23/04/2010

CAPITAL GOODS SECTOR FINANCIAL STATEMENT ANALYSIS

Acknowledgement

I would like to pay my sincere thanks to Dr. V. K. Vasal, Faculty, University of Delhi, South

Campus for endowing me with the precious insights needed for working out this Project. He

has been very instrumental in communicating the core of this project study and thus without

his direction, the very inception of this work would not have been possible.

Arpan Majumder.

CONTENTS

1. Objective

2. Indian capital goods sector

3. Company overview:

Alstom

Bharat Bijlee

Kalpataru

Walchandnagar

4. Financial Statement analysis:

Ratio analysis

Common Size statements

Trend analysis

5. References.

Objective

The aim of this work is to analyze the financial statements of the four major companies, in

the Capital Goods Sector of India, through a few introductory techniques and hence arrive at

some interpretations about their financial health.

The parameters judged are numerous ranging from a firm’s short term health to the overall

long term stability.

The analysis has been carried out on the Financial Statements of the respective companies so

as to get appraised of the financial state of the whole group involved in the operations.

Due attempts have been made to standardize the terms, across all the financial statements, so

that the analysis gathers more meaning and yields the best possible results in spirit.

With the conclusion I endeavor to arrive at the optimal determination of the relatively best

company, from the point of view of creditors and investors.

THE INDIAN CAPITAL GOODS SECTOR

The development of a strong and vibrant engineering and capital goods sector has been at the

core of the industrial strategy in India since the planning process was initiated in 1951. The

emphasis that this sector received was primarily influenced by the erstwhile Soviet Union

model, which had made impressive progress by rapid state-led industrialization through the

development of the core engineering and capital goods sector.

The ‘Mahalanobis Model’, which was a ‘supply oriented’ model with a basic emphasis on

increasing the rate of capital accumulation and saving, gave the engineering and capital goods

sector a central place. Superimposed over this were the other objectives of balanced regional

development, prevention of the concentration of economic power and the development of

small-scale industries.

One of the primary objectives was import substitution, which was pursued as a priority.

Owing to these historical factors, today India has a strong engineering and capital goods base.

The Indian capital goods sector is characterized by a large width of products (almost all

major capital goods are domestically manufactured) – a legacy of the import substitution

policy. Even nations with advanced capital goods sectors do not produce the entire range of

capital goods, but instead focus on segments, or sub segments. The range of machinery

produced in India includes heavy electrical machinery, textile machinery, machine tools,

earthmoving and construction equipment including mining equipment, road construction

equipment, material handling equipment, oil & gas equipment, sugar machinery, food

processing and packaging machinery, railway equipment, metallurgical equipment, cement

machinery, rubber machinery, process plants & equipment, paper & pulp machinery, printing

machinery, dairy machinery, industrial refrigeration, industrial furnaces etc. However, the

raw materials used are largely domestic in origin and in many instances the quality of

domestic raw materials is not up to the international standards in terms of dimensional

tolerances and metallurgical properties, which in turn affects the quality of the final product.

According to the estimates made by the Government, the investment requirement for

infrastructure is around USD450 billion during the 11th five year plan. This is going to boost

construction equipment segment to grow further.

In the domestic market, heavy engineering provides growing opportunities in projects such as

refinery upgradation and modernisation of fertiliser plants. The Government of India plans to

add 100,000MW capacity to the power sector to achieve its goal ’Mission 2012: Power for

all’. The focus is also on the construction of several UMPPs which will ensure continuous

growth of the electrical industry, both upstream and downstream, at least for the next few

years. Thus, the power sector provides good business prospects to the capital goods

manufacturing companies in medium- to long-term.

The performance of the Capital Goods sector reveals that its fortunes are inextricably linked

with that of the overall Indian industry. High degree of correlation between the performances

of the two sectors is further accentuated by high elasticity of Capital Goods industry to

changes in industry growth. The Capital Goods value added contributes a fairly constant

proportion (9-12 percent) of the total manufacturing value added, thus establishing that

manufacturing as the key end-user sector of Capital Goods drives the performance of the

latter. Another key determinant of the demand for Capital Goods is the gross investment

undertaken in the economy. The apparent consumption of Capital Goods constitutes a

constant share (17-21 percent) of the total Gross Domestic Investment in the country. On the

supply side the output of Capital Goods is determined by investments in Capital Goods sector

and capacity utilization. The investments in the Capital Goods sector have declined with the

decline in the relative profitability of the Capital Goods sector with respect to other sectors.

The export performance corroborates the inward focus of Capital Goods industry as less than

one-tenth of its sales is directed to exports. Except for few segments within the Capital Goods

sector, almost all of them have single digit exports as percentage of sales figures.

The overall growth rate of index of industrial production (IIP) during FY07 was 11.3%

compared to 8.2% in FY06. The growth rate achieved by the mining, manufacturing and

electricity sectors during FY07 was 5.1%, 12.3% and 7.2% respectively compared to 1.0%,

9.1% and 5.2% during corresponding period of the previous year. The Indian Industry grew

by 11% and manufacturing by 12% in 2006-07, supporting capital goods industry to grow

significantly. Reflecting the buoyant capacity addition in the manufacturing industry, the

capital goods industry grew by a healthy 17.7% in 2006-07.

The severity and worldwide impact of the global downturn was in many ways an

unprecedented event that froze economies around the world for more than two years. Indian

economy was no exception and was bound to witness a slow down.

However, it showed greater resilience than most others and was amongst the first few to

emerge from the downturn. The period from September 2008 to June 2009 impacted

industrial manufacturers most adversely. The gloom created by the global downturn impacted

Indian industry in more ways than one. There was a severe crunch in financial liquidity both

on debt and equity sides, customers backtracked on their orders, there were inventory pileups

and blockages in cash flows, to name a few.

Presently, the engineering sector is showing signs of recovery. This is reflected in IIP

numbers which grew by 11.7 percent in November 2009 within which manufacturing sector

grew by 12.7 percent. Though some end user industries are still cautious in their capital

expenditure plans, the sector continues to benefit from the relatively ‘recession proof’ high

growth infrastructure segments like power generation and transport infrastructure.

The capital goods sector recorded mixed performance with most of the companies catering to

power sector demand doing well. But the deceleration in the economic growth and re-

evaluation, deferment / cancellation of projects by the private sector has impacted the

performance of companies catering to industrial sector. These players' revenues eased despite

impressive order book.

Out of the 26 companies that are part of BSE Capital Goods Index six companies have not

declared their results as of the date of compilation of the aggregates. Hence the aggregate

revenue of the 20 industry majors was up by 23% to Rs 35772 crore. As commodity prices

came down on yoy basis, the material cost as proportion sales has moderated but the staff

cost and other expenses as proportion to sales for most of the players have increased. This

trend was more pronounced for PSU companies such as BHEL, BEL etc. For instance BHEL

provided Rs 890 crore in Q4FY09 itself in this regard compared to Rs 818 crore provided in

entire FY08.

The rising staff costs and other expenditure have primarily lead to marginal 20 bps easing of

operating margins to 16.5%, limiting the growth of operating profit to 22% to Rs 5900 crore.

The industry was impacted by more than doubling (114% rise) of interest costs to Rs 301

crore (up 114%) and 19% rise in provision for depreciation to Rs 397 crore. Finally, the

sector recorded 16% rise in net profit to Rs 3820 crore in the quarter ended March 2009.

On a relative basis, power sector investment is largely unaffected barring delay in award of

fresh contracts. Hence, the companies supplying equipment/ servicing this sector have seen

strong burnout of healthy order book. However, their Operating margins were impacted by

rise in staff and other costs / provisions, which negated the benefit of fall in input costs.

Bucking the general trend of easing of margins, Siemens and Alstom Projects reported

improvement in margins. The former has seen its margin zoom on a low base while the

latter's margin improved due to better order mix. On the flipside, some players catering to the

power sector like ABB, Kalpataru Power Transmission and Bharat Bijlee have seen their

revenue as well as profits fall.

Government of India steps up spends on infrastructure development to perk up the economy

of the country. Equally, with rise in global risk appetite improving the availability of funds

for capital-intensive Power projects. This along with recent modifications in mega power

policy etc is all set to encourage private investments. Moreover, the strong growth

opportunity in merchant power sale well above the rates under Power Purchase Agreements

is to entice private players to flock to these sector with investments. This will augur well for

domestic power equipment players. With more and more private players preferring domestic

equipment producers rather than overseas players enhance the prospects of domestic power

generation equipment majors. Given the fact of strong order book for power equipment

players and availability of expanded capacity, the book to bill ratio to improve driving growth

for the company in the medium term. Also, players catering to power sector are insulated

from wide fluctuations in price due to Price Variance clause in their orders thereby auguring

well on profitability count as well. Overall, the power generation equipment players are set to

see strong growth in the coming periods.

COMPANY OVERVIEW

ALSTOM Projects India Limited.

Alstom Projects India Ltd. (APIL) is a 67% subsidiary of Alstom Group, which is a world

leader in energy and rail transport infrastructure. Alstom Projects India (ALSTOMPROJ) has

full capabilities in engineering, manufacturing, project management and supply of power

generation equipment and also has a significant presence in the transport sector providing

railway equipment and technology solutions. The company was incorporated in 1992. The

chairman of the company is Sunand Sharma and Emmanuel Colombier, the managing

director. 

The company is a major player in the energy and transport infrastructure business supplying

critical electrical and industrial equipment including boilers and turbines and pollution

control equipment for power plants. The power segment is engaged engineering, procurement

and construction of power plants. The transport segment is engaged in designing,

manufacturing, supplying and supporting large scale transportation systems and is among the

world leaders in rail transport. It has six engineering centers in four locations. It has four

manufacturing units; hydro equipment in Vadodara, boilers in Durgapur, and transport in

Coimbatore. 

In 2007, the Alstom Transport led consortium bagged a contract worth Rs 2.55 billion from

the Delhi Metro Rail Corporation (DMRC) for train control and signaling systems to be

completed by March 2010. The company bagged a contract worth Rs 10 billion from the

Gujarat State Electricity Corporation (GSECL) for the construction of a combined cycle

power plant in India. The company has entered into a joint venture (JV) pact with domestic

auto component maker Bharat Forge for manufacturing equipment for power sector. 

The company has strategic partnerships with NTPC, BHEL, and Infosys for various projects.

The registered office is at The International, 5th Floor, 16, Marine Line Cross Road No.1, Off

Maharshi Karve Road, Churchgate, Mumbai-400020. 

Business Segment Analysis

The business of the Company is categorised in two segments, namely, Power and Transport.

Reviews on each of the company’s businesses are as follows:

POWER

This segment is engaged in the business of engineering, procurement, construction and

servicing of power plants and power equipment. Our customers enjoy the most economical,

environmentally friendly and advanced technology. The market for power equipment in 2008

confirmed the trend in 2007 with ordering of over 35 GW. This trend is likely to sustain at

least for the next 3-5 years as the country endeavours to enhance the power generation

capacity. The market is predominantly for coal-fired thermal power plants. Hydro and gas

also make a reasonable contribution. In future, demand for nuclear power is likely to increase

as well.

Subsequent to the enactment of The Electricity Act, 2003, the Private Sector started to play

an important role in the power market. Almost half of the upcoming power generation

capacities are being developed by private companies. The financial crisis and the upcoming

general elections may slow down the process to some extent in 2009 but overall the market

remains buoyant. Notwithstanding, the power generation capacity ordered last year,

electricity generation growth during the year has been the lowest in last eight years. It has

been just 2.71% as compared to 6.33% during the year 2007-08. Low rainfall and shortages

in coal and gas resulted in lower generation from existing facilities whereas, deficiency in the

supply chain prevented addition of planned capacities. Over the longer term, fuel availability

and implementation capability could pose a serious threat to the development of the sector.

The Company has the widest range of products and servicing capabilities to provide clean

power and maintenance support solutions across the spectrum of requirements for the power

market.

TRANSPORT

Railways

To keep pace with the country’s economic growth and forecast growth in passenger and

freight traffic, and to improve the efficiencies of its operations, Indian Railways plan

substantial investments in expansion of its network infrastructure, equipment and up-

gradation and induction of modern technologies. It is also a stated policy now to involve

private sector in partnerships to achieve these growth plans of the Indian Railways. Indian

Railways are exploring the framework for the private sector participation in various projects

for the manufacture of rolling stock and infrastructure development. Due to the complexity

and magnitude of these projects the initial attempts could not proceed as anticipated and it is

expected that these projects will be revived by Indian Railway during this financial year.

Metro

Based on the Delhi Metro experience, several Indian cities have announced Metro systems as

an answer to the urban growth and road traffic congestion. The existing signalling contract

for Lines 1 and 2 of Delhi Metro is under implementation in time for the planned

commencement of services ahead of the Commonwealth Games in 2010. Work on Shahdra to

Dilshad Garden and Vishwavidyala to Jehangirpuri have been executed ahead of schedule for

which the Company has received commendations from Delhi Metro.

The business also supplies signalling equipment to meet the requirements of improving the

safety standards on Indian Railways. It also provides signalling application engineering

services to the various global Alstom units from the dedicated application engineering and

software centre located in Bangalore. This activity is expected to increase with greater role

for this unit in local and overseas projects of Alstom transport.

Column1 Column2 Column3 Column4 Year Mar 09 Mar 08 Mar 07

SOURCES OF FUNDS : Share Capital 67.02 67.02 67.02 Reserves Total 340.49 281.27 266.51 Equity Share Warrants 0 0 0 Equity Application Money 0 0 0 Total Shareholders Funds 407.51 348.29 333.53 Minority Interest 0 0 0 Secured Loans 1.13 1.69 2.25 Unsecured Loans 0 0 0 Total Debt 1.13 1.69 2.25 Total Liabilities 408.64 349.98 335.78 APPLICATION OF FUNDS : Gross Block 494.87 377.46 342.43 Less: Accumulated Depreciation 235.5 208.4 185.56 Net Block 259.37 169.06 156.87 Lease Adjustment 0 0 0 Capital Work in Progress 119.33 50.53 16.83 Investments 0 0.01 0.01 Current Assets, Loans & Advances Inventories 64.26 61.3 66.9 Sundry Debtors 627.79 566.2 477.53 Cash and Bank 367.99 397.13 289.41 Loans and Advances 1,300.75 761.84 478.39 Total Current Assets 2,360.79 1,786.47 1,312.23 Less : Current Liabilities and Provisions Current Liabilities 2,239.45 1,578.69 1,046.66 Provisions 91.92 75.35 88.7 Total Current Liabilities 2,331.37 1,654.04 1,135.36 Net Current Assets 29.42 132.43 176.87 Miscellaneous Expenses not written off 0 0 0 Deferred Tax Assets 17.8 13.67 13.9 Deferred Tax Liability 17.28 15.72 14.34 Net Deferred Tax 0.52 -2.05 -0.44 Total Assets 408.64 349.98 335.78 Contingent Liabilities 20.29 20.29 15.37

Column1 Column Column Column

2 3 4

YearMar 09(12)

Mar 08(12)

Mar 07(12)

INCOME :

Sales Turnover 2,318.1

61,596.1

41,247.0

1 Excise Duty 27.88 49.07 27.33

Net Sales2,290.2

81,547.0

71,219.6

8 Other Income 49.48 48.45 36.86 Stock Adjustments 0 0 0

Total Income2,339.7

61,595.5

21,256.5

4 EXPENDITURE :

Raw Materials 1,600.8

91,101.5

3 848.95 Power & Fuel Cost 16.09 14.93 14.53 Employee Cost 238.97 180.67 123.34 Other Manufacturing Expenses 24.53 13.06 14.84 Selling and Administration Expenses 131.01 81.45 57.33 Miscellaneous Expenses 83.09 57.06 41.62 Less: Pre-operative Expenses Capitalised 0 0 0

Total Expenditure2,094.5

81,448.7

01,100.6

1 Operating Profit 245.18 146.82 155.93 Interest 0.1 0.14 0.17 Gross Profit 245.08 146.68 155.76 Depreciation 33.1 23.68 16.4 Minority Interest(before tax) 0 0 0 Profit Before Tax 211.98 123 139.36 Tax 71.81 41.96 0.51 Deferred Tax -2.57 1.61 25.05 Net Profit 138.12 76.51 111.47 Minority Interest(after tax) 0 0 0 Profit/Loss of Associate Company 0 0 0 Net Profit after Minority Interest & P/L of Assoc. Co. 138.12 76.51 111.47 Extraordinary Items 1.87 2.88 0 Adjusted Net Profit 136.25 73.63 111.47 Adjst. below Net Profit 0 0 0 P & L Balance brought forward 132.48 126.03 103.91 Statutory Appropriations 0 0 0 Appropriations 91.91 70.06 89.35 P & L Balance carried down 178.69 132.48 126.03 Dividend 67.03 53.62 67.02 Preference Dividend 0 0 0 Equity Dividend (%) 100 80 100

EPS before Minority Interest (Unit Curr.) 18.91 10.06 14.93 EPS after Minority Interest (Unit Curr.) 18.91 10.06 14.93 Book Value (Unit Curr.) 59.61 50.71 48.43

BHARAT BIJLEE Limited.

Bharat Bijlee (BBL), incorporated in 1946, is one of the oldest companies in the electrical

engineering industry in India. 

The ISO 9001:2000 certified company is a multi-product, multi-division organization

operating in the two business segments of industrial products which comprises transformers,

motors and drives; and projects. Three phase AC induction motors; special products like

torque motors and sugar centrifuge motors; and centrifugal, submersible and other pumps are

manufactured. The manufacturing plant is located on a 193,000 sq. m. campus, with a

working area of approximately 50,000 sq. m. near Kalwa, Mumbai. The PWRLEX

transformer range has increased the manufacturing capacity to more than 8,000 MVA per

annum. 

The projects division undertakes turnkey projects involving outdoor EHV and HV

switchyards upto 220 kV, indoor substations, overhead and underground distribution systems,

industrial electrification involving lighting and power distribution, power system studies,

illumination systems, and power evacuation systems for power projects. The industrial

electronics division is the first and largest Indian manufacturer of microprocessor-based

variable speed drives for batch-type sugar centrifugal machines. Other products offered

include AC drives, DC drives, retrofit AC and DC drives. 

The company has in FY07 entered into trade and technical collaboration agreements with

Tecnoloma SA, Spain for lift automatic door systems and S.A. Sistel, Spain for electronic

printed circuit boards for lift controllers. Transformers are ordered in bulk from prestigious

customers like MSTCL, UPPCL, Reliance Petrochemicals, Enercon, and others. An

important export order from the Occidental Group of Oman was a major breakthrough in the

export business. Motors are ordered by original equipment manufacturers, consultants and

end users. Major projects have been undertaken for Gujarat Ambuja Cement, ICL Sugars,

Raymond Steel, Mahindra & Mahindra and several others. 

The registered office is located at Electric Mansion, 6th Floor, Appasaheb Marathe Marg,

Prabhadevi, Mumbai-400025. 

Business Segment Analysis

Industrial Products:

In this segment the Company manufactures and sells Power and Distribution Transformers, a

wide range of standard and customized Low Tension Motors, and Gearless Machines for the

elevator industry. It also markets Anti-Corrosion products, Submersible Pumps and AC

Variable Speed Drives. During the year, the Transformer business saw its highest ever order

inflow at 10350 MVA. This included prestigious orders from MSETCL (11 Nos. 200 MVA,

220 KV) and PGCIL (7 Nos. 160 MVA, 220 KV). Production for the year was 7589 MVA

compared with 8111 MVA during the previous year. The Transformer plant’s capacity

enhancement to 11000 MVA was completed during the year. With a reasonably robust

unexecuted order book position, the Company is hopeful of utilizing the enhanced capacity

during 2009-10.

The sales turnover of the Motor business was 10.54% lower than in the previous year.

Industry reports have indicated a steep fall in production and sales of LT Motors during the

second half of the year under review and demand continues to be depressed. However,

ongoing product-range extensions, specific initiatives towards market focus and superior

customer responsiveness are expected to contribute to increased sales and market share.

Column1 Column2 Column3 Column4 Year Mar 09 Mar 08 Mar 07

SOURCES OF FUNDS : Share Capital 5.65 5.65 5.65 Reserves Total 193.84 162.85 110.19 Equity Share Warrants 0 0 0 Equity Application Money 0 0 0 Total Shareholders Funds 199.49 168.5 115.84 Secured Loans 0 5.74 5.71 Unsecured Loans 11.63 12.3 20.25 Total Debt 11.63 18.04 25.96 Total Liabilities 211.12 186.54 141.8 APPLICATION OF FUNDS : Gross Block 99.41 69.4 56.07 Less : Accumulated Depreciation 31.89 25.37 22.24 Less:Impairment of Assets 0 0 0 Net Block 67.52 44.03 33.83 Lease Adjustment 0 0 0 Capital Work in Progress 5.07 11.77 0.01 Investments 7.54 20.29 18.73 Current Assets, Loans & Advances Inventories 88.96 77.35 63.97 Sundry Debtors 156.92 167.55 142.53 Cash and Bank 9.71 7.4 10.25 Loans and Advances 21.22 15.79 70.59 Total Current Assets 276.81 268.09 287.34 Less : Current Liabilities and Provisions Current Liabilities 113.72 124.42 115.91 Provisions 28.16 32 81.74 Total Current Liabilities 141.88 156.42 197.65 Net Current Assets 134.93 111.67 89.69 Miscellaneous Expenses not written off 0 0 0 Deferred Tax Assets 3.42 3.79 3.72 Deferred Tax Liability 7.36 5.01 4.18 Net Deferred Tax -3.94 -1.22 -0.46 Total Assets 211.12 186.54 141.8 Contingent Liabilities 9.48 13.47 15.37

Column1 Column2 Column3 Column4

YearMar 09(12)

Mar 08(12)

Mar 07(12)

INCOME : Sales Turnover 600.77 637.9 536.01 Excise Duty 58.79 75.09 66.92 Net Sales 541.98 562.81 469.09 Other Income 3.05 3.71 4.84 Stock Adjustments 6.3 9.43 13.38 Total Income 551.33 575.95 487.31 EXPENDITURE : Raw Materials 361.95 369.42 315.56 Power & Fuel Cost 4.88 3.96 3.35 Employee Cost 51.07 40.72 34.23 Other Manufacturing Expenses 10.54 11.14 13.34 Selling and Administration Expenses 26.99 24.86 19.07 Miscellaneous Expenses 8.69 5.67 7.94 Less: Pre-operative Expenses Capitalised 0 0 0 Total Expenditure 464.12 455.77 393.49 Operating Profit 87.21 120.18 93.82 Interest 6.77 4.62 7.75 Gross Profit 80.44 115.56 86.07 Depreciation 7.08 3.93 2.93 Profit Before Tax 73.36 111.63 83.14 Tax 22.53 37.88 28.11 Fringe Benefit tax 0.59 0.49 0.32 Deferred Tax 2.71 0.77 -0.37 Reported Net Profit 47.53 72.49 55.08 Extraordinary Items 0.26 0.03 -1.01 Adjusted Net Profit 47.27 72.46 56.09 Adjst. below Net Profit 0 0 0 P & L Balance brought forward 13.63 15.98 17.43 Statutory Appropriations 0 0 0 Appropriations 36.53 74.84 56.53 P & L Balance carried down 24.63 13.63 15.98 Dividend 14.13 16.96 14.13 Preference Dividend 0 0 0 Equity Dividend % 250 300 250 Earnings Per Share-Unit Curr 79.88 123.2 93.24 Earnings Per Share(Adj)-Unit Curr 79.88 123.2 93.24 Book Value-Unit Curr 353.08 298.23 205.03

KALPATARU POWER TRANSMISSION LTD.

Incorporated in 1981, Kalpataru Power Transmission (KPT) is one of India's leading

engineering, procurement and construction (EPC) companies providing services to the power

transmission sector. KPT has its manufacturing facility in Gandhinagar, Gujarat. The

promoter of this firm (63% stake) is the Kalpataru Group, a Mumbai based real estate and

property development organisation. Over the years, KPT has diversified its business by way

of entering businesses like real estate, pipelines, rural electrification and distribution, biomass

energy, construction and warehousing and logistics. Their core competencies lie in EPC

services to the power transmission & distribution industry and oil & gas pipeline sectors.

The company`s activities include designing, testing, fabrication, erection and construction of

transmission lines and sub-station structures on a turnkey basis across India and overseas.

The construction division has been involved in the survey, foundation/civil works, erection

and stringing of more than over 6,500 km of turnkey projects in India for various clients such

as the Power Grid Corporation of India and various State Electricity Boards (SEBs). About

400,000 MT of towers and substation structures have already been designed, manufactured

and supplied over the last few years, of which over 100,000 MT have been exported. Over

200 tower tests of 132-500 KV have been carried out successfully, including 100 at the

company`s own testing station. 

Kalpataru Power has two large fabrication plants with an annual installed capacity of 78,000

MT, one of the largest in the world. It is equipped with modern machineries (including seven

CNC machines) and automated temperature controlled galvanizing baths, besides its own

state-of-the-art testing station and R&D centre to test towers up to 800 KV. The company has

exported tower parts to Mexico, Peru, Turkey, Algeria, Malaysia, Philippines, Thailand,

Vietnam, Bangladesh, UAE, Syria and Australia and many other Middle East and African

countries. It has executed jobs for reputed international companies such as ABB, Alstom,

EnelPower, Sumitomo, Downer, Cobra, etc. The company is technically pre-qualified for

domestic and international tenders and has executed jobs funded by the World Bank, ADB,

JBIC/OECF and Arab Fund. 

Kalpataru Power has entered into new strategic areas of business; firstly, civil works for

power projects, in which company has secured multiple jobs from BHEL, L&T (at IOCL,

Panipat) and civil works for Coal Handling plant at Dadri (NTPC). It has also made a

breakthrough in the water pipeline segment with its first job in Ahmedabad with further more

jobs expected shortly, mostly projects funded by ADB, World Bank and/or JNURM. 

The company secured three projects worth Rs 4 billion from Sonelgaz, the state electricity

company of Algeria. The company has been awarded a contract at an estimated value of Rs

3.85 billion for laying of approx. 550 KM pipeline as Part A of Mundra-Bhathinda Pipeline

Project for transportation of crude oil from Mundra to Guru Govind Singh Refinery at

Bhatinda. 

Kalpataru Power Transmission has bagged three orders worth Rs 399 crore from Power Grid

Corporation for 765 KV and 400 KV transmission line projects in Bihar, Chattisgarh and

Assam. These orders have to be executed between 18 to 24 months.

Earlier on 4th March 2009, the company got another order from Power Grid for supply and

erection of transmission towers for 413 kms and for providing 765 KV S/C transmission lines

associated with Sasan Ultra Mega Power Project for Silwar-Satna and Satna-Bina Section.

This work was to commence in March 2009 and scheduled to be completed within 27

months.

In addition to these two orders, the company also got Rs 385 crore order for laying of about

550 KMs of pipeline as Part A of Mundra-Bhatinda Pipeline project for transportation of

crude oil from Mundra to Guru Govind Singh Refinery at Bhatinda. This project was

awarded by Hindustan Mittal Energy, which is a joint venture between Hindustan Petroleum

Corporation and L N Mittal Group. To be executed in three spreads, this project is to be

completed within 18 months from the date of award. All the above orders were disclosed in

March 2009, which together account for Rs 1157 crore. Inclusive of other orders on hand, the

order book of Kalpataru Power Transmission now exceeds Rs 5000 crore.

Column1 Column2 Column3 Column4(Rs in Crs)

Year Mar 09 Mar 08 Mar 07 SOURCES OF FUNDS : Share Capital 26.5 26.5 26.5 Reserves Total 843.3 756.64 617.76 Equity Share Warrants 0 0 0 Equity Application Money 0 0 0 Total Shareholders Funds 869.8 783.14 644.26 Minority Interest 94.71 82.21 62.47 Secured Loans 752.98 414.98 395.37 Unsecured Loans 192.15 31.67 3.24 Total Debt 945.13 446.65 398.61 Total Liabilities 1,909.64 1,312.00 1,105.34 APPLICATION OF FUNDS : Gross Block 714.5 555.76 399.82 Less: Accumulated Depreciation 173.09 117.78 81.7 Net Block 541.41 437.98 318.12 Lease Adjustment 0 0 0 Capital Work in Progress 113.27 7.99 5.07 Investments 0.51 35.58 139.21 Current Assets, Loans & Advances Inventories 326.96 267.75 189.04 Sundry Debtors 1,416.01 933.2 699.94 Cash and Bank 58.25 108.46 136.75 Loans and Advances 697.71 485.23 320.54 Total Current Assets 2,498.93 1,794.64 1,346.27 Less : Current Liabilities and Provisions Current Liabilities 1,105.21 843.79 609.58 Provisions 120.34 102.26 77.97 Total Current Liabilities 1,225.55 946.05 687.55 Net Current Assets 1,273.38 848.59 658.72 Miscellaneous Expenses not written off 1.66 2.89 0.05 Deferred Tax Assets 7.45 2.81 3.81 Deferred Tax Liability 28.04 23.84 19.64 Net Deferred Tax -20.59 -21.03 -15.83 Total Assets 1,909.64 1,312.00 1,105.34 Contingent Liabilities 321.01 271.42 65.77

Column1Column2

Column3

Column4

YearMar 09(12)

Mar 08(12)

Mar 07(12)

INCOME :

Sales Turnover 3,277.1

92,705.4

71,640.3

0 Excise Duty 46.04 61.4 42.12

Net Sales3,231.1

52,644.0

71,598.1

8 Other Income 34.61 25.1 12.58 Stock Adjustments 25.88 22.17 17.53

Total Income3,291.6

42,691.3

41,628.2

9 EXPENDITURE :

Raw Materials 1,671.2

01,322.6

7 821.27 Power & Fuel Cost 27.05 20.33 16.85 Employee Cost 188.94 138.57 65.11 Other Manufacturing Expenses 821.87 653.9 317.19 Selling and Administration Expenses 193.28 173.81 89.4 Miscellaneous Expenses 48.08 27.55 34.35 Less: Pre-operative Expenses Capitalised 0 0 0

Total Expenditure2,950.4

22,336.8

31,344.1

7 Operating Profit 341.22 354.51 284.12 Interest 113.67 67.36 43.91 Gross Profit 227.55 287.15 240.21 Depreciation 57.59 38.65 18.16 Minority Interest(before tax) 0 0 0 Profit Before Tax 169.96 248.5 222.05 Tax 40.13 61.05 53.8 Deferred Tax -0.43 6.08 3.46 Net Profit 128.27 179.65 163.03 Minority Interest(after tax) 17.33 14.76 1.71 Profit/Loss of Associate Company 0 0 0 Net Profit after Minority Interest & P/L of Assoc. Co. 110.94 164.89 161.32 Extraordinary Items -1.06 -0.58 -0.23 Adjusted Net Profit 112 165.47 161.55 Adjst. below Net Profit -0.29 -0.09 -1.4 P & L Balance brought forward 335.66 215.11 98.45 Statutory Appropriations 0 0 0

Appropriations 37.12 44.25 43.26 P & L Balance carried down 409.19 335.66 215.11 Dividend 19.87 19.88 19.88 Preference Dividend 0.07 0.24 0 Equity Dividend (%) 75 75 75 EPS before Minority Interest (Unit Curr.) 46.95 66.14 60.25 EPS after Minority Interest (Unit Curr.) 40.42 60.57 59.6 Book Value (Unit Curr.) 328.04 295.32 242.89

WALCHANDNAGAR

Business Profile 

Walchandnagar Industries was incorporated at Mumbai. The company manufactures sugar

refined spirit, sugar machinery, plastic goods, cement plant paper and pulp plant, water tubes

boilers, time pieces, etc. The company manufactures sugar by the double sulphitation

process. 

The company has also received orders for EPC projects in the field of mineral processing.

The company gets orders for sugar plants, cement plants, steam generating plants and gear

boxes. The order book position for space, defense and nuclear continues to be good. 

The company created a separate division named `Walchand Projects Group` to avail the

growing opportunities in this type of business. Fields of Oil & Gas applications and Nuclear

Power applications bear long term potential for the Company. The Oil & Gas applications

can include the jobs for the on and off shore drilling applications, the nuclear power

applications can be in the core equipment such as Calendria, End shields, Heat Exchangers

etc. Your Company had identified that it would need a suitable land with waterfront for easy

handling and transportation of such large and heavy components and structures. During the

year, the Company acquired on lease about 57 Acres of land at Dahej, near Bharuch in the

state of Gujarat. This land is having necessary water front and is located in the well

developed Dahej industrial area. Presently, the Company is in the process of completing the

work relating to the detailed project report and obtaining various regulatory clearances with

the intention of establishing a green field manufacturing facility capable of addressing the

requirements of Oil & Gas, Nuclear Power and similar heavy engineering works.

Engineering strength and the untiring dedication to excel in this field has been the key focus

of your Company over the decades. During the year, your company took a significant step

forward and established Walchand Technology Group with diverse skill sets in several fields

such as Nuclear Power, Aerospace, Thermal Design, Mechanical Engineering, Non-

conventional Energy, Water Treatment and Water Solutions, etc. The Walchand Technology

Group employs 70 professionals, which are qualified engineers in several disciplines of

engineering. The group focuses on the research & development of engineering applications,

for the potential business opportunities being pursued by the Company.

Column1 Column2 Column3 Column4(Rs in Crs)

Year Sep 09 Sep 08 Sep 07 SOURCES OF FUNDS : Share Capital 7.61 7.61 3 Reserves Total 419.61 414.25 219.77 Equity Share Warrants 0 0 0 Equity Application Money 0 0 0 Total Shareholders Funds 427.22 421.86 222.77 Secured Loans 109.92 73.16 20.88 Unsecured Loans 15.04 15.11 5.16 Total Debt 124.96 88.27 26.04 Total Liabilities 552.18 510.13 248.81 APPLICATION OF FUNDS : Gross Block 574.03 556.54 418.53 Less : Accumulated Depreciation 283.28 259.23 254.68 Less:Impairment of Assets 0 0 0 Net Block 290.75 297.31 163.85 Lease Adjustment 0 0 0 Capital Work in Progress 52.37 22.26 9.97 Investments 46.22 41.77 5.35 Current Assets, Loans & Advances Inventories 171.73 120.48 112.58 Sundry Debtors 266.33 338.01 167.85 Cash and Bank 41.49 10.48 27.62 Loans and Advances 108.93 80.62 68.99 Total Current Assets 588.48 549.59 377.04 Less : Current Liabilities and Provisions Current Liabilities 407.33 378.78 286.57 Provisions 7.72 14.16 13.27 Total Current Liabilities 415.05 392.94 299.84 Net Current Assets 173.43 156.65 77.2 Miscellaneous Expenses not written off 0 0 0 Deferred Tax Assets 0.35 1.68 1.12 Deferred Tax Liability 10.94 9.54 8.68 Net Deferred Tax -10.59 -7.86 -7.56 Total Assets 552.18 510.13 248.81 Contingent Liabilities 277.18 199.74 240.53

Column1 Column2 Column3 Column4

YearSep 09(12)

Sep 08(12)

Sep 07(12)

INCOME : Sales Turnover 525.32 727.7 668.31 Excise Duty 12.71 31.68 35.77 Net Sales 512.61 696.02 632.54 Other Income 12.3 4.21 4.61 Stock Adjustments 33.24 -4.63 0.01 Total Income 558.15 695.6 637.16 EXPENDITURE : Raw Materials 310.21 439.39 399.51 Power & Fuel Cost 6.7 7.41 8.22 Employee Cost 51.61 47.96 37.61 Other Manufacturing Expenses 83 59.03 69.14 Selling and Administration Expenses 48.81 61.2 56.81 Miscellaneous Expenses 0.4 5.14 1.89 Less: Pre-operative Expenses Capitalised 0.39 0.97 0.82 Total Expenditure 500.34 619.16 572.36 Operating Profit 57.81 76.44 64.8 Interest 11.94 8.85 4.45 Gross Profit 45.87 67.59 60.35 Depreciation 10.52 7.09 5.47 Profit Before Tax 35.35 60.5 54.88 Tax 8.88 19.84 15.83 Fringe Benefit tax 0.34 0.59 0.49 Deferred Tax 2.73 0.3 3 Reported Net Profit 23.4 39.77 35.56 Extraordinary Items -0.02 0.05 0.65 Adjusted Net Profit 23.42 39.72 34.91 Adjst. below Net Profit 0 0 0 P & L Balance brought forward 82.31 50.97 22.48 Statutory Appropriations 0 0 0 Appropriations 6.79 8.43 7.07 P & L Balance carried down 98.92 82.31 50.97 Dividend 3.8 3.8 3 Preference Dividend 0 0 0 Equity Dividend % 50 50 100 Earnings Per Share-Unit Curr 5.98 10.28 116.83

Earnings Per Share(Adj)-Unit Curr 5.98 10.28 116.83 Book Value-Unit Curr 60.22 55.19 413.73

FINANCIAL STATEMENT ANALYSIS

Financial Statement analysis means analysis and regrouping of data contained in historical

financial statements. It serves the essential function of converting accounting data contained

in financial statements in to useful information which is always in scarce supply. After

analysis of financial statements, interpretation of analyzed information is done by decision

maker to forecast future profitability, financial strength and liquidity position of the business.

TYPES OF ANALYSIS

Financial statements are analysed to establish certain crucial relationships which help us to

take sound decisions. Accounts for the year 2004-2005 to 2008-2009 have been studied in

this report.

Analysis consists of:

1. Financial Ratio Analysis

2. Common Size Statements

3. Trend Analysis

FINANCIAL RATIO ANALYSIS

Ratio analysis is a very popular tool of financial analysis. Under this system of analysis,

financial statements have been analyzed by computing accounting ratios. Ratios indicate how

a business is performing and provide indications of trends and patterns. They can be

compared to the same ratios in previous years' accounts and the accounts of other businesses

operating in a similar environment.

The ratios can be looked at from three perspectives:

Creditors

Investors

Shareholders

There are various parameters upon which various types of different analysis is done. They

include:

1. Liquidity Analysis.

2. Profitability Analysis.

3. Solvency Analysis.

4. Efficiency Analysis.

LIQUIDITY RATIOS

Liquidity is the ability to convert assets into cash or to obtain cash. It is important from the

point of view of meeting the firm’s short term obligations.

Current Ratio

It is the ratio of the current assets to current liabilities of the company. It is calculated to test

the short term solvency of a business and its ability to meet its short term commitments.

Besides measuring liquidity, it also measures the margin of safety available in case of

uncertainty of flow of funds.

It provides a measure of degree to which current assets cover current liabilities. The excess of

current assets over current liabilities provides a measure of safety margin available against

uncertainty in realization of current assets and flow of funds.

Quick ratio

It is an indicator of a company's short-term liquidity. The quick ratio measures the

company's ability to meet its short-term obligations with its most liquid assets. The higher the

quick ratio, the better the position of the company.

Cash + Marketable securities + accounts receivables

Quick Ratio =

Current liabilities

ALSTOM

BHARAT BIJLEE

KALPATARU

WALCHANDNAGAR

LIQUIDITY RATIOSCURRENT RATIO 1.01 1.95 2.04 1.41 (times)QUICK RATIO 0.99 1.32 1.77 1.05 (times)

ANALYSIS –

1. Apart from Alstom Projects Ltd all other companies have a healthy current ratio,

which means that the short term liquidity of the company may be suspect.

2. The Quick ratio depicts a picture that all the companies are very much liquid in the

immediate period, thus there is no reason for concern even in the case of Alstom ltd.

PROFITABILITY RATIOS

Profitability ratios are probably the most important ratios studied by any analyst. They are

able to give a good overall picture of a company with respect to its peers. The most important

objectives for the business and, arguably therefore, the most important ratios, are those

concerned with profitability. As obvious from the name, the higher these ratios the better for

the company.

Net profit margin

Net profit margin divided by net revenues, often expressed as a percentage. This number is an

indication of how effective a company is at cost control. The higher the net profit margin is,

the more effective the company is at converting revenue into actual profit. The net profit

margin is a good way of comparing companies in the same industry, since such companies

are generally subject to similar business conditions. However, the net profit margins are also

a good way to compare companies in different industries in order to gauge which industries

are relatively more profitable.

Net Profit Margin = Net Profit * 100 = Profit before Interest and Taxation * 100

Turnover Turnover

Return on Capital Employed: Net after Tax Profit divided by Net Worth, this is the 'final

measure' of profitability to evaluate overall return. This ratio measures return relative to

investment in the company. Put another way, Return on Net Worth indicates how well a

company leverages the investment in it. May appear higher for startups and sole

proprietorships due to owner compensation draws accounted as net profit.

ALSTOM

BHARAT BIJLEE

KALPATARU

WALCHANDNAGAR

PROFITABILITY RATIOSNET PROFIT MARGIN 9% 14% 5% 7%OPERATING PROFIT MARGIN 9% 15% 9% 8%RETURN ON CAPITAL EMPLOYED 34% 24% 15% 6%RETURN ON ASSETS 36% 24% 8% 6%

1. The net profit margin of the four companies though not healthy, but on the

background of the global meltdown, can be said to be satisfactory.

2. Operating profit margin represents the return that the company is able to generate

from its operations over its net revenue. Operating profit margin of the companies is

also very low. Bharat Bijlee has the highest profit margins.

3. But Alstom shows that it is giving the best returns, as far as Capital or Assets at the

stake of the company, despite the fact that it is highly under-leveraged firm, as more

than 99% of its invested capital is in equity. Thus, Alstom has been able to generate

high returns on its assets and equity despite not taking advantage of “trading on

equity.” Walchandnagar has the lowest returns.

LEVERAGE RATIOS

These ratios determine the financial leverage enjoyed by the firm and also look at the short

term solvency of the firm in terms of its interest paying capacity. Long Term Debt /

Equity ratios provide insight into the extent to which non equity capital is used to finance the

assets of the firm.

Ratio = long term liabilities/ shareholders equity

The higher is the ratio, the higher the proportion of assets financed by non-shareholder

parties. Which components to include in the numerator or denominator of the ratios depend

on how one defines liabilities and shareholders equity.

Debt-Equity Ratio: Total liabilities divided by Net Worth. This ratio helps to clarify the

impact of long-term debt, which can be seen by comparing this ratio with Current Liabilities:

Net Worth. Creditors are concerned to the extent that total liability levels exceed Net Worth.

Debt to equity ratio shows extend to which the company has raised external debt with respect

to the shareholder’s fund. A high debt/equity ratio generally means that a company has been

aggressive in financing its growth with debt. This can result in volatile earnings as a result of

the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company

could potentially generate more earnings than it would have without this outside financing. If

this were to increase earnings by a greater amount than the debt cost (interest), then the

shareholders benefit as more earnings are being spread among the same amount of

shareholders. However, the cost of this debt financing may outweigh the return that the

company generates on the debt through investment and business activities and become too

much for the company to handle. This can lead to bankruptcy, which would leave

shareholders with nothing.

Interest Coverage Ratio: It’s a very useful ratio from the point of view of suppliers of funds

because it shows the no of times earnings cover interest liability. The higher the ratio the

better it is from the viewpoint of lender of funds

ALSTOM

BHARAT BIJLEE

KALPATARU

WALCHANDNAGAR

SOLVENCY RATIOSDEBT-EQUITY RATIO 0.003 0.058 1.087 0.251

INTEREST COVERAGE RATIO 2451.80 12.88 3.00 8.57

1. As is evident from the above ratios, these companies have very low component of

debt on their books, apart from Kalpataru which is geared according to market norms.

2. As the debt component is very low the Interest Coverage ratio is very high for these

companies, which means that these companies are not “trading on their equity”, and

thus losing out on opportunity to earn more profits. Only Kalpataru has made use of

this gearing advantage.

TURNOVER RATIOS

These ratios give an indication as to how efficiently a company is utilizing its assets.

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed

assets (on the balance sheet). It indicates how well the business is using its fixed assets to

generate sales.

Generally speaking, the higher the ratio, the better, because a high ratio indicates the business

has less money tied up in fixed assets for each rupee of sales revenue. A declining ratio may

indicate that the business is over-invested in plant, equipment, or other fixed assets. It also

indicates pricing strategy: companies with low profit margins tend to have high asset

turnover, while those with high profit margins have low asset turnover.

Inventory turnover ratio represents on average inventory basis, how quickly the company is

converting its inventory into finished goods. A ratio showing how many times a

company's inventory is sold and replaced over a period.

 

The days in the period can then be divided by the inventory turnover formula to calculate the

days it takes to sell the inventory on hand or "inventory turnover days".

Although the first calculation is used for our study, COGS (cost of goods sold) may be

substituted because sales are recorded at market value, while inventories are usually recorded

at cost. Also, average inventory may be used instead of the ending inventory level to

minimize seasonal factors. This ratio should be compared against industry averages. A low

turnover implies poor sales and, therefore, excess inventory. A high ratio implies either

strong sales or ineffective buying. High inventory levels are unhealthy because they represent

an investment with a rate of return of zero. It also opens the company up to trouble should

prices begin to fall.

Working Capital turnover ratio shows how well the company is using its working capital

to generate its sales. Working capital turnover ratio establishes a relationship between net

sales and working capital. This ratio measures the efficiency of utilisation of working capital.

Working Capital Turnover Ratio = Net Sales or Cost of Goods Sold/Net Working Capital

Though high working capital turnover ratio signifies efficient use, but on the other hand it

also shows tight liquidity position for the company.

ALSTOMBHARAT BIJLEE KALPATARU WALCHANDNAGAR

ACTIVITY RATIOSWORKING CAPITAL TURNOVER RATIO 77.848 4.017 2.537 3.602ASSET TURNOVER RATIO 6.038 2.726 2.006 1.306

INVENTORY TURNOVER RATIO 35.641 6.092 9.882 4.068

1. Alstom has a very high working capital turnover ratio in comparison to the other three

companies, which shows the efficient use of resources, but also shows tight liquidity

position of the company.

2. All four companies have a very low asset turnover ratio, this is due the global

meltdown and also the nature of business of these companies.

3. Again we see that Alstom is the leader by large among the four companies when it

comes to utilisation of resources. It has a very high inventory turnover ratio

suggesting strong sales and efficient management of inventory.

ALSTOMBHARAT BIJLEE KALPATARU WALCHANDNAGAR

VALUATION RATIOSPRICE/EARNINGS RATIO 32.76 12.67 26.58 40.87PRICE/BOOKVALUE RATIO 10.39 2.87 3.28 4.06

1. The P/E ratio depicts that Bharat Bijlee is the least priced and Walchandnagar is the

most highly priced of the four stocks.

2. Again we see that Bharat Bijlee has the least price as far as P/BV ratio is concerned,

where as Alstom has the highest price, which can be attributed to its high returns.

Common Size Financial Analysis

Under common size financial analysis, company financial statements are displayed

as percentages of a common base figure. This type of financial statement allows for easy

analysis between companies or between time periods of a company. The values on the

common size statement are expressed as percentages of a statement component such as

revenue. While most firms don't report their statements in common size, it is beneficial to

compute if you want to analyze two or more companies of differing size against each other.

Formatting financial statements in this way reduces the bias that can occur when

analyzing companies of differing sizes. It also allows for the analysis of a company over

various time periods, revealing, for example, what percentage of sales is cost of goods sold

and how that value has changed over time.

For the purpose of this analysis, balance sheets for all companies as on 31st March 2009 and

the income statement for April 08-March 09 were studied and computations were done on

them.

Analyst’s Perspective

1. On the liabilities side, we see that Alstom has the lowest amount of debt as a

percentage of total assets as compared to other companies. This means that Alstom is

the least levered firm in the category. Bharat Bijlee also has a very low debt

component.

2. On the assets side (application of funds) side it can be seen that Alstom has a very

high Capital Work in Progress (almost 30% of total assets), where other firm have

less than 7% of total assets in working capital.

3. Bharat Bijlee has significant amount of its assets blocked in the form of inventories.

4. Alstom has an unusually high level of current liability, but it also has sufficient

amount of current assets to back them up. So although Alstom has very high

proportions of Sundry Debtors, Cash or Loans and Advances in comparison to the

other companies, it is only to cover for the huge current liabilities.

5. But, when comes to net current assets Alstom has a very low figure, which is not a

very good sign. Bharat Bijlee and Kalpataru has high levels of net current assets.

6. Another point of concern is the amount of contingent liabilities for Kalpataru and

Walchandnagar, 321 and 238 times of the total assets respectively. If even some part

of these liabilities would arise then these companies would be in serious trouble to

meet these liabilities.

Analyst’s Perspective

1. The operating profits of the four firms are almost equal with Bharat Bijlee leading the

pack with 16%. This shows the operational efficiency of the companies.

2. We see that a significant portion of expenditure is in the form of raw materials, which

is common in the capital goods industry. Other expenses are relatively very low in

proportion. But in Kalpataru we see that manufacturing expenses are also significant

(25%), in comparison to the other companies which have very low manufacturing

expenses. Alstom has comparatively higher employee costs than the others.

3. As seen from the table showing data as a % of Operating profit, that the proportion of

Net Profit to Operating Profit is highest for Alstom and Bharat Bijlee, while for

Klapataru it is very low.

TREND ANALYSIS

Trend Analysis provides important information regarding the historical performance and

growth and it can be a great tool for analyzing , planning and forecasting. In our study I have

taken 5 year trend data for each of the company with 04-05 serving as the base year for each

of the company with 100 as the base value.

ALSTOM

1. The reserves of the company have steadily increased, showing constant growth and

profitability.

2. The company follows a policy of debt reduction, which is evident from the constantly

diminishing debt component.

3. There has been a constant increase in the capital assets of the company as well as

work in progress over the years. Though the first may be a good sign but the second

definitely does not project well about the company.

4. Loans & Advances and Current liabilities have increased manifold over the years. So

has the amount of Sundry Debtors, which does not bode well for the company.

5. The sales turnover of the company has increased steadily and constantly showing the

growth phase of the company.

BHARAT BIJLEE

1. The reserve of the company has increased slowly but steadily, depicting constant

growth in operations.

2. Capital assets and Current assets have increased with the pace of growth of the

company, but we see that Current liabilities had increased significantly in the third

year then decreased subsequently.

3. Sales have increased over time except for the most recent year, which can be

attributed to the recession in the global economy. Similarly Operating profit has

increased throughout except in the last year for similar reason

KALPATARU LTD.

1. Although Sales have increased constantly over the past, the Operating profit has fallen

for the last year due to global market conditions. Also the last year saw unusual

increase in manufacturing expenses.

2. Interest component has increased substantially further decreasing the profit of the

company.

3. Reserves have increased substantially so has the total Debt component of the

company, which shows that the company is expanding by use of external funds.

4. Capital and Current assets have increased considerably, but work in progress has

increased exponentially in the last year, which may be due to cancellation of orders.

WALCHANDNAGAR

1. Sales increased steadily over the past but fell sharply in the last year due to global

recession and market conditions.

2. All expenditures have increased in accordance with the sales but the manufacturing

expenses have risen sharply in the last year, thus low operating profit for the last year.

3. Reserves have increased steadily, Debt component has also increased rather sharply in

the last two years, which shows that the company has gone for external financing for

its operations.

4. Assets, Investments and Current liabilities have all seen a huge rise in the year before

last, depicting the boom previous to the recession.

From the perspective of the creditors, we can see that Alstom and Bharat Bijlee have

negligible debt component, while Kalpataru has high debt. Although Kalpataru has

infavourable Debt-equity ratio, it is well covered as it has a comfortable Interest coverage

ratio. Liquidity of the firms is also very good apart from that of Alstom which has just

enough liquidity. So considering all, it can be said that Bharat Bijlee is the most safe

company for creditors.

From the perspective of the investor, again Bharat Bijlee is the best stock as it has the highest

profitability and also it is highly under priced.

REFERENCES.

ALSTOM PROJECTS ANNUAL REPORT 2008-09

BHARAT BIJLEE ANNUAL REPORT 2008-09

KALPATARU POWER TRANSMISSION ANNUAL REPORT 2008-09

WALCHANDNAGAR ANNUAL REPORT 2008-09

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