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FINANCIAL ANALYSIS OF INDIAN OIL CORPORATION LTD.
Section: B Group: 3
Company Overview Indian Oil Corporation is an Indian state-
owned oil and gas corporation. According to Fortune 500 Global list, it is the
world’s 96th largest corporation and the largest public corporation when ranked by revenue.
Indian Oil and its subsidiary company accounts for 30.54 percent of country’s refining capacity.
Why do we do Ratio Analysis? A means of evaluating and diagnosing performance Ratios standardize numbers and facilitate comparisons
Comparing performance to competitors or industry standards (horizontal comparison)
Comparing performance to prior history (vertical comparison) Examine a variety of areas
Liquidity Solvency Efficiency Profitability
Remember that ratios are meaningless unless you have something to compare
Profit After Tax & Total Revenue
2009-10 2010-11 2011-12 2012-13 2013-140
10000
20000
30000
40000
50000
60000
27775.6133152.69
43770.6645061.147662.74
15525.637445.48
3954.62 5005.17 7019.09
Total RevenueProfit After Tax
Total Revenue*10
Crude Oil Price Variation
Net Profit Ratio
2009-10
2010-11
2011-12
2012-13
2013-14
0
1
2
3
4
5
6 5.59
2.25
0.9 1.111.47
There had been continuous decrease in net profit ratio from 2009-10 to 2011-12. This may be attributed to fact that there had been constant increase in crude oil prices and USD to INR currency exchange rate. As a result of it, the cost increases and hence the profit decreased. In 2011-12, price of $1 increases from Rs 44 to Rs 52. As a result, there was decrease in profits and hence net profit ratio. After that the exchange rates remains same and but due to decrease in employee benefits and low closing stock results in increase in sales, hence revenue and therefore net profit margin. It is to be noted that the net profit margin didn’t increase by a large margin
Gross Profit & Revenue From Operations
2009-10
2010-11
2011-12
2012-13
2013-14
500010000150002000025000300003500040000450005000055000
15192.56
24492.1829152.46
33949.95
48807.93
27775.6132809.23
42511.2144709.6247321.01
Gross ProfitRevenue from Opera-tions
Revenue from Operations*10
Gross Profit Margin
2009-10
2010-11
2011-12
2012-13
2013-14
0
2
4
6
8
10
12
5.47
7.47 6.867.59
10.31 Since crude oil prices had increased
and exchanges rate increasing at a very high rate. In 2010-11, the raw material consumed and purchases increased. As a result, gross margin decreases and hence gross margin ratio. There were high increase in purchases in 2011-12, as a result percentage increase in gross margin decline and hence growth in gross margin ratio declined. There was huge changes in revenues and decrease in closing stock in 2013-14 as revenues from new refineries (launched in 2013).
Operating Profit & Revenue from Operations
2009-10
2010-11
2011-12
2012-13
2013-14
05000
100001500020000250003000035000400004500050000
15716.148407.52
4179.39
8561.9599999999
9 9942.14
27775.6132809.23
42511.2144709.6247321.01
Operating ProfitRevenue from Opera-tions
Revenue from Operations*10
Operating Profit Margin
2009-10
2010-11
2011-12
2012-13
2013-14
0
1
2
3
4
5
6 5.66
2.56
0.98
1.92 2.1
In 2010-11, high expenses resulted in the decline of operating profit. There had been huge decline in operating profit in 2011-12 due to increase in cost prices and as a consequence, the operating cost increases. There were high expenses as exceptional and other expenses. The company invested in refineries in Orissa in 2013 resulting in low operating cost. The miscellaneous and other expenses were decreased and hence operating cost. In 2013-14, employee benefits also declined thereby increasing operating profit margin.
Return on Total Assets
2009-10
2010-11
2011-12
2012-13
2013-14
02468
1012
9.75
4.29
1.88 2.19 2.78
ROTA There had been continuous decrease in net profit
ratio from 2009-10 to 2011-12. This may be attributed to fact that there had been constant increase in crude oil prices and USD to INR currency exchange rate. As a result of it, the cost increases and hence the profit decreased. In 2011-12, price of $1 increases from Rs 44 to Rs 52. As a result, there was decrease in profits and hence net profit ratio. After that the exchange rates remains same and but due to decrease in employee benefits and low closing stock results in increase in sales, hence revenue and therefore net profit margin. It increased but not by much. Since profit after tax declined till 2011-12 and then increases and the total assets continues to increases year by year, it resulted in the download of ROTA and then increases. The purchases and raw material consumed increased drastically and henceforth profit declined
Total Assets & Assets Under Development
2009-10
2010-11
2011-12
2012-13
2013-14
050000
100000150000200000250000300000
259483.2
173679.7209859.8
228019.3252413.8
Total Assets
2009-10
2010-11
2011-12
2012-13
2013-14
05000
100001500020000250003000035000
21226.85
8939.313415.36
25646.21
33150.64
Assets Under De-velopment
Return on Earning Assets
2009-10
2010-11
2011-12
2012-13
2013-14
02468
1012 11.23
4.522.01 2.47 3.2
Return on Earning Assets
There has not been any major changes as compared to return on total assets. It indicates the fact that the company had been not much changes in the capital work in progress over the years. The capital work in progress increases continuously from 2010-11.
Return on Operating Assets
2009-10
2010-11
2011-12
2012-13
2013-14
02468
101214 13.06
5.79
2.35
12.95 13.1
Return on Operating Assets
There had been huge decline in operating profit in 2011-12 due to increase in cost prices and as a consequences of oil and exchange rates, the operating cost increases. In 2012-13, there was a huge increase in the operating assets and operating assets declined drastically in 2012-13. The current investments of the company in 2012-13 increases by over 10 times and hence a result the return on operating assets increases approx. by 6 times. Due to high non-current investments in 2012-13 and 2013-14, the operating assets increases and thereby returns.
Borrowings (Long Term & Short Term)
2009-10 2010-11 2011-12 2012-13 2013-140
100002000030000400005000060000700008000090000
43420.1250308.96
70323.9378325.2 80599.12
Debt Equity Ratio
2009-10
2010-11
2011-12
2012-13
2013-14
00.20.40.60.8
11.21.4
0.83 0.91
1.22 1.28 1.22
Debt Equity Ratio Initially, the ratio was less than 1
indicating the fact the company believed in risk free game and tried to protect the investors’ money. There had been substantial increase in the ratio and now it is more than 1 indicating that the portion of assets provided by creditors is greater than the portion of assets provided by stockholders. The company is now started investing in higher risk firms. Since the ratio is still close to 1, it indicate that creditors and stockholders almost equally contribute to the assets of the business.
Asset Turnover Ratio
2009-10
2010-11
2011-12
2012-13
2013-14
1.51.61.71.81.9
22.1
1.74
1.89
2.031.96
1.87
Asset Turnover Ratio The asset turnover ratio is an efficiency ratio
that measures a company's ability to generate sales from its assets by comparing net sales with average total assets i.e. this ratio shows how efficiently a company can use its assets to generate sales. Higher turnover ratio means the company is using its assets more efficiently. Lower ratios mean that the company isn't using its assets efficiently and most likely have management or production problems.
The asset turnover ratio remains almost same over the 5 years. Since the ratio is close to 2, it implies that the company is able to generate sales from its assets by comparing net sales with average total assets. The ratio reaches its peak in 2011-12 due to drastic increase in the revenues.
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