FINANCIAL MANAGEMENT

PROJECT

Company –ONGC

Submitted to Prof. Ramesh

Submitted by
Preeti Morla
FPB1012/053
Section- B
Contents
01. Ascertain sales, gross profit, EBITDA, EBIT, PBT, PAT and CFAT....................................................3
02. Ascertain beta of the equity share of the company................................................................................4
03. Ascertain the market price of the equity share for past 30days..............................................................4
04. Ascertain the market price of the  equity share with 52 week high and low  for all three years.............5
05. Ascertain Working Capital i.e., current assets - current liabilities for all three years.............................6
06. What is Working Capital Management, ascertain the methods of Working Capital Management
followed by your company?........................................................................................................................6
Methods of working capital management................................................................................................7
Debtors Management...............................................................................................................................7
Short term financing................................................................................................................................7
Factors influencing Working Capital are.................................................................................................7
Methods of Working Capital Management:.............................................................................................7
Dimensions of Working Capital Management:........................................................................................8
07. Ascertain the amount invested in capital budget for the above period...................................................8
08. If you know sales and pat you can take investment decisions or capital budgeting decisions. 
Comment in a paragraph..............................................................................................................................8
09. What is time value of money?...............................................................................................................9
Present and Future Values:......................................................................................................................9
10. Which method of capital budgeting is the best method to evaluate a project?.....................................10
Net Present Value (NPV).......................................................................................................................10
11. Return is a factor of risk, elaborate and also explain CAPM model?...................................................11
Types of Risk.........................................................................................................................................11
Capital Asset Pricing Model – CAPM:..................................................................................................12
12. Ascertain dividend paid by your company for the past three years......................................................12
13. Ascertain the source of finance of your company and list the sources.................................................13
14. Find the debt equity ratio of your company and comment on the financial leverage of your company.
.................................................................................................................................................................. 13
15.Write a note on angels, VC and PE companies.....................................................................................13
Angel investor.......................................................................................................................................13
Venture capital......................................................................................................................................14

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 Private Equity........................................................................................................................................15
16. How beta is different from standard deviation ?..................................................................................16
Beta.......................................................................................................................................................16
Standard deviation.................................................................................................................................17
Difference between Beta and Standard deviation..................................................................................17
17. Check whether your company has inter corporate deposit, if so understand the legal provisions for the
same..........................................................................................................................................................17
18. As your company is listed in the NSE find out the procedure for listing in NSE?..............................17
Listing Procedure...................................................................................................................................17
Submission of Memorandum and Articles of Association.................................................................17
Approval of draft prospectus.............................................................................................................18
Submission of Application.................................................................................................................19
Submission of Application (For Issuers listing on NSE for the first time).........................................19
Submission of Application (Listing of further Issues by Issuers already listed on NSE)...................19
Listing Fees.......................................................................................................................................19
Submission of Application (Security Deposit)....................................................................................21
Submission of Application (Supporting Documents).........................................................................22
19. Ascertain what is  risk free rate of return for 2011in India,  check RBI and GOI web sites to find out.
.................................................................................................................................................................. 23
20. Is your company making use of financial leverage operating leverage and combined leverage,
illustrate.....................................................................................................................................................24
Leverage................................................................................................................................................24
Operating leverage.................................................................................................................................25
Financial leverage..................................................................................................................................25
Combined leverage................................................................................................................................25
21. Check whether your company’s debt instrument is listed, if listed is it traded...............................25
22. Ratio analysis.................................................................................................................................26
23. If term loan or cash credit is availed by your company then collect the details of the same such as
amount, rate of interest, period of re payment etc......................................................................................26
24. Ascertain EPS of the company and find out PE ratio.....................................................................27
25. Go through annual report, directors’ report, auditor’s report and understand the comments made
by them, check is there any critical comments made  by the auditors of the company..............................27
26. Take Cash flow before tax of your company and ascertain C- FAT, for two years.........................27

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 1. Ascertain sales, gross profit, EBITDA, EBIT, PBT, PAT and CFAT.

Rs in million
Year 2009-10 2008-09 2007-08
Gross Sales 619832 650494 615426
Excise duty 56752 59174 61106
Net sales 563080 591320 554320
Less: COGS ( Change in stock+
Purchases+ Direct expenses) 167026 213028 202408
Gross Profit 396054 378292 351912
Add: Non operating transactions -20466 -57950 -37122
EBITDA 375588 320342 314790
Less: Ammortization 89407 67320 47580
EBITD 286181 253022 267210
Depletion 45302 42148 36776
Depreciation 12312 14491 14060
Impairment -433 -3110 -437
Less: Total 57181 53529 50399
PBIT 229000 199493 216811
Interest -20839 -40314 -35535
PBT 249839 239807 252346
Tax 82163 78544 85330
PAT 167676 161263 167016
PAT 167676 161263 167016
CFAT 269395 243074 228656

02. Ascertain beta of the equity share of the company.

Beta= Co-Variance (SENSEX, stock)/ Variance (SENSEX)

Beta of ONGC= 0.62

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03. Ascertain the market price of the equity share for past 30days

Date Open Price Close Price Average Price

14-Feb-11 281.15 279.45 279.68
11-Feb-11 272.1 277.05 270.41
10-Feb-11 274 273.6 275.04
9-Feb-11 283.55 274.3 280.98
8-Feb-11 300 282.05 285.93
7-Feb-11 1200 1194.55 1198.56
4-Feb-11 1195.55 1191.7 1201.23
3-Feb-11 1183 1195.4 1189.74
2-Feb-11 1184.4 1181.6 1192.18
1-Feb-11 1191 1176.75 1181.32
31-Jan-11 1143.2 1177.8 1183.68
28-Jan-11 1124.95 1132.9 1131.31
27-Jan-11 1139 1113.8 1122.06
25-Jan-11 1142.1 1130.45 1131.57
24-Jan-11 1118 1138.25 1128.74
21-Jan-11 1132 1105.55 1114.92
20-Jan-11 1145.1 1134.3 1134.43
19-Jan-11 1171.1 1158.85 1169.85
18-Jan-11 1170.35 1170.45 1166.48
17-Jan-11 1175.1 1170.1 1171.69
14-Jan-11 1207 1179.05 1192.05
13-Jan-11 1185 1201.5 1196.85
12-Jan-11 1190 1186.65 1175.98
11-Jan-11 1177 1184.8 1190.25
10-Jan-11 1202 1174.35 1185.34
7-Jan-11 1225.15 1205.85 1216.67
6-Jan-11 1269.4 1227.3 1234.31
5-Jan-11 1288.9 1266.15 1269.73
4-Jan-11 1295.35 1287.05 1289.94
3-Jan-11 1304 1292.8 1293.22

04. Ascertain the market price of the  equity share with 52 week high and low
for all three years.

For year 2009

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 Particulars Price Traded quantity Turnover in Lacs Dates
Open 1177.00 317627 3771.72 04-Jan-10
High 1472.60 1020640 14867.11 28-Sep-10
Low 996.00 1125110 11355.48 22-Apr-10
Close 1288.20 766409 9904.18 31-Dec-10

For year 2009

Particulars Price Traded quantity Turnover in Lacs Dates

Open 667.00 1161119 7905.01 01-Jan-09
High 1277.65 456876 5751.17 15-Oct-09
Low 587.8 1569268 10066.40 16-Jan-09
Close 1178.00 727549 8571.16 31-Dec-09

For year 2008

Particulars Price Traded quantity Turnover in Lacs Dates

Open 1240.00 925453 11545.03 01-Jan-08
High 1356.00 3510337 47136.28 04-Jan-08
Low 538.15 4354160 25967.54 27-Oct-08
Close 667.10 1326857 8823.45 31-Dec-08

05. Ascertain Working Capital i.e., current assets - current liabilities for all
three years.

Working Capital= Current asset- Current liability

Particulars 2009-10 2008-09 2007-08

Current asset 537713 546000 498331
Current liability 194999 211051 176083
Working capital 342714 334949 322248

06. What is Working Capital Management, ascertain the methods of Working

Capital Management followed by your company?

Working capital management is an integral part of overall financial management. The management of
short term assets and short term source of finance is known as working capital management. Working
capital management involves analysis of risk and return. Working Capital Management therefore, aim at
striking a balance such that there is an optimum amount of Current Assets. In general the higher the Net
Working Capital, the lower is the risk, as also the profitability and Vice-versa.

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Methods of working capital management
Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firm's short-term assets and its
short-term liabilities.

The goal of working capital management is to ensure that the firm is able to continue its
operations and that it has sufficient cash flow to satisfy both maturing short-term debt and
upcoming operational expenses

Debtors Management
Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any
impact on cash flows and the cash conversion cycle will be offset by increased revenue and
hence Return on Capital (or vice versa)

Short term financing

Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally
financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or
overdraft), or to "convert debtors to cash" through "factoring".

Factors influencing Working Capital are

 Nature of the business
 Manufacturing Cycle & Time lag in Production & Sales
 Sales Volume & Turnover of Working Capital
 Credit Policy (Terms of Sales & Purchases)
 Production policy
 Seasonal Fluctuations
 Operating Efficiency
 Growth & Expansion
 Price Level Changes & Adjustments

Methods of Working Capital Management:

 Operating Cycle Method
 Estimating Current Assets & Current Liabilities Method
 Cash Forecasting Method
 Projected Balance Sheet Method
 Profit & Loss Adjustment Method

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Dimensions of Working Capital Management:

07. Ascertain the amount invested in capital budget for the above period.

Investments for year 2010 is 57720 Millions

Investments for year 2009 is 50903 Millions

Investments for year 2008 is 58995 Millions

08. If you know sales and pat you can take investment decisions or capital
budgeting decisions.  Comment in a paragraph.

Investment Decisions or Capital Budgeting decisions cannot be based on sales & PAT, The
decision should be taken by considering CFAT(Cash flow after tax). Here cash flow is important
in every organization in for to take such an important decisions and cash plays an important role
in every organizational decisions

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09. What is time value of money?

The time value of money is the value of money figuring in a given amount of interest earned
over a given amount of time.

For example, 100 dollars of today's money invested for one year and earning 5 percent interest
will be worth 105 dollars after one year. Therefore, 100 dollars paid now or 105 dollars paid
exactly one year from now both have the same value to the recipient who assumes 5 percent
interest; using time value of money terminology, 100 dollars invested for one year at 5 percent
interest has a future value of 105 dollars. This notion dates at least to Martín de Azpilcueta
(1491-1586) of the School of Salamanca.

The method also allows the valuation of a likely stream of income in the future, in such a way
that the annual incomes are discounted and then added together, thus providing a lump-sum
"present value" of the entire income stream.

The time value of money – a dollar received today is worth more than a dollar received in the
future because time has a value

• If we owe, we would prefer to pay money later

• If we are owed, we would prefer to receive money sooner
• The longer the term of a single-payment loan, the higher the amount the borrower
must repay
• The discount factor decreases as time increases
• The farther away a cash flow is, the more we discount it decreases as
interest rates increase
• When interest rates are high, a dollar today is worth much more
than that same dollar will be in the future

Present and Future Values:

Basic time value of money relationships:
PV  FV  DF
FV  PV  CF
where PV = present value;
FV = future value;
DF = discount factor = 1/(1  R )t
CF = compounding factor = (1  R )t
                                                                                                                                  
R = interest rate per period; and
t = time in periods

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10. Which method of capital budgeting is the best method to evaluate a
project?

Capital budgeting (or investment appraisal) is the planning process used to determine whether an
organization’s long term investments such as new machinery, replacement machinery, new
plants, new products, and research development projects are worth pursuing. It is budget for
major capital, or investment, expenditures.

Capital Budgeting is the process of identifying, evaluating, and implementing a firm’s

investment opportunities. It seeks to identify investments that will enhance a firm’s competitive
advantage and increase shareholder wealth.

The typical capital budgeting decision involves a large up-front investment followed by a series
of smaller cash inflows. Poor capital budgeting decisions can ultimately result in company
bankruptcy.     

The most important and commonly used methods are:

 Urgency Method
 Pay-Back Period Method
 Unadjusted Return on Investment Method
 Present Value Method
 Internal Rate Of Return Method
 Net Present Value method
 Terminal Value Method
 Benefit-Cost Ratio Method
 Equivalent Annual Cost Method

Net Present Value (NPV)

This method is also called Excess Present Method Value (EPV) method or Net Gain Method or
Investor’s method. This is the best method of evaluating the investment proposals and is just a
variation of present value method. As such it is a type of present value calculation, which is
designed to overcome the disadvantages of IRR. This method is used when management has
already determined a minimum rate of return (cut-off rate) as their policy. All cash flows (Cash
out flows & Cash in-flows) are discounted at a given rate and their present values are
ascertained. If all out flows are made in the initial year, their present values will be equal to
initial investment outlay. Present values of cash out flows are then deducted from the present
value of the cash inflows.

NPV obtained may be equal to zero, more than zero (+ve) or less than zero (-ve). A project is
approved only when such present values of cash inflows are equal to or more than the present
value of cash out flows (i.e. initial investment at zero period of time). Thus NPV should be

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positive for the approval of a project or it should be equal to zero. If NPV is negative the project
will be treated as worthless and is to be out right rejected. Even NPV method can be used to rank
the various proposals which are mutually exclusive. As a general rule, higher the amount of NPV
greater worthiness of the project will be. Amongst the various alternative investment proposals
having the same cost, the best one will be one which provides highest NPV.

11. Return is a factor of risk, elaborate and also explain CAPM model?

There are basically three types of core investments: cash (or cash equivalents), bonds, and
stocks.
Return on Investment always have a risk factor. Some investments are certainly more "risky"
than others, but no investment is risk free. Trying to avoid risk by not investing at all can be the
riskiest move of all. That would be like standing at the curb, never setting foot into the street.
You'll never be able to get to your destination if you don't accept some risk. In investing, just like
crossing that street, you carefully consider the situation, accept a comfortable level of risk, and
proceed to where you're going. Risk can never be eliminated, but it can be managed. Let's take a
look at the different types of risk, how different asset categories perform, and the ways and
means to help manage risk.

Types of Risk

"Risk" can be translated as loss of principal. However, there are many kinds of risk. Let's take a
look at some of them:

 Capital Risk: Losing your invested monies.

 Inflationary Risk: Investment's rate of return doesn't keep pace with inflation rate.
 Interest Rate Risk: A drop in an investment's interest rate.
 Market Risk: Selling an investment at an unfavourable price.
 Liquidity Risk: Limitations on the availability of funds for a specific period of time.
 Legislative Risk: Changes in tax laws may make certain investments less advantageous.
 Default Risk: The failure of the institution where an investment is made.

The Ways to Manage Risk

There are a number of strategies that can help limit risk while offering the potential of higher
returns.

 Diversification:
Investing in a variety of investments, or simply following the old adage "Don't put all
your eggs in one basket." With a portfolio spread among several different investments,
you benefit when each type is doing well, and also limit exposure when one or more
investment is performing poorly.

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  Asset Allocation:
Building upon the diversification concept, with asset allocation you create a customized
portfolio consisting of several asset categories (cash, stocks, bonds) rather than individual
securities. Changing economic conditions affect various types of assets differently;
consequently, each asset category's return may partially offset the others'.
 Dollar Cost Averaging:
Systematically investing a fixed dollar amount at regular time intervals. When this
disciplined program is adhered to and market fluctuations are ignored, it attempts to
"smooth out" the ups and downs of the market over the long haul. Dollar cost averaging,
however, cannot guarantee a positive return in a declining market and you must consider
your ability to continue investing on a regular basis under all market conditions.

Capital Asset Pricing Model – CAPM:

The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free
security plus a risk premium. If this expected return does not meet or beat the required return,
then the investment should not be undertaken. The security market line plots the results of the
CAPM for all different risks (betas). Using the CAPM model and the following assumptions, we
can compute the expected return of a stock. We can say its a model that describes the
relationship between risk and expected return and that is used in the pricing of risky securities.

The general idea behind CAPM is that investors need to be compensated in two ways: time value
of money and risk.

12. Ascertain dividend paid by your company for the past three years.

Rs in Million
  2009-10 2008-09 2007-08
Dividend 70583 68444 68444
Interim dividend 38500 38500 38500
Proposed final dividend 32083 29944 29944

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13. Ascertain the source of finance of your company and list the sources.
 Shareholder’s fund
o Share capital
o Reserves & surplus
 Loan funds
o Unsecured loan (foreign currency loan from banks)
 Deferred tax liability (NET)/ deferred govt grant
 Liability for abandonment cost

14. Find the debt equity ratio of your company and comment on the financial
leverage of your company.

Debt Equity Ratio= Total Debt / Total Equity

Total Debt = Secured Loans + Unsecured Loans

Total Debt 52.37

Total Equity 872826
Debt Equity Ratio 0.00006

Debt equity ratio= 0.00006:1

The Interpretation:

ONGC has only 0.00006 of Debt and $ 1 in Equity to meet this obligation.

15.Write a note on angels, VC and PE companies.

Angel investor

An angel investor or angel (also known as a business angel or informal investor) is an affluent
individual who provides capital for a business start-up, usually in exchange for convertible debt
or ownership equity. A small but increasing number of angel investors organize themselves into
angel groups or angel networks to share research and pool their investment capital.

Business Angels are private investors who invest in unquoted small and medium sized
businesses. They are often businessmen and women who have sold their business. They provide

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not only finance but experience and business skills. Business Angels invest in the early stage of
business development filling, in part, the equity gap.

Parameters Business Angels

Personal Entrepreneurs
Money Invested Own money
Firms funded Small, early stage
Due diligence done Minimal
Location of inv. Of concern
Contract used Simple
Monitoring after inv. Active, hands-on
Involvement in mgt Important
Exiting the firm Of lesser concern

Angels typically invest their own funds, unlike venture capitalists, who manage the pooled
money of others in a professionally-managed fund. Although typically reflecting the investment
judgment of an individual, the actual entity that provides the funding may be a trust, business,
limited liability company, investment fund, etc. The Harvard report by William R. Kerr, Josh
Lerner, and Antoinette Schoar tables evidence that angel-funded startup companies are less
likely to fail than companies that rely on other forms of initial financing.

Angel capital fills the gap in start-up financing between "friends and family" who provide seed
funding, and venture capital. Angel investment is a common second round of financing for high-
growth start-ups, and accounts in total for almost as much money invested annually as all venture
capital funds combined.

Angel investments bear extremely high risk and are usually subject to dilution from future
investment rounds. As such, they require a very high return on investment because a large
percentage of angel investments are lost completely when early stage companies fail,
professional angel investors seek investments that have the potential to return at least 10 or more
times their original investment within 5 years, through a defined exit strategy, such as plans for
an initial public offering or an acquisition. Current 'best practices' suggest that angels might do
better setting their sights even higher, looking for companies that will have at least the potential
to provide a 20x-30x return over a five- to seven-year holding period. After taking into account
the need to cover failed investments and the multi-year holding time for even the successful
ones, however, the actual effective internal rate of return for a typical successful portfolio of
angel investments is, in reality, typically as 'low' as 20-30%. While the investor's need for high
rates of return on any given investment can thus make angel financing an expensive source of
funds, cheaper sources of capital, such as bank financing, are usually not available for most
early-stage ventures, which may be too small or young to qualify for traditional loans.

Venture capital

Venture capital is money put into an enterprise which may all be lost if the enterprise fails. A
businessman starting up a new business will invest venture capital of his own, but he will
probably need extra funding from a source other than his own pocket. However, the term

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'venture capital' is more specifically associated with putting money, usually in return for an
equity stake, into a new business, a management buy-out or a major expansion scheme.

The institution that puts in the money recognizes the gamble inherent in the funding. There is a
serious risk of losing the entire investment, and it might take a long time before any profits and
returns materialize. But there is also the prospect of very high profits and a substantial return on
the investment. A venture capitalist will require a high expected rate of return on investments, to
compensate for the high risk.

A venture capital organization will not want to retain its investment in a business indefinitely,
and when it considers putting money into a business venture, it will also consider its "exit", that
is, how it will be able to pull out of the business eventually (after five to seven years, say) and
realize its profits.

When a company's directors look for help from a venture capital institution, they must recognize
that:

• The institution will want an equity stake in the company

• It will need convincing that the company can be successful
• It may want to have a representative appointed to the company's board, to look after its
interests.

The directors of the company must then contact venture capital organizations, to try and find one
or more which would be willing to offer finance. A venture capital organization will only give
funds to a company that it believes can succeed, and before it will make any definite offer, it will
want from the company management:

• A business plan

• Details of how much finance is needed and how it will be used

• The most recent trading figures of the company, a balance sheet, a cash flow forecast and
a profit forecast

• Details of the management team, with evidence of a wide range of management skills

• Details of major shareholders

• Details of the company's current banking arrangements and any other sources of finance

• Any sales literature or publicity material that the company has issued.

A high percentage of requests for venture capital are rejected on an initial screening, and only a
small percentage of all requests survive both this screening and further investigation and result in
actual investments.

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Private Equity

Equity capital that is not quoted on a public exchange. Private equity consists of investors and
funds that make investments directly into private companies or conduct buyouts of public
companies that result in a delisting of public equity. Capital for private equity is raised from
retail and institutional investors, and can be used to fund new technologies, expand working
capital within an owned company, make acquisitions, or to strengthen a balance sheet.  

The majority of private equity consists of institutional investors and accredited investors who can
commit large sums of money for long periods of time. Private equity investments often demand
long holding periods to allow for a turnaround of a distressed company or a liquidity event such
as an IPO or sale to a public company.

The size of the private equity market has grown steadily since the 1970s. Private equity firms
will sometimes pool funds together to take very large public companies private. Many private
equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt
are issued to fund a large purchase. Private equity firms will then try to improve the financial
results and prospects of the company in the hope of reselling the company to another firm or
cashing out via an IPO.

Private equity refers to a type of investment aimed at gaining significant, or even complete,
control of a company in the hopes of earning a high return. As the name implies, private equity
funds invest in assets that either are not owned publicly or that are publicly owned but the private
equity buyer plans to take private. Though the money used to fund these investments comes from
private markets, private equity firms invest in both privately and publicly held companies. The
private equity industry has evolved substantially over the past decade or so. The basic principle
has remained constant: a group of investors buy out a company and use that company's earnings
to pay themselves back. What has changed are the sheer numbers of recent private equity deals.
In the past ten years, the record for the most expensive buyout has been broken and re-broken
several times. Private equity firms have been acquiring companies left and right, paying
sometimes shockingly high premiums over these companies' market values. As a result, takeover
targets are demanding exorbitant prices for their outstanding shares; with the massive buyouts
that have made headlines around the world, companies now expect a certain premium over their
current value.

16. How beta is different from standard deviation ?

Beta
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that
calculates the expected return of an asset based on its beta and expected market returns. Beta of
an asset is a measure of the market risks in that asset’s returns. It indicates to what extent the
returns from that asset will deviate from the expected returns due to market movements i.e. due
to market risks. Beta of an asset is defined as covariance of that asset’s returns and market
returns divided by variance of market return.
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Beta is calculated using regression analysis, and you can think of beta as the tendency of a
security's returns to respond to swings in the market. A beta of 1 indicates that the security's
price will move with the market. A beta of less than 1 means that the security will be less volatile
than the market. A beta of greater than 1 indicates that the security's price will be more volatile
than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the
market.

Standard deviation
A measure of the dispersion of a set of data from its mean. The more spread apart the data, the
higher the deviation. Standard deviation is calculated as the square root of variance. In finance,
standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility. Standard deviation is also known as historical volatility and is used by
investors as a gauge for the amount of expected volatility.
In other words;
This is a measure of the difference between data and its mean. It is also a measure of a security's
volatility. Standard deviation represents historical volatility which helps determine the amount of
expected volatility.

Difference between Beta and Standard deviation

Beta measures volatility based on a security's correlation with the market as a whole, whereas
standard deviation determines volatility based on its historical pattern.

17. Check whether your company has inter corporate deposit, if so

understand the legal provisions for the same.

No, the company don’t have any inter corporate deposit because it has not revealed it anywhere.

18. As your company is listed in the NSE find out the procedure for listing in
NSE?

An Issuer has to take various steps prior to making an application for listing its securities on the
NSE. These steps are essential to ensure the compliance of certain requirements by the Issuer
before listing its securities on the NSE. The various steps to be taken include:

 Submission of Memorandum and Articles of Association

 Approval of draft prospectus
 Submission of Application
 Listing conditions and requirements

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Listing Procedure

Submission of Memorandum and Articles of Association

Rule 19(2) (a) of the Securities Contracts (Regulation) Rules, 1957 requires that the Articles of
Association of the Issuer wanting to list its securities must contain provisions as given hereunder.

The Articles of Association of an Issuer shall contain the following provisions namely:

 That there shall be no forfeiture of unclaimed dividends before the claim becomes barred
by law;
 That a common form of transfer shall be used;
 That fully paid shares shall be free from all lien and that in the case of partly paid shares
the issuer's lien shall be restricted to moneys called or payable at a fixed time in respect
of such shares;
 That registration of transfer shall not be refused on the ground of the transferor being
either alone or jointly with any other person or persons indebted to the issuer on any
account whatsoever;
 That any amount paid up in advance of calls on any share may carry interest but shall not
in respect thereof confer a right to dividend or to participate in profits;
 That option or right to call of shares shall not be given to any person except with the
sanction of the issuer in general meetings.
 Permission for sub-division/consolidation of share certificate.

Note: The Relevant Authority may take exception to any provision contained in the Articles of
Association of an Issuer which may be deemed undesirable or unreasonable in the case of a
public company and may require inclusion of specific provisions deemed to be desirable and
necessary.

If the Issuer's Articles of Association is not in conformity with the provisions as stated above, the
Issuer has to make amendments to the Articles of Association. However, the securities of an
Issuer may be admitted for listing on the NSE on an undertaking by the Issuer that the
amendments necessary in the Articles of Association to bring Articles of Association in
conformity with Rule 19(2)(a) of the Securities Contract (Regulation) Rules, 1957 shall be made
in the next annual general meeting and in the meantime the Issuer shall act strictly in accordance
with prevalent provisions of Securities Contract (Regulation) Act, 1957 and other statutes.

It is to be noted that any provision in the Articles of Association which is not in tune with sound
corporate practice has to be removed by amending the Articles of Association.

Approval of draft prospectus

The Issuer shall file the draft prospectus and application forms with NSE. The draft prospectus
should have been prepared in accordance with the statutes, notifications, circulars, guidelines,
etc. governing preparation and issue of prospectus prevailing at the relevant time. The Issuers
may particularly bear in mind the provisions of Companies Act, Securities Contracts

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(Regulation) Act, the SEBI Act and the relevant subordinate legislations thereto. NSE will
peruse the draft prospectus only from the point of view of checking whether the draft prospectus
is in accordance with the listing requirements, and therefore any approval given by NSE in
respect of the draft prospectus should not be construed as approval under any laws, rules,
notifications, circulars, guidelines etc. The Issuer should also submit the SEBI acknowledgment
card or letter indicating observations on draft prospectus or letter of offer by SEBI.

Submission of Application
• For Issuers listing on NSE for the first time
• Listing of further Issues by Issuers already listed on NSE
• Listing Fees
• Security deposit (for new & fresh issues and when NSE is the Regional Stock Exchange)
• Supporting documents
Submission of Application (For Issuers listing on NSE for the first time)

Issuers desiring to list existing/new securities on the NSE shall make application for admission
of their securities to dealings on the NSE in the forms prescribed in this regard as per details
given hereunder or in such other form or forms as the Relevant Authority may from time to time
prescribe in addition thereto or in modification or substitution thereof.

Appendix 'A' - Clauses of Articles of Association.

Appendix 'B'- Application Letter for Listing.
Appendix 'C-1' - Listing Application providing pre-issue details of securities.
Appendix 'C-2' - Listing Application providing post-issue details of securities.
Appendix 'D'- Checklist for supporting documents ( as applicable to the issuer)
Appendix 'E' - Schedule of Distribution
Appendix 'F'- Listing Agreement

Submission of Application (Listing of further Issues by Issuers already listed on NSE)

Issuers whose securities are already listed on the NSE shall apply for admission to listing on the
NSE of any further issue of securities made by them. The application for admission shall be
made in the forms prescribed in this regard or in such other form or forms as the Relevant
Authority may from time to time prescribe in addition thereto or in modification or substitution
thereof.

Appendix 'E' - Schedule of Distribution

Appendix 'G'- Application Letter for Listing of further issues.
Appendix 'H' - Listing Application providing details of securities.
Appendix 'I' - Checklist for supporting documents submitted (as applicable)

Listing Fees

The listing fees depend on the paid up share capital of your Company:

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Particulars Amount (Rs.)
Initial Listing Fees 25,000
Annual Listing Fees (based on paid up share, bond and/or debenture and/or debt capital etc.)
Upto  Rs. 1 Crore 10,000
Above Rs. 1 Crore and upto Rs.5 Crores 15,000
Above Rs. 5 Crore and upto Rs.10 Crores 25,000
Above Rs. 10 Crore and upto Rs.20 Crores 45,000
Above Rs. 20 Crore and upto Rs.30 Crores 70,000
Above Rs. 30 Crore and upto Rs.40 Crores 75,000
Above Rs. 40 Crore and upto Rs.50 Crores 80,000
Above Rs. 50 Crores and upto Rs.100 Crores 1,30,000
Above Rs. 100 Crore and upto Rs.150 Crores 1,50,000
Above Rs. 150 Crore and upto Rs.200 Crores 1,80,000
Above Rs. 200 Crore and upto Rs.250 Crores 2,05,000
Above Rs. 250 Crore and upto Rs.300 Crores 2,30,000
Above Rs. 300 Crore and upto Rs.350 Crores 2,55,000
Above Rs. 350 Crore and upto Rs.400 Crores 2,80,000
Above Rs. 400 Crore and upto Rs.450 Crores 3,25,000
Above Rs. 450 Crore and upto Rs.500 Crores 3,75,000

Companies which have a paid up share, bond and/ or debenture and/or debt capital, etc. of more
than Rs.500 crores will have to pay minimum fees of Rs.3,75,000 and an additional listing fees
of Rs.2,500 for every increase of Rs.5 crores or part thereof in the paid up share, bond and/ or
debenture and/or debt capital, etc.

Companies which have a paid up share, bond and/ or debenture and/or debt capital, etc. of more
than Rs.1,000 crores will have to pay minimum fees of Rs.6,30,000 and an additional listing fees
of Rs.2,750 for every increase of Rs.5 crores or part thereof in the paid up share, bond and/ or
debenture and/or debt capital, etc.

Listing Fees - Mutual Fund

The listing fees depend on the paid up unit capital of your Scheme:
 

Particulars Amount (Rs.)

Initial Listing Fees -
Listing Fees where the tenure of the Scheme is upto six months (based on the Unit capital of
the Scheme in crores)

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0-100 16,000
100-300 29,000
300-500 47,000
500-1000 78,000
Maximum fees 125,000

Where the tenure of the scheme is more than six months, the listing fee as applicable for
multiples of six months as given in the above table shall be levied.

Please draw your Cheques/Demand Drafts favouring National Stock Exchange of India
Limited payable at Mumbai.

Submission of Application (Security Deposit)

(Payable only for new and fresh issues and only when NSE is the Regional Stock
Exchange)

The Relevant Authority shall not grant admission to dealings of securities of an Issuer
which is not listed or of any new (original or further) issue of securities of an Issuer
excepting Mutual Funds, which is listed on the NSE unless the Issuer deposits and keeps
deposited with the NSE (in cases where the securities are offered for subscription, whether
through the issue of a prospectus, letter of offer or otherwise, and NSE is the Regional
Stock Exchange for the Issuer) an amount calculated at 1% of the amount of securities
offered for subscription to the public and or to the holders of existing securities of the
Issuer, as the case may be for ensuring compliance by the Issuer within the prescribed or
stipulated period of all requirements and conditions hereinafter mentioned and shall be
refundable or forfeitable in the manner hereinafter stated:

 The Issuer shall comply with all prevailing requirements of law including all
requirements of and under any notifications, directives and guidelines issued by the
Central Government, SEBI or any statutory body or local authority or any body or
authority acting under the authority or direction of the Central Government and all
prevailing listing requirements and conditions of the NSE and of each recognized
Stock Exchange where the Issuer has applied for permission for admission to dealings
of the securities, within the prescribed or stipulated period;

 If the Issuer has complied with all the aforesaid requirements and conditions
including, wherever applicable, its obligation under Section 73 (or any statutory
modification or re-enactment thereof) of the Companies Act, 1956 and obligations
arising therefrom, within the prescribed or stipulated period, and on obtaining a No
Objection Certificate from SEBI and submitting it to NSE , NSE shall refund to the
Issuer the said deposit without interest within fifteen days from the expiry of the
prescribed or stipulated period;

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 If on expiry of the prescribed or stipulated period or the extended period referred to
hereafter, the Issuer has not complied with all the aforesaid requirements and
conditions, the said deposit shall be forfeited by the NSE, at its discretion, and
thereupon the same shall vest in the NSE. Provided the forfeiture shall not release the
Issuer of its obligation to comply with the aforesaid requirements and conditions;

If the Issuer is unable to complete compliance of the aforesaid requirements and

conditions within the prescribed or stipulated period, the NSE, at its discretion and if the
Issuer has shown sufficient cause, but without prejudice to the obligations of the Issuer
under the laws in force to comply with any such requirements and conditions within the
prescribed or stipulated period, may not forfeit the said deposit but may allow such further
time to the Issuer as the NSE may deem fit; provided that

o The Issuer has at least ten days prior to expiry of the prescribed or stipulated
period applied in writing for extension of time to the NSE stating the reasons for
non-compliance, and

o The Issuer, having been allowed further time by the NSE, has before expiry of
the prescribed or stipulated period, published in a manner required by the NSE,
the fact of such extension having been allowed; provided further that where the
NSE has not allowed extension in writing before expiry of the prescribed or
stipulated period, the request for extension shall be deemed to have been refused;
provided also that any such extension shall not release the Issuer of its
obligations to comply with the aforesaid requirements and conditions.

50% of the above mentioned security deposit should be paid to the NSE in cash. The
balance amount can be provided by way of a bank guarantee, in the format prescribed by or
acceptable to NSE. The amount to be paid in cash is limited to Rs.3 crores.

Submission of Application (Supporting Documents)

Issuers applying for admission of their securities to dealings on the NSE shall submit to the
NSE the following:

 Documents and Information

The documents and information prescribed in Appendix D or Appendix I (as the case
may be) to this Regulation or such other documents and information as the Relevant
Authority may from time to time prescribe, in addition thereto or in modification or
substitution thereof together with any other documents and information which the
Relevant Authority may require in any particular case;

 Distribution Schedules
Distribution Schedules duly completed in respect of each class and kind of security in
the form prescribed in Appendix E (Table I, II & III) to this Regulation or in such other
form or forms as the Relevant Authority may from time to time prescribe in addition

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 thereto or in modification or substitution thereof.

19. Ascertain what is  risk free rate of return for 2011in India,  check RBI and
GOI web sites to find out.

The risk-free interest rate is the theoretical rate of return of an investment with zero risk,
including default risk. The risk-free rate represents the interest an investor would expect from an
absolutely risk-free investment over a given period of time. The risk-free rate of return is one of
the most basic components of modern finance and many of its most famous theories – the capital
asset pricing model (CAPM), modern portfolio theory (MPT) and the Black-Scholes model – use
the risk-free rate as the primary component from which other valuations are derived. The risk-
free asset only applies in theory, but its actual safety rarely comes into question until events fall
far beyond the normal daily volatile markets. Although it’s easy to take shots at theories that
have a risk-free asset as their base, there are limited options to use as a proxy.

In theory, the risk-free rate is the minimum return an investor expects for any investment because
he or she will not accept additional risk unless the potential rate of return is greater than the risk-
free rate.whereas, In practice  the risk-free rate does not exist because even the safest
investments carry a very small amount of risk. Thus, the interest rate on a three-month U.S.
Treasury bill is often used as the risk-free rate

The T-Bill Base

The risk-free rate is an important building block for MPT. As referenced in Figure 1, the risk-
free rate is the base of the line where the lowest return can be found with the least amount of
risk.

Risk-free assets under MPT, while theoretical, typically are represented by Treasury bills (T-
bills), which have the following characteristics:

 T-bills are assumed to have zero default risk because they represent and are backed by
the good faith of the U.S. government. (Read Why do commercial bills have higher
yields than T-bills? to learn more.)
 T-bills are sold at auction in a weekly competitive bidding process and are sold at a
discount from par. (Read Bond Market Pricing Conventions for more on how prices are
determined.)
 They don’t pay traditional interest payments like their cousins, the Treasury notes and
Treasury bonds.
 They’re sold in various maturities in denominations.
 They can be purchased by individuals directly from the government.

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Because there are limited options to use instead of the United States T-bill, it helps to have a
grasp of other areas of risk that can have indirect effects on risk-free assumptions.

India may sell 91-day t-bills at 7.25 pct-poll

India's central bank may sell 91-day t-bills at 7.25 percent and 182-day bills at 7.5 percent,
according to the median estimate of 15 respondents in a Reuters poll. For the 91-day bills, the
highest yield forecast was 7.3 percent and the lowest was 7.18 percent, while for the 182-day
bills they were at 7.55 percent and 7.22 percent, respectively. The central bank is auctioning 50
billion rupees of 91-day treasury bills and 15 billion rupees of 182-day treasury bills on
Wednesday. The last auction cut-offs were 7.23 percent for 91-day bills and 7.45 percent for
182-day bills.

20. Is your company making use of financial leverage operating leverage and
combined leverage, illustrate.
Leverage
According to Solomon Ezra, “Leverage is the ratio of the rate of return and share holder’s equity
and the rate of return on capitalization”

• The use of various financial instruments or borrowed capital, such as margin, to increase
the potential return of an investment.
• The amount of debt used to finance a firm's assets. A firm with significantly more debt
than equity is considered to be highly leveraged.

Leverage is most commonly used in real estate transactions through the use of mortgages to
purchase a home.

Most companies use debt to finance operations. By doing so, a company increases its leverage
because it can invest in business operations without increasing its equity. For example, if a
company formed with an investment of $5 million from investors, the equity in the company is
$5 million - this is the money the company uses to operate. If the company uses debt
financing by borrowing $20 million, the company now has $25 million to invest in business
operations and more opportunity to increase value for shareholders.

Leverage helps both the investor and the firm to invest or operate. However, it comes with
greater risk. If an investor uses leverage to make an investment and the investment moves against
the investor, his or her loss is much greater than it would've been if the investment had not been
leveraged - leverage magnifies both gains and losses. In the business world, a company can use
leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and
credit risk of default destroys shareholder value.

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 Leverage is of 3 types:

• Financial leverage

• Operating leverage

• Combined leverage

Operating leverage

According to John Hampton, “Operating leverage exist when changes in revenues produce
greater changes in EBIT. Operating leverage is an attempt to estimate the percentage change in
operating income EBIT for a one percent change in revenue.

Financial leverage

According to John Hampton, “Financial leverage exists whenever a firm has debts or other
sources of funds that carry fixed charges”. Financial leverage tries to estimate the percentage
change in net income for a one percent change in operating income.

Combined leverage

The mixture of the operating and the financial leverage would give combined or total leverage
which will clarify the combined effect of operating and financial leverage. It estimates the
percentage change in net income for a one percent change in revenue.

21.Check whether your company’s debt instrument is listed, if listed is it traded.

Yes, debt instruments like commercial paper and bonds are listed and is traded as well.

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 22. Ratio analysis

Ratio's Formula   2009-10 2008-09 2007-08

Gross Profit / Net Sales * 100 Gross profit 396054 378292 351912
Gross Profit Ratio (Gross Profit = Sales - COGS) Net Sales 563080 591320 554320
  Gross Profit Ratio 70.3 64.0 63.5
Net Profit(PAT) / Net Sales * 100 Net profit 167676 161263 167016
Net Profit Ratio   Net sales 563080 591320 554320
  Net Profit Ratio 29.8 27.3 30.1
Current Assets / Current Liabilities Current Assets 464097.62 476975.3 434925
Current Ratio   Current Liabilities 194999 211051 176083
  Current Ratio 2.38 2.26 2.47
Liquid Assets / Current Liabilities Liquid Assets 269098.6 276476.8 308145.3
Liquid Assets = Current Assets -
Quick Ratio
Inventory Current Liabilities 194999 211051 176083
  Quick Ratio 1.38 1.31 1.75
Total Debt / Total Equity Total Debt 52.37 236.21 706.17
Total Debt = Secured Loans +
Debt Equity Ratio Unsecured Loans Total Equity 872826 787354 706174
Total Equity = Equity Capital +
R&S Debt Equity Ratio 0.00006 0.0003 0.001
  PAT 167676 161263 167016
Net profit to equity (PAT/Equity)*100 Total Equity 872826 787354 706174
  Net profit to equity 19.2 20.5 23.7

23. If term loan or cash credit is availed by your company then collect the details
of the same such as amount, rate of interest, period of re payment etc.
Yes, term loan is availed by ONGC which are

Secured loan Amount Un-Secured loan Amount

Rupee term loans from Foreign currency loan (long term) 9325.8
– Banks 3334.26 Sales tax deferment loan 2742.62
– Financial institutions 372.13 Non-recourse deferred loan 934.26
– Others 1009.62 Short term loan- commercial paper 10900
Other loan 8407
Non-convertible redeemed bonds 23400

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 Period of repayment- 1 year

24.Ascertain EPS of the company and find out PE ratio.

Ratio's Formula 2009-10 2008-09 2007-08

  Net Earnings 167676 161263 167016
Earnings Net Earnings / No. of
Per Share Shares No. of Shares 21389973211 21387665782 21387629658
  Earnings Per Share 78.39 75.4 78.09
  PAT 167676 161263 167016
Net profit
(PAT/Equity)*100 Total Equity 872826 787354 706174
to equity
  Net profit to equity 19.2 20.5 23.7

25. Go through annual report, directors’ report, auditor’s report and

understand the comments made by them, check is there any critical
comments made  by the auditors of the company.

 Oil & gas investments in 2009 declined by 19% compared to 2008 as in volatile market
conditions majority of companies revisited their capital expenditure plans, many projects
were slashed and cautious approach became the strategy world over. In case the prices
remain low it will discourage the industry from making big moves.
 World over oil field depletion, declining discovery rates, insufficient new projects and
waning investment in E&P project is a real concern which may bring in complications for
the industry in future.
 Turnover in comparison to 2008 has decreased by 6%

26. Take Cash flow before tax of your company and ascertain C- FAT,
for two years.

Rs in million
Year 2009-10 2008-09
Gross Sales 619832 650494
Excise duty 56752 59174
Net sales 563080 591320
Less: COGS ( Change in stock+
Purchases+ Direct expenses) 167026 213028

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Gross Profit 396054 378292
Add: Non operating transactions -20466 -57950
EBITDA 375588 320342
Less: Ammortization 89407 67320
EBITD 286181 253022
Depletion 45302 42148
Depreciation 12312 14491
Impairment -433 -3110
Less: Total 57181 53529
PBIT 229000 199493
Interest -20839 -40314
PBT 249839 239807
Cash flow before tax 351558 321618

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Sources
Financial Management- By Dr. S.P. Gupta

http://nseindia.com

http://en.wikipedia.org/wiki/Angel_investor

http://www.investopedia.com/terms/p/privateequity.asp

http://www.wikinvest.com/concept/Private_Equity

http://bseindia.com/about/abindices/betavalues.asp

http://www.nseindia.com/content/equities/eq_listprocedure.htm

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