- Essar Oil Limited was incorporated in 1956 and engaged in oil and gas activities. HPCL operates two major refineries in India. - An analysis of key financial ratios between the two companies in 2011 showed that HPCL had stronger financial performance and position compared to Essar Oil Limited, with higher profitability, liquidity, and returns. - Therefore, HPCL would be preferred over Essar Oil Limited for investment based on its relatively stronger financial profile in 2011.

2. • Essar Oil Limited was incorporated as a
Public Limited Company on 12th
September 1956
• Promoters of EOL.
• EOL was engaged in preliminary activities
relating to bidding for oil & gas fields

3. Balance Sheet as at March 31,2011
Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Sources of funds
Shareholders’ funds
a. Share capital 1,382.27 1,218.13
b. Advance towards issue of global
depository shares. - 1,153.21
c. Reserves and Surplus 5,155.63 2,836.57
Loan funds
a. Secured Loans 12,274.42 9,470.59
b. Unsecured Loans 2,272.51 883.14
Deferred tax liability(net) 11.45 -
Total 21,096.28 15,561.64

4. Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Application of funds
Fixed Assets
a. Gross block 13,974.59 13,802.50
b. Less: Accumulated depreciatiion and
amortisation 2,230.50 1,493.15
c. Net block 11,744.09 12,309.35
Capital work-in-progress 8,423.04 4,318.75
Investments 103.00 203.00
Deferred tax assets (net) - 0.57
Current Assets, Loans and
Advance.
a. Inventories 5,749.14 3,969.44
b. Debtors 2,367.30 1,957.42
c. Cash and Bank balances 2,958.66 1,350.75
d. Other Current Assets 497.84 406.54
e. Loans and advances 737.88 728.37

5. Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Less: Current Liabilities and Provisions
a. Current Liabilities 11,287.69 10,160.57
b. Provisions 196.98 56.24
11,484.67 10,216.81
Net Current Assets 826.15 (1,804.29)
Debit balance in statement
of profit and loss - 534.26
Total 21,096.28 15,561.64

6. Statement of Profit and Loss
for the year ended March 31, 2011
Particulars 2011 2010
(Rs. in Crores) (Rs. In Crores)
Income
a. Turnover (Gross) 53,119.10 42,401.68
b. Less: Excise duty 5,213.77 5,083.20
c. Turnover (Net) 47,905.33 37,318.48
d.Less: Sales tax 917.12 813.87
46,988.21 36,504.61
e. Other Income 354.00 871.93
47,342.21 37,376.54
Expenditure
Purchase of traded petroleum products 1,964.20 1,705.74

7. Particulars 2011 2010
(Rs. In crores) (Rs.In crores)
Consumption of raw materials 42,129.27 32,855.98
Increase/ Decrease in stock (1,157.64) (310.81)
Operating expenses 735.66 413.52
Employees Cost 119.67 97.50
Selling and Distribution expenses 409.14 381.26
General and Administration expenses 362.42 295.53
44,562.72 35,438.72
Profit before interest,depreciation and taxes 2,779.49 1,937.82
Less: Interest and Finance charges 1,220.24 1,180.93
Less: Depreciation and amortisation 730.86 728.31
Net profit before taxes 828.39 28.58

8. Particulars 2011 2010
(Rs. In Crores) (Rs. In Crores)
Taxes
Income tax 162.49 -
Income Tax Refund - 0.88
Deferred Tax 12.02 -
Net profit after taxes 653 .88 29.46
Balance brought forward from previous year (556.51) (556.96)
Add: Amount transferred from foreign project
reserves - 0.45
Less: Amount transferred to debenture
redemption reserve 60.33 29.46
Balance carried forward 37.04 (556.51)

10. • HPCL is a Government of India
Enterprise with a Navratna Status, and
a Fortune 500 company.
• HPCL operates 2 major refineries
producing a wide variety of petroleum
fuels & specialties, one in Mumbai and
one in vishakapatnam.

11. Balance Sheet as at March 31,2011
Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Sources of funds
Shareholders’ funds
a. Share capital 339.01 339.01
b. Reserves and Surplus 12,206.79 11,218.96
12,545.80 11,557.97
Loan funds
a. Secured Loans 3,657.68 1,375.88
b. Unsecured Loans 21,363.51 19,926.49
25,021.19 21,302.37
Deferred tax liability(net) 3,195.63 1,807.97
Total 40,762.62 34,668.31

12. Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Application of funds
Fixed Assets
a. Gross block 29,648.39 24,988.37
b. Less: Accumulated depreciatiion and
amortisation 11,003.86 9,681.70
c. Net block 18,644.53 15,306.67
d. Capital work in progress 3,798.70 3,887.59
22,443.23 19,194.26
Investments 11,335.02 11,387.22
Current Assets, Loans and
Advance.
a. Inventories 16,622.28 12,579.22
b. Debtors 2,654.37 2,437.34
c. Cash and Bank balances 80.00 243.17
d. Other Current Assets 98.51 123.74
e. Loans and advances 7,135.81 5,258.47

13. Particulars 2011 2010
(Rs.in Crores) (Rs.in Crores)
Less: Current Liabilities and Provisions
a. Current Liabilities 17,801.84 14,535.52
b. Provisions 1,804.76 2,019.59
19,606.60 16,555.11
Net Current Assets 6,984.37 4,086.83
Total 40,762.62 34,668.31

14. Statement of Profit and Loss
for the year ended March 31, 2011
Particulars 2011 2010
(Rs. in Crores) (Rs. In Crores)
Income
Sale of goods 132,669.97 108,598.68
Less: Excise duty 8,897.55 7,251.17
Net Sales 123,772.42 101,347.51
Recovery under subsidy schemes 9,726.52 6,289.95
Other Income 1,343.54 1,646.16
134,842.48 109,283.62
Increase/(Decrease) 3,438.78 3,249.96
Expenditure
Purchase of products for resale 85,396.86 62,677.82

15. Particulars 2011 2010
(Rs. In crores) (Rs.In crores)
Consumption of raw materials 40,362.01 37,727.59
Packages consumed 143.42 136.39
Excise duty on inventory differential 285.15 337.08
Transhipping expenses 2,886.50 2,653.56
Payments to and provisions for
Employees 2,017.16 1,617.32
Exploration Expenses 93.03 255.62
Other Operation expenses 2,444.80 2,938.86
Depreciation /Amorisation 1,406.95 1,164.40
Borrowing Cost 884.00 903.75
135,919.88 110,412.39
Profit before prior period adjustments
and taxes 2,361.38 2,121.19
Prior period adjustments credit/(debit) 15.24 (3.84)

16. Particulars 2011 2010
(Rs. In Crores) (Rs. In Crores)
Balance brought forward 8,715.15 8,104.16
Profit available for appropriation 10,254.16 9,405.53
Appropriated For:
General Reserve 153.90 130.14
Debenture Redemption Reserve 176.15 86.40
Proposed Final Dividend 474.08 406.35
Tax on Distributed profits 76.91 67.49
Balance carried forward 9,373.12 8,715.15

19. RATIO COMPANY
ANALYSIS
REASONS
GROSS PROFIT
RATIO
12.05% 67.39% HPCL Higher ratio:
Greater
Profitability
OPERATING
RATIO
0.015% 1.97% ESSAR OIL
LIMITED
Higher ratio:
Lower margin of
profit
EXPENSE RATIO 0.85%
0.75%
2.33%
0.075%
ESSAR OIL
LIMITED
HPCL
High ratio means
lower
profitability and
inefficiency of
management in
controlling
expenses
NET PROFIT RATIO 1.36% 1.24% ESSAR OIL
LIMITED
Higher ratio
indicates higher

21. RATIO COMPANY
ANALYSIS
REASONS
CURRENT
RATIO
1.07:1 1.35:1 HPCL Higher ratio:
sound financial
position.
QUICK
RATIO
0.50:1 0.14:1 ESSAR OIL
LIMITED
Higher ratio:
sound financial
position.
PROPRIETORY
RATIO
20.13% 25.58% HPCL Higher ratio:
lesser
dependence on
outside funds-
sound financial
position but over
capitalization and
low returns.
DEBT EQUITY
RATIO
2.22:1 1.99:1 HPCL Lower ratio
indicates low
owed funds.

23. RATIO COMPANY
ANALYSIS
REASONS
RETURN ON
CAPITAL
EMPLOYED
3.92% 5.75% HPCL Higher ratio:
favorable
lower ratio:
unfavorable
RETURN ON
PROPRIETORS
FUNDS
13% 12.26% HPCL Higher ratio:
growing and
prosperous
company
RETURN ON
EQUITY
CAPITAL
0.47:1 4.5:1 HPCL Higher ratio :
Effective use of
equity capital
and advantage of
trading on equity
DEBTORS
TURNOVER
RATIO
20.23 TIMES 46.62TIMES ESSAR OIL
LIMITED
Lower ratio:
Favorable
Higher ratio;
Unfavorable

24. HPCL is preferred for investment as:
 It has financial sound position as compared to
EOL.
a. Current ratio
b. Quick ratio
 It indicates lesser dependance on outside
funds
a. Proprietory Ratio

25.  It indicates low owed funds
a. Debt Equity ratio
 It indicates growing and prosperous company
a. Return on proprietors funds
b. Return on Equity capital
 It is profitable
a. Gross Profit