Analysis Of IOCL

Satisfactory Essays
IOCL in comparison to its competitor i.e. HPCL has a better liquidity position except for the year 2008-09 where HPCL has a better position. The ideal current ratio of 1.5 has not been achieved by any of the company mainly because of the nature of the O&G industry .Current ratio also represents the margin of safety for creditors. There is need for the safety margin for the inevitable unevenness in the flow of funds through current asset and current liability account. The flow should be absolutely smooth and uniform each year so that the current assets are sufficiently large than the current liability so that the firm is able to pay its current maturing debt when it becomes due. The trend of current ratio is represented in the chart above for a better understanding. In this chart a fluctuating trend can be noticed in case of IOCL. However, IOCL has a better ratio compared to its competitor apart from the year ending Mar' 09. Thus, IOCL has a better short term solvency position than HPCL even though it has not reached the ideal ratio i.e. 1. However, considering that the company is dependent on the government grants and subsidies, IOCL is in a safe zone and hence it enjoys a good creditworthiness and goodwill. The above table shows the quick ratio. From the table the quick ratio is increasing for the past few years hence the liquidity position of the firm is better in the current year compared to its own past position and position of HPCL. Clearly HPCL has greater proportion of debt in comparison to the equity and is highly levered whereas IOCL is least levered. This signifies that IOCL follows a conservative approach compared to its competitors whereas HPCL follows comparatively aggressive approach taking more r... ... middle of paper ... ... Since the amount not distributed as dividend is retained earning which is 1-dividend payout ratio so almost 60% of earning are retaining by the companies which is utilized for research, exploration and development purposes as there is always a need to plan and develop new products to satisfy the new and changing demands. The earnings per share for both the companies is following a zigzag trend due the change in net income for the respective years. In the years 2010 and 2011 the earning per share of IOCL has decreased in comparison to HPCL due to increase in number of shares from 119.47 to 242.7. The share capital of IOCL is quite large in comparison HPCL i.e. IOCL’s equity share capital is 2427.95(crore)and that of HPCL is of 339.1(crore) but the profit earned by the company is not much in contrast to each other so EPS of IOCL is in same range as of HPCL.