file by dandanhuanghuang


									                                  EXECUTIVE SUMMARY

This project gives an in-depth analysis and understanding of the current status of the Oil Industry
in the country with a focus on the performances of major players like ONGC, ESSAR Oil, IOC
and Cairn.

The report gives a brief overview of the global scenario in the Oil Companies and also explains
the evolution of India with respect to Oil. Over the last decade and a half Oil industry has wit-
nessed major changes and is now among the fastest growing sectors in the Indian economy.

Oil industry has contributed to the development of the economy and has thus paved the way for
faster growth of the country’s GDP over a period of 10-15 years thereby increasing the jobs cre-
ated for skilled labour.

This industry is very important from the point of view of growth of the economy, as this com-
modity is the second most favourite of the market to trade after Gold hence oil is also called as
the Black Oil.

Also the government is encouraging and supporting the setting up for new explorations and invit-
ing foreign investments and private players in India which further enables better production and
independence of the country.

The report gives brief idea about the growth prospects of Indian Oil Industries along with valua-
tion and investment strategy of IOC and finding out the reasons for the volatility in the stock
prices of the four companies. It also gives the major news and the milestones achieved by the
four companies.

The report also contains information about the Insurance Sector in brief and throws more infor-
mation about Max New York Life as a company and about its different products.

Sr. no   Topic                                 Page No.

1                             Life Insurance

         Introduction and Overview             6-7

         Advantages of Life Insurance          7-8

         History of life insurance             9-12

         Competition                           13

2        Max New York Life Insurance

                 Overview                      14-16

                 Products                      17-18

3        Global Crude Oil                      19-31

         Crude Oil in India                    32-35

4        Crude Oil Companies Overview          36-87

5        Relative Valuation                    88-97

6        Bibliography                          98

                                     Page 2

Life insurance or life assurance is a contract between the policy owner and the insurer, where the
insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individ-
uals' death or other event, such as terminal illness or critical illness. In return, the policy owner
agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There
may be designs in some countries where bills and death expenses plus catering for after funeral
expenses should be included in Policy Premium.

As with most insurance policies, life insurance is a contract between the insurer and the policy
owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which
is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the value
derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse
financial consequences caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people named in the pol-

Life-based contracts tend to fall into two major categories:

        Protection policies - designed to provide a benefit in the event of specified event, typical-
          ly a lump sum payment. A common form of this design is term insurance.
        Investment policies - where the main objective is to facilitate the growth of capital by
          regular or single premiums. Common forms (in the US anyway) are whole life, universal
          life and variable life policies.

                                                 Page 3

Life Insurance is insurance for you and your family's peace of mind. Life insurance is a policy
that people buy from a life insurance company, which can be the basis of protection and financial
stability after one's death. Its function is to help beneficiaries financially after the owner of the
policy dies.

It can also be a form of savings in the long run if you purchase a plan, which offers the option of
contributing regularly. Additionally, a little known function of life insurance is that it can be tied
in with a person's pension plan. A person can make contributions to a pension that is funded by a
life insurance company. These are considered private pension arrangements.

In addition, you should also make a list of what you feel needs to be protected in your family's
way of life. With a life insurance policy in place, you can:

    Provide security for your family
    Protect your home mortgage
    Take care of your estate planning needs
    Look at other retirement savings/income vehicles


Life insurance, especially tailored to meet your financial needs

Need for Life Insurance

Today, there is no shortage of investment options for a person to choose from. Modern day in-
vestments include gold, property, fixed income instruments, mutual funds and of course, life in-
surance. Given the plethora of choices, it becomes imperative to make the right choice when in-
vesting your hard-earned money. Life insurance is a unique investment that helps you to meet
your dual needs - saving for life's important goals, and protecting your assets.

Let us look at these unique benefits of life insurance in detail.

Asset Protection

                                               Page 4
From an investor's point of view, an investment can play two roles - asset appreciation or asset
protection. While most financial instruments have the underlying benefit of asset appreciation,
life insurance is unique in that it gives the customer the reassurance of asset protection, along
with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s family remain protected
from circumstances such as loss of income due to critical illness or death of the policyholder.
Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The
customer therefore benefits on two counts and life insurance occupies a unique space in the land-
scape of investment options available to a customer.

Goal based savings

Each of us has some goals in life for which we need to save. For a young, newly married couple,
it could be buying a house. Once, they decide to start a family, the goal changes to planning for
the education or marriage of their children. As one grows older, planning for one's retirement
will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the instrument in which you
invest should offer corresponding benefits pertinent to the new life stage.

Life insurance is the only investment option that offers specific products tailormade for different
life stages. It thus ensures that the benefits offered to the customer reflect the needs of the cus-
tomer at that particular life stage, and hence ensures that the financial goals of that life stage are

                                               Page 5

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
(Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in
terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient
Indian history has preserved the earliest traces of insurance in the form of marine trade loans and
carriers’ contracts. Insurance in India has evolved over time heavily drawing from other coun-
tries, England in particular.


    1818 saw the advent of life insurance business in India with the establishment of the Ori-
       ental Life Insurance Company in Calcutta. This Company however failed in 1834. In
       1829, the Madras Equitable had begun transacting life insurance business in the Madras
       Presidency. 1870 saw the enactment of the British Insurance Act and in the last three
       decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Em-
       pire of India (1897) were started in the Bombay Residency. This era, however, was dom-
       inated by foreign insurance offices which did good business in India, namely Albert Life
       Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian of-
       fices were up for hard competition from the foreign companies.
    Insurance in India has its history dating back till 1818 started by Anita Bhavsar, when
       Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the
       needs of European community. Pre-independent era in India saw discrimination among
       the life of foreigners and Indians with higher premiums being charged for the latter. It
       was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insur-
       ance company covered Indian lives at normal rates.


    In 1914, the Government of India started publishing returns of Insurance Companies in
       India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to
       regulate life business. In 1928, the Indian Insurance Companies Act was enacted to ena-
       ble the Government to collect statistical information about both life and non-life business

                                              Page 6
       transacted in India by Indian and foreign insurers including provident insurance societies.
       In 1938, with a view to protecting the interest of the Insurance public, the earlier legisla-
       tion was consolidated and amended by the Insurance Act, 1938 with comprehensive pro-
       visions for effective control over the activities of insurers.The oldest existing insurance
       company in India is National Insurance Company Ltd, which was founded in 1906 and is
       doing business even today.


    The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there
       were a large number of insurance companies and the level of competition was high.
       There were also allegations of unfair trade practices. The Government of India, therefore,
       decided to nationalize insurance business.
    An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector
       and Life Insurance Corporation came into existence in the same year. The LIC absorbed
       154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign
       insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was re-
       opened to the private sector.

2000 onwards

China’s has moved ahead of Indian the insurance sector, global credit rating agency Standard &
Poor’s said in a report.

“Although India, supported by a more developed Financial market, has better capitalised non-life
insurers than China, the overall Financial strength of its insurance industry is weakened by its
financially weak state-owned life insurance company,” S&P’s said.

China’s insurance industry operates in a more developed marketplace than India and is supported
by a positive regulatory environment, higher asset quality, better performing major companies,
against a backdrop of stronger economic development, the rating agency said.

Though both the countries have some commonalities, China has solved some of its legacy prob-
lems like low capital base through restructuring and listing, less restriction on private and foreign
ownership compared to India.

                                               Page 7
India opened the market to private players in 2000 while China did that a decade earlier. For for-
eign investors, China allows upto 50 per cent ownership for life insurance companies and upto
100 per cent in non-life insurance companies, which is much higher than the 26 per cent foreign
ownership restrictions in India.

S&P’S Outlook on the India non-life insurance industry remains unchanged at stable while the
outlook on life insurance reflects its good potential. The agency has recently revised its outlook
on China’s insurance industry to positive from developing, reflecting the industry’s continued
improvement in operational fundamentals, positive regulatory development and good potential.

China's insurance industry achieved a return on investment of 2.5 per cent in the first half, up
0.86 percentage points year on year and hitting a new peak in recent years, according to latest
statistics released by the China Insurance Regulatory Commission (CIRC).

China's insurance industry achieved a return on investment of 2.5 per cent in the first half, up
0.86 percentage points year on year and hitting a new peak in recent years, according to latest
statistics released by the China Insurance CIRC.

During the first six months, the return on investment in stocks was more than 10 per cent; in
funds, more than 9 per cent; and in bonds, more than 2 per cent. China now has eight insurance
assets management companies and another one is under preparation. The return on investments
of assets management companies is likely to set a new high this year.

By the end of June this year, China's insurance assets management companies managed 1.3 tril-
lion yuan of assets, accounting for 82.3 per cent of the total available funds of the insurance in-
dustry, up from 77.7 per cent at the yearend of 2005, according to statistics.

A half-year report released by China Life Insurance Asset Management Company Limited, sug-
gests that insurance assets management companies have greatly improved returns on investment
and have reinforced the industry's overall strength through centralised management and special-
ised utilisation of insurance assets.

Some of the important milestones in the life insurance business in India are:

                                              Page 8
    1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
       started functioning.
    1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company
       started its business.
    1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate
       the life insurance business.
    1928 - The Indian Insurance Companies Act enacted to enable the government to collect
       statistical information about both life and non-life insurance businesses.
    1938 - Earlier legislation consolidated and amended to by the Insurance Act with the ob-
       jective of protecting the interests of the insuring public.
    1956 - 245 Indian and foreign insurers and provident societies taken over by the central
       government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
       with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton In-
surance Company Ltd., the first general insurance company established in the year 1850 in Cal-
cutta by the British.


   1. Bajaj Allianz Life Insurance Company Limited
   2. Birla Sun Life Insurance Co. Ltd
   3. HDFC Standard life Insurance Co. Ltd
   4. ICICI Prudential Life Insurance Co. Ltd.
   5. ING Vysya Life Insurance Company Ltd.
   6. Life Insurance Corporation of India
   7. Max New York Life Insurance Co. Ltd
   8. Met Life India Insurance Company Ltd.
   9. Kotak Mahindra Old Mutual Life Insurance Limited
   10. SBI Life Insurance Co. Ltd
   11. Tata AIG Life Insurance Company Limited
   12. Reliance Life Insurance Company Limited.
   13. Aviva Life Insurance Co. India Pvt. Ltd.

                                               Page 9
14. Sahara India Life Insurance Co, Ltd.
15. Shriram Life Insurance Co, Ltd.
16. Bharti AXA Life Insurance Company Ltd.
17. Future Generali Life Insurance Company Ltd.
18. IDBI Fortis Life Insurance Company Ltd.
19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd
20. AEGON Religare Life Insurance Company Limited.
21. DLF Pramerica Life Insurance Co. Ltd.
22. Star Union Dai-ichi Life Insurance Comp. Ltd.
23. National Insurance Company Ltd.

                                           Page 10
                                 MAX NEW YORK LIFE


Max New York Life Insurance Company Ltd. is a joint venture between New York Life; a For-
tune 100 company and Max India Limited; one of India's leading multi-business corporations.
Max New York Life Insurance Co Ltd is a Rs. 250 crore joint venture with a paid up capital of
Rs. 807 crore. The insurance agents employed at Max New York Life Insurance Co Ltd are
trained in-house with a rigorous training program of over 152 hrs, much higher than the standard
100 hrs of mandatory training laid down by the IRDA. Around 345 Max New York Agent Advi-
sors qualified for Million Dollar Round table (MDRT) membership in 2006. It is an internation-
ally renowned congregation of world's top insurance agents.The company has positioned itself
on the quality platform. In line with its vision to be the Most Admired Life Insurance Company
in India, it has developed a strong corporate governance model based on the core values of excel-
lence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a
Trusted Life Insurance Specialist through a quality approach to business.

Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its
values of financial responsibility, Max New York Life has adopted prudent financial practices to
ensure safety of policyholder's funds. The Company's paid up is Rs. 1,782 crore.

Having set a Best in Class Agency Distribution Model in place, the company is spearheading a
major thrust into additional distribution channels to further grow its business. The company has
multi-channel distribution that includes the agency distribution, partnership distribution,
bancassurance, distribution focused on emerging markets and alliance marketing through em-
ployed sales force. The company currently has 33 bancassurance relationships, 14 corporate
agency tie-ups and direct sales force at 14 locations. Max New York Life has put in place a
unique hub and spoke model of distribution to deepen rural penetration. The company has 133
(13 hub office, 120 spoke offices) offices dedicated to emerging markets in Punjab and Haryana.
Max New York Life offers a suite of flexible products. It now has 36 products covering both life
and health insurance and 8 riders that can be customized to over 800 combinations enabling cus-
tomers to choose the policy that best fits their need. Besides this, the company offers 6 products

                                             Page 11
and 7 riders in group insurance business. The company currently has more than 15,362 employ-

Vision: to be the Most Admired Life Insurance Company in India

Values: to ensure financial responsibility and safety of policyholder's funds.


Mr. Analjit Singh               Chairman                          Max India Limited
Mr. Anuroop (Tony) Singh        ViceChairman                      Max New York Life Insurance
Mr. Rajesh Sud                  CEO & Managing Director           Max New York Life Insurance
Mr. Rajit Mehta                 Executive Director & Chief Max New York Life Insurance
                                Operating Officer
Mr. John Harrison               Director                          Max New York Life Insurance
Mr. Richard Mucci               Director                          Max New York Life Insurance
Dr. S. S. Baijal                Director                          Max New York Life Insurance
Dr. Omkar Goswami               Director                          Max New York Life Insurance
Mr. Rajesh Khanna               Director                          Max New York Life Insurance


Rajesh Sud                      Managing Director and CEO         Max New York Life
Rajit Mehta                     Chief Operating Officer
Anil Mehta                      Senior Director - New Mar-
                                kets SBU
Sunil Kakar                     Senior Director & Chief Fi-
                                nancial Officer
Ajay Seth                       Senior Director- Legal &
Debashis Sarkar                 Senior Director      &    Chief
                                Marketing Officer

                                             Page 12
John Poole           Appointed Actuary


                          Managing director

                           Vice president

                       Associate vice president

                         Regional manager

                     Multi partner multi locations

                          Partner in charge


                          Associate partner

                           Sales manager

                      Associate sales manager


                      Associate agency partner

                                 Page 13

Max New York Life has the following Insurance Policies:

For individual:-

Protection Plans

Life is full of surprises. Unexpected events that strike without warning can disrupt the smooth
rhythm of life. You must be prepared at all times. As the primary earning member, you need to
make sure that your family is never lacking in anything even if you are taken away from them
forever. Do your best today to ensure that your family can always enjoy a comfortable lifestyle.
In double income families, both spouses should get adequate life covers especially if there are
dependent children involved. Max New York Life provides plans that guarantee maximum pro-
tection at a low cost.

Five Year Renewable and Convertible

Level Term Policy

Children Plans:-

Many children are keen to pursue unconventional careers, so to provide continuous flow of mon-
ey in the way of children and the fulfilment of their true potential this plan is formed for the ben-
efit of children to secure their future.

Investment Plans:-

Investment Plans offer the dual benefit of protection and market-linked returns with the flexibil-
ity to choose the premium and determine the market exposure.

Retirement Plans:-

This plan helps to create a superior tomorrow. If you want to sustain your current lifestyle even
after you stop working, make that money work for you. The Retirement Plans will keep you
comfortable and content, and let you live the life you deserve.

Health Plans

                                              Page 14
A medical crisis can strike anyone, anytime and may even force an individual to dip into savings
to meet these sudden and steep costs. Such an eventuality could delay or destroy a cherished fi-
nancial goal. No wonder, health is wealth. The health of every member of the family is precious
and you need to safeguard it as a priority. This Health Plans helps to make sure your family stays
fit and fine.

Savings Plans:-

This plan helps to instill the discipline of investment through force of habit as you park your
money for protection and growth to meet your needs over your lifetime. It’s a plan that matches
your needs and budget. They have a dual benefit saving plans recognize your need for all round
financial protection, and include a life cover that will protect you till the last day.

Emerging Market Plans:-

This plan reflects the social responsibility to serve the financially vulnerable sections of society.
This plan is specialized Emerging Market Plans to meet the particular needs of customers in rural
areas. The ticket size has been kept low, the premiums are affordable and the procedures are

Strategic Products Plans:-

Strategic Products Plans helps to meet an individual’s special needs and are available through
additional distribution channels. You can choose a plan to meet the planned events and unfore-
seen incidents in your life

Group Plans:-

People are the most valuable asset of any organization. Group Plans offer a three-in-one ad-
vantage, as they are a powerful tool for motivation, reward and retention, in these times of high

                                                Page 15
                                       CRUDE OIL

It is the second largest commodity after gold. It also known as the “Black Gold”.

Oil has different types of reserves. They are as followed:-

Types of Oil Reserves:-

 Proven Reserves - defined as oil "Reasonably Certain" to be producible using current tech-
   nology at current prices (90% certainty).
 Probable Reserves - defined as oil "Reasonably Probable" of being produced using current
   or likely technology at current prices (50 % certainty).
 Possible Reserves - i.e., "having a chance of being developed under favorable          circum-
   stances". (10 % certainty).
Oil is very much dependent on its quality. There are several Selected Quality Parameters.
They are as followed:-

    Commonly Monitored Parameters                   Other Significant Parameters

    Gravity or Density                              Organic Chlorides

    Sulfur                                          Methanol

    BS&W                                            Naturally Occurring Radioactive Material

    Salt (usually as water soluble chlorides)       Calcium Naphthenate

    Total acid Number (TAN)                         Crude Incompatibility

    Filterable Solids                               Asphaltene and Resins (SARA)

    Metals (Ni, V, Fe, Hg, Se, etc.)                Ease of Desalting

    Crude Distillation Properties                   Volatile Amines

                                                Page 16
About Crude oil and its sector:-

As mentioned earlier it is the second largest commodity to be traded. Economy’s progress is also
dependent on its oil reserves. There are several countries like the Gulf Emirates Countries, OPEC
which have become very rich due to their oil reserves. It has also helped them a lot to progress
and boom their economy.

Alliances: Oil has seven alliances in different countries. These alliances have the reserves of oil
and take care of the reserves as well as its production, consumption, imports and exports. These
alliances are in:-

      America
      Middle East
      Europe
      Africa
      Nigeria
      Russia
      ASEAN Countries
Factors to determine oil production and its price:-

There are several factors which determine oil’s price and its production. They are:-

     Weather:-
It plays a very important role in the oil production and its prices. In summer generally the drilling
works goes on and due to the heat there is less demand for oil as the countries doesn’t require it
so much to generate heat. In the winter the demand for oil is much higher than in summer as the
cold countries imports lot of oil to generate heat and for other uses.

     Supply v/s Demand:-
One of the major reasons for the prices to fluctuate is the supply and demand. When the demand
is higher than the supply, there is a gap in the supply chain resulting higher price of oil due to its

Again when the supply is more than the demand there is a fall in the prices as there are more re-
serves or more production than required.

                                               Page 17
    New discoveries:-
The share prices of the oil producing, exploring and refining companies also depends on their
discoveries of new oil refineries. The stock prices of those companies will rise on the news of
their new discoveries. If the company is not making any new discoveries its prices will go down
as the investor will not be interested in those companies which is not coming up with new dis-

Any oil producing company’s performance is based on its discoveries, how many oil refineries
did they find out and how many mergers and acquisition for the better supply and prices of oil.

    Quarter wise reports:-
Generally any company’s quarter 3 will finishes their oil reports and oil surveys releases. In
quarter 4 the company gets out new exploration, Joint Venture and overseas acquisition as the
company tries to show a better profit making picture.

How can we Predict Oil Production

Factors to be considered:-

    Conventional oil reserves:-
The reserves which are already present. There daily production, rate of the depletion of the re-
serves. We also come to know that how long they can supply oil and their reserves.

    Unconventional oil sources:-
These are the sources other than the normal reserves, which produces oil and the oil production
is determined from their reserves and their capacity to produce oil.

    Production trends:-
The production trends are the pattern in which the production of oil is done. As mentioned earlier
the oil production is dependent on many factors like the weather during summer the drilling is on
and the production stops in rainy season.

The outside atmosphere also makes a big difference in the production of the oil. So whenever all
the factors are favorable for the production the drilling, new exploration and discoveries starts.

                                              Page 18
     Extraction technology:-
Technology plays a very important role in the extraction the production charts shows that the
production of oil has improved by leaps and bounds due to the progress of technology. Hence
better the technology better will be the production.

For example there have been few countries like Africa who are very rich in their resources but
lack the technology development, and therefore their production is also low.

     Political factors:-
It is a very important point in relation to the production of oil. The political factors can make a
big difference in the production. The political power and the change in the same will result in the
change in the production of oil can be in a negative or a positive way. It depends upon the politi-
cal power to decide how much importance to give to the oil sector, what amount should be allo-
cated to this sector all this will determine the oil production.

Oil Discovery Follows Many Factors

     Oil exploration is a high-risk enterprise:-
It is a very high risk enterprise, as it requires a lot of initial capital as well as lot of funds to inject
for the company to run. It is also very risky as lot of money is put in purchasing the fixed assets
like big oil producing machineries, drilling machineries, man power etc for the oil production
and if there is no success in the entire production and exploration process the company has to
suffer a lot of loss as there is no guarantee for the oil exploration to be successful.

     Favorable geology encourages exploration:-
As mentioned earlier oil exploration depends upon many factors like the surrounding, weather,
climate and if all these things are favorable the oil production and exploration will be very good.
Therefore there are many countries like the Middle East, Gulf Emirates Countries, OPEC etc
who have very huge reserves compare to other countries due to their favorable geological envi-

     New technology encourages exploration:-
As mentioned technology plays a very important role in the oil production, better

The technology better will be the exploration.

                                                 Page 19
For example there have been few countries like Africa who are very rich in their resources but
lack the technology development, and therefore their production is also low.

        High prices encourage exploration:-
Oil prices have been very volatile in this recent time; this was because of the Demand v/s Sup-
ply. The higher the demand the more will be the price and due this high prices their will be more
exploration. As the high prices will definitely attracts more exploration to make maximum prof-

        Low prices discourage exploration:-
This is a total opposite situation of the above factor. If the production is more resulting in more
supply, but if the demand is low there won’t be many buyers for the same. This will result in the
lowering the prices of oil and will discourage the exploration as it is not required.

        Regulation discourages exploration:-
Oil Sector is surrounded by lot of regulations; it can be positive as well as negative. For example
if the government put the subsidies burden on the oil companies this will discourage the compa-
nies for new exploration as they suffer with huge losses due to these regulations, but if the regu-
lations are less like if the government allows the increase in the oil prices if the international
prices are rising this will help the company to earn profits.

        Political unrest discourages exploration:-
A nation’s progress is dependent on its political stability, the political power influences the oil
sector and the oil companies of that nation. If there is unrest in the power there won’t be any sta-
ble government which will take important decision on the oil sector. There won’t be any FII at-
traction and the nation will be considered to be weak. If the opposition keeps on discriminating
the government, there will be more tiff between the two and no good budget will be finalize on
the oil sector. Hence there won’t be an encouragement in the exploration as the companies will
also be unstable due to unstable power.

                                              Page 20
Global Oil Production Projection:-

Oil Resource Limits:-

    All mineral resources are finite and oil is a mineral resource.
    All mineral deposits have a fixed extent that is determined using a variety of sampling
    The known fixed quantity of a deposit is called a “reserve”.

Per Capita GDP Assumptions:-

                                            Page 21
Per capita GDP grows quickest in developing Asia & the transition economies, but OECD
countries remain far ahead in 2030.

Global Oil Demand & GDP Growth:-

Per capita GDP grows quickest in developing Asia & the transition economies, but OECD
countries remain far ahead in 2030.

Crude Oil Price Assumptions:-

                                       Page 22
Oil prices are assumed to drop back from recent highs over the next 2 years, but rebound
after 2010.

Increase in Primary Oil Demand, 2002-2030:-

Most of the increase in oil demand comes from the transport sector – especially in OECD

Proven Oil Reserve Estimates:-

                                        Page 23
Between 57% and 65% of the world’s remaining proven oil reserves are in the Middle

Undiscovered Oil & Gas Resources & Exploration Wells Drilled, 1995-2003:-

Discoveries have fallen in recent years, mainly because exploration has shifted to less pro-
spective regions.

OPEC & Non-OPEC Oil Production:-

                                          Page 24
    OPEC countries will contribute most of the increase in world oil supply after 2010.

Cumulative Global Oil Investment, 2003-2030:-

Over 70% of the projected $3 trillion of oil-industry investment will go to the upstream –
largely to replace exhausted capacity.

                                         Page 25
High Oil Price Case:-

    Analyses impact on oil markets of higher oil prices than assumed in Reference Scenario.

    Combination of factors could keep oil prices high in the years to come.

    Under-investment in supply infrastructure.

    Strong demand-side pressures.

    Lack of resource availability.

    Geo-political factors.

    IEA crude oil import price is assumed to average $35 per barrel (in year-2000 dollars)
       over the projection period – average for 2004 to date.

    Natural gas prices are also assumed to remain high.

Higher prices would choke off 19 mb/d of demand in 2030, but demand still rises by 1%
per year from 2002 to 2030

How can we Predict Oil Demand:-

    Demand is synonymous with consumption.

Predicting oil demand is very difficult, it is so volatile that it becomes difficult to know a proper
pattern and its trend. There are few factors on which you can predict the demand.

Factors to consider:-

    Economic growth including population:-
Economic growth means how the country is growing in terms of its infrastructure, markets,
standard of living wise, and other developments wise. As the country develops its demand for the
oil also increases. It requires extra oil for various things like to suffice their ever increasing
population, to meet its infrastructure needs. Once the country develops its technology will also
develop at the same time resulting in the increase in the demand for oil. So in short a growing
economy will always demand more for the oil due to its ever growing requirements.

                                              Page 26
    Developing world demand:-
It is the time for liberalization, privatization and globalization. There have been many associa-
tions for the better transportation of goods, requirements, favorable atmosphere for imports and
exports. Due to all these reasons the globe has become a very small place and has resulted in the
development of the economies, as a result of that they require more oil for their infrastructure,
population, automobile etc development.

    Fuel efficiency:-
Oil is very much demanded and priced on its quality to perform. The better the efficiency the
better will be the performance and reduction in the wastages and hence the demand for such effi-
cient fuel will be more but again the wastage will be less, resulting in the better utilization of oil
which will lead to less demand of that extra oil which gets wasted.

    Fuel substitution:-
Fuel is a necessicity for any economy to run, but it is a non renewable resource therefore the
countries are always looking out for other ways to reduce its use or consumption. Therefore they
always try to use a substitute to satisfy their needs. Hence if the fuel’s substitution is readily
available then the demand will be less for the fuel, as the same work is done by their substitute
with less cost and wastage.

    Social factors:-
There are various social factors like the society conservatism, the environmental factors on
which the demand for the fuel is depended.

Global Demand is Not Exploding:-

    Oil demand growth is less than population growth.
    Projections show very modest growth to 2025.
    Demand in Europe and Japan is flat or declining.
    US Demand is up but only slightly from 1980.
    China oil demand is expanding fast but still well below US.
    The only category of US demand that is growing fast is “Light Trucks” (pickups, SUVs,
       Hummers, etc.) Big opportunities exist for efficiency improvements, particularly in autos
       and trucks.Large opportunities still exist for substitution (ethanol, biofuels, electric).

                                              Page 27
    Changes in consumer habits can drastically affect oil demand.
We Can Surviive Peak Oil?

    We are more vulnerable to oil geopolitics than oil geology.
    Consumers have proven that they will reduce oil consumption when given incentives and
      good alternatives.
    Simple conservation efforts can forestall crisis for sometime.
    Brazil has proven that a large economy can become energy independent .
    We already have the technology and know-how to make Peak Oil a non-event.
    A successful demand-side energy strategy could cause oil prices to collapse if demand
      falls faster than supply.
    We need to take Peak Oil, oil independence, and GlobalWarming seriously.
Oil Reserve Conclusions:-

    All reserve declarations are suspect.
    Reserve declarations are particularly suspect in foreign countries that may have political
      motive to misstate their domestic oil reserves. (Saudi Arabia )
    Reserve calculations are dependent upon external factors such as local standards, price,
      and extraction technology.
    Many oil regions are in known production declines but total global production appears to
      be growing strongly.
    Traditional reserve declarations are very conservative.
    Oil will remain the world’s leading energy source.
    Demand will rise from 79 mb/d in 2003 to 121 mb/d in 2030 – driven mainly by
    Conventional production will not peak before 2030, assuming more oil is “proved up”.
    OPEC countries – especially in Middle East – will meet most of the demand increase.
    Net inter-regional oil trade will be more than double to over 65 mb/d in 2030.
    The risk of a supply disruption at the critical chokepoints through which oil must flow
      will grow.
    Higher oil prices would significantly reduce demand & OPEC revenues in the long term.

                                             Page 28
                                      Crude oil in India

Oil & Gas sector has a long history in India

    1991-1994 – 4th, 5th, 6th, 7th and 8th Rounds of exploration bidding
    1999 New Exploration Licensing Policy (NELP)
    2000 – NELP II
    2002 – NELP III
    2003 – NELP IV
    2004 – NELP V
    2006 – NELP VI
    2007 – NELP VII
Just over 60% of potential in oil sector has been explored so far

Status of exploration in India:-

                                20%               21%

                                                                    Poorly Explored
                                                                    Exploration Initiated

                          15%                                       Unexplored
                                                                    Moderate Explored


Extensive discoveries have been made in recent years

Annual crude oil production (MMT):-

    Total production of crude oil during 2007-08 is 34.12 MMT.
    Contribution from Pvt. /JV small, medium and discovered fields during the year is
       5.08MMT of oil which accounts for about 15 per cent of the national oil production.

                                               Page 29
    Annual crude oil production ratio of off-to-onshore operations has largely remained stat-

Energy consumption mix in India:-

    India still largely remains dependant upon coal and oil.
    The growth in demand is projected to catapult the overall demand to 196 MMT in 2011-
      12 and 250 MMT in 2024-25.
    Growing demand-supply gap has led the Indian government to open up exploration and
      production to private participants through.
    NELP and develop a more holistic strategy for acquisition of equity oil abroad.
Energy consumption mix in India:-


                                                                Natural Gas
                                                                Nuclear Energy
                                                                Hydro Electric

                                                Page 30
The demand – supply gap has been increasing:-

    Oil comprises about 33 per cent of India’s primary energy consumption at present.
    Growth in demand is projected to catapult the overall demand to 199 MMT in 2011-12
       and 376 MMT in 2024-25.
    Likewise, demand for NG i.e. Natural Gas (at more than 231 mmscmd) in the country has
       far outstripped supply (about 95 mmscmd), and there has an increasing trend towards
       emergence of new NG demand as well as conversion from existing fuels to NG.

Various opportunities in the oil and gas sector Oil:-

    Investments under NELP:-
Investment under NELP is increasing at a rising rate, there have been many NELP projects
which have been undertaken, resulting in the increase in the production and exploration of oil
and making India less reliable on other countries for oil. Further the projections of NELP also
looks very bright, it has resulted in many oil refineries discoveries and helped India to be more

    Destination India as refining hub:-
India has been considered as the destination hub of refinig. Due to many FIIs and DIIs the oil
production has been taken seriously which has got lot of success. India is considered to be the
next powerful nation and its fundamentals are also very strong, this attracts investors all around
the world to invest in India as has all the characteristics to be the next power economy.

                                              Page 31
    Increased investment in fuel quality up gradations:-
In recent years there have been a very good investment in the oil sector for its production and
exploration, there have been many new private sector coming up and there have bee many new
discoveries, India needs to put more money on the oil up gradations, and should give more im-
portance to its quality. This is very much possible as there are many FIIs who are ready to invest
in it as they find India to be very profitable for investments.

    Building strategic petroleum reserve through public private partnership:-
Many private players have come in India to invest in oil industries. The government should build
up more strategic petroleum reserve through public private partnership. This will result in less
dependency for oil from other countries, it will also increase create more reserves, more produc-
tion and exploration and will boost oil companies to explore more.

    Acquisition of overseas oil assets:-
There have been many opportunities for India to explore and go for overseas acquisition, the
government should take this opportunity and give more importance to overseas acquisition as
this will help India to build their international oil relationship, and it will also reduce the oil de-
pendency and will help India to get a good deal and discounts in imports.

    Competition in the downstream (retail and institutional) segment.

Private & foreign investments are on the rise:-

    Many Indian private sector players (RIL, PetroNet, Essar, etc) are coming up.
    Under seven rounds of NELP, 212 blocks were awarded, of which 56 blocks went to pri-
       vate companies & JVs.
    International players and approx. investments in India: Cairn Energy Plc – over US$ one
    British Gas - over US$ 800 million, Shell US$ 650 million, BP - US$ 444 million.
    Other global players with India operations Total, Exxon Mobil, Gaz De France, and

                                               Page 32
                                      About the company


Oil and Natural Gas Corporation (ONGC) is the largest oil & gas company in India, dominating
the exploration & production of crude oil and natural gas, with approximately 84% share of pro-
duction in both segments. The company has proved domestic crude oil reserves of 3306 million
barrels and natural gas reserves of 366 billion cubic meters, while its international reserves have
been growing steadily in recent years. ONGC is India’s largest company in terms of profits and
market capitalisation (though only 3.9% of its equity is traded).

Being a company primarily engaged in oil production, international crude oil prices should de-
cide the trend in company’s profits. However, for many years government of India has been in-
fluencing the amount of profits ONGC earns. While earlier government used to fix price at
which ONGC can sell oil, now it passes on subsidies on LPG and Kerosene to the company.
Moreover, it is made to pay very high rates of royalty, cess and sales tax, besides contingency
duties. Rupee appreciation is also negative for the company as its earnings are supposed to be
linked to oil prices in US dollar. The price at which company can sell gas continues to be fixed
by government at almost half the market-determined levels. Moreover, being a government or-
ganisation, the company had been very slow and risk-averse in exploring and acquiring new oil
and gas reserves. The result is that the company’s volume growth has remained and will continue
to remain sluggish in the near future.

It has acquired (though its 100% subsidiary ONGC Videsh) participating interests in oil and gas
exploration projects in Libya, Iraq, Iran, Syria, Myanmar and Russia.

It has also lined up investment of Rs 4486 crore by 2007 for deep-sea exploration and Rs 9571
crore by 2007 on existing oil fields redevelopment programs.

On a long-term basis, ONGC has drawn out a four pronged strategy for the next twenty years. This in-
cludes -

     Doubling reserves from 5.77 billion metric tonne (bln mt) oil plus oil equivalent gas
           (O+OEG) to 12 bln mt in the next 20 years.

                                               Page 33
    Improving average recovery factor to 40% from 28% currently. Notably, while some of
       the wells have a recovery factor of over 30%, some have a recovery factor of less than
       10% also.

    Sourcing 20 mln mt pa Oil/Oil-equivalent Gas from Equity Assets abroad.

    Sustainable growth as a Global Integrated Energy Provider.

The profits of the company were adversely affected due to accounting for subsidies on LPG and

Nevertheless, higher floating stock will increase its chances of inclusion in MSCI Index for Indi-
an stocks as also in NSE Nifty. Moreover, the weightage of ONGC in BSE Sensex will also in-
crease. Thus funds tracking these indices will have to buy the scrip. Moreover, ONGC is the only
listed scrip in the oil exploration sector and the FIIs wanting an exposure to this sector in India
has no other alternative.

    From its attractive future prospects, ONGC has given very good returns to its sharehold-
       ers. While, a rupee invested in Sensex in end 2000 would have now become Rs 198.43,
       the same amount invested in ONGC would have become Rs 700.17.

                                              ONGC      Sensex

                             2000(year-end) 150.00      3972.12

                             2006             1200.25 11853.85

                             Growth in %      700.17    198.43

                                             Page 34
Volatility in the Share Prices:-

              er 99

        O pril 1

        O ril 2

        O ril 3

        O ril 4

        O ril 5

        O ril 6

        O ril 7

              ril 8
        O be r 9 8

              er 2

              er 3

              er 4

              er 5

              er 6

              er 7

              er 8

           A 200

           Ap 200

           Ap 200

           Ap 200

           Ap 200

           Ap 200

           Ap 200

           Ap 200
           o b 200

           o b 200

           o b 200

           o b 200

           o b 200

           o b 200

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           o b 19

        ce ly 1
      De Ju







The share prices of ONGC have been increasing at a consistent rate, with some volatility. The
prices have gone down in 2000, with a marginal rise in 2002 and then have continued to escalate.
In mid 2004 the prices have tumbled another such downturn was in 2007. The stock has per-
formed well in 2006, late 2007 and early 2008.

The reasons for such volatility are:-

February – March 2000 (Down)

    ONGC insurance claims rising:-
OIL and Natural Gas Corporation's (ONGC) insurance claims have been on the rise in the last
few years, which does not ``reflect well upon the operational and safety standards of the

January – February 2002 (Up)

    puts BUY on ONGC:-, the premier online stock trading wing of ICICI group, has recommended
ONGC share as Pick of the Week.

                                            Page 35
ONGC is the largest Indian company in terms of profits with its FY 2002 results. For the first
time, in FY 03 it would be eligible for market driven pricing for its products viz. Oil & Gas and
is aggressively shaping up its business model for long term growth.

    The Deregulation:-
With effect from April 1, 2002, the pricing for the oil sector has moved from APM to market-
based pricing. This is very positive for ONGC, which would now realise $23.25/bl in FY2003E
compared to the APM formula, which had a cap of $16/bl. This by itself is a strong earnings
kicker, adding 67.9 per cent growth over FY2002.

Investor interest in the stock has increased considerably since beginning of the year with disman-
tling of administered pricing (APM) and PSU scrips attracting attention

The GoI deregulated the Indian oil industry with effect from April 01, 2002, by doing away with
APM. This meant that domestic oil companies could take independent decisions based on import
parity and market forces in pricing petroleum products

2003 (Up)

    ONGC up on dividend hopes on June 21, 2003:-
Expectations are that ONGC will turn out buoyant results and announce a hefty dividend.
ONGC has been a star performer in the market of late and shows potential to rise further. The
scrip of the oil and gas explorer advanced 5.7% last week to Rs 507.60 on BSE, registering a
near 8-year high.

    ONGC Rises 4% on Firm Crude Prices, FII Buying:-
The share price of Oil & Natural Gas Corporation (ONGC) rose by 4 per cent on BSE on the
back of firm crude oil prices. The increase in share price is also attributed to strong FII and local
institutional buying.

                                              Page 36
2004 (Down)

    LPG, kerosene subsidy pulls down ONGC net:-
LPG and kerosene subsidies have pulled down ONGC’s net for the year 2003-04. Net profit of
the oil PSU fell 17.7 per cent to Rs 8,664 crore as opposed to Rs 10,529 crore in the previous
year. Revenue fell 6.8 per cent to Rs 32,180 crore compared with Rs 34,537 crore in 2002-03.

    Profits were also down because the appreciation in the rupee value vis-à-vis dollar. This
eroded the gains for ONGC from selling crude oil, which it produces, at a higher price of $29.95
a barrel in 2003-04 as against $28.5 a barrel in 2002-03.

Mid 2005 (Down)

    Fire Accident:-
ONGC was hit by a fire at an oil platform in its oldest field Mumbai High in July 2005.

In July 2005, a major fire at Mumbai High had destroyed a crude processing platform at the oil-
field, cutting production by about 1,23,000-bpd, which resulted in falling share prices due to the
investor’s panic.

    Subsidy Burden:-

ONGC’s subsidy burden was Rs 2843.17 crore for the Dec-05 quarter. ONGC has been sharing
the burden of under recoveries of oil marketing companies (OMCs) since April 2003 by allowing
a discount in the prices of crude oil, PDS kerosene and domestic LPG. There is a reason to be-
lieve that ONGC's subsidy burden will decline in the December 2006 quarter.

Late 2005 (Up)

    Government nod for sale of cross holdings fuels gain in oil scrips:-

Indian Oil Corporation (IOC) and GAIL India edged higher on reports that the Union Cabinet
has allowed state run oil firms to sell stakes in other energy companies.

                                             Page 37
    ONGC declares highest-ever 400 per cent dividend:-

The ONGC Board has decided to pay the highest-ever dividend of Rs. 5704 Crore @ 400 per
cent for the fiscal 2004-05. Out of this, 200 per cent has already been paid as interim dividend.
This takes the dividend payout go up 67 per cent from last year’s figure of Rs. 3422 Crore.

    Crisil Marketwire:-

Oil and Natural Gas Corporation Ltd’s net profit is likely to rise 110 per cent on year to Rs 3,602
crore for October-December, according to an average of estimates of eleven brokers polled by
Crisil MarketWire.

Analysts said the doubling of profit will be on the back of sharply higher global crude oil prices
during the quarter. Revenues for the third quarter of 2004-05 (April-March) are seen rising 52
per cent to Rs 11,476 crore.

The company is expected to post strong results for the quarter, mainly due to the steep rise in in-
ternational crude oil prices.

    ONGC to receive insurance claim:-

September 2005

The stock climbed 2.1% to Rs 2,021.60 on reports that the oil exploration major will be the re-
cipient of $ 173 million in insurance claims for its Bombay High North (BHN) platform that was
destroyed by a fire in July.

2006 :- June - July and November(Up), September (Steep Down)

    ONGC plunges:-

On 24th May ONGC slipped 4.70% to Rs 1,179 on reports Subir Raha, the high-profile chairman
and managing director of the company has not been given an extension by the government.

The stock had fallen heavily during the recent market meltdown.

                                             Page 38
        ONGC to streamline operations at Mumbai High, gains:-

ONGC surged 3.62% to Rs 1063.60 on plans to resume normal operation at Mumbai High.

        ONGC packs a punch with 1:2 bonus issue:-

Oil exploration major ONGC jumped 3.3%, to Rs 1,130.50 in July after it declared a 1:2 bonus

ONGC surprised the market by declared a 1:2 bonus issue along with its Q1 June 2006 results.
The company had last announced a bonus issue way back in 1995 that too a liberal 3:1.

        ONGC regains market-cap throne:-

November, 2006

A surge of over 4% in its scrip helped ONGC regain its numero uno slot in terms of market cap.

The stock had been marred by volatility over the past few days due to alternate bouts of buying
and selling amid rising global crude oil prices. After an initial fall, the stock bounced back from
the lower level later. From Rs 1,129.95 on 10 July, the counter slipped to a low of Rs 1,028.35
by 17 July. Thereafter, the stock recovered to Rs 1,193.90 by 11 August 2006.

Although a rise in global oil price augurs well, it will not benefit ONGC in full as it will have to
bear the subsidy burden to compensate for losses made by oil marketing companies.

        ONGC in demand:-

November, 2006

ONGC surged nearly 4% to Rs 834 on reports that the government has firmed up natural gas pol-

3.1 lakh shares changed hands in the counter on BSE.

                                              Page 39
As per reports, the government has firmed up natural gas policy whereby natural gas pricing will
be arrived at through competitive bidding. Government will also fix reference price of natural
gas. Further, different gas prices would be set for different regions. All disagreement on gas pric-
ing will be resolved by independent regulator.

    ONGC in Russia:-
The stock boosted by reports that the government has firmed up a natural gas policy and on the
news that ONGC is planning joint ventures with Russian oil companies, to acquire oil and gas
assets in Russia and other countries, which boosted the counter.

    ONGC upbeat on NELP-VI success:-

ONGC rose 1.2% to Rs 856, after an empowered committee of secretaries awarded 21 blocks to
ONGC in the sixth round of exploration-license awards in India.

Analysts feel ONGC is a beneficiary of softening crude price environment as industry under-
recoveries (which ONGC shares with state-run refiners) will come down faster. Recently, foreign
brokerage CLSA put a 'buy' on the stock, Rs 930 being the price target. It also said that ONGC is
attractively valued.

    ONGC bends under subsidy burden:-

ONGC tanked 4.60%, to Rs 1,052 after the share of subsidy burden on upstream firm –ONGC
was raised to Rs 24,000 crore this fiscal.

This subsidy burden is to be shared jointly by ONGC, Oil India and GAIL India as part of a
bailout package for oil marketing companies.

The stock witnessed a severe pounding in the past few months. From a peak of Rs 1,484.45 on
10 May 2006, the stock slumped sharply to Rs 1,102 on 05 June 2006, under intense selling pres-
sure, in line with the recent market meltdown.

                                              Page 40
     ONGC tanks on hike in cess on crude:-

ONGC lost nearly 4% to Rs 1,131.50 following an increase in cess on crude oil collected by the

     ONGC retracts:-

December, 2006

ONGC lost 1.48% to Rs 875, after the scrip turned ex-dividend today.

A total of 1,04,081 shares had changed hands in the counter on BSE, where the scrip was the top
loser from the 30-Sensex pack.

ONGC had declared an interim-dividend of Rs 18 per share (180%) for the financial year 2006-
2007, on the post-bonus expanded equity capital. In absolute terms, this interim dividend works
out to a pay-out of Rs 3,850 crore, including Government of India’s share of Rs 2,854 crore

ONGC's subsidy bill nearly tripled to Rs 12,000 crore in the year to March 2006, compared with
Rs 4,100 crore in the previous year.

In FY 2006, ONGC charged $42 per barrel for state-run refiners Indian Oil Corporation, BPCL
and HPCL to help them reduce their losses. Global crude prices have risen sharply but domestic
retail prices have increased just 15% due to government price caps that aim to help control infla-

     Dividend bonanza spurs ONGC:-

December, 2006

ONGC gained 1.82% to Rs 881 on news that the company has declared an interim dividend of
180%, its highest ever, for the ongoing fiscal.

                                              Page 41
This dividend is on the post-bonus expanded equity capital of the company. In absolute terms,
this interim dividend works out to a pay-out of Rs 3,850 crore (on the post-bonus paid-up capital
of Rs 2,139 crore), including a Government of India share (74.14%) of Rs 2,854 crore. This is
also the highest-ever interim dividend paid by the company.

    Huge gas find fuels rally in ONGC:-

December, 2006

Oil exploration major ONGC surged rose 5.4% to Rs 861 following reports that it has made a
huge gas find in the Bay of Bengal, with initial estimates suggesting reserves of about 21 trillion
cubic feet.


    ONGC close buying a stake of up to 33% in Turkmenistan:-

January, 2007

Oil exploration major ONGC rose 1.4% to Rs 887.10 following reports it is close buying a stake
of up to 33% in two Caspian sea blocks offshore of Turkmenistan.

    New gas find propels ONGC:-

January, 2007

ONGC advanced 3.73% to Rs 928, after it informed about a gas find off India's eastern coast.

ONGC said that it had been offered stakes in its deepwater fields in the eastern Krishna Godavari
basin to Brazil's Petrobras, Italy's ENI, Norway's Norsk Hydro and Malaysia's Petronas.

    ONGC firms up on picking up stake in block of foreign firm:-

February, 2007

                                             Page 42
ONGC rose 1.72% to Rs 900.10, in a weak market, after overseas arm ONGC Videsh picked up
20% stake in Italian ENI's deepwater block in Congo Brazzaville.

As per reports, ONGC has entered into talks with Brazil's Petrobras for offering each other a
stake in their oil and gas blocks. ONGC is likely to offer Petrobras a stake in a block in
deepwater Krishna-Godavari basin, in which it recently had discovered gas. In return, Petrobras
is expected to offer ONGC a stake of equal value in blocks in the Campos basin, off Brazil's
coast. ONGC Videsh already owns 15% stake in an offshore block in Brazil.

    ONGC gains 11%:-
March, 2007

Exploration and production stock ONGC has recovered by over 11 per cent in March. In the last
one week, the counter has gained around 4.14 per cent.

    Government to offer 80 blocks in NELP-VII auction:-

June, 2007

The largest single-round auction

The petroleum ministry is planning to offer 80 oil and gas blocks in the seventh round of auction
under the New Exploration Licensing Policy (NELP-VII) in mid-August 2007.

    ONGC demands 40% hike in Administered Price Mechanism (APM) gas price:-

September, 2007

Oil and Natural Gas Corporation 1.28% to Rs 913 on reports that it has sought a steep hike in the
gas prices from government

ONGC has reportedly sought a steep hike in the price of gas to Rs 4,500 per thousand cubic me-
tre from the present Rs 3,200 per thousand cubic metre. The Tariff Commission had recom-
mended a minimum producer price of Rs 3,600 per thousand cubic metre in May 2007.

                                            Page 43
ONGC hopes to gain Rs 2000 crore in revenues annually if prices were raised.

2008 (Down)

It was because of the sentiments after the Lehman Brothers crash and the economic meltdown.
The whole of the financial sector felt the heat and as a result, the future markets came under a lot
of pressure. Traders started rolling back their positions and there was a sudden crash but based
on certain fundamentals, prices are moving up again

     Global peers beat ONGC hollow in revenue:-
June, 2008

Oil major earns $60 a barrel less than its foreign counterparts.

Oil and Natural Gas Corporation (ONGC), the country's most profitable company, is far behind
its global counterparts in terms of revenue earned per barrel. The oil major makes a profit of
around $10 a barrel for every barrel of oil it sells, while its global peers earn a profit of over $70
a barrel.

                          ERODING                               FIGURES
                          ONGC oil prices ($/barrel)

                          Year       Gross price Net price         Discount

                          2003-04 29.96             26.46          3.50

                          2004-05 43.20             37.79          5.41

                          2005-06 59.66             42.34          17.32

                          2006-07 66.33             44.22          22.11

                          2007-08 85.54             52.90          32.64

                                               Page 44
2009 (Up)

    ONGC makes 1 billion barrel oil discovery offshore Iran:-
April, 2009
India's Oil and Natural Gas Corp. (ONGC) has discovered a new offshore oil field in the Persian
Gulf with reserves of 1 billion barrels of heavy crude, according to National Iranian Oil Co.
(NIOC). This resulted in rise in the share price.

    ONGC jumps 5.54% on expectation of higher natural gas price:-
May, 2009

Merrill Lynch retains its `Buy’ rating on ONGC

Since the May 16 election results, there is expectation that auto fuel pricing may be freed up to
oil price of $75/bbl. Assuming a 8-10 % price hike in diesel and gasoline has meant no auto fuel
subsidy for ONGC up to Brent price of $62/bbl. FY12E EPS is also boosted 15% due to lower
auto fuel subsidy


June 28, 2009

    ONGC, IOC, BSNL, SAIL, CIL may be termed Mahanavaratnas:-

Oil majors ONGC and IOC, telecom firm BSNL, steel-maker SAIL, and Coal India Ltd may be
the only state-run firms which would get the coveted 'Mahanavaratna' status conferring them
greater operational autonomy

Sources said Mahanavaratna status would be given to PSUs who had clocked Rs 30,000 crore or
more turnover in the past three years and earned more than Rs 5,000 crore profit after tax in three
consecutive years

                                              Page 45
Also, the Mahanavaratna-eligible PSU should have an average networth of Rs 15,000 crore and
global presence, according to the cabinet note circulated by department of public enterprises

May 22, 2009

    ONGC to shell out Rs 8.52 bn for subsidizing petrol, diesel in Jan-Mar:-

Oil and Natural Gas Corporation (ONGC) will pay Rs 8.52 billion for subsidizing petrol and die-
sel during January-March quarter but state gas utility GAIL India has been spared from the sub-
sidy burden, reports Economic Times.

March 2009

    ONGC questions Goldman Sachs report:-

Oil & Natural Gas Corp said Goldman Sachs has used non-comparable benchmarks for rapping
the company on corporate governance issues. On Thursday, the investment bank, in a report, had
claimed that ONGC, as a state-run company, had sold crude to government refiners at artificially
low prices set by the Centre for the past six years.

August 2008

    India's ONGC to buy Imperial Energy for £1.4bn:-

Imperial Energy, which explores for oil in western Siberia, has agreed to a takeover by India's
ONGC Videsh for £1.4bn.

Imperial and ONGC said in a joint statement today that they had agreed a recommended pre-
conditional cash offer of £12.50 a share. The deal depends on approval from the Russian
government and the anti-monopoly regulator.

                                              Page 46
October 22, 2007

        ONGC-Mittal Joint Venture acquires 30% Participating Interest in Turkmenistan
          Exploration Block:-
ONGC Mittal Energy Ltd. (OMEL), a joint venture between ONGC Videsh Ltd. (OVL) and Mit-
tal Investment Sarl (MIS), has acquired 30% Participating Interest (PI) in an exploratory Block
11-12, Offshore Turkmenistan in the Caspian Sea. Covering an area of 5663 square km, the
block is located close to discovered and producing fields, and contains a number of prospects
with significant reserve potential. Discoveries have been made in adjoining areas such as Ashrafi
and Karabakh.

September 20, 2007

ONGC Videsh, the overseas investment arm of ONGC won three exploration blocks in Colum-

September 19, 2007

        ONGC requests Government to Increase Gas Prices:-

ONGC seeks an increase in the Gas prices and has requested the Congress Government to re-
think on gas pricing. ONGC has requested an increase of nearly 50 per cent from the current
price finalised by the Government. ONGC expects to get the market value of Gas and doesn't
want Government to offer any subsidy on Natural Gas.

July 03, 2007

        ONGC sharply cut gas reserve estimates in Krishna Godavari Basin:-

As per the reports ONGC has sharply cut gas reserve estimates at one of its blocks in the Krishna
Godavari Basin. The block is estimated to have 2.38 trillion cubic feet (TCF) of in-place gas re-
serves, much lower than its earlier estimate of 21 TCF.

June 21, 2007

                                            Page 47
    ONGC Videsh to buy a 33% stake in an Egyptian deep-water block:-
The Union cabinet had approved the state-run explorer's plan to buy a 33% stake in an Egyptian
deep-water block from operator Royal Dutch Shell. The Egyptian block has estimated gas re-
serves of around 14 trillion cubic feet (tcf). The size is stated to be approximately the same as
Reliance India's (RIL) approved gas find in the Krishna Godavari (KG) Basin. Two of the six
wells in the block have resulted in gas discoveries. The government is likely to support ONGC
Videsh in the block development. The production is expected to begin by 2012.

June 14, 2007

    ONGC talks with Brazil's Petrobras:-

As per reports, ONGC has entered into talks with Brazil's Petrobras for offering each other a
stake in their oil and gas blocks. ONGC is likely to offer Petrobras a stake in a block in
deepwater Krishna-Godavari basin, in which it recently had discovered gas. In return, Petrobras
is expected to offer ONGC a stake of equal value in blocks in the Campos basin, off Brazil's
coast. ONGC Videsh already owns 15% stake in an offshore block in Brazil.

November 09, 2006

    ONGC for a JV with Hinduja Group:-

Oil and Natural Gas Corporation (ONGC) and the Hinduja Group announced intentions for a
joint venture to pursue oil exploration and production business globally. ONGC is expected to be
the major stakeholder in the proposed tie-up with 49.8%. Hinduja-promoted Ashok Leyland Pro-
ject Services (ALPS) will hold 48.02% and foreign institutions and banks will have the remain-
ing 2%. The joint venture will look at sourcing LNG at competitive terms.

    ONGC in Russia:-

ONGC is also looking at joint ventures with State-owned oil companies of Russia to acquire oil
and gas assets. The joint ventures will look for properties in Russia and other countries but not
India. In the proposed joint venture, the Russian company will hold 51% stake while ONGC will
own the remaining 49%

                                            Page 48
ONGC has declared its capex plans of Rs 82670 crore for next five years till year 2012. Large
chunk of the investments are planned in its core areas of oil exploration, boosting the oil produc-
tion from ageing wells, developing marginal oil & gas fields etc. Apart from the primary busi-
ness of E&P, the company will be investing in a number of businesses such as petrochemicals,
coal-bed-methane and a mega power plant in Northeast by 2010.

Apr 28, 2006

    IOC sells 20% of its stake in ONGC:-

State-owned Indian Oil Corp on Thursday sold a fifth of its 9.2 per cent stake in Oil and Natural
Gas Corp (ONGC) to garner Rs 3,685 crore that will bridge the shortfall in revenue arising from
non revision of fuel prices despite spiralling crude oil prices.

April 08, 2004

    ONGC Share Allocation and Refunds being rectified:-

10% of ONGC equity amounting to 14, 25, 93, 300 Equity shares of Rs. 10/- each was offered
for sale by the President of India. The offer opened on 5th March, 2004 and closed on 13th
March, 2004. This highest-ever equity float in the Indian capital market received unprecedented
response from investors in India and abroad. Through the book building process, the price was
set at the upper limit of Rs. 750/- and the proceeds of Rs. 10, 542 Crore have been credited to the
Consolidated Fund of India on 31st March, 2004.

November 26, 2005

    ONGC may steal show on overseas aspirations:-

Oil exploration ONGC may edge higher on reports that ONGC and China National Petroleum
Corporation are jointly bidding for Petro-Canada's $ 1 billion oil and gas fields in Syria. The Syr-
ian assets -- Petro-Canada's interest in a major Syrian oil and gas joint venture with Royal Dutch
Shell-operated are valued at about $1 billion or more, reports suggest.

September 30, 2005

                                               Page 49
    ONGC may gain on bagging oil block in Vietnam:-

ONGC may edge higher after the company said its overseas arm ONGC Videsh (OVL) has been
awarded an exploration block 127 in Phu Khanh Basin offshore Vietnam with 100 percent partic-
ipating interest. The estimated in-place reserves of the block are more than 1 billion barrels.

September 2005

    Rise in Petrol and Diesel prices:-

Following a 7% rise in domestic transportation fuel prices in June 2005, the prices petrol and
diesel were revised upwards in early September 2005 by Rs 3 and Rs 2 per litre respectively.

Meanwhile, the government is expected to grant oil bonds to marketing companies to the extent
of Rs 12,000–Rs 15,000 crore to compensate them for bearing the burden of subsidies on LPG
and kerosene.

July, 2005

    Fire Accident:-

A fire devastated ONGC oil platform in Mumbai on Wednesday and the coast guard rescued at
least 270 people who had been working there.

Another 20 people had been located and operations were on to bring them to safety. Oil Minister
Mani Shankar Aiyar said there were some casualties, although he had no immediate details.

The accident resulted in cutting production by about 1,23,000-bpd.

June 20, 2005

    ONGC declares highest-ever 400 per cent dividend:-

                                              Page 50
The ONGC Board has decided to pay the highest-ever dividend of Rs. 5704 Crore @ 400 per
cent for the fiscal 2004-05. Out of this, 200 per cent has already been paid as interim dividend.
This takes the dividend payout go up 67 per cent from last year’s figure of Rs. 3422 Crore.

Sep 11, 2003

     ONGC may share LPG, kerosene subsidy burden:-

The Government is considering a proposal to transfer some of the burden of subsidy on LPG and
kerosene on to ONGC.

Currently, the public sector oil marketing companies, IOC, HPCL and BPCL, bear the entire
brunt of this subsidy

March 03, 2003

Reliance exits ONGC in Rs744 crore deal:-

The Stock Exchange, Mumbai (BSE) recorded a mega deal in which the Reliance group exited
from the oil and gas major ONGC Ltd counter.

According to Reuters, the seller in the ONGC deal was Reliance group which sold its entire 86
lakh shares comprising 0.6% of the ONGC’s equity. Quoting a Reliance source, it said, “The
shares have been sold to a clutch of foreign funds. The Citigroup was sole book-runner for the


     ONGC’s New Fields Discovery:-
ONGC struck large gas reserves in the Daman Offshore field on the western coast of India. Ini-
tial assessment puts the total in place reserves at 30-50 billion cubic meters or 1 trillion cubic
feet. ONGC has discovered 5.8 bn tonne of oil plus oil-equivalent gas, of which 2.1 bn tonne are
recoverable reserves. During 2001-02, it has added 66.5 mn tonne of oil & oil equivalent gas re-
serves. Also, 122 mn tonne came from Sakhalain project in Russia. ONGC is expected to double
reserve accretion and improve recovery factor by 40 per cent in next two years. It is undertaking

                                             Page 51
a massive program of investing Rs 12000 crore plus in improving oil recovery in its 15 oil fields.
It is expected that the recovery rate would be improved to 40 per cent from the current 25-27 per

Aug 04, 2002

ONGC acquire stake in Birla group, Mangalore Refinery and Petrochemicals (MRPL).

INDIA will have its first integrated oil company in Oil and Natural Gas Corporation (ONGC)
following its acquisition of the Birla group stake in Mangalore Refinery and Petrochemicals
(MRPL). The acquisition will mark the entry of ONGC, an oil exploration and production com-
pany, into the downstream business of refining and marketing of petroleum products. This is a
significant development not just for ONGC but for the oil sector as a whole.

Milestones Achieved by the Company:-

June 23, 2009

    ONGC scores hat-trick on gas discoveries:-
India’s biggest oil explorer ONGC has struck oil and gas in three new blocks, one of these finds
its most significant in decades and holding the promise of significantly narrowing the energy-
starved country’s demand-supply gap in the natural gas sector.

The gas find at Krishna Godavari (K-G) basin off the Andhra coast could prove as rich as the
Reliance Industries’ D-6 block, which, at its peak, is expected to double India’s current natural
gas output. The other two discoveries included an oil find in Charada-3 offshore block in Cam-
bay basin and oil and gas find in Matar in Vadodara district, both in Gujarat.

April 16, 2009

    ONGC receives ‘Leading Oil & Gas Corporate of the Year’ Award:-

                                             Page 52
ONGC bagged 'Leading Oil & Gas Corporate of the Year' award announced by Petroleum Fed-
eration of India today. This is the highest category of award given to a corporate by PetroFed.
The PetroFed Oil & Gas Awards-2008’ were given at an impressive ceremony in New Delhi.

March 25, 2009

    ONGC receives Dalal Street Investment Journal Award for Highest Profit among
The first DSIJ PSU Awards 2009 were given away at a glittering ceremony held at the India
Habitat Centre, New Delhi last evening. The awards have been instituted by the Dalal Street In-
vestment Journal (DSIJ) to felicitate the real heroes of the Indian economy with a view to recog-
nizing their contributions in shaping the nation’s economy.

February 12, 2009

    ONGC receives FICCI Annual Award for Environmental Sustainability of Busi-
At the 81st Annual General Meeting of FICCI, Oil and Natural Gas Corporation Limited
(ONGC) was conferred by FICCI its annual award for 2007-08 in appreciation to “Outstanding
Achievement in Environmental Sustainability of Businesses”.

December 18, 2007

    ONGC - First-ever Indian entrant in Fortune list of 'World's Most Admired Com-
Oil and Natural Gas Corporation Ltd. (ONGC) has got the unique distinction to become the first-
ever Indian company in the Fortune Magazine's annual list of the World's Most Admired Com-
panies. This is based on a survey of the Fortune companies across the globe, conducted by the
Fortune magazine, in association with world-renowned Hay Group. ONGC finds the pride of
place in the list released by Fortune for the year 2007.

September 24, 2007

    ONGC wins global award in Corporate Governance for the 3rd time:-

                                              Page 53
Oil and Natural Gas Corporation Ltd. (ONGC) has won Golden Peacock Global Award for Ex-
cellence in Corporate Governance – 2007, conferred by the World Council for Corporate Gov-
ernance (WCFCG), London.

June 19, 2006

    ONGC ranked 402 in 2006 Fortune 500 list

    ONGC improves FT Global 500 rank: 158 from 192:-

ONGC – with a market capitalization of US$ 41.9 billion on 31st March 2006 - has gone up in
the 10th annual Financial Times Global 500 listing of the world’s largest companies. ONGC is at
the 158th position; its rank last year was 192.

ONGC’s capital investment of Rs.10, 681 Crore during 2004-05 was not only highest-ever in a
single year by ONGC, but also by any Indian Corporate. This Capex was entirely focused on
augmenting and expanding the exploration campaign and production facilities and systems. For
2005-06 the CAPEX budget is again Rs.10, 000 Crore. These figures exclude investments abroad
through ONGC Videsh Limited.

April, 2005

265th position in Forbes Global 2000 listing of by Sales, Profits, Assets and Market value, and is
first amongst Indian Corporates.


    ONGC the best Oil & Gas Company in Asia in 2004 by Global Finance Magazine,
       New York:-

ONGC has become the first public sector enterprise in India to launch Reverse Auction facility
for speedy, transparent and cost-effective procurement.

Indian Oil Corporation (IOC)

                                              Page 54
About the Company

Indian Oil Corporation Ltd. (IOCL), India's largest commercial ISO-9002 certified enterprise and
as a leading public sector enterprise of India, is the highest ranked Indian company in the prestig-
ious Fortune 'Global 500' listing. IOCL is the 20th largest petroleum company in the world. Es-
tablished in 1959 as Indian Oil Company Ltd., Indian Oil Corporation Ltd was formed in 1964
with the merger of Indian Refineries Ltd. (Estd. 1958). It was originally incorporated as IOCL in
the year 1964. IndianOil and its subsidiaries account for 47% petroleum products market share,
40.4% refining capacity and 67% downstream sector pipelines capacity in India. IOCL a tradi-
tional manufacturer of refined petroleum products, the new building blocks for global ambition
of the corporation are the Petrochemicals, Natural Gas, Exploration & Production, Overseas
Business, Consultancy, Biofuels and Hydrogen, etc.

IndianOil reaches precious petroleum products to millions of people everyday through a coun-
trywide network of about 32,500 sales points. They are backed for supplies by 170 bulk storage
terminals and depots, 101 aviation fuel stations and 89 Indane LPG bottling plants.

Indian Oil Blending Ltd a wholly owned subsidiary was merged with IndianOil on May 2006. In
2007, the corporation received plenty of awards, Oil Industry Safety Directorate Awards, 'Most
Admired Retailer of the Year' award, `CIO 100 Award 2007', SAP ACE - Awards for Customer
Excellence and the only petroleum company as `The Most Trusted Brand' in ET's Brand Equity's
annual survey. It has taken a significant step in promoting Bio-Diesel as a green fuel by entering
into a Memorandum of Understanding (MoU) with the Government of Chattisgarh

IndianOil's `LNG at Doorstep' facility launched in April 2008 at the Pen unit of H&R Johnson,
the facility, first of its kind in the country, is primarily aimed at catering to the needs of Lique-
fied Natural Gas (LNG) customers who are not located on the main natural gas pipelines, the
project                   covers                   Rs                    29                    crore.

IndianOil has ambitious investment plans of Rs. 43,250 crore in the next five years.

Further new project of the corporation are as Panipat-Jalandhar LPG Pipeline cost of Rs.186.72
crore, which will be commissioning on August 2008

                                              Page 55
IOCL, the flagship national oil company in the downstream sector is currently implementing a
master plan envisaging by the year 2011-12 in petrochemicals, which covers Rs.30000 crore
(US$ 6.8 billion) of investment.

Indian Oil Corporation Limited is engaged in petroleum refining, pipelines-crude oil and petro-
leum products, petroleum products marketing, and research and development. The Company's
products include XTRAPREMIUM petrol, XTRAMILE diesel, SERVOXPRESS, Indane,
autogas, IndianOil Aviaton, Xtra Care and Swagat. During the fiscal year ended March 31, 2008,
the Company had 17,574 petrol/diesel stations (retail outlets), including 2,125 Kisan Seva Ken-
dra outlets for rural customers. It also opened 352 new consumer pumps.
IOC Shareholding pattern:-

                                    3%1% 4%
                                                                 Govt. of India
                                                                 Mutual Funds and UTI
                                                                 Banks, Fis, Ins Co.
                                                                 Indian Public


IOC Major Projects:-


Project Cost: Rs. 29,777.00 crore

                                              Page 56
Expected Commissioning: March, 2012

Benefit: The project will help in partly meeting deficit of distillates viz. LPG, Naphtha, MS,
Jet/Kero, Diesel and other products, in the eastern part of the country. The complex will gener-
ate intermediate petrochemicals feedstock.


Project Cost: Rs. 5,882.00 crore

Expected Commissioning: January, 2010

Benefit: The objectives of the project are multifold. It shall ensure meeting product quality re-
quirement of MS/HSD to EURO-III/IV levels, processing increased quantity of high sulphur
crude and improvement in distillate yield.


Project Cost: Rs. 2,869.00 crore

Expected Commissioning: December, 2009

Benefit: Improvement in quality of HSD conforming to Euro-II/Euro-IV equivalent norms. In
addition, it will improve the distillate yield and crude processing capacity of the refinery.


                                              Page 57
Project Cost: Rs. 14,439.00 crore

Expected Commissioning: November 2009

Benefit: This project is a cornerstone for IndianOil's entry into petrochemicals and a new busi-
ness line for growth. For the State of Haryana, this project shall lay the foundation for creation
of a world-class petrochemicals hub, which will engender significant industrial activity in the
coming years.

   Dividends Declared

   Announcement       Effective         Dividend       Dividend (%) Remarks
   Date               Date              Type

   28-05-08           09-09-08          Final          55.00          AGM

   28-05-07           10-09-07          Final          130.00         -

   07-12-06           26-12-06          Interim        60.00          -

   26-05-06           07-09-06          Final          125.00         AGM

   30-05-05           08-09-05          Final          100.00         AGM

   07-12-04           29-12-04          Interim        45.00          -

   08-06-04           23-08-04          Final          160.00         AGM

   29-05-09           -                 Final          75.00          -

  Bonus History

  Announcement Date               Bonus Ratio       Record Date           Ex-Bonus Date

                                             Page 58
   06-06-2003                                                                                                  1:2                                                                       18-08-2003                                                                14-08-2003

   17-06-1999                                                                                                  1:1                                                                       14-10-1999                                                                20-09-1999

   12-09-1994                                                                                                  2:1                                                                       -                                                                         -

Volatility in the share prices of IOC:-

                                                                                               November 2003

                                                                                                                                                                                                                                                                         November 2008
                                                                                   June 2003

                                                                                                                                                                                                                                                             June 2008
                                                                                                                                                             July 2005
                                                                    January 2003

                                                                                                                                                                                                                                              January 2008
                                                                                                                                                                                         May 2006
                                         March 2002

                                                                                                                                                                                                                   March 2007
                                                                                                               April 2004

                                                                                                                                                                                                                                                                                         April 2009
            August 1999

                                                      August 2002

                                                                                                                                             February 2005

                                                                                                                                                                                                                                August 2007
                          October 2001

                                                                                                                            September 2004

                                                                                                                                                                         December 2005

                                                                                                                                                                                                    October 2006

We can see that the share prices of IOC has been increasing consistently, with few major fall or
rise in the prices. The reasons for the major changes in the prices are as follows:-

1999 – 2001 (Down)

    13 Apr 2000, PULP and paper prices could harden further following a strike by the Finn-
       ish paper industry. Refineries and Petrochemicals Ltd (BRPL) with Indian Oil Corpora-
       tion (IOC) as well against the actual of 6.1 m.t. in 1999-2000, of speculative positions
       saw share prices fluctuating wildly today.
 April 2004 – Sept 2004 (Down)

         NOVA Chemicals Corporation’s proprietary SCLAIRTECH technology has been se-
                     lected by Indian Oil Corporation Limited (IOCL) for a new linear-low density/high-
                     density polyethylene (LLDPE/HDPE) plant in India.

                                                                                                                                                             Page 59
         Adequate sign-off procedures were not followed by the Company at the time of ‘go-
           live’ of SAP which resulted in uploading the data without purification. This was con-
           firmed when Audit noticed that data in respect of lube inventory was not correctly
           uploaded at depot at Ajmer in December 2003 which resulted in difference of
           Rs.2.63 crore (May 2004) in the physical inventory and stock as per SAP.
           None of the Critical Success Factors had been achieved despite implementation of
           SAP at 292 sites (March 2004).

May 2006 – October 2006 (Down)

    IOC losing market due to immense competition:-

IOC, the clear market leader with over 50 percent share of the downstream Indian oilmarket, has
been steadily losing market share in the past three years, due to immense competition and Due to
concerns on the deteriorating credit risk profile of the OMCs

    Increased Reliance:-

In a rising oil price scenario, ICRs concerns largely emanated from the increased reliance of IOC
on the government`s stan A`ce on under recovery sharing mechanism for its profitability.

    Others:-

Besides, the existing under recovery sharing mechanism has several draw backs, such as the
timeliness of the announcement and issue of oil bonds, which translate to significant unpredicta-
bility of profits and cash generation for the OMCs.

December 2006 – January 2007 (Major Rise)

    Indian Oil moved up 18 places in Fortune 'Global 500':-

Indian Oil moved up 18 places in the just-released Fortune 'Global 500' list of world's largest
companies by sales for the year 2007. Placed at 135, IndianOil leads the pack of six Indian com-

                                             Page 60
panies figuring in the list that is based on performance in the fiscal year ended March 31, 2007.
IndianOil has been consistently improving its position in the elite list published annually by the
CNN-Time Warner group magazine, Fortune. In the Global 500' club, IndianOil has steadfastly
climbed from 226 in the year 2002 to 191 in 2003, 189 in 2004 to 170 in 2005, 153 in 2006 and
135 in 2007. IndianOil has also maintained its leadership status as India's numero uno corporate
in the prestigious listing, followed by Reliance Industries (269), Bharat Petroleum (325), Hindu-
stan Petroleum (336), Oil & Natural Gas Corporation (369) and State Bank of India (495).

In the Petroleum Refining category of the Global 500 list, IndianOil is listed at the 20th position.
IndianOil created history this year when it became the first corporate to breach the Rs. Two
lakh crore turnover mark, clocking revenues pegged at Rs. 220,779 crore (US $51 billion)
and profit after tax of Rs. 7499 crore (US $1.73 billion) for fiscal 2006-07.

    Along with the above reason the Indian markets were booming at a very fast rate
       duringthat particular period. BSE was at 21K and so was the NSE boom, it was at 7K so
       IOC stocks also increased with the market.


June 19, 2009

    Indian oil company to be third bidder for Addax:-

Addax Petroleum provided a talking a point amid suggestions that the company has been
approached by a third "mystery" bidder, possibly a national oil company from India.
Both Sinopec – a Chinese state-backed group – and the Korean National Oil Company are
believed to be in talks with Addax, which could be sold for up to £5bn.

However, some traders noted gossip that an Indian group may be involved in the auction. State-
backed ONGC, which last year bought Imperial Energy for £1.4bn, and Reliance were touted as
potential Indian suitors.

Jun 12, 2009

                                              Page 61
     Indian Oil sells 7.95 pct 2025 bond at par:-

IOC has sold the 7.95 percent bond maturing in 2025 at par value of 100 rupees, two sources

The 8.40 percent 2025 bond was sold at a yield of 8.02 percent and the 8.40 percent 2026 bond
was sold at a yield of 8.03 percent, they added.

June 12, 2009

     IOC gets nod for Indo-Nepal pipeline:-

The Indo-Nepal oil pipeline, which was proposed by state-owned Indian Oil Corporation (IOC)
years ago, will finally see the light of the day.

According to a source, IOC has been finally given a go-ahead by the Nepalese government to
form a joint venture company with Nepal Oil Corporation (NOC) to implement and manage the
pipeline. "Though IOC would like to have 50% stake in the venture, it seems that the Nepalese
government has been insisting on a majority stake," the source said, adding, "IOC will have to
prepare a detailed feasibility report for which it has asked NOC to send its basic inputs, such as
throughput for the next five, 10 and 15 years."

IOC feels the pipeline will also reduce transportation costs by almost 60%. The 35-40 km
pipeline will require an investment of around Rs 40 crore.

November 2007

     ICRA assigns `LAA+` rating to Indian Oil Corporation:-

Credit rating agency, ICRA has assigned a positive outlook to the long term rating of LAA+, in-
dicating high-credit-quality,outstanding against the Rs 100.5 billion long-term fund based limits,
the Rs 60 billion long-term debt programme and the Rs 35 billion term loans of Indian Oil Cor-
poration (IOC).

                                                Page 62
March 2007

   IndianOil moves up 18 places in the Fortune Global 500 list, ranked 135

Milestones Achieved By IOC


    The year marked IndianOil's big ticket entry into the high stakes business of E&P. The
       IndianOil and Oil India consortium signed its Exploration and Production Sharing
       Agreement (EPSA) with the National Oil Corporation of Libya for Block No. 86, in the
       Sirte basin of Libya.
    Indian Oil's Mathura Refinery was the first refinery in India to attain the capability of
       producing entire quantity of Euro-III compliant diesel by commissioning the Rs 1046
       crore DHDT (Diesel hydrotreating unit). Mathura Refineries also commissioned India's
       first MS quantity upgradation unit to produce Euro-III compliant petrol.
    Indian Oil becomes the top oil trading company amongst national oil companies in the
       Asia Pacific region for the second consecutive year.
    Indian Oil signed a JV agreement with GAIL to enter the city gas distribution projects in
       Agra and Lucknow.
    IndianOil allowed by Government of India to charter crude oil ships on its own instead of
       going through Transchart, the chartering wing of the Ministry of Shipping.

    IndianOil signs MoU with IIM (Ahmedabad) to offer one-year Post Graduate Pro-
       grammes in Management (Energy) to be conducted at IIPM, Gurgaon.
    R & D Centre bags the prestigious National Technology Award for successful commer-
       cialisation of INDMAX technology for conversion of low value heavy petroleum resi-
       dues into high value LPG.
    IndianOil moves up by two places to the 189th position in the Fortune 'Global 500' rank-
       ing based on fiscal 2003 performance.

                                            Page 63
    IndianOil's Rs 1248 crore LAB (Linear Alkyl Benzene) plant, the world's largest single
       train kerosene-to-LAB unit, was commissioned at Gujarat, thus signalling IndianOil's en-
       try into petrochemicals business.
    IndianOil signs Memorandum of Collaboration (MoC) with Mahindra & Mahindra to roll
       out the country's first hydrogen vehicle in the next two years.
    IndianOil's 60 km-long Rs 76 crore Panipat Rewari Product Pipeline commissioned.
    The year marked IndianOil's entry into gas business. As co-promoter of Petronet LNG
       Limited, complete quantity of gas (2.52 MMSCMD) alloted to IndianOil was sold out
       and commercial supplies commenced April 2004 onwards.

    Retail operations began in Sri Lanka. IndianOil became the first Indian Petroleum Com-
       pany to begin downstream marketing operations in overseas market. Lanka IOC became
       an independent oil company in Sri Lanka
    Gasahol, 5% ethanol blended petrol, was introduced in select states.
    IndianOil Technologies Ltd. for marketing intellectual properties of R&D centre was
    Concept of XTRA, covering Retail Outlets and customer service, launched
    SERVO became a Super Brand
    IndianOil named as nodal agency by MoP&NG to undertake research in the areas of pro-
       duction, storage, distribution and utilisation of hydrogen gas as an alternative fuel.

    The foundation stone of IndianOil's Panipat Refinery expansion (6 to 12 MMTPA) pro-
       ject and PX/PTA plant (553 TMTPA) project laid at Panipat.

    APM dismantled. Pricing of Petroleum products decontrolled.
    IBP Co. Ltd. was acquired with management control.
    Barauni Refinery expansion project completed.
    New generation auto fuels IOC Premium and Diesel Super introduced


                                              Page 64
    Digboi Refinery completed 100 years of continuous operation.
    Eight Exploration blocks awarded to the IndianOilled consortium under NELP-II.
    Two Coal Bed Methane (CBM) blocks awarded to the consortium of IndianOil and
       ONGC under CBM-I.
    The investment proposal for Integrated PX/PfA project at Panipat was approved.


    Indian Oil crossed the turnover of the magical mark of Rs l ,00,000 Crore -- the first Cor-
       porate in India to do so.
    The Indian Oil Foundation -- a non-profit trust -- the first of its kind in Corporate India,
       was unveiled to protect, preserve and promote the country's heritage.
    Y2K compatibility achieved.
    The Lube Blending Plant at Asoti and the Once through Hydrocracker Unit at Mathura
       refinery were commissioned.
    Indian Oil entered into Exploration & Production (E&P) with the award of two explora-
       tion blocks to Indian Oil and ONGC consortium under NELP-I.

    India attained self-sufficiency in Refining.

    Manthan -- the IT re-engineering project was launched.


Essar Oil Limited (EOL), a company incorporated as a Public Limited Company during the year
1989, engaged in preliminary activities relating to bidding for Oil & Gas fields as well as advis-
ing the Energy. EOL deals with its three segments of business, such as Exploration & produc-
tion, the Refinery and Marketing - Retail Business.

EOL is one of the few private companies permitted to market petroleum products in India. To
serve retail customers under the brand 'Essar Oil', EOL has a modern, large countrywide distribu-

                                             Page 65
tion network of Retail Outlets. The company became a wholly owned subsidiary of Essar Gujarat
Limited in March of the year 1992 and entered into an MOU for operation and maintenance ser-
vices for the Refinery with an affiliate company, Essar Refineries Limited. The Company en-
tered into an MOU with Government owned public sector oil company, Indian Oil Corporation
Limited for marketing and distribution of its products. EOL has initiated a marketing agreement
with the public sector Indian Oil Corporation (IOC), according to which, 50 per cent of the
offtake from the refinery would be through IOC, and the balance through BPCL.

EOL has started supplying Liquefied Petroleum Gas (LPG) and Kerosene during the year 2007
to PSUs for sale through the Public Distribution System. The Company has begun the implemen-
tation of the up-gradation of base refinery

   Dividends Declared

   AnnouncementEffective         Dividend Dividend Remarks
   Date             Date         Type         (%)

   27-02-03         20-03-03     Final        0.00      AGM & Nil Dividend

   25-05-98         -            Final        0.00      -

Oil Retail Marketing

1,274 Retail Outlets

Exploration & Production Blocks

▪ Ratna, India

▪ Mehsana, India

▪ Raniganj, India

▪ Assam

                                              Page 66
▪ Madagascar

▪ Nigeria

Volatility in the share prices of ESSAR oil:-




         pt ril 06
               be 00 6
         O ay 1

          ve e 2 5

                ay 8
         pt rch 2

                ry 4

                ry 7
        Fe be 0 3
               be 0 1

               be 00 5

               be 00 8
                er 2

          ce ly 2 5

          ce ly 2 8

                 ly 9

        Fe be 07
              M 200

       No Jun 00

              M 200
              ua 00

              ua 00
             o b 20 0

      De Ju 00

              Ju 200
      Se Ma 200
      De Ju 99

      Se Ap 20

            m 20

           br r 2

           br r 2
           em 2

           em 2





We can see that the share prices of ESSAR Oil have been quite consistent, with hardly any major
increase, but from September 2007 to February 2008, there has been a major increase in the
share prices. After that there has been a lot of volatility in the share prices, with a big fall from
August to December 2008. The reasons for the major changes in the prices are as follows:-

September 2007 – February 2008 (Major Increase)

    Good Margins:-
The large-cap private sector oil refiner had outperformed the market

The company attributed the jump in profit to increased retail sales. It has reopened most of its
retail outlets, which were closed for more than a year towards the end of 2008. Essar oil (EOL)
has also earned good margins from sale of petrol and diesel.

    Along with the above reason the Indian markets were booming at a very fast rate during
that particular period. BSE was at 21K and so was the NSE boom, it was at 7K so IOC stocks
also increased with the market.

                                              Page 67
August 2008 – December 2008 (Down)

    Unfavourable Market Conditions:-

The depreciation of the rupee and the unprecedented volatility in crude prices resulted in inven-
tory and forex losses.

The recessionary environment triggered off a steep fall in commodity prices that negatively
impacted the profitability of the business. This was primarily due to shrinking of the refinery
margins and erosion of the value of the crude and product inventory which the company held.

    Liquidity crisis:-
Further, due to the liquidity crisis and the sharp fall in value of rupee, borrowings became more

Essar Oil leads losers in BSE’s 'A' group

    Foreign exchange loss:-
The company incurred a foreign exchange loss of Rs 679 crore in Q3 December 2008. It also
booked a loss of Rs 524 crore due to steep fall in crude oil prices.

    Besides the above reasons there was a global recession going on, due to which all the in-
       dices including Asian indices were falling drastically resulting in the price fall of the

March 2009 – April 2009 (Up)

    ESSAR to raise funds through QIP:-

Essar Oil jumped 8.59% to Rs 181.40 on BSE on reports that the company has decided to raise
around $500 million by way of qualified institutional placement route as part of a $2 billion
fund-raising programme.

                                              Page 68
    The shares advanced 6.1 percent to 179.35 rupees at 10:13 a.m. after climbing as much as
       7 percent, the most since May 25
    Essar Oil has surged 14% after the company reported a hefty profit for the Q4.
    The stock till this time has clocked a hefty volume of 2.82 million shares as against its
       two-week daily average traded volume of around 2.10 million shares on the BSE.
    The stock had risen a whopping 90.78% from a recent low of Rs 71.65 on 30 March
       2009. The stock had outperformed the market over the past one month till 8 April 2009,
       surging 107.38% as compared to the Sensex's 29.02% rise. It had also outperformed the
       market in the past one quarter, spurting 56.23% as against the Sensex rise of 12.05%.


June 20, 2009

IDFC-SSKI Securities puts 'outperformer' on Essar Oil

June 16, 2009

    Essar Oil hike petrol and diesel prices:-

Private sector refiner Essar Oil reportedly hiked prices of petrol and diesel by Rs 1-2.50 a litre
and Rs 1-2 a litre respectively from 17 June 2009 as international crude oil prices surged to a
seven-month high of $71 a barrel on Tuesday,.

June 11, 2009

Reliance Industries, Essar in Oil Talks With Cairn, Essar Oil, the operator of India’s second-
largest, non- state refinery, is looking to buy as much as 5 million metric tons of crude a year
from Cairn’s field in the state, according to the newspaper report.

June 3, 2009

    Essar Oil plans to raise around $500 million by way QIP:-
Reports on Essar Oil plans to raise around $500 million by way of qualified institutional place-
ment route as part of a $2 billion fund-raising programme The Ruias-owned oil company has re-

                                              Page 69
cently taken the decision to raise a couple of billion dollars to finance its expansion plans. Last
year, the company had received shareholders' permission to raise the same amount of fund but
did not collect the money. Hence, it needs to take fresh approval from shareholders for the fund
raising exercise.

May 24, 2009

    Essar Energy to raise Rs 400 cr debt:-

The Ruias promoted Essar Energy is planning to raise a debt of Rs 400 crore to fund its project
to produce gas found on coal beds — called coal bed methane (CBM) — in its Raniganj block in
West Bengal.

May 21, 2009

    Essar Oil may invest USD 70 mn in FY'10:-
Essar Oil may invest USD 70 mn in FY'10 to fund E&P activities.

Essar Oil's investment may go up to USD 70 million in exploration and production this year if a
long-pending Production Sharing Contract (PSC) with the government for the Ratna and R-
Series fields is concluded early.

May 13, 2009

    Essar Oil, Canoro to tie up for exploration & production:-

Essar Oil, a group company under the Ruias-owned business house Essar, will soon tie up with
Canadian firm Canoro Resources for oil exploration & production.

May 2009

The company has decided to seek its shareholders’ approval for issue of further equity shares
and/or convertible debentures by way of private placement in domestic or international market
up to $2 billion.

February 2, 2009

    Essar Oil loss spirals by over 8,600 percent:-

                                             Page 70
Essar has reopened over 1,000 retail outlets, after the sharp fall in global crude prices had made
operations “profitable” in the domestic market.

    Essar Oil soars on reports of Tehran tie-up:-
Company is in talks to sell petrol to Iran and has signed its first-ever term contract with Tehran
to import 1.6 million barrels of crude oil every month

Company is in talks to sell petrol to Iran and has signed it’s first-ever term contract with Tehran
to import 1.6 million barrels of crude oil every month.

December 30, 2008

    Essar Oil to invest $140m in overseas oil, gas exploration:-

Essar Oil Ltd plans to invest around $140 million over the next four years in hunting for oil and
gas in its assets acquired overseas

Most of the investment will be in the vietnam block and the two newly-acquired offshore blocks
in Australia

December 11, 2008

    Essar Oil to reopen 1,250 outlets by month-end

October 08, 2008

    Essar Oil Signs Pact with IOC:-

Essar Oil signed a Product Sale, Purchase and Infrastructure Sharing MoU with Indian Oil Cor-
poration, having earlier signed similar pacts with the other two PSU oil companies, HPCL and

This is part of the company’s strategy to directly sell its product through long term tie-ups with
consumers and through its own distribution network in the overseas markets.

                                             Page 71
With the signing of this MoU, Essar Oil has MoUs or agreements covering close to seven million
tonnes of its refinery products.

March 4, 2008

       Essar Oil to invest $60 million in Vietnam:-

Essar Oil’s upstream exploration & production subsidiary, Essar Exploration & Production Ltd
Mauritius, has been awarded a shallow water block in Vietnam’s prolific Song Hong basin ad-
measuring approximately 5,925 sq km. The block was offered under the recent licensing round
offering 7 offshore blocks.

The exploration phase is estimated to last five years and the investment for this programme will
be approximately $60 million.

This will help build a strong, fully integrated oil Company with upstream, refining and down-
stream marketing activities,” the company said in a statement.

September 2007

Earlier in September this year, some reports suggested that Essar Oil was close to raising $5 bil-
lion in loans to fund the expansion of its refinery in Gujarat. Reports had further suggested that
Essar was spending $6 billion to expand its refining capacity in Gujarat to 6.80 lakh barrels per
day by 2010.

It was reported that Essar oil is buying 50% stake in a Kenyan refinery

July 23, 2003

       FIs approve debt recast of Essar Oil refinery project:-

Lenders to Essar Oil's Vadinar refinery project have finally agreed to restructure the debt, paving
the way for re-starting the work on the 12-million tonne refinery, which has been held up over
the                            past                          four                            years.

                                             Page 72
Milestones Achieved by the Company:-

September 2008

The company declared commercial production of their refinery and has declared their maiden
profit during the first quarter of 2008-09.

The company has successfully integrated the Fluid Catalytic Cracker Unit (FCCU) and Diesel
Hydro Desulphurising Unit (DHDS) into the refinery

July 18, 2007

    Essar strikes oil again in Gujarat:-

Essar Oil Limited has stuck oil in its Mehsana onshore exploration block CB ON-3 in Gujarat.
This is the second oil discovery in the block by Essar, the first being in March this year

September 23, 2006

    Essar Oil imports first crude:-

In a major milestone towards commissioning of its $2.2 billion refinery at Vadinar in Gujarat,
Essar Oil Ltd has imported the first

November 4, 2004

    Essar Oil stops discount on branded petrol:-

Essar Oil, the first private sector oil marketing company, withdrew its introductory discount on
its branded petrol Punch. In less than five months, the company has priced its fuel on a par with
the ordinary petrol marketed by public sector oil companies in the country

Essar Oil is also launched its branded diesel ` DDX' having 56 C-tane specifications across all its
outlets in the country. Recently, the company decided against selling ordinary fuel and moved
towards offering the premium petrol such as Punch (nov 04)

                                              Page 73
June 26, 2004

        Essar packs a Punch in branded petrol:-

Essar Oil, the private oil company, threw down the gauntlet in the premium petrol market. It had
launched a premium brand petrol by the name `Punch' next month at a price that is Rs 1.25-1.30
lower than the price charged by the three public sector oil companies Indian Oil Corporation
(IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd

December 12, 2001

        Essar Oil refinery bags L&T guarantee:-

The much delayed construction at Essar Oil refinery has received a shot in the arm with Larsen
& Toubro (L&) providing "guarantee" to undertake the physical completion of the 10.5 million
tonne per annum refinery at Vadinar in Gujarat.


Cairn is an independent oil and gas exploration and production company. Listed on the London
Stock Exchange since 1988, with the company’s head office in Edinburgh. Its core area of focus
is South Asia: it holds material exploration and production rights in India, Bangladesh and Ne-

Cairn India (CIL) was incorporated on 21 August 2006 to consolidate Cairn’s business and inter-
ests in India. CIL is acquiring its assets and business through acquisition of Cairn’s subsidiaries:
Cairn Energy Australia Pvt Ltd (CEA), Cairn Energy hydrocarbons (CEH) and Cairn Energy In-
dia Holdings B.V.(CEIH).

In January 2004, the Mangala oil field discovery in Rajasthan by CIL was the largest oil discov-
ery by any company in India since 1985. Mangala is the core of CIL’s future development. The
other fields in Rajasthan include Aishwariya, Saraswati and Raageshwari. Cairn Plc has invested
$500 million in Rajasthan.

                                              Page 74

    The existing cost of producing oil from Ravva field is lower than US$1 per barrel of oil.
      CIL is continuously producing 50,000 barrels of oil per day (bopd) on an approximate
      basis at this cost since 2002.
    The cost of producing oil from the Mangala field of Rajasthan will be around US $ 3.5- $
      4 (bopd). The company has targeted 1,50,000 bpd from the Mangala field at plateau rate.
    The total gross proved plus probable (2P) reserves attributable to the fields in production
      and under development in which CIL has interest is 754 million barrels of oil equivalent
      (mmboe). Its networking interest in these reserves is estimated at 472 mmboe. Most of
      these 2P reserves are estimated to be in the Rajasthan Block and remains to be tapped.


    The Ravva field was expected to come off its plateau rate of 50,000 bopd in late 2007. So
      the production of crude will come down from its existing plateau rate. Future production
      to reach its plateau rate will depend upon new discoveries in the Ravva field, which the
      company has initiated.
    The necessary pipeline infrastructure from the Mangala field needs to be developed in
      time for the commencement of crude oil production in 2009. MRPL is the nominee ap-
      pointed by the government of India. CIL is not satisfied with the progress of the pipeline
      made by MRPL. Hence, the company is considering other options like negotiating with
      private players and even entering such mid-stream activities. This will increase the cost to
      the company. Moreover, its UK parent does not have experience in mid-stream activities
      so far. Any delay in setting up pipeline will affect production from the Mangala field.

                                            Page 75
Based on existing financials, there is no significant EPS. However, companies like CIL are val-
ued based on projected earning and cash flow from the discovered reserves. Hence, the current
PE ratio is irrelevant

Landmark Discoveries

    2000       Gas in Gulf of Cambay
    2001       Oil & Gas in miocene / pliocene in deep waters of KG Basin
    2004       Oil in paleocene onland of Barmer-Sanchor Basin
Volatility in share prices of Cairn:-




                        150                                                   Series1




                            ch 7

                            ch 8

                            ch 0 9

                          M 00 7

                          M 00 8

                          M 00 9

                   Se Ju 07

                   Se Ju 08


                          ar 00

                          ar 00


                        em 20


                      Ja e r 2

                      Ja e r 2

                       ve r 2

                       ve r 2


                     pt ly 2




                    No be

                    No be










We can see that the company didn’t have a good start and hence closed at a discount after its IPO
in December 2006, but later the stock started performing well and we can see from the chart that
it is consistently moving up with a major decline in 2008 but again recovering after that.
The reasons for such volatility are:-
2007 (Up)

     Government agreed Cairn’s proposal to lay a pre-heated 580-km pipeline:-

Cairn India had gained 3.59% to Rs 142.70 on reports that the government had agreed to its pro-
posal to lay a pre-heated 580-km pipeline at a cost of Rs 2,400 crore.

As per reports, the Central government has agreed to Cairn India's proposal to lay a pre-heated
580-kilometre (km) pipeline at a cost of $600 million (Rs 2,400 crore) to transport the crude oil

                                             Page 76
from its Barmer oil fields in Rajasthan to Virangam in Gujarat. The cost of laying the pipeline is
to be shared between Cairn and Oil and Natural Gas Corporation (ONGC) in a 70:30 ratio, the
same as the shareholding in the oil field, laying to rest a contentious issue between the govern-
ment and Cairn.

    Cairn India notches a strike on block deal:-

The Edinburgh-based oil explorer Cairn Energy Plc, parent of Cairn India Ltd, on Monday said
that it was confident of reaching an agreement with its Indian partner ONGC on construction of a
pipeline to deliver oil from its Rajasthan fields in the first half of this year (H1 2007). This
statement helped propel Cairn India's share price to an intra-day high of Rs 155 on the BSE.
Cairn India shares which opened at Rs 147.95 last traded at Rs 150.05.

Cairn India rose 0.77% to Rs 150.55 on reporting a single block deal of 15 lakh shares at
Rs 152.50 per share on BSE.

The stock bounced back to Rs 127.65 on 13 March 2007 after International Finance Corporation
(IFC), the private lending arm of the World Bank, acquired seven million shares for about $20
million in Cairn India.

    Oil exploration, offshore services firms in demand as crude surges:-

Oil exploration firm Hindustan Oil Exploration jumped 13.4% to Rs 72.90, and another
exploration firm Cairn India surged 3% to Rs 130.75.

Demand for oil-drilling rigs remains strong. Since rigs are also in short supply and construction
of new rigs can take up to 2-3 years, charter rates are expected to hold firm for some time.

A recent Lehman Brothers survey notes the global spend on exploration and production will rise
13% in 2007. In 2005 and 2006, E&P companies had seen a 20% and 30% increase in spend.

    Merril nod pushes up Cairn shares:-

                                             Page 77
Shares of Cairn Energy Plc, an oil explorer in India, rose by more than 2% for the fourth consec-
utive day after Merrill Lynch & Co advised investors to buy the stock and increased its price es-
timate. Cairn shares have risen nearly 14% in the past week on speculation they were underval-
ued and the company may be bought.

March – May 2008 (Up)

Corporate Strategy March 18, 2008

    Cairn India Raises $650 Million in Share Placement:-

Cairn India has raised $625 million through a private placement of 1.13 million shares to
Petronas and Orient Global Tamarind Fund. Petronas and Orient Global will buy shares at a price
of Rs224.30 ($5.55) per share. The issue price represents a marginal half percent premium to the
average closing price of Cairn India on the National Stock Exchange on the last two trading
days, March 13 and 14

September 2008 – October 2008 (Major Down)

    Company's proposed capital increase:-

Cairn India closed at Rs214 on the Bombay Stock Exchange on Monday, down 6% as investors
were disappointed by the news about the company's proposed capital increase.

    Unfavorable Market Conditions:-

However, the fall mirrored prevailing sentiment on Indian bourses as the broader market index,
the Sensex, also lost around 6%. Investors followed global cues and subprime contagion spread
following news over the weekend about the takeover of Bear Stearns by JPMorgan at a price of
$236 million, representing $2 a share. The deal is widely perceived as a fire sale as Bear Stearns
closed trading at $30 a share on Friday, despite losing significantly during the course of the
week's trading.

                                             Page 78
Asian markets all traded down as nervousness ran high about which other banks could be at risk

Crude oil prices have been quite volatile in the last few days causing volatility in shares of global
oil exploration firms and Cairn India has not been an exception.

    International crude price fell down:-

July 16 Shares of private oil refining companies Cairn India and Reliance Petroleum slumped on
Wednesday as international crude price closed down $6.44 at Rs 138.74-a-barrel, a sharp fall on
a single day.

    Prift tax on private oil companies:-

The issue of the likely imposition of the windfall prift tax on private oil companies has also im-
pacted the share price of Cairn

Besides drop in oil price and reports of windfall profit tax, marketmen fear that the company
might have to pay a cess for its production from Rajasthan.

    Withdrawal of concessions to private oil companies:-

The Samajwadi Party has been insisting imposition of a windfall profit tax and withdrawal of
concessions to private oil companies.

    Besides the above reasons there was a global recession going on, due to which all the in-
       dices including Asian indices were falling drastically resulting in the price fall of the

2009 (up)

    Cairn India rose 1.95% to Rs 180 as crude oil prices surged over 7% on the New
       York Mercantile Exchange
    Cairn India rose 2.03% to Rs 178.20 on BSE, as crude oil prices rose more than 2%
       in Asian electronic trading

                                              Page 79
Rise in crude oil prices would result in higher realizations from crude sales for the oil exploration
firm. Crude oil for April 2009 delivery rose 2.04% or 98 cents to $49.12 a barrel in Asian elec-
tronic trading on Thursday, 19 March 2009, erasing Wednesday's decline as the dollar tumbled
to a two-month low against the euro as a surprise move by the Federal Reserve to buy govern-
ment bonds revived hopes the battered US economy could soon begin its recovery.

The US Federal Reserve said that it will buy up to $300 billion worth of longer-term US gov-
ernment debt over the next six months and expand purchases of mortgage related debt to help
ease credit market conditions.

     Cairn India inches ahead as oil recovers after a sharp slide:-

The large-cap stock had outperformed the market over the past one month till 9 March 2009,
falling 3.50% as compared to the Sensex's 14.85% fall. It had also outperformed the market in
the past one quarter, gaining 13.99% as compared to the Sensex's 10.94% fall.

Cairn India gained 3.25% to Rs 177.80 on BSE, as crude oil extending gains as Israel in-
tensified its
military campaign against Hamas, raising concerns about possible supply disruptions in
the Middle-East

May 29, 2009
     Indian Oil to buy Cairn crude:-
    Indian Oil Corp will buy Cairn India's crude oil from January 2010

May 27, 2009

Cairn India, a unit of Britain's Cairn Energy said its March quarter net profit plunged 84 percent
on falling crude prices and higher costs, and said it was ready to start producing from its Raja-
sthan fields.

                                              Page 80
May 19, 2009

    BRIEF-Cairn Energy says making good progress in India:-

PHASED MANGALA, BHAGYAM AND AISHWARIYA (MBA) development project contin-
ues to make good progress. Ready to start production with initial evacuation by trucking in mid-
year 2009 from the rajasthan fields has adequate funding to complete the core mangala develop-
ment project plus the pipeline

March 2009

    Reliance Industries and Essar Oil keen on buying crude oil from Cairn India's Ra-
       jasthan fields:-

As per recent reports, Reliance Industries and Essar Oil are keen on buying crude oil from Cairn
India's Rajasthan fields even as the Petroleum Ministry struggles to find takers of the nation's
most prolific oil discovery among public sector firms. Cairn has written to the Petroleum Minis-
try saying it would start oil production from Rajasthan next month with an initial output of
4,000-5,000 barrels per day (bpd), reports added.

Cairn India has got the Rajasthan government's nod for completion of the remaining part of its
600-kilometre-plus crude oil pipeline from Barmer fields in the state to Salaya in coastal Gujarat.

Earlier on 19 January 2009, Cairn had received government approval to develop three oil and
gas discoveries in Kameshwari West and a new development area of 822 square kilometres in
the northern appraisal area of Rajasthan blocks.

December 22, 2008

    Cairn makes more discoveries:-

Cairn India, in which Cairn Energy retains a 69.5 per cent interest, has made an oil and gas dis-
covery in the Raageshwari East 1/1Z well. This is close to the southern part of the development

                                             Page 81
area of Rajasthan that hosts Cairn's prolific existing discoveries. Cairn has obtained final approv-
al from the Indian government for the first four development plans for these fields, and the most
advanced of these, Mangala, is scheduled to begin producing in the second half of 2009. The lat-
est well encountered approximately 10 metres of net oil pay (thickness of the oil reservoir capa-
ble of producing hydrocarbons) and flowed at 500 barrels of oil per day plus gas.

February 27, 2007

    £481 million return of cash to shareholders:-

Cairn announces the proposed return of approximately £481 million of the proceeds from the
flotation of its Indian business, Cairn India, to Shareholders


    Shareholders to receive £3.00 for each Existing Ordinary Share held
    Return to be implemented by way of a B share scheme with a view to providing UK tax
       resident shareholders with flexibility to elect to receive cash in the form of income or
       capital or a combination of both
    One B share for every one Existing Ordinary Share held
    13 for 16 share consolidation to seek to maintain comparability of share price and
       earnings per share

EGM were suppose to approve the return on 22 March 2007

December 2006

Cairn’s IPO and its failure:-

Cairn India raised $1.93 billion through an initial public offering of shares in December 2006.
The IPO coincided with some nervousness in Indian stock markets and also suffered lacklustre
demand due to some uncertainties about Cairn India's contractual agreements. The result was
that the IPO scraped through barely garnering full subscription and was priced at the lower end
of the Rs160-Rs190 range indicated by bookrunners ABN AMRO Rothschild and DSP Merrill

                                              Page 82
Lynch in pre-marketing. Cairn India opened trading in January 2007 at Rs149 and lost 14% in
first day of trading to close at Rs137. It has since recovered and has been trading above Rs200

Cairn India was trading at Rs 137 on BSE in early trade, a discount of 14.3% over the IPO
price of Rs 160.

Cairn India's IPO, in, managed to scrape through. The IPO was embroiled in controversy just
before the float with Oil and Natural Gas Corporation, Cairn's partner in Rajasthan, dragging the
company to the market regulator, Securities and Exchange Board of India, complaining that its
subsidiary, Mangalore Refinery and Petrochemicals (MRPL) did not bear the sole responsibility
for ensuring midstream development (pipeline for the transport of crude oil).

November 2006
Malaysian oil-major Petronas had acquired a 10% stake in Cairn India as a long-term supportive
investment and to build a positive and constructive relationship with the management of Cairn

    Cairn India gains after amicable end to pipeline tiff:-

Cairn India jumped 5% to Rs 142, amid reports of reaching an agreement with ONGC to
build a $340-million pipeline to transport crude oil from Rajasthan to Gujarat.

Milestones Achieved by the Company:-

May 10, 2007

    More Discoveries

Cairn India said it had made two new discoveries in the Rajasthan block in northern India. The
company received a six-month extension from the government for further exploration in the

    Cairn India among top-50 m-cap luminaries

                                             Page 83
A disappointing debut notwithstanding, Cairn India entered the league of top 50 Indian compa-
nies in terms of market capitalisation on Day 1.


Company             PE                ROI              ROE           ROIC

IOC                 13.07             0.082261         0.159621      0.174007

ESSAR               8.26              -0.00302         -0.01144      -0.00363



                                             Page 84
ROI: - PAT / Total Assets

ROE: - PAT – Preference Dividend / Paid up Equity share + Reserves and surplus

ROIC: - NOPAT / Debt + Equity

                                        Page 85

         Page 86
Balance Sheet & P&L Consolidated

              Page 87
       Year          2004       2005        2006        2007        2008         2009         2010          2011        2012        2013

Share Capital        1168.01     1168.01    1168.01     1192.37     1192.37      1192.37       1192.37      1192.37      1192.37      1192.37

Reserve Total       22783.56    26281.96   29472.93     35351.9    42427.09    48791.154    56109.8265    65648.497    78778.196    94533.836
% Change                         15.35%     12.14%      19.95%      20.01%          15%           15%          17%          20%            20%

Funds               23951.57    27449.97   30640.94    36544.27    43619.46    49983.524    57302.1965    66840.867    79970.566    95726.206

Minority Interest    1293.98     1706.65    1742.59     1697.83     2200.17    2244.1734     2311.4986    2357.7286    2428.4604    2501.3142
% Change                         31.89%      2.11%      -2.57%      29.59%           2%              3%         2%             3%          3%

Secured Loans        4441.74     3901.28    9365.46     6620.82     7600.47    8512.5264    10215.0317    11236.535    12584.919    14095.109
% Change                        -12.17%    140.06%     -29.31%      14.80%          12%           20%          10%          12%            12%

Unsecured Loans     10504.32     16427.8   20698.14     22860.3    31220.46    34966.915    39862.2833     45044.38    51801.037    61125.224
% Change                         56.39%     25.99%      10.45%      36.57%          12%           14%          13%          15%            18%

Total Debt          14946.06    20329.08    30063.6    29481.12    38820.93    43479.442     50077.315    56280.915    64385.956    75220.333

Total Liabilities   40191.61     49485.7   62447.13    67723.22    84640.56    95707.139     109691.01    125479.51    146784.98    173447.85

Gross Block         44578.02    49516.66    53434.7    61691.25    63951.58    70346.738    76188.3311    87616.581    98405.687    113166.54
% Change                         11.08%      7.91%      15.45%       3.66%       10.00%         8.30%       15.00%       12.31%       15.00%

Less: Accumulat-
ed Depreciation     16476.24    18876.14   21348.75    24092.95    26993.39    30232.597    33860.5084    37923.769    42664.241    47783.949
% Change                         14.57%     13.10%      12.85%      12.04%       12.00%        12.00%       12.00%       12.50%       12.00%

Less: Impairment
of Assets                   0      35.56      35.56       90.24       90.24        90.24         90.24        90.24       99.264     109.1904
% Change                                     0.00%     153.77%       0.00%        0.00%         0.00%        0.00%          10%            10%

Net Block           28101.78    30604.96   32050.39    37508.06    36867.95    40023.901    42237.5827    49602.571    55642.182      65273.4

Lease Adjust-
ments                       0          0           0           0           0            0             0            0            0            0

Capital WIP          6460.14     8925.05    9899.39     4821.88    10102.52     8082.016     12123.024     10304.57    12365.484    15456.856
% Change                         38.16%     10.92%     -51.29%     109.51%         -20%           50%         -15%          20%            25%

Investments          2708.59     2880.28   12296.85    19316.18    20773.11    24927.732    30287.1944    36344.633     43613.56    52628.483
% Change                          6.34%    326.93%      57.08%       7.54%       20.00%        21.50%       20.00%       20.00%       20.67%

Net Current As-
sets                 7652.52    12090.41   13362.24    11978.33    22885.28    28752.837    31268.7102    35408.687    41428.164    46399.544
% Change                         57.99%     10.52%     -10.36%      91.06%       25.64%         8.75%       13.24%       17.00%       12.00%

Miscellaneous          85.02       38.78      61.37      158.38      125.08       156.35      195.4375     273.6125     383.0575     536.2805

                                                                   Page 88
Expenses not
written off
% Change                      -54.39%     58.25%    158.07%     -21.03%        25%          25%         40%          40%          40%

Deffered Tax
Assets               203.52       1.75       0.57         0          0           0            0           0            0            0

Deffered Tax
Laibilities         5019.96   5055.53     5223.68    6059.61    6113.38   6235.6476   6422.71703   6454.8306   6648.4755    6847.9298
% Change                        0.71%      3.33%     16.00%      0.89%       2.00%        3.00%       0.50%        3.00%        3.00%

                                                                                  -            -           -
Net Deffered Tax   -4816.44   -5053.78   -5223.11   -6059.61   -6113.38   6235.6476   6422.71703   6454.8306   -6648.4755   -6847.9298

Total Assets       40191.61   49485.7    62447.13   67723.22   84640.56   95707.139    109691.01   125479.51   146784.98    173447.85

                                                               Page 89
      Year           2004       2005       2006        2007         2008       2009        2010        2011        2012        2013


Sales Turnover      135380.4   151536.6    185791.3   228748.4    258994.4    295253.59   348399.24   418079.09   510056.49   637570.61
% Change                        11.93%      22.60%     23.12%      13.22%       14.00%      18.00%      20.00%      22.00%      25.00%

Excise Duty         18457.01   17188.13    23372.96   27254.56    29123.34     32035.67   35239.241   40525.128   47819.651   57383.581
% Change                         -6.87%     35.98%     16.61%       6.86%       10.00%      10.00%      15.00%      18.00%      20.00%

Net Sales           116923.4   134348.5   162418.34   201493.9      229871    263217.92     313160    377553.96   462236.84   580187.03

Other Income         1653.95    1440.18     2384.85    6530.78      5016.88     6020.25   7224.3072   9391.5994   12678.659    17116.19
% Change                       -12.92%      65.59%    173.84%      -23.18%         20%         20%         30%         35%         35%

Stock Adjustment      831.03     2169.3      2934.2     386.22      2799.42     3779.21    5101.943    6887.623    9298.291   12552.693
% Change                       161.04%      35.26%    -86.84%      624.83%         35%         35%         35%         35%         35%

Total Income        119408.4    137958    167737.39   208410.9    237687.3    273017.39   325486.25   393833.18   484213.79   609855.91
                                                                                14.86%      19.21%      20.99%    0.2294896   0.2594766

Total Expenditure   105791.6    127213    156607.68   192051.5    220309.9    248950.16   288782.19   340762.99   408915.58   496832.43
% Change                        20.25%      23.11%     22.63%      14.71%       13.00%      16.00%      18.00%      20.00%      21.50%

Operating Profit     13616.8   10744.96    11129.71   16359.34    17377.46     24067.22   36704.058   53070.198   75298.205   113023.48
% Change                        -21.09%      3.58%     46.99%       6.22%           7%         12%         15%         15%         20%

Interest              560.52     795.29     1286.08    1777.33     1847.06    2068.7072   2316.9521   2622.9363   3001.1351   3507.1983
% Change                        41.88%      61.71%     38.20%       3.92%       12.00%      12.00%      13.21%      14.42%      16.86%

Gross Profit        13056.28    9949.67     9843.63   14582.01     15530.4    21998.521   34387.106   50447.261    72297.07   109516.28
% Change                       -23.79%       -1.07%    48.14%       6.50%       41.65%      56.32%      46.70%      43.31%      51.48%

Depreciation         2095.81    2413.92     2550.43    2970.28     3041.71    3181.6287   3334.3468   3501.0642   3697.1238   3918.9512
% Change                        15.18%       5.66%     16.46%       2.40%        4.60%       4.80%       5.00%       5.60%       6.00%

Profit Before Tax   10960.47    7535.75      7293.2   11611.73    12488.69    18816.892   31052.759   46946.197   68599.946   105597.33
% Change                       -31.25%      -3.22%     59.21%       7.55%       50.67%      65.03%      51.18%      46.12%      53.93%

Tax                  2605.82    1384.75     1945.02    2553.92     3851.87    6585.9122   10868.466   14083.859   20579.984   36959.065
% Change                       -46.86%      40.46%     31.31%      50.82%       70.98%      65.03%      29.58%      46.12%      79.59%

Net Profit before
Minority Interest    8354.65      6151     5348.18     9057.81     8636.82     12230.98   20184.293   32862.338   48019.962   68638.264
% Change                       -26.38%     -13.05%     69.36%       -4.65%      41.61%      65.03%      62.81%      46.12%      42.94%

Minority Interest     345.63     431.76      183.45      311.9       637.82     924.839   1387.2585   2080.8878   3017.2872   4375.0665
% Change                        24.92%     -57.51%     70.02%      104.50%      45.00%      50.00%      50.00%      45.00%      45.00%

Net Profit after
Minority Interest    8009.02    5719.24     5164.73    8745.91        7999    11306.141   18797.035    30781.45   45002.675   64263.198
% Change                       -28.59%       -9.70%    69.34%       -8.54%      41.34%      66.26%      63.76%      46.20%      42.80%

                                                                 Page 90

Steps and assumptions


a. Find out the current capital structure.

b. Calculate the tax rate from previous year tax paid.

                               Assumption: Tax rate will increase slightly in future.

c. Calculate the cost of debt from previous year interest paid.

                               Assumption: cost of debt will increase slightly in future.

d. Calculate the post tax cost of debt.

                               Post tax cost of debt= debt x (1-Tax)

e. Rfr (risk free rate) = 10 year government bond rate.

f. Find out the Beta for the firm.

Assumption: In long run Beta of the firm will be move towards the beta of firm.

g. Calculate the cost of equity.

                               Cost of equity= Rfr + Beta x (m(r)-Rfr)

                                              Page 91
                               Where m(r) = Return from the market.

h. Calculate the Weighted Average Cost of Capital (WACC).

                               WACC = We (cost of equity) + Wd (cost of debt)

                               Where We =weight of equity in total capital

                             Wd = weight of debt in total capital.

i. Future growth

Assumption: it will be almost close to the inflation rate, which is currently at -1.67% but in fu-
ture it will be close to 3.5% to 4.0%.


a. Sales growth rate:

Assumption: growth rate of the paint industry is estimated at rate of 17% to 18% and Asian
Paints is the leader in this sector in India, we are estimating the growth rate of 17% for first 2
years and 16% fro next 3 years.

b. Expenditure: It is estimated on the basis of sales.

c. Depreciation: It is estimated on the basis of previous records.

d. Change in working capital: Working capital is estimated on the basis of sales.

e. Change Capital expenditure: difference in current and previous year gross block.

Step-3: Calculate the terminal value (TV)

TV= Last Earning / (WACC - future Growth Rate)

Step-4: Calculate discounting Factor(DF)

DF= 1/ (1+WACC)^n

                                               Page 92
Step-5: Calculate the present value of Equity.


EQUITY                               1192.37
RESERVES                            42427.09
TOTAL SF                           43619.46

SEC LOANS                            7600.47
UNSEC LOANS                         31220.46
TOTAL DEBT                         38820.93

TOTAL LIAB                         82440.39

EQUITY WTS                          52.91%
DEBT WTS                            47.09%

INTEREST                            1847.06

INTEREST RATE                         4.76%

PBT                                12488.69
TAX                                 3851.87

TAX RATE                            30.84%

POST TAX INT RATE                     3.29%

CAPM = RFR + [E( R)-

WACC                                  4.42%

                                                 Page 93
                           2008    2009E      2010E      2011E      2012E      2013E

Net-Sales                 229871   263217.9     313160     377554   462236.8     580187
Other Income             5016.88   6020.256   7224.307   9391.599   12678.66   17116.19
Stock Adjustment         2799.42   3779.217   5101.943   6887.623   9298.291   12552.69
Total Income            237687.3   273017.4   325486.2   393833.2   484213.8   609855.9
Less: Op. Exp.          220309.9   248950.2   288782.2     340763   408915.6   496832.4
EBITDA                  17377.46   24067.23   36704.06    53070.2    75298.2   113023.5
Less: Depreciation       3041.71   3181.629   3334.347   3501.064   3697.124   3918.951
EBIT                    14335.75    20885.6   33369.71   49569.13   71601.08   109104.5
Less: Interest           1847.06   2068.707   2316.952   2622.936   3001.135   3507.198
EBT                     12488.69   18816.89   31052.76    46946.2   68599.95   105597.3
Less: Tax                3851.87   6585.912   10868.47   14083.86   20579.98   36959.07
PAT                      8636.82   12230.98   20184.29   32862.34   48019.96   68638.26
Add: Depreciation        3041.71   3181.629   3334.347   3501.064   3697.124   3918.951
CF from Operation       11678.53   15412.61   23518.64    36363.4   51717.09   72557.22
Less: Pref. Dividend           0          0          0          0          0          0
Less:∆ W/C              10906.95   5867.557   2515.873   4139.977   6019.477    4971.38
Less: ∆ Capital Exp.     2260.33   6395.158   5841.593   11428.25   10789.11   14760.85
FCFE                    -1488.75   3149.893   15161.17   20795.18    34908.5   52824.98
TV                                                                             1551600
Discounting Factor          0.00       0.96       0.92       0.88       0.84       0.81
PV                                 3016.454   13903.83   18262.71   29358.56   42544.54
Total PV                107086.1
Less: Debt              38820.93
Less: Minority Int.      2200.17
Add: Cash & Bank         1060.22
Add: Invt. in mkt Sec          0
Total Price             67125.22
Price per Share         562.9421

                                     Page 94
                      BIBLIOGRAPHY & WEB REFERENCES





•   http://











•   Capitaline Database

                                      Page 95

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