TERM PAPER OF FINANCIAL MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

SUBMITTED TO: SUBMITTED

BY:
Ms. NITIKA SEHGAL NITIN
SHARMA
ROLL NO
RSI903B30

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REG.
NO.10904136

M.B.A 2ND SEM

ACKNOWLEDGMENT

The most precious moments are those when we get an opportunity to remember
and thank everyone who has in some way or the other motivated and facilitated us
to achieve our goals.

First of all I thank to GOD ALMIGHTY for giving me power to pen down the
term paper in present shape. I thank the entire teaching staff especially Ms.
NITIKA SEHGAL for sharing her valuable knowledge with us & for providing
her able guidance and support. I also thank to my classmate who every time helped
me out and encouraged me for carrying out the task.

I fall short of words to thank my family, who stood beside me while completion of
my task.

NITIN SHARMA

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INDEX

INTRODUCTION 4

HISTORY 5-6

MANAGEMENT – ONGC 7

PROFIT AND LOSS ACCOUNT 8-9

COMPITITORS 10-11

ONGC PERFORMANCE GRAPH 12

CAPITAL STUCTURE 13

ANALYSIS 14

BINLOGRAPHY 15

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INTRODUCTION

Oil and Natural Gas Corporation

Oil and Natural Gas Corporation Limited (ONGC) (incorporated on 23 June 1993) is an
Indian public sector oil and gas company. It is a Fortune Global 500 company ranked 152nd, and
contributes 77% of India's crude oil production and 81% of India's natural gas production. It is
the highest profit making corporation in India. It was set up as a commission on 14 August 1956.
Indian government holds 74.14% equity stake in this company.

ONGC is one of Asia's largest and most active companies involved in exploration and
production of oil. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary
basins of India. It produces about 30% of India's crude oil requirement. It owns and operates
more than 11,000 kilometres of pipelines in India

International rankings

• ONGC has been ranked at 198 by the Forbes Magazine in their Forbes Global 2000 list
for the year 2007.
• ONGC has featured in the 2008 list of Fortune Global 500 companies at position 335, a
climb of 34 positions from rank of 369 in 2007.
• ONGC is ranked as Asia’s best Oil & Gas company, as per a recent survey conducted by
US-based magazine ‘Global Finance’
• 2nd biggest E&P company (and 1st in terms of profits), as per the Plats Energy Business
Technology (EBT) Survey 2004

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• Ranks 24th among Global Energy Companies by Market Capitalization in PFC Energy
50 (December 2004).
• Economic Times 500, Business Today 500, Business Baron 500 and Business Week
recognizes ONGC as most valuable Indian corporate, by Market Capitalization, Net
Worth and Net Profits.

HISTORY
1947--1960

During the pre-independence period, the Assam Oil Company in the northeastern and Attock Oil
company in northwestern part of the undivided India were the only oil companies producing oil
in the country, with minimal exploration input. The major part of Indian sedimentary basins was
deemed to be unfit for development of oil and gas resources.

After independence, the national Government realized the importance oil and gas for rapid
industrial development and its strategic role in defense. Consequently, while framing the
Industrial Policy Statement of 1948, the development of petroleum industry in the country was
considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of
India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and
the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company)
was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam.
In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of
India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast
sedimentary tract in other parts of India and adjoining offshore remained largely unexplored.

In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed
mineral oil industry among the schedule 'A' industries, the future development of which was to
be the sole and exclusive responsibility of the state.

Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it
would not be possible for the Directorate with its limited financial and administrative powers as

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subordinate office of the Government, to function efficiently. So in August, 1956, the

Directorate was raised to the status of a commission with enhanced powers, although it
continued to be under the government. In October 1959, the Commission was converted into a
statutory body by an act of the Indian Parliament, which enhanced powers of the commission
further. The main functions of the Oil and Natural Gas Commission subject to the provisions of
the Act, were "to plan, promote, organize and implement programmers for development of
Petroleum Resources and the production and sale of petroleum and petroleum products produced
by it, and to perform such other functions as the Central Government may, from time to time,
assign to it ". The act further outlined the activities and steps to be taken by ONGC in fulfilling
its mandate.

1961-1990

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

AFTER 1990

The liberalized economic policy, adopted by the Government of India in July 1991, sought to
deregulate and de-license the core sectors (including petroleum sector) with partial
disinvestments of government equity in Public Sector Undertakings and other measures. As a
consequence thereof, ONGC was re-organized as a limited Company under the Company's Act,
1956 in February 1994.

After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil &
Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares
through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by
offering shares to its employees.

In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into

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the downstream sector. ONGC will soon be entering into the retailing business. ONGC has also
entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL). ONGC has made
major investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon revenue
from its investment in Vietnam.

MANAGEMENT – ONGC

NAME DESIGNATION

R S Sharma Chairman and Managing director

A K Hazarika Director

U N Bose Director

Sudhir Vasudeva Director

S S Rajsekar Director

Santosh Nautiyal Director

R S Butola Director

A K Balyan Director

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D K Pande Director

D K Sarraf Director (FINANCE)

L M Vas Director

S Balachandran Director

Anita Das Non Official Part Time Director

PROFIT AND LOSS ACCOUNT

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Sales Turnover 46,848.44 48,536.43 57,190.17 60,466.48 64,342.28

Excise Duty 689.04 546.69 276.73 401.38 338.29

Net Sales 46,159.40 47,989.74 56,913.44 60,065.10 64,003.99

Other Income 1,372.66 2,499.67 3,107.05 4,228.63 4,085.59

Stock Adjustments 29.86 211.58 -19.73 114.11 81.10

Total Income 47,561.92 50,700.99 60,000.76 64,407.84 68,170.68

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Expenditure

Raw Materials 6,812.33 5,662.50 8,177.22 8,424.32 10,905.51

Power & Fuel Cost 214.32 195.45 320.28 317.15 270.79

Employee Cost 2,746.48 3,014.71 3,974.79 5,843.27 4,536.80

Other Manufacturing Expenses 10,289.74 11,305.10 15,616.76 17,184.51 19,578.49

Selling and Admin Expenses 1,941.77 -40.27 -560.70 -2,328.21 -4,470.78

Miscellaneous Expenses 575.53 1,068.25 1,079.27 983.74 1,011.04

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00

Total Expenses 22,580.17 21,205.74 28,607.62 30,424.78 31,831.85

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Operating Profit 23,609.09 26,995.58 28,286.09 29,754.43 32,253.24

PBDIT 24,981.75 29,495.25 31,393.14 33,983.06 36,338.83

Interest 3,548.39 3,718.44 3,724.81 5,016.88 8,485.40

PBDT 21,433.36 25,776.81 27,668.33 28,966.18 27,853.43

Depreciation 1,824.22 3,852.76 3,292.80 3,915.77 4,355.62

Other Written Off 0.00 0.00 0.00 0.00 0.00

Profit Before Tax 19,609.14 21,924.05 24,375.53 25,050.41 23,497.81

Extra-ordinary items 146.08 -122.87 -564.27 607.25 790.68

PBT (Post Extra-ord Items) 19,755.22 21,801.18 23,811.26 25,657.66 24,288.49

Tax 6,685.95 7,321.43 8,041.02 8,941.85 8,437.78

Reported Net Profit 12,983.05 14,430.78 15,642.92 16,701.65 16,126.32

Total Value Addition 15,767.83 15,543.24 20,430.40 22,000.46 20,926.34

Preference Dividend 0.00 0.00 0.00 0.00 0.00

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Equity Dividend 5,703.74 6,416.70 6,630.51 6,844.39 6,844.39

Corporate Dividend Tax 776.33 899.94 1,012.51 1,163.20 1,163.20

Per share data (annualised)

Shares in issue (lakhs) 14,259.34 14,259.34 21,388.73 21,388.73 21,388.73

Earning Per Share (Rs) 91.05 101.20 73.14 78.09 75.40

Equity Dividend (%) 400.00 450.00 310.00 320.00 320.00

Book Value (Rs) 328.52 378.42 289.52 330.16 368.12

COMPETITORS

Last Price Market Cap. Sales Net Profit Total Assets

(Rs. cr.) Turnover

ONGC 1,082.90 231,618.51 64,017.82 16,126.31 94,771.12

Cairn India 310.85 58,957.92 3.73 54.24 31,990.80

GAIL 431.65 54,753.83 23,960.80 2,803.70 15,969.76

Oil India 1,149.15 27,631.82 - - -

Reliance Natural 65.50 10,697.00 270.02 69.87 3,321.78

Petronet LNG 80.45 6,033.75 8,428.70 518.44 4,265.13

Alban Offshore 1,251.95 5,448.01 1,055.88 255.57 4,318.31

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Guj State Petro 90.10 5,067.66 487.50 123.41 2,363.13

Guj Gas 292.05 3,745.54 1,417.64 175.12 698.48

Hind Oil Explore 254.25 3,317.79 85.18 53.57 1,188.83

ANALYSIS

 The total assets of the ONGC is much greater. While gujrat gas has minimum total assets
i.e. 698.48
 Net profit of ONGC is much higher i.e. 16,126.31 than its competitors but CAIRN
INDIA has lowest profit i.e. 54.24.
 Sales of ONGC has again much higher than its competitors.
 CAIRN INDIA has again lowest sales in comparisons of all above competitors.
 The Market cap of ONGC is much greater than all its competitors while hind oil explore
has minimum market cap i.e. 3,317.79.
 OIL INDIA has neither profit nor sales turnover and as well as its total assets also nil.
 According to profit and loss account the earning per share of ONGC is not increasing
every year. In mar.05 it is 91.05 and in mar.06 it is 101.20 i.e. increased by 10.15 while
in mar.07, mae.08 NAD mar.09 it is not increases in this way.
 Equity dividend of ONGC is increases every year while in mar.o8 to till mar.09 it is
stagnant i.e. 6844.39
 Operating profit of the ONGC is increased in every year.
 Income of the ONGC is increased due to increase in expenditure of the co. like raw
material, selling and admin expenses and miscellaneous expenses.
 As the above given balance sheet showing that the ONGC does not having preference
share capital because it’s a growing company and it has sufficient finance to operate or
run the business and the profit of the co.ic also increased.
 Equity share capital of the co. is increased in every year due to increase in profit of the
co. and it shows that the co. having strong goodwill among its competitors.

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 Reserves of the ONGC are increases in every year due to increase in the net profit of the
company.
 Current asset of the company also increased means that the company is very good in
converting its current assets into cash with in a year.

ONGC PERFORMANCE GRAPH

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ANALYSIS

ONGC Profits are increasing in every year so its very good position for the company and also
earning per share increasing from year to year it shows that more scope for higher rate of
dividends

CAPITAL STRUCTURE OF ONGC LTD.

AUTHORIZED CAPITAL:

Authorized Capital
Year Shares Face Value Value (Rs Crore)
2006-07 45000 10 450
2005-06 41000 10 410
2004-05 40000 10 400

ISSUED CAPITAL:

Issued and subscribed

Year Shares Face Value Value (Rs Crore)

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2006-07 38537 10 385.37

2005-06 38283 10 382.82
2004-05 36175 10 361.75

NOMINAL VALUE OF CAPITAL:

• Face Value: Rs. 10 per share. The face value remains the same over the previous three years
• Stock Split: There has been no change in the Face Value of the share in the past.

ISSUE PRICE OF THE SHARE:

• Share Premium

Year Share Premium (Rs Crore)

2006-07 1936.4
2005-06 1828.7
2004-05 1473.9

DIVIDEND DISTRIBUTION:
• Cash Dividend:

Year Proposed Dividend(in Rs. Crore)

2006-07 578.07
2005-06 497.94
2004-05 452.19

ANALYSIS

A mix of a company's long-term debt, specific short-term debt, common equity and preferred
equity. The capital structure is how a firm finances its overall operations and growth by using
different sources of funds. A company's proportion of short and long-term debt is considered
when analyzing capital structure. When people refer to capital structure they are most likely
referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is.
Usually a company more heavily financed by debt poses greater risk, as this firm is relatively
highly levered.

Following is the final analysis of Capital Structure of ONGC Ltd.:

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• WACC is highest in 2008 followed by 2007 & 2009, it shows that the value of firm is
highest in 2009 followed by 2007 & 2008.

• The retained earnings of the company has increased significantly over the years, it shows
the intention of the company for its expansion plans.

• In 2009 the Company raised Rs.400 crores by way of private placement of Secured, Non-
Convertible Redeemable Debentures (“NCDs”) with an average maturity of 6 years.
Your Company managed to raise the NCDs at highly competitive rates inspite of there
being a sever credit freeze and liquidity crunch in the market.

• Capital Structure of the company affects the WACC. Due to the use of debt in the capital
structure the WACC decreases, because the debt is the cheaper source of finance. So the
WACC has decreased in 2009. But it has increased in 2008.

BIBLOGRAPHY
TEXT BOOKS

PARESH SHAH
I.M PANDEY

WEB SITES

http://www.ongcindia.com/

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www.equitymaster.com/research-it/.../comp_info.asp?h...

http://en.wikipedia.org/wiki/Oil_and_Natural_Gas_Corporation

http://www.24dunia.com/english-news/search/capital-structure-of-ongc.html

http://www.moneycontrol.com/stocks/company_info/pricechart.php?sc_did=ong

http://sify.com/finance/stockpricequote/Oil_Natural_Gas_Corporation_Ltd-
ONGC/capitalstructure.html

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