project ongc

7/27/2019 Project Ongc

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1.1COMPANY PROFILE

The origin of ONGC dated back to 1956, when it existed as Oil and Natural Gas

Directorate. To function efficiently in the task of oil exploration and exploitation in October

1959, The Directorate was converted into a statutory body viz. Oil and Natural Gas

Commission. Up to the fifties in most of India, oil wealth was undiscovered. The

infrastructure to achieve this gigantic task of oil exploration was missing. ONGC filled this

void within a short span of three decades made oil exploration and exploitation a well-

planned countrywide operation.

ONGC made its debut in 1959 with the discovery of Cambay field. Since then, it has

been steadily expanding its operation to cover the entire length and breadth of the country

from the desert of Jaisalmer to the dense tropical forest of Assam, from tricky terrains of

Himalayas to the deep waters of the Arabian Sea and Bay of Bengal. ONGC has discovered

oil reserves onshore in Cambay basin in Tamilnadu. ONGC maintains about 200 onshore and

150 offshore production installations and network of 7,9000 kms. on land and2,800 kms.

Submerse pipelines to carry oil and Gas. Its total Assist base exceeds Rs. 20,000 Crores.

ONGC had significant successes in its harden venture, in the seventies. In 1974, oil

was struck in Bombay High in western offshore. This was further consolidated withunprecedented growth and expansion in the eighties; oil was also struck in Eastern Offshore

(Ravva field). In1989, ONGC was ranked at 275 th position among the fortune global 5000

companies with a turnover of 4.8 billion.

Though there was some slow down in the early nineties, a turnaround has been

achieved in 1993 and the position has been further consolidated during 1994-1995 with the

Crude oil production to 30.01 MMT and Gas production touching 20BCM. But ONGC could

not sustain the increase in oil production in late nineties and the production comes down to26.18 MMT in 1999-2000.ONGC also maintains its prominent position between the PSUs as

the highest profit earning company with a net profit of Rs. 10,529 Crores for the year ending

2002-2003. ONGC today ranks among the top 20 oil Companies of the world with production

exceeding 1 Million tones of oil and OEG and accounts for about 90% of Indias production

of crude oil and Natural Gas and has attained technological expertise in various aspects of

upstream hydrocarbon exploration.


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ONGC also strives to acquire hydrocarbon reserves abroad through its wholly owned

subsidiary-ONGC Videsh Limited (OVL). OVL currently has a production-sharing contract

in Vietnam jointly with British Petroleum and state oil (NORWAY) where 2 Trillion cubic

feet gas reserves have been discovered. OVL has also taken stakes in production sharing

contracts in Tanzania and Gulf of Suez in Egypt

1.1.1 Functions, Activities & Objectives

The main functions, activities and objectives of Oil and Natural Gas Corporation

Limited are as under: -

Functions

Exploration & exploitation of hydrocarbon reserves is required to cater the petroleumrequirement of the country. In addition, alternative resources of energy are to be developed to

meet the energy requirement of the country.

Activities

ONGC is the premier entity through which the Government explores for and

develops oil and natural gas resources in India. Its activities are mainly the exploration and

production of oil and natural gas. It had also started in participating in down stream

activities such as petroleum refining or distribution and related activities of refined produ cts.

Throughout its existence, it has been actively engaged in planning, promoting,

organizing and implementing programmes for the development of petroleum resources with

the objective of bringing India closer to its goal of self reliance in its petroleum needs. Since

its formation, it has established 5,716 billion tones of oil and oil equivalent gas. The figure

includes oil and oil equivalent gas of 372 billion tones in respect of the fields offered under

joint venture and fields operated by private enterprises. Reserves of oil and oil equivalent gas

on 1st April1997 (including reserves pertaining to the fields offered to joint venture and

private parties) were as follows:

OIL 698.55 MILLION TON

GAS 648.71 BILLION CUBIC METERS

Soon after independence, the Government formulated a national policy, which made

development of oil resources the exclusive responsibility of the state. As first step towards

the implementation of this policy, a Petroleum Division was created in October 1955 for


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exploration in the country within Geological Survey of India, which grew in to the

Directorate of Oil& Natural Gas and was then raised to the status of Commission on 14 th

August 1956. The Commission was later on converted in to a statutory body on 15 th October

1959 with Headquarters at Tel Bhavan, Dehradun.

Objectives

To acquire the whole or any part of the undertaking, business, the assets/ liabilities,

rights, obligations, power, goodwill, privileges, functions and associated establishment and

personnel of whatever nature of Oil & Natural Gas Commission (established under Oil &

Natural Gas Commission Act [No.43 of 1959] and for the purpose to enter into and carry into

effect such agreements/ contracts/arrangements as may become necessary.

To plan, promote, organize, exploit and implement programmes for the efficient

development of petroleum and petroleum products and alternate resources of energy and the

production, distribution, conservation and sale of petroleum and other products/services

produced by it and for all the matters connected therewith.

To carry out exploration and to develop and optimize production of hydrocarbons and

to maximize the contribution to the economy of the country. To carry out geological,

geographical or any other kind of surveys for exploration of petroleum resources, to carry out

drillings and other prospecting operations, to probe and estimate the reserve of petroleum

resources, to undertake, encourage and promote such other activities as may lead to the

establishment of such reserves including geological, chemical, scientific and other

investigations.

To carry on all or any of the business of the sale and purchase of petroleum and other

crude oils, asphalt, bitumen, natural gas, liquefied petroleum gas, chemicals and all kinds of

petroleum products and to treat and turn to account in any manner whatsoever any petroleum

and other crude oils, asphalt, bitumen, natural gas, liquefied petroleum gas and all kinds of

petroleum products, chemicals and any such substances as aforesaid.


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1.1.2 Major Products of O.N.G.C.

Crude Oil.

Natural Gas.

Liquefied Petroleum Gas.

Natural Gasoline.

Ethane/Propane.

Achromatic Naphtha.

Superior Kerosene Oil.

1.1.3 Regions and Work Centres of ONGC:-

Headquarter

Dehradun

New Delhi

Mumbai Offshore Project with Headquarter at Mumbai

Regional Office, Mumbai

Other establishment in Maharashtra Coast

Uran Project

Hazira Plant

Central Region with Headquarter at Calcutta

Regional Office, Calcutta

West Bengal Project

Mahanadi Bengal Purnia Project (MBP)

Coal Bed Methane (CBM)


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Eastern Region with Headquarter at Nazira

Silchar

Shivsagar

Nazira

Jorhat

Agartala

Northern Region with Headquarter at Dehradun

Western Ganga Valley other than Dehradun

Southern Region with Regional Office at Chennai

Chennai

Rajamundary

Karaikal

Hyderabad Liaison Office

Western Region with Regional Office at Vadodara

Vadodara

Ankleshwar

Ahmedabad

Cambay

Mehsan

Jodhpur


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1.1.4 ONGCS Specialization

Geochemical studies, Bio-stat graphic Analysis.

Basic Evaluation, techno-Economic Analysis.

Formation analysis and reservoir Modeling.

Estimation of Reservoir and Reserves.

Drilling operation including horizontal and drain hole.

Wells loading operation.

Reservoir management.

Design erection & maintenance of oil and gas production installation.

Artificial left design. Down hole completion system.

Stimulation Techniques.

Long distance transportation of oil and gas.

Erection and Maintenance of Gas Sweetening Plants

Corrosion and Maintenance: onshore and offshore.

Corrosion Studies in offshore structure.

Training of manpower.

Computer Application in petroleum Industry.

Engineering and construction of offshore, platforms and pipelines

Equipment Management and Quality Assurance.

Safety Audits and Environment Studies


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1.1.5 ONGC Vision & ONGC Mission

ONGC Vision:-

TO BE A WORLD CLASS OIL &GAS COMPANY, INTEGRATED IN

ENERGY BUSINESS WITH DOMINANT INDIAN LEADERSHIP &GLOBAL

PRESENCE

NEW VISION OF ONGC ADOPTED ON 26TH

APRIL2010

To be global leader in integrated energy business through sustainable

growth, knowledge excellence and exemplary governance practices.

ONGC Mission:-

To be a world-class oil and gas company,

ONGC is dedicated to excellence by leveraging competitive advantages in R&D and

technology with involved people.

Imbibe high standards of business ethics and organizational values.

ONGC also Fosters a culture of trust, openness and mutual concern to make workinga stimulating and challenging experience for our people

Strive for customer delight through quality products and services.


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1.1.6Various Institutes of ONGCThe National Oil Company of India, ONGC has set up various institutions to meet its

Research and Development need in exploration to exploitation. The institutes have developed

multidimensional expertise, over the year in diverse fields of the upstream petroleum industry

by harnessing the leading state of the art technologies form the international areas through

acquisition and collaboration coupled with in R&D efforts. List of important institutes of

ONGC are:

GEOPIC: Geodata Processing and Interpretation Centre, Dehra Dun in Uttrakhand

was established in house the largest computing facility of Oil and Natural Gas

Corporation Ltd. And is one of the few centers around the world where integrated

processing and interpretation of different geosientific data from seismic to petro

physical, geological and reservoir engineering is carried out.

ONGC Academy: ONGC Academy, Dehra Dun previously known as Institute of

Management Development is an institution committed to excellence in the cause of

HRD and the availability of the appropriate system and procedures for the knowledge

and technology intensive, risky and complex oil and gas exploration and development

industry in the energy sector with view to ensure managerial effectiveness, qualityand productivity.

KDMIPE: Keshav Dev Malaviya Institute of Petroleum Exploration, Dehra Dun and

its activities are focused towards development of new concepts for exploration and

exploitation, development of hydrocarbon resources generation and up gradation of

geoscientific data and computer application.

IDT: Institute of Drilling Technology, Dehradun. It is engaged in relentless efforts in

R&D and has rendered excellent services in the area of oil and gas well drilling

technology. Over the years the institute has emerged as a premier R&D center in

South East Asia, capable of providing advance technical knowledge through training

and offering plausible solution to field problems. The institute is with highly qualified

experienced scientist and engineers carriers.

IEOT: Institute of Engineering and Ocean Technology, Panvel in Mumbai. The

institute is founded in Nov, 1983 for innovation and development of the future plans


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of ONGC to achieve self-reliance in related technology. The institution has developed

expertise in the field of concept evaluation and risk analysis, geotechnical engineering

and materials and corrosion engineering.

IRS: Institute of Reservoir Studies, Ahmedabad. The institution was founded as a

single source and multi service reservoir engineering agency with objectives to

integrate the skills and technologies for better reservoir management, prepare

development plans for new discovery to select and design enhanced oil recovery

schemes, develop techniques for importing well productivity, maximize hydrocarbons

recovery keeping the cost in mind with market realities.

IOGPT: Institute of Oil and Gas Production Technology, Panvel in Mumbai. The

institute is developed for improving production technology of ONGC.

IPSHEM: Institute of Petroleum Safety, Health & Environment Management. :

Institute of Petroleum Safety, Health & Environment Management was established

1989 with the objective of promoting standards of safety, health and environment in

petroleum sector in India. The Institute is committed to upgrade and develop human

resources with a view to minimize the overall risk to human life, damage to property,

process and the environment.

INBIGS: Institute of Biotechnology & Geo-tectonic Studies. (No longer Present)


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1.1.7 The ONGC Group of Companies comprises of:- ONGC Videsh Limited (OVL): OVL is the wholly own subsidiary of ONGC which

has been mandated to carry out international E&P business operations of the parent

company. Mangalore Refinery and Petrochemicals Limited (MRPL): This is a 71.60%

subsidiary of ONGC. It is the only other listed company besides parent ONGC within

the ONGC group.

ONGC Nile Ganga BV (ONG BV): This is the wholly owned subsidiary of ONGC

Videsh Limited which, in turn, is 100% owned by ONGC. The company was

incorporated in Netherlands and has 25% participating interest in the Greater Nile Oil

Project in Sudan producing crude oil from on-shore blocks earmarked for the purpose.

ONGC Mittal Energy Limted (OMEL): This is the joint venture between ONGC

Videsh Limited and Mittal Investments Sarl in the ratio of 49.98% : 48.02% with SBI

Capital holding the remaining 2%. This joint venture aims to source equity oil and gas

from abroad for securing Indias energy independence.

ONGC Mittal Energy Services Limited (OMESL): This is the joint venture

between ONGC Videsh Limited and Mittal Investments Sarl with the same ownership

structure as that of OMEL. This joint venture will be involved in trading and shipping

of oil and gas (including LNG) sourced by OMEL from abroad.

ONGC Tripura Power Company Pvt. Ltd. (OTPCL): ONGC has embarked upon a

project for generation of power with 750 MW gas based closed-cycle power plant.

The project is being developed by a SPV between IL&FS, Government of Tripura and

ONGC with an equity share of 50%, 24% and 26% respectively. The project is

estimated to cost around Rs. 3800 Crores and is expected to be commissioned during

the first quarter of 2008.

Kakinada Refinery & Petrochemicals Limited (KRPL): This is a public private

joint venture company formed pursuant to an MOU between MRPL, Kakinada

Seaport Limited (KSPL), IL&FS and AP Government, to set up an export-oriented

refinery of 7.5 MMTPA capacity at Kakinada in coastal Andhra Pradesh which is

envisaged to be integrated with bio-diesel facility.

Kakinada SEZ Limited: In tune with the recent initiatives of Ministry of Commerce

and Industry, Govt.of India, for declaring Special Economic Zones (SEZs) to boos

industrial growth in the country, ONGC/MRPL has become co-promotor under


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public-private partnership to form this joint venture company and it is envistaged that

KRPL and other gas infrastructure units will be located within the Kakinada SEZ to

liverage financial initiatives and to bolster economic growth.

Mangalore SEZ Limited: With a view to providing synergy with MRPL, large

petroleum and petrochemicals based projects are envisaged to be developed at

Mangalore. With view to optimizing the capital cost during the construction of the

project and subsequently promoting sale of petrochemical intermediates, a decision

was taken to associate with a special economic zone (SEZ) Contemplated for

development at Mangalore. The SEZ will be an SPV with Karnataka Industrial Areas

Development Board (KIEDB), Karnataka Chambers of Commerce and Industry

(KCCL) and ONGC between them bringing in 49% equity with ONGC contributing

26%. IL & FS has offered to take the remaining 51% equity. This SPV is in the

process of being incorporated.

Dahej SEZ Limited: ONGC participating in the initiative of Govt. of Gujarat has

formed a joint venture company under public private partnership to establish and

develop necessary infrastructure facilities within a land of 1740 hectares in

cooperation with Gujarat Industrial Development Corporation. ONGC is currently

engaged in implementing its C2-C3 extraction project, which will be located within

this SEZ.

Rajasthan Refinery Limited (RRL): With the recent discovery of waxy oil in

Mangla and other adjoining structure by Cairn Energy India, its PSC partner in

Rajashtan Block, MRPL has been nominated by Govt. of India as its nominee for

buying the crude oil to be produced from this block. MRPL, in coordination with

Cairn Energy, and as per due facilitation by Rajasthan Govt., has proposed to form a

joint venture company named Rajasthan Refinery Limited (RRL), which will examine

the techno-economic viability of establishing a well-head refinery of 7.5 MMPPA

Capacity and if found feasible will implement the same at a suitable location in

Rajasthan.


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1.2 INDUSTRY ANALYSIS:-

ONGCs profit for June 2010 quarter plummeted more than expected as the subsidy

burden surged. The companys future prospects appear healthy, However , the governments

ever-changing subsidy-sharing policy poses the keyrisk. Till June 2010 quarter, the upstream

oil companies were required to contribute towards the under-recoveries only on autofuels.

However, with the government decontrolling petrol prices and raising diesel prices in June, the

subsidy sharing formula is set to change going forward.

Given that the oil industrys under-recoveries for FY11 will be higher than in FY10 in

spite of the recent price increases, ONGCs subsidy, which stood at Rs11,555 crore in FY10 , is

unlikely to ease. In the June 2010 quarter, the oil industrys under-recoveries rose to Rs 20,000

crore, increasing the share of upstream companies to Rs 6,667 crore. With over 80% of this

shared by ONGC, it had to shell out Rs 5,515 crore as discounts highest in past seven

consecutive quarters and 12-times the year-ago number.

This amounted to nearly $33 per barrel of discount, pulling lower the companys net

realisation to $48.04, which stood at $58.25 in June 2009 quarter. The subsidy burden was so

heavy that the benefits of decontrolled gas prices failed to make a mark. The administered

pricing mechanism was dismantled in April on the 48.5 mms cmd gas sold from nominated

fields, which is expected to add Rs 3,500 crore to its bottom line on an annualised basis.

Although the company made nearly Rs 850 crore higher profits on this count its net profit fell

24%, which shows the severity of these subsidies.

Even the ONGC management couldnt help call the subsidy burden excessive. The

7% appreciation in rupee against the year-ago period played another trick on the companys

financial numbers as it bills its customers in rupees. The net realisation on crude oil, which

appeared only 17.5% lower on y-o-y basis in dollar terms, was actually 22.6% down in rupeeterms.

In other words, every barrel of oil sold during the quarter fetched 22.6% lower price to

the oil major compared to the June 2009 quarter. While the companys oil production

stagnated, it basically was the higher revenues in its gas business that enabled ONGC to restrict

fall in net sales to mere 8.1%. The company continues to remain fundamentally strong, with its

production likely to increase gradually over next few years. Its attempts at diversifying the

revenue base will also start giving results as its two petrochemical complexes and a power plant


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come up over next 18-20 months. However, the subsidy uncertainties continue to make it a

doubtful investment candidate for retail investors.

1.3THE PRIORITIES :-

R S Sharma, who was recently appointed as the permanent head of Oil and Natural Gas

Corp (ONGC) after an uncertainty of over 13 months, has set his sight on reversing decline in

production from ageing fields and cutting rising expenditure during his tenure till 2011. In his

message to more than 34,000 ONGC employees after being appointed as chairman and

managing director, Sharma listed employee attrition and rising payout on kerosene and LPG

subsidy as areas of concern.

"The concern areas are decline in production from ageing fields, rising exploration and

production expenditure, constraints of oil field services, high subsidy payouts, under-recoveries

in gas business and employee attrition," he wrote. Sharma, who was director (finance) when the

government in May 2006 refused extension of service to flamboyant Subir Raha, has been the

acting head of the company since then.

Though he was selected for the top job by government's headhunting panel PESB in

August, the Prime Minister's Office refused his confirmation in February. Even though the

selection process of PESB invited professionals from private firms to apply, the PMO wanted

the invitation to be more explicit. Sharma was again selected and his appointed confirmed by

Prime Minister Manmohan Singh on July 2. Besides finding new reserves of oil and gas,

Sharma promised tackling issues of morale and motivation of employees and opening

promotional avenues to arrest the brain drain. He, however, expressed concern at rising subsidy

payout that increased 42.4 per cent to Rs 17,024 crore in 2006-07,

1.3.1OPPORTUNITIES:-

The Indian petrochemicals industry is finally discarding its nascent stage tag and the

companies are now vying for a major chunk of the global pie of the petrochemicals market.

Indian major Reliance has recently acquired a German polyester major Trevira GmbH and this

marks the private sector giant's entry into the European markets in a big way.

At the same time, ONGC and IOC are planning entry into the business in a major way

as this is in line with their forward integration plans. The petrochemicals cycle is currently on a

global uptrend thanks to growing demand from China and other developing nations. In the


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domestic markets, growing activity in infrastructure and construction segments coupled with

strong growth in the auto sector on the back of lower interest rates have actually boosted the

performance of the petrochemicals sector. Major beneficiaries of this uptrend are the integrated

players such as Reliance Industries, GAIL and IPCL (to some extent).

A low per capita consumption of 4 Kgs of plastic as compared to a global average of 20

Kgs leaves enough scope for capacity expansion resulting in ONGC and IOC venturing into the

business. The following are the major uses of the products:

Polymer Products and the uses

Product Uses

LDPE/LLDPE Consumer packaging/film, extrusion wires, cable coatings

HDPE Fertilizers, household packaging, woven sacks, cartons, crates,

luggage, pipes

Polypropylene (PP) Cement packaging, monofilament yarn, ropes

PVC Water pipe, electrical wires, cables, sheets

Polybutadeine Rubber

(PBR)

Automotive tyres and tubes, conveyor belts and footwear

Let us now do a SWOT analysis on the industry so as to have a better understanding of the

prospects for the industry, going forward:


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1.3.2 Strengths:Consolidation: The Indian petrochemicals industry has witnessed consolidation over the

last few years and nearly 85% of the polymer capacity in the domestic market is with

the top three participants (Reliance, IPCL and Haldia Petrochemicals (HPL)). Of the

three companies mentioned, IPCL forms a part of the Reliance stable while GAIL is set

to pick up stake in HPL. Such high concentration is likely to benefit these players, as

this would help reduce duplication of production.

Synergies: Most of the petrochemical players have integrated facilities, thereby

reducing external dependence to a large extent. To put things in perspective, Reliance

Industries uses naphtha from its own Jamnagar refinery as a feedstock for thepetrochemicals production. IPCL uses Reliance's vast and widespread marketing

network to reach out to global consumers. On the other hand, GAIL utilizes natural gas

for its petrochemicals capacity.

Rich natural gas is evacuated into the pipelines and after separation of the hydrocarbons such as

ethane, propane and butane, the lean gas is transmitted to consumers such as power and

fertilizer industry. Further, petrochemicals business being a high value add, would add further

to the profitability of these integrated companies.

1.3.3 Weaknesses:

Low bargaining power vis--vis the suppliers: Input costs form nearly 50% to 60% of

the raw material costs. Further, gas prices are regulated but in short supply, while

naphtha is an expensive source of feedstock. Refineries realize the import parity prices

on naphtha produced and in case of high feedstock prices, petrochemical players have

little bargaining power against the suppliers. These players are therefore vulnerable to

raw material prices.

Low Bargaining power vis--vis customers: In case of increase in input costs, the

companies might not be able to pass on the rise to the consumers as the prices of

products is highly influenced by factors such as international prices and supply.


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1.3.4Threats:

Customs duties: Historically, the domestic industry has been protected from overseas

competition by high import duties imposed by the government. However, of late,

Import duty on polymers has been steadily reduced and is currently at 20%. As part of

its commitment to various multilateral and bilateral trade agreements, the government is

likely to reduce duties going forward and this is likely to reduce the cushion enjoyed by

the domestic players as against the landed cost of imported products.

Growing competition: The domestic industry is likely to witness immense competition

going forward with IOC all set to enter the segment with its Rs 64 bn project in FY06. Further,

ONGC is also venturing into petrochemicals business. With commitments to reduce andeliminate tariff and non-tariff barriers, India, with huge market potential, might witness entry of

global majors such as ExxonMobil, Dow Chemicals and Shell into the business. These global

majors with deep pockets can actually lead into a pricing war, which could result in squeezing

margins.


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2.1 Problem Formulation

Following steps have been carried out for the project undertaken:

Step 1- Got acquainted with the organization to understand its setup in

Order to be able to appreciate its functioning.

Step 2- Studied the annual financial reports of the company for the last five years and the

relevant data was sorted out from the maize of information therein.

Step 3- Classified the relevant data and carried out the required calculations to determine the

ratios to be analyzed.

2.2 Objective of the study

The main objectives of the research undertaken are as follows:-

To find out and compare the ratios of other exploration companies with ONGC Ltd.

To assess the ratios of ONGC Ltd. and suggest remedial measures to improve the

same in future.

To know which is the most profitable company, in which the investor can currently

invest.

2.3 Primary Data

It means collection of information for the first time. In order to collect such type ofinformation questioner i.e., to be constructed and information is collected from the

respondent. In my project report working capital Analysis in ONGC ltd, the primary data

collection is not used since it is based on secondary data which is already available.


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2.4Secondary Data

Secondary data are information, which has already been collected by others. In order to carry

out my project successful I have relied on the secondary data already available.

2.5Sources of Secondary Data

Annual report of ONGC Ltd. Oil-India and Chevron

ONGC LTD website:www.ongcindia.com

OIL-INDIA LTD website:www.oilindia.com

CHEVRON LTD website:www.chevron.com

Library of ONGC at KDMIP
http://www.ongcindia.com/http://www.ongcindia.com/http://www.ongcindia.com/http://www.ongcindia.com/


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RATIO ANALYSIS

Several ratios are calculated from the accounting data , it can be grouped In various

classes according to financial activity or function to be evaluated ,the parties interested in

financial and short and long term creditors mainly interested in liquidity position or short-

term solvency of the firm, Long term creditors on the other hand are more interested in the

long term solvency of the firm . similarly owners concentrates on the firm profitability and

financial condition , management is interested in evaluating every aspects of the firm grows

profitably, In view of the requirements of the various users ratios , we may classify them into

four important categories,

Liquidity ratios,

Leverage ratios,

Activity ratios,

Profitability ratios,

3.1:- LIQUIDITY RATIOS

It is extremely essential for a firm to be able to meet its obligation as they become

due, liquidity ratios measures the ability of the firm to meet its current obligation , in fact

analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements

, but liquidity ratios by establishing a relationship between cash and other current assets to

current obligation , provide a quick measure of liquidity , the failure of a company to meet

its obligation due to lack of sufficient liquidity , will result in a poor creditworthiness , loss

of creditors confidence ,or even legal tangles resulting in the closure of the company . a

very high degree of liquidity also bad ; idle asset earn nothing . the firms funds will be

unnecessarily tied up in current assets therefore it is necessary to strike a proper balance

between high liquidity and lack of liquidity .

The most common ratios which indicate the extent of liquidity and the lack of liquidity are : -


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3.1.1 CURRENT RATIO

Current ratio = current assets /current liability

Current assets include cash and those assets which can be converted in to cash within

one year , such as marketable securities , debtors and inventories , prepaid expenses are also

included in the current assets as they represent the payments that will not be made by the firm

in future ,all obligation maturing within a year are included in current liabilities , current

liabilities include creditors , bills payable , accrued expenses , short term bank loan ,income

tax liability and long term debt maturing in the current year,

Idle current ratio = = 2:1;

Current assets includes

Inventories

Debtors

Cash and bank balances

Loans and advances

Current liabilities includes

Sundry creditors

Liability for royality/sales tax

Depositors

Other liabilities

Unclaimed dividend

Current assets of a firm represents those assets which can be converted into cash within a

short period of time not exceeding one year and include cash and bank balance, marketable

securities, inventory of finished material, semi-finished and finished goods, debtors, net provision

for bad debt and doubtful debts, bill receivable and prepaid expenses.

As on 31

March12

As on 31

March11

As on 31

March10

As on 31

March09

As on

31March08

Current Assets 476443 434298 387850 326279 285477

Current Liability 211051 176083 139932 105951 108763

Current Ratio 2.26 2.47 2.77 3.08 2.62


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INTERPRETATION

Although the high ratio shown by the graph says that the company can easily meet its

current liabilities, yet too high a ratio is also not beneficial for the company as it shows that

due to the poor investment policy of the management.

The cash and bank balance is 121405.48 which mean that the money is lying

idle either in the organization or in the form of bank balance. This represents the poor

investment policy of the management as this amount can be utilized elsewhere.

3.1.2 QUICK RATIO

Quick ratio also called acid test ratio establishes a relationship between Quick, or liquid,

assets and current liabilities. An asset is liquid if it can be converted into cash immediately.

Inventories are considered to be less liquid. Inventories normally require some time for

realizing into cash.

Generally a quick ratio of 1 to 1 is considered to represent a satisfactory current financial

condition. Thus, a company with a high value of quick ratio can suffer from the shortage of

funds if it has slow paying, doubtful and long duration outstanding debtors. On the other hand

a company with a low value of quick ratio may really be prospering and paying its current

obligation in time if it has been turning over its inventories efficiently.

0

1

2

3

4

2012 2011 2010 2009 2008

Current Ratio


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As on 31st

march12

As on 31st

march11

As on 31st

march10

As on 31st

march 09

As on 31st

march08

Quick assets =current

assets-inventory

435836 399492 387512 295894 259785

Quick ratio= quick

assets/total current

liabilities

2.0650743 2.268770977 2.554898093 2.792743816 2.388542059

INTERPRETATION

Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial

condition. Since the inventory does not play a major role in the current assets, the differencebetween quick and current ratio is not high. This can be explained by the fact that ONGC

being into an exploration sector requires fewer amounts of raw materials.

The inventory is 40606.71which shows that there is not much difference

between the current and quick ratio, since the company does not have much raw material as

the company is into the exploration sector.

0

0.5

1

1.5

2

2.5

3

As on 31stmarch12

As on 31stmarch11

As on 31stmarch10

As on 31stmarch09

As on 31stmarch08

Quick Ratio


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24

3.2 LEVERAGE RATIO :-

In finance, leverage is a general term for any technique to multiply gains and losses

.Common ways to attain leverage are borrowing money, buying fixed assets and using

derivatives. Important examples are:

A public corporation may leverage its equity by borrowing money. The more it

borrows , the less equity capital it needs, so any profits or losses are shared among a smaller

base and are proportionately larger as a result.

A business entity can leverage its revenue by buying fixed assets. This will increase

the proportion offixed, as opposed to variable, costs, meaning that a change in revenue will

result in a larger change in operating income.

Measuring leverage:-

A good deal of confusion arises in discussions among people who use different

definitions of leverage. The term is used differently in investments and corporate finance, and

has multiple definitions in each field.

There are different kind of leverage ratio we will consider debt ratio,To judge the long

term financial position of the firm financial leverage ratios are calculated.

As on 31stMarch12

As on 31stMarch11

As on 31stMarch10

As on 31stMarch09

As on 31stMarch08

UNSECUREDLOANS

267.35 369 696 1069.76 1490

DEBT 267.35 369 696 1069.76 1490

SHARECAPITAL

21389 21388.87 21388.87 14259.3 14259.28

RESERVESANDSURPLUS

765965.28 684785.12 597850.39 525337.39 454194.87

EQUITY 915729 706173.99 619239.26 539596.69 468454.15

CAPITALEMPLOYED

640583 605213 541440 494832 421416

NET WORTH 780848 699435 614099 535934 463142
http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Fixed_assetshttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Public_corporationhttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Fixed_costshttp://en.wikipedia.org/wiki/Variable_costshttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Operating_incomehttp://en.wikipedia.org/wiki/Investmentshttp://en.wikipedia.org/wiki/Corporate_financehttp://en.wikipedia.org/wiki/Corporate_financehttp://en.wikipedia.org/wiki/Investmentshttp://en.wikipedia.org/wiki/Operating_incomehttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Variable_costshttp://en.wikipedia.org/wiki/Fixed_costshttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Public_corporationhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Fixed_assetshttp://en.wikipedia.org/wiki/Finance


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3.3 DEBT RATIO:-

Debt Ratio is a financial ratio that indicates the percentage of a company's assets that

are provided via debt. It is the ratio oftotal debt (the sum ofcurrent liabilities and long-term

liabilities) and total assets (the sum ofcurrent assets, fixed assets, and other assets such as

'goodwill').

or alternatively:

For example, a company with $2 million in total assets and $500,000 in total

liabilities would have a debt ratio of 25%. Like all financial ratios, a company's debt ratio

should be compared with their industry average or other competing firms.

Several debt ratios may be used to analyze the long term solvency of a firm. The firm

may be interested in knowing the proportion of the interest bearing debt in the capital

structure. Total debt will include short and long term borrowings from financial institutions,

debentures/bonds, deferred payment arrangements for buying capital equipments, bank

borrowings, Public deposits and any other interest bearing loan.

As on 31st

March12

As on 31st

March11

As on 31st

March10

As on 31st

March09

As on 31st

March08

DEBT RATIO =

TOTAL

DEBT/CAPITAL

EMPLOYED

0.0004168 0.000527569 0.001287116 0.002166545 0.003548244
http://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/w/index.php?title=Total_debt&action=edit&redlink=1http://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Long-term_liabilitieshttp://en.wikipedia.org/wiki/Long-term_liabilitieshttp://en.wikipedia.org/wiki/Total_assetshttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Fixed_assetshttp://en.wikipedia.org/wiki/Goodwillhttp://en.wikipedia.org/wiki/Goodwillhttp://en.wikipedia.org/wiki/Fixed_assetshttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Total_assetshttp://en.wikipedia.org/wiki/Long-term_liabilitieshttp://en.wikipedia.org/wiki/Long-term_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/w/index.php?title=Total_debt&action=edit&redlink=1http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Financial_ratio


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INTERPRETATION

The debt ratio ONGC Ltd. For the last 5 year show that the company has been more faithful

to equity finance. The ratio states that the company has only used 0.4% to .3% of debt

financed cost structure for the last 5 year. This is because the company is not involved in

investment activities hence does not need outside finance thus the ratio has decreased over

the year.

3.4 ACTIVITY RATIO:-

Activity ratios measure company sales per another asset accountthe most

common asset accounts used are accounts receivable, inventory, and total assets.

Activity ratios measure the efficiency of the company in using its resources. Since

most companies invest heavily in accounts receivable or inventory, these accounts are

used in the denominator of the most popular activity ratios.

Accounts receivable is the total amount of money due to a company for

products or services sold on an open credit account. The accounts receivable turnover

shows how quickly a company collects what is owed to it.

0

0.0005

0.001

0.0015

0.002

0.0025

0.003

0.0035

0.004

As on 31st

March12

As on 31st

March11

As on 31st

March10

As on 31st

March09

As on 31st

March08

Debt Ratio


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27

Accounts Receivable Turnover =

Total Credit Sales

Accounts Receivable

For a company to be profitable, it must be able to manage its inventory,

because it is money invested that does not earn a return. The best measure of

inventory utilization is the inventory turnover ratio (inventory utilization ratio), which

is the total annual sales or the cost of goods sold divided by the cost of inventory.

Inventory Turnover =

Total Annual Sales or Cost of Goods Sold

Inventory Cost

Using the cost of goods sold in the numerator is a more accurate indicator of

inventory turnover, and allows a more direct comparison with other companies, since

different companies would have different markups to the sale price, which would

overstate the actual inventory turnover.

In seasonal businesses, where the amount of inventory can vary widely

throughout the year, the average inventory cost is used in the denominator.


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28

3.5 CASH RATIO

The cash ratio measures the extent to which a corporation or other entity can quickly

liquidate assets and cover short term liabilities, and therefore is of interest to short term

creditors.

CASH RATIO

As on 31stmarch12

As on 31stmarch11

As on 31stmarch10

As on 31stmarch09

As on 31stmarch08

CASH 121405.98 160143.04 136705.08 42792.65 58488.06

Marketablesecurities

0 0 0 0 0

Currentliabilities

130150.90 109151.42 88169.7 65270.11 92030.61

Cash ratio 0.9328018 1.467164055 1.550476865 0.655623991 0.635528331

INTERPRETATION

The above graph shows that the concerned ratio is quite satisfactory in all the previous years

because it is much higher than the rule of thumb i.e. 5. Moreover a higher ratio in all the

years shows that the company has improved its needed short term financial position.

The above graph shows that the cash and balance for the year 10 has declined and has come

down to 121405.48 from 160143.04 in 11. This means that there has been a decrease in the

short term financial position of the company.

0

0.5

1

1.5

2

As on

31st

march12

As on

31st

march11

As on

31st

march10

As on

31st

march09

As on

31st

march08

Cash Ratio


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29

3.6 OPERATING EXPENSE RATIO

The operating expense ratio explains the changes in the profit margin (EBIT to sales) ratio.

A higher operating expenses ratio is unfavorable since it will leave a small amount o

operating income to meet interest, dividends etc. The variations in the ratio, temporary or

long lived can occur due to several factors such as:

a) Change in the sales prices.

b) Change in the demand for the product.

c) Ch

INTERPRETATION

The operating ratio is the measurement of the efficiency and profitability of the business

enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold

and the operating expenses. Lower the operating ratio, the better it is, because it will leave

higher margin of profit on sales.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

For 11-12 For 10-11 For 09-10 For 08-09

Operating Expense Ratio

For 11-12 For 10-11 For 09-10 For 08-09

Operating expense 123812 106823 102016 76762

Sales 639681 601370.2 569123.1 482009

Operating expense

ratio

19.36% 17.76% 17.93% 15.93%


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RETURN ON CAPITAL EMPLOYED

The term investment may refer to total assets or net assets. The conventional approach of

calculating return on investment (ROCE) is to divide PBDIT or PBIT by capital employed.

Capital employed represents pool of funds supplied by shareholders and lenders, while PAT

represents residue income of shareholders

INTERPRETATION

Return on Capital employed judges the overall performance of the enterprise. ROCE shows a

good trend of average 54% in the past five years. It shows the strong profitability and god

performance efficiency.

44.00%46.00%48.00%50.00%52.00%54.00%56.00%58.00%60.00%

As on 31st

March12

As on 31st

March11

As on 31st

March 10

As on 31st

March 09

As on 31st

March 08

ROCE

As on 31stMarch12

As on 31stMarch11

As on 31stMarch 10

As on 31stMarch 09

As on 31stMarch 08

PBIT 319684 314790 306465 283731 246784

CAPITALEMPLOYED

640583 604844 540744 493763 419926

ROCE=PBIT/CAPITALEMPLOYED

49.91% 52.04% 56.67% 57.46% 58.77%


31/61


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32

CAPITAL EMPLOYED RATIO

This is yet another alternative way of expressing the basic relationship between debt

and equity.

As on 31st

March12

As on 31st

March11

As on 31st

March10

As on 31st

March09

As on 31st

March08

CAPITAL

EMPLOYED

640583 605213 541440 494832.76 421416

NET WORTH 780848 699435 614099 535934 463142

CAPITAL

EMPLOYED

RATIO

0.82 0.86 0.88 0.92 0.90

0.760.78

0.80.820.840.860.88

0.90.920.94

As on 31stMarch12

As on 31stMarch11

As on 31stMarch10

As on 31stMarch09

As on 31stMarch08

C E Ratio


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33

INVENTORY TURNOVER RATIOS

Inventory turnover is the ratio of cost of goods sold to inventory. This ratio indicates how

many times inventory is created and sold during the period:

As on 31st

March12

As on 31st

March11

As on 31st

March10

As on 31st

March09

As on 31st

March08

NET SALES 639493 601370.2 569123.1 482443.9 467112.5

GROSS

PROFIT

319684 314790 306465 283731 246784

COST OF

GOODS

SOLD

319809 286580.2 262658.1 198712.9 220328.5

OPENING

INVENTORY

34806.37 30337.58 30384.94 25691.9 24056.89

CLOSING

INVENTORY

40606.71 34806.37 30337.58 30384.94 25691.9

AVG.

INVENTORY

37706.5 32571.98 30361.26 28038.42 24874.4

I.T.R 8.48 8.80 8.65 7.09 8.86

I.T.R. (days)

43 41 42 51 50


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34

INTERPRETATION

ONGC is turning its inventory of finished goods into sales 8.48 times in 2012. In other

words it holds average inventory for 43 days in 2012. The average inventory figure is more

appropriate to use than the yearend inventory figure because the levels of inventories

fluctuate over the year. The average inventory figures smoothes out the fluctuations

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

I.T.R. (in Days)

0

2

4

6

8

10

2012 2011 2010 2009 2008

INVENTORY TURNOVER


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35

DEBTORS TURNOVER RATIO

Debtors turnover ratio establishes the relationship between the net credit sales and

average debtors of the year. Average debtors are calculated by dividing the sum of debtors in

the beginning and at the end by 2. This ratio is calculated as:

As on 31st

March 12

As on 31st

March 11

As on 31st

March 10

As on 31st

March 09

As on 31st

March 08

Net credit sales 639493 601370.23 569123.06 482443.9 467112.48

Opening

balance(debtors)

43603.66 27594.4 37042.76 37293.07 23177.99

Closing balance 40838.05 43603.66 27594.4 37042.76 37293.07

Avg. Acc.

Receivables

42221 35599.03 32318.58 37167.915 30235.53

Debtors Turnover

Ratio

15.14 16.89 17.61 12.98 15.45

AVG

COLLECTION

PERIOD(days)

24 21 20 27 23


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36

INTERPRETATION

The above graph shows that ONGC is able to turnover its debtors 15.14 times a year in

2012. In other words, its debtors remain outstanding for 24 days in the year 2012. The graph

shows that in the year 10 the average collection period has increased from 21 days in the year

08 to 24 days in 10. The increased average collection period in the last two years is not a

good indicator since it shows the deficiency of collection policies in the management.

02468

1012141618

20

As on 31st

March 12

As on 31st

March 11

As on 31st

March 10

As on 31st

March 09

As on 31st

March 08

Debtors Turnover Ratio

0

5

10

15

20

25

30

2012 2011 2010 2009 2008

AVG COLLECTION PERIOD(DAYS)


37/61

37

NET PROFIT MARGIN

O.NG.C (11-12) CHEVRON(11-12) OIL-INDIA(11-12)

PAT 167016.47 10483 216168.40

SALES 601370.23 167402 713971.91NET PROFIT

MARGIN

0.27 0.063 0.302

INTERPRETATION

The net profit margin shows the relative efficiency of the firm after taking into account all the

expenses and income taxes but not extraordinary charges. It establishes the relationship

between net profit and sales and indicates the managements efficiency in manufacturing.

From the above graph it is clear that the net profit margin of ONGC and Oil- India is better as

compared to Chevron. The firm with a high net profit margin is in a better position to survive

in the face of falling selling prices, rising costs of production or declining demand for the

product.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

O.NG.C (11-12) CHEVRON(11-12) OIL-INDIA(11-12)

0.27

0.063

0.302

NET PROFIT MARGIN


38/61

38


O.NG.C (11-12) CHEVRON (11-12) OIL-INDIA (11-12)

P.B.I.T 319684 18528 338697.03

CAPITALEMPLOYED

640583 126300 664578.79

RETURN ON

CAPITAL

EMPLOYED

49.90% 14.70% 50.96%

INTERPRETATION

The return on capital employed judges the overall performance of the enterprise. The

ROCE of ONGC and Oil-India is 49.90% and 50.96% respectively. However the ROCE ofChevron is only 14.70%. The high ROCE shows the strong profitability and good

performance efficiency. By seeing the figures it is clear that the ONGC and Oil-India has

strong profitability and good performance efficiency as compared to Chevron.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

O.NG.C (11-12) CHEVRON (11-12) OIL-INDIA (11-12)

49.90%

14.70%

50.96%



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39

4). DEBT TO CAPITAL EMPLOYED

O.N.G.C (11-12) CHEVRON (11-

12)

OIL-INDIA (11-12)

LONG TERM DEBT 267 10130 36263.62

CAPITAL

EMPLOYED

640584 102691 84628.96

DEBT TO CAPITAL

EMPLOYED

0.0004168 0.0986 0.428

INTERPRETATION

From the above graph it is clear that the debt to capital employed is the minimum in the case

of ONGC, whereas it is maximum in case Oil India. The decrease in the debt to capital

employed ratio in case of ONGC states that the company does not borrow money from the

public whereas Chevron and OilIndia borrow money from the public. The graph states that

ONGC is in sufficient to manage its operations. Also Oil- India borrows heavily from the

government.

0

0.1

0.2

0.3

0.4

0.5

ONGC(11-12) CHEVRON (11-

12)

OIL-INDIA (11-

12)

0.00041680.0986

0.428

DEBT TO CAPITAL EMPLOYED


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40

3.7 TREND ANALYSIS :-

3.7.1TURNOVER

YEAR TURNOVER(IN Rs. million)

2008 467098

2009 482009

20010 569037

20011 601373

2012 639493

Table :-7

diagram -

The above graph shows continuous increase turnover of the company fronm yeafr

2008 to 2012,

It has increased approximately at a CAGR of 7.38% in 5 years,

This is mainly due to highest reserve accretion in the current year in last two

decades,

This is good for the company and increase the reputation of the company,

Turnover has increased due to high production of 61.85 mote and also to increasedoil recovery programs (28n to 33%),

0

100000

200000

300000

400000

500000

600000

700000

2008 2009 2010 2011 2012


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41

3.7.2:-NET PROFIT :-

YEAR

NET PROFIT(In Rs million)

2008 129830

2009 144308

2010 156249

2011 167016

2012 161263

Table :-

The above graph shows continuous increase in the turnover of the company from

the year 2008 to 2012 and then a decrease in the year 2010 of approximately 3%,

It has increased approximately at a CAGR of 6% in 5 years,

This decrease is mainly due to sharing of huge burden under recoveries of oil

marketing companies to the extent of Rs 282252.

Taking in account the recession this is good performance by the company,

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2008 2009 2010 2011 2012

Column2


42/61

42

3.7.3:-OPERATING INCOME :-

YEAR OPERATING INCOME(PBIT)

2008 184768

2009 199158

2010 211471

2011 216811

2012 198835

the above graph shows continuous increase in the operating income of the company

from the year 2008 to 2011 and then a decrease in year 2012 of approximately8.29%,

it has increased approximately at a CAGR of 1.5% in 5 years,

this decrease is mainly due to high volatility of crude oil prices in the year 2011-12

which went up to 147$ barrel,

taking in account the high volatility of crude oil prices this is good performance by

the company,

this decrease is mainly due to sharing of huge burden under recoveries of oilmarketing companies to the extent of Rs 282252 million,

160000

170000

180000

190000

200000

210000

220000

2008 2009 2010 2011 2012

Series 3


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43

3.7.4:-NET WORTH :-

YEAR NET WORTH(IN Rs million)

2008 463142

2009 535934

2010 614099

2011 699435

2012 780848

The above graph shows continuous increase in the net worth of the company from

the year 2008 to 2012 with increase of 12%in the current year,


This is mainly due to increase in reserves and surplus during the years,

This is favorable for the reputation of the company,

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

2008 2009 2010 2011 2012


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44

3.7.5:-CURRENT LIABILITIES AND PROVISIONS : -

YEAR CURRENT LIABILITIES AND PROVISION

2008 108763

2009 105951

2010 139932

2011 176083

2012 211051

The above graph shows continuous increase in the current liabilities of the company

from the year 2009 to 2012 only a decrease of 2.5%in the year 2009,

It has increased approximately at a CAGR of 16% in 5 years,

The reason behind this is that sundry creditors and other current liabilities are

increasing,

0

50000

100000

150000

200000

250000

2008 2009 2010 2011 2012

Series 3


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45

3.7.6:-INVESTMENTS :-

YEAR INVESTMENTS(IN Rs MILLIONS)

2008 50903

2009 58995

2010 57021

2011 48865

2012 403567

This above graph shows continuous decrease in the investments of the company

from the year 2008 to 2012 and a increase in year 2008 of approximately 15.8%,

This decrease is mainly due to sale of investments in the following years,

And no new investments are done by the company,

0

10000

20000

30000

40000

50000

60000

70000

2008 2009 2010 2011 2012

Series 3


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46

3.7.7:-INVENTORIES:-

YEAR

INVENTORIES

2008 25692

2009 30385

2010 30338

2011 34806

2012 40607

Table :-13 , Diagram:-12

The above graph shows continuous increase in the investments of thecompany from the year 2008 to 2012,


This shows bad inventory management of the company,

This is due to increase in finished goods inventory and raw materials,

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2008 2009 2010 2011 2012

Series 3


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47

3.8 :-FINACIAL COMPARISION OF VARIOUS FIRMS WITH ONGC:-

COMPANIES TOTAL

ASSETS

MARKET

PRICE(Rs)

MARKET

CAP IN(cr)

SALES

TURNOVER

NET

PROFIT

ONGC 94771.12 1204.25 257,573.72 64017.82 16,126.31

GAIL 15969.76 473.35 60043.38 25103.25 3139.84

Carin India 31,990.80 310.15 58834.65 3.73 54.24

Reliance

Natura

3321.78 63.15 10345.88 298.39 73.32

Petronet LNG 4734.68 78.55 5891.25 10649.09 404.50

The above table shows the comparision of some financial parameters with

ONGC which is way ahead of other firms in case of total Assets , market capitalization

, turnover and net profit with oil being distant 2nd

.oil leads in the stock price,


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48

ONGC GAIL Carin

india

Reliance

Natura

Petronet

LNG

(INCOME) Mar12 Mar12 Mar12 Mar12 Mar12

Sales Turnover 64342.28 24,292.24 3.73 270.02 10,649.09

Excise Duty 338.29 507.53 0.00 0.00 0.00

Net Sales 64,003.99 23,784.71 3.73 270.02 10649.09

Other income 4085.59 752.52 276.25 146.77 92.74

Stock Adjustments 81.10 5.00 0.00 0.00 0.00

Total Income 68170.68 24,542.23 279.98 416.79 10746.33

Raw materials 10905.51 16651.23 0.00 176.20 9671.32

Power, fuel cost 270.79 869.51 0.00 43.86 0.48

Employee cost 4536.80 576.67 9.01 4.90 20.44

Other manufacturing

expenses

19,578.49 833.55 85.43 0.00 2.32

Selling and

adminExpenses

-4470.78 257.86 32.95 18.27 42.19

Miscellaneous expenses 1011.04 495.10 19.29 6.48 17.77

Preoperative exp 0.00 -16.74 0.00 0.00 0.00

Total expenses 31,831.85 19667.18 146.68 249.71 9802.04


49/61

49

ONGC GAIL Carin India Reliance

Neutra

Petronet LNG

March12

March12 March12 March12 March12

Operating

profit

32,253.24 4122.53 -142.95 20.31 847.05

PBDIT 36338.83 4875.05 133.30 167.08 944.29

Interest 8485.40 101.09 0.34 95.13 183.97

PBDT 27853.43 4773.96 132.96 71.95 760.32

Depreciation 4355.62 559.91 0.00 0.06 160.83

Other written

off

0.00 0.00 20.88 0.00 0.00

Profit before

tax

23,497.81 4214.05 112.08 71.89 599.46

Extra-ordinary items

790.68 -10.03 0.00 0.00 0.03

PBT(Post

extra 0rd

items)

24,288.49 4204.02 112.08 71.89 599.49

Tax 8437.78 1400.32 57.83 2.01 195.01

Per share data

Share in

issue(lakhs)

21.388.73 12684.77 18,966.68 16,331.30 7500.00

Earnings per

share(Rs)

75.40 22.10 0.29 0.43 5.39

Equity

dividend(%)

320.00 70.00 0.00 0.00 17.50

Book value 368.12 116.44 168.46 11.02 29.80


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50

3.9:- ANALYSIS AND COMPARISON OF BALANCE SHEET ITEMS

OF VARIOUS FIRMS WITH RESPECT TO ONGC

Balance Sheet

(Rupees in crores)

ONGC GAIL Cairn india Reliance

Natura

Petrone

t LNG

Source of funds Mar12 Mar12 Mar12 Mar12 Mar12

Total share capital 2138.89 1268.48 1896.67 816.57 750.00

Equity share capital 2138.89 1268.48 1896.67 816.57 750.00

Share application money 0.00 0.00 38.90 0.00 0.00

Preference share capital 0.00 0.00 0.00 0.00 0.00

Reserves 76596.53 13501.15 30055.23 983.61 1484.88

Revaluation reserves 0.00 0.000.00 0.00 0.00 0.00

Net Worth 78,735.42 14769.63 31,990.80 1800.18 2234.88

Secured loans 0.00 1100.00 0.00 0.00 2299.77

Unsecured loans 16035.70 100.13 0.00 1521.60 200.04

Total debt 16035.70 1200.13 0.00 1521.60 2499.81

94771.12 15969.76 31990.80 3321.78 4734.69Total Liabilities

Application of funds

Gross block 61355.61 17603.98 0.06 470.20 3549.51

Less:Accum.

Depreciation

50941.23 8553.66 0.00 101.50 666.65

Net block 10414.38 9050.32 0.06 368.70 2882.86


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Capital work in progress 52923.19 2426.33 54.03 0.00 1318.36

Investments 5090.32 1737.27 29225.40 1963.3 538.62

Inventories 4060.67 601.41 0.00 0.00 222.26

Sundry debtors 4083.80 1503.34 1.79 33.67 503.48

Cash and Bank balance 161.48 133.25 1.40 0.17 3.37

ONGC GAIL Carin India Reliance

Natura

Petrone

tLNG

Total current assets 8305.95 2238.00 3.19 33.84 729.11

Loans and advances 55964.02 6833.03 85.45 874.33 156.26

Fixed deposits 18934.74 3322.90 2761.88 156.05 337.12

Total CA,Loans,advances 83204.71 12393.93 2850.52 1064.22 1222.49

Deferred credit 0.00 0.00 0.00 0.00 0.00

Current liabilities 26854.11 5661.244 107.67 74.39 1071.97

Provisions 30657.98 3976.85 31.54 0.06 155.68

Total CA &Provisions 57512.09 9638.09 139.21 74.45 1227.65

Net current assets 25692.62 2755.84 2711.31 989.77 -5.16

Miscellaneous expenses 650.61 0.00 0.00 0.00 0.00

Total assets 94771.12 15969.76 31990.80 3321.78 4734.68

Contigent Liabilities 36024.57 11352.14 351.74 0.00 1975.34

Book Value(Rs) 368.12 116.14 168.46 11.02 0.00


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3.9.1:-FINANCIAL RATIOS

3.9.1.1:-LIQUIDITY RATIOS :-

COMPANY CURRENT RATIO QUICK RATIO

ONGC 2.25 2.06

OIL 2.70 2.54

SHELL 1.13 0.81

The current ratio of ONGC is best amongst all the OIL has too high CR whichmeans it has idle cash lying with itself , similarly in case of SHELL it is too low,

The quick ratio of ONGC is also best as OIL has high quick ratio and SHELL has

too quick ratio from industry accepted levels,

3.9.2:-LEVERAGE RATIO:-

COMPANY DEBT EQUITY RATIO

ONGC .003

OIL .005

SHELL .008

THE above table shows good market position of all the companies amongst which

ONGC has least use of debt hence it has better reputation,

3.9.3:-ACTIVITY RATIO :-

COMPANY DEBTOR TURNOVER RATIO

ONGC 15.65

OIL 17.60

SHELL 19.42


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The above graph shows that ONGC has best position on case of debtors turnover hence

better position in the industry then the others,

3.9.4-PROFITABILITY:-

3.9.4.1:-PERCENTAGE INCREASE IN PROFIT:-

COMPANY %INC IN PROFIT

ONGC

-3%

OIL

31.60%

SHELL

-52.00

The table here shows ONGC AND SHELL having decrease in profit ,ONGC mainly

due to sharing burden of under recoveries of oil marketing companies and also due to

sharing of huge subsidy burden of around 11500 crores here OIL performs better with

increase in profit,

3.9.4.2:-ROCE(RETURN ON CAPITAL EMPLOYED):-

COMPANY ROCE

ONGC 49.10

OIL 30.00

SHELL 8.00

The table here shows ONGC having highest ROCE amongst all due to high

profit,


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3.9.5:-REVENUES :-

3.9.5.1:-CHANGE IN REVENUES

COMPANY %INC IN REVENUE

ONGC 6.00

OIL 38.40

SHELL -31.00

The above table shows SHELL having decrease in revenue due to decrease inproduction whereas as ONGC and OIL having increase in revenues,

3.9.5.2:-EPS:-

COMPANY EPS

ONGC

75

OIL

101

SHELL

104

1:-EPS of SHELL best amongst all companies,

2:-But OIL is the only company whos EPS is increasing from previous years,


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4.1 FINDINGS

On analyzing the performance analysis (ratio analysis) it can be summarized as

follows:

ONGC has got a very sound working capital management particular cash & debtors,

The liquidity position of corporation very safe, this means that ONGC is in a quite

credit worthy position,

ONGC has a sound capital and asset based which also indicates that it is in a position

to clear all its current liabilities, In fact it has become a debt free company,

The corporation operates very efficiently as can be seen from the profit margin.


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4.2CONCLUSION

1. From the analysis of the liquidity ratio we are able to recommend that the liquidity

position of the company is good, and also it is able to meet it current obligation.

2. The capital structure ratio shows the performance of the company is increasing ,

because the company repaid the long term borrowing.

3. The balance sheet figures are showing the declining trend since last year. It should be

the reason for higher inventory level which unnecessary blocked the money. For

higher the profitability ratio of the firm, it is required to increase the sales along with.

4. To increase the work efficiency of the workers as well as of the staff members,

arrangement of different training programs like meeting members, seminars,

conferences, coching classes etc. is required

5. For the innovations of new market, select capable market representatives who are

more efficient to recover the more market share.

6. Try to maintain the quality level as per the market demand which satisfies the

customer more.

7. In order to increase the profit the firm should keep proper control over the expenses

retaliating to the purchase of goods, manufacturing and labours for that, proper

supervision and timely comparison of actual with budgeted overheads should be

taken. This will help the management to know the causes and taling competitive

action a to reduce the expense. Use more credit facility which is given by the

creditors.

8. Firm should also use more short term loans to recover the working requirement

because the interest rate for short term loans is less and it should be flexible to use.

9. In order to maximize wealth under uncertainty, the firm must pay enough dividends to

satisfy investors. It should help to increase the moral of the investors and side by side

also helps in long term financial strength of the firm. So, by increasing profits, the

firm should pay dividends regularly.


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4.3 LIMITATIONS

Limitation of financial ratio analysis are follows:-

1:-Different Accounting Policies

The choices of accounting policies may distort inter company comparisons. Example

- IAS 16 allows valuetion of assets to be based on either revalued amount or at depreciated

historical cost. The business may opt not to revalue its asset because by doing so the

depreciation charge is going to be high and will result in lower profit.

2:- Creative accounting

The businesses apply creative accounting in trying to show the better financial performance

or position which can be misleading to the users of financial accounting. Like the IAS 16

mentioned above, requires that if an asset is revalued and there is a revaluation deficit, it has

to be charged as an expense in income statement, but if it results in revaluation surplus the

surplus should be credited to revaluation reserve. So in order to improve on its profitability

level the company may select in its revaluation programme to revalue only those assets

which will result in revaluation surplus leaving those with revaluation deficits still at

depreciated historical cost.

3:-Ratios are not definitive measures

Ratios need to be interpreted carefully. They can provide clues to the companys

performance or financial situation. But on their own, they cannot show whether performance

is good or bad. Ratios require some quantitative information for an informed analysis to be

made.

.4:- Outdated information in financial statement

The figures in a set of accounts are likely to be at least several months out of date, and so

might not give a proper indication of the companys current financial position.

.5:- Historical costs not suitable for decision making

IASB Conceptual framework recommends businesses to use historical cost of accounting.

Where historical cost convention is used, asset valuations in the balance sheet could be

misleading. Ratios based on this information will not be very useful for decision making.


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6:- Financial statements contain summarised information

Ratios are based on financial statements which are summaries of the accounting records.

Through the summarisation some important information may be left out which could have

been of relevance to the users of accounts. The ratios are based on the summarised year end

information which may not be a true reflection of the overall years results.

7:- Interpretation of the ratio

It is difficult to generalise about whether a particular ratio is good or bad. For example a

high current ratio may indicate a strong liquidity position, which is good or excessive cash

which is bad. Similarly Non current assets turnover ratio may denote either a firm that uses

its assets efficiently or one that is under capitalised and cannot afford to buy enough assets.

8:-Price changes

Inflation renders comparisons of results over time misleading as financial figures will not be

within the same levels of purchasing power. Changes in results over time may show as if the

enterprise has improved its performance and position when in fact after adjusting for

inflationary changes it will show the different picture.

9 :-Technology changes

When comparing performance over time, there is need to consider the changes in technology.

The movement in performance should be in line with the changes in technology. For ratios to

be more meaningful the enterprise should compare its results with another of the same level

of technology as this will be a good basis measurement of efficiency.

10 :-Changes in Accounting policy

Changes in accounting policy may affect the comparison of results between different

accounting years as misleading. The problem with this situation is that the directors may be

able to manipulate the results through the changes in accounting policy. This would be done

to avoid the effects of an old accounting policy or gain the effects of a new one. It is likely to

be done in a sensitive period, perhaps when the businesss profits are low.


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11:- Changes in Accounting standard:-

Accounting standards offers standard ways of recognising, measuring and presenting

financial transactions. Any change in standards will affect the reporting of an enterprise and

its comparison of results over a number of years.

12:- Impact of seasons on trading:-

As stated above, the financial statements are based on year end results which may not

be true reflection of results year round. Businesses which are affected by seasons can choose

the best time to produce financial statements so as to show better results. For example, a

tobacco growing company will be able to show good results if accounts are produced in the

selling season. This time the business will have good inventory levels, receivables and bank

balances will be at its highest. While as in planting seasons the company will have a lot of

liabilities through the purchase of farm inputs, low cash balances and even nil receivables.

13:-Different financial and business risk profile:-

No two companies are the same, even when they are competitors in the same industry

or market. Using ratios to compare one company with another could provide misleadinginformation. Businesses may be within the same industry but having different financial and

business risk. One company may be able to obtain bank loans at reduced rates and may show

high gearing levels while as another may not be successful in obtaining cheap rates and it

may show that it is operating at low gearing level. To un informed analyst he may feel like

company two is better when in fact its low gearing level is because it can not be able to

secure further funding.

Companies may have different capital structures and to make comparison of performance

when one is all equity financed and another is a geared company it may not be a good

analysis.


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14:-Impact of Government influence:-

Selective application of government incentives to various companies may also distort

intercompany comparison. One company may be given a tax holiday while the other within

the same line of business not, comparing the performance of these two enterprises may be

misleading.

15.:- Window dressing:-

These are techniques applied by an entity in order to show a strong financial position.

For example, MZ Trucking can borrow on a two year basis, K10 Million on 28th December

2003, holding the proceeds as cash, then pay off the loan ahead of time on 3rd January 2004.

This can improve the current and quick ratios and make the 2003 balance sheet look good.

However the improvement was strictly window dressing as a week later the balance sheet is

at its old position.

Ratio analysis is useful, but analysts should be aware of these problems and make

adjustments as necessary. Ratios analysis conducted in a mechanical, unthinking manner is

dangerous, but if used intelligently and with good judgement, it can provide useful insightsinto the firms operations.


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Bibliography

BOOKSANDREADINGS Khan, M.Y. & Jain, P.K. (2009) Financial Management, Tata McGraw-Hill

Publishing Company Limited (fifth edition)

ANNUAL REPORTS

Annual ReportONGC Ltd. 2008-2009




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