Sip Iocl 0921411


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(Internship presentation)Financial analysis of IOCL & its new pipeline PRRPL

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  • 1. ONGC inc ONGC Videsh Limited(OVL)2. IOCL inc CPCL its subsidiary3. BPCL inc Numaligarh its subsidiary4. MRPL-Subsidiary of ONGCONGC is the dominant player in India’s upstream sector, accounting for nearly 71percent of country’s oil production in year 2008-09.OIL is the next largest producer. Reliance is also becoming a significant operator in the oil sector and is the largest private oil and gas company in country.Cairn India, a branch of UK-based Cairn Energy and BG exploration are also important players in the industry.IOCL is the dominant player in downstream sector. Reliance opened its refinery in year 1999 and has gained considerable share in India’s oil sector.
  • Values- CITP : Care Innovation Passion TrustPage 28,29-Mission,Vision,Values2827.06Cr NPBT (net profit before tax)
  • Currently IOC holds 51.89% while NICO holds 15.40%.
  • Print outs of stages page75-80Prepare financial plan, assess the risks, design the financing mix, raise the funds,Funds are repaid from the cash flows of the project.
  • PO-tables of PRRPLMS-Motor Spirit (Passenger cars,taxis,two wheeler and three wheeler)SKO-Superior Kerosene Fuel for Cooking and LightingHSD- High Speed Diesel for Transport sector(Railways/Roads),Agriculture( tractors, Pump sets)
  • IDC – interest during construction
  • Ratios charts
  • In the year 2009, the operating profits shoot up to Rs.2514.37 Cr due to Change in Accounting Policy of IOCL.Earlier the operating cost of crude pipelines was taken as income and Product pipelines were charged a 75% of notional railway freight. From year 2009, 75% of Notional Railway Freight (NRF), for both crude as well as product pipelines, is taken as income. It is also called as Cost of Transportation (COT).From the above analysis it can be clearly seen that in last two years the cumulative income from transporting crude is 85% where as that of products is just a 15%.The reason for the same is because crude is transferred from the start to end point of the pipeline i.e. from oil tanks to refineries. There is no delivery in between and hence the COT charged is maximum possible. Whereas, in case of products it can be delivered to any of the intermediate stations and hence the COT charged is only till that point of delivery.
  • All the ratios print outs.The variable cost at the pipeline division mainly constitutes Power & Fuel and Chemicals.The Variable cost kept rising till year 2009 owing to rising crude prices which even touched $147/barrel. However last fiscal prices came down and currently are in the range of $75-80 a barrel which resulted in lower variable cost per MT.
  • Print outs of pages 98-99
  • Sip Iocl 0921411

    2. 2. This Presentation Entails :  Research Methodology  Industry Profile  Company Profile  Pipeline Division  Project Finance-PRRPL  Financial Analysis-IOCL  Financial Analysis-Pipeline Division  Contribution to IOCL-Pipeline Division  Recommendations  Learning
    3. 3. Research Methodology  Systematic way to carry out activities to achieve objectives.  Research-Type : Analytical Fundamental Historical  Objectives :  To determine the feasibility of the PRRPL  To analyze the financials of IOCL and Its pipeline division  Scope :  Focus on Project finance  Analysis of IOCL-Pipeline’s Financials.  Limitations :  Limited Availability of Time.  No Opportunity to visit Refinery.
    4. 4. Research Methodology Where’s Problem, Info, or Knowledge What to do? ? Lets find out…. How to do? Working with proper Consultation & Guidance, for maximum Contribution Data Processing Data Collection Data Analysis Stimulate Mind & Leave the Knowledge to achieve Footprints Objectives.
    5. 5. Industry Profile  Petroleum : An oily liquid existing at various places in the Earth’s crust.  Technology-Intensive & High Capital Investment  2% of world market-business worth USD 30bn  13% yearly growth, one of the fastest growing sector  Global oil majors benchmark their production costs with OPEC  Historically, Administered Pricing Mechanism (APM) regulation was in place, but now dismantled with presence of private players.  Volatile Prices of Crude & Petro Products, dependency on international market
    6. 6. Industry Profile Downstream Sector Public IOCL HPCL BPCL Private Reliance Shell Essar
    7. 7. Company Profile 1964>>125th-Fortune 2010 CITP - Values Rs.2,827.06 Cr - 2009  18th Largest petroleum company in the world.  India’s largest Commercial Enterprise.  Ranks 125th on the Fortune Global 500 listing (2010), & classified as A+ Grade PSU in India.  1959 : Began operation as Indian Oil Company Ltd.  1964 : IOCL was formed, with the merger of Indian Refineries Ltd.  Golden Jubilee year 2009-10 :  48% Share in Petroleum Product Market  34% Share in Refining Capacity  71% Share in Downstream Sector Pipelines Capacity  IndianOil owns & operates 10 of India's 20 refineries with a combined refining capacity of 60.20 MMTPA .  Cross-country pipelines network spans more than 10,329 kms.  It operates the largest & widest network of fuel stations in India, numbering about 18,278.  CMD: Mr. B M Bansal
    8. 8. Refinery IOCL R&D Divisions Marketing Pipelines
    9. 9. Pipeline Division  Has a network of 10,329km which serves as the backbone of refining and marketing operations  It has a throughput capacity of 74.41 MMTPA.  3 Crude and 18 product pipelines with 10 more under implementation. Product 5963Km (33.41MMTPA) 10329Km (74.41MMTPA) Crude 4363Km (41 MMTPA)
    10. 10. Project Finance  What is it all about??  Project finance-A ten stage process I • Need for a new Pipeline II • Cost Estimates are prepared III • Detailed Feasibility Report (DFR) IV • Board Approval X • Commissioning of Purchase Requisitions V • the project IX • Insurance VI • Tenders are invited • Techno Bids and Commercial Bids are • Project commences VIII VII received
    11. 11. Project finance for PRRPL  PRRPL – “Paradip-New Sambalpur-Raipur- Ranchi Pipeline”  Need-Railway Tariffs.  Length of the pipeline -1108 Km  Products- MS,SKO & HSD  Throughput projections till 2027.  Minimum 33% as common carrier.  Construction Schedule – 36 months
    12. 12.  Capital cost Rs1793 Cr (Inc Rs610 Cr FC)  Annual Operating Cost Rs67 Cr  Financing- Debt:Equity =1:1  Debt@11%p.a. (8instalments with 1yr Moratorium period)  Working capital(Internal sources)  IRR 16.8% (w/o IDC) > Hurdle Rate  FINANCIALLY VIABLE
    13. 13. Comparative Ratio Analysis of IOCL, HPCL and BPCL  Profitability Ratios IOCL leads among the state owned oil companies in all the Profitability ratios consistently.  Liquidity Ratios Due to the massive scale of operations it is way below its competitors in this category.  Activity Ratios DTR and FATR are all below that of competitors.
    14. 14. Financial Analysis of Pipeline Division  Operating Profits Analysis (Rs in Crores) 3000 2,827.06 2500 2,514.37 2000 1500 1000 500 295.23 417.15 435.32 0 2005-06 2006-07 2007-08 2008-09 2009-10 Operating Profit  Cost of Transportation (COT) Analysis (Rs in Crores)
    15. 15. Financial Analysis of Pipeline Division  Variable Cost Per MT Analysis 80 70 68 60 54 56 (Rs per MT) 50 47 40 39 Variable Cost Per MT 30 20 10 0 2006 2007 2008 2009 2010 Particulars 2006 2007 2008 2009 2010 Total Variable Cost(Rs Crores) 173 242 308 403 356 Throughput (TMT) 44832 51222 56686 59171 63992 Variable Cost Per MT(Rs) 39 47 54 68 56  Ratio Analysis- Specific to pipeline division
    16. 16. Contribution to IOCL-Pipelines Division  E-Payment Analysis (April,May’10)  SAP related work-  Cost Estimates checked for-  PRRPL  Hot Crane  Restoration of Sanganer  CBR Trichy Pipeline  Tenders-Commercial & Price bid evaluation for  “Hot Crane” Tender(Public)  “Restoration of Sanganer plant” Tender(Limited)
    17. 17. Cntd..  Preparation of CapEx reports for April’10 and May’10 (MS Excel, Macros)  Preparation of Schedules X and Schedule V (Balance sheet) of 2009-10. (Analysis of payments to foreign parties using SAP)  Preparation of insurance Claim file(Sanganer plant Fire)
    18. 18. Recommendations  The controllable costs of Rs.76.88 Cr. in 2010 should be reduced, to increase profits.  Current Ratio of 0.67:1 is low, so is quick ratio & stock-to- working capital ratio; it should be improved to amend IOCL’s liquidity position.  Working Capital of IOCL is negative Rs207Cr, because of CL>CA, therefore steps should be taken to turn it into positive. Either it should work on ↑CA or ↓CL or both.  DTR of 48.15 is almost half that of competitors like BPCL. Measures should be taken by improving credit terms and standards.  The ratios of operating costs, establishment costs per employees, per tonne are very high; it is very pertinent to bring them down.
    19. 19. Learnings In IndianOil Corporation Ltd.- Pipelines Division
    20. 20. Thank You