MBA Finance- A Study on Funds Flow Analysis With reference to GAIL(India) Limited- PPT

1. A Study on
Funds Flow Analysis
With reference to GAIL (India) Limited, Rajahmundry
Submitted by :
Immani Chandra Shekar
(Reg. No: 19K61E0020)
II-MBA Finance-SITE

2. CHAPTER-I INTRODUCTION
INTRODUCTION TO FUNDS FLOW ANALYSIS:
 Every organisation prepares its balance sheet at the end of its accounting year. It discloses the financial position
of the firm at a certain point of time. A balance sheet no-shows the movement of funds.
 Income statement measures flow restricted to transactions that pertaining to productive and commercial activities.
 In business Organizations, funds flow from different sources, and similar funds are invested in various sources of
investment. It is a continuous process.
 The study and control of this funds flow process are the primary objectives of financial management to evaluate
the soundness and the solvency of a firm. Hence, the need for another statement for periodical increase or
decrease of funds of an enterprise. This statement is called the funds flow statement.
DEFINITION OF FUNDS FLOW STATEMENT:
 In the words of FOULKE: "A Statement of Sources and Applications of Funds is a technical device for
analysing the change in a business enterprise's financial situation between two dates."
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3. NEED FOR THE STUDY
 The main want is to finish project work for the same fulfilment of my Master's degree.
 The project work is carried out by me in GAIL (INDIA) LIMITED, and the aim of a
project is to analyse the Funds flow analysis of the company.
 The “FUND FLOW ANALYSIS” has been emerging as a technique for analysing financial
statements. The funds flow analysis can be used with other measures to fully evaluate
operational efficiency.
3

4. SCOPE OF THE STUDY
The main scope of the study is to check the fund’s flow of the GAIL (INDIA) LIMITED. It
involves the study of the present and past records of the organization. It deals with the
following areas:
 Study of the sources and applications of the funds maintained by the Company.
 The study of funds flow statement is based on only one tool i.e. Funds Flow Analysis.
 Study of the procedures followed in forecasting finance needs.
 The study has been conducted to understand the position of the industry and various
functional areas of the company and their operation
 Further the study is based on the last 5years Annual Reports i.e. 2015-2016 to 2019-2020
of the company.
4

5. OBJECTIVES OF THE STUDY
 To study and analyse the fund’s flow of the company from 2015-2016 to 2019-2020.
 To identify the various sources and applications of company funds,
 To examine the changes in the working capital of the company.
 To make specific suggestions for improvement of the company performance.
 To understand the financial stability of the company.
5

6. RESEARCH METHODOLOGY OF THE STUDY
All the data is collected with the cooperation of the Management of GAIL (INDIA) LIMITED who
permitted me to carry on the study and provided the required data.
The data for the study has been obtained from two principal sources:
1. Primary data
Primary data is gathered through a series of detailed discussions with Managers,& Executives of
the company. Continuous interaction with the employees during the survey helped me to arrive at a
certain conclusion about the study.
2. Secondary data
Secondary data is mainly dependent on the company’s annual reports, company magazines, Annual
accounts, Brochures, Reference books provided by the organization. Certain standard textbooks of
eminent authors were also referred for the Theoretical backdrop of the Subject.
6

7. LIMITATIONS OF THE STUDY
Though this project is completed successfully, a few limitations have been there. The limitations
of this study are as follows:
 Time is the key limiting factor that is not sufficient to make a complete study of all the aspects
for a full-fledged project.
 The research is mainly dependent upon secondary data. Hence, opinions expressed based
upon such data are subjective to the correctness of such data.
 Due to their busy schedule, the employees in the company are unable to spend their time with
the project trainees.
 The data submitted in the report belongs to the last 5 years from 2015-2016 to 2019-2020.
 The study is confined to only GAIL (INDIA) LIMITED. Hence not its subsidiary companies.
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8. CHAPTER-II PROFILE OF GAS INDUSTRY IN INDIA
INTRODUCTION:
 Oil and gas sector is among the eight core industries in India and plays a major role in
influencing decision making for all the other important sections of the economy.
 India’s economic growth is closely related to its energy demand, therefore, the need for oil
and gas is projected to grow more, thereby making the sector quite conducive for investment.
 The Government has adopted several policies to fulfil the increasing demand. It has allowed
100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas,
petroleum products and refineries among others.
 According to IEA (India Energy Outlook 2021), primary energy demand is expected to
nearly double to 1,123 million tonnes of oil& gas equivalent, as the country's gross domestic
product (GDP) is expected to increase to USD 8.6 trillion by 2040. 8

9. MARKET SIZE:
 India is expected to be one of the largest contributors to non-OECD Oil& gas consumption growth
globally. Crude Oil& gas import rose sharply to US$ 101.4 billion in 2019-20 from US$ 70.72
billion in 2016-17.
 Natural Gas consumption is forecast to reach 143.08 million tonnes (MT) by 2040. India’s LNG
import stood at 33.68 bcm during FY20.
 India’s consumption of oil& gas products grew 4.5% to 213.69 MMT during FY20 from 213.22
MMT in FY19. The total value of Oil& gas products exported from the country increased to US$
35.8 billion in FY20 from US$ 34.9 billion in FY19. Export of Oil& gas products from India
increased from 60.54 MMT in FY16 to 65.7 MMT in FY20.
 Gas pipeline infrastructure in the country stood at 17,016 kms as of June 30, 2020.
9

10. GOVERNMENT INITIATIVES:
Some of the major initiatives taken by the Government of India to promote oil and gas sector are:
 In February 2021, Prime Minister Mr. Narendra Modi announced that the Government of India plans
to invest ₹7.5 trillion (US$ 102.49 billion) on oil and gas infrastructure in the next five years.
 In Union Budget 2021, the Finance Minister announced to provide 1 crore more LPG connections
under Pradhan Mantri Ujjwala Yojana (PMUY) scheme.
 The Ministry of Petroleum and Natural Gas released a draft LNG policy that aims to increase the
country's LNG re-gasification capacity from 42.5 million tonnes per annum (mtpa) to 70 mtpa by
2030 and 100 mtpa by 2040.
 The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.
 The Government is planning to invest US$ 2.86 billion in the upstream oil and gas production to
double natural gas production to 60 bcm and drill more than 120 exploration wells by 2022.
10

11. ROAD AHEAD:
Oil& gas demand of India is anticipated to grow faster than other energy demand of all major
economies on the back of continuous robust economic growth.
India’s oil& gas demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2019.
Moreover, the country’s share in global primary energy consumption is projected to increase by two-
fold by 2035.
Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by
2040 from 58.10 million tonnes in 2018.
India is set to expand India’s natural gas grid to 34,500 kms by adding another 17,000 km gas
pipeline. The regasification capacity of the existing 42 MMT per annum will be expanded to 61 MMT
per year by the year 2022.
11

12. STRUCTURE OF INDIAN OIL& NATURAL GAS INDUSTRY:
GAIL India GAIL India
12

13. CHAPTER-III PROFILE OF GAIL (INDIA) LIMITED
GAIL (INDIA) LIMITED
Type: Government of India-owned enterprise-
Maharatna status
Traded as: BSE: 532155, NSE: GAIL, LSE: GAID,
NSE NIFTY 50 Constituent
Industry: Energy
Founded: August 1984
Headquarters: New Delhi, India
Key people: Manoj Jain (Chairman & MD)
Products: Natural gas, petrochemical, liquid
hydrocarbons, Liquefied petroleum
gas transmission, city gas distribution,
E&P, Electricity generation, GAIL Tel.
Revenue: ₹ 74,054.85 crore (US$10 billion)
(2020)
Operating income: ₹8,182.34 crore(US$1.1 billion) (2020)
Net income: ₹9,422.05 crore(US$1.3 billion) (2020)
Total assets:
Total equity:
Owner:
Number of
employees:
Parent:
Website:
₹74,914.18 crore(US$11 billion) (2020)
₹49,268.25 crore (US$6.9 billion) (2020)
Government of India (51.8%)
4,529 (2019)
MoP&NG, Government of India
www.gailonline.com
13

14.  The Government of India granted Maharatna status on GAIL on February 1, 2013.According to the Brand Trust
Report 2014, a study conducted by the Trust Research Advisory, GAIL is ranked 131st among India's most
trusted brands. GAIL (India) Ltd., with a sales of 7.2 billion US dollars, is India's largest natural gas corporation
and Asia's biggest gas utility
 The organization's headquarters are in New Delhi. Its market segments are as follows:
 Natural gas,
 Liquid hydrocarbon,
 Liquefied petroleum gas transmission,
 Petrochemical,
 City gas distribution &
 Exploration and production,
 GAIL Tel,
 Electricity generation.
14

15. Vision:
“Be the world's leading natural gas company, with a global focus, a loyalty to customer service, value
creation for all stakeholders, and protecting the environment.”
Mission:
“Improving people's lives by renewable energy and beyond.”
VISION& MISSION:
ETHICS& ENVIRONMENTAL RESPONSIBILITY:
Ethics:
In dealing with everyone, we are open, honest, and consistent. In all of our operations, we rely on fairness,
dignity, and trustworthiness.
Environmental Responsibility:
GAIL is committed to organisational excellence in everything we do, with a focus on continuous efforts to
improve ecological execution for ourselves and our clients, and we will be responsive to the needs of nature in all of
our operations. 15

16. NATURAL GAS TRANSMISSION:
 GAIL has fabricated a system of trunk pipelines layer the length of around 11,000 km.
 GAIL transmits more than 160 MMSCMD of gas through its submitted pipelines and has in excess of a 70% bit
of the general business .
 Ministry of Petroleum and Natural Gas authorised five new pipelines to GAIL in 2009, totalling more than
5,500 km in length.
S.no Pipeline Length km/capacity in MMSCMD Commission
1. Dadri-Bawana-Nangal 610 km/31MMSCMD 2011-12
2. Chainsa-Jhajjar-Hissar 300 km/35MMSCMD 2011-12
3. Dabhol-Bangalore 1386 km/ 16 MMSCMD 2013-14
4. Kochi- Kanjiracode -Bangalore 860 km/ 16 MMSCMD 2012-13
5. Jagdishpur-Haldia Bokaro-Dharma 2500 / Unknown 2019-20
*MMSCMD. Million Metric Standard Cubic Meter Per Day.
16

17. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY:
OUR APPROACH:
 GAIL argues that listening to people's needs, benefiting sustainable societies, and protecting the environment
will eventually decide the rate of change.
 GAIL dedicates 2% of its average net profit (PBT) from the
previous three fiscal years to achieving its CSR goals
through the introduction of effective and sustainable CSR
programmes. The same is in accordance with U/S 135 of the
Companies Act of 2013.
 GAIL's CSR programmes cover a broad range of welfare
and growth events that include many target areas and are
often carried out in and around our major work centers.
RESOURCES FOR CSR:
17
National Heritage City Development & Augmentation
Yojana (HRIDAY)

18. SWOT ANALYSIS OF GAIL (INDIA) LDT:
Strengths:
 India's leading Natural Gas Company,
 The company has a competitive advantage due to its good
market position,
 GAIL has been granted Maharatna status by the Government
of India,& Demonstrated organic growth in gas transmission
over the years by constructing a vast network of trunk
pipelines,
 Company with Low Debt.
Weakness:
 Promoter decreasing their shareholding,
 Government regulations,
 Fall in Quarterly Revenue and Net Profit (YoY).
Opportunities:
 India's energy usage has increased faster in recent years
and is projected to increase more.
 With the launch of innovative goods and services,
research and development programmes will assist the
organisation in creating new revenue sources.
 Presence in the Polymer industry.
Threats:
 Company faces stiff competition across different market segments it
serves.
 Drilling natural gas wells, including development wells, involves
numerous risks, including the risk that the company may not encounter
commercially productive natural gas reservoirs. 18
 FII / FPI or Institutions increasing their shareholding,

19. SUBSIDIARIES:
 Brahmaputra Cracker and Polymer Limited (BCPL),
 GAIL Gas Limited,
 GAIL Global (Singapore) Pte Limited,
 GAIL Global (USA) Inc., (GGUI)
 GAIL Global USA LNG LLC (“GGULL”)
 Konkan LNG Limited (KLL)
JOINT VENTURES/ASSOCIATES:
 Aavantika Gas Limited (AGL)
 Bhagyanagar Gas Limited (BGL)
 China Gas Holdings Limited (China Gas)
 Central U.P. Gas Limited (CUGL)
 Green Gas Limited (GGL)
 Indraprastha Gas Limited (IGL)
 Mahanagar Gas Limited (MGL)
 Maharashtra Natural Gas Limited (MNGL)
 National Gas Company (Natgas)
 ONGC Petro-additions Limited (OPaL)
 South-East Asia Gas Pipeline Company Limited (SEAGP)
 TAPI Pipeline Company Limited (TPCL)
 Tripura Natural Gas Company Limited (TNGCL)
 Vadodara Gas Limited (VGL)
COMPETITORS:
 ONCG,
 IOL,
 BPL,
 RIL,
 Greenko Group PLC,
 ReNew Power Private Ltd,
 Mytrah Energy India Private Ltd,
 BGR Energy Systems Ltd.
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20. CHAPTER – IV DATA ANALYSIS & INTERPRETATION
FUNDS FLOW STATEMENT FOR THE YEAR ENDED 2019-2020 (₹ in Crores)
Sources of Funds Amount
₹
% Applications of Funds Amount
₹
%
Funds from operations
Issue of share capital
Issue of debentures
Raising of long term loans receipt
Sales of fixed assets
Non-trading receipts such as
 Interest received
 Dividend received on
Investments
 Dividend received on related party
Sales of Mutual Fund
Receipt of Government Grants (Capital Grant)
Loans & Advances - Related Parties
Net decrease in Working Capital
7,149.29
----
----
4,649.70
27.53
317.92
217.26
359.17
19,620.51
1,010.51
----
1,296.78
20.63
----
---
13.42
00.08
00.92
00.63
01.04
56.63
02.92
---
03.74
Funds lost in operations
Redemption of preference
Share capital(Buy back)
Re- payment of long term loans
Re- payment of short term loans
Loans & Advances to Related Parties
Purchase of fixed assets/CWIP
Investments in Mutual funds
Purchase of long term Investments
Non-trading payments such as
 Finance cost paid
 Dividend paid
Lease liabilities paid
Payments of tax
Net increase in Working Capital
----
----
----
130.10
----
2,677.06
5,462.04
19,591.99
650.75
113.19
3,942.06
125.96
1,955.52
----
---
---
---
00.38
---
07.72
15.77
56.54
01.88
00.32
11.38
00.37
05.64
---
TOTAL: 34,648.67 100 34,648.67 100 20

21. INTERPRETATION:
 The above Table shows the Funds flow statement during the study period 2019-2020.
 During the study period, the total sources of funds ₹34,648.67 Crores majorly
generated from Sales of Mutual Fund i.e.56.63 %, Funds from operations i.e. 20.63 %,
raising of long term loans 13.42% & Remaining 9.32% from Non-trading receipts,
Sales of fixed assets, Receipt of Government & Net decrease in Working Capital.
 During the study period, the total applications of funds ₹34,648.67 Crores majorly
used for Investments in Mutual funds i.e. 56.54%, Purchase of fixed assets&
Investments i.e. 17.65%, Non-trading payments 11.70%& Remaining 14.11% for
payment of taxes, Re-payment of long term loans& advances, Net increase in working
capital, & Lease liabilities paid.
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22. TABLE SHOWING THE AMOUNT OF FUNDS
FROM OPERATIONS: (₹ in Crores)
YEARS
FUNDS FROM
OPERATIONS
Amount
₹
2015-2016 4,157.11
2016-2017 7,205.49
2017-2018 8,810.66
2018-2019 11,644.15
2019-2020 7,149.29
GRAPH SHOWING THE AMOUNT OF FUNDS FROM
OPERATIONS: (₹ in Crores)
INTERPRETATION: The above Table &Graph shows the funds from operations of the Gail (India) limited during
the study period 2015-2016 to 2019-2020. The funds from operations during the study period shows a fluctuating
trend. The highest value shows during the period 2018-19 are ₹11,644.15 Crores and the lowest value shows during
the period 2015-2016 are ₹4,157.11 Crores.
22

23. TABLE SHOWING THE NET WORKING CAPITAL
REQUIREMENT YEARLY WISE: (₹ in Crores)
YEARS
CURRENT
ASSETS
Amount
₹
CURRENT
LIABILITIES
Amount
₹
NET WORKING
CAPITAL
Amount
₹
+/(-)
2015-2016 10,755.84 10,882.27 (126.43)
2016-2017 9,144.51 8,374.72 769.79
2017-2018 10,108.63 9,901.55 207.08
2018-2019 10,307.61 9,334.45 973.16
2019-2020 11,113.95 11,437.57 (323.62)
GRAPH SHOWING THE NET WORKING CAPITAL
REQUIREMENT YEARLY WISE: (₹ in Crores)
INTERPRETATION: The above Table &Graph shows the net working capital requirement of the Gail (India) limited during the
study period 2015-2016 to 2019-2020. The net working capital requirement during the study period shows a fluctuating trend. The
highest value shows during the period 2018-19 are ₹973.16 Crores in increasing trend and the lowest value shows during the
period 2019-2020 are (₹323.62) Crores in decreasing trend. 23

24. TABLE SHOWING THE CHANGES IN WORKING
CAPITAL: (₹ in Crores)
YEARS SOURCES
OF FUNDS
Amount
₹
APPLICATIO
N OF FUNDS
Amount
₹
CHANGES IN
WORKING CAPITAL
Increasing/(Decreasing)
Amount
₹
2015-2016 4,940.80 5,670.32 (729.52)
2016-2017 8,976.08 8,448.22 527.86
2017-2018 15,325.97 15,875.27 (549.30)
2018-2019 45,276.04 44,509.96 766.08
2019-2020 33,351.89 34,648.67 (1,296.78)
GRAPH SHOWING THE CHANGES IN WORKING
CAPITAL: (₹ in Crores)
INTERPRETATION:
The above Table &Graph shows the changes in the working capital of the Gail (India) limited during the study period 2015-2016
to 2019-2020. The changes in working capital during the study period shows a fluctuating trend. The highest value shows during
the period 2018-19 are ₹766.08 Crores in increasing trend and the lowest value shows during the period 2019-2020 are (₹1,296.78)
Crores in decreasing trend. 24

25. CHAPTER – V FINDINGS & SUGGESTIONS
 There is inevitably a time gap between the sale of goods and receipt of cash.
 The current assets have changed during these years because of Trade Receivables, Cash&
Cash Equivalents and Bank Balances.
 Inventories and Trade Receivables of a company should be increased from year to year.
When comparing to 2015-2016 to 2019-2020, the Trade Receivables increased by ₹1819.23
Crores i.e. 67%. When comparing to 2015-2016 to 2019-2020, the Inventories increased by
₹1215.23 Crores i.e. 70%.
 There was a decrease in Current liabilities of the company every year. And there was an
increase in level of inventories & Trade Receivables every year.
FINDINGS:
25

26.  It has been major fluctuations in the working capital, which affect the current assets and
current liabilities, and sources of funds have affected a lot. There is a decrease in working
capital during the year 2015-2016 i.e.(₹126.43 Crores)& 2019-2020 i.e.(₹323.62 Crores).
Remaining years the maintenance of working capital of the company is in a satisfactory
position.
 Funds from operations increased from ₹4,157.11 Crores in the year 2015-2016 to
₹11,644.15 Crores i.e. 180% in the year 2018-2019and suddenly there was decrease in
funds from operation to ₹7,149.29 Crores i.e. 63% in the year 2019-2020.
 Long term borrowings of the company has decreased by 57% & it’s a good sign.
26

27. SUGGESTIONS
 The overall performance of company was satisfactory. It is suggested for the company to
take care in decreasing the expenditure the profits can be increased by a large extent.
 The company should finance some parts of its current assets which short term funds it’s
better to not depend on long term funds as they involve higher interest payments.
 Also, the company net sales have reduced so the company should find ways to increase its
operating income through Natural Gas& LPG Pipeline Transmission and Marketing which
can increase the company net sales.
 It is suggested for the company to bring down to credit periods 90 days so that it can have
low of funds and there by sufficient working capital. It can be suggested the company has
diversify its funds on various alternatives.
27

28.  Also the costs of operations have increased within the last few years which should be
reduced in order to increase the operating profits for the company.
 The cash reserve position in the company is high which may create most significant
adverse effects of holding excess cash is paying more interest on debt than is necessary.
So it is advisable to maintain adequate reserves of cash.
 It is suggested that company may maintain the good position current assets over current
liabilities for the solvency of the business.
 It is suggested that the company has to maintain proper balance between the sources and
the application of funds.
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29. CONCLUSION:
 Evaluation of the financial performance of an organization is a continuous process for
understanding the direction in which organization is moving so as to decide and implement
the suitable strategies with a view to accomplish the goals of the organization.
 The funds flow statement in a statement which shows the movement of funds and is a report
of the financial operations of the business undertaking.
 Indicates various means by which funds were obtained during a particular period and the way
to which these funds were employed.
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30. BIBLIOGRAPHY:
TEXT BOOKS:
 I.M. PANDAY – Financial Management – Vikas Publication, 2015
 M.Y.KHAN & P.K. JAIN – Financial Management – Tata McGill’s Publication, 2008
 PRASANNA CHANDRA – Financial Management – Tata McGill’s Publication, 2012
WEBSITES:
 https://www.ibef.org/industry/oil-gas-india.aspx
 http://naturalgas.org/overview/history/
 https://www.moneycontrol.com/financials/gailindia/cash-flowVI/GAI/1#GAI
 https://en.wikipedia.org/wiki/GAIL
 https://gailonline.com/
OTHER INFORMATION:
 GAIL (India) Limited 6 years Annual Reports from 2014-2015 to 2019-2020.
30

31. Department of Management Science
Thank You Sir
2021