Project Report On OIL AND NATURAL GAS CORPORATION LIMITED Jeevan Bharti Tower 2,124, Indira Chowk, New

Delhi-110001

Submitted by: SAVAN S PRAJAPATI S.Y. - C - 206 N.R.Institute of business Administration Ahmedabad Year = 2009-10

N.R. INSTITUTE OF BUSINESS ADMINISTRATION GLS Campus, Mardia Plaza Lane, Off. C.G. Road, Ellis bridge, Ahmedabad-380006, Phone: 26430373 CERTIFICATE This is to certify that the Financial Report based on the Annual Reports of Pfizer Limited is submitted by Mr.Savan S. Prajapati to N.R. Institute of Business Administration, affiliated to Gujarat University, in the partial fulfillment of the requirements for the completion of Practical Studies in the area of Financial Management at the Second Year of the B.B.A. Program for the year 2009-2010.

___ ______________ Director Date: 06/12/2010 __________________ Prof. in-charge _____________ External Evaluator

INDEX

CHAPTER NO
1. 1.1 1.2 1.3 1.4 1.5 1.6 1.7

TITLE
COMPANY PROFILE Name of the company Address of the company Brief introduction of the activities of the business Status of the company Special achievements Financial highlights Meaning of analysis and objectives of studies RESULT OF OPEARTION Profit for three years Importance of cash profit Calculating cash profit from p&l a/c Conclusion RATIO ANALYSIS Meaning and importance of ratio and classification Profitability Ratios Activity Ratios Liquidity Ratios Leverage Ratios Others Accounting Policies and notes Directors Report Auditors Report Common sized statement Findings

2. 2.1 2.2 2.3 2.4 3. 3.1 3.2 3.3 3.4 3.5 3.6 4. 5. 6. 7. 8.

PREFECE
Management means at art of getting the things done through others. Today we find management in each and every field. Its a developing field. This are frequent change in its principles due to increasing complexities that we find around the world finance function is one of the financial area in management field. Today, finance function has played a significant role in the field. of management. Today, there is scarcity of funds, so its very important for every company to make effective utilization of the funds. Thus, finance function is most important. As a student of S.Y.B.B.A. I study the finance function in this report as practical study. So, in this report the analysis of financial statements has been done at ONGC LTD. The encyclopedia at Britannica defines finance as The act of providing the means at payment." Financing is the process of organizing the flow of funds so that a business can (worry) out its objective is the most efficient manners. In the word of Joseph & Massie, "Financial management is the operation activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation."

Acknowledgement
The financial report is an integral part of practical training in the three year B.B.A. Programme. The financial training is very important integral part of experience to develop managerial ability at the level of B.B.A. . The students are requiring studying the financial aspect to any company to get the practical knowledge about subject. Financial theory and practical knowledge continue to play a vital role in an company management. Finance has fetched greater strategic focus as manager scope with how to create value within a corporate setting. The purposes of financial trading report remain one of at providing three things. Developing understanding off the rapidly waling and existing theory of finance. It enables one to evaluate how closed the firm investments financing and dividend decision come to an objective of maximum share holders wealth. It familiarizes readers with the ways in which analytical techniques are brought to bear in financial decision making. The report supplies the institutional material necessary for a environment in which financial decision are made by this trading programme. I am first faithful to our college for giving me this opportunity. I am thankful to Professor SEEMA PANDIT who had helped me in making financial report. I am also thankful to my friends and my seniors who had also help me in making a financial report.

NAME: SAVAN S. PRAJAPATI ROLL NO.: 206

CHAPTER 1 COMPANY PROFILE

1.1 Name of the company

OIL AND NATURAL GAS CORPORATION LIMITED

1.2 Registered address of the company

8th floor, Jeevan Bharti Building, Tower II, 124, Indira Chowk NewDelhi,110001 Tel: 011-23301000/23310156/23721756, Fax: 011-23316413, Email: secretariat@ongc.co.in Website: www.ongcindia.com

1.3 Brief introduction of the activities of the business:Board of Directors

S.No Name 1 Mr. R S Sharma 2 Mr. S S Rajsekar 3 Mr. Santosh Nautiyal 4 Mrs. L M Vas 5 Mr. U N Bose 6 Mr. Sudhir Bhargava 7 Mrs. Anita Das 8 Mr. R S Butola 9 Mr. D K Pande 10 Mr. A K Hazarika 11 Mr. S Balachandran 12 Mr. S Vasudeva 13 Mr. D K Sarraf Key Executives S.No Name 1 Mr. N K Sinha

Designation Chairman and Managing director Director Director Director Director Director Director Director Director Director Director Director Director (Finance) Designation Co. Secretary & Compl. Officer

Co-Curricular Activities Sr No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Industry Business Group Chairman and Ma

Event Hindi Calligraphy English Poem Recitation English Calligraphy Hindi Solo Song Drawing Competition English Essay Hindi Group Song House Meeting Hindi essay writing Hindi poem recitation English extempore English action song (I-II) Hindi extempore House meeting Quiz competition
BSE Code NSE Code ISIN No 500312 ONGC INE213A01011

Oil Drilling And Exp Public Sector Mr. R S Sharma

Bankers Auditors

State Bank of India Kalyaniwalla PSD &

&

Mistry Associates

Registrar

Arun K Agarwal & Associates Padmanabhan Ramani & Ramanujam Singhi & Co. Karvy Computershare Private Ltd. Karvy Computershare Private Ltd.

Corporate Office Tel Bhavan Dehradun , Uttar Pradesh - India PinCode :248003 Phone :0135-755298,,, Factory/plant Uran Plant Dronagiri Bhavan, Uran Uran , Maharashtra India PinCode :400702 Phone :22-27222802,,, Factory/plant Hariza Plant PO ONGC, Bhatpore, Surat District , Gujarat - India PinCode :394518 Phone :261-28328129,,,

1.4 Status in the market:The Centre on Tuesday formally conferred the coveted Maharatna status on Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC) and NTPC. Minister for Heavy Industry and Public Enterprises Vilasrao Deshmukh gave away certificate conferring the Maharatna status to the heads of ONGC, IOC and NTPC at a function here. The Maharatna status to select PSEs ensures more empowerment in decision making and encourages becoming globally competitive. Navratna for RINL Visakhapatnam Special Correspondent writes: Rashtriya Ispat Nigam Ltd., the corporate entity of Visakhapatnam Steel Plant, joined the exclusive club of Navratna companies. Mr. Deshmukh presented the certificate of recognition as a Navratna company to RINL Chairman-cum-Managing Director P.K. Bishnoi, a company press release says. ONGC ranks 3rd Oil & Gas Exploration & Production (E&P) Company in the world and 23rd among leading global energy majors as per Platts 250 Global Energy Companies List for the year 2009 ONGC ranks 24th among the Global publicly-listed Energy companies as per PFC Energy 50 (Jan 2008) Finance Asia 100 list ranks ONGC no 1 among Indian Blue Chips. Occupies 155th rank in Forbes Global 2000 list 2010 of the worlds biggest companies for 2010 based on sales, profits, assets and market capitalisation.

 ONGC ranked 402nd position as per Fortune Global 500 - 2009 list;, based on revenues, profits, assets and shareholders equity. Ranked at top of the Best companies to work for in Core Sector by Business Today in Feb 2010 edition.

1.5 Special Achievements

256th in forbes global 2000 list (Mar,2006), topper from India 454 in fortuneglobal 500 & 95th in fortuneglobal 100 (july,2005) Pfc energy 50: 18th among top 50 pulbicly traded global oil & gas companies (jan, 2006) Financial times global 500: 158th among the worlds largest companies (june,2006), toper from India Moital Oswal CNBC: biggest weaith creator among indian companies (nov,2005) BT: most valuable company in India (nov,2005) ET 500 : no.1 by market cap & net profit (feb,2006) No.1 in business indias super 100 list (nov,2005) Business world- IMRB survey (june, 2006): most respected PSU Best psu: peoples award for excellence in business & economy 2006, by planman media (june 2006) Golden peacock award 2005 for corporate governance Golden peacock global award 2005 for corporate governance (may,2006) Amity corporatye excellence award (feb,2006) Teri award for corporate social responcibility (may,2005) National award for excellence in cost management (dec,2005) Enterprise excellence award by Indian institution of indusrial engineers (may,2006) All india public sector sports promotion Board : the est sports promoter among all psus (24.06.2006)

ONGC bagged the special jury award for the largest implementation of sap in asia at a special sap-ace awards function for customer excellence held in Mumbai on September 27,2006.

1.6 Financial Highlights

Profit :year 2009-10 2008-09 2007-08 profit(in million) 167676 161263 167016

Sales:year 2009-10 2008-09 2007-08

sales 5,99,862.77 6,36,187.79 5,98,482.79

EPS:year 2009-10 2008-09 2007-08

Eps (Rs.) 78.39 75.4 78.09

1.7 MEANING OF ANALYSIS AND OBJECTIVE OF STUDY

Analysis is nothing but the evaluation of such data so that can get some conclusion about that particular study Financial statements, as prepared and presented annually are of little use for the guidance of prospective investors, creditors or even management. If relationship between various related items in these financial statement are established, they can provide useful clue to gauge accurately he financial health & ability of business to make profit. This relationship between the two related items of financial statements is known as ratios. Thus a ratio is one number expressed in items of another. It is a mathematical yardstick that measure the relationship between two figures for examples, if the total current assets are divided by current liabilities, it give us a figure which shows their relationship and give an idea of working capital in a business. If the sane figure is multiplied by 100,a percentage is obtained. A ratio is customarily expressed in three different ways. (1) Simple figure or pure ratio (2) Percentage (3) Propotion of number or function.

Ratio analysis is a process of comparison of one figure against another and the interpretation of the ratio to know the strengths and weaknesses of the firms operations and of its financial position. Ratio analysis helps various interested parties like prospective investors, creditors, banks, employees etc. to draw useful conclusions to serve their purpose. The use of ratio is becoming increasing popular recently. originally, the banks used the current ratio to judge the caoacity of the borrowing firm to repay the loan and to make regular interest payments. Today it has assumed such an importance that anybody connected with the business turns to ratios for measuring the financial strength and earning capacity of the business. The suppliers of funds in the form of share capital would like to analyse the account to ascertain its earning capacity and future prospects. A banker or creditor will measure the capacity and the financial strength on thr basis of accounting ratios. Finance is the very typical aspect in course of management. The main objective behind the study is to get practical and conceptual knowledge precisely. It also helps us to study the present finance scenario. The objective is such that the student can know about how are the companys profitability, liquidity and capacity. By such analysis we can interpret the position of the company. So it is very important to study. This study helped us to understand the impact of liberalization and globalization. The practical knowledge enables us to get into touch with real world rather than theoretical knowledge. The study helped us into put the theory into practical. THEORY WITHOUT ANY PRACTICE, HAS NO FRUIT; PRACTICE WITHOUT NO THEORY, HAS NO ROOT.

CHAPTER - 2 RESULTS OF OPERATIONS

2.1 Profit of 3 years GP,NP,EBIT,EBT,EAT :(A) GP: Year 2007-08: (Rs. in million) GP = 203816 Year 2008-09: (Rs. in million) GP = 378,292 Year 2009-10: (Rs. in million) GP = 396,054 (B) NP Year 2007-08: (Rs. in million) NP = 167016 Year 2008-09: (Rs. in million)

NP = 161263 Year 2009-10: (Rs. in million) NP = 167676

(C) EBIT Year 2007-08: (Rs. in million) EBIT = 216811 Year 2008-09: (Rs. in million) EBIT = 198835 Year 2009-10: (Rs. in million) EBIT = 229000

(D) EBT Year 2007-08: (Rs. in million) EBT = 252346

Year 2008-09: (Rs. in million) EBT = 239807 Year 2009-10: (Rs. in million) EBT = 249839

(E) EAT Year 2007-08: (Rs. in million) EAT = 167016 Year 2008-09: (Rs. in million) EAT =161263 Year 2009-10: (Rs. in million) EAT =167676

2.2MEANING & IMPORTANT OF CASH FLOW STATEMENT

The statement of changes in financial position is a supplementary statement in addition to balance sheet and profit and loss account or income or revenue statement. Relevance of Cash Profit The Cash Profit is in an important measure of profitability as well as liquidity. When the Cash Profit differs from the profit shown in Profit and Loss Account or Profit and Loss Statement it indicates the impact on Non-Cash Expenses &Incomes. The cash profit is arrived at by adjusting depreciation, amortization of capital Expenses etc. The Cash profit is much less or negative compared to the profit declared in the profit and Loss Account. It indicates illiquidity and signals for appropriate Cash Management. The Net Cash flow operation can be calculated through adjustment of NonCash items like depreciation, changes in inventory & receivables and payables and all other items for which cash affects the investing and financing activities.

Cash Flow Statement

A Cash Flow Statement provides information that enables users to evaluate the changes in the assets of an enterprise, its financial structure and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances. The Cash Flow Statement should report cash flows during the period classified by operating, investing and financial activities. Cash Flow Statement is concerned only with the change in cash and Fund Flow Statement is concerned with Changes in working capital.

2.3 Cash flow statement of the company

Particulars Profit Before Tax Mar'10 Mar'09

24,983.84 23,895.42

Net Cash Flows from Operating Activity 20,388.01 22,272.74 Net Cash Used Investing Activity Net Cash Used Financing Activity in 13,237.10 17,459.91 in -8,016.08 -8,134.27

Net Inc/Dec in Cash and Cash Equivalent -865.18

-3,321.44

Cash and Cash Equivalent - Beginning of the Year 19,096.21 22,417.66 Cash and Equivalent End of the Year 18,231.04 19,096.21

CASH FLOW STATEMENT ANALYSIS Cash flow statement is divided into three major parts. 1. Cash inflow or out flow from operating activities In the year 2009-10 the cash flow from operating activities is highest and also in this year the companys out flow is highest. 2. Cash inflow or out flow from investment activities The cash flow from these activities is decreased in year 2010. But there is a slight change in the year 2010 compare to 2009 that means the company decrease their money in investment. It is not good for company . 3. Cash flow from financing activities In the year 2009 the net cash flow from financing activities is less And after that it has slide increased that means the company acquires its cash from financing activities.

Chapter: 3 RATIO ANALYSIS

3.1 MEANING OF RATIO ANALYSIS

Ratio is financial form should the comparison between two financial terms". It relationship between various related items in these financial statements is established, they can provide useful clues to judge accurately the financial health and ability of business to maximize the profit. This relationship between related items of financial is thus, one number expressed in form of return on paid up capital the net profit of the business is dividend by the paid up share capital. The figure so obtain is the ratio. It the same is multiplied by 100 a percentage rate of return on paid up capital is obtained. EXPRESSION In the form of percentage In the form of proportion of the value In the form of number of times

IMPORTANCE OF RATIO ANALYSIS

Importance of Ratios: In application to studying the rupee amount shown in the financial statements, relationships between different items may be established by computing various ratios. The relation between two related items of financial statement is known as Ratio. A ratio is thus, one number expressed in terms of other Ratios are particularly useful in comparing one years performance with other years, as well as one companys performance with anothers. In many cases the average ratios relating to companies in particular industries are available, and an individual companys ratio may be compared with such an average. Ratios help to make qualitative judgments depending upon the calculations made which are quantitative judgments. The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio in itself does not indicate favorable or unfavorable condition. It should be compare with some standard. Standard of comparison may decided by the company or firm itself. IMPORTANCE/UTILITY: Profitability: Useful information about the trend of profitability is available from profitability ratios. The gross profit ratio, net profit ratio of return on investment give a good idea of the profitability of business. On the basis of these ratios, investors get an idea about the overall efficiency of business, the management gets an idea about the efficiency of managers and bank as well as other creditors draws useful conclusions about repaying capacity of the borrowers. Liquidity: In fact, the use of ratios was made initially to ascertain the liquidity of business. The current ratio, liquid ratio and acid test ratio will tell whether the business will be able to meet its current liabilities as and when

they mature. Banks and other leaders will be able to conclude from these ratios whether the firm will be able to pay regularly the interest & loan installments. Efficiency: The turnover ratios are excellent guides to measure the efficiency of managers. E.g. the stock turnover will indicate how efficiently the sale is being made, the debtors turnover will indicate the efficiency of collection department and assets turnover shows the efficiency with which the assets are used in business. All such ratios related to sales present a good picture of the success or otherwise of the business. Inter firm comparison: The absolute ratios of a firm are not of much use, unless they are compared with similar ratios of other firms belonging to the same industry. This is interring firm comparison, which shows the strength and weakness of the firm as compared to other firms and will indicate corrective measures.

Indicate trend: The ratios of the last three to five years will indicate the trend in the respective fields. For example, the current ratios of a firm are lower than the industry average, but if the ratios of last five years show an improving trend, it is an encouraging trend. Reverse may also be true. A particular ratio of a company for one year may compare favorably with industry average but, of its trend shows a deteriorating position, if is not desirable. Only ratio analysis will provide this information.

Useful for Budgetary Control: Regular budgetary reports are prepared in a business where the system of budgetary control is in use. If various ratios are presented in these reports, if will give a fairly good idea about various aspect of financial position.

Useful for Decision making: Ratio guide the management in making some of the importation show an unsatisfactory position, the management may decide to get additional liquid funds. Even for capital expenditure decisions, the ratio of return on investment will guide the management can be judged on the basis and efficiency of each department can thus be determined.

CLASSIFICATION OF RATIO:
Accounting ratio is generally classified as follows: 1) Traditional classification 2) Functional classification (A) Traditional classification: The ratio is grouped in to three categories on the basis of the statement from which the figures are taken for computing the ratio. It is well-known traditional classification and has been grouped since the advent of ratio analysis. The ratio according to this classification is: Revenue Statement Ratio Balance Sheet Ratio Composite Ratio (B) Functional Classification: Ratio is also grouped in accordance with certain tests. On this basis there are four categories of ratios: PROFITABILITY RATIO:

Useful information about the trend of profitability is available from profitability ratio the gross profit ratio. Net profit ratio and ratio on return on investment give a good idea of a profitability of business on the basis of these ratios investors get and idea about the overall efficiency of business the management gets and idea about the efficiency of managers. Gross profit ratio Net profit ratio Operating ratio Return on total assets Return on capital employed Return on share holder fund ratio Return on equity share capital Earnings per share Dividend per share TURNOVER RATIOS: The turnover ratios are excellent guide to measure the efficiency of managers. The stock turnover ratio will indicate how efficiency sale is being. The debtors turnover will indicate the efficiency of collection department and assets turnover shows efficiency with which the assets are used in business. All such ratio related to sales present a good picture of success or otherwise of the business. Debtors' Turnover Ratio Creditors Turn over Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio stock turnover ratio

LIQUIDITY RATIO:

In fact the use of ratio was made initially to ascertain the liquidity of business. The current ratio, liquid ratio, and acid test ratio will tell whether the business will be able to meet its current liabilities and when the nature banks and lenders will be able to pay regularly the interest and loan installment Current Ratio Liquid Ratio Acid test ratio LEVERAGE RATIO: It indicates the total capital of the company & its division into own funds & borrowed fund. proprietary Ratio Debt Equity Ratio Long term Loan to Fixed Assets Ratio Capital Gearing Ratio Long term fund to fixed assets

3.2 PROFITABILITY RATIOS

1. Gross Profit Ratio It is a ratio expressing relationship between Gross Profit earned to Net Sales. It is a useful indication of the profitability of business. This ratio is usually expressed as a percentage. The ratio shows whether the mark-up obtained on cost of production is sufficient. CALCULATION:-

This ratio is calculated by dividing the gross profit by net sales. It is expressed as percentage. Form of formula of this ratio may be expressed as Gross profit ratio = Gross profit -------------------Sales x 100

Particular Gross profit Net Sales Ratio

2007-08 203816 598483 34.06

( rs.in million) 2008-09 2009-10 198025 208912 635983 599863 31.14 34.83

INTERPRETATION:In 2009 the gross profit was low, it indicates that the cost of sales was high & purchase was not efficient. In the year 2008 and 2010 the percentage increased which showed satisfactory position of the company. In the company gross profit is first declines from 2008 to 2009 but after it increases from 31.14% to 34.83% which is a good sign for the company.

2. Net Profit Ratio

The ratio is valuable for the purpose of ascertaining the over-all profitability of the business and shows the efficiency or otherwise of operating the business. It is the reserve of the operatingratio CALCULATION:This ratio is computed by dividing the net profit by the net sales. It is expressed in percentage. In the form of the formula, this ratio may be expressed as under

Net Profit Ratio = Particular Net profit Net Sales Ratio INTERPRETATION:-

Net Profit ----------------Net sales 2007-08

x 100 Rs.in million 2008-09 2009-10 167676 599863 27.95%

167016 161263 598482.79 636188 27.91% 25.35%

In the given financial year the net profit is very low in compare to the gross profit of the company. In 2008, 2009, 2010 the percentages of the net profit were 27.91%, 25.35%, and 27.95% respectively. The net profit for the company is increases from 2008 to 2009 .

3. Expenses Ratio
For the purpose of ascertaining relationship between operating expenses and net sales, expense ratio is computed. Fixed expense ratio will change according to change in sales, but variable expenses ratios will remain constant. Some accountants calculate expenses ratio in respect of raw-material consumed, direct wages and factory expenses.
CALCULATION:-

This ratio is computed by dividing the expenses by the net sales. It is expressed in percentage. In the form of the formula, this ratio may be expressed as under

Expenses Operating Expense Ratio = ----------------------- x 100 Net sales. Particular Expense Net Sales Ratio INTERPRETATION:This ratio is increase from 2008 to 2009 i.e. from 66.60% to 70.99% but after it increase from 2006 to 2007 i.e. from 90.02% to 90.70%. In all three year the expenses are above 65% it high which can be observed by Ratios which reduce the net profit of the company which is not good for the organization. 2007-08 398615 598483 66.60% (Rs. In million) 2008-09 2009-10 451659 390832 636188 599863 70.99% 65.15%

4. Operating Ratio:It is the ratio shouting relation ship between expenses and net sales. It shows the efficiency and effective at management the higher the ration the less will be the margins available to the proprietor.
CALCULATION:-

This ratio is computed by dividing the operating cost by the net sales. This ratio is expressed as a percentage. In the form of the formula this ratio is expressed as under

Operating Cost of sales + Expenses Operating Expense Ratio = ------------------------------ x 100 Net sales. Particular Cost of sales +Expense Net Sales Ratio INTERPRETATION:In the given financial year COGS very high in compare to the sales of the company. In 2008, 2009, 2010 the percentages of COGS were83.8%, 88.33%, and 86.23% respectively. This is not satisfactory for the companys management, because it affects profit negatively. This is not good for the company. 2007-08 501490 598483 83.8% Rs. In .million 2008-09 2009-10 561770 517244 635983 88.33% 599863 86.23%

5. Return on capital employed:It is an index of profitability of business and is obtained by comparing net profit with capital employed. The term capital employed includes. share capital reserve and term loans such as debentures.
CALCULATION:-

This ratio is calculated by dividing net profit before tax and interest by the capital employed. EBIT --------------------x 100 Capital Employed Rs. In million. 2008-09 2009-10 198835 229000 640583 738014 31.04% 31.03%

Return on capital employed

Particular EBIT Capital Employed Ratio% INTERPRETATION:-

2007-08 216811 604844 35.86%

It is the most important ratio form the view point of management because success of the enterprise is judge with the help of this ratio. The ratio was highest in 2008 but in 2009 the percentage decrease and again in 2010 also decrease i.e. it decreases from 35.86% to 31.04% to 31.03% so this situation indicates not good situation of company. So they must try to increase their capital employed or to increase their profit.

6. Return On shareholder's fund:In order to judge the efficiency with which the proprietor's funds are employed in business the ratio is ascertained proprietors equity or proprietors funds included share capital and reserves. It is of great practical important to prospective inventors as it enable the profitability of a company to be compare to with that of the other company. It also includes whether the return on proprietors funds is enough in relation to the rich that they under take. CALCULATION:This ratio is calculated by dividing net profit after interest, tax by the shareholders fund. PAT ------------------------- x Shareholders fund Rs. In million 2008-09 2009-10 161263 167676 787354 872726 20.48% 19.21%

Return on Shareholder's fund ratio =

100

Particular PAT Share holder fund Ratio(%)`

2007-08 167016 706174 23.65%

INTERPRETATION:Higher this ratio more benefits to shareholders because it shows what amount of dividend may given on shares. It indicates whether the return on proprietor funds is enough in relation to the risks that they undertake. It is continuously decreases from 2008 to 2009 top 2010 i.e. from 23.65% to 20.48% to 19.21%. this is a not good sign for the company. In this way We can see that they are using their funds not efficiently and they need to be used efficiently.

7. Return on Equity share capital:The ratio show the relationship between net profit and share holder funds. The ratio is compare by dividing the amount at net profit by share holder's fund. CALCULATION:This ratio is calculated by dividing net profit after interest, tax & preference share dividend by the shareholders fund. PAT Return on Sh. Holder's Fund Ratio = ---------------------- X 100 Eq. Share Capital

Particulars Net PAT Share Capital RATIO

2007-08 167016 21389 780.85%

(Rs. In Million) 2008-09 2009-10 161263 167676 21389 21389 753.95% 783.96%

INTERPRETATION:In the company there is no preference share so return on share holders fund and return on equity share holders fund are same. This ratio decreases in year 2008 to year 2009 but after than increase highly. it is more beneficial for the company and share holder both.. In 2008 it was 780.85% but in 2009 it was decrease at 753.95% and after in 2010 it was increase to 783.96%.

8. Earning Per Share Ratio :The ratio shows the efficiency of the company to give a profit per share to the shareholders. The ratio is computed by the dividing the amount of Net Profit by number of shares. CALCULATION:This ratio is calculated by dividing net profit after interest, tax & preference share dividend by no. of equity shares.

PAT Earning per Share Ratio = ----------------------- X 100 No. of Share Rs.in million Particular PAT No.ofshare Ratioin Rs. 2007-08 167016 2138872530 78.09 2008-09 161263 2138872530 75.19 2009-10 167676 2138872530 78.39

INTERPRETATION:The Earning per Share of the company refers to the earning to the ordinary share holders. It decreases in 2009 comparatively to 2008. I.e. it decreases

from 78.09 RS to 75.19 RS, but after it increases from 2009 to 2010 i.e. from 75.19 RS to 78.39 RS. It is beneficial to shareholders because more earning Per Share more dividends to shareholders and higher value of share in the market.

9. Dividend per Share This ratio measures a relationship between earnings available to an equity shareholder on a per share basis. CALCULATION:This ratio is calculated by dividing dividend paid to the equity share holder by no. of equity shares. Total Dividend ------------------------ x 100 No. of Shares

Dividend per Share

Particulars Total Dividend No. of Shares Ratio in Rs.

(Rs in Million) 2007-08 2008-09 2009-10 68444 68444 70583 2138872530 2138872530 2138872530 32 32 33

INTERPRETATION:This ratio shows dividend paid to the share holder of the company. The Dividend per Share of the company was same in 2008 & 2009. But in 2010 it

was increase i.e. this increase from RS 32 to RS 33. It is beneficial to shareholders because more dividend Per Share more dividends to shareholders and higher value of share.

10. Price Earning Ratio This ratio measures a relationship between market value of equity share and earning per share. CALCULATION:This ratio is calculated by dividing market value per equity share by earning per share. Market value per share ----------------------------------Earning per share

Price Earning Ratio

(In Rs.) Particulars 2007-08 Market value Per Equity Share. Earning Per Share Price Earning Ratio (times)

2008-09

2009-10 1092 78.39 13.93

INTERPRETATION:In 2009-10 this ratio is 13.93.this ratio shows market value per share

11. DIVIDEND YIELD RATIO

The dividend yield and earning yield evaluate the shareholders result in relation to the market value of the share. The earnings yield is also called the earning price ratio. The dividend yield is the dividend per share dividend by the market value per share and the earning yield is the earning per share dividend by market value per share. Dividend per share ------------------------- X 100 Market per share

Dividend yield Ratio =

Year Dividend per share market price per share Ratio

2007-08

2008-09

2009-10 33 1092

3.02%

Interpretation
Dividend yield ratio evaluates the share holders returning the market value per ordinary share.

3.3 TURNOVER RATIO

1. Fixed Assets Turnover Ratio:The ratio shows the relationship between fixed assets and turnover means sale. The Ratio is computed by dividing the amount of sale by the fixed assets. CALCULATION:assets. Net Sales --------------------Fixed Assets This ratio is calculated by dividing net sales by fixed

Fixed Assets Turnover Ratio =

Particular Net sales Fixed Assets Ratio INTERPRETATION:-

Rs. In million 2007-08 2008-09 2009-10 598483 635983 599863 175925 221108 258899 3.4times 2.88times 2.32times

This ratio shows the efficiency with which assets are being used in the company. This ratios continuously decreases from 2007-08 to 2007-09 to 2009-10 i.e. from 3.4 times to 2.88 times to 2.32 times respectively. Which is a not good sign for the company because the assets of the company are using not effectively by the company.

2. Debtors' Ratio:The ratio shows the number of days taken to collect the dues of credit sales. It shows the efficiency or otherwise of the collection policy of the enterprise. Calculation: The ratio is computed by dividing the amount of debtors and bills payable by the credit sales. Debtors + Bills Receivable Debtors' Ratio = -------------------------------------------- X 365 Credit Sales Particular Debtors + Bill/Receivable Credit sales Ratio Days INTERPRETATION:This rati0o shows the average collection period of the company .This ratio is continuously decreases from 2007-08 to 2008-09 to 2009-10. I.e. it decreases from 26.59 days to 23.44 days to 18.61 days. This shows the collection policy from the debtors of the company. This is good for the company. 2007-08 43604 598483 26.59 2008-09 40838 635983 23.44 Rs. In million 2009-10 30586 599863 18.61

3. Debtors turnover Ratio

The debtors are created, when credit sales is used as a marketing tool along with the cash sales. The debtors are expected to be converted into cash over a short period of time and hence they are included in the current assets. CALCULATION:This ratio is calculated by dividing no of days by debtors ratio. No of days Debtors Turnover Ratio = ------------------------Debtors ratio Particular No of days Debtors ratio Ratio 2007-08 365 27 13.52% 2008-09 365 23 15.87% Rs. In million 2009-10 365 19 19.21%

INTERPRETATION:This ratio shows he collection policy of the company in 2007-08 the ratio was low i.e. it was 13.52 times which shows ineffective collection policy. But after it continuously goes up from 2007-08 to 2008-09 to 2009-10 i.e. from 13.52 times to 15.87 times to 19.21 times. This shows the companys collection policy has become effective. This is good for the company.

4. Creditors' Ratio
The Ratio shows the relationship between Fixed Assets, and turnover means sale. The Ratio is computed by civilizing the amount of sales by the fixed assets. The Creditors Ratio gives us the number of days within which the amount due for credit Purchase is payment. Similarly the number of days within which we payment to our creditors for Credit Purchase is obtained from Creditors Velocity

Creditors+ Bills Payable creditors' Ratio = ---------------------------------------------- X 365 Credit Purchase Particular Creditors Bill payable Credit Purchase Ratio 2007-08 5521 65115 31day 2008-09 4569 85166 20day Rs. In million. 2009-10 10.21 139.31 27day

INTERPRETATION:This ratio shows the average payment to the creditors of the company. This ratio decreases from 2007-08 to 2008-09 i.e. from 31 to 20 days, but after it increase from 2008-09 to 2009-10 i.e. from 20 days to 27days, which is good for the company.

5. Creditors' Turnover Ratio:This ratio establishes a relationship between net credit purchase and average trade creditors. No. of days Creditors' Turnover Ratio = ---------------------------- X 100 Creditors ratio Rs. In million 2009-10 365 27 13.52%

Particular No. of days Creditors ratio Ratio

2007-08 365 31 11.77%

2008-09 365 20 18.25%

INTERPRETATION:This ratio increases from 2007-08 to 2008-09 i.e. from 11.77 to 18.25 times, but after it falls from 2008-09 to 2009-10 i.e. from 18.25 times to 13.52 times, which is good for the company, Because it results in liberal payment policy.

6. Stock Turnover Ratio

The number of times the average stock is turnover during the year is know as stock turnover ration. It is computed by the average stock In the business average stock is the average at opening stock and closing stock at the year. CALCULATION:This ratio is calculated by dividing cost of goods sold by average stock. It is expressed as x. no. of times. Stock turnover ratio:COGS__ Avg. Stock Rs. In million Particular COGS Average stock Ratio INTERPRETATION:This ratio decreases from 2007-08 to 2008-09 i.e. from 82.62 times to 78.38 times but after also it declines from 78.38 times to 57.76 times i.e. from 2008-09 to 2009-10, which is not good for the company. The main reason for this ratio is that both COGS and average stock are increases but increase in the average stock is greater than increase in the COGS. 2007-08 394668 4777 82.62 2008-09 437958 5588 78.38 2009-10 390951 6768 57.76

7. Working Capital turnover Ratio The working capital turnover ratio represents the excess of current assets over current liabilities. Although it is not a ratio, it is frequently employed as a measure of the companys liquidity position. An enterprise must have sufficient amount of working capital in order to able to meet the claims of the creditors and the day-to-day business. Net sales Working capital turnover= ---------------------------------Net working capital

Particulars Net Sales Net working Capital Ratio

2007-08 598483 322248 1.86

2008-09 635982 334949 1.90

Rs.In million 2009-10 599863 342714 1.76

Interpretation Net working capital of the company increased from 2008 to 2009. It increased from 1.86 to 1.90 to 1.76 times respectively although working capital of the company was decreasing from year to year . From 2009 to 2010 sales decreased more than working capital so the ratio decreased.

8. Book Value per share

This ratio establishes a relationship between net worth and total no. of equity shares.The objective of computing this ratio is to to know the past earning and distribution policy of the company and to know net worth per equity share. CALCULATION:This ratio is calculated by dividing net worth by total no. of equity share. Proprietor fund BOOK VALUE PER SHARE= ---------------------------------NO. OF EQUITY SHARE (RS in million) 2009-10

PARTICULAR NET WORTH _____________________ NO. OF SHARE BOOK VALUE PER SHARE Rs.

2007-08

2008-09

699435 780848 864413 _______ _______ _______ 2138872530 2138872530 2138872530 327 365 404

INTERPRETATION:-

In year 2008 book value per share is 327 RS, which indicates the liberal distribution policy while in 2009 and 2010 book value per share is more which shows huge reserve. Low or high book value per share creates the problem of under capitalization or over capitalization, which is not good for the company management.

3.4 LIQUIDITY RATIO

1. Current Ratio
This most widely used ratio shows the proportion of current assets to current liabilities. It is also known as Working Capital Ratio as it is a measure of working capital available at a particular time. The ratio is obtained by dividing current assets by the current liabilities. It is a measure of short term financial strength of the business and shows whether the business will be able to meet its current liabilities, as and when they mature. Current Assets ----------------------------Current Liabilities 2007-08 498331 176083 2.83 Rs. In million 2008-09 2009-10 545999 211051 2.59 537713 194999 2.76

Current Ratio

Particular Current assets Current Liab. Ratio INTERPRETATION:-

The Current Ratio shows that liquidity position of the company. The ideal current ratio is 2:1 which is near of 2 in the year 2008,2009, 2010 . which reflects good liquidity position of the company.

2. LIQUID RATIO
Liquid Assets are obtained by deducting Stock in - trade from Current Assets. Stock is treated as a liquid asset because it cannot be readily converted into cash as and when required. Liquid Liabilities are obtained by deducting Bank Overdraft from Current Liability. Liquid Ratio = Liquid Assets____ Liquid Liabilities Rs. In million Particular Liquid assets Liquid liability Ratio 2007-08 493555 176083 2.80:1 2008-09 540412 211050 2.56:1 2009-10 530945 194999 2.72:1

INTERPRETATION:If the liquid assets are equal to or more than liquid liabilities, the condition may be considered as satisfaction. This ratio of the company satisfied the ideal ratio i.e. ratios are more than 1:1. this ratio decreases from 2.80 times to 2.56 times in the year 2008-09 but after it increase from 2.56 times to 2.72 times. But it is higher than the ideal one so the liquidity position of the company is good .

2. Quick Ratio (Acid Test Ratio)

The measure of absolute liquidity may be obtained by comparing only cash and bank balance as well as readily marketable securities with liquid liabilities. This is a very exacting standard of liquidity and it is satisfactory if the ratio is 1:1. Here, quick assets do not include stock. Sometimes it is called as Absolute Liquidity Ratio. Quick Ratio = Quick assets___ Current Liabilities

Particulars Quick Assets Current Liabilities Ratio Interpretation

2007-08 160143.04 176082.67 0.91:1

2008-09 121405.48 211050.98 0.58:1

(In million) 2009-10 108279.29 194999.65 0.56:1

Quick ratio is used as a measure of companys ability to meet its current obligation. A healthy liquid ratio is 1: 1. We see into the ONGCS quick ratio is 0.91, 0.58 and 0.56. It shows that companys quick ratio is less than the requirement , so we can say that it is due to less credit period given to debtors.

3.5 Leverage ratio

1. Proprietary ratio:The ratio shows for the proportion of proprietor funds to the total assets employed in the business. The proprietor funds or shareholder equity, consist of share capital and reserve and surplus. Proprietary Ratio = Proprietors funds -------------------------Total Assets. x 100

Particular Proprietor fund Total assets Ratio

Rs.in million 2007-08 2008-09 2009-10 706173.99 789354.15 872826.02 169185.74 214602.2 250485.4 417.4 366.81 348.45

INTERPRETATION:This ratio is continuously decreases from 2007-08 to 2008-09 to 2009-10 i.e. it decreases from 417.4% to 366.81% to 348.45% respectively. This shows the proportion of the owners fund in compare to the net assets.

2. Debt Equity Ratio:This ratio is only another form of proprietary ratio and establishes between outside term liability and owner funds. It shows the proportion of the long term external equities and internal equities e.g. proportion of funds provided long term creditors and that provide by shareholder and proprietors. Long Term Liabilities -----------------------------Share Holders Fund

Debt Equity Ratio

* 100

Rs. In million Particular 2007-08 2008-09 2009-10 Long term 6449.64 5898.86 6378.44 liability Share holder 706173. 787354.1 872826.62 fund 99 5 Ratio 0.91% 0.75% 0.73% Interpretation The ratio indicates the relationship between long funds and net worth of the company. 0.5 :1 is normally accepted ratio by the financial institutions ,means debt should be halved of net worth. Debt equity ratio of the company is not fully satisfactory but in the year by year it is decreasing which is good for the company, because it shows decreasing debt year by year. Year by year debt was decreasing and net worth was increasing , so the ratio simply decreased. 3. Capital Gearing ratio:-

The ratio express the proportion of preference capital and ordinary capital in other word it is the ratio of fixed dividend bearing capital to ordinary capital even debentures are included among with preference capital. Fixed interest bearing capital -------------------------------------- x 100 Equity share capital 2007-08 2008-09 2009-10

Capital Gearing ratio =

Particular Preference share Debenture Equity share Capital Ratio

369.42 49.75 267.35 21388.87 21388.87 21388.87 1.73 0.23 1.25

Comments:See the above table in the capital gearing ratio is high in 2007-08 compare to 2008-09 and 2009-10 debenture are decrease compare to last year but more increased then 2008-09 which shows that is more progress in the company.

4. Long term fund to fixed asset ratio:-

Normally the fixed assets of the company must be purchased out of fixed capital only. Which included share reserves and long term liability. The ratio of shows the relationship between fixed capitals and fixed assets the ratio must be 1:1 or more e.g. the fixed capital must be more than fixed assets or must allot equal to fixed assets. Long Term Funds ------------------------- x 100 Fixed assets Rs. In million. Particular Long term fund Fixed assets Ratio 2007-08 699804.25 175924.76 397.79 2008-09 781115.26 221108.30 353.27 2009-10 864462.47 258898.56 333.90

LTF To FAR

Interpretation:Here, the long term fund to fixed assets, long term fund and fixed assets are increase compare to the last two year. and the ratio show that decrease compare to 2007-08 and 2008-09 because at increasing in debt. So, it is not good for the company.

CHAPTER - 4 ACCOUNTING POLICIES AND NOTES

Notes of account
1. In terms of the decision of Government of India (Gol), the Company has shared under-recoveries of Oil Marketing Companies (OMCs) for the year 2009-10 by allowing discount in the prices of Crude Oil, PDS Kerosene and domestic LPG based on provisional rates of discount communicated by Petroleum Planning and Analysis Cell, Ministry of Petroleum & Natural Gas (MoP&NG). The Company does not foresee any material impact on finalization of discount rates. 2.1 Sales revenue in respect of Crude Oil is based on the pricing formula agreed with the customers for the period from 01.04.2002 to 31.03.2004. Pending finalization of fresh Memorandum of Understanding (MOU)/Crude Oil Sale Agreement (COSA) with the customers, the same pricing formula has been provisionally adopted from 01.04.2004 onwards. However, for Crude Oil produced in Assam, benchmark price revised by MoP&NG w.e.f. 01.04.2008 has been adopted. 2.2 Sales revenue in respect of Natural Gas under Administered Price Mechanism (APM) is based on the gas prices fixed on provisional basis as per directives dated 20.06.2005 and 05.06.2006 of the Gol, MoP&NG. 2.3 Adjustments, if any, on account of Para 2.1 and 2.2 above shall be carried out on finalization of agreements/ receipt of government directives. However, the Company does not foresee any material impact on current years results. 3. MoP&NG vide letters dated 15.03.10 and 09.04.10 have directed GAIL (India) Limited (GAIL) that difference between consumer price and producer price revised vide MoP&NG letter dated 5th June, 2006 for APM gas being supplied to City Gas Distribution Projects and small consumers having allocations up to 0.05 MMSCMD should be transferred by GAIL from surplus in Gas Pool Account to the producers. Accordingly, an amount ofRs. 4,415.79 million on account of above for the period from 06.06.06 to 31.03.10 has been recognised during the current year.

4. The MOU for trading in products of Mangalore Refinery and Petrochemicals Limited (MRPL), a subsidiary of the Company, expired on 31st March, 2009, and accordingly no trading activity of their products was carried out during the year. Sales revenue and Purchases on account of trading of such products in the previous year was Rs. 85,098.15 million and Rs. 85,073.62 million respectively. 5.1 During the year, the Company has changed its accounting policy on abandonment cost and started providing the full eventual estimated liability towards costs relating to dismantling, abandoning and restoring of onshore well sites. Such cost of onshore well site has been capitalized to Producing Property/Development Wells in Progress /Exploratory Wells in Progress when completed and in case of dry wells it is charged to Profit & Loss account. This has resulted in increase in Producing Property by Rs. 8,353.36 million, Exploratory Wells in Progress by Rs. 166.64 million and Development Wells in Progress by Rs. 102.57 million with corresponding increase in abandonment liability by Rs. 8,622.57 million. This has also resulted in increase in Depletion cost by Rs. 403.72 million and cost of dry wells by Rs. 88.50 million with corresponding decrease in profit before tax by Rs. 492.22 million. 5.2 Further, in case of offshore wells, upto the previous year the Company was providing full eventual estimated liability towards costs relating to dismantling, abandoning and restoring of offshore wells/facilities that were forming part of producing properties. However, during the current year, the Company started providing such liability in respect of wells completed and facilities capitalized also whether they are transferred to Producing Property or not. This has resulted in increase in Development Wells in Progress by Rs. 305.52 million and corresponding increase in abandonment liability by a similar amount. This has no impact on profit before tax.

6. During the year, the Company changed its accounting policy of amortising intangible assets from Written Down Value Method @ 40% to Straight Line Method over the useful life not exceeding a period of 5 years in order to systematically amortize its intangible assets. This has resulted in decrease in Depreciation, Depletion, Amortisation and Impairment by Rs. 424.55 million, consequently activity cost decreased by Rs. 3.22 million and Profit before tax increased by Rs. 421.33 million.

ACCOUNTING POLICIES:1. Accounting Conventions The financial statements are prepared under the historical cost convention on accrual basis in accordance with Generally Accepted Accounting Principles (GAAP), applying the Successful Efforts Method as per the Guidance Note on Accounting for Oil and Gas Producing Activities issued by the Institute of Chartered Accountants of India and Accounting Standards issued under the Companies (Accounting Standards) Rules, 2006 and provisions of the Companies Act, 1956. 2. Use of Estimates The preparation of financial statements requires estimates and assumptions which affect the reported amount of assets, liabilities, revenues and expenses of the reporting period. The difference between the actual results and estimates are recognized in the period in which the results are known or materialized. 3. Government Grants Government grants for acquisition of fixed assets are initially treated as Capital Reserve and are subsequently recognized as income in the Profit & Loss Account on a systematic basis over the useful life of the assets in the proportion in which depreciation on those assets is charged. 4. Fixed Assets 4.1 Fixed assets are stated at historical cost less accumulated depreciation and impairment. Fixed assets received as donations/gifts are capitalised at assessed values with corresponding credit taken to Capital Reserve.

4.2 All costs relating to acquisition of fixed assets till the time of bringing the assets to working condition for intending use are capitalised. 5. Intangible Assets Costs incurred on intangible assets, resulting in future economic benefits are capitalized as intangible assets. 6. Impairment Producing Properties, Development Wells in Progress (DWIP) and Fixed Assets (including Capital Works in Progress) of a Cash Generating Unit (CGU) are reviewed for impairment at each Balance Sheet date. In case, events and circumstances indicate any impairment, recoverable amount of these assets is determined. An impairment loss is recognized, whenever the carrying amount of such assets exceeds the recoverable amount. The recoverable amount is its value in use or net selling price (if determinable) whichever is higher. In assessing value in use, the estimated future cash flows from the use of assets and from its disposal at the end of its useful life are discounted to their present value at appropriate rate. An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss / reversal thereof is adjusted to the carrying value of the respective assets, which in case of CGU, is allocated to its assets on a pro-rata basis. Subsequent to impairment, depreciation is provided on the revised carrying value of the assets overthe remaining useful life.

CHAPTER 5 DIRECTOR REPORT

DIRECTOR REPORT:Board of directors of the company,the 17th annual raport and audited statements of account for the year ended 31st march,2010,together with the auditors report and comments of the accounts by comptroller and auditor general of India. Their company continues to achieve excellence in its core area of e&p sphe both in India as well as abroad, and also continues to win accolades from various quarters. Finance asia, hongkong has ranked ONGC as number -1 top blue chip company of India for 2009. ONGC is ranked at second position in financial express FE500 listing of Indian companies both in items of net worth and overall composite ranking. Their company has been ranked at 155th position in forbes global 2000 list of worlds biggest companies for 2010. ONGC retains number one rank among Indian companies and has been ranked 95th among the forbes global 2000 biggest companies as per profit. New projects During FY-10 the board has approved development of various offshore marginal fields viz additional development of D-1 field at an investment 0f rs.21636.5 million , development of north tapti gas field at an investment of rs.7557 million and development of cluster-7 fields at an investment of rs.32410 million. Their company is currently implementing redevelopment projects in major fields of western offshore at an estimate cost of rs.182 billion which includes Mumbai high north redevelopment phase 2 at rs.71 billion , Mumbai high south redevelopment phase 2 at rs,88 billion and heera & south heera redevelopment t rs.23 billion .during FY10 , the following new facilities were completed to enhance production:

 Installation of 4 well platforms c-39a,c-24, c-39-1, and c-22, along with associated modification and pipelines under C-Series development. nd Installation of process platform BCPA-2 with 2 stage booster compressors for bassein field and vasai east process facilities having liquid handling capacity of 12000 bopd, gas compression of 2.0 MMSCMD and water injection facility of 47000 bwpd along with associated modification under vasai east development project. Three new smart well platforms rs.-15, rs.-16 , rs.-17 along with associated cabels,pipelines and topside modification under Mumbai high south redevelopment phase 2. FINANCIAL RESULTS Dispite volatile markets, their company has earned a prafit after tax of rs.167676 million , up 3.98%, which is incidentally the highest-ever. During the year under review , their company registered gross revenue of rs. 619832 million ,up 9.44%, by netting off the revenue from trading of project of manglore refinery & petrocamicals limited, a subsidiary of their company, amounting to rs.nil. Highlights: Gross Revenue Profit after Tax (PAT) Contribution to Exchequer Return on Capital Employed Debt-Equity Ratio Earning Per Shared) Book Value Per Share (Rs.) Rs. 619,832 million Rs. 167,676 million Rs.280,988 million* 50.9% 0.00006:1 78.39 404

Dividend Their Company paid an interim dividend of Rs. 18 per share (180%), in December, 2009. The Board of Directors have recommended a final dividend of Rs. 15 per share (150%) making the aggregate dividend at Rs. 33 per share (330%) as compared to Rs. 32 per share (320%) paid in 2008-09. The total dividend will absorb Rs. 70,583 million, besides Rs. 11,616 million as tax on dividend, which is historically the highest dividend payout by the Company.

CHAPTER - 6 AUDITORS REPORT

AUDITOR REPORT

1. They have audited the attached Balance Sheet of OIL AND NATURAL GAS CORPORATION LIMITED (the Company) as at 31st March, 2010, the Profit and Loss Account and the Cash Flow Statement for the year ended on that date, annexed thereto in which are incorporated the Companys share in the total value of assets, liabilities, expenditure and income of 124 blocks under New Exploration Licensing Policy (NELPs)/ Joint Venture (JVs) accounts for exploration and production out of which 70 NELP/ JV accounts have been audited by one of the firms of statutory auditors, 47 NELPs /JVs accounts have been certified by other firms of Chartered Accountants and 7 NELP/JVs are as certified by the management (Refer Note 24.3.1 and 24.3.2 of Schedule 27 of the financial statements). These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. They conducted their audit in accordance with auditing standards generally accepted in India. Those standards require that they plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. They believe that their audit provides a reasonable basis for their opinion. 3. They have placed reliance on technical/ commercial evaluation by the management in respect of categorization of wells as exploratory, development and producing, allocation of cost incurred on them, depletion of producing properties / impairment on the basis of the proved developed hydrocarbons reserves, liability for abandonment costs, liability under NELP and nominated blocks for under performance against agreed Minimum Work Programme and allocation of depreciation

process platforms to transportation and facilities. 4. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, they enclose in the Annexure (read with paragraph 1 above) a statement on the matters specified in paragraph 4 and 5 of the said Order. 5. Further to their comments referred to in paragraph 4 above they report as follows: 5.1. they have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of ouraudit; 5.2. In their opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; 5.3. The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; 5.4. In their opinion, the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. 5.5. Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not required as per notification number GSR 829(E) dated October 21,2003 issued by the Department of Company Affairs. 5.6. Without qualifying their opinion we invite attention to Note no. 2.1 to 2.3 of Schedule 27 in respect of recognition of sales revenue of crude oil and natural gas and Note no. 13 of Schedule 27 regarding

certain observations made by auditors of a Jointly Controlled assetsPanna Mukta & Tapti, impact of which is not ascertainable, in their opinion and to the best of our information and according to the explanations given to them, the said accounts read with notes to account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31sl March, 2010; b) In the case of the Profit & Loss Account, of the profit of the Company for the year ended on that date; and c) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

CHAPTER 7 COMMONSIZED STATEMENT