Revision in

Cash Management System

@

Indian Oil Corporation Limited

SHANTANU

MITALI

YASH ROHITJA

PRESENTED

BY

SWATHI CHETAN

NIKETESH

SAIMAHESH

Type Public

Traded as BSE: 530965

NSE: IOC

Industry Oil and gas

Founded 1964

Headquarters New Delhi, India

Area served India

Key people R.S Butola (Chairman)

Products Fuels, lubricants,petrochemicals

Revenue US$ 76.05 billion (2012)

Operating income US$ 3.30 billion (2012)

Profit US$ 786 million (2012)

Total assets US$ 40.88 billion (2012)

Total equity US$ 11.59 billion (2012)

Owner(s) Government of India

Employees 36,198 (2012)

Website www.iocl.com

INTRODUCTION

• Indian Oil Corporation Ltd. (IOCL) was India's largest company by

sales

• with a turnover of Rs 2710.740 billion and

• profit of Rs. 102.210 billion for the year 2009-10.

• IOCL was India's largest commercial enterprise and flagship national

oil company and downstream petroleum major.

• It operated the largest and widest network of fuel stations in the

country.

• In 2010, IOCL had a market share of 41% in refining, 54% in product

pipelines, and 46% in the petroleum products market.

By financial year 2010-11, IOCL had 14 products such as;

• Indane Gas Domestic and Industrial Gas

• Auto Gas Automotive Natural Gas

• Xtra Premium Automotive Premium Petrol

• Xtra Mile Automotive Premium Diesel

• Servo Lubricants and Greases

It was a major supplier to core sectors such as the

• Army

• The Railways,

• State Road Transport Corporations,

• The Air Force,

• The Navy,

• Power, and

• Aviation.

IOCL revised its Cash Management System or Treasury

Management System in the year 2006-07.

History[edit]

Indian Oil began operations in 1959 as Indian Oil Company Ltd.

The Indian Oil Corporation was formed in 1964, with the merger of

Indian Refineries Ltd. Indian Oil is the biggest oil producer and

marketeer Oil's product range covers petrol, diesel, LPG, auto LPG,

aviation turbine fuel,

lubricants,naphtha, bitumen, paraffin, kerosene etc. Xtra Premium

petrol, Xtra Mile diesel, Servo lubricants, Indane LPG cooking gas,

Autogas LPG, IndianOil Aviation are some of its prominent brands.

Recently Indian Oil has also introduced a new business line of

supplying LNG (liquefied natural gas) by cryogenic transportation.

This is called "LNG at Doorstep".

Stock price: 530965 (BSE)Rs. 228.60+3.55 (+1.58%)

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation

with its headquarters in New Delhi, India. It is the world's 88th largest corporations, according

to the Fortune Global 500 list, and the largest public corporation in India when ranked by

revenue.[2]IndianOil and its subsidiaries account for a 49% share in the petroleum products

market, 31% share in refining capacity and 67% downstream sector pipelines capacity in India.

The Indian Oil Group of companies owns and operates 10 of India's 22 refineries with a

combined refining capacity of 65.7 million metric tonnes per year. The President of India owns

78.92% (1.9162 billion shares) in the company.[citation needed] In FY 2012 IOCL sold 75.66

million tonnes of petroleum products and reported a PBT of 37.54 billion, and the Government

of India earned an excise duty of 232.53 billion and tax of 10.68 billion. It is one of the

seven Maharatna status companies of India, apart from Coal India Limited, NTPC Limited, Oil

and Natural Gas Corporation, Steel Authority of India Limited, Bharat Heavy Electricals

Limited and Gas Authority of India Limited.[3]

IndianOil operates the largest and the widest network of fuel stations in the country, numbering

about 20,575 (16,350 regular ROs & 4,225 Kisan Seva Kendra). It has also started Auto LPG

Dispensing Stations (ALDS). It supplies Indane cooking gas to over 66.8 million households

through a network of 5,934 Indane distributors. In addition, IndianOil's Research and

Development Center (R&D) at Faridabad supports, develops and provides the necessary

technology solutions to the operating divisions of the corporation and its customers within the

country and abroad. Recently Indian Oil Corp (IOC) has raised $500 million by selling 10-year

dollar-denominated bonds, its fourth such issue overseas in the last three and a half years

OIL INDUSTRY

BACKGROUND

CATEGORIZED INTO 3 TYPES

•UPSTREAM

•DOWNSTREAM

•MARKETING

•DISTRIBUTION

UPSTREAM

• INDIA has 26 sedimentary basins

• Total area 3.14 million sq.km out of which

1.35 million sq.km are under deep water

• Domestic production

2005-2006 – 32.19 MT

2006-2007 – 33.98 MT

2007-2008 – 34.11 MT

DOWNSTREAM

• In 2008-2009- Refining capacity- 178

MMTPA

• In 2011-India has 17 refineries out of which 7

are owned by IOCL

• No new refineries has been set up in US &

Europe

• India has also benefit of geographic location

MARKETING

• INDIA’s major PSU’s are:- IOCL,BPCL,HPCL

• In April 2002-Private sector came into

existence:- Essar Oil, RIL , Royal Dutch Shell

• Public Distribution System was emerged

through subsidized LPG

• IOCL has 35,066 retail outlets in INDIA till

09’

• 9366 LPG distributions & 6614 superior

kerosene oil

DISTRIBUTION

• Supply of oil & gas for household purpose

Railways – 40%

Pipelines- 30%

Coastal tankers – 12%

Road- 18%

• National Gas Grip was also planned

COMPANY STRUCTURE

•THE ESTABLISHMENT OF THE CASH

MANAGEMENT PRODUCT MODULE IN

IOCL IN 2006-2007, THE TRANSACTION

TOOK PLACE THROUGH THE

COVENTIONAL METHOD USING THE

REGIONAL CASH CREDIT MODULE.

•IN THE RCC MODULE ,STATE BANK OF INDIA

BRANCHES IN VARIOUS LOCATION,SENT

INFORMATION ABOUT THE REMMITTANCE OF THE

FUND TO THE REGIONAL OFFICES AND THEY IN TURN

FORWARDED THAT INFORMATION TO SBI HEAD

OFFICE

HIGH VALUE TRANSACTION i.e. THOSE ABOVE

Rs.500000 WERE BEING INFORMED PRIOR TO

THEIR COLLECTION SO THAT THEY COULD BE

CONSIDERED IN ITS DAILY BUDGETING PROCESS

AND WOULD HELP IOCL TO ALLOCATE FUNDS

NECESSARY FOR PAYMENTS. ANYTHING BELOW

Rs. 500000 WAS TREATED AS LOW VALUE

TRANSACTION AND PRIOR INFORMATION FOR

THESE TRANSACTIONS WAS NOT DEEMED

NECESSARY.

CURRENT CASH MANAGEMENT SYSTEM

WHAT IS CASH MANAGEMENT SYSTEM?

• The corporate process of collecting, managing

and investing cash.

• This is a key component of ensuring a company’s

financial stability and solvency.

• The above definition is as given in theory. But in

real world cash management system is one of the

industries endear and ear hearing magnet for most

of the organization catering into IT,

manufacturing and outsourcing companies.

UTILIY of cash management system• When there is a demand for particular product in the market, the

demanded company has to maintain his position in the market and on the

other hand they have to maintain their shares in the top position in the

stock market.

• So, cash management system helps the company to achieve this targets.

Ways to achieve this targets?

- By using optimum resources, and limited raw material

- Maintaining price strategy by giving a reasonable price to the customers

for a long period of time.

Example of effective Cash Management System

Collections modes:-

Non e-collection mode.

Local instruments.

outstation instruments.

collection account.

special current account.

current account.

letter of authority.

railway credit note.

cash credit account.

BANKING ARRANGEMENTS

E-collection mode.

REAL TIME GROSS SETTLEMENT (RTGS).

NATIONAL ELECTRONIC FUND TRANSFER (NEFT).

CORPORATE INTERNET BANKING.

CORE TO CORE.

INSTRUCTION CARD.

BANKING ARRANGEMENTS

CASH FLOW FORECASTING

A key element of cash management involved projections of

inflows and outflows of cash by the corporation.

• Projections were done in two stages:-

• Monthly: by the 7th of every month.

• Rolling: by the 22nd of every month for the next month.

• For effective forecasting, managers at IOCL required

credible information from multiple sources.

• For budgeting December 2010,the months that were

taken as per method were Sep.,Oct. and November. The

actual collections were put in region wise.

Then the total of each region was arrived at and this was

divided by three to find the average of three months.

• Likewise in December 2009,the actual collection of

same period was summed up and divided by three to get

the average of each region.

• The actual collection for December 2009 was also noted

region wise.

• The percentage for adjustment was obtained by dividing

actual collection in December 2009 by average

collection.

• This percentage of adjustment was carried forward and

multiplied with average of each region in the 2010

figures.

IOCL BPCL HPCL

OPERATING INCOME 447096.41 240115.75 206958.80

COST OF SALES 433359.56 234008.95 202697.14

OPERATING PROFIT 13736.85 6106.80 4261.66

OTHER RECURRING INCOME 3514.79 1680.23 1102.36

ADJUSTED PBDIT 17251.64 7787.03 5364.02

FINANCIAL EXPENSES 6409.15 1825.24 2019.33

DEPRECIATION 5200.99 1926.10 1983.52

ADJUSTED PBT 5641.50 4035.69 1361.17

TAX CHARGES 642.63 1392.79 630.47

ADJUSTED PAT 4998.87 2642.90 730.70

OTHER NON CASH ADJUSTMENT 6.30 174.01

REPORTED NET PROFIT 5005.17 2642.90/ 3142.90 904.71/10587.4

EQUITY DIVIDEND 1505.33 795.39 287.83

DIVIDEND TAX 255.83 127.47 48.92

RETAINEND EARNING 3244.01 2220.04 10250.70

IOCL BPCL HPCL

SHARES IN ISSUE 24279.52 L 7230.84L 3386.27 L

EARNING PER SHARE

16.29/- 36.55/- 26.72/-

EQUITY DIVIDEND (%)

50.00 110.00 85.00

BOOK VALUE 238.38 230.04 405.35