TITLE

Financial Analysis of Indian Oil Corporation Limited

Submitted to- Prof Kriti

Sap Id- 81022100433
Roll No- A218
BBA LLB Sem III
 ACKNOWLEDGMENT

I would like to express my special thanks to my Finance teacher “Prof Kriti Utreja” for her
able guidance and support in completing my research paper.
Secondly, I would also like to extend my gratitude to my parents and friends who were a
constant driving force in completing this paper

Riddhi Uniyal
BBA LLB (Sem II)

DECLARATION

I Riddhi Uniyal student of BBALLB 2nd year (Sem III) declare that the work in this
dissertation titled (“Financial Analysis of Indian Oil Corporation Limited
”) is a work of bonafide research carried out by me under the supervision and guidance of
Prof. Aditya Nagaraja and has not been previously submitted for any degree or diploma or
any other title of recognition.

Riddhi Uniyal
BBA LLB 2nd Year (Sem III)
ABSTRACT

Oil and gas are two of the most significant forms of energy, and they are
considered the lifeblood of every economy. In India, the oil and gas sector
accounts for over 40% of main energy sources. Oil and gas is one of India's six
major industries, having a strong forward connection to the whole economy.
India is the world's fifth largest user of petroleum and the ninth largest importer
of crude oil. According to the Ministry of Petroleum's records, the Indian
petroleum sector has played an important role in accelerating the country's
economic growth by contributing 15% of total GDP over the years. As a result,
the Indian oil and gas industry is strategically important and plays a crucial role
in influencing choices in all other sectors of the economy. Considering the
foregoing facts and numbers, the usefulness of the research becomes critical for
offering a better knowledge to the various stakeholders for their productive
investments. The current study will help to improve the knowledge and abilities
of many stakeholders such as shareholders, investors, suppliers, creditors,
government authorities, and others to readily assess and comprehend financial
statements.

INTRODUCTION

Financial analysis is the method and science of studying financial statements

and make inferences from them. Financial analysis is also known as financial
statement analysis and interpretation. It refers to the process of assessing the
firm's weaknesses and strengths by examining the link between the balance
sheet, profit and loss account, and other operational data. Financial analysis is
primarily concerned with the link between the many financial aspects in a firm
as revealed by a given set of statements, as well as the examination of these
elements as demonstrated in a collection of statements. Certain tools are
required for the financial analyst to apply to different financial elements. Certain
tools are required for the financial analyst to apply to various financial
elements. The ratio is a strong and extensively used tool. The numerical
relationship between two or more related variables/values is expressed by ratios.
This connection can be stated numerically as percentages, times, or proportions.
Accounting ratios serve to describe important relationships that exist between
statistics on a balance sheet, profit and loss statement, budgetary control system,
or any other aspect of the accounting organization. Ratio analysis is useful in
assessing a company's financial advantages and disadvantages in comparison to
other firms in the same industry. The research also shows if the company's
financial status has improved or worsened.

LITERATURE REVIEW

Indian Oil Corporation Limited is India's flagship national oil company, with
operations spanning the entire hydrocarbon value chain, from refining, pipeline
transportation, and marketing of petroleum products to crude oil and gas
exploration and production, natural gas marketing, and petrochemicals. It is the
top Indian corporation in the Fortune 'Global 500' index, rated 83rd in 2012,
with over 34,233 employees. Indian Oil Corporation Limited has been assisting
to satisfy India's energy demands for nearly half a century.

With a corporate aim of being India's Energy, Indian Oil Corporation Limited
ended the fiscal year 2011-12 with a sales revenue of Rs. 4,09,957 crore ($
85,550 million) and profits of Rs.3,955 crore ($ 825 million). Indian Oil
Corporation Limited's operations are strategically organised around business
verticals such as refineries, pipelines, marketing, research and development, and
business development in E&P, petrochemicals, and natural gas.

Indian Oil Corporation Limited is currently forging ahead on a well-defined

road map to achieve the next level of growth through vertical integration—
upstream into oil exploration and production (E&P) and downstream into
petrochemicals—as well as diversification into natural gas marketing and
alternative energy, as well as globalisation of its downstream operations. With
subsidiaries in Sri Lanka, Mauritius, and the United Arab Emirates (UAE),
Indian Oil Corporation Limited is looking for new business prospects in Asia
and Africa's energy markets. Indian Oil Corporation Limited and its subsidiary
(CPCL) hold about 49% of the petroleum products market, 31% of national
refining capacity, and 71% of downstream pipeline capacity in India.

OBJECTIVES

The objectives of this research paper is to analyse the Financial concepts of

Indian Oil Corporation. This will help us in concluding whether the company is
stable or not from the investors point of view. In this research paper various
accounting techniques are used like Gross profit ratio, Return on Investment and
Dividend payout Ratio which helps us in analyzing whether the company is
using a stable accounting technique and utilizing the financial funds wisely or
not which is very very crucial from the investors point of view.

RESEARCH METHODOLOGY

The analysis is based on secondary data gathered from recent decades of Indian
Oil Corporation Limited and Ministry of Petroleum annual reports. To meet the
study's objectives, the data was tabulated, analyzed, and classed using important
financial factors such as profitability ratios, liquidity ratios, solvency ratios, and
investment ratios.

RESEARCH ANALYSIS

The data analysis of Indian Oil Corporation Limited For the past few years is
 Gross profit ratio
YEAR GROSS PROFIT NET SALES GROSS
Rs. In Cr Rs. In Cr PROFIT
RATIO(%)
 2015-16 9931 184822 5.37
2016-17 14622 222826 6.56

2017-18 14339 249805 5.74

2018-19 11319 287760 3.93
2019-20 18872 274406 6.88

2020-21 16336 332898 4.91

Analysing the above data, it is found that the company is not stable in the gross
profit ratio. In the year 2015-16 the gross profit ratio was 5.37 which got
increased in the next year (2016-17) 6.56, this shows the satisfactory status of
the company. But the company could not maintain its status for the next year as
it got decreased to 5.74% in the year 2017-18 and to 3.93 in the year 2018-19
which cannot be said as a satisfactory position from the investors point of view.
Undoubtedly company geared up for the next year and its profit increased to
6.88% in the year 2019-2020 but again it could not maintain the profit and the
following year it decreased to 4.91%. Hence it is concluded that the company
failed to stable its gross profit ratio which is no good for the company’s health.

 Return on Investment
YEAR EBIT Capital ROI(%)
Rs in Cr Employeed
Rs in Cr
2015-16 7728 46008 16.80

2016-17 11990 49581 24.18

 2017-18 11631 57108 20.37

2018-19 8281 68812 12.03

2019-20 15632 75759 20.63

2020-21 11769 83804 14.04

From the above analysis, it is clear that in the year 2015-16 and 2016-17 the
return of investment had increased from 16.8 to 24.18% which is the highest.
Later the company could not maintain this stability and its ROI decreases to
20.37% in 2017-18 which is almost half of the previous year. This instability
shows company’s inability to maintain its financial expenditures and funds.
Capital employeed is increasing every year but the fluctuations in the Return on
Investment is because of Earning Before Interest and Tax.

 Dividend payout ratio

YEAR Dividend per Earnings per Dividend payout
share share ratio
2015-16 10.74 42.08 0.26

2016-17 15.84 62.89 0.25

2017-18 4.86 58.39 0.08

2018-19 6.22 24.30 0.26

2019-20 10.90 42.10 0.26

2020-21 8.02 30.66 0.26

Indian Oil Corporation is experiencing stable dividend payout ratio as 0.26

except in the year 2017-18 in which it was 0.08. This shows that the company is
using stable and efficient dividend policy.
  Quick ratio
YEAR QUICK ASSETS CURRENT QUICK RATIO
Rs in Cr LIABILITIES
Rs in Cr
2015-16 18774 35375 0.53

2016-17 28663 42064 0.68

2017-18 37749 54082 0.70

2018-19 36352 55516 0.65

2019-20 40869 64112 0.64

2020-21 48877 83576 0.58

Quick ratio is the supplementary to the current ratio, which gives double surety
to the creditors as to the soundness of the company’s financial stability.
Ideally quick ratio should be 1:1 but from the above analysis average quick ratio
is 0.63:1 and Indian oil Corporation could not achieve the ideal quick ratio in
any year. From the analysis Quick ratio is increasing in the first three years and
then decreasing in the following years, while the quick assets and the current
liabilities both of them have been increasing in all the years. But the ratio is
fluctuating because of the proportion which concludes that the quick assets are
not been able to match with the current liabilities which is a matter of worry for
the company.

CONCLUSION

After studying Indian Oil Corporation Limited's financial analysis from various
financial aspects such as profitability, liquidity and solvency, activity and
investment, it can be concluded that the company's profitability position cannot
be described as satisfactory because of Gross Profit Ratio ranges from 3.93% to
6.88%, with an average of 5.3%. The percentage of gross profit of 5.3% should
be increased. The second profitability indicator is net profit ratio, which ranges
from 0.82% to 5.14% on average. The profitability ratio of 3.22% is
unsatisfactory in any case, thus the corporation should focus on reducing
expenditures. The second profitability indicator is net profit ratio, which ranges
from 0.82% to 5.14% on average. The net profit margin of 3.22% is
unsatisfactory in any case, thus the corporation should focus on reducing
expenditures. The third metric of profitability that is taken into account is return
on investment, which ranges from 12.03% to 24.18% on average. The return on
investment of 18.67% to investors may be considered good, and it appears to be
an average return on any investment. The fourth and last indicator of
profitability is cost of capital, which ranges from 6.70% to 21.51% on average,
but the firm must increase the quality of its returns.

REFERENCES

https://www.researchgate.net/publication/
338829507_FINANCIAL_ANALYSIS_OF_INDIAN_OIL_CORPORATION_
LIMITED