A Project Report on

“Liquidity, Efficiency, Solvency, & Profitability Analysis” At Essar Oil Limited Vadinar, Jamnagar
Submitted to The School of Management, Sumandeep Vidyapeeth In the partial fulfillment of the award of the MBA Degree Submitted by Yogesh Jethva SM20090012

Under the Guidance of

Faculty Guide Pinkal Shah Lecturer School of Management Sumandeep Vidyapeeth Piparia, Vadodara

Company Guide Mr. Yogesh Sharma Finance Manager Essar Oil Limited Jamnagar Gujarat

July, 2010

DECLARATION

THE SCHOOL OF MANAGEMENT SUMANDEEP VIDYAPEETH UNIVERSITY, AT+PO-PIPARIYA, WAGHODIA, VADODARA Declare that this project report entitled, “Liquidity, Efficiency, Solvency, & Profitability analysis of Essar Oil Limited ” It is the result of my own research and hard work of 2 Months of the academic year 2010-2011 and has not been previously submitted to any university for any other purpose.

Date:

Signature

Place: Baroda

(Yogesh Jethva)

PREFACE

The objective of this study is to test the Liquidity, Efficiency, Solvency, Profitability of Essar Oil Limited through the help of various ratios. This report is the reflection of what I studied, and some things that I came to know during my training. The knowledge I obtained will be helpful to my studies and in future also.

ACKNOWLEDGEMENT

It is my pleasure that this opportunity to state my excited sense of thanks to my guide “Pinkal Shah” “from “THE SCHOOL OF MANEGEMENT for helpful advice. This report is guided by their co-operation and practicable suggestion. I get chance to recognized my gratitude to director “PROF. B.S.PATEL” of “THE SCHOOL OF MANEGEMENT” I would like thank to my God because without his blessing no work can be completed, I am also very thankful to my parents for their moral support during the project and the people who directly or indirectly gives a fretfully on in preparing this report.

Date: PLACE: PIPARIYA, VADODARA

EXECUTIVE SUMMARY
As the part of Sumandeep Vidyapeeth University MBA College curriculum, summer internship provides the opportunity to get the exposure of working culture of the organization.

Financial analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz. owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analysis. My objective and purpose of this study is to analysis of liquidity, efficiency, solvency and profitability, to find out the degree of deviation from each standard related with liquidity, efficiency, solvency and profitability. And understand the Core function like Finance, Marketing, HR, and Production. Now the methodology of the research is secondary data collection. The whole data was collected through company financial report, balance sheet, and profit & loss account of the last 5 years of the company.

Here current ratio is decrease because of high investment in inventory. Also the Acid test ratio and Absolute test ratio is increase from in this year because of cash management and debtors management. Here also cash management and debtor’s management are more efficient then the inventory management. Debt equity ratio is increasing the last year because of increasing of secured loan as well as unsecured loan. Net worth ( proprietary ) ratio is decrease and fixed assets to net worth ratio is increase because of capitalized the company in 2008-09 so that it is increase and also related to net profit and net profit is also increase which is good sign for the company. Net profit ratio and operating profit ratio is increase because they are maintaining their solvency and efficiency of the company. And expenses ratio is also decrease and expanses ratio is more decrease than company have also benefit of economic scale. So that it is good sign of the company. Company must maintain their current assets and current liability so that current ratio is increase in near future. Company decreases their debt so that company repayment their loans as early as possible so that company can decrease their debt equity ratio. In solvency currently they are maintain their inventory, fixed and current asset so that if they maintain same as in future so that is good sign for the company. In profitability ratio, company decrease their expense as possible as they can so that it helpful of profit in future.

CONTENT
No. Ch 1. Title Page No.

Topic:

Why, Whom, Where, When and How. Definition and Background information about the topic. Identifying the variables and parameters for the particular study.
Ch 2.1 Company Profile: History Benchmark & Milestone Growth & Development Vision, Mission, Spirit Who’s who Ch 2.2 Industry Profile:

Competitive Scenario Market Share Industry Life – Cycle Govt. Rules & regulation
Ch 3.

Overview of Functional Area:
Finance Marketing Human Resource Operations

Ch 4.

Model Application:
Strategic Advantage Profile. Porter’s Five Forces Model. ETOP (Environmental Threat & Opportunity Profile). BCG (Model). Value Chain

Environmental Framework: Economic Political Social Technological Legal

Ch 5.

Research Methodology:
Objectives and purpose of the study Scope of the study, Benefits of the study Assumptions Types of research design Unit of Analysis Methods of data Collection Appropriate tools for data analysis Limitations of the study.

Ch 6. Ch 7. Ch 8. Ch 9.

Data Collection & Analysis: Findings: Suggestions/Recommendations: Bibliography/Annexure

SELECTION OF TOPIC Liquidity, efficiency, solvency and profitability Analysis of Essar oil ltd
WHY:
To measure these four parameters of company. We know that company’s past, present, future data analysis is one of the important factor. So that I have to analysis of Liquidity, Efficiency, Solvency, & Profitability Analysis of the Essar Oil Ltd.

WHOM:
The main purpose to choose this topic was to evaluate the financial position of the company. This topic was decided by me & consolation with finance department.

WHERE:
The Analysis of Company’s Liquidity, efficiency, solvency and profitability analysis at Essar Oil Ltd.

WHEN:
The time period of this research is 1 May, 2010 to 30 June, 2010. Using the data of last Five years.

HOW:
The Calculating of liquidity, efficiency, solvency and profitability from Balance sheet and profit & loss a/c by using Last Five financial Year of the Company.

INTRODUCTION OF FINANCIAL STATEMENT
The basis for financial planning, analysis and decision making is the financial information. Financial information is needed to predict, compare and evaluate the Firm’s earning ability. It is also required to aid in economic decision making –investment and financing decision- making. The financial information of an enterprise is contained in the financial statements or accounting reports. Three basic financial; statement of great significance to owners, management and investors are balance sheet, profit and loss account and cash flow statement. Finance is the set of activities dealing with the management of funds. More specifically, it is the decision of collection and use of funds. It is a branch of economics that studies the management of money and other assets. Finance is also the science and art of determining if the funds of an organization are being used properly. Through financial analysis, companies and businesses can take decisions and corrective actions towards the sources of income and the expenses and investments that need to be made in order to stay competitive.

BALANCE SHEET
Balance sheet is the most significant financial statement. It indicates the financial condition or the state of affairs of a business at a particular moment of time. More specifically, balance sheet contains information about resource and obligations of a business entity and about its owner in the business at a particular point of time. Thus, the balance sheet of a firm prepared on 31 March reveals the firm’s financial position on this specific date. In the language of accounting balance sheet communicate information about assets, liabilities and owners equity of business firm as on a specific date. It provides a snapshot of the financial position of the firm at the close of firms accounting period.

PROFIT AND LOSS ACCOUNT
Balance sheet is considered as a very significant statement by bankers and other leaders because it indicates the firm’s financial solvency and liquidity, as measured by its resources and obligations. However, creditors, particularly bankers and financial analysts in India have recently started paying more attention to the firm’s earning capacity as a measure of its financial strength. The earning capacity and potential of a firm are reflected by its b profit and loss a/c. the profit and loss account is a “score-board” of the firms performance during a period of time. The generally accepted convention is to show one year’s events in the profit and loss account. Since the profit and loss account reflects the results of operations for a period of time. It is a flow statement. In contrast, the balance sheet is a, stock, or status statement as it shows assets, liabilities and owner’s equity at a point of time.

Introduction of financial analysis and types of analysis Types of financial analysis
Vertical analysis Financial analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz. owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analysis. Technique for identifying relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. In a balance shit, for example, cash and other assets are shown as a percentage of the total assets and, in an income statement, each expense is shown as a percentage of the sales revenue financial statement. Using this technique are called financial statement Horizontal analysis Comparative study of a balance sheet or income statement for two or more accounting periods, to compute both total and relative variances for each line item. Cash Flow statement A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance Fund flow statement One of the quarterly financial reports a publicly traded company is required to disclose to the SEC and the public. It provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and its external investment sources as well as all cash outflows that pay for business activities and investments during a specified quarter Time series analysis An analysis of the relationship between variables over a period of time. Time-series analysis is useful in assessing how an economics or other variable changes over time. For example, one may conduct a time-series analysis on stocks to help determine its volatility.

RATIO ANALYSIS Introduction of ratio analysis
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things” in financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding or the performance and financial position of the firm. An accounting figure conveys meaning when it is related to some another relevant information. For example, an Rs 5 crores net may look impressive, but the firm’s performance can be said to be good or bad only when the net profit figure is related to the firm’s investment. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to summaries large quantities of financial data and to make qualitative judgment about the firm’s financial performance. For example, consider current ratio. It is calculated by dividing current assets by current liabilities, the ratio indicts the relationship – a quantified relationship between current assets and current liabilities. This relationship is an index or yardstick, which permits a qualitative judgment to be formed about the firm’s ability to meet its current obligations. it measures the firms liquidity. The greater the ratio, the greater the firm’s liquidity and vice versa. The point to note is that a ratio reflecting a quantities relationship helps to form a qualitative judgment.

Standards of comparison
The ratio analysis involves comparison for a useful interpretation of the financial statement. A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with some standard. Standard of comparison may consist of; • • • • Past ratio: i.e., ratio calculated from the past financial statement of the same firm. Competitors ratios: ratio of some selected firms, especially the most progressive and successful competitor, at the same point in time. Industry ratios: i.e., ratios of the industries to which the firm belongs and Projected ratio: i.e., ratio develop using the projected, or proforma, financial statement of the same firm.

Types of ratio
Several ratios, calculated from the accounting data, can be groups into various classes according to financial activity or function to be evaluated. As stated earlier, the parties interested in financial analyses are short and long term creditors, owners and management. Short term creditors, main interest is in the liquidity position or the short term solvency of the firm. Long term creditors, on the other hand, are more interested in the long term solvency and profitability of the firm. Similarly, owners concentrate on the firm’s profitability and financial condition. Management is interested in evaluating every aspect of the firm’s performance. They have to protect the interest of all parties and see that firm grows profitability. In view of the various users of ratios, we may classify them into the following four important categories:

(1) Liquidity ratio • • • • • Current ratio Acid-test ratio Cash ratio Net working capital ratio Absolute liquidity ratio

(2) Leverage ratio • Debt ratio • Debt equity ratio • Capital employed to net worth ratio • Other debt ratio

(1) Activity ratio • Inventory turnover ratio • Debtor turnover ratio • Assets turnover ratio • Fixed and current assets turnover ratio Working capital turnover ratio

(2) Profitability ratio • ratio • • ratio • ratio • • • ratio • Price earnings ratio Return on equity ratio Earnings per share ratio Dividend per share Return on investment Net profit margin ratio Operating expenses Gross profit margin

Liquidity ratio measure the firm’s ability to meet current obligations; leverage ratio show the proportions of debt and equity in financial the firm’s assets; activity ratio reflect the firm’s efficiency in utilizing its assets, and profitability ratio measured overall performance and effectiveness of the firm.

THEORATICALE FRAME WORK

(1)Variables Different ratios, actual and historical Current ratio Cash ratio Net working capital ratio Debt equity ratio Coverage ratio Debtor’s term over ratio Total turnover ratio Current turnover ratio Net profit margin ratio Operating expenses ratio Return on investment ratio Earnings per share ratio Dividend pays out ratio Price earnings ratio Quick ratio Interval measure ratio Debt ratio capital employed to net worth ratio Inventory turnover ratio Assets turnover ratio Fixed assets turnover ratio Gross profit margin ratio Net profit after tax ratio Cost of goods sold ratio Return on equity ratio Dividends per share ratio Dividend and earning yield ratio Market value to book value ratio

(Note: Here researcher may use the past data and find out any deviation in four functions like Liquidity, efficiency, solvency and profitability and current that deviation.)

LITERATURE REVIEW

The Profitability of Technical Analysis: A Review Cheol-ho park (korea capital market institute) Scott H. Irwin (University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics), October 2004 Summery The purpose of this report is to review the evidence on the profitability of technical analysis. The empirical literature is categorized into two groups, "early" and "modern" studies, according to the characteristics of testing procedures. Early studies indicated that technical trading strategies were profitable in foreign exchange markets and futures markets, but not in stock markets before the 1980s. Modern studies indicated that technical trading strategies consistently generated economic profits in a variety of speculative markets at least until the early 1990s. The data snooping, ex post selection of trading rules or search technologies, and difficulties in estimation of risk and transaction costs. Future research must address these deficiencies in testing in order to provide conclusive evidence on the profitability of technical trading strategies.

Minimum Capital Requirements X Profitability Leao, L. C. G Ph. D. – Ibmec-Mg, Brasil Cristino, M. A. B. M. Sc. – Crediarcos, Brasil Summary:

The predominant aspect of this article is the approach of cooperative foundations of doctrine and the requirement of minimum capital to cover risks, and their influence, or not, the profitability of credit cooperatives of Sicoob Central Crediminas. In this context, the activities of credit cooperatives involve taking various types of risks such as credit, market, liquidity, operationa and reputation. Aware that non-identification and measurement of exposures taken can lead to imbalances of property and to cause a collapse in the credit cooperative, make the relevant empirical research that is proposed this paper, especially considering the events after August 2008. It is through a regression analysis; the known association of these variables, with the intention of contributing to a better understanding of the current status of cooperative credit to the standards imposed on minimum capital and thus is able to suggest reasons that explain the results. Role of Financial Variables in Explaining the Profitability of North Dakota Farm Supply and Grain Marketing Cooperatives Gregory McKee, Assistant Professor, Department of Agribusiness and Applied Economics, North Dakota State University. Fargo, ND, 58108 USA. Phone: 701-231-8521. E-mail: gregory.mckee@ndsu.edu. Summary: This paper examines the profitability of a balanced sample of 58 North Dakota farm supply and grain marketing cooperatives over the period 2003-2007. Our findings reveal that increased liquidity tended to allow farm supply cooperatives to operate more efficiently, but reduced the efficiency of cooperatives which provide farm supply and grain marketing services. These results suggest strategies for cooperatives during times of illiquidity and other credit constraints for achieving profitability objectives.

Liquidity, solvency, and efficiency? An empirical analysis of the Japanese banks’ distress Marie-Joe Bou-Said 1 Philippe Saucier Summary: The long lasting banking crisis in Japan raised questions on the real origin of the persistent and even Increasing fragility of Japanese financial institutions. Although the dominant view points out accumulation of risky assets in the second half of the 1980’s as the main cause for 1990’s bank distress, after the assets bubble had collapsed, it is also argued that poor efficiency in bank management could explain difficulties to resume with sound operation.

INSOLVENCY PREDICTION IN THE PORTUGUESE TEXTILE INDUSTRY Carmem Pereira Leal UTAD University, Portugal. E-mail: cleal@utad.pt Summary: This study explores the main characteristics of the business bankruptcy phenomenon. Some financial ratios are analysed in the context of bankruptcy prediction in Portuguese textile industry, using statistical instruments of multivariate analysis, particularly the discriminate analysis and the conditional analysis of probability (legit). Although these models have been frequently used, it must be underlined that the great popularity assigned to financial ratios as indicators of the firms’ financial health, is still evident in some of the most recent research.

Company Profile
History
The Ruia family’s origins are in Rajasthan. Sometime in the 19th century, they moved to Mumbai and set up their own business. In 1956, Mr. Nandkishore Ruia, father of Mr. Shashi Ruia and Mr. Ravi Ruia, moved to Chennai, capital of the south Indian state of Tamil Nadu, to begin independent business activities. He mentored his two sons in the intricacies of business. When Mr. Nandkishore Ruia passed away in 1969, the brothers laid the foundation of the Group. The Essar Group began its operations with the construction of an outer breakwater in Chennai port. It quickly moved to capitalize on every emerging business opportunity, becoming India’s first private company to buy a tanker in 1976. The Group also invested in a diverse shipping fleet and oilrigs, when the Government of India opened up the shipping and drilling businesses to private players in the 1980s. Then, in the 1990s, Essar began its steelmaking business by setting up India’s first sponge iron plant in Hazira, a coastal town in the western Indian state of Gujarat. The Group went on to build a pellet plant in Visakhapatnam, and eventually a fully integrated steel plant in Hazira. Through the 1990s, with the gradual liberalization of the Indian economy, Essar seized every opportunity that came its way. It diversified its shipping fleet, started oil & gas exploration and production, laid the foundation of its oil refinery at Vadinar, Gujarat, and set up a power plant near the steel complex in Hazira. The construction business helped the Group build most of its business assets. Essar also entered the GSM telephony business, establishing India’s first mobile phone service in Delhi (branded Essar Cellphone) with Swiss PTT as the joint venture partner. The 21st century for the Essar Group has been all about consolidating and growing the businesses, with mergers and acquisitions, new revenue streams and strategic geographical expansion.

Benchmark & Milestone Benchmark

Expansion of existing 10.5-million tone refinery to 34 million tones

Additional single point mooring system to handle crude

Milestone
The 1990s, with the gradual liberalization of the Indian economy, Essar seized every opportunity that came its way. It diversified its shipping fleet, started oil & gas exploration and production, laid the foundation of its oil refinery at Vadinar, Gujarat. Essar oil Ltd is the first private Ltd company of oil & gas refinery in India & Essar oil Ltd is second largest Private sector company in India. • • • Q3 EBITDA jumps to Rs228 crore against a negative EBITDA of Rs740 crore in Q3 of FY 2009 EBIDTA for the nine-month period ended December 2009 increases to Rs1,255 crore against Rs77 crore for the corresponding year-ago period Crude throughput increased 9.3% to 3.51 MMT in Q3 of FY 2010 from 3.21 MMT in the corresponding quarter of FY 2009

Growth & Development
Today, the Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a lowcost manufacturer with high quality products and innovative customer offerings. Alongside its ambitious business pursuits, Essar has been committed to its social responsibility. The Group runs community outreach initiatives in all its plant locations, with a focus on education, healthcare, environmental and agricultural development, and selfemployment. Essar Oil Ltd (EOL, NSE: ESSAROIL) operates a fully integrated oil company. Its assets include developmental rights in proven exploration blocks, a 10.5 MTPA refinery in the west

coast of India and close to 1,500 oil retail stations across India. Plans are under way to increase its exploration acreage in various parts of the globe, expand its refinery capacity to 34 MMTPA and open 5,000 retail outlets.

• • • • • • •

Reputed international agency, NSAI, has certified the in-place resource at the company’s Raniganj block in West Bengal to be at a level of 3.1 tcf and recoverable reserve of about 1 tcf with upside potential. Gas flow has already started and sales are likely to commence from Q4 FY2010. The company has been announced the winner of the Rajmahal CBM block in Jharkhand at the closing of the CBM – IV round of bidding. DGH estimates indicate Rajmahal to be a very good CBM play with 3.2 TCF of in-place resource. The refinery is currently operating at 14 MMTPA at a capacity utilization of 133%. Total crude processed in the 2nd quarter of FY 2010 has been 3.63 MMT, its highest ever. Production of higher margin light and middle distillates has jumped to 75% during Q2 of FY 2010 from 65% of all products during Q2 of FY 2009 The company has finalized its agreement with Indian Oil for the sale of its products and sourcing of products from IOC’s supply locations. Retail operations have been hit by surge in crude prices, with no corresponding adjustment in retail selling prices. The company is making significant efforts to increase its non-fuel revenues to complement its retail sales. Plans are afoot to expand retail outlets to 1500 during FY 2010

Vision Mission Spirit Vision:
We will be a respected global entrepreneur, through the power of positive action.

Mission
We are committed to innovative growth, through our personal passion, reinforced by a professional mindset, creating value for all those we touch.

Spirit
The Essar Group has changed significantly in recent years and continues to evolve, to keep pace with the changing times. We have undertaken a sustainable journey of transformation by foraying into new international markets, and exploring new business areas in a bid to keep our entrepreneurial spirit alive, and to continue growing. To mark the phenomenal growth witnessed over the last four decades, the Group recently unveiled its new brand identity marking a very important milestone in its journey and reflecting a new beginning for the Group. A new brand identity reinforces all the positives to fulfill our vision to be a global entrepreneur through the power of positive action. We aim to have a robust value system comprising positive attitude, positive action and positive achievement.

Privately owned and professionally managed, the Group is judiciously invested in the commodity, annuity and services businesses. Forward and backward integration, the use of state-of-the-art technology, in-house research and innovation have made Essar Global a force to reckon with in each of its businesses. Finally, the Essar way is all about keeping its entrepreneurial spirit alive, and to keep growing with a passion to progress and the power to succeed with a renewed strength of purpose and commitment.

Who’s Who
Promoter Directors

Mr Shashi Ruia Chairman Essar Group

Mr Ravi Ruia Vice Chairman Essar Group

Mr Prashant Ruia Group Chief Executive Essar Group

Mr Anshuman Ruia Promoter Director Essar Group

Ms Smiti Kanodia Promoter Director Essar Group

Mr Rewant Ruia Promoter Director Essar Group

Board of Directors
Mr Shashi Ruia — Chairman Mr Prashant Ruia — Director

Mr Anshuman Ruia — Director Mr Naresh Nayyar — Managing Director Mr P Sampath — Director, Finance Mr Dilip J Thakkar — Director Mr KN Venkatsubramanian — Director Mr K V Krishnamurthy — Director Dr G Goswami — IDBI Bank Limited, Nominee Mr VK Sinha — LIC of India, Nominee Mr RP Singh — IFCI Limited, Nominee

Oil & Gas executive committee members
Promoter Directors Mr Naresh Nayyar — MD and CEO, Essar Oil Ltd. Mr Shishir Agrawal — Director and CEO, Essar Exploration and Production (I) Ltd. Mr Iftikhar Nasir — Executive Director, Strategy and Business Development Mr Naren Vachharajani — CEO, Refinery Operations and International Trade Mr P Sampath — Director Finance, Essar Oil Ltd. Mr S Thangapandian — CEO, Marketing Mr Shaffi Sheikh — Company Secretary and Head, Legal Mr C Manoharan — Head, Refinery Mr Raahil Burhaani — Chief Information Officer Mr DK Jha — Sr VP and Head, EPS Mr K Govindarajan — CEO, Projects Mr Kaustubh Sonalkar — Head, Human Resources Mr T Srinivas — Head, International Supply and Trading

Industry Profile Competitive Scenario
Public Sector
ONGC- Oil & Natural Gas Corporation IOC- Indian Oil Corporation BPCL- Bharat Petroleum Corporation Ltd HPCL- Hindustan Petroleum Corporation Ltd GSPC- Gujarat State Petroleum Corporation

Private Sector
RIL- Reliance Industrial Ltd CEI- Cairns Energy India

Market share
Essar oil ltd is one of the best organizations in India. Essar oil ltd is second largest refinery in India. Market position of the Essar Oil Ltd is quite good as camper to other company. Market share of Essar oil ltd is around 22% in India so the good contribution of product oil & gas by the Essar oil ltd. So we can say that the Essar Oil Ltd is not leading company of oil & gas product but his contribution is good & market position is also good.

➢ The market positioning is quite good then the other company. ➢ Company provides good facilities to the customers. ➢ Well formed & organized built company. ➢ Continuous new technology adopt by the company.

Industry Life Cycle & Growth
The product life cycle concept describes the various stages in the life of a product from introduction to decline. A product which is introduced will eventually die out but the number of year in each stage, particularly the ones generating maximum yield. Indian Petroleum Company is most important for the Indian market. Because of limited sources of oil & gas product & also limited industry of oil & gas product in India. The industrial life cycle of the petroleum industry is as better to the past. Now, the petroleum industry continues growth & development in India. So that we can say that the Indian petroleum industry is on the stage of growth in industrial life cycle. Essar oil ltd was launched a new product then immediate aim would be to gain a foothold in the market & gradually establish itself. Essar oil ltd continues growth because 2008/09 Essar Oil Ltd have huge loss but in 2009/10 Essar have nearby his BEP level. So that continues growth of Essar oil ltd. ➢ Essar oil revenue increase 19.7% in Q3 of FY 2009-2010 to Rs 11,421 crore from Rs 9541 crore in the corresponding quester of FY 2008-2009. ➢ Essar oil is currently operating 1500 retail outlets with a pan- India footprint. This has increased from the 983 active outlets the company had in Dec 2008. ➢ Essar assets include development right in proven exploration blocks a 10.5 MMTPA refinery in the west cost of Indian & close to1500 oil retail stations across India plans are under way to increase its exploration in various parts of the globe, expand its refinery capacity to 34 MMPTA & open 5000 retail outlets.

So that we can say that Essar oil ltd is now on the stage of growth in the industrial life cycle.

Government Rule & Regulation
➢ Consuming or being in possession of alcohol or illegal drugs on company premises, or on any company job site, is prohibited ➢ Fighting, horseplay, practical jokes or otherwise interfering with other workers is prohibited. ➢ Theft, vandalism or any other abuse or misuse of company property is prohibited. ➢ All unsafe acts and conditions, including "near miss" incidents, are to be reported to appropriate supervision promptly. ➢ All incidents that result in damage or injury are to be reported to a supervisor immediately. ➢ First aid treatment is to be obtained promptly for any injury. ➢ Hard hats, safety boots and safety glasses are to be worn at all times on all job sites. ➢ All work shall be carried out in accordance with appropriate safe work practices and the supervisor's direction. ➢ Only those tools that are in good repair, with all guards and safety devices in place, shall be used. ➢ Every worker shall keep his/her work area neat, clean and orderly.

Overview Functional Area
Marketing
Essar Oil serves retail customers through a modern, country-wide network of over 1,000 retail outlets. Essar was the first private, Indian company to enter petro retailing, looking beyond urban marketers and reaching out to consumers deep in India’s heartland. Essar Oil offers a wide range of products to bulk customers in the industrial and transport sectors. EOL has product off take and infrastructure sharing agreements with oil PSUs, namely Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation (IOCL). It has received approvals to supply Aviation Turbine Fuel (ATF) to the Indian Armed Forces. To serve customers under the retail brand “Essar Oil”, we have built a modern, countrywide distribution network of 2000 filling stations. These are designed as complete retail outlets, offering value-added amenities and services in accordance with what customers want in individual markets. Looking beyond the saturated urban markets, we are reaching out to consumers deep in India’s heartland. In addition to petrol, diesel and lubricants, we will market a full range of fuels including naphtha, kerosene and fuel oil.

Structure Of Marketing Department: Marketing department

S&D

MCO

Marketing Accounts

MCO ROAD

MCO RAIL

MCO MARINE

Supply & Distribution:

S&D department is a part of the marketing department; which is responsible for seeking of availability of refinery products to customers and also seeks that all the refinery products are being distributed properly in the domestic market. To ensure proper distribution of refinery products, S&D on behalf of EOL has entered in to purchase and sales agreement with several oil marketing companies like IOC, HPCL and BPCL. It has also entered in to similar contract with private players like RIL, SHELL etc.

MCO (Marketing Co-ordination Office)
MCO is also a part of marketing department which is basically responsible for operational activities i.e. distribution of petroleum products (loading of petroleum product). Presently Essar Oil distribute its products through three modes i.e. Rail, Road and marine. so in order to carry out the distribution process smoothly MCO has been divided in to three divisions namely MCO- Rail, MCO-Road and MCO- Marine.

Retail Business
The retail business unit of Essar Oil is oriented towards delivering better and faster service to its consumers. Essar pioneered the concept of setting up retail outlets using the franchiseeowned, franchisee-operated model. We have more than 1,000 retail outlets across the country, with plans to set up more than 5,000 outlets. Our retail outlets seek to redefine the way fuels are retailed in India. Essar supplies its retail outlets with its branded petrol ‘PUNCH’ and high speed diesel. A host of other products are available that complement petrol (MS) and diesel (HSD), and services that cater to customers’ requirements in different markets. Essar has entered into tie-ups with leading companies like Castrol (for lubes), Pepsi and Coca Cola (for beverages), Biostad and Rallis (for fertilizers), TATA Indicom (for PCO booths) and HDFC.

Essar Retail Strategy:

•Switch from distribution mode to “marketing value-added” mode •Choose franchisee rout  

Faster implementation of retail network Low Cost Quick Payback

•Objective is to acquire a national 10% market share in transportation fuels in diesel

And petrol.
•Average sales per outlet to exceed 150KL per month.

Essar Retail Outlet Model:
•Franchisee owned franchise operated model     

The business model of Essar is a trendsetter in the Indian Petro-Retailing industry. The model is based on the franchise format. Franchisee leases his land to ESSAR OIL LTD for a period of 30 years. Franchisee makes the investment in site for retail outlet development. Franchisee operates and runs the retail outlet.

•The leased land attracts 5%per annum as lease rent on assessed value of land. •The total investment made by the Franchisee attracts 5% p.a. return on normative

Cost.
• Additionally, Franchisee earns commission on per KL sales of MS and HSD which is

10% higher than PSU commissions.
•We have slab based commission system.

Distribution Network:

Tanker/road (retail/bulk) Road R Customer Inland Terminal Primary supply O depot location A D

Product Distribution Process:
Refinery

(Product produced)

PIT (Product Intermediate Tank)

Dispatch Tank

Gantry

Tank Truck/ Tank Wagon

Logistic Department
Logistic is the process of strategically managing the procurement, movement and storage Of materials, parts and finished inventory (and the related information flows) through the Organization and its marketing channels in such a way that current and future profitability And maximized through the cost-effective fulfillment of orders. The mission of logistics management is to plan and co-ordinate all those activities Necessary to achieve desired levels of delivered service and quality at lowest possible Cost. “The scope of logistics spans the organization, from the management to raw materials Through to the delivery of the final product.” Materials Flow

suppliers

procurement

operations

distribution

Customers

Requirements information flow

Logistics management, from this system viewpoint, is the means whereby the needs of Customers are satisfied through the co-ordination of the materials and information flows That extends from the marketplace, through the firm and its operations and beyond that to Suppliers.

Distribution
The logistics chain includes the owners (wholesalers and retailers), manufacturers' agents, and transportation channels that an item passes through between initial manufacture and final purchase by a consumer. At each stage, goods belong (as assets) to the seller until the buyer accepts them. Distribution includes four components:
1.

Manufacturers' agents: Distributors who hold and transport a consignment of
finished goods for manufacturers without ever owning it. Accountants refer to manufacturers' agents' inventory as in order to differentiate it from goods for sale.

2.

Transportation: The movement of goods between owners, or between locations of
a given owner. The seller owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but most transportation providers act as the agent of the owner of the goods.

3.

Wholesaling: Distributors who buy goods from manufacturers and other suppliers
(farmers, fishermen, etc.) for re-sale work in the wholesale industry. A wholesaler's inventory consists of all the products in its warehouse that it has purchased from manufacturers or other suppliers. A produce-wholesaler (or distributor) may buy from distributors in other parts of the world or from local farmers. Food distributors wish to sell their inventory to grocery stores, other distributors, or possibly to consumers.

4.

Retailing: A retailer's inventory of goods for sale consists of all the products on its
shelves that it has purchased from manufacturers or wholesalers. The store attempts to sell its inventory (soup, bolts, sweaters, or other goods) to consumers.

Finance
Financial management involves the application of general management principles to particular finance operations. It is that part of management which is concerned mainly with raising funds in the most economic and suitable manner, using these funds as profitability as possible; planning future operations; and controlling current performances through financial accounting, cost a/c, budgeting, statistics and other means. Financial management provides the best guide for future resource allocation by a firm. Financial management is important because it has an impact on all the activities of a firm. Financial management is concerned with those managerial decisions which result in the acquisition and financing of long term and short term assets of a firm.

Structure
Finance Manager.

Accounts Officer.

Accountant & Staff.

The above organizational chart is an illustration as to how the authority and responsibility has been delegated at Essar Oil Limited. EOL follows line organization structure as authority depends from the top of hierarchy to its bottom level and responsibility runs from bottom level to the top of hierarchy.

Financial planning
One of the most important functions of finance manager is that of planning. Financial planning is essentially concerned with the economical procurement and profitable use of funds – a use which is determined by realistic inventories decisions. Financial planning helps management to avoid waste by providing policies and procedures which make possible a closer coordination between various functions of the business enterprise. Financial planning is responsibility of top level management.

Budget
Budget generally refers to a list of all planned expenses and revenues. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. The purpose of Budgeting is to:

1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast. In Essar, for the simplicity of work, the budget section is divided in two sub-sections: ➢ Capital Expenditure Budget ➢ Operating Expenditure Budget

Capital Expenditure Budget:
Capital expenditures (CAPEX) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capex are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. In accounting, a capital expenditure is added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or value of an asset as adjusted for tax purposes). Capex is commonly found on the Cash Flow Statement as "Investment in Plant Property and Equipment" or something similar in the Investing subsection. For tax purposes, capital expenditures are costs that cannot be deducted in the year in which they are paid or incurred, and must be capitalized. The general rule is that if the property acquired has a useful life longer than the taxable year, the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in question. As stated above, capital expenditures create or add basis to the asset or property, which once adjusted, will determine tax liability in the event of sale or transfer.

Included in capital expenditures are amounts spent on: 1. Acquiring fixed assets 2. Fixing problems with an asset that existed prior to acquisition 3. Preparing an asset to be used in business 4. Legal costs of establishing or maintaining one's right of ownership in a piece of property 5. Restoring property or adapting it to a new or different use 6. Starting a new business In Essar, for budget planning purpose, each and every department is assigned a cost center code. Each department has to define its budget by estimating the assets they want to buy in that year. According to that, budget is allocated to the various cost centers by the budget department. Each department has to manage within the allocated budget. If at the end of the year they found that their expenses are more than the budget allocated to them, than that department has to give justification about the over expenditure to the budget department.

Operating Expenditure Budget:
An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an on-going cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier is the CAPEX, and the annual paper and toner cost is the OPEX. For larger systems like businesses, OPEX may also include the cost of workers and facility expenses such as rent and utilities. In business, an operating expense is a day-to-day expense such as sales and administration, or research & development, as opposed to. In short Production, costs, and pricing, this is the money the business spends in order to turn inventory into throughput. Operating expenses also include depreciation of plants and machinery which are used in the production process. On an income statement, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year. • • • • Accounting expenses License fees Maintenance and repairs Advertising

• • • • • • • • • •

Office expenses Supplies Attorney fees and legal fees Utilities, such as telephone Insurance Property management Property taxes Travel and vehicle expenses Leasing commissions Salary and wages

For OPEX, the budget allocation is done in the same way as is done in CAPEX. For budget planning purpose, each and every department is assigned a cost center code. Each department has to define its budget by estimating the assets they want to buy in that year. According to that, budget is allocated to the various cost centers by the budget department. Each department has to manage within the allocated budget. If at the end of the year they found that their expenses are more than the budget allocated to them, than that department has to give justification about the over expenditure to the budget department.

For Essar Oil Ltd. the main sources of fixed capital are equity shares. To maintain appropriate fixed capital the company follows various measures. The company maintains the liquidity. Excess loans taken from the bank is repaid. Fixed capital is mainly required for the fixed assets like machineries, land and building and other assets. Following are the Written down value of fixed assets of Essar Oil Ltd. As at March 31 2009.

• • •

Land : - Rs. 60.11 Crores Buildings : - Rs. 249.99Crores Plant and machinery : - Rs. 12029.58 Crores

• • •

Furniture and fixtures : - Rs. 2,00 Crores Office equipment : - Rs. 12.93 Crores Vehicle : - Rs. 5.12 Crores

SOURCES OF FINANCE
When a firm wants to invest in long term or short term assets, it must find the means to finance them. The firm can rely to some extent on funds generated internally. However, in most cases internal resources are not enough to support investment plans. When that happens the firm may have to curtail its investment plan or seek external sources of finance. Most firms choose the later course of action. They supplement internal funding with external funding rising from a variety of sources. The following sources of long-term finance commonly employed by business firms: • • • • Retained Earnings. Equity Capital. Debentures. Term Loans.

The following sources of short term finance are commonly employed by business firms: • • • • • • • Short Terms Loans. Commercial Banks. Finance Companies. Accrual Accounts. Indigenous Bankers. Advances from Customers. Miscellaneous Sources.

Essar Oil Ltd. has planned the sources of finance on the basis of their requirements. For long term finances sources employed by the company are equity shares, debentures etc. For short term finances the sources employed by the company are loans from banks, loans from financial institution.

CAPITAL STRUCTURE
Capital structure is sometime known as the financial plan. It is the permanent financing of the firm represented by long term share capital by equity shares and preference shares. In capital structure the proportion of capital is to decide with regard to use of debt and equity. The requisition of proportion arises because if company issues only ownership capital then it cannot satisfy the main objective i.e. to maximize the shareholders return and if the company issues more borrowed capital then it has to pay compulsory interest and thus it reduces shareholders capital. Thus the mixture of debt and equity is called capital structure. Capitalization is the sum total of all kinds of long term securities as well as surplus which are not meant for distribution. The amount of capital at any time should not exceed not should be less than the amount required in both the situation company will be the loser. Capitalization means the total amount of a company capital of total volume of its capital stock. In other words, we can say that the capitalization means the total borrowed capital and ownership capital of the firm. If the resource funds and retained profit increases with the growth of company it means capitalization of the company is increasing.

WORKING CAPITAL MANAGEMENT
Working Capital may be regarded as the lifeblood of a business. Its effective provisions can do much to ensure success of a business, while its inefficient management can lead not only to loss of profits but also to the ultimate downfall of what otherwise might be considered as a promising concern. The term working capital is commonly used for the requirement of capital for daily operation of a business i.e. for purchase of raw material, payment of salaries and wages to the employees, rent for the building, electric charges, etc. and working capital is concerned with the problem that arrives to attempt to manage, current assets, relationship that exist between them.

Current assets means, “Those assets which are easily converted into cash within one year.”

Inventory: Inventories are being valued at the lower of cost and net realizable value. The cost of inventory is determined using the weighted average cost formula. Amount of Inventory is as follows: Raw material = Rs.1137.05crore Work-in-progress = Rs.614.22crore Traded/finished goods = Rs.289.31crore Store and spare parts = Rs.184.04crore Other consumables = Rs.26.31crore Total = Rs.2250.93crore.

Market Capital
During the year, pursuant to shareholders approval obtained at Extraordinary General Meeting held on 18th December, 2007, the company allotted 27,771,948 equity shares of Rs. 10/- each of the overseas depositories for Global Depository Shares (GDSs) on issue of GDSs aggregating to US$129.418 million to promoters on preferential issue basis. Authorized share capital: Rs.5, 000.00crore Issued share capital: Rs.1263.46crore Paid up share capital: Rs.1201.53crore

Human Resource
Human Resource Management
At the Essar Group, they believe that excellent individuals build excellent companies. And by transforming each employee into a highly motivated, satisfied and productive team member, they will create an outstanding organization. They also understand that each individual has unique talents and expectations from the organization. Based on those principles, human resources development at Essar is customized, flexible and well planned. Every Essar employee is meticulously selected and given the freedom to be innovative, within a work culture that is non-bureaucratic and result-oriented. They work with employees to develop personalized and flexible individual plans for career growth, retention and compensation within a carefully structured work framework. Through extensive career mapping, they offer a choice of career paths that could include job rotations across functions and Group Companies. Essar's wide range of businesses and exciting pace of growth presents a range of opportunities and exposure that only a few others can match. The Group has a very serious commitment to continuous training and development. Essar Learning Centre provides yearround training. Thus, a career with Essar will offer a unique opportunity to unlock your own potential and realize excellence.

Management Structure
Managing Director/ Executive Director/ CEO/Head of Corporate functions Senior Vice President Vice President General Manager Joint General Manager Deputy General Manager Senior Manager Manager Deputy Manager Senior Officer Officer

General Information Office timing
   

General shift: 7:30a.m. To 5:30p.m. Shift A: 6a.m. to 2p.m. Shift B: 2p.m. to 10p.m. Shift C: 10p.m. to 6a.m.

The A, B and C shift is currently to operation department.

Mobile Phone
The facility of mobile phones to the employees is totally need based and depends on the nature of job responsibility entrust to the employee. This will be decided by the respected HOD and approved by the Head.

Canteen facility
Three canteens functioning at site, where breakfast/ snacks are available in the morning hour and lunch from 12:00p.m. To 2:30p.m. At fixed charges. Tea, coffee etc is served in the office two times in the morning hour and once in the afternoon.

Mail Room
A full fledge mail office functions from Refinery Administration Building, Wing No. 2 courier service, postal stationary items etc are available on payment. The mail room person can be contacted at extant 1118

Transportation Facility

The company provides free bus services to commute to and from all corners of Jamnagar, Sikka and Khambhalia.

 This facility is provided up to M6 (DGM) and M5 & above to made their own arrangements.

Employee sitting beyond 7:30p.m. Can request for vehicle from transport department.

Attendance & leave rules Attendance
All employees are expected to reach the place of work at least five minutes before the commencement of working hours.

All employees have to sign the attendance muster.

Leave rules
All confirmed employees will be entitled to 26 working day earned leave in a leave year from the date of joining. An employee on probation can avail earned leave on completion of 3 months of probation. All confirmed employee will be entitled to 12 working days as medical/ casual leave out of which 5 working days may be avail of as a casual leave.

Salary Structure
EOL has flexi CTC concept, which offers employees to modify their CTC Components. CTC include Basic, PF, Superannuation, Gratuity, Food Allowances, Conveyance Allowance Certain special allowances, HRA, LTA, Medical, Variable allowances, etc.

Recruitment at EOL
For new position arising due to project expansion and for other higher positions EOL first prefers departmental candidates if they are suitable to job. Then priority is given to relatives of employees. If still suitable candidates are not found then it goes for other sources of recruitment.

RECRUITMENT PROCESS Interviews at EOL
At Essar, usually semi-structured interviews are conducted so as to know the inside out of candidates. Interviewers often make observations and take notes of candidate’s response given during the interview, body language, subject knowledge, way of reply and behavior, nervousness, aggression, overall impression created by the candidate, check leadership qualities, analytical skills, communication skills, personality and attitude, etc.

Due weight age is given to the habits and actual facts noticed during the interview for the final selection. Past work experience is also assessed so as to predict the future performance.

Types of Appointments Permanent Appointment
All the regular roll employees are permanent employees and are employed in different levels i.e. M-11 to M-01 (lower to higher). Services of such employees are transferable to any part of India as per requirement of the company.

Contractual Appointment
Such employees are appointed for a particular project. As soon as the project gets complete, they are released or the company may extend their services for another project if they are suitable to job. They are known as project roll employees. Their services are non transferable.

Consultants/Advisers
Certain highly experience personnel, usually above the age of 50 are appointed on contractual bases for specific project or assignment in different functional areas for specific time duration to guide existing employees and share their experience and impart knowledge of respective field.

Trainees
Fresh graduate/Post graduate Engineers, Diploma Engineers and fresher from management field are appointed as trainees by campus interviews. If they succeed in training which last usually for one year they will be absorbed in the management cadre as per their qualification. DET are put at M-11, MT and GET at M-10 level.

Induction & Orientation
The objective of induction and orientation programmed is to introduce the new employee and the organization with each other, to help them become acquainted and explain upcoming one what is expected from him on the job. New employee is introduced with various department

personals, he is made familiar with the work culture so that he can adopt and adjust himself in the same as early as possible. Sometimes few materials like handbook etc. may be provided which contain information related to business group, ongoing projects, employee compensation benefits, personnel policies, sources of information, employee daily routine and inside out of the company. Checklist for induction programmed at EOL: 1. 2. 3. 4. Briefing about company objectives, policies, practices and regulations. Introduce new employee to his colleagues. Provide assistance for any query like accommodation etc. Explain working condition.         5. Method and mode of reporting Safety and accident preventions Holidays and leaves Transportation facility Working hours and break time Security formalities for entry and exit Communication system Overtime policy

Explain company standard as to the following:      Handling confidential information Attendance and punctuality Performance norms Wearing uniform Discipline and behavior, safety rules

INDUCTION PROGRAMME
Complete Joining Formalities

Briefing about Business Group/Company Objectives

Explain Company Standards

Explain Working Condition

Introduction to Staff

Offer Assistance for accommodation etc.

Release Employee to his Department

Management trainee programmed
Through the management trainee Programmed, Essar hires post graduate management students from top ranking business schools throughout India. Trainees are initially hired as a group resource for a range of functions such as marketing, finance, human resources and operations. Essar makes selections between December and February, through a rigorous selection process. Selected candidates then go through a comprehensive one-month induction Programmed, which includes classroom sessions, an introduction to all the group companies, plants and corporate functions, and a six-day executive leadership camp at the Essar Learning Centre. Soon after the induction, in an interview with corporate human resources each trainee has the opportunity to discuss mutual expectations, a career map and the group company and assignment that he or she will be posted to. Trainees are confirmed after completing the oneyear management trainee Programmed. Depending on their capabilities, management trainees can usually look forward to a faster career track, an expanded role and eventually, a leadership position within the organization.

Welfare Activities and Facilities
Welfare activities are carried on at Essar, not as a social or legal liability but as a parental care. Essar is commuted to take a due care of its employee’s personal life including their family members. Following are the glimpse of the same…

• Bachelor Colony
ECL provides a bachelor colony at Vadinar site that includes around 200 employees of all levels. Colony also provides very good facilities like cricket ground, volleyball ground, and recreation hall with carom board, table tennis, television etc.

Labor Colonies
GOMTI, YAMNOTRY, PRAYAG and MYTHOI are four labor colonies with best infrastructure that includes around 13,000 workers.

• •

Employee entitlements
Various events, Programmers, get to gather, parties, festival celebration, sports activities, etc. are arranged on frequent basis.

• Bank Account
All the employees have their salary account with banks designated by Essar Oil Limited under the corporate arrangement.

• Leave Rules
All the confirmed employees are entitled to get 26 working days leave in a year and 12 working days leave as a medical/casual leaves

• Accident Insurance • Medical facilities • Free transportation facilities • Canteen facility

STATUTORY FACILITIES
• • • • • • • Shelters, Rest rooms and Lunch room First-aid facilities Storing facilities Washing facilities Urinal and Toilet facilities Sitting Facilities Canteen facilities

Labor Welfare, as define in a resolution in 1947 by ILO is “such services, facilities and amenities as adequate canteen, ret and recreation facilities, arrangement of travel to & from work, and for the accommodation of workers employed at a distance from their houses and such other services, amenities and facilities which contribute to improve the conditions under which workers are employed.

NON STATUTORY FACILITIES
Following are the non statutory facilities provided by the company on volunteer basis so as to motivate and facilitate the employees. •Education help •Sports activities •Uniform •Cultural events on Establishment Day •Snacks and tea •Medical reimbursement •Winter wear •Long service award

Operation
REFINERY DIVISION
Essar Oil Refinery at Vadinar in Jamnagar, Gujarat is ideally located in India's West Coast in close place to the crude rich Gulf States. Vadinar is an all-weather deep-draft natural port. More than 60% of India's crude imports land in and around this region. The company has already embarked up gradation of the expanding the refining capacity at Vadinar from the present capacity 10.5 MMTPA to 34 MMTPA with an investment of close to Rs.10 Billion (USD 2.2 billion). The refinery is fully integrated with its own dedicated 120 MW co-generation power plant, port and terminal facilities. It includes a Single Point Mooring (SPM) capable of handling vessels up to 350, 000 DWT with a capacity; marine product dispatch capacity of 14 MMTPA; rail -car and truck loading facilities.

OIL EXPLORATION & PRODUCTION
Essar Oil was among the first private sector company in India who had participated in 1993’s bidding round for exploration blocks. It currently has participation interest in several blocks in India and overseas for exploration, production and development of oil, gas and coal bed methane. In order to strike a right balance between Exploration as well as Production, Essar Oil has constantly looked out for new opportunities. Company’s current Geo-graphical areas of focus are Indian sub-continent, the Middle East, Saharan Africa, Australia, Russia etc. Company’s current E&P portfolio comprises Nine Onshore and Three Offshore blocks for oil, gas and CBM in India, Madagascar, Myanmar and Nigeria with total acreage of about 46,000 sq. km. in onshore and 4,600 sq. km. in offshore, held under Essar Exploration & Production Limited. In the early 1990's and undertake drilling, hydro-fracturing and de-watering of 3 CBM wells, in the Cambay Basin, near Mehsana, Gujarat, India. EEPL was setup and is also currently augmenting, a highly enriched technical team and highly motivated management team, consisting of specialists in finance, business development, logistics, human resources, and project consultancy.

PLANT LOCATION ESSAR REFINERY AT VADINAR
The refinery at Vadinar, India of Essar Oil Limited was commissioned on November 28, 2006. The refinery has the most advanced configuration with following major process units:

Crude Distillation Unit (CDU)
This is a mother unit in which crude oil is fractionated into different products like light naphtha, heavy naphtha, Lkero, Hkero, LGO and HGO by distillation process. The unit has major equipments like world's tallest crude distillation column, fired heater, network of heat exchangers, coolers and air coolers, pumps, compressors and vessels. The unit operation is fully automatic with the most advanced instrumentation and control system to ensure safe and the most energy efficient operation.

Vacuum Distillation Unit (VDU)
This is a basic unit to upgrade the atmospheric residual oil received from CDU through distillation process carried out under vacuum and to derive the products like vacuum distillate, LVGO, HVGO and HHVGO. The unit has major equipments like vacuum distillation column, ejector system, fired heater, pumps, vessels and the integrated network of heat exchangers, coolers and air coolers with CDU.

Vis Reaker Unit (VBU)
The vacuum residue received from VDU is further upgraded to derive more distillates by thermal cracking process in this unit. The thermal cracking takes place in the furnace and distillates are obtained through two stage distillation in atmospheric and vacuum distillation columns.

Fluid Catalytic Cracking Unit (FCCU)
The LVGO and HVGO (received from VDU) as well as gas oils obtained from VBU are further upgraded into useful products like LPG, gasoline, diesel components, etc. through catalytic cracking process carried out in the specially designed reactor in this unit.

The catalyst is also continuously regenerated and reused in the unit to reduce production cost drastically

Saturated Gas Unit (SGU)
Refinery gases and light naphtha steams are processed in this unit to recover LPG components and reduce gaseous losses such as to maximize LPG production.

Naphtha Hydrotreater and Catalytic Reformer Unit (NHT-CCR)
Naphtha produced in the refinery is processed in this unit to produce high octane blending component to boost octane of the gasoline pool.

Treating Units
The products like LPG, gasoline, kerosene, ATF, diesel, etc. obtained from various units in the refinery undergo finishing treatments to meet the highest quality standards for these products mainly w.r.t. sulfur and olefins contents. The refinery has following treating units: a) Diesel Hydro Desulfurization Unit( Under construction) b) Kerosene Treating Unit c) Gasoline Treating Unit d) LPG Treating Unit

Automation of Refinery Operation
The operation of the entire refinery involving all the process units and all the facilities is made fully automatic with the most advanced instrumentation and control system to ensure safe and the most energy efficient operation.

Organizational & group structure Essar Group
Essar Steel Ltd

Essar Oil Ltd Essar Power Ltd Essar Construction Ltd Essar Shipping & Logistic Ltd Essar Telecom Ltd Essar Bpo (Agies Ind ) Ltd Essar Agro Ltd

Model Application
A. Strategic Advantage Profile:

The Strategic Advantage Profile analysis is nothing but the strength and the weakness of the company. It includes every aspect which connects to the betterment of the company and also to know at which place the company is lacking. So, this is the reason why the company makes up to the SAP analysis. And, the strength and the weakness of the company is treated to be one of the important factor to get to know about the company’s future courses, the improvement sessions, the collectivism, and also the improvising part. Let us see the strength and the weakness of the company as per the departments in a tabular measurement way:

Areas MARKETING 1. Company Reputation 2. Market Share 3. Customer Satisfaction 4. Customer Retention 5. Product Quality 6. Service Quality 7. Pricing 8. Distribution Effectiveness FINANCE 1. Cost of Capital 2. Cash Flow 3. Financial Stability
4. Financial Growth

Performance Strength Weakness Major Minor Neutral Minor Major ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ •

Importance Rating High Medium Low 3 3 2 3 3 2 1 3

✔ ✔ ✔ ✔

2 2 2 1

Human Resource 1. Recruitment 2. Trainee programmed 3. Welfare ✔ activities & facilities

✔ ✔

2 2 3

Symbols ✔

Rating System RATING 3 GOOD 2 SATISFACTORY 1 BAD

This is the rating which I took into consideration in the study of the company. And, by this you can easily judge the company’s strengths and weaknesses. Still, the company is lacking in some course of actions but the stages of the improvements are going high.

A. Porter’s 5 Forces Model: The Porter's 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're looking to move into. The tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations too.

Under stated is the Porter’s 5 Forces Model:

Supplier Power

Barriers to Entry

RIVALRY

Threats of Substitutes

Buyer Power 1) Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. Suppliers large Similar products Differentiation of inputs Impact of inputs

2) Barriers to Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. No technology protection Brand Identity Government Policy Capital requirements New product launch 3) Buyer Power:

Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. Price sensitivity Brand identity High buyer power Product differentiation 4) Threats of substitution: This is affected by the ability of your customers to find a different way of doing what you do Price Performance Competitors Relationship Management Switching costs 5) Rivalry: What is important here is the number and capability of your competitors – if you have many competitors, and they offer equally attractive products and services, then you’ll most likely have little power in the situation. If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength.

B. ETOP:

ETOP is commonly used to report the external environment situation. It is used to relate to external business environment. It considers with the external factors of the company. And, also deals with the Opportunities and Threats. ETOP includes some environment factors like economic, social, technological, political, legal affect by the organization. The economic factors like the employment, income, inflation, recession, productivity and wealth of the consumers & firm. So that economic factors is also affected to the orgnization.The income of the people is also affected like the income increases of the people they purchase more product but their income is low then people purchase less product. The inflation is at the least base of the economic factors which could be affected but it also has a bit of play in market. The pricing factor is also affect, internal & external factor affect to the organization.

Environment Threats: 1. The main threats are Adverse Macroeconomic Factors in the organization.
2. The Essar oil ltd some Stringent Regulations in the organization. 3. The Essar oil ltd Intense Domestic Competition to the organization 4. The Essar oil ltd main threats are income of the people & inflation rate..

Opportunity Profile:
1. The Essar oil ltd considering New Assets Acquisition in the organization. 2. The Essar oil ltd is the Coalbed Methane Operations in the organization. 3. The Essar oil ltd is the Expansion Plans for the refinery of the organization.

4. The progressive report shows the company is getting into and taking improvements steps in the field itself by the help of the technology, by the time in this moving technological world. 5. The Essar oil ltd provides employment to the people.

A. BCG Matrix:
BCG Matrix is basically based on the study of the review note. It is a study of relation between market share and market growth. And, the level of high and low rating scale is classified. BCG Matrix Model:

Now, here it says like the rating scale relation between Market Share and Market Growth. – – The Market share serves the measure of strength in the market. The Market growth rate provides a measure of market attractiveness.

Let us see it in detail in further:
1. Stars:

Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Need of the heavy investment is necessary to sustain growth. So, in here, the company relates to heavy investment and in return the heavy returns for their customers. So, majorly the STARS Stage is not in the suitable position to be called to be the company’s motive for long term periods. They relate this activity in the initial stages as to get into market and held their position.

2. Cash Cows: Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.

The investments are made to give the best out of the company. There is a stagnant appeal growth in the company which lead the company to this level where it is successful and mature in flowing of funds and profits. 3. Question Marks: Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. It is never in the stage like this where they need potential to be grown up. From the initial stage only the company is in the pathway of growth and development. And, there grow up into the market share in the market; they had been successful in generating funds for their expenses at the vital intervals. 4. Dogs: The term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Our company situation has never been into such practices to be into such stages. In here, it says that the company can get into such low practices. Finding Now, we can say that Essar Oil Ltd is in the cash cows stage in present. As, from the establishment in year 1990, the investments are made to give the best out of the company. There is a stagnant appeal growth in the company which lead the company to this level where it is successful and mature in flowing of funds and profits.

A. VALUE CHAIN:
The value chain as a tool for identifying ways to create more customer value. Every firm is a synthesis of activities that are performed to design, produce, and market, deliver, and support its product. Value chain identifies nine value creating activities consist of five primary activities and four support activities. The primary activity includes the following points:

• • • • •

Inbound Logistics Operations Outbound Logistics Marketing & Sales Service

Now let us see the above points into the company’s terms: 1. Inbound Logistics: Bringing new material into the business is the purpose of the inbound logistics. The Essar oil ltd is purchase 40% of crude for the oil & gas product by nearest place & More than 60% of India's crude imports land in and around different region. This row material goes to the operation for the further process. 2. Operations: Operation relates with the motive, goal and subject. A specific goal for the inputs made in the inbound stage. So, we have to define a goal for the inputs made. The Essar oil ltd the row material of the further processing in to the refinery & different product produces by the company like Naphtha, Heavy Naphtha, Lkero, Hkero, LPG, Gas, Diesel, Oil etc 3. Outbound Logistics: It relates to the finished goods. The product now are been manufactured and are ready to be launched into the market for their sales and stacks. The product is produces then the product sales in to the market. Different product sales in different market. The Essar oil ltd is also sales the product in different state of India & also export the product in different country. 4. Marketing & Sales: The marketing and sales plays a vital role in the part of the oil manufacturing for the company because if marketing is done in a proper way then it is obvious that the sales of the oil would take place. And, if sales are made in the proper channel then the marketing could be carried out as well. So, sales and marketing are inter related. And, it also includes the channel of distribution. 5. Services: It leads the after sales services and the in - stock services given by the company. The services provided to the customers of the company also plays major role in success of product launch. Because, customers if are in trouble using it then there should be someone who can guide them at the trouble shoot.

Environmental Framework
Economic
Economic factors, such as employment, income, inflation, interest rates, exchange rate,

recession productivity, and wealth, that influence the buying behavior of consumers and
firms. The economical environment affects the company in many ways.

➢ As, it relates to the factors like employment, and employment plays in the affecting factors because if the recruits are not placed properly then it do affect. Because it is like the right person at right place. ➢ The income factor plays like the income redemption to the employees of the company. And, with it the payments should be made unbiased and towards his capability. ➢ The inflation is at the least base of the economic factor which could be affected but it also has a bit of play in market. ➢ The most important is the pricing factor in which the people are most interested. ➢ The recession is also important factor affect to the company & market.

Social
Social environment affects people live and behave as they do.
➢ The social environment affects the Company in the greater way because the Company

is serving to the societal benefits. ➢ The prevention facilities are concern to the social living only. ➢ The company proved different type of facilities like Education, social welfare activity & so on ➢ The company is affected by social environment are:

External Factors Relationship Customerization Preventive measures Well – Being facilities Satisfaction level Internal Factor Employee’s stagnancy Benefits to the employees Payment benefits Delegation of work force

Technological
The technology is the most important of the company. The technological factor plays an important role in the company’s positional scenario. They are totally measured as the development of the company. The technical factors are affected in the internal courses only. The present scenario of the company can be measured through the technical aspects which takes place in the company at the time of the activist of the company. The way of treating, operating, analyzing, etc can be included in the technological factors of the company. ➢ The present scenario of the company as per the technological factor is concerned are as under • Operating facilities • Analyzing • Billing • Filling • Payment • Operating facilities • Billing • Filling • Payment • Conferencing • Training ➢ The progressive report shows the company is getting into and taking improvements steps in the field itself by the help of the technology, by the time in this moving technological world. ➢ ➢ ➢ ➢ ➢

Political
➢ The basic understanding of the political legal environment is when the government

implement's laws and regulations which affect the way a business operate. ➢ The political factors are affecting in the way of the government rules and regulations.
➢ The format of the start the business, the form filling, the prescribed relative

documentaries, the sanction planning of the company.
➢ These all are factors which are the affecting the company in the current scenario but

still the political issue in the profession of the oil industry is at its least possession.

Legal
➢ Sets the basic rules for how a business can operate in society. ➢ Without legalization the company cannot make its place on the market. ➢ The legal aspect also includes the government. Because the highest authority is the government. ➢ So, for that the basic rules are to be followed to reunite any of the company. ➢ So, legal environment also play a part to be followed into the company and it does affect vigorously. ➢ There are various steps to be carried out for the legalization and that is included in the legal environment.

RESEARCH METHODOLOGY
Objective and purpose of the study
• • • • To analysis of liquidity, efficiency, solvency and profitability To find out the degree of deviation from each standard related with liquidity, efficiency, solvency and profitability. To do detail inquiry to fill gap of deviation To understand the Core function like Finance, Marketing, HR, Production.

Scope of the study
The time period of this research is within two month at Essar Oil Ltd. Basically quantitative data collection of the last Five year. This analysis is just for the Essar oil ltd at Jamnagar.

Benefits of the study
For company • • • Company is able to know existing position of a four function like Liquidity, efficiency, solvency and profitability Company is also able to know the deviation in the Liquidity, efficiency, solvency and profitability And how to improve this deviation of liquidity, efficiency, solvency and profitability.

For reader • It can be useful to those who want to do further research on this topic as guidance.

Assumption

Researcher may assume that the primary and secondary data is fair. Primary data collected by the researcher is true to the extent possible. No adjustment has been done in the data collect for secondary sources.

Types of research design
Here researcher take a descriptive research design because of the variable is well known and well define and existing theory of analysis of financial statement for module liquidity, efficiency, solvency, and profitability is going to be check in Essar Oil Ltd. Also well aware about the problem and subject of the research and also we know the various techniques to solving particular problem.

Unit of analysis The unit of analysis is as under: Current ratio Cash ratio Net working capital ratio Debt equity ratio Quick ratio Interval measure ratio Debt ratio capital employed to net worth ratio

Coverage ratio Debtor’s term over ratio Total turnover ratio Current turnover ratio Net profit margin ratio Operating expenses ratio Return on investment ratio Earnings per share ratio Dividend pays out ratio Price earnings ratio

Inventory turnover ratio Assets turnover ratio Fixed assets turnover ratio Gross profit margin ratio Net profit after tax ratio Cost of goods sold ratio Return on equity ratio Dividends per share ratio Dividend and earning yield ratio Market value to book value ratio

Methods of data collection
Secondary methods: Researcher is use primary methods as well as secondary methods because they may use the profit and loss account and balance sheet of the company for the last five year analysis so it is secondary methods. Primary methods: I have relied on the facts and figures as published in the Financials of Essar Oil Limited and also conducted interviews on test basis to modify/change any assumption that I have made in the analysis of data of Essar Oil Limited

Appropriate tools for data analysis
We may use statically tools like central tendency measure of variation and mathematical tools like ratio analysis

Limitation of the study
• The main limitation of this research is short period of time and other factor is cost

• •

Data is closed so there is a chance of deviation in actual situation Researcher has retied on primary & secondary data as available from time to time.

DATA COLLECTION
The data are collocated from publish financial report and also from the balance sheet and profit and loss account of company.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

Data analysis Liquidity
1. Current Ratio
Ratio
Current Ratio 0.92

2008-09
0.85

2007-08
0.98

2006-07

2005-06
1.17

2004-05
1.05

Current Ratio refers to the ability of a firm to meet its obligation in the short run, usually one year. Normally, High Current Ratio is considered to be a sign of Financial Strength. An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liabilities exceed current assets, then the company may have problems meeting its short-term obligations. The ratio is mainly used to give an idea of the company's ability to pay back its

short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations.

2. Acid-Test Ratio
Ratio
Acid-Test Ratio

2008-09
0.53

2007-08
0.34

2006-07
0.31

2005-06
1.01

2004-05
0.81

Acid-Test Ratio is more conservative measure of liquidity. The ratio of current assets less inventories to total current liabilities. This ratio is the most stringent measure of how well the company is covering its short-term obligations, since the ratio only considers that part of current assets which can be turned into cash immediately (thus the exclusion of inventories). The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice. also called acid-test ratio. A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

3. Absolute Liquidity Ratio
Ratio 05
Absolute liquidity Ratio 0.57

2008-09
0.17

2007-08
0.13

2006-07
0.16

2005-06

20040.58

A subsequent innovation in ratio analysis, the Absolute Liquidity Ratio eliminates any unknowns surrounding receivables. Absolute liquidity is represented by cash and near cash items. It is a ratio of absolute liquid assets to current liabilities. In the computation of this ratio only the absolute liquid assets are compared with the liquid liabilities. The absolute liquid assets are cash, bank and marketable securities. It is to be observed that receivables (debtors/accounts receivables and bills receivables) are eliminated from the list of liquid assets in order to obtain absolute4 liquid assets since there may be some doubt in their liquidity.

Solvency
1. Debt Equity Ratio
Ratio
Debt Equity Ratio 2.13

2008-09
2.80

2007-08
2.78

2006-07
2.86

2005-06

2004-05
2.41

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle.

2. Net worth (Proprietary) Ratio
Ratio
Net Worth Ratio 0.27

2008-09
0.17

2007-08
0.17

2006-07

2005-06
0.19

2004-05
0.26

This ratio relates the shareholder's funds to total assets. Proprietary / Equity ratio indicates the long-term or future solvency position of the business. Shareholder's funds include equity share capital plus all reserves and surpluses items. Total assets include all assets. In that case the total shareholder's funds are to be divided by total tangible assets. As the total assets are always equal to total liabilities. This ratio throws light on the general financial strength of the company. It is also regarded as a test of the soundness of the capital structure. Higher the ratio or the share of shareholders in the total capital of the company, better is the long-term solvency position of the company. A low proprietary ratio will include greater risk to the creditors.

3. Fix Assets to Net worth Ratio
Ratio
Fix Assets to Net Worth Ratio 0.06

2008-09
3.52

2007-08
0.12

2006-07

2005-06
0.07

2004-05
0.07

Measure of the solvency of a firm, this ratio indicates the extent to which the owners' cash is frozen in the form of brick and mortar and machinery, and the extent to which funds are available for the firm's operations. Fixed assets are going to be a stable source of income over a period. Variable will change in price over a given period. Where variable can bring a higher rate of return fixed will always bring a steady sure rate of return.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

4. Current Assets to Net worth Ratio
Ratio
Current Assets to Net Worth Ratio 0.47

2008-09
1.65

2007-08

2006-07
2.10

2005-06
1.55

2004-05
0.37

This Ratio Shows extent to which share holder own fund sunk into CA assets. Higher the ratio, stronger the financial position of business and vice versa

5. Current Liability to Net worth Ratio
Ratio
Current Liability to Net Worth Ratio 0.51

2008-09
1.93

2007-08
2.15

2006-07

2005-06
1.33

2004-05
0.36

A measure of the extent to which the enterprise is using creditor funds versus their own investment to finance the business. It Indicates reliance on the equity for payment of debt. It is one of the measures of the solvency of a firm. Higher percentages mean significant pressure on future cash flows.

6. Interest Coverage Ratio
Ratio
Interest Coverage Ratio -144.58

2008-09
1.61

2007-08

2006-07

2005-06
-8.36

2004-05
-18.61

-8.43

A calculation of a company's ability to meet its interest payments on outstanding debt. Interest coverage ratio is equal to earnings before interest and taxes for a time period, often one year, divided by fix interest expenses for the same time period. The lower the interest coverage ratio, the larger the debt burden is on the company. A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.

7. Inventory Turnover Ratio
Ratio
Inventory Turnover Ratio 14.55

2008-09
91.91

2007-08

2006-07
1.20

2005-06
2.15

2004-05
7.73

Although the first calculation is more frequently used, sales may be substituted because sales are recorded at market value, while inventories are usually recorded at cost. Also, average inventory may be used instead of the ending inventory level to minimize seasonal factors. This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. This ratio reveals how well inventory is being managed. It is important because the more times inventory can be turned in a given operating cycle, the greater the profit.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

8. Working Capital Turnover Ratio
Ratio
Working Capital turnover Ratio -10.90

2008-09
-37.20

2007-08
-3.20

2006-07

2005-06
0.72

2004-05
14.70

A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. A company uses working capital to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation.

9. Fix Assets Turnover Ratio
Ratio
Fix Assets Turnover Ratio

2008-09
2.98

2007-08

2006-07
1.31 2.41

2005-06
3.45 7.21

2004-05

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year

2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

10.Current Assets Turnover Ratio
Ratio
Current assets Turnover Ratio 0.93

2008-09
6.34

2007-08
0.07

2006-07

2005-06
0.10

2004-05
0.68

Ratio that indicates how efficiently a firm is using its current assets to generate revenue. Current Assets Turnover ratio shows the productivity of the company's current assets.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

11.Total Assets Turnover Ratio

Ratio
Total Assets Turnover Ratio 0.12

2008-09
1.83

2007-08
0.03

2006-07

2005-06
0.03

2004-05
0.07

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue the higher the number the better. It also indicates pricing strategy: companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

Profitability
1. Operating profit Ratio
Ratio Operating Profit Ratio
3.60%

2008-09
3.20.%

2007-08
-6.31%

2006-07

2005-06

2004-05
-10.41%

-8.31%

Operating profit ratio earned by the concern from its business operation & not from the other sources. While calculating the net profit of the concern all income either they are not part of the business operating profit like rent from tenants, interest on investment etc are added & all non operating expenses are deducted. Operating profit ratio shows the relationship between operating profit & net sales. Operating profit ratio indicates the earning capacity of the concern on the basis of its business operation & not from earning the other sources. It shows whether the business is able to stand in the market or not.

2. Expense Ratio
Ratio
Expense Ratio 1.08

2008-09
1.00

2007-08
1.10

2006-07

2005-06
1.13

2004-05
1.24

For a operating costs, including management fees, expressed as a percentage of the average net assets for a given time period. The expense ratio does not include brokerage costs and various other transaction costs that may also contribute to a total expenses. An expense ratio is determined through an annual calculation, where a operating expenses are divided by the sales under management. Operating expenses are taken out of a fund's assets and lower the return to a investors.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

3.

Net Profit Ratio (After Tax)
2008-09
-1.37% 0.94%

Ratio
Net Profit Ratio -14.71%

2007-08
-7.32%

2006-07

2005-06
-14.24%

2004-05

The net profit ratio is net profit expressed as a percentage of total sales. Net profit is taken before tax and other indirect costs. Essentially the net profit ratio tells us about how the company's profits relate to their sales. Different industries have fundamentally different net profit ratios. The net profit ratio can tell us about the nature of the industry the company is operating in as well as serving to compare past performances of a company. NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.

4. Return on Net Worth
Ratio 2008-09 2007-08 2006-07 2005-06
-2.25%

2004-05
-3.72%

Return on net Worth Ratio 14.34% 0.41%

-1.14%

Effective measure to know sustainable profitability. Return on net worth represents the profit after tax & Net worth.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year

2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

5. Return on Total Resources
Ratio
Return On Total Resources Ratio 0.11%

2008-09
-2.50%

2007-08
-0.19%

2006-07

2005-06
-0.43%

2004-05
-0.98%

Return on total Resources is Represent profit after tax & total assets.

Note:
The company has commenced commercial production of Refinery on May 1, 2008. All Expenditure pertaining to the completed Refinery being advances on capital account, capital work in progress & expenditure during construction have been capitalized during the year 2008-09. Hence it will not be possible to compare effectively the financial results of the organization over a period of time due to the capitalized effect.

Findings
➢ Here current ratio is decrease because of high investment in inventory. ➢ Also the Acid test ratio and Absolute test ratio is increase from in this year because of cash management and debtors management.

➢ Here also cash management and debtor’s management are more efficient then the inventory management. ➢ Debt equity ratio is increasing the last year because of increasing of secured loan as well as unsecured loan.

Net worth ( proprietary ) ratio is decrease and fixed assets to net worth ratio is increase because of capitalized the company in 2008-09 so that it is increase and also related to net profit and net profit is also increase which is good sign for the company. Here all the ratio is increasing then the last year because of company is capitalized and these are related with profitability ratio. and reflect the liquidity and efficiency.

Net profit ratio and operating profit ratio is increase because they are maintaining their solvency and efficiency of the company. And expenses ratio is also decrease and expanses ratio is more decrease than company have also benefit of economic scale. so that it is good sign of the company.

Suggestion
➢ Company must maintain their current assets and current liability so that current ratio is increase in near future.

Company decreases their debt so that company repayment their loans as early as possible so that company can decrease their debt equity ratio.

➢ In solvency currently they are maintain their inventory, fixed and current asset so that if they maintain same as in future so that is good sign for the company. ➢ In profitability ratio, company decrease their expense as possible as they can so that it helpful of profit in future.

Bibliography Essar.com

Essarnet.com

Annexure Essar balance sheet & profit/loss account