SUMMER TRAINING PROJECT REPORT

ON
“A STUDY OF FINANCIAL MANAGEMENT PRACTICES”
IN
BACHELOR BUSINESS ADMINISTRATION

SUBMITTED BY
Sarthak Rawat
2113081042

UNDER THE SUPREVISION OF

Mr. RAJ KARAN GAHLOT
HOD (BBA)
DEPARTMENT OF BACHELOR OF BUSINESS ADMINISTRATION
DELHI GLOBAL INSTITUTE OF TECHNOLOGY
SAMPLA-BERI ROAD , BAHADURGARH , JHAJJAR
HARYANA 1242201

1
 CERTIFICATE OF ORINGINALITY

This is to certify that the business plan entitled “A STUDY OF

MANAGEMENT PRACTICES AT ONGC VIDESH FINANCIAL Ltd.”
Submitted to DELHI GLOBAL
INSTITUTE OF TECHNOLOGY & Research , New Delhi in partial fulfillment of the
requirement for the award of the degree of BBA is an original work carried out
with the guidance of Mr. RAJ KARAN GAHLOT. The matter embodied in this
project is a genuine work done and the best of knowledge and belief and has
been submitted neither to this institute nor to any other university for the
fulfilment of the requirement of the course of study.

Signature of the student Signature of the Guide

Designation

2
 CERTIFICATE
This is to certify that the business plan titled “A STUDY OF FINANCIAL
MANAGEMENT PRACTICES AT ONGC VIDESH Ltd.” Is an academic work done
under the guidance of “RAJ KARAN GAHLOT” submitted in the partial fulfilment of
the requirement for the award of the degree of BBA from (DGIT) DELHI GLOBAL
INSTITUTE OF TECHNOLOGY. The authenticity of the business plan will be verified
by the viva examiner which includes the verification of the contents there in and
may be rejected due to non-fulfilment of quality standards.

(DIRECTOR)

3
 DECLARATION

I hereby declare that the summer training report conduct at “A STUDY OF

FINANCIAL MANAGEMENT PRACTICES AT ONGC VIDESH Ltd.” Submitted in partial
fulfilment of the requirement of master of Business administration (BBA) DELHI
GLOBAL INSTITUE OF TECHNOLOGY , NEW DELHI. It is may original work and the
same has not been submitted for the award of any other
Degree/Diploma/Fellowship or other similar titles or prizes.

Student signature

4
 ACKNOWLEDGEMENT

A task or a project cannot be completed alone. It requires the efforts of many

individuals. It is a great pleasure for me to have the opportunity to extend thanks to
everybody who helped me through the successful completion of this summer
internship project in ONGC VIDESH Ltd. without the help of whom, this project
would have been difficult to complete.
At first, I thank ONGC VIDESH Ltd. for giving me such a challenging project to
work upon. I hope this challenge has brought best out of me.
I am indebted to my industry guides Mr. ASHOK KUMAR (F&A) Deputy
manager at ONGC VIDESH Ltd. for the direction and purpose they gave to the
project through their invaluable insights, which constantly inspired me to think
beyond the obvious. Their support and encouragement helped me to look at the
project from different aspects.
Finally, I express my thankfulness to all those who have directly or indirectly
contributed towards the successful completion of this report.
The project was a tough journey but a learning experience.

5
 Deendayal Urja Bhawan
Tower B
5. Nelson Mandela
Marg,Vasant Kunj, New
Delhi-110070

Date :3rd October, 2022

This is to certify that Sarthak is a genuine student of Delhi Global Institute of Technology,
Barhana , Jhajhar, who is currently enrolled in B.B.A. 3rd Year. He completed his SUMMER
TRAINING in our company from
August 9th to September 27th ,2022.
During the training, We found her to be serious and industrious.

We wish him the best of luck

in his future pursuits.

Mr. ASHOK KUMAR

(F&A) Deputy
manager

6
 Table of Content

1. COVER PAGE (1)

2. INNER PAGES
a. CERTIFICATEOF ORIGINALITY (2)
b. CERTIFICATE (3)
c. DECLERATION (4)
d. ACKNOWLEDGEMENT (5)
e. BVIMR CERTIFICATE BY DIRECTOR (6)
3. EXECUTIVE SUMMARY

a. Chapter 1 - INTRODUCTIO (8-23)

b. Chapter 2 – RESEARCH METHODOLOGY (24-27)

c. Chapter 3- CONCEPTUAL DISCUSSION (28-31)

d. Chapter 4- DATA ANALYSIS (32-45)

e. Chapter 5 – CONCLUSION AND SUGGESTION(46-48)

X Bibliography (49)

7
CHAPTER – 1
INTRODUCTON

8
 OVERVIEW OF THE INDUSTRY

The Indian Oil and Gas (O&G) sector is one of the six core industries of India and contributes
over 15 per cent to the Gross Domestic Product (GDP). The country is the sixth largest consumer
of oil in the world and the ninth largest crude oil importer.

The sector is of immense importance to the economy owing to its significant forward integration
with many other sectors. India is committed to boosting its growth in the years to come and this
progress would translate into the country’s energy needs growing many times. The need of the
hour, therefore, is to channelize all efforts on exploration of new blocks effectively as well as
efficiently.

The growing demand for crude oil and gas in the country coupled with policy initiatives of the
Government of India towards increased E&P activity has given a great impetus to the growth of
this sector.

Key Statistics
 Oil continued to remain the top item in India's export basket during 2012-13. Crude oil as well as
other petroleum products accounted for about one-fifth of India's outbound shipments, giving the
much-needed boost to the country’s exports. Petroleum product exports rose 7.7 per cent at US$ 60.3 billion
in 2012-13 from US$ 56.04 billion in 2011- 12.
 Indian refiners processed 6.8 per cent more oil in April 2013 than a year earlier at 3.62 million
barrels per day (mbpd), according to recent Government data, reflecting expanded capacity.

 Natural gas output stood at 3 billion cubic metres (BCM) in April 2013.
 India’s refining capacity was enhanced by 400, 000 bpd in 2012. Another 400, 000 bpd of capacity
could be added in 2013 if Indian Oil Corporation's 300,000 bpd Paradip and Nagarjuna's 120,000
bpd Cuddlier refineries are completed by the end of

9
 Oil & Gas - Road Ahead
• Oil Ministry's PPAC forecasts fuel consumption at 155.63 MT. Demand for diesel, which
accounts for 45 per cent of the fuel consumption in India, is projected to grow by 8.3 per
cent to 70.1 MT (It was previously projected to grow by 5.9 per cent). PPAC projects a
5.5 per cent growth in petrol demand (at 15.82 MT).

• Furthermore, India's natural gas demand is likely to more than double to 473 million
standard cubic meters per day by 2016-17 with most of the additional demand coming
from
power plants, according to Oil Ministry’s projections for the 12th Five Year Plan (2012-
13 to 2016-17).

• Moreover, Business Monitor International (BMI) forecasts that India will account for 12.4
per cent of Asia Pacific regional oil demand by 2015, while satisfying 11.2 per cent of the
supply.

10
Diesel & Petrol
Crude oil production, as indicated by the core sector index, accounts for over 5 per cent of
India's index of industrial production (IIP).

Diesel consumption increased by 4.2 per cent year-on-year (y-o-y) in April 2013 to 6.2 million
tonnes (MT), according to data compiled by the Petroleum Planning and Analysis Cell (PPAC) of
the Ministry of Petroleum and Natural Gas. The growth in diesel consumption was faster than
other petroleum products.

The overall consumption of petroleum products increased 3.1 per cent y-o-y in April 2013, PPAC
data

indicated.

11
Gas
Natural Gas has emerged as one of the most preferred fuel owing to its environment-friendly
properties, greater efficiency and cost effectiveness.

India's shale gas reserves are at about 290 trillion cubic feet (TCF), of which 63 TCF could be
recovered, according to a study by US Energy International Agency. Shale gas is natural gas
formed from being trapped within shale formations.

Natural gas sector constitutes about 9.8 per cent of primary energy consumption which is
projected to grow up to 20 per cent by 2025 as per Indian Hydrocarbon vision. About 65 per cent
of natural gas consumption is accounted by power and fertiliser sectors. Petroleum and Natural
Gas Regulatory Board chairman S. Krishnan emphasises on the need to develop a strategy to
meet substantial share of energy needs from natural gas and take its contribution in the country’s
energy basket from 9.8 per cent to 25 per cent in the medium term.

• The demand for natural gas in India has been growing, and is expected to increase by 280
per cent from the current levels to 220 BCM by 2020.

12
Oil & Gas - Government Initiatives
Decisions made in the E&P sector influences decisions in every sphere of the economy and the
Indian Government keeps a meticulous track of policies implemented, global happenings and
future reforms.

• The Cabinet Committee on Investment (CCI) has recently cleared 25 E&P blocks,
releasing Rs 24, 900 crore (US$ 4.36 billion) of investments.

• Meanwhile, India and Finland have decided to join efforts in the area of sustainable
development for mutual benefits in the O&G sector, which includes specific projects in
solar energy applications for O&G Projects, bio-fuels & algae based bio-fuels research
and water and waste water management.

• The Reserve Bank of India (RBI) has also announced that Navratna Public Sector
Undertakings — OVL and OIL — will be allowed to make overseas investments in the
incorporated Joint Ventures (JVs)/Wholly Owned Subsidiaries (WoS) in the oil sector.

These investments for exploration and drilling for oil and natural gas by the Navratna
PSUs, already approved by the Government of India, will be without any limits under the
automatic route, said the RBI notification.

So far, OVL and OIL were allowed to invest in overseas unincorporated entities in oil
sector (for exploration and drilling for oil and natural gas), which are duly approved by
the Government of India, without any limits under the automatic route.

The Oil & Gas (Petroleum Industry) is usually divided into three major components:

• UPSTREAM

• MIDSTREAM

• DOWNSTREAM

UPSTREAM SECTOR

13
The upstream oil sector is a term commonly used to refer to the searching for and the recovery
and production of crude oil and natural gas. This sector is also known as the Exploration and
Production (E&P) Sector.

The upstream sector includes the searching for potential underground or underwater oil & gas
fields, drilling of exploratory wells, and subsequently operating the wells that recover and bring
the crude oil and/ or raw natural gas to the surface.

MIDSTREAM SECTOR

The midstream industry processes, stores, markets and transport commodities such as crude oil,
natural gas, natural gas liquids (NGLs mainly ethane, propane and butane) and sulphur.
Midstream operations are included under the downstream category.

DOWNSTREAM SECTOR

The downstream oil sector is a term commonly used to refer to the refining of crude oil, and the
selling and distribution of natural gas and products derived from crude oil. Such products include
Liquefied petroleum gas (LPG), gasoline or petrol, jet fuel, diesel oil, and other fuel oils.

The downstream sector includes oil refineries, petrochemical plants, petroleum products
distribution, retail outlets and natural gas distribution companies. The downstream industry
touches consumers through thousands of products such as gasoline, diesel, jet fuel, heating oil,
asphalt, lubricants, synthetic rubber, plastics, fertilizers, antifreeze, pesticides, pharmaceuticals,
natural gas and propane.

The Indian petroleum industry is one of the oldest in the world, with oil being struck at Makum
near Margherita in Assam in 1867 nine years after Col. Drake’s discovery in Titusville. The
industry has come a long way since then. For nearly fifty years after independence, the oil sector
in India has seen the growth of giant national oil companies in a sheltered environment. A process
of transition of the sector has begun since the mid-nineties, from a state of complete protection to
the phase of open competition. The years since independence have however, seen the rapid
growth of upstream and downstream oil sectors. The sector in recent years has been characterized
by rising consumption of oil products.

14
 INTRODUCTION OF THE COMPANY

 ONGC VIDESH Ltd.

ONGC Videsh Ltd. is the second largest Energy and Petroleum Company in India both in terms
of oil production and oil & gas reserve holdings. The primary business of OVL is to prospect for
oil and gas acreages abroad including acquisition of oil and gas fields, exploration, development,
production, transportation and exports of oil and gas. OVL is a wholly owned subsidiary of Oil
and Natural Gas Corporation Ltd (ONGC)- The flagship national oil company of India.

While OVL participates and operates in varied environments- both political and geographical, it
is committed to the highest standards of occupational health, safety and environment protection
and compliance to all applicable local laws and regulations.

Some of the leading alliance partners of OVL are- BP, CNPC, Ecopetrol, ENI, Exxon, Statoil
Hydro, PDVSA, Petrobras, Petronas, Petrovietnam, Repsol, Rosneft, Shell, Sinopec, Total and
TPOC

During the initial days, we were given a brief introduction of the company. This included-

➢ History
➢ Objectives
➢ Mission
➢ Performance highlights
➢ Technology to excel
➢ Various plants spread acro
➢ Objects
➢ CSR
➢ Various offices of OVL and its subsidiaries
I worked at the OVL office, at Antariksh Bhawan, KG Marg, Delhi. The organizational structure
at the office is as follows:-

 Places of Operation in World:

15
16
ONGC VIDESH LTD. (OVL) is a holly owned subsidiary of OIL AND NATURAL GAS LTD.
(ONGC) was rechristened on 15th June, 1989 from erstwhile hydrocarbons India PVT. LTD.
Which was incorporated on 5th March, 1965. The authorized and paid-up share capital of ONGC
VIDESH as on 31st March, 2013 stood at `5,000 crore. The primary business of the company is
to prospect for oil and gas acreages abroad, which includes acquisition of oil and gas fields in
foreign countries as well as exploration, production, transportation and sale of oil and gas.

ONGC VIDESH was functioning in small scale to carry out limited exploration activities in few
countries like Iraq, Yemen, Sri Lanka, Tanzania etc. but overseas acquisitions and exploration
activities started from late 1990s. In 1988, Production Sharing Contract (PSC) was signed for the
Block 06.1 in Vietnam.

The first Oil production of ONGC VIDESH was from Greater Nile Oil Project (GNOP), Sudan in
March 2003 and Gas from Block 06.1, Vietnam in January 2003. ONGC VIDESH acquired
Sakhalin-1, Russia in July 2001 and oil production started from October, 2005. ONGC VIDESH
acquired Block 5A, Sudan in May 2004 as exploratory asset and oil production started from June,
2006; acquired producing assets AFPC, Syria in July 2005 and MECL, Colombia in Sept. 2006.
ONGC VIDESH acquired BC-10, Brazil in April 2006 at development stage and first oil produced
from 12th July 2009, two months ahead of schedule. Acquired producing assets Sancristobal,
Venezuela in April 2008 and Imperial Energy, Russia in January 2009. In May 2010, ONGC
VIDESH acquired 11% P.I. of Carabobo-1 project in hydrocarbon rich Orinoco belt of
Venezuela. ONGC VIDESH acquired 25% participating interest in Satpayev exploration block
located in Caspian Sea on April, 2011.
In December, 2012, ONGC VIDESH acquired two exploratory blocks in Colombia, GUA
offshore 2 with 100% PI and 50% PI in LLA 69 on land block with partnership MECL. ONGC
VIDESH acquired 2.7213, participating interest in ACG Consortium (Azeri, Chirag and Deep
water portion of Guneshli field in Caspian Sea) of Azerbaijan and 2.36% stake in Baku-Tbilisi-
Ceyhan (BTC) pipeline in March, 2013.

17
ONGC VIDESH now has the distinction of operating in the harshest environments in the world
that are as diverse as in deep sea in Brazil to the extremely cold climate in Russia. Offshore
Blocks A1 and A3 in Myanmar, ONGC VIDESH’s share (17%) with recoverable reserve of
37.25 BCM of Gas are in advanced stage of development. It consists of laying of 110 Km, 32
inch dia offshore pipeline, 792.5 Km, 40 inch dia onshore pipeline, drilling of development
wells, construction of offshore & onshore facilities etc. The first Gas is expected in July
2013@200 mmscfd and within 12 months period it will be increased @500 mmscfd. Onshore
project Carabobo-1, Venezuela where ONGC VIDESH’s share is 11% with balance reserve of
52.99 MMT of Oil is also in advanced stage of development. The projected peak production is
400,000 bopsand the first oil production started in December 2012.
ONGC VIDESH has built up a sound Oil and Gas Reserve base since 2001. As on 1st April
2013, the remaining 1P and 2P reserves are 196.41 MMTOE (Oil 104.12 MMT, Gas 92.29
BCM) and
395.61 MMTOE (Oil 256.21 MMT, Gas 139.40 BCM) respectively in 10 countries.

While ONGC VIDESH participates and operates in varied environments, both political and
geographical, it is committed to the highest standards of Occupational Health, Safety and
Environments protection and compliance to all applicable local laws & regulations. Understanding
well its corporate social responsibility, ONGC VIDESH makes valuable contribution to the
communities and economics in which it operates, by investing in education, training and
improving employment opportunities for nationals, providing medical, sports, agricultural
facilities to the local community etc. besides payment of tax revenue to local governments.

ONGC VIDESH has developed strong relationships with National/ International Oil Companies
of various countries by working with their team and management at project level. Some of the
leading alliance partners of are ExxonMobil, British Petroleum, Shell, ENI, Total, Repsol, Statoil,
Chevron, Petrobras, Sodeco, Socar, Rosneft, Kazmunaigaz (KMG), Petro Vietnam, CNPC,
Sinopec, PDVSA, TPOC, Petronas and Ecopetrol.

18
• Global Ranking
• Only Indian energy major in Fortune's Most Admired List 2012 under 'Mining, Crude Oil
Production' category.
• It is ranked 171th in Forbes Global 2000 list of the World's biggest companies for 2012
based on Sales (US$ 26.3 billion), Profits (US$ 5 billion), Assets (US$ 51 billion) and
Market Capitalization (US$ 46.6 billion).
• ONGC VIDESHhas been ranked 39th among the world's 105 largest listed companies in
'transparency in corporate reporting' by Transparency International making it the most
transparent company in India.

❖ ONGC VIDESHRepresents India's Energy Security Through its

Pioneering Efforts

ONGC VIDESHis the only fully–integrated petroleum company in India, operating along the
entire hydrocarbon value chain. It has single-handedly scripted India's hydrocarbon saga. Some
key pointers:

• ONGC VIDESHhas discovered 6 out of the 7 producing basins in India:

• It has 7.59 billion tonnes of In-place hydrocarbon reserves. It has to its credit more than
320 discoveries of oil and gas with Ultimate Reserves of 2.69 Billion Metric tonnes
(BMT) of
Oil Plus Oil Equivalent Gas (O+OEG) from domestic acreages.
• It has cumulatively produced 851 Million Metric Tonnes (MMT) of crude and 532 Billion
Cubic Meters (BCM) of Natural Gas, from 111 fields.
• ONGC VIDESHhas won 121 out of a total 235 Blocks (more than 50%) in the 8 rounds
of bidding, under the New Exploration Licensing Policy (NELP) of the Indian
Government.
• ONGC's wholly-owned subsidiary ONGC VIDESH Ltd. (OVL) is the biggest Indian
multinational, with 30 Oil & Gas projects (9 of them producing) in 15 countries.
• Produces over 1.24 million barrels of oil equivalent per day, contributing over 64% of
India's domestic production. Of this, over 75% of crude oil produced is Light & Sweet.
• The Company holds the largest share of hydrocarbon acreages in India (51% in PEL Areas
& 67% in ML Areas).
• ONGC VIDESHpossesses about one tenth of the total Indian refining capacity.
• ONGC VIDESHhas a well-integrated Hydrocarbon Value Chain structure with interests
in LNG and product transportation business as well.
• A unique organization in world to have all operative offshore and onshore installations
(403) accredited with globally recognized certifications.
(404)

19
❖ Perspective Plan 2030 (PP2030)

PP2030 charts the roadmap for ONGC's growth over the next two decades. It aims to double
ONGC's production over the plan period with 4-5 per cent growth against the present growth
rate of 2 percent. In physical terms the aspirations under Perspective Plan 2030 aims for -

• Production of 130 mmtonne of oil and oil equivalent gas (O + OEG) per year and
accretion of over 1,300 mmtoe of proven reserves.

• Grow ONGC VIDESH Limited (OVL) six fold to 60 mmtoe of international O+OEG
production per year by 2030.
• More than 20 mmtoe of O+OEG production per year in India coming from new
unconventional sources such as shale gas, CBM, deepwater and HPHT (High Pressure &
High Temperature) reservoirs.

• Over 6.5 GW power generation from nuclear, solar and wind and 9 MTPA of LNG.
• Scaling up refining capacity to over 20 MMTPA and targeted investments to capture
downstream integration in petrochemicals.

❖ Dividend Policy
Dividends are declared at the Annual General Meeting of the shareholders based on the
recommendation by the Board. The Board may recommend dividends, at its discretion, to be paid
to our members. The Board may also declare interim dividends. Generally, the factors that may be
considered by the Board before making any recommendations for the dividend include, but are not
limited to, future capital expenditure plans, profits earned during the financial year, cost of raising
funds from alternate sources, cash flow position and applicable taxes including tax on dividend,
subject to the Government guidelines described below:
As per the guideline dated February 11, 1998 from the Government of India, all profit-making
PSUs which are essentially commercial enterprises should declare the higher of a minimum
dividend of 20 percent on equity or a minimum dividend payout of 20 percent of post-tax profit.
The minimum dividend pay-out in respect of enterprises in the oil, petroleum, chemical and other
infrastructure sectors such as us should be 30 percent of post-tax profits

20
❖ Vision and Mission

To be global leader in integrated energy business through sustainable growth, knowledge

excellence and exemplary governance practices.
World Class
• Dedicated to excellence by leveraging competitive advantages in R&D and technology with
involved people

• Imbibe high standards of business ethics and organizational values.

• Abiding commiFMent to safety, health and environment to enrich quality of community life.
• Foster a culture of trust, openness and mutual concern to make working a stimulating and
challenging experience for our people.
• Strive for customer delight through quality products and services.

Integrated In Energy Business

• Focus on domestic and international oil and gas exploration and production business
opportunities.
• Provide value linkages in other sectors of energy business.
• Create growth opportunities and maximize shareholder value.
Dominant Indian Leadership
• Retain dominant position in Indian petroleum sector and enhance India's energy availability

21
Organizational chart

22
❖ SWOT ANALYSIS OF THE COMPANY:

 Strength:

➢ India’s largest crude oil and natural gas producer

➢ Strong brand name

➢ High profit making

➢ Has over 50,000 employees

➢ It produces about 30% of India's crude oil requirement

➢ Contributes 77% of India's crude oil production and 81% of India's natural gas production

➢ Commemorative Coin set was released to mark 50 Years of ONGC

 Weakness:

➢ Legal issues

➢ Employee management

➢ Bureaucracy

➢ Human rights and rehabilitation issues

 Opportunity:

➢ Increasing fuel/oil prices

➢ Increasing natural gas market

➢ More oil well discoveries

➢ Expand export market

23
 CHAPTER – 2

RESEARCH METHODOLOGY

24
RESEARCH METHODOLOGY

Objectives of the project

❖ To map the DPE guidelines to ONGC VIDESH short term investment process.
❖ To study the investment profile of ONGC VIDESH Ltd.
❖ To understand the investment governance process followed by ONGC VIDESH Ltd.

The project is to study the short-term investment policy of ONGC. As the data taken for the
project is secondary which is taken from the reports but i have experience the real time training
in the company to understand the different kinds of procedure followed by the company to invest
in the short term investment and the limits in which the company has to invest in different sector
of the market.

The following studies have been done:

Study of DPE guidelines:

All the PSEs have to follow the guidelines of DPE to park their idle funds. Hence these are the
basic guidelines, which the company keeps in mind before taking any investment decisions.

Study of CRISIL report:

The Company has appointed CRISIL in 2002 to study its investment procedure and it has
devised “Risk based limit structure for banks” for the company.

Study of Investment Avenues of ONGCvidesh:

Currently, the Company invests in very few avenues. DPE and the Investment Committee of
ONGC VIDESH restrict the investment avenues of the Company. This portion deals with the
study of those investment avenues of the company.

Study of Investment Portfolio of the Company:

This portion deals with the current investments of the company, and the analysis of the returns,
which the Company gets from them.

25
Study of other investment avenues:
In this part of the study all those investments avenues are studied in which DPE allows the
company to invest. So this portion deals with the study of those investments avenues, which are
untouched by the company till date.
Therefore, its managerial usefulness is,

1. To decide how much share holding to maintain and whether to issue shares or
debentures as per the condition exists.

2. To decide whether to expand or to save funds for any upcoming liability.

3. To track the flow of funds and to prepare an efficient plan to utilize the unused funds
and to make use of these funds more appropriately.

Some steps involved in it are,

1. Gathering Data,

Kinds of information and one has to choose which information to use which will
be appropriate.
2. Summarising,

It includes brief summary about the subject to familiarise the reader with the subject
and then communicating about the topic of research here it is Ratio Analysis.

3. Collecting Data,

Gathering information on the subject as per the topic and as per depth required and
information available.

4. Editing,

After collecting data, analysing it as per requirement to make it more informative

and attractive.
5. Rechecking,

Checking the research to make it flawless and more user-friendly and simple.

26
Also, there are a number of advantages and well as disadvantages of this financial
management.

The advantages of financial management as a profit centre rather than being as a cost centre are:

• The financial is usually encouraged to offer services as economically as possible, to

check that the profit is made at the market rate. For example, managing hedging
activities for a
subsidiary.

• The individual business units of an entity can usually be charged at a market rate for the
services offered, making their operating costs more realistic.

While on the other hand, there are a number of disadvantages of this financial management as
well and they are:

• The management of time is usually wasted in arguments with a number of different

business units over issues like charges for services, even though the market rates are
neutrally checked.
• There are a number of different kinds of extra administrative costs, that would prove to be
very excessive.

• The profit concept of the financial management usually proves to be a temptation to

consider most of the times.

Lastly, these treasures also require gaining knowledge of taxation in these specific areas, where
the group operates and derives from that. The ability to makes profits or looses is quite huge, as a
treasurer can easily wipe out all the profit made from the making and selling of things over a
number of months. Therefore, it is very important that the functions of the financial management
are monitored carefully by the treasurer.

27
 CHAPTER – 3

CONCEPTUAL DISCUSSION

28
DPE GUIDELINES
DPE has formulated different policies for PUBLIC SECTOR ENTERPRISES (PSEs) regarding
investment of short-term surpluses. The guidelines are issued dated 14 th December, 1994 by DPE
and are reviewed from time to time dated 1st November, 1995, 11th March, 1996,2nd July, 1996,14th
February, 1997, 25th November, 1999, 29th September, 2005, 31st August, 2007, 4th December,
2007, 11th April, 2008, 15th April, 2008.
All the instructions given by the government to the PSUs should fall under the following two
categories:

Presidential Directives—These are issued by the administrative ministries to the concerned PSUs
whenever the situation so warrants and are mandatory in nature. For the purpose of maintaining
uniformity, such Directives shall be issued in consultation with the DPE if these relate to single
PSU and with the concurrence of the DPE if these are applicable to more than one PSU. Further,
the DPE could also ask the administrative Ministries to issue Presidential Directives to one or
more PSU on policy issues requiring a uniform approach.

Guidelines—These could be issued either by the administrative Ministry or the DPE as the case
may be and will be advisory in nature. The Board of Directors of the PSUs will have the
discretion not to adopt these guidelines for reasons to be recorded in writing. The Board
Resolution on the subject giving the reasons therein should be forwarded both to the
administrative Ministry concerned as well as to the DPE.

Recommendations of the Joint Parliamentary Committee regarding: Investment of surplus

funds, procedures of investments, banking transactions, responsibilities of Board of Directors,
etc.

The Joint Parliamentary Committee (JPC) in their report on "irregularities in securities and
banking transactions" have made a number of recommendations covering the areas mentioned
above. These recommendations have been considered by the Government. The decisions of the
Government on these recommendations are given below for information and necessary action by
the respective administrative Ministries and the public sector enterprises.

29
It was noted by the Committee that while the Government permitted PSUs to have banking
transactions with foreign banks, it was not monitored properly. The Government have decided
that the administrative Ministries dealing with particular PSU should monitor adherence to all
guidelines issued by the Government. The PSUs should report to the administrative Ministry in
case of inability to comply with particular guidelines and the Ministry will consider condonation
or enforcement by issue of a Presidential directive. In this connection, attention is also invited to
the DeparFMent of Public Enterprises OM No. 6/6/88-Coord. dated 8.4.91 wherein it is indicated
that the Boards of Directors of the PSUs will have the discretion not to adopt these guidelines for
reasons to be recorded in writing. 'The Board Resolution on the subject given the reasons therein
should be forwarded both to the administrative Ministries as well as to the DPE. The valid reasons
should be fully rendered in speaking orders/ resolutions.

The Committee have raised the question of the duty and responsibility for ensuring,
implementation of guidelines. It is the primary responsibility of the PSU itself to abide by
Governmental guidelines. Government recognizes that the prime duties of a Government nominee
on the Board of Directors of a PSU are to safeguard the interest of the shareholders, contribute to
the efficient functioning of the PSUs and report back the same regularly to the Government.

With regard to investment of surplus funds, the Committee have suggested that the policies
should be clear-cut and transparent. Administrative Ministries are requested to lay down
guidelines for different types of PSUs under their control indicating the destination and
procedures of investment of their surplus funds. Administrative Ministries are also requested to
direct the Boards of Directors of their PSUs to the effect that instructions regarding
investment of fund shall be transparent and taken only by the delegated authority and that
exercise of such authority shall be monitored by the Board. The administrative Ministries are also
desired to lay down guidelines for the PSU under their control in the matter of regular reporting
of financial transactions to the Board having regard to the nature of its business, size of financial
transactions and the level to which the financial powers have been delegated.

Boards of Directors of all non-financial PSUs should ensure that decisions regarding investments
of funds are transparent and taken only by the delegated authority, and that the proper exercise of
such authority is monitored by the Board. Boards of all PSUs are directed to lay down clear
policies on investment of surplus funds, establish transparent procedures, review delegation of

30
authority and prescribe regular reporting of investments to the Board.

Guidelines for Investment of Surplus Funds by Public Sector

Enterprises
Principles concerning investments

• Investments should be made only in instruments with maximum safety.

• There should be no element of speculation on the yield obtaining from the investment.
• There should be a proper commercial appreciation before any investment decision of
surplus funds is taken. The surplus availability may be worked out for a period of
minimum
one year at any point of time.
• Funds should not be invested by the PSE at a particular rate of interest for a particular
period of time while the PSE is resorting to borrowing at an equal or higher rate of
interest for its requirements for the same period of time.

• Investment decision should be based on sound commercial judgment. The availability

should be worked out based on cash flow estimates taking into account working capital
requirements, replacement of assets and other foreseeable demands.

• The remaining period of maturity of any instrument of investment should not exceed one
year from the date of investment where the investment is made in an instrument already
issued. Where investment is made in an instrument newly issued, the final maturity of the
instrument should not exceed one year. However, only in the case of term deposits with
banks, it can be up to three years.

31
 CHAPTER – 4
DATA
ANALYSIS

32
DPE GUIDELINES

S No PERMISSIBLE MAXIMUM RATING OTHER CRITERIA

INSTRUMENTS TENOR/RESIDUAL
MATURITY

1 Fixed Deposits with 1 year N/A Any Scheduled Commercial Bank

banks (Banks incorporated in India)
2. Net Worth of minimum 100
Crores
3.Meets capital adequacy
requirements as prescribed by RBI

2 Government Securities 1 year Sovereign N/A

and FINANCIAL Bills

3 Bonds/ Commercial 1 year Investment N/A

Paper issued by Central Grade
PSEs

4 Inter-corporate deposits 1 year Investment N/A

to Central PSEs Grade

5 Certificates of deposits 1 year Investment N/A

Grade

6 Public Sector Mutual 1 year (2000cr) Investments in schemes of such

Funds mutual funds, having equity
investments, should not exceed 30%
of the available surplus funds with
the Company

33
INVESTMENT PROCEDURE

OBJECTIVE

The objective of the cash management activity is to ensure availability of required funds in proper
time to ensure smooth conduct of the business of the Company and to deploy the surplus funds of
the Company from time-to-time to avoid idling and generate returns.

CASH FORECASTING

Nature & Periodicity of Cash Forecast

The Funds Section will prepare cash-forecast for the next one year with monthly break-up on
roll- over basis and weekly break-ups for the first two months, as also break-ups in between
wherever major cash flows such as offshore royalty, advance tax, dividend payment etc are
involved. The Cash Forecast will be accompanied by an advice to call quotations, along with
indicative amount/range of funds for which quotations are to be invited. The Cash Forecast will
detail the assumptions made for the preparation of forecast, the variation vis-à-vis the previous
forecast and the reasons thereof, to the extent practicable. The Cash Forecast will be sent to
FINANCIAL Management Group, New Delhi (FMG) every week on a fixed day (such as, every
Wednesday) to be decided by Funds Section with the approval of Head of Corporate Accounts to
have regularity and better control over the forecasting system. In addition, Cash Forecast will
also be sent on request from FMG/ Investment Committee.

PROCESS OF INVITATION OF OFFERS UPTO APPROVAL OF INVESTMENT

PROPOSAL AND ISSUE OF INVESTMENT AUTHORITY

Responsibility

FMG will have the responsibility to coordinate the process of invitation of offers, preparation of
comparative statement, providing required assistance to the Investment Committee, and issue of
investment authority to the Accounts Department for effecting the investment transactions.
34
Invitation of Enquiries to Quote Rates

• The FINANCIAL Management Group (FMG) on the basis of the Cash Forecast and
considering actual/ anticipated changes, if any, in the fund position, will invite
quotations,
with the approval of an Investment Committee member, from the eligible parties, as per
the approved list of invitees, from time-to-time. Offers are to be invited for investment in
avenues permitted by the Board. Enquiry may be invited from the eligible Bank/CPSEs
for a minimum amount of Rs.5.00 cr.

• The invitation letter inter-alia will specify the indicative investment amount, indicative
dates of investment, indicative tenure and the last date/time for the submission of Enquiry.
Such amounts and tenures will be subject to change depending upon availability of funds,
yields for various maturities, etc and approval of the competent authority for investment
decision.

• Enquiry will be invited from eligible parties. Invitations should be sent through fax / e-mail
/ website and quotations be invited in sealed cover / e-mail from the eligible parties. In
case, it is not feasible to send the invitation by fax / e-mail due to non-availability of fax /
e-mail facility at Bank/CPSEs end, breakdown of fax / e-mail communication at ONGC’s
/ Bank/CPSEs end or, for any other reason, invitation may be sent by ordinary post or
handed over to authorized representative of the Bank/CPSEs to the extent practicable.
Generally the enquiry is send through Fax.

• The invitation of Enquiry will not in any way bind ONGC VIDESH for placement of
fund with any of the Bank/CPSEs. ONGC VIDESH will reserve the right to reject any
bid without any further reference to the Bank/CPSEs.

• The Enquiry should be invited directly from the Bank/CPSEs and no broker should be
involved in the transaction between the Bank/CPSE and ONGC.

Submission of Enquiry
35
 • The Bank/CPSEs will be requested to submit their Enquiry within the date and time
specified in the invitation letter. The preferred mode for the submission of Enquiry is
through Fax. It can also be submitted in a bid box (FINANCIAL Bid Box) that is kept at
a location (to be specified in the invitation letter) in office of the ONGC VIDESHat New
Delhi. The Bank/CPSEs may, if they so like, submit their Enquiry by courier or registered
post provided that the Enquiry must reach the addressee specified in the invitation letter
within the stipulated date and time but such practice is undertaken if it is not possible to
send through fax. However, ONGC VIDESH will not be responsible for any loss or delay
of Enquiry in transit.

• Late offers are not to be considered.

• The Enquiry should be firm and unconditional and give the information requested in the
invitation letter in the manner requested. Investment Committee will have full powers to
reject any incomplete bid.

• If any Bank/CPSE after submission of Enquiry withdraws/amends any term or condition

and/or expresses inability in acceptance of any term/rate quoted, such Bank/CPSE, with
the approval of CMD and Director (F), may not be considered for future invitation of Enquiry.
Upon request of the Bank/CPSE or otherwise under a general review, invitation to such
Bank/CPSE may be re-initiated with the approval of CMD and Director (F).

Opening of Enquiry and Comparative Statement

• The Enquiry will be opened by (a) at least two members of the Investment Committee, or
(b) at least one member of the Investment Committee and an official of the FMG.

• Bank/CPSEs will be invited to depute, if they so wish, their authorized representative to

be present at Enquiry opening.

• An Enquiry opening register, showing the details of Enquiry received and duly signed by
the Bank/CPSEs’ representatives, if any, present at the time of Enquiry opening, has to
be
maintained by the FMG..

36
Approval of CMD and Director (F)

The recommendations of the Investment Committee shall be put up to CMD and Director (F) on
immediate priority to avoid any delay in investment action.

Issue of Investment Authority Note

• FMG will issue a request note (the Investment Authority Note) to the head of the F&A
section of New Delhi office for making the investments in accordance with the approval
granted by CMD and Director (F).

• The Investment Authority Note will specify, inter alia, the amount of investment, name
and address of the borrower, particulars of instrument, rate of return, date of investment,
date of maturity and maturity amount.

• The Investment Authority Note will be signed by (a) any two officers of the FMG or (b)
any one officer of FMG and any Investment Committee member.

• The Funds Section would intimate fund availability and provide drawing power for
investment.

The Head of Finance, Delhi Office, as the case may be, will invest the surplus funds in
accordance with the Investment Authority Note issued by FMG.

37
Eligible Investments
Investments may be made in one or more of the following instruments.

• Term deposits with any scheduled commercial bank [i.e., banks incorporated in India]
and with a paid up capital of atleastRs. 100 Crores, fulfilling the capital adequacy norms
as prescribed by the R.B.I. from time to time. These adequacy norms should be reflected
in the last published balance sheet.

• Instruments which have been rated by an established Credit Rating Agency and have been
accorded the highest credit rating signifying highest safety e.g. certificates of deposits,
deposits schemes or similar instruments issued by scheduled commercial banks/term
lending institutions including their subsidiaries, as well as commercial paper of
corporate.

• Inter-corporate loans are permissible to be lent only to Central PSEs, which have
obtained highest credit rating awarded by one of the established Credit Rating Agencies
for borrowings for the corresponding period.

• Any debt instrument, which has obtained highest credit rating from an established Credit
Rating Agency.

Authority Competent to Investment

Decisions on investment of surplus funds shall be taken by the Public Sector PSU Board.
However, decisions involving investing short-term surplus funds up to one year maturity may be
delegated up to prescribed limits of investment, to a designated group of Director[s], which
should invariably include CMD & Director (Finance)/Head of Finance internally. Where such
delegation is made, the delegation order should spell out the levels of approval and the powers of
each official, which should be strictly observed. Where such delegation is exercised, there should
be a proper system of automatic internal reporting to the Board at its next meeting in all cases.

PSEs should ensure that all investment decisions are in accordance with the regulations as per
the Company Law & Government of India instructions and any other relevant legislation and
rules as

38
applicable. Any investment already made, which is not in conformity with the above guidelines
should not be renewed after maturity.

Every PSE should arrange to place the above guidelines at its next Board Meeting and evolve a
suitable procedure to cover investment of surplus funds to be followed by company.

The Joint Parliamentary Committee (JPC) had desired that clear guidelines be laid down about
investment of surplus funds by public sector enterprises in order to ensure that no misuse of PSU
funds recurs. In pursuance of the observations of the JPC, the Government had issued detailed
guidelines vide O.M. of even number dated 14th December, 1994.

PSUs will not be allowed to invest their surplus funds in UTI and other public and private mutual
funds as they are equity based and are, therefore, inherently risky.

There should be a proper commercial appreciation before any investment decision of surplus
funds is taken, and that the availability of surplus funds may be worked out for a minimum
period of one year at any point of time. The public enterprises are advised to make their best
estimates of the availability of surplus funds in consultation with their administrative Ministry.

The Government had decided that while one year ceiling on the remaining maturity period shall
hold good for the general instruments, the public enterprises can also select FINANCIAL bills
and Government of India securities up to three years maturity period for the investment of
surplus funds.

The guidelines of December, 1994 have stated that the Term Deposits may be made with any
scheduled commercial bank (i.e. bank incorporated in India) and with a paid up capital of atleast
Rs.100 Crores, fulfilling the capital adequacy norm as prescribed by the RBI from time to time. It
has now been decided that instead of the condition of Rs.100 Crores as paid up capital there will
be a condition of Rs.100 Crores as ‘net worth’ of the bank, i.e. the paid up capital plus free
reserves of the bank should not be less than Rs.100 Crores.

The guidelines of 14th December, 1994 under Para 3(ii) envisage that the investment may be made
in instruments which have been rated by an established Credit Rating Agency and have been
accorded the highest credit rating signifying highest safety, e.g. Certificates of Deposits, Deposit
Scheme or similar instruments issued by scheduled commercial bank/term lending institutions
including their subsidiaries as well as commercial paper of corporates. It is clarified that credit

39
ratings issued by rating agencies are broadly classified as investment grade and non-investment
grade. Since "highest credit rating" would mean the top most in the investment grade, which
would limit choice and probably lower the overall yield, PSUs will now be free to invest in
instruments falling under investment credit rating.

The earlier guidelines also envisage that inter-corporate loans shall be permissible to be lent only
to Central PSUs which have obtained highest credit rating awarded by one of the established
Credit Rating Agencies for borrowing for the corresponding period. The Government reiterate
that inter- corporate borrowing programmes can also be credit rated by rating agencies and the
public enterprises may invest surplus funds only on the basis of such ratings. This would help to
avoid the instances of the enterprise providing friendly support to other enterprise on
considerations other than safety.

The existing holding of the enterprise in the UTI schemes or similar schemes of various other
public sector and private sector mutual funds have to be disinvested to fall in line with these
guidelines. Such investment may however be phased out without running the risk of capital loss
with due approval from the Boards of the public enterprises.

DPE vide O.M. issued subsequent clarifications on 11 th march 1996. Further recommendations
were made. Earlier the PSUs were advised that the existing holdings or the enterprises in UTI or
other similar schemes or various other mutual funds should be disinvested to fall in line with
these guidelines and such liquidation of holdings be phased out without running the risk of
capital loss.

The matter has been further examined by the Government and it has now been decided that the
existing holdings of PSUs in various schemes of UTI and similar mutual funds schemes of other
public sector and private sector mutual funds may be phased out over a period of three years.

Reference is invited to the Department of Public enterprises OM of even number dated 14 th

December, 1994 detailing the guidelines for investment of surplus fund by public sector
enterprises, in the wake of Joint Parliamentary Committee Report which enquired into the
irregularities in security transactions noticed by the Committee in case of certain public
enterprises. These guidelines were followed by OM dated 1.11.95, 11.3.96, 2.7.96 and 14.2.97
indicating certain modifications in the policy and certain clarifications which were raised from
different quarters on the specific methods of investment of surplus funds.

40
Investment Procedure of Surplus Funds
ONGC VIDESHregularly invests its short term surplus funds in accordance with the Guidelines
(DPE Guidelines) on the subject issued by the Department of Public Enterprises (DPE) as well as
decisions taken by the Board of Directors of ONGC VIDESHwith respect to investment avenues,
exposure limits, delegations, etc. within the overall framework of DPE. The practices in this
regard have evolved Investment of surplus funds involves the following activities:

• Preparation of Cash Forecast and determining investible surplus, if any;

• Inviting quotations from eligible parties, as may be approved by the competent authority
from time-to time;
• Investment decisions after necessary deliberations and recommendations by the
Investment Committee of senior officials of ONGC VIDESHconstituted by the ONGC
VIDESHBoard
and approval by a designated Committee of Directors comprising of CMD & Director
(Finance), to whom powers of investment of surplus funds up to specified limit have been
delegated by the Board;
• Deployment of funds with successful Bank/CPSEs in line with investment decision;
• Settlement activities at the time of investments as well as at the time of maturity.
• Generating relevant MIS based on financial results of the empanelled entities/ market
intelligence reports or other sources and providing the same to the higher management.
In
particular, reporting of the investment transactions to the Board as required by DPE
Guidelines and seeking Board approval/ratification, wherever required.

41
 MISCELLANEOUS
 FMG will periodically update the panel of invitees and their financial details, audited balance
sheets, exposure limits etc.

 It is the intention to use information technology measures such as web-based bidding to increase
efficiency of bidding process and reduce cycle time. Procedures for such web-
 based bidding may be evolved with approval of CMD and Director (F).

 This procedure applies to all the investments to be made through Investment Committee and with
the approval of CMD and Director (F) under delegated powers in accordance
 with the decisions taken by the Board from time to time.
 CMD and Director (F) are authorized to alter the constitution of Investment Committee
 whenever needed provided that any such alteration shall be reported to the Board as soon as
practicable, preferably at its next meeting.
PERMITTED INVESTMENT AVENUES
Investment in following avenues is permitted by the Board of Directors of ONGC:-
• Term Deposits with scheduled commercial banks (incorporated in India)
• Public sector banks with a minimum net worth of Rs. 100 Cr and also meeting the
capital adequacy norms, as prescribed by the RBI.
• Private sector banks, with a minimum net worth of Rs.500 Cr and also meeting the
capital adequacy norms prescribed by RBI from time to time.
• Instruments rated “AA” or “P-2”or equivalent e.g., Certificates of Deposits, Deposit
Schemes or similar instruments issued by scheduled commercial banks.
• Commercial paper issued by corporate having highest credit rating (P1+ or equivalent)
from an established credit rating agency. In case of CP of corporate, other than central
PSEs, the issuer must be a company whose shares are listed as “Category A” shares on
Bombay Stock Exchange.
• Inter-corporate loans to central ‘Navaratna’ PSEs having highest credit rating (AAA or
equivalent) from an established rating agency for borrowing for the corresponding period.
• Bonds issued by central PSEs having highest credit rating (AAA or equivalent.)
• FINANCIAL Bills and Governments of India Securities.
• Liquid TDR, automatic and value-dated, with SBI, Tel Bhavan for the min. period.
• UTI Liquid Plan and UTI FINANCIAL Advantage Fundfor a maximum period of one
year subject to a maximum limit of Rs 2,000 Crore.

The maximum investment duration shall be one year (including one year and one/two days).
Also, if the maturity date happens to be a holiday, then investment/maturity shall be for a tenure
up to the next working day, as per the banking practice.

42
LIST OF INVITEES FOR OFFERS FOR INVESTMENT OF SURPLUS
FUNDS
The following parties are to be invited for investment of short term surplus funds by ONGC,
subject to availability of exposure limits:-
• For investment in term deposits and rated instruments issued by banks, invitees shall
comprise of the list of empanelled banks, as approved by the Board.
• For Inter-corporate loans, the invitees shall comprise of central Navaratna PSEs having
highest credit rating. Accordingly, invitees will comprise of Indian Oil, BPCL, HPCL,
NTPC, SAIL and BHEL, subject to the availability of highest credit rating.

• For investment in rated bonds/CPs as well as T-bills/Govt. securities, the invitees should
comprise of Primary Dealers promoted by one or more scheduled commercial banks
(registered in India)/financial institutions, and operating at Delhi.

In case of banks, invitation will be sent to the Zonal Office at Delhi or to branch at Delhi
nominated by Zonal Office of the respective bank. In case of SBI, the invitation shall be made to
Tel Bhawan Branch (where the banking facilities of ONGC VIDESH are centralized) and New
Delhi Main Branch (where ONGC VIDESH maintains its current account).
EXPOSURE LIMITS
The investments are to be made subject to the following exposure limits:-
For Commercial Banks (investment in TDRs and STDRs): As per the bank
• For Inter-corporate loans to central Navaratna PSEs: 25% of Net worth, subject to a cap
of following:
NTPC: Rs. 500 Crore
BHEL: Rs. 500 Crore
Indian oil Corporation: Rs. 3500 Crore
Hindustan Petroleum Corporation Limited: Rs. 1500
Crore Bharat Petroleum Corporation Limited: Rs. 1500
Crore Steel Authority of India: Rs. 500 Crore
Gas Authority of India: Rs. 1500 Crore

All these individual limits are subject to the overall limit for Inter-Corporate loans is Rs 7,500 Cr.

• For T-Bills/G-Securities:No credit exposure limits, in view of sovereign exposure. The

Net Worth of PSEs/ other corporate shall be taken as per the latest available audited
43
 accounts (previous year’s published audited accounts) of the respective parties.
• UTI Liquid Plan and UTI FINANCIAL Advantage Fund for a maximum period of 1
Year days subject to a maximum limit of Rs 2,000 Crore.
The above limits are further subject to following instrument-wise limits-

• T-Bills/GOI Securities: Rs 10,000 Cr

• TDRs/STDRs of banks: Rs 30,000 Cr
• Rated instruments of banks/FIs: Rs 1,000 Cr
• Commercial Paper/Bonds of corporate: Rs 1,000 Cr
• Inter-corporate loans to central PS-Es: Rs 7,500
Cr Liquid Plans of UTI Mutual Fund: Rs 2,000 Cr
SHORT TERM FUNDING:
The need for finance may be for long-term, medium-term or for short-term. Financial requirements
with regard to fixed and working capital vary from one organization to other. To meet out these
requirements, funds need to be raised from various sources. Some sources like issue of shares and
debentures provide money for a longer period. These are therefore, known as sources of long-
term finance. On the other hand sources like trade credit, cash credit, overdraft, bank loan etc.
which make money available for a shorter period of time are called sources of short-term finance.
In this lesson you will study about the various sources of short-term finance and their relative
merits and demerits.

Objectives:

• discuss the purpose served by short-term finance;

• identify and explain the various sources of short-term finance;
• outline the merits and demerits of short-term finance.
• describe the relative merits of trade credit and bank credit;
• explain the advantages and disadvantages of bill discounting;
• distinguish between bank over-draft and bank loans;
• differentiate between bank overdraft and cash credit.
• identify the types of securities required for bank credit.
• state the merits and demerits of customers advances as a source of short-term finance..

44
Purpose of Short-term Finance:
After establishment of a business, funds are required to meet its day to day expenses. For example
raw materials must be purchased at regular intervals, workers must be paid wages regularly,
water and power charges have to be paid regularly. Thus there is a continuous necessity of liquid
cash to be available for meeting these expenses. For financing such requirements short-term
funds are needed. The availability of short-term funds is essential. Inadequacy of short-term
funds may even lead to closure of business.

Sources of Short-term Finance:

There are a number of sources of short-term finance which can be used by PSU like ONGC VIDESH
for its Short Term Borrowing are listed below:

• Commercial Paper
• Collateralized Borrowing And Lending Obligation (CBLO)
• External Commercial Borrowing (ECB)
• Buyer’s Credit
• Commercial Banks
• Loan Syndication
• Line of Credit
• Counter Trade
• Trade Credit
• Bank Credit
• Bill Finance
• Channel Financing
• Deposits From Suppliers and Contractors
• Structured Finance
• Project Finance
• Costumer’s Advance

45
 CHAPTER – 5
CONCLUSION &
RECOMMENDATIONS

CONCLUSION

From the study of overall process of investment of short-term surplus of ONGC, I can conclude
that it has devised a sound process of investment, which, is purely based on commercial basis. The
Company is following the DPE guidelines to park its surplus funds, which all the PSEs have to
follow. Along with it the Company has its own investment Committee which looks after every
aspect before investing the funds. The Company appoints different agencies from time-to-time to
review its investment process. The Risk based limit structure for banks proposed by CRISIL is
quite satisfactory. As the Company is a PSE, its major concern is the protection of capital and to
maintain adequate liquidity. Thus, the Company does not invest its funds with any instrument for
more than one year to meet any unforeseen contingencies. Similarly, the Company properly takes
care of Default probability of each avenue before investing the funds with it. And hence, do not
invest its funds with those instruments, which have risk associated with them.

The major portion of the Company’s funds is invested in the UTI mutual funds. They are also in
line with the guidelines given by DPE. Thus, the Company still has a lot of scope to broaden its
investment portfolio.

At last to conclude I would like to add that whatever the Company is doing at present with respect
to invest its short-term surplus funds, depending upon its risk appetite is commendable
46
RECOMMENDATIONS
The present investment policy of ONGC VIDESH is as per the DPE guidelines and doesn’t
involve any major shortcomings. But still some suggestions, which the company can consider for
the shortcomings mentioned above in the findings, are as follows:

S.No. POLICY REFERENCE SUGGESTIONS

1 Cash forecasts Currently, Company prepares cash forecasts manually. It is

2 Cash forecasts tenor
recommended that the process of cash forecasting and variance
against forecasts be automated through leveraging SAP. As well
as in the interest accrual computation, the end-term amount does
not include interest. This inaccuracy is manually addressed. The
computation logic in SAP for end-term amount may be revised
to
reflect the accurate value without manual intervention.
The Policy currently requires cash forecasting to be conducted
for one year. To enable effective deployment of funds for longer
horizon, the policy may require that the horizon for cash
forecasting be increased to three years wherein monthly forecasts
are prepared for the first year and quarterly forecasts thereafter.

3 Communication of Cash forecasts are communicated to FMG via e-mail or fax, it is

Cash forecasts to recommended that cash forecasting and variance analysis should
FMG be included as a part of SAP. This would facilitate automation of
the process and reduce communication gaps.

4 Allocation of funds in The policy proposes allocation of funds based on the net worth
case of tie for the of the Bank/CPSE. This may however not lead to the most
Enquiry for FD optimal risk weighted return. Accordingly it is recommended
that in case of a tie, funds be allocated in the following manner:
To the least risky bank in terms of external credit rating.
In situations of tie in the credit rating of the banks, the funds may
be allocated in the ratio of CRAR.
47
LIMITATIONS

Although the project has been worked out at its best yet there are some limitations, which cannot
be overlooked. Had these limitations been overcome, the findings would be accurate.

Some of the limitations are:

1) Time constraint:

Time was really a limiting factoring the project. It's really difficult to work out such a large project
between two months time.

2) Data constraint:

All the data that has been collected for this project, has been taken from secondary sources like
websites, magazines, newspapers and book.

48
BIBLIOGRAPHY

• ONGC VIDESH Annual Reports 2008-09, 2009-10,2010-11,

2011-12

• ONGC VIDESH Activity Report 2011-12

• ONGC VIDESH Energy Review 2011-12
• http://www.ongcindia.com/
• http://www.ongcreports.com/
• http://www.moneycontrol.com/
• http://investing.businessweek.com/
• http://www.globalinsight.com/
• http://petroleum.nic.in/
• http://www.investopedia.com/
• http://www.bizminer.com/
• http://www.gasandoil.com/
• http://www.usitc.gov/

49