Emperical study tanmay chakrabarty-14mb5058 (1)

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PROJECT REPORT
ON
COMPARATIVE FINANCIAL ANALYSIS OF TOP FIVE OIL AND GAS
SECTOR COPANIES LISTED IN BSE.
A Project Report Submitted In Partial Fulfillment of the Requirements
For The Award of the Degree of
MASTERS OF BUSINESS ADMINISTRATION
TO
M S RAMAIAH ACADEMY MANAGEMENT
BY
Tanmay Kumar Chakrabarty
University Reg. No. 14MB5058
MBA (UoM) Batch 2014-2016
Under the guidance of
Prof. Kumuda P. R
M S RAMAIAH ACADEMY MANAGEMENT
NEW BEL ROAD, BANGALORE-560054

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CERTIFICATE
This is to certify that this report of Final Project conducted at M.S.Ramaiah Academy
of Management and submitted by Tanmay Kumar Chakrabarty, in partial fulfillment
of the requirements for the award of the MASTERS IN BUSINESS
ADMINISTRATION to M.S.RAMAIAH MANAGEMENT INSTITUTE is a record
of bonafide training carried out under my supervision and guidance and that no part of
this report has been submitted for the award of any other degree/diploma/fellowship or
similar titles or prizes.
GUIDE Signature:
Name: Prof. Kumuda P.R
Qualifications: M.Com, MBA, MPhil, PGDIB, UGC-NET, (PhD)
Program Head Signature:

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Student Declaration
I hereby declare that the Project conducted at M.S.Ramaiah Academy of Management
under the guidance of Prof. Kumuda P.R and the project report submitted in partial
fulfillment of the requirements for the MASTERS IN BUSINESS ADMINISTRATION (UoM) to
M.S.Ramaiah Academy of Management, is my original work and the same has not
been submitted for the award of any other Degree/Diploma/Fellowship or other similar
titles or prizes .
Place: Bangalore TANMAY KUMAR CHAKRABARTY
Date: Reg. No: 14MB5058

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ACKNOWLEDGEMENT
I extend my special gratitude to our beloved and respected Dean Dr. H
Murlidharan, and Academic Head Prof. V Narayanan and Program Head Dr.
Anuradha T.N for inspiring me to take up this project.
I wish to acknowledge my sincere gratitude and indebtedness to my project guide
Prof. Kumuda P.R of M.S. RAMAIAH ACADEMY OF MANAGEMENT
Bangalore for his /her valuable guidance and constructive suggestions in the
preparation of project report.
STUDENT NAME
TANMAY KUMAR CHAKRABARTY

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Executive Summary
The Indian oil and gas sector is one of the six core industries in India and has very significant
forward linkages with the entire economy. India has been growing at a decent rate annually and is
committed to accelerate the growth momentum in the years to come.
This study focuses on the comparison of financial positions of top five Oil and Gas Sector Company
listed on BSE. This measures profitability, assets management, efficiency, liquidity, long term
solvency etc.
In the introductory chapter, study have considered the current scenario of Oil and Gas Sector
Company, the growth aspects of the same in the coming years, uniqueness and consumers
adoptability and consumption of Oil and Gas.
In the study other similar industry based researches are also considered as review of the same is
provided with summary.
This study also contain the industry related discussions i.e. history of the industry, growth factors of
industry, big players in domestic and global level, various government regulation, size of the
industry, challenges and issues of the industry, future prospect.
Research analysis and interpretations are made on fifteen different ratios to measure the positions of
each firm and made a comparative analysis by line graph of the five years position 2011-15. Based
on the graph interpretations and company position is described in the interpretation.
Whatever is the outcome of the empirical study analysis, based on that findings are given, after
understanding the fact of findings and evaluating each companies position suggestions are made then
study came to an conclusion.
In our study we tried to understand the profitability of the companies, EPS growth, and investment
analysis for each company and we got an overview of that with the successful completion of the
study.

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Table of Contents
1. Introduction- 8-15
Introduction
Growth
Uniqueness of the industry
Performance of oil industry
I. Working title
II. Statement of problem
III. Research objective
IV. Research methodology
V. Limitations of the study
VI. Importance of the study
2. Chapter 1- Literature Review- 16-34
3. Chapter 2- Industry Profile- 35-51
2.0 Introduction
2.1 History
2.2 Growth
2.3Size of Industry
2.4 Major Players at National and Global Level
2.5 Govt. rules and regulations
2.6 Challenges and Issues
2.7 Future Prospects
2.8 Porter’s Five Force Model
4. Chapter 3 & 4- Research Analysis and Interpretation- 52-84
Dividend payout ratio
Return on equity
Earnings retention ratio
Gross profit margin
Net profit margin
Earnings per share(EPS)
Price to Earnings Ratio(P/E)
Return on Net Worth
Current ratio
Return on capital employed
Debt equity ratio
Interest cover ratio
Inventory turnover ratio
Debtors turnover ratio
Fixed asset turnover ratio

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5. Chapter 5- Findings, Suggestions and Conclusion- 85-90
Findings
Suggestions
Conclusion
6. Bibliography- 91-92
Websites-
Books-
7. Annexure- 93-129
Annexure I
Annexure II
Annexure III
Annexure IV
Annexure V
Annexure VI
Annexure VII
Annexure VIII
Annexure IX
Annexure X
Annexure XI
Annexure XII
Annexure XIII
Annexure XIV
Annexure XV

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The Indian oil and gas sector is one of the six core industries in India and has very significant
forward linkages with the entire economy. India has been growing at a decent rate annually and is
committed to accelerate the growth momentum in the years to come. This would translate into India's
energy needs growing many times in the years to come. Hence, there is an emphasized need for
wider and more intensive exploration for new finds, more efficient and effective recovery, a more
rational and optimally balanced global price regime - as against the rather wide upward fluctuations
of recent times, and a spirit of equitable common benefit in global energy cooperation. The purpose
of this study is to comparative study of financial performance, of India’s five leading oil and
petroleum companies i.e. Oil and Natural Gas Corporation, Reliance Petroleum Limited, Indian Oil
Corporation, Hindustan Petroleum Corporation and Cairn India Limited have been selected for the
study. The most common tool of financial analysis various ratios as used. It is concluded that the
overall performance of Oil and Natural
Gas Corporation found highly satisfactory in net profit growth on the profitability level, short term
liquidity position, efficiency level, solvency capacity and investment analysis.
Comparative financial analysis is one of the important techniques, which is used to study the future
behavior of the companies. It actually refers to analyses of present and future earning capacity of the
ratios based on the analysis of industry and company as a whole, thereby to determine the intrinsic
values of the stocks. In other words, financial analysis is mainly concerned with the determination of
intrinsic value by analyzing the fundamental factors of industry and company as a whole. The
intrinsic value of the stocks represents the real worth, which is used by the fundamental analysts to
identify the underpriced and overpriced securities in the market. It means, if the intrinsic value of the
stock is more than the market value, it considered as underpriced and included in the portfolio. Thus,
fundamental analysis is mainly concerned with the determination of intrinsic value of stocks and
based on that intrinsic value investment decisions are taken by the fundamental analysts.

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Introduction-
India is the sixth largest consumer of oil. There is a huge demand-supply gap in oil and gas in India.
The country imports more than 70% of its crude oil requirement. In 2005, oil and gas accounted for
38% of primary energy consumption in India, followed by coal at 55%. Oil and gas industry is
broadly classified into Upstream and Downstream segments and comprises 18 refineries, with total
refining capacity of 132.47 mmtpa as of April 1, 2006.
According to Ministry of Petroleum and Natural Gas, India’s crude oil reserves have increased from
726mmt in FY02 to an estimated 786mmt in FY06, whereas natural gas reserves have increased from
763 billion cubic metres (bcm) to 1,101bcm between FY02 and FY06. Crude oil production was
estimated at 32.19mmt and natural gas at 32.20bcm in FY06. Consumption of crude oil was
estimated at 130.11mmt, whereas consumption for natural gas was estimated to be 31.02bcm in the
same year. The production and consumption of petroleum products was estimated at 119.75mmtpa
and 111.92mmt respectively. Recently,
India has emerged as net exporter of petroleum products. The Indian oil and gas sector is of strategic
importance and plays a predominantly pivotal role in influencing decisions in all other spheres of the
economy. The annual growth has been commendable and will accelerate in future consequently
encouraging all round growth and development. This has necessitated the need for a wider
intensified search for new fields, evolving better methods of extraction, refining and distribution, the
constitution of a national price mechanism - keeping in mind the alarming price fluctuation in the
recent past and evolving a spirit of equitable global cooperation.
GROWTH
In the 50 years since Independence India has witnessed a significant growth in the refining facilities
and increase in the number of refineries from one to seventeen now. There has been an increase in
the refining capacity from 0.25 tonsMMTpa to about 103 MMTpa.
The first decade of Independence (1947-57) saw the establishment of three coastal refineries by
multinational oil companies operating in India at that time, viz.
Burmah Shell, Esso Stanvac and Caltex; the first two at Mumbai and the third at Visakhapatnam.
The second decade (1957-67) witnessed the setting up of Indian Refineries Ltd. in 1958, a wholly-
owned public sector Government company. Under its banner three refineries were set up at Guwahati
(Assam), Barauni (Bihar) and Koyali (Gujarat) essentially to process the indigenous crude
discovered in Assam and

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Gujarat. In addition, one joint sector refinery was set up with the participation of an American
company at Cochin, based on imported crude.
The next ten year period (1967-77) witnessed the establishment of two refineries, one with equity
participation from American and Iranian companies at Chennai and another in the public sector at
Haldia by Indian Oil.
The period 1977-87 saw the commissioning of two more refineries in the public sector. The refinery
at Bongaigaon was the first experiment in having an integrated petroleum refinery-cum-
petrochemicals unit. The notable feature of the capacity additions during this decade have been the
extensive utilization of the process design capabilities of M/s Engineers India Ltd. and installation of
Secondary Processing Facilities to increase the production of much required kerosene, diesel and
LPG.
During the fifth decade (1987-97), a small refinery of 0.5 MMTpa at Nagapatinnam was built in
Tamil Nadu. It is based on crude from adjoining fields. In 1996, a 3 MMTpa refinery was built in the
joint sector at Mangalore between HPCL and Indian Rayon. This decade also witnessed major policy
initiatives in the refining sector. In 1987, the Government decided to set up refineries in the joint
sector in which the equity participation of public sector undertaking was envisaged to be 26%.
Another 26% equity was meant for the private sector partner and the balance 48% was to be raised
from the public.
The Government has also announced that investments in the refining sector will be encouraged by
providing reasonable tariff protection and making marketing rights for transportation fuels viz. MS,
HSD & ATF conditional on owning and operating refineries with an investment of at least
Rs.2,000crore or oil exploration and production companies producing at least 3 million tons of crude
oil annually. As per the current outlook, India's refining capacity is estimated to reach a level of 129
MMTpa by the end of the IX Plan (2001-02).
UNIQUENESS OF PETROLEUM INDUSTRY
The petroleum industry is such an industry which has the largest earning capacity. The
variouspetroleum products are diversified in a very wide range. The main functional areas of this
industry are extraction of crude, refining of crude, processing and transporting. The main problem
faced by the entire petroleum industry is the pollution problem. The refining of crude oil creates
huge pollution by producing various harmful gases. Another problem is of drilling mud. When
thedrilling work is done a huge amount of crude, water, soil mixture gets wasted. Hereinnovative and
upgraded technology is required to minimize the wastage of petroleum. The leakage and drainage

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problems are also one of the major barriers in case of refinery work. Good piping technology and
proper drainage system is
also very essential in this industry. One thing wemust appreciate that India has very limited
production of petroleum in comparison with demand scenario. In this condition the wastage is a
critical issue which must be addressed properly.
PERFORMANCE OF INDIAN OIL INDUSTRY
The petroleum industry in India stands out as an example of the strides made by the country in its
march towards economic self-reliance. At the time of Independence in 1947, the industry was
controlled by international companies. Indigenous expertise was scarce, if not non-existent. Today, a
little over 50 years later, the industry is largely in the public domain with skills and technical know-
how comparable to the highest international standards. The testimony of its vigor and success during
the past five decades is the significant increase in crude oil production from 0.25 to 33 million
tonsper annum and refining capacity from 0.3 to 103 million metric tons per annum (MMTpa). The
consumption of petroleum products has grown 30 times in the last 50 years from 3 million tons
during 1948-49 to about 91 million tons in 1998-99. A vast network of over 29,000 dealerships and
distributorships has been developed backed by over 400 storage points over the years to serve the
people even in the remote and once-inaccessible areas.
I.Working Title-
“Comparative financial analysis of top five oil and gas sector companies listed in BSE”.
II.Statement of Problem-
Any person who invests his hard earned money in shares and security must possess adequate
knowledge about securities market and securities price. Investors should be very careful and should
exercise skills, knowledge and experience for choosing investment opportunity.

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III.Research Objective-
 To conduct comparative financial analysis of top five oil and gas sector companies listed in
BSE.
 To analyze the profitability, solvency position and liquidity position of companies.
 To identify the net profit and EPS growth rate performance of companies.
 To predict the future prices of shares of the selected companies.
 To conduct SWOT analysis for oil and gas industry.
IV. Research Methodology-
 The study will be carried on an analytical basis by applying the following factors for the past
five years :
o Earnings per share(EPS)
o Price to Earnings Ratio(P/E)
o Dividend payout ratio
o Return on Net Worth
o Return on equity
o Gross profit margin
o Net profit margin
o Return on capital employed
o Current ratio
o Debt equity ratio
o Interest cover ratio
o Inventory turnover ratio
o Debtors turnover ratio
o Fixed asset turnover ratio
o Earnings retention ratio
 The research will include figurative and diagrammatic interpretation for better understanding.
 The following are the selected five top Indian companies of Oil and Gas sector
Oil & Natural Gas (ONGC)
GAIL India
Bharat Petroleum

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Hindustan Petroleum
Indian Oil
The researcher, being an external analyst/student, had to depend mainly upon secondary data for the
purpose of studying the financing performance of Oil and Gas Industries in India from the top five
companies in India which is highly performed in overall growth in terms of finance, exports and total
assets value. The exploratory research techniques have been used for this study and also the study is
restricted only to Indian based oil and petroleum organizations.
SOURCES OF DATA
DATA COLLECTION
The present study is mainly based on secondary data which were collected from the corporate annual
audited reports, company database, published research reports by various industries, related websites
and research organization.
SELECTION OF COMPANY AND PERIOD
The present study is mainly intended to examine the comparative financial performance of oil and
petroleum companies i.e. Oil and Natural Gas Corporation, Indian OilCorporation, Hindustan
Petroleum Corporation and Bharat Petroleum.
TOOLS USED FOR ANALYSIS
The present study has analyzed the financial performance of top five Oil and Petroleum companies
listed on BSE. In order to evaluate and compare the financial performance of selected industries ratio
analysis technique has been used.

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V) Limitation of the Study-
1. 1.For study only following limited variables has studied such as Profit, Fixed assets,
Inventory, Sales, Earnings, Payout etc. are considered where, GDP, inflation rates, exchange
rates, foreign exchange reserves, agriculture, industrial, service & allied sectors, currency
markets, telecommunication sector & export growth are not taken into consideration.
2. The study is also limited only to competition of the industry.
3. The study is restricted only to the financial statements and analysis of financial statements.
For the purpose of interpretation, key ratios of the top five Oil and gas sector companies
listed on BSE are studied for the period 2011-2015.
VI)IMPORTANCE TO STUDY-
 This study provides a logical and systematic approach to estimate future profits. This study
helps to know that the company’s performance depends not only on its own efforts but also
on the industry and economic factors.
 This study helps an analyst to study the fundamental factors affecting the performance of
different industries. Also industry analysis helps to evaluate the relative strength and
weaknesses of particular company.
 The financial statements of ONGC can be used to evaluate the financial performance of the
company. Ratio analysis helps investors to determine the strength and weaknesses of the
company. It also helps to him to assess whether the financial performance and financial
strength are improving or deteriorating.

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Chapter 1
Literature Review

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1.1Introduction: The Indian Oil Industry occupies an important place in the economy of the
country because of its contribution to the industrial output, employment generation and foreign
exchange earnings. The Oil that is produced by the Oil Industry in India provides more than thirty
five percent of the energy that is primarily consumed by the people of India. This amount is expected
to grow further with both economic and overall growth in terms of production as well as percentage.
The demand for oil is predicted to go higher and higher with every passing decade and is expected to
reach an amount of nearly 250 million metric ton by the year 2024. Profit earning is the aim of
business. In the course of analysis of this study various statistical techniques have been made. The
statistical techniques used are correlation, t-test and multiple regression analysis to find out the
relationship between the variable and to identify the factor influencing the profitability. Based on the
analysis net sales and net profit have some relationship and working capital management was highly
influencing factor to find out profitability of selected oil companies in India. Companies must
concentrate with other influencing factor for better more of the company.
Accounting for nearly 40% of the country‘s energy demand, the petroleum and natural gas sector
forms a major source of energy in India. The share of oil and gas in India‘s energy mix is projected
to increase in the near to medium term. Further, for both these sources, the dependence on imports is
also projected to rise. Even though the two products are used differently, their exploration processes
are similar and this has often led to them to being addressed in the same category, particularly in
legislations.
Given this dependence on the sector and the linkages of energy with economic development, it is
essential to examine and identify key issues that affect the development of the sector. This
background paper on the oil and gas sector of India provides an understanding of key governance-
related issues that affect the sector. It lays out the key laws and regulations that have shaped the
development of the sector in the country. Subsequently, the paper discusses various organizations
within the sector and examines the roles that each of these perform. Finally, key issues related to
regulation, competition, Centre–State relations, financial health of utilities, and community
participation are discussed in detail.
A number of research studies have been carried out on different aspects of financial performance of
different industries by the researchers, economists and academicians in India and abroad. Different
authors have analyzed performance in different perspectives. A review of these analyses is important
in order to develop an approach that can be employed in the context of the study of Indian oil and gas
industry.

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Title of the study: A STUDY ON FUNDAMENTAL ANALYSIS OF ONGC.
Date of issue: International Journal of Multidisciplinary Research Vol.1 Issue 8,
December 2011, ISSN 2231 5780
Authors: Sugandhraj Kulkarni
OBJECTIVE OF THE STUDY:
1. To study the economical factors which directly or indirectly affect on performance of ONGC.
2. To take an overview of industrial and company aspects of the company.
METHODOLOGY:
The present is based on the secondary data sources which includes-
1. The annual report of ONGC for the year 2009-2010 to interpret the ratios of the company.
2. Books on portfolio management and financial management.
Fundamental analysts often use the efficient market theory in determining the intrinsic price of a
share. This theory submits that in an efficient market all investors receive information instantly and
that it is understood and analyzed by all the market players and is immediately reflected in the
market prices. The market price, therefore, at every point in time represents the latest position at all
times. The efficient market theory submits it is not possible to make profits looking at old data or by
studying the patterns of previous price changes. It assumes that all foreseeable events have already
been built into the current market price.
The fundamental analysis is broken into three distinct parts:
1. the economy,
2. the industry within which the Company operates, and
3. The company.
The information has to be interpreted and analyzed and the intrinsic value of the share determined.
This intrinsic value must, then, be compared against the market value the fundamentalists say, and
only then can an investment decision be taken.
FINDINGS:
1. The economy of India is the eleventh largest economy in the world by nominal GDP.
2. The fourth largest by purchasing power parity (PPP).

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3. India had established itself as the world's second-fastest growing major economy.
4. However, the year 2009 saw a significant slowdown in India's GDP growth rate to 6.8% as well as
the return of a large projected fiscal deficit of 6.8% of GDP which would be among the highest in the
world.
5. The fiscal year 2009-10 began as a difficult one. There was a significant slowdown in the growth
rate in the second half of 2008-09, following the financial crisis that began in the industrialized
nations in 2007 and spread to the real economy across the world. The growth rate of the gross
domestic product (GDP) in 2008-09 was 6.7 per cent, with growth in the last two quarters hovering
around 6 per cent.
6. The fiscal year 2009-10 has been a time of inflationary concerns. It was a year of a somewhat
unusual inflation. While food inflation soared, inflation in the non-food sector was negligible. The
Government was concerned that the upward pressure on prices should not escalate to all sectors.

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Title of the study: AN ANALYSIS OF RELATIONSHIP AND FACTOR INFLUENCING THE
PROFITABILITY OF SELECTED OIL COMPANIES IN INDIA.
Date of issue: International Journal of Current Research, Vol. 4, Issue 06, pp.099-104, June 2012,
ISSN: 0975-833X
Authors: Dr. N. Pasupathi
To study the relationship between Net Sales and Net Profit of selected oil companies in India.
To study the factor influencing profitability of selected oil companies in India.
METHODOLOGY:
This study is mainly based on the secondary data. The required data was collected from the corporate
data house and other relevant data used is collected from the secondary
sources like journals, magazines, prowess database and websites. The study period covers 10 years
from 1999-2000 to 2008-2009 and they are collected from 5 companies. The
samples techniques used for the study is convenient sampling. A sample of 5 oil companies has been
selected based on the availability of data for research process. In the course of
analysis of this study various statistical techniques have been made. The statistical techniques used
are correlation, t-test and multiple regression analysis to find out the relationship
between the variable and to identify the factor influencing the profitability.
Correlation Analysis
Correlation is a statistical device which helps us in analyzing the covariation of two or more
variables. The problem of analyzing the relation between different series should be broken into three
steps.
Determining whether a relation exists, if it does, measuring it.
Testing whether it is significant.
Establishing the cause and effect relation, if any.
It should be noted that the detection and analysis of correlation (i.e Covariation) between two
statistical variables require relationship of some sort which associates the observation in
pairs, one of each pair being a value of each of the two variables.
Multiple Regression Analysis
Multiple regression analysis represents a logical extension of two variable regression analysis.
Instead of a single independent variable, two or more independent variables are
used to estimate the values of a dependent variable. The multiple regression equation describes the
average relationship between these variables and this relationship is used to predict or control the
dependent variable.

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FINDINGS : Profit earning is the aim of business. The relationship between Net Sales and Net
Profit of selected oil companies in India, Bharat Petroleum Corporation Limited, Hindustan
Petroleum Corporation Limited and Indian Oil Corporation Limited are highly correlated with Net
Profit and Net Sales and other remaining companies are smaller correlation between Net Profit and
Net Sales. Working capital management was highly
influencing factor to find out profitability of selected oil companies in India. So the companies must
concentrate with other influencing factor for better more of the company.

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Title of the study: An Empirical Analysis Of The Profitability Of Indian Oil Refineries
Date of Issue: International Journal of Innovative Research & Development, Vol 2, Issue 2, pp.500-
523, February, 2013.
Authors: Dr.A.Vijayakumar, P.Gomathi
 Analysis Of Profitability-
Profitability is the main indicator of the efficiency and effectiveness of a business
enterprise in achieving its goal of earning profit. Profitability of a firm can be measured by its
profitability ratios. The profitability ratios can be determined on the basis of either investment or
sales and for this purpose a quantitative relationship between the profit and the investment or the
sales is established. The profitability of the company should be evaluated in terms of its investment
in assets and in terms of capital contributed by creditors and owners, as such if a company is unable
to earn a satisfactory return on investments, its survival is threatened. The profitability of selected oil
refineries in India has been analyzed from the view point of financial management and shareholders.
 Profitability From The View Point Of Financial Management-
A financial manager is very much interested in locating and pinpointing the causes which are
responsible for low or high profitability. The financial manager should continuously evaluate
efficiency of his company in terms of profit. The profit margin ratio is a profitability ratio which
measures the relationship between the profit and sales. It
indicates the efficiency or effectiveness with which the operations of business are carried
on. Profit margin varies with disproportionate variations in sales revenue in comparison
to cost or vice-versa. To judge profitability from the view point of financial management
of selected oil refineries in India, the following ratios have been computed and analyzed.
Table 1 shows a fluctuating trend in the operating profit margin ratio of the selected
refineries during the study period. Such a fluctuating trend could be attributed to the
poor performance of selected oil refineries due to poor market condition, difficulty in
getting raw material and all round rise in the input cost without corresponding increase
in selling price.
METHODOLOGY:
The financial and statistical analysis approach plays a vital role in the financial environment. To
enjoy the benefit of financial and statistical analysis researcher has collected, assembled and
correlated the data, classified the data appropriately and condensed them into a related data series,
stated the resultant information in a comprehensive form, text, tables and analyzed and interpreted
the reported data. It is well known that management is considered with efficient performance,

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profitability and solvency. For this purpose it has to study certain specific ratios, because investors
look upon certain ratios, which are concerned with an organization’s operating and financial
performance. For the purpose of this study, the researcher has used ratios namely, operating profit
margin, gross profit margin, return on assets, return on net worth, earnings per share, dividend
payout ratio, total assets turnover ratio, fixed assets turnover ratio, current assets turnover ratio and
inventory turnover ratio. The role of statistical tools is important in analyzing the data and drawing
inferences there from. In order to derive the results from the information collected through secondary
data, various statistical tools such as mean, standard deviation, variance, compound annual growth
rate, regression, tests of hypotheses both parametric and non-parametric have been accomplished
through EXCEL, SX and SPSS software.
FINDINGS:
The profitability measured through operating profit margin ratio is satisfactory in all the
selected oil companies and found adequate to cover the fixed charges and dividend
reserve during the study period. The overall analysis of return on capital employed ratio
showed that this ratio has improved significantly during the study period which was on
account of considerable increase in profit margin as well as assets turnover. Finally, it
can be inferred that the operating efficiency of selected oil refineries in India was
satisfactory and the management generally succeeded in investing capital funds. The
performance of Reliance Industries Ltd and Chennai Petroleum Corporation Ltd was
good during the study period. Mangalore Refinery Petrochemicals Ltd and Essar Oil Ltd
have not performed well during the period of study. Further, owners’ funds was utilized
profitably by all the selected oil refineries in India except Mangalore Refinery and
Petrochemicals Ltd and Essar Oil Ltd. It is significant to note that the position regarding
earnings per share and dividend payout ratio in all the selected oil refineries during the
period under review shows better performance and prospects from the point of view of
shareholders. The results showed that Hindustan Petroleum Corporation Ltd, Bharat
Petroleum Corporation Ltd, Mangalore Refinery and Petrochemicals, Essar Oil Ltd and
Reliance Industries Ltd experienced a strong tendency in profitability to decline over the
study period. The falling tendency of profit rate of these companies is the proof of
adverse effect of various controls on process, output, expansion, investment and distribution imposed
by government on these companies over time. Only in the case of Mangalore Refinery and
Petrochemicals Ltd, Chennai Petroleum Corporation Ltd and Reliance Industries Ltd, the time trend
co-efficient is positive implying the tendency of profit rate to rise over time. To sum up, the analysis

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of profitability of the selected oil refineries reveals that majority of the companies under review
highlighted better performance and prospects from the point of view of owners.

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Title of the study: Impact of Total Cost Management on Financial Performance : An Empirical
Study of Selected Public Sector Oil and Gas Companies in India.
Date of issue: The Journal of Institute of Public Enterprise, Vol. 35, No. 3&4 2012, Institute of
Public Enterprise.
Authors: Aniruddha Sarkar
The main objective of the present study is to assess the impact of TCM on
financial performance of the selected oil and gas companies in India on the basis
of available data collected from published annual reports of the companies
over a period of 10 years (i.e., from 2000-01 to 2009-10). The specific
objectives of this study are as follows :
i) To measure, test and evaluate the TCM position of the selected companies during the period under
study,
ii) To analyze the rank correlation between CATA and Return on Capital Employed (ROCE) of the
selected companies during the period under study; and
iii)To find out the degrees of associations between the ratios relating to selected key elements of cost
to total cost with the measure of profitability
(viz., ROCE) of the selected companies during the period under study.
METHODOLOGY:
The study is mainly based on secondary sources of information. The required
data have been collected from the published annual reports of Oil and Natural Gas Corporation
Limited (ONGC), Indian Oil Corporation Ltd., (IOCL), Oil India Ltd., (OIL), Bharat Petroleum
Corporation Ltd., (BPCL), Hindustan Petroleum Corporation Ltd., (HPCL) and Gas Authority of
India Ltd., (GAIL) and also from the published annual reports of the
Public Enterprise Survey by the Ministry of Heavy Industries, Government of India (GoI) over a
period of ten years i.e., 2000-01 to 2009-10. For collecting relevant data for the purpose of
conducting this study, internet surfing has also been done for obtaining the requisite and latest
information. Editing, classification and tabulation of the financial data collected from the above
mentioned sources have been done as per requirement of the study. In order to analyze the data the
ratios of vital elements of cost to total cost and an important tool of measuring profitability have
been calculated on the basis of available data for the selected companies during the period under
study. The ratios which have been applied for highlighting the proportion to total cost are RMCTC,
PFCTC, ECTC, OMCTC, SACTC and METC and the measure of profitability which has been

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selected is RoCE. For assessing the degrees of associations between the ratios of selected elements of
cost to total cost with the profitability, Pearson’s simple correlation co-efficient has been used and
for assessing the degrees of associations between CATA and ROCE, Spearman’s rank correlation
has been applied. To examine the significance of the computed values of correlation coefficients
students ‘t’ test has been used.
FINDINGS:
The study of rank correlation analysis reveals that there is a high degree of positive association
between CATA and ROCE for ONGC during the period under study. Out of the six selected
companies liquidity management of ONGC has significant influence on the overall profitability of it,
liquidity management of other companies has no significant contribution towards the overall
profitability during the period under study. The study of the impact of TCM on financial
performance reflects both positive and negative associations for the selected companies during the
period under study. Out of the six selected companies, SACTC of OIL has significant contribution
towards the overall financial performance of it both at 1 per cent and 5 percent significance levels
and SACTC of BPCL has significant contribution towards the overall financial performance of it at 5
per cent level of significance.

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Title of the study: Capital Structure, Leverage and Financing Decision : An Empirical Analysis of
Selected Public Sector Oil and Gas Companies in India.
Date of issue: The Journal of Institute of Public Enterprise, Vol. 36, No. 1&2 2013, Institute of
Public Enterprise.
Authors: Chitta Ranjan Sarkar & Aniruddha Sarkar.
The study has the following objectives:
• To study the trend of leverages of the selected public sector oil and gas companies in India for the
period from 2000-01 to 2009-10,
• To make a comparative analysis regarding the capital structure of the selected public sector oil and
gas companies in India during the study
period,
• To analyze the risk patterns of the selected companies under study by introducing the well-known
devices of measuring risks, viz., DOL, DFL, financial break-even point and DTL,
• To assess the degrees of associations between the various leverage ratios and well-known
profitability indicator viz., RoE of the selected companies under study during the study period, and
• To provide valid recommendations these deserve the attention of the management of concerned
companies under study, oil and gas sector in India and especially government.
METHODOLOGY:
The study of associations between the leverage ratios and RoE of Oil and Natural Gas Corporation of
India (ONGC), Indian Oil Corporation Ltd., (IOCL), Oil India Limited (OIL),
Bharat Petroleum Corporation Ltd., (BPCL), Hindustan Petroleum Corporation Ltd., (HPCL) and
Gas Authority of India Ltd., (GAIL) for the accounting period from 2000-01 to 2009-10
is mostly based on the data collected from the secondary sources. Various reputed journals, e-
journals from UGC-Inflibnet centre, various reputed books on finance, conference proceedings, etc.,
have been used for the purpose of conducting the research work. “CAPITALINE 2000” data base
package has also been used for procuring data. In order to analyze the data the values of DOL, DFL,
DTL, financial break-even point and RoE have been measured on the basis of data available in the
published annual reports of the selected companies under study. For assessing the degrees of
associations between the various leverage ratios and profitability indicator viz., RoE, Pearson’s
simple correlation coefficient has been applied and student’s ‘t’ test has been used to test the
significance of the results
of the empirical study.

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FINDINGS:
In the present study, IOCL, BPCL and HPCL have both the leverages at high level during the entire
study period. That means they are on a very risky position during the period under study as compared
to others in the industry. Table-1 depicts that the values of associations
between the various leverage ratios and RoE are posititive for all the concerned companies except
GAIL during the study period. That means the leverage ratios of all the concerned
companies except GAIL have the negative influences on the earnings available
to the equity shareholders’ during the study period. Diagram-1 highlights that IOCL uses greater
amounts of external capital in its capital structure and OIL uses lesser amounts of external capital as
compared to others in the industry throughout the entire study period. So,
OIL and ONGC may employ additional amounts of external capital (i.e., fixed charge bearing
capital) in their capital structure as a result the earnings after tax can be enriched as the rewards to
the external fund providers are tax deductible expenditure which can ultimately
lead to make the equity shareholders’ happy and reliable on the firm’s operating as well as financing
performance. On the other hand, IOCL should be maintaining a sound shortterm debt paying
capacity because the employment of more amounts of external funds may lead to short-term
insolvency.

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Title of the study: EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY
OF FIRMS: A STUDY OF THE INDIAN OIL DRILLING AND EXPLORATION INDUSTRY.
Date of issue: Global Journal of Business Management, Vol. 4, No. 1, June, 2010, ISSN: 0973-8533.
Authors: Dr. Anupam Jain
Keeping in view the pragmatic importance of working capital management in finance, an
attempt is made in this study to contribute towards a crucial element in financial management
which working capital management. Specific objectives are:
• To examine a relationship between Working Capital Management and Profitability of
the selected firms in Oil Drilling and Exploration industry;
• To establish a relationship between the two objectives of liquidity and profitability of
the firm and;
• To find out the relationship between debt used by the firm and its profitability on the
firms.
METHODOLOGY:
The present study is based on a sample of four Oil Drilling and Exploration companies
operating in India. These companies constitute a large part of the oil industry in terms of
market sharing within the country.
The data used in this study was acquired from the Internet and websites of different
firms. Data of companies for the most recent five years formed the basis of our calculations.
The period covered by the study extends to five years starting from 2005 to 2009. The reason
for restricting to this period was that the latest data for investigation was available for this
period.
In order to analyze the effects of working capital management on the firm’s profitability,
profitability is measured by Return on Total Assets (ROTA), which is defined as profit before
interest and tax divided by total assets. Profitability was used as the dependent variable. With
regards to the independent variables, working capital management was measured by cash
conversion cycle (CCC) and current ratio (CR), debt ratio (DR). Sales growth has been taken
as control variable. CCC focuses on the length of time between when a firm makes payment
and when firm receives cash inflow. The lover the value is, better the position of the firm is,
since it can canily convert high liquidity short-term investments in current assets to cash.
However, longer value of CCC indicate greater investment in current assets and hence the
greater the need for financing of current assets. CCC is calculated as the number of days required for
Average Collection Period (ACP) plus the number of days required for Inventory

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turnover (ITID) minus the number of days available for accounts payment period (APP).
Average Collection Period (ACP) is calculated by dividing account receivable by sales
and multiplying the result by 365 (number of days in a year). ACP represents the number of
days that a firm takes to collect payments from its customer. Inventory turnover in days
(ITID) is calculated by dividing inventory by cost of goods sold and multiplying with 365 days.
This variable reflects the average number of days of stock held by a firm. Longer storage
times represent a greater investment in inventory for a particular level of operations. Average
Payment Period (APP) is calculated by dividing accounts payable by purchases and multiplying
the result by 365. This measure indicates the average time firm takes to pay their suppliers.
The higher the value, the longer firms take to settle their payment commitments to their
suppliers. In nutshell, we have taken ROTA as dependent variable and CCC, CR, DR and SG
as independent variables.
FINDINGS:
Working capital management is important part in firm financial management decision.
The ability of the firm to continuously operate in longer period is depends on how they deal with
investment in working capital management. The optimal of working capital management
could be achieved by firm that manage the trade off between profitability and liquidity. The
purpose of this study is to investigate the relationship between working capital management
and firm profitability. Cash conversion cycle is used as measure of working capital management.
Results of this study found that current ratio is positively associated with profitability whereas
cash conversion cycle are significantly negative associated to the firm profitability. Thus, the
firm manager should concern about reduction of cash conversion period in order to create
shareholder wealth.
The primary aim of this study is to investigate the relationship between working capital
management and firm’s profitability in Oil Drilling and Exploration sector in India. Since our
study focused exclusively on the four Oil Drilling and Exploration firms for the 5 years,
therefore, there is much to be explored about working capital management and its relationship
with profitability with respect to Indian firms from other industries as well. We suggest that
further research may be conducted on the same issue with more companies covering diverse
industries and more number of years in the sample. The scope of further research may also
be extended to other components of working capital management such as cash, marketable
securities, receivables and inventory management.

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Title of the study: “Leverage” – An Analysis and Its Impact On Profitability With Reference To
Selected Oil And Gas Companies.
Date of issue: International Journal of Business and Management Invention ISSN (Online): 2319 –
8028, ISSN (Print): 2319 – 801X Volume 2 Issue 7ǁ July. 2013ǁ PP.50-59
Authors: Khushbakht Tayyaba
An investor who wants to make investment activity has to assess a lot of information about past
performance and the expected future performance of the companies, industries and the economy
before taking the investment decision. The present study is concerned with the analysis of the impact
of leverage and liquidity on profitability of selected oil and gas companies. The objectives of this
study are as follows:
companies.
METHODOLOGY:
Models:
Model 1
ROA=DFLDOL
Model 2
ROE=DFLDOL
Model 3
ROI=DFLDOL
Model 4
EPS=DFLDOL
Where: ROA= Return on asset, ROE= Return on equity ROI= Return on investment DFL =Degree
of financial leverage DOL=Degree of operating leverage ɛ = the error term α: the constant, β: the
regression coefficient Leverage ratios are the financial statement ratios which show the degree to
which the business is leveraging itself through its use of borrowed money. The financial leverage
ratio indicates the extent to which the business relies on debt financing. A high financial leverage
ratio indicates possible difficulty in paying interest and principal while obtaining more funding.

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FINDINGS:
This paper explained the studies on the leverage analysis and its impact on profitability with
reference to Oil and Gas companies. Using the Panel data of companies between 2007 and 2012, we
examined that whether there is effect of leverage on profitability or not. I used return on asset, return
on equity, return on investment and Earning per share as dependent variables and degree of financial
leverage and degree of operating leverage as independent variables. After applying regression,
correlation descriptive analysis it is concluded that DFL and ROA have positive relationship while
DOL and ROA have inverse relationship. It means that there is positive correlation between ROA
and DFL while there is negative correlation between ROA and DOL.DFL, DOL and ROE have
positive relationship. It means that there is positive correlation between these variables. DFL and
ROI have inverse relationship and similarly DOL and ROI also have inverse relationship. It means
that there is negative correlation between these variables. DFL and EPS have positive relationship
while DOL and EPS have negative relationship. There is positive correlation between DFL and EPS
while there is negative correlation between DOL and EPS. These results does not affect significantly.
So there is no significant effect of DFL and DOL on ROA, ROE, ROI and EPS.It was supposed that
highly leveraged oil and gas companies have lower profitability. However, this research is opposite
to the supposition that there is positive relationship between financial leverage and both profit
measures. It was also supposed that highly leveraged companies are riskier with reference to return
on equity and investment. The results showed that high leveraged firms were less risky in both
market-based and accounting-based measures and it is opposite to the hypothesis one. Industry
specific variables may help in explaining these unexpected findings.

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Title of the study: FINANCIAL ANALYSIS OF OIL AND PETROLEUM INDUSTRY.
Date of issue: INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE, IT &
MANAGEMENT, VOLUME NO. 2, ISSUE NO. 6 , JUNE, 2012, ISSN 2231-5756
Authors: DR. ASHA SHARMA
o To analyze the profitability, solvency position and liquidity position of companies.
o To identify the net profit and EPS growth rate performance of companies.
METHODOLOGY:
The researcher, being an external analyst, had to depend mainly upon secondary data for the purpose
of studying the financing performance of Oil and
Petroleum Industries in India from the top three companies in India which is highly performed in
overall growth in terms of finance, exports and total assets
value. The exploratory research techniques have been used for this study and also the study is
restricted only to Indian based oil and petroleum organizations.
FINDINGS:
The major findings from the present study are:
· Profitability – decline.
· Financial Strength – not highly satisfactory.
· Fixed Assets-Financed mainly through owners fund
· Working Capital - Not efficiently and effectively managed.
On the basis of the analysis of profitability, Activity, earning per share, fixed assets and inventory
turnover, it can be concluded that the performance of selected five companies i.e., Oil and Natural
Gas Corporation, Reliance Petroleum Limited, Oil India Limited, Hindustan Petroleum Corporation
and Cairn India Limited EPS is high, Current Assets is above standard, Proprietary fund also found
satisfactory. The position of the ONGC can be ranked on top among the selected unit and based on
the analysis of data. Indian Oil and Petroleum Industry is an independent and self-reliant industry. It
has large and potential domestic and international market. The main problems with the Petroleum
Industry in India are related to infrastructural developments. The lack of proper storage facilities,
enhancements in refining capacities, and fluctuating import prices plays important role in the
development of the sector.

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The study has analyzed the short term and profitability position of leading Oil and Petroleum
companies in India, some of the important ratios were used to measure the financial performance of
five selected companies. Based on the above analysis the overall performance of ONGC is one of the
major and fully vertically integrated composite mills player in India. It produces around 77% of
India's total crude oil production (and around 30% of total demand) and around 81% of natural gas
production. ONGC is one of the largest publicly traded companies by market capitalization in India
and the largest India-based company measured by. The result of financial analysis also shows that
ONGC is comparatively good with the other four companies. Its financial position is found to be
highly satisfactory level in net profit growth on the profitability level, short term liquidity position,
efficiency level, solvency capacity and investment analysis basis. The other two selected ONGC
companies performance were not satisfactory positions. Hence these companies will have to
strengthen its shareholders funds and working capital to compete and enhancing its current
performances in growing Oil and Petroleum in global business environment. This is an attempt
identify and study the movement of key financial parameters and their relationship with profitability
of Oil and Petroleum industry. It is an attempt to and the study whether the key identified parameters
move in a synchronous way going up and coming down with basic profitability parameters. All three
comparably profit-making companies have been taken as the sample for study for the period of 2006
to 2010. The data have been taken from the figures supplied by prowess database. On the basis of
this data a trend parameter is calculated for the year 2011. So, on the base of the analysis, the broad
conclusion is that the parameters are consistent within a wide horizon and with the growth that
companies have achieved, the parameters have also responded in a synchronous manner.

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Chapter 2
Industry Profile

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2.0Introduction-
The oil and gas sector is among the six core industries in India and plays a major role in influencing
decision making for all the other important sections of the economy.
In 1997–98, the New Exploration Licensing Policy (NELP) was envisaged to fill the ever-increasing
gap between India’s gas demand and supply. A recent report points out that the Indian oil and gas
industry is anticipated to be worth US$ 139.8 billion by 2015. India’s economic growth is closely
related to energy demand; therefore the need for oil and gas is projected to grow more, thereby
making the sector quite conducive for investment.
The Government of India has adopted several policies to fulfil the increasing demand. The
government has allowed 100 per cent foreign direct investment (FDI) in many segments of the
sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts
both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL)
and Cairn India.
2.1 History-
 India has become the third-largest energy consumer in 2015
 In 2015,oil production in the country reached 0.75 mbpd as compared to 0.76 mbpd in 2014,
registering a decline of 0.85 percent. In 2014, country had, 5.7 billion barrels of proven oil
reserves
 India had 1.4 tcm of gas proved reserves and produced 33.66 bcm of gas in 2015 which is
expected to rise and reach 33.73 bcm in 20

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 Oil consumption is estimated to expand at a CAGR of 3.3 per cent during FY2008–16F to
reach 4.0 mbpd by 2016
 Due to the expected strong growth in demand, India’s dependency on oil imports is likely to
increase further
 Rapid economic growth is leading to greater outputs, which in turn is increasing the demand
of oil for production and transportation
 With rising income levels, demand for automobile is estimated to increase

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2.2Growth-Rob
us domestic

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2.3 Size of the Industry-
PIPELINES: CRUDE PIPELINE NETWORK
 India has a network of 9,573 km of crude pipeline having a capacity of 947.04 mmtpa*
 In terms of length, IOCL accounts for 46.47 per cent (4,448 km) of India’s crude pipeline
network. Moreover, the company has the country’s longest pipelines: Salaya-Mathura-
Panipat Pipeline (1,870 km) and Haldia-Barauni/Paradip-Barauni Pipeline (1,302 km)
 In terms of actual capacities, ONGC leads the pack with a share of 50.5 per cent, followed by
IOCL at 27.6 per cent
PIPELINES: REFINED PRODUCTS AND LPG PIPELINE NETWORK
 With 14463 km of refined products pipeline network (capacity of 77.41 mmtpa) in India,
Indian Oil Corporation (IOC) leads the segment with more than half of the total length of
product pipeline network
 Top three companies IOC, HPCL and BPCL contributes 76.90 per cent of the total length of
product pipeline network in 2015
 In 2015 Gas Authority of India Limited (GAIL) has largest share (87.06 per cent or 2,032
km) of the country’s LPG pipeline network (2,334 km)

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PERSISTENT DOMESTIC DEMAND TO DRIVE THE MARKET

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2.4 Major Players at National & Global Level –
ONGC: CONTINUING ON STRONG GROWTH PATH
IOCL: FLAGSHIP OF INDIAN REFINING
 Indian Oil Group of Companies owns and operates 10 of India’s 22 refineries with a capacity
of 1.30 mbpd
 In 2015, IOCL was ranked 119 in the Fortune Global 500 list
 In 2015, Its network of crude oil and product pipelines runs to about 11081 Km
 Subsidiary CPCL accounts for 49 per cent of market share in petroleum products

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RELIANCE INDUSTRIES: WELL POSITIONED FOR GROWTH
 Reliance Industries has the biggest petrochemical refining complex in the world
 The company was ranked 158th in the Fortune Global 500 list 2015
 It contributes 14 per cent to India's exports and is going to invest around USD30 billion to
improve its businesses in the next three year

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KEY DOMESTIC OIL & GAS COMPANIES

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KEY INTERNATIONAL OIL & GAS COMPANIES OPERATING IN INDIA
2.5 Government Regulations and Initiative-
Foreign Investment Policy-Oil and Gas sector

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New Exploration & Licensing Policy Rounds
Some of the major initiatives taken by the Government of India to promote oil and gas sector are:
 The Ministry of Petroleum and Natural Gas has put up for comments a draft policy, to opt for
revenue-sharing model while auctioning future oil and gas blocks for exploration to private
companies, compared to production-sharing mode earlier, in order to make the process more
transparent and market-oriented.
 The Ministry of Petroleum and Natural Gas has announced a new 'Marginal Fields Policy',
which aims to bring into production 69 marginal oil and gas fields with 89 million tonnes or
Rs 75,000 crore (US$ 11.5 billion) worth of reserves, by offering various incentives to oil and
gas explorers such as exemption from payment of oil cess and customs duty on machinery
and equipment.
 Government of India entered into bilateral discussion with Norway to extend co-operation
between the two countries in the field of oil and natural gas and hydrocarbon exploration.
 To strengthen the country`s energy security, oil diplomacy initiatives have been intensified
through meaningful engagements with hydrocarbon rich countries.

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 PAHAL - Direct Benefit Transfer for LPG consumer (DBTL) scheme launched in 54 districts
on November 11, 2014 and expanded to rest of the country on January 1, 2015 will cover
15.3 crore active LPG consumers of the country.
 24 x 7 LPG service via web launched to provide LPG consumers an integrated solution to
carry out all services at one place, through MyLPG.in, from the comfort of their home.
 The Government of India launched the 'Give It Up' campaign on LPG subsidy that helped it
save Rs 140 crore (US$ 21.11 million) as on 22nd July 2015 with nearly 12.6 lakh Indians
registering for the cause. As per recent statistics from oil ministry, as many as 30,000 to
40,000 households are giving up LPG subsidy each day.
 Special dispensation for North East Region: For incentivising exploration and production in
North East Region, 40 per cent subsidy on gas price has been extended to private companies
operating in the region, along with ONGC and OIL.
 The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Mr
Narendra Modi, has approved a mechanism for procurement of Ethanol by Public Sector Oil
Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Program.
2.6 Challenges and Issues-
Some key factors affecting the Indian oil and gas industry are the following:
o Dominated by state controlled enterprises: The sector is primarily dominated by state
controlled enterprises, with only a few foreign players. The primary reason for this
could be the country’s regulatory framework, where ventures involving foreign
players take longer to get the required approvals. Further, the participation of foreign
players has been limited during the nine rounds of bidding for exploration rights
through the NELP, while the participation of state owned players has been high.
o Subsidies on Oil and Gas products: Eliminating subsidies on oil and gas products is
proving to be a major challenge for the government, due to political pressure. These
subsidies have led to large scale under recoveries in the Indian oil and gas sector.
o Environmental issues: Offshore mining of oil and gas and deep water exploration
poses significant threats to the environment in terms of potential threats of water
contamination. Further particulate emissions of refineries and production plants could
have an adverse impact on the environment as well.

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o Requirement of advanced technology for upstream segment: The industry faces a
shortage of skilled labour for the mining of unconventional assets such as shale gas
and Coal Bed Methane (CBM), which offer a huge potential in terms of ensuring
sustainability.
The Government has proactively aimed to curb some of these challenges including subsidies on
oil and gas, and technology requirements in the upstream segments through actionable reforms
such as the Kirith Parikh Committee’s recommendations, and by encouraging a higher level of
private sector participation. It further addresses them through initiatives introduced in the 2016–
17 Union Budget, as discussed in the subsequent sections.
2.7 Future Prospects-
The future of Indian oil and gas industry has good potential but it needs developmental
activities in this sector to strengthen itself.
The world at present is experiencing a lot of changes of mammoth proportions. The Petroleum
Industry in India is one of the harbingers of huge economic growth. The arena for business has now
gone global since trade boundaries are fast dissolving. These developments present India with
tremendous opportunities in the future to be one of the major players in the export of petrochemical
intermediaries.
Today, India imports more than 70% of its oil requirements. The search for more oil led India to sift
through the international markets comprising of the emerging energy-trading countries - China,
Russia, and Iran. India has made new partnerships with Venezuela, Burma, Middle East nations, and
Pakistan.
The long-term energy strategies of India have to emphasize on the methods of using energy
effectively and efficiently, and to enhance energy self-sufficiency. To lift the Indian economy to
enhanced economic standards innovation, diplomacy, creativity, and vision are the need of the hour.
India has to compete for conventional energy sources and for that there must be
developmental activities for energy efficient buildings and vehicles. The main problems with the
Petroleum Industry in India are related to infrastructural developments. The lack of proper storage
facilities, enhancements in refining capacities, and fluctuating import prices plays important role in
the development of the sector.
The target of improvement for the growth of the economy for India should be in the area of
the petrochemical sector. The need for intermediary products for the manufacturing of the end use

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products is an important sector to tap in. With the per capita consumption for the petrochemical
products in India being low and the production of these products being high, India may become one
of the leading exporters of such intermediary products.
The future of Indian Oil & Gas Industry depends on:
 Demand for petroleum is growing in leaps and bounds
 Shifting focus to more production of olefin - ethylene, propylene, butadiene,
 Price and availability of crude oil and gas as feedstock would still be critical factors
 The demand of the end products would affect the demand of the intermediary products

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2.8 PORTER’s Five Force Model-
Porter five forces model is the one which helps in finding out the efficiency as well as the
productivity which are faced by many companies while they are in the oligopolistic environment.
The 3 major forces are from the horizontal competition and the other two are from the vertical
competition. Under the horizontal factor forces that factor in are threat of new entrants, substitutes
and finally threat of existing players. Under vertical, bargaining power of buyers as well as suppliers
do arise. So, the porter’s five force analysis goes thus:

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Power of suppliers:
In the oil industry the major power is held by the supplier of oil. Here the major supplier is the
ONGC which supplies approximately 40% of the total oil produce all over the world. Among the top
oil importing countries India stands at 9th position with a requirement of 1.5 million barrels from
OPEC. So, looking at the dependence we can say that the supplier in this industry enjoys more power
and also it is having more power with regard to even fixing prices. But comparatively the bargaining
power these days is becoming low as the purchase is happening from many suppliers. For ex. Indian
oil has a method of purchasing. It calls tenders and who so ever bids lower price would be given the
deal. For the month of October it bought a millions of barrels from Tunisian Zarzaitine crude base.
After that it even bought from 4 mn barrels from Nigeria and also from the fields of bonga. So, as
and when demand is there Indian oil is purchasing from different suppliers. So, from the above
analysis we can say that top Indian companies like Indian have given very less scope for suppliers to
hold power as they purchase from various suppliers through tenders.
Power of buyers:
For the oil industry there are two types of buyers. One is the industrial buyer and the other is the
individual buyer. They both together constitute downstream buyers. These buyers get supplies from
the upstream buyer for ex. Indian oil. They do have an incentive to limit supply so they keep prices
as high as possible due to shrinking downstream margins. They do this because there are other
competitors for them. Say for example: Indian oil is having competitors like BP, SHELL and
RELIANCE in the diesel and petrol segment. Whereas, in the lubricants segment they face intense
competition from: CASTROL, SHELL and VALVOLINE products. So the industrial customers who
do bulk purchase is having good bargaining power as they order in huge quantity and on top of it
they have good number of other suppliers too. And for the individual consumers they have got wide
variety of choices. So they can switch to some other brand as there is no switching cost involved. So,
we can say that buyers are having considerable bargaining power in the oil industry.
Threat from existing players:
In the oil industry the competition is very fierce as the there is trading of commodities. And there is
competition even from the other industries also who supply chemicals and other fuel which acts as
substitute for the oil industry products. There is an estimation that the industry would grow at around
4%. Just because it is a commodity market it gets competitive advantage by giving products to public
at lower cost. This can be done by achieving efficiency in the productions and operations. Focusing
on just lubricants there has been distribution of market by various competitors. Gulf oil has full
acquired the buses segment, servo’s share consists of Lorries and trucks. With regard to valvoline it
has its market share from the drillers and other heavy equipment users. And finally Castrol has

Page | 51
targeted bike segment and high end users. So, from the above scenario we can say that there is more
rivalry among existing players in this oil industry.
Threat from substitutes:
If we see substitute for oil industry there are many. The other energy generating fuels such as coal,
solar energy, nuclear power pose as a substitute for oil industry. With the countries getting more and
more liberalized there arises chances for smaller firms to import oil at less price and reach out to
customers at lower price who are mainly focused on price factor. So by this the market share for the
larger companies like Indian oil, and shell will reduce. So some small aspects appear to be threat.
And also in the oil industry some refine the used oil and sell it as the normal ones, because of this the
price of the oil also would be lower and customer may opt for it. This also slightly poses as a threat
to the regular oil companies. And finally there are many substitutes which pose as a threat like solar
energy. Recently many are going green so as to reduce the carbon emission. So by that extent their
consumption of oil will reduce. Thus, this finally poses as a threat to oil industry.
Threat of new entrants:
This is also one of the factors that look in to while analyzing the oil industry attractiveness. The
threat appears to be low because to enter in to industry one should have the financial muscle and
should have good distribution channels. Apart from all these this industry asks for so many
environmental regulations to be followed which itself is a cumbersome process. It also requires high
level of expertise in the areas of extraction and exploration and also the refining. There is more fixed
cost involved in the upstream, downstream and also the other chemical products. All these factors
make new entrant to think twice to enter this industry.
From the above porters analysis we can say that the oil industry is very attractive. The threat from
the new entrants to the industry is low and also the bargaining power of buyers. Whereas bargaining
power of the supplier is high. This won’t affect much because sometimes big players would be
handling suppliers’ segment as well as the buyer segment. But the attractiveness is slightly reduced
by the internal rivalry between existing players which is high in the oil industry.

Page | 52
Chapter 3 & 4
Research Analysis &
Interpretations

Page | 53
1)Dividend Payout Ratio-
Dividend Payout Ratio= Dividends / Earnings Per Share
Dividend Payout
Ratio (%)
Mar '11 Mar '12 Mar '13 Mar '14 Mar '15
ONGC 42.27 35.06 41.42 39.24 50.46
Gail India 27.93 31.76 31.88 31.78 26.38
Indian Oil 32.55 32.29 31.70 31.72 32.39
Hindustan Petroleum 32.42 33.29 33.63 31.92 32.35
Bharat Petroleum 34.30 31.71 31.62 31.81 33.96
*Source-Capitalline.com/database
Comparision Graph I -
Interpretation-
A consistent trend in Dividend Payout Ratio is usually more important than a high or low ratio, in
case of Dividend Payout Ratio. We found that,
Last five years Bharat Petroleum has more or less stable figure in their financial statement,
Consistency also seen in Hindustan Petroleum as its showing a stable line in the graph,
0.00
10.00
20.00
30.00
40.00
50.00
60.00
PayoutRatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 54
Hindustan Petroleum is the second most stable company as their figure and graph indicates a good
position over the five year periods.
except Gail India as it has a down move in the last financial year from year 2014-15 this figure has
fallen drastically but then again hold at the same level and reached from where it started five years
ago.
But ONGC is in the high fluctuating position as it has many up and down moves in the five years.
Generally, more mature and stable companies tend to have a higher ratio than newer start up
companies.

Page | 55
2) Return on Equity-
Return on Equity = Net Income/Shareholder's Equity
Companies Particulars Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC
Net Income 17,732.95 22,094.81 20,925.70 25,122.92 18,924.00
Shareholder's
Equity
1,44,600.98 1,36,725.01 1,24,453.22 1,12,956.73 97,504.43
Return on Equity 0.1226 0.1616 0.1681 0.2224 0.1941
Gail India
Net Income 3,039.17 4,375.27 4,022.20 3,653.84 3,561.13
Shareholder's
Equity
29,119.52 27,072.33 24,227.80 21,625.83 19,253.34
Return on Equity 0.1044 0.1616 0.1660 0.1690 0.1850
Indian Oil
Net Income 5,273.03 7,019.09 5,005.17 3,954.62 7,445.48
Shareholder's
Equity
67,969.97 65,992.08 61,124.31 57,876.70 55,332.32
Return on Equity 0.0776 0.1064 0.0819 0.0683 0.1346
Hindustan
Petroleum
Net Income 2,733.26 1,733.77 904.71 911.43 1,539.01
Shareholder's
Equity
16,022.09 15,012.16 13,726.40 13,122.52 12,545.81
Return on Equity 0.1706 0.1155 0.0659 0.0695 0.1227
Bharat
Petroleum
Net Income 5,084.51 4,060.88 2,642.90 1,311.27 1,546.68
Shareholder's
Equity
22,467.48 19,458.76 16,634.02 14,913.86 14,057.62
Return on Equity 0.2263 0.2087 0.1589 0.0879 0.1100
Return on Equity Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 19.41% 22.24% 16.81% 16.16% 12.26%
Gail India 18.50% 16.90% 16.60% 16.16% 10.44%
Indian Oil 13.46% 6.83% 8.19% 10.64% 7.76%
Hindustan
Petroleum
12.27% 6.95% 6.59% 11.55% 17.06%

Page | 56
Bharat Petroleum 11.00% 8.79% 15.89% 20.87% 22.63%
Comparison Graph II -
Interpretation-
Return on Equity varies substantially across different industries. Therefore, it is recommended to
compare return on equity against company's previous values or return of a similar company. We get
here,
Bharat Petroleum is in top position by the analysis that has a consistent growth; return on equity is
one of the profitability ratios,
So along with it Hindustan Petroleum Also growing at the second position,
ONGC is in third position as it shows a declining move profitability is decreeing after year 2012,
Gail India is also a big company but failed to show its performance during the years2012-14 and
ending up declining in the last year.
Indian Oil Corporation is a top most company but it is showing high fluctuations which indicates its
profitability is not stable in the Oil and Gas industry.
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
ReturnonEquity
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 57
3) Earnings Retention Ratio-
Earnings Retention Ratio=1-(Payout Ratio)
Dividend Payout
Ratio (%)
ONGC 42.27 35.06 41.42 39.24 50.46
Gail India 27.93 31.76 31.88 31.78 26.38
Indian Oil 32.55 32.29 31.70 31.72 32.39
Earnings Retention Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 49.55% 60.76% 58.59% 64.94% 57.73%
Gail India 73.63% 68.22% 68.12% 68.24% 72.07%
Indian Oil 67.60% 68.28% 68.30% 67.72% 67.45%
Hindustan Petroleum 32.39% 31.95% 33.68% 33.32% 32.46%
Comparison Graph III -
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
EarningsRetentionRatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 58
Interpretation-
High Earnings Retention Ratio is not always good, as it shows company don’t pay dividend to the
investors. In this analysis we can see,
Hindustan petroleum has a stable rate of retention at 30% that shows it is paying dividend
consistently,
ONGC is only company which is declining year by year, started from below 60% it came down to
50%.,
Bharat Petroleum is stable at 65%, it has paid low dividend to investor,
Position of Indian Oil Corporation is little weak compare to others,
Gail India has the highest Earnings Retention Ratio,
More over position of industry is stable, which shows that dividend has paid by each company at a
fixed rate with the increasing profit.

Page | 59
4)Gross Profit Margin-
Gross Profit Margin= (Revenue-COGS) / Revenue
ONGC
Gross Profit 37,823.19 43,039.20 38,917.90 44,138.48 29,856.09
Sales
Revenue
82,870.96 83,890.27 82,970.05 76,488.02 68,316.17
Gross Profit
Margin
45.64% 51.30% 46.91% 57.71% 43.70%
Gail India
Gross Profit 5,252.53 7,572.85 7,038.71 6,130.72 5,890.24
Sales
Revenue
56,741.98 57,507.93 47,522.69 40,440.76 32,536.52
Gross Profit
Margin
9.26% 13.17% 14.81% 15.16% 18.10%
Indian Oil
Gross Profit 12,523.95 15,685.60 10,848.79 8,622.10 13,642.53
Sales
Revenue
4,43,777.07 4,79,271.66 4,52,014.13 4,02,797.74 3,32,245.15
Gross Profit
Margin
2.82% 3.27% 2.40% 2.14% 4.11%
Hindustan
Petroleum
Gross Profit 6,132.88 4,817.45 3,458.08 2,932.17 3,744.68
Sales
Revenue
2,06,626.18 2,23,351.53 2,08,062.81 1,79,512.82 1,34,981.36
Gross Profit
Margin
2.97% 2.16% 1.66% 1.63% 2.77%
Bharat
Petroleum
Gross Profit 9,931.53 8,195.80 5,961.79 3,769.04 4,050.29
Sales
Revenue
2,38,086.90 2,60,074.99 2,40,115.75 2,11,972.97 1,51,639.45
Gross Profit
Margin
4.17% 3.15% 2.48% 1.78% 2.67%

Page | 60
Gross Profit
Margin
ONGC 45.64% 51.30% 46.91% 57.71% 43.70%
Gail India 9.26% 13.17% 14.81% 15.16% 18.10%
Indian Oil 2.82% 3.27% 2.40% 2.14% 4.11%
Hindustan
Petroleum
2.97% 2.16% 1.66% 1.63% 2.77%
Comparison Graph IV -
Interpretation-
High gross profit margin indicates that the company can make a reasonable profit, as long as it keeps
the overhead cost in control. Low gross profit margin indicates that the business is unable to control
its production cost. We found by the analysis,
That except ONGC other competitors are almost slightly at declining position, fluctuations can be
noticed in ONGC.
Gail India is slowly declining from its position where it started five years from now,
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
GrossProfitMargin
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 61
But good indicator is Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation is at
growth stage and showing potential to be a market leader all three companies are showing an upward
move in the gross profit margin.

Page | 62
5) Net Profit Margin-
Net Profit Margin=Net Profit/Sales Revenue
ONGC
Net Profit 17,732.95 22,094.81 20,925.70 25,122.92 18,924.00
Sales
Revenue
82,870.96 83,890.27 82,970.05 76,488.02 68,316.17
Net Profit
Margin
21.40% 26.34% 25.22% 32.85% 27.70%
Gail India
Net Profit 3,039.17 4,375.27 4,022.20 3,653.84 3,561.13
Sales
Revenue
56,741.98 57,507.93 47,522.69 40,440.76 32,536.52
Net Profit
Margin
5.36% 7.61% 8.46% 9.04% 10.95%
Indian Oil
Net Profit 5,273.03 7,019.09 5,005.17 3,954.62 7,445.48
Sales
Revenue
4,43,777.07 4,79,271.66 4,52,014.13 4,02,797.74 3,32,245.15
Net Profit
Margin
1.19% 1.46% 1.11% 0.98% 2.24%
Hindustan
Petroleum
Net Profit 2,733.26 1,733.77 904.71 911.43 1,539.01
Sales
Revenue
2,06,626.18 2,23,351.53 2,08,062.81 1,79,512.82 1,34,981.36
Net Profit
Margin
1.32% 0.78% 0.43% 0.51% 1.14%
Bharat
Petroleum
Net Profit 5,084.51 4,060.88 2,642.90 1,311.27 1,546.68
Sales
Revenue
2,38,086.90 2,60,074.99 2,40,115.75 2,11,972.97 1,51,639.45
Net Profit
Margin
2.14% 1.56% 1.10% 0.62% 1.02%
Net Profit Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

Page | 63
Margin
ONGC 21.40% 26.34% 25.22% 32.85% 27.70%
Gail India 5.36% 7.61% 8.46% 9.04% 10.95%
Indian Oil 1.19% 1.46% 1.11% 0.98% 2.24%
Hindustan
Petroleum
1.32% 0.78% 0.43% 0.51% 1.14%
Bharat
Petroleum
2.14% 1.56% 1.10% 0.62% 1.02%
Comparison Graph V -
Interpretation-
Net profit (NP) ratio is a useful tool to measure the overall profitability of the business. A high ratio indicates
the efficient management of the affairs of business. Analysis shows,
That market leader ONGC and Gail India’s net profit ratio is drastically declining where others are moving
upwards,
But Bharat Petroleum is performing good as it has third highest profit in the industry and showing growth,
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
NetProfitMargin
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 64
Hindustan Petroleum is also showing better performance compare to the market leaders,
Indian Oil Corporation is also has same movement like Hindustan Petroleum in future it can become a
important company for Oil and Gas Sector,
Overall we can say the performance of profit margin is disappointing for the investors, growth is also slow as
shown in the graph from year 2014-15 its effecting industry performance also.

Page | 65
6)Earnings Per Share-
EPS = Net Income / Average Outstanding Common Shares
EPS Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 18.83 24.21 22.94 27.81 20.7
Gail India 22.75 32.72 30.11 27.39 26.85
Indian Oil 20.37 27.43 19.56 15.49 29.19
Hindustan
Petroleum 75.64 48.51 25.24 25.51 43.13
Comparison Graph VI -
Interpretation:
We found that,
Top five oil and gas sector companies are not having higher Earnings per share except Hindustan
petroleum and Bharat Petroleum that shows the good profit these two companies are making every
year and moving upwards trends it has a capability to hold the lead position in upcoming days,
Gail India are not gaining good profit,
0
10
20
30
40
50
60
70
80
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
EPS
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 66
Higher earnings per share ratio often make the stock price of a company rise. But for Indian Oil it
shows many up and down moves we can easily understood that this is a very risky company to
invest,
Specially for big market leader ONGC, it’s not a good sign to decline its earnings per share below
past five years. It means profitability is less for the shareholders.

Page | 67
7) Price To Earnings Ratio-
P/E ratio = Price per share / Earnings Per Share (EPS)
P/E Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 16.29 13.16 13.58 9.61 14.01
Gail India 17.09 11.48 10.6 13.69 17.32
Indian Oil 18.08 10.17 14.39 16.95 11.45
Hindustan
Petroleum
8.59 6.39 11.3 11.89 8.28
Bharat
Petroleum
12.23 8.61 10.87 20.16 14.98
Comparison Graph VII -
Interpretation:
The price earnings ratio is prospect ratio that calculates the market value; this analysis shows, That
after year 2014 all companies heading upwards. It means all over performance of the oil industry is
doing very well,
Bharat Petroleum has long up and down move in the graph which means share prices have fall
drastically,
0
5
10
15
20
25
P/ERatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 68
Hindustan Petroleum also has declined by three year consistently now it has moved up enormously,
Gail India definitely at second position after Indian Oil but it also gain value from the year 2014,
Indian Oil is at top position after a continuous fall in share price now it is able to gain up to 18.08%,
ONGC is at third position holding but it is very consistent and gaining its share price yearly,
after continuous declining from year 2012 to 2014,
Industry is moving upwards with a faster rate.

Page | 69
8)Return on net worth-
Return on Net Worth =Net After-Tax profits/(Shareholder capital + Retained
earnings)
Return on Net
Worth(%)
ONGC 12.61 16.92 17.63 23.87 20.48
Gail India 10.82 17.06 17.54 17.88 19.76
Indian Oil 6.23 9.25 8.41 18.61 14.06
Comparison Graph VIII -
0
5
10
15
20
25
30
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
ReturnonNetWorth
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 70
Interpretation-
The analysis shows that the return that shareholders could receive on their investment in a company,
If all of the profit earned was to be passed through directly to them is higher in Bharat Petroleum and
Hindustan Petroleum as compared to other giant companies like Gail India.
However ONGC’s performance is average as long fluctuations we can see in the comparison graph.
Gail India is in the second last position it shows investment are not gaining return what it supposed
to get,
Indian Oil again disappointing performance as per the investor’s view it has not generating returns to
its shareholders fund.

Page | 71
9) Current ratio-
Current Ratio = Current Assets / Current Liabilities
Current Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 0.87 0.93 0.99 0.95 1.31
Gail India 0.89 0.89 0.8 0.83 1.04
Indian Oil 0.89 0.89 0.87 0.84 0.81
Hindustan
Petroleum
0.89 0.82 0.76 0.71 0.7
Comparison Graph IX -
Interpretation-
The analysis result showing that all five companies are under performing in maintaining current
assets over current liabilities, but all companies have maintain a close competition amongst them.
Indian Oil, Gail India and Hindustan Petroleum is holding top position if we compare these three
companies are in better position that manages its assets and liabilities up to some extent,
0
0.2
0.4
0.6
0.8
1
1.2
1.4
CurrentRatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 72
Bharat Petroleum is however in weak position compare to others,
ONGC, though it is at second position but overall performance of liquidity is poor as it has declined
drastically.
But it is showing that current liability of top five companies are higher than the current assets and so
liquidity measurement is quite weak.

Page | 73
10) Return On Capital Employed-
ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed
Return On Capital
Employed(%)
ONGC 15.8 20.83 21.3 28.41 24.93
Gail India 11.64 18.58 20.2 22.07 26.52
Indian Oil 6.39 8.4 8.16 13.55 11.58
Comparison Graph X -
Interpretations-
If all of the profit earned was to be passed through directly to them is higher in Bharat Petroleum and
Hindustan Petroleum as compared to other giant companies like Gail India.
However ONGC’s performance is average as long fluctuations we can see in the comparison graph.
0
5
10
15
20
25
30
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
ReturnOnCapitalEmployed
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 74
Gail India is in the average position, as it shows capital investment are not gaining return what it
supposed to get,
Indian Oil again disappointing performance as per the investor’s view it has not generating returns to
its capital employed.

Page | 75
11) Debt - Equity Ratio-
Debt - Equity Ratio = Total Liabilities / Shareholders' Equity
Comparison Graph XI-
Interpretation-
The analysis shows that.
ONGC is throughout this five year performed quite stably so level of risk of financing is very low
and company is safe,
0
0.5
1
1.5
2
2.5
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
DebtEquityRatio
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium
Debt Equity Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 0 0 0.02 0.02 0.09
Gail India 0.3500 0.3800 0.3100 0.1900 0.1100
Indian Oil 1.0600 1.3100 1.3100 1.1300 0.9200

Page | 76
Other competitors are far behind in comparison to Debt to Equity,
Hindustan Petroleum has slipped from its position over the years but now generally goind strong,
Bharat petroleum is getting strong position for debt-equity, as it has successfully managing its debts
over equity is decreasing year by year it is a good sign,
Indian Oil also now showing that its debts are coming down or there are more equity investment,
Danger signal for Gail India as every year their debts are increasing so the graph is moving upwards,
so the company needs to reduce their debts quickly or else it can create a problem,
But in other hand overall position of oil and gas industry is getting stronger as graph is moving
downwards for all top five companies.

Page | 77
12) Interest Coverage Ratio-
Interest Coverage Ratio=EBIT/Interest Expense
Interest Coverage Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 9,519.00 90,089.72 1,106.08 1,053.04 1,100.82
Gail India 12.86 18.48 32.06 46.85 64.24
Indian Oil 2.82 2.62 1.87 3.05 4.37
Comparison Graph XII -
Interpretation-
ONGC is way ahead in the comparison with other. All other companies are growing Interest
Coverage Ratio slowly.
Bharat petroleum is in second position as it stopped in 13.72, good position as gross profit is more,
0.00
10.000.00
20.000.00
30.000.00
40.000.00
50.000.00
60.000.00
70.000.00
80.000.00
90.000.00
100.000.00
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
InterestCoverageRatio
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 78
Gail India is in third position as it holds to 12.86, to maintain its interest expence,
Next will be the Hindustan Petroleum interest expense is more that shows a poor performance or
debt is high,
Indian Oil a risky position as its debts are more so it is not a good sign for the company.

Page | 79
13) Inventory Turnover Ratio-
Inventory Turnover Ratio=Cost of Goods Sold ÷ Average Inventory
Inventory Turnover Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 12.9 13.38 14.25 15.36 14.41
Gail India 26.22 30.4 32.1 35.62 44.37
Indian Oil 8.58 8.1 8.18 8.05 8.36
Comparison Graph XIII -
Interpretations-
Inventory Turnover Ratio shows how efficient a company is managing their inventory over its sells;
by the comparison graph we can see,
An worrying factor is present for Gail India,
Companies like ONGC, Indian Oil are quite stable in this position,
0
5
10
15
20
25
30
35
40
45
50
Mar
'11
Mar
'12
Mar
'13
Mar
'14
Mar
'15
InventoryTurnoverRatio
Years
ONGC
Gail India
Indian Oil
Hindustan
Petrolium
Bharat Petrolium

Page | 80
only Gail India is declining year by year,
where as we found a growth aspect in both Hindustan petroleum and Bharat Petroleum as they are
showing upward trends and will be performing well in near future,
A high ratio says a high liquidity in company but low inventory also where too low ratio is also not
good for liquidity of the company.

Page | 81
14) Debtors Turnover Ratio-
Debtors Turnover Ratio=Net Credit Sales/Average Accounts Receivable
Debtors Turnover Ratio Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
ONGC 7.64 11.21 12.76 15.09 19.47
Gail India 19.46 21.73 21.63 21.93 21.09
Indian Oil 53.34 45.17 45.33 45.97 48.84
Comparison Graph XIV -
Interpretation-
Current analysis indicates a very strong and efficient position for Bharat Petroleum as their
receivables are more,
Then Indian Oil is at stable position but year 2015 their growth is good so holding the second
position,
0
10
20
30
40
50
60
70
80
DebtorsTurnoverRatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 82
And then Hindustan Petroleum is struggling to maintain its sale and credit sales to manage debtor
turnover ratio efficiently,
Where in the year 2015, ONGC and Gail India has faced a decline stage in the market.
So top companies for this analysis are way ahead from the first year itself (2011).

Page | 83
15) Fixed Asset Turnover Ratio-
Fixed Asset Turnover Ratio=Net Sales/ Net Fixed Assets
Fixed Asset Turnover
Ratio
ONGC 0.47 0.52 0.58 0.59 0.58
Gail India 1.53 1.79 1.68 1.69 1.53
Indian Oil 4.05 4.63 4.66 4.44 4.33
Comparison Graph XV -
Interpretation-
We found top companies of oil and gas sector such as ONGC and Gail India are able to maintain a
stable ratio that shows from past five years they are managing their fixed asset in a same manner to
generate its revenue or it can imply that simultaneous growth of fixed asset and sales.
0
1
2
3
4
5
6
7
8
9
FixedAssetTurnoverRatio
Years
ONGC
Gail India
Indian Oil
Hindustan Petrolium
Bharat Petrolium

Page | 84
But other three companies Bharat Petroleum, Hindustan Petroleum have shown an up move either by
decreasing assets or their profit is more and a decline that shows inefficient management of fixed
assets more or less in same percentage.
Indian oil is a average company accordingly as their not too high in profit and not too low in assets
as well,
So overall position holding for this industry is moderate as most companies are in a stable mode to
evaluating by their fixed assets,

Page | 85
Chapter 5
Findings , Suggestions
and Conclusions

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FINDINGS
A consistent trend in Dividend Payout Ratio is usually more important than a high or low ratio, in
case of Dividend Payout Ratio. We found that last five years every company has more or less stable
figure in their financial statement, except Gail India as it has a very high fluctuation from year 2012-
13 this figure has fallen drastically but then again hold at the continuous level and manages to
maintain its position in the market. But ONGC is in the top position. Generally, more mature and
stable companies tend to have a higher ratio than newer start up companies.
Return on Equity varies substantially across different industries. Therefore, it is recommended to
compare return on equity against company's previous values or return of a similar company. Gail
India is in top position by the analysis that has a consistent growth; return on equity is one of the
profitability ratios. So along with Gail India, Hindustan Petroleum Also growing at the second
position.
High Earnings Retention Ratio is not always good, as it shows company don’t pay dividend to the
investors. In this analysis we can see all companies have a stable rate of retention. ONGC is only
company which is declining year by year. More over position of industry is stable.
High gross profit margin indicates that the company can make a reasonable profit, as long as it keeps
the overhead cost in control. Low gross profit margin indicates that the business is unable to control
its production cost. We found by the analysis that except ONGC other competitors are almost
slightly at declining position, fluctuations can be noticed in ONGC.
Net profit (NP) ratio is a useful tool to measure the overall profitability of the business. A high ratio indicates
the efficient management of the affairs of business. Analysis shows that market leader ONGC and Gail India’s
net profit ratio is drastically declining where others are moving upwards.
We found that top five oil and gas sector companies are not having higher Earnings per share except
Hindustan petroleum and Bharat Petroleum that shows others are not gaining good profit. Higher
earnings per share ratio often make the stock price of a company rise.
The price earnings ratio is prospect ratio that calculates the market value; this analysis shows that
after year 2014 all companies heading upwards.
The price earnings ratio is prospect ratio that calculates the market value; this analysis shows that
after year 2014 all companies heading upwards. It means all over performance of the oil industry is

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doing very well, after continuous declining from year 2012 to 2014, industry has incline with a faster
rate.
if all of the profit earned was to be passed through directly to them is higher in Bharat Petroleum and
Hindustan Petroleum as compared to other giant companies like ONGC. However Indian Oil
Corporation’s performance is average as long fluctuations we can see in the comparison graph.
The analysis result showing that all five companies are under performing in maintaining current
assets over current liabilities, but all companies have maintain a close competition amongst them.
But it is showing that current liability of top five companies are higher than the current assets and so
liquidity measurement is quite weak.
if all of the profit earned was to be passed through directly to them is higher in Bharat Petroleum and
Hindustan Petroleum as compared to other giant companies like ONGC. However Indian Oil
Corporation’s performance is average as long fluctuations we can see in the comparison graph.
The analysis shows that ONGC is throughout this five year performed quite stably so level of risk of
financing is very low and company is safe, other competitors are far behind in comparison to Debt to
Equity. But in other hand overall position of oil and gas industry is getting stronger as graph is
moving downwards for all top five companies.
ONGC is way ahead in the comparison with other. All other companies are growing Interest
Coverage Ratio slowly.
Inventory Turnover Ratio shows how efficient a company is managing their inventory over its sells;
by the comparison graph we can see an worrying factor is present for Gail India. Other companies
are quite stable in this position, only Gail India is declining year by year. A high ratio says a high
liquidity in company but low inventory also where too low ratio is also not good for liquidity of the
company.
Current analysis indicates a very strong and efficient position for Bharat Petroleum then Indian Oil
and then Hindustan Petroleum. Where in the year 2015, ONGC and Gail India had faced a decline in
the market. So top companies for this analysis are way ahead from the first year itself (2011).

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