FINANCIAL ANALYSIS OF INDIAN OIL CORPORATION LTD.

Section: B Group: 3

Company Overview Indian Oil Corporation is an Indian state-

owned oil and gas corporation. According to Fortune 500 Global list, it is the

world’s 96th largest corporation and the largest public corporation when ranked by revenue.

Indian Oil and its subsidiary company accounts for 30.54 percent of country’s refining capacity.

Why do we do Ratio Analysis? A means of evaluating and diagnosing performance Ratios standardize numbers and facilitate comparisons

Comparing performance to competitors or industry standards (horizontal comparison)

Comparing performance to prior history (vertical comparison) Examine a variety of areas

Liquidity Solvency Efficiency Profitability

Remember that ratios are meaningless unless you have something to compare

Profit After Tax & Total Revenue

2009-10 2010-11 2011-12 2012-13 2013-140

10000

20000

30000

40000

50000

60000

27775.6133152.69

43770.6645061.147662.74

15525.637445.48

3954.62 5005.17 7019.09

Total RevenueProfit After Tax

Total Revenue*10

Crude Oil Price Variation

Net Profit Ratio

2009-10

2010-11

2011-12

2012-13

2013-14

0

1

2

3

4

5

6 5.59

2.25

0.9 1.111.47

There had been continuous decrease in net profit ratio from 2009-10 to 2011-12. This may be attributed to fact that there had been constant increase in crude oil prices and USD to INR currency exchange rate. As a result of it, the cost increases and hence the profit decreased. In 2011-12, price of $1 increases from Rs 44 to Rs 52. As a result, there was decrease in profits and hence net profit ratio. After that the exchange rates remains same and but due to decrease in employee benefits and low closing stock results in increase in sales, hence revenue and therefore net profit margin. It is to be noted that the net profit margin didn’t increase by a large margin

Gross Profit & Revenue From Operations

2009-10

2010-11

2011-12

2012-13

2013-14

500010000150002000025000300003500040000450005000055000

15192.56

24492.1829152.46

33949.95

48807.93

27775.6132809.23

42511.2144709.6247321.01

Gross ProfitRevenue from Opera-tions

Revenue from Operations*10

Gross Profit Margin

2009-10

2010-11

2011-12

2012-13

2013-14

0

2

4

6

8

10

12

5.47

7.47 6.867.59

10.31 Since crude oil prices had increased

and exchanges rate increasing at a very high rate. In 2010-11, the raw material consumed and purchases increased. As a result, gross margin decreases and hence gross margin ratio. There were high increase in purchases in 2011-12, as a result percentage increase in gross margin decline and hence growth in gross margin ratio declined. There was huge changes in revenues and decrease in closing stock in 2013-14 as revenues from new refineries (launched in 2013).

Operating Profit & Revenue from Operations

2009-10

2010-11

2011-12

2012-13

2013-14

05000

100001500020000250003000035000400004500050000

15716.148407.52

4179.39

8561.9599999999

9 9942.14

27775.6132809.23

42511.2144709.6247321.01

Operating ProfitRevenue from Opera-tions

Revenue from Operations*10

Operating Profit Margin

2009-10

2010-11

2011-12

2012-13

2013-14

0

1

2

3

4

5

6 5.66

2.56

0.98

1.92 2.1

In 2010-11, high expenses resulted in the decline of operating profit. There had been huge decline in operating profit in 2011-12 due to increase in cost prices and as a consequence, the operating cost increases. There were high expenses as exceptional and other expenses. The company invested in refineries in Orissa in 2013 resulting in low operating cost. The miscellaneous and other expenses were decreased and hence operating cost. In 2013-14, employee benefits also declined thereby increasing operating profit margin.

Return on Total Assets

2009-10

2010-11

2011-12

2012-13

2013-14

02468

1012

9.75

4.29

1.88 2.19 2.78

ROTA There had been continuous decrease in net profit

ratio from 2009-10 to 2011-12. This may be attributed to fact that there had been constant increase in crude oil prices and USD to INR currency exchange rate. As a result of it, the cost increases and hence the profit decreased. In 2011-12, price of $1 increases from Rs 44 to Rs 52. As a result, there was decrease in profits and hence net profit ratio. After that the exchange rates remains same and but due to decrease in employee benefits and low closing stock results in increase in sales, hence revenue and therefore net profit margin. It increased but not by much. Since profit after tax declined till 2011-12 and then increases and the total assets continues to increases year by year, it resulted in the download of ROTA and then increases. The purchases and raw material consumed increased drastically and henceforth profit declined

Total Assets & Assets Under Development

2009-10

2010-11

2011-12

2012-13

2013-14

050000

100000150000200000250000300000

259483.2

173679.7209859.8

228019.3252413.8

Total Assets

2009-10

2010-11

2011-12

2012-13

2013-14

05000

100001500020000250003000035000

21226.85

8939.313415.36

25646.21

33150.64

Assets Under De-velopment

Return on Earning Assets

2009-10

2010-11

2011-12

2012-13

2013-14

02468

1012 11.23

4.522.01 2.47 3.2

Return on Earning Assets

There has not been any major changes as compared to return on total assets. It indicates the fact that the company had been not much changes in the capital work in progress over the years. The capital work in progress increases continuously from 2010-11.

Return on Operating Assets

2009-10

2010-11

2011-12

2012-13

2013-14

02468

101214 13.06

5.79

2.35

12.95 13.1

Return on Operating Assets

There had been huge decline in operating profit in 2011-12 due to increase in cost prices and as a consequences of oil and exchange rates, the operating cost increases. In 2012-13, there was a huge increase in the operating assets and operating assets declined drastically in 2012-13. The current investments of the company in 2012-13 increases by over 10 times and hence a result the return on operating assets increases approx. by 6 times. Due to high non-current investments in 2012-13 and 2013-14, the operating assets increases and thereby returns.

Borrowings (Long Term & Short Term)

2009-10 2010-11 2011-12 2012-13 2013-140

100002000030000400005000060000700008000090000

43420.1250308.96

70323.9378325.2 80599.12

Debt Equity Ratio

2009-10

2010-11

2011-12

2012-13

2013-14

00.20.40.60.8

11.21.4

0.83 0.91

1.22 1.28 1.22

Debt Equity Ratio Initially, the ratio was less than 1

indicating the fact the company believed in risk free game and tried to protect the investors’ money. There had been substantial increase in the ratio and now it is more than 1 indicating that the portion of assets provided by creditors is greater than the portion of assets provided by stockholders. The company is now started investing in higher risk firms. Since the ratio is still close to 1, it indicate that creditors and stockholders almost equally contribute to the assets of the business.

Asset Turnover Ratio

2009-10

2010-11

2011-12

2012-13

2013-14

1.51.61.71.81.9

22.1

1.74

1.89

2.031.96

1.87

Asset Turnover Ratio The asset turnover ratio is an efficiency ratio

that measures a company's ability to generate sales from its assets by comparing net sales with average total assets i.e. this ratio shows how efficiently a company can use its assets to generate sales. Higher turnover ratio means the company is using its assets more efficiently. Lower ratios mean that the company isn't using its assets efficiently and most likely have management or production problems.

The asset turnover ratio remains almost same over the 5 years. Since the ratio is close to 2, it implies that the company is able to generate sales from its assets by comparing net sales with average total assets. The ratio reaches its peak in 2011-12 due to drastic increase in the revenues.

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