21MBA13

Accounting for managers

Topic: financial Analysis of Indian oil

Submitted by: Nikshith
Class: 1st MBA “A” Sec
Department of business Administration
SCEM,Adyar,Mangalore To:
Prof.Suchithra Achaya
Department of Business Administration
SCEM,Adyar,Mangalore
Indian Oil Corporation
Indian Oil Corporation Limited (IOCL),  
IndianOil, is an Indian government owned oil and gas explorer and producer. It is under the ownership of Ministry of
Petroleum and Natural Gas, Government of India headquartered in New Delhi. The government corporation is ranked
212th on the Fortune Global 500 list of the world's biggest corporations as of 2021. It is the largest government owned
oil corporation in the country, with a net profit of $6.1 billion for the financial year 2020-21. As of 31 March 2021,
Indian Oil's employee strength is 31,648, out of which 17,762 are executives and 13,876 non-executives, while 2,775
are women, comprising 8.77% of the total workforce.
Indian Oil's business interests overlap the entire hydrocarbon value-chain, including refining, pipeline transportation,
marketing of petroleum products, exploration and production of crude oil, natural gas and petrochemicals. Indian Oil
has ventured into alternative energy and globalisation of downstream operations. It has subsidiaries in Sri Lanka
(Lanka IOC), Mauritius (IndianOil (Mauritius) Ltd) and the Middle East (IOC Middle East FZE).
In May 2018, IOCL became India's most profitable government corporation for the second consecutive year, with a
record profit of ₹21,346 crores in 2017–18, followed by Oil and Natural Gas Corporation, whose profit stood at
₹19,945 crores In February 2020, the company signed a deal with the Russian oil company Rosneft to buy 140,000
barrels per day of crude in year 2020 By 1 April 2020, IndianOil was in absolute readiness to launch BS-VI (Bharat
Stage VI) fuels in all its retail outlets in Telangana and adopt world-class emission norms.

Product and services

Indian Oil accounts for nearly half of India's petroleum products market share, 35% national refining capacity
(together with its subsidiary Chennai Petroleum Corporation Ltd., or CPCL), and 71% downstream sector pipelines
through capacity. The Indian Oil Group owns and operates 11 of India's 23 refineries with a combined refining
capacity of 80.7 million tonnes per year Indian Oil's cross-country pipeline network, for the transport of crude oil to
refineries and finished products to high-demand centres, spans over 13,000 km. The company has a throughput
capacity of 80.49 million tonnes per year for crude oil and petroleum products and 9.5 million cubic metres per day
at standard conditions for gas. On 19 November 2017, IOCL, in collaboration with Ola, launched India's first electric
charging station at one of its petrol-diesel stations in Nagpur. Indian governments' National Electric Mobility Mission
Plan launched in 2013 aims at gradually ensuring a vehicle population of 6 to 8 million electric and hybrid vehicles in
India by 2020.
Servo is the lubricants brand under which IOCL operates its lubricant business. Servo is the largest selling lubricant brand in both
automotive and industrial segments.
In January 2021, sales were registered at an all time high of 410,000 barrels of oil per day till 26 January 2021. Delek, Qatar
Petroleum, Saudi Aramco are its largest business partners with Abu Dhabi National Oil Company and National Iranian Oil
Company signing deals to deliver high production output at end of 2020.
FINANCIAL RATIO ANALYSIS OF INDIAN OIL CORPORATION
CURRENT RATIO

The current ratio is also known as working capital ratio. It measures the ability of a company to meet its
short-term obligations that are due within a year. The ratio takes into consideration the total current
assets versus the current liabilities. It gives an indication of the financial health of the company and how
it can maximize the liquidity of the current assets for clearing payables and debts.
CURRENT RATIO = CURRENT ASSESTS/ CURRENT LIABILITIES

Year 2021 2020 2019 2018

Current ratio 0.73 0.69 0.81 0.76

current ratio
0.82
0.8
0.78
0.76
0.74 current ratio
0.72
0.7
0.68
0.66
0.64
0.62
2021 2020 2019 2018
year
  A Quick analysis of the current ratio will tell you that the company’s liquidity has got increase after
2018 and decreased in 2020.As the ratio of 2018 was 0.76 and in 2019 increased to0.81. In 2020 it
reduced to 0.69 and 2021 increased to 0.73.

Liquid Ratio
Liquid ratio is also known as Liquidity Ratio, Acid Test Ratio or Quick Ratio. liquidity refers to the
ability of a company to pay its short-term obligations as and when they become due.
LIQUID RATIO =QUICK ASSESTS/QUICK LAIBILITIES

Year 2021 2020 2019 2018

Quick ratio 0.20 0.27 0.33 0.25

Quick ratio
0.35
0.3
0.25
0.2 current ratio
0.15
0.1
0.05
0
2021 2020 2019 2018
year
A liquidity analysis of the quick ratio will tell you that the company’s liquidity has got increased after 2018
and decreased in 2020.As the ratio of 2018 was0.25, In 2019 it increased to 0.33 and in 2020 it reduced to
0.27. In 2021 it decreased to 0.20.

DEBT EQUITY RATIO

The debt equity ratio is a measure of the relative contribution of the creditors and shareholders or
owners in the capital employed in company. It is the ratio of the total long-term debt and equity capital
in the company. The debt-to-equity ratio is a particular type of gearing ratio.
DEBT EQUITY RATIO =LONG TERM DEBT/SHAREHOLDERS EQUITY
Year 2021 2020 2019 2018
Debt equity ratio 0.97 1.32 0.82 0.55

Debt equity ratio

1.4
1.2
1
0.8 debt equity ratio
0.6
0.4
0.2
0
2021 2020 2019 2018
year
A liquidity analysis of the debt equity ratio will tell you that the company liquidity has keep on
increasing to 1.32 from 2018 to 2020.and after that in 2021 it decreased to 0.97.

INVENTORY TURNOVER RATIO

Inventory turnover ratio is also known as stock turnover ratio. Inventory turnover is a financial ratio showing how
many times a company has sold and replaced inventory during a given period. A company can then divide the days in
the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD/ AVERAGE INVENTORY

Year 2021 2020 2019 2018

Inventory turnover 7.22 6.85 5.97
4.3
ratio 6

Inventory turnover ratio

 8
7
6
5 inventory turnover
4 ratio
3
2
1
0
2021 2020 2019 2018
year
  A Quick analysis of the inventory turnover ratio will tell you that the company’s inventory has got increased
after 2018 and decreased in 2021. As the ratio of 2018 was5.97, 2019 increased to 6.85 and in 2020 it got increased
to7.22, In 2021 was 4.36.

DEBTORS TURNOVER RATIO

The Debtors Turnover Ratio is also known as Receivables Turnover Ratio, shows how quickly the
credit sales are converted into the cash. This ratio measures the efficiency of a firm in managing and
collecting the credit issued to the customers.
DEBTORS TURNOVER RATIO = NET CREDIT SALES /AVERAGE DEBTORS

Year 2021 2020 2019 2018

Debtor turnover ratio 38.45 39.63 46.58 52.3

debtor turnover ratio

60
50
40
debtor turnover ratio
30
20
10
0
2021 2020 2019 2018
year
  Debt turnover ratio will tell you that the company’s ratio has increased in 2018 and decreased after 2019.
As the ratio of 2018 was 52.3, In 2019 it is decreased to 46.53 and in 2021 it was 38.45.

Gross profit Ratio

Gross profit ratio is a simple metric to measure the company’s profitability. Also, it helps to evaluate
how efficiently the company is using its labor and raw materials during the production process.
GROSS PROFIT RATIO = GROSS PROFIT/NET SALES *100

Year 2021 2020 2019 2018

Gross profit ratio 8.12 -1.76 4.64 7.95

Gross profit ratio

10

6
gross profit ratio
4

0
2021 2020 2019 2018
-2 year

-4
  Gross Profit Ratio of the company shows that after 2018 it got increased and in 2019 it decreased. And in 2020
the ratio was negative .As the ratio of 2018 was 7.95, 2019 decreased to 4.64 and in 2020 it reduced to -1.72, 2021
it was 8.12.

NET PROFIT RATIO

Net profit ratio is a short-term measure of determining the profit and in the long term as it does not
reveal the company’s strategy to maintain profitability during that period.
NET PROFIT RATIO = NET PROFIT/ NET SALES

Year 2021 2020 2019 2018

Net profit 5.65 -0.67 3 5.15

Net profit ratio

6

4
Net profit ratio
3

0
2021 2020 2019 2018
-1 year
Net profit ratio of company got increased in 2018,then in 2019 it decreased to 3 and in the year 2020 it showing
negative results that is -0.67 and in 2021 it increased to 5.65

RETURN ON INVESTMENT (ROI)

Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of
an investment or compare the efficiency of a number of different investments. ROI tries to directly
measure the amount of return on a particular investment, relative to the investment’s cost.
RETURN ON INVESTMENT = NET PROFIT BEFORE INTEREST AND TAXES / TOTAL CAPITAL EMPLOYED *100

Year 2021 2020 2019 2018

Return on 7.19 5.55 16.87 23.97

investment

ROI
30
25
20
ROI
15
10
5
0
2021 2020 2019 2018
year
  Return on investment ratio of the company will tell you that the ratio increased in 2018 .In 2019 and
2020 it is decreased to 5.5 and in 2021 was 7.69.

RETURN ON EQUITY CAPITAL

Return on equity (ROE) is a measurement of how effectively a business uses equity or the money
contributed by its stockholders and cumulative retained profits to produce income. In other words, ROE
indicates a company’s ability to turn equity capital into net profit.
RETURN ON EQUITY CAPITAL = NET PROFIT AFTER INTEREST, TAX AND PERFRENCE DIVIDEND/
SHAREHOLDERS FUND

year 2021 2020 2019 2018

RoE 19.34 -0.93 15.45 19.48

ROE
25

20

15
ROE
10

0
2021 2020 2019 2018
-5 year
Return on equity capital ratio of the company shows you that, after 2018 it decreased. As in 2018 was 19.48,2019
was 15.45 and in 2020 it reduced to -0.93, 2021 was 19.34.

EARNING PER SHARE

Earnings per share or EPS is an important financial measure, which indicates the profitability of a
company. It is a tool that market participants use frequently to gauge the profitability of a company
before buying its shares
EARNING PER SHARE = NET PROFIT AFTER TAXES AND PREFRENCE DIVIDEND/ EQUITY SHAREHOLDERS
FUND *100

Year 2021 2020 2019 2018

EPS 23.57 -0.97 18.41 23.41

EPS
25

20

15
EPS
10

0
2021 2020 2019 2018
-5 year
  Earnings per share is calculated as a company’s profit divided by the outstanding shares of its common stock.
ratio of 2019 was decreased compare to 2018. As 2018 was 23.41, 2019 was 18.41 and 2020 was decreased to -
0.97, 2021 was 23.57

PRICE EARNING RATIO

The price to earnings ratio (P/E RATIO) is the ratio for valuing a company that measures its current share price
relative to its earnings per share (EPS). The price to earnings ratio is also sometimes known as the price multiple or the
earnings multiple

PRICE EARNING RATIO = MARKET PRICE PER EQUITY SHARE/ EARNING PER SHARE

Year 2021 2020 2019

Price earning ratio 17.5 5.8 8.8

price earning ratio

20
18
16
14
12 price earning ratio
10
8
6
4
2
0
2021 2020 2019
year
  Price earningratio is the ratio that values the company and here it interpretates that the ratio of 2019
was 8.8, and 2020 was 5.8, 2021 was 17.5.

CAPITAL TURNOVER RATIO

Capital turnover is the measure that indicates organization’s efficiency in relation to the
utilization of capital employed in the business and the higher the ratio, the better is the utilization
of capital employed. A measure indicating how effectively investment capital is used to
produce revenues. Capital turnover is expressed as a ratio of annual sales to invested capital .
CAPITAL TURNOVER RATIO = COST OF SALES/ CAPITAL EMPLOYED
Balance sheet As on 31/03/2019
Conclusion:
The main objective of the present study is to identify the individual ratios which are affecting the profitability
of the Indian oil corporation. Company always delivered superior financial performance and created
sustainable value for shareholders.The study reveals that the financial performance is fair. There prevails a
notion that liquidity is important for any business unit to boost its profitability and also that financial leverage
is helpful in enhancing the financial performance of the company.

Indian oil is the 4th largest profitable company in India,It is a government owned company .As per the
records of Ministry of Petroleum ,over the years Indian petroleum industry has played an influential part in
triggering the speedy expansion of the Country’s economy by contributing 15% in the total GDP.

Cash flow Statement

A cash flow statement is essential to any business as it can be the basis of budgeting by assessing the timing and
fixing the future cash flows. The statement of cash flow like other two key. A financial statement is a collection of
reports presenting inflows and outflows of cash in forms of receipt and payment. This involves various activities of
business including operating, investing and financing during a specific period.

A cash flow statement finds out the inward and outward flow of money in a business and therefore acts as a
bridge between the income statement and balance sheet. The change in cash per period, as well as the beginning and
ending balances of cash, are present in a cash flow statement. While summarizing the amount of cash and cash
equivalents flowing in and out of the company, also measures to manage company’s cash position.

Format of cash flow statement

Operating activities: Operating activities are those cash flow activities that either generate revenue or record the money
spent on producing a product or service. Operational business activities include inventory transactions, interest payments,
tax payments, wages to employees, and payments for rent. Any other form of cash flow, such as investments, debts, and
dividends are not included in this section.

Investment activities: The second section on the cash flow statement records the gains and losses caused due to
investment in assets like property, plant, or equipment (PPE) thus reflecting overall change in the cash position for a
company. When analysts want to know the company’s investment on PPE, they check for changes on a cash flow
statement.
Financial activities: The third section on the cash flow statement records the cash flow between the company and its owners and
creditors. Financial activities include transactions involving debt, equity, and dividends. In these transactions, incoming cash is
recorded when capital is raised (such as from investors or banks), and outgoing cash is recorded when dividends are paid
 Mar '21 Mar '20 Mar '19 Mar '18 Mar '17

  12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 29715.65 -3694.11 25126.92 32564.28 26321.24

Net Cash From Operating Activities 49095.79 7190.30 13489.53 26423.80 27799.42

Net Cash (used in)/from -22153.95 -26882.37 -21839.00 -15778.68 -14733.90

Investing Activities

Net Cash (used in)/from Financing Activities -27163.76 20189.32 8334.49 -10644.33 -13274.57
Net (decrease)/increase In Cash and Cash -221.92 497.25 -14.98 0.79
Equivalents

Opening Cash & Cash Equivalents 535.56 38.31 53.48 52.86 261.91

Closing Cash & Cash Equivalents 313.64 535.56 38.50 53.65 52.86

conclusion:
Cash flows over various periods enables an investor to assess a company’s performance.An analysis of
cash flow statements can reveal many things like the quality of earnings through comparison of cash from
operating activities to company’s net income . For example, earnings are said to be higher if cash from
operating activities is higher than net income.The statement of cash flow is a significant measure of
profitability and present and future outlook for a company.

Cash flow from operating activities is positive in all the years.Cash flow has been increased in the year 2020
which decreased in the year 2019.
Cash flow from investing activities is negative in the year 2019 ,2020 and company has used its all funds in
investing activities which is not beneficial to the company..
Cash flow from financial activities is negative in all the year ,

Reference:

http://www.moneycontrol.com

http://www.screener.com

http://www.wiklipedia.com