Indian Journal of Finance

Open Access Open Access  Restricted Access Subscription Access

Financial Performance Evaluation of Selected CPSEs of India Through Dupont Analysis


Affiliations
1 Department of Commerce, Sri Venkateswara University, Tirupati - 517 501, Andhra Pradesh, India

   Subscribe/Renew Journal


The ability to create wealth for investors is one of the key performing indices of a business entity. Return on equity (ROE) measures this index, and DuPont analysis facilitates a critical evaluation of ROE. The present study attempted to establish the impact of DuPont factors on ROE and evaluated the financial performance of the selected companies. The empirical study was carried out on the financial data of three Maharatna central public sector enterprises doing business in the Indian fuel sector: Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation Limited (IOCL), and GAIL (India) Limited. Data were derived from the annual reports for a period of 10 years, from 2010–11 to 2019–20. Multiple linear regression was used to assess the degree of influence of DuPont factors on ROE. The results showed that the net profit margin of all the companies had more impact on ROE rather than the total asset turnover and equity multiplier . The results also proved that GAIL (India) Limited is a favored company for investors among the three companies considered in terms of consistency in ROE.

Keywords

CPSE, DuPont analysis, equity multiplier, net profit margin, return on equity, total asset turnover.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Almazari, A. A. (2012). Financial performance analysis of the Jordanian Arab Bank by using the DuPont system of financial analysis. International Journal of Economics and Finance , 4 (4), 86–94. https://doi.org/10.5539/ijef.v4n4p86

  • Bothra, N., & Gupta, S. (2020). DuPont analysis of luxury industry and market portfolio: A comparative study. Indian Journal of Finance, 14(10 –11), 24 – 42. https://doi.org/10.17010/ijf/2020/v14i10-11/155969

  • Botika, M. (2012). The use of DuPont analysis in abnormal returns evaluation: Empirical study of Romanian market. Procedia-Social and Behavioral Sciences,62,1179–1183 . https://doi.org/10.1016/j.sbspro.2012.09.202

  • Budhedeo, S. H., & Pandya, N. P. (2018). Financial performance of public sector banks in India: A post reform analysis. Indian Journal of Finance, 12(10), 7 – 20. https://doi.org/10.17010/ijf/2018/v12i10/132491

  • Budhedeo, S. H., & Pandya, N. P. (2020). Liquidity and business performance: A study of selected Indian banks. Indian Journal of Finance, 14(5–7), 7–17. https://doi.org/10.17010/ijf/2020/v14i5-7/153321

  • Burja, V., & Mărginean, R. (2014). The study of factors that may influence the performance by the DuPont analysis in the furniture industry. Procedia Economics and Finance, 16, 213–223. https://doi.org/10.1016/s2212-5671(14)00794-1

  • Chakraborty, J. (2017). Financial soundness of Indian life insurance firms: An investigation based on the C ARAMELS frame work.Indian Journal of Finance,11(11),7–29 . https://doi.org/10.17010/ijf/2017/v11i11/119339

  • Chang, K. J., Chichernea, D. C., & Hassab Elnaby, H. R. (2014). On the DuPont analysis in the health care industry. Journal of Accounting and Public Policy,33(1),83–103 . https://doi.org/10.1016/j.jaccpubpol.2013.10.002

  • Chitta, S., Jain, R. K., & Sriharsha, R. (2019). Financial soundness of Maharatna companies : Application of Altman Zscore model.Indian Journal of Finance,13(10),22–23 . https://doi.org/10.17010/ijf/2019/v13i10/147745

  • Dehning, B., & Stratopoulos, T. (2002). DuPont analysis of an IT-enabled competitive advantage. International Journal of Accounting Information Systems, 3(3), 165–176. https://doi.org/10.1016/s1467-0895(02)00032-5

  • Department of Public Enterprises, Government of India. (2021). Schedule wise list of CPSEs as on October 2021. https://dpe.gov.in/about-us/policy-i-division/schedule-wise-list-cpses-october-2021

  • Doorasamy, M. (2016). Using DuPont analysis to assess the financial performance of the top 3 JSE listed companies in the food industry. Investment Management and Financial Innovations, 13(2), 29–44. https://doi.org/10.21511/imfi.13(2).2016.04

  • GAIL (India) Limited. (n.d.). Annual reports. https://GAILonline.com/IZ-AnnualReports.html

  • Gupta, P., & Jaiswal, K. K. (2020). Analysis of financial performance of selected public and private sector banks. Indian Journal of Finance, 14(1), 45–57. https://doi.org/10.17010/ijf/2020/v14i1/149856

  • Hindustan Petroleum Corporation Limited.(n.d.). Financial performance . https://www.hindustanpetroleum.com/Financial Indian Oil. (n.d.). Financial performance.https://iocl.com/AboutUs/FinancialPerformance.aspx

  • Nagaraju, T. (2014). An analysis of profitability and marketability efficiencies of Indian public and private banks.Indian Journal of Finance,8(1), 15–28. https://doi.org/10.17010/ijf/2014/v8i1/71981

  • S&P Global.(n.d.). The Commodity Insights Top 250 Global Energy Company Rankings ® . https://www.spglobal.com/platts/top250/rankings

  • Sharma, P., & Gupta, S. (2019). A comparative study on effect of IFRS on profitability of selected companies in developed and developing countries.Indian Journal of Finance,13(6) ,65–73 . https://doi.org/10.17010/ijf/2019/v13i6/144852

  • Turner, J., Broom, K., Elliott, M., & Lee, J.-F. (2015). A decomposition of hospital profitability : An application of DuPont analysis to the US market. Health Services Research and Managerial Epidemiology, 2.https://doi.org/10.1177/2333392815590397


Abstract Views: 288

PDF Views: 2




  • Financial Performance Evaluation of Selected CPSEs of India Through Dupont Analysis

Abstract Views: 288  |  PDF Views: 2

Authors

Sreevidya Hothur
Department of Commerce, Sri Venkateswara University, Tirupati - 517 501, Andhra Pradesh, India
K. Jayachandra Reddy
Department of Commerce, Sri Venkateswara University, Tirupati - 517 501, Andhra Pradesh, India

Abstract


The ability to create wealth for investors is one of the key performing indices of a business entity. Return on equity (ROE) measures this index, and DuPont analysis facilitates a critical evaluation of ROE. The present study attempted to establish the impact of DuPont factors on ROE and evaluated the financial performance of the selected companies. The empirical study was carried out on the financial data of three Maharatna central public sector enterprises doing business in the Indian fuel sector: Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation Limited (IOCL), and GAIL (India) Limited. Data were derived from the annual reports for a period of 10 years, from 2010–11 to 2019–20. Multiple linear regression was used to assess the degree of influence of DuPont factors on ROE. The results showed that the net profit margin of all the companies had more impact on ROE rather than the total asset turnover and equity multiplier . The results also proved that GAIL (India) Limited is a favored company for investors among the three companies considered in terms of consistency in ROE.

Keywords


CPSE, DuPont analysis, equity multiplier, net profit margin, return on equity, total asset turnover.

References





DOI: https://doi.org/10.17010/ijf%2F2022%2Fv16i5%2F169517