Capital Structure Analysis of Indian OilCorporation Limited
(IOCL)A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATIONDEPARTMENT OF MANAGEMENT STUDIES, PONDICHERRY
UNIVERSITY
UNDER THE GUIDANCE OFInstitutional guide:Dr. M.Basheer Ahmed
Khan
Department of Management
Studies
Pondicherry University
Organisational guide: Mr. Himangshu Bardoloi Accounts Officer
Guwahati Refinery (IOCL)
Submitted By:Kankan Deka
Regn. No.-13397039MBA 2rd Year.
DECLARATIONI 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.
Date-29.08.14 Kangkan deka
Place- Guwahati Regn no. 13397039
MBA, 3rd semester
Pondicherry University
2
GUIDES CERTIFICATECertified that this report entitled CAPITAL
STRUCTURE ANALYSIS OF INDIAN OIL CORPORATION LIMITED is submitted
in partial fulfillment for the award of MBA is record of
independent research work carried out by KANGKAN DEKA under my
guidance and no part of this corporate Exposure Training has been
previously submitted earlier for the award of any
degree/diploma.
Professor & Head Faculty Guide:
Dr. T .Nambirajan Dr.M.Basheer Ahmed Khan Department Of
Management Department Of Management Studies Studies
Pondicherry University Pondicherry university
3
ACKNOWLEDGEMENTSThis 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 guidance. Deepest gratitude are
also due to the members of the finance department, Ms. Rina
Choudhary, Mr. Munin Baradakai without whose knowledge and
assistance this study would not have been successful.I would also
like to convey my thanks to my college faculty, Prof. M.
BasheerAhmed Khan.And finally I wish to express my love and
gratitude to my beloved family; for their understanding &
endless love through the duration of my internship.Place: Guwahati
Kangkan dekaMBA 2nd yearPondicherry University4
TABLE OF CONTENTSCHAPTER 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 PROJECT6
Introduction to the topic:Capital Structure of a Company refers
to the composition or make up of its Capitalization and it includes
all long term Capital resources i.e. loans, reserves, shares and
bond. It shows the 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. In finance, capital structure
refers to the way a corporation finances its assets through some
combination of equity, debt, or hybrid securities. A firm's capital
structure is then the composition or'structure' of its liabilities.
For example, a firm that sells $20 billion in equity and $80
billion in debt is said to be 20% equity-financed and 80% debt-
financed. The firm's ratio of debt to total financing, 80% in this
example is referred to as the firm's leverage. In reality, capital
structure may be highly complex and include tens of sources.
Gearing Ratio is the proportion of the capital employed of the firm
which come from outside of the business finance, e.g. by taking a
short term loan etc.Debt comes in the form of bond issues or
long-term notes payable, while equity is classified as common
stock, preferred stock or retained earnings. Short-term debt such
as working capital requirements is also considered to be part of
the capital structure structure. A company's proportion of short
and long-term debt is considered when analyzing capital Structure.
When people refer to capital structure they are most likely
referring to a firm's debt-to-equity ratio, which provides insight
into how risky a company is. Usually a company more
heavily7financed by debt poses greater risk, as this firm is
relatively highly levered. The long term creditors would judge the
soundness of the firm on the basis of the long term financial
strength measured in terms of ability to pay the interest regularly
as well as repay the installment of the principal on due dates or
in one lump sum at the time of maturity. Accordingly, there are two
different, but mutually dependent and interrelated, types of
leverage ratio First Ratio which are based on the relationship
between borrowed funds and owners capital. In this Paper,
researcher explain the different leverage ratio as also how they
can be used to draw inferences regarding the financialsoundness of
the firm.8
OBJECTIVES OF THE STUDY To examine the Capital Structure policy
and pattern of IOCL.
To understand the capital structure of Indian Oil
Corporation
To identify the share capital and debt of the company.
To Find out the earnings per share
To Find out the leverage
To give suggestions for improvement of the composition of Indian
Oil corporation LtdCapitalStructure
Evaluate the contents of IOCL Debts and Equity.
9
CHAPTER 2: PROFILE OF THE COMPANY AND THEMARKET
SCENARIO10COMPANY OVERVIEWINDIAN OIL CORPORATION LTDIOCL (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
productsmarket 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 GROUPIOCL Group consists of
Indian Oil Corporation Ltd. and the following subsidiaries:
Lanka IOC Ltd
Indian Oil (Mauritius) Ltd. IOCL Middle East FZEIndian Oil
Technologies Ltd.
Chennai Petroleum Corporation Ltd. (CPCL) Bongaigaon Refinery
& Petrochemicals Ltd (BRPL)
11Location of IOCL in India
12The current Refining capacity stands at 55.01 million ton per
annum.
Yet another refinery is being set up on the East Coast at
Paradip (Orissa). The outlay includes provision for Expansion of
Barauni Refinery, Quality improvement for HSD at Haldia, Gujarat,
Mathura, Grass Root Refinery in Eastern Sector, Residue Up
gradation at Gujarat, and Implementation of Lube Quality
improvement at Haldia etc.
The company is mainly controlled by the Government of India
which owns approx.. 79% shares in the company. It is one of the
Maharatna status companies of India apart from Coal India Limited,
NTPC Limited, Oil and Natural Gas Corporation, Steel Authority of
Indian Limited, Bharat Heavy Electricals Limited and Gas Authority
of India Limited.
Indian Oil Corporation Limited operates a network of 11,214 km
long crude oil, petroleum product and gas pipelines with a capacity
of 77.258 million metric tonnes per annum of oil and 10 million
metric standard cubic meter per day of gas. Cross-country pipelines
are globally recognized as the safest, cost-effective,
energy-efficient and environment friendly mode for transportation
of crude oil and petroleum products. Indian Oil has one of the
largest petroleum marketing
and distribution networks in Asia with over 35,000 marketing
points.
13VISION OF IOCLA 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 IOCLIOCL 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 wealth, value and satisfaction for the
stakeholders.
To attain leadership in developing, adopting and assimilating
state- of- the-art technology for competitive advantage.
To provide technology and services through sustained Research
and
Development.
To foster a culture of participation and innovation for employee
growth and contribution.
To cultivate high standards of business ethics and Total
Quality
Management for a strong corporate identity and brand equity.
To help enrich the quality of life of the community and preserve
ecological balance and heritage through a strong environment
conscience.
14VALUES OF IOCLValues 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
OBJECTIVES OF INDIAN OILIOCL has defined its objectives for
succeeding in its mission. These objectives are:
To serve the national interests in oil and related sectors in
accordance and consistent with Government policies.
To ensure maintenance of continuous and smooth supplies of
petroleum products by way of crude oil refining, transportation and
marketing activities and to provide appropriate assistance to
consumers to conserve and use petroleum products efficiently.
To enhance the country's self-sufficiency in crude oil refining
and build expertise in laying of crude oil and petroleum product
pipelines.
To further enhance marketing infrastructure and reseller network
for providing assured service to customers throughout the
country.
To create a strong research & development base in refinery
processes,
product formulations, pipeline transportation and alternative
fuels
15with a view to minimizing/eliminating imports and to have next
generation products.
To optimize utilization of refining capacity and maximize
distillate yield
and gross refining margin.
To maximize utilization of the existing facilities for improving
efficiency and increasing productivity.
To minimize fuel consumption and hydrocarbon loss in refineries
and stock loss in marketing operations to effect energy
conservation.
To earn a reasonable rate of return on investment.
To avail of all viable opportunities, both national and global,
arising
out of the Government of Indias policy of liberalization and
reforms.
To achieve higher growth through mergers, acquisitions,
integration and diversification by harnessing new business
opportunities in oil exploration & production, petrochemicals,
natural gas and downstream opportunities overseas.
To inculcate strong core values among the employees and
continuously update skill sets for full exploitation of the new
business opportunities.
To develop operational synergies with subsidiaries and joint
ventures and continuously engage across the hydrocarbon value chain
for the
benefit of society at large.
16Major Divisions of IOCL:IOCL
Indian Oil Corporation Limited (Indian Oil) owns and operates a
network of crude oil and petroleum product pipeline in India. It
has two divisions: Refineries Division and Marketing Division. The
Refineries Division is focused on managing the public sector
refineries and the Marketing Division is focused on distribution
not only the entire production of public sector refineries but also
the deficit products imported. It is organized in two segments:
sale of petroleum products, and other businesses, which comprises
sale of imported crude oil, sale of gas, petrochemicals, explosives
and cryogenics, wind mill power generation and oil
and gas exploration activities jointly undertaken in the form of
unincorporated
17joint ventures. The Digboi Refinery of Assam Oil Division
processed 0.623 million metric tons (MMT) of crude oil during the
year. The Division sold about 1.067
MMT of products. IBP Division comprises the explosives and
cryogenics business.
18
CHAPTER 3: RESEARCH METHODOLOGY19RESEARCH DESIGNA 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 COLLECTIONThis 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.20CAPITAL STRUCTUREA 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.
Debt comes in the form of bond issues or long-term notes
payable, while equity is classified as common stock, preferred
stock or retained earnings. Short-term debt such as working capital
requirements is also considered to be part of the capital
structure. But the IOCL does not issue the preference shares and
debenture to the public of the company
COMPONENTS OF CAPITAL STRUCTURE:CAPITAL STRUCTURE Shareholder s
fund s
Borrowed funds-equity capital-preference capital (Nil)
-debenture (Nil)-Term loan
21
CHAPTER 4: DATA ANALYSIS22SHARE CAPITAL60005000400030002000
Authorised Capital(CR)Issued Capital (CR)
100002014 2013 2012 2011 2010AUTHORISED CAPITAL: The maximum
equity capital a company canraise, which is mentioned in the
Memorandum of Association and Articles of Association of the
Company. However, share premium is excluded from the definition of
authorized capital.
SSUED CAPITAL: Issued capital is the amount of nominal value of
share held by the shareholders. It is the face value of the shares
that have been issued to the shareholders. Issued share capital and
share premium represent the amount invested by the shareholders in
the company. It is also known as the subscribed capital or
subscribed share capital.
Analysis: But here, IOCL issued very less share capital IN
Previous years if I compared to Authorized capital. IOCL is only
issued the limited share to the shareholders
Paid up capitalFrom - ToInstrumentShares(nos)Face
valueCapital
2013 2014Equity share2427952482102427.95
2012 2013Equity share2427952482102427.95
2011 2012Equity share2427952482102427.95
2010 2011Equity share1192374306101192.37
2009 2010Equity share1192374306101192.37
2008 2009Equity share77867480910778.67
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 shareholders
and they have to issue more share capital to shareholders in future
periods.
TOTAL DEBTThe 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.
Secured loans usually offer lower rates, higher borrowing limits
and longer repayment terms than unsecured loans. As the term
implies, a secured loan means you are providing "security" that
your loan will be repaid according to the agreed terms and
conditions. It's important to remember, if you are unable to repay
a secured loan, the lender has recourse to the collateral you have
pledged and may be able to sell it to pay off the loan.
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.26SECURED
LOAN25000200001500010000
(CR)
500002014 2013 2012 2011 2010(CR) 17866 13046 20380 18292
17565Analysis: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.27UNSECURED LOAN700006000050000400003000020000100000
(CR)
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 help of a credit
counseling
28organization. In some cases, credit counselors can negotiate
with creditors better than debtors can. However, if IOCL choose to
work with a credit counselor make sure the organization is
reputable.
EARNING BEFORE INTEREST AND TAXEarnings before interest and tax
A measure of a Indian oil corporation limited (IOCL) earning power
from ongoing operations, equal to earnings before deduction of
interest payments and income tax. EBIT excludes income and
expenditure from unusual, non-recurring or discontinued activities.
In the case of a IOCL with minimal depreciation and amortization
activities, EBIT is watched closely by creditors, since it
represents the amount of cash that such a company will be able to
use to pay off creditors. also called operating profit.
As you can re-arrange the formula to be calculated as
follows:EBIT=
Revenue - COGS-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.
29Financial managers spend a considerable amount of time
analyzing and understanding their EBIT. EBIT is short for earnings
before interest and taxes and is synonymous with net operating
income. EBIT is calculated by taking revenue and subtracting cost
of goods sold and all operating expenses. The calculation is useful
because it provides a look at how profitable a business is before
loan decisions and tax considerations are included to arrive at net
income. If you plan on improving EBIT while holding sales constant,
your only
option will be to reduce costs.
30Earnings before interest and tax200001500010000
( CR)
50000Analysis: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 structure
and look for areas where operations can be centralized or more
productive. For instance, labor is sometimes redundant or
inefficiently organized. Writing out your processes in a flow
diagram can help you identify and eliminate or reorganize them.
Consider introducing new, long-term cost saving technologies for
inventory, production and sales. These systems can greatly
increase efficiency, creating costs savings.
31EARING PER SHARE (EPS)Earnings per share represent a portion
of a company's profit that is allocated to one share of stock.
Therefore, if you were to multiply the EPS by the total number of
shares a company has, you'd calculate the company's net income. EPS
is a calculation that many people who watch the stock market pay
attention to.
When calculating, it is more accurate to use a weighted average
number of shares outstanding over the reporting term, because the
number of shares outstanding can change over time. However, data
sources sometimes simplify the calculation by using the number of
shares outstanding at the end of-the-period.
Diluted EPS expands on basic EPS by including the shares of
convertibles or warrants outstanding in the outstanding shares
number.
32EPS of IOCL Shareholders from 2010 to 2014:50403020
(Rs)100Analysis: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 decrease the number of shares,
do a share buyback from
shareholders.
33LEVERAGEThe 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. Components of leverage are:
LEVERAGEFinancial leverage Operating leverageFinancial
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 higher return on
investment (ROI) than the interest rate it is paying, leverage
will
have its positive effect shareholders return. The darker side is
that if the said
34situation is opposite, higher leverage can take a business to
a worst situation like bankruptcy. the Degree of Financial Leverage
(DFL) can be calculated with the following formula:
DFL = % Change in EPS / % Change in EBIT
Where EPS is the Earnings per Share and EBIT is the Earnings
before interest and Taxes.
Operating leverage:Operating leverage, just like the financial
leverage, is a result of operating fixed expenses. Higher the fixed
expense, higher is the operating leverage. Like the financial
leverage had an impact on the shareholders return or say earnings
per share, operating leverage directly impacts the operating
profits (Profits before Interest and Taxes (PBIT)). Under good
economic conditions, due to operating leverage, an increase of 1%
in sales will have more than 1% change in operating profits.
The formula used for determining the Degree of Operating
Leverage or DOL
is as follows:
DOL = % Change in EBIT / % Change in Sales
So, Indian oil corporation limited (IOCL) need to be very
careful in adding any of the leverages to your business viz.
financial leverage or operating
leverage as it can also work as a double edged sword.
35Degree Financial leverage of IOCL:21.510.5
(Ratio)
0Analysis: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 more likely be available, but they
will be available at more attractive interest rates. Like
individuals, companies with solid financials.
36Degree of Operating leverage of Indian Oil Corporationlimited
(IOCL):1.151.11.051 (Ratio)0.950.9Analysis: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 improvement in profitability with higher volume, because
variable costs, or costs that are based on the number of units
sold, increase
with volume.
37Total leverage of Indian Oil Corporation
limited:32.521.510.50
(Ratio)
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: CONCLUSION39FINDINGS IOCL has issued less shares
capital to the shareholders, constantly from
2010 to 2014. IOCL does not fulfill the of authorized share
capital which is mention in memorandum of association.
IOCL, Preference share and Debenture not existent in the
industry.
The return on investment ratio of IOCL is the lowest among its
competitors which imply that the degree of efficiency of IOCL in
utilizing the funds entrusted by shareholders and long term
creditors is lower than its competitors.
IOCL has maximum no of total debts in the period of 2014, if I
compared with previous years.
In 2014, unsecured loan is constantly higher than previous
years.
In 2014, IOCL has maintained the secured loan amounts. Which is
mostly remain same with previous years.
EBIT is very less in 2014; it is constantly decreasing from 2010
to 2014.
In 2014, earning per share (EPS) value is Rs 28.91, which is
higher than 2013 but overall five years, IOCL shareholders has
earned minimum EPS in 2014.
IOCL has Degree of operating leverage almost same with last five
years.
IOCL having a good position in future period of time.
40In 2014, degree of financial leverage is very high than
previous years, IOCL incurs a debt that must be paid. But, this
debt is paid in small installments over a relatively long period of
time.
The overall efficiency of IOCL is higher than those of its
competitors in previous years of comparison.
SUGGESTIONS The company should utilize the debt funds more
efficiently to maximize
shareholders return.
Increasingly firms are moving from secured debt to unsecured
debt in order to free their assets.
For IOCL, to issue maximum number of share to the public and
they have to reduce the share price is minimum. And IOCL try to
fulfill the limit of authorized share capital.
IOCL have to reduce total debts of the company against of
issuing more share to the public.
IOCL, Need to minimize the degree of financial leverage
.otherwise which will be affect in future period of time.
The company should try to increase the profit before interest
and tax so that the Investments in the firm are attractive as the
investors would like to
invest only where the return is higher.
41The company can invest in marketable securities to improve its
cash position.
IOCL can try to reduce the secured loan because secured loan can
be affect
the assets of the company in future.
LIMITATIONS OF THE STUDY The scope of the study is limited to
Guwahati Refinery.
Time taken to complete the study is very limited.
The analysis of the analysis of the companies and suggestion
totally depends upon the information shared.
Non-monetary aspects are not considered making the results
unreliable.
CONCLUSIONFrom 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 well as external factors. And with regard
to
resources, the firm is take utilization of the borrowed fund in
a right place.
42
BIBLIOGRAPHY43
WEBSITE REFERENCES: www.moneycontrol.com www.iocl.comBOOKS
REFERENCES: K.R Das, Priti chandna B.B Dam, & Anju Kakoty 1st
Edition
(2013):Financial Statement Analysis.
THANK YOU44Financial statements of Indian Oil Corporation
Ltd.
45
46
47
4820142013201220112010
(CR)62733.15727832354.226273.827406.7Analysis:
20142013201220112010( CR)
13359.43
12050.65
16773.88
11157.05
15057.96
20142013201220112010
(Rs)28.9120.6116.2930.6742.1
20142013201220112010(Ratio)1.611.911.491.311.11
20142013201220112010(Ratio)1.121.141.091.131.01
20142013201220112010(Ratio)1.822.431.641.491.21