Ramya. S, Pooja priya dharshini. N, Chandran R.

Pavithra; International Journal of Advance Research and Development

(Volume3, Issue3)
Available online at: www.ijarnd.com

Financial Analysis & Performance of Indian Oil

Corporation Ltd
S. Ramya1, N. Pooja priya dharshini2, R. Pavithra Chandran3
1
Assistant Professor PSGR Krishanammal College for Women, Coimbatore
2,3
Student, PSGR Krishanammal College for Women, Coimbatore

ABSTRACT
Indian Oil Corporation Limited owns and operates a network of crude oil and petroleum product pipeline in India. The company
is mainly controlled by the Government of India which owns approx. 79% shares in the company. It has two divisions: Refineries
Division and Marketing division. The main objective of this analysis is to determine the firm’s liquidity, solvency and financial
position of the firm by using the tools like ratio analysis and common size balance sheet. Various ratios like current ratio, liquid
ratio, absolute liquid ratio, turnover ratios have been used to measure the financial performance of the company. The data used
in this analysis were collected from various magazines, audited reports and from websites.

For a better understanding of the analysis, the findings are interpreted in tables, charts, and diagrams. As the shareholders
invest in a company by knowing its financial performance, this analysis will be greatly helpful. This analysis also helps to make
correct financial decisions, planning more efficiently and economically. This analysis consists of findings and interpretations to
assists the company to improve its performance.

Keywords: Ratios, Pertinent Information, Current Ratio, Acid Test Ratio, Common Sixe Financial Statement.

1. INTRODUCTION
Indian Oil Corporation Limited (IOCL) is an Indian state-owned oil and gas company headquartered in New Delhi. It is the largest
commercial enterprise in the country, with a net profit of INR 19,106crore (USD 2,848 million) for the financial year 2016–17.It is
ranked 1st in Fortune India 500 list for the year 2016 and 168th in Fortune's ‘Global 500’ list of world's largest companies in the
year 2017. On 31st March 2017 Indian Oil’s employee strength is 33,135 out of which 16,545 are in the officer cadre. As Indian Oil
accounts for nearly half of India's petroleum products market share, 35% national refining capacity (together with its subsidiary
Chennai Petroleum Corporation Ltd., or CPCL), and 71% downstream sector pipelines through capacity. The Indian Oil Group
owns and operates 11 of India's 23 refineries with a combined refining capacity of 80.7 MMTPA (million metric tonnes per annum)
of 31st March, 20Indian Oil's equity shares are listed on the Bombay Stock Exchange and National Stock Exchange of India.As of
30th June 2017, the Promoters Government of India held approx. 57.34% of the shares in Indian Oil. Public held the rest 42.66% of
the shares - this includes Mutual Fund Companies, Foreign portfolio Investors, Financial Institutions/ Banks, Insurance Companies,
Individual Shareholders, and Trusts.
2. OBJECTIVES OF THE STUDY
 To evaluate the financial performance of Indian Oil Corporation Limited (IOCL) by using the financial
modeling tools for a period of five years from 2013 to 2017.
 To measure the solvency position and effective utilization of resources of the company by using ratio analysis.

3. RESEARCH METHODOLOGY
The Advanced Learner’s Dictionary of Current English lays down the meaning of research as “a careful investigation or inquiry
especially through search for new facts in any branch of knowledge.”Research in common parlance refers to a search for knowledge.
Research can be defined as a scientific and systematic search for pertinent information on a specific topic. When the researcher

© 2018, www.IJARND.com All Rights Reserved Page | 1

 Ramya. S, Pooja priya dharshini. N, Chandran R. Pavithra; International Journal of Advance Research and Development

utilizes secondary data, then he has to look into various sources from where he can obtain them. To analyze the financial performance
of the Indian Oil Corporation Ltd., for the period of last five years i.e. from (2013-2017).
4. TOOLS USED FOR THE ANALYSIS
 Ratio Analysis
 Common Sixe Balance Sheet

5. LIMITATIONS OF THE STUDY

 The secondary data was collected through audited financial reports, magazines, journals etc., and the figures are
most approximate figures.
 The period of the study is limited to five years from 2013-2017 and the results may vary when the same study
is conducted after some years.

6. REVIEW OF LITERATURE
Vijayakumar (2002) carried out a study entitled “Assessment of Corporate Liquidity- A Discriminate Analysis Approach” in which
5 Co-operative sugar mills and 5 private sector companies in Tamil Nadu were taken into consideration among 14 cooperative sugar
mills and 14 private sector sugar mills. Only those units which were established before 1984 and has a crushing capacity of 2000
metric tonnes per day were selected for the study. The discrimination analysis was employed to determine the combined effects of
the ratios. The author concluded that the Co-operative sector was classified as a poor risk in all the selected years on the basis of
current and liquid ratio. The author further concluded that the same became good risk during the years 1986-87 and 1987-88 on the
basis of discriminating „Z‟ score. The study revealed that the overall liquidity position of the industry was satisfactory.
7. ANALYSIS & INTERPRETATION
7.1 Common Size Balance Sheet
A statement in which balance sheet items are expressed as the ratio of each asset to total asset and the ratio of each liability is
expressed as a ratio of total liabilities is called common size balance sheet. A common size financial statement displays all items as
percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between time
periods of a company. The values on the common size statement are expressed as percentages of a statement component.
Common Size Balance Sheet for the Year Ending 2013-2017

PARTICULARS 2013% 2014% 2015% 2016% 2017%

EQUTIES AND LIABILITIES
Shareholders’ funds
Equity share capital 0.11 0.96 1.10 1.07 1.83
Reserves and surplus 26.20 25.18 29.81 31.56 36.65
Total shareholders’ funds 27.29 26.14 30.91 32.63 38.47
Non-Current Liabilities
Long Term Borrowings 9.56 12.55 14.89 11.01 7.84
Deferred Tax Liabilities (Net) 2.46 2.23 3.06 4.18 2.61
Other Long-Term Liabilities 5.11 5.31 6.92 7.79 8.09
Long Term Provisions 0.18 0.16 0.19 1.05 1.13
Total Non-Current Liabilities 17.29 20.25 25.05 24.03 19.66
Current Liabilities
Short Term Borrowings 25.41 19.38 7.72 7.74 11.60
Trade Payable 13.27 14.14 13.28 9.89 11.62
Other Current Liabilities 8.86 9.63 10.60 12.74 11.35
Short Term Provisions 7.88 1.05 12.42 12.97 7.30
Total Current Liabilities 55.42 53.61 44.03 43.34 41.87
Total Capital And Liabilities 100 100 100 100 100
ASSETS
Tangible Asset 26.71 24.66 29.85 39.82 41.24
Intangible Asset 0.36 0.27 0.29 0.30 0.38
Capital work-In-Progress 8.03 13.12 16.18 8.97 3.94
intangible Asset Under Development 0.13 0.29 0.35 0.31 0.20
Non-Current Investments 2.25 6.46 7.56 7.49 15.47
Long Term Loans and Advances 5.24 1.83 2.10 0.37 0.46
© 2018, www.IJARND.com All Rights Reserved Page | 2
 Ramya. S, Pooja priya dharshini. N, Chandran R. Pavithra; International Journal of Advance Research and Development

Other Non-Current Asset 0.01 0.03 0.04 0.03 2.52

Total Non-current Asset 42.72 8.30 56.37 60.57 64.20

Current Assets
Current Investments 6.09 2.89 3.31 3.09 2.78
Inventories 26.48 25.63 20.73 16.89 24.07
Trade Receivable 5.03 4.37 3.07 3.54 3.28
Cash and Cash Equivalents 0.23 1.03 0.05 0.23 0.03
Short Term Loans and Advances 16.44 16.47 14.31 13.75 0.68
Other Current Asset 3.02 2.93 2.18 1.92 4.96
Total Current Asset 57.28 53.32 43.64 39.43 35.80
Total Asset 100 100 100 100 100

Source: Secondary Data

Interpretation
 The above table shows that the percentage of current assets to total assets was57.28% in 2012-13 and has
decreased to 35.80% indicating that the company has dispersed its idle assets.
 In the year 2012-13 the non-current asset 42.72 % and it was increased to 64.20% in the year 2016-17. The
current investment was 6.08% in 2012-13 and it was decreased to 2.7% in 2016-17.
 The current liabilities also show a decreasing trend from 55.42% to 41.87%indicating that the company had met
its current obligations.
 The long-term loan funds were 5.24% in 2012-13 and were decreased to 0.46% in 2016-17 and short-term loan
funds were 16.44% in 2012-13 and were decreased to 0.68%in 2016-17 which indicates the repayment of the
loan by the company.

8. RATIO ANALYSIS
“Ratio analysis is a tool of Management for measuring efficiency and guiding business policies ’’Ratios are constituted to be the
best guides for the efficient executions of basic managerial functions like planning, forecasting control etc, Absolute figures are
valuable, but they stand alone conveying no meaning unless compared with I
8.1 Current Ratio

YEAR CURRENT CURRENT CURRENT

ASSETS LIABILITIES RATIO
(in Rs. Cr.) (in Rs. Cr.)
2013 128298.57 124133.67 1.03
2014 134577.77 135320.24 0.99
2015 95931.02 96801.35 0.99
2016 89349.74 98208.65 0.91
2017 92787.70 108522.78 0.86
Average = 0.96

Interpretation
The standard current ratio is 2:1. In this analysis, we have taken the average of five years. Thus the company has 0.96 on an average
so, it is not acceptable. The ratio lies an indication of a company’s ability to meet short-term debt obligations; the higher the ratio,
the more liquid the company is. Thus the company does not maintain a good balance of its short-term obligations. The current ratio
implies a higher margin of safety for creditors. The higher current ratio implies a higher margin of safety for the creditors.
8.2 Acid Test Ratio

YEAR QUICK CURRENT QUICK

ASSETS LIABILITIES RATIO
(at rs. (at rs. Cr.)
Cr.)
2013 68984.18 124133.67 0.56
2014 69880.4 135320.24 0.52

© 2018, www.IJARND.com All Rights Reserved Page | 3

 Ramya. S, Pooja priya dharshini. N, Chandran R. Pavithra; International Journal of Advance Research and Development

2015 50387.17 96801.35 0.52

2016 51067.34 98208.65 0.52
2017 30386.56 108522.78 0.28

Average = 0.48
Interpretation
Ideally, the standard acid test ratio will be 1:1. In general, a quick ratio of 1 or more is acceptable by most creditors. In this analysis,
we have taken the average of five years. As per the analysis, the company has a non-acceptable standard quick ratio of about 0.48,
which implies that the company’s financial strength is not satisfactory.
8.3 Cash Ratio
YEAR ABSOLUTE CURRENT ABSOLUTE
LIQUID LIABILITIES LIQUID
ASSETS (in Rs. Cr.) RATIO
(in Rs. Cr.)
2013 14141.89 124133.67 0.11
2014 9891.23 135320.24 0.07
2015 7382.81 96801.35 0.08
2016 7523.99 98208.65 0.08
2017 7281.91 108522.78 0.07

Average = 0.41
Interpretation
It measures the absolute liquidity position of the business. Generally, 0.75:1 ratio is recommended to ensure liquidity. This test is a
more rigorous measure of a firm’s liquidity position. If the ratio is 1:1, then the firm has enough cash on hand to meet all current
liabilities. This type of ratio is not widely used in practice. In this analysis, we have taken the average of five years. From the
analysis, we come to know that the company may face risk while meeting its current liabilities
8.4 Fixed Assets Turnover Ratio
YEAR SALES F.A ACC. FIXEDASSET
(in Rs. Cr.) DEP. (in TURNOVER
Rs. Cr.) RATIO
2013 391364.87 73104.86 5.31
2014 433667.06 91067.93 4.76
2015 420347.81 98046.31 4.29
2016 342907.72 107064.93 3.20
2017 353210.21 112394.34 3.14

Average = 4.14
Interpretation
The higher the fixed assets turnover ratio, the more effective the company’s investment in net property, plant, and equipment and
thus increase in fixed assets leads to increase in sales. . In this analysis, we have taken the average of five years. By this analysis,
we came to know that the company is making a turnover by using the investments in fixed assets of around 4 times.
8.5 Total Assets

YEAR SALES TOTAL TOTAL ASSETS

(in Rs. ASSET TURNOVER RATIO
Cr.) (in Rs. Cr.)
2013 391364.87 223995.27 1.75
2014 433667.06 252413.78 1.72
2015 420347.81 219849.47 1.91
2016 342907.72 226607.18 1.51
2017 353210.21 259213.27 1.36
Average = 1.65

© 2018, www.IJARND.com All Rights Reserved Page | 4

 Ramya. S, Pooja priya dharshini. N, Chandran R. Pavithra; International Journal of Advance Research and Development

Interpretation
Thus increase in total assets results in an increase in total sales. In this analysis, we have taken the average of five years. From his,
we came to know that the company is making a turnover of about 1.65 times from the investment made in total assets.
9. FINDINGS
COMMON SIZE BALANCE SHEET
From the analysis of Common Size Income Statement, it is very clear that the profitability of the firm is fluctuating. Decreasing
flow of current assets to the total assets shows that the company has dispersed its idle assets. Share Holders funds increased indicates
in shareholders contribution.
10. RATIO ANALYSIS
 The current ratio has a standard of 2:1 and the company on its analysis shows a current ratio of 0.96, which is not
appropriate. The ratio was high at 1.03 in the year 2012-2013 and low at 0.86 in the year 2016-2017. Thus the company is
not having a satisfactory balance of its short-term obligations.
 The acid test ratio has a standard of 1:1, the company is not having an acceptable standard which is 0.48, which implies
that the financial strength is not satisfactory. The ratio is high at 0.56 in the year 2012-2013 and remains constant during
the years 2014-2017.
 The cash ratio has a standard of 1:1, the company is having only 0.41 which is not satisfactory. The ratio is high at 0.11
and constant at 0.08 in the years 2015-2016.
 The company has maintained an average of 4.14 times of net sales when compared to fixed assets. The ratio is high at 5.31
in the year 2012–2013 and low at 3.14 in the year 2016-2017.
 The company has maintained an average of 1.65 times of net sales when compared to total assets. The ratio is high at 1.91
in the year 2014-2015 and low at 1.31 times in the year 2016-2017.
 The debt to equity ratio has a standard of 2:1 and the company have 60.58 which shows that the company is financing more
with equity. The ratio is high at 76.78 in the year 2013-2014 and low at 62.55 in the year 2014-2015.
 The debt ratio has a standard of 2:1 and the company on its analysis shows a debt ratio of 0.26 which is lower than 50% so
it is not a leveraged company. The ratio is high at 0.35 in the year 2012-2013 and constant at 0.19 during the period 2015-
2017.

11. SUGGESTIONS

 The company should take proper steps in increasing its liquidity throughout the year as it was decreasing and fluctuating.
 The activity ratios tell that the company operates efficiently and the fixed assets turnover and total assets turnover to
increase its efficiency in its operations.
 The company should take care of investing in fixed assets rather investing in non-income recurring assets.
 The company can invest in marketable securities to improve its cash ratio.
 The company must keep on making a profit in the forthcoming years, which will also enhance the share value of the
company.

12. CONCLUSION
This analysis of financial performance of IOCL is not merely a work of the project. But a brief knowledge and experience of how
to analyze the financial performance of the company. The study undertaken has brought in to the light of the following conclusions.
From the above analysis, it is very clear that the company have been doing a satisfactory job. But the company should focus on the
area of meeting its current liabilities. So the company should focus on getting profits in the coming years by taking care of both
internal and external factors. And with regard to resources, the company is advised to utilize its assets properly.
13. REFERENCE
[1] www.indianoil.co.in
[2] https://www.iocl.com
[3] http://academia.edu/
[4] www.google.com
[5] http://www.investopedia.com/
[6] www.wikipedia.com
[7] Vijayakumar A“ Assessment of Corporate Liquidity-A Discriminate Analysis Approach”. Research Studies in Commerce and
Management, Classical Publishing Company, New Delhi, 2002, pp.121-130.

© 2018, www.IJARND.com All Rights Reserved Page | 5