Financial Analysis of ONGC

Financial Analysis of ONGC

CHAPTER-1

INTRODUCTION

1.1 COMPANY PROFILE

During the pre-independence period, the Assam Oil Company in the northeastern and attock Oil company in northwestern part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input.

After independence, the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense. Consequently, while framing the Industrial Policy Statement of 1948, the development of petroleum industry in the country was considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development.

With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as a subordinate office under the then Ministry of Natural Resources and Scientific Research.

S.V. Institute of Management (SVIM)KADI [Batch 2008-10]

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1.2 Company History

In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among the schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state.

Oil and Natural Gas Corporation (ONGC) was set up in 1956 with significant contribution in industrial and economic growth of the country. In October, 1959 the Commission was converted into a statutory body by the Oil and Natural Gas Commission Act, 1959. The main objectives of the Commission were to plan, promote, organize and implement program for the development of oil and natural gas resources and the production and sale of oil and natural gas products.

ONGC functions as the primary arm of the Government as regards exploration for and exploitation of India's petroleum resources. The Company's revenues are derived primarily from the sale of its production of crude oil, natural gas, liquefied petroleum gas (LPG), C2-C3 (ethane-propane) and natural gasoline (NGL).

To strengthen reserves accretion portfolio and open up areas of future exploration ONGC has undertaken an Accelerated Program of Exploration with an outlay of Rs.3958 crores. – The main objectives of APEX were Enhancement in seismic surveys, enhancement in exploratory drilling, national seismic program, exploration in frontier areas and acquisition of foreign acreage. ONGC has assimilated various technologies in the field of hydrocarbons explorations and exploitation.

The Company owns Dornier-228 aircraft, chetak helicopter, offshore supply vessels and geo-technical survey vessel. It has 2 central work shops located at Baroda & Sibsagar, 7 project workshops and 11 auto workshops located at various project sites employing multifarious equipments and machinery. It has also state-of-the- art communication systems both terrestrial and satellite based for meeting operational & MIS requirements of onshore & offshore.


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1.3 General Information

1. Name of Unit : Oil and Natural Gas Corporation2. Registered office : Jeevan Bharti Bldg., Tower II, 124, Indira Chowk,

New Delhi, Delhi – 110001.3. Tel No : 23301000, 23310156, 23721756.4. Fax : 233164135. E-mail : [email protected]. Website : www.ongcindia.com7. Corporate Office : Tel Bhavan

Dehradun , Uttar Pradesh-248003, India.8. Tel No : 7552989. Registrar & Share Transfer

Agent: Karvy Computer share Pvt Ltd

Plot No. 17-24, Vittal Rao Nagar, Madhapur,Hyderabad–500086.Andhra Pradesh.

10. Tel No : 1-800-345400111. Factory/Plant : Uran Plant Dronagiri Bhavan, Uran,

Maharashtra-400702. India.12. Tel No : 27222802.13. Factory/Plant Hariza Plant PO ONGC, Bhatpore,

Surat District, Gujarat-394518. India14. Tel No 2832812915. Business Group : Public Sector16. Listings : BSE, NSE17. ISIN No. : INE213A0101118. Incorporation : 23/06/199319. Bankers : State Bank of India20. Auditors : Singhi & Co., K K Soni & Co.,

S C Ajmera & Co., PSD & AssociatesPadmanabhan Ramani & Ramanujam

1.4 Corporate InformationSr No. Name Designation1. Mr. R S Sharma Chairman and Managing Director2. Dr. Bakul H Dholakia Director3. Mr. N K Mitra Director4. Mr. U N Bose Director5. Mrs. Sindhushree Khullar Director6. Mr. D K Pande Director7. Mr. S Sundareshan Director8. Mr. P K Choudhury Director9. Mr. A K Hazarika Director10. Dr. R K Pachauri Director11. Mr. V P Singh Director12. Dr. A K Balyan Director13. Mr. D K Sarraf Director14. Mr.S P Garg Co Secretary & Compl Officer


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http://www.ongcindia.com/


1.5 DIFFERENT STRUCTURES

ONGC Has Different Types Structures like ASSETS/ BASINS/ PLANTS/ REGIONS/ INSTITUTES/ SERVICES

A. Assets:

1) Mumbai High Asset, Mumbai2) Neelam & Heera Asset, Mumbai3) Bassein & Satellite Asset, Mumbai4) Rajamundry Asset, Rajamundry5) Ankleshwar Asset, Mehsana6) Ahmedabad Asset, Ahmedabad7) Mehsana Asset, Mehsana8) Cauvery Asset, Karaikal9) Assam Asset, Nazira 10) Tripura Asset, Agartala

B. Basins:

1) Western Offshore Basin, Mumbai2) Western Onshare Basin, Baroda3) K. G. Basin, Rajamundry4) Cauvery Basin, Chennai5) Assam & Assam-Arkan Basin, Jorhat6) CBM- BPM Basin, Kolkata7) Frontier Basin, Dehradun

C. Plants:

1) Uran Plant, Uran2) Hazira Plant, Hazira

D. Region:

1) Mumbai Region, Mumbai2) Western Region, Baroda3) Eastern Region, Nazira4) Southern Region, Chennai5) Central Region, Kolkata


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Financial Analysis of ONGCE. Institutes:

1) Keshava Deva Malaviya Insti. of Petroleum Exploration (KDMIPE), Dehradun2) Institute of Drilling Tech., (IDT), Dehradun3) Institute of Reservoir Studies, Ahmedabad4) Institute of Oil & Gas Production Tech., Navi Mumbai5) Institute of Engineering & Ocean Tech.,, Navi Mumbai6) Geo-data Processing & Interpretation Center (GEOPIC), Dehradun7) ONGC Academy, Dehradun8) Institute of Petroleum Safety, Health & Envi. Management, Goa9) Institute of Biotechnology & Geotectonic Studies, Jorha

10) School of Maintenance Practices, Baroda 11) Regional Training Insti., Navi Mumbai, Chennai, Sivasagar & Baroda

F. Services:

1) Chief Drilling Services, Mumbai2) Chief Well Services , New Delhi3) Chief Geo-Physical Services, Dehradun4) Chief Logging Services, Mumbai5) Chief Engineering Services, Mumbai6) Chief Offshore Logistics, Mumbai7) Chief Technical Services, Dehradun8) Chief Info-com Services, New Delhi9) Chief Corporate Planning, New Delhi10) Chief Human Resource Development, Dehradun11) Chief Employee Relations, Dehradun12) Chief Security, New Delhi13) Company Secretary, New Delhi14) Chief Marketing, New Delhi15) Head Corporate Affairs & Co-ordination, New Delhi16) Head Corporate Communication, New Delhi17) Chief Material Management, Dehradun18) Chief Health, Safety & Environment, Mumbai19) Head Legal, New Delhi20) Chief Medical, Dehradun21) Chief Internal audit, New Delhi22) Head Commercial, New Delhi23) Chief Exploration & Development, Dehradun


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1.6 VISON STATEMENT

To be a world-class Oil And Gas Company integrated in energy business with dominant Indian and global presence.

World Class

Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people.

Imbibe high standards of business ethics and organizational values.

Abiding commitment to safety, health and environment to enrich quality of community life.

Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people.

Stive for customer delight through quality products and services.

Integrated In Energy Business

Focus on domestic and international Oil And Gas exploration and production business opportunities.

Provide value linkages in other sectors of Energy business.

Create growth opportunities and maximize shareholder value.

Dominant Indian Leadership

Retain dominant position in Indian petroleum sector and enhance India’s Energy availability.


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1.7 Products’ Detail:

Product Name Year Month Sales Quantity

UOM Sales Value(Corers)

Oil Crude 2008 12 24076241 Metric Tones 38,680.27

Gas Natural 2008 12 20427710 Thousands Cu Meters 7,178.00

HSD 2008 12 1539370 Kilolitres 4,860.83 Aromatic Rich Naphtha 2008 12 1442019 Metric Tones 4,384.86

Liquefied Petroleum Gas 2008 12 1036773 Metric Tones 2,016.86

C2/C3 (Ethane/Propane) 2008 12 519957 Metric Tones 929.07

Motor Spirit 2008 12 231758 Kilolitres 915.90

Superior Kerosene Oil 2008 12 308164 Kilolitres 740.08

Superior Kerosene Oil 2008 12 168454 Metric Tones 337.38

LSHS 2008 12 17544 Metric Tones 41.83

Kerosene/ATF 2008 12 10093 Metric Tones 39.36

Others 2008 12 0 11.29

HSD 2008 12 379 Metric Tones 1.28

1.8 Capital Structure:

From Year

To Year Class Of Share

Authorized Capital(Crores)

Issued Capital(Crores)

Paid Up Shares(Nos)

Paid Up Face

Value

Paid Up Capital(Crores)

2007 2008 EQS 15000.00 2138.89 2138872530 10 2138.872006 2007 EQS 15000.00 2138.89 2138872530 10 2138.872005 2006 EQS 15000.00 1425.93 1425933992 10 1425.932004 2005 EQS 15000.00 1425.93 1425933992 10 1425.932003 2004 EQS 15000.00 1425.93 1425933992 10 1425.932002 2003 EQS 15000.00 1425.93 1425933992 10 1425.932001 2002 EQS 15000.00 1425.93 1425933992 10 1425.932000 2001 EQS 15000.00 1425.93 1425933992 10 1425.931999 2000 EQS 15000.00 1425.93 1425933992 10 1425.93

EQS: Equity Shares


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1.9 Achievements / Awards

(1)Prime Minister hands over ‘Public Sector Company of the Year’ Award to ONGCMarch 24, 2005,ONGCNews ONGC has bagged the Business Standard Star Public Sector Company Award for 2004, in the Public Sector category.

(2)ONGC enters retail – launches OVaL - completes integrationMarch 19, 2005, ONGCNews March 19, 2005 will remain a red letter day for ONGC. The cycle – Drilling to Dispensing – was completed on this day by ONGC.

(3)Super CEO- Subir Raha - Business IndiaMarch 19, 2005 Courtesy: Business India

(4)ONGC secures Award for its Safety InitiativesFebruary 14, 2005, ONGCNews ONGC’s high standards in Safety, both in its Offshore and Onshore petroleum operations, have got it the Safety Initiatives Award, constituted by the Institution of Engineers (India).

(5)ONGC receives Biggest Wealth Creator AwardJanuary 21, 2005, ONGCNews ONGC received Biggest Wealth Creator Award amongst all the companies listed on Indian Stock exchanges. C&MD Mr. Subir Raha accepted the award on behalf of 38004 ONGCians, colleagues from OVL, MRPL & ONGC Nile-Ganga BV, at an exclusive function organized in Mumbai on January 19, 2005. The Award was presented by Mr. Ajay Primal, Chairman, Nicholas Piramal India Limited.

(6)Mr. Subir Raha bags SCOPE Individual Excellence Award for his outstanding contribution to Public Sector ManagementONGC News, 13th January, 2004 Mr. Subir Raha, ONGC’s C&MD, has won the ‘SCOPE Award for Excellence and Outstanding Contribution to the Public Sector Management – Individual Category’, for the year 2002-03. The award carries a gold plaque and a purse of 1 Lakh rupees.


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Financial Analysis of ONGC(7)ONGC Bags NPMP Awards In Creativity And Finance ONGC News, 4th July 2003 ONGC’s production engineers dominated the stage in the “Creativity and Innovation” category of NPMP awards for 2001-02, which were distributed by the Petroleum Minister Mr. Ram Naik on July 3, 2003.

(8)ONGC Bags Three Greentech Foundation AwardsONGC News, 2nd July 2003 ONGC has bagged three Greentech Excellence awards for maintaining the highest standards of safety at its installations and operational areas.

(9)Dr J V S S Narayana Murthy Wins National Mineral Award 2001ONGC News, 22nd January 2003 Harvesting the fruits of information technology needs two professionals – one from software development, and another from the specialist knowledge domain. It is indeed rare to find someone who excels in both.

(10)Partha P Mitra Awarded National Mineral Award-2001ONGC News, 22nd January 2003 The National Mineral Award for 2001 was conferred on ONGC's SG (S), Mumbai High Asset, Mr Partha P Mitra in recognition of his contribution to the area of application of innovative technique for mineral exploration. (11)Four ONGC Scientists Bag National Mineral Award-2001 ONGC News, 24th December 2002

Four ONGC geoscientists, Dr Anil Bhandari, DGM (Geology), Mr Narendra Kumar Verma, Chief Geologist, Dr J V S S Narayana Murthy, Suptdg Geophysicist (S) and Mr Partha Pratim Mitra, Suptdg Geophysicist (S) have bagged the National Mineral Awards 2001 for their outstanding contribution in the field of Fundamental/Applied Geosciences.

(12)AG Pramanik Elected Member Of European Academy Of Science ONGC News, 26th November 2002(13) Mr. Y B Sinha Elected Director Of International Body On Open Software ONGC News, 25th November 2002

ONGC's Director (Exploration), Mr. Y B Sinha has been elected Director of Petrotechnical Open Software Corporation (POSC), an international body on software integration, standardization and benchmarking of oil industry.

(14) Scaling The Summit


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http://www.ongcindia.com/achieve1.asp?fold=achieve&file=achieve4.txt

Financial Analysis of ONGCONGC News, 25th November 2002

ONGC's C&MD, Mr Subir Raha, was awarded the CEO Business Leader of the Year Award at the India Leadership Summit in Mumbai on Nov 21, 2002. A brief report follows.

(15)Energy Packed Performance The ET500, September 2002

Of the top 20 companies on the ET500 list, an incredible six are from the oil and gas industry. With the disinvestments process picking up pace, this sector will be something to watch out for.

Also: ONGC: A Record Performance

(16)ONGC: India's First National Integrated Oil & Gas Corporate Drilling & Exploration World, Vol 11, No. 10, August 2002

With the acquisition of the equity held by the Aditya Birla Group in Mangalore Refineries and Petrochemicals Limited (MRPL), ONGC has become the first Indian integrated oil and gas corporate.

(17)ONGC's Most Momentous Year 16th August 2002, Raj Kanwar

In its eventful 46 years of existence, the Oil & Natural Gas Corporation (ONGC) Ltd. has achieved many a landmark. On the occasion of 46th ONGC Day, Mr. Raj Kanwar, a veteran journalist and a freelance writer, summarizes the highlights. ED, Chief, Geophysics Services, Mr. Anand Gopal Pramanik, ONGC has been elected as Member to the prestigious European Academy of Sciences, Brussels, Belgium, for his distinguished services to the Geosciences community.

Also: Interview with Mr. Pramanik


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CHAPTER-2

BALANCESHEET ANALYSIS

1.1 INTRODUCTION TO BALANCESHEET

A balance sheet is a list of assets and liabilities and claims of a business at some specific point of time and is prepared from an adjusted Trial Balance. It shows the financial position of a business by detailing the source of funds and utilization of these funds. A Balance Sheet shows the assets and liabilities grouped, properly classified and arranged in a specific manner.

USES OF BALANCE SHEET It enables us to ascertain the proprietary interest of a person or business

organization. It enables us to calculate the actual capital employed in the business. The lender can ascertain the financial position of the business. It may serve as the basis for determining purchase consideration of the

business. Different ratio can be calculated from the Balance Sheet and these ratios can

be utilized for better management of the business.

LIMITATION OF BALANCE SHEET Fixed assets are shown in the Balance Sheet as historical cost less

depreciation up-to-date. A conventional Balance Sheet can not reflect the true value of these assets. Again intangible assets are shown in the Balance Sheet at book values which may bear no relationship to the market values.

Sometimes, balance sheet contains some assets which command no market value such as expense, debenture discount etc. the inclusion of these assets unduly inflate the total value of assets.

The balance sheet can not reflect the value of certain factors such as skill and loyalty of staff.

A conventional balance sheet may mislead untrained readers in inflationary situations.

The value of major number of current assets depends upon some estimates, so it cannot reflect the true financial position of business.


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1.2 BALANCE SHEET

BALANCE SHEET OF ONGC AS ON 31ST MARCH

(Rs. In Crore)Oil & Natural Gas Corporation Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08

SOURCES OF FUNDS: Owner's Fund: Equity Share Capital 1,425.93 1,425.93 1,425.93 2,138.89 2,138.89 Share Application Money 0.00 0.00 0.00 0.00 0.00 Preference Share Capital 0.00 0.00 0.00 0.00 0.00 Reserves & Surplus 39,117.17 45,419.49 52,533.74 59,785.04 68,478.51 Loan Funds: Secured Loans 0.00 0.00 0.00 0.00 0.00 Unsecured Loans 11,407.79 9,916.22 12,722.61 15,109.07 12,482.71

Current Liabilities & Provisions 14,517.73 37,821.16 47,638.17 59,601.18 24,979.07

Total 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.1 USES OF FUNDS: Fixed Assets: Gross Block 41,007.62 42,983.85 47,882.35 52,038.07 57,463.78 Less : (1)Revaluation Reserve 0.00 0.00 0.00 0.00 0.00

(2)Depreciation 35,339.16 37,147.32 40,040.15 43,198.95 46,945.77

Net Block 5,668.46 5,836.53 7,842.20 8,839.11 10,518.01 Inventories 25,184.99 28,838.35 33,373.92 37,794.16 41,154.63 Investments 4,421.67 4,036.67 4,888.57 5,702.05 5,899.50 Current Assets, Loans & Advances

30,652.83 55,340.09 67,849.42 83,784.78 49,833.14

Miscellaneous expenses not written

540.68 531.16 366.34 514.06 673.90

Total 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.18


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Interpretation:-

The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets.

Owner’s fund increases by 712.96 Crore in 2007-08 as compared to base year 2003-04. The reserves & surplus is also get increase in last four years very rapidly. It increases by 29361.34 Crore in 2007-08 as compared to base year 2003-04.

Now, here the strongest point of the company that company’s debt is decrease in 2007-08 by 34622.11 Crore as compared to previous year 2006-07 and

Proportion of the debt in capital structure is decrease that is in 2006-07 borrowing debt is 15,109.07 Crore and in 2007-08 debt is 12,482.71 Crore. So, it is decrease by 96.43.

The balance sheet also shows the balance of assets and other investment made by the company. The gross fixed assets are increased in 2007-08 by 1678.90 Crore as compared to previous year 2006-07.

The investment is also increase in 2006-07 by 197.45 Crore as compared to previous year. The overall inventory turnover ratio shows the good position of the company is good.

We also conclude that the liquid position of the company is good because Current Assets are increase year by year.


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1.3 COMPARATIVE ANALYSIS OF BALANCE SHEET

(Rs. In Crore)Oil & Natural Gas Corporation Mar- ‘04 Mar- ‘05 Mar- ‘06 Mar- ‘07 Mar- ‘08

SOURCE OF FUNDS:Net Worth 1425.93 1425.93 1425.93 2138.89 2138.89Change 0.00 0.00 712.96 0.00Reserve & surplus 39117.17 45419.49 52533.74 59785.04 68478.51Change 6302.32 7114.25 7251.3 8693.47Borrowings 11407.79 9916.22 12722.61 15109.07 12482.71Change -1491.57 2806.39 2386.46 -2626.36Current Liabilities & Provision 14517.73 37821.16 47638.17 59601.18 24979.07Change 23303.43 9817.01 11963.01 -34622.41Total Liabilities 66468.62 94582.80 114320.45 136634.18 108079.18

APPLICATION OF FUNDS:Gross Fixed Assets 5668.46 5836.53 7842.20 8839.11 10518.01Change 168.07 2005.67 996.91 1678.9Investment 4421.67 4036.67 4888.57 5702.05 5899.50change -385.00 851.90 813.48 197.45Inventories 25184.99 28838.35 33373.92 37794.16 41154.63Change 3653.36 4535.57 4420.24 3360.47Current Assets 30652.83 55340.09 67849.42 83784.78 49833.14Change 24687.26 12509.33 15935.36 -33951.64Miscellaneous expenses 540.68 531.16 366.34 514.06 673.90Change -9.52 -164.82 147.72 159.84Total Assets 66468.62 94582.80 114320.45 136634.18 108079.18


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CHAPTER 3:

PROFIT AND LOSS ACCOUNT ANALYSIS

1.4 INTRODUCTION TO PROFIT AND LOSS ACCOUNT

The Profit & Loss account is also known as the income statement. It can be defined as a report that summaries the revenues and expenses of an accounting period to reflect the changes in various critical areas of firm’s operation. It is of greatest interest and import and importance to end-users of accounting statements because it enables them to ascertain whether the business operations have been profitable or not during that particular period.

The important destination between the balance sheet and income statement is for a period of one year. The two broad categories of item shown in the income statement are revenue and expenses. Revenues derived from a companies operation say manufacturing and selling products. During transaction business has also incurred revenues other than main business operation. Expenses are occurred in day-to-day transactions.

Here, expenses regarding manufacturing activities, office and administrative expenses are considered. By deducting total expenses from total revenue we get profit and by deducting total revenue from total expenses we get total loss. Income tax amount is also decided by profit that incurred in business with help of this statement.


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1.5 PROFIT & LOSS ACCOUNT (Rs. In Cr.)

Oil & Natural Gas Corporation Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08Income : Operating Income 31,649.62 46,159.40 47,989.75 56,913.43 59,848.28

Expenses : Material Consumed 1,493.23 6,782.47 5,450.92 8,196.95 7,079.11 Manufacturing Expenses 8,696.41 10,504.06 11,500.55 15,937.04 187.43 Personnel Expenses 2,561.88 2,746.48 3,014.71 3,974.79 0.00 Selling Expenses 5,762.50 6,707.69 5,206.03 6,661.41 0.00 Administrative Expenses (3,652.56 ) (4,104.17 ) (4,129.09 ) (6,015.52 ) 22,466.13 Expenses Capitalized 0.00 0.00 0.00 0.00 0.00 Cost Of Sales 14,861.46 22,636.52 21,043.12 28,754.66 29,732.67 Operating Profit 16,788.17 23,522.88 26,946.62 28,158.77 30,115.61 Other Recurring Income 1,293.04 1,462.35 1,890.94 3,730.50 4,997.67 PBDIT 18,081.21 24,985.22 28,837.56 31,889.27 35,113.28 Financial Expenses 2,753.03 3,548.39 3,718.44 3,724.81 58.96 Depreciation 1,768.02 1,824.22 3,852.76 3,292.80 9,819.62 Other Write offs 0.00 0.00 0.00 0.00 0.00 PBT 13,560.16 19,612.61 21,266.36 24,871.67 25,234.70 Tax Charges 4,958.77 6,685.95 7,321.43 8,041.02 8,920.06 PAT 8,601.39 12,926.66 13,944.93 16,830.64 16,314.65

Non Recurring Items (39.53 ) (89.69 ) 608.73 (623.45 ) 0.00 Other Non Cash adjustments 102.57 146.08 (122.87) (564.27) 387.00 Net Profit 8,664.45 12,983.05 14,430.78 15,642.92 16,701.65 Earnings Before Appropriation 8,664.45 12,983.08 14,430.79 15,642.96 16,701.69 Equity Dividend 3,422.24 5,703.74 6,416.70 6,630.51 6,844.39 Preference Dividend 0.00 0.00 0.00 0.00 0.00 Dividend Tax 438.48 776.33 899.94 1,012.51 1,163.20 Retained Earnings 4,803.73 6,503.01 7,114.14 7,999.95 8,694.10


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INTERPRETATION:- The profit and loss account of the company shows the overall income and

expenditure, made by the company in a particular time period. The difference between the debit and credit side of the P&L account, shows the net profit or net loss.

Here, the profit and loss account of the company shows the satisfactory level but as compared to previous year the expenses of the company is increases. Here the sales turnover is increase year by year. The operating income in 2006-07 is 56913.43 and now it is increase by 2934.85 Crore Rs. in 2007-08. So, by this way the net profit of the company is increase by 1058.73 in 2007-08 as compared to previous year.

While on the other side the expenditure shows the expenses meet by the company in a particular period. The expenditure met by the company is highest in 2007-08, while in other year the expenditure of the company are increases. The overall analysis of the expenditure side of the company shows the average increase in expenses of the company.

After analyzing the income and expenditure side of the company, there is difference between both sides which is known as the net profit / loss. The net profit of the company shows an overall increase year by year. In 2003-04 it is 8664.45 Crore Rs. and now it is increasing and in 2007-08 it is 16701.65 Crore Rs.


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1.6 COMPARATIVE ANALYSIS OF PROFIT & LOSS ACCOUNT

(Rs. In Cr.)Oil & Natural Gas Corporation Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Income 31,649.62 46,159.40 47,989.75 56,913.43 59,848.28Change 14509.78 1830.35 8923.68 2934.60Expenditure 14,861.46 22,636.52 21,043.12 28,754.66 29,732.67Change 7775.06 -1593.4 7711.54 978.01PBDIT 18,081.21 24,985.22 28,837.56 31,889.27 35,113.28Change 6904.01 3852.34 3051.71 3224.01PBT 13,560.16 19,612.61 21,266.36 24,871.67 25,234.70Change 6052.45 1653.75 3605.31 363.03PAT 8,601.39 12,926.66 13,944.93 16,830.64 16,314.65Change 4325.27 1018.27 2885.71 -515.99


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CHAPTER: 4

COMMON SIZE STATEMENTS

1.7 COMMON SIZE STATEMENT OF PROFIT AND LOSS ACCOUNT

Oil & Natural Gas Corporation Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08

Income:Operating Income 96.07% 96.94% 96.21% 93.85% 92.29%Other Income 3.93% 3.06% 3.79% 6.15% 7.71%Total Revenue 100.00% 100.00% 100.00% 100.00% 100.00%

Expenses:Material Consumed 4.53% 14.24% 10.93% 13.52% 10.92%Manufacturing Expenses 26.40% 22.06% 23.06% 26.28% 0.29%Personnel Expenses 7.78% 5.77% 6.04% 6.56% 0.00%Selling Expenses 17.49% 14.08% 10.44% 10.98% 0.00%Administrative Expenses -11.09% -8.62% -8.28% -9.92% 34.66%Expenses Capitalized 0.00% 0.00% 0.00% 0.00% 0.00%Total Expenses 45.11% 47.53% 42.19% 47.42% 45.85%

PBDIT 54.89% 52.47% 57.81% 52.58% 54.15%- (1)Financial charges 8.36% 7.45% 7.45% 6.14% 0.09% (2)Depreciation 5.37% 3.83% 7.72% 5.42% 15.14%PBT 41.16% 41.19% 42.64% 41.02% 38.92%Tax Provision 15.05% 14.04% 14.68% 13.26% 13.76%PAT 26.11% 27.15% 27.96% 27.76% 25.16%Appropriation of profitEquity Dividend 10.33% 11.92% 12.36% 11.93% 10.05%Dividend Tax 1.30% 1.63% 1.40% 1.64% 1.70%Retained Earnings 14.48% 13.60% 14.20% 14.19% 13.41%


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INTERPRETATION OF COMMON SIZE STATEMENT OF PROFIT AND LOSS ACCOUNT

For the analysis of Profit & Loss account we have taken the operating income and other income as base.

From the analysis of common size statement, we can interpret that the income of the company increases year by year excluding 2008.

The expenditure also increases year by year. It recorded in %. In current year expenditure is higher than previous year.

As we see in the table Material Consumed & Manufacturing Expenses increases very large proportion. It shows that production of the company increases year by year.

The PBDIT of the company is also increase in current year. In previous year it is 52.58% and in current year it is 54.15%.

The PBT of the company is decrease in current year. In previous year it is 41.02% and in current year it is 38.92%. In the current year depreciation is so much because of new machinery.

The PAT of the company is also decrease in current year. In previous year it is 27.76% and in current year it is 25.16%.


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1.8 COMMON SIZE STATEMENTOF BALANCE SHEET

(Rs. In Crore)ONGC March- ‘04 March- ‘05 March- ‘06 March- ‘07 March- ‘08

SOURCE OF FUNDS:Owner's Fund: Equity Share Capital 2.14% 1.51% 1.25% 1.57% 1.98%Reserve & Surplus 58.85% 48.02% 45.95% 43.76% 63.36%Loan Funds: Unsecured Loans 17.16% 10.48% 11.13% 11.06% 11.55%Current Liabilities & provisions 21.85% 39.99% 41.67% 43.61% 23.11%

Total Liabilities 100% 100% 100% 100% 100%

APPLICATION OF FUNDS:Gross fixed assets 61.69% 45.45% 41.88% 38.09% 53.16%Less: Depreciation 53.17% 39.27% 35.02% 31.62% 43.44%Net fixed assets 8.52% 6.18% 6.86% 6.47% 9.72%Investment 37.89% 30.49% 29.19% 27.66% 38.08%Inventories 6.65% 4.27% 4.28% 4.17% 5.46%Current Assets 46.12% 58.51% 59.35% 61.32% 46.11%Miscellaneous expenses 0.82% 0.55% 0.32% 0.38% 0.63%Total Assets 100% 100% 100% 100% 100%


21


INTERPRETATION OF COMMON SIZE STATEMENT OF BALANCE SHEET

Source of Funds :-

For the source of Funds we have taken the total Liabilities as 100.

As we see in the table that in first year borrowing constitutes a largest part of the source of funds and after that reserves and surplus constitutes largest part of the source of funds.

The Current Liabilities are decrease in 2007-08 by 20.65% as compared to previous year.

For the Year 2003-04


Equity Share Capital 2.14%Share Application Money 0.00%Preference Share Capital 0.00%

Reserve & Surplus 58.85%Loan Funds: Secured Loans 0.00%Unsecured Loans 17.16%Current Liabilities & provisions 21.85%

22

2003-042.14%

0.00%

0.00%

58.85%

0.00%

17.16%

21.85%

Equity Share Capital Share Application Money

Preference Share Capital Reserve & Surplus

Loan Funds: Secured Loans

Unsecured Loans Current Liabilities & provisions

Financial Analysis of ONGCFor the Year 2004-05




23

2004-051.51%

0.00%

0.00%

48.02%

0.00%10.48%

39.99%










24

2005-06 1.25%

0.00%

0.00%

45.95%

0.00%11.13%

41.67%










25

2006-07 1.57%

0.00%

0.00%

43.76%

0.00%11.06%

43.61%










26

2007-081.98%

0.00%

0.00%

63.36%0.00%

11.55%

23.11%






Application of Funds:-

For the analysis of application of funds we have taken the Total Assets as 100. From the table we can interpret that the investment in the company increase

in last year compared to previous year. So it is good for company. The Current Assets of the Company in last year is decreasing. It’s not good for

the company. We see in the table that net fixed assets increase in last year. In 2007-08 net

fixed assets is 9.72% which is higher than previous year by 3.25%.

For the year 2003-04

Net fixed assets 8.52%Investment 37.89%Inventories 6.65%Current Assets 46.12%Miscellaneous expenses 0.82%


27

2003-04

8.52%

37.89%

6.65%

46.12%

0.82%

Net fixed assets Investment

Inventories Current Assets

Miscellaneous expenses




2004-05

6.18%

30.49%

4.27%

58.51%

0.55%





28





29

2006-07

6.86%

29.19%

4.28%

59.35%

0.32%







38.08%

5.46%





30


CHAPTER-5:

TREND ANALYSIS

1.9 TREND ANALYSIS OF PROFIT AND LOSS ACCOUNT (Rs. In Crore)


Income:Operating Income 100.00 145.85 151.63 179,82 189.10Other income 100.00 113.09 146.24 288.51 386.51

Expenses:Material Consumed 100.00 454.21 365.04 548.94 474.08Manufacturing Expenses 100.00 120.79 132.24 183.25 02.16Personnel Expenses 100.00 117.68 107.21 155.15 00.00Selling Expenses 100.00 116.40 90.34 115.60 00.00Administrative Expenses -100.00 -112.24 -113.05 -164.69 715.07

PBDIT 100.00 138.03 159.49 176.37 194.20Financial charges 100.00 128.89 135.07 135.30 02.14Depreciation 100.00 103.18 217.91 186.24 555.40PBT 100.00 114.63 156.83 183.42 186.09Tax provision 100.00 134.83 147.65 162.16 179.88PAT 100.00 150.29 162.12 195.67 189.67

Appropriation of profit:Dividends 100.00 166.67 187.50 193.75 199.99Dividend Tax 100.00 177.05 205.24 230.91 265.28Retained Earnings 100.00 135.37 148.10 166.54 180.99


31

Financial Analysis of ONGCTREND ANALYSIS OF OPERATING INCOME

The above graph of operating income shows continuously increase in the income compared to the base year 2003-04.

In the year 2003-04 it was 100% it has been continuously increase to 189.1% in the year 2007-08. It means it has been increased 89.1% in this period.

So it is favorable for the company & increases the reputation of the company.

TREND ANALYSIS OF PBDIT

The above graph shows the continuously increasing in the PBDIT compared to the base year 2003-04.

In the year 2003-04 it was 100%. And now in 2007-08 it is 194.20. So, it is increase by 94.20%. It is favorable for the company.

It has increased due to increase in operating income over the years.


32

Financial Analysis of ONGCTREND ANALYSIS OF PBT

The above graph shows the continuously increasing in the PBT compared to the base year 2003-04.



TREND ANALYSIS OF PAT

The above graph shows increasing-decreasing in the PAT compared to the base year 2003-04.




33


1.10 TREND ANALYSIS OF BALANCE SHEET (Rs. In Crore)


SOURCES OF FUNDS:Owner's Fund:Equity Share Capital 100.00 100.00 100.00 150.00 150.00Reserves & Surplus 100.00 116.11 134.30 152.84 175.06Loan Funds:Unsecured Loans 100.00 86.92 111.53 132.45 109.42

Current Liabilities & Provisions100.00

260.52 328.14 410.54 172.06

Total 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.18Total (%) 100.00 142.30 171.99 205.56 162.60

USES OF FUNDS:Fixed Assets:Gross Block 100.00 104.82 116.76 126.90 126.90Less : Depreciation (100.00) (105.12) (113.30) (122.24) (132.84)Net Block 100.00 102.97 138.35 155.93 185.55Inventories 100.00 114.51 132.51 150.07 163.41Investments 100.00 91.29 110.56 128.96 133.42Current Assets, Loans & Advances

100.00 180.54 221.35 273.33 162.57

Miscellaneous expenses not written

100.00 98.24 67.76 95.08 124.64

Total 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.18Total (%) 100.00 142.30 171.99 205.56 162.60


34


SOURCE OF FUNDS:-

TREND ANALYSIS OF NET WORTH

Networth

100% 100% 100%150% 150%

0%50%

100%150%200%

March-'04 March-'05 March-'06 March-'07 March-'08

Series1

Here the net worth of the company is not increasing till 2006-07. It was 100% in the base year 2003-04 and in 2007-08 it is 150% in the year

2006-07. so it is increase by 150% The reason behind that reserve and surplus increase very rapidly, but share

capital remains same.

TREND ANALYSIS OF BORROWINGS

Borrowings

10086.92

111.53

132.45

109.42

0

20

40

60

80

100

120

140

M-04 M-05 M-06 M-07 M-08

Series1

Borrowings of the company are decreasing in 2004-05 .But, then after it are increasing till 2006-2007. In 2007-08 it is also decreasing.

In the year 2003-04 it is 100% but in the year 2007-08 it is 109.42% so it is increase by only 9.42%.


35


TREND ALYSIS OF CURRENT LIABILITIES AND PROVISIONS

Current Liabilities & Provisions

100%

260.52%328.14%

410.54%

172.06%

0%100%200%300%400%500%


Series1

The above graph of trend of current liabilities & provisions shows continuously increase compared to the base year 2003-04 till 2007-08

In the year 2003-04 it was 100% it has been continuously increase to 410.54% in the year 2006-07. It means it has been increased 310.54% in this period. Then, after in 2007-08 it is decreasing by 238.48.

Current liabilities & provisions constitutes of liabilities & provisions. The reason behind those sundry creditors and other current liabilities are

increasing.


36


APPLICATION OF FUNDS:-

TREND ANALYSIS OF NET FIXED ASSETS

Net Fixed Assets

100% 102.97%138.35% 155.93%

185.55%

0%

50%

100%

150%

200%


Series1

The above graph of net fixed assets shows continuous increasing as compared to base year 2003-04

In the year 2003-04 it was 100% it increased by 85.55 in the year 2007-08. In real it was 5,668.46 in the year 2003-04 and increased to 10518.01 in the

year 2007-08.

TREND ANALYSIS OF INVESTMENTS

Investments

100% 91.29%110.56%

128.96% 133.42%

0%

50%

100%

150%

March-'04

March-'05

March-'06

March-'07

March-'08

Series1


37


The above graph of trend of investments shows fluctuation but investments have been decreased compared to the base year 2003-04 in 2004-05. Then, after it is continuously increasing.

In the year 2003-04 it was 100% but in the year 2004-05 it has been reduced to 91.29% but then it has been increased to 110.56% in the year 2005-06. After that in the year 2006-07 it has increased to 18.4% and also after that in the last year it is increased to 133.42%.

It has reduced in the year 2004-05 because of sales of investments in this year.

TREND ANALYSIS OF INVENTORIES

Inventories

100% 114.51%132.51%

150.07% 163.41%

0%50%

100%150%200%

March-'04

March-'05

March-'06

March-'07

March-'08

Series1

The above graph of trend of inventories shows continuously increase till the last year.

2003-04 year is based year. In the year 2003-04 it was 100%. In the 2007-08 year it is 163.41%. So, it is

increase by 63.41%


38


CHAPTER-6

CASH FLOW STATEMENT ANALYSIS

1.11 INTRODUCTION TO CASH FLOW STATEMENT

Cash is the nerve center around which business activity flow. The profit figure is shown in the profit & loss statement in the book profit. It does not represent cash profit. For knowing the cash profit we prepare cash flow statement in the business. This statement provides information about the cash flows of an enterprise. This statement is also useful in taking economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents. The cash flow statement deals with the provision of information about the historical changes in cash. Cash flow statement which classifies cash flows during the period among (i) Operating (ii) investing (iii) financing activities.


39


1.12 CASH FLOW STATEMENT (Rs. In Crore)

ONGC March-‘04 March-‘05 March-‘06 March-‘07 March-‘08EBIT 196477 213924 275323 275,720 276,678Depreciation 61874 83,347 95,353 109,011 125,272Other non-operating items

(32,708) (34,283) 1,850 1,801 464

(Inc) / Dec. in working capital

(4,182) (10,610) (24,082) (21,441) (23,716)

Cash flow from operations

221,461 273,597 348,444 365,090 378,697

Taxes paid (net of refund)

(65,531) (75,102) (83,148) (83,267) (83,557)

Net cash flow from ope act

155,930 198,495 265,297 281,823 295,141

Exceptional items 180 7,747 - - -Net cash flow after excp act

156110 206242 265297 281823 295141

Dividend paid (incl dividend tax)

(48282) (73170) (32518) (93501) (93636)

Net capex and strategic inv

(84506) (122003) (182830) (183113) (183425)

Net cash after capex

23322 11070 49948 5208 18080

Inc / (Dec) in short term bor

(24650) (218) - - -

Inc / (Dec) in long term bor

(601) (202) 133 160 192

(Inc) / Dec in investments

- - - - -

-Equity issue / (Buyback)

0 0 - - -

Cash flow from fin act

(25251) (419) 133 160 192

Others 9181 (17191) (200) (151) (100)Opening Cash 87416 94669 88128 138009 143226Add: Amalgamation and other adj

- - - - -

Change in Cash 7252 (6540) 49881 5217 18171Closing Cash 94669 88128 138009 143226 161398


40


ANALYSIS OF CASH FLOW STATEMENT

Cash Flow From Operating Activities :

From the table of cash flow statement of the company we can interpret that in 2008 cash from operating activities is increase as compared to previous year. But in 2008 PAT is decrease more compared to previous years.

The other reason is that current assets of the company is increasing every year excluding 2008 and also current liabilities are increasing with minor changes but in last year it decreases.

Cash Flow From Investing Activities :

From the cash flow statement we can interpret that cash from investing activities is performed very good in last three years.

The reason behind it is that the purchase of the fixed assets by the company is increase. So we can say that the company expands its business.

Cash Flow From Financing Activities :

From the cash flow statement we can say that the cash from financing activities is increase year by year.

From the cash flow statement we can say that company repaid the borrowing and loan. And also paid to the dividend to the shareholders.


41


CHAPTER - 7

RATIO ANALYSIS

Ratio analysis is a widely used tool for financial analysis. It is defined as the systematic use of ratio to interpret the financial statement, so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ration refers to the numerical and quantitative relationship between two items/variables. The relationship can be expressed as:-

1. Percentage2. Fraction3. Proportion of numbers

The rational of ratio analysis lies in the fact that it makes related information comparable. A single figure by itself has no meaning but when expressed in terms of a related figure, it yields significant inferences.

Ratio analysis thus, a quantitative tool enables analysis to draw quantitative answers such as:-

Is the net profit adequate? Are the assets being used efficiently? Is the firm solvent? Can the firm meet its current obligations and so on?


42


1.13 UTILITY OF RATIO ANALYSIS The use of ratio was started by banks for ascertaining the liquidity and profitability

of the company’s business for the purpose of advancing loan to them. It gradually become popular and other creditors began to use them profitably. Now even the investor calculates ratio from the published account of the company before investing their savings. The ratio analysis provides useful information to management, which would help them in taking important policy decision. Diverse group of people make use of ratios, to determine the particular aspect of the financial position of the company, in which they are interested.

1) ProfitabilityUseful information about the trend of profitability is available from the

profitability ratios. The gross profit ratio, net profit ratio and ratio of return on investment give a good idea of profitability of business.

2) LiquidityIn fact, the use of this ratio is to ascertain the liquidity of the business. The

current ratio and liquid ratio will tell whether the business will be able to meet its current liabilities as and when they mature.

3) EfficiencyThe turnover ratio are excellent guides to measures the efficiency of

managers. For e.g. the stock turnover will indicate how efficiency the sales are being made, the debtors turnover shows the efficiency of collection department and assets are used in business.

4) Inter- firm comparisonThe absolute ratio of the firm are not of much use, unless they are compared

with similar ratio of other firm belongs to the same industries.

5) Indicate TrendThe ratio of the last three to five years will indicate the trend in the

respective fields.

6) Useful for budgetary ControlRegular budgetary reports are prepared in business where the system of

budgetary control in use. If various ratios are prepared in these reports, it will give a fairly good idea about various aspect of financial position.

7) Useful for decision makingRatios guide the management in making some of the important decision.


43


1.14 CLASSIFICATION OF RATIO Ratios can be classified into four broad group :-

1. Liquidity Ratio2. Leverage / Capital structure Ratio3. Profitability Ratio4. Activity / Efficiency Ratio

A) LIQUIDITY RATIOSLiquidity is the most important factor in successful financial management. A

firm should have enough money to meets its short term liabilities, as and when they become due for payment. If affirm fails to meet its short term liabilities frequently, its prestige and creditworthiness would be adversely affected. A very high degree of liquidity is also bad; idle assets earn nothing. Therefore it is necessary to strike a proper balance between high liquidity and lack of liquidity.

A.1) Current Ratio:This most widely used ratio shows the proportion of current assets to current

liabilities. It is also known as ‘ Working Capital Ratio’. It is a measure of short term financial strength of business and shows whether the business will able to meet its current liabilities. Generally, it is believed that ratio of 2:1 is good and shows a comfortable working capital position. But this ratio is differing company by company. The formula for calculating this ratio is as under:-

Current Ratio = Current Assets Current Liabilities

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08

Current Assets 30652.83 55340.09 67849.42 83784.78 49833.14Current liabilities & Provision

14517.73 37821.16 47638.17 59601.18 24979.07

Current Ratio(times) 2.11 1.46 1.42 1.41 1.99


44


Interpretation:- This calculation implies that the fluctuation in the current ratio.

As compared to previous year the current year’s ratio shows the better liquidity position. In the previous year this ratio is 1.41:1 and in the current year it is 1.99:1 which shows increase in liquidity. The reason behind that cash balance and receivable is increasing.


45


A-2) Acid Test / Quick Ratio:

The Acid test ratio is the ratio between quick current assets and current liabilities and is calculated by dividing the quick assets by the liquid liabilities.

Most people believe that liquid ratio is acid test ratio, but sometimes business is able to repay its liquid quick assets. The reason behind that is emergency requirement cash and business cannot get it from debtors, so quick assets include cash balance + investment certificate that can be immediately transferable into cash. The satisfactory ratio is 1:1 but lower limit is 0.5:1. Here quick assets do not include stock.

= Quick Assets (Current assets-Inventories) Current Liabilities

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Quick Assets 5467.84 26501.74 34475.5 24183.6 8678.51Current liabilities 14,517.73 37,821.16 47,638.17 59,601.18 24,979.07 Quick Ratio(times) 0.37 0.70 0.72 0.40 0.35

Interpretation:- So, as per the current year ratio of the company is up to some

extent satisfactory. This ratio shows the repay ability of the company which is satisfactory as per lower level all over the year. As compared to previous year in current year it is not good. In 2006-07 it is 0.40:1 and in current year it is 0.35:1.


46


B) CAPITAL STRUCTURE/LEVERAGE RATIOThe second category of financial ratios is leverage or capital structure ratios.

The long term creditors would judge the soundness of a firm on the basis of the long term financial strength measured in terms of its ability to pay the interest regularly as well as repay the installment of the principal of due dates or in one lump sum at the time of maturity.

B.1) Long Term Funds to Fixed Assets Ratio:

This ratio is obtained by dividing the long term funds with fixed assets. Here long term fund include owner’s fund plus long term debt. This ratio must be 1:1 or more. If fixed capital is less than fixed assets, it would mean that short term funds have been used in purchasing fixed assets the business would be put to trouble.

= Owner’s fund + Long term debt Fixed Assets

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Long term funds 12833.12 11342.15 14148.51 17247.96 14567.60Fixed assets 5,668.46 5,836.53 7,842.20 8,839.11 10,518.01 Long term fund to fixed assets ratio (times)

2.26 1.94 1.80 1.95 1.38

Interpretation:- This ratio is decreasing year by year till 2005-06, In the year 2003-04 it is 2.26:1 and now it is 1.38:1 in 2007-08. It is decrease by 0.88.Because of increase in fixed assets after 2006.


47

Financial Analysis of ONGC B.2) Total Debt Equity Ratio:

This ratio can be called as a proprietary ratio and it is another form of it. It establishes relationship between the outside long term & short term liabilities and owner’s funds. This ratio is obtained by dividing the total debt by net worth.

= Total Debt Net Worth

Rs. In Crore Year Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Debt 11,407.79 9,916.22 12,722.61 15,109.07 12,482.71

Net Worth 40543.1 46845.42 53959.67 61923.93 70617.4

Debt Equity Ratio (times)

0.28 0.21 0.24 0.24 0.18

Interpretation:- This ratio shows the 0.18 Rs. of liabilities against the 1Rs. of owner’s capital. This ratio is high in 2004 and then it is decrease. It is good for company as the interest burden is low. Because of Net worth is increase year by year.


48


C) PROFITABILITY RATIOProfit is the main objective of any business enterprise. Besides, profitability is

the measure of efficiency. The owners invest their funds in expectation of receiving reasonable return. Hence profitability ratios are very important from the view point of various shareholders.

C.1) Gross Profit Ratio:

Gross profit margin ratio reflects the efficiency with which management produces each unit of product. It expressing the relationship between Gross Profit earned to Net Sales. This ratio usually expressed as percentage.

= Gross Profit X 100Sales

Rs. In CroreYear Mar- ‘04 Mar- ‘05 Mar- ‘06 Mar- ‘07 Mar- ‘08Gross Profit 19,180.90 25,867.16 29,653.87 32,694.59 35,032.51Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26Gross Profit Ratio (%)

59.00 55.38 61.52 57.38 58.25

Interpretation:- Gross profit ratio shows the relation between gross profit and sales. That means how much proportion of gross profit in sales. This ratio is increase in last year compared to previous year.


49


C.2) Operating Profit Ratio:

It is a ratio showing relationship between Operating Profit and Net Sales. It shows the efficiency of management.

= EBIT X 100 Net Sales

Rs. In Crore Year Mar- ‘04 Mar- ‘05 Mar- ‘06 Mar- ‘07 Mar- ‘08EBIT 25293 66 28596.47 24984.8 23161 16313.19Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26Operating Profit Ratio (%)

77.80 61.22 51.83 40.70 27.13

Interpretation:- Operating profit ratio shows the proportion of profit before interest and tax in sales revenue. This ratio is in 2004, it is 77.80%, in 2005t is 61.22%, in 2006it is 51.83%, in 2007 it is 40.70%, in 2008 it is 27.13% which means operating profit is decreasing. Because of depreciation is increasing year by year. It’s not good for the company.


50

Financial Analysis of ONGC C.3) Net Profit Ratio:

Net Profit is obtained when operating expense, interest and taxes are subtracted from the gross profit. The net profit ratios measured by dividing PAT (Profit After tax) by sales. This ratio indicates the firm’s capacity to withstand adverse economic conditions.

= PAT X 100 Sales

Rs. In CroreYear Mar- ‘04 Mar- ‘05 Mar- ‘06 Mar- ‘07 Mar- ‘08

PAT 8,664.45 12,983.05 14,430.78 15,642.92 16,701.65Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26Net ProfitRatio (%)

26.65 27.79 29.94 27.49 27.77

Interpretation:- Net profit ratio shows the relationship of PAT with the sales. This ratio is in 2004, it is 26.65%, in 2005 it is 27.79%, in 2006 it is 29.93%, in 2007 it is 27.49%, in 2008 it is 27.77% which means PAT is always near to 26% to 30%. Because of Tax charges is increasing year by year.


51

Financial Analysis of ONGC C.4) Cost of Goods Sold Ratio:

This ratio indicate percentage share of sales in consumed cost of goods sold and conversely what proportion is available for meeting expenses such as selling and general distribution expense as well as financial expenses consisting of taxes, interest and dividend.

= COGS X 100 Sales

Rs. In Crore

Year Mar- ‘04 Mar- ‘05 Mar- ‘06 Mar- ‘07 Mar- ‘08Cost of Sales 14,861.46 22,636.52 21,043.12 28,754.66 29,732.67Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26

COGS Ratio (%) 45.71 48.46 43.66 50.53 49.44

Interpretation:- This ratio indicates proportion of cost of good sold in the sales revenue. The cost of good sold ratio is always near about 45% to 50%. This ratio shows fluctuating decreasing. Because of Sales is increasing year by year more than compared to Cost of Sales.


52


C.5) Return on Total Investment:

Profitability ratio can also be computed by relating the profit of a company to its total assets. The ROA may also be called profit – to –asset ratio. This ratio can be computed by dividing the PAT by total assets.

= PAT X 100 Total Assets

Rs. In Crore Year Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08PAT 8,601.39 12,926.66 13,944.93 16,830.64 16,314.65Total Assets 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.18Ratio of return on investment (%)

12.94 13.67 12.20 12.32 15.10

Interpretation:-

This ratio shows company’s profit earned on the total investment made in the company. This ratio is increase in current year. In 2004 it is 12.94% and now it is 15.10% in 2008. So it is increasing by 2.16%. Because of total assets is decreased compared to previous year. It is good for the company.


53

Financial Analysis of ONGC C.6) Earning Per Share:

Financial analyst regards the earning per share as an important measure of profitability. EPS measures the profit available to the equity shareholders on a per share basis, that is the amount that they can get on every share held. It is computed by dividing the PAT to the No. of equity share.

= Profit After Tax No. of equity share

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08PAT 8,601.39 12,926.66 13,944.93 16,830.64 16,314.65

No. of equity share 1,425.93 1,425.93 1,425.93 2,138.89 2,138.89

EPS Ratio 6.03 9.07 9.78 7.87 7.63

Interpretation:- The earning per share is increases. But in 2007 & 2008 EPS is decreases because PAT is decrease in 2008. EPS is as 6.03, 9.07, 9.78, 7.87, 7.63. It is good for shareholders. They get good return.


54

Financial Analysis of ONGC C.7) Selling Expense Ratio:

This ratio shows the relationship between the selling expenses and sales obtained by the company. This ratio is obtains dividing the selling expenses by the sales as follows:-

= Selling Expenses X 100 Sales

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Selling expenses 1786.29 1941.77 -40.27 -560.70 206.73Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26

Selling expenses ratio(%)

5.49 4.16 -0.08 -0.98 0.34

Interpretation:- The average of all year’s ratio shows the reduction in selling expenses of the company. The ratios are 5.49, 4.16, -0.08, -0.98, 0.34. Because the advertising and marketing expenses decrease year by year and sales are increases year by year. But in 2008 the advertising expenses increases.


55


D) ACTIVITY RATIOThe activity ratio measures the efficiency with which assets are being used in

business. They are also known as Turnover Ratio. The efficiency with which the assets are used would be reflected in the speed and rapidly with which assets are converted into sales. The greater the rate of turnover or conversation, the more efficient is the utilization / management, other things being equal.

D.1) Inventory Turnover Ratio:

This ratio indicates how fast inventory is sold. A low ratio would signify that inventory does not sale fast stays on the self or in the warehouse for long time.

= COGS Inventory

Rs. In CroreYear Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08COGS 14,861.46 22,636.52 21,043.12 28,754.66 29,732.67

Inventory 25,184.99 28,838.35 33,373.92 37,794.16 41,154.63

Inventory turnover Ratio (times)

0.59 0.78 0.63 0.76 0.72

Interpretation:- Here, we have taken total inventory as base. The overall result of this ratio shows year by year fluctuating decreasing of inventory turnover. The result of 2004 to 2005 it is increasing rate but after 2005 it is decreasing in 2006. Because of COGS is decreasing. And then it is increasing. Because of COGS is increasing.


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D.2) Total Assets Turnover Ratio:

The amounts invested in business are invested in all assets jointly and sales are affected through them to earn profits. So in order to find out relation between total assets to sales. Total assets include net fixed assets and current assets.

= Sales Total Assets

Rs. In Crore Year Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26Total Assets 66,468.62 94,582.80 1,14,320.45 1,36,634.18 1,08,079.18Total Assets Turnover Ratio (times)

0.49 0.49 0.42 0.42 0.56

Interpretation:- Here, we have taken as total assets as base. The total assets are increasing year by year till 2008. The investment in assets in 2003-04 it is 66468.62 and in 2007-08 it is 108079.18 which was approximately 1.6 times more. The company is using the assets efficiently that’s why the ratio is increasing trend.


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D.3) Fixed Assets Turnover Ratio:

Here we have also taken fixed assets as base. To ascertain the efficiency and profitability of business of business, the total fixed assets are compared to sales. This ratio can be finding out by dividing sales with the total fixed assets. The more the sales in relation to amount invested in fixed assets, the more efficient is the use of fixed assets.

= Net Sales Fixed Assets

Rs. In Crore

Year Mar-‘04 Mar-‘05 Mar-‘06 Mar-‘07 Mar-‘08Sales 32,511.92 46,712.14 48,200.87 56,903.70 60,137.26

Fixed Assets 5,668.46 5,836.53 7,842.20 8,839.11 10,518.01

Fixed Assets Turnover Ratio

5.74 8.00 6.15 6.44 5.72

Interpretation:- This ratio shows an efficiently and profitability of the business. The overall result of this ratio shows year by year fluctuating decreasing. This show the fixed assets are being used effectively to earn profits in the business.


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CHAPTER – 8

RECOMMENDATIONS AND SUGGESTION

By analyzing the annual report of the company, we would have to recommend and suggest that:-

From the analysis of the liquidity ratio we are able to recommend that the liquidity position of the company is good, and also it is able to meet it current obligation.

The capital structure ratio shows the performance of the company is increasing, because the company repaid the long term borrowing.

The balance sheet figures are showing the declining trend since last years. It should be the reason for higher inventory level which unnecessary blocked the money. For higher the profitability ratio of the firm, it is required to increase the sales along with.

To increase the work efficiency of the workers as well as of the staff members, arrangement of different training programs like meetings, seminars, conferences, coaching classes etc. is required.

For the innovation of new market, select capable market representatives who are more efficient to recover the more market share.

Try to maintain the quality level as per the market demand which satisfies the customers more.

In order to increase the profit the firm should keep proper control over the expenses retaliating to the purchase of goods, manufacturing and labours for that, proper supervision and timely comparison of actual with budgeted overheads should be taken. This will help the management to know the causes and taking competitive actions to reduce the expenses.

Try to reduce the debt collection period which should be main sources for working capital.

Use more credit facility which is given by the creditors.


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Financial Analysis of ONGC Firm should also use more short term loans to recover the working capital

requirement because the interest rate for short term loans is less and it should be flexible to use.

In order to maximize wealth under uncertainty, the firm must pay enough dividends to satisfy investors. It should help to increase the moral of the investors and side by side also helps in long term financial strength of the firm. So, by increasing profits, the firm should pay dividends regularly.


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CHAPTER-9

ANNEXURE-A

BALANCE SHEETRs. In Croore

Oil & Natural Gas Corporation Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08SOURCES OF FUNDS:Total Share Capital 1,425.93 1,425.93 1,425.93 2,138.89 2,138.89Equity Share Capital 1,425.93 1,425.93 1,425.93 2,138.89 2,138.89Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 39,117.17 45,419.49 52,533.74 59,785.04 68,478.51Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net worth 40,543.10 46,845.42 53,959.67 61,923.93 70,617.40Secured Loans 0.00 0.00 0.00 0.00 0.00Unsecured Loans 11,407.79 9,916.22 12,722.61 15,109.07 12,482.71Total Debt 11,407.79 9,916.22 12,722.61 15,109.07 12,482.71Total Liabilities 51,950.89 56,761.64 66,682.28 77,033.00 83,100.11

Application Of Funds:Gross Block 41,007.62 42,983.85 47,882.35 52,038.07 57,463.78Less: Accum. Depreciation 35,339.16 37,147.32 40,040.15 43,198.95 46,945.77Net Block 5,668.46 5,836.53 7,842.20 8,839.12 10,518.01Capital Work in Progress 25,184.99 28,838.35 33,373.92 37,794.16 41,154.63Investments 4,421.67 4,036.67 4,888.57 5,702.05 5,899.50Inventories 2,405.69 2,569.19 3,038.49 3,033.76 3,480.64Sundry Debtors 2,317.80 3,729.31 3,704.28 2,759.44 4,360.37Cash and Bank Balance 15.34 20.88 699.80 27.42 22,417.66Total Current Assets 4,738.83 6,319.38 7,442.57 5,820.62 30,258.67


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ANNEXURE-B ANNUAL RESULT Oil & Natural Gas Corporation

Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08

Sales 60,137.26 56,903.70 48,200.87 46,712.14 32,511.92

Other Income 5,010.66 4,243.10 2,354.99 1,729.79 1,547.08

Stock Adjustment -114.11 19.73 -211.58 -29.86 11.15

Raw Material 681.69 392.75 373.17 184.09 135.07

Power And Fuel 0.00 0.00 0.00 0.00 0.00

Employee Expenses 1,145.37 2,981.78 1,272.66 1,002.92 955.25

Excise 288.74 270.89 278.00 349.20 447.99

Admin And Selling Expenses 0.00 0.00 0.00 0.00 0.00

Research And Development Expenses

0.00 0.00 0.00 0.00 0.00

Expenses Capitalized 0.00 0.00 0.00 0.00 0.00

Other Expenses 28,054.74 24,765.56 19,142.77 21,030.71 13,281.89

Provisions Made 0.00 0.00 0.00 0.00 0.00

Operating Profit 30,080.83 28,472.99 27,345.85 24,175.08 17,680.57

Interest 58.98 21.50 46.97 37.71 46.75

Gross Profit 35,032.51 32,694.59 29,653.87 25,867.16 19,180.90

Depreciation 9,797.92 9,499.44 8,457.28 6,201.61 5,571.86

Taxation 8,920.05 8,027.29 7,313.74 6,685.12 4,958.77

Net Profit / Loss 16,314.54 15,642.92 14,523.39 12,980.43 8,650.27

Extra Ordinary Item 0.00 475.06 640.54 0.00 0.00

Prior Year Adjustments 387.11 0.00 -92.61 -2.62 14.16

Equity Capital 2,138.87 2,138.87 1,425.93 1,425.93 1,425.93

Equity Dividend Rate 0.00 180.00 250.00 200.00 240.00

Agg. Of Non-Prom. Shares (in Lacs)

553.13 5,531.32 3,687.74 3,687.74 3,685.60


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ANNEXURE-CAUDITOR’S REPORT

1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS CORPORATION LIMITED (the Company) as at 31 March, 2008, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date, annexed thereto in which are incorporated the Companys share in the total value of assets, liabilities, expenditure, income and net profit of 103 blocks under New Exploration Licensing Policy (NELPs) / Joint Venture (JVs) accounts for exploration and production out of which 91 NELPs /JVs accounts have been certified by other firms of Chartered Accountants and remaining 12 NELPs/JVs as certified by the management (Refer Note 21.1.1 to 21.1.4 of Schedule 28 of the financial statements). These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We have placed reliance on technical/commercial evaluation by the management in respect of categorization of wells as exploratory, development and producing, allocation of cost incurred on them, depletion of producing properties on the basis of the proved developed hydrocarbons reserves, liability for abandonment costs, liabilities under NELP for under performance against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

4. As required by the Statement on the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure (read with paragraph 1 above) a statement on the matters specified in paragraph 4 and 5 of the said Order.

5. Further to our comments referred to in paragraph 4 above we report as follows:

5.1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

5.2. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;


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Financial Analysis of ONGC5.3. The Balance Sheet, Profit and Loss Account and the Cash Flow Statement

dealt with by this report are in agreement with the books of account;

5.4. In our opinion, the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

5.5. Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not required as per notification number GSR 829(E) dated 21st October, 2003 issued by the Department of Company Affairs.

5.6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with notes to accounts and in particular Note 2 of Schedule 28 in respect of recognition of Sales Revenue in respect of crude oil and natural gas, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2008;

b) in the case of the Profit & Loss Account, of the profit of the Company for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Annexure to the auditors report

(Referred to in paragraph A of our report of even date)

1. a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) We are informed that the fixed assets other than those which are underground/ submerged/ under joint venture, having substantial value have been physically verified by the management in phased manner. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on physical verification and consequential adjustments with regard to discrepancies are carried out on completion of reconciliation. According to the information and explanations given by the management, in our opinion, the same is not material.

c) The Company has not disposed off substantial parts of fixed assets during the year.

2. a) The inventory has been physically verified (excluding inventory lying with third parties, at some of the site- locations, inventory with joint ventures and


64

Financial Analysis of ONGCmaterial in transit) during the year by the management. In our opinion, the frequency of verification is reasonable.

b) The procedures of physical verification of inventory followed by the management to the extent verified were generally reasonable and adequate in relation to the size of the Company and nature of its business.

c) The Company has generally maintained proper records of inventory except for recording of consumption at a few of its site- locations. The discrepancies noticed on verification between the physical stock and book records were not material having regard to the size of the operations of the Company. In case where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books. In respect of those cases where the reconciliation is not complete, the management has stated that the same would be adjusted in due course.

3. The Company has not taken nor granted any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly clauses 4 (iii)(a), (b) (c) and (d) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods. During the course of our audit we have not observed any continuing failure to correct major weakness in internal controls.

5. a) According to the information and explanations given to us, there is no contract or arrangement referred to in section 301 of the Companies Act, which are required to be entered in the register maintained under the section.

b) Accordingly, the provisions of clause 4 v (b) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the Rule made by the Central Government for the maintenance of cost records under section 209 (1 )(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

9. The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education


65

Financial Analysis of ONGCand Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it. There are no such material outstanding statutory dues accrued in accounts as of the last date of the financial year concerned for a period of more than six months from the date they became payable.

10. The Company has no accumulated losses at the end of the current financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

11. The Company has not issued any debentures and not defaulted in repayment of dues to financial institutions or banks.

12. In our opinion and as per the information and explanation given by the management, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund/ society. Accordingly, the provision of clause (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. In our opinion and as per the information and explanation given by the management, the Company is not dealing in or trading in shares, securities, debentures and other investments.

15. In our opinion and as per the information and explanation given by the management, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the Company, since these guarantees are given for the subsidiary/ company promoted by the Company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. On an overall examination of the balance sheet of the Company, we report that no funds raised on short terms basis have been used for long term investment.

18. The Company has not issued any preferential allotment of shares during the year.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by way of public issue during the year.


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Financial Analysis of ONGC21. According to the information and explanations given to us, no fraud on or

by the company which is material in amount and nature has been noticed or reported during the course of our audit.

For K. K. Soni & Co. For S. C. Ajmera & Co. For Singhi & Co.

K.K. Soni Arun Sarupria Pradeep Kr. SinghiPartner(Mem.No.07737) Partner (Mem.No.78398) Partner (Mem.No.50773)

For P. S. D. & Associates For Padmanabhan Ramani&Ramanujam Chartered Accountants

D.D. Dadhich Padmanabhan R.Partner (Mem. No. 71909) Partner (Mem. No. 13216)

New Delhi 25th June, 2008


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CHAPTER – 10

BIBLIOGRAPHY

For the preparing the report we uses the following:-

1. Annual Report of the company of 2007-08.

2. Websites :- www.ongc.com www.google.comwww.kotaksecurities.comwww.moneycontrol.com

3. Book:- Financial Accounting, 3rd Edition, PHI Learning Pvt. Ltd., Author- R. Narayanswamy, Part III, Chapter 11, Financial Statement Analysis.


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http://www.kotaksecurities.com/

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Financial Analysis of ONGC