DECLARATION
I hereby declare that the project titled A STUDY ON COMPANY ANALYSIS with respect to HINDUSTAN PETROLEUM CORPORATION LIMITED is an original and independent work submitted by me to JAWAHARLAL TECHNOLOGICAL UNIVERSITY, ANANTAPUR under the esteemed guidance of Dr. B. GURU BHEEMA CHAR, for the award of the degree of MASTER OF BUISINESS ADMINISRATION. This project has not been submitted earlier in part or whole for the award of any other degree/diploma of any university.
Date: Place: (N.VENKATA SIVUDU) 08EH1E0006
CERTIFICATE
This is to certify that the project report titled “A STUDY ON
COMPANY
ANALISIS
with
respect
to
HINDUSTAN
PETROLEUM
CORPORATION LIMITED, Balaji Service Station, NH-7, SAP Camp, KURNOOL. Is a bonafide work of N. Venkata Sivudu (08EH1E0006) carried out in partial fulfillment for the award of degree of MASTER OF BUSINESS ADMINISTRATION of Jawaharlal Nehru Technological University, Anantapur. Under my guidance.
ACKNOWLEDGEMENTS
It is with immense pleasure that I would like to express my indebted gratitude to our guide Dr. B. GURU BHEEMA CHAR guided me a lot and encouraged in every step of the project work. Her invaluable moral support and guidance throughout the project helped me to a greater extent. I would also express my sincere gratitude to my parents, well wishers and friends for their support to complete this project.
(N.VENKATA SIVUDU) 08EH1E0006
CONTENTS CHAPTER NO
I
NAME OF THE CHAPTER
INTRODUCTION
II
COMPANY PROFILE
III
DEPARTMENTAL ANALYSIS
IV
DATA ANALISYS & INTREPRETATION
V
FINDINGS, CONCLUSIONS
BIBLIOGRAPHY
CHAPTER – I INTRODUCTION
INTRODUCTION
HPCL is a Fortune 500 company, with an annual turnover of over Rs 1,03,837 Crores ($ 25,142 Millions) during FY 2007-08, 16% Refining & Marketing share in India and a strong market infrastructure. Corresponding figures for FY 2006-07 are: Rs 91,448 Crores ($20,892 Million).
The Corporation operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 5.5 MMTPA capacities and the other in Vishakapatnam, (East Coast) with a capacity of 7.5 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is progressing towards setting up of a refinery in the state of Punjab in the joint sector.
HPCL also owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production.
The vast marketing network of the Corporation consists of Zonal offices in major cities and over 91 Regional offices facilitated by a Supply & Distribution infrastructure
comprising Terminals, Aviation Service Stations, LPG Bottling Plants, and Inland Relay Depots & Retail Outlets. The Corporation over the years has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 million tonnes in 1984/85 to 13.70 million metric tonnes (MMT) presently. On the financial front, the turnover grew from Rs. 2687 Crores in 1984-85 to an impressive Rs 1,03,837 Crores in FY 2007-08.
CHAPTER-II COMPANY PROFILE
VISION To be a World Class Energy Company known for caring and delighting the customers with high quality products and innovative services across domestic and international markets with aggressive growth and delivering superior financial performance. The Company will be a model of excellence in meeting social commitment, environment, health and safety norms and in employee welfare and relations.
MISSION •
"HPCL, along with its joint ventures, will be a fully integrated company in the hydrocarbons sector of exploration and production, refining and marketing.
•
High standards of business ethics and organizational values.
•
Abiding commitment to safety, health and environment to enrich quality of community life.
•
Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for their people.
•
Strive for customer delight through quality products and services. Integrated In Energy Business
•
Focus on domestic and international oil exploration and production business opportunities.
•
Provide value linkages in other sectors of energy business.
•
Create growth opportunities and maximize shareholder value. Dominant Indian Leadership
•
Retain dominant position in Indian petroleum sector and enhance India's energy Availability.
BOARD OF DIRECTORS
Chairman &Managing Director Mr. Arun Balakrishnan Chairman & Managing Director Shri Arun Balakrishnan took charge as Chairman & Managing Director of Hindustan Petroleum Corporation Ltd on April 01, 2007. Prior to this assignment, Shri Balakrishnan was holding the position of Director - Human Resources. A Chemical Engineer from the Government College of Engineering, Trichur - Kerala and a Post Graduate Management from the Indian Institute of Management, Bangalore, Shri Balakrishnan has handled various portfolios in Marketing, Corporate and Human Resources of HPCL and possesses a rich experience in the oil sector. He also had a 5 year stint with the Oil Coordination Committee (OCC) as Director Planning. In his capacity as Director - Human Resources, Shri Balakrishnan introduced a number of contemporary People Management initiatives. As a result the Corporation came to be acknowledged as one of the 'Best Employers in India -2004' in the study conducted by Hewitt Associates and CNBC - TV 18. Under his leadership, HPCL was also the recipient of 'Award in Best Work Place Practices' by Asian Forum for Corporate Social Responsibility, Philippines in 2004. HPCL also received the Golden Peacock National Training Award for 2005 and an award for Commitment to Building and Learning Organisation by Peter Senge in 2006. In the recent past, the All India Management Association has conferred a fellowship and the Institute of Engineers (India) has presented a Scroll of Honor for recognition 'of his outstanding contribution to the profession of Chemical Engineering'.
Mr. S. Roy Choudhury Director- Marketing Shri S. Roy Choudhury took charge as Director-Marketing effective May 2004. Prior to this he was Executive Director, Direct Sales SBU. Shri S. Roy Choudhury is a Mechanical Engineer from the University of Assam. He commenced his career in the Petroleum Industry with Assam Oil Company, Digboi, and a subsidiary of Burma Oil Company. He has held various positions in the company in streams of Refinery, Marketing (Operations), Projects and Sales Division of HPCL. He is well known in the Oil Industry for his knowledge and expertise in the cross Country Pipeline Projects.
Mr. V. Vizia Saradhi Director- Human Resources Shri V Vizia Saradhi took charge as Director Human Resources effective August 03, 2007. Prior to this he was Executive Director - Industrial Relations. Shri V. Vizia Saradhi is a post graduate in Industrial Relations & Personnel Management from the Andhra University. He joined HPCL in December 1979. Before joining HPCL, he had 4 years of experience in Bharat Heavy Plate & Vessels (BHPV). He has had a wide exposure to the petroleum industry over 28 years in Human Resources and Industrial Relations in Refineries, Marketing and Corporate Division of HPCL.
Mr. B. Mukherjee Director- Finance Shri B. Mukherjee is a fellow member of the Institute of
Mr. K. Murali Director- Refineries Shri K Murali took charge as Director – Refineries effective February 02, 2009. Prior to this he was the Executive Director (Refineries) of HPCL.
Mr. L. N. Gupta Director Shri L N Gupta, IAS, has been appointed as a Part Time Director on the HPCL Board effective June 25, 2008 Shri L N Gupta is Joint Secretary (Refineries) in the Ministry of Petroleum and Natural Gas. He has done his M.A (Economics) and MBA from Birmingham University
Mr. Prakash G Apte Director Prof. Prakash G. Apte is the Director and UTI Chair Professor at the Indian Institute of Management Bangalore. His special areas of interest are international finance, exchange rate behaviour, financial derivatives and risk management. Prof. Apte holds a Ph.D. in Economics from Columbia University, PGDM from IIM Calcutta and B. Tech. from IIT Bombay. He has taught Economics at the Vassar College, Poughkeepsie, USA and Columbia University. He was a Consultant at Edison Electric Institute, New York and a Project Manager at Centron Industrial Alliance, Bombay.
Mr. P. V. Rajaraman Director Shri P.V. Rajaraman is a retired IAS Officer. He holds Masters degrees in Physics (Madras University) and Management (University of Leeds, U.K.) He has worked as Director in the Ministry of Chemicals and Fertilizers, Government of India, Managing Director, India Cements, Chairman and Managing Director, Tamilnadu Housing Board, Commissioner of Sugar and Chairman and Managing Director, Tamilnadu Sugar Corporation, Secretary to the Government of Tamilnadu in the Commercial Taxes, Home and Finance Departments, Development Commissioner and Chairman, Tamilnadu Industrial Investment Corporation.
HISTORY
HPCL, a fortune 500 company, is regarded as one of the major integrated oil refining and marketing companies in India. It is a Mega Public Sector Undertaking (PSU) with Navaratna status. HPCL has achieved its market leadership through efficiency in production and management. HPCL accounts for about 16% of the market share and 10.3% of the nation's refining capacity with two coastal refineries, one at Mumbai (West Coast) having a capacity of 5.5 MMTPA and the other in Vishakapatnam (East Coast) with a capacity of 7.5 MMTPA. HPCL also holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited (MRPL), a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA.
HPCL owns the country's largest Lube Refinery with a capacity of 335,000 metric
Tonnes which amounts to 40% of the national capacity of Lube Oil production. HPCL has given India a firm ground in this sector with its world class standard of Lube Base Oil.
HPCL has returned "Excellent" performance for fifteen Consecutive years up to 200506, since signing of the first MOU with the Ministry of Petroleum & Natural Gas. HPCL won the prestigious MOU Award for the year 2006-07 for Excellent Overall Performance, and for being one of the Top Ten Public Sector Enterprises who fall under the 'Excellent' category. HPCL performance for the year 2007-08 also qualifies for "Excellent" rating.
The Corporation over the years has moved from strength to strength on all fronts. Our refining thruput has increased three fold between 1984/85 to 2007/08, rising from 4.47 million tonnes in 1984/85 to 13.70 million tonnes currently.
Consistent excellent performance has been made possible by highly motivated workforce of over10,800 employees working all over India at its various refining and marketing locations. HPCL continually invests in innovative technologies to enhance the effectiveness of employees and bring qualitative changes in service. Business Process ReEngineering exercise, creation of Strategic Business Units, ERP implementation, Organizational Transformation, Balanced Score Card, Competency Mapping, benchmarking of refineries and terminals for product specifications, ISO certification of Refineries and Supply Chain Management are some of the initiatives that broke new grounds. HPCL has successfully integrated Information Technology in its activities at different levels. The Enterprise Resource Planning (ERP) system is now operational on J.D.Edwards, an Oracle product, across the Company.
MILESTONES
Hindustan Petroleum Corp Limited (HPCL) is the first among Oil PSUs to enter into an agreement with US Trade Development Agency (USTDA) on April 4, 2008 for Technical assistance grant related to Asset Integrity Management Programme in Refineries.
10 Sep 2008 , New Delhi : Hindustan Petroleum Corp Limited (HPCL) is the first among Oil PSUs to enter into an agreement with US Trade Development Agency (USTDA) on April 4, 2008 for Technical assistance grant related to Asset Integrity Management Programme in Refineries.
On its way forward, HPCL signed up a Contract with a reputed US Company on
10th September 08, which would cover Field Demonstration and training of Advanced technologies / Risk Based Inspection in relation to Asset reliability and Inspection Techniques to minimise the risks and enhance the safety of equipment and pipelines in HPCL Refineries.
Infrastructure HPCL's infrastructure is at par with that of the best global corporations in the hydrocarbons sector. For over a quarter century now, HPCL has been consistently breaking new grounds in production and marketing. A glimpse of the vast marketing network already developed is given below in a table. Our Marketing Network
Regional Offices Terminals/Installations/TOPs Depots LPG Bottling Plants ASFs Retail Outlets
2007-08
2006-07
2005-06
2004-05
91 42 93 43 16 8329
86 37 93 42 13 7909
85 36 92 41 13 7313
85 36 100 40 10 6667
SKO/LDO Dealers LPG Distributors LPG Customers (in Crores)
1648 2232 2.52
1648 2238 2.39
1648 2202 2.28
1648 2153 2.17
From the table it can be easily noticed how the marketing network has been strengthened over the years. The dominance that is reflected in numbers is equally translated through the best quality of service. HPCL was one of the first companies to understand the nation's energy requirements and take necessary measures to fulfill the expectations. The corporation's increasing growth function is due to the successful realization of targets and sustained quality of service and customer relations. HPCL presently owns and operates two coastal refineries at Mumbai and Visakhapatnam along with a joint venture refinery at Mangalore. A massive infrastructure comprising two cross country pipelines and an extensive network of terminals, depots, bottling plants and aviation servicing facilities contributes to India's growth every year.
INNOVATIONS HPCL has undertaken a Business Process Re-engineering (BPR) study with the assistance of M/s. Arthur Andersen & Associates to sharpen the Corporation's competitive edge in critical areas of operations, and specially the challenges arising out of deregulation of the Petroleum Sector, to make the organisation more responsive to market requirements and to update information technology for quicker decision making. The conclusions of the BPR study have been accepted by the Management and are under implementation in all major areas of activity. The exercise includes: •
Creation of 4 Strategic Business Units (SBUs) within Marketing - Lubricants, Retail, I&G and LPG.
•
Development of an action plan to reposition and strengthen the Lubricants business.
•
Decentralisation of the purchase functions to SBUs to quicken purchase process.
•
Broad banding of various positions, to allow greater continuity and development of expertise.
•
Enterprise Resource Planning (ERP) system to meet the long-term information technology needs of the Corporation. HPCL has kept itself abreast with the developments in the field of Information Technology, deploying state-of-the-art computers and systems for its activities. o It has installed computers at over 250 locations and developed various applications including on-line transaction processing systems at very remote locations. o It has also installed computer networks at its administrative offices, refineries and its major locations to share information among the personnel at these locations for responses. o It is in the process of implementing a voice and data network connecting over 22 sites at 5 cities, to provide instant access to information available.
o It also plans to set up usage of applications like
Interactive Voice Response Systems for LPG cylinder booking and the use of the Internet to provide access to the public to Corporate Information.
•
SOCIAL OBJECTIVES HPCL, as part of its social commitment, assists in community welfare programmes
for uplifting the weaker sections of the society. The major socio-economic welfare oriented activities include various income generating schemes, vocational training, scholarships for SC/ST students, drinking water facilities, health and family welfare camps and distribution of free medicines, etc. •
THINKING GREEN HPCL has always taken keen interest in the protection, preservation and
improvement of the environment. Environment protection efforts begin at the planning and design stage of new projects by incorporation various measures for ensuring minimal impact on the environment. Environment Management also covers development of environment friendly technologies, tree plantation and implementation of energy conservation and environment improvement projects. Both Mumbai and Visakhapatnam Refineries have already implemented various environment protection projects. The recently introduced NMP
technology, developed by Mumbai Refinery and Indian Institute of Petroleum, in the hexane plant is but an illustration of our commitments to strive for newer ways to protect the environment. Also, other environmental projects like diesel hydride sulphurisation, continuous stack monitors, co-boiler are under implementation.
PERFORMANCE Projects & Development India Ltd. (PDIL) is an ISO Certified premier Consultancy and Engineering Organization which has played pivotal role in the growth profile of Indian Fertilizer Industry with over four decades of experience in providing Design, Engineering and related project execution services from concept to commissioning of Fertilizer and Chemical Projects. Our esteemed clients are almost all the major Fertilizer Manufacturing Organizations in India in Public, Co-operative and Private Sectors. Over the years, PDIL has also diversified its technology base and engineering expertise to cater to other industrial Sectors viz. Chemicals, Oil & Gas, Refinery, Power and Infrastructure .PDIL’s Design Engineering Centers at NOIDA (NCR-New Delhi) and Baroda are equipped with State-of-the-Art computer facilities such as Plant Design System (PDS) from Intergraph Corp., U.S.A., Aspen Plus from Aspen Tech., U.S.A., and a large number of state of the art work specific software for carrying out design and engineering work. PDIL is a member of Heat Transfer Research INC., U.S.A. giving it right to use Xchanger Suite of Software.
SERVICES OFFERED Pre-Project Services Market Study Reports, Feasibility Studies, Detailed Project Reports, Site Selection, Risk Analysis, Hazop, EIA Studies etc. Project Engineering Services Design, Detailed Engineering, Procurement Services, Inspection & Expediting, Project Scheduling and Monitoring , Project Management, Construction Supervision, Commissioning Supervision and Performance Guarantee Tests, and also Project Management Consultancy Services (PMC). Other Specialized Services Revamp / Retrofit / De-bottlenecking Studies, Health Study & End-to-End Survey, Environmental Engineering, Energy Audit , Safety Audit, Third Party Inspection and Non Destructive Testing.
DETAILS OF PROJECTS & SERVICES. Fertilizer In the field of Fertilizers, the recently completed major projects are: •
Detailed Engineering Consultancy service for the world’s largest Single Train
•
2200 MTPD Ammonia plant at Karratha, Australia for M/s Burrup Fertilizer Pvt. Ltd.,
•
Ammonia V Technology upgradation for M/s RCF, Trombay .PDIL is currently engaged in the execution of a number of Revamp / Upgradation projects such as :
•
Debottlenecking for Capacity Enhancement for Ammonia / Urea Plantsat Aonla and Phulpur for Indian Farmers Fertilizers Cooperative Ltd.
•
Energy Saving for Ammonia – I Plant at Vijaipur for National Fertilizers Ltd.
•
Revamp of Ammonia / Urea Plant at Gadepan-I and II for Chambal Fertilizers & Chemicals Ltd.
•
Consultancy services for various Upgradation Schemes at Paradeep for the DAP Fertilizer complex for Indian Farmers Fertilizers Cooperative Ltd.
•
Revamp of Urea Plant for Energy Savings for Gujarat Narmada Valley Fertilizers (GNFC) Bharuch.
•
Revamp of Methanol Plant at Trombay for Rashtriya Chemicals &Fertilizers Ltd. Apart from this, PDIL is also providing services such as Feasibility Reports, Detailed Project Reports, Site selection, Technology evaluation, etc. to many clients for Joint Venture Fertilizer projects outside India.
•
Projects in Oil & Gas and Refinery Sector The company have the privilege of having provided our services for Projects in
Oil and Gas& Refinery Sectors and PDIL has provided the services to all the major organizations in India for LPG Import Terminals, POL Terminals/ Depots/Storages, Crude/ Gas/ Petroleum Products Pipelines, Gas Gathering Stations, Mounded Storages for LPG, Atmospheric Cryogenic Storages for Petroleum Products, LPG Bottling Plants, City Gas Distribution Project including CNG Stations, Skid Mounted/ Relocatable Refinery, Revamp Jobs for Refineries covering Atmospheric Distillation Unit, Sulphur Recovery Unit, Lube Oil Complex, Crude Distillation Unit, Crude Topping Unit , Sour Water Treatment Units , Hazop Studies , Effluent Treatment Plants , etc.
•
Projects in Chemical Sectors PDIL has undertaken many projects in the Chemical sector such as Methanol
Plant, Hydrogen Plant, Methyl Amines, Sulphuric Acid, Phosphoric Acid, Nitric Acid, Sodium Nitrite / Nitrate, Ammonium Nitrate, Ammonium Bi-Carbonate. •
Infrastructure sector PDIL has established credentials in infrastructure sector also and has provided PMC
services /Review consultant services for Housing projects of the Ministry of Defence, located at various cities across the Country. •
Third Party Inspection PDIL is a recognized Agency for Inspection & Quality Assurance Services and
undertaking the services of Third Party Inspection Services for many projects to prestigious organizations like IOCL, BHEL, BPCL, HPCL, State PHEDs, etc. PDIL has been selected by BHEL as their Third Party Inspection Agency for the Equipment and Items procured by the
various BHEL Units for their Projects. Third Party Inspection Services are also being provided to Overseas Engineering Consultants and EPC Contractors. •
Non-Destructive Testing Services PDIL provides NDT services for plants in various sectors like Fertilizer,
Chemical, Refineries, Oil & Gas, Cross Country pipeline etc. PDIL specialized NDT services includes Automatic Ultrasonic scanning of Reformer Tubes for Ammonia Plants and Refineries, Infra-Red Thermo- Vision /imaging , Eddy current testing, Vibration signature analysis etc. PDIL also undertakes Inspection & safety Certification of storage tanks for petroleum products as well as Ammonia Storage tanks. •
PDIL Catalyst PDIL’s Catalyst Division manufactures and supplies a wide range of commercially
proven catalysts used in Ammonia Plants and other Industries. Catalysts manufactured by PDIL for Ammonia Plants are Primary Gas Reforming, Secondary Reforming, Iron -Chromia High Temp. CO Shift Conversion, Copper Promoted High Temperature Shift , Conventional & High Copper Low Temperature Shift Conversion, Methanation & Super Methanation, and also Vanadium Pentoxide for Sulphuric Acid Plants.
ACHIEVEMENTS HPCL has been conferred the coveted ‘NDTV Profit’ Business Leadership Award in the category of Oil & Gas. The award was presented by Hon’ble Finance Minister, Shri P. Chidambaram and was received by our C&MD, Shri Arun Balakrishnan
The Award honours business excellence and are aimed at recognizing companies that have fuelled the Indian economy to currently being among the fastest growing economies in the world. Extensive research was carried out over a period of 5 months to determine the nominees & the winners under the guidance of the jury that comprises of eminent personalities like Smt Anu Aga, Dr Amit Mitra, Dr Bimal Jalan, Shri N. R. Narayana Murthy, Shri Suman Dubey and Dr Prannoy Roy. •
Reader’s Digest ‘Trusted Brand Asia Platinum’ Award’
Awarded in the Petrol Station category, this is the third year in succession that HPCL has received the trusted brand award. The Reader’s Digest Trusted Brand awards are based on survey carried out by ‘The Nielsen Company’ and reflect the consumers’ choice of their most trusted and favorite brands. The consumers have named their most trusted brand on a fivepoint scale, on six qualitative criteria of Trustworthiness, Credible Image, Quality, Value, Understanding of Customer Needs, and Innovation. CIO 100 Award 2008
HPCL has been awarded the CIO 100 Award for the Third Consecutive Year. The Annual Award Program recognizes Organizations that exemplify the highest level of operational and strategic excellence in Information Technology (IT). This year’s award theme ‘The Bold 100’ recognizes those Executives and Organizations who embrace great risk for the sake of great reward. These organizations are playing not just to survive, but to win. “CIO 100” award of IDG (International Data Group) is one of the most prestigious recognitions in the IT Industry worldwide. Over the years a CIO 100 award has come to be considered the equivalent of the Oscars of the IT Industry across the world. •
OISD Safety Award
HPCL bagged 2 Safety Awards from Oil Industry Safety Directorate (OISD) as the ‘Best Performer’ for the year 2007 – 08, one under the category of ‘LPG Marketing Organizations’ and the other amongst ‘Lube Oil Blending Organizations’. OISD safety awards are instituted in order to inculcate competitiveness among oil companies to improve their safety performance. •
National Award For Excellence In Cost Management
HPCL was conferred with the National Award for Excellence in Cost Management from the Institute of Cost Accountants of India (ICWAI). HPCL has won the Second Award in the Public Sector – Manufacturing (Organization) – Turnover more than Rs. 1000 Crores category of National Award for Excellence in Cost Management.
Pursuant to Government directive for conducting audit of Cost Accounts, the Cost Audit was conducted for the first time in respect of various manufacturing facilities of Corporation for the year ending March 31, 2007. •
Greentech Environment Excellence Award 2008
HPCL’s has been awarded 15 ‘Greentech Environment Excellence Award’ for the year 2008 at the 9th Annual Global Environment Conference held recently at Goa. HPCL’s Mumbai & Visakh Refineries were awarded the Greentech ‘Gold’ Award in Petroleum Refining Sector. While Hassan POL Terminal bagged the Greentech ‘Gold’ Award, Mangalore POL Terminal & Irumpanam POL Terminal were awarded the Greentech ‘Silver’ Award. Besides, 10 of our LPG Plants have won the Greentech Environment Excellence Award 2008.
Greentech Foundation’s Environment Excellence Awards are presented to Organizations & Individuals as a mark of recognition for the significant contribution made towards protection, preservation & improvement of environment. These awards certainly reflect HPCL’s commitment to environment protection and enhance our Eco-Friendly image.
OBJECTIVES PDIL has defined its objectives for succeeding in its mission as follows: A. PROFITABILITY: To manage the assets and human resources, in the most effective and efficient manner, to ensure reasonable return on investment and to maintain adequate liquidity B. GROWTH: To achieve reasonable and consistent growth and to generate resources for developing the infrastructure and expertise in the Company C.DEVELOPMENT: To enrich its design capabilities and to improve catalyst manufacturing
D.ORGANIZATIONAL ENVIRONMENT: To develop and maintain an organizational environment for initiative, innovation and productivity, and also to ensure a fair deal to the employees with humane approach E. BUSINESS DEVELOPMENT: To generate adequate profitable Business by utilising the existing resources to the maximum extent F.DIVERSIFICATION: To maximize generation of business in sectors other than Fertilizer sector G.OBLIGATION TO SOCIETY: To conduct business in the most ethical manner, and with legal standards, in order to generate a good social environment.
RECENT DEVELOPMENTS HPCL has collaborated with several academic / research institutions to come up with innovative results enhancing the production capacity and other industrial parameters. The details of the projects (particularly the partners in collaboration) and the costs of the projects are given below: The Energy and Resource Institute (TERI), New Delhi: The Project has been named "Screening and selection of efficient microbial strains for bio hydrogen production". An approximate time frame of 24 months has been set for the completion of the project. ďƒ˜ Gandhi Institute of Technology and Management (GITAM), Visakhapatnam: The projects contemplated with GITAM are as follows:
Effect of Nano - particle inclusion in the lubricating properties of lubricants to be completed within 2 years. Bioremediation: Bio desulphurization of petroleum oil by nonpathogenic micro-organisms slated to be completed within one year. Production of Bioremediation of petroleum oil by non pathogenic microorganisms within a time frame of 1 year. 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. The scope of MoU signed between the two parties includes the setting up of R&D centre and implementation of various collaborative projects. Currently a project on nanoparticles is being undertaken. Central Institute for Mining and Fuel Research (CIMFR, erstwhile CFRI), Dhanbad: This project involves the characterization of 3 bottom streams viz. VTB, FCC and PDA bottoms utilizing the pilot plant available at CIMFR. A proposed 100 kg/hr plant is slated for installation. A fully self sufficient Corporate R&D centre is going to be established with the integrated facilities of designing, commissioning supervision, interpretation of data generated development of protocols for operating and testing of the plants.
Research Triangle Institute (RTI), USA: The project involves collaborative R&D activities between RTI and HPCL, which would cover one or more of the following areas: •
Advisory support for the establishment of a catalyst laboratory and its associated development for synthesis and evaluation.
•
Diesel
desulphurization
including
demonstration
scale-up,
protocols,
knowledge transfer and IP access to assist in achieving tight timelines for 2010 quality standards, and •
Resid gasification including characterization.
Advanced Research Technologies (ART), Chevron & IIT Kanpur: HPCL has entered into a Memorandum of Understanding with the following organizations. Advance Refining Technologies LLC (ART), Chevron USA Inc. and Indian Institute of Technology (IIT) Kanpur Collaborative research activities are slated at IIT Kanpur under the project title of “Industry sponsored joint research and exchange program agreement". According to the MoU signed, all the three sponsors will equally share the costs of research to be undertaken at IIT Kanpur. Accordingly, four projects have been identified for implementation between April 2005 and June 2007. They are the following•
Monolithic reactors for multiphase reactions,
•
Slurry bubble column hydrodynamics,
•
Supported Ionic Liquid Catalysis and Hydrodynamics in Packed Bed and
•
Modeling of mass transfer effects in resid FCC.
FUTURE TRENDS HPCL plans to expand its capabilities in both refining as well as marketing segments. The marketing division is implementing two major product pipeline projects connecting Mundra with Delhi and Loni with Sholapur at an estimated cost of Rs 19.6 billion in order to meet the demand in the northern sector. The division will spend further nearly Rs 14 billion towards upgradation, automation and modernization of retail outlets and other facilities. All these activities including the expenditure required for the initiatives under the exploration and production segments, entering the gas segments, etc., would entail a capital expenditure of about Rs 110 billion to be incurred during the next three to four years. HPCL has drawn plans to set up a new USD 3 billion refinery in India instead of
expanding the plant `s capacity. The company is negotiating with Total, Kuwait Petroleum International and Oil India for picking up stake in the planned refinery. HP is introducing a new GEOS-based PDA/Palmtop called the OmniGo (formerly known by its codename, Jedi). It is scheduled for availability on or around Oct. 15, or about the same time as this edition of the FAQ is being written. Read because as this is being written very little reliable information is available, but a flood of information should be quickly forthcoming •
Environment Mission & SHE Policy Mission To have safe, healthy and pollution free environment in and around all our refineries,
plants, facilities and other premises at all times; instill awareness in these areas, including relevant laws, in all employees, their families and the communities in which we carry out our activities. Environment Policy The Corporation is committed to conduct its operation in such a manner as compatible with environment and economic development of the community. Its aim is to create an awareness and respect for the environment, stressing on every employee’s involvement in environmental improvement by ensuring healthy operating practices, philosophy and training. Health Policy To provide a structured program to look after and promote the health of vital “Human Resource”, essential for productivity and effectiveness of the Corporation. Safety Policy As an integral part of its business, HPCL believes that no work or service or activity is so important or urgent that safety be overlooked or compromised. Refineries History Mumbai Refinery Mumbai refinery has grown over the years as the main hub of petroleum products, particularly crude base oil. The refinery has reached its present form through several upgradation and restructuring processes. A chronological summary of the developments is provided below:
•
M/s Esso commissioned in 1954 with a crude processing capacity of 1.25 MMTPA.
•
Lube refinery, Lube India Ltd, was commissioned in 1969 with a capacity of 165 TMTPA of Lube Oil Base Stock (LOBS) productions.
•
Crude processing capacity increased to 3.5 MMTPA during 1969
•
Government of India took over Esso and Lube India and formed HPCL in 1974.
•
Kosan Gas Company, the concessionaries of HPCL in the domestic LPG market, were taken over and merged with HPCL in 1979.
•
Expansion of fuels block was carried out by installation of new 2 MMTPA crude units in 1985. Also, a second expansion of Lube Refinery took place to increase the capacity of the refinery to 335 MMTPA, so far the largest in India.
•
The current Installed capacity of the refinery is estimated at 5.5 MMTPA
Visakh Refinery The Visakh Refinery is also an important contributor to HPCL's crude production. This refinery has been instrumental in supplementing the production of the Mumbai refinery to achieve some marketable amount of petroleum products in chosen foreign markets. The summary of development of the refinery is given below.
•
The first East Coast Oil refinery was commissioned as Caltex Oil Refining India Ltd. (CORIL) in 1957 with a crude processing capacity of 0.65 MMTPA.
•
The refinery was subsequently taken over by Government of India in 1976 and merged with HPCL in 1978.
•
The refinery's crude refining capacity increased to 4.5 MMTPA during the first expansion in 1985.
•
The refinery's crude refining capacity increased to a further 7.5 MMTPA during the second expansion in 1999.
CHAPTER-III DEPARTMENTAL ANALYSIS
HUMAN RESOURCE STRATEGY 1. To meet challenging demands of the business environment, focus of the HR Strategy is on change of the employees' ‘mindset’ 2. Building quality culture and resources
3. Re-engineering and redeployment for maximizing utilisation of HR potential 4. To build and upgrade competencies through virtual learning, opportunities for growth and providing challenges in the job 5. Re-strengthening mutual faith, trust and respect inculcating a spirit of learning & enjoying challenges 6. Developing Human Resource through virtual learning, providing opportunities for growth, inculcating involvement and exposure to benchmarking in performance Attrition of experienced manpower continues to be of concern. On an average, over 150 officers leave every year for better opportunities both within and outside the country. Large scale recruitment and training appears to be the only solution. A number of HR initiatives have been introduced to make the Corporation a great place to work. The ‘Balanced Score card’ tool to set up performance targets and evaluation, Competency Mapping and Development Centers. To enhance employee capabilities and Six Sigma for quality improvement have yielded rich dividends and are being constantly upgraded to higher levels of sophistication. Such initiatives give your Management the confidence to take on bigger challenges in its pursuit of growth. A significant HR event of the period was the conduct of an International Program on ‘Emotional Intelligence’ in association with TISS wherein a large number of professionals and students participated and appreciated the program. The Corporation continues to give utmost importance to training by nominating employees both for in-house and external programmes. The Employee Portal also offers a number of self-learning programs which prepares the employee to take on technical and behavioural challenges. Officers are also sponsored for part-time MBA programs of reputed Institutions.
• Shareholders Our Shareholder family is large and is presently over one lakh. You have shown your trust and confidence in the Corporation by remaining with us and we thank you for reposing your faith in the management. We have always endeavoured to reward our shareholders with attractive dividends .The record of the Corporation in this regard is
creditable. The current financial constraint has been due to factors beyond our control. This has resulted in a lower payout of dividend as compared to previous years. However, we feel that this is a passing phase and the Corporation will soon have the freedom to price its products. Such freedom will be exercised responsibly by the management and would include the interests of its customers, shareholders and stakeholders. •
Stakeholders The company also grateful to all our dealers, vendors, contractors, business
associates, employees and all others who have reposed their faith in HPCL. Your Corporation which has completed over 50 years of operation will not feel daunted by the current scenario but will continue to endeavour to meet the challenges posed by unprecedented levels of crude oil prices. In these difficult times, your Board of Directors has played a significant role in guiding the affairs of your Corporation. The Independent directors have been a source of inspiration with their wide knowledge and experience. The Government directors were our conduits to the Ministry and their guidance have been exceptional. The functional directors are respected professionals in the oil sector and have all been acting in tandem to take your company forward.Our Administrative Ministry, the Ministry of Petroleum & Natural Gas, have been providing continuous guidance and support in all our efforts. We, on our part, would continue to take HPCL further towards growth and profitability by meeting the challenges that we face and capitalizing on the opportunities that arise. At the time of writing this message, there are welcome signs of reduction in crude oil prices. Global efforts are continuing to conserve energy and also look at areas to develop alternate and cheaper form of energy. Global warming has also given a further urgency to such efforts. A positive outcome would benefit everyone by improving the quality of the air we breathe and reducing the cost of energy which in some form or other touches every human life. We look forward to your continued support in this ongoing journey.
MARKETING STRATEGY Hindustan Petroleum Corporation Limited has 20% market share which is backed by a VAST MARKETING NETWORK
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4 Zonal Offices
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34 Zonal Offices (including 10 LPG Regional Offices)
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22 Terminals
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31 LTG Bottling Plants
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9 Aviation Service Stations
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4 Lube blending plants & a lube pipeline for base oil evacuation from the refinery
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90 Inland relay depots
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4327 Retail outlets
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1622 SKO/LDO dealerships
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1463 LTG distributorships
In addition to the above, two pipelines i.e. the 161 kms long Mumbai-Pune Product Pipeline of 3.67 MMTPA capacity and the recently commissioned 350 kms long Visakh-Vijayawada pipeline of 4.1 MMTPA capacity, are used for transportation of MS. SKO, HSD and LDO. •
Refineries HPCL has two refineries. On the West Coast is the Mumbai Refinery with a
capacity of 5.5 Million Metric Tonnes Per Annum, while the other at Visakhaptnam on the East Coast has a capacity of 7.5 Million Metric Tonnes Per Annum. The Lube Refinery at Mumbai is the largest in the country with a capacity of 335,000 Metric Tonnes Per Annum producing superior quality base oils. Both the refineries produce a number of value added products like petrol, high speed diesel oil, superior kerosene oil, liquefied petroleum gas, naphtha, aviation turbine fuel and others and over 300 grades of lubes, specialties and greases. Both the refineries have implemented and upgraded facilities to produce green fuels like unleaded petrol and low sulphur diesel.
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Marketing The marketing operations of HPCL are divided into three strategic business units,
Retail, Direct Sales comprising of Lubes and Industrial & Government Sales, and LPG. •
Retail
The Retail Business Unit is oriented towards delivering better and faster service to consumers. The retails network consists of a nationwide network of over 4700 retail outlets and over 1600SKO/LDO resellers. The scope of the HP petrol pump has been redefined. The consumers’ larger interests are served by transforming the petrol pump into a one-stop convenience outlet where one can shop for anything from fuels to grocery and lubricants to gifts. A nationwide chain of convenience stores has been set up at HP petrol pumps. A number of outlets provide customers Internet access while instant access to cash through ATMs of leading banks is available at prominent locations. •
Lubricants
HPCL has a 31% market share of the lubricant market in the country. The HP Engine Oils product range covers over 300 brands of lubricants, greases and Specialties catering to the automotive as well as the industrial sector. With years and Years of research and technical expertise, they are engineered to meet the rigours of modern automobiles and the extreme service conditions of highly sophisticated Industrial machines. HPCL has six lube blending plants at Mumbai, Kolkata, Chennai and the recently commissioned 60 thousand metric tonnes per annum capacity plant at Silvassa. HPCL’s market now extends to count ries like Nepal, Sri Lanka, Bangla Desh, Saudi Arabia and Malaysia.
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Industrial & Government Sales
HPCL’s petroleum products cover numerous applications from automobile, aviation, marine and power plant fuels to being used in the manufacture of products such as fertilizers, carbon black, jute, insecticides, cosmetics, edible oil, fabrics
Compact discs and medicines. HPCL is the second largest producer of bitumen in India with annual sales of More than 500 TMT. HPCL is the marine lube partner of Elf Lubricants, France, manufacturing and Supplying the Elf brand of marine lubes. HPCL is one of the largest suppliers of fuel to state owned and Independent •
Power Plants (IPPs). Ten Aviation Service Facilities (ASFs) cater to the refueling requirements of both
domestic as well as international airlines. At Mumbai, both domestic and international airports are directly connected to the refinery through a dedicated pipeline.
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Liquefied Petroleum Gas (LPG) HPCL has over 24% of market share of LPG business in the country. HP Gas, the
HPCL brand of LPG, is bottled at 40 plants across the country with a total capacity of 1554 TMT per annum. The over 17 million LPG consumers of HPCL are serviced through a nationwide network of over 1865 dealers.
FINANCIAL MANAGEMENT
Financial management in the small firm is characterized, in many different cases, by the need to confront a somewhat different set of problems and opportunities than those
confronted by a large corporation. One immediate and obvious difference is that a majority of smaller firms do not normally have the opportunity to publicly sell issues of stocks or bonds in order to raise funds. The owner-manager of a smaller firm must rely primarily on trade credit, bank financing, lease financing, and personal equity to finance the business. One therefore faces a much more severely restricted set of financing alternatives than those faced by the financial vice president or treasurer of a large corporation.
On the other hand, many financial problems facing the small firm are very similar to those of larger corporations. For example, the analysis required for a long-term investment decision such as the purchase of heavy machinery or the evaluation of lease-buy alternatives, is essentially the same regardless of the size of the firm. Once the decision is made, the financing alternatives available to the firm may be radically different, but the decision process will be generally similar.
One area of particular concern for the smaller business owner lies in the effective management of working capital. Net working capital is defined as the difference between current assets and current liabilities and is often thought of as the "circulating capital" of the business. Lack of control in this crucial area is a primary cause of business failure in both small and large firms.
CHAPTER-IV DATA ANALYSIS AND INTREPRETATION
RATIO ANALYSIS Financial ratio’s indicates about the financial position of a business concern. A company is deemed to be financial sound if it is in position to carry on its financial obligation i.e. both long term as well as short term without any strain. Financial ratio can be studied under as Liquidity Ratio’s:
1. CURRENT RATIO: Current ratio is a ratio between current assets and current liabilities. The current ratio is calculated by current liabilities .The main purpose of current ratio is to ascertain to what extent the current assets are sufficient to meet the current liabilities of a business concern. In general current ratio of 2:1 is considered to be satisfactory .Current assets includes Cash, Debtors, Inventories, Prepaid Expenses, marketable securities, bills receivables etc. Current liabilities include Creditors, Bills Payable, Bank Overdraft, and Outstanding Expenses. Current assets Current Ratio
=
-----------------------------------Current liabilities
TABLE - 1.1 Table showing the Current Ratio during the period 2005-06 to 2007-08 (Rs in Crores) Years 2006 2007 2008
Current Assets 9256.52 9855.3 14074.41
Current Liabilities 7394.74 8891.77 11893.37
CHART 1.1 Chart Represent of current ratio
Ratio 1.25 1.11 1.18
Interpretation: •
The current ratio of the company in the year 2006 is 1.25.It has been decreasing up to the year 2007.
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In the year 2007 the current ratio 1.11 is decreased. When compare to previous years ratios.
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In the present year 2008 the current ratio is 1.18.
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The standard for current ratio is 2:1.
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The overall current ratio position of the company is not satisfactory.
2. QUICK RATIO: Quick ratio is also known as liquidity ratio. Quick ratio is calculated to ascertain by comparing the liquid assets to current liabilities. In other words this ratio indicates relationship between liquid asset and current liabilities. Liquid assets mean those current assets which are easily converted in to cash without any much loss. In general Quick Ratio of ratio is considered to represent a satisfactory current Financial Condition.
Quick Assets Quick ratio
= -----------------------------------Current Liabilities
TABLE - 1.2 Table showing the Quick ratio during the period 2006 to 2008
(Rs in Crores) Year
Quick Assets
Current Liabilities
Ratio
2006
1446.23
7394.74
0.19
2007
1756.9
8891.77
0.19
2008
2054.13
11893.37
0.17
CHART 1.2 Chart Represent of quick ratio
Interpretation: •
The quick ratio of the company is 0.19 in the year 2006. Later it is equal in the next year.
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The highest quick ratio is 0.19 in the year 2007. After it is decreased to 0.17 in the year 2008.
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The overall position of the company is not satisfactory.
Absolute Liquidity ratio or Cash Ratio: Cash ratio is calculated by dividing Cash and Marketable securities by Current Liabilities. Trade investment or marketable securities are equivalent of cash therefore they may be including in computation of cash ratio. Absolute Liquid Assets Absolute Liquid ratio = ---------------------------------------Quick Liabilities
TABLE - 1.3
Table showing the cash ratio during the period 2006 to 2008 (Rs in Crores)
Year
Absolute Liquid Assets
Quick Liabilities
Ratio
2006
42.59
7394.74
0.006
2007
86.79
8891.77
0.009
2008
294.01
11893.37
0.024
CHART 1.3 Chart Represent of Absolute Liquid Ratio
Interpretation: •
The cash ratio is 0.006 in the year 2006. Later the cash ratio is increased gradually. Up to the year 2008.
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The standard for cash ratio is 0.5:1. But the company is maintaining less cash than required.
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The overall cash ratio is not satisfactory.
2. Profitability Ratios The primary objective of a business under taking is to earn profit. Profits to the management are the test of efficiency and measurement of control. Generally profitability ratios are calculated either in relations to sales or in relation to investments.
1. Net Profit Ratio: This ratio is calculated by dividing Net Profit by sales. Net profit is obtained when operating expenses, interest and taxes are subtracted from Gross Profit. So, Net Profit Ratio is measured by dividing profit after tax by sales. This ratio also indicates the firm’s capacity to with stand adverse economic conditions. This ratio is over all measure firms’ ability to turn each rupee sales into net profit. Net Profit Net Profit Ratio
= -------------------------- x 100 Sales
TABLE – 2.1 Table showing Net Profit Ratio during the period 2006 to 2008 (Rs in Crores) YEAR 2006 2007 2008
NET PROFIT 405.63 1571.17 1134.88
SALES 68161.77 83571.14 96442.92
RATIO 5.95 1.88 1.18
CHART 2.1 Chart Represent of Net Profit Ratio
Interpretation: •
The net profit ratio is 5.95 in the year 2006. After the ratio is decreased to 1.88 in the year 2007.
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The main reason for low net profit ratio is the company is maintaining more inventory level that required at that period the sales are very low.
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Over all net profit ratio is in decreasing trend.
2. Earnings per share ratio (EPS):
This ratio is computed by dividing earnings available to the equity share holders by the total number of equity shares out standings .This ratio is an important index because it indicate the wealth of each share holder on a per share basis has changed over the period .A year to year comparison of earnings per share Net Profit Earnings per share
=
-----------------------------------Number of shares
TABLE – 2.2 Table showing Earnings per Share during the period 2006 to 2008
(Rs in Crores) YEAR 2006 2007 2008
NET PROFIT 405.63 1571.17 1134.88
NO. OF SHARES 338.94 338.95 339.01
RATIO 11.97 46.35 33.48
CHART 2.2 Chart Represent of Earnings Per Share
Interpretation: •
The EPS is 11.97 in the year 2006. After the EPS is increased to 46.35 in the year 2007.
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The main reason for increasing EPS is Net Profit increasing.
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The overall company EPS is Satisfactory.
CHAPTER-V FINDINGS & CONCLUSIONS
FINDINGS: •
The current ratio of the company in the year 2006 is 1.25.It has been decreasing up to the year 2007.
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In the year 2007 the current ratio 1.11 is decreased. When compare to previous years ratios.
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The quick ratio of the company is 0.19 in the year 2006. Later it is equal in the next year.
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The highest quick ratio is 0.19 in the year 2007. After it is decreased to 0.17 in the year 2008.
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The cash ratio is 0.006 in the year 2006. Later the cash ratio is increased gradually. Up to the year 2008.
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The standard for cash ratio is 0.5:1. But the company is maintaining less cash than required.
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The net profit ratio is 5.95 in the year 2006. After the ratio is decreased to 1.88 in the year 2007.
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The main reason for low net profit ratio is the company is maintaining more inventory level that required at that period the sales are very low.
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The EPS is 11.97 in the year 2006. After the EPS is increased to 46.35 in the year 2007.
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The main reason for increasing EPS is Net Profit increasing.
CONCLUSIONS •
The present study has been conducted to analyzing and evaluating the financial performance of the HINDUSTAN PETROLEUM CORPORATION LIMITED, through Ratio Analysis.
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The performance of the company is observed through the liquidity and Profitability ratios with the reference of the study.
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The researcher observed that the liquidity ratios, profitability ratios are fluctuating during the study period the investigator suggested the Coromandel Agro Products and Oils Ltd., that there is a need to bring improve in the liquidity profitability ratios to obtain efficiency in finance performance to the company.
BIBLIOGRAPHY
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Philip kotler: Marketing Management, 11/e, Pearson, 2007
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S. N. Chary, production and Operation management, 2/e, TMH, 2006
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I. M. Pandey, Financial Management, Vikas Publishers, New Delhi, 2007
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D. Chandra Bose Fundamentals of Financial Management, PHI, 2006
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ANNUAL REPORTS OF HINDUSTAN PETROLEUM CORPORATION LIMITED.