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A STUDY OF RECEIVABLE

MANAGEMENT AND ROLE OF


E-PAYMENT IN INDIAN OIL
CORPORATION LTD.

Presented By:
Dipanjan Guha
BM-09066
ABOUT INDIAN OIL CORPORATION

 The Indian Refineries and Indian Oil Company were combined to form the
giant Indian Oil Corporation (IOCL) on 1st September 1964
 India’s largest commercial enterprise with leading market shares in
downstream segment of oil business.
 Highest ranked Indian corporate in Fortune’s list of world’s 500 largest
Companies (2010:: 125th)
 20th largest petroleum company in the world- Fortune Global500
 India’s No.1 corporate in annual listing of Business Standards (BS
10000),Business India (BI Superior 100) &Economic Time (ET 500).
METHODOLOGY
 Collection of Data
 Type of Project

 Analysis of Data

 Interpretation and Recommendations


OBJECTIVES
 Analyze the efficiency of different Collection Procedures with special emphasis on
the e-Collection Mode like RTGS and Core-to-Core banking.
 To find the Trend of the Sales and Debtors of the Company and to find a relation
between the two.
 To find out the Average Collection Period of Various Customers, DGS&D and Non
DGS&D.
 To analyze the Cash Conversion Cycle and the Liquidity of the Company.
 To analyze the Working Capital of the Company and how it can be regulated.
 To find out the different Ratios related to Liquidity and Profitability of the Company
and compare them with the competitors like HPCL and BPCL
 To know the Credit Policies of IOCL for different Customers.
EFFICIENCY OF E-COLLECTION MODE
 Cost Reduction
 Reduction in the Time

 Streamlined Payment Processing

 Improved Visibility of Cash

 Better Control on the Debtors

 Error Detection

 Decrease in the fraud


DEBTOR TURNOVER RATIO ANALYSIS
SCHEDULE FOR SUNDRY DEBTORS
ANALYSIS OF THE SUNDRY DEBTORS
Debts considered Unsecured & Good and Debts from Subsidiary Companies and
Unsecured & Doubtful Other Companies
LIQUIDITY RATIO ANALYSIS
WORKING CAPITAL ANALYSIS
GRAPHICAL REPRESENTATION OF CA AND CL

Current Assets Current Liabilities


CASH CONVERSION CYCLE

It means that IOCL has to borrow or tie up Capital for 23.76 days while
awaiting payment from a customer.
ANALYSIS OF THE DEBTORS IN THE
EASTERN REGION
SALES FIGURE OF DGS&D CUSTOMERS ON MONTH-
WISE BASIS IN 2009-10(ER):
OUTSTANDING IN DGS&D SECTOR AS ON 31 MARCH
2010(ER):

Calculation of Average Collection Period:

Average Collection Period= Total Outstanding/Daily Sales

Daily Sales= Current Month`s Sale/Number of Working Days in a Month


IOCL`S AVERAGE COLLECTION PERIOD OF DGS&D
(ER) FOR 2009-10
SALES AND OUTSTANDING OF NON DGS&D
CUSTOMERS TILL 31 MARCH 2009 (ER):
AVERAGE COLLECTION PERIOD OF NON DGS&D
CUSTOMERS IN 2009-10:
COMPARATIVE ANALYSIS OF IOCL
WITH BPCL & HPCL
DEBTORS TURNOVER RATIO AND AVERAGE
COLLECTION PERIOD
COMPARISON DTR AND ACP OF IOCL WITH HPCL
AND BPCL

DTR ACP
COMPARISON OF LIQUIDITY RATIO
COMPARISON OF CURRENT AND QUICK RATIO

Current Ratio Quick Ratio


COMPARISON OF CASH CONVERSION CYCLE
COMPARISON OF CCC FOR IOCL, HPCL,
BPCL
PROFITABILITY RATIO
COMPARISON OF PROFITABILITY RATIOS
A CASE STUDY
ISSUANCE OF CREDIT NOTE AGAINST AN OUTSTANDING OF RS.
653319 ON ACCOUNT OF CUSTOMER M/S RIFLE FACTORY,
ISHAPORE (SAP 138174) DUE TO DISCOUNTS NOT BEING PASSED.
BREAKUP OF THE INVOICE OF M/S RIFLE FACTORY
IN ED, SALES TAX AND CESS
ANALYSIS

 SUGGESTION:
The difference in charged NTV and applicable LAV per invoice is
having difference on account of excise (Rs. 82134) and on account
of Sales Tax (Rs.60806) ie. Total amount Rs.142940. The same had
been calculated on the basis of the breakup of the pricing. The
charged NTV had been checked with the SAP and found correct.
The Applicable LAV had been checked with the pricing agreement
as per attached annexure and found to be correct.
 FINAL DECISION:
DGM (Finance), WBSO approved the issuance of credit note for
differential amount of price for mentioned invoices except for ED
and Cess differential. A Credit Note of Rs.571185 was issued for
Rifle Factory.
CONCLUSION
 The Debtors of IOCL are well managed because though the Sales is increasing every year the
Sundry Debtors are decreasing. So is the Average Collection Period which is also showing a
downward trend every year.
 But from the Schedules of Sundry Debtors it can be seen that Unsecured Debts are on the Higher
side in comparison to the Secured loans and almost 67% of the of the Total Debt per year is
unsecured. Another aspect is that almost 96% of this Unsecured Loans are from the Other
Companies which are not Subsidiaries of IOCL.
 The debts from the Other Companies are almost 78% of the total Debt which should be reduced
to meet the Cash Flow of the Company.
 The main problem of the Current Assets of IOCL is the Inventory Control which shows a huge
fluctuation every year from -16% to 35.6%. So a better Inventory Control Procedure should be
taken up by the company to regulate its Working Capital.
 The Cash Conversion Cycle is on the higher side for IOCL whose basic cause in the Inventory
Holding Period only.
 The debtors in the Eastern Region have a higher Average Collection Period than the Overall for
the Company. If this ACP can be reduced then the Overall Collection period can also be reduced
which will also help in reducing the CCC of the Company.
 In comparison to the competitors like HPCL(6.55 days) and BPCL (4.80 days), IOCL gas a much
higher Average Collection Period of 10.5 days which can be brought down if the Credit period in
the DGS&D in decreased as the ACP of Non DGS&D is well below the Overall Company
average.
RECOMMENDATIONS
1. IOCL restrict the credit period to the consumers specially the DGS&D Customers so that the tax proceeds and the
consequent equivalents interest amount can be enjoyed for a longer policy
2. Just in Time Inventory mechanism should be followed by IOCL to reduced the Inventory Holding Period and there-
by the CCC of the Company can be decreased mitigating the problem of cash flow.
3. IOCL should try to get a higher Credit period from its Creditors to infuse more liquidity. This can will also solve the
Cash flow problems and can allow IOCL to give a better Credit Period for its Debtors to retain a competitive edge
in this Highly competitive market with Private players like Reliance and Essar Oil entering the scenario.
4. For better receivable Management, IOCL has to take some Steps:
a. Prices and Discounts should be updated in SAP regularly, so that correct challans are generated from time to
time.
b. There should be reduction in lead time between Sales Data and Actual Data of dispatch from location.
c. All the customers should use the RTGS or Core-to-Core facility for better regulation
5. IOCL buys product at International Prices and it is forced to sell the products to retailers and customers at
Government regulated prices, which is sometimes less than the purchase prices. All this leads to huge loss to IOCL.
Therefore IOCL has to take some policies:
a. Government should consider the better Pricing Policies to prevent losses.
b. To allow IOCL to control the prices of the Premium Brands. Rates of commercial products like Naphtha and
Bitumen should be regulated correctly.
c. By introduction of differential rate to different income groups in the society for the same product. Eg. High rate
of LPG cylinders to Commercial Users and subsidized rate to low income groups.
THANK YOU

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