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Submitted by:- MAUMITA ADHIKARY

Roll No.:- DT-09/12

Subject code:- MS-245

Submitted to:- Prof. P.K. ROY

Submitted on:- 08/07/2014

WEST BENGAL UNIVERSITY OF ANIMAL AND FISHARY SCIENCES

A CRITICAL ANALYSIS REPORT ON HPCL

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Stock price: 500104 (BSE)Rs. 290.40 +7.20 (+2.54%)7 Mar,2014 3:55 pm IST - DisclaimerHeadquarters: Mumbai, IndiaFounded: 1976

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OBJECTIVESTo know about the brief introduction of HPCLTo know about Mission, Vision and Quality policy of HPCLTo know about the products as well as competitors of HPCLTo know about the share holding pattern and financial assessment of HPCLTo know about the economic analysis of HPCLTo know about the ratio analysisTo know about the SWOT analysis and the industrial analysis(Porter’s 5 forces) of HPCLTo know about strategies and the Research & development of HPCLTo know about future outlooks of HPCL

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METHODOLOGYHPCL is the one of the largest refineries in the INDIA. They have a mission, vision and future outlooks to enhance the profit in future. There are so many petroleum based products like lubes, petrol, diesel and others which have a large market. There are so many share holders who holds a huge no. of shares. Nowadays, HPCL has so many competitor refineries. As it is a growing up company, so it many ups and down in market. It also spread its business outside of INDIA. Many on going projects & researches is continued by this company. Analyzing marketing strategies suggestions is given.

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INTRODUCTIONHPCL is an Indian state-owned oil and natural gas company with Navranta Status. Its

operates two major Refineries Mumbai, Maharashtra(west zone), Vishakhapatnam(east zone). HPCL headquarters is Mumbai, Maharashtra. It’s an oil industry which found in 1974. HPCL has been ranked 260th in the Fortune Global 500 rankings of the world's biggest corporations (2013) and 4th among India's Companies for the year 2012. HPCL has about 20% marketing share in India among PSUs and a strong marketing infrastructure. The President of India owns51.11% shares in HPCL. It’s holds equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited (MRPL). HPCL was featured on the Forbes Global 2000 list for 2013 at position 1217. It is 10th most valuable brand in India according to an annual survey conducted by Brand and The Economic Times in 2010. HPCL also owns and operates the lube refinery in India producing Lube Base Oil of International Standards. This Lube Refinery accounts for over 40% of the India’s total Lube Oil production. HPCL is constructing refinery at Bathinda, in the state of Punjab, as a joint venture with Mittal Energy Investment Pte. Ltd.

It’s business units includes-Refineries, Aviation, Bulk-fuel, LPG, Lubes, Retail, Trade, Joint ventures and E&P (exploration and production).

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MISSION, VISION AND QUALITY POLICY

• MISSION: The mission of HPCL is to enhance their productivity, profitability and quality of the products so that they can be the no. 1 in the oil industry by taking into care the cultural heritage and the environment and the customers and employee.

• VISION: The vision of HPCL is to be World Class Energy Company to be known for its caring and delighting its customers with good quality products in domestic and international market. The company will be excellence in social commitments, environment, employee welfare and relations, health and safety norms.

• QUALITY POLICY: The company is committed to deliver “Quality Petroleum Products” to the costumer on time, every time in order to achieve “Total Customer Delight”. As it’s important for all companies to obtain customer’s satisfaction.

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PRODUCTSThe main petroleum products of HPCL include:• Petrol: Known as Motor Spirit(MS) in Oil Industry. HPCL markets the product through its retail pumps spread all over India. Its

principle consumers are regular personal vehicle owners.

• Diesel: Known as Heavy Stock Diesel(HSD) in Oil Industry. HPCL markets the products through its retail pumps as well as terminals and depots. Its consumers are not only regular auto owners but also transport agencies, industries etc.

• Lubricants: Riding on its brand - HP Lubes, HPCL is the market leader in lubricant and associated products. It commands over 30% of market share in this sector. The popular brands of HP lubes are Laal Ghoda, Milcy, Thanda Raja, Koolgard, Racer 4, etc.

• Aviation Turbine Fuel: With major ASF(Air Service Facility) present in all major airports of India. HPCL is a key player in this sector supplying ATF to major airlines. It has an accomplishment of sorts to supply fuel to US Air Force 1.

• LPG: HP GAS, The HPCL brand of LPG is a popular brand across India for domestic and industrial uses.

• Furnace Oil: It’s black oil which is used in ships.

• Bitumen

The KANDLA TERMINAL is basically involved in receiving , storing and distribution of the finished products like MS, HSD, FURNES oil and lubes. In KANDLE TERMINAL there are total 24 tanks in the terminal in that 3 tanks are underground and the rest 21 tanks are above ground and there is specific tank for every specific product.

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INDUSTRY COMPITITORS(stock shares by industry, as of 27/05/2014, by BSE)

COMPANY NAME

OPEN HIGH LOW LAST PRICE

PRV PRICE

CHANGE % CHG NET PROFIT IN Cr. (2013)

BPCL 557.40 559.40 536.50 551.10 555.65 - 4.55 - 0.82 2642.90

Chennai Petro

95.10 96.65 92.40 94.00 94.90 - 0.09 - 0.95 - 96.80

Essar Oil 83.55 87.00 79.20 85.90 83.70 2.20 2.63 - 1,180.44HPCL 436.0 438.00 418.40 425.40 436.75 - 11.35 - 2.60 904.71IOC 372.00 375.00 353.20 361.65 370.65 - 9.00 - 2.43 764.54

MRPL 70.00 70.20 66.70 67.90 69.90 - 2.00 - 2.86 - 247.68

RELIANCE 1105.00 1106.00 1076.05 1087.75 1101.00 - 13.25 -1.20 21,003.00

27/05/2014

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GRAFICAL FIG. OF REFINARIES ON THE BASIS OF NET PROFIT(2013)

BPCL

Chennai Petro

Essar O

il HPCL

IOC

MRPL

RELIANCE

-5000

0

5000

10000

15000

20000

25000

NET PROFIT (2013) (Rs. Cr)

NET PROFIT (2013) (Rs. Cr)

27/05/2014

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SHARE HOLDING PATTERN (CONTD.)(as of 31-3-2012)

NAME NO. OF SHARES HOLD % HOLD

THE PRESEDENT OF INDIA 173076750 51.11

FINANCIAL INSTITUTIONS 44613071 13.97

FII’s/OCB’s 23256521 8.66

BANKS 948131 0.13

MUTUAL FUNSDS 4106835 12.45

NRI’s 928090 0.29

EMPLOYEES - PHYSICAL 270845 0.08

PUBLIC 54465407 13.31

TOTAL 338627250 100

27/05/2014

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SHAREHOLDING PATTERN

% HOLD

THE PRESEDENT OF INDIA FINANCIAL INSTITUTIONS FII’s/OCB’s BANKS MUTUAL FUNSDS NRI’s EMPLOYEES - PHYSICAL PUBLIC

27/05/2014

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FINANCIAL ASSESSMENTREVENUE STATEMENT

Rs. In CRORESMARCH’13 MARCH’12 MARCH’11 MARCH’10 MARCH’09

SALES TURNOVER 215,877.41 188,327.54 142,396.49 114,888.82 131,802.84

GROWTH(%) 14.62 32.25 23.94 12.83NET SALES 206,958.80 178,735.50 133,213.79 107,300.57 124,935.02

GROWTH(%) 15.79 34.17 24.15 14.11TOTAL INCOME 207,251.71 180,585.38 137,984.87 111,43.20 123,584.67GROWTH(%) 14.76 30.87 23.82 9.83

TOTAL EXPENSES 201,887.69 175,513.48 133,329.50 107,236.82 119,796.96

GROWTH(%) 15.02 31.63 24.33 10.48OPARETING

PROFIT4,261.66 4,046.31 3,323.07 3,313.71 3,301.28

GROWTH(%) 5.32 21.76 0.28 0.37NET PROFIT 904.71 911.43 1,539.01 1,301.37 574.98GROWTH(%) 0.73 0.02 18.26 126.3329/05/2014

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GRAFICAL DIAGRAM OF HPCL ON THE BASIS OF NET SALES, NET PROFIT AND TOTAL INCOME

MARCH'13

MARCH'12

MARCH'11

MARCH'10

MARCH'09

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

NET SALES

TOTAL INCOME

NET SALESNET PROFITTOTAL INCOME

29/052014

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ECONOMIC ANLYSIS The High oil prices have contributed to the widening of the current account deficit. Oil production in the country increased marginally and oil imports have increased over the year. The consumption of petroleum products in India despite the slowdown in the economy, increased by 5% in 2012-2013 compared to 4.9% in 2011-2012. Petroleum product consumption in 2012-13 was reaches about 155 MMT. With pan-India presence in refining & marketing, the company has given about 25% of the country retail demand of petrol, diesel & LPG. Apart from its business it has also invested in exploration & production, renewable, biofules, gas.

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Swot analysisStrength

1. Network of 1400 retail outlets and more than 250 retail in various stages of construction.

2. State of art technologies at refinery.

3. Very active in CSR activities.4. First Indian private sector

company to enter petro retailing.

Weakness

1. Company operations are bound by Govt regulations and fluctuations.

2. Net sales are affected due to increasing cost.

3. Environmental hazards from wastages.

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Opportunity

1. Demand-Supply gap in India.

2. Increasing natural gas market globally.

3. Heavy industrialization causing an increase in demand for fuel.

Threats

1. Threats from competitors.

2. Competitors receiving subsidies on taxes by central and state government.

3. Economic instability and fluctuations in India’s policies.

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INDUSTRAL ANALYSIS (PORTER’S 5 FORCES)1. THREAT OF NEW ENTRANS:

HIGH• Developing customer base takes

long time.• Product differentiation.• Capital costs are high.• Switching cost are high.• Access to distribution channels.• Gestation period is long.• Government policies.

2. BARGAINING POWER OF SUPPLIERS: MEDIUM

• Supplier industry is dominated by Government firms. Degree of fragmentation is more in supplier.

• Supplier’s products have no substitutes.

• Product of the supplier becomes an important input to the product of buyer.

• Demand for suppliers products.• Suppliers’ products have high

switching costs.

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3. BARGAINING POWER OF BUYERS: VERY LOW• Buyers are heavily dependent on the product.• Purchase accounts for a small fraction of supplier’s sales.• Products are heavily dependent on the fuel for transportation.• Supplier can sell to anyone irrespective of any restriction.• Product quality in the hands of the supplier.

4. THREAT OF SUBSTITUTE PRODUCTS: LOW• Clearly low substitute products as of now.• R&D for the substitutes in nascent stage.• Polymers allow better performance than substitutes in most application.• But polymers are non-biodegradable and causes concern.• Fiber intermediates are used which have better properties than substitutes.• The prices charged by the firms are limited to products with similar function.

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5. RIVALARY AMONG COMPETITIVE FIRMS: MEDIUM

INTENSE RIVAIRY IS DUE TO:• Fragmentation is low.• Rivalry is cyclical and often happens.• Apart from prices, there is competition in quality, cost and

support.• Making new product introductions.

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RATIO ANALYSISLiquidity ratio HPCL(2012)

Current Ratio 0.79Quick Ratio 0.14

Solvency RatioDebt to Equity Ratio 2.87

Debt Asset Ratio 0.63Interest Coverage Ratio 3.17

Efficiency RatioReceivables Turnover Ratio 2.26Inventory Turnover Ratio 8.52

Working Capital Turnover Ratio 36.18Valuation Ratio

Earning per share Ratio 26.92Price Earning Ratio 11.16

Dividend Payout Ratio 0.31Book Value Per Share 387.10

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STRATEGIES OF HPCL•HPCL continually invests in innovative technologies to enhance the effectiveness of employees and bring qualitative changes in service.•Business process Re-Engineering exercise•Creation of strategic business units•EPR implementation•Organizational transformation•Benchmarking of refineries and terminals for product specifications.

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REASEARCH AND DEVELOPMENT• The Energy and Resource Institute (TERI), New

Delhi: Screening and selection of efficient microbial strains.• Indian Institute of Science (IISc), Bangalore: “Society

for Innovation and Development” (SID) is an innovation centre of IISc and will collaborate on behalf of IISc with HPCL.

• Advanced Research Technologies (ART), Chevron & IIT Kanpur: HPCL has entered into a memorandum of understanding with the following organizations.

• Advance Refining Technologies LLC (ART).

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FUTURE OUTLOOK• The target price for HPCL is 336.• The company is coming out with a joint venture

with Rajiv Gandhi Institute of Petroleum Technology (RGIPT).

• As per the fundamental analysis the company is good to invest for long term investments.

• Technically the company would be less profitable to invest in short term.

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LIMITATION OF STUDY• Data can varies in future, because it may be

changed from the time of collection.• Most of the data source are secondary.• As all data collected from the web and news

papers, so data may be differ from the actual.

• Other universities like Centurion University, Pralakhemundi; Tolani Institute of Management studies, Adipur; also reported a project on HPCL in past years.

SERVEY OF LITARECY

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RECOMENDETION AND SUGGESTION

As this terminal of the organization is mainly working manually so it should be converted into fully automation, to make the work done quickly, easily, efficiently and smoothly. The automation will help this terminal to take the decision effectively and it will also help the information flow.

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COLLECTION OF DATA AND DATE

• Stock market – (on 7th March,2014)• Introductions – (on 9th May,2014)• Stock shares –(on 27th May,2014)• Share holding pattern –(on 27th May,2014)• Financial assessment-(0n 27th May,2014)• Research and development – (on 27th May,2104)• Future Outlook – (on 27th May,2014)• Annual report of the company(pdf file) – (on 27th May)

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Bibliography• MONEYCONTROL.COM• HINDUSTANPETROLEUM.COM• THE TIMES OF INDIA (NEWSPAPER)• MONEY.REDIFF.COM• TRADEECONOMIC.COM• WWW.GOOGLE.COM• WIKKIPEDIA.ORG