A Study On Financial Performance of Oil and Natural Gas Corporation ( (1) - Original

A STUDY ON FINANCIAL PERFORMANCE OF
OIL AND NATURAL GAS CORPORATION (ONGC)
A Project Report submitted to the

JAMAL MOHAMED COLLEGE (AUTONOMOUS)
Affiliated to Bharathidasan University, TIRUCIRAPPALLI.
In partial fulfillment of the requirements for the Award of the Degree of
MASTER OF COMMERCE
Submitted By
A.AARIF KHAN
(Reg.No.11PCO 001)
Under the guidance of
Prof. R. KHADER MOHIDEEN
Principal & Head, Department of Commerce
POST GRADUATE AND RESEARCH DEPARTMENT OF COMMERCE
JAMAL MOHAMED COLLEGE (Autonomous)

Nationally accredited with A Grade by NAAC CGPA 3.6 out of 4.0
Affiliated to Bharathidasan University
TIRUCHIRAPPALLI 620 020
APRIL 2013
Prof. R. KHADER MOHIDEEN

Principal & Head, Department of Commerce
Jamal Mohamed College (Autonomous)
Tiruchirappalli 620 020.
Date:
CERTIFICATE
This is to certify that the Project Work is done under my guidance
and
the
Dissertation
entitled
STUDY
ON
FINANCIAL
PERFORMANCE OF OIL AND NATURAL GAS CORPORATION (ONGC)

submitted by A. AARIF KHAN (Reg. No. 11PCO 001) in partial fulfillment of
the requirements for the award of the Degree of
MASTER OF COMMERCE of Jamal Mohamed college (Autonomous)
affiliated to Bharathidasan University, Tiruchirappalli 620020 for the
academic period 2011-2013 is the original work of the candidate.
SIGNATURE OF THE
HEAD OF THE DEPARTMENT
SIGNATURE OF THE
PROJECT ADVISOR
SIGNATURE OF THE EXTERNAL EXAMINAR
ACKNOWLEDGEMENT
At the out set, I wish to express
my sincere
thanks to the
Almighty for showering his blessing on me to complete this project.
I am deeply indebted to Dr. R.KHADER MOHIDEEN M.Com, M.B.A.,

M.Phil., Ph.D., Principal and Head, Department of Commerce, for his guidance
and assistance in carrying out the project work.
I am very much grateful to Dr. A.M.MOHAMED SINDHASHA
M.Com., M.B.A., M.Phil., Ph.D., M.Sc(Psy), Additional Vice Principal
and HOD In-Charge Department of Commerce, for his support and
providing necessary facility to carry out my project.
I sincerely thank the Faculty Members, Department of Commerce for

their encouragement and support.
Last but not least I like to thank my Parents and beloved friends for their
moral support for completing this project work successfully.
A.AARIF KHAN
CHAPTER 1
INTRODUCTION
1.1
INTRODUTION
Finance is regarded as the base of a business enterprise. This is because in the
modern money-oriented economy, finance is one of the basic foundations of all kinds
of economics activities. Finance provides access to the entire source being employed
in manufacturing and merchandising activities. It has rightly been said that business
means money to make more money. However, it is also true that money begets more
money only when it is properly managed. Hence, efficient management of every
business enterprise is closely linked with efficient management of its finance.
In general, finance may be defined has a provision of money at the time it is

wanted. Finance function may be defined as the procurement of funds and their
affective utilization. Some of the authoritative definitions are as follows.
In the words of Guthman and Dougall, Business finance may be defined as
the activity concerned with planning, raising, controlling and administering of the
funds in the business.
Business finances is that business activities which is concerned with the
acquisition and conservation of capital funds in meeting financial needs and overall
objectives of a business enterprise.
Finance mainly involves rising of funds and their effective utilization keeping
in view the overall objectives of the firm. This requires great caution and wisdom on
the part of management. The management makes use of various financial techniques,
devices, etc, for administering the financial affairs of the firm ink the most effective
and efficient way.
1.2
FINANCIAL MANAGEMENT
Financial management is the managerial activity which is concerned with the

planning and controlling of the firms financial resources.
Financial management is concerned with the efficient use of an important
economic resource, namely capital funds.
Financial management is necessary for the proper management of funds.
Finance manager must see that the funds are procured in the manner that the risk, cost
and control considerations are properly balanced in a given situation and there is
optimum utilization of funds.
Financial management is concerned with management decisions that result in
the acquisition and financing of long term and short term credit for the firm. As such
it deals with the situations that require selection of specific assets as well as the
problem of size and growth of an enterprise. The analysis of these decisions is based
on the expected inflows and their effects upon managerial objectives.
In the modern economy, finance is one of the basic foundations of all kinds of
economics activities. It is the master key, which provides the access to all the sources
for the being employed in manufacturing and merchandising activities. Efficient
management of every business enterprise is closely linked with efficient management
of finances. Finance is the only common denominator for vast range of corporate
objectives. The major part of any corporate plan must be expresses in financial term.
Finance is a specialized function and it draws heavily on their related

functions, finance has undergone a significant change and is concerned with flow of
funds and decisions relating to business operations effecting the valuation of the firm.
Finance functions cover decisions relating to investment, financing and dividends.
1.3
SIGNIFICANCE OF THE STUDY

So this core industry requires a huge amount of finance. Finance as a resource,
in this industry needs to be improved today. Improvement of financial is possible by

way proper planning and utilization of funds. Finance is a means which improves the
performance of this core industry. Financial analysis helps a company to diagnose its
profitability and financial soundness.
Due to the above reasons this study namely Financial statement analysis of
OIL AND NATURAL GAS CORPORATION is necessary and is undertaken.
1.4
OPERATIONAL DEFINITIONS AND CONCEPTS
Finance
Finance in common parlance refers to money. The edifice of modern economy
stands on the foundation of money i.e. finance. All economic activities centre on
making of money. Finance is the backbone of all activities whether it is
manufacturing, or servicing. The entire idea of dong any economic activity is to make
more money out of money. However, this is possible only when the finance is
properly and prudently managed. So it goes without saying that efficient management
of an enterprise is closely related to efficient management of its finances.
Financial Statement
A financial statement is an organized collection of data according to logical
and consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show a position at a moment of time
as in the case of a balance sheet, or may revel a series of activities over a given period
of time, as in the case of an income statement.
Basically there are two types of financial statement. They are income
statement and balance sheet.
3
Financial Statement Analysis

It is the process of identifying the financial strength and weakness of a firm
from the available accounting data and financial statement. The analysis is done by
properly establishing the relationship between the items of Balance Sheet and Profit
and Loss Account. The first task of financial analyst is to determine the information in
relevant to the decision under consideration from the total information contained in
the financial statement. The second step is to arrange information in a way to
highlight significant relationship. The final step to provide is information and drawing
of inferences and conclusion. Thus financial analysis is the process of selection
relating and evaluation of the accounting data/information.
This study contains the following analyses
Ratio Analysis
Trend Analysis
Common Size Balance Sheet
Comparative Balance Sheet
Comparative Financial Statement

Comparative financial statements are those statements which have been
designed in a way so as to provide time perspective to the consideration of various
elements of financial position embodied in such statements. In these statements,
figures for two or more periods are placed side by side to facilitate comparison.
But the income statement and balance sheet can be prepared in the form of
comparative financial statement.
Comparative Balance Sheet
Comparative balance sheet as on two or more different dates can be used for
comparing assets and liabilities and finding out any increase or decrease in those
items. Thus, while in a single balance sheet the emphasis is
4
on present position, it is on change in the comparative balance sheet. Such a balance

sheet is very useful in studying the trends in an enterprise.
Common-Size Financial Statement
Common-size financial statements are those in which figures reported are
converted into percentages to some common base. In the income statement the sales
figure is assumed to be 100 and all figures are expressed as a percentage of sales.
Similarly, in the balance sheet, the total of assets or liabilities is taken as 100 and all
the figures are expressed as a percentage of this total.
WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are referred to
as working capital management. These involve managing the relationship between a
firms short-term assets and its short term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming
operational expenses.
By definition, working capital management entails short term decisiongenerally, relating to the next one year periods- which are reversible. These
decisions are therefore not taken on the same basis as capital Investment Decisions
(NPV or Related, as above) rather they will be based on cash flows and/or
profitability.
One measure of cash flow is provided by the cash conversion cycle-the Net
number of days from the outlay of cash for Raw material to receiving payment from
the customer. As a management tool, this metric makes explicit the inter-relatedness
of decisions relating to inventories, accounts receivable and payable, and cash.
Because this number effectively corresponds to the time that the firms cash is tied up
in operations and unavailable for other activities, management generally aims at a low
net count.
5
In this context, the most useful measure of profitability is Return on Capital

(ROC). The result is shown as a percentage, determined by dividing relevant income
for the 12month by capital employed; Return on Equity (ROE) shows this result for
the firms share holders. Firm value is enhanced when, and if, the return on capital,
which results from working capital management, exceeds the cost of capital, which
results from capital investment decisions as above. ROC measures are therefore useful
as a management tool, in that link short-term decision making. Economic Value
Added (EVA).
Trend Analysis
Trend Analysis is a comparative study of the financial statement of several
years.
Ratio
Ratio is a mathematical expression of relationship between figures which have
connection in one way or the other. Ratios are expressed in two ways:
1. Times: One value is divided by another value. The expression is number of
times
2. Percentage: The quotient obtained above is multiplied by 100. This gives the
%
Ratio Analysis
Ratio analysis is a widely used tool of financial analysis. The term ratio in it
refers to the relationship expressed in mathematical terms between two individual
figures or group of figures connected with each other in some logical manner and are
selected from financial statement of the concern. The ratio analysis is based on the
fact that single accounting figures by it self may not communicate any meaningful
information but when expressed as a relative to some other figures, it may definitely
provide some significant information the relationship between two or more
accounting figure / group is called a financial ratio helps to express the relationship
between two accounting figures in such a
way that users can draw conclusions about the performance, strengths and weakness
of a firm.
Accounting Ratio
The arithmetical method of ascertaining the interrelation between any two
numeric data expressed in accounting statements is known as Accounting Ratio. The
definition implies that in use of an accounting ratio both the components in the form
of numerals or variables used in computing a ratio are taken from the financial
statements prepared in financial accounting. For example it can be stated that if in a
concern the Sales of a particular year is Rs. 2.00.000 and the Net Profit is Rs. 40,000
Sales Ratio becomes 1:5 or 1/5 indicates that the Net Profit of the concern for that
year is one-fifth portion of its Sales or for Sales of Rs. 5 Net Profit is Rs. 1. In this
case Sales and Net Profit both these variable are taken out of the Profit and Loss
Account prepared in financial accounting. For this reason this ratio is stated as
Accounting Ratio. In the opinion of J. Batty, accounting ratio is used to describe
significant relationships which exist between figures shown on a Balance Sheet, in a
Profit and Loss Account in a Budgetary Control System or in any other part of the
accounting organization.
Steps in Ratio Analysis

The following steps are followed in analysis through accounting ratios:
(i)
Collection of information: In the first step of ratio analysis raw data is

collected from the financial statements for computing different ratios.
(ii)
Computation of ratios: In the second step necessary ratios are computed

between the figures having cause and effect inter-relationship. Such ratios may
be expressed in terms of times, multiples, proportion or percentage depending
on the specific requirement.
(iii)
Making comparison: The ratios computed are compared with the ratios of the
past year or years of the same concern or with the standard ratios of the
industry to which the concern belongs.
(iv)
Arriving at decisions on comments: In the next step the significance of these

ratios must be conceived on the basis of comparative interrelationship among
them in such a manner so that adequate comments can be made for helping the
users of accounting information to arrive at their decisions.
(v)
Preparing report: In the final step necessary reports are to be prepared for
communicating analyzed information and the relevant comments to the
management.
Significance of Financial Statement Analysis:

1.
Judging the earning capacity or profitability of a business concern.
2.
Analyzing the short term and long term solvency of the business concern.
3.
Helps in making comparative studies between various firms.
4.
Assists in preparing budgets.
Limitations of Financial Statement Analysis

Analysis of financial statements helps to ascertain the strength and weakness
of the business concern, but at the same time it suffers from the following limitations.
It analyses what has happened till date and does not reflect the future.
It ignores price level changes.
Financial analysis takes into consideration only monetary matters, qualitative

aspects are ignored.
The conclusions of the analysis are based on the correctness of the financial
statements.
Analysis is a means to an end and not the end itself.
As there is variation in accounting practices followed by different firms a valid

comparison of their financial analysis is not possible.
There are different ways by which financial statement analysis can be
undertaken and one among them is Ratio Analysis.

CLASSIFICATION OF RATIOS:
a) Liquidity Ratios
b) Leverage Ratios
c) Activity Ratios
d) Profitability Ratios
A) Liquidity Ratios
These ratios portray the capacity of the business unit to meet its short term
obligation from its short-term resources (i.e0 Current Ratio, Quick Ratio.
Current Ratio:
Current ratio may be defined as the relationship between current assets and
current liabilities it is the most common ratio of measuring liquidity. It is calculated
by dividing current assets and current liabilities. Current assets are those, the amount
of which can be realized with in a period of one year. Current liabilities are those
amounts which are payable with in the period of the year.
Current assets
Current Assets =
Current liabilities
Liquid Ratio:
The term liquidity refers to the ability of a firm to pay its short-term
obligation as and when they become due. The term quick assets or liquid assets refers
current assets which can be converted into cash immediately it
comprises all current assets except stock and prepaid expenses it is determined by
dividing quick assets by quick liabilities.
Liquid assets
Liquid Ratio =
Liquid liabilities
B) Leverage Ratios
Many financial analyses are interested in the relative use of debt and equity in
the firm. The term solvency refers to the ability of a concern to meet its long-term
obligations. Accordingly, long-term solvency ratios indicate a firms ability to meet
the fixed interest and cost and repayment schedule associate with its long-term
borrowings. (i.e) Debt Equity Ratio, Proprietary Ratio, etc.
Debt equity Ratio:

It expresses the relationship between the external equities and internal equities
or the relationship between funds and owners capital. It is a popular measure of the
long-term financial solvency of a firm. The relationship is shown by the debt equity
ratio. The ratio indicates the relative proportion of debt and equity in financing the
assets of a firm. This ratio is computed by dividing the total debt of the firm by its
equity (i.e) net worth.
Outsiders funds
Debt equity Ratio=
Proprietors funds
Proprietary ratio:
Proprietary ratio relates to the proprietors funds to total assets. It reveals the
owners contribution to the total value of assets. This ratio shows the long-time
solvency of the business it is calculated by dividing proprietors funds by the total
tangible assets.
Proprietors funds
Proprietary Ratio =
Total tangible assets
10
Fixed assets to net worth Ratio:

The ratio shows the relationship between fixed assets and proprietors funds.
The purpose of ratio is to find out the percentage of the owners fund invested in fixed
assets.
Fixed assets
Fixed assets to net worth Ratio=
Proprietors funds
Ratio current assets to proprietors funds:
The ratio of current assets to proprietors funds establishes the
relationship between current assets and proprietors funds.
Current assets
Ratio current assets to proprietors funds=
Proprietors funds
Ratio of current assets to fixed assets:
The ratio establishes the relationship between current assets and fixed
assets.
Current assets
Ratio of current assets to fixed assets =
Fixed assets
Stock to working capital Ratio:

Stock on inventory
Stock to working capital Ratio =
Working capital
C) Activity Ratios
These ratios evaluate the use of the resources of the business concern along
with the use of the components of total assets. They are intended to measure the
effectiveness of the assets management the efficiency with which the assets are used
would be reflected in the speed and rapidity with which the assets are converted into
sales. The greater the rate of turnover, the more
11
efficient the management would be (i.e) Stock Turnover Ratio, Fixed Assets Turnover
Ratios etc.
Fixed assets turnover Ratio:
The ratio indicates the extent to which the investment in fixed assets
contribution towards sales. If the compared with a previous year. It indicates whether
the investment in fixed assets has been judious or not the ratio is calculated as
follows.
Net sales
Fixed assets turnover Ratio=
Fixed assets
Working capital turnover Ratio:
Working capital turnover ratio indicates the velocity of the utilization of net
working capital. The ratio indicates the number of times the working capital is turned
over in the course of a year. It is a good measure over-trading and under-trading.
Net sales
Working capital turnover Ratio =
Net working capital
Return on total assets:
Profitability can be measured in terms of relationship between net profit and
total assets. It measures the profitability of investment. The overall profitability can be
known by applying this ratio.
Net profit
Return on the assets = x 100
Total assets
Return on proprietors funds:
This ratio shows the rate of profit on proprietors funds. It relates the profit
available for the share holders to their total investment.
12
Net profit after interest & tax

Return on proprietors funds =
Proprietors funds
D) Profitability Ratios:
The profitability ratios of a business concern can be measured by the
profitability ratios. These highlight the end result of business activities by which alone
the overall efficiency of a business unit can be judged, (i) Gross Ratios, Net Profit
Ratio.
Net profit Ratio:
Net profit ratio establishes a relationship between net profit (after taxes) and
sales. It is determined by dividing the net income after tax to the net sales for the
period and measures the profit per rupee of sales.
Net profit
Net profit ratio = x 100
Net sales
Expenses Ratio:
This ratio establishes the relationship between various indirect expenses to net
sales.
Administrative expenses Ratio:
Administrative expenses
Administrative expense Ratio = x 100
Sales
Selling & distribution expenses Ratio:
Selling and distribution expenses Selling
& distribution expenses Ratio = x 100
Sales
13
CLASSIFICATION OF ACCOUNTING RATIO AND ITS FORMULAS:
14
15
16
17
18
CHAPTER II
REVIEW OF LITERATURE
INTRODUCTION
It is mandatory to review the literature available with respect to the area of the
research study. Measuring the performance of the corporate sector has always been an
area of controversies form the point of view of the government, share holders,
prospective investors, creditors, employees and any other stock holder. Several studies
have been undertaken to evaluate the financial performance in the corporate sector.
This chapter presents some of the examples of various studies conducted by financial
analysis.
S. Bain study in (1951) of 42 four digit us manufacturing Industries to
establish for the period 1936 40 was a pioneering work on profitability. He
has sought to establish the relationship between concentration and profitability
for this he regressed average, after tax return on equity of the liquidity firms
on eight firms concentration ratio. He found that the relationship was positive,
between concentration and profitability.
Hall. M. and Weiss I.W., (1967) in their important study found that size of the
firm as a major determinant of profitability. They found after tax on equity of
individual firm (341 large U.S. industries corporations) significantly related
more with size of the firm than with concentration.
Altman (1968) in his study on Financial Ratios, Discriminate analysis and
prediction of corporate Bankruptcy, took 66 firms in general and applied
multiple discriminate analysis to discriminate the failed firms from the nonfailed firms, on the basis to the weighted combination of working capital to
total liabilities, cumulative retained earnings to total Assets, market value of
equity to book value of total debt and sales to total Assets, market value of
equity to book value of total debt and sales tot total Assets, he was able to
predict the bankruptcy with 45 percent
19
degree of accuracy. He also revealed that the predictive ability of the

model declined.
Edward I Altman (1986) in the Dean Solvency predictors. He was the first
person to successfully use step-wise multiple discriminate analysis to develop
a prediction model with a high degree of accuracy using the sample of 66
companies, 33 failed and 33 successful, Altmans model achieved an accuracy
rate of as percent. Altmans model takes the following form.
Z = 1.2 A + 1.4 B + 3.3 C + 0.6 D + 0.99 E A
= Working Capital to total assets
B = Retained earnings to total assets C
= EBIT to total assets
D = Market value of equity / Book value of liabilities
E = Sales to total assets.
Smith K.V (1974) readers to profitability US liquidity trade in working capital
management. The study suggested that parallel monthly for costs of liquidity
and profitability can be useful in evaluating tradeoff between two goals. This
study also discussed individual and collect effects of account receivables,
inventories, accounts payable and other ocular on profitability and liquidity.
Hilton (1976) in his study he pointed out that the rate of interest is used as a
proxy for the opportunity cost of carrying stock or as a measure of the cost of
funds needed to hold inventories. The study also found that inventories
generally accumulate with expansion of economic activities of the company.
20
Ramamoorthy (1978) has found profitability and solvency as the twin goals
of working capital management. According to him a firms survival and
growth depend on its ability to achieve these goals. If liquid Assents can pay
off current liabilities, financial strength can be created and the firm can sustain
its Neputation.
Bhabatosh Banerjee (1979) has analyzed the different turnover ratios such as
debtors, creditors and the stock turnover ratio. The cash position and cash
movement is also examined with the effect of the liquidity ratio.
Singh (1981) has found out that the size of the unit has a significant role in the
capital structure of the cement industry. His study has revealed that the returns
and profitability can be increased by increasing the size firm small to big.
Desai, B.H (1983) The capital structure is a part of financial structure and is
a structure of funds to finance all the fitted Assets. Which a company is
supposed to keep permanently carrying in the business.
Pandey (1985) conducted another empirical study examining the industrial
patterns, trend and volatilities of Leverage and the impact of size profitability
and growth on leverage.
George Paul (1985) studied the financial performance of diversified
companies in India. A comparative study of diversified and Non-diversified
companions. The financial performance of 32 relatively matched pairs of
diversifying and non- diversifying generally outperform non- diversifying on
indicators of growth, profitability, safety and market evaluation. However
inter- industry differences in the benefits of diversification are selectively
useful.
21
Kumar (1985) in this study on Corporate Growth and profitability in the

Large Indian companies has examined the relationship between profitability
and growth in 83 large companies in Indias corporate sector during 1969-70.
The study reveals a significant inter- Industry difference
2
in the growth process of firms under study. The very low value or R in all the
cases shows that only a small fraction of the growth firm in India
corporate sector has been explained by profitability.
Dr. P.K. Bhattacharyya (1987) analysed the capital structure and profitability
of central sector under takings. According to him governments liberal policy
of granting loan to public enterprise which severely curtailed their
profitability. He suggested the enlargement of equity base and improvement of
profitability of such enterprises.
Harbir Sing (1990) in his study has stated that the financial health of a
company can be improved if stringent control is exercised on raw materials,
stores and spares and also by reducing the unprofitable investment blocked in
current assets. The cash flow can be regulated if the companies prepare weekly
cash flow statement and also cash budget on a regular basis.
Panigrahi (1990) in his study discussed the objectives of working capital

analysis and its impact on profitability. The study reveals that liquidity
position is not satisfactory. The impact of working capital ratios on
profitability showed both negative and positive impacts on profitability in
transport sector.
Srinivasa Rao. G. and Indrasense Reddy. P (1995) in their study entitled
Financial performance in paper Industry. A case study stated that the financial
position of the company has been improving form year to year. The companys
performance in relations to generating internal funds in the form of reserve
and surplus was excellent and also sounded
22
as it was revealed by current on quick ratios which were above the standard.
The solvency ratios showed that the company had been following the policy of
low capital gearing from this year. The performance of the company in relation
to its profitability was not up to the Expected level. The companys ability to
utilize assets for generation of sales has been improved much during the study
period as it was revealed by its turnover ratios.
Van Horne, J.C (1996) study pointed that the term liquidity means the
ability of an organization to realize value in money the most liquid among all
assets.
Sakthivel Murgan. M (1999) in his study on working capital management
A case analysis revealed that one of the several indicators of efficient
management of working capital is to examine whether adequate liquidity is
maintained. The Z score analysis reveals that the organization. Maintains the
Z score above 3 points for all the year taken for the study. This shown that
the company is maintaining adequate working capital by investing sufficient
funds in its current assets, is also able to meat the current obligations without
inviting the risk of bankruptcy.
Rajeswari N. (2000) in her study, an attempt has been made to evaluate the
efficiency of liquidity management in Tamil Nadu cement corporation. The
ratios namely current Ratio, quickly ratio and absolute liquid ratio have been
used. The study shows that the liquidity position of TANCEM is not stable due
to abnormal increases of ideal assets by the corporation during the study
period.
Business wire New York year Dec 2008
It will help you to identify and explain information sources besides annual
financial statements and supplementary information; learn the
23
mechanics of the accounting process, which is the foundation for financial

reporting assess the securities valuation implications of any financial statement
element or transaction comprehend income statements, Balance sheet and
Cash flow statements and become familiarized with the different financial
analysis techniques such as ratio analysis and common size financial
statements that provide valuable insight into a companys operation risk
characteristics and valuation beyond what readily apparent by examining raw
data.
24
CHAPTER-III
INDUSTURY PROFILE
3.1
History of the oil industry in India

The history of the Indian oil industry extends back to the period of the British
Raj, at a time when petroleum first became a primary global energy source.
Colonial rule, 1858-1947

The first oil deposits in India were discovered in 1889 near the town of Digboi
in the state of Assam.[1] This discovery came on the heels of industrial development.
The Assam Railways and Trading Company (ARTC) had recently opened the area for
trade by building a railway and later finding oil nearby. The first well was completed
in 1890 and the Assam Oil Company was established in 1899 to oversee production.
At its peak during the Second World War the Digboi oil fields were producing 7,000
barrels per day.[citation needed] At the turn of the century however as the best and
most profitable uses for oil were still being debated, India was seen not as a producer
but as a market, most notably for fuel oil for cooking. As the potential applications
for oil shifted from domestic to industrial and military usage this was no longer the
case and apart from its small domestic production India was largely ignored in terms
of oil diplomacy and even written off by some as hydrocarbon barren. Despite this
however British colonial rule laid down much of the countrys infrastructure, most
notably the railways.
Independence, 1947-1991
After India was granted independence in 1947, the new government naturally
wanted to move away from the colonial experience which was regarded as
exploitative. In terms of economic policy this meant a far bigger role for the state.
This resulted in a focus on domestic industrial and agricultural production and
consumption, a large public sector, economic protectionism, and central economic
planning.
25
The foreign companies continued to play a key role in the oil industry. Oil India
Limited was still a joint venture involving the Indian government and the British
owned Burma Oil Company (presently, BP) whilst the Indo- Stanvac Petroleum
project in West Bengal was between the Indian government and the American
company SOCONY-Vacuum (presently, ExxonMobil).[5] This changed in 1956 when
the government adopted an industrial policy that placed oil as a schedule A industry
and put its future development in the hands of the state.[5] In October 1959 an Act of
Parliament was passed which gave the state owned Oil and Natural Gas Commission
(ONGC) the powers to plan, organize, and implement programmes for the
development of oil resources and the sale of petroleum products and also to perform
plans sent down from central government. In order to find the expertise necessary to
reach these goals foreign experts from West Germany, Romania, the US, and the
Soviet Union were brought in. The Soviet experts were the most influential and they
drew up detailed plans for further oil exploration which were to form part of the
second five-year plan. India thus adopted the Soviet model of economic development
and the state continues to implement five-year plans as part of its drive towards
modernity. The increased focus on exploration resulted in the discovery of several
new oil fields most notably the off-shore Bombay High field which remains by a long
margin Indias most productive well.
Liberalization, 1991-present
The process of economic liberalization in India began in 1991 when India
defaulted on her loans and asked for a $1.8 billion bailout from the IMF. This was a
trickle-down effect of the culmination of the cold war era; marked by the 1991
collapse of the Soviet Union, Indias main trading partner. The bailout was done on
the condition that the government initiates further reforms, thus paving the way for
Indias emergence as a free market economy.
For the ONGC this meant being reorganized into a public limited company
(it is now called for Oil and Natural Gas Corporation) and around 2%
26
of government held stocks were sold off. Despite this however the government still
plays a pivotal role and ONGC is still responsible for 77% of oil and 81% of gas
production while the Indian Oil Corporation (IOC) owns most of the refineries
putting it within the top 20 oil companies in the world. The government also
maintains subsidized prices. As a net importer of oil however India faces the
problem of meeting the energy demands for its rapidly expanding population and
economy and to this the ONGC has pursued drilling rights in Iran and Kazakhstan
and has acquired shares in exploration ventures in Indonesia, Libya, Nigeria, and
Sudan.
Indias choice of energy partners however, most notably Iran led to concerns
radiating from the US. A key issue today is the proposed gas pipeline that will run
from Turkmenistan to India through politically unstable Afghanistan and also through
Pakistan. However despite Indias strong economic links with Iran, India voted with
the US when Irans nuclear program was discussed by the International Atomic
Energy Agency although there are still very real differences between the two countries
when it comes to dealing with Iran.
27
3.2
ONGC- A PROFILE
OIL AND NATURAL GAS CORPORATION (ONGC)

Oil and Natural Natural Gas corporation (ONGC) an Indian multinational oil
and gas company headquartered in Dehradun, India. It is one of the largest Asia based
oil and gas exploration and production companies, and produces
28
around 77% of India's crude oil (equivalent to around 30% of the country's total
demand) and around 81% of its natural gas. It is one of the largest publicly traded
companies by market capitalization in India. ONGC has been ranked 357th in the
Fortune Global 500 list of the world's biggest corporations for the year 2012. It is also
among the Top 250 Global Energy Company by Platts.
HISTORY
1961 to 2000
Since its inception, ONGC has been instrumental in transforming the country's
limited upstream sector into a large viable playing field, with its activities spread
throughout India and significantly in overseas territories. In the inland areas, ONGC
not only found new resources in Assam but also established new oil province in
Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan
Fold Belt and East coast basins (both inland and offshore). ONGC went offshore in
early 70's and discovered a giant oil field in the form of Bombay High, now known as
Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas
fields in Western offshore changed the oil scenario of the country. Subsequently, over
5 billion tonnes of hydrocarbons, which were present in the country, were discovered.
The most important contribution of ONGC, however, is its self-reliance and
development of core competence in E&P activities at a globally competitive level.
ONGC became a publicly held company in February 1994, with 20% of its
equity were sold to the public and eighty percent retained by the Indian government.
At the time, ONGC employed 48,000 people and had reserves and surpluses worth
104.34 billion, in addition to its intangible assets. The corporation's net worth of
107.77 billion was the largest of any Indian company.
2000 to present:
In 2003, ONGC Videsh acquired Talisman Energy's 25% stake in the Greater
Nile Oil project.
29
In 2006 a commemorative coin set was issued to mark the 50th anniversary of
the founding of ONGC, making it only the second Indian company (State
Bank of India being the first) to have such a coin issued in its honour.
In 2011, ONGC applied to purchase of 2000 acres of land at Dahanu to

process offshore gas.
ONGC Videsh, along with Statoil ASA (Norway) and Repsol SA (Spain), has
been engaged in deepwater drilling off the northern coast of Cuba in 2012.
On 11 August 2012, ONGC announced that it had made a large oil discovery
in the D1 oilfield off the West coast of India, which will help it to raise the
output of the field from 2/23/13 Oil and Natural Gas Corporation around
12,500 barrels per day (bpd) to a peak output of 60,000 bpd.
In November 2012, ONGC Videsh agreed to acquire ConocoPhillips' 8.4%

stake in the Kashagan oilfield in Kazakhstan for around US$5 billion, in
ONGC's largest acquisition to date. The acquisition is subject to the approval
of the governments of Kazakhstan and India and also to other partners in the
Caspian Sea field waiving their pre-emption rights.
ONGC Videsh:
ONGC Videsh Limited (OVL) is the international arm of ONGC. It was

rechristened on 15 June 1989. It currently has 14 projects across 16 countries.
Its oil and gas production reached 8.87 MMT of O+oEG in 2010, up from
0.252 MMT of O+OEG in 2002/03.
ONGC Tripura Power Company:
ONGC Tripura Power Company Ltd (OTPC) is a joint venture which was
formed in September 2008 between ONGC, Infrastructure Leasing and
Financial Services Limited and the Government of Tripura. It is developing a
726.6 MW CCGT thermal power generation project at
30
Palatana in Tripura which will supply electricity to the power deficit areas
of the north eastern states of the country.
Frontiers of Technology
State-of-the-art seismic data acquisition, processing and interpretation
facilities
Uses one of the Top Ten Virtual Reality Interpretation facilities in the world
Alliances with Transocean, Schlumberger, Halliburton, Baker Hughes, IPR,
Petrobras, Norsk, ENI and Shell
One of the biggest ERP implementations in the Asia
Best In Class Infrastructure And Facilities
The Company operates with 27 Seismic crews, manages 240 onshore
production installations, 202 offshore installations, 77 drilling (plus 44 hired)
and 58 work-over rigs (plus 30 hired), owns and operates more than 26,598
kilometers of pipeline in India, including 4,500 kilometers of sub-sea
pipelines.
ONGC has adopted Best-in-class business practices for modernization,
expansion and integration of all Infocom systems.
Financials (2011-12)
ONGC group's turnover during 2011-12 has been Rs. 150,185 Crore with net
profit of Rs. 28,144 Crore. ONGC paid the highest-ever dividend of Rs. 8,342
Crore. The Net Worth of ONGC Group of companies is Rs. 135,266 Crore.
During 2011-12, the turnover of ONGC (on standalone basis) has been Rs.
76,887 Crore with net profit of Rs.25,123 Crore; the highest-ever despite
sharing under-recovery of Rs.44,466 Crore to the Oil Marketing Companies
(OMCs) as per the instructions of the Government of India. Net worth of
ONGC (on standalone basis) has been Rs.1,11,784 Crore.
31
OVL's consolidated gross revenue increased by 21% from Rs. 18,671 Crore
during 2010-11 to Rs.22,637 Crore during 2011-12 and consolidated net profit
increased by 1% from Rs. 2,621 Crore during 2010-11 to Rs. 2,721 Crore
during 2011-12.
The turnover of MRPL has been Rs.52,207 Crore, up 19% from Rs.43,800
Crore and net profit has been Rs.909 Crore during 2011-12.
MOU ratings
MOU performance rating of ONGC during the last four years is as given
below:
Year
Score
Grading/Rating
2007-08
1.81
Very good
2008-09
1.70
Very good
2009-10
1.53
Very good
2010-11
1.79
Very good
Corporate Social Responsibility

In recognition of its role as a 'responsible leader', ONGC continues its quest to
make positive, tangible difference in the lives of the vulnerable and disadvantaged.
With a business paradigm that is based on an interconnected vision - of people's
welfare, societal growth and environmental conservation, ONGC in 2011-12
continued to cater to the developmental needs across the following focus areas:
Education including vocational courses;
Health Care;
Entrepreneurship (self-help & livelihood generation) schemes;
Infrastructure support roads, bridges, Schools, hospitals in around our
operational areas.
Environment protection, ecological conservation, promotion;
Protection of heritage sites, UNESCO heritage monuments etc.;
32
Promotion of artisans, craftsman, musicians, artists etc. for preservation of

heritage, art & culture;
Women's empowerment, girl child development, gender sensitive projects;
Water management including ground water recharge;
Initiatives for physically and mentally challenged;
Sponsorship of seminars, conferences, workshops etc. and
Promoting sports/sports persons; supporting agencies promoting sports / sports
persons.
Corporate Governance
ONGC has taken structured initiatives towards Corporate Governance and its
practices which evolve around multi-layered checks and balances to ensure
transparency. Apart from the mandatory measures required to be implemented as a
part of Corporate Governance, ONGC has gone the extra mile in this regard and has
implemented the Whistle Blower Policy, Annual Report on working of the Audit &
Ethics Committee, MCA Voluntary Guidelines on Corporate Governance, Enterprisewide Risk Management (ERM) framework.
Health, Safety & Environment

ONGC has implemented globally recognized QHSE management systems
conforming to requirements of ISO 9001, OHSAS 18001 and ISO 14001 at ONGC
facilities and certified by reputed certification agencies at all its operational units.
Corporate guidelines on incident reporting, investigation and monitoring of
recommendations has been developed and implemented for maintaining uniformity
throughout the organization in line with international practice.
During 2011-12, 20% reduction in incidents achieved, 131 environmental

clearance (EC/TOR) obtained, 4 Lakh Ringal Bamboo Planted in Upper Himalayas,
25000 MT of oily waste treated using Bioremediation, 412
33
installations certified with QHSE, 240 operational units audited for HSE Performance,
130 employees trained on HUET, 14 HSE awareness programs completed.
Corporate Disaster Management Plan and guidelines have been developed for
uniform disaster management all across ONGC. ONGC has also developed
Occupational Health physical fitness criteria for employees deployed for offshore
operations. Occupational Health module has now been populated on SAP system.
Human Resources
ONGC has vast pool of skilled and talented professionals the most valuable
asset for the company. 32,909 ONGCians (as on 31st March, 2012) dedicate
themselves for the excellent performance of the company. ONGC extends several
welfare benefits to the employees and their families by way of comprehensive
medical care, education, housing and social security.
Vision Statement:
To be global leader in integrated energy business through sustainable
growth, knowledge excellence and exemplary governance practices.

World Class
Dedicated to excellence by leveraging competitive advantages in R&D and
technology with involved people.
Imbibe high standards of business ethics and organizational values.
Abiding commitment to safety, health and environment to enrich quality of
community life.
Foster a culture of trust, openness and mutual concern to make working a
stimulating and challenging experience for our people.
Strive for customer delight through quality products and services.
34
Integrated In Energy Business

Focus on domestic and international oil and gas exploration and production
business opportunities.
Provide value linkages in other sectors of energy business.
Create growth opportunities and maximize shareholder value.
Dominant Indian Leadership
Retain dominant position in Indian petroleum sector and enhance India's
energy availability.
Registered Address
Jeevan Bharti Building,
Tower II,,124, Indira Chowk
New Delhi
Delhi
110001
Tel: 011-23310156 011-23323201
Fax: 011-23316413
Email: secretariat@ongc.co.in
Website: http://www.ongcindia.com
Group: Public Sector
Management - ONGC
Name
Designation
Sudhir Vasudeva
Chairman & Managing Director
K S Jamestin
Director - Human Resources
A Giridhar
Government Director
Deepak Nayyar
Independent Director
S K Barua
35
Anita Das
Part Time Non Official Director
Pronip Kumar Borthakur
Director
Deepak Nayyar
Additional Director
Joeman Thomas
Director
O P Bhatt
Additional Director
S V Rao
Director
Aloke Kumar Banerjee
Director Finance
D Chandrasekharam
Arun Ramanathan
Om Prakash Bhatt
Shaktikanta Das
Government Director
Shashi Shanker
Director
Arun Ramanathan
Additional Director
S K Barua
Additional Director
Shaktikanta Das
Government Director
36
CHAPTER-IV
RESEARCH METHODOLOGY
4.1
Research Problem
The main purpose of the study is to determine the working and growth of the
ONGC through its financial statements.
The aim of financial performance is to assess the ONGC financial stability.
4.2
Objectives of the study
To bring out the origin and growth of the ONGC of India in the Country.
To know the financial position and profitability of the ONGC.
To analyze the financial performance of the ONGC as a whole.
To offer suggestion for further improvement in the performance of the ONGC.
4.3
Research Design
The descriptive form of research is adopted for study. The major purpose of
descriptive research is description of state of affairs of the institutions as it exits at

present. The nature and characteristics of the financial statements of OIL AND
NATURAL GAS CORPORATION have been described in this study.
4.4
Nature of Data
The data required for the study has been collected from secondary sources.
The relevant figures were taken from annual reports, journals and contents gathered
from internet.
37
4.5
Methods of Data Collection

This study was based on the annual report of OIL AND NATURAL GAS
CORPORATION. Hence the information related to, profitability, short term and
long term solvency and turnover are required for attaining the objectives of the
percent study.
4.6
Tools Applied
To have a meaningful analysis and interpretation of various data collected the

following tools were made, for of this study.
Comparative statement
Common size Statement
Ratio analysis
Trend Analysis
4.7
Period of Study:
This study covers a period of years from 2007-08 to 2011-12. Data
relate to 5 years were collected from the website of ONGC.

4.8
Scope of the Study:

The present is study is meant for the ONGC under the study because it
deals with Financial performance of the ONGC by analyzing the Profit and Loss
account and the Balance sheet.
4.9
LIMTATIONA OF THE STUDY

All ratios could not be used for analyzing the financial performance of
the ONGC.
The study was based on published annual reports.
Due to time constraint the period of study is for five years only.
38
CHAPTER-V
FINANCIAL PERFORMANCE OF ONGC- AN ANALYSIS

RATIOS
5.1
CURRENT RATIO
It is used for measuring short-term liquidity or solvency. Whether the
current assets of the firm are sufficient to meet its current liabilities that is
assessed through the current ratio
Current assets
Current Assets=
Current liabilities
TABLE - 5.1
(Rs. In Crores)
YEAR
CURRENT
ASSESTS ( )
CURRENT
LIABLITIES ( )
RATIO
(TIMES)
2007-08
66,604.64
64,252.78
1.04
2008-09
84,037.65
87,930.19
0.96
2009-10
90,788.99
80,711.49
1.12
2010-11
92,596.56
1,03,793.58
0.89
2011-12
79,688.44
77,778.95
1.02
(SOURCE: FINANCIAL REPORTS OF ONGC)
39
INTERPRETATION:
The Ideal Standard is 2:1. In no year the standard ratio was reached by the
company.
The short term solvency ratio had been fluctuating during the period of study.
It ranged between 0.89 to 1.12.
A low current ratio than the standard indicates a bad liquidity, over-trading,
less Working capital and unsatisfactory debt repayment capacity of the firm.
The investment of creditors in a firm having a low current ratio may not be too
safe.
CHART - 5.1
CURRENT RATIO
1.20
1.12
1.04
1.00
1.02
0.96
0.89
0.80
0.6
0
CURRENT
RATIO
0.4
0
0.2
0
0.0
0
2007-08
12
2008-09
2009-10
2010-11
2011-
40
5.2
QUICK RATIO:
It is used to verify the short-term liquidity position of the firm as indicated by
the current ratio and supported by the quick ratio. It is in fact used to measure the
cash position of the firm.
(Cash + Marketable Securities)
Liquid Ratio=
Quick or Liquid Liabilities
TABLE- 5.2
(Rs. In Crores)
YEAR
QUICK ASSETS ( )
CURRENT
LIABLITIES ( )
RATIO
2008
7,750.04
64,252.78
0.12
2009
8,907.15
87,930.19
0.10
2010
8,569.57
80,711.49
0.11
2011
19,839.92
1,03,793.58
0.19
2012
41,057.56
77,778.95
0.53
41
INTERPRETATION:
The ideal standard is 1:1. The Current Liability was fluctuating during the
period of study.
The Liquid Ratio was below the standard throughout the period of study. During
period 2008 to 2011 it was very low ranging from 0.10 to 0.19 and in 2012 it
increased to 0.53.
Since the current ratio and the quick ratio were not satisfactory a low absolute
liquid ratio indicates that the debt repayment capacity of the firm was not
sound.
CHART 5.2
QUICK RATIO
0.60
0.50
0.40
0.30
QUICK
RATIO
0.20
0.10
0.00
2007-08
200809
200910
201011
201112
42
5.3
TOTAL ASSETS TURNOVER RATIO:

It is used to measure the managerial efficiency with which the firm has utilised
its investment in fixed assets and its overall activity. It indicates the generation of
sales for per rupee invested in fixed asset.
TOTAL INCOME
TOTAL ASSETS TURNOVER RATIO =
TOTAL ASSETS
TABLE- 5.3
(Rs. In Crores)
YEAR
TOTAL INCOME ( )
TOTAL ASSETS ( )
RATIO
(%)
2007-08
1,01,115.25
80,175.90
1.26
2008-09
1,07,999.69
1,00,193.98
1.08
2009-10
1,07,232.27
1,26,775.78
0.85
2010-11
1,24,294.52
1,23,620.37
1.01
2011-12
1,55,709.69
1,53,870.74
1.01
43
INTERPRETATION:
The table shows that Fixed Asset during the period is almost increasing trend
due to new addition in the assets and sales shows increasing trend.
Total Turnover Ratio was ranged between 0.85 to 1.26. It shows that the
company is doing extremely well.
A high fixed assets turnover ratio is an indicator of efficient utilisation of
fixed assets in generating sales. It reveals that use of less fixed assets made
possible higher generation of sales.
CHART-5.3
TOTAL ASSETS TURNOVER

RATIO
140.00
126.12
120.00
107.79
100.55
100.00
101.2
0
84.58
80.00
TOTAL ASSETS
TURNOVER 60.00 RATIO

40.00
20.00
0.00
2007-08 2008-09
2009-10 2010-11 2011-12
44
5.4
PROPRIETARY/ NETWORTH RATIO:

It is used in the analysis of long-term solvency and financial stability of tie
firm. The proportion of total assets of a firm collected through proprietors fund can be
understood from this ratio.
SHAREHOLDERS FUND
PROPRIETARY/ NETWORTH RATIO=
TOTAL ASSETS
TABLE- 5.4
(Rs. In Crores)
YEAR
SHARE HOLDER'S
FUND ( )
TOTAL ASSETS ( )
RATIO
2007-08
78,086.62
80,175.90
0.97
2008-09
92,223.50
1,00,193.98
0.92
2009-10
1,01,406.64
1,26,775.78
0.80
2010-11
1,15,327.25
1,23,620.37
0.93
2011-12
1,36,439.13
1,53,870.74
0.89
45
INTERPRETATION:
The Ideal Norms is 1:3 (33%) of Total Assets collected through proprietary
capital. Here Proprietary Ratio was high ranging between 0.80 to 0.97. It
was adequate and above the standard norms.
A high proprietary ratio indicates more use of proprietors funds in acquiring
total assets of the firm.
This situation shows a favourable long-term solvency and a satisfactory
financial stability of the firm. So a high proprietary ratio is favourable to the
long-term creditors and investors.
CHART- 5.4
PROPRIETARY/NETWORTH RATIO
1.00
0.90
0.97
0.93
0.92
0.80
0.80
0.70
0.60
0.89
PROPRIETARY/NETWO
RTH
RATIO
0.50
0.40
0.30
0.20
0.10
0.00
2007-08 2008-09 2009-10 2010-11

2011-12
46
5.5
NET PROFIT/ GROSS MARGIN RATIO:

It is used to measure the overall profitability and the efficiency of the
Management in generating additional revenue over and above the total operating
costs.
It does not make any difference between operating and non operating expenses and
shows the relation between net profit and net sales.
NET PROFIT/ GROSS MARGIN RATIO=
NET PROFIT
--------------------X 100
NET SALES
TABLE 5.5
(Rs. In Crores)
YEAR
NET PROFIT ( )
NET SALES ( )
RATIO
2007-08
20,221.05
96,772.56
20.90
2008-09
20,170.88
1,04,634.68
19.28
2009-10
19,727.57
1,02,223.99
19.30
2010-11
22,824.97
1,18,002.86
19.34
2011-12
28,428.91
1,47,305.72
19.30
47
INTERPRETAION:
The Net Profit Ratio shows that the Net Contribution made by sales of rupee 1 to
the owners fund.
The study unit showed and average of 19.5%.
The table shows that the higher Net profit Ratio by the corporation, this
indicates better overall profitability and managerial efficiency.
It expresses how much the total revenue earned is more than the total
expenses incurred.
CHART 5.5
NET PROFIT/GROSS MARGIN

RATIO
21.00
20.90
20.50
20.00
19.50
19.28 19.30
19.34
NET
PROFIT/GROSS
19.30
MARGIN RATIO
19.00
18.50
18.00
2007-08 2008-09
2009-10 2010-11 2011-12
48
5.6
INTEREST COVERAGE RATIO:

It is used for measuring long-term solvency and the effect of fixed interest
charges on profit earned. It explains the relation between earnings before interest and
tax and the interest paid on debt capital. From the lenders viewpoint it is used to
measure the safety of return on investment.
EBIT
INTEREST COVERAGE RATIO=
FIXED INTEREST CHARGES
TABLE 5.6
(Rs. In Crores)
FIXED INTEREST
CHARGE ( )
YEAR
EBIT ( )
2007-08
40,595.98
135.30
300.04
2008-09
42,861.48
238.51
179.71
2009-10
44,818.98
502.19
89.25
2010-11
48,299.16
457.15
105.65
2011-12
58,725.50
434.94
135.02
49
RATIO
INTERPRETAION:
The table show that the earnings before interest and tax and the operating profit
are same. So the interest coverage ratio measures as to how many times the
interest burden of the firm is covered by the operating profit of the firm.
The highest was 300.14 times in the year 2008 it indicates better debt servicing
capacity. It is beneficial from the viewpoints of both the firm and the lenders.
From the viewpoint of the firm it is beneficial because it indicates more shock
absorbing capacity in case of lower profit and the reduced risk of default in
interest payment.
The lowest was 4.17 in the year 2011 it reveals that the lenders have a low safety
of return on their investment, it is also unfavourable to the firm because in such
case the firms profitability in relation to its interest payment commitment is low
and it is not in a position to take recourse to further debt financing in case of any
need.
CHART- 5.6
INTEREST COVERAGE RATIO

350.0
0
300.0
0
300.04
250.0
0
200.0
0
INTEREST
COVERAGE
RATIO
179.71
150.0
0
100.0
0
135.02
105.65
89.25
50.00
0.00
2007-08 2008-09 2009-10 2010-11
2011-12
50
5.7
OPERATING RATIO:
It is used to analyse profitability and managerial efficiency. It explains the

proportion of operating expenses in sales of rupee 1.
(Cost of Goods Sold + Operating Expenses) Operating
ratio = x 100
Net Sales
TABLE 5.7
(Rs. In Crores)
YEAR
COST OF GOODS
SOLD+OPERATING
EXPENSES ( )
NET SALES ( )
RATIO
2007-08
56,286.67
96,772.56
58.16
2008-09
61,428.80
1,04,634.68
58.71
2009-10
57,777.89
1,02,223.99
56.52
2010-11
70,595.39
1,18,002.86
59.83
2011-12
89,044.34
1,47,305.72
60.45
51
INTERPRETATION:
Generally the range of 70% to 80% is accepted standard ratio. Here the
corporation has not reached the standards during the study period.
The highest was 60.45% during the year 2011-12 and the lowest was 56.52%
during the year 2009-10.
A low operating ratio indicates that the firm has more surpluses in its hand after
meeting operating costs. This surplus can be used for payment of tax, payment of
dividend, transfer to reserve, etc. Therefore, an indicator of high profitability and
good efficiency.
CHART -5.7
OPERATING RATIO
61.00
60.45
60.00
59.83
59.00
58.00
58.71
58.16
OPERATING RATIO
57.00
56.52
56.00
55.00
54.00
2007-082008-09
2009-10 2010-11 201112
52
5.8
OPERATING PROFIT RATIO:

If this ratio is used along with other profitability ratios it provides a more
meaningful Interpretation of a firms profitability and managerial efficiency. It is

relevant to mention in this context that the operating profit ratio and the operating
ratio are complementary to each other. If a firms operating ratio is 80% its operating
profit ratio will be (100-80)% or 20%.
Operating Profit
Operating profit Ratio = x100
Net Sales
TABLE- 5.8
(Rs. In Crores)
YEAR
OPERATING
PROFIT ( )
NET SALES ( )
RATIO
2007-08
40,595.98
96,772.56
41.95
2008-09
42,861.48
1,04,634.68
40.96
2009-10
44,818.98
1,02,223.99
43.84
2010-11
48,299.16
1,18,002.86
40.93
2011-12
58,725.50
1,47,305.72
39.87
53
INTERPRETATION:
The table shows that operating profit ratio of ONGC had been ranging between
39.87% to 43.84%.
Generally an operating profit in the range of 20% to 25% is acceptable standard in
manufacturing firms.
Here it is seen that it was above the standards. This is the indicator of good
profitability and efficient managerial ability.
CHART- 5.8
OPERATING PROFIT RATIO

45.00
43.84
44.00
43.00
42.00
41.00
41.95
40.96
40.00
40.93
OPERATING PROFIT
RATIO
39.87
39.00
38.00
37.00
2007-08 2008-09
2009-10 2010-11 201112
54
5.9
DIVIDEND PAYOUT RATIO:

It is used to assess the scope of dividend of the equity shareholders and
the extent of self financing made by the company.

Dividend per Share
Dividend Payout ratio =
Earning per Share
TABLE- 5.9
(Rs. In Crores)
YEAR
DIVIDEND PER
SHARE ( )
EARNING PER
SHARE ( )
RATIO
2007-08
32.00
94.54
33.85
2008-09
32.00
94.31
33.93
2009-10
33.00
92.23
35.78
2010-11
17.50
26.68
65.59
2011-12
9.75
33.23
29.34
55
INTERPRETATION:
The table shows that how much percentage of dividends paid by the company
from the profit earned by the company.
The highest payout ratio was 65.59% during the year 2010-11 and lowest was
the 29.34% during the year 2011-12.
From the viewpoint of the financial health of the company a high dividend
payout ratio is never desirable because in such case retention of profit
becomes less.
A low dividend payout ratio indicates less distribution and more retention is
helpful for the sustained growth of the company.
70.00
65.59
60.00
50.00
40.00
33.85
30.00
20.00
10.00
33.93
35.78
29.34
CHART- 5.9
DIVIDEND PAY OUT RATIO
DIVIDEND PAY OUT

RATIO
0.00 2007-08 2008-09 2009-10 2010-11 201112
56
5.10
RETURN ON PROPRIETOR'S FUND:

It is used to analyse the profitability of the firm from the point of view of
funds employed and to evaluate the efficiency of the management. This ratio explains
the Relationship between the operating profit i.e. net profit before interest and tax and
Proprietors fund.
Net Profit before Interest and Tax
Return on proprietors fund= x 100
Proprietors Funds or Equity
TABLE - 5.10
(Rs. In Crores)
YEAR
NET OPERATING
PROFIT AFTER TAX
( )
PROPRIETOR'S
FUND ( )
RATIO
2007-08
20,221.05
78,086.62
25.90
2008-09
20,170.88
92,223.50
21.87
2009-10
19,727.57
1,01,406.64
19.45
2010-11
22,824.97
1,15,327.25
19.79
2011-12
28,428.91
1,36,439.13
20.84
57
INTERPRETATION:
The table reveals that how much percentage of return from the Proprietors
fund. Here highest was 25.90% during the 2007-08 and lowest was the
19.45%.
This ratio is a real test of the profitability and managerial efficiency. The
higher the return on Proprietors fund the higher is the profitability and the
sound is the managerial ability.
From the viewpoint of shareholders and the management a high return on
capital employed is always favourable.
CHART 5.10
RETURN ON PROPRIETOR'S FUND

30.00
25.90
25.00
21.87
19.45
20.84
19.79
20.00
RETURN ON
PROPRIETOR'S
15.00
FUND
10.00
5.00
0.00 2007-08 2008-09 2009-10 2010-11

2011-12
58
TREND ANALYSIS
Trend analysis is very helpful in making a comparative study of the
financial statements of several years. Under this technique, information for a number
of years is taken up and one year-usually the first year-is taken as the base year. Each
item of the base year is taken as 100 and on that basis the percentages for the other
years are calculated.
5.11
TREND ANALYSIS OF SALES:

TABLE -5.11
Year
Sales ( )
Trend %
2007-08
1,01,834.91
100.00
2008-09
1,09,412.94
107.44
2009-10
1,06,638.27
97.46
-3
2010-11
1,23,157.47
115.49
15
2011-12
1,51,121.10
122.71
23
59
Difference %
INTERPRETATION:
From the above table- 5.11, the sales have been raising year after year except
the year 2009-10.
It can be seen that there has been steep rise from 2007-2008 to 2008-2009
(i.e) Rs.1,01,834.91 to Rs.1,09,412.94.
There is a slight decrease in the year 2009-10 , increase of 15% in the year
2010-11 and increase of 23% in the year 2011-12.
CHART -5.11
TREND PERCENTAGE OF SALES

140.0
0
120.0
0
122.71
115.49
107.44
100.0
0
100.00
97.46
80.00
TREND
PERCENTAGE OF
SALES
60.00
40.00
20.00
0.00
2007-08 2008-09 2009-10 2010-11 2011-12
60
TREND ANALYSIS OF NET PROFIT

TABLE 5.12
TREND PERCENTAGE OF NET PROFIT
Year
NET PROFIT
( )
2007-08
20,221.05
100.00
2008-09
20,170.88
99.75
-0.25
2009-10
19,727.57
97.80
-2.20
2010-11
22,824.97
115.70
15.70
2011-12
28,428.91
124.55
24.55
Trend %
Difference %

INTERPRETATION:
The table shows that Trend percentage of Net profit was fluctuating during the
period of study.
The lowest was 97.80% during the year 2009-10. A low net profit ratio reveals
that the net earning is insufficient and the profitability and managerial
efficiency were not up to the mark.
Here we can clearly see that for the past two years 2010-11 and 2011-12 it
was in the increasing Trend. The highest is 124.55% (i.e) 24.55% higher than
the base year.
A higher net profit ratio indicates better overall profitability and managerial
efficiency. It expresses how much the total revenue earned is more than the
total expenses incurred.
If a firm has a low net profit ratio in spite of having a high gross profit ratio, it
seems that it has excessive indirect expenses on which it has not been able to
enforce control.
61
TABLE 5.12
TREND PERCENTAGE OF
NET PROFIT
140.0
0
120.0
0
100.0
0
80.00
TREND
PERCENTAGE OF
60.00
NET PROFIT
40.00
20.00
0.00
2007-08 2008-09 2009-10 2010-11
201112
62
5.13
TREND ANALYSIS OF TOTAL ASSETS

TABLE -5.13
TREND PERCENTAGE OF TOTAL ASSETS
Year
TOTAL
ASSETS ( )
Trend %
2007-08
80,175.90
100.00
2008-09
1,00,193.98
124.97
24.97
2009-10
1,26,775.78
126.53
26.53
2010-11
1,23,620.37
97.51
-2.49
2011-12
1,53,870.74
124.47
24.47
Difference %
INTERPRETATION:
The table 5.13 shows that there is a slight fluctuation in the Total Assets. If the
total assets of a firm increase without any corresponding increase in its
operating profit, the return on total assets will come down. It reveals that
the increase in investment has not resulted in the welfare of
the owners.
Here we can clearly understood that the operating profit adequate from
the
table 5.8 which shows that it is resulted in the welfare of the
owners.
63
CHART -5.13
TREND PERCENTAGE OF TOTAL

ASSETS
140.0
0
124.97 126.53
120.0
0
100.0
0
100.00
124.47
97.51
80.00
TREND
PERCENTAGE OF
TOTAL ASSETS
60.00
40.00
20.00
0.00
2007-08 2008-09 2009-10 2010-11 2011-12
64
5.14 TREND ANALYSIS OF TOTAL LIABLITIES

TABLE 5.14
TREND PERCENTAGE OF TOTAL LIABLITIES
Year
TOTAL
LIABLITIES ( )
Trend %
2007-08
64,252.78
100.00
2008-09
87,930.19
136.85
36.85
2009-10
80,711.49
91.79
-8.21
2010-11
1,03,793.58
128.60
28.60
2011-12
77,778.95
74.94
-25.06
Difference %

INTERPRETATION:
The Table-5.14 shows that there is a fluctuation in the Total liabilities.
There is increase by 36.85% in the year 2008-09, decrase by -8.21% in
the year
2009-10, increase by 28.60 in the year 28.60% and decrease
by -25.06 in the year 2011-12.

Here it is evident from the table 5.1 the ONGC has not reached the standard
ratio of 2:1. The investment of creditors in a firm having a low current ratio
may not be too safe.
65
TABLE 5.14
TREND PERCENTAGE OF TOTAL

LIABLITIES
160.0
0
140.0
0
136.85
128.60
120.0
0
100.0
0
100.00
TREND
PERCENTAGE OF
91.79
80.00
74.94
60.00
40.00
20.00
0.00
2007-08 2008-09 2009-10 2010-11 2011-12
TOTAL LIABLITIES
66
5.15
TREND ANALYSIS OF EARNING PER SHARE

TABLE 5.15
TREND PERCENTAGE OF EARNING PER SHARE (EPS)
Year
EARNING PER
SHARE ( )
Trend %
2007-08
94.54
100.00
2008-09
94.31
99.76
-0.24
2009-10
92.23
97.79
-2.21
2010-11
26.68
28.93
-71.07
2011-12
33.23
124.55
24.55
Difference %

INTERPRETATION:
The table-5.15 shows that the Earning per Share is in decreasing trend except
in the year 2011-12 (i.e) 24.55%
A high price earning ratio indicates either a fall in earning per share or an
increase in market price per share. A high price earning ratio resulting from
increased market price per share is beneficial to the shareholders. It indicates
high managerial efficiency, high profitability and good market reputation.
A low price earning ratio not caused by an increased earning indicates
reduced market price per share. It also reveals a low level of managerial
efficiency and profitability. It is against the interest of the shareholders.
If the low price earning ratio is caused by an increased earning per share it
does not indicate an unfavourable situation for the shareholders.
67
TABLE 5.15
TREND PERCENTAGE OF
EARNING PER
SHARE (EPS)
140.0
0
120.0
0
100.0
0
80.00
TREND
60.00
PERCENTAGE OF
EARNING PER SHARE
(EPS)
40.00
20.00
0.00
2007-082008-092009-102010-11
201112
68
TABLE-15.16 COMMON SIZE BALANCE SHEET 2008-2009

2008 ( )
PERCENTAGE
2138.89
2.67
2138.89
2.13
14.58
0.02
0.00
0.00
Reserves
75933.15
94.71
90084.61
89.91
Net worth
78086.62
97.39
92223.50
92.04
Secured Loans
697.97
0.87
680.92
0.68
Unsecured Loans
246.50
0.31
5878.21
5.87
Total Debt
944.47
1.18
6559.13
6.55
Minority Interest
Total Liabilities
1144.83
80175.92
1.43
100.00
1411.35
100193.98
1.41
100.00
APPLICATION OF
FUNDS
Gross Block
76216.22
95.06
89828.65
89.65
Less: Accum.
Depreciation
54242.39
67.65
59929.17
59.81
Net Block
21973.83
27.41
29899.48
29.84
Capital Work in
Progress
50694.15
63.23
70056.07
69.92
Investments
4482.14
5.59
3480.35
3.47
Inventories
7298.48
9.10
6542.39
6.53
Sundry Debtors
7046.94
8.79
7181.35
7.17
703.10
0.88
1725.80
1.72
Total Current Assets
15048.52
18.77
15449.54
15.42
Loans and Advances
27203.37
33.93
47718.36
47.63
Fixed Deposits
24352.75
30.37
20869.75
20.83
Total CA, Loans &

Advances
66604.64
83.07
84037.65
83.87
Current Liabilities
38391.38
47.88
53574.13
53.47
Provisions
25861.40
32.26
34356.06
34.29
Total CL & Provisions
64252.78
80.14
87930.19
87.76
2351.86
2.93
-3892.54
-3.89
673.92
0.84
650.62
0.65
80175.92
100.00
100193.98
100.00
PARTICULARS
2009 ( )
PERCENTAGE
SOURCES OF FUND
Equity Share Capital
Share Application Money
Cash and Bank Balance
Net Current Assets

Miscellaneous
Expenses
Total Assets
69
INTERPRETATION:
The above statement shows the percentage of various assets and
liabilities on the total.
During the year 2008, Net worth is 97.39%, total debt was 1.18% and
Minority interest was 1.43% of the Total Liabilities. It is clear from the above
statement that the majority 97.39% of Total Liabilities constitute Net Worth.
During the year 2008 Net Block is 27.41%, Capital Work in progress was
63.23%, investments is 5.59%, Net current assets was 2.93% and
Miscellaneous expenses 0.84% of the total assets. It was clear from the above
statement that the majority 63.23% of Total Assets constitute to Capital Work
in progress.
During the year 2009, Net worth is 92.04%, total debt is 6.55% and Minority
interest was 1.41% of the Total Liabilities. It is clear from the above statement
that the majority 92.04% of Total Liabilities constitute Net Worth.
69.92%, investments is 3.47%, Net current assets was -3.89% and
in progress.
70
PARTICULARS
2009 ( )
PERCENTAGE
2010 ( )
PERCENTAGE
SOURCES OF FUND
2138.89
2.13
2138.89
1.69
Reserves
90084.61
89.91
99267.75
78.30
Networth
92223.50
92.04
101406.64
79.99
680.92
0.68
789.35
0.62
Unsecured Loans
5878.21
5.87
22936.61
18.09
Total Debt
6559.13
6.55
23725.96
18.71
Minority Interest
1411.35
1.41
1643.16
1.30
100193.98
100.00
126775.76
100.00
Gross Block
89828.65
89.65
99731.19
78.67
Less: Accum.
Depreciation
59929.17
59.81
65816.45
51.92
Net Block
29899.48
29.84
33914.74
26.75
Capital Work in
Progress
70056.07
69.92
76782.91
60.57
Investments
3480.35
3.47
5159.31
4.07
Inventories
6542.39
6.53
8240.01
6.50
Sundry Debtors
7181.35
7.17
7142.35
5.63
1725.80
1.72
1427.22
1.13
15449.54
15.42
16809.58
13.26
Loans and Advances
47718.36
47.63
53022.40
41.82
Fixed Deposits
20869.75
20.83
20957.01
16.53
Total CA, Loans &

Advances
84037.65
83.87
90788.99
71.61
Current Liabilities
53574.13
53.47
40417.59
31.88
Provisions
34356.06
34.29
40293.90
31.78
87930.19
87.76
80711.49
63.66
Net Current Assets
-3892.54
-3.89
10077.50
7.95
650.62
0.65
841.32
0.66
100193.98
100.00
126775.78
100.00
Secured Loans
Total Liabilities
APPLICATION OF
FUNDS
Miscellaneous
Expenses
Total Assets

71
INTERPRETATION:
The above statement shows the percentage of various assets and
Minority interest was 1.41% of the Total Liabilities. It is clear from the above
During the year 2009 Net Block was 29.84%, Capital Work in progress was
69.92%, investments was 3.47%, Net current assets was -3.89% and
Miscellaneous expenses 0.65% of the total assets. It is clear from the above
in progress.
Minority interest was 1.30% of the Total Liabilities. It was clear from the
above statement that the majority 79.99% of Total Liabilities constitute Net
Worth.
During the year 2010 Net Block was 26.75%, Capital Work in progress is
60.57%, investments is 4.07%, Net current assets was 7.95% and
Miscellaneous expenses 0.66% of the total assets. It is clear from the above
in progress.
72

PARTICULARS
2010 ( )
PERCENTAGE
2011 ( )
PERCENTAGE
SOURCES OF FUND
2138.89
1.69
4277.76
3.46
0.00
0.00
0.00
0.00
Reserves
99267.75
78.30
111049.49
89.83
Networth
101406.64
79.99
115327.25
93.29
789.35
0.62
778.27
0.63
Unsecured Loans
22936.61
18.09
5512.96
4.46
Total Debt
23725.96
18.71
6291.23
5.09
1643.16
1.30
2001.88
1.62
126775.76
100.00
123620.36
100.00
Gross Block
99731.19
78.67
108941.27
88.13
Less: Accum.
Depreciation
65816.45
51.92
73083.35
59.12
Net Block
33914.74
26.75
35857.92
29.01
Capital Work in
Progress
76782.91
60.57
94807.31
76.69
Investments
5159.31
4.07
3356.10
2.71
Inventories
8240.01
6.50
8567.57
6.93
Sundry Debtors
7142.35
5.63
9772.39
7.91
1427.22
1.13
10067.53
8.14
16809.58
13.26
28407.49
22.98
Loans and Advances
53022.40
41.82
45568.34
36.86
Fixed Deposits
20957.01
16.53
18620.73
15.06
Total CA, Loans &

Advances
90788.99
71.61
92596.56
74.90
Current Liabilities
40417.59
31.88
65063.43
52.63
Provisions
40293.90
31.78
38730.15
31.33
80711.49
63.66
103793.58
83.96
Net Current Assets
10077.50
7.95
-11197.02
-9.06
841.32
0.66
796.06
0.64
126775.78
100.00
123620.37
100.00
Secured Loans
Minority Interest
Total Liabilities
APPLICATION OF
FUNDS
Miscellaneous
Expenses
Total Assets

73
INTERPRETATION:
The above statement
shows the percentage
of various assets
and

During the year 2010, Net worth was 79.99%, total debt was 18.71% and
Minority interest is 1.30% of the Total Liabilities. It is clear from the above
During the year 2010 Net Block is 26.75%, Capital Work in progress is
60.57%, investments was 4.07%, Net current assets is 7.95% and
in progress.
During the year 2011, Net worth was 93.29%, total debt is 5.09% and Minority
interest was 1.62% of the Total Liabilities. It was clear from the above
During the year 2011 Net Block was 29.01%, Capital Work in progress is
in progress.
74

PARTICULARS
2011 ( )
PERCENTAGE
2012 ( )
PERCENTAGE
SOURCES OF FUND
4277.76
3.46
4277.76
2.78
0.00
0.00
0.00
0.00
Reserves
111049.49
89.83
132161.37
85.89
Networth
115327.25
93.29
136439.13
88.67
778.27
0.63
5958.75
3.87
Unsecured Loans
5512.96
4.46
9264.44
6.02
Total Debt
6291.23
5.09
15223.19
9.89
Minority Interest
2001.88
1.62
2208.43
1.44
123620.36
100.00
153870.75
100.00
Gross Block
108941.27
88.13
180143.61
117.07
Less: Accum.
Depreciation
73083.35
59.12
80801.20
52.51
Net Block
35857.92
29.01
99342.41
64.56
Capital Work in
Progress
94807.31
76.69
49698.13
32.30
Investments
3356.10
2.71
2920.71
1.90
Inventories
8567.57
6.93
13168.01
8.56
Sundry Debtors
9772.39
7.91
11714.33
7.61
10067.53
8.14
27889.55
18.13
28407.49
22.98
52771.89
34.30
Loans and Advances
45568.34
36.86
26916.55
17.49
Fixed Deposits
18620.73
15.06
0.00
0.00
Total CA, Loans &

Advances
92596.56
74.90
79688.44
51.79
Current Liabilities
65063.43
52.63
51233.68
33.30
Provisions
38730.15
31.33
26545.27
17.25
103793.58
83.96
77778.95
50.55
Net Current Assets
-11197.02
-9.06
1909.49
1.24
796.06
0.64
0.00
0.00
123620.37
100.00
153870.74
100.00
Secured Loans
Total Liabilities
APPLICATION OF
FUNDS
Miscellaneous
Expenses
Total Assets
75
INTERPRETATION:
The above statement
shows the percentage
of various assets
and

Worth.
in progress.
Worth.
During the year 2012 Net Block was 64.56%, Capital Work in progress was
32.30%, investments was 1.90% and Net current assets was 1.24% of the total
assets. It is clear from the above statement that the majority 64.56% of Total
Assets constitute to net block.
76
TABLE 5.20 COMPARITIVE BALANCE SHEET 2008-09

PARTICULARS
2008 ( )
2009 ( )
INCREASE/
DECREASE
PERCENTAGE
SOURCES OF FUND
2138.89
2138.89
0.00
0.00
14.58
0.00
-14.58
-100.00
Reserves
75933.15
90084.61
14151.46
18.64
Networth
78086.62
92223.50
14136.88
18.10
Secured Loans
697.97
680.92
-17.05
-2.44
Unsecured Loans
246.50
5878.21
5631.71
2284.67
Total Debt
944.47
6559.13
5614.66
594.48
1144.83
1411.35
266.52
23.28
80175.92
100193.98
20018.06
24.97
Gross Block
76216.22
89828.65
13612.43
17.86
Less: Accum. Depreciation
54242.39
59929.17
5686.78
10.48
Net Block
21973.83
29899.48
7925.65
36.07
Capital Work in Progress
50694.15
70056.07
19361.92
38.19
Investments
4482.14
3480.35
-1001.79
-22.35
Inventories
7298.48
6542.39
-756.09
-10.36
Sundry Debtors
7046.94
7181.35
134.41
1.91
703.10
1725.80
1022.70
145.46
15048.52
15449.54
401.02
2.66
Loans and Advances
27203.37
47718.36
20514.99
75.41
Fixed Deposits
24352.75
20869.75
-3483.00
-14.30
Total CA, Loans &

Advances
66604.64
84037.65
17433.01
26.17
Current Liabilities
38391.38
53574.13
15182.75
39.55
Provisions
25861.40
34356.06
8494.66
32.85
64252.78
87930.19
23677.41
36.85
2351.86
-3892.54
-6244.40
-265.51
673.92
650.62
-23.30
-3.46
80175.92
100193.98
20018.06
24.97
Minority Interest
Total Liabilities
APPLICATION OF FUNDS
Net Current Assets

Miscellaneous Expenses
Total Assets
77
INTERPRETATION:
Form the above Comparative Balance sheet as on 31.3.2009 Net worth has
increase 18.10% Secured Loan has decreased by -2.44% and Minority interest
increased by 23.28%.
Here Net block has increase 36.07% capital work in progress has increased by
38.19% Investments has decreased by -22.35%, Net current assets has
decreased by -265.51% and Miscellaneous expenses decreased by -3.46%
78
PARTICULARS
2009 ( )
2010 ( )
INCREACE/
DECREASE
PERCENTAGE
SOURCES OF FUND
2138.89
2138.89
0.00
0.00
Reserves
90084.61
99267.75
9183.14
10.19
Networth
92223.50
101406.64
9183.14
9.96
680.92
789.35
108.43
15.92
Unsecured Loans
5878.21
22936.61
17058.40
290.20
Total Debt
6559.13
23725.96
17166.83
261.72
Minority Interest
1411.35
1643.16
231.81
16.42
100193.98
126775.76
26581.78
26.53
Gross Block
89828.65
99731.19
9902.54
11.02
59929.17
65816.45
5887.28
9.82
Net Block
29899.48
33914.74
4015.26
13.43
70056.07
76782.91
6726.84
9.60
Investments
3480.35
5159.31
1678.96
48.24
Inventories
6542.39
8240.01
1697.62
25.95
Sundry Debtors
7181.35
7142.35
-39.00
-0.54
1725.80
1427.22
-298.58
-17.30
15449.54
16809.58
1360.04
8.80
Loans and Advances
47718.36
53022.40
5304.04
11.12
Fixed Deposits
20869.75
20957.01
87.26
0.42
Total CA, Loans &

Advances
84037.65
90788.99
6751.34
8.03
Current Liabilities
53574.13
40417.59
-13156.54
-24.56
Provisions
34356.06
40293.90
5937.84
17.28
87930.19
80711.49
-7218.70
-8.21
Net Current Assets
-3892.54
10077.50
13970.04
-358.89
650.62
841.32
190.70
29.31
100193.98
126775.78
26581.80
26.53
Secured Loans
Total Liabilities
Total Assets
79
INTERPRETATION:
increase 9.96% Secured Loan has increased by 15.92%, Total Debt has
increased by 261.72% and Minority interest increased by 16.42%.
Here Net block has increase 13.43% capital work in progress has
increased by 9.60%, Investments has increased by 48.24%, Net current assets
has decreased by -358.89% and Miscellaneous expenses increased by 29.31%
80
PARTICULARS
2010 ( )
2011 ( )
INCREACE/
DECREASE
PERCENTAGE
SOURCES OF FUND
2138.89
4277.76
2138.87
100.00
Reserves
99267.75
111049.49
11781.74
11.87
Networth
101406.64
115327.25
13920.61
13.73
789.35
778.27
-11.08
-1.40
Unsecured Loans
22936.61
5512.96
-17423.65
-75.96
Total Debt
23725.96
6291.23
-17434.73
-73.48
1643.16
126775.76
2001.88
123620.36
358.72
-3155.40
21.83
-2.49
Secured Loans
Minority Interest
Total Liabilities
0.00
Gross Block
99731.19
108941.27
9210.08
9.23
65816.45
73083.35
7266.90
11.04
Net Block
33914.74
35857.92
1943.18
5.73
76782.91
94807.31
18024.40
23.47
Investments
5159.31
3356.10
-1803.21
-34.95
Inventories
8240.01
8567.57
327.56
3.98
Sundry Debtors
7142.35
9772.39
2630.04
36.82
1427.22
10067.53
8640.31
605.39
16809.58
28407.49
11597.91
69.00
Loans and Advances
53022.40
45568.34
-7454.06
-14.06
Fixed Deposits
20957.01
18620.73
-2336.28
-11.15
Total CA, Loans & Advances
90788.99
92596.56
1807.57
1.99
Current Liabilities
40417.59
65063.43
24645.84
60.98
Provisions
40293.90
38730.15
-1563.75
-3.88
80711.49
103793.58
23082.09
28.60
Net Current Assets
10077.50
-11197.02
-21274.52
-211.11
841.32
796.06
-45.26
-5.38
126775.78
123620.37
-3155.41
-2.49
Total Assets
81
INTERPRETATION:
increase 13.73% Secured Loan has decreased by -75.96%, Total Debt has
decreased by 73.48% and Minority interest increased by 21.83%.
Here Net block has increase 5.73% capital work in progress has increased by
23.47%, Investments has decreased by -34.95%, Net current assets has decreased
by -211.11% and Miscellaneous expenses decreased by -5.38%.
82

PARTICULARS
2011 ( )
2012 ( )
INCREACE/
DECREASE
PERCENTAGE
SOURCES OF FUND
4277.76
4277.76
0.00
0.00
Reserves
111049.49
132161.37
21111.88
19.01
Networth
115327.25
136439.13
21111.88
18.31
778.27
5958.75
5180.48
665.64
Unsecured Loans
5512.96
9264.44
3751.48
68.05
Total Debt
6291.23
15223.19
8931.96
141.97
Minority Interest
2001.88
2208.43
206.55
10.32
123620.36
153870.75
30250.39
24.47
108941.27
180143.61
71202.34
65.36
73083.35
80801.20
7717.85
10.56
Net Block
35857.92
99342.41
63484.49
177.04
94807.31
49698.13
-45109.18
-47.58
Investments
3356.10
2920.71
-435.39
-12.97
Inventories
8567.57
13168.01
4600.44
53.70
Sundry Debtors
9772.39
11714.33
1941.94
19.87
10067.53
27889.55
17822.02
177.02
28407.49
52771.89
24364.40
85.77
Loans and Advances
45568.34
26916.55
-18651.79
-40.93
Fixed Deposits
Total CA, Loans &
Advances
18620.73
0.00
-18620.73
-100.00
92596.56
79688.44
-12908.12
-13.94
Current Liabilities
65063.43
51233.68
-13829.75
-21.26
Provisions
38730.15
26545.27
-12184.88
-31.46
103793.58
77778.95
-26014.63
-25.06
Net Current Assets
-11197.02
1909.49
13106.51
-117.05
796.06
0.00
-796.06
-100.00
123620.37
153870.74
30250.37
24.47
Secured Loans
Total Liabilities
Gross Block
Total Assets
83
INTERPRETATION:
increase 18.31% Secured Loan has increased by 68.05%, Total Debt has
increased by 141.97% and Minority interest increased by 10.32%.
Here Net block has increase 177.04% capital work in progress has decreased
by -47.58%, Investments has decreased by -12.97% and Net current assets has
decreased by -117.05%.
84
CHAPTER VI
6.1
INTRODUCTION:
From the foregoing chapters the following inferences have been made:
6.2
INFERENCES
During 2011-12, the turnover of ONGC (on standalone basis) has been Rs.
76,887 Crore with net profit of Rs.25,123 Crore; the highest-ever despite
sharing under-recovery of Rs.44,466 Crore to the Oil Marketing Companies
(OMCs) as per the instructions of the Government of India. Net worth of
ONGC (on standalone basis) has been Rs.1,11,784 Crore.
Short term Solvency Ratio had been fluctuating during the study period. It
ranged between 0.89 to 1.12. Investment of creditors in the corporation might
not be too safe. Because the Current Ratio was low (i.e) below 2.
Liquid Ratio was below the standard (i.e) 1 through out the period from 2008 to
2011, it was very low ranging from 0.10 to 0.19 and in 2012, it increased to
just 0.53 but not atleast 1.
Total Assets Turnover Ratio was ranged between 0.85 to 1.26. It decreased in
the first three years (2008-10) and increased in the recent two years (2011-12).
Proprietory Ratio was ranging between 0.80 to .97. It is adequate and above
the standard norms (0.33). It indicates the better overall profitability and
managerial efficiency of the corporation.
Operating Ratio prevailed between 56.52 to 60.45 ,which was low (70% to
80%) that the corporation had less surpluses in its hand after meeting operating
cost. Therefore it affects the profitability of the corporation.
85
Operating Profit Ratio of ONGC had been ranging between 38.87% to 43.84%.
This is the indicator of good profitability and efficient managerial ability of the
corporation.
In the year 2010-11, the Dividend Payout Ration of 65.59% was highest during
the study period. From the view point of financial health of the company a high
Dividend Payout Ratio is never desirable because in such case the retention of
profit become less.
Return on Proprietors fund was ranging between 19.45% to 25.90%. The higher
return on profitability and the sound is the managerial ability.
Sales in the Corporation had been rising year after year.
Total Liabilities increased by 36.85%, in the year 2008-09 decreased by -8.21%

in the year 2009-10 increased by 28.60% and decreased by 25.06% in the year
2011-12. This fluctuation is not desirable to the growth of the Corporation.
During the year 2008, Networth was 97.39%. Total Debt was 1.18% and
Minority interest was 1.43% of Total Liabilities. It is clear from the above result
that the majority (97.39%) of total liabilities constitutes Networth.
During the year 2012, Net Block was 64.56%, Capital Work in Progress was
32.30%, investment was 1.90% and Net Current Asset was 1.24% of Total
Assets. It is clear from the above statement the majority (64.56%) of Total
Liability constitute to Net Block.
6.3
SUGGESTIONS
The Corporation has to increase the Current Assets to meet out Current
Liabilities and to maintain Standard norms of 2:1.
The Corporation has to try to increase the Operating Ration by way of

reducing the Operating Cost in order to boost up its Profitability..
86
The Corporation should maintain the Quick Assets properly to face the
emergency needs of cash.
The corporation should have less Dividend Payout Ratio (i.e) less distribution
and more retention is helpful for the substained growth of the company.
The Fixed Assets of Corporation should be used more effectively to reduce the
cost of production and maintain their sales.
The company shall increase the profitability so as to improve the effectiveness

and soundness of the organisation.
6.4
CONCLUSION
The Growth and Development of the organisation is highly depending on
financial position. From the above study it is concluded that the companys fund
position is good in terms of key financial indicators of the performance. ONGC one of
the largest Asia based Oil and Gas exploration and Production Companies. But in
recent years there is a slow downs in the business activities due to recession and more
subsidies. Proper steps to be taken by the company to overcome its adverse economic
condition and make better profit with its sound Financial Recourses experienced
technically skilled Human Resource and with help of continuous research the
company can restore its reputation and efficiently in near future.
87
BIBLIOGRAPHY
Books:
Agarwal M. R. Financial Management, RBSA Publisher, Jaipur, 4th ed.

2010.
Banerjee B. Financial Policy and Management Accounting The World Press

Pvt. Ltd., Kolkata, 1999.
Banerjee S. K. Financial Management, S. Chand & Co. Ltd. New Delhi,

2004.
Chandra Prasanna Financial Management: Theory and Practice, Tata

McGraw-Hill Publishing Company Ltd. New Delhi, 6thed. 2005.
Ghosh T.P. Accounting & Finance for Managers, Taxman Allied Services
(P) Ltd., 2004.
Hampton John J. Financial Decision Making, Prentice Hall Publication of

India Pvt. Ltd., 4th ed. 1996.
Khan M. Y. & Jain P. K. Financial Management: Text & Problems, Tata

McGraw-Hill Publishing Company Ltd. New Delhi.
Kishore Ravi M. Financial Management, Taxman Allied Services (P) Ltd.,

New Delhi, 6th ed. 2005.
Kothari C. R. Research Methodology, New Age International (P) Ltd, New

Delhi, 2004.
Kuchhal S. C. Corporation Finance Principles and Problems, Chaitanya

Publishing House, Allahabad, 2001 Kumar Arun & Sharma Rachana.
Financial Management: Theory and Practice, Atlantic Publishers and

Distributors, New Delhi, 2001.
Maheshwari S. N. Financial Management: Principles and Practice, Sultan

Chand & Sons Educational Publishers, New Delhi, 8th ed. 2003.
88
Journals and Newspapers:
The Times of India
Economic Times
The Business Line
Websites:
www.wikipedia.org
www.mckinsey.com
www.ongcindia.com
www.moneycontrol.com
89

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A STUDY ON FINANCIAL PERFORMANCE OF

OIL AND NATURAL GAS CORPORATION (ONGC)

A Project Report submitted to the

POST GRADUATE AND RESEARCH DEPARTMENT OF COMMERCE

JAMAL MOHAMED COLLEGE (Autonomous)

Prof. R. KHADER MOHIDEEN

PERFORMANCE OF OIL AND NATURAL GAS CORPORATION (ONGC)

SIGNATURE OF THE EXTERNAL EXAMINAR

Almighty for showering his blessing on me to complete this project.

I am deeply indebted to Dr. R.KHADER MOHIDEEN M.Com, M.B.A.,

I sincerely thank the Faculty Members, Department of Commerce for

In general, finance may be defined has a provision of money at the time it is

Financial management is the managerial activity which is concerned with the

Finance is a specialized function and it draws heavily on their related

SIGNIFICANCE OF THE STUDY

in this industry needs to be improved today. Improvement of financial is possible by

OPERATIONAL DEFINITIONS AND CONCEPTS

Financial Statement Analysis

This study contains the following analyses

Common Size Balance Sheet

Comparative Balance Sheet

Comparative Financial Statement

on present position, it is on change in the comparative balance sheet. Such a balance

WORKING CAPITAL MANAGEMENT

In this context, the most useful measure of profitability is Return on Capital

Steps in Ratio Analysis

Collection of information: In the first step of ratio analysis raw data is

Computation of ratios: In the second step necessary ratios are computed

Arriving at decisions on comments: In the next step the significance of these

Significance of Financial Statement Analysis:

Judging the earning capacity or profitability of a business concern.

Helps in making comparative studies between various firms.

Assists in preparing budgets.

Limitations of Financial Statement Analysis

It ignores price level changes.

Financial analysis takes into consideration only monetary matters, qualitative

Analysis is a means to an end and not the end itself.

As there is variation in accounting practices followed by different firms a valid

undertaken and one among them is Ratio Analysis.

Debt equity Ratio:

Fixed assets to net worth Ratio:

Stock to working capital Ratio:

Net profit after interest & tax

CLASSIFICATION OF ACCOUNTING RATIO AND ITS FORMULAS:

degree of accuracy. He also revealed that the predictive ability of the

Kumar (1985) in this study on Corporate Growth and profitability in the

Panigrahi (1990) in his study discussed the objectives of working capital

mechanics of the accounting process, which is the foundation for financial

History of the oil industry in India

Colonial rule, 1858-1947

OIL AND NATURAL GAS CORPORATION (ONGC)

In 2011, ONGC applied to purchase of 2000 acres of land at Dahanu to

In November 2012, ONGC Videsh agreed to acquire ConocoPhillips' 8.4%

ONGC Videsh Limited (OVL) is the international arm of ONGC. It was

ONGC Tripura Power Company:

Corporate Social Responsibility

Promotion of artisans, craftsman, musicians, artists etc. for preservation of

Health, Safety & Environment

During 2011-12, 20% reduction in incidents achieved, 131 environmental

growth, knowledge excellence and exemplary governance practices.

Integrated In Energy Business

Chairman & Managing Director