(Internship presentation)Financial analysis of IOCL & its new pipeline PRRPL

2. “PROJECT FINANCE FOR PRRPL AND
FINANCIAL ANALYSIS OF IOCL AND ITS
PIPELINE DIVISION”
By:
Parul Midha
PGD-FM/09/007

3. This Presentation Entails :
 Research Methodology
 Industry Profile
 Company Profile
 Pipeline Division
 Project Finance-PRRPL
 Financial Analysis-IOCL
 Financial Analysis-Pipeline Division
 Contribution to IOCL-Pipeline Division
 Recommendations
 Learning

4. Research Methodology
 Systematic way to carry out activities to achieve objectives.
 Research-Type :
Analytical Fundamental Historical
 Objectives :
 To determine the feasibility of the PRRPL
 To analyze the financials of IOCL and
Its pipeline division
 Scope :
 Focus on Project finance
 Analysis of IOCL-Pipeline’s Financials.
 Limitations :
 Limited Availability of Time.
 No Opportunity to visit Refinery.

5. Research Methodology
Where’s Problem,
Info, or Knowledge
What to do? ? Lets find out….
How to do?
Working with
proper
Consultation &
Guidance, for
maximum
Contribution
Data Processing
Data
Collection
Data
Analysis
Stimulate Mind &
Leave the Knowledge to achieve
Footprints Objectives.

6. Industry Profile
 Petroleum : An oily liquid existing at various places in
the Earth’s crust.
 Technology-Intensive & High Capital Investment
 2% of world market-business worth USD 30bn
 13% yearly growth, one of the fastest growing sector
 Global oil majors benchmark their production costs
with OPEC
 Historically, Administered Pricing Mechanism (APM)
regulation was in place, but now dismantled with
presence of private players.
 Volatile Prices of Crude & Petro Products,
dependency on international market

7. Industry Profile
Downstream Sector
Public
IOCL
HPCL
BPCL
Private
Reliance
Shell
Essar

8. Company Profile 1964>>125th-Fortune 2010
CITP - Values
Rs.2,827.06 Cr - 2009
 18th Largest petroleum company in the world.
 India’s largest Commercial Enterprise.
 Ranks 125th on the Fortune Global 500 listing (2010), & classified as A+
Grade PSU in India.
 1959 : Began operation as Indian Oil Company Ltd.
 1964 : IOCL was formed, with the merger of Indian Refineries Ltd.
 Golden Jubilee year 2009-10 :
 48% Share in Petroleum Product Market
 34% Share in Refining Capacity
 71% Share in Downstream Sector Pipelines Capacity
 IndianOil owns & operates 10 of India's 20 refineries with a
combined refining capacity of 60.20 MMTPA .
 Cross-country pipelines network spans more than 10,329 kms.
 It operates the largest & widest network of fuel stations in
India, numbering about 18,278.
 CMD: Mr. B M Bansal

9. Refinery
IOCL
R&D Divisions Marketing
Pipelines

10. Pipeline Division
 Has a network of 10,329km which serves as
the backbone of refining and marketing
operations
 It has a throughput capacity of 74.41 MMTPA.
 3 Crude and 18 product pipelines with 10
more under implementation.
Product
5963Km
(33.41MMTPA)
10329Km
(74.41MMTPA)
Crude 4363Km
(41 MMTPA)

12. Project Finance
 What is it all about??
 Project finance-A ten stage process
I
• Need for a new Pipeline
II
• Cost Estimates are prepared
III
• Detailed Feasibility Report (DFR)
IV
• Board Approval
X
• Commissioning of Purchase Requisitions
V
• the project
IX
• Insurance VI
• Tenders are invited
• Techno Bids and Commercial Bids are
• Project commences
VIII VII received

13. Project finance for PRRPL
 PRRPL – “Paradip-New Sambalpur-Raipur-
Ranchi Pipeline”
 Need-Railway Tariffs.
 Length of the pipeline -1108 Km
 Products- MS,SKO & HSD
 Throughput projections till 2027.
 Minimum 33% as common carrier.
 Construction Schedule – 36 months

14.  Capital cost Rs1793 Cr (Inc Rs610 Cr FC)
 Annual Operating Cost Rs67 Cr
 Financing- Debt:Equity =1:1
 Debt@11%p.a. (8instalments with 1yr
Moratorium period)
 Working capital(Internal sources)
 IRR 16.8% (w/o IDC) > Hurdle Rate
 FINANCIALLY VIABLE

15. Comparative Ratio Analysis of
IOCL, HPCL and BPCL
 Profitability Ratios
IOCL leads among the state owned oil companies in
all the Profitability ratios consistently.
 Liquidity Ratios
Due to the massive scale of operations it is way
below its competitors in this category.
 Activity Ratios
DTR and FATR are all below that of competitors.

16. Financial Analysis of Pipeline Division
 Operating Profits Analysis (Rs in Crores)
3000
2,827.06
2500
2,514.37
2000
1500
1000
500
295.23 417.15 435.32
0
2005-06 2006-07 2007-08 2008-09 2009-10
Operating Profit
 Cost of Transportation (COT) Analysis
(Rs in Crores)

17. Financial Analysis of Pipeline Division
 Variable Cost Per MT Analysis
80
70 68
60
54 56 (Rs per MT)
50
47
40 39
Variable Cost Per MT
30
20
10
0
2006 2007 2008 2009 2010
Particulars 2006 2007 2008 2009 2010
Total Variable Cost(Rs Crores) 173 242 308 403 356
Throughput (TMT) 44832 51222 56686 59171 63992
Variable Cost Per MT(Rs) 39 47 54 68 56
 Ratio Analysis- Specific to pipeline division

18. Contribution to IOCL-Pipelines Division
 E-Payment Analysis (April,May’10)
 SAP related work-
 Cost Estimates checked for-
 PRRPL
 Hot Crane
 Restoration of Sanganer
 CBR Trichy Pipeline
 Tenders-Commercial & Price bid evaluation for
 “Hot Crane” Tender(Public)
 “Restoration of Sanganer plant” Tender(Limited)

19. Cntd..
 Preparation of CapEx reports for April’10 and
May’10 (MS Excel, Macros)
 Preparation of Schedules X and Schedule V
(Balance sheet) of 2009-10. (Analysis of payments
to foreign parties using SAP)
 Preparation of insurance Claim file(Sanganer plant
Fire)

20. Recommendations
 The controllable costs of Rs.76.88 Cr. in 2010 should be
reduced, to increase profits.
 Current Ratio of 0.67:1 is low, so is quick ratio & stock-to-
working capital ratio; it should be improved to amend IOCL’s
liquidity position.
 Working Capital of IOCL is negative Rs207Cr, because of
CL>CA, therefore steps should be taken to turn it into
positive. Either it should work on ↑CA or ↓CL or both.
 DTR of 48.15 is almost half that of competitors like BPCL.
Measures should be taken by improving credit terms and
standards.
 The ratios of operating costs, establishment costs per
employees, per tonne are very high; it is very pertinent to
bring them down.

21. Learnings
In IndianOil
Corporation
Ltd.-
Pipelines
Division

22. Thank
You