INTRODUCTION TO THE STUDY

Financial Management refers to the strategic planning, organizing, directing and

controlling of financial undertakings in an organization or an institute. It also includes applying
management principles to the financial assets of an organization, while also playing an important
part in fiscal management. Its objectives are maintaining enough supply of funds for the
organization, ensuring shareholders of the organization to get good returns on their investment,
optimum and efficient utilization of funds and creating real and safe investment opportunities to
invest in. Financial management is also made up of financial planning which is the process of
calculating the amount of capital that is required by an organization and then determining its
allocation. A financial plan includes determining the capital amount requirement, determining
capital organization and structure, framing of the organization’s financial policies and
regulations, financial control which it’s role is to assess whether an organization is meeting its
objectives or not.

Cash plays an important role in the business firm’s economic life. What blood is to
human body, cash is to business enterprise. Therefore, the major responsibility of financial
management of the business firm is to maintain adequate cash in the business. It is one of the pre-
requisites for successful operation. A business firm needs cash to make payments for purchase of
goods or raw materials, to meet day to day expense and to pay salaries, wages, interest and
dividends etc., The movement of cash is of vital importance to management. If the inflows of
cash are not sufficient to meet the outflows of cash, the firm cannot meet its current obligations.
Hence, the need for proper planning and control of cash flow arises. Cash constitutes the basic
foundation of all business transactions without which the other components of current assets
have little significance. There is a need for cash analysis. For analysis of cash, a separate
statement is to be prepared known as Cash Flow Statement.

Cash Flow Statement is a statement of Cash Flow. Cash signified the movements of cash
in and out of a business concern. Inflow of cash is known as source and outflow of cash is called
use of cash. The term cash here stands for Cash and Bank balance.

Investors, creditors, and managers use cash flow information to make decisions about a
company’s ability to meet obligations, or to take advantage of business opportunities.
1
Information about a current period’s cash flows provides a basis for predicting the amount,
timing, and certainty of future cash flows. Cash flow information is also useful in evaluating the
liquidity, solvency, and financial flexibility of a company. Liquidity refers to the ability of a
company to pay its current liabilities with existing liquid assets. Solvency is the ability to pay all
debts as they come due. A company may wish to raise money by issuing shares, for instance.
Financial flexibility relates to the ability of a company to use its resources to adapt to change and
take advantage of business opportunities as they arise.

Operating activities is to forecast future cash flows from its regular operations, to
determine the sufficiency of cash flows for payment of dividends, repayment of loans and make
new investments without going for external financing. Investment activities helps the user to
estimate the future operating cash flows because of the current year investing activities and other
income from the investment activities, If an entity purchases plant or fixed assets during the year,
user can forecast an increase in operating cash flows and if any entity invested in shares or other
securities, The user can forecast the future cash flows by way of other income from such
investments (dividend, interest). Financing activities useful to predict future claims by providers
of funds by way of dividend, interest etc.

Direct Method and Indirect Method, the standard gives an option to the entity in
presentation of operating activities i.e. It can present either on direct method or indirect method.
Presentation of operating cash flows under indirect method is more popular in practice.

Disclosure the components of cash and cash equivalents. Present a reconciliation of

cash and cash equivalents in the CFS with the equivalent items reported in the balance sheet. The
amount of significant cash and cash equivalent balances held by the enterprise those are NOT
available for use by it and management’s comment should be added to that. Any additional
information may be relevant to users in understanding the financial position and liquidity of an
enterprise.

2
 A cash flow statement (formerly known as a statement of changes in financial position)
is designed to help a user make these evaluations and to answer specific questions such as, What
accounts for the difference between cash and cash equivalents at the beginning of the year and at
the end of the year, What was done with the cash raised from the sale of bonds or shares, How
did the business finance its purchases of machinery or other capital assets, How was it possible
to pay dividends when the business reported a net loss on its income statement and Does the firm
have the ability to pay off the mortgage on its office building.

When planning the short or long-term funding requirements of a business, it is more

important to forecast the likely cash requirements than to project profitability etc. Whilst profit,
the difference between sales and costs within a specified period, is a vital indicator of the
performance of a business, the generation of a profit does not necessarily guarantee its
development, or even the survival. Bear in mind that more businesses fail for lack of cash flow
than for want of profit.

It also throws light for the Management of HPCL on use for poor liquidity in spite of
good profits and excessive liquidity in spite of heavy losses. Cash flow statement helps the
Management in planning repayment of loans, replacements of assets. In brief, it summarizes the
causes of changes in Cash position between dates of two balanced sheets. Cash flow statement is
like receipts and payments account in summary form. Cash Flow statement helps the
Management of HPCL in understanding the post behavior of cash cycle and in controlling the
use of Cash in future. It helps in evaluating financial policies of the Management. This statement
is helpful in short term financial decisions relating to liquidity and helps the Management in
preparing the cash budgets properly.

3
 NEED FOR THE STUDY

A cash flow statement when used in conjunction with the other financial statements
provides information that enables users to evaluate the changes in net assets of an enterprise its
financial structure (including its liquidity and solvency) and its ability to effect the amount and
timing of cash flow in order to adapt to changing circumstances and opportunities cash
information’s useful in assessing the ability of the enterprise to generate cash and cash
equivalents and enables users to develop models to assess compare the present value of the
future cash flow of different enterprises. Simply, cash flow statements indicate the amount of
cash payments or disbarments during a specified time. It outlines from where cash was generated
and to where it was expensed. In other words, it reports the cash inflows and cash outflows,
During a time period.

A cash flow report shows that a cash flow statement is financial statement that
summarizes the amount of cash and cash equivalents entering and leaving a company. The cash
flow statement measures how well a company manages its cash positions, meaning how well the
company generates cash to pay its debt obligations and fund its operating expenses. The cash
flow report important because it informs the reader of business cash position. For a business to be
successful, it must have sufficient cash at all times. It needs cash to pay its expenses, to pay bank
loans, to pay taxes and to purchase new assets. A cash flow report determines whether a business
has enough cash to do exactly this. Having cash is a key requirement for a business to stay
solvent. When a business has no longer enough cash to pay its dues, it is often declared bankrupt.
For this introduction to accounting, we will not go through the actual preparation of an actual
cash flow report. In fact, in the business world, small businesses rarely produce a cash flow
report, as profit and loss report is sufficient for their needs. It is unlikely that a small business
such as a bakery will involve complex non cash transactions that would warrant such
information. Therefore, it is considered a waste of time and money to have an accountant prepare
a report that would be of little use to anyone!

4
 On the other hand, for large entities such as HPCL, having a cash flow report is
imperative. Such Indian Public Sector Oil and Gas Company will often have a significant amount
of non-cash transactions, sometimes even crores in revenue that is simply owed to them but
hasn’t been received in cash yet. In these situations, a profit and loss statement is not always
sufficient, and a cash flow report is valuable to many users, such as banks and shareholders.
Major statements of Cash Flows Note Disclosures information about all noncash investing and
financing. i.e., investing and financing activities that affect recognized assets or liabilities but not
cash flows, must be disclosed in the notes. Conversion of debt to equity, acquisition of assets
either by assuming directly related liabilities or by a lessee recognition of a finance or operating
lease and exchange of a noncash asset or liability for another. Hence HPCL follows all the rules
and regulations for preparing financial statements and discloses allocation and apportionment of
funds at the end of financial statements and maintains transparency of its financial statements.

Overview, the primary purpose of the statement of cash flows is to provide relevant
information about the cash receipts and payments of an entity during the period. To achieve this
purpose, the statement should provide information about cash inflows and outflows from
operating, investing and financing activities of an entity. This is the accepted order of
presentation. The statement of cash flows should help users assess the entity’s ability to meet
obligations and its financial flexibility. The statement of cash inflows explains the change in cash
and cash equivalents during the period. It recognizes the period’s beginning balance of cash and
cash equivalents with the ending balance. The limitations of the statement of cash flows is not
sufficient for forecasting the profitability of a firm as noncash items are not included in the
calculation of cash flow from operating activities, it not represents true liquid position of an
entity. Hence, decisions regarding large expenditure could be based on misconceived information
when decisions are based only on the statement of cash flows. This statement must be viewed in
conjunction with their other financial statements, such as the balance sheet and the income
statement. Information can be manipulated in the statement of cash flows. For instance,
management can schedule vendor payments to occur after year end to increase net cash flows
reported on the statement of cash flows.

5
 OBJECTIVES OF THE STUDY

• To Study and understand the conceptual framework of cash flow statement in

general.
• Present the profile of HPCL in general and studying the format and structure
of cash flow statement of the company.
• Giving a general idea of the existing regulatory framework regarding cash
flow statement.
• In Analyzing and presenting current practices of cash flow statement of HPCL
and reporting on the basis of information provided in the annual reports.
• Presenting the summary, findings & conclusion by putting forward some
suggestion.

6
 METHODOLOGY OF THE STUDY
The purpose of this project study is to analyze the cash flow statement in HPCL -
Visakha Refinery. The source of information for the study was through primary and secondary
data.

PRIMARY DATA:

The primary data are those which are collected afresh and for the first time. The primary
data was collected through statements, by having discussions with officers and managers of
Finance Department.

SECONDARY DATA:

The secondary data on the other hand are those which are already been collected by
someone else and which had already passed through statistical process. The secondary data
collected through the annual reports, internal balance sheets of HPCL VISAKHA REFINERY.

Most of the data used for the study is secondary in nature and has been collected as

 Annual reports of the company

 Financial statements, auditors report, information vouchers
of the organization.
 By referring text tools.
 By business magazines.

7
 LIMITATIONS OF THE STUDY

 HPCL –Visakha Refinery only carries out manufacturing activities and different other
Departments of HPCL carry on other activities. So the interpretations with regard to
stock, cash and Bank Balances may not hold good.

 Very less time was available for this project so it might affect the quality of this project.
 The present study is subject to some limitations namely non availability of required
information, obstacles in meeting with higher officials.

8
 INDUSTRY PROFILE

INTRODUCTION TO THE OIL AND ITS INDUSTRY

Hindustan Petroleum Corporation Ltd. (HPCL) came into being in mid-1974 after the
takeover and the merger of the erstwhile Esso and Lube India undertakings. Caltex was taken
over by the Government in 1976 and subsequently merged with HPCL in 1978. Kosan Gas
Company, the concessionaires of HPCL in the domestic LPG market, was taken over and
merged with HPCL in 1979. HPCL thus came into being after merging four different
organizations at different points of time. As we approach the new millennium, the
Corporation too will be touching a significant landmark in its illustrious history & has completed
25 years of fruitful existence on July 15, 1999.

HPCL operates two fuels refineries, one at Mumbai and the other at Visakhapatnam. In
addition, the Corporation also operates a Lube Refinery, which is the largest in India and
accounts for 41% of the country's capacity. Over the years, the Corporation has grown rapidly
and has carved its own niche in the Petroleum Sector in India. It is clearly reflected in its
impressive turnover of over Rs.25,000crores and a 20% market share which is largely due to
its vast and strategically located Marketing & Distribution network comprising with an aim
to reach and meet the requirements of its wide customer base, the Corporation owns and
Operates two cross–country pipelines, one from Mumbai to Pune and the other from
Vishakhapatnam to Vijayawada, put together have a capacity to carry 7.77 Million Metric Tons
(MMT) of Petroleum Products. Our Corporation has been consistently rated in the "Excellent
Category" as per the MOU evaluation, by the Government, for the past 7 years in succession.

For manning the refining and marketing divisions, the Corporation has a large and
skilled work force of more than 11,400 employees, working all over India at its various refining
and marketing locations with a fair degree of decentralized administration. The marketing
segment is controlled through four geographical zones, North, South, East and West. The
Chairman & Managing Director and the full time four Functional Directors (Refineries,
Marketing, Human Resources and Finance) are at the apex of the Corporation.

The sweeping changes in the Indian Economy and the consequent fiscal restructuring in
the recent years have led to an increase in competition amidst other challenges in the Petroleum

9
Sector. HPCL has taken up to the challenges and is ready to face the emerging competition in
different areas of its operations. The projects envisaged in the coming years encompass -
modernization and expansion of the existing refining capacity, strengthening its marketing
infrastructure by setting new terminals, depots, bottling plants with allied distribution facilities
and emphasis on value addition and improvement in the quality of its products. The Corporation
also has made a beginning in the area of Oil Exploration & Production with the incorporation
of “Prize Petroleum Company limited", in Joint Ventures and also has plans to make forays (to
do something new activity in field) in the field of Power Generation. Simultaneously, HPCL
embarked on a Business Process Re- engineering (BPR) exercise in early 1997. In keeping with
the corporate strategy, the measures adopted as a result of BPR study focus on increased
customer orientation, productivity improvement, technological up gradation, cost control and
excellence in quality. This coupled with the bringing in of the latest in Information Technology
will enable the Corporation to translate its vision into reality. The vision being is to make HPCL
a leading world class company in the field of Hydrocarbon and energy related sectors with a
global presence.

Change and development are the key terms in this modern world. Change is the
difference in man’s attitude, values, skills, abilities, knowledge etc., and also refers to the
changes in the environment. In the case of development, it is act or process of growing and
becoming stronger. Moreover, change and development are inter-related and change is driving
force behind development. The development of any country mainly depends upon the effective
utilization of its natural resources.

Now life as a challenge made to invent, discover, develop and use modern technology.
The growing needs, demands of the people led to industrialization. Having realized the
importance of industrialization, India has been allotting and spending millions of rupees for its
development in every five-year plan, right from the 2 nd plan to 10th plan (1951-2007). The result
is that the country with all its sincere efforts has achieved high-level experts in petroleum
industry i.e., exploration and production of crude oil.

Keeping pace with the emerging trends and responding to the present demands the
discovery of crude oil in the middle of 19 th century is of great importance. Moreover, its
availability helped in accelerating the pace of industrialization, which actually started with coal
and steam. Along with other sources huge underground reserves of oil and natural gas are located
i.e., India is a proud owner of quite a few of these oil beds.
10
 INDUSTRY STRUCTURE

The domestic oil industry is largely controlled by the government with the ministry of
petroleum and natural gas at the helm and was being assisted by Directorate General of Hydro
carbon (DGH) gas linkage committee, Oil Industry Development Board (OIDB) and Oil Co-
Ordination Committee (OCC). Till OCC was as replaced by another regulatory body the new
board has been named as “Petroleum Planning and Analysis Cell”.

The regulatory body will take care of the followings:

1. Administer subsidy of kerosene for public distribution system and domestic cooking gas
and fright subsidy for far flung areas.

2. Maintain information date and banks and communication system to deal with energies
and unforeseen situating.

3. Forecast aid evaluate petroleum import and export trends and operationalize the sector
specify surcharge schemes.

4. The availability of petroleum and gas products in different regions of country especially
remote areas.

5. Establishing the qualify specifications, monitoring compliance environmental standards

and targets for technological achievements.

6. Ensuring equitable accuses to the pipelines and monitoring the tariff monitors aid
regulate of common usage facilities.

7. To monitor the implementation of polices pertaining to downstream oil sector activities

lay down or pronounced by the government.

8. Protection of consumer interest with respect to price quality and availability of products.

9. Prevent unfair trade practices and cartelization.

Among exploration and production companies Oil and Natural Gas Corporation (ONGC)
and Oil India Limited (OIL) have a virtual monopoly with more than 84% of the production in
upstream crude oil and gas industry. The refining sector is again dominated by PSUS like Indian

11
Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), Chennai
Petroleum Corporation Limited (CPCL), Cochin Refineries Limited (CRL) and Bungalow
Corporation Limited (BCL) has the rights to marks its products like petrol, diesel and kerosene
the last three are standard refiners IBP is allowed to market its products. In government divested
its IBP to IOCL after an open bidding process where it’s in IOCI piped Reliance Group and
many MNC’s. IOCL is the market ladder in both refining and marketing followed by BPCL,
HPCL and Mangalore Refining and Petrochemical (MRPL). The first Non–PSU in the sector
followed by reliance petroleum and Essar from 1st April,2002. Administered price mechanism
was dies malted state sub-dues were scrapped for all products except for kerosene and cooking
gas (LPG). Sacristies for their politically sensitive item would continue for three to five years
before being out. However subsidies will be presided for in the budget in addition to that oil
companies will be free to set their own prices at the pump products wheel sales account for about
70% of the total sales in India. In volume the terms it is roughly around 77MMT’s in value terms
it is roughly Rs.1.45 lakh crores sold every year. Margins for petrol are marginally higher than
that of diesel by about Rs.1.3 lakh crores.

12
EXPLORATION-THE SEARCH OF PETROLEUM
Exploration is the act of investigation or travel experience of a subject. For example,
search of unknown regions for oil, gas, coal, etc., Petroleum is found in POROUS ROCK
formation in the upper strata of some areas of the Earth's crust, in sub surface this volume
may be filled with petroleum (oil and gas), water, a range of non-hydrocarbon gasses or some
of these combination. Earth scientists in the Petroleum industry including Geologists,
Geophysicists, Geochemists, Paleontologists study the rocks which got buried thousands of
meters below the surface, how these rocks have been affected and transformed stretching back
millions of years to identify 'traps' with recoverable oil reserves. A trap is an oil reservoir,
petroleum systems or petroleum reservoir is often thought of as being an underground 'lake’ of
oil, but it is actually composed of hydrocarbons contained in porous rock formations. Known
reserves of petroleum are typically estimated at around 1.2 trillion barrels. Consumption is
currently around 84 million barrels per day, or 31 billion barrels per year. At current
consumption levels, current known reserves would be gone in about 32 years, around 2039.
However, this ignores any new discoveries, changes in demand, better technology, population
in growth, industrialization of third world countries and other factors. While oil is expected to
remain a major source of energy in coming years, alternative energy development such as
solar power, wind power, butanol (a chemical compound) , ethanol, photovoltaic, nuclear
power, hydrogen, or oil from oil shale, and oil sands may increase in significance. Coal may
also increase in use because of its existence in vast quantities in rapidly developing countries,
such as China and India.

RISK FACTORS OF INDUSTRY

1) Inter firm rivalry.

2) Competition in the sector is likely to intensify.

3) The government has stipulated a fixed investment of minimum Rs.2000 Crores for new
entry.

4) New entry barriers.

5) Limited bargaining power on raw material.

13
CRITICAL SUCCESS FACTORS

1) Cross refining margins should be high.

2) Buy crude by entering into term contracts and through tender process.

3) Buy Crude which will give lesser quantity of heavier distillate Products and more of
heavier refinery products.

4) Location of a refinery is very important.

5) Tariff protection.

6) Pipe line network.

7) Environment regulations.

8) Marketing network and infrastructure.

9) Sales composition.

MERGERS AND ACQUISITION:

As part of its plan of restructuring oil sector the government decided on the integration
of standalone refineries in public sector and accordingly it sold its stakes and Numaligarh Oil
Refinery (NOR) is subsidiary of IOCL. This arrangement will strengthen to stand alone refineries
to face the challenges of deregulation and enhanced supply of petroleum products to LOC and
BPCL in the southern and northern term regions. In private sector reliance petroleum has decided
to merge itself with the parent reliance industries to become the first private company to enter the
list of fortune 500 companies.

GOVERNMENT POLICIES

The following key recommendations were announced in the union budget 2004-05.

1. The pricing of petroleum product will become market determined.

2. The oil part a/c will be dismantled on 1st April, 2002 and issue of oils bonds to the concerned
oil companies will liquidate the outstanding balances.

3. Private companies will be permitted in distribution subject to the concerned oil companies.

14
4. A petroleum regulatory board will be set up to oversee the sector.

MAJOR POLICY

The Administered pricing mechanism dismantled w.e.f 1st April, 2002. De-Regulation
has brought forth balance between reasonable earnings for the industry and protection of
consumer interest. The APM was designed to keep prices of essential petroleum products (such
as LPG and Kerosene) with in the common man’s reach.

Thus account that kept on growing to unsustainable proportions. The APM

Mechanism functioned on retention price concept, wherein, oil marketing companies were
assured a post-tax return of 12% on their net worth. With the dismantling with nearly Rs.15000
cores due to oil companies till March 31, 2002.

SOME OF THE KEY HIGHLIGHTS WERE

 Petroleum Regulatory Board to be set up

 Govt. to act as regulatory till the setting up of a Regulatory Authority

Subsidies on LPG & Kerosene borne thru fiscal budget

 Subsidies to be phased out in the next 3 years

 Freight subsidy for far flung areas continues

 Marketing service obligation for rural & far flung areas for all players

 Free pricing of indigenous crude

 Guideline of laying new pipelines announced

 Refineries in the North East region granted 50% excise duty exemption.

ACTIONS TAKEN WERE:

 Sector moved from APM to Market Determined pricing mechanism

 Disinvestment of HPCL and BPCL announced by the govt.

 IOC, ONGC & GAIL to remain national oil companies in near future

15
 Entry of private and multinational companies in the oil sector imminent.

Dismantling led to a massive hike in net profits of over Rs.23000 Cores of the
national companies. Majority of these companies’ profits has been due to the dismantling of
the administered price mechanism there by allowing the company to reap a windfall by
selling crude at market rates instead of being tethered down by artificially low price ceilings.
While there has been a benefit on the inventories held, the increase in retail prices in
December also led to an improvement in marketing margins. While the major companies -
Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Mangalore
Refinery Petrochemicals Ltd (MRPL), HPCL, GAIL and BPCL have made huge profits,
smaller subsidiaries side performed well. Companies like Kochi Refineries and CPCL too
While the sales have been witnessing a steady growth over the past few years, the bottom line
is that oil and gas companies have seen a sharp and consistent rise in profits. Large dividend
payouts have been a striking feature of these public sector companies which made their
valuation more attractive on the bourses. Assured posted good growth in top line and bottom
line. Returns for oil companies in the APM era resulted in gross inefficiencies at the cost of
the taxpayers. Besides, these companies were ill-equipped to source crude economically as
IOC was the sole canalizing agency for the purpose. Also, Cross-Subsidization of prices
caused uneven pricing across oil products.

Thus, the cost of petrol used to be almost twice that of diesel unlike in developed
countries where prices almost equal. Aviation Turbine Fuel (ATF) too used to cost more than
in most other countries. Post-APM, the market based environment ensure better pricing,
efficient working capital management and higher margins for oil PSUs. Deregulation has
PSUs more competitive and has led to a strong performance at the bourses.

However, the question that is begging to be answered is why, after more than a
year since the deregulation process was announced, has it still to be effected? The
phenomenal results of the oil PSUs over the last few months have generated immense interest
in the international market.

16
ENERGY

Demand for energy has been growing and the market is bound to expand with a
ever growing population. While the sales have been witnessing a steady growth over the past few
years. The bottom line is that oil and gas companies have seen a sharp and consistent rise in
profits. Right now, oil, gas, coal, Hyde, and nuclear are the five sources of energy supply. Going
forward in the energy sector, gas is expected to replace the demand for oil and is expected to
constitute 20% of the energy supply by 2025.

INDUSTRY PRODUCTS

The oil that is obtained subsequent to exploration and production activities carried
out is a mixture of hydrocarbons with other elements including Sulphur, Nitrogen and Oxygen. It
can be classified into two categories on the basis of its quality, light and heavy. The lighter the
crude oil, that is specific gravity is less than 0.8672, the richer are the product mixers. The
Sulphur content of the crude oil determines its sweetness/sourness, Crude oil with more than
0.5% Sulphur content is classified as sours crude. This determines further processing of the oil,
as a high degree of Sulphur content results simultaneously in higher processing costs, but lower
selling price. Sweet crude on the other hand requires little processing and hence has higher
realization, to complement the existence of higher demand for it.

The process of separation of crude oil into various fractions on the basis of
physical properties such as viscosity and ignition temperature is call refining. As variety of
products can be obtained on the further processing or refining of the crude oil, which can be
further classified into three broad categories of distillates (usage based products). These include
heavy distillates such as Furnace Oil and Bitumen, middle distillates like diesel, kerosene and
Aviation Turbine Fuel and light distillates such as LPG and Petrol. Some of these products have
been discussed in the following lines.

LPG

LPG may be defined as those hydrocarbons, which are in gaseous state at normal
atmospheric pressure, but may be condensed to liquid state at normal temperature on application
of moderate pressures and is mostly a mixture of propane and butane. LPG finds many

17
applications right from being used as a domestic cooking fuel to various industrial applications
and even as a new alternate fuel in the automotive segment.

MOTOR SPIRIT

Motor Spirit, Petrol and Gasoline are different terms for the same product and
mean a mixture of the lighter fractions of petroleum composed of hydrocarbons having boiling
points in the range of approximately 30-0C-215-0C. It is used as fuel for internal combustion
engines such as passenger cars, 2 wheelers, 3 wheelers etc.

DIESEL

Diesel denotes any fuel suitable for burning in diesel or compression ignition
engines. It is sold in India in two main grades, which are High Speed Diesel (HSD), a 100%
distillate fuel and Light Diesel Oil (LDO), a blend of distillate fuels. On the other hand, LDO is
generally used for stationary diesel engines operating below 750 rpm.

SUPERIOR KEROSENE (SKO)

SKO is a refined petroleum distillate, which is less volatile than gasoline, either a
boiling between 1500C and 3000C. Kerosene, with its distillation range overlapping that of
gasoline and HSD has variety of applications.

NAPHTHA

NAPHTHA is a general term used to describe special boiling point having a

boiling range of approximately 30-170 Degree Celsius. This volatile product is marketed in two
types, High Aromatic Naphtha (HAN) and Low Aromatic Naphtha (LAN) and consists
essentially of paraffin, naphthenic and aromatic hydrocarbons. Its most common applications are
in fertilizer plants and in petrochemical industries as a feed stock.

FURNACE OIL

FURNACE OIL or FUEL OIL is a dark viscous residual fuel that is obtained on
blending mainly heavier components from crude distillation unit, short residue and clarified oil.
Fuel oil is the general term applied to any oil used for generation of power or heat and can
include distillates and blends of distillates and residue such as LDO.

18
BITUMEN

It is non-crystalline solid or viscous material having adhesive that can be derived

from petroleum either by natural or refinery process.

MAJOR PLAYERS IN OIL INDUSRTY

GUWAHATI REFINERY, IOCL (ASSAM)

Guwahati Refinery, the first in public sector, was set up in collaboration with
Rumania at a cost of Rs.17.29 crores and commissioned on 1 st January, 1962 with a design
capacity of 0.75 MMTPA. The present capacity of this Refinery is 1.00 MMTPA. Hydrotreater
unit for improving the quality of diesel has been installed and was commissioned in 2002. The
refinery has also installed in 2013 Indmax Unit a novel technology developed by its R&D Centre
for upgrading heavy ends LPG, Motor Spirit and Diesel Oil.

BARAUNI REFINERY, IOCL (BIHAR)

Barauni Refinery in Eastern India was built in collaboration with the Soviet Union
at a cost of Rs.49.4 crores and went on stream in July, 1964. By November, 1967, the initial
capacity of 2 MMTPA was expanded to 3 MMTPA by 1969. The present capacity of this
refineries is 6.00 MMTPA. A Catalytic Reformer Unit (CRU) was also added to the refinery in
1997 for production of unleaded motor spirit. Projects are also planned for meeting future fuel
quality requirements.

KOYALI REFINERY- IOCL (GUJARAT)

The Gujarat Refinery was built with Soviet assistance at a cost of Rs.26.00 crores
and went on stream in October, 1965. The Refinery had an initial installed capacity of 2 MMTPA
and was designed to process crude from Ankleshwar, Kalol and Nawagam oilfields of Oil &
Natural Gas Commission on Gujarat. In September, 1967, the capacity of the Refinery was
further increased to 4.3 MMTPA through de-bottle-necking measures and to 7.3 MMTPA in
October, 1978 by implementing an expansion project of Rs.56.07 crores. With the
implementation of additional processing facilities the Refinery could achieve capacity of 9.5

19
MMTPA in 1989. The Refining capacity was further expanded to 12.5 MMTPA with
commissioning of 3.0 MMTPA CDU in September, 1999. The present refining capacity of this
refinery is 13.70 MMTPA. In order to meet future fuel quality requirement, MS quality
improvement facilities are planned to be installed in 2006.

HALDIA REFINERY – IOCL (WEST BENGAL)

The Haldia Refinery for processing 2.5 MMTPA of Middle East Crude was
commissioned in January, 1975. With two sectors – one for producing fuel products and the
other for Lube Base Stocks. The fuel sector was built with was built with French Collaboration
and the Lube sector with Romanian Collaboration. The refining capacity of the Refinery was
increased to 2.75 MMTPA in 1989 through De-bottle-necking measures. The refining capacity
was further expanded to 3.75 MMTPA with the commissioning of new crude distillation unit of
1.0 MMTPA in March, 1997. The present refining of this Refinery is 7.50 MMTPA.

MATHURA REFINERY – IOCL (UTTAR PRADESH)

The Mathura Refinery with a capacity of 6.00 MMTPA was set up at a cost of
Rs.253.92 crores. The Refinery was commissioned in January, 1982 excluding FCCU and
Sulphur Recovery Units which were commissioned in January, 1983. The refining capacity of
this refinery was expanded to 7.5 MMTPA in 1989 by De-bottle-necking and revamping. A
DHDS Unit was commissioned in 1989 for product of HSD with low sulphur content of 0.25%
wt. (max). The present refining capacity of this refinery is 8.00 MMPTA.

DIGBOI REFINERY (ASSAM)

The Refinery was set up at Digboi in 1901 by Assam Oil Company Limited. The Indian
Oil Corporation Ltd took over the Refinery and Marketing Management of Assam Oil Company
Ltd. With effect from 14.10.1981 and created a separate division. This division has both Refinery
and Marketing Operations. The Refinery at Digboi had an installed capacity 0.50 MMTPA. The
refining capacity was increased to 0.65 MMTPA by modernization of Refinery in July, 1996. A
new delayed Cocking Unit of 1,70,000 TPA capacity was commissioned in 1999. A new Solvent
Dewaxing Unit for maximizing production of micro-crystalline wax was installed and
commissioned in 2003. The refinery has also installed Hydrotreater to improve the quality of
diesel.

20
PANIPAT REFINERY – IOCL (HARYANA)

The refinery was setup in 1998 at Baholi Village in dist. Panipat, Haryana at a cost of
Rs.3868 crores. The refining capacity of this refinery is 6.00 MMTPA. The expansion of refining
capacity from 6 MMTPA to 15 MMTPA has been completed in 2010 to cater to the fuel needs of
North and Western India.

MUMBAI REFINERY (HPCL) (MAHARASTRA)

The Refinery at Mumbai came into stream in 1954 under the ownership of ESSO. In
1974 March. Government of India acquired it Hindustan Petroleum Corporation Ltd was formed
on 15.7.1974 after the merger of these companies. The capacity of the Mumbai Refinery of
HPCL was 3.5 MMTPA which was further increased to 7.5 MMTPA.

VISAKH REFINERY (HPCL) (ANDHRA PRADESH)

In 1957, Visakh Refinery went on stream under the ownership of M/s Caltex India Ltd.
In May,1978. M/s Caltrex Oil Refinery (India) was amalgamated with Hindustan Petroleum
Corporation Ltd. The installed capacity of 1.5 MMTPA was increased to 4.5 MMTPA in 1985
and 8.30 MMTPA in 1999, through an expansion programmer.

BHARAT PETROLEUM CORPORATION Ltd. (BPCL) (MAHARASTRA)

The Refinery at Mumbai came into stream in January, 1955 under the ownership of
Burmah-Shell Refineries Ltd. Following the Government’s acquisition of the burmah shell, name
of the refinery was changed to Bharat Refineries Limited on 11.2.1976. In August 1997 the
company was given its permanent name Bharat Petroleum Corporation Ltd. The installed
capacity of 5.25 MMTPA was increased to 6 MMTPA in 1985. The present refining capacity of
the refinery is 12.00 MMTPA.

KOCHI REFINERY (BPCL) (KERALA)

The Kochi Refinery (KR) is a public crude oil refinery in the city of Kochi Kerala. It is
the largest state owned refinery in India with a production capacity of 15.5 million tons per
annum. Formerly known as Cochin Refineries Limited and later renamed as Kochi refineries
Limited, it was acquired by Bharat Petroleum Corporation Limited in the year 2006.

21
MANALI REFINERY – CHENNAI PETROLEUM CORPORATION Ltd.
(CPCL) (TAMIL NADU)

Chennai Petroleum Corporation Limited formerly known as Madras Refineries Limited

(MRL) was formed a joint venture in 1965 between the Government of India, AMOCO and
National Iranian Oil Company (NIOC) having a shareholding in the ratio 74%,13%,13%
respectively. From the grassroots stage CPCL Refinery was set up with an installed capacity of
2.5 Million Tones Per Annum in a record time of 27 months at a cost of Rs.43 crores without any
time or cost overrun. As a part of re-structuring steps taken by the Government of India, IOCL
acquired entity from GOI in 2000-01 currently IOC holds 51.88% while NIOC continued its
holding at 15.40%. In view of the CPCL become subsidiary of IOCL in 2001. The Manali
Refinery has a capacity of 9.5 MMTPA and is one of the most complex refineries in India with
Fuel, Lube, Wax and Petrochemicals feedstock’s production facilities. The current capacity of
Manali Refinery is 10.5 MMTPA.

CAUVERY BASIN TEFINERY – CPCL (NAGAPATTINAM) (TAMIL

NADU)

CPCL’s second refinery is located at Cauvery Basin at Nagapattinam. The initial unit
was set up in Nagapattinam with a capacity of 0.5 MMTPA in 1993 and later on its capacity was
enhanced to 1.0 MMTPA.

NUMALIGARH REFINERY LIMITED (ASSAM)

Numaligarh Refinery, popularly known as “Assam Accord Refinery “ has been setup a
gross-root refinery at Numaligarh in the district of Golaghat, Assam in fulfillment of the
commitment made by the Government Of India in the historic “ Assam Accord ”, signed on 15-
8-1985 at an approval cost of Rs.2,724 crores. NRL incorporated on 22-4-2993. Presently Bharat
Petroleum Corporation Limited holds 51% of the company’s equity. The other equity holder is
Government of Assam, Oil industry Development Board and Oil India Limited with equity
participation of 10% each. The balance 19% equity is ear marked for the public issues. The
refining capacity of this refinery is 3 MMTPA.

MANGLORE REFINERY AND PETROCHEMICALS LTD. (MRPL)

(KARNATAKA)

22
 Government approved on 11.4.1991 the setting up a 3 MMTPA Oil Refinery at
Manglore at an estimated cost of Rs.1160 crores, including foreign exchange component of
Rs.300 crores. The project has been implemented by a Joint Venture Company with Hindustan
Petroleum Corporation Limited, Mumbai and Indian Rayon and Industrial Limited, Gujarat as
Co-Promotors. The Refinery was commissioned in March, 1996. MRPL which was a Joint
Sector Company become a PSU subsequent on acquisition of its majority shares by ONGC. The
capacity of the refinery was assessed at 3.69 MMTPA and has been further expanded to 15.00
MMTPA.

TATIPAKA REFINERY (ANSHRA PRADESH)

A Mini Refinery of ONGC with capacity of about 0.1 MMTPA with an approved cost
of Rs.29.9 crores was commissioned in September, 2001 at Tatipaka in East Godavari District,
Andhra Pradesh.

RELIANCE INDUSTRIES LIMITED (RIL) PRIVATE SECTOR

JAMNAGAR (GUJARAT)

The Private Sector Refinery (RPL) was commissioned on 14 th July, 1999 with an
installed capacity of 27 MMTPA at Jamnagar. The present capacity of this refinery is 68.20
MMTPA.

23
 HINDUSTAN PETROLEUM CORPORATION Ltd

HISTORY

Hindustan Petroleum Corporation Limited (HPCL) has been formed through

amalgamation of four established companies. Gradually, it has grown today as a second largest
integrated Oil Refinery and Marketing Company in India. Merge of ESSO, Lube India Limited,
Caltex Oil Refining India Limited and Kosan Gas Company Limited incorporated HPCL.
HPCL accounts for about 20% of the nation’s refining capacity on west coast it is the Mumbai
refinery with a capacity of 5.5 million metric tons per annum while the other at Visakhapatnam
on the east has a capacity of 7.5 million metric tons per annum.

HPCL is a mega public sector undertaking (PSU) and is the second largest
integrated oil company in India with NAVARATNA status. It has two refineries producing a
wide variety of petroleum products, fuels lubricants The company also operates the only joint
venture refinery in country with Aditya Birla Group of companies and is progressing towards
second joint venture in the state of Punjab.

HPCL is the result of successful merger of four established companies HPCL was
born of die successful merger of ESSU, wide Indian limited, Caltex and Kosan gas company of
India ltd the company was renamed HPCL with effect from July 15 th 1974 Indian oil and gas
sector accounts for more than 30% of Indians oil import bill and the sector contributes over 20%
to the national exchange through customer and exercise. India’s share to world oil and gas
production is less than 1% with petrol product consumption of less than 3%. The objectives of
self-reliance in the sector has become a distance dream with the demand far exceeding the
production and with crude price soaring high in international markets.

HPCL has the second largest share of product pipelines in India a pipeline network of
more than 3015 KMS for transportation of petroleum products and a vast marketing network
consisting of 13 Zonal offices in major cities and 106 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 Distributorship.
Consistent excellent performance has been made possibly by highly motivated workforce of over

24
11,000 employees working all over India as its various refining and marketing locations. HPCL
is committed to achieve the economic, ecological & social responsibility objectives of
sustainable development consistently these are of varied operations and activities.

CORPORATE VISION STATEMENT

To be a leading world-class company in hydrocarbons and energy retailed
sectors with a global presence.

CORPORATE MISSION STATEMENT

HPCL will be a fully integrated company in the Hydrocortisones Sector by

‘focusing on enhancement of productivity, quality and profitability, caring for customers and
employee’s environment protection, cultural heritage’. It will also attain international dimensions
by diversifying into other energy related fields and by taking up transnational operations. The
above statement would be the guiding force for defining the scope and reach of HPCL during the
next 25 years. HPCL would provide the full range of services integrated across the business
energy sector and geographic boundaries and distinguish itself on the corporate horizon.

‘HPCL along with its joint venture will be a fully integrated company in
hydrocarbon sector of exploration production refining and marketing focusing on
enhancement of productivity quality and profitability caring for customer and employees
caring for environment protection and cultural heritage it will also attain scale dimension
by diversifying into other energy related fields and by taking up transnational operation’.

VISION 2020

The long perspective plan vision 2020 was prepared with the active involvement
of different functional departments so that the corporations strategies and action plans are fully
integrated SWOT analysis and a survey on managing the changes was under taken it he contest
of the present imperatives and in order prepare suitable strategies and action plan. The
corporation formulated its vision, mission statements and developed corporate values objectives
and goals.

OBJECTIVE OF HPCL

To maintain continuity of supplies through their refinery and marketing network

at customer to conserve and put the most efficient use valuable energy resources, to earn a
25
reasonable returns on their investment, to work towards their achievement of self-reliance in the
field of oil refining, Formulation and distribution system & To create strong research and
development and base for the field of oil refining and stimulate research and development in
developing new petroleum products a so as to minimize their imports.

FUNCTION OF DIRECTORS

1) DIRECTOR OF REFINERIES

Director refineries have the key role in the organization. He is responsible for the
production of the finished production i.e. refining the crude, refining is the process of distillation
cracking and treatments so it comprises complex unit and its operation with sophisticated
technology. The duty of the director is to look after operations and maintenance of the units.

2) DIRECTOR OF MARKETING

Director Marketing is responsible for marketing of the products which have been
produced through refining. He is supposed to maintain good relations with Dealers, distributors
to increase sales.

3) DIRECTOR OF FINANCE

The director finance function is difficult and separate from production (Refineries),
marketing and other functions. The main function of finance director is raising funds and
investing them in Assets and distributing returns earned from assets to shareholders respectively.

4) DIRECTOR OF HUMAN RESOURCE

Human resource management can be said as the most important of all resources. HR
Directors directly or indirectly responsible for employing people developing their services in
tune with the job and organization requirements.

26
Mr. ARUN BALAKRISHNAN

Shri.Arun Balakrishnan took charge as Chairman & Managing Director of Hindustan

Petroleum Corporation Ltd on April 01, 2007. Prior to this assignment, Shri.Balakrishnan was
holding the position of Director - Human Resources. A Chemical Engineer from the Government
College of Engineering, Trichur - Kerala and a Post Graduate Management from the Indian
Institute of Management, Bangalore, Shri.Balakrishnan has handled various portfolios in
Marketing, Corporate and Human Resources of HPCL and possesses a rich experience in the oil
sector. He also had a 5-year stint with the Oil Coordination Committee as Director - Planning.

In his capacity as Director - Human Resources, Shri.Balakrishnan introduced a number of

contemporary People Management initiatives. As a result, the Corporation came to be
acknowledged as one of the 'Best Employers in India -2004' in the study conducted by Hewitt
Associates and CNBC - TV 18. Under his leadership, HPCL was also the recipient of 'Award in
Best Work Place Practices' by Asian Forum for Corporate Social Responsibility, Philipinesin
2004. HPCL also received the Golden Peacock National Training Award for 2005 and an award
for Commitment to Building and Learning Organization by Peter Singe in 2006.

In the recent past, the All India Management Association has conferred a fellowship and
the Institute of Engineers (India) has presented a Scroll of Honor for recognition of his
outstanding contribution to the profession of ‘Chemical Engineering'.

Mr.’s ROY CHOUDAURY

Shri S. Roy Chaudhary took charge as Director-Marketing effective May 2004. Prior to
this he was Executive Director, Direct Sales SBU.

Shri S. Roy Chaudhary is a Mechanical Engineer from the University of Assam. He

commenced his career in the Petroleum Industry with Assam Oil Company, Digboi, a subsidiary
of Burma Oil Company. He has held various positions in the company in streams of Refinery,
Marketing (Operations), Projects and Sales Division of HPCL. He is well known in the Oil
Industry for his knowledge and expertise in the cross Country Pipeline Projects.

27
Mr.M.A. TANKIWALA

Shri M.A. Tankiwala took charge as Director – Refineries effective June 01, 2005. Prior
to this he was the Managing Director of Guru Gobind Singh Refineries Limited (GGSRL), a
fully owned subsidiary of HPCL and he was instrumental in developing the grass root project.

He also served on the Board of Mangalore Refineries & Petrochemicals (MRPL), the first
refinery in the joint sector, as Managing Director (Technical) and ensured that due share was
given to MRPL in meeting the country’s energy demand.

Shri M.A. Tankiwala, a Graduate in Mechanical Engineering commenced his career in

Mumbai Refinery of HPCL. He has had a wide exposure to the Petroleum Industry spanning for
more than three decades in Refining sector. He has worked in both the Refineries of HPCL in
various capacities and contributed to the growth and development of the refinery operations of
the Corporation.

Mr. C. RAMULU

Shri C. Ramulu is holding the portfolio of Director – Finance since 2003. Prior to this he
was Executive Director – Joint Ventures & Strategic Planning.

Shri C. Ramulu is a qualified Chartered Accountant and Company Secretary and a rank
holder in the All India level. He is also an MBA from the University of Leeds, UK. His wide
experience of over 29 years encompasses Financial Management including Corporate Finance,
Treasury Operations, Budgetary Control, Internal Audit and General Management including
Strategy Planning, Management of Joint Ventures etc.

28
SWOT ANALYSIS

SWOT Analysis is analyzing the Strengths, Weaknesses, Opportunities and Threats of

the corporation.

STRENGTHS OF HPCL

1) Profit making.

2) Adequate surplus.

3) Technically strong management.

4) Qualified employees.

5) Capital market for petroleum products.

6) Ability to adopt high technologies.

7) Dedicated operating staff and experienced maintenance crew strong technical service
support.

8) Adequate captive power generation.

9) Highly experienced and qualified employees.

WEAKNESS OF HPCL:-

1) Research and development being expensive and a long run programmer purchasing of
technology is more feasible and preferably.

2) Handing of different types of crude mix there by landing to sub optimal changes
frequently in operations.

3) Lack of infrastructure facilities in and around Visakhapatnam to take up emergency

maintenance jobs.

29
OPPORTUNITIES OF HPCL

1) Scope for further expansion and diversification possible by incurring one fourth of
expenditure.

2) Availability of highly qualified skilled and experience employees.

3) Scope of lifting of control on petroleum product prices by government of India.

4) Increasing sustained demand of petroleum products.

5) High demand for by products and petrochemical feed stocks.

THREATS AND COMPETITORS

1) Growing industrial relation problems.

2) Concern about environment problems keeping in view increasing awareness among the
public and publicizing of environmental problems.

3) To generate sufficient internal resources for financing partly, wholly expenditure on new
capital projects.

4) To develop long term corporate plan to provide adequate growth of the activities and
operations.

30
MIDDLE DISTILLATES

1. Mineral Turpentine Oil (MTO) - Used in Paint Industry.

2. Aviation Turbine Fuel (ATF) - Used as a fuel for Planes.

3. Superior Kerosene Oil (SKO) - Kerosene.

4. High Speed Diesel (HSD) - Used as a fuel for heavy vehicles.

5. Jute Batching Oil (JBO) - Used for Jute Machines Lubrication.

6. Light Diesel Oil - Used as fuel for Ships.

7. Wash Oil (WO) - Used as lubrication for Lathe Machines.

HEAVY ENDS

1. Fuel Oil (FO)

2. Low Sulphur Heavy Stock (LSHS) used as oil usually blended for Laying Roads.

3. Bitumen / Asphalt.

REFINING PROCESS

Crude oil by itself is an unrefined form and has no direct use. It value as a commodity is
realize only when many different hydro carbons components are separated out broken down or
combined with other chemicals in refinery to provide products that can be marketed. Each crude
oil has its own unique characteristics that determine the products it will yield after refining built
to meet specific demands for particular markets. The trend is away from heavier products
towards maximization of middle distillates and gasoline. As a result, the processes are
continually getting upgraded.

31
REFINING & MARKETING ACTIVITIES

The crude petroleum that nature yields form the base for a large number of products.
The HP Refines upgrade the crude oil into value added products like petrol, high speed diesel ,
superior kerosene oil , liquefied petroleum gas , aviation turbine fuel , naphtha , furnace oil ,
bitumen, low Sulphur heavy specialties and greases . HPCL accounts for about 20% of the
Nation’s refining capacity.

Today HPCL has two coastal refineries, one in Mumbai and the other at
Visakhapatnam. It also promotes the only joint venture refinery in the country, the Mangalore
Refinery & Petrochemicals Limited (MRPL) and are well on their way towards setting up
another Grass-Roots Refinery near Bathinda in Punjab. Their lubricating Oils Refinery at
Mumbai is the largest the country and produces superior quality lube Base Oils.

Mumbai and Visakha Refiners were the first in India to undertake the implementation
of comprehended automation of offsite product handling facilities. These refiners have
implemented projects and upgraded facilities to produce green fuels like Unleaded Petrol and
Low Sulphur Diesel. The refiners have been benchmarked by an international agency for various
performance parameters and there is a constant endeavor to excel in all spheres of refining
operations. Both the refiners have been conferred with numerous awards by national and
international agencies in recognition of their efforts in the area of Energy Conservation,
Environment and Safety.

Like in any other business, Marketing is the vital link in the chain between the
manufacturing unit and the consumer. The petroleum products produced at the refiners ultimately
reach the consumers through widespread infrastructure. HPCL country – wide marketing
network consist of various Zonal / Regional Offices, Terminals, Deposits, Aviation Services
Facilities, LPG Bottling Plants and Lube Filling plants. Added to this a large numbers of Retail
Outlets, LPG/SKO/LDO dealers and distributors.

32
BUSINESS PROCESS RE-ENGINEERING

The Business Process Re–Engineering exercise, initiated in early 1997, has helped them
streamline their marketing actives. In a bid to sharpen competitive edge and improve customer
orientation, they have now set up three Strategic Business Units to add focus to the marketing
and sales efforts in Retail, Direct and LPG business lines. The stream ling has enabled them to
provide better and faster services, and real time response to the consumers.

NAVRATNA – THE CROWN JEWEL

Navratna, mean ‘Nine Precious Jewels ‘. A pride of place accorded by the Government
of India to nine public sector companies in recognition for their excellent services, global
potential and commitment to the nation’s growth. HPCL is a Navratna, because of its
infrastructure and large network. Added to which are the merger and takeovers as well as the
large amount of capital, which has seen the company evolve into India’s second largest oil
company. Above all this lays the fact that HPCL believes itself to be more than just about oil in
its commitment to people and the natural environment HPCL is in fact a rare jewel.

IMPORTS / EXPORTS

The total crude oil products during the year were 15.7 Million Metric Tons of which
MMT was indigenous procurement and the balance 11.5 MMT was import from
countries such as Iran, Saudi, Arabia etc. The product imports during the year were 1921
Trillion Metric Tons with diesel accounting for bulk of the imports. The products exports
during the year were 1543 TMT. Naphtha, FO, Diesel (1%) formed bulk of the exports.
HPCL commenced independent chartering of ocean tanks in 2008. During the year 2008-
09, The shipping division successfully met all the chartering requirements of the Crude
Oil and LPG imports as well as coastal movement of LPG and Lube Oil Base Stock.
Coastal movement of product was met using vessels under time charter.

33
JOINT VENTURES & PROJECTS

In an effort to fulfill its vision and achieve its objects, HPCL has formulated plans for
expansion, diversification, and internal restructuring. HPCL future efforts include some major
projects which are under implementation.

JOINT VENTURE

 Mangalore Refiners and Petrochemicals Ltd.

 Bitumen Emulsions.

 Pertinent India ltd.

 Mangalore – Bangalore Pipeline.

 Oil Exploration and Production.

 LPG Cavern Store.

 Marketing of Green Fuels.

HPCL PROJECTS

 Punjab Refinery Project.

 Green/Clean Fuel Projects at Refineries.

34
TOUCHING LIVES – HPCL SOCIAL CONCERNS

Beyond balance sheets and bottom lines lies a complex world. It may not always seem to
add up. But one we can make a difference to. If only we reach out and touch. With our hearts,
amidst all the hustle & bustle of corporate Lives trying to give this growing Nation the energy it
needs and distanced itself from its social responsibilities. Through network they spread across
the country, carry out welfare activates for the betterment of the underprivileged.

Over the years, HPCL has done considerable work under a special component plan. Their
aim is to contribute towards improving the quality of life. If the primary education or health care
, provision of drinking water or vocational training, development of the infrastructure in rural
areas through adoption of villages of assistance to the physically challenged through a wide
range of assistance program they are trying to help themselves.

It all started in 1986, when HPCL made a humble beginning by lunching Special
Component plan and Tribal sub – plan by adopting a tiny hamlet of manyapalem, situated near
our Visakha Refinery. At that time, the village comprised of 27 families who survived by selling
firewood collected from the nearby forest. While the government of Andhra Pradesh provided
them with dwellings, HPCL took upon itself the task of initiating a number of health, welfare and
educational activates, as well as income generating schemes.

After the success of its development project at Manyapalem, HPCL undertook many such
projects all over the country, especially in villages inhabited by the socially and economically
weaker sections. One of HPCL’s numerous success stories is Joduvanipalem, a small tribal
village in Andhra Pradesh. Comprising of not more than 50 families, the people of this villages
were largely dependent on the age old custom of shifting agriculture , that gave them food grain
enough only for a few months in a year at best . Today with the help of the State government,
these tribal have been allotted land and their make – shift homes have been replaced with regular
houses. Provision for irrigation like bore also wells and water pumps have been made. A small
school has been set up to extend basic education to the children. Today residents of
Joduvanipalem feel confident enough to sustain their growth on the strength of their own efforts
and HPCL is looking to move on – to find another Joduvanipalem. And this not just it, HPCL has
been in the forefront whenever the Nation has needed its assistance. At all-time of crises, be it
natural or man – made, the corporation and its employee have contributed selflessly towards

35
allaying the pain and trauma of India to commission a Retail Outlet for the welfare of the
dependents of the brave soldiers who laid down their lives during the Cargill conflict.

AWARDS AND RECOGNITIONS

 HPCL has won several awards in the year 2016-17. A brief account of the achievements
in 2016-17 follows. (As of Sept 2017) .
 HPCL ranks 336 in Fortune Global 500 list
 Hindustan Petroleum Corporation Ltd. HPCL is ranked 336th position during 2010-11 in
the prestigious list of Fortune Global 500 Companies.
 HPCL ranks 1054 in Forbes 2000 list
 Hindustan Petroleum Corporation Ltd. HPCL is ranked 1054 position during 2016-17 in
the prestigious list of Forbes 2000.
 Scope CSR Award for the Year 2009-10
 HPCL received the SCOPE Gold Trophy Meritorious Award for Corporate Social
Responsibility & Responsiveness from Her Excellency The President of India Smt.
Pratibha Devi singh Patil.
 Golden Peacock Award for CSR – 2017
 HPCL received the ‘Golden Peacock Award for Corporate Social Responsibility’ for the
year 2011 during the 6th International Conference on Corporate Social Responsibility
organized at Delhi on April 29, 2017.
 Readers’ Digest Trusted Brand Gold Award 2017.
 HPCL has been conferred with our service brand, Club HP with the Gold award for the
6th consecutive year at the 13th Reader’s Digest Trusted Brand survey.
 “Excellence in Quality” Award
 HPCL has been conferred with “Excellence in Quality” award by M/s BOSCH for
supplies of Lubricants for their Aftermarket Sales. This award is the result of consistent
performance in meeting the customer’s requirement on Quality & Delivery.
 Golden Peacock HR Excellence Award
 HPCL has been conferred with the “Golden Peacock HR Excellence Award “for the year
2017. The Golden Peacock HR Excellence is awarded to Organizations that follow
excellent Human Resources practices and strategies which are directly contributing to the
business.

36
  Indira Gandhi Raj Bhasha Puraskar HPCL has been conferred with Indira Gandhi Raj
Bhasha Puraskar by Govt. of India, Ministry of Home Affairs – Rajbhasha Vibhag for the
year 2009-10 under PSU category for excellent performance in “B” Region for the 4th
consecutive year. Bagged the “CIO 100” Award for the 6th consecutive year in
recognition for using information technology in innovative ways.

REFINERY MAKES FOLLOWING PRODUCTS

PRODUCTS
LPG DOMESTIC [ COOKING GAS ]
COMMERICIAL [ COOKING GAS ]
PETROL TRANSPORTATION
NORMAL PETROL LEVEL
0.05 WT % SULPHUR
PETROL

KEROSENE DOMESTIC [ COOKING FUEL ]

DIESEL TRANSPORLATION FUEL
NORMAL DIESEL POWER GENERATION
0.05 WT% SULPHUR
DIESEL

LOW SULPHUR FLASH NAVY GRADE DIESEL

DIESEL
AVIATION TURBO FUEL AVIATION
TRANSPORTATION
PROPYLENE PETRO CHEMICAL FEED
STOCKS
NAPTHA INDUSTRIAL,POWER
FUEL GENERTAION,PETRO
FERTILIZATION CHEMICAL FEED
PETRO CHEMICAL STOCKS

MINERAL TURPENTINE OIL PAINT INDUSTRY

SOLVENT
JUTE BATCHING OIL JUTE DIESEL SOLVENT
BIGHT DIESEL OIL MARINE DIESEL
[SHIPPING ]
FUEL OIL INDUSTRIAL
LIGHT
HEAVY

37
LOW SULPHUR INDUSTRIAL POWER PAVING
HEAVY STOCKS LOW
SULPHUR
MEDIUM SULPHUR

BITUMEN ROAD PAVING

80/100
60/70

OUR MARKETING NETWORK

2019-20 2018-19 2017-18 2016-17 2015-16 2014-15

Regional Offices 101 90 91 86 85 85

Terminals/Installations/TOPs 42 42 42 37 36 36

Depots 100 100 93 93 92 100

LPG Bottling Plants 44 43 43 42 41 40

ASFs 32 21 16 13 13 10

Retail Outlets 9140 8539 8329 7909 7313 6667

SKO/LDO Dealers 1638 1638 1648 1648 1648 1648

LPG Distributors 2395 2250 2232 2238 2202 2153

LPG Customers (in crores) 2.91 2.698 2.52 2.39 2.28 2.17

38
DEMAND FOR PETROLEUM PRODUCTS

The demand for petroleum products in India increased from 130.5 MMT to 134.4 MMT,
reflecting a growth of 2.9% in FY-11. The Indian refining capacity increased to 184.1 MMT
from 179.9 MMT. Details of product-wise demand and growth during the last year are as follows

(In KT) FY 2016-17 FY 2005-16 Growth (%)

Diesel 59,869 56,148 6.6%
Gasoline 14,200 12,818 10.8%
ATF 5,078 4,627 9.7%
LPG 13,679 12,516 9.3%
Kerosene 8,928 9,304 -4.0%
Naphtha 8,951 9,014 -0.7%
Others 23,674 26,131 -9.4%
Total 134,378
(incl. others)

39
 FINANCIAL ANALYSIS

Financial analysis is the process of identifying the finance strengths and weakness of
the firm by the property establishing relationship between the items of the balance sheet and the
profit and loss account. Finance analysis can be undertaken by management of the firm or parties
outside of the firm, viz. owners, creditors, investors and other to form judgment about the
operating performance and financial position of the form users of the financial statements can get
better insight about the financial strength and weakness of the firm to make their best use to be
able to spot out the financial weakness of firm to make their best use and to be able to spot out
the financial weakness of firm to take suitable corrective actions. The future we plan of the firm
should be laid down in view or the firm’s financial strength and weakness. Thus, financial
analysis is the starting point for making plans, before using any sophisticated forecasting and
planning procedures. Understanding the past, a pre-requisites anticipating the future.

FEATURES OF FINANCIAL ANALYSIS

 To present the complex accounting data in simple and Understandable form.

 To classify the items given in profit and loss account and Balance Sheet.
 To make comparison between different group to interpret different conclusions.

TOOLS OF FINANCIAL ANALYSIS

The analysis and interpretation of financial statement is used to determine the financial
position and results of operations as well. A number of methods or devices are used to study the
relationship between different statements. The following methods of analysis are generally used.

 Comparative Statements.

 Trend Analysis

 Common Size Statement

 Ratio Analysis

 Funds Flow Statement

40
  Cash Flow Statement

CASH FLOW STATEMENT

INTRODUCTION

Cash plays a very important role in entire economic life of a business this movement of
cash is of vital importance to the management. A firm needs to make payments to its suppliers, to
incur day to day expenses and to pay salaries wages, interest and dividend etc. In fact, what
blood is to a Human Body cash is to a business enterprise, It is very essential for a business to
maintain adequate balance of cash.

But many times, a concern operates profitably and yet it becomes very difficult to pay
taxes and dividend. This may be because:

 Although huge profit has been earned yet cash may not have been received.
 Even if cash has been received it may have drained out. (Used) for some other purposes.

AROSE OF CASH FLOW STATEMENT

The two basic financial statements, i.e., the Balanced Sheet and Profit & Loss Account
provide the essential basic information of the financial activities of a business, but their
usefulness is limited for analysis and planning purposes. The balanced sheet does not disclose the
cause for changes in the assets and liabilities between two different points of time. The profit and
loss account also fails to disclose the reason for shortage of cash in spite of positive net incomes.
Thus, another statement called Funds Flow Statement. Was prepared to show the changes in the
assets and liabilities from the end of one period time .To underline the importance of funds
statements, the Institute of Chartered Accounts of India (ICAI) issued ACCOUNTING
STANDARD -3 in July 1981 dealing with the preparation of statement of changes in financial
position .The statement of changes in financial position summarized, for the period covered by it,
the changes in the financial position including the sources from which funds were obtained by
the enterprise and the specific uses to which such funds were applied. For this purpose, the term
“FUNDS” was defined as Cash and Cash Equivalents and Working Capital. The statement of
changes in financial position also called Funds Flow Statement was intended to provide a
meaningful link between the balanced sheet at the beginning and at the end of a period and the
P&L account for that period.

41
DIFFERFRENCE BETWEEN CASH FLOW AND FUNDS FLOW

Cash Flow Statement shows the changes in the cash position (Inflows and Out flows) of
a firm. It is an analytical reconciliation statement which explains the reasons for the differences
between the Opening and Closing Cash Balances over a period. On the other hand, Fund Flows
Statement is a statement that shows the ups and downs of the financial position or the changes in
working capital of the entity between the two financial years.

A cash flow statement shows the inflows and outflows of the cash and cash equivalents.
cash includes cash on hand and demand deposits with the banks while cash equivalents are
highly liquid investments i.e., they can readily have converted into cash like marketable
securities, commercial papers and short-term government bonds. It explains the changes in the
cash in hand and cash at bank at the beginning and the end of the accounting period.

Funds refer to the working capital of the company, so Fund Flow Statement is a
statement that studies the changes in the working capital of the business between two accounting
years.

ALTHOUGH THE FUNDS FLOW STATEMENT PROVIDE USEFUL

INFORMATION, IT SUFFERED FROM THE FOLLOWING
LIMITATION:

 The meaning of the term funds as a result, some firms prepared the statement on
working capital basis, whereas others prepared it on cash basis. However, in general;
statement was prepared on working capital basis.

 An AS-3 did not provide any standard format for the preparation of Funds Flow
Statement. As such, firms adopted different methods for preparing the statement
making comparisons difficult.

 The Funds Flow Statement, even when prepared on cash basis, did not disclose cash
flows from Operating, Investing and Financial Activities separately. It merely
provided information regarding inflows and outflows of funds.

In view of the above limitations there was a need for Cash Flow Statement prepared in standard
format. The Financial Accounting Standard Board (IFAS) of USA, has emphasized the need for
Cash Flow Statement.
42
DEFINITION OF CASH FLOW STATEMENTS

Financial reporting should provide information to help present and potential investors
and creditors amount others users in assessing the amounts timing and uncertainty of prospective
cash receipts from dividends or interest and proceeds from the sales, operating needs, to reinvest
in operations and to pay cash dividends.

AS-3 revised: Cash Flow Statements in March 1997. The revised Accounting Standard
AS-3 changes in financial position issued in June 1981 as under: “Information about the Cash
Flows of an enterprise is useful in providing users of Financial Statements with a basis to assess
the ability or the enterprise to generate cash and cash equivalents and the needs of the enterprises
to utilize those cash flows. The economic decision that is taken by users requires an equivalent of
the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of
their generation. The statement deals with the provision of information about the historical
changes in cash and cash equivalents of an enterprise by means of a cash flow statement, which
classified cash flows during the period Operating, Investing and Financing Activities.

A statement of changes in financial position on cash basis, commonly known as the

“CASH FLOW STATEMENT” summarizes the causes of changes in cash position between
dates of two balance sheets. It indicates the sources and uses of cash. The cash flow statement is
similar to the funds flow statement except that if focuses attention on cash instead of working
capital. A firm needs sufficient cash to pay debts maturing in the near future, to pay interest and
expenses ad to pay dividends to shareholders.

MEANING OF CASH FLOW STATEMENT

It is a statement of Cash Flow means the movement of cash in and cash out of a
business. Cash Flow is a statement, which analysis the reason of changes in cash balance of
business between two dates.

(OR)

Cash flow statement is a statement which describes the Inflows (Source of Cash) and
Outflows (Use of Cash) of cash and cash equivalents in an enterprise during a specific period of
time.

43
 Such a statement enumerates net effect of the various business transactions of cash and
its equivalents and takes into account receipt and disbursement of cash. According to AS-3
(revised), an enterprise should prepare a Cash Flow Statement and should present it for each
period for which financial statements are prepared. The term, cash equivalents and cash flows are
used in this statement with the following meanings:

 Cash comprises cash on hand and demand deposit with banks.

 Cash Equivalents Are Short Term Highly Liquid Investments that are readily convertible
into known amounts of cash and which are subjected to an insignificant risk of changes in
value. Cash Equivalents are held for the purpose of meeting short term cash commitments
rather than for investments or other purposes.

 Cash Flows Are Inflows and Outflows of Cash and Cash Equivalents. Flow of cash is
said to have taken place when any transactions makes changes in the amount of cash and
cash equivalents available before happening of transaction.

 If the effect of transaction results in the increase of cash and its equivalents, it is called an
Inflow (source) of cash and if it results in the decrease of total cash it is known as
Outflow (use) of cash.

 Cash Flows exclude movements between items that constitute cash or cash equivalent
because these components are part of the cash management of an enterprise rather than
part of its Operating, Investing and Financing Activities.

 Cash management includes the investment of excess Cash in Cash Equivalents.

OBJECTIVES

 Cash flow statement gives information about cash inflow from Operations of business.
Such information is used by internal financial management for certain decision making
e.g., repayment of long term loans, purchase of fixed assets etc.

 A cash flow statement discloses the speed at which the cash is being generated from
current assets such as debtors, bills receivable, stocks etc. and the speed at which the

44
 current liabilities such as creditors, bills payable etc., are being paid. Thus, it enables the
management to assess the true position of cash in future.

 A business may have made profit and yet is running short of cash. Similarly, a business
may have suffered a loss and still has sufficient cash balances. A cash flow statement
reveals reason for such increase or decrease of cash balance.

 A cash flow statement prepared on an estimated basis for the next accounting period
enables the management to know how much cash can be received internally and how
much cash can be received internally and how much it should be arranged from outside.
Such estimated amounts are used for preparing cash budget.

 It ensures the future Positive Cash Flow of particular concern, capacity of an organization
to pay a Dividend, Identifying Non-Cash items ensuring cash income and expenses of a
concern, comparing various items of the current year with those of last year, Knowing
Cash and Cash Equivalent and outsource inflow of a concern for a particular period.

SCOPE

 An enterprise should prepare a cash flow statement and should present it for each period
for which financial statements are presented.

 Users of an enterprise’s financial statements are interested in how the enterprise

generates and uses cash and cash equivalents.

 This is the case regardless of the nature of the enterprise’s activities and irrespective of
whether cash can be viewed as the product of the enterprise as may their operations.

 To pay their obligations.

 To provide returns to their investors.

SIGNIFICANCE

 Since a cash flow statement is based on the cash basis of accounting, it is very useful in
the evaluation of cash position of a firm.

45
  A projected cash flow statement can be prepared in order to know the future cash
positions of a concern so as to enable a firm to plan and coordinate its financial
operations properly.

 By preparing this statement, a firm can come to know as to how much cash will be
needed to make various payments and hence the firm cash well plan to arrange for the
future requirements of cash.

 A comparison of the historical and projected cash flow statements can be made so as to
find the variations and deficiency or otherwise in the performance so as to enable the firm
to take immediate and effective action.

 A series of Intra-Firm Cash Flow Statements reveals whether the firm’s liquidity (short-
term paying capacity) is proving or deteriorating over a period of time and in comparison
to other firms over a given period of time.

 Cash flow statements help in planning the repayments of loans, replacement of fixed
assets and other similar long-term planning, of cash. It is also significant for capital
budgeting decisions.

It is better in explaining the cause for poor cash position in spite of substantial profits in
a firm by throwing light of various applications of cash made by the firm. It further helps in
answering some intricate questions like what happened to the net profits. Where did the net
profits go? Why more dividends could not be paid in spite of sufficient available profit.

Cash flow statements provide information of all activities classified under operating,
investing and financing activities, the funds statements even when prepared on cash basis, did not
discloses cash flows from such activities separately. Thus, cash flow statement is more useful
than the funds statements.

LIMITATIONS

 As a cash flow statement is based on cash basis of accounting, it ignores concept of

Accrual Basis.
 Some people feel that as working capital is a wider concept of fund, Fund Flow
Statement provides a more complete picture than Cash Flow Statement.

46
  Cash Flow Statement is not suitable for judging the profitability of a firm as non-cash
charges are ignored while calculating Cash Flows from Operating Activities.
 The difference of opinion relating to the word- ‘CASH’ it is easily understandable by
common people but difficult to explain or define. In greater sense Stamp, Cheque,
Postal etc., Should be included under cash title. But there prevail great differences of
opinions in this matter. The accepted principle is not yet established in this regard.
 A clear picture of cash position not available, the sources of Inflow and Outflow of
cash can be known from the cash flow statement. But a clear cash picture cannot be
known from Cash Flow Statement exhibits a clear picture of the fund.
 Fund Flow Statement more importance since the working capital is considered as a
larger concept of the fund, The Fund Flow Management is more important than Cash
Flow Statement.
 Incapable of ascertaining the amount to be spent on Fixed Assets and Long-Term
Investment.

CLASSIFICATION OF CASHFOLWS

According to AS-3(Revised) the cash flow statement should report cash flow during the period
classified by operating, investing and financing activities. Thus, cash flows are classified into
three main categories:

 Cash flow from operating activities.

 Cash flow from investing activities.
 Cash flow from financing activities.

CASH FLOW FROM OPERATING ACTIVITES

Operating activities are the principal revenue-producing activities of the enterprises

and other activities that are not investing or financing activities. It involves producing and selling
goods and services. It involves producing and selling goods and services. Cash Inflows from
customers for sales of goods and services. Cash outflows from operating activities include
payments to suppliers for materials for taxes.

47
 The amount of cash flows arising from operating activities is a key indicator of the
extent to which the operation of the enterprise has generated sufficient cash flows to maintain the
operating capability of the enterprise, pay dividend, repay loans, and make new investments

Without resources to external sources of financing. information about the specific

components of historical operating cash flows is useful, in conjunction with other information, in
forecasting future operating cash flows.

EXAMPLES OF CASHFLOW FROM OPERATING ACTIVITIES ARE

 Cash receipt from the sale of goods and the rendering of service.

 Cash receipts from royalties, fees, commissions, and other revenue;

 Cash payment to suppliers of goods and services;

 Cash payments to and behalf of employees;

 Cash receipt and cash payments of an insurance enterprise for premium and claims, and
other policy benefits;

 Cash payments or funds of income taxes unless they can be specifically identified with
financing and investing activities;

 Cash receipts and payments relating to future contracts, forward contracts .options

 Contracts and swap contract when the contracts are held for dealing or trading purposes.

CASHFLOW FROM INVESTING ACTIVITIES

Investing activities are the acquisition and disposal of long term assets and other activities not in
cash equivalents. It involves acquiring and disposing fixed assets, buying and selling financial
securities, and disbursing and collecting loans. Cash inflows from investing activities include
receipt from the sale of assets (real as well financial 0, recovery of loans, and collection of
dividend and interest. Cash outflows from investing activities include payments for the purchase
of assets (real and financial) and disbursement of loans. The separate disclosures of cash flows

48
arising from investing activities is important because the cash flows represent the extent which
expenditures have been made for resources intended to generate future income and cash flows.

EXAMPLES OF CASHFLOW FROM INVESTING ACTIVITIES ARE

 Cash payments to acquire fixed assets (including intangibles). These payments include
those related to capitalized research and development costs and self-constructed fixed
assets;

 Cash receipts from disposal of fixed assets (including intangibles);

 Cash payments to acquire shares, warrants, or debts instruments of other enterprise and
interest in joint ventures (other than payments for those instruments considered to be cash
equivalents and those held for dealing or trading purposes);

 Cash receipt from disposal of shares, warrants or debt instruments of other enterprises
and interests in joint venture (other than receipts from those instruments considered to be
cash equivalents and those held for dealing or trading purposes);

 Cash advances and loans made to third parties (other than advances and loans made by a
financial enterprise);

 Cash receipts from the repayments of advances and loans made to third parties (other than
advances and loans of a financial enterprises);

 Cash receipts for futures contracts, forward contracts , option contracts and swap
contracts except when the contracts are held for dealing or trading purposes or the
receipts are classified as financing activities;

CASH FLOW FROM FINANCING ACTIVITIES

Financing activities are activities that result in the size and composition of the
owner’s capital (including preference share capital in the case of a company) and borrowings of
the enterprise. it involves raising money from lenders and shareholders, paying interest and
redeeming loans and share capital.

Cash inflows from financing activities include receipt from issues of securities and
from loans and deposits. Cash outflows from financing activities include payments of interest on

49
various forms of borrowings, payments of dividends, retirements of borrowings and redemption
of capital.

EXAPMLES FOR CASHFLOWS FROM FINANCING ACTIVITIES

ARE

 cash proceeds from issuing shares or other similar instruments;

 cash proceeds from issuing debentures, loans, notes, bonds, and other short or long
term borrowing;

 Cash payments of amounts borrowed such as redemption of debentures, bonds,

preference shares.

CASH FLOW STATEMENT

PARTICULARS RS RS

Cash flow from operating activities either

Receipts from customers ***
Paid to suppliers and employees (***)
Generated from operations ***
Tax Paid (***)
Cash flow before extraordinary items *** ***
Ordinary items ***
Cash from ( used in ) operating activities
Or ***
Profit before tax and extraordinary items
Statements for non-cash and non-operating items of individual
items such as depreciation, foreign exchange loss on sales of
fixed assets, interest income, dividend income, interest expenses
etc. ***
Operating profit before working capital changer statements for ***
changes in current assets and current liabilities ( list individual ***
items) ***
***
Cash generated from (used) operation before tax ***
Income tax paid ***
Cash flow before extraordinary items
Extraordinary items
Cash from ( used in) operating activities ***
***
Cash flow from investing activities
***
Individual items of cash inflow and outflow from financing

50
 activities
(Such as purchase/sale of fixed assets, purchase or sale of
investments interest received, dividend etc.) ***
***
Net cash from (used) investing activities ***
Cash flow from financing activities ***
Individual items of cash inflow and out flow financing activities ***
(such as proceeds from issue of shares, long term borrowing,
repayments of long term borrowing, interest paid etc.) ***

Increase (decrease) in cash and cash equivalents at the beginning

of the period
Cash and cash equivalent at the beginning of the period
Cash and cash equivalents at the end of the period

CASH MANAGEMENT
Cash Management is one of the key areas of working capital. The term cash with
reference to cash management is used in two senses. In a narrow sense it is used broadly to cover
currency and generally accepted equivalent of cash such as Cheque. Drafts and demand deposits
in bank. The broader view of cash also includes near cash assets such as marketable securities
and time deposits in banks. The main character of these in that they can be readily sold and
converted into cash.

KEYNES HAS IDENTIFIES 5 MOTIVES FOR HOLDING CASH

TRANSACTION MOTIVE

Need for cash payments arising in the ordinary course of action. These payments
include such things as purchase, Labor Taxes and Dividends etc.

PRECAUTIONARY MOTIVE

This Precautionary balance maintenance will act as a cashier of buffer to meet in

unforeseen and unexpected contingencies. More predictable cash flow of business, the less will
also influence this balance.

SPECULATIVE MOTIVE

51
 This is holding of cash management will ensure is resolving uncertainly both cash
inflow and cash outflow.

INVESTMENT MOTIVE

For meeting operations requirements. Building of an investment image and other

such intangibles.

COMPENSATION MOTIVE

Banks provide a variety of services to business firms, such as clearance of Cheque,

Supply of credit information, transfer of funds, etc., While for some of the services, a bank
charges a commission fee for others they seek indirect compensation. Such balances are called
Compensation Balance.

Cash management has assumed importance because it is most significant of all the
current assets. It is required to meet business obligations and it is unproductive when not used.
Cash Management deals with the following.

 Cash inflows and outflows.

 Cash flows within the firm.
 Cash balances held by the firm at point of time.

RECEIVABLES MANAGEMENT

Receivables are assets which are created as a result of sale of goods or services in
the ordinary course of business. These are known as “Account Receivables, Trade Receivables or
Customer Receivables”. The receivables represent an important component of the current assets
of a firm. Every business needs to have a proper control management of receivables.

MEANING

Receivable represents amount owed to the firm as a result of sale of goods or

services in the ordinary course of business. The purpose of maintaining or investing in
receivables is to meet competition and to the sales and profits.

PURPOSE OF RECEIVABLES MANAGEMENT

52
 Every commitment of financial resources in a firm expected to constitute to the goal
of maximizing the present value of the firm in the marketplace. This is result of maintaining
receivables is as follows.

 To achieve growth in sales.

 To increase profits.
 To meet competition.

CASHFLOW MANAGEMENT IN BUSINESS

The definition of cash flow management for business can be summarized as the process
of monitoring, analyzing and optimizing the net of cash receipts minus cash expenses. Net cash
flow is an important measures of financial health for any business.

IMPORTANCE OF CASHFLOW MANAGEMENT

If your business constantly spends more than it earns, you have cash flow problem.

For small businesses, the most important aspect of cash flow management is avoiding
extended cash shortages, caused by an overly large gap between cash inflows and outflows. You
won’t be able to stay in business if you can’t pay your bills for an extended period of time.

EXAMPLES OF CASH FLOW MANAGEMENT PROBLEMS IN

BUSINESS

Real estate development has always been highly cyclical industry and developers are
often prone to cash flow problems. Property development requires significant initial capital
investment, as well as ongoing cash outflows for operations.

Unless some or all of the development can be sold before construction, developers
often run into cash flow problems before the development begins to sell off, particularly if the
property market happens to soften during construction. Many property developers have been
forced into bankruptcy because of negative cash flow for extended periods of time.

Any business that’s undergoing rapid expansion can run into cash flow problems as
well. Business expansion generally involves higher advertising costs and more capital investment
for new facilities, equipment and so on. Having to maintain increased levels of inventory can
also eat into excess cash.
53
 Extending credit to other businesses is another common way for businesses to run into
cash flow problems. Involving is normally done 30 or 60 day terms and it isn’t unusual for
customers to delay payment, which can leave a business in a cash flow crunch. An example of a
business with cash flow management problems and a negative cash balance for the year.

DEBT FINANCING vs EQUITY FINANCING

Debt Financing is common for assets such as equipment, Buildings, Land and
Machinery when the assets to be purchased are used as security or collateral for the loan. The
main advantage of debt financing over equity financing is that the business owner dosen’t have
to give up partial ownership of the business and thus can retain full control.

 For short-term cash flow shortages, many small business owners make use of credit cards
or lines of credit.

Equity Financing involve raising money from angel investors or venture

capitalists. Equity financing is much less risky because money invested doesn’t have to be repaid
if the business doesn’t succeed. However, in exchange for financing the investor becomes part
owner and as such takes share of the profits and has a say in how business in run.

Whatever from financing is required, it’s vital to have an updated business plan in
place to present to financial institutions or investors. The business plan should demonstrate the
need and effect of financing for the future of the business.

ADVANTAGES OF CASH FLOW STATEMENTS

 The management can find the movement of cash for a specific period.

 There is a possibility of using cash very properly through preparing Cash Flow
Statement.

 The management can take corrective action if there is any misappropriation of cash or if
any default in the utilization of cash.

 The management can assess the quantum of cash required for a specific period.

 Moreover, the management can make an arrangement of cash at required time for smooth
running of the company.

 The management can take many decisions with regard to short term finance.

54
THE NECESSITY AND IMPORTANCE OF THE CASH FLOW
STATEMENT ARE STATED BELOW

EVALUATION OF CASH POSITION

Since the Cash Flow Statements is prepared by Cash Records, it is very much useful in
evaluating the cash position of business concern. The expected amount of cash helps the
management in deciding for Short-Term Investment. Contrariety, if the shortage of cash arises,
the management can find out the possible sources of cash for meeting various expenditure.

GETTING AN IDEA OF FUTURE CASH POSITION

By various information a probable Cash Flow Statement is prepared so that a clear

idea regarding future cash position can be achieved by making a plan and adjustment regarding
financial activities. With the help of this statement, a business concern may find out source of
cash needed and the amount of cash to be spent on different heads.

CORRECTION OF DECISION

The correction is made between the Historical Cash Flow Statement and a Projected
Cash Flow Statement. If any deviation is marked, the management can take corrective measures.

PICTURE OF LIQUIDITY POSITION

Every business organization should poses the required liquidity. In the light of it, Cash
Flow Statement is prepared and compared with those of similar business organizations and
concerned departments of the organization.

IN SUCH A CASE WEATHER THE TREND OF LIQUIDITY IS

IN PROGRESS OR DEGREES CAN BE KNOWN

FRAMING LONG-TERM PLANNING

In the case of investment and financing both cash quantity and time are significant to
the management. Projected Cash Flow Statement helps the management in this respect. Cash

55
Flow Statement helps largely in respect of loan payment, Preference Share Capital Payment,
replacement of fixed asset and other Long-Term plans.

SEARCHING FOR SOLUTIONS TO VARIOUS PROBLEMS

Answers to various questions can be known from the Cash Flow Statement.

For Example, how the net profit has been earned, where that profit has gone, why dividend could
not be paid despite sufficient profit, how tax will be paid, what types of fixed assets have been
purchased in a particular financial year, weather any fixed assets have been sold, if sold how that
cash has been utilized etc.,

MORE IMPORTANT THAN FUND FLOW STATEMENT

In the case of short-term investment since cash is more important than working
capital, the cash flow statement is more important than a fund flow statement for short-term
financial analysis.

USEFUL TO INTERESTED OUTSIDE PARTIES

Cash Flow Statement in not less important to those who use published financial
statements of a company. Potential creditors always remain eager to know about the liquidity
position of concern before making any transaction.

They also like beware of the profit earning capacity of the concern.

Cash Flow Statement helps in both cases. Bank & Tax authority also depend very
much on the Cash Flow Statement.

METHODS OF PREPARING THE CASH FLOW

STATEMENTS

Operating activities are the main source of revenues and expenditures, thereby cash
flow from the same needs to be ascertained. The cash flow can be reported through two ways.

56
DIRECT METHOD

Direct Method discloses the major classes of gross cash receipts and cash payments.

INDIRECT METHOD

 Indirect method that has the net profit or loss adjusted for effects of
transactions of Non-Cash nature.
 Any deferrals or accurals of past or future operating cash receipts and
 Items of income or expenses associated with investing or financing cash
flows.

DIRECT METHOD

In the direct method the major heads of cash inflows and outflows (such as cash
received from trade receivables, employee benefits, expenses paid, etc.,) are to be considered.

As the different line items are recorded on accrual basis in the statement of profit and
loss, certain adjustments are to be made to convert them into cash basis such as the following.

 Cash Receipts from Customers = Revenue from Operations + Trade Receivables in the
beginning – Trade receivables in the end.
 Cash Payments to Suppliers = Purchases + Trade Payables in the beginning – Trade
Payables in the end.
 Purchases = Cost of Revenue from Operations – Opening Inventory + Closing Inventory.
 Cash Expenses = Expenses on Accrual Basis + Prepaid Expenses in the beginning and
Outstanding expenses in the end – Prepaid Expenses in the end and Outstanding
Expenses in the Beginning.

INDIRECT METHOD

Indirect Method of ascertaining Cash Flow from Operating Activities begins with the
amount of net profit/loss. This is so because statement of profit and loss incorporates the effects
of all operating activities of an enterprise. However, statement of profit and loss or prepared on
accrual basis (and not on cash basis). Moreover, non-operating items such as interest paid,
profit/loss on sale of fixed assets, etc., and non-cash items such as depreciation, goodwill to be

57
written off etc., therefore, it becomes necessary to adjust the amount of net profit/loss as
shown by statement of profit an d loss for arriving at cash flows from operating activities.

THREE PART CASH FLOW STATEMENT PRESENTS THE

TRUE FINANCIAL PICTURE OF CONCERN

CASH AND CASH EQUIVALENT

 According to section 6 of the International Accounting Standards – 7 cash means cash in

hand and cash at bank.
 Cash in hand means cash in notes and coins which are kept in the cash box.
 Besides, prize Bond, Negotiable Instruments, Postal Order, Un-Deposited Check, Bank
Draft, Bank Pay Order are also considered as cash.
 Bank deposit means cash deposited into the bank payable on demand.

In section 6 it is further stated that cash and cash equivalent include short-term highly
liquid assets easily convertible into cash and measurable regarding money. So cash equivalents
are

 Convertible into cash within three months.

 Highly Liquid and capable of paying debts.
 Easily convertible into cash and risk-free.

CASHFLOW IS NOT PROFITABLE

People often mistakenly believe that a cash flow statement will show the profitability of a
business or project. Although closely related, cash flow and profitability are different. A cash
flow statement lists cash inflows and cash outflows while the income statement lists income and
expenses. A cash flow statement shows liquidity while income statement shows profitability.

Many income items are also cash inflows. The sales crop and livestock are usually both
income and cash inflows. The timing is also usually the same as long as a check is received and
deposited in your account at the time of sale. Many expense items are also cash outflow items.
The purchase of livestock feed (cash method of accounting) is both an expense and a cash
outflow item. The timing is also the same if a check is written at the time of purchase.

58
 However, there are many cash items that are not income and expense items and vice versa.
For example, the purchase of a tractor is a cash outflow if you pay cash at the time of purchase as
shown. If money is borrowed for the purchase using a term loan, the down payment is a cash
outflow at the time of purchase and the annual principle and interest payments are cash outflows
each year.

The tractor is a capital asset and has a life of more than year. It is included as an expense
item in the income statement by the amount it declines in the value due to wear and tear and
obsolescence. This is called “Depreciation”. The cost of depreciation is listed every year. In the
account Rs. 70,000 tractors are depreciated over seven years at the rate of 10% per year.

Depreciation calculated for income tax purposes can be used. However, to more accurately
calculate net income, a realistic depreciation amount should be used to approximate the actual
decline in the value of the machine during the year.

Where the purchase is financed the amount of interest paid on the loan is included as an
expense along with depreciation, because interest is the cost of borrowing money. However,
principle payments are not an expense but merely a cash transfer between you and your lender.

59
DATA ANALYSIS AND INTERPRETATION OF THE STUDY

HINDUSTHAN PETROLEUM CORPORATION LTD.,

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2020

(In crores)

Particulars 2019-20

A. Cash Flow From Operating Activities

Net Profit/(Loss)before Tax & Extraordinary items 1,572.59

Adjustments for :

Depreciation and Amortization 3,304.39

Interest income from HBL pref shares -

(Profit)/Loss on Sale/write off of Fixed Assets/ CWIP 14.44

Amortization of capital grant (0.19)

Spares written off 3.74

Provision for diminution in value of investments (238.33)

Borrowing Cost 884.00

Exchange rate difference on loans 131.60

Provision for Doubtful Debts & Receivable 36.42

Interest Income (584.61)

Share of Profit from PII (0.02)

Dividend received (82.07)

(Profit)/Loss on sale of short term investment 235.13

60
Operating Profit before Working Capital Changes {Sub Total - (i)} 4,154.49

Increase /( Decrease) in Working Capital :

Trade Receivables (253.05)

Other Receivables (1,839.56)

Inventories (4,046.80)

Trade and other Payables 3,551.84

Sub Total - (ii) (2,587.57)

Cash generated from operations (i) + (ii) 1,566.92

Direct Taxes / FBT refund / (paid) - (Net) (564.50)

Cash Flow before extraordinary items 1,002.42

Extraordinary items -

Net Cash from Operating activities (A) 1,002.42

B. Cash Flow From Investing Activities

Purchase of Fixed Assets (including Capital Work

in Progress / excluding interest capitalized (4,610.07)

Sale of Fixed Assets 99.80

Purchase of Investment (708.80)

Investment in Subsidiary (105.52)

Sale Proceeds of Oil bonds 1,250.86

Interest received 609.84

Dividend received 82.07

Share of profit from PII 0.02

61
Net Cash from Investing activities (3,381.80)

C. Cash Flow From Financing Activities

Long term loans raised/(repaid) 3,012.77

Short term loans raised / (repaid) 28.03

Interest Paid on Loans (893.25)

Dividend paid (including dividend distribution tax (473.14)

Net Cash from Financing activities 1,674.41

(NET INCREASE / (DECREASE) IN CASH AND CASH (704.97)

EQUIVALENTA+B+C)

INTREPRETATION

Cash flow statements for the year end 31st march,2020.

1. CASH FLOW FROM OPERATING ACTIVITIES

The Net Cash Flow from Operating Activities is Rs. 1,002.42 crores as the Net Profit
before Tax and Extraordinary Items is Rs. 2,346.14 crores. Which is adjusted for prior period
adjustments, Depreciation is Rs. 1,406.95 crores, Interest is Rs.893.25 crores and Income Tax is
Rs.729.97 crores, The Operating Profit Before Working Capital Changes is Rs. 4,154.49 crores.
There is cash outflow because of the increase in other Current Liabilities and Cash Credit Loans.
There is cash outflow because of increase in provisions. Their Interest paid during the year
Rs.893.25 crores. So the net cash flow from operating activities is Rs.482.56 crores.

2. CASH FLOW FROM INVESTING ACTIVITIES

There is huge cash outlay by way of purchase of fixed assets of Rs. 4,610.07 crores. The
cash inflow by way of sale of fixed assets Rs.99.870 crores. So, the net cash used in investing
activities is Rs. 3,381.80.

62
 3. CASH FLOW FROM FINANCING ACTIVITIES

There is cash outflow by way of payment of dividends including tax on dividends

Rs.473.14 crores. There is cash inflow by way of proceeds from long term and other borrowings
and Rs. 3,012.77 crores. Cash outflows by way of payment of long term borrowings Rs.873.25
crores. The net cash used in financing activities Rs. 1,674.41 crores. So, the cash balance and
equivalents during the year 2019-2020 from operating, investing, and financing activities
Rs.704.97 crores.

63
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2019
(In crores)
Particulars 2018-19
Cash Flow From Operating Activities
Net Profit/(Loss)before Tax & Extraordinary items 2,125.03
Adjustments for :
Depreciation prior period 3.52
Depreciation / Amortization 1,164.40
Raw Material & Packages (4.70)
(Profit)/Loss on Sale/write off of Fixed Assets/ CWIP (1.66)
Amortization of capital grant (0.19)
Spares written off 1.82
Provision for diminution in value of investments 703.73
Borrowing Cost 903.75
Exchange rate difference on loans 102.24
Provision for Doubtful Debts & Receivable 20.47
Interest Income (699.37)
Share of Profit from PII (0.62)
Dividend received (46.26)
(Profit)/Loss on sale of short term investment 56.75
Operating Profit before Working Capital Changes {Sub Total - (i)} 4,328.91
Increase /( Decrease) in Working Capital :
Trade Receivables (217.29)
Other Receivables (633.36)
Inventories (3,788.00)
Trade and other Payables 3,985.70
Sub Total - (ii) (652.95)
Cash generated from operations (i) + (ii) 3,675.96
(394.56)
Direct Taxes
3,281.40
Extraordinary items _
Net Cash from Operating activities 3,281.40
B. Cash Flow From Investing Activities
Purchase of Fixed Assets (3,617.98)

64
Sale of Fixed Assets 7.98
Purchase of Investment (3,461.40)
Investment in Subsidiary (100.00)
Sale Proceeds of Oil bonds 5,213.52
Interest received 756.78
Dividend received 46.26
Share of profit from PII 0.62
Net Cash from Investing activities (1,154.22)
C. Cash Flow From Financing Activities
Long term loans raised/(repaid) 538.00
Short term loans raised / (repaid) (1,516.05)
Interest Paid on Loans (1,122.39)
Dividend paid (including dividend distribution tax) (209.27)
Net Cash from Financing activities (2,309.71)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS(A+B+C) (182.52)

INTERPRETATION

Cash flow statement at the end of year 31st march,2019.

1. CASH FLOW FROM OPERATING ACTIVITIES

The net cash flow from operating activities is Rs. 3,281.40 crores as the net profit of
and before tax and extraordinary items is Rs. 2,125.03 crores, which is adjusted for prior period
adjustments, Depreciation Rs. 1,164.40, Interest Rs.699.37 and tax on income. The operating
before the working capital changes is Rs. 4,320.91 crores. There is cash outflow because of the
decreases in other current assets and loans advances. There is cash inflow by way of increase in
current liabilities and cash credit loans. There is cash out flow because of decreases in
provisions. Their interest paid during the year Rs.652.95 crores and the income tax paid during
the year Rs.394.56 crores. So the net cash flow from operating activities is Rs. 3,281.40 crores.

2. CASH FLOW FROM INVESTING ACTIVITIES

65
 There is huge cash outlay by way of purchase of fixed assets of Rs. 3,617.98 crores.
The cash inflow by way of sale fixed assets Rs.7.98 crores. So, the net cash used in investing
activities Rs. 1,154.22.

3. CASH FLOW FROM FINANCING ACTIVITIES

There is cash out flow by way of payments of dividends including tax on dividends
Rs.209.27 crores. There is cash inflow by way of proceeds from long term and other borrowings
Rs,538.00 and cash outflow by way of payments of long term borrowings Rs.1516.05 crores.
The net cash used in financing activities Rs2,309.71 crores. So the cash balance and cash
equivalents during the year 2018-19 from Operating, Investing and Financing Activities
Rs.182.52 crores.

66
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2018

Particulars 2017-2018
Cash flow from operating activities:
Net Profit before Tax & Extraordinary items 712.23
Adjustments for :
Depreciation prior period 0.15
Depreciation / Amortization 981.29
Raw Material & Packages (0.16)
Exchange rate variation included in Fixed Assets/CWIP -
Loss/(Profit) on Sale/Write off of Fixed Assets/ CWIP 7.46
Amortization of capital grant (0.19)
Spares written off 1.88
Provision for diminution in value of investments (75.28)
Borrowing Cost 2,082.84
Exchange rate difference on loans (165.02)
Oil Bond receivable (2,037.89)
Provision for Doubtful Debts & Receivables 7.71
Interest Income (412.70)
Share of Profit from PII (0.82)
Dividend Received (36.84)
(Profit)/Loss on sale of long term investment -
(Profit)/Loss on sale of short term investment (36.57)
Operating Profit before Working Capital Changes 1,028.09
Increase /(Decrease) in Working Capital :
Trade Receivables (537.03)
Other Receivables 2,881.84
Inventories 3,225.16
Trade and other Payables (723.83)
4,846.14
Cash generated from operations 5,874.23
Direct Taxes / FBT refund / (paid) - Net (33.47)
Cash Flow before extraordinary items 5,840.76
Extraordinary items -
Net Cash from operating activities 5,840.76
Cash Flow From Investing Activities
Purchase of Fixed Assets (including Capital Work in Progress (1,927.45)
excluding interest capitalised)

67
Sale of Fixed Assets 51.22
Purchase of Investment (Including share application money pending (16,306.22)
Investment in Subsidiary (CREDA - HPCL Biofuel Ltd.) (7.83)
Sale Proceeds of Oil bonds 9,275.49
Interest received 281.01
Dividend Received 36.84
Share of profit from PII 0.82
Net Cash from investing activities (8,596.12)
Cash Flow From Financing Activities
Proceeds from Calls in Arrears (Net) -
Interest received on calls in arrears -
Dividend paid on forfeited shares -
Long term loans raised/(repaid) (65.00)
Short term loans raised / (repaid) 5,667.52
Interest paid on Loans (2,208.50)
Dividend paid (including dividend distribution tax) (119.37)
Net Cash from financing activities 3,274.65
Net Increase / (Decrease) in Cash and Cash Equivalents 519.29

INTERPRETATION
Cash Flow Statement of the year 2018 of Hindustan Petroleum Corporation Limited
determines.

1) CASH FLOW FROM OPERATING ACTIVITIES

The net cash flow from Operating Activities is Rs. 5,840.76 crores as the net profit and
before tax and extraordinary items is Rs.712.23 crores, which is adjusted for prior period
adjustments, Depreciation Rs.981.29, Interest Rs.412.70 and tax on income. The operating before
the working capital changes is Rs.1,028.09 crores. There is cash outflow because of the increases
in other current assets and loans advances. There is cash inflow by way of decrease in current
liabilities and cash credit loans. There is cash out flow because of decreases in provisions. Their
interest paid during the year Rs.723.83 crores and the income tax paid during the year
Rs.0.15crores. So the net cash flow from Operating Activities is Rs. 5,840.76crores.

68
 2) CASH FLOW FROM INVESTING ACTIVITIES

There is huge cash outlay by way of purchase of fixed assets of Rs.1927.45crores. The
cash inflow by way of sale fixed assets Rs.51.22crores. So, the net cash used in investing
activities Rs. 8,596.12.

3) CASH FLOW FROM FINANCING ACTIVITIES

There is cash out flow by way of payments of dividends including tax on dividends
Rs.119.37crores. There is cash inflow by way of proceeds from long term and other borrowings
Rs.92.00 and cash outflow by way of payments of long term borrowings Rs. 5,667.52crores. The
net cash used in financing activities Rs. 3,274.65crores. So the cash balance and cash equivalents
during the year 2017-18 from Operating, Investing, and Financing Activities Rs.519.29crores.

69
CASHFLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2017
(In crores)
Particulars 2016-17
Cash flow from operating activities:
Net Profit before Tax & Extraordinary items 1,108.67
Adjustments for :
Depreciation prior period 5.59
Depreciation / Amortization 850.82
Raw Material & Packages -
Exchange rate variation included in Fixed Assets/CWIP 16.06
Loss/(Profit) on Sale/Write off of Fixed Assets/ CWIP 4.51
Amortization of capital grant (0.19)
Spares written off 0.08
Provision for diminution in value of investments 62.42
Borrowing Cost 766.10
Exchange rate difference on loans (93.91)
Oil Bond receivable (3,448.45)
Provision for Doubtful Debts & Receivables (5.23)
Interest Income (401.16)
Share of Profit from PII (0.72)
Dividend Received (24.48)
(Profit)/Loss on sale of long term investment (2.10)
(Profit)/Loss on sale of short term investment 202.20
Operating Profit before Working Capital Changes (959.80)
Increase /(Decrease) in Working Capital :
Trade Receivables (127.65)
Other Receivables 47.90
Inventories (3,921.96)
Trade and other Payables 3,351.34
(650.37)
Cash generated from operations (1,610.17)
Direct Taxes / FBT refund / (paid) - Net (119.76)
Cash Flow before extraordinary items (1,729.93)
Extraordinary items -
Net Cash from operating activities (1,729.93)
Cash Flow From Investing Activities
Purchase of Fixed Assets (including Capital Work in Progress /
excluding interest capitalised) (3,163.83)
Sale of Fixed Assets 20.54

70
Purchase of Investment (Including share application money pending (4,520.03)
allotment/Advance towards Equity)
Investment in Subsidiary (CREDA - HPCL Biofuel Ltd.) -
Sale Proceeds of Oil bonds 4,334.90
Interest received 444.04
Dividend Received 24.48
Share of profit from PII 0.72
Net Cash from investing activities (2,859.18)
Cash Flow From Financing Activities
Proceeds from Calls in Arrears (Net) 2.12
Interest received on calls in arrears 7.47
Dividend paid on forfeited shares (7.47)
Long term loans raised/(repaid) 232.08
Short term loans raised / (repaid) 5,865.64
Interest paid on Loans (788.39)
Dividend paid (including dividend distribution tax) (483.11)
Net Cash from financing activities 4,828.34
Net Increase / (Decrease) in Cash and Cash Equivalents
(A + B + C) 239.23

INTERPRETATION

Cash Flow Statement at the year-end 31st march,2017.

1) CASH FLOW FROM OPERATING ACTIVITIES

The net cash flow from Operating Activities is Rs. 1,729.93 crores as the Net Profit
before Tax and Extraordinary Items is Rs. 1,108.67crores, which is adjusted for prior period
adjustments, Depreciation Rs.850.82, Interest Rs.401.16 and tax on income. The operating before
the working capital changes is Rs.959.80crores. There is cash outflow because of the increases in
other current assets and loans advances. There is cash inflow by way of decrease in current
liabilities and cash credit loans. There is cash out flow because of decreases in provisions. Their
interest paid during the year Rs.650.27 crores and the income tax paid during the year
Rs.119.76crores. So the net cash flow from operating activities is Rs. 1,729.93 crores.

71
 2) CASH FLOW FROM INVESTING ACTIVITIES

There is huge cash outlay by way of purchase of fixed assets of Rs. 3,163.83 crores.
The cash inflow by way of sale fixed assets Rs.20.50 crores. So, the net cash used in investing
activities Rs. 2,859.18.

3) CASH FLOW FROM FINANCING ACTIVITIES

There is cash out flow by way of payments of dividends including tax on dividends
Rs.983.11crores. There is cash inflow by way of proceeds from long term and other borrowings
Rs.232.08 and cash outflow by way of payments of long term borrowings Rs. 5,865.64crores.
The net cash used in financing activities Rs. 4,828.34crores. So the cash balance and cash
equivalents during the year 2016-17 from Operating, Investing, and Financing Activities
Rs.239.23crores.

72
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2016

(In crores)
PARTICULARS 2015-16
A. CASH FLOW FROM OPERATING ACTIVITIES:

Net profit before Tax Extraordinary Items 1967.16

Adjustments for:
Depreciation/Amortization
Provision for assets under reconciliation no longer required 704.00
Loss on sale/write off of Fixed Assets/CWIP -----
Amortization of capital grant 3.41
Spares written off (0.19)
Provision for Diminution in the value of current Inv 4.87
Browsing Cost 99.30
Exchange on difference on loans 422.98
Provision for doubtful receivables written back ------
Provision for doubtful debts ------
Interest income 42.79
Share of Profit from PII (265.19)
Dividend received (0.95)
Profit/loss on sale of Oil bonds
(21.51)
20.03
Operating profit before working capital
Changes (increase)/Decrease in working capital 2976.70
Trade
(228.31)
receivables Other
95.25
Receivables
(292.98)
Inventories
1319.59
Trade and other payables
Cash generated from operations
893.55
Direct Taxes/FBT refund(paid) Net
3870.25
(82.74)
Cash flow before extraordinary items

3787.51
Extraordinary items ------

3787.51
Net Cash from operating activities (A)

73
 B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed assets (Inc. capital work in
Progress/excluding interest capitalized) (3851.02)
Sale of fixed assets 10.47
Purchase of investment(including share application money
Pending allotment/Adv. towards equity (5101.05)
Sale proceeds of Oil bonds 1930.70
Interest received 184.24
Dividend received 21.51
Share of profit from PII 0.95

Net cash from investing activities (B) (6804.20)

CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from calls in Arrear (Net) 0.48

Long term raised 1249.99
Fixed deposits/debenture repaid -----
Short term loans raised( repaid) 2586.41
Interest paid on loans (497.41)
Dividend paid(including Dividend Distribution tax) (347.90)
Capital grant against purchase of assets -----

Net cash from financing activities (C) 2991.57

Net increase/Decrease in cash and cash equivalents (25.12)

(A) + (B) + (C) + Net profit

INTERPRETATION

Cashflow statements for year-end 31st march,2016.

1) CASH FLOW FROM OPERATING ACTIVITIES

The net cash flow from Operating Activities is Rs.3787.51 crores as the Net Profit Before
Tax and Extraordinary items is Rs.1967.16 crores, which is adjusted for prior period adjustments,
Depreciation Rs.704.00, Interest Rs.265.19 and tax on income. The Operating before the
working capital changes is Rs2976.70 crores. There is cash outflow because of the

74
increases in other current assets and loans advances. There is cash inflow by way of decrease in
current liabilities and cash credit loans. There is cash out flow because of decreases in
provisions. There is no interest paid during the year and the income tax paid during the year
Rs.292.98 crores. So the net cash flow from operating activities is Rs.3787.51crores.

2) CASH FLOW FROM INVESTING ACTIVITIES

There is huge cash outlay by way of purchase of fixed assets of Rs.3851.02 crores. The
cash inflow by way of sale fixed assets Rs.10.47crores. So, the net cash used in investing
activities Rs.6804.20 crores.

3) CASH FLOW FROM FINANCING ACTIVITIES

There is cash out flow by way of payments of dividends including tax on dividends
Rs.347.90 crores. There is cash inflow by way of proceeds from long term and other borrowings
Rs.1249.99 and cash outflow by way of payments of long term borrowings Rs.2586.41crores.
The net cash used in Financing Activities Rs.2991.57crores. So the cash balance and cash
equivalents during the year 2015-16 from Operating, Investing, and Financing Activities
Rs.25.12. crores.

75
TABLE: 1
NET PROFIT BEFORE TAX & EXTRAORDINARY ITEMS
Particulars 2019-20 2018-19 2017-18 2016-17 2015-16

Profit Before Tax 2,346.14 2,125.03 712.23 1,108.67 1,967.16

Rs./ (Crores)

PROFIT BEFORE TAX (in

250
0
crores)
200
0 PROFIT
BEFORE
150 TAX
0 (in crores)

100
0

50
0

0
2019- 2018- 2017- 2016- 2015-
20 19 18 17 16

ANALYSIS AND INTERPRETATION OF NET PROFIT BEFORE TAX

In the year of 2019-20 and 2015-16, it is clear that NP is 2411.79 & 1967.16. Between
these years there is a lot of variations in net profit before Tax.

The seasons can be analyzed for the increase in net profits is:

 Loss on sale of assets, the exchange rates and provision for doubtful debts is very less
comparing rest year as such. The variation Net Profit before Tax for its decline it in the
year 2014-2015 i.e., (604.59).

 Borrowing cost is more which charges high interest and other statutory and compelling
reasons.

76
TABLE: 2

NET CASH FROM OPERATING ACTIVITIES.

2019-20 2018-19 2017-18 2016-17 2015-16

Net Cash Flows from Operating 1,002.42 3,281.40 5,840.76 1,703.55 3,787.51
Activity

7,000.00
NET CASH FROM OPERATING ACTIVITIES
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
Net cash from
operating activities

1,000.00
0.00
-1,000.00 2019-20 2018-19 2017-18 2016-17 2015-16
-2,000.00
-3,000.00

ANALYSIS AND INTERPRETATION OF OPERATING ACTIVITIES

In the year 2019-2020, Operating Activities are1, 002.42and in the 2016 it is 3787.51.
Variation can be seen more in 20015-14 i.e., (-1,703.55) fluctuations occurred due to

 Borrowing costs was almost doubled in 06, high rate of depreciation and write off fined
assets.

 In 2017 and 2019 the increase is positive as much cash is needed to meet the operational
expenses and Company adopted a good strategy for getting excess of cash flow.

77
TABLE: 3
NET CASH FROM INVESTING ACTIVITIES.
2019-20 2018-19 2017-18 2016-17 2015-16

Net Cash Used in Investing 3,381.80 1,154.22 8,596.12 2,859.18 6,804.20

Activity

8,596.12
9,000.00
8,000.00
7,000.00 6,804.20
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
3,381.80
1,000.00 2,859.18
0.00

1,154.22

2019-20 2018-19 2017-18 2016-172015-16

ANALYSIS AND INTERPRETATION OF INVESTING ACTIVITIES

Cash flow from investing activities can be seen from 2019-2020 in which it was
(3,381.80) in 2019-20 whereas it is (6804.20) crores in 2016-17.

Reasons contributed for the analysis for occurrence of deficit is because

 The sale of fixed assets and oil bonds naturally reduces the profit.
 High depreciation value of fixed assets.
 High operational rest and lack of cash inflows. These led to poor investment activity for
the company.
 Investing activities are gradually increasing and it was 20 times more in 2020 from 2015
onwards.

78
TABLE: 4

NET CASH FROM FINANCE ACTIVITIES

2019-20 2018-19 2017-18 2016-17 2015-16

Net Cash Used in Financing 1,674.41 2,309.70 3,274.65 4,801.96 2,991.57

Activity

Net cash from Finance Activities (in crores)

6,000.00

5,000.00

4,000.00
3,000.00
Net cash from
2,000.00Finance
Activities (in
1,000.00crores)
0.00

2019-20 2018-19 2017-18 2016-17 2015-16

-1,000.00

-2,000.00
-3,000.00

ANALYSIS AND INTERPRETATION OF FINANCING ACTIVITIES

The net cash from financing activities were (1,674.41) in 2019-20 and 2991.57 in 2015-
16. From above graph, it is clear that year 2018-19 and 2017-18 financing activities were more
because of

 Increase of short term loan raised.

 Interest paid on loans was loss.

The results are more cash flows. In year 2019-20, 17-15, 16-17 financing activities was
negative due to Fixed Deposits and debentures repaid was lesser.

79
TABLE: 5

NET CASH & CASH EQUIVALENTS

Particulars 2019-20 2018-19 2017-18 2016-17 2015-16

Net Inc/Dec in Cash and Cash -704.97 -182.52 519.29 239.23 -25.12
Equivalent

NET CASH & CASH EQUIVALENTS (in crores)

600
400

200
NET CASH
& CASH EQUIVALE
0
NTS (in crores)
19-2 18-1 2017-18 2016-17 2015-16
-200

-400
-600

-800

ANALYSIS AND INTERPRETATION OF CASH AND CASH

EQUIVALENTS

Cash and cash equivalents were -704.97 in 2019-2020 and (-25.12) in 2015-16.

Lot of variation impact because of all the 3 activities Financing, operating & investing activities

The major variances may be attributed because of operating activities. The reasons can be
 High rate of depreciation.

 Writing off on fixed assets.

 Changes in Borrowings costs etc.

80
 SUMMARY
The area of financial management has undergone far reaching changes over time. The
finance functions assume a lot of significance in the modern days in the view of increased size of
business operations and growing complexities associate thereto. A firm performs finance
function simultaneously and continuously in the normal course in the business. They do not
necessarily occur in a sequence. Finance function call for kill full planning, control and
execution of business activities.

The financial statements provide a summarized view of the financial position and
operations of the firm. Therefore, much can be learned about the organization by a careful
examination of its financial statements, as they are invaluable documents regarding the financial
performance of an organization. Thus analysis of financial statements is an important aid to
financial analysis. The financial statements to obtained better understanding of the firm’s
position and performance.

HPCL is being a profitable organization is still facing a huge problem from the foreign
competitors. The liberation, privatization, globalization policy has opened the floodgates and has
allowed the foreign competitors to take its market in the nation. Financial statement provides
summary of the accounts of a business enterpriser. But the accounts stated in balance sheet and
income statement require treatment in order to assess the financial soundness of the enterprise.

About three decades ago, the scope of financial management was confined to rising of
funds, whenever needed and little significance used to be attached to financial decision making
and problem solving. As a consequence, the traditional finance texts were structured around this
theme and contained description of the instruments and institutions of raising funds and of the
major events, such as promotion, reorganization, readjustment, merger, consolidation etc., when
funds were raised.

In the mid-fifties, the emphasis shifted to the judicious utilization of funds. The modern
thinking in financial management accords far managers do not perform the passive role of
scorekeepers of financial data and top management areas and play dramatic role in solving
complex management problems. They are now responsible for shaping the fortunes of the
enterprise and are involved in the most vital management decision of allocation of capital it is
their duty to ensure that the funds are raised most economically and used in the most efficient
and effective manner. Because of this change in emphasis, the descriptive treatment of the
81
subject of financial management is being replaced by growing analytical content and sound
theoretical underpinnings.

Financial management is that managerial activity, which is concerned with the planning
and controlling of the firm’s financial resources, it’s activities, and the mix of debt and equity
which is nothing but it’s Capital structure. The financial manager must strive to obtain the best
financing mix or the optimum capital structure for his or her firm.

The analysis of financial statements is, thus, an important aid to financial analysis. Users
of financial statements can get further insight about financial strengths and weaknesses of the
firm if they properly analyze information reported in these statements. The future plan of the firm
should be laid down in view of the firm’s financial strengths and weakness.

To evaluate the financial position, the basic idea is to gain through understanding how
money in any organization whether big or small and for that matter a rational allocation of funds
available at its disposal of with primary motive, the study has been undertaken to achieve the
predetermined objectives. The basic scope of the study is limited to the Budgetary Control
Techniques / procedures adapted by the department. The study is based on ``secondary data
``which constitutes that already exists somewhere.

Investors, creditors and managers use cash flow information to make decisions about a
company’s ability to meet obligations, or to take advantage of business opportunities.
Information about a current period’s cash flows provides a basis for predicting the amount,
timing, and certainty of future cash flows. Cash flow information is also useful in evaluating the
liquidity, solvency, and financial flexibility of a company. Liquidity refers to the ability of a
company to pay its current liabilities with existing liquid assets. Solvency is the ability to pay all
debts as they come due. A company may wish to raise money by issuing shares, for instance.
Financial flexibility relates to the ability of a company to use its resources to adapt to change and
take advantage of business opportunities as they arise.

A cash flow statement (formerly known as a statement of changes in financial position) is

designed to help a user make these evaluations and to answer specific questions such as, what
accounts for the difference between cash and cash equivalents at the beginning of the year and at
the end of the year, what was done with the cash raised from the sale of bonds or shares, How did
the business finance its purchases of machinery or other capital assets, How was it possible

82
to pay dividends when the business reported a net loss on its income statement, Does the firm
have the ability to pay off the mortgage on its office building.

When planning the short or long-term funding requirements of a business, it is more

important to forecast the likely cash requirements than to project profitability. The difference
between sales and costs within a specified period, is a vital indicator of the performance of a
business, the generation of a profit does not necessarily guarantee its development, or even the
survival. Bear in mind that more businesses fail for lack of cash flow than for want of profit.

Cash plays a very important role in entire economic life of a business this movement of
cash is of vital importance to the management. A firm need to make payments to its suppliers, to
incur day to day expenses and to pay salaries wages, interest and dividend etc. In fact, what
blood is to a human body, cash is to a business enterprise? It is very essential for a business to
maintain adequate balance of cash. But many times, a concern operates profitably and yet it
becomes very difficult to pay taxes and dividend. This may be because:

 Although huge profit has been earned yet cash may not have been received.
 Even if cash has been received it may have drained out. (Used) for some other purposes.
 The HPCL origin of oil industry in India can be traced back to the last part of 19th century
when petroleum was discovered in Digboi in north east.

Hindustan petroleum is India’s 2nd largest oil refiners and oil companies for nearly 20%
of the country’s total refining capacity. The company has two major refineries one in Mumbai,
the other is in southern India city of Visakhapatnam and produces lubricating oil, aviation fuel,
greases and light diesel oil.

Recent trends of Visakha refinery is in process of establishing environmental management

system (EMS) for its operating complex and to get it certified to the ISO 14001 standard. The
corporation produces a range of petroleum products and serves all sectors of the economy:
industry, agriculture, transport, domestic and public utilities and also a major concern like
railways, power plant, steel plant, defense, fertilizer plants etc.

Hence, a cash flow statement is of primary importance to financial management. This

statement helps the organization like HPCL to evaluate and meets various obligations and shown
good profits.

83
 At the same time, it serves as a valuable tool of financial analysis it reveals the values of
changes in cash balances between two balances

Cash Flow Statement reports the cash receipt cash payments and net changes in cash
resulting from operating, investing and financing activities during a period Cash inflows and
outflows are the key elements in the operating cycle of an enterprise and are of most fundamental
events upon which accounting measurement are based and upon which investors and creditors
bases their decision. The data is collected from annual reports, accounts manager and other
employees of finance department.

The main objective of this is to study and understand the conceptual framework of cash
flow statement in general, analyzing the data and presenting the summary, findings &
conclusion.

Fuel oils presently up the majority of India's refinery output. Total refined product output
from India's refineries has raised about 60% in the past decade. Oil accounts for a large
percentage of the world's energy consumption, ranging from a low of 32% for Europe and Asia
up to a high of 53% for the Middle East.

Hindustan Petroleum Corporation Limited (HPCL) came into being in 1974 after the
takeover and merger of the Erstwhile ESSO and Lube India undertakings. Caltex was merged
with HPCL in the domestic LPG market was taken over and merged with HPCL in 1979. HPCL
is a listed Public Sector, India's second largest oil refining and accounts for more than 20% of the
country's total refining capacity.

Cash flow statement is additional information to user of financial statement. Cash flow
statement of listed companies shall be presented only under the indirect method as prescribed in
AS 3. It helps the investor’s judge whether the company is financially sound. Two approaches
are there, income statement approach & book approach. There are three elements of it i.e.
operating, investing and financing activities.

It can be classified into: operating, investing and financing. The operating activities
shows it is sufficient to repay the debt, pay dividends and invest or not without the external
funds. It represents the net increase of decrease in cash form the operations. The investing
activities includes: that paid and received for property, plant and equipment and other non-

84
current assets, interest and dividends received on investments. The financing activities comprise
receipts or repayments of principal from or to external providers of finance.

HPCL continually invests in innovative technologies to enhance the effectiveness of

employees and bring qualitative changes in service. Business Process Re-Engineering exercise,
creation of Strategic Business Units, ERP implementation, Organizational Transformation,
Balanced Score Card, Competency Mapping, benchmarking of refineries and terminals for
product specifications, ISO certification of Refineries and Supply Chain Management are some
of the initiatives that broke new grounds.

HPCL has successfully integrated Information Technology in its activities at different

levels. The Enterprise Resource Planning (ERP) system is now operational on J.D. Edwards, an
oracle product, across the Corporation. So overall performance of the company is excellent.
Which company has to maintain by providing best services to internal as well as external
customer by adopting latest technology, good strategy, with human talents etc.

HPCL Corporation continues to adopt the best practices of Corporate Governance to

ensure transparency, integrity and accountability in its functioning. The Corporate Governance
Report highlighting these endeavors has been incorporated as a separate section that form part of
the Annual Report for the financial year 2019-20.

HPCL Corporation has compiled with provisions relating to the constitution of Internal
Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressed) Act,2013. 23 workshops were organized across the
Corporation during the financial year 2019-20 to educate employees on the subject.

In terms of Proviso to Section 136(1) of the Companies Act, 2013, your Corporation will
place separate audited Financial Statements in respect of each of its Subsidiary Company of its
websites and also provide a copy of separate audited Financial Statements in respect of each of
its Subsidiary Companies to any Shareholder of the Corporation who seeks the same. The
Financial Statements of the Subsidiary Companies will also have kept open for inspection at the
registered offices of the Corporation the respective Subsidiary Companies. Pursuant to provisions
of section 129(3) of the Companies Act, 2013 a separate statement containing salient features of
the Financial Statements of Subsidiary/ Associate/ Joint Venture Companies in FORM AOC-1 is
attached along with Financial Statements.

85
 Performance evaluation of board, its committees and individual directors your
Corporation, being a Government Company, the performance evaluation of the performance of
the Corporation, its Board and indirectly its Committees are carried out by the Administrative
Ministry, i.e. Ministry Of Petroleum and Natural Gas (MOP&NG) through the process of
Memorandum of Understanding entered into for each financial year. Further there is also
performance evaluation of Functional Directors by MOP&NG. The compliance to Section 134(3)
(p) is exempted by virtue of MCA Notification dated June 05, 2015 for Government companies
as Performance Evaluation of Directors is carried out by MOP&NG as per its evaluation
methodology.

All Independent Directors have given a declaration that they meet the criteria of
independence as laid down under Section 149(6) of Companies Act, 2013 and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015. A statement of declaration
required under Section 149(7) has been obtained from all the Independent Directors.

HPCL Corporation, being a Government Company is exempted to furnish information

under Section 134(3)(e) of the Companies Act, 2013 vide MCA Notification dated on June 05 th,
2015. Opinion of Board regarding integrity, Expertise and Experience (including the proficiency
) of the Independent Director appointed during the year. HPCL Corporation, being a Government
Company, under the administrative control of Ministry of Petroleum and Natural Gas
(MOP&NG). The power to appoint Directors (including Independent Directors) vests with
Government of India.

The Financial Statements are prepared in accordance with Indian Accounting Standards
(Ind AS) notified under Section 133 of the Companies Act, 2013 (“Act”) read with Companies
(Indian Accounting Standards) Rules, 2015; and other relevant provisions of the Act and Rules
thereunder. The Financial Statements are prepared under historical cost convention basis, except
for certain assets and liabilities measured at fair value. The Corporation has adopted Ind AS in
accordance with Ind AS 101 (First time adoption of Indian Accounting Standards). The transition
was carried out from Accounting Standard as prescribed under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014, (previous GAAP). The Corporation’s
presentation currency and functional currency is Indian Rupees. All figures appearing in the
Financial Statements are rounded off to the nearest Crore (Crore), except where otherwise stated.

86
 Depreciation on Property, Plant & Equipment is provided on straight line method. In
accordance with requirements prescribed under Schedule II of Companies Act, 2013, the
Corporation has assessed the estimated useful lives of its Property, Plant & Equipment and has
adopted the useful lives and residual value as prescribed in Schedule II except for the following
which are based on internal technical assessment: Useful Life: Plant and Machinery relating to
Retail Outlets (other than Storage tanks and related equipment) 15 years Cavern Structure 60
years LPG cylinders & regulators (excluding cylinders held for sale) 15 years Residual Value: In
cases of LPG Cylinders & pressure regulators and Catalysts having Precious Metals, with due
consideration to expected realization, a higher residual value is considered.

Intangible assets are carried at cost net of accumulated amortization and accumulated
impairment losses, if any. Internally generated intangibles, excluding development costs, are not
capitalized and the related expenditure is reflected in Statement of Profit and Loss in the period
in which the expenditure is incurred. Development costs are capitalized if technical and
commercial feasibility of the project is demonstrated, future economic benefits are probable, the
Corporation has an intention and ability to complete and use or sell the asset and the costs can be
measured reliably.

Assets where entire output generated is committed to be sold to a public sector entity
(including Government body) for almost entire useful life of the asset are classified as intangible
assets as per the requirements of Ind-AS and are amortized (after retaining the residual value, if
applicable) over their useful life. In cases where, the Corporation has constructed assets and the
Corporation has only a preferential right to use, these assets are classified as intangible assets and
are amortized (after retaining the residual value, if applicable) over their useful life or the period
of the agreement, whichever is lower.

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible
assets with finite lives are amortized on straight line basis over their useful life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortization period and the amortization method for an intangible asset with a finite useful life
are reviewed at each financial year end. The amortization expense on intangible assets with finite
lives and impairment loss is recognized in the statement of Profit & Loss.

87
 Intangible assets with indefinite useful lives, such as ‘right of way’ which is perpetual
and absolute in nature, are not amortized, but are tested for impairment annually. The useful lives
are reviewed at each period to determine whether events and circumstances continue to support
an indefinite useful life assessment for that asset. If not, the change in useful life from indefinite
to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite
life is recognized in the Statement of Profit and Loss.

88
 FINDINGS

 The current figure of long term loan raised shows the highest percentage increased by
727.69% as compared to last two years, which was in decreasing order from 81.43% to
71.99%.

 In 2016-2017 the net increase in cash is 5.04,the cash opening balance is 117.30 and cash
closing balance is 704.97. In this year the main sources of cash is 233.73.i.e cash flow
from financing activities. Net cash flow from operating activities is 1,002.42.

 At the end of the financial year of 2015-16, cash inflows are increased by Rs 4,550.21 As
compared to the year 2011 to 2013, the Issue of Capital is an increasing order, but there
are no changes of it since last two recent years i.e. 2015-2016 & 2016-2017.

 The net cash used in Financing Activities has been decreased by 170.53% in the year
2015-16, as compared to the last year 2014-15.

 The last 5-years figure of net cash from Operation Activities show that company’s
liquidity position is standard which has been increased by 86.57% in 2014-15 to 2015-16
as compared to previous year which is decreased by 200.64%.

 The sale of fixed assets has been decreased in this current year 2015-16 by 84.42% as
compared to the last years which are in increasing order.

 In the current Year 2015-16, the Loss on Sale of Fixed Assets has decreased by 122.25%
as compared to previous year 2014-15.

 There have not been any changes in Amortization of intangible Assets since 2013-14 to
2015-16. which shows organization owes to others. Organization has to pay the debt
gradually where the debt has not paid.

 The purchase of fixed assets has been increased by 87.70% as compared to the last two
years by 17.84% & 39.07% in 2013-14 & 2014-15 respectively which is in decrease.

89
 SUGGESTIONS

 It is suggested that sale obsolete Assets at an earlier date could fetch more rate.
 It is reasonable to take calculated risks with a positive approach to meet cut throat
competition in era of Globalization.
 Management can increase market share by following other marketing strategies to
develop this market.
 We can suggest as a matter of policy the sale of anything must cash a reasonable margin
instead of getting losses.
 The company can earn operating profits when the management follows a competitive
strategy to get maximum profits.
 If the company could not make use of the inventory, it is an unnecessary block of capital
money.

90
91