PROJECT FINANCE FOR PRRPL AND FINANCIAL ANALYSIS OF IOCL AND ITS PIPELINE DIVISION

By:

Parul Midha PGD-FM/09/007

This Presentation Entails :

Research Methodology Industry Profile Company Profile Pipeline Division Project Finance-PRRPL Financial Analysis-IOCL Financial Analysis-Pipeline Division Contribution to IOCL-Pipeline Division Recommendations Learning

Research Methodology
  

Systematic way to carry out activities to achieve objectives. Research-Type :

Analytical Fundamental Historical

Objectives :
To determine the feasibility of the PRRPL To analyze the financials of IOCL and Its pipeline division

Scope :
Focus on Project finance Analysis of IOCL-Pipelines Financials.

Limitations :
Limited Availability of Time. No Opportunity to visit Refinery.

Research Methodology
Working with proper Consultation & Guidance, for maximum Contribution

What to do? How to do?

Wheres Problem, Info, or Knowledge ? Lets find out.

Data Processing

Data Collection Data Analysis

Leave the Footprints

Stimulate Mind & Knowledge to achieve Objectives.

Industry Profile
Petroleum : An oily liquid existing at various places in the Earths crust. Technology-Intensive & High Capital Investment 2% of world market-business worth USD 30bn 13% yearly growth, one of the fastest growing sector Global oil majors benchmark their production costs with OPEC Historically, Administered Pricing Mechanism (APM) regulation was in place, but now dismantled with presence of private players. Volatile Prices of Crude & Petro Products, dependency on international market

Industry Profile
Downstream

Sector

Public IOCL HPCL BPCL Private Reliance Shell Essar

Company Profile

1964>>125th-Fortune 2010 CITP - Values Rs.2,827.06 Cr - 2009

18th Largest petroleum company in the world. Indias largest Commercial Enterprise. Ranks 125th on the Fortune Global 500 listing (2010), & classified as A+ Grade PSU in India. 1959 : Began operation as Indian Oil Company Ltd. 1964 : IOCL was formed, with the merger of Indian Refineries Ltd. Golden Jubilee year 2009-10 :
48% Share in Petroleum Product Market 34% Share in Refining Capacity 71% Share in Downstream Sector Pipelines Capacity

IndianOil owns & operates 10 of India's 20 refineries with a combined refining capacity of 60.20 MMTPA . Cross-country pipelines network spans more than 10,329 kms. It operates the largest & widest network of fuel stations in India, numbering about 18,278. CMD: Mr. B M Bansal

Refinery

R&D

IOCL Divisions

Marketing

Pipelines

Pipeline Division


 

Has a network of 10,329km which serves as the backbone of refining and marketing operations It has a throughput capacity of 74.41 MMTPA. 3 Crude and 18 product pipelines with 10 more under implementation.
Product 5963Km (33.41MMTPA)
10329Km (74.41MMTPA)

Crude 4363Km (41 MMTPA)

Project Finance
 

What is it all about?? Project finance-A ten stage process

Need for a new Pipeline
II

Cost Estimates are prepared

III

Detailed Feasibility Report (DFR)

IV

Board Approval

Commissioning of Purchase Requisitions the project V

IX

Insurance
VIII

VI

Tenders are invited

Techno Bids and Commercial Bids are Project commences VII received

Project finance for PRRPL



     

PRRPL Paradip-New Sambalpur-RaipurRanchi Pipeline Need-Railway Tariffs. Length of the pipeline -1108 Km Products- MS,SKO & HSD Throughput projections till 2027. Minimum 33% as common carrier. Construction Schedule 36 months

   

  

Capital cost Rs1793 Cr (Inc Rs610 Cr FC) Annual Operating Cost Rs67 Cr Financing- Debt:Equity =1:1 Debt@11%p.a. (8instalments with 1yr Moratorium period) Working capital(Internal sources) IRR 16.8% (w/o IDC) > Hurdle Rate FINANCIALLY VIABLE

Comparative Ratio Analysis of IOCL, HPCL and BPCL



Profitability Ratios IOCL leads among the state owned oil companies in all the Profitability ratios consistently. Liquidity Ratios Due to the massive scale of operations it is way below its competitors in this category. Activity Ratios DTR and FATR are all below that of competitors.

Financial Analysis of Pipeline Division



Operating Profits Analysis

3000 2500 2000 1500 1000 500 0 295.23 2005-06 417.15 2006-07 435.32 2007-08 2008-09 Operating Profit 2009-10 2,514.37

(Rs in Crores)
2,827.06

Cost of Transportation (COT) Analysis

(Rs in Crores)

Financial Analysis of Pipeline Division


80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 39 54 47 Variable Cost Per MT 68 56

Variable Cost Per MT Analysis

(Rs per MT)

Particulars Total Variable Cost(Rs Crores) Throughput (TMT) Variable Cost Per MT(Rs)

2006 173 44832 39

2007 242 51222 47

2008 308 56686 54

2009 403 59171 68

2010 356 63992 56

Ratio Analysis- Specific to pipeline division

Contribution to IOCL-Pipelines Division

E-Payment Analysis (April,May10) SAP related workCost Estimates checked forPRRPL Hot Crane Restoration of Sanganer CBR Trichy Pipeline

Tenders-Commercial & Price bid evaluation for

Hot Crane Tender(Public) Restoration of Sanganer plant Tender(Limited)

Cntd..
Preparation of CapEx reports for April10 and May10 (MS Excel, Macros) Preparation of Schedules X and Schedule V (Balance sheet) of 2009-10. (Analysis of payments to foreign parties using SAP) Preparation of insurance Claim file(Sanganer plant Fire)

Recommendations
The controllable costs of Rs.76.88 Cr. in 2010 should be reduced, to increase profits. Current Ratio of 0.67:1 is low, so is quick ratio & stock-toworking capital ratio; it should be improved to amend IOCLs liquidity position. Working Capital of IOCL is negative Rs207Cr, because of CL>CA, therefore steps should be taken to turn it into positive. Either it should work on CA or CL or both. DTR of 48.15 is almost half that of competitors like BPCL. Measures should be taken by improving credit terms and standards. The ratios of operating costs, establishment costs per employees, per tonne are very high; it is very pertinent to bring them down.

Learnings

In IndianOil Corporation Ltd.Pipelines Division

Thank You