Understanding

Cash Flow Statement

For BPCL, Year ending 2019-20 and 2020-21
Team details

Aishwarya A R 44112 Deepanshu M Tyagi 44165

Akanksha Achint Toppo 44113 Duke Pande 44175
Akshita Garg 44121 Homan Jamuda 44186
Amitava Mondal 44126 Ishika Agarwal 44189
Vaishnavi Chandak 44156 Jahnabi Hazarika 44191
Darshna Verma 44161
 Cash flow from operating activities (CFO)
indicates the amount of money a company
brings in from its ongoing, regular business
activities, such as manufacturing and selling
goods or providing a service to customers. It

Cash flow from is the first section depicted on a company's

cash flow statement.
Operating CFO focuses only on the core business, and is

activities also known as operating cash flow (OCF) or net

cash from operating activities.

Operating Cash Flow = Net Income + Non-

Cash Expenses – Increase in Working
Capital
Net Profit Before Tax (After Exceptional Items)

2020-21: 22,617.58 2019-20: 2,671.04

Net profit is the measurement of a company's profit

once operating costs, taxes, interest and depreciation
have all been subtracted from its total revenues.

Net Profit = Total Revenue - Total Expenses

Net PBT saw an increase by 746.77%

 Depreciation 2020-2021: 3,978.05 2019-2020: 3,786.89

Depreciation is a type of expense that is used to reduce the carrying value of an

asset. It is an estimated expense that is scheduled rather than an explicit expense.

The use of depreciation can reduce taxes that can ultimately help to increase net income. Net
income is then used as a starting point in calculating a company's operating cash flow. Operating
cash flow starts with net income, then adds depreciation/amortization, net change in operating
working capital, and other operating cash flow adjustments. The result is a higher amount of cash
on the cash flow statement because depreciation is added back into the operating cash flow.
Depreciation is a non-cash item and hence, Rs 3,978.05 and 3,786.89 charged as depreciation
does not result in any cash flow. Therefore, this amount must be added back to the net profit.

Ultimately, depreciation does not negatively affect the operating cash flow of the business.
Depreciation expense reduces profit but does not impact cash flow (it is a non-cash expense).
Hence, it is added back.
Finance costs 2020-2021: ,328.36 2019-2020: 2,181.86

Finance costs are also known as “financing costs” and “borrowing costs”. Companies
finance their operations either through equity financing or through borrowings and
loans.
Finance costs of Rs 1,328.36 and 2,181.86 is a Finance cost is a financing cash
cash outflow on account of financing activity. outflow is to be added back while
Therefore, this amount must also be added other income such as interest
back to net profit while calculating cash flows received which is investing cash
from operating activities. This amount of inflow is to be deducted from the
finance cost will be shown as an outflow under amount of net profit.
the head of financing activities.
Foreign Exchange
Fluctuations
Currency fluctuations are a natural
outcome of floating exchange rates
The net profit / loss arising due to
conversion of current assets /
current liabilities, receivable /
payable in foreign currency is
furnished under the head "Foreign
Exchange Fluctuations".
2020-21: (129.46)
2019-20: 1,021.17
Unrealized gains and losses arising from
changes in foreign currency exchange
rates are not cash flows. However, the
effect of exchange rate changes on cash
and cash equivalents held or due in a
foreign currency is reported in the cash
flow statement in order to reconcile
cash and cash equivalents at the
beginning and the end of the period.
(Profit) / Loss on Sale of Property, Plant and Equipment
2020-2021: 21.29 2019-2020: 41.14

(Profit) / Loss on Sale of Investment in Subsidiary

2020-21: (9,422.41) 2019-2020: nil

(Profit) / Loss on Sale of Current Investments

2020-21: (3.58) 2019-20: (26.31)

Indirect method of ascertaining cash flow from operating activities

begins with the amount of net profit/loss. This is so because statement
of profit and loss incorporates the effects of all operating activities of an
enterprise.
However, Statement of Profit and Loss is prepared on accrual basis (and not on
cash basis). Moreover, it also includes certain non-operating items such as interest
paid, profit/loss on sale of fixed assets, etc.) and non-cash items (such as
depreciation, goodwill to be written-off, etc..

Therefore, it becomes necessary to adjust the amount of net profit/loss as shown

by Statement of Profit and Loss for arriving at cash flows from operating activities.

(Profit) / Loss on Sale of Property, Plant and Equipment: Hence, this amount must be added
from the amount of net profit while calculating cash flows from operating activities.

(Profit) / Loss on Sale of Investment in Subsidiary : It is cash inflow from investing activity.
Hence, this amount must be deducted from the amount of net profit while calculating cash
flows from operating activities.
(Profit) / Loss on Sale of Current Investments: It is cash inflow from investing activity. Hence, this
amount must be deducted from the amount of net profit while calculating cash flows from
operating activities.
Dividend
Received
(2,068.23)
(1,091.81)
Dividends received by a company for its own
investments are reported as an operating
activity under GAAP. An operating activity is
any activity engaged in by a company that has
a direct impact on cash flow, whether it is
money coming in or money going out from
the company. Dividends received are an
indication of income coming into the company
as they are paid out as a result of the
company's own financial investment portfolio.
Income from
Investments
(1,211.30)
(1,099.08)
Income from investments by a company are
reported as an operating activity under GAAP.
An operating activity is any activity engaged in
by a company that has a direct impact on cash
flow, whether it is money coming in or money
going out from the company. Dividends
received are an indication of income coming
into the company as they are paid out as a
result of the company's own financial
investment portfolio.
Expenditure towards Corporate Social Responsibility
2020-21: 136.25 2019-20: 198.98

It reflects as an expense in the statement of P/L so it

should be added back to the net profit to ascertain cash
inflow/outflow from operating activities.

CSR expenditure witnessed a reduction by 31.52%

Share Options Outstanding Account
2020-21: 940.72 2019-20: nil

Options outstanding refers to the total of all options granted that have not yet been
exercised, forfeited or expired, irrespective of whether they are vested (exercisable) or
otherwise.
Total expense of ` 940.72 Crores
The Share Options Outstanding account is (Previous year : Nil) arising from share
used to record the fair value of Equity- based payment transactions is
settled Share-based Payment transactions recognized in Statement of Profit and
with Employees. The amounts recorded in Loss as an exceptional item. Since it is
an exceptional item it needs to be
Share Options Outstanding Account are
added to the net profit to determine
transferred to Securities Premium upon
the true cash inflow/outflow from
excersice of Share options. operating expenses
 Impairment of Investment
Other Non-Cash items
in Subsidiary
2020-21: 1,170.59 2019-20: 791.98
2020-21: 2,032.79 2019-20: nil

non-cash expenses, like

depreciation, so in the cash
flow statement they will be
added back when reconciling
operating profit to cash
generated from operating
activities, just like depreciation
again.
Impairment losses are non-cash
expenses, like depreciation, so in
the cash flow statement they will be
added back when reconciling
operating profit to cash generated
from operating activities, just like
depreciation again.
 Operating Profit before Working Capital Changes
2020-21: 19,390.65 2019-20: 8,475.86
Calculation of Operating Profit Before Working Capital Changes:

Net Profit Before Tax and Extraordinary Items

Add:-Depreciation
Unamortised Expenses written off(eg share issue expenses, Discount on issue of shares, Loss on
issue of debentures)
Goodwill, patents etc amortised
Loss on sale of Fixed Assets
Interest on borrowings
Interest on Debentures
Less:-Interest income
Dividend Income
Rent income
Profit on sale of Fixed Assets

=Operating Profit Before Working Capital Changes

 Working capital changes: and Cash generated from Operations
2020-21: 22,962.25 2019-20: 7,810.69

Inventories (6,325.74) 45.67

Trade Receivables (2,604.05) 1,357.78
Other Receivables 6,144.77 2,097.16
Current Liabilities and Payables 6,356.62 (4,165.78)
Effect of changes in Working Capital is to be taken into as follows:

Current Assets : An increase in an item of current assets causes a decrease in cash inflow because cash
is blocked in current assets. A decrease in an item of current assets causes an increase in cash inflow
because cash is released from the sale of current assets

Current Liabilities: An increase in an item of current liability causes a decrease in cash outflow because
cash is saved. A decrease in an item of current liability causes an increase in cash outflow because of
payment of the liability. Then you arrive at cash generated from operations
Net Cash from / (used in) Operating Activities
2020-21: 20,128.43 2019-20: 6,265.30

Direct Taxes Paid (2,719.10), (1,235.50)

Paid for Corporate Social Responsibility (114.72), (309.89)

These are deducted because income tax payments are operating outflows in the cash flow statement

Taxes on income arise on transactions that give rise to
cash flows that are classified as operating, investing or
financing activities in a cash flow statement. While tax
expense may be readily identifiable with investing or
financing activities, the related tax cash flows are often
impracticable to identify and may arise in a different
period from the cash flows of the underlying
transactions. Therefore, taxes paid are usually classified
as cash flows from operating activities.
Depreciation expense reduces profit but
does not impact cash flow (it is a non-
cash expense). Hence, it is added back.
Similarly, if the starting point profit is
above interest and tax in the income
statement, then interest and tax cash
flows will need to be deducted if they are
to be treated as operating cash flows
Cash flow from
operating activities
 Cash Flow from
Investing Activities
For BPCL, Year ending 2019-20 and 2020-21
Purchase of Property, Plant and Equipment / Intangible Assets
(6,162.09) (9,367.80)

Capital Advance
2020-21: 27.99
2019-20: 70.64

been a decrease in the amount of cash outflow for purchase of property, plant and
There has
equipment and assets, as well as the amount for capital advance. Both these heads seeing a
decrease implies a lower acquisition or investment activity by the company.
 Sale of Property, Plant and Equipment 2020-2021: ,55.14 2019-2020: 27.03

There is a significant increase in the cash inflow from sale of property, plant and equipment.
This suggests that either a higher number/volume of assets were sold, or, the valuation of
assets has increased over the year, or both.
Investment, Loans and Advances to Subsidiaries, Joint Venture
Companies and Associates

3 subsidiaries have
shown a decreased
return, by virtue of higher
OD values. 3 subsidiaries
have shown a net
increase in cash flow.
There has been no investment by BPCL in capital contribution, or purchase of bonds.
There has been a reduced purchasing of treasury bills, and reduced revenue by sale of treasury bills.
There is a reduction in purchase of Mutual Funds, but a slight increase in sale of MF.
Interest received and Divident recieved have both increased
Net cash flow from investing activities has seen an increase from negative
values to a positive net.
Cash At Hand Cash and Cash
2020-21: 16.08, Equivalents
2019-20: 6.08

Cash at hand has largely increased. This Cheques in hand as well as cash at
can be primarily due to the returns of bank has seen a large increase. This
higher operating cash flow, along with can be attributed to the inflow from
inflow from sale of assets sale of assets, sale of Mutual funds,
and interest and dividend received, ie,
Money in the bank due to investing activities, as well has a
higher operating revenue.
Cheques and drafts on hand - Cash at Bank -
2020-21: 6.68 2020-21: 203.76
2019-20: 6.10 2019-20: 86.09
Cash and cash equivalents
 Deposits in Bank

Demand deposits with Banks with original maturity of less than three months 6,140.00, nil
Investment in Triparty Repo Settlement System 149.93, nil
Less : Bank Overdraft 2020-21: (38.41), 2019-20: (196.90)

There has been an investment by the company in deposits with the bank and the Triparty
Repo system. This was a new expenditure that was not recorded in the previous FY.
Bank Overdraft has seen a large decrease.

Net Increase/Decrease
This implies that the total cash
flow from Operating, Investing
and Financing activities has
yielded a large return, and the
company is still in growth.
Increase/(Decrease) in Cash and Cash Equivalents
2020-21: 6,577.57
2019-20: 34.00
Net increase in Cash and Cash
equivalents observes an immense
increase.
On referring to the balance sheet, the
balance sheet also represents a higher
value as on EoFY 2020 than EoFY 2020.
Net Cash flow from
financing activities
For BPCL, Year ending 2019-20 and 2020-21
Cash flow from financing activities (CFF) measures the movement of cash between a
firm and its owners, investors, and creditors. This report shows the net flow of funds
used to run the company including debt, equity, and dividends.

What is Included in the Cash Flow from Financing Activities?

Financing activities refer to the transactions involved in raising and retiring funds. The
former is associated with cash inflow, and the latter denotes cash outflows.
 Cash flow from financing activities
The items in cash inflow from financing activities usually include the following:
Issuance of ordinary shares.
Issuance of preference shares.
Issuance of debentures and bonds.
Availing of loans from banks and other institutional sources – increase in short-
term and long-term borrowings

Cash outflow from financing activities consist of the following transactions

Dividend payment.
Payment of interest on debts.
Repaying debts.
Repayment of financial lease obligations.
Dividend distribution tax
Buyback of shares.
Analyzing Cash Flow From Financing Activities

Cash flow from financing activities is a section of a company’s cash flow statement,
which shows the net flows of cash that are used to fund the company.
Financing activities include transactions involving debt, equity, and dividends.
Debt and equity financing are reflected in the cash flow from financing section, which
varies with the different capital structures, dividend policies, or debt terms that
companies may have.

 Positive and Negative CFF

Debt and equity financing are reflected in the cash flow from financing section, which varies with the
different capital structures, dividend policies, or debt terms that companies may have.
Transactions That Cause Positive Cash Flow From Financing Activities
Issuing equity or stock, which is sold to investors
Borrowing debt from a creditor or bank
Issuing bonds, which is debt that investors purchase
A positive number for cash flow from financing activities means more money is flowing into the company
than flowing out, which increases the company’s assets.
Transactions That Cause Negative Cash Flow From Financing Activities
Stock repurchases
Dividends
Paying down debt
Negative CFF numbers can mean the company is servicing debt, but can also mean the company is
retiring debt or making dividend payments and stock repurchases, which investors might be glad to see.
CFF is calculated :
CFF = Cash flows from issuance of equities and debts – (Dividends + Interest + Stock
repurchase + repayment of debt + repayment of lease obligations + dividend distribution tax)
 1. Payment of Lease Rentals (Principal 2021- 124.24 2020- 102.47
Component)

2. Payment of Lease Rentals (Interest 2021- 534.55 2020-507.82

Component)

Lease Rentals means, with respect to any

(a) which are on account of maintenance
period, the sum of the minimum amount of
rental and other obligations required to be paid
during such period by the Company or any
Subsidiary as lessee under all leases of real or
personal property (other than Capital Leases),
excluding any amounts required to be paid by
the lessee (whether or not therein designated
as rental or additional rental)
and repairs, insurance, taxes, assessments,
water rates and similar charges, or (b)
which are based on profits, revenues or
sales realized by the lessee from the leased
property or otherwise based on the
performance of the lessee.
Short Term Borrowings (Net) 2021- 13,325.19
2020- 13,906.40
Liabilities that represent money borrowed from banks or other institutions to fund
the ongoing operations of a business that will come due within one year.
We can see that the short term borrowing is decreasing from the year 2020 to 2021
which mean the cash is going out i.e, Cash outflow

Long Term Borrowings

Long-term debt appears in the cash flow statement under financing activities. This
includes borrowings and payments. A business must weigh the decision to borrow
against the company's future prospects. A heavy debt burden coupled with a
sudden economic downturn could put a company out of business rather quickly.
In the LTB the cash is coming in i.e., Cash Inflow

 Repayment of Long Term Borrowings 2021- 3,661.13 2020 - 5,987.71

The cash outflow for debt initially having maturity due after one year or beyond the normal
operating cycle, if longer.

Interest Paid 2021- 1,230.59 2020- 1,326.62

Interest is the monetary charge for the privilege of borrowing money, typically expressed as an
annual percentage rate (APR). Interest is the amount of money a lender or financial institution
receives for lending out money

In the earlier years the interest paid rate was higher but in the year 2021
 Dividend Paid 2021- 4,261.30, 2020- 4,818.86
A dividend is a token reward paid to
the shareholders for their investment in a company's
equity, and it usually originates from the company's net profits. At times, companies may still
make dividend payments even when they don't make suitable profits.

BPCL is a profitable organization whose net profit of Rs 17,319.8 crore on a consolidated basis
for the fiscal ended March 31, 372.5% higher than the profit posted a year ago.

Dividend Distribution Tax 2021 -N/A , 2020- 918.98

The Dividend Distribution Tax is a tax levied on dividends that a company pays to its shareholders
out of its profits. However, an additional tax is imposed on the shareholder, who receives over Rs.
10 lakh in dividend income in a financial year.

Company reports net profit of Rs 11,940 crore, to pay record Rs 12,581 cr dividend. The
company’s revenue from operations rose 21.5 percent on a year-on-year basis to Rs 98,755.6
crore for the quarter, which was sharply higher than analysts’ estimates.
....cont
In another important development, the company’s board approved a final dividend
of Rs 58 per share, which includes a one-time special dividend of Rs 35 per equity
share. The special dividend pertains to the proceeds collected from the shares sold
by the company belonging to BPCL Trust. The dividend works out to Rs 12,581.66
crore, including a special dividend of Rs 7592.38 crore, majority of which will go to
the government before the company's privatisation.

The state-owned refiner’s bottomline was boosted by a one-time gain of Rs

6,992.95 crore

Net Cash from / (used in) Net cash is a figure that is reported
on a company's financial statements.
Financing Activities It is calculated by subtracting a
15,622.27, 2,940.22 company's total liabilities from its
total cash. Net cash may also refer to
The company’s net cash is more the amount of cash remaining after
compared to the year 2020 which a transaction has been completed
means the company is profitable and all associated charges and
and there is cash inflow to the deductions have been subtracted
organization.

Overall, net cash flows for the

company during FY21 stood at Rs
15,622 from the Rs 2,940 net cash
flows seen during FY20.
 BPCL Cash Flow Statement Analysis
BPCL's cash flow from operating activities (CFO) during FY21 stood at Rs 236 billion,
an improvement of 198.9% on a YoY basis

Cash flow from investing activities (CFI) during FY21 stood at Rs -26 billion on a YoY
basis

Cash flow from financial activities (CFF) during FY21 stood at Rs -140 billion on a YoY
basis

Overall, net cash flows for the company during FY21 stood at Rs 70 billion from the
Rs 3 billion net cash flows seen during FY20.

 Current Valuations for BPCL

The trailing twelve-month earnings per share (EPS) of the company stands at Rs
84.3, an improvement from the EPS of Rs 11.5 recorded last year

The price to earnings (P/E) ratio, at the current price of Rs 458.7, stands at 5.5
times its trailing twelve months earnings

The price to book value (P/BV) ratio at current price levels stands at 1.5 times,
while the price to sales ratio stands at 0.5 times

The company's price to cash flow (P/CF) ratio stood at 4.5 times its end-of-year
operating cash flow earnings