Som_Organizational Redesign at BPCL The Challenge of Priva…

February 10, 2018 | Author: Hitanchi Kulkarni | Category: Human Resource Management, Strategic Management, Dividend, Earnings, Economies
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Organizational Redesign at BPCL: The Challenge of Privatization Ashok Som ESSEC Business School, Paris During his yearly inspection visit to one of the refineries during mid 2001, S. Behuria, the chairman of BPCL wondered if he would be able to see his employees as a part of the same company or would they be working in the same refinery, but under a different company name? How could he motivate his employees to be ready for the upcoming competition within a year’s time when the state owned enterprises in India would be privatized? Can his employees handle the momentum of the proposed organizational redesign process or would everything crumble with full deregulation of the petroleum industry in 2002?

Background History of the Company Bharat Petroleum Corporation Ltd. (BPCL), a government owned company incorporated under the Companies Act, 1913, is in the business of refining, storing, marketing and distributing of petroleum products. The paid up capital of BPCL is Rs1.300 million of which Government of India (GOI) holds 66.2% and the balance 33.8% equity are held by foreign institutional investors, financial institutions, employees and other investors The history of BPCL dates back to 1975 when the Government of India, pursuant to an agreement acquired 100% equity of Burmah-Shell Refineries Limited (BSR). The Burmah-Shell Oil Storage & Distributing Company of India Ltd. (BSM), a foreign company, established in England in 1928, was in the business of distribution and marketing of petroleum products in India. BSR was renamed as Bharat Refineries Limited (BRL) in 1976 and to BPCL in 1977. BSR was incorporated in 1952 as a Company under the Companies Act 1913, in Bombay. The company set up a refining plant at Mahul. Between 1991 to 1994, Government of India (GOI) had disinvested part of its holdings to financial institutions and employees of BPCL as a result the equity holding of the GOI was reduced to 66.2%. GOI planned to fully divest its share by the end of 2002.

Crisis BPCL operates in the retail, lubricant, liquid petroleum (LPG) and aviation fuel sector. With the ongoing liberalization process in India, sectors like LPG and lubricants have been deregulated. BPCL owns one refinery in Mumbai, which has a capacity of 7-8 million tons, and it sells about 16 to 18 million tons of crude per year. As the market is controlled in the retail business, there is a national pool of oil, controlled by the Oil Coordination Cell (OCC) which distributes crude to the three main players in India. There is one private firm in the industry, Reliance Petroleum, which cannot openly compete in the market, but has its own refinery. The output generated from its refinery is bought and distributed by one or more of the three state owned enterprises (SOEs) i.e., BPCL, Hindustan Petroleum (HPCL) and Indian Oil (IOL), had enjoyed a monopoly under the administered pricing mechanism of the government. With full deregulation of the industry in 2002, the market structure will change and there will be open competition in the industry. One of the senior managers reflected: "In the lubricants sector BPCL had a market share of 12 to 16%. In 1999, when the Lubricants market was deregulated, BPCL's market share came down to 4%. There is a worry of what will entail when the entire sector is deregulated"

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1 US $ = Rs 50

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Retention of market share would be a serious threat with anticipation of entry of new local (private) and global players in this sector in the country. BPCL ought to redesign itself shifting from a state-owned enterprise mindset operating under a regulated market to lean, agile, competitive, customer oriented player in order to compete for its market share.

Industry Environment and Market Structure The business environment saw many changes after the initial phase of deregulation. India's petroleum retail sector (see Exhibit 1) is currently dominated by SOEs, and private domestic firms such as Reliance and Essar Oil have been barred from tapping the market directly. This market structure is facing impending change. With new private investment, both BPCL and HPCL will be well positioned to attract investment and increase their market share at the expense of the leader Indian Oil Corporation (IOL). Naturally the concern remains that the strategic sale of HPCL will simply be palmed off to SOE, as in the case with Indo Burmah Petroleum (IBP). With liberalization, India’s demand for petroleum products is expected to increase in the future and is therefore attracting the attention of multinational oil companies and other private Indian players. The domestic private firms are trying to complete the construction of their refineries for the future prospects. This is bound to increase competition in this lucrative sector. For the existing SOEs this will mean a significant loss in their market share. Deregulation would also bring other changes such as product prices will be determined by the import parity prices. Margins set by competitive pressures will be more volatile and highly uncertain. Dealers and distributors may shift their allegiance and consequently, the existing firms may lose retail sites and LPG go-downs. Firms may react by offering minimal facilities in their highway segment of retail outlets to keep costs low and reduce lead times. Trained and experienced manpower in the industry will be lured away by the new entrants. Nonfuel offerings (for e.g., convenience stores, and automated teller machines) are likely to be threshold activities especially in metros and urban markets. One of the managers summed up: "The increasing demand for hydrocarbons in India is a tremendous opportunity. The major concern is the possible and inevitable loss of market share due to an increase in the number of players in the market place. The greatest challenge will be to retain our customers and to remain profitable"

Redesign Strategy On strategy one of the managers reflected: "Our broad strategy is to win in the deregulated environment, to focus on customer service and improve our profitability. In order to beat the competition, a very strong customer focus in the whole organization is needed. It is necessary to understand and respond quickly to the customers’ needs and expectations. The speed at which the staff responds in the market will determine the success of the Corporation. The measures of success in the competitive scenario will be customer loyalty. The whole organization has to align itself to meet the customer requirements and to acquire new competencies and skills" In the refinery sector, which is still regulated, BPCL has a capacity of 7 to 8 million tons, whereas it sells about 16 to 18 million tons of crude per year. To address this gap, BPCL acquired Kochi Refineries, which has a capacity of about 8 million tons and is looking forward to expand opportunities in the refinery business. Following the international model, opportunities are experimented into related and unrelated diverse fields in the non-fuel sector. BPCL hired the internationally renowned consultancy firm McKinsey on formulating an effective retailing strategy and opening of convenience and grocery stores.

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The deregulation of the industry forced the top-management to realize that BPCL had to be customer focused, its decision making process had to be faster which would be possible only by delayering the hierarchical organization and by empowering its staff. Two of the senior managers pointed out: "Most employees do not understand the nature of the business, what we are doing. Our core competence is not refining crude oil but selling products. This is where the market will be after deregulation. The aim of redesign was to be ready for change. This meant changing ourselves to be tuned to the external changes. Our national competitors are Reliance and MRPL (a Joint Venture by the Birla Group of Companies) and foreign competitors will be Castrol, TotalElfFina, British Petroleum, Mobile as was witnessed with the deregulation of the Lubricants " Organization redesign started in 1998 with the help of consultant Arthur D. Little and its group of consultants. They formed a Project Group with over 30 people drawn from different functions and regions with a General Manager as their leader. It was called Project CUSECS meaning customer satisfaction. Their main thrust areas were better customer service, profitability, creation of strategic business units (SBUs) and dividing the organization into regions. The redesign of BPCL saw the change of the organization structure from a functional to a divisional enterprise with strategic business units (see Exhibit 2 and Exhibit 3). The six SBUs spread over four geographical regions (North, South, East & West) are refinery, retail, industrial / commercial, lubes, LPG and aviation. The entities that support the strategic business units (SBUs) are Human Resource Services (HRS), Human Resource Development (HRD), Finance, Planning, Brands, Audit, Vigilance, Corporate Affairs (Legal, PR, Health, Safety, Environment), Strategy, IS and Project Entrance. HRM (both HRS and HRD) played a critical role in the redesign process. As one of the member of the board of directors pointed out: "BPCL has undergone a very interesting HRD-powered transformation process […] It was orchestrated by Arun Maria and his team from Arthur D. Little. […]Instead of providing Bharat Petroleum with a package of vision, strategy, structure, processes […] he asked the management to carry through a very broad envisioning exercise. Some 2500 managers participated. It resulted not only in a clear corporate vision, identification of shareholders, and statement of core values, but visions were collectively evolved by each function, department, branch and section. This envisioning and agenda setting was facilitated by trained individuals, many of them volunteers from functions other than HRM" The main theme of the vision is “Business partner first, business partner last.” The themes vary for each SBU. For example, the theme of HRM department is “It is a great place to be”, for the Lubes it is "Survive today, to be there in the future" while for the retail SBU it is "People above oil; We care for you; We exist because of you" (see Exhibit 4 to view the corporate vision of BPCL). The necessity and the competencies required for the redesign was summed up by a senior manager: "It is because we have to compete! Competition is with both national and multinational companies. The key to compete is to deliver quality product at cheaper price, cut costs and keep costs in control. There should be a concern for financials by all the stakeholders with a profit building motive and sustaining the bottom line. The required functional competency is in selling required is selling and distributing products. Customers, both internal and external, should be satisfied. The situation to manage is very fluid. The challenge is to manage this situation with effective leadership at all levels." The functional structure of the organization consisting of functions of sales & distribution, IS, Marketing and HRM, was dismantled to form the following SBU structure: (a) The Refinery SBU (b) The Retail SBU (c) The Lubricant SBU (d) The LPG SBU (e) The Aviation SBU. The structure before the 3

redesign at the corporate level was functionally oriented. The functions were refinery, marketing, finance and personnel. The marketing function, for example, was divided into sub-functions sales, supply & distribution, lubricants, aviation, engineering & projects. All these operations were then divided into four geographical regions and in each region they were grouped on a functional basis. Each division consisted of the staff from sales and engineering functions for development, up-gradation and maintenance of retail outlets. A sales officer was given charge of three or four revenue districts. In most divisions, one single officer was responsible for the sale of petrol & diesel through retail outlets: LPG and kerosene through distributors, lubricants through retail outlets, distributors and direct customers and fuels & specialty products to industrial & commercial customers. Although the depots reported to the divisional manager there was very little coordination at the field level amongst the sales officers and the operational officers. As one of the senior executive summarized: "These functional structure made it difficult for senior managers to focus on developing and implementing strategies for particular businesses such as Lubricants and LPG. It created a bottleneck between the process of strategy formulation and its implementation. This created two problems. First, the strategy formulators were in close touch with the ground reality and second, the implementers of the strategies did not fully understand the rationale of the strategy and the execution was not up to the mark". The redesigned organization has four elements – (a) corporate center (b) strategic business units (SBUs), (c) support services and (d) lateral linking mechanisms. Corporate center has four Directors (marketing, finance, refineries, and personnel). Marketing Director has a team of 8 members who are responsible for leading and coordinating the brand building, brand management of the SBUs. The Finance director has a team of 6 members who are responsible for leading and coordinating the strategy development effort at the corporate level. The directors also facilitate the SBUs in developing their respective strategies and integrate the same across the businesses. In addition this team assists the top management in optimally allocating resources while managing the business portfolio. Support Services include the HRM, Finance, Information Systems and Engineering & Projects (Marketing). People of the embedded units’ report to the respective heads of SBUs, for example, embedded HRM in LPG SBU will report to the head of LPG SBU. Dedicated teams called Shared Services perform the support tasks that have enterprise-wide or region-wide implications and are not business specific. This was done to bring down the operating costs of these services by pooling some of the activities together outside the businesses. Each SBU has a Council, Brand & Strategy has a Council and there are two governing councils, the Apex Council and the Executive Council. Before the redesign, the organization was “totally hierarchical”, according to some executives. Today, it is mostly participative and team based with absolute delegation of authority. One example cited is the new Performance Management System, which is co-created. Now the system as a whole is open and most personnel understand their role that they have to play. All the services are a unified web with interlinkages. As an example one of the managers stated: "The old commandant rule is gone and it is now more a team based organization. There is lot more flexibility, it is like running your territory as your own business. It means I can do things differently, take risks, experiment and innovate. Now if my team performs well I can even think of giving them a tour abroad. It is the attitude shift that has taken place and all in a span of three years" BPCL recruited generalists and after their training in the organization they became specialists. Most of the senior managers at BPCL are generalists while a few are specialists. One of the managers pointed out:

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"The redesign is a good concept. It is an ideal one. The implementation also has taken place in a good way. The only problem I foresee is that the territory managers are not mature enough to handle their jobs properly. Due to historical recruitment structure the personnel are generalists while we need bright specialists like MBA. There would be a gap, if we cannot look into this matter, as 70% of our recruits are not so good as our competitors, they are average. The profile, experience and expertise for the job is not there" The integration of the organization, after the redesign, has been done by two councils – the governance council and the integrative council in addition to the functions carried out by the Committee of Functional Directors. The governance council consists of the Apex Council, Executive Council and the Management Council. The responsibility of the Apex Council consisting of the whole time/functional Directors include decisions on corporate strategy, portfolio of investments, joint-ventures & alliances, performance targets, selection, development and appraisal of key executives, corporate image etc. The Executive Council is the next highest authority after the Apex Council, members being the Apex Council members and heads of SBUs, and entities – Strategy, Brand, HRM, IT, Finance. Its responsibilities are integration of corporate and SBU decisions, cohesion within and between SBUs, policy matters within SBUs. The Management Council is the next in rank, which ensures consistency in communication with the rest of the organization in terms of strategy, plans, progress, policies, standards, and receiving suggestions and feedback. The Management Council is not a decision-making body, but a body for building consensus around important issues. The integrative council integrates all the individual entity councils of strategy, brand, IS, HRM, and finance. To facilitate these processes there are also regional and business councils. The decisions taken in these councils are representative of the SBUs, all other entities and the organization as a whole. These integrative councils provide a forum where the issues are analyzed and consensus developed. One of the vehicles used for facilitating the change process has been communication. Plenty of communication workshops have been conducted, in which, staff from various locations, irrespective of their positions in the organization, have participated. This has brought about much better understanding and commitment to the change process. As the brand manager pointed out: "The key to a change process is communication. No one likes (to) change. Arthur D. Little did this very effectively. It was a participative way to answering questions like why, what and how of the redesign process. Before the redesign, departments worked in silos. They had to be knit together in teams and hence most of the redesign that we seen in BPCL is co-created with all the stakeholders and partners in the business. BPCL is a place proud to be in and a great place to work" One of the managers had a different view: "Communication exercise is done to a certain group of management cadre. But I am not sure how much of this communication reaches the blue-collar personnel who are 2.5 times the strength of the management cadre. I feel communication is lacking there and we have to focus on all personnel."

HRM at BPCL: "It is a great place to work" HRM has been classified on the same level as the other support services like finance and information systems. The support services are organized into three types of structures – Embedded support services, shared support services and corporate services. One of the HRS managers pointed out: "This type of three layered structure facilitates the process of decision-making and issues get focused attention"

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Before the redesign, the Regional HR manager was responsible for all the functions in the region and all the personnel in the region reported to the Regional Manager. The Regional Manager in turn had a very formal relationship with the Corporate HRM. Now each SBU has HRM personnel known as “embedded HRM” who assists the SBU in HRM related issues like transfers, organizational learning, performance appraisal and discipline. The Embedded HRM has the following functions: (a) Administering the performance management system (b) Workforce planning (c) Design and delivery of functional training (d) Anchoring organizational learning (e) Transfers within business units and (f) Discipline management The Shared services entail support tasks that have enterprise-wide and region-wide implications. They are not confined to being business specific and are transactional in nature. All business units and entities share teams performing these tasks. Pooling some of the activities together outside the businesses leads to economies of scale. The HRM Services team is in each region headed by the Head of Regional Services. He is supported by the HR Manager (Employee Relations) – responsible for recruitment of nonmanagement staff. The structure and role of HRM Department: "The HRM division between corporate, HRM Services and Embedded HRM satisfies the role of HRM. The role of HRM is to help other areas and provide support to the main business. HRM should be ready to help and provide information and support in a proactive manner than what it is today. HRM has changed a lot but still need to be changed in terms of its functioning and proactive nature. Sometimes it is reactive. Last but not least, HRM should know the business we are in, and not only concentrate on HRM practices, but try to implement those practices in helping the business." Recruitment process Recruitment at BPCL takes place at a junior level. Most recruitments at BPCL are at entry level. The company believes in building its human potential rather than buying it from the market. Until now it was seen as a lifetime job and people worked their way up through the management. The redesign entailed strengthening the field force to boost marketing and customer focus. The consultants advised a 50% increase in the sales force and front line staff, but without any additional recruitment. This increase in sales force had to come from the existing employee base by retraining and redeployment of management staff from the back office. After the initiation of the redesign process there has been a hiring freeze. Recruitment is done only for specialized and new jobs. Competency mapping will be introduced. Selection within the organization is done by matching the job profile and the appraisal. Scope for promotion is less at BPCL. The average age profile at BPCL is between 35 and 40 years. A promotion can only be expected after three years. There is a system of job-rotation. To occupy a responsible position a person needs to have a work experience in atleast three departments. One of the managers reflected: "There is no clear cut policy on promotion" Retraining & Redeployment Retraining and redeployment plays a very important role after the redesign process. It is a part of the business strategy to redeploy and transfer personnel. The excess manpower in certain areas are trained and redeployed. But the decision to redeploy is not taken in an ad-hoc fashion. Retraining and redeployment is first discussed with the personnel and then action is taken. This is a big challenge, as employees do not want to be redeployed. One of the senior managers pointed out: "After the implementation of ERP (SAP) in areas of dispatch, logistics, project and HRM, there are surplus of manpower. We were trying to find new opportunities and to train the excess workforce to absorb them where they can build their new competencies" 6

Performance Management Systems The extensive team based structures that were proposed by Arthur D. Little were pilot tested with six retail projects. Visionary Leadership & Planning (VLP) workshops were held to clarify shared visions, document their current situation and devise concrete plans for bridging the gap between vision and reality. During the redesign process, the consultants understood that the new organization needed new competencies and mindset to make the redesign successful. From a functional perspective of the yester years a team based, collaborative, cross functional mindset was required. It was a difficult task. Employees were invited to participate in learning experiences through the Foundations of Learning (FOL) program, which was designed to develop their abilities to work in high-performing cross-functional teams. An example cited: "In one of the questions, before the new performance management system (PMS), there were four options in the PA system on the question of the dependability of the subordinate - generally dependable, dependable, mostly dependable and trustworthy. Supervisors who did not know the difference of these terms could hamper the career of a bright subordinate as the terms are ambiguous and can be represented in different ways." As one of the HRM managers reflected: "Earlier the system was closed. Now it is open and transparent. Key result areas (KRAs) have been identified and the shift is towards open marks system. Now the evaluation brings in an internal customer in the section of critical and generic attributes. The review is done quarterly with the KRA objectives and measures fixed. The outcome of this new PA is that the Corporate Business Plan should percolate to the individual level." "One of the critical elements in the success of a redesign of an organization is the reward process. The only reward for good performance we have today is promotion. As the number of vacancies is always limited, all eligible staff in a job group cannot be promoted. Rewarding good performers / teams is a solution to achieve performance. A task force is looking into a reward structure that has a combination of monetary and non-monetary reward." Rightsizing /Retaining BPCL being a public enterprise there is no scope of rightsizing. Hence efforts are taken for retraining and redeploying of personnel from areas where there is excess of manpower. A current example is in the refinery after the implementation of ERP. One of the managers pointed out: "Voluntary retirement schemes (VRS) should come in immediately. We should have a policy like that of Indian Oil Company, which are VRS by choice, holding of interviews and then deciding whether VRS should be given or not, not give VRS if he / she wants to quit, let him / her quit. This will bring some scope for new recruitment of professionals within the company."

Changes in Performance BPCL decided to measure performance both in financial (see Exhibit 5 and 6) and customer satisfaction terms. The specific measures for business purpose for investments were return on capital employed, return on investment and IRR. Specific measures used to measure customer satisfaction were market share and customer satisfaction. Customer satisfaction was measured from periodic customer surveys, which are used to measure customer loyalty index. The capabilities of key business e.g., corporate and business strategies, IS plan, brand strategy, HRM strategy were gauged by the quality of their outputs. As an example, the retail SBU measures performance on return on capital employed, customer loyalty index, cycle time of retail engineering projects, security of sites and morale of staff.

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Series of activities were taken by the consultants to implement the redesign mechanism and link it to performance. The performance of those sites was closely monitored and they showed dramatic improvements in the resolution (and prevention) of customer complaints, as well as the reduction of open items (accounts receivable). The productivity and operating efficiency increased and felt throughout the units. Both managerial and non-managerial personnel after going through intense communication process understood the need of the hour and felt the need to give their best to save their company from the ensuring competition. As a result of the redesign process together with reinforcement of HRM strategies and the communication exercises absenteeism reduced, morale were high and the employees’ co-operation with the management reached new heights. Employees felt that they had to put in their best to fight the challenge or otherwise perish. This saw the beginning of innovations in product, process, systems and management at all levels.

New Possibilities Opposition to the planned sell-off has been led by a number of more nationalistic and protectionist ministers, who hold reservations on two general areas: • The move means that the government will be relinquishing much of its influence over the pricing of fuels, a particularly sensitive issue that has precipitated unrest and criticism of the government in the past; • There is a feeling that these companies will not be sold at what they consider to be a fair price. The process of privatization has so far raised only Rs50bn (US$1bn) this year, against a government target of Rs120bn (US$2.4bn).

Future Outlook and Implications Along with Reliance and Essar Oil, foreign operators such as Shell, BP, TotalElfFina, ExxonMobil and Petronas of Malaysia are expected to bid for controlling stakes. Private investment will then enable investment into marketing and retail infrastructure, which should lead to improved service levels, if not lower prices. The surge in the companies' share prices reflects investor confidence that the biggest hurdles have now been navigated and should help to ensure the government receives a healthy price for the stakes. The move will help the Indian government to get its privatization agenda back on track after several months of uncertainty.

Questions 1. How can deregulation affect BPCL? What possible entry barriers can BPCL have in order to counter act such affects? 2. How can BPCL create sustainable competitive advantage? 3. Does the newly redesigned structure support the overall long-term vision of BPCL? 4. How can BPCL have an effective selection process? Is it best to hire versatile employees and then train them to company specific objectives? 5. How can BPCL implement a policy to build human potential? How else can BPCL ensure full employee commitment towards the vision for the company. 6. What are the possible mechanisms for growth for BPCL in the Indian market post deregulation? Are partnerships and/or government lobbying an essential way to grow in the future?

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Exhibit 1: Key players in the Oil Industry in India India: Key Players in the Downstream Sector Ownership Indian Oil Corp (IOC) 84% state-owned BPCL 66% state-owned* HPCL 51% state-owned* Indo Burmah Petroleum Controlling 33% stake (IBP) held by IOC Reliance Industries Privately owned Essar Oil

Privately owned

Refining Capacity 620,000 bpd 180,000 bpd 295,000 bpd

Market Share 55% 20% 20%

-

5%

540,000 bpd Presently barred from 210,000 bpd refinery due access to the to be commissioned in marketing/retail sector 2004

* Controlling 26% stakes due to be sold off

www.indiainfoline.com Exhibit 2. Organizational Structure before redesign

C & MD

Dir (Per)

Dir (Mktg)

Personnel & Admin

Dir (Finance)

Corporate Communication

International Trade

Finance Corporate

Lubes Corporate

Aviation

Finance Mktg

HR

E&P Marketing

LPG Corporate

S&D Corporate

Sales Corporate

Region Heads (N/E/W/S)

Regional Personnel

Regional Engineering

Regional S&D Regional LPG

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Regional Sales

Regional Finance

Exhibit 3. Organizational Structure after redesign C & MD

Dir (Ref)

Dir (Mktg)

Dir (Per)

Dir (Finance)

Refinery

HR Services

Retail Business

Aviation Business

Finance Corporate

Corporate Affairs

Corporate Planning

HR Corporate

Ind./Com m.

HSE

Corporate Treasury

Legal

LPG Business

E&P

Information Systems

Audit

Corporate Strategy

Vigilance

JV Refineries Special Projects

Lubes Business

Brand/Corporate Communication

IT & Supply

Coordination

Research & Developme t

Company Secretary

Exhibit 4: Corporate Vision

Make people a source of our

Make BPCL a great place to work

Effective boundary management Fulfil social responsibilitie

To be the Best

Apply the best

Have excellent customer caring and customer service

BPCL Be an ethical company

Establish first class brand and corporate Corporate strategy

Sound business performance and

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Strong and dynamic systems

Exhibit 5: Performance Profile Profit and Loss Statement (2003-1999) (In Million Rs) 0303-(12) 0203-(12) 0103-(12) 0003-(12) 9903-(12) Income : Operating Income

431,854.26

352,704.44

416,692.37

291,186.49

190,067.70

Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Adminstrative Expenses Expenses Capitalized

379,643.85 1,803.56 6,456.97 12,492.62 7,767.44 0.00

308,827.45 1,451.89 6,253.72 10,272.66 6,507.00 0.00

375,091.59 1,058.88 6,354.48 10,623.38 6,479.70 0.00

254,202.42 1,076.71 4,280.55 9,439.52 5,952.74 0.00

159,962.59 814.10 2,824.35 8,858.77 3,908.01 0.00

Cost Of Sales

408,164.44

333,312.72

399,608.03

274,951.94

176,367.82

23,689.82

19,391.72

17,084.34

16,234.55

13,699.88

3,374.82

2,541.25

2,887.96

1,303.33

1,777.06

27,064.64

21,932.97

19,972.30

17,537.88

15,476.94

2,473.73 4,809.24 0.00

3,074.00 4,809.85 0.00

2,568.37 6,644.63 0.00

1,870.88 6,153.71 0.00

1,759.63 4,039.89 0.00

19,781.67

14,049.12

10,759.30

9,513.29

9,677.42

7,281.59

4,910.61

2,930.00

2,330.00

2,770.00

Adjusted PAT Non Recurring Items Other Non Cash adjustments

12,500.08 46.88 -46.68

9,138.51 -840.53 200.32

7,829.30 -17.09 514.42

7,183.29 -12.22 -154.76

6,907.42 -83.56 236.27

Reported Net Profit

12,500.28

8,498.30

7,927.16

7,038.55

7,012.35

Earnings Before Appropriation

12,500.29

8,498.31

8,326.64

7,016.32

7,060.14

4,500.00 0.00 7,500.60

3,300.00 0.00 5,198.31

2,250.00 0.00 5,847.14

1,875.00 0.00 4,728.82

1,875.00 0.00 4,978.89

12670

12638

12264

12094

11704

Operating Profit Other Recurring Income Adjusted PBDIT Financial Expenses Depreciation Other Write offs Adjusted PBT Tax Charges

Equity Dividend Preference Dividend Retained Earnings Manpower (Nos.)

Source: Company Documents

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Exhibit 6: Performance Profile Ratio Analysis (2003-1999) 0303-(12) 0203-(12) 0103-(12) 0003-(12) 9903-(12) PER SHARE RATIOS Adjusted E P S (Rs.) Adjusted Cash EPS (Rs.) Reported EPS (Rs.) Reported Cash EPS (Rs.) Dividend Per Share Operating Profit Per Share (Rs.) Book Value (Excl Rev Res) Per Share (Rs.) Book Value (Incl Rev Res) Per Share (Rs.) Net Operating Income Per Share (Rs.) Free Reserves Per Share (Rs.) PROFITABILITY RATIOS Operating Margin (%) Gross Profit Margin (%) Net Profit Margin (%) Adjusted Cash Margin (%) Adjusted Return On Net Worth (%) Reported Return On Net Worth (%) Return On long Term Funds (%) LEVERAGE RATIOS Long Term Debt / Equity Total Debt/Equity Owners fund as % of total Source Fixed Assets Turnover Ratio LIQUIDITY RATIOS Current Ratio Current Ratio (Inc. ST Loans) Quick Ratio Inventory Turnover Ratio PAYOUT RATIOS Dividend payout Ratio (Net Profit) Dividend payout Ratio (Cash Profit) Earning Retention Ratio Cash Earnings Retention Ratio COVERAGE RATIOS Adjusted Cash Flow Time Total Debt Financial Charges Coverage Ratio Fin. Charges Cov.Ratio (Post Tax) COMPONENT RATIOS Material Cost Component(% earnings) Selling Cost Component Exports as percent of Total Sales Import Comp. in Raw Mat. Consumed Long term assets / Total Assets Bonus Component In Equity Capital (%)

41.67 57.70 41.67 57.70 15.00 78.97 158.25 158.25 1,439.51 139.15

30.46 46.49 28.33 44.36 11.00 64.64 133.25 133.25 1,175.68 121.05

26.10 48.25 26.42 48.57 7.50 56.95 135.98 135.98 1,388.97 125.95

47.89 88.91 46.92 87.95 12.50 108.23 232.98 232.98 1,941.24 221.98

46.05 72.98 46.75 73.68 12.50 91.33 201.45 201.45 1,267.12 189.87

5.48 4.37 2.87 3.97 26.33 26.33 35.38

5.49 4.13 2.39 3.92 22.86 21.25 30.48

4.09 2.50 1.88 3.44 19.19 19.43 22.38

5.57 3.46 2.40 4.55 20.55 20.14 24.70

7.20 5.08 3.65 5.70 22.85 23.20 28.56

0.32 0.69 59.09 4.33

0.40 0.96 50.94 3.80

0.45 1.02 49.52 5.09

0.31 0.74 57.40 4.08

0.32 0.55 64.44 3.40

0.95 0.68 0.43 11.16

0.98 0.59 0.45 13.98

1.35 0.72 0.65 14.24

1.22 0.75 0.53 11.62

1.12 0.77 0.64 17.36

39.99 28.88 60.01 71.12

38.83 24.79 63.89 76.35

31.27 17.01 68.34 82.87

32.49 17.33 68.16 82.85

29.67 18.83 69.87 80.99

1.90 10.94 8.00

2.76 7.13 5.33

2.87 7.78 6.67

1.94 9.37 8.05

1.52 8.80 7.28

91.30 2.89 2.75 35.38 0.49 92.33

86.60 2.91 0.49 50.44 0.58 92.33

90.40 2.54 0.88 43.75 0.50 92.33

92.93 3.24 0.71 40.23 0.49 84.66

87.17 4.66 0.17 23.95 0.57 84.66

Source: Company Documents

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