ONGC is India's largest oil and gas exploration and production company. It aims to make India self-reliant in petroleum through domestic exploration. The document analyzes ONGC's leverage ratios over 5 years, finding operating and financial leverage peaked in 2013-14 when sales were highest. Going forward, ONGC plans $34 billion in investments to boost output as leverage has declined recently. Maintaining high leverage is important for profits and access to financing.

1. Submitted by
Dhananjay SINGH
M.Com (commerce)

2.  What is ONGC?
 Mission, vision and objectives of ONGC.
 Annual report’s leverage analysis of past 5
years.
 Future prospects of ONGC in respect of
upcoming financial investments.
 Conclusion.

3.  Oil and Natural Gas Corporation ltd. is public
sector Multinational Oil and Gas company of the
govt. of India under the administrative control of
the Ministry of Petroleum and Natural Gas.
 It’s India’s largest oil and gas exploration and
production company with about 77% of India’s
crude oil production and around 62% of natural
gas.
 Its products includes: Petroleum, natural gas and
other petrochemicals with average annual revenue
and profit of 139364.35cr and 14300.93cr
respectively.

4.  Its vision is to be a global leader in integrated energy
business through sustainable growth, knowledge
excellence and exemplary governance practice.
 Firstly, its mission is to focus on domestic and
international oil and gas exploration and production
business opportunities and secondly to make India
self-reliant in petroleum sector and enhance its
energy availability.
 Its objective is to ensure maintenance of continuous
petroleum supply to all the sectors and to serve
nation’s interest in accordance with government
policies.

5.  Leverage implies the ability of a firm to use fixed costs
assets or funds in order to magnify the return to its
shareholders.
IMPORTANCE OF LEVERAGE
 It is important because it allows a company to
maximize the profits earned by shareholders as
compared to profits earned from equity operations.
 Companies that demonstrate the ability to manage
leverage by repaying debts on time increase their
chances of getting loans at better interest rates.

6. OPERATING
LEVERAGE
FINANCIAL
LEVERAGE
COMPOSITE/COMBINED
LEVERAGE

7.  Contribution=sales-variable cost
 EBIT=contribution-fixed cost
 EBT=EBIT-interest
 Operating leverage(OL)=contribution/EBIT
 Financial leverage(FL)=EBIT/EBT
 Combined leverage(CL)=OL*FL

8. Particulars 2015-16 2014-15 2013-14 2012-13 2011-12
Sales
1785651.0
0
1730935.0
0
1844770.5
6
1624025.2
1
1473057.1
9
Fixed cost
205787.00 388027.00 165809.09 117633.04 129329.90
Variable
cost 203540.00 230993.00
1154500.2
2
1078750.4
8
874203.20
Interest
payments 5052.00 2843.00 6243.35 4837.97 4349.41

9. Particulars
2015-
16
2014-15 2013-14 2012-13 2011-12
Contribution
158211
1.00
1599942.
00
590270.3
4
545274.7
3
589571.6
1
EBIT
137632
4.00
1211915.
00
424461.3
0
427641.9
6
469524.0
9
EBT
137127
2.00
1209072.
00
418217.9
5
422803.7
2
465174.6
8
Operating
Leverage
1.14 1.32 1.39 1.28 1.25
Financial
leverage
1.10 1.20 1.25 1.05 1.00
Combined
leverage
1.15 1.33 1.41 1.29 1.25

10. 0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
OPERATING FINANCIAL COMBINED
2011-12
2012-13
2013-14
2014-15
2015-16

11.  ONGC has unveiled a Rs. 34000cr. Investment
plan to develop its KG basin fields, which
would help boost the company’s oil and gas
outputs by 5 times in upcoming 4 years.
 ONGC in talks with GPSC for acquiring a stake
in its gas field in the Krishna-Godavari Basin
and may invest about $5 billion.

12.  From the above slides and graphs it can be
concluded that the company has reached its peak
point during the year 2013-14, thereafter its
earning are continuously declining. This shows that
now the time has come for the firm to inculcate
such changes so that in the upcoming FY 2016-17,
its earning increases so as to give higher returns to
its shareholders as well as increase its retained
earnings.
 Financial leverage is the degree to which a
company uses fixed-income securities such as
debt and preferred equity. The more debt financing
a company uses, the higher its financial leverage.

13.  Similarly in operating leverage, the level of the
leverage will be higher when the amount of
sales is more than the EBIT. As can be seen in
the table 1that during the FY 2013-14, the
amount of sales was the highest resulting in the
highest operating leverage as compared to all
the other years.
 The combined leverage graph takes the same
shape as that of the other two leverages as it
the product of the two. From year 2011 to 2014
it showed an increasing level as the other two
were also showing the same trend and from
2014 to 2016 FY it showed a downward trend
due to the same reasons.