Escolar Documentos
Profissional Documentos
Cultura Documentos
Institutional guide:
Dr. M.Basheer Ahmed Khan
Department of Management
Studies
Pondicherry University
Submitted By:
Kankan Deka
Organisational
guide:
Mr. Himangshu
Bardoloi
Accounts Officer
Guwahati Refinery
(IOCL)
Regn. No.13397039
MBA 2
rd
Year.
DECLARATION
I hereby declare that the project report titled CAPITAL
STRUCTURE ANALYSIS OF INDIA OIL CORPORATION
LIMITED submitted in partial fulfillment of the requirement
for the award of the degree of MASTER OF BUSINESS
ADMINISTRATION at Department of Management Studies,
Pondicherry University is an original piece of work and not
submitted for award of any other degree, diploma, fellowship,
or any other similar title or prizes.
As per my knowledge and belief, the substance in the report
does not form the part of any other business or research
work. Also, this report has never been submitter earlier or
used for any academic purpose.
rd
semester
Pondicherry
University
GUIDES CERTIFICATE
Certified that this report entitled CAPITAL STRUCTURE
ANALYSIS OF INDIAN
OIL
CORPORATION
LIMITED
is
submitted
in
partial
Faculty Guide:
Dr. T .Nambirajan
Department Of Management
Studies
Department Of Management
Studies
Pondicherry University
Pondicherry university
ACKNOWLEDGEMENTS
This project, though an individual project, wouldnt have been
possible without the constant help and guidance of a few
individuals whose support has been vital to the completion of
the project.
At the outset, I would like to thank Mr. Hitesh Barman
(Manager Vigilance department) for providing me the
opportunity to do a project at Indian Oil Corporation limited.
This research project would not have been possible without
the support of many people. I wish to express my gratitude to
my supervisor, Mr. Vishal Maheshwari, who was abundantly
helpful
and
offered
invaluable
assistance,
support
and
Place: Guwahati
Kangkan deka
MBA 2
nd
year
Pondicherry
University
4
TABLE OF
CONTENTS
CHAPTER 1: INTRODUCTION TO THE
PROJECT 1.1: Introduction
to the topic 1.2: Objective
of the study
CHAPTER 2: PROFILE OF THE COMPANY AND THE
MARKET SCENARIO 2.1: Origin of oil industry
in India.
2.2: About IOCL and Guwahati
refinery. 2.3: Vision, Mission
and values.
CHAPTER 3: RESEARCH
METHODOLOGY 3.1:
Research design.
3.2: Data source and
collection. 3.3: Capital
structure analysis.
CHAPTER 4: DATA INTERPRETATION AND
ANALYSIS CHAPTER 5: CONCLUSION
5.1: FINDINGS
5.2:
SUGGESTIONS
5.3:
LIMITATIONS
5.4:
CONCLUSION
CHAPTER 6: BIBLIOGRAPHY
5
CHAPTER 1: INTRODUCTION TO
THE PROJECT
some
combination
of
equity,
debt,
or
hybrid
10
COMPANY OVERVIEW
INDIAN OIL CORPORATION LTD
IOCL (Indian Oil Corporation) was formed in 1964 as the result
of merger of Indian Oil Company Ltd. (Estd. 1959) and Indian
Refineries Ltd. (Estd. 1958).
Indian Oil Corporation Ltd. is currently India's largest company
by sales with a turnover of Rs. 2 441 329 600, and profit of Rs.
25 994 000 for fiscal 2009.
Indian Oil Corporation Ltd. is the highest ranked Indian
company in the prestigious Fortune Global 500. It is ranked
at 109th position in 2010. It is also the 20th largest petroleum
company in the world.
Indian Oil and its subsidiaries today accounts for 49%
petroleum products market share in India.
Indian Oil group has sold 59.29mn tonnes of Petroleum
including 1.74mn tonnes of natural gas in the domestic
market and exported 3.33mn tonnes in the yr 2008-09.
IOCL GROUP
IOCL Group consists of Indian Oil Corporation Ltd. and the
following subsidiaries:
Lanka IOC Ltd
Indian Oil (Mauritius) Ltd.
IOCL Middle East FZE
Indian Oil Technologies Ltd.
Chennai Petroleum Corporation Ltd. (CPCL)
Location of IOCL
in India
1
2
13
VISION OF IOCL
A major diversified, transnational, integrated energy company,
with national leadership and a strong environment conscience,
playing a national role in oil security & public distribution.
MISSION OF IOCL
IOCL has the following mission:
To achieve international standards of excellence in all aspects
of energy and diversified business with focus on customer
delight through value of products and services and cost
reduction.
To maximize creation of
satisfaction for the stakeholders.
wealth,
value
and
through
14
VALUES OF IOCL
Values exist in all organizations and are an integral part of any
it. Indian Oil nurtures a set of core values:
1. CARE
2. INNOVATION
3. PASSION
4. TRUST
15
and
To
achieve
acquisitions,
higher
integration
growth
through
and
mergers,
diversification
by
production,
petrochemicals,
natural
gas
and
To
inculcate
strong
core
values
among
the
16
IOCL
wind
mill
power
generation
and
oil
and
gas
exploration
activities
jointly
undertaken
unincorporated
17
in
the
form
of
18
CHAPTER 3: RESEARCH
METHODOLOGY
1
9
RESEARCH DESIGN
A research design is the specification of method and procedure for
accruing the information needs. It is overall operational pattern of
frame work of project that stipulates what information is to be
collected for source by the procedures.
Descriptive Research design is appropriate for this study.
Descriptive study is used to study the situation. This study helps
to describe the situation. A detail description about present and
past situation can be found out by the descriptive study .
DATA SOURCE AND COLLECTION
This research is based on secondary data. This means the data
are already available, i.e. the data which have been already
collected and analyzed by someone else.
Secondary data are used for the study of ratio analysis of this
company and also its competitors. To collect the data, company
annual report, internet websites has been used.
Analyzing and interpreting the information available in the financial statements
and drawing meaningful conclusions from them.
20
CAPITAL STRUCTURE
A mix of a company's long-term debt, specific short-term
debt, common equity and preferred equity . The capital
structure is how a firm finances its overall operations and
growth by using different sources of funds.
COMPONENTS OF CAPITAL
STRUCTURE:
CAPITAL STRUCTURE
Shareholders funds
funds
Borrowed
CHAPTER 4: DATA
ANALYSIS
2
2
SHARE
CAPITAL
600
0
500
0
400
0
300
0
200
0
100
0
Authori
sed
Capital
(CR)
Issued
Capital
(CR)
0
2014
CA
A PI
U TA
T L:
H The
O
RI
ma
xim
um
S equ
E ity
D cap
ital
an
raise,
which is
cmentione
od in the
m
Memoran
pdum
of
aAssociati
non
and
yArticles
of
cAssociati
aon of the
Co d
mp cap
de
face
value
of
an ital.
bthe
y.
yshares
Ho SS
that
we UE
thave
ver D
hbeen
CA
eissued to
the
sh PI
are
ssharehol
pre
hders.
mi
um
is
ex
clu
de
d
fro
m
the
de
fini
tio
n
of
aut
hor
ize
TA
L:
Iss
ued
cap
aIssued
rshare
ecapital
hand
ital
oshare
is
l premium
the
drepresen
am
et
oun
ramount
t of
sinvested
no
. by
mi
I sharehol
nal
tders
val
the
the
the
in
ue
i company.
of
sIt is also
sha
known as
re
tthe
hel
hsubscrib
ed
A
pit na
al ly
or
si
su
s:
ca
bs
But
her
be e,
d IOC
sh L
are iss
ca ued
pit ver
al. y
cri
ll
IN
ePrevious
syears if I
scompare
d
to
sAuthorize
hd capital.
aIOCL
is
ronly
eissued
the
climited
ashare to
pthe
i sharehol
tders
a
23
Paid up capital
Instrument
Shares(nos)
Face
value
2013 2014
Equity
share
2427952482
10
2427.95
2012 2013
Equity
share
2427952482
10
2427.95
2011 2012
Equity
share
2427952482
10
2427.95
2010 2011
Equity
share
1192374306
10
1192.37
2009 2010
Equity
share
1192374306
10
1192.37
2008 2009
Equity
share
778674809
10
778.67
From -
To
Capital
Paid up capital:
The amount of a company's capital that has been funded by
shareholders, Paid-up capital can be less than a company's
total capital because a company may not issue all of the
shares that it has been authorized to sell. Paid-up capital can
also reflect how a company depends on equity financing .
Here, from 2011 to 2013, the companys Paid up capital
remain same. Its means the IOCL collected average funded by
24
TOTAL DEBT
The IOCL has only two debts
Secured loan
Unsecured loan
Total debt means here included debenture, Bonds, Long term
loans, short term loan etc. But Indian Oil Corporation limited
(IOCL) did not issued debenture, bonds etc.
Secured loan:
Secured loans are those loans that are protected by an asset
or collateral of some sort. The item purchased, such as a
home or a car, can be used as collateral, and a lien is placed
on such item. The finance company or bank will hold the deed
or title until the loan has been paid in full, including interest
and all applicable fees. Other items such as stocks, bonds, or
personal property can be put up to secure a loan as well.
Secured loans are usually the best (and only) way to obtain
large amounts of money. A lender is not likely to loan a large
amount with assurance that the money will be repaid. Putting
your home or other property on the line is a fairly safe
guarantee that you will do everything in your power to repay
the loan.
25
Unsecured loan:
On the other hand, unsecured loans are the opposite of secured loans and
include things like credit card purchases, education loans, or personal
(signature) loans. Lenders take more of a risk by making such a loan, with no
property or assets to recover in case of default, which is why the interest rates
are considerably higher. If you have been turned down for unsecured credit,
you may still be able to obtain secured loans, as long as you have something
of value or if the purchase you wish to make can be used as collateral.
When you apply for a loan that is unsecured, the lender believes that you can
repay the loan on the basis of your financial resources. You will be judged
based on the five (5) C's of credit -- character, capacity, capital, collateral, and
conditions these are all criteria used to assess a borrower's creditworthiness.
Character, capacity, capital, and collateral refer to the borrower's willingness
and ability to repay the debt. Conditions include the borrower's situation as
well as general economic factors.
26
SECURED LOAN
25000
20000
15000
10000
(CR)
5000
0
Analysi
s:
In 2014 the secured loan proportion is high than 2013. The
India oil corporation limited (IOCL) has try to reduce the
secured loan because secured loan effect the assets of the
company and it will be effect on future periods so the IOCL
Increasingly firms are moving from secured debt to unsecured
debt in order to free their assets.
Secured loans have the largest positive impact on Companys credit when
they are repaid. If company have never taken a secured loan, companys credit
may be low despite your good record of repayment.
27
UNSECURED LOAN
70000
60000
50000
40000
30000
(CR)
20000
10000
0
Analysis:
Here unsecured loan is constantly high from 2010 to 2013.
Indian oil corporation limited ( IOCL).Unsecured loan is more
better than secured loan Because secured loan will be affect
the assets of the company in future period of time so the IOCL
has increasing the unsecured loan for reducing the risk of the
company . Most of the company has preferred the unsecured
debt which will not affect any assets of the company.
In some cases, IOCL may be able to reduce IOCL unsecured
debts by negotiating with creditors for a lower balance. Either
IOCL can talk to creditors on IOCL own, or IOCL can solicit the
Operating Expenses
Also known as Profit before Interest & Taxes (PBIT), EBIT equals Net
Income with interest and taxes added back to it.
EBIT was the precursor to the EBITDA calculation, which
includes
depreciation and amortization expenses.
29
30
20000
15000
(C
R)
10000
5000
0
2014
2013
2012
2011
2010
13359.4 12050.6 16773.8 11157.0 15057.9
( CR)
3
5
8
5
6
Analysis:
In 2014, the operating profit of Indian oil corporation limited
(IOCL) is Rs 13359.43 (Cr). But at present generally they are
earning average operating profits. so IOCL has try to reduce
the long term borrowed fund and issue the more share capital
to the shareholders in different areas.
Analyze
Indian
Oil
Corporation
limited
(IOCL)
internal
or
more
productive.
For
instance,
labor
is
costs savings.
31
32
Analysis:
In 2014, IOCL shareholders earned per share of Rs 28.91. But
in 2010, EPS was Rs 42.1. At that time shareholders of IOCL
was earned more than last year. So constantly decreasing the
earning capacity of shareholders of the IOCL, But still there
EPS is good if I compared to other companies.
IOCL is to increase earnings or decrease the number of
shares. In order to increase earnings, a business has to
increase revenues, reduce expenses or both. In order to
(R
s)
LEVERAGE
The degree to which an investor or business is utilizing
borrowed money. Companies that are highly leveraged may
be at risk of bankruptcy if they are unable to make payments
on their debt; they may also be unable to find new lenders in
the future. Leverage is not always bad, however; it can
increase the shareholders ' return on investment and often
there
are
tax
advantages
associated
with
borrowing.
LEVERAGE
Financial leverage
leverage
Operating
Financial leverage:
Financial leverage is a leverage created with the help of debt
component in the capital structure of a company. Higher the
debt, higher would be the financial leverage because with
higher debt comes the higher amount of interest that needs
to be paid. Leverage can be both good and bad for a business
depending on the situation. If a firm is able to generate a
35
1.91
1.49
1.31 1.11
Analysis:
In 2014 degree of financial leverage of Indian Oil Corporation
limited (IOCL) ratio is 1.61 and it has constantly higher than
previous years.
By borrowing funds, the IOCL incurs a debt that must be paid.
But, this debt is paid in small installments over a relatively
long period of time. This frees funds for more immediate use.
Indian Oil Corporation limited that successfully uses leverage
demonstrates by its success that it can handle the risks
associated with carrying debt. This can become an important
factor when additional financing is needed. Not only will loans
1.15
1.1
1.05
1
(Ratio
0.95
0.9
(Ratio)
1.12
1.09
1.13 1.01
Analysis:
In 2014 Indian oil corporation limited has degree of operating
ratio is 1.12
.which is constantly almost same from 2011 to 2014.
According to this chart IOCL having a good position in future
period of time. The more operating leverage a company has,
the more it has to sell before it can make a profit. IOCL with a
high operating leverage must generate a high number of
sales to cover high fixed costs, and as this sales increase, so
does the profitability of the company. Conversely, a company
with a lower operating leverage will not see a dramatic
3
2.5
2
(Rati
o)
1.5
1
0.5
0
(Ratio) 1.82
2.43
1.64
2011 2010
1.49
1.21
Analysis:
Combined or total leverage measures total risk of the Indian
oil
corporation
limited
(IOCL).
In
this
year
Indian
Oil
Corporation has minimum risk than last year which ratio was
2.43. In this diagram is measured by percentage change in
earning per share (EPS) due to percentage change in sales.
IOCL ask their existing shareholders to issuing common stock
rights. Stock rights allow existing shareholders to purchase
additional shares at below-market prices, in order to raise
equity. While this practice does improve a companys financial
strength, it also dilutes the current shareholders percentage
of ownership.
38
CHAPTER5:
CONCLUSION
3
9
FINDINGS
IOCL has issued less shares capital to the shareholders,
of time.
40
SUGGESTIONS
The company should utilize the debt funds more efficiently
to maximize shareholders return.
41
CONCLUSION
From the above discussion it can be concluded that Indian Oil
Corporation limited running with low debt fund. Therefore, they
may increase it to get benefits of low cost capital. It has found
that IOCL largely employing shareholders funds in their as sets it
has crossed even 100% in the first two years. Moreover EOL is on
high degree financial risk. Therefore, they may reduce the debt
capital and employ more equity fund. The study undertaken has
brought in to the light of the following conclusions. According to
this project I came to know that from the analysis of capital
structure analysis it is clear that Indian Oil Corporation Ltd have
been doing a satisfactory job. But the firm has certain areas to
ponder upon like capital employment. So the firm should focus on
getting of profits in the coming years by taking care internal as
BIBLIOGRA
PHY
4
3
WEBSITE REFERENCES:
1
www.moneycontrol.com
www.iocl.com
BOOKS REFERENCES:
st
THANK YOU
44