SUMMER INTERNSHIP PROJECT RATIO ANALYSIS

SUBMITTED BY: MONICA GOEL FW 2008-10 IIPM

UNDER THE GUIDANCE OF Ms. ANURADHA GARG Sr. FINANCE MANAGER INDIAN OIL CORPORATION LTD. (MARKETING DIVISION)

ACKNOWLEDGEMENT
It gives my immense pleasure to express my sincere gratitude to my respected mentor, Ms. ANURADHA GARG, Sr. Finance Manager, Indian oil corporation LTD. (Marketing Division) for providing me the much required inspiration by way of expert guidance and ceaseless encouragement throughout my training programme. I would also like to place on records my thanks to International Institute of planning and management (IIPM) for encouraging me to exhibit my innovativeness and communication skill through which I got an opportunity to get training under IOCL.

Ms. ANURADHA GARG (SUPERVISOR)

MONICA GOEL FW 2008-10

Comparative Ratio Analysis of IOC LTD and BPCL

INTRODUCTION

atios are used to analyze financial statements and to explain

relationships between individual amounts in the financial statements (i.e., revenues and expenses; assets and liabilities; revenue to assets; and expenses to liabilities). A ratio in isolation is typically of little value. Ratios become more meaningful when they are compared to: Organizations past performance. Organizations of similar size.

INDIAN OIL CORPORATION

Sarthak Behuria is the Chairman of Indian Oil Corporation. He is also serving as Chairman (parttime) of subsidiary companies, Bongaigaon Refineries & Petrochemicals Ltd and Chennai Petroleum Corporation Ltd. He is also on board of Indian Oil Tanking Ltd., a joint venture for building and operating services for petroleum products.

PROFIT & LOSS A/C OF IOC LTD.

Profit & Loss A/C Mar '04 12 mths
Income
Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income 133,911.11 17,022.57 116,888.54 1,494.67 728.72 119,111.93 153,588.52 14,374.20 139,214.32 1,197.76 1,653.90 142,065.98 193,216.88 18,321.76 174,895.12 1,605.16 2,599.33 179,099.61 238,348.37 21,849.52 216,498.85 3,810.01 -180.73 220,128.13 270,402.30 23,051.25 247,351.05 3,136.73 1,958.09 252,445.87

..in Rs. Cr

Mar '05 12 mths

Mar '06 12 mths

Mar '07 12 mths

Mar '08 12 mths

Expenditure
Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses 98,575.39 350.32 1,537.18 547.76 5,602.28 615.27 0.00 107,228.20 123,234.27 401.60 1,829.10 851.19 6,533.28 581.88 0.00 133,431.32 159,012.86 218.29 1,799.23 742.93 7,435.51 867.22 -406.74 169,669.30 193,290.80 291.31 2,586.80 821.56 8,528.96 526.75 -542.83 205,503.35 223,214.64 357.82 2,894.86 1,200.32 10,084.29 642.54 -403.58 237,990.89

Mar '04 12 mths

Operating Profit PBDIT Interest 10,389.06 11,883.73 470.86

Mar '05 12 mths

7,436.90 8,634.66 604.17

Mar '06 12 mths

7,825.15 9,430.31 995.44

Mar '07 12 mths

10,814.77 14,624.78 1,496.25

Mar '08 12 mths

11,318.25 14,454.98 1,589.73

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

11,412.87 1,873.79 0.00 9,539.08 144.33 9,683.41 2,646.40 7,004.82 8,652.81 0.00 2,452.83 314.27

8,030.49 2,072.80 0.00 5,957.69 21.45 5,979.14 1,063.80 4,891.38 10,197.05 0.00 1,693.62 237.29

8,434.87 2,201.46 10.47 6,222.94 498.45 6,721.39 1,790.38 4,915.12 10,656.44 0.00 1,460.02 204.77

13,128.53 2,590.31 113.43 10,424.79 76.73 10,501.52 2,949.46 7,499.47 12,212.55 0.00 2,250.89 361.72

12,865.25 2,709.70 236.53 9,919.02 178.64 10,097.66 3,104.54 6,962.58 14,776.25 0.00 732.29 0.00

Per share data (annualized) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 11,680.12 59.97 210.00 197.32 11,680.12 41.88 145.00 222.47 11,680.12 42.08 125.00 250.88 11,680.12 64.21 190.00 298.22 11,923.74 58.39 55.00 344.58

Source : Asian CERC

FINANCIAL REVIEW
TURNOVER The turnover (exclusive of excise duty) of Indian oil for the year ended 31st March, 2008was Rs. 2, 47,351crore as compared to Rs.216499crore in the previous year. The total sale of petroleum products (including natural gas) for 2007-08 was 62.62MMT, as against 57.97MMT during 2006-07. Profit Before Tax The corporations profit before tax was Rs. 10,098 crore during 2007-08 as compared to Rs. 10,502 crore in 2006-07.

Profit After Tax The corporation has ended a Profit after Tax of Rs. 6963 crore during the current financial year as compared to Rs.7499 crore in 2006-07. Depreciation & Amortization Depreciation for the year 2007-08 was Rs. 2,709 crore, as against Rs.2590 crore for the year 2006-07. Interest (net) Interest Expenditure (net) of the Corporation for the current year was Rs. 408 crore, as against Rs. 675 crore during 2006-07.

BALANCE SHEET OF IOC LTD.

Balance Sheet Mar '04 12 mths
Sources Of Funds
Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 1,168.01 1,168.01 0.00 0.00 21,879.40 0.00 23,047.41 3,175.21 9,003.35 12,178.56 35,225.97 1,168.01 1,168.01 0.00 0.00 24,816.35 0.00 25,984.36 2,491.23 14,829.01 17,320.24 43,304.60 1,168.01 1,168.01 0.00 0.00 28,134.66 0.00 29,302.67 7,793.54 18,610.77 26,404.31 55,706.98 1,168.01 1,168.01 24.36 0.00 33,664.92 0.00 34,857.29 5,671.42 21,411.27 27,082.69 61,939.98 1,192.37 1,192.37 0.00 0.00 39,893.88 0.00 41,086.25 6,415.78 29,107.39 35,523.17 76,609.42

..in Rs. Cr

Mar '05 12 mths

Mar '06 12 mths

Mar '07 12 mths

Mar '08 12 mths

Mar '04 12 mths

Application Of Funds
Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets 36,386.16 14,339.55 22,046.61 5,261.30 5,595.43 14,951.08 3,973.12 697.66 19,621.86

Mar '05 12 mths

39,869.26 16,488.47 23,380.79 8,719.47 5,554.93 19,504.82 5,689.87 434.70 25,629.39 10

Mar '06 12 mths

43,662.84 18,639.42 25,023.42 9,620.03 14,521.39 24,277.79 6,699.48 729.54 31,706.81

Mar '07 12 mths

54,770.29 21,400.07 33,370.22 4,394.30 19,990.86 24,702.69 6,736.06 916.24 32,354.99

Mar '08 12 mths

56,731.50 23,959.68 32,771.82 9,170.22 21,535.78 30,941.48 6,819.23 815.05 38,575.76

Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

11,436.06 0.41 31,058.33 0 20,928.14 7,880.85 28,808.99 2,249.34 73.29 35,225.97 14,955.23 197.32

11,791.63 11.62 37,432.64 0.00 24,553.64 7,262.68 31,816.32 5,616.32 33.09 43,304.60 11,466.17 222.47

10,729.93 14.63 42,451.37 0.00 28,377.36 7,589.38 35,966.74 6,484.63 57.51 55,706.98 8,724.76 250.88

11,601.54 9.73 43,966.26 0.00 32,305.52 7,633.41 39,938.93 4,027.33 157.27 61,939.98 22,676.47 298.22

14,920.93 9.38 53,506.07 0.00 39,326.07 1,172.99 40,499.06 13,007.01 124.59 76,609.42 25,574.96 344.58

Source : Asian CERC

FINANCIAL REVIEW
Capital Assets Gross Fixed Assets (including Capital Work in Progress) increased from Rs. 59,165 crore as on 31st March, 2007 to Rs. 65902 crore as on 31st March, 2008. Investments Investments, including advances for investment, as on 31st March, 2008 were Rs. 21,536 crore as compared to Rs. 19,991crore as on 31st March, 2007. The changes in investments during the year are mainly on net increase in Government of India Special Oil Bonds. The aggregate market value of the quoted investments as on 31st March,2008i.e., investments made in oil & natural gas corporation Ltd., GAIL(India) Ltd., Petronet LNG Ltd. and Lanka IOC Ltd., is Rs.21,438 crore (As against the cost price of Rs.2, 854 crore). . Net Current Assets Net Current Assets as on 31st March, 2008 were Rs. 18,350 crore, as against Rs. 9,351 crore as on 31st March, 2007.

11

RATIO ANALYSIS
LIQUIDITY RATIOS
1.) Current Ratio Formula to calculate current ratio: Current ratio = Current assets Current liabilities Current ratio definition and explanation: The current ratio is used to evaluate the liquidity, or ability to meet short term debts. High current ratios are needed for companies that have difficulty borrowing on short term notice. The generally acceptable current ratio is 2:1 The minimum acceptable current ratio is 1:1 Therefore, Mar08, Current Ratio = 38575.76 40499.06 = 0.95

2.) Quick Ratio

Formula to calculate quick ratio: Quick ratio = (Current Assets Closing Stock) Current liabilities Quick ratio definition and explanation: The quick ratio is used to evaluate liquidity. Higher quick ratios are needed when a company has difficulty borrowing on Short term notice. A quick ratio of over 1:1 indicates that if the sales revenue disappeared, the business could meet its current obligations with the readily available "quick" funds on hand. Therefore, Mar08, Quick Ratio = 53496.69 30941.48
40499.06 = 0.55

12

SOLVENCY RATIOS
3.) Debt-Equity Ratio Formula to calculate debt to equity ratio:

Debt to Equity Ratio = Long Term Debt/Total Shareholders Equity Debt to equity ratio definition and explanation: The debt to equity (debt or financial leverage) ratio indicates the extent to which the business relies on debt financing. Upper acceptable limit of the debt to equity (debt or financial leverage) ratio is usually 2:1, with no more than one-third of debt in long term. Therefore, Mar08, Debt - Equity Ratio = 35523.17/41086.25 = 0.86: 1

4.) Operating Profit Margin Formula to calculate Operating Profit Margin: Operating Profit Margin = EBITDA/Net Revenues Therefore, Mar08, Operating Profit Margin = 11318.25/247351.05 = 4.57% 5.) Interest Coverage Ratio Formula to calculate Interest Coverage Ratio: Interest Coverage Ratio = Income before interest and tax expenses Interest on Long term debt The interest coverage ratio indicates the extent of which earnings are available to meet interest payments.
13

Therefore, Mar08, Interest Coverage Ratio = 10097.66/1589.73 = 6.35 times

TURNOVER RATIOS
6.) Inventory Turnover Ratio Formula to calculate Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of Goods Sold Average Inventories
The inventory turnover ratio measures the number of times a company sells its inventory during the year.

Therefore, Mar08, Inventory Turnover Ratio = 237990.89 27822.085 = 8.55 times 7.) Debtors Turnover Ratio Formula to calculate Debtors Turnover Ratio: Debtors Turnover Ratio = Therefore, Mar08, Debtors Turnover Ratio = 247351.05 6777.645 = 36.49 times 8.) Average Collection Period (in Days) Formula to calculate Average Collection Period (in Days): Average Collection Period = 365 DTR Net Credit Sales Average A/C Receivables

14

Therefore, Mar08, Average Collection Period (in Days) = 365 36.49 = 10 days

9.) Fixed Assets Turnover Ratio Formula to calculate Fixed Assets Turnover Ratio: Fixed Assets Turnover Ratio = Therefore, Mar08, Fixed Assets Turnover Ratio = 247351.05 32771.82 = 7.54 times Net Sales Net Fixed Asset

PROFITABILITY RATIOS
10.) Gross Profit Ratio Formula to calculate Gross Profit Ratio: Gross Profit Ratio = Gross Profit * 100 Net Sales Low gross profit margin ratio indicates that low amount of earnings, required to pay fixed costs and profits, are generated from revenues. The gross profit margin ratio is a good ratio to benchmark against competitors. Therefore, Mar08, Gross Profit Margin Ratio = 247351.05 237990.89* 100 247351.05 = 3.78%

15

11.) Net Profit Margin Formula to calculate Net Profit Margin: Net Profit Margin = Net Profit after Tax*100 Net Sales Indicates the revenue required to earn a dollar profit after tax. Therefore, Mar08, Net Profit Margin = 6962.58*100 247351.05 = 2.81% 12.) Return on Net Worth Formula to calculate Return on Net Worth: Return on Net Worth = (PAT Preference Dividend)* 100 Equity Shareholders Funds A return of over 10% indicates enough to pay common share dividends and retain funds for business growth. Therefore, Mar08, Return on Net Worth = (6962.58 0.00)* 100 (41086.25 124.59) = 16.99% 13.) Earning Per Share (EPS) Formula to calculate Earning per Share: Earning Per Share = Profit after Tax No. of Shares Therefore, Mar08, EPS = 6962.58 1192374306 = 58.39

16

CALCULATION OF RATIOS OF IOC LTD FROM FINANCIAL YEAR MARCH 2004 TO MARCH 2008.
Ratios
Current Ratio Quick Ratio Debt-equity Ratio

Mar04
0.68 0.55 0.52

Mar05
0.81 0.56 0.67

Mar06
0.88 0.50 0.90

Mar07
0.81 0.48 0.78

Mar08
0.95 0.55 0.86

Operating Profit Ratio Interest Coverage Ratio Inventory Turnover Ratio Debtors Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period Gross Profit Ratio

8.88%

5.34%

4.47%

4.99%

4.57%

20.56 7.40

9.9 7.74

6.75 7.75

7.01 8.39

6.35 8.55

29.3 5.30 12days

28.81 5.95 13days

28.23 6.98 13days

32.23 6.48 11days

36.50 7.54 10days

8.26%

4.15%

2.98%

5.07%

3.78%

Net Profit Ratio

5.99%

3.51%

2.81%

3.46%

2.81%

Return on Net Worth Earning Per Share

30.5% 59.97

18.84% 41.88

16.8% 42.08

21.6% 64.21

16.99% 58.39

17

Intra-firm comparison of ratios of IOC LTD

From the above calculation it has been observed that; Current ratio: It has increased to 0.95 from March04 to March08 but this current ratio is below generally accepted norm of 1.33:1. Therefore, resources provided by the financial institutions are not efficiently utilized. Quick ratio: It has increased from 0.55 to 0.56 from year Mar04 to Mar05. After that it has declined to 0.48 in the year 07 and then increased to 0.55 in the year Mar08. Thus, IOCL is not able to meet its current obligations as it doesnt have readily available funds. Debt-equity ratio: Very low ratio during March04. Based on a standard ratio of 1.5: 1. In the year 08, debt equity ratio has increased to 0.86:1. Company is relying more on debt for financing its assets. Operating ratio: This ratio has drastically decreased to 4.57% in the year 2008 from 8.88% in the year 2004. Debtor turnover ratio: This ratio has increased from 29.3times to 36.50times from the year 2004 to 2008. Fixed asset turnover ratio: This ratio has increased from 5.30times to 6.98times from year 2004 to 2006 and after that it has decreased to 6.48times in the year 2007 and in the year it reached to 7.54times. Growth in the efficiency of fixed assets utilization. Gross profit ratio: It has decreased to 2.98% from the year 2004 to year 2006. This ratio reached to 5.07% in the year 2007 after that it comes down to 3.78%. Company have to pay fixed costs out of the revenues as it has low earnings. Net profit ratio: Net profit ratio is 2.81% in the current year as compared to 3.46% in the previous year. Therefore, this ratio has been decreased by 81.21%. Return on net worth: 28.57% improvement over 2005-2006. But in the year 2008 it comes down to 16.99% from 21.6% in the previous year. It shows not a very good operational efficiency. Earnings per Share: Earnings per Share for the year 2007-08 work out to Rs. 58.39 as compared to Rs. 62.90 in the previous year. Cash Earnings per Share for the current year work out to Rs.81.10 as compared to Rs. 84.97 in the previous year.

18

Accreditation
Indias largest commercial enterprise with leading market Shares in downstream segment of Oil business. Highest ranked Indian company in the Fortune 'Global 500' listing (moved up 19 places to 116th position in 2008). 18th largest petroleum Company in the world Fortune Global 500. Awards/recognitions: Indias No. 1 Corporate in annual listing of Business Standard (BS 1000). Indias leading company in Economic Times (ET 500) Listing. Rated amongst top ten in Business India (BI Super 100) and amongst Indias top valuable companies in BT 500 listing. Frost & Sullivan award for Industry Innovation & advancement in Indian Bio-fuel industry. Emerged as the Most Trusted Fuel Pump Brand in a Survey conducted by Readers Digest and AC Nielsen.

19

BHARAT PETROLEUM CORPORATION

20

Ashok Sinha is Chairman and Managing Director, Bharat Petroleum Corporation Ltd. An electrical engineer and an alumnus of IIM Bangalore with 29 years of experience in the petroleum industry, he has received several awards, including the India CFO Award 2001 for Information and knowledge Management by the Economic Intelligence Unit (EIU) India and American Express.

21

PROFIT & LOSS A/C OF BHARAT PETROLEUM CORPORATION

Profit & Loss account

..in Rs. Cr. Mar '04 12mths Mar '05 12 mths

63,857.00 5,979.60 57,877.40 405.03 1,586.25 59,868.68

Mar '06 12 mths

85,149.62 9,616.32 75,533.30 304.66 754.4 76,592.36

Mar '07 12 mths

107,452.27 10,895.42 96,556.85 550.99 205.45 97,313.29

Mar '08 12 mths

121,684.07 11,475.94 110,208.13 1,091.63 -392.5 110,907.26

INCOME
Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income 53,448.36 5,464.34 47,984.02 448.45 -284.03 48,148.44

Expenditure
Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses 41,909.81 82.99 661.83 123.59 1,667.23 385.61 0 44,831.06 54,571.66 19.69 752.29 141.54 1,765.58 520.67 0 57,771.43 71,461.39 47.72 881.35 205.27 2,059.31 531.51 0 75,186.55 88,745.19 66.64 1,003.70 243.43 2,365.31 620.23 0 93,044.50 101,743.99 61.75 1,297.21 229.54 2,508.57 823.61 0 106,664.67

Mar '04 12 mths Operating Profit

PBDIT Interest PBDT Depreciation 2,868.93 3,317.38 104.97 3,212.41 561.16

Mar '05 12 mths

1,692.22 2,097.25 139.8 1,957.45 596.04 22

Mar '06 12 mths

1,101.15 1,405.81 247.41 1,158.40 768.01

Mar '07 12 mths

3,717.80 4,268.79 477.35 3,791.44 904.11

Mar '08 12 mths

3,150.96 4,242.59 672.47 3,570.12 1,098.21

Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

0 2,651.25 -28.25 2,623.00 928.44 1,694.57 2,921.24 0 525 67.27

0 1,361.41 31.53 1,392.94 427.14 965.8 3,199.77 0 375 52.04

0 390.39 17.81 408.2 116.56 291.65 3,725.15 0 90.39 12.68

0 2,887.33 -126.5 2,760.83 955.33 1,805.48 4,299.32 0 578.47 91.87

0 2,471.91 118.65 2,590.56 1,010.00 1,580.56 4,920.68 0 144.62 9.16

3,000.00 56.49 175 194.99

3,000.00 32.19 125 212.95

3,000.00 9.72 25 302.6

3,615.42 49.94 160 284.16

3,615.42 43.72 40 322.97

Source : Asian CERC

FINANCIAL REVIEW
The gross profit before interest, depreciation and tax (PBDIT) for the year stood at Rs.43, 679.65 million, representing an increase of 3.89% over the previous year. The profit before tax for the year of Rs. 25,972.87 million has declined by 6.16 % as compared to Rs. 27,676.44 million in 2006-07. After providing for tax, (including deferred tax and fringe benefit tax)of Rs. 10,167.26 million as against Rs. 9,621.69 million during the last year, the profit after tax for 2007-08 stood at Rs. 15,805.61 million as compared to Rs. 18,054.75 million in 2006-07, reflecting a decline of 12.46% over the previous year. The Board of Directors has recommended a dividend of 40% (Rs.4 per share) for the year on the paid-up share capital of Rs.3, 615.42 million, which would absorb a sum of Rs. 1,537.78 million out of the profit after tax, inclusive of Rs. 91.61 million towards Corporate Dividend Tax on distributed profits.

23

BALANCE SHEET OF BHARAT PETROLEUM CORPORATION

Balance Sheet Mar '04 12mths Sources of funds
Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 300 300 0 0 5,549.72 0 5,849.72 1,973.74 715.98 2,689.72 8,539.44 300 300 0 0 6,088.43 0 6,388.43 1,173.42 2,708.20 3,881.62 10,270.05 300 300 61.54 0 8,777.88 0 9,139.42 3,071.32 5,302.28 8,373.60 17,513.02 361.54 361.54 0 0 9,912.00 0 10,273.54 2,593.96 8,235.28 10,829.24 21,102.78 361.54 361.54 0 0 11,315.30 0 11,676.84 2,730.21 12,292.17 15,022.38 26,699.22

in Rs. Cr... Mar '05 12 mths Mar '06 12 mths Mar '07 12 mths Mar '08 12 mths

Mar '04 12 mths Application Of Funds

Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances 11,157.80 5,111.97 6,045.83 1,407.65 1,976.97 4,286.02 821.07 625.72 5,732.81 2,811.19

Mar '05 12 mths

12,668.84 5,668.72 7,000.12 1,348.55 1,677.14 6,258.56 854.58 351.5 7,464.64 3,016.10 24

Mar '06 12 mths

17,376.84 7,459.48 9,917.36 1,168.11 3,877.42 9,044.77 1,315.89 491.19 10,851.85 2,676.22

Mar '07 12 mths

19,457.58 8,476.53 10,981.05 852.34 7,385.42 8,661.26 1,518.73 863.05 11,043.04 3,797.44

Mar '08 12 mths

21,500.93 9,532.26 11,968.67 766.71 9,358.01 10,603.84 1,608.61 960.67 13,173.12 7,797.30

Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

0.89 8,544.89 0 8,549.62 886.28 9,435.90 -891.01 0 8,539.44 2,287.45 194.99

0.89 10,481.63 0 9,633.85 603.56 10,237.41 244.22 0 10,270.03 2,350.15 212.95

0.91 13,528.98 0 10,466.36 512.49 10,978.85 2,550.13 0 17,513.02 2,751.56 302.6

0.91 14,841.39 0 11,881.37 1,076.07 12,957.44 1,883.95 0 21,102.76 3,590.62 284.16

0.92 20,971.34 0 15,379.36 986.15 16,365.51 4,605.83 0 26,699.22 5,083.23 322.97

Source : Asian CERC

FINANCIAL REVIEW
Net Worth BPCLs net worth as on 31st March, 2008 was Rs. 11,676.84 crore, as compared to Rs. 10,273.54 crore as at the end of the previous year. Investments Investments, as on 31st March, 2008 were Rs. 9358.01crore as compared to Rs. 7385.42crore as on 31st March, 2007.

25

CALCULATION OF RATIOS OF BHARAT PETROLEUM CORPORATION FROM FINANCIAL YEAR MARCH 2004 TO MARCH 2008. Ratios
Current Ratio Quick Ratio Debt-equity Ratio Operating Profit Ratio Interest Coverage Ratio Inventory Turnover Ratio Debtors Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period Gross Profit Ratio Net Profit Ratio Return on Net Worth Earning Per Share

Mar04 0.7 0.43 0.46 5.97% 26.12 11.3 57.68 6.95 6days 6.6% 3.53% 28.97%
56.49

Mar05 0.77 0.4 0.61 2.92% 10.98 9.32 69.08 7.34 5days 3.41% 1.66% 15.12%
32.19

Mar06 0.67 0.39 0.92 1.45% 3.21 8.4 69.6 7.8 5days 1.73% 0.38% 3.19%
9.72

Mar07 0.61 0.47 1.05 3.85% 7.5 11.24 68.13 8.47 5days 4.11% 1.86% 17.57%
49.94

Mar08 0.74 0.61 1.29 2.85% 4.51 11.64 70.48 5.15 5days 1.86% 1.43% 13.53%
43.72

26

Intra-firm comparison of ratios of Bharat Petroleum Corporation

From the above calculation it has been observed that; Current ratio: It has increased to 0.74 in the current year from 0.61 in the previous year but this current ratio is below generally accepted norm of 1.33:1. Therefore, resources provided by the financial institutions is not efficient. Quick ratio: It has decreased from 0.43 to 0.39 from year Mar04 to Mar06. After that it has increased to 0.47 in the year 2007 and then increased to 0.61 in the year 2008. Thus, BPCL is not able to meet its current obligations as it doesnt have readily available funds. Debt-equity ratio: Very low ratio during March04. Based on a standard ratio of 1.5: 1. It goes on increasing from year2005.In the year 2008 debt equity ratio has increased to 1.29:1 which is very close to standard ratio. This indicates the extent to which the company relies on debt financing. Operating ratio: This ratio has drastically decreased to 2.85% in the year 2008 from 5.87% in the year 2004. Debtor turnover ratio: This ratio has increased to 70.48 in the current year from 68.31 in the previous year. Fixed asset turnover ratio: There has been an increasing trend in the fixed assets turnover ratio for the past 4 years. But in the current year it comes down to 5.15times. Gross profit ratio: It has decreased to 1.73% from the year 2004 to year 2006. This ratio rises to 4.11% in the year 2007 after that it falls to 1.86%. Net profit ratio: Net profit ratio is 1.43% in the current year as compared to 1.86% in the previous year. Therefore, this ratio has been decreased by 76.88%. Return on net worth: 50.78% improvement over 2005-2006. But in the year 2008 it comes down to 13.53% from 17.57% in the previous year. It shows poor operational efficiency. Earning per share: The earnings per share stood at Rs. 43.72 in 2007-08 as compared to Rs. 49.94 during 2006-07. Internal cash generation during the year was higher at Rs. 26,363.28 million as against Rs.22, 177.03 million in the previous year. BPCLs contribution to the exchequer by way of taxes and duties during the year increased to Rs. 260,475.75 million from Rs.243, 562.22 million during the last financial year.
27

Industry Market Share

Market Size 118.827MMT Percentage Share
IOCL 48.84

Category 1 Category 2

BPCL 20.89

HPCL 18.55 RIL 9.35

Category 3 Category 4 category5

OTHERS 2.47
category5

Category 1

Category 2

Category 3

Category 4

Key: IOCL Indian oil group BPCL Bharat Petroleum Corporation limited HPCL Hindustan Petroleum Corporation limited

Note: All figures for FYE08

RIL Reliance industries limited

28

Inter-firm comparison of IOCL and BPCL

LIQUIDITY RATIOS
IOCL is making better utilization of resources than BPCL. Current ratio of IOCL is greater than the BPCL. But the quick ratio of BPCL is more i.e 0.61:1 than the IOCL i.e 0.55:1

SOLVENCY RATIOS
IOCL debt-equity ratio is more than that of BPCL. Therefore, IOCL finance its assets through long-term borrowings.

TURNOVER RATIOS
These ratio measures the extent of turnover or volume of gross income generated by the fixed assets of a company. Therefore, IOCL is making efficient utilization of fixed assets.

PROFITABILITY RATIOS
In terms of profitability ratios, IOCL is doing very well. Increase in RONW contributed by improvement in both the net profit margin as well as net worth turnover. Net profit ratio of IOCL is almost double the ratio of BPCL.

BRIEF ANALYSIS
Though both IOCL and BPCL have been performing well. IOCL has recorded improvement in all areas except quick ratio, debt-equity ratio and debtor turnover ratio. On all other parameters, IOCL performance is far better than the BPCL. However, stronger than BPCL. IOCL has the highest market size of 48.84% than the BPCL with 20.89%. Market size of IOCL is more than the double of BPCL. Therefore, IOCL is the no.1 oil industry.

29

BIBLIOGRAPHY

www.moneycontrol.com Ambrish Gupta : Financial accounting for management

30