Académique Documents
Professionnel Documents
Culture Documents
Group 10 Section
B
UM15069- Apratim Chandra
UM15073- Ayush Garg
UM15103-Rashmi Gupta
UM15105- Saif Hasan Rizvi
Contents
1
Executive Summary........................................................................................................................................................... 5
Industry Overview.............................................................................................................................................................. 6
2.1
2.2
2.3
2.4
2.5
Industry Benchmarks................................................................................................................................................ 10
2.6
PESTEL Analysis......................................................................................................................................................... 14
2.7
2.8
2.9
Competitive Landscape............................................................................................................................................. 20
Company Overview.......................................................................................................................................................... 25
3.1
Company background................................................................................................................................................ 25
3.2
3.3
Vision................................................................................................................................................................................... 28
Mission................................................................................................................................................................................. 28
Values................................................................................................................................................................................... 28
3.4
3.5
3.6
3.7
3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)....34
3.8
SWOT Analysis............................................................................................................................................................ 34
3.9
Portfolio Analysis....................................................................................................................................................... 36
4.2
1 Executive Summary
Industry Overview: - The oil and gas sector consists of three segments upstream, midstream and downstream. The upstream segment primarily
comprises companies that are engaged in exploration and production activities, while the midstream segment comprises of players in storage and
transportation, and the downstream segment comprises of players that are engaged in refining, processing and marketing of petroleum products.
Major players in this segment are upstream: -ONGC, reliance; midstream: - IOC, Reliance; Downstream: - IOC, ESSAR, Reliance, BPC. The
value of the Indian oil and gas sector is forecasted to grow from US$ 117,562.9 million in 2012 (estimated) to US$ 139,814.7 million by 2015.
IOC is a market leader in terms of capacity and ranks 2 nd in oil refineries in the country. It also has the largest pipeline distribution network in the
country. It is Indias flagship national oil company meeting countrys energy demand from last half a century. With a corporate vision to be 'The
Energy of India' and to become 'A globally admired company,' its business interests capture the whole hydrocarbon value-chain e.g. refining,
pipeline transportation, marketing of petroleum products, exploration & production of crude oil & gas, marketing of natural gas and
petrochemicals, besides forays into alternative energy and globalisation of downstream operations. IOC is moving towards a transnational model
and has set up subsidiaries in Sri Lanka, Mauritius and the UAE. It is simultaneously scouting for new business prospects in the energy markets
of Asia and Africa. It has also formed about 20 joint ventures with reputed business partners from India and abroad to pursue diverse business
interests.
Our Analysis shows that increase in drilling activity & underserved demand along with technological advancements are the key growth factors in
the Industry. The critical success factors (CSF) are access to key markets, logistics and demand, manufacturing excellence and feedstock.
Government policies and regulations play a significant role in this industry, even the prices are regulated by government. Increase in consumption
fuelled by aviation and automobile industry will result in strong oil and gas demand in the coming years. Indian oil and gas sector companies are
investing heavily in R&D and are equipped with state of the art technology. Further, government is also promoting investment in research to boost
oil and gas production and develop new formulations of lubricating oils to cater to defence, public utilities, railways and transportation.
In the recent years, government has taken several steps to liberalize the sector. Though a welcome step, it has also created threat to big
companies as there are higher chances that smaller firms may import oil at lesser price and reach out to customers at lower price. Further,
government is promoting alternate sources of energy like solar energy, wind energy and bio-fuels. This can also create stiff competition for the
sector in coming years.
Our SWOT analysis shows that IOC needs to work on legal issues, employee management, bureaucracy, feedstock prices. Along with these, it
also needs to focus on the opportunities like Increasing market share (by extending their operations in eastern India), expansion in export
markets, and investment in R&D facilities for future development.
To further fuel its growth, it has planned several strategic initiatives. It is trying to develop a petrochemical hub at PARADIP which will help to
accelerate growth in Eastern India. With its constant focus on R&D, It has developed technology to utilize petrochemical by-products for producing
chemicals that can be used downstream to cater to other industries like automobile, railways, manufacturing etc. Further, it has also venture in
producing speciality products which are currently imported in India. This will help in increasing revenue and diversifying its product portfolio.
2 Industry Overview
2.1 Nature and Size of the Industry
The oil and gas sector is among the 6 core industries in India and it plays a very major role in influencing decision making for all other important
sections of the economy.
In 199798, the New Exploration Licensing Policy (NELP) was visualized to fill the increasing gap between Indias gas demand and supply.
Recent reports suggest that the Indian oil and gas industry is anticipated to be worth more than US$ 139.8 billion by the year 2015. Indias
economic growth is closely related to energy demand; therefore the need for oil and gas is projected to grow more, thereby making the sector
quite conducive for investment.
The Government of India has taken up several policies to fulfil this increasing demand. The government has allowed 100 per cent foreign direct
investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts
both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.
Market Size
Supported by new oil fields, domestic oil output is anticipated to increase to 1 MBPD by FY16. With India developing gas-fired power stations,
consumption is up more than 160% since 1995. Gas consumption is likely to grow at a CAGR of 21% during FY0817. Presently, domestic
production accounts for more than three-quarters of the countrys total gas consumption.
India increasingly relies on imported LNG; the country was the 5th LNG importer in 2013, accounting for 5.5% of global imports. Indias LNG
imports are forecasted to increase at a CAGR of 33% during 201217. However, net imports of Natural Gas fell from 13.14 BCM in 2012-13 to
13.03 BCM in 2013-14.
State-owned Oil and Natural Gas Corporation (ONGC) constitutes majority of the upstream segment (exploration and production), accounting
for approximately 68% of the countrys total oil output (FY14).
Indian Oil Corporation Limited (IOCL) operates 11,214 km network of crude, gas and product pipelines, with a capacity of 1.6 MBPD of oil and
10 million metric standard cubic metre per day (MMSCMD) of gas. This is around 30 per cent of the nations total pipeline network. IOCL is the
largest company, operating 10 out of 22 Indian refineries, with a combined capacity of 1.3 MBPD.
Due to higher oil and gas demand and exhausting hydrocarbon resources, focus is shifted to
unexplored reservoirs fuelling the growth. Further, technological advancement has empowered this
growth significantly.
Indian government unveiled plans to add another 91 Million barrels to its crude oil capacity to
protect India from supply disruptions by 2017
.
Indian government unveiled plans to add another 91 Million barrels to its crude oil capacity to
protect India from supply disruptions by 2017.
Rationale
In house state of the art R&D facilities, high refining capacity, advance crude oil process units goes
a long way in improving the operating margins of the unit.
Integration
Increasing investment in value chain business such as exploration and production will create
integrated projects.
Feedstock
CSF 1
CSF 2
CSF 3
CSF 4
11,211 km Pipeline
56,200 crores
invested in
exploration. 1.75
trillion investment to
expand output by
54%.
North
1563 km Pipeline
23 MMTPA
South
911 km Pipeline
11.5 MMTPA
East
1710 km Pipeline
32.5 MMTPA
West
1151 km Pipeline
13.7 MMTPA
North-East
1713 km Pipeline
Central
345 km Pipeline
Global
India
Category
Industry Level
(National)
Activity Ratios
Indicator
Market Leader
201112
201213
201314
2014-15
(till Q3)
201112
2012-13
201314
2014-15
(till Q3)
38,39,0
49
36,38,5
24
35,68,4
76
44,52,64
9
26,50,447
23,87,220
25,04,938
28,54,000
Inventory
turnover
9.388
10.722
10.504
14.444
9.45
8.69
9.35
9.32
Receivables
turnover
35.462
35.776
40.236
45.146
18.4
23.78
34.61
42.95
Payables
turnover
9.16
10.722
10.504
14.444
9.45
8.69
9.35
9.32
Asset turnover
4.178
4.186
4.206
1.5
1.57
1.51
1.12
Current ratio
0.942
0.93
0.916
0.778
1.46
1.43
1.11
0.89
Quick ratio
0.74
0.766
0.706
0.5
1.19
1.12
1.03
0.63
Cash ratio
0.206
0.212
0.176
0.059
0.586
0.593
0.419
0.098
Debt-to-assets
0.539
0.555
0.579
0.521
0.332
0.330
0.402
0.403
Market Size
Liquidity Ratios
Category
Indicator
Market Leader
201112
201213
201314
2014-15
(till Q3)
201112
2012-13
201314
2014-15
(till Q3)
Debt-to-capital
ratio
0.539
0.555
0.579
0.521
0.332
0.330
0.402
0.403
Debt-to-equity
ratio
1.178
1.288
1.212
0.84
0.36
0.3
0.43
0.41
Interest
coverage ratio
4.93
3.166
4.524
6.5
10.66
9.66
9.68
13.45
Gross profit
margin
2.858
2.038
2.352
1.602
6.73
5.91
5.66
7.02
Operating
profit margin
4.304
3.332
3.612
2.904
10.19
8.54
7.91
9.6
Net profit
margin
1.972
1.462
2.054
1.716
6.07
5.82
5.63
6.9
Return on
assets (ROA)
315.568
295.652
326.868
352.428
498.21
554.22
609.78
668.05
Return on
equity (ROE)
4.1
5.2
6.9
8.05
6.9
6.7
6.1
5.3
ratio
Solvency Ratios
Profitability
Ratios
Category
Valuation Ratios or
Price Ratios
Indicator
Market Leader
201112
201213
201314
2014-15
(till Q3)
201112
2012-13
201314
2014-15
(till Q3)
Price to
Earnings (P/E)
31.6
16.8
9.13
13.2
13.4
11.4
11.1
12.1
Price to Cash
Flow
7.1
6.233
4.667
6.733
8.3
7.4
7.4
8.1
Price to Book
(P/B)
1.2
1.1
0.933
1.233
1.6
1.3
1.3
1.3
Price to Sales
.333
.300
.233
.367
0.7
0.6
0.6
0.8
Dividend Yield
1.733
1.9
3.633
2.7
1.1
1.1
24.898
26.12
25.8325
26.4175
12.62
12.51
12.7
12.95
Enterprise
value (EV)
4.175
6.021
4.086
8.246
9.63
9.30
11.40
11.09
Staff Cost/
Salary as % of
sales
1.17%
1.43%
1.34%
1.68%
1.10%
1.30%
1.28%
1.67%
Op-Expenses
as percent of
24.43
25.442
25.612
21.796
60.16
63.3
66.99
63.63
Category
Indicator
Market Leader
201112
201213
201314
2014-15
(till Q3)
201112
2012-13
201314
2014-15
(till Q3)
Depreciation
as percentage
of Sales
2.74%
2.30%
2.15%
2.44%
3.46%
2.83%
2.58%
3.08%
Fixed Assets
to Sales
Revenue
36.54%
36.96%
42.57%
57.48%
45.10%
45.35%
52.62%
83.42%
Sales
Description
Rationale
Political
Economic
Social
Technological
India
is
amounts
spending
of
huge
money
in
R&D
centre
is
producing
than
thousands
more
of
formulations of lubricating
oils.
These help to cater to
different fields of Indian oil
industry such as Public
utilities, Defense, Railways
and Transportation.
The
R&D
centres
refinery
machinery
and
of
lubricants,
formulations,
emission
pipeline
Environmental
Today
environmental
factors are one of the most
important factors in the oil
industry.
The
environmental analysis has
to focus more on critical
issues inbuilt in clean ups
programs as they affect the
refining process in todays
oil
industry.
The
environmental monitoring
also affects the transport
systems, storage, recovery
options and utilization.
The
gaseous
emissions,
solid
oil
spills
from
the
tankers
affects
the
methods
for
the
improvement
of
management.
Legal
Power of buyers:
For the oil industry there are two types of buyers
Industrial buyer.
Individual buyer.
They both together constitute downstream buyers. These buyers get supplies from the upstream buyer for ex. Indian oil. They do have
an incentive to limit supply so they keep prices as high as possible due to shrinking downstream margins. This is done for other
competitors. Say for example: Indian oil is having competitors like BP, SHELL and RELIANCE in the diesel and petrol segment. In the
lubricants segment they face fierce competition from: CASTROL, SHELL and VALVOLINE products. So the industrial customers who do
bulk purchase have good bargaining power as they order huge quantity and on top of that they have good number of other suppliers.
And for the individual consumers they have got wide variety of choices. So they can switch to some other brand as there is no switching
cost involved. So, we can say that buyers are having considerable bargaining power in the oil industry.
Main differentiator of IOC from its competition is the large distribution network which is approximately double in size from its nearest
competitor.
10,329 KM of pipeline owned by IOC helps in establishing its niche over other competing refineries.
Regions
-Petroleum
-Develop neighbouring
markets:
Pakistan, Bangladesh and Nepal.
-Plastic Resins
( Nylon Acrylic )
-Synthetic Rubber
-Paints
-Synthetic Fibres
-Plastic Products
( Packaging, Electrical, Auto)
Details
End-user Segments
Significance Attached
(Low, Medium, High)
Blend
(Crude Oil)
Refineries B2B.
High
Individual customers
High
Individual Customers
Medium
The impact of the buying criteria is graded on the basis of the intensity and duration of their impact on the current market landscape. The
magnitude of the impact has been categorized as described below:
Low - Negligible or no impact on the market landscape
Medium - Medium-level impact on the market
High - Very high impact with radical influence on the growth of the market
Key Trend
High
High Probability
High
High Probability
Medium
Medium Probability
High
High Probability
Oil & gas industry players are addressing many near-term threats to financial returns. Yet the long-term outlook, based on demand and supply
fundamentals, remains quite optimistic. To resolve the conflict between near-future pressures and long-term potential, oil and gas companies
should be executing a strategic response to the economic crisis that triggers near-term risks and increases long-term capabilities. The key
trends and developments in this industry can be broadly defined under 6 categories
Ensure strategic liquidity
Though most of the companies have avoided or already looked into immediate financial crisis challenges, many still face refinancing, expiring
hedges, and cash flow not sufficient to sustain debt service, along with on-going investment in operations. Looking into some of the below
mentioned points could help in ensuring strategic liquidity
3 Company Overview
3.1 Company background
Indian Oil Corporation (Indian Oil) is India's largest commercial enterprise, with a sales turnover of Rs. 4,50,756 crore (US$ 73.7 billion) and
profits of Rs. 5,273 crore for the year 2014-15. Indian Oil is ranked 119 th among the world's largest corporates (and first among Indian
enterprises) in the prestigious Fortune Global 500 listing for the year 2015.
As India's flagship national oil company, with a 33,000-strong work-force currently, Indian Oil has been meeting Indias energy demands for
over half a century. With a corporate vision to be 'The Energy of India' and to become 'A globally admired company,' Indian Oil's business
interests straddle the entire hydrocarbon value-chain from refining, pipeline transportation and marketing of petroleum products to
exploration & production of crude oil & gas, marketing of natural gas and petrochemicals, besides forays into alternative energy and
globalisation of downstream operations.
Having set up subsidiaries in Sri Lanka, Mauritius and the UAE, the Corporation is simultaneously scouting for new business opportunities in
the energy markets of Asia and Africa. It has also formed about 20 joint ventures with reputed business partners from India and abroad to
pursue diverse business interests.
Indian Oil's network of over 43,000 customer touch-points reaches petroleum products to every nook and corner of the country. These include
close to 25,000 petrol & diesel stations, including 6,200 Kisan Seva Kendra outlets (KSKs) in the rural markets. The Corporation has a 65%
share of the bulk consumer business, and almost 6,400 dedicated pumps are in operation for the convenience of large-volume consumers like
the defence services, railways and state transport undertakings, ensuring products and inventory at their doorstep. They are backed for
supplies by 136 bulk storage terminals and depots, 98 aviation fuel stations and 91 LPG bottling plants.
Indian Oil has ambitious plans to broaden its energy basket with alternative energy options such as wind, solar, bio-fuels and nuclear power,
Wind power systems to the tune of 69.3 MW have been installed in the States of Gujarat and Andhra Pradesh. A 5-MW grid-connected solar
power plant at Rawra, Rajasthan, is operational since 2012. Solar power systems of about 900 kW have also been installed at various Indian
Oil installations and offices across the country. Steps are underway to set up an additional 200 MW of wind power and 60 MW of solar power
systems.
As a major initiative in reducing carbon emissions, the Corporation has so far converted over 2,600 fuel stations to operate on solar energy. The
cumulative capacity of 8.6 MW from these solar photo-voltaic power systems, with an annual generation capacity of 103 lakh units, has carbon
emission reduction potential of 8,500 tonnes per year. Indian Oil's extensive retail network in rural areas was leveraged to sell over 1.4 lakh
rechargeable solar lanterns to help replace the traditional kerosene wick lamps in rural households which are not yet connected to grid power.
Indian Oil has the largest captive plantation covering 8,000 hectares for bio-fuel production in India in the States of Chhattisgarh, Madhya
Pradesh and Uttar Pradesh. To straddle the complete bio-fuel value chain, Indian Oil has formed two joint ventures, Indian Oil CREDA Biofuels
Ltd. and Indian Oil Ruchi Biofuels LLP. Currently, ethanol production from lignocellulosic sources such as rice straw, cotton stalk, bamboo, etc.,
is also being actively explored.
Mission
To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through
value of products and services, and cost reduction
To maximise creation of wealth, value and satisfaction for the stakeholders
To attain leadership in developing, adopting and assimilating stateof-the-art technology for competitive advantage
To provide technology and services through sustained Research and Development
To foster a culture of participation and innovation for employee growth and contribution
To cultivate high standards of business ethics and Total Quality Management for a strong corporate identity and brand equity
To help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience.
Values
Care Innovation Passion Trust
Petrol/Gasoline- Automotive gasoline and gasoline-oxygenate blends are used in internal combustion spark-ignition engines. These
spark ignition engine fuels are primarily used for passenger cars. They are also used in off-highway utility vans, farm machinery and in
other spark ignition engines employed in a variety of service applications.
Diesel/Gasoil-Petroleum derived diesel (called as petrodiesel) is a mixture of straight run product (150 C and 350 C) with varying
amount of selected cracked distillates and is composed of saturated hydrocarbons (primarily paraffins including n , iso , and
cycloparaffins),
and
aromatic
hydrocarbons
(including
napthalenes
and
alkylbenzenes).
Diesel is used in diesel engines, a type of internal combustion engine. The Indian Standard governing the properties of diesel fuels is IS
1460:2005 (5th Rev). Important characteristics are ignition characteristics, handling at low temperature, flash point.
Servo Lubes and Greases-SERVO brand, from Indian Oil, is the brand leader among lubricants and greases in India and has been
conferred the Consumer Superbrand status by the Superbrands Council of India.
AutoGas- (LPG) is a clean, high octane, abundant and eco-friendly fuel. It is obtained from natural gas through fractionation and from
crude oil through refining. It is a mixture of petroleum gases like propane and butane. The higher energy content in this fuel results in a
10% reduction of CO2 emission as compared to MS.
Indane Cooking Gas - Indane is today one of the largest packed-LPG brands in the world and has been conferred the coveted
Consumer Superbrand status by the Superbrands Council of India.
Kerosene- Kerosene are distillate fractions of crude oil in the boiling range of 150-250C. They are treated mainly for reducing aromatic
content to increase their smoke point (height of a smokeless flame) and hydrofining to reduce sulphur content and to improve odour,
colour & burning qualities (char value).
Bulk Industrial Fuels - In the large volume consumer segment, IndianOil's provides complete Fuel Management Solutions to customers
who require fuels in bulk and have dedicated facilities for storage and handling
Aviation Fuel Indian Oil Aviation Service is a leading aviation fuel solution provider in India and the most-preferred supplier of jet fuel
to major international and domestic airlines
Marine Fuels Indian Oil caters to all types of bunker fuels and lubricants required by various types of vessels operating throughout the
world in the shipping industry.
Bitumen - Bitumen is a common binder used in road construction. Indian Standard Institution defines Bitumen as a black or dark brown
non-crystalline soil or viscous material having adhesive properties derived from petroleum crude either by natural or by refinery
processes
It has the highest Refining Share with 31% of the Industry Capacity of 213.18MMTPA
Downstream Industry Capacity of Pipelines is 70.35 MMTPA with IOCL its 50%
Key
Partners
Key
Activities
Categories
Production: Plants and refineries to process crude
Value
Propositio
ns
Customer
Segments
Key
Resources
available to consumers.
Retail Outlets, Servicing Centres,
Distributors
No direct relationship with customers but
indirect relation through wholesalers and
retailers.
Sale of petroleum related products.
Need for domestic use of petrol for
automobiles.
Fuel, Petrochemicals, Plastic Resins,
Synthetic Rubber.
Oil is a very important commodity needed
for daily usage like transportation, cooking
etc.
Channels
oil.
Problem Solving: Decisions about innovation and
new product lines.
Platform/Network: Direct B2B and B2C through
marketing channels.
Characteristics
Diversifying into new products like plastic and
paraffin wax.
High Brand Equity of IOC.
Low cost leadership of IOC promotes its products.
Innovative measures to reduce cost of production.
Increasing Profits suggest that IOC is less risky for its
stakeholders.
Strong distribution network making the products
accessible across remote locations
Mass Market
Diversified
Types of resources
Physical- Plant and locations for refineries.
Intellectual (brand patents, copyrights, data)- For
new products and refining processes.
Human- Shop floor workers to use their expertise in
plants.
Financial-Huge working capital for establishing new
plants and meeting operating expenses of R & D.
Channel phases
1. Awareness
Cost
Structure
Revenue
Streams
network of dealers.
LPG distributors work best.
Online retail if implemented can be cost
efficient.
3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity
System Map)
3.8 SWOT Analysis
Strengths
Weakness
1. Legal issues
2. Employee management
3. Bureaucracy
4. Volatility in the crude market & subsidy burden
Threats
Opportunities
1. Government regulations
2. High Competition
The main competitors of IOC are Reliance, BPCL, HPCL and MRPL. We have analyzed IOC with respect to its competitors
in the following section.
Company
Reliance
Distribution
Network
Capacity (mmta)
Investment
1386 km
34
1,12,573.00
11211 km
80.70
23,899.49
BPCL
6.00
12,391.14
HPCL
2514 km
14.80
11,241.48
MRPL
362.77 km
15.00
IOC
1,349.67
Capacity (mmta)
100
80
Capacity (mmta)
60
40
20
0
IOC is the market leader in terms of capacity. Its capacity is approximately nine times of its nearest competitor Reliance.
Compa
ny
Relianc
e
Last
Price
Market
Capitalizat
ion
966.65
3,13,205.67
IOC
367.65
89,263.67
BPCL
769.25
55,623.26
HPCL
687.95
23,295.86
MRPL
57.6
10,094.97
Sales
turnover
Net
Profit
Total
Assets
3,29,076.0
0
4,37,526.1
3
2,38,086.9
0
2,06,626.1
9
22,719.0
0
3,05,317.00
5,273.03
1,17,680.54
5,084.51
34,244.76
2,733.26
33,077.73
57,477.07
-1,712.23
13,180.49
350000
300000
250000
200000
Last Price
150000
Market
Capitalization
100000
50000
0
Reliance IOC BPCL HPCL MRPL
In terms of sales Turnover, IOC is the market leader. However, net profit of Reliance refinery is highest and approximately four times of
IOC. This shows that Reliance is highly profitable as compared to other competitors.
The above chart shows Petrochemical capacity growth of IOC. It is the second largest petrochemical player in the country.
Capacity Share: - Glycols: - 25%, Polymers: - 18%, PTA: - 14%, LAB: - 24%
Growth Areas
Utilization of petrochemical by
products for producing chemicals
Downstream
petrochemical
industry for polymer processing.
Revamp
of
the
existing
processing unit for PetCoke
gasification.
Produce light distillates from
crude oil which hold higher value
in market. E.g. Synthetic ethanol,
Acetic Acid etc.
Increase in revenue
Development of
hub at PARADIP
Rewards
Key Success Factors
petrochemical