CFM PBL Final Report

Company-Industry-Economy Analysis
ON
“AirBus”

SUBMITTED BY:
TEAM No. 4; Team Lead: Akash Srivastava
Akash Srivastava (2023003); Ph. No.: 9695204282
Ashima Rajesh Patel (2023010); Ph. No.: 6394880863
Parth Sehrawat (2023067); Ph. No.: 8929242384

Project Guide: Dr. Gajavelli V S

Ph.D. (HCU), PCL (Harvard, Boston-US)

Project Anchor-person: Ashima Rajesh Patel

Respective Subject Representative: Anusha Masand
Contact: 8889142000
 ACKNOWLEDGEMENT

It gives us immense pleasure to express our sincere gratitude to all the helping hands
that have guided us in successfully completing this project . It was a great learning
experience for each one of us. As students of IMT - Nagpur, we were blessed with an
opportunity to learn and explore our domains in economics with the best guidance
from our respected professor of the course, Dr. Gajavelli V S (Ph.D. (HCU), PCL
(Harvard, Boston-USA) (Faculty in-charge –Consumer, Firms and Markets).

Because of the flipped classroom approach, case study methodologies, and relating
our concepts of economics to real-life economic issues, we were able to put in our
best efforts to prepare this report. The project on analyzing and understanding the
“Petroleum Industry- INDIAN OIL CORPORATION LTD.” based on various
economic forces that are both market and non-market, would not have been
completed without the support of each group member, our peers, and the most crucial
person, Prof. Dr. Gajavelli VS, whose constant support and encouragement have
been our guiding light for the success of this report.
Background:
Indian Oil Corporation Limited is a government-owned oil and gas explorer and producer
headquartered in New Delhi. This is a public sector company overseen by the Oil and Gas
Department. Indian Oil is ranked 212th on the Fortune Global 500 list of the world's largest
companies (as of 2021). It is the largest state-owned oil company in the country, with a net profit
of $ 6.1 billion for the 2020-21 fiscal year. As of March 31, 2021, Indian Oil employs 31,648, of
which 17,762 are executives, 13,876 are non-executives, and 2,775 are women, accounting for
8.77% of the total workforce.

History of IOCL:
Indian Oil Corporation was founded in 1964. Indian Oil gained Navratna status in 1997 and
became India's largest trading company in 1999. In 2009, a year before Indian Oil gained
Maharatna status, Indian Oil defined its vision as "India's new energy" and decided to transform
itself from an oil company into a diverse energy giant. It was a company that was praised by.

Industry Analysis:
The Petroleum (oil) industry addresses quite possibly the main segments of the energy
business, which resembles the circulatory arrangement of the human body to the advanced
economy. The oil business is partitioned into upstream (investigation, advancement,
extraction of oil and flammable gas) and downstream (transport by oil tanks or pipelines,
treatment facilities, retailers, and purchasers).
As of October 01, 2020, India's oil refining limit remained at 249.9 million metric tons
(MMT), making it the second-biggest purifier in Asia. Privately owned businesses own
about 35.29% of the all-out refining limit in FY20.
Yearly oil utilization remained at 4.69 million barrels each day (mbd), though for gas, it
remained at
54.20 billion cubic meters (bcm). By 2035, India's energy request is relied upon to twofold
to 1,516Mtoe from 753.7 Mtoe in 2017.
In FY20, unrefined petroleum creation in India remained at 30.5 MMT. In FY20, unrefined
petroleum imports expanded to 4.54 mbpd from 4.53 mbpd in FY19. Petroleum gas
utilization is conjecture to arrive at 143.08 million tons (MT) by 2040. India's LNG import
remained at 33.68 bcm during FY20.
India's utilization of oil based goods became 4.5% to 213.69 MMT during FY20 from
213.22 MMT in FY19. Fare of oil based commodities from India expanded from 60.54
MMT in FY16 to 65.7 MMT in FY20.
Economic Analysis:

India, authoritatively the Republic of India, is the world's fifth biggest economy by
ostensible GDP,third biggest by buying power equality (PPP) per capita GDP, seventh
biggest country by zone, the second-most crowded country, and the greatest majority rules
system on the planet.

India is assessed to have a populace of 1369.56 million in the year 2020 and expected to
arrive at 1443.063 million by 2024, developing at a CAGR of 1.31%.

India's genuine (GDP) was INR 1, 47,059.21 billion of every 2019 and because of the
COVID-19 episode it is assessed to increment by 1.871% to associate with INR 1,
49,810.69 billion in the coming years

India's joblessness rate was 5.355% of the all out workforce in 2019. Because of the
stoppage in worldwide monetary action because of the COVID-19 pandemic, joblessness is
relied upon to incrementby 65.74% and arrive at 17% in the coming years

India's per capita GDP was assessed at USD 2198.59 while buying power equality (PPP)
based per capita GDP was assessed to be at USD 8483.69 for the year 2019.

In 2019, the Indian government's income was assessed to be INR 43,302.60 billion though the
consumption was assessed to be INR 57,928.26 billion. This is relied upon to bring about the
Indian government's net loaning/getting negative at INR 14,625.66 billion of every 2019
showing that insufficient monetary assets were made accessible by the Indian government to
help financial development.
Vision and Mission:
Indian Oil’s ‘Vision with Values’ encompasses the Corporation’s new aspirations – to broaden its
horizons, to expand across new vistas, and to infuse new-age dynamism among its employees.
Cashflow of IOCL:

Decision Problem / Dilemma:

Chemical Discharge from Paradip Refinery Damaging Crops, IOCL Refutes Claims. The
farmers claimed that water mixed with toxic oil, discharged from the refinery, flowing into their
farmland has destroyed crops in an area of over 300 acres in the village and surrounding areas.
Demand and Supply side of Market:
Price sensitivity:
According to Indian Oil (IOC), the current increase in the retail selling price of gasoline was
justified, and by not passing on the entire extent of the spike in global oil prices, it has lessened
the impact on the customer.
According to a statement from the IOC, the intended rise in the retail selling price of gasoline in
a market like New Delhi should have been Rs 3.72 per litre based on current pricing levels in the
international oil market. Indian Oil, on the other hand, has opted to lessen the impact on the
customer by simply raising prices by Rs 2.50 per litre and without passing along the additional,
necessary rise of Rs 1.22 per litre.
Even during the most recent revision of the price of gasoline with effect from December 16th, a
month ago, the actual increase was limited to Rs 2.96 per litre as opposed to the required
increase of Rs 4.90 per litre in the price at New Delhi, leaving a gap of Rs 1.94 per litre in
anticipation of a likely decline in the price levels in the global oil market.
However, according to IOC, the average price of the Indian crude basket has increased from
$87.83 per barrel during the previous revision of the price of gasoline in December to the current
level of
$92.31 per barrel, representing an increase of $4.48 per barrel, as a result of the persistent
upward trend in global oil prices. Over the same time period, the average global price of gasoline
increased even more, by $5.17 per barrel, from a level of $95.30 per barrel to $100.47 per barrel.
Owing to the substantial increase in oil prices, the oil marketing companies (OMCs) are
continuing to incur huge amounts of under-realisations on the sales of other sensitive petroleum
products, including diesel, kerosene (PDS) and LPG.
Pricing of IOCL

Sales Volume of IOCL:

Approximately 81.03 million metric tonnes of sales were recorded by Indian Oil Corporation
Limited during the fiscal year 2021. The sales volume decreased from the prior fiscal year. Both
local and foreign sales volume made up the overall sales volume. Gas, petrochemicals,
explosives, and petroleum products made up the product portfolio.
Capital Expenditure:
Indian Oil met its targeted capital expenditure of RS 26,233 crore for the year 2020-2021 and
exceeded it with a total CAPEX spend of Rs 27,194 crore.

Financial Summary:
Indian Oil Corporation Limited reported earnings results for the full year ended March 31, 2022.
For the full year, the company reported sales was INR 5,893,357.4 million compared to INR
3,639,496.7 million a year ago. Revenue was INR 7,398,130.6 million compared to INR
5,237,363.8 million a year ago. Net income was INR 251,022.3 million compared to INR
216,382.1 million a year ago. Basic earnings per share from continuing operations was INR
18.2267 compared to INR 15.7133 a year ago. Diluted earnings per share from continuing
operations was INR 18.2267 compared to INR 15.7133 a year ago.
 PORTER’S FIVE FORCES ANALYSIS

THREAT OF NEW ENTRANTS

The economies of scale are fairly difficult to achieve in the industry in which
Indian Oil operates. This makes it easier for those producing large capacitates to
have a cost advantage. It also makes production costlier for new entrants. This
makes the threats of new entrants a weakerforce.
The capital requirements within the industry are high, therefore, making it difficult
for new entrants to set up businesses as high expenditures need to be incurred.
Capital expenditure is alsohigh because of high Research and Development costs.
All of these factors make the threat of new entrants a weaker force within this
industry.
The access to distribution networks is easy for new entrants, which can easily set up
their distribution channels and come into the business. With only a few retail outlets
selling the product type, it is easy for any new entrant to get its product on the
shelves. All of these factors make the threat of new entrants a strong force within
this industry. The government policies within the industry require strict licensing
and legal requirements to be fulfilled before a company can start selling. This makes
it difficult for new entrants to join the industry, therefore, making the threat of new
entrants a weak force.

BARGAINING POWER OF SUPPLIERS

The number of suppliers in the industry in which Indian Oil operates is a lot
compared to the buyers. This means that the suppliers have less control over prices
and this makes the bargainingpower of suppliers a weak force.
The product that these suppliers provide are fairly standardised, less differentiated
and have low switching costs. This makes it easier for buyers like Indian Oil to
switch suppliers. This makes the bargaining power of suppliers a weaker force.
The suppliers do not provide a credible threat for forward integration into the
industry in which Indian Oil operates. This makes the bargaining power of suppliers
a weaker force within the industry.
The industry in which Indian Oil operates is an important customer for its suppliers.
This means that the industry’s profits are closely tied to that of the suppliers. These
suppliers, therefore, haveto provide reasonable pricing. This makes the bargaining
power of suppliers a weaker force within the industry.
 BARGAINING POWER OF BUYERS

The number of suppliers in the industry in which Indian Oil operates is a lot more
than the number of firms producing the products. This means that the buyers have a
few firms to choose from, and therefore, do not have much control over prices. This
makes the bargaining power of buyers a weaker force within the industry.
The product differentiation within the industry is high, which means that the buyers
are not able to find alternative firms producing a particular product. This difficulty
in switching makes the bargaining power of buyers a weaker force within the
industry. The income of the buyers within the industry is low. This means that there
is pressure to purchase at low prices, making the buyers more price sensitive. This
makes the buying power of buyers a weaker force within the industry.
The quality of the products is important to the buyers, and these buyers make frequent purchases.
This means that the buyers in the industry are less price sensitive. This makes the bargaining
power of buyers a weaker force within the industry.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

There are very few substitutes available for the products that are produced in the
industry in which Indian Oil operates. The very few substitutes that are available are
also produced by low profit earning industries. This means that there is no ceiling
on the maximum profit that firms can earn in the industry in which Indian Oil
operates. All of these factors make the threat of substitute products a weaker force
within the industry.
The very few substitutes available are of high quality but are way more expensive.
Comparatively, firms producing within the industry in which Indian Oil operates
sell at a lower price than substitutes, with adequate quality. This means that buyers
are less likely to switch to substitute products. This means that the threat of
substitute products is weak within the industry.

RIVALRY AMONG EXISTING FIRMS

The number of competitors in the industry in which Indian Oil operates are very
few. Most of these are also large in size. This means that firms in the industry will
not make moves without being unnoticed. This makes the rivalry among existing
firms a weaker force within the industry.
The very few competitors have a large market share. This means that these will
engage in competitive actions to gain position and become market leaders. This
makes the rivalry among existing firms a stronger force within the industry.
 The industry in which Indian Oil is growing every year and is expected to continue
to do this for a few years ahead. A positive Industry growth means that competitors
are less likely to engagein completive actions because they do not need to capture
market share from each other. This makes the rivalry among existing firms a weaker
force within the industry.
The fixed costs are high within the industry in which Indian Oil operates. This
makes the companies within the industry to push to full capacity. This also means
these companies to reduce their prices when demand slackens. This makes the
rivalry among existing firms a stronger force within the industry.

Stock Market Performance:

Learnings:
Since the firm operates in a Pure Oligopoly environment, we may learn more about the market
environment's elements, such as problems with the fluctuation of oil barrel prices from its
suppliers on the global market and the problems with distribution in a Covid impacted economy.
Further, since the industry has significant entry barriers and is heavily regulated by the
government with taxation policies that continuously affect the prices of petroleum products, the
problem of air pollution brought on by petroleum products, employee protests, Covid hit reduced
sales, etc., the primary set of problems and issues faced by the company can be explored in its
non-market environment. This project will enable us to learn more about these facets of the
industry and to extend our perspective. At last, we would also like to thank our teacher Dr.
Gajavelli V S as he has always believed in us and has motivated us just like the belief of Indian
Oil Corporation Limited, whatever the situation be always rise and show the market your
capabilities
Sources:
https://iocl.com/our-vision-with-values
https://en.wikipedia.org/wiki/Indian_Oil_Corporation
https://in.investing.com/equities/indian-oil-corporation-financial-summary
https://www.mbaskool.com/marketing-mix/services/17023-indian-oil-corporation-iocl.html
https://odishatv.in/news/miscellaneous/chemical-discharge-from-paradip-refinery-damaging-
crops-iocl-refutes-claims-160550/amp
https://www.moneycontrol.com/financials/indianoilcorporation/consolidated-cash-
flowVI/IOC#IOC
https://iocl.com/admin/img/UploadedFiles/PriceBuildup/Files/English/f2378e654f3a4604ba95ea
d8c9c87130.pdf
https://iocl.com/admin/img/UploadedFiles/PriceBuildup/Files/English/d3db5637334745ffae008f
3cc2b34899.pdf
https://www.statista.com/statistics/1125714/iocl-sales-volume/#statisticContainer