Professional Documents
Culture Documents
Done By
Abijith T Cherian
PGP 029/02
IIM Bodh Gaya
IIM BG Summer Internship Report
1. ACKNOWLEDGEMENT
The completion of this Project would have been impossible without the material and moral support from
various people. It is my obligation, therefore to extend my gratitude to each of them.
I am greatly indebted to Ms. Nimmy Thomas, Deputy Manager, Finance for her effective supervis io n,
dedication and support towards the completion of this project. I also express my sincere gratitude to Mr. N
Srikanth, Chief Manager, Finance for his mentoring and guidance throughout the project. I am also thankful
to all other staff members of HPCL South Zone office, Chennai, for their support.
Its my great pleasure to thank Dr. Sudhir Jaiswall, Guest Faculty, Finance and Control group, Indian Institute
of Management, Calcutta, who has shown a keen interest in clarifying my various doubts, swiftly responding
to all my queries.
I am also thankful to the Placement committee of my institute, Indian Institute of Management, Bodhgaya, for
giving me an opportunity to do this internship for the partial fulfillment of the requirements for the award of
the degree of Post Graduate Programme in Management.
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IIM BG Summer Internship Report
2. ABSTRACT
The purpose of this report is to summarize my summer internship project, done in partial fulfillment of the
requirements for the award of the degree of Post Graduate Programme in Management, from Indian Institute
of Management, Bodh Gaya. The Internship is done at Hindustan Petroleum Corporation Limited (HPCL),
Zonal Office, South Zone, Chennai from 3 rd April to 2nd June 2017.
In this report, various financial ratio analysis is done for three major Public sector petroleum companies in
India, namely, Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited
(BPCL), and Indian Oil Corporation Limited (IOCL). The data from FY 2012-13 to FY 2015-16 is used for
the analysis. Common Size Statement and Horizontal Analysis is prepared for each of the three companies to
find out the trend over the period. Also, various ratios are calculated, namely liquidity ratios, leverage ratios,
activity ratios, profitability ratios and valuation ratios, to analyze both intra and inter-company variations. Du
Pont analysis is also done for all the three companies to have a deeper understanding of the Return on Equity
values over the years.
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IIM BG Summer Internship Report
3. TABLE OF CONTENTS
1. Acknowledgment 2
2. Abstract 3
3. Table of Contents 4
4. HPCL Introduction 5
a. Financial Performance Analysis
i. Trend Analysis
ii. Vertical Analysis
5. BPCL Introduction 6
a. Financial Statement Analysis
i. Trend Analysis
ii. Vertical Analysis
6. IOCL Introduction 7
a. Financial Statement Analysis
i. Trend Analysis
ii. Vertical Analysis
7. Liquidity Ratio Analysis 8
a. Cash Ratio
b. Quick Ratio 9
c. Current Ratio
d. Inventory to Working Capital Ratio 10
8. Solvency Ratio Analysis 11
a. Debt to Asset Ratio
b. Debt to Equity Ratio 12
c. Equity Ratio
9. Efficiency Ratio Analysis 13
a. Asset Turnover Ratio
b. Inventory Turnover Ratio 14
c. Fixed Assets Turnover Ratio
10. Profitability Ratio Analysis 15
a. Return on Assets
b. Return on Equity 16
c. Gross Profit Margin
d. Net Profit Margin 17
e. Operating Profit Margin
11. Valuation Ratio Analysis 18
a. Earnings Per Share
b. Dividend Per Share
12. Du Pont Analysis 19
13. Bibliography 20
14. Disclaimer 21
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IIM BG Summer Internship Report
4. HPCL: INTRODUCTION
250 30.00
200 20.00
150
100 10.00
50 0.00
0
12-13 13-14 14-15 15-16
FY
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IIM BG Summer Internship Report
5. BPCL: INTRODUCTION
Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled oil and gas
company headquartered in Mumbai, Maharashtra. The Corporation operates two large
refineries of the country located at Mumbai and Kochi. The Government of India owns
54.93% shares in BPCL and others are distributed amongst financial institutes, public and
other investors. The company is ranked 358th on the Fortune Global 500 list of the world's
biggest corporations as of 2016. BPCL traces its history to 1928 when the Burmah Shell
Oil Storage & Distribution Company of India was incorporated in England to enter the
petroleum products business in India. The business of the Company grew substantially
given the international backing of Shell and it achieved the leadership position in India. In
1952, Shell and Burmah Oil Company set up Burmah Shell Refineries to set up a refinery
in Mumbai. The entire operations of Burmah Shell in India were nationalised in 1976 and
the Refinery and Marketing Companies were merged to form BPCL.
50
200 40
Percentage
30
150 20
10
100
0
50
0
12-13 13-14 14-15 15-16
6. IOCL: INTRODUCTION
200.00 50
40
Percentage
150.00 30
20
100.00 10
0
50.00
0.00
12-13 13-14 14-15 15-16
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IIM BG Summer Internship Report
&
=
There are some situations where a companys use of its cash may be restricted by certain loan agreements, minimum
bank balance requirements, or mandates imposed upon the use of funds by the firms board of directors.
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IIM BG Summer Internship Report
(, , )
=
(c)CURRENT RATIO
Unlike the most narrowly focused quick ratio that only considers easily cashable. Or quick assets, the current ratio takes
a broader view of liquidity by including such assets such as inventory in its calculation. By measuring all of a companys
current assets against its current liabilities, one can arrive at a figure that will indicate how likely that company is to
have enough resources to support its debt over the next year.
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IIM BG Summer Internship Report
=
+
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IIM BG Summer Internship Report
Because the debt to asset ratio takes such a broad look at a companys solvency, it cant accommodate every possible
financial scenario. While it will provide some insight into how well a firms assets support its debt commitments, the
debt to asset ratio treats all liabilities equally. This is the case whether the debts are short term, long term, necessary or
unnecessary to the companys overall level of operational efficiency.
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IIM BG Summer Internship Report
(c)EQUITY RATIO
All of a companys assets are the result of shareholders equity, loans from creditors, or a combination of both. The
equity ratio is a simple calculation that can show how much of a companys assets are funded by owner shares. The
equity ratio will provide information on both debt situation and long-term financial stability.
=
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IIM BG Summer Internship Report
An Asset turnover ratio of 1 means that a firm is generating a rupee in sales for every rupee in assets that it owns.
Generally, a higher ratio is more desirable, as it tells that the company is using its resources in most efficient manner
possible to produce income. When the ratio value is very low, on the other hand, it tells that the business has a lot of
money invested in assets, but isnt seeing a huge return on those assets in terms of revenue. In the case of lower value,
it can be probably assumed that the business isnt managed efficiently or its experiencing manufacturing or production
difficulties that are impacting sales.
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IIM BG Summer Internship Report
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IIM BG Summer Internship Report
(a)RETURN ON ASSETS
By calculating firm's Return on Assets (ROA), one can measure its net earnings against its total assets to determine just
how successfully it's using its resources to generate profit from its regular business operations. Not only this will allow
one to judge how efficient a companys management team is at generating earnings, it can also indicate just how capable
the company is of funding its own growth and expansion. Considering the fact that the entire purpose behind a firms
asset is to produce revenue, the return on assets ratio should play a critical role in the evaluation of a potential investme nt.
A higher return on Asset is generally a more desirable outcome since it means that a business is handling its resources
more effectively in the production of income. The higher the result of the ratio, the more profitable a companys assets
are.
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IIM BG Summer Internship Report
(b)RETURN ON EQUITY
The Return on Equity (ROE) ratio allows one to calculate the returns a company is able to generate from the equity that
the shareholders have invested in it. The more capable a company is of yielding a profit from equity, the higher its return
on equity will be. This ratio allows one to know exactly how much net income a firm is producing from each rupee of
the equity invested by its common shareholders.
=
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IIM BG Summer Internship Report
(d)NET PROFIT MARGIN
Net Profit Margin is one of the most useful financial ratios to evaluate the companys overall performance for investment
purposes. By measuring net income against revenues, the Net profit margin ratio demonstrates exactly what percentage
of each sales rupee remains as profit after a companys expenses have been paid.
=
NET PROFIT MARGIN BPCL has got the highest Net Profit
Margin from FY 2013-14 to FY 2015-
4.5 16. The Net Profit Margin of all the
4 three companies are showing an
3.5 upward trend from FY 2012-13 to FY
3 2015-16, except for IOCL, which
Percentage
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IIM BG Summer Internship Report
11.VALUATION RATIO ANALYSIS
Business valuation ratios are particularly useful for comparing companies within the same market sector, or within the
entire market as a whole, because they define how cheap or expensive an investment in terms of its potential for profit.
(a)EARNINGS PER SHARE
Earnings per share are the portion of the companys profit allocated to each outstanding share of common stock. Earnings
per share also serve as an indicator of companys profitability.
=
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IIM BG Summer Internship Report
12.DUPONT ANALYSIS
DuPont analysis is a method of performance measurement that was started by the DuPont Corporation in the 1920s. The
Du Pont identity breaks down Return on Equity (that is, the returns that investors receive from the firm) into three
distinct elements. This analysis enables the analyst to understand the source of superior (or inferior) return by
comparison with companies in similar industries (or between industries).
=
Where
ROE (Return on Equity) = Net Income/Average Equity %
NPM (Net Profit Margin) = Net Income/Net Sales %
ATO (Asset Turnover) = Net Sales/Average Total Assets
FLM (Financial Leverage Multiplier) = Average Total Assets/Average Equity
HPCL
6 25
5 20
4
15
3
10
2
1 5
0 0
12-13 13-14 14-15 15-16
BPCL
5 40
4 30
3
20
2
1 10
0 0
12-13 13-14 14-15 15-16
IOCL
4 20
3 15
2 10
1 5
0 0
12-13 13-14 14-15 15-16
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IIM BG Summer Internship Report
13. BIBLIOGRAPHY
1. http://www.hindustanpetroleum.com/Financial
2. https://www.bharatpetroleum.com/Bharat-Petroleum-For/Investors/Our-Financials/Annual-Reports.aspx
3. https://www.iocl.com/AboutUs/FinancialPerformance.aspx
4. https://wealthyeducation.com/
5. http://www.blog.sanasecurities.com/how-do-oil-marketing-companies-make-money/
6. http://simplestudies.com/profitability_and_coverage_analysis.html/page/13
7. http://www.moneycontrol.com/
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IIM BG Summer Internship Report
14. DISCLAIMER
This disclaimer informs readers know that this report is done as part of my internship at Hindusta n
Petroleum Corporation Limited (HPCL), Zonal office, South Zone, Chennai, in partial fulfillment of the
requirements for the award of the degree of Post Graduate Programme in Management, from Indian
Institute of Management, Bodh Gaya. The analysis, views and the opinions expressed in this report belong
solely to the author, and not necessarily to any employees or stakeholders related to Hindustan Petroleum
Corporation Limited (HPCL).
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