INDIAN OIL NSEI: IOC

CORPORATION LIMITED
(INE242A01010; IOC | 530965 |)
Extraordinary Performance Robust Transition

FINANCIAL
MODELLING
REPORT
A Comprehensive Equity Research Report, DCF and Comparable Comp Valuation
submitted in fulfilment of the Financial Statement analysis course of batch 2022-26.
Date of submission -
Group Members –
1. Varanya Bhattacharya (226213068) – [email protected]
2. Sumaya Shaik (226213151) – [email protected]
3. Kumar Firake (226213110) – [email protected]
4. Sai Preetham Perubotla (226213124) - [email protected]
 Table of Contents
1. Company overview
2. Industry Analysis
3. Economic Analysis
4. Data Source and Coverage
5. Return Equity Analysis (Du Pont)
6. Peer Analysis
7. Acknowledgement
8. Confirmation
9. Risk and Challenges
 Company Overview

Company logo

Date of Incorporation – 30th June 2959

History of the firm – Indian Oil Company Limited merged with Indian Refineries Limited
in 1959 and got renamed to Indian Oil Corporation Limited. The company is a public sector
undertaking run by the Ministry of Petroleum and Natural Gas. The company is
headquartering in New Delhi but is registered in Mumbai, Maharashtra. IOCL became India’s
largest Indian company and is 94th on the Fortune Global 500 list of world’s largest
corporations. The company has more than 31,000 employees.
Indian Oil business focus lies in hydrocarbon value pipeline, marketing of petroleum
products, exploration of petroleum products and production of petroleum, NG and
petrochemicals, It is also venturing into renewable energy.
How the firm has scaled – As a public sector entity Indian Oil Corporation Limited has
received a lot of support from the government as 90% of it was controlled by the Indian
government. It was an integral part of oil trade (Mostly foreign) and worked closely with the
Indian government and it was considered to be a near monopoly in this space. This all
changed in 2002 when the petroleum industry was deregulated and the monopoly on crude oil
imports held by IOCL. During this initial phase IOCL set up a formidable control on the
petroleum industry owning and operating 17 refineries and holding almost 40% of the
country’s refining capacity. During this reign they emphasized on acquisition of smaller firms
and also focused primarily on the foreign trade aspect and strengthened themselves in this
area. After deregulation they turned their attention to other areas in the petroleum area. They
are into natural gas domain since2004 where they started investing have emerged as a major
player, investing
Key Products, Segments and markets –
1. Refinery services
2. Pipeline transportation
3. Marketing petroleum products
4. Sale of petroleum gas
5. Sale of petrochemicals
Competitions –
1. Adani Total Gas Limited
2. Agarwal Industrial Corporation Limited
3. APAR Industries Limited
4. Ashland Inc
5. Bharat Petroleum Corporation Limited
6. BP p.l.c.
7. Cairn India Limited
8. Chevron Corporation
9. China Petroleum & Chemical Corporation
10. ConocoPhillips
11. DNO ASA
Date of IPO – September 7th, 2009
Industry/Industries where the company operates-
1. Petroleum products
2. Petrochemicals
3. Other petroleum segments
NSE Code- NSEI: IOC MI KEY: 4157473
Area of operations-
India, Sri Lanka and Mauritius
1Year market performance chart –

IOCL 1 year stock performance in comparison with the NIFTY 50 index

 Company name – One Page Profile

Company summary description.

Key Financial Metrics Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Share Price – 5 Years
Revenue (Net Operating) % -8% -22% 58% 40% -8%
COGS % -5% -29% 72% 48% -16%
EBITDA % -70% 285% 12% -40% 160%
EBIT % -92% 1333% 11% -55% 259%
EBT % -115% -904% 7% -69% 440%
Key Financial Ratios Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Market Trading Volume – 5 Years
EBITDA MARGIN 2.27% 11.27% 7.95% 3.39% 9.58%
Net Profit Margin 0.27% 5.78% 4.04% 0.98% 5.12%
`
Fixed Asset Turnover 3.95% 2.88% 4.48% 5.56% 4.74%
Inventory Turnover 6.68% 3.84% 5.00% 6.72% 5.73%
Return on Asset 0.42% 6.54% 6.23% 1.96% 8.66%
Debt to Equity 1.20% 0.87% 0.84% 0.98% 0.66%
Interest Coverage 0.38% 10.6% 7.57% 2.40% 8.14%

Top 8 Shareholders No. of Shares (%) Holding Market Value Shareholding Pattern
Government of India 7,272,199,767 51.50 Rs.15773M

Oil & Natural Gas Corp. Ltd. 2,005,822,884 14.20 Rs.4350M

Life Insurance Corporation of India 1,152,603,861 8.162 Rs.2500M
Oil India Ltd. 728,385,744 5.158 Rs.1580M
Indian Oil Corp. Ltd. 349,677,684 2.476 Rs.758M
SBI Funds Management Ltd. 135,520,155 0.9597 Rs.294M
Kotak Mahindra Asset Management 82,701,030 0.5856 Rs.179M
Co. Ltd.

Managerial Remuneration Designation Remuneration X of Median salary Capital Structure

Share price as on 20/8/2024 Rs.172
Shrikant Vaidya CEO 1,65,12,419 Outstanding Shares 13,771,560,699
Anuj Jain CFO 27,93,398 Market Capitalization Rs.2,302,191.8 (in
millions)
Sathish Vaduguri CMO 90,45,617 Less: Cash and Equivalents Rs. 12,466 (in millions)
Rashmi Govil CHRO 4,40,825 Add: Total Debt Rs.1,326,276(in millions)
Arvind Kumar CRO 74,60,614 Add: Minority Interest Rs.47,467 (in millions)
Enterprise Value. Rs. 3,544,785.2 (in millions)
Senthil Kumar CPO 60,65,121

Recent Updates & Events

 Management Assessment

CEO

Mr. Shrikant Madhav Vaidya, a Chemical Engineer from NIT Rourkela, has over 36 years of experience in
refining and petrochemicals. He played a key role in developing India's largest cracker plant, the Panipat Naphtha
Cracker Complex, which is central to IndianOil's petrochemicals business. Vaidya is a technocrat with expertise in
refinery-petrochemicals integration, essential for the industry's long-term sustainability. He serves as Non-
Executive Chairman of Chennai Petroleum Corporation Ltd. and Ratnagiri Refinery & Petrochemicals Ltd., and as
a Non-Executive Director on the Board of Petronet LNG Ltd.

Director of Finance Director of Marketing Director of Human resources

Mr. Anuj Jain, aged 52 years, is a Masters Mr. Satish Kumar Vaduguri holds a post

in Business Finance from the ICAII and a graduate degree in Management from the Ms. Rashmi Govil, 53, is a Science

Chartered Accountant (ICAI). University of Ljubljana, Slovenia. He has Graduate and MBA in Personnel

Joined Indian Oil in 1996, 3 decades of over 3 decades of experience in marketing of Management from Bundelkhand University

experience in the field of Finance, Taxation petroleum products in various geographies of with three decades of experience in Human

and Commercial aspects of the Oil & Gas the country. He worked and headed Resource Management. She has worked

industry. Appointed the Director of Finance marketing networks of the company and across Indian Oil’s refinery units,

on October 2023. The post he took over was state levels He has been instrumental in headquarters, and corporate office, gaining

left unappointed for a year as the implementing key business initiatives like expertise in industrial relations, performance

predecessor left to join GAIL. Direct Benefit Transfer for LPG (DBTL), management, staffing, and policy
PMUY, BS-VI fuel implementation, etc. formulation.

Director of Pipelines Director (Planning & Business

Director of Refineries Development)

Mr. Arvind Kumar, 56, is a Mechanical

Engineer from KNIT, Sultanpur, with an
Mr. N. Senthil Kumar, an Electronics and
MBA in Operations Management. Joining
Communication Engineer, has over 30 years Mr. Sujoy Choudhury, a Mechanical
Indian Oil in 1990, he has over three decades
of experience in the operations and Engineer with an MBA in Finance from
of experience in Engineering, Project
maintenance of IndianOil’s nationwide oil Jadavpur University, has over 30 years of
Management, and Plant Operations,
and gas pipelines. Before becoming Director experience in the oil industry, covering
including roles as Unit Head of Mathura
(Pipelines) at IndianOil, he led the Engineering, Retail Sales, and
Refinery and Executive Director (Projects).
Operations function at the Pipelines Division Petrochemicals Marketing. Prior to
Kumar played a key role in overseeing mega
Head Office. He played a key role in becoming Director (P&BD), he led
refinery and petrochemical projects during
enhancing pipeline security systems, IndianOil’s Punjab State office, overseeing
his tenure in the Refineries Division.
developing the Central Pipeline Information petroleum activities in Punjab, Himachal
Management System (CPIMS). Pradesh, Jammu & Kashmir, Ladakh, and
 Industry Analysis – Oil and Gas sector of India and the world
Overview- A relatively small industry in terms of player, the number of players that refine
and sell oil in India are less than 15 and the total industry players are less than 20 in the country.
The government is highly involved in this sector and holds major ownership of all major players,
reason being Indian economic security is heavily dependent on the stability of the Oil and Gas
sector. The Oil and Gas sector is a huge import dependent sector as India has very limited
sources of crude oil and has to import to meet its consumption needs.

Indian government wants to consumers to move towards sustainable or locally available

alternatives as the imports of crude oil is so large that it always pushes the current account
deficits, This from an economic standpoint is not a good sign as India is losing out on its
wealth/ownership to foreign players from whom we are importing such huge amounts of oil to
meet our requirements.

The government has already diversifying the options from a supply point of view due to the
addition of electric charging stations, bio fuel, CNG and natural fuel projects and R&D by the
players of this industry.

OPEC+ plans to cut crude oil production till the end of 2025. The industry has had a very steep
challenge, especially in crude oil production which has been in a downward slope for a straight
11 years. The up-to-date profiles reveal a 3. The production was cut down to 54% in April of
2023 as compared to the production in the same month for the previous year. Thus, several
governmental measures aiming at the development of the domestic production have been
undertaken still, the downward trend has not been halted by these steps; changes in exploration
policies as well as application of the enhanced recovery techniques are examples of such

actions.

Flow of investments is conscious and conservative and the posted capex plan of Rs. 301 billion
for ONGC supports this view. 25 billion for the financial year 2023-24; the BERC figure was
slightly lower at Rs. 302 billion. 08 billion in 2022-23. The company expects a 10% growth in the
capital expenditure for the year 2024-25 due to new upstream ventures. On the other hand, Oil
India has a plan of capital expenditure of Rs. 49 billion for the same period.

There has been a reduced quantity of crude oil reserves. Reserves recorded in March 2015 at
762730 thousand tonnes were to be reduced to 651800 thousand tonnes by March 2022. The
number of wells that have also been deployed has reduced over the years from 644 in the 2013-
14 financial year to 566 in the 2021-22 financial year implying a reduction in the extra
exploration activities.
Therefore, although the crude oil and natural gas industry is heading to the implementation of a
new round of projects and investments, it has significant challenges in production and
environmental performance that will a ect its future growth path in the next couple of years.

PESTEL Analysis-
Pestal analysis.

1. Political
a. Open Acreage Licensing Policy:
i. . This assists an explorer in analyzing the data that is accessible for
bidding on the preferred blocks. This has been done to enhance the
foreign participation by worldwide E & P companies such as Shell, BP,
Conoco Philips among others.
ii. Based on government employment data, in 2022, government
employed around 223,031people .
iii. Under OALP, the Ministry of Petroleum and Natural Gas has taken this
initiative and have come up with their 9th bid round.
b. Investments to enhance production:
 i. In February 2024, Prime Minister, Mr. Narendra Modi outlined an
interlinked investment plan of 67 billion USD over a 5-6 year period to
raise the share of natural gas in India’s primary energy from 6% to 15%.
ii. Said Minister of Petroleum & Natural Gas, and Housing & Urban A airs,
Mr. Hardeep Singh Puri in February 2022 that India will double its
exploration area of oil and gas to 0. 5 million sq. km. to 75 by the year
2025 and to one Million sq. km. To achieve it, the production has been
set at 40 re s by 2030 with a vision of increasing the domestic output.
iii. ONGC said in November 2021 it committed Rs. 6,000 crores (US$ ~800
million) on the petrochemical arm ONGC Petro Additions Ltd. (Opal) to
meet equity demands. National Policy on Biofuels, 2018
iv. Pledge to have 20 percent blending of ethanol in petrol and 5 percent bio
diesel blending in diesel by 2030. In May 2022, this policy was pre
poned, moving the 20% target up to fiscal 2025-26.
v. promoted second generation bio fuels focusing on increasing a funding
gap of Rs 5000 crore in six years for 2G ethanol biorefineries and tax
exemptions.
vi. To seize this change P&NG, Government of India has issued the Policy –
‘Ethanol Procurement Policy’ under the ‘Ethanol Blended Petrol (EBP)
Programme’ on October 11, 2019, which contains the long-term
procurement mechanism of ethanol, Long-Term Procurement Contract
terms and condition along with the Pricing Methodology and other
provisions.Economic
c. Demand
i. India is world’s third largest consumer of energy.
ii. Crude oil imports averaged an increase rate of 5 percent for the past
years. 7% and 0. 9 % during the period of January 2024 and April-
January, 2023-24 as compare to the corresponding earlier period.
iii. The demand for diesel in Indian is projected to double to 163MT by 2029-
30, diesel and petrol’s account for approx 58% of India’s oil demand till
2045.Oil demand in India is expected to reach a 2x growth up to 11
million barrels by 2024.
iv. India’s oil and gas production is expected to get a mid-decade top
between 2023-2032, around the year 2027, because of the KG-Basin
projects operated by Reliance Industries Limited and Oil and Natural
Gas Corporation (ONGC).
2. Social:
No Relevant data found.

3. Technological:
a. Innovate for India:
i. BPCL signed a cloud deal with Microsoft in April, 2022 to revolutionise
the company’s operation and advance the future of the oil and sector.
ii. In February 2021, Indian Oil Corp Ltd partnered with Greenstat
Hydrogen India Pvt Ltd to form a memorandum of understanding for
setting up a center of excellence for hydrogen value chain alongwith
other terms such as storage of hydrogen, fuel cells etc.Environmental:
 b. The company have also invested significantly on sustainable fuel segment and
has been actively engaged in developing 100% sustainable fuels that will
support the future ready green fuel vehicles in the subsequent years.

4. Legal:

No Relevant data found

SWOT- The following is the SWOT analysis of the Oil and Gas industry –

Herfindahl score-
The Herfindahl score not only gives us a preliminary peer comparison but also tells us about
the industry concentration of the market based on market share. The calculation is as follows.
A score above 2000 but below 2500 is considered a medium concentrated market, In this case
the Oil and Gas sector seems to have a few players with large market shares due to the high
fixed capital investments. We took all the players operating in the market and used their
Revenue to derive the percentage of market share and the concentration levels of the market.
One thing to note here is that Reliance is not considered here due to unavailability of the data,
this could also mean that if data for reliance is made available, We could find the results of
Herfindahl to be di erent.
 Economic Analysis

Factors affecting the revenue/growth potential of Indian Oil Corporation Limited –

1. Prices of crude oil (Supply side) – Delays in the operationalization of hydrocarbon
blocks due to delays in environmental blocks due environmental clearances and
regulatory approvals.
2. Sales of internal combustion engine vehicles in India. - There seems to be a slow but
inevitable shift towards sustainable transportation and the additional push by the
central government seems towards reducing crude oil imports(crude imports are
affecting Indian Current accounts), this is a big downside for the current business
model of Indian Oil.
3. Global Geopolitical tensions- The global geopolitical scenarios can have a major
impact on the prices of crude oil, namely the Russia-Ukraine situation which had an
impact on crude oil prices around the world. It resulted in a $37.14 increase in WTI
crude prices and a $41.49 increase in Brent crude oil prices reaching a 52.33% and
56.33% increase respectively.
4. Demand for air, land and sea transportation- As we saw during Covid, the demand for
air, sea and land transportation had come to a standstill which impacted the volume of
oil consumptions.

5. Supply-chain disruptions (supply chain mishaps) – Damage to crucial equipment’s/

transportation systems due to human errors/ natural disaster creates major uncertainty
in this sector.
6. Policies & Mandates -The Government of India announced that it expects that at least
30% of all vehicles be EVs and a substantial fleet of last-minute delivery vehicles also
be a substantial portion. And the government is also providing incentives to any
company that is going above and beyond to achieve this goal.
7. OPEC policies on production and trades. – The 1973 oil embargo had brought the
western world to its knees when OPEC decided to halt exports of crude to west as it
supported Israel during the Yom Kippur War, also called the 6-day war. Indian Oil
also benefitted from the recent bulk buying of Russian crude oil when the European
union placed a ban on Russian imports at the beginning of Russia – Ukraine war.
8. Technological developments of some sustainable alternatives (mainly EV). – EV
technology and hybrid vehicles technologies is seeing a major evolution in the USA,
China and Japan and when the technology comes at par with the present day ICE
vehicles performance then they can impact fossil fuel powered vehicle demand
9. Agricultural situations (fertilizer demand)- Fossil fuel-based fertilizers accounted for
almost 3-5% of the world’s fossil fuels and the number since then has only gone
upwards. Although there is an outcry to use natural fertilizers and pesticides, fossil
fuel-based fertilizers are still used to get better results

10. FX Changes increasing the cost of crude – Indian Oil as a business is heavily
dependent on imports and if the Indian rupee weakens drastically, the cost of
crude oil can increase and affect profitability.
11. Global and local competition. – As we move more and more towards biofuel, the
market will become more competitive.
 Data source and Coverage Period

Coverage period of the report spans from 2018-2024

Link to financials- IOCL Financials.xlsb

Sources for the financials-

https://iocl.com/contents/AnnualReportenglish_2022-23/index.html

S&P Capital IQ Pro

Moneycontrol.com

https://in.marketscreener.com/quote/stock/INDIAN-OIL-CORPORATION-LI-9059029/company-
shareholders/

Sources for industry and economic analysis-

CMIE Economic outlook

CMIE Industry outlook

https://www.oneearth.org/fertilizer-a-new-battleground-in-the-fight-to-solve-the-climate-
crisis/#:~:text=Currently%2C%20the%20synthetic%20ammonia%20for,global%20oil%20dema
nd%20through%202026.

https://www.altigreen.com/blog-3/how-is-the-last-mile-ev-adoption-scenario-in-india-and-
globally#:~:text=The%20Indian%20government%20aims%20to,mile%20delivery%20fleets%20i
n%20India.

https://www.planete-energies.com/en/media/article/fuels-aviation-and-
shipping#:~:text=The%20aviation%20industry%20represents%207.8,less%20energy%20use%
20than%20shipping.

https://www.nature.com/articles/s41599-023-02526-
9#:~:text=Through%20the%20event%20analysis%20method,oil%20prices%2C%20reaching%2
056.33%25.
 Return on Equity (Du Pont)

DUPONT ANALYSIS 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Tax Burden 67.24% -35.66% 73.48% 76.21% 84.98% 75.69%
Interest Burden 85.36% -27.17% 90.57% 86.79% 58.32% 87.72%
EBIT Margin 5.58% 2.80% 8.68% 6.11% 1.98% 7.71%
Total Asset Turnover 167.15% 156.31% 113.17% 154.03% 199.90% 169.35%
Leverage 290.55% 331.76% 302.31% 295.80% 311.64% 258.74%
ROE 15.55% 1.40% 19.76% 18.42% 6.12% 22.42%

The analysis given above is the return on equity break-down of IOCL for the last 6 years. We
will discuss the reasons for anomalies or extremities in the few years and investigate why
there has been a sharp jump in the financial year of 2023-24 ROE. IOCL is a volume-based
organization, therefore we see that Asset turnover is extremely high, but EBIT margin is quite
low.

Tax Burden –
The tax burden percentage was consistent over the years except for 2019-2020, where it was
negative and 2022-2023, where it was significantly higher. Let’s delve into these two years to
understand the underlying reasons for these fluctuations.
On average the tax rate that IOCL was paying was 25% but this changed massively for 2019-
20. This could be explained by the unexpected drop in revenue and the tax rate changes. The
revenue went down this year due to two factors – drop in demand for commercial vehicles
lead to a drop in demand for fuel during that year, The after-effects of demonetisation created
a sharp decline in consumption which negatively impacted car sales. GDP growth rate was
down to 3.87% compared to 6.1% the previous year.
Secondly, Covid-19 also first hit the country during the end of the financial year where all air
travels, land and sea travel had come to a standstill which created a deep impact on the
revenue of Indian Oil. Indian Oil lost more than INR 6000 Crores due to the last 20 days of
the financial year of 2020 when the nation was placed on lockdown, this was mentioned in
the NRV notes.
The EBITDA was down 40% due to this and EBIT down by a staggering 70%. Changes in
corporate income tax also lead to further changes in the deferred tax assets. IOCL had paid
advances taxes based on the earlier 30% tax rate but the government introduced a new lower
tax rate with additional fees of 22% which IOCL decided to opt, this lead to revisions in the
deferred tax being negative. This reduction in deferred tax liabilities provided a tax benefit
for the year, contributing to positive PAT despite a negative PBT.
We see something very different happen in FY2022-23, IOCL had a booming year. 2022 saw
the global economy recover post the pandemic, Indians were travelling and there was a huge
demand for tourism and flight transportation, The demand far outpaced the expectations, and
this had a negative impact from a managerial perspective, despite a higher revenue, ROE was
still low is the question we explore here – The one massive jump we see is cost of goods sold,
We see that revenue went up by a strong 28% from previous year but COGS jumped a
massive 50% indicating raw material (crude oil) prices went up. When we looked further, we
see that prices of crude went down over the year of 2022-23 that meant our findings were not
matching with the numbers on the financials, the real answer lied in the FX exposure that a
heavy import-oriented business like IOCL faces. Rupee weakened almost 10% over the year
during 2022 and 2023 which made it expensive for IOCL to import oil and greatly impacted
the businesses profitability. Unexpectedly higher demand and weakening of the Rupee are the
two major reasons for tax burden to by 89% and EBIT margin to be a meagre 1.98% leading
to a very low ROE. You can see the amount of FX exposure that IOCL that year.

Interest Burden-
Interest burden on average has been 20% of EBIT but this changes only for two years again,
that is 2019-20 and 2022-23. Interest burden for FY 2019-20 is shown to be negative, This is
essentially a flaw that the interest burden formula as the net realizable value of crude oil
which is lower than the inventory cost is subtracting the expenses in the form of exceptional
item. Interest burden is 58% (paying higher interest) in FY 2022-23, This can be attributed to
increase in short term liabilities due a sudden increase in cost of purchase, It is also worth
noting that Long term liabilities were reduced by an approx. INR 8000 crores in FY2023-24,
this reduction was based on managements focus to reduce its leverage.
EBIT Margin-
In the year 2019-20, the EBIT margin went down by over 3% compared to the previous year.
The major reason for the same was the dip in vehicle purchases in 2019-20. Due to the
repercussions of the demonetisation, the sales growth of vehicles around the country
experienced a dip across the country dipping to an average of about -20% across the board,
the majority of which comes from commercial vehicles, which suffered a dip of -28%
compared to the previous year. It is also due to the increase in freight capacity of the entire
population of trucks in India by 20-25% by the government, which resulted in overall lesser
fuel consumption and impacted the HSD demand negatively. The civil aviation sector was
also severely hit by the pandemic resulting in a 32.4 % drop in Aviation Turbine Fuel demand
in March 2020.Aditionally, the grounding of Boeing 737 Max and the closure of Jet Airways
earlier in 2019-20 further exacerbated the decline in ATF sales leading to an overall demand
fall of 3.6% in the year. The EBIT margin was also significantly impacted due to a substantial
write down in the valuation of inventories, driven by COVID-19 and the resulting decline in
oil prices. Indian Oil has a policy of valuing its inventories at cost or NRV, whichever is
lower. However, due to the pandemic and the subsequent lockdown from March 25,2020
there was drastic decrease in demand for petroleum products. As a result, a longer time period
was used for estimating NRV to ensure it reflects the most reliable evidence. Initially the
write down in inventory valuation amounted to Rs. 6,855.35 crore due to fall in oil prices.
However, the write down was increased to Rs. 11304.64 crore considering the extended time
period. This entire written down was treated as an Exceptional Item in the P & L. Out of this
Rs. 5,714.30 crore was transferred from cost of material consumed and the remaining amount
was transferred from changes in inventories of finished goods, stock in trade, and work in
progress to Exceptional items. This classification of exceptional items impacted EBIT which
led to its decrease compared to previous year.

Coming to the EBIT margin for the 2022-2023 financial year, which was the second outlier
year which we came across in our research time frame. The EBIT during this time period
dipped below the covid year and 2019-2020 where the fears of covid were on the rise. One of
the major reasons for this is due to the nature of turbulent oil prices, rivalling that of the 2008
financial crisis. The oil prices rose sharply up until the latter half of 2022 after which the
prices dipped, this was due to supply concerns coupled with geopolitical tensions and
rampant speculation about a recession. The redrawing of energy trade routes during this time
is also one of the reasons for the volatile oil process during this time. Another major reason
for this was due to the impact of the Rupee depreciating almost 7% against the Dollar,
although the Rupee did better than most of its peers during this timeframe it still increased the
COGS by a sizable level. And although the demand saw a significant boost with the GDP
growth being robust, the demand failed to catch up to the levels it was pre pandemic, the
demand for oil went up by about 5.6% but this was not a good enough figure to catch up with
the levels pre pandemic.

For the year 2023-2024 the company recovered primarily due to the consolidation of oil
prices coming from the previous year, although the geopolitical flashpoints remained, the
market adapted to the circumstances. Apart from this reason, the demand for energy further
grew by a further 7.6% facilitate the 6.8% GDP growth for the 2023-2024 year. In fact, this
sudden surge in energy consumption was much more than the average of the previous 5 years
of 3.7%. The post pandemic surge was also very evident for all to see as Airways saw a third
consecutive year of double-digit growth which further helped in the demand for petroleum.
Given this increase in demand plus a stable period of oil prices boosted the EBIT for the year
2023-2024 compared to the previous year.
Total Asset Turnover -
In 2022-23, the company’s total asset turnover was at its highest because revenue surged.
This boost in revenue was due to higher prices and increased sales volume. As the Indian
economy recovered from the pandemic, energy demand in India grew by 5.6%, and power
consumption jumped by 9.5% which was more than double the growth rate in the Asia Pacific
region. The revenue increase was driven by demand and external factors such as volatile
commodity prices rather than a change in asset efficiency.
Leverage-
Leverage has remained in a consistent range of 290% to 330% for the past 6 years. This is a
good thing as company has its debts in control which is a positive sign from a solvency
perspective.
 Acknowledgement

Acknowledgement

We the undersigned, hereby acknowledge that:

A. The report represents our original work and does not contain any material taken from
any source, except as acknowledged.
B. There is no use of any text generation tools. If the use of any text generation tool is
found, then the entire project will be considered plagiarized.

Authors.
1. Sai Preetham Perubotla 226213124
2. Varanya Bhattacharya 226213068
3. Sumaya Shaik (226213151)
4. Kumar Firake 226213110
Company Name
(NSE:|BSE:) Logo

Peer Analysis

IOCL has the revenue followed by ONGC, and

Bharat petroleum, closely followed by Hindustan
Petroleum

IOCL (31%) has the largest market share

followed by ONGC at 23% and Bharat
Petroleum at 20 %. The market share is well
spread amongst few very large players.

From this we see that Adani Total GAS, Oil India

and Gujarat state are amongst the most overvalued
companies, potentially because they have high
growth potential due their small size and variety in
product o erings.

Castrol seems to be having the highest

liquidity using cash/ current liabilities
liquidity ratio. IOCL has relatively low cash
reserves, this indicates that either IOCL is
heavily invested its surplus cash or IOCL is
dealing with some working capital problems.
Given that IOCL is the largest revenue
generating company, maintaining cash
reserves maybe be di icult.
 Risk & Challenges for Indian Oil Corporation Limited

The following are the Risks and challenges that Indian Oil corporation given the
current Economics outlook, Industry and competitive outlook along with consumer
demand: -

Economic risks –

1. Demand shift - The Local consumption seems to be showing a declining trend

indicating consumers moving away from ICE vehicles.
2. Crude price volatility- Sharp changes in crude price around the world due to
geopolitical tensions and changes in the world order could skew the revenues of the
company periodically.
3. Forex fluctuations could be a point of difference for IOCL due to the constant changes
in currency prices due to the economic landscape.
4. Policy changes- Policy changes carried out by OPEC and various other countries
could affect the operations of the corporation.
5. Changing competitive landscape – Currently the market appears to be Oligopoly at
present, but the advent of biodiesel and similar technology evolution may make the
market monopolistic in nature and cause harm to companies’ market share.
6. Increased policy (Government and sustainability organizations) pressure towards
sustainability could harm a business operating in the oil and gas landscape.
7. The top brass of the company has shown slight instability recently indicating potential
unsystematic risk.
8. Technological innovation- The increase in R&D towards Battery technology and EV
powertrains pose to be a threat to the organization.
9. Supply chain disruptions due to geopolitical issues and natural occurrences will be a
recurring pain point moving on.
 CONFIRMATION

We the undersigned, hereby acknowledge that :

1. We have used the annual reports of the companies, databases for this report
and only publicly available information.
2. The report does not exceed 25 pages.
3. The report is in word .doc or .docx.
4. The report is in 1.5-line space. The font used is Times New Roman and the
font size is 12. We have not used any other line space, font or font size.
5. The report reads as one continuous story and not as disjointed parts.
6. The report does not reproduce information from the annual report but provides
relevant analysis of the information.
7. The pages are numbered consecutively.

Authors.
1. Kumar Firake (226213110)
2. Sai Preetham Perubotla (226213124)
3. Varanya Bhattacharya (226213068)
4. Sumaya Shaik (226213151)