Financial Performance Evaluation of Selected CPSEs of India Through Dupont Analysis

Authors

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

DOI:

https://doi.org/10.17010/ijf/2022/v16i5/169517

Keywords:

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

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.

Downloads

Download data is not yet available.

Downloads

Published

2022-05-01

How to Cite

Hothur, S., & Jayachandra Reddy, K. (2022). Financial Performance Evaluation of Selected CPSEs of India Through Dupont Analysis. Indian Journal of Finance, 16(5), 41–56. https://doi.org/10.17010/ijf/2022/v16i5/169517

Issue

Volume 16, Issue 5, May 2022

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

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