Imperial Journal of Interdisciplinary Research (IJIR) Vol-2, Issue-9, 2016 ISSN: 2454-1362, http://www.onlinejournal.in Imperial Journal of Interdisciplinary Research (IJIR) Page 462 5-point Du Pont Analysis of the Indian Oil & Gas Sector: Pre and Post Recession Shivam Singhal 1 & Srijan Narang 2 1 Senior Undergraduate, Indian Institute of Technology (IIT) Delhi 2 Senior Undergraduate, Indian Institute of Technology (IIT) Delhi Abstract: This term paper analyzes the effect of the global recession of 2008 on the stocks of the Oil & Gas Sector of the BSE (Bombay Stock Exchange) 500 Index in India. Although many papers indicate that the effect of the global recession in India was not as severe as that of the US but it is also true that India as an economy was not completely shielded too. This paper attempts to investigate the same by computing Du Pont 5-Point ratios for two periods of 5 years each: Pre 2008 recession and Post 2008 recession. The paired T-test is used to support the analysis and determine the significance of the global meltdown. The results computed using the Du Pont 5-Point financial ratios suggest that the Indian Oil & Gas Sector was not very well shielded by recession and has not been able to fully recover till 2013. Keywords: Du Pont ratios, Recession, paired T-test, Oil & Gas Sector 1. Introduction The Indian Oil and Gas Sector, being a key component of the six core industries in India namely Crude Oil, Petroleum Refinery Products, Coal, Electricity, Cement and Finished Steel is a major driving factor for other sections of the economy as well. After the 1991 Economic Liberalisation Reforms, India has become a much more integral part of the global economy than before [1]. Therefore it is evident that any global economic crisis would influence the Indian economy as well. The global recession of 2008 although did not hit the Indian economy as strongly as US but slowed the nation’s Gross Domestic Product (GDP) growth rate from 9.3% in 2007-08 to 6.8% in 2008-09 [2]. India is the fourth largest consumer of crude oil and petroleum products in the world and the demand for oil & gas is increasing every year owing to the growing GDP. Rest of the sections in this term paper will now aim to analyse the major drivers in the downfall of the Indian Oil & Gas Sector about the year 2008 with the help of 5 components of the Du Pont Ratios being Tax Burden, Interest Burden, Operating Profit Margin, Asset Turnover and Equity Multiplier. The combined product effect of the 5 ratios determine the Return on Equity. Du Pont analysis shows vital performance measures of a company like leverage, turnover and profitability [3]. Following the Du Pont analysis, T-test is used to support the analysis. A t-test is any statistical hypothesis test in which the test statistic follows a Student's t-distribution if the null hypothesis is supported. It can be used to determine if two sets of data are significantly different from each other. For calculations, data for various companies of the Oil & Gas Sector was collected for the period 2003-2013 and divided into two parts: Pre-recession period (2003-2007) and Post-recession period (2009- 2013). 2. Materials and Methods A similar analysis was performed on the top three companies of the Pharmaceutical Industry in India in which important ratios like ROE and ROA were calculated to determine their financial health [4]. The data used for calculating the components of 5 Point Du Pont analysis has been gathered from Ace Equity Database (developed by Accord Fintech Pvt. Ltd.) and the websites of the Bombay Stock Exchange (BSE) and Make in India (a Government of India initiative). Primary analysis in this paper revolves around Return on Equity (ROE) ratio which is the division of Earnings after Taxes (EAT) by Shareholders Equity. ROE being a product of Tax Burden, Interest Burden, Operating Profit Margin, Asset Turnover and Equity Multiplier ratios, is calculated using the following formulas: