Submitted by :- Veda Satish Poduval

(15/UCMB/663)
Date : August 16, 2016.

ACKNOWLEDGEMENT
Firstly, I would like to convey my sincere gratitude to Mrs. Leelavathy
(Management accounts teacher) for providing us an opportunity to work out
such an interesting assignment. I would also like to thank her for all the
mental and physical support, especially in clarifying our doubts and coping
up with us.

I would also like to thank my parents who helped me in selecting a company

and shared all the knowledge they knew about annual reports of a company,
and also for their mental support.

I thank my friends and classmates who helped me at various stages of this

project, without which my work wouldnt have been possible.

Lastly, I thank the Almighty for giving me the courage and strength
throughout and for the timely completion of my work.

HINDUSTAN PETROLEUM CORPORATION LTD.

HPCL is a Government of India Enterprise with a Navratna Status, and a Forbes 2000 and
Global Fortune 500 company. It had originally been incorporated as a company under the
Indian Companies Act 1913. It is listed on the Bombay Stock exchange (BSE) and National
Stock Exchange (NSE), India.

HPCL owns & operates 2 major refineries producing a wide variety of petroleum fuels &
specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA)
capacity and the other in Visakhapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL
also owns and operates the largest Lube Refinery in the country producing Lube Base Oils of
international standards, with a capacity of 428 TMT. This Lube Refinery accounts for over 40%
of the India's total Lube Base Oil production. Presently HPCL produces over 300+ grades of
Lubes, Specialities and Greases. HPCL in collaboration with M/s Mittal Energy Investments Pte.
Ltd.. is operating a 9 MMTPA capacity Refinery at Bathinda in Punjab and also holds an equity
of about 16.95% in the 15 MMTPA Mangalore Refinery and Petrochemicals Ltd. (MRPL).

HPCL has the second largest share of product pipelines in India with a pipeline network of more
than 2,500 kms for transportation of petroleum products and a vast marketing network consisting
of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply &
Distribution infrastructure comprising Terminals, Pipeline networks, Aviation Service Stations,
LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships.
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Consistent excellent performance has been made possible by highly motivated workforce of over
11,000 employees working all over India at its various refining and marketing locations.

HPCL is committed to achieve the economic, ecological & social responsibility objectives of
sustainable development consistently through varied operations and activities. HPCLs focus
areas are in the fields of Child Care, Education, Health Care, Skill Development & Community
Development, touching lives of weaker section of society.

RATIO ANALYSIS
The ratio analysis is one of the most powerful techniques of financial analysis. With the help of
ratios financial statements can be analyzed more clearly and reasonable decisions can be taken
by the management.
A ratio is an expression of the quantitative relationship between two numbers. A financial ratio is
the relationship between two accounting figure expressed mathematically. Ratios provide
information about the financial strength, soundness, position and weakness of a business
concern. Ratio analysis is a technique of analysis and interpretation of financial reports. Numbers
of ratios can be calculated from the information given in the financial statements but the analyst
should select the appropriate data and calculate some appropriate ratios keeping in mind the
objective of analysis.
Importance or usefulness of Ration analysis

To give meaning to absolute figure

For planning and forecasting
As a basis of decision making
To compare results and performance
For analysis of strengths and weakness
For analyzing change in the form of trend

C la s s if c a t io n o f
R a t io s

Proftability
ratios
Turnover
Ratios
Solvency
Ratios

Profitability Ratios
Profit making is the main objective of business. Aim of every business concern is to earn
maximum profits in absolute terms and also in relative terms. Ability to make maximum profit
from optimum utilization of resources by a business concern is termed as Profitability. Profit is
an absolute measure of earning capacity. Profitability analysis consists of different elements i.e.,
study of sales, cost of goods sold, analysis of gross margin on sales, operating expenses,
operating profit, and analysis of profit in relation to capital employed.

Turnover Ratios
These ratios are called performance ratios. Activity ratios highlight the operational efficiency of
the business concern. The term operational efficiency refers to effective, profitable and rational
use of resources available to the concern. The ratios comprising this category are calculated with
reference to sales or cost of sales and expressed in number of times. These ratios indicate the
briskness with which the business is being carried on. Therefore they are also called velocities.

Solvency Ratios
Solvency or financial ratios include all ratios which express financial position of the concern.
Financial position may mean differently to different persons interested in the business concern.
Creditors, banks, management, investors and auditors have different views about financial
position. The term financial position generally refers to short term- and long-term solvency of the
business concern, indicating safety to different interested parties. Financial ratios are also
analyzed to find judicious use of funds.

OBJECTIVE:- To analyze and interpret the accounting figures of Hindustan Petroleum using
Ratio Analysis and to compare the same among their annual reports for three consecutive
accounting years(2012-2013; 2013-2014; 2014-2015).

Ratios observed:I.

Profitability ratios:
1. Return on Shareholders funds
2. Net profit ratio
3. Earnings per share

II.

Turnover ratios:
4. Working capital turnover ratio
5. Fixed asset turnover ratio
6. Capital turnover ratio

III.

Solvency ratios:
7. Current ratio
8. Liquid ratio
9. Fixed asset ratio
10. Proprietary ratio

1. RETURN ON SHAREHOLDERS FUNDS

This ratio determines the profitability from the shareholders point of view which
indicates the profitability of the firm in relation to the funds supplied by the
shareholders or owners. This ratio helps the firm to know whether the firm has earned
enough returns to repay to its shareholders or not.
Formula:
Return on shareholders funds= Net profit after interest and tax x 100
Share holders funds

Analysis:

Table 1

Particulars
Net profit after Interest and tax
Shareholders fund
Return on shareholders fund [%]

[Figures in the table are in Crore]

2013()
904.71
13726.40
6.91

2014()
1733.77
15012.16
11.54

2015()
2733.26
16022.09
17.06

Interpretation

Return on shareholders' funds

2013
2014
2015

From the above pie chart, it can be concluded that the return for repaying the shareholders was
maximum in the year 2015, as compared to that of 2014 and 2013. It was the lowest in 2013, and
has improved in the following years. This is because of the rise in net profits of the company.
Thus, HPCL has had a growth in its profits and has enough funds to repay to its owners.

2. NET PROFIT RATIO

This ratio is also called net profit to sales ratio. It is a measure of a managements
efficiency in operating the business successfully from the owners point of view. It
indicates the return on shareholders investments. Higher the ratio better is the
operational efficiency of the business concern.
Formula:
Net profit ratio = Net profit after tax x 100
Net sales

Analysis:
Particulars
Net profit after tax
Net sales
Net profit ratio (%)

Table 2
2013()
904.71
206529.34
0.44

[Figures in the table are in Crore]

2014()
1733.77
223036.67
0.78

2015()
2733.26
206380.37
13.21

Interpretation:

Graph 2.1

Graph 2.2

250000

Net profit ratio

200000

15

150000

Net Proft

100000

Sales

10

Series 1

50000
0

0
2013

2014

2015

2013

2014

2015

Graph 2.1 represents the net profit earned and the net sales of the company during the years
2013, 2014, 2015. Graph 2.2 interprets the net profit ratio in terms of percentage. 2015 has
earned the highest net profit ratio as the margin of profit earned out of sales during that year was
much higher than that of 2013&2014. We can conclude that the operational efficiency of HPCL
in 2015 was higher than the previous years.

3. EARNINGS PER SHARE

This ratio highlights the overall success of the concern from owners point of view
and it is helpful in determining market price of equity shares. It reflects upon the
capacity of the concern to pay dividend to its equity shareholders. Generally,
investors are accustomed to judge companies in the context of the share market, with
the help of Earnings per share.
Formula:
Earnings per share = Net profit after tax and preference dividend
No. of equity shares

Analysis:

Table 3

Particulars
Net profit after tax and preference dividend ()
No. of equity shares
Earnings per share ()

[Figures in the table are in Crore]

2013
904.71
33.863
26.72

2014
1733.77
33.863
51.20

2015
2733.26
33.863
80.72

Interpretation:
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E.P.S
2015
E.P.S

2014
2013
0 10 20 30 40 50 60 70 80 90

The above graph denotes the E.P.S of HPCLs shareholders after the payment of tax, and
preference dividend to preference shareholders. The number of equity shares remains same in all
three years, but since there is a wide difference in the net profits of the years, the E.P.S shows a
change accordingly. Being net profit the highest in year 2015, the earnings per share of an equity
shareholder is also high as compared to the previous years. 2013 has the lowest E.P.S. This
maybe an encouragement to the equity owners of HPCL.

4. WORKING CAPTAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also
measures the smooth running of business or otherwise. The ratio establishes
relationship between cost of sales and working capital. Higher sales in comparison to
working capital indicate overtrading and lower sales in comparison to working capital
indicate undertrading. A higher ratio is the indication of lower investment of working
capital and more profit.
Formula:
Working capital turnover ratio = Sales / Cost of goods sold
Net Working capital
Analysis:

Table 4

[Figures in the table are in Crore]

Particulars
2013()
Net Sales
206529.34
Net Working Capital*
(5032.01)
Working capital turnover ratio(times)
(41.04)
[*Net working capital= Current assets Current liability]

2014()
223036.67
4429.52
50.35

2015()
206380.37
3904.18
52.86

Interpretation:

Working captial turnover ratio

Working captial turnover ratio
60
40
20
0

2013

2014

2015

-20
-40
-60

The above graph depicts a chart with both positive and negative values. The working capital in
the year 2013 shows a negative figure. This happens when a companys current assets
substantially decrease as a result of a large one-time cash payment, or current liabilities increase
due to significant credit extension resulting in an increase in accounts payable. 2014 and 2015
show a positive ratio, a greater value of current assets than their current liabilities in relation to
net sales.

5. FIXED ASSET TURNOVER RATIO

This ratio determines efficiency of utilization of fixed assets and profitability of a
business concern. Higher the ratio, more is the efficiency in utilization of fixed assets.
A lower ratio is the indication of underutilization of fixed assets.
Formula:
Fixed asset turnover ratio = Sales/ Cost of goods sold
Net fixed assets

Analysis:

Table 5
Particulars

Sales
Net fixed assets
Fixed asset turnover ratio

[Figures in the table are in Crore]

2013()

206520.30
27721.57
7.45

2014()

223,036.67
30497.8
7.31

2015()

206380.37
32537.23
6.34

Interpretation:

Fixed Asset turnover ratio

2013

2014

2015

The pie chart represents the fixed asset turnover ratio attained in the three years. 2014 shows the
highest operational efficiency in utilization of fixed assets, followed by 2013 and the 2015
respectively.

6. CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost
of sales or sales with the amount of capital invested in the business. Higher ratio
indicates higher efficiency and lower ratio indicates ineffective usage of capital.
Formula:
Capital turnover ratio= Sales/ cost of goods sold
Capital employed

Analysis:

Table 6
Particulars

Sales
Capital employed
Capital turnover ratio

[Figures in the table are in Crore]

2013()
206529.34
32928.08
6.27

2014()
223036.67
42270.83
5.28

2015()
206380.37
43855.34
4.70

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Interpretation:

Capital turnover ratio

Capital turnover ratio
6.27
5.28

2013

2014

4.7

2015

The above graph shows a decreasing trend in the capital turnover ratios in relation to their net
sales for the years 2013, 2014, & 2015. The highest managerial efficiency was in year 2013 as
observed, followed by 2014 and finally 2015. The company will thus have to work more
efficiently to cope up with a higher ratio, like in the previous years.

7. CURRENT RATIO
It is the ratio of current assets to current liabilities. In order to measure the short term
liquidity or solvency of a business concern, comparison of current assets and current
liabilities is inevitable. This ratio indicates the ability of a concern to meet its current
obligations as and when they are due for payment. Internationally accepted current
ratio is 2:1.
Formula:
Current ratio = Current assets
Current liabilities

Analysis:

Table 7
Particulars

Current Assets
Current Liabilities
Current ratio

[Figures in the table are in Crore]

2013()
38230.64
43262.65
0.88:1

2014()
39736.78
35307.26
1.13:1

2015()
27599.48
23695.52
1.16:1

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Interpretation:
2
1.8
1.6
1.4
1.2
Current ratio

Ideal current ratio

0.8
0.6
0.4
0.2
0
2013

2014

2015

The above graph shows a comparison among the current ratios for years 2013, 2014, and 2015,
as well as the difference between the current ratio of HPCL with that of the Ideal current ratio
(2:1) a business concern must maintain. Out of the three years, 2013 projects a more dangerous
position as their current assets cannot even cover their current liabilities one time. The following
years show a better position, even though they cannot be considered to be that safe as it hasnt
reached the level of ideal current ratio.

8. LIQUID RATIO
These ratio is also knows as Acid-Test ratio or Quick ratio. The ideal quick ratio or
the generally accepted norm for liquid ratio is 1.
Formula:
Liquid Ratio= Liquid Asset
Current liabilities

Analysis:

Table 8

Particulars
2013()
Liquid/Quick assets*
21791.94
Current Liabilities
43262.65
Liquid ratio
0.50:1
*[Here, Liquid assets= Current assets Stock]

[Figures in the table are in Crore]

2014()
20961.37
35307.26
0.59:1

2015()
14627.22
23695.52
0.62:1

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Interpretation:
1
0.9
0.8
0.7
0.6
0.5

Liquid ratio

0.4

Ideal liquid ratio

0.3
0.2
0.1
0
2013 2014
2015

From the above data and graph, it is clear that the company has not achieved the Ideal quick ratio
(1:1) in any of the years. It has always been below 1. However, 2015 projects an even better
position of the company to repay its obligations using the quick assets that are readily
convertible into cash.

9. FIXED ASSET RATIO

The ratio establishes a relationship between fixed assets and long term funds. The
objective of calculating this ratio is to ascertain the proportion of long term funds
invested in fixed assets. The ratio should not be generally more than 1. An ideal fixed
asset ratio is 0.67.
Formula:
Fixed Asset Ratio= Fixed assets
Long term funds
Analysis:
Particulars
Fixed assets
Long term funds
Fixed asset ratio

Table 9

[Figures in the table are in Crore]

2013()
27721.57
32928.08
0.84:1

2014()
30497.8
42270.83
0.72

2015()
32537.23
43855.34
0.74

Interpretation:

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0.9
0.8
0.7
0.6
0.5

Fixed asset ratio

0.4

Ideal fxed asset ratio

0.3
0.2
0.1
0
2013

2014

2015

The above graph projects the original fixed asset ratio of three consecutive years and the ideal
fixed asset ratio (0.67). All three years have a ratio less than 1 which indicates that a portion of
working capital has been financed by long term funds. A fixed asset ratio more than 1 is not a
prudent policy. 2014 has the attained the best ratio which is almost close to the ideal ratio,
followed by 2015 and 2013 respectively.

10. PROPRIETARY RATIO

The ratio compares the shareholders funds and total tangible assets. It shows the
general soundness of the company. A high ratio indicates safety to the creditors and a
low ratio shows greater risk to the creditors. Usually a ratio below 0.5 is alarming to
the creditors.

Formula:
Proprietary ratio= Shareholders funds
Total tangible assets
Analysis:
Particulars
Shareholders fund
Total tangible assets
Proprietary ratio

Table 10

[Figures in the table are in Crore]

2013()
13726.40
22441.67
0.61:1

2014()
15012.16
25797.19
0.58

2015()
16022.09
28852.05
0.56
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Interpretation:

Proprietary ratio
2015

2014

Proprietary ratio

2013

0.52 0.54 0.56 0.58 0.6 0.62

The graph clearly projects the proprietary ratios of HPCL for the years 2013, 2014 and 2015. All
three ratios are more or less closer to 0.5 which puts the creditors of the company in an alarming
situation. Comparing the three years, 2013 shows a better position that 2014 and 2015.

CONCLUSION
The project deals with the ratio analysis and interpretation of accounting figures of Hindustan
Petroleum Corporation Ltds annual reports for the years 2013, 2014 and 2015.
(Incl : Financial statements of 2013, 2014 and 2015 )
10 ratios have been analyzed using their data and the interpretation has been done using the
graphs. Although the company has been running on a profit for many consecutive years now,
their ratios are such that some are favorable to the company where as some has to be worked
upon for a safer long run of the company.
Working on this assignment seemed to be really interesting and knowledgeable as the theoretical
accounting knowledge was put into practice by ones self. It also helped in gaining knowledge
regarding how a companys annual reports are published and who are the stake holders of the
same.
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