SUMMER TRAINING REPORT ON

CAPITAL STRUCTURE ANALYSIS OF INDIAN OIL CORPORATION LIMITED (IOCL)

NAME OF SIP COMPANY: INDIAN OIL

CORPORATION LIMITED

SIP LOCATION: KANPUR

Submitted in partial fulfillment of the requirements of Post Graduate Diploma in Management

By

ZEESHAN ALI KHAN(2014-2016)

1809

Dr. Gaur Hari Singhania Institute of Management ResearchKamla Nagar, Kanpur-208005

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STUDENT DECLARATION

I hereby declare that this project report titled “CAPITAL STRUCTURE

ANALYSIS OF INDIAN OIL CORPORATION LIMITED” is my own work

to the best of my knowledge and belief. Neither it contains any material previously

written by any other person nor material which, to a substantial extent, has been

accepted for the award of any other degree or diploma of any other institute, except

where due acknowledgement has been made in text.

Date: Signature of Student

Zeeshan Ali Khan

Roll No.: 1809

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CERTIFICATE BY FACULTY MENTOR

This is to certify that Zeeshan Ali Khan, student of full time PGDM course

(2014-16) at Dr. Gaur Hari Singhania Institute of Management & Research,

Kanpur has satisfactorily submitted the summer internship report titled

Capital Structure Analysis of Indian Oil Corporation Limited under the

guidance of the undersigned in partial fulfillment of PGDM- FULL TIME course.

Date: Signature of Faculty Mentor

Name:

Designation:

3

PROJECT COMPLETION CERTIFICATE FROM COMPANY MENTOR

The project work entitled “Capital Structure Analysis Of Indian Oil Corporation

Limited the original work done by Zeeshan Ali Khan during his summer project

training period.

Date: Signature of Company Guide

Name: Mr. Sanjay Tripathi

Designation: Senior Plant Manager

Company Seal:

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ACKNOWLEDGEMENTS

This project, though an individual project, wouldn’t have been possible without the constant help

and guidance of a few individuals whose support has been vital to the completion of project.

At the outset, I would like to thank Mr. Basudev Sai (Chief Bottling Plant Manager) for

providing me the opportunity to do a project at INDIAN OIL CORPORATION LIMITED.

This research project would not have been possible without the support of many people. I wish

to express my gratitude to my supervisor Mr. Sanjay Tripathi, who was abundantly helpful and

offered invaluable assistance, support & guidance. Deepest gratitude are also due to the members

of finance department, Ms. Nalini Goel without whose knowledge and assistance this study

would not have been successful.

I would also like to convey my thanks to my college faculty, Prof. Devendra Jaiswal.

And finally I wish to express my love and gratitude to my beloved family; for their

understanding and endless love through the duration of my internship.

Place: Kanpur Zeeshan Ali Khan

PGDM 3rd Trimester

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GHS-IMR

TABLE OF CONTENT

CHAPTER1: INTRODUCTION TO THE PROJECT

1.1: Introduction to the topic.

1.2: Objectives to the study.

CHAPTER2: PROFILE OF THE COMPANY AND THE MARKET SCENARIO

2.1: Origin of oil industry in India.

2.2: About IOCL and Kanpur Bottling Plant.

2.3: Vision, Mission & Values.

CHAPTER3: RESEARCH METHODOLOGY

3.1: Research design.

3.2: Data source & allocation.

3.3: Capital structure analysis.

CHAPTER4: DATA INTERPRETATION AND ANALYSIS

4.1: Share capital.

4.2: Total debt.

4.3: Secured & Unsecured loans.

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4.4: EBIT

4.5: EPS

CHAPTER5: CONCLUSION

5.1: Findings.

5.2: Suggestions.

5.3: limitations.

5.4: Conclusions.

CHAPTER6: BIBLOGRAPHY

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CHAPTER1: INTRODUCTION TO THE PROJECT

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INTRODUCTION TO THE TOPIC

Capital Structure of a Company refers to the composition or make up of its Capitalization and it

includes all long term Capital resources i.e. loans, reserves, shares and bonds. It shows the mix

of a company’s long-term debt, specific short-term debt, common equity and preferred equity.

The capital structure is how a firm’s finances it overall operations and growth by using different

sources of funds. In finance, capital structure refers to the way a corporation finance its assets

through some combination of equity, debt or hybrid securities. A firm’s capital structure is then

the composition or ‘structure’ of its liabilities. For example, a firm’s that sells $20 billion in

equity and $80 billion in debt is said to be 20% equity financed and 80% debt financed. The

firm’s ratio of debt to total financing, 80% in this example is referred to as the firm’s leverage. In

reality, capital structure may be highly complex and include tens of sources. Gearing ratio is the

proportion of the capital employed of the firm which come from outside of the business finance,

e.g. by taking a short term loan etc. Debt comes in the form of bond issues or long-term notes

payable while equity is classified as common stock, preferred stock or retained earnings. Short-

term debt such as working capital requirements is also considered to be part of the capital

structure. A company’s proportion of short and long-term debts is considered when analyzing

capital structure. When people refer to capital structure they are most likely referring to a firm’s

Debt-to-equity ratio, which provide insight into how risky a company is. Usually a company

more heavily financed by debt poses greater risk, as the firm relatively highly livered. The long-

term creditors would judge the soundness of the firm on the basis of the long term financial

strength measured in terms of ability to pay the interest regularly as well as repay the installment

of the principal on due dates or in one lump sum at the time of maturity. Accordingly, there are

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two different, but mutually dependent and interrelated, types of leverage ratio First ratio which

are based on the relationship between borrowed funds and owner’s capital. In this paper

researcher explain the different leverage ratio as also how they can be used to draw inferences

regarding the financial soundness of the firm.

OBJECTIVES OF THE STUDY

i. To examine the capital structure policy and pattern of IOCL.

ii. To understand the capital structure of Indian Oil Corporation Limited.

iii. To identify the share capital and debt of the company.

iv. To find out the earning per share (EPS).

v. To find out leverage.

vi. To give suggestion for improvement of the capital structure composition of Indian Oil Corporation Ltd.

vii. Evaluate the content of Indian Oil Corporation Ltd. (IOCL) debt and equity.

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CHAPTER 2: PROFILE OF THE COMPANY AND THE MARKET SCENARIO

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COMPANY OVERVIEW

INDIAN OIL CORPORATION LIMITED

IOCL (Indian Oil Corporation Limited) was formed in 1946 as the result of merger of Indian Oil

Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1958).

Indian Oil Corporation is India’s flagship national oil company with business interests straddling

the entire hydrocarbon value-chain – from refining, pipeline transportation and marketing of

petroleum products to exploration and production of crude oil and gas, marketing of natural gas

and petrochemicals, besides forays into alternative energy and globalization of downstream

operation. It is the leading Indian corporate in Fortune prestigious ‘Global 500’ listing of the

world’s largest corporates, ranked at the 96th position in the year 2014. Having set up

subsidiaries in Sri Lanka, Mauritius and the UAE, Indian Oil is simultaneously scouting for the

business opportunities in the energy markets of Asia and Africa.

With a 34,000-strong work-force, Indian Oil has been helping meet India’s energy demands for

over half a century. With a corporate vision to be ‘The Energy of India’, the corporation closed

the year 2013-14 with a sales turnover of US$ 75.6 Billion and profits of US$1.18 Billion.

IOCL GROUP

i. IOCL Group consists of Indian Oil Corporation Ltd. & the following subsidiaries:

ii. Lanka IOC Limited.

iii. Indian Oil (Mauritius) Ltd.

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iv. IOCL Middle East FZE.

v. Indian Oil Technologies Ltd.

vi. Chennai Petroleum Corporation Ltd. (CPCL)

vii. Bongaigaon Refinery & Petrochemicals Ltd. (BRPL)

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viii.

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Indian Oil and its subsidiary CPCL accounts for over 49% of India’s petroleum products market

shares, 31% national refining capacity, and 71% downstream sector pipeline through capacity.

The Indian Oil Group owns and operate 10 of India’s 22 refineries with a combined refining

capacity of 65.7MMTPA (million metric tonnes per annum), i.e. approx. 1.31 million barrels per

day.

The corporation’s cross country pipeline network, for transportation of crude oil and finished

products, spans 11,214 km, with a throughout capacity of 77.26 MMTPA for crude oil and

petroleum products and 10 MMSCMD for gas. This network is largest in the country and meets

a vital energy needs of the consumer in an efficient, economical and eco-friendly manner.

The company is mainly controlled by the government of India which owns approx. 80% of the

shares in the company. It is one of the Maharatnas status companies of India among the NTPC,

BHEL, Natural Gas Corporation, SAIL, Coal India Ltd.

INDIAN OIL CORPORATION PRODUCTS

Indane Gas

Auto Gas

Natural Gas

Petrol

Diesel

ATF / Jet Fuel

Servo Lubricants & Greases

Marine Fuel

Kerosene Oil

Crude Oil 15

CUSTOMER SERVICE

Indian Oil’s network of 42,000 customer touch-point spread across urban and rural India reach

petroleum products to every nook and corner of the country. These include over 24,500 petrol &

diesel stations, including over 6,300 Kisan Seva Kendra outlets (KSKs) in the rural market. They

are backed by supplies by 135 bulk storage terminals and depots, 98 aviation fuel stations and 90

LPG bottling plants.

Indane LPG cooking gas reaches the doorstep of 8.95 crore households in about 3,264 market

through a network of 7,988 distributors. Over 6,300 dedicated pumps are also in operation for

the convenience of large-volume consumers like the defense services, railways and state

transport undertakings, ensuring products and inventory at their doorstep.

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VISION OF INDIAN OIL CORPORATION LIMITED

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MISSION OF INDIAN OIL CORPORATION LIMITED

IOCL has the following mission:

To achieve International standards of excellence in all aspect of

energy and diversified business with focus on customer delight through value of product and

Services and cost reduction.

To maximize creation of wealth, value and satisfaction for the stakeholder.

To attain leadership in developing, adopting and assimilating state-of-the-art technology

for competitive advantage.

To provide technology and services through sustained Research & Development.

To foster a culture of participation and innovation for employee growth and contribution.

To cultivate high standard of business ethics and TQM (Total Quality Management) for a

strong corporate identity and brand equity.

To help enrich the quality of life of the community and preserve ecological balance and

heritage through a strong environment conscience.

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VALUES OF INDIAN OIL CORPORATION

Values exist in all organization and are an integral part of any it. Indian Oil nurtures a set

of core values.

I. CARE

II. INNOVATION

III. PASSION

IV. TRUST

OBJECTIVES OF INDIAN OIL CORPORATION

IOCL has defined its objectives for succeeding in its mission. The objectives of the company are:

To serve the national interest in oil and related sectors in accordance and consistence of

Government policies.

To ensure maintenance of continuous and smooth supply of petroleum products by way

of crude oil refining, transportation and marketing activities and to provide appropriate

assistance to consumers to conserve and use petroleum products efficiently.

To enhance the country’s self-sufficiency in crude oil refining and build expertise in

laying of crude oil and petroleum pipelines.

To further enhance marketing infrastructure and reseller network for proving assured

service to customers through the country.

To develop a strong research and development base in refinery processes, product

formulation , pipeline transportation and alternative fuels with a view to

minimizing/eliminating imports and to have next generation products.

To optimize utilization of refining capacity and maximize distillate yield and gross

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refining margin.

To maximize utilization of existing facilities for improving efficiency and increasing

productivity.

To minimize fuel consumption and hydrocarbon loss in refinery and stock loss in

marketing operations to effect energy conservation.

To earn reasonable rate of return on investments.

To avail of all viable opportunities, both national and global, arising out of the

Government of India’s policy of liberalization and reforms.

To achieve higher growth through mergers, acquisitions, integrations, and diversification

and harnessing a new business opportunities in oil exploration and productions,

petrochemicals, natural gas and downstream opportunities overseas.

To inculcate strong ‘core values’ among the employees and continuously update skill sets

for full exploitation of the new business opportunities.

To develop operational synergies with subsidiaries and joint venture and continuously

engage across the hydrocarbon value chain for the benefit of society at large.

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MAJOR DIVISIONS OF IOCL

REFINERIES:

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PIPELINES:

MARKETING:

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RESEARCH & DEVELOPMENT:

ASSAM OIL:

Indian Oil Corporation Limited (IOCL) owns and operate a network of crude oil and petroleum

product pipeline in India. It has two divisions: Refineries division & Marketing division is

focused on distribution not only the entire production of public sector refineries but also the

deficit product imported.

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It is organized in two segments: Sale of petroleum products and other businesses, which

comprises sale of import crude oil, sale of gas, petrochemicals, explosives and cryogenics, wind

mill power generator and oil and gas exploration activities jointly undertaken in the form of

unincorporated joint ventures. The Digboi Refinery of Assam Oil Division processed 0.753

million metric tons (MMT) of crude oil during the year. The division sold about 2.067 MMT of

products. IBP Division comprises the explosives and cryogenics business.

CHAPTER 3: RESEARCH METHODOLOGY

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RESEARCH DESIGN

A research design is the specification of method and procedure for accruing the information

needs. It is overall operational pattern of frame work of project that stipulates what information

is to be collected for sources by the procedure.

Descriptive Research Design is appropriate for this study.

Descriptive study is used to study the situation. This study helps to describe the situation. A

detail description about present and past situation can be found out by the descriptive study.

DATA SOURCE AND COLLECTION

This research is based on secondary data. This means that the data are already available, i.e. the

data which have been already collected and analyzed by someone else.

Secondary data are used for the study of ratio analysis of this company and also its competitor. 25

To collect the data, company annual report, internet website has been used.

Analyzing and interpreting the information available in the financial statement and drawing

meaningful conclusion from them.

CAPITAL STRUCTURE

A mix of company’s long-term debt, specific short-term debt, common equity and preferred

equity. The capital structure is how a firm finances its overall operations and growth by using

different sources of funds.

Debt comes in the form of bond issues or long-term notes payable, while equity is classified as

common stock, preferred stock and retained earnings. Short-term debt such as working capital

requirements is also considered to be part of the capital structure. But the IOCL (INDIAN OIL

CORPORATION LIMITED) does not issues the preference shares and debentures to the public

of the company.

COMPONENTS OF CAPITAL STRUCTURE

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CHAPTER 4: DATA ANALYSIS

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SHARE CAPITAL

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AUTHORISED CAPITAL: The maximum equity capital a company can raise, which is

mentioned in the Memorandum Of Association and Articles of Association of the Company.

However, share premium is excluded from the definition of authorized capital.

ISSUED CAPITAL: Issued Capital is the amount of nominal value of share held by the

shareholders. It is the face value of the shares that have been issued to the shareholders. Issued

share capital and share premium represent the amount invested by the shareholders in the

company. It is also known as the subscribed capital or subscribed share capital.

ANALYSIS: But here, IOCL issued very less share capital in previous year if I compared to

Authorized capital. IOCL is only issued the limited share to the shareholders.

PAID UP CAPITAL

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YEAR INSTRUMENT SHARES (nos) FACE VALUE CAPITAL (in crore Rs)

2014-2015 EQUITY SHARES

762986920 10 2427.95

2013-2014 EQUITY SHARES

2427952482 10 2427.95

2012-2013 EQUITY SHARES

2427952482 10 2427.95

2011-2012 EQUITY SHARES

2427952482 10 2427.95

2010-2011 EQUITY SHARES

1192374306 10 1192.37

2009-2010 EQUITY SHARES

1192374306 10 1192.37

2008-2009 EQUITY SHARES

778674809 10 778.67

The amount of a company’s capital that has been funded by shareholders, paid up capital can be

less than a company’s total capital because a company may not issue all the shares that it has

been authorized to sell. Paid up capital can also reflect how a company depends on equity

financing.

Here, from the year 2011-2014 the company’s paid up capital remain same. Its means the IOCL

collected average funded by shareholders and they have to issue more share capital to

shareholders in future periods.

TOTAL DEBT

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The IOCL has only two debts:

Secured Loan

Unsecured Loan

Total debts means here include Debenture, Bonds, Long term loan, Short term loan etc. But

Indian Oil Corporation Limited (IOCL) did not issued debenture, bonds etc.

Secured Loan: Secured loans are those loans that are protected by an assets or collateral of

some sort. The item purchased, such as a home or a car, can be used as collateral, and a lien is

placed on such item. The finance company or bank will hold the deed or title until the loan has

been paid in full, including interest and all applicable fees. Other item such as stock, bonds or

personal property can be put up to secure a loan as well.

Secured loans are usually the best (and only) way to obtain large amount of money. A lender is

not likely to loan a large amount with assurance that the money will be repaid. Putting your

home or other property on the line is a fairly safe guarantee that you will do everything in your

power to repay the loan.

Secured loans usually offer lower rates, higher borrowing limits and longer repayment terms than

unsecured loans. As the term implies, a secured loans means you are providing “security” that

your loan will be repaid according to the agreed terms and conditions. It’s important to

remember, if you are unable to repay a secured loan, the lender has resource to the collateral you

have pledge and may be able to sell it to pay off the loan.

UNSECURED LOAN: On the other hand, unsecured loans are the opposite of secured

loans and include things like credit card purchases, education loans, or personal loans. Lenders 31

take more of a risk by making such a loan, with no property or assets to recover in case of

default, which is why the interest rates are considerably higher. If you have been turned down for

unsecured credit, you may still be able to obtain secure loans, as long as you have something of

value or if the purchase you wish to make can be used as collateral.

When you apply for a loan that is unsecured, the lender believes that you can repay the loan on

the basis of your financial resources. You will be judged based on the five (5) C’s of credit –

Character, Capacity, Capital, Collateral and Conditions. These are all criteria used to assess a

borrower’s creditworthiness character, capacity and collateral refers to borrower’s willingness

and ability to repay the debt. Conditions include the borrower’s situation as well as general

economic factors.

SECURED LOAN

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ANALYSIS:

In 2015 the secured loan proportion is high than 2014. The Indian Oil

Corporation Limited (IOCL) has try to reduce the secured loan because secured loan effect the

assets of the company and it will be effect on future periods so the IOCL increasingly firms are

moving from secured debt to unsecured debt in order to free their assets.

Secured loan have the largest positive impact on company’s credit when they are repaid. If

company have never taken a secured loan, company’s credit may be low despite your good

record of repayment.

UNSECURED LOAN33

ANALYSIS:

Here unsecured loan is constantly high from 2011-2015. Indian Oil Corporation Limited (IOCL).

Unsecured loan is better than secured loan, because secured loan will be affect the assets of

the company in future period of time so the IOCL has increasing the unsecured loan for reducing

the risk of the company. Most of the company preferred the unsecured debt which will not affect

any assets of the company.

In some cases, IOCL may be able to reduce IOCL unsecured debts by negotiating with creditors

for a lower balance. Either IOCL can talk to creditors on IOCL own, or IOCL can solicit the help

of a credit counseling organization. In some cases, credit counselor can negotiate with creditors

better than debtors can. However, if IOCL choose to work with a credit counselor make sure the

organization is reputable.

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EARNINGS BEFORE INTEREST AND TAX

Earnings before interest and tax (EBIT) a measure of an Indian Oil Corporation Limited (IOCL)

earning power from ongoing operations, equal to earning before deduction of interest payments

and income tax. EBIT exclude income and expenditure from unusual, non-recurring or

discontinued activities. EBIT is watched closely by creditors, since it represents the amount of

cash that such a company will be able to use to pay off creditors, also called operating profit.

As you can re-arrange the formula to be calculated as follows:

EBIT = REVENUE – COGS – OPERATING EXPENSES

Also known as Profit before interest and tax (PBIT), EBIT equals Net Income with interest and

taxes added back to it.

EBIT was the precursor to the EBITDA calculation, which include depreciation and amortization

expenses.

Financial mergers spend a considerable amount of time analyzing and understanding their EBIT.

EBIT is short for earnings before interest and taxes and is synonymous with net operating

income.

EBIT is calculated by taking revenue and subtracting cost of goods sold and all operating

expenses. The calculation is useful because it provides a look at how profitable a business is

before loan decisions and tax considerations are included to arrive at net income. If you plan on

improving EBIT while holding sales constant, your only option will be to reduce costs.

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EARNINGS BEFORE INTEREST AND TAX

Analysis:

In 2015, the operating profit of Indian Oil Corporation Limited (IOCL) is Rs. 15620.33(Cr). But

at present generally they are earning average operating profits. So IOCL has try to reduce the

long term borrowed funds and issue the more share capital to the shareholders in different areas.

Analyze Indian Oil Corporation Limited IOCL internal structure and look for areas where

operations can be centralized or more productive. For instance, labor is sometime redundant or

inefficiently organized. Writing out your processes in a flow diagram can help your identify and

eliminate and recognize them. Consider introducing new long term cost saving technologies for

inventory, production and sales. These system can greatly increase efficiency, creating cost

savings.

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Earning Per Shares (EPS)

Earning per shares represent a portion of a company’s profit that is allocated to one share of

stock. Therefore if you were to multiply the EPS by the total no. of shares a company has, you’d

calculate the company’s net income. EPS is a calculation that many people who watch the stock

market pay attention to.

Net Income – Dividend on Preferred Stock

Average Outstanding Shares

When calculating, it is more accurate to use a weighted average number of shares outstanding

Over the reporting term, because the number shares outstanding can change over time. However

data sources sometimes simplify the calculation by using the number of shares outstanding at the

end of the period.

Diluted EPS expands on basis EPS by including the shares of convertibles or warrants

outstanding in the outstanding shares number.

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EPS OF IOCL SHAREHOLDERS FROM 2010-2015

Analysis;

In 2015, IOCL shareholders earned per share of Rs 38.67. But in 2010, EPS was Rs 42.1. At that

time shareholders of IOCL was earned more than last year. So constantly decreasing the earning

capacity of shareholders of the IOCL, but still there EPS is good if I compared to other

companies.

IOCL is to increase earning or decrease the number of shares. In order to increase earnings, a

business has to increase revenues, reduce expenses or both. In order to decrease the number of

shares, do a share buyback from shareholders.

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LEVERAGE

The degree to which an investors or business is utilizing borrowed money. Company that are

highly leveraged may be at risk of bankruptcy if they are unable to make payments on their

debts, they may also be unable to find new lenders in the future. Leverage is not always bad,

however it can increase the shareholders, return on investment (ROI) and often there are tax

advantage associated with borrowing. Components of Leverage are ;-

Financial Leverage

Operating Leverage

Financial Leverage :

Financial Leverage is a leverage created with the help of debt

component in the capital structure of a company. Higher the debt, higher would be the financial

leverage because with higher debts comes the higher amount of interest that needs to be paid.

Leverage can be both good or bad for a business depending on the situation. If a firm is able to

generate a higher return on investment (ROI) than the interest rate it is paying, leverage will have

its positive affect shareholder’s return. The darker side is that if the situation is opposite, higher

leverage can take a business to a worst situation like bankruptcy. The degree of financial

leverage (DFL) can be calculated with the following formula ;

DFL = % Change in EPS / % Change in EBIT

Where EPS is the Earning Per Share and EBIT is the Earning Before Interest And Taxes.

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Operating Leverage :

Operating Leverage, just like the financial leverage, is the result of

operating fixed expenses. Higher the fixed expense, higher the operating leverage. Like the

financial leverage had an impact on the shareholder’s return or say earning per share, operating

leverage directly impacts the operating profits (Profit before interest and taxes (PBIT)). Under

good economic conditions, due to operating leverage, an increase of 1% in sales will have more

than 1% change in operating profits.

The formula used for determining the Degree Of Operating Leverage or DOL is as follows :

DOL = % Change in EBIT / % Change in Sales

So, Indian Oil Corporation Limited IOCL need to be very careful in adding any of the leverages

to your business viz. financial leverage or operating leverage as it can also work as a double

edged sword.

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DEGREE FINANCIAL LEVERAGE OF IOCL

Analysis:

In 2015 degree of financial leverage of Indian Oil Corporation Limited IOCL ratio is

2.19 and it has constantly higher than previous years.

By borrowing funds, IOCL incurs a debt that must be paid. But this debt is paid in small

installments over a relatively long period of time. This frees funds for more immediate use.

Indian Oil Corporation Limited that successfully uses leverage demonstrate by its success that it

can handle the risks associated with carrying debt. This can become an important factors when

additional financing is needed. Not only will loans more likely be available, but they will be

available at more attractive interest’s rates. Like individuals, companies with solid financials.

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DEGREE OF OPERATING LEVERAGE OF IOCL

Analysis:

In 2015 Indian Oil Corporation Limited has degree of operating ratio is 1.46.

According to this chart IOCL having a good position in future period of time. The more

operating leverage a company has, the more it has to sell before it can make a profit. Indian Oil

Corporation Limited IOCL with a high operating leverage must generate a high number of sales

to cover high fixed costs, and as this sales increase, so does the profitability of the company.

Conversely, a company with a lower operating leverage will not see a dramatic improvement in

profitability with higher volume, because variable costs, or costs that are based on the number of 42

unit sold, increase with volume.

TOTAL LEVERAGE OF INDIAN OIL CORPORATION LIMITED (IOCL)

Analysis:

Combined or total leverage measures total risk of the Indian Oil Corporation Limited

IOCL. In this year Indian Oil Corporation has minimum risk than last two years which ratio was

1.82 & 2.43. In this diagram is measured by percentage change in earning per share EPS due to

percentage change in sales.

IOCL asks their existing shareholders to issuing common stock rights. Stocks right allow

existing shareholders to purchase additional shares at below market prices, in order to raise

equity. While this practice does improve a company’s financial strength, it also dilutes the

current shareholder’s percentage of ownership.

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CHAPTER5: CONCLUSION

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FINDINGS

IOCL has issued less shares capital to the shareholders, constantly from 2010-2015.

IOCL does not fulfill the authorized share capital which is mention in memorandum of

association (MOA).

IOCL, preferences share and debenture do not exist.

The return on investment ratio of IOCL is the lowest among its competitors which imply

that the degree of efficiency of IOCL is utilizing the funds entrusted by shareholders and

long term creditors is lower than its competitors.

IOCL has maximum numbers of total debts in 2015, if I compared with previous years.

In 2015, IOCL has maintained the secured loan amount. Which is mostly remain same

with previous year.

In 2015, earning per share EPS value is Rs. 38.61 which is higher than 2014, but overall

five years, IOCL shareholders has earned minimum EPS in 2014.

IOCL has Degree of operating leverage (DOL) almost same with last five years. IOCL

heaving a good position in future period of time.

In 2015, Degree of financial leverage is very high than previous years, IOCL incurs a

debt that must be paid. But this debt is paid in small installment over a relatively long

period of time.

The overall efficiency of IOCL is higher than those of its competitors in previous years of

comparison.

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SUGGESTIONS

The company should utilize the debt fund more efficiently to maximize shareholder’s

return.

IOCL is spite being a cash rich company having loads of unsecured loans so it should be paid of to make it an agile company.

Increasingly firms are moving from secured debt to unsecured debt in order to free their

assets.

For IOCL, to issue maximum number of shares to the public and they have to reduce the

share price is minimum. And IOCL try to fulfill the limit of authorized share capital.

IOCL have to reduce total debts of the company against of issuing, more share to the

public.

IOCL, need to minimize the degree of financial leverage. Otherwise which will be affect

in future period of time.

The company should try to increase the profit before interest and tax so that the

investments in the firms are attractive as the investors would like to invest only where the

return is higher.

The company can invest in marketable securities to improve its cash positions.

IOCL can try to reduce the secured loans can be affected the assets of the company in

future.

LIMITATIONS OF THE STUDY The scope of the study is limited.

Time taken to complete the study is very limited.

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The analysis of the company’s and suggestion totally depends upon the information

shared.

Non-monetary aspects are not considered making the results somehow less reliable.

CONCLUSION

From the above discussion it can be concluded that IOCL (Indian Oil Corporation

Limited) running with low debt fund. Therefore they may increase it to get benefits of

low cost capital. It has found that Indian Oil Corporation Limited IOCL largely

employing shareholders’ funds in their assets it has crossed even 100% in the first two

years. Moreover EOL is on high degree financial risk. Therefore, they may reduce the

debt capital and employ more equity fund. The study undertaken has brought in to the

light of the following conclusions. According to this project I came to know that from the

analysis of capital structure it is clear that Indian Oil Corporation Limited have been

doing a satisfactory job. But the firms has certain area to ponder upon like capital

employment. So the firm should focus on getting of profits in the coming years by taking

care internal as well as external factors. And with regard to resources, the firm is take

utilization of the borrowed funds in a right place.

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CHAPTER 6: BIBLIOGRAPHY

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WEBSITES REFRENCES:

www.moneycontrol.com

www.iocl.com

www.economicstimes.indiatimes.com

www.profit.ndtv.com

BOOK REFRENCES:

K.R. Das, Priti Chandna, B.B Dam & Anju Kakoty 2nd Edition (2014) : Financial Statement Analysis.

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THANK YOU

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