29

46,159.40 47,989.74 56,913.44 60,065.10 64,003.99 1,372.66 29.86 2,499.67 211.58 3,107.05 -19.73 4,228.63 114.11 4,085.59 81.10

47,561.92 50,700.99 60,000.76 64,407.84 68,170.68

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TERM PAPER OF FINANCIAL MANAGEMENT Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 6,812.33 214.32 2,746.48 5,662.50 195.45 3,014.71 8,177.22 320.28 3,974.79 8,424.32 317.15 5,843.27 10,905.51 270.79 4,536.80

10,289.74 11,305.10 15,616.76 17,184.51 19,578.49 1,941.77 575.53 0.00 -40.27 1,068.25 0.00 -560.70 1,079.27 0.00 -2,328.21 -4,470.78 983.74 0.00 1,011.04 0.00

22,580.17 21,205.74 28,607.62 30,424.78 31,831.85 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

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

23,609.09 26,995.58 28,286.09 29,754.43 32,253.24 24,981.75 29,495.25 31,393.14 33,983.06 36,338.83 3,548.39 3,718.44 3,724.81 5,016.88 8,485.40

21,433.36 25,776.81 27,668.33 28,966.18 27,853.43 1,824.22 0.00 3,852.76 0.00 3,292.80 0.00 3,915.77 0.00 4,355.62 0.00

19,609.14 21,924.05 24,375.53 25,050.41 23,497.81 146.08 -122.87 -564.27 607.25 790.68

19,755.22 21,801.18 23,811.26 25,657.66 24,288.49 6,685.95 7,321.43 8,041.02 8,941.85 8,437.78

12,983.05 14,430.78 15,642.92 16,701.65 16,126.32 15,767.83 15,543.24 20,430.40 22,000.46 20,926.34 0.00 0.00 0.00 0.00 0.00

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TERM PAPER OF FINANCIAL MANAGEMENT Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 14,259.34 14,259.34 21,388.73 21,388.73 21,388.73 91.05 400.00 328.52 101.20 450.00 378.42 73.14 310.00 289.52 78.09 320.00 330.16 75.40 320.00 368.12 5,703.74 776.33 6,416.70 899.94 6,630.51 1,012.51 6,844.39 1,163.20 6,844.39 1,163.20

COMPETITORS

Last Price

Market Cap.
(Rs. cr.)

Sales Turnover 64,017.82 3.73 23,960.80 270.02 8,428.70 1,055.88

Net Profit

Total Assets

ONGC Cairn India GAIL Oil India Reliance Natural Petronet LNG Alban Offshore

1,082.90 310.85 431.65 1,149.15 65.50 80.45 1,251.95

231,618.51 58,957.92 54,753.83 27,631.82 10,697.00 6,033.75 5,448.01

16,126.31 54.24 2,803.70 69.87 518.44 255.57

94,771.12 31,990.80 15,969.76 3,321.78 4,265.13 4,318.31

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Guj State Petro Guj Gas Hind Oil Explore 90.10 292.05 254.25 5,067.66 3,745.54 3,317.79 487.50 1,417.64 85.18 123.41 175.12 53.57 2,363.13 698.48 1,188.83

ANALYSIS
 The total assets of the ONGC is much greater. While gujrat gas has minimum total assets i.e. 698.48  Net profit of ONGC is much higher i.e. 16,126.31 than its competitors but CAIRN INDIA has lowest profit i.e. 54.24.  Sales of ONGC has again much higher than its competitors.  CAIRN INDIA has again lowest sales in comparisons of all above competitors.  The Market cap of ONGC is much greater than all its competitors while hind oil explore has minimum market cap i.e. 3,317.79.  OIL INDIA has neither profit nor sales turnover and as well as its total assets also nil.  According to profit and loss account the earning per share of ONGC is not increasing every year. In mar.05 it is 91.05 and in mar.06 it is 101.20 i.e. increased by 10.15 while in mar.07, mae.08 NAD mar.09 it is not increases in this way.  Equity dividend of ONGC is increases every year while in mar.o8 to till mar.09 it is stagnant i.e. 6844.39  Operating profit of the ONGC is increased in every year.  Income of the ONGC is increased due to increase in expenditure of the co. like raw material, selling and admin expenses and miscellaneous expenses.  As the above given balance sheet showing that the ONGC does not having preference share capital because it’s a growing company and it has sufficient finance to operate or run the business and the profit of the co.ic also increased.  Equity share capital of the co. is increased in every year due to increase in profit of the co. and it shows that the co. having strong goodwill among its competitors.

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 Reserves of the ONGC are increases in every year due to increase in the net profit of the company.  Current asset of the company also increased means that the company is very good in converting its current assets into cash with in a year.

ONGC PERFORMANCE GRAPH

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ANALYSIS ONGC Profits are increasing in every year so its very good position for the company and also earning per share increasing from year to year it shows that more scope for higher rate of dividends

CAPITAL STRUCTURE OF ONGC LTD.
AUTHORIZED CAPITAL: Authorized Capital Year Shares Face Value Value (Rs Crore) 2006-07 45000 10 450 2005-06 41000 10 410 2004-05 40000 10 400

ISSUED CAPITAL:
Issued and subscribed Year Shares Face Value Value (Rs Crore)

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2006-07 38537 2005-06 38283 2004-05 36175

10 385.37 10 382.82 10 361.75

NOMINAL VALUE OF CAPITAL: • Face Value: Rs. 10 per share. The face value remains the same over the previous three years • Stock Split: There has been no change in the Face Value of the share in the past. ISSUE PRICE OF THE SHARE: • Share Premium Year Share Premium (Rs Crore) 2006-07 1936.4 2005-06 1828.7 2004-05 1473.9 DIVIDEND DISTRIBUTION: • Cash Dividend: Year Proposed Dividend(in Rs. Crore) 2006-07 578.07 2005-06 497.94 2004-05 452.19

ANALYSIS
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. A company's proportion of short and long-term debt is considered when analyzing capital structure. When people refer to capital structure they are most likely referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is. Usually a company more heavily financed by debt poses greater risk, as this firm is relatively highly levered. Following is the final analysis of Capital Structure of ONGC Ltd.:

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WACC is highest in 2008 followed by 2007 & 2009, it shows that the value of firm is highest in 2009 followed by 2007 & 2008.

The retained earnings of the company has increased significantly over the years, it shows the intention of the company for its expansion plans.

In 2009 the Company raised Rs.400 crores by way of private placement of Secured, NonConvertible Redeemable Debentures (“NCDs”) with an average maturity of 6 years. Your Company managed to raise the NCDs at highly competitive rates inspite of there being a sever credit freeze and liquidity crunch in the market.

Capital Structure of the company affects the WACC. Due to the use of debt in the capital structure the WACC decreases, because the debt is the cheaper source of finance. So the WACC has decreased in 2009. But it has increased in 2008.

BIBLOGRAPHY
TEXT BOOKS PARESH SHAH I.M PANDEY WEB SITES
http://www.ongcindia.com/

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TERM PAPER OF FINANCIAL MANAGEMENT www.equitymaster.com/research-it/.../comp_info.asp?h... http://en.wikipedia.org/wiki/Oil_and_Natural_Gas_Corporation http://www.24dunia.com/english-news/search/capital-structure-of-ongc.html http://www.moneycontrol.com/stocks/company_info/pricechart.php?sc_did=ong http://sify.com/finance/stockpricequote/Oil_Natural_Gas_Corporation_LtdONGC/capitalstructure.html

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