md sagir finance

8/8/2019 Md Sagir Finance

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TERM PAPERON

FINANCIAL MANAGEMENT

Topic- Comparative working capital analysis of NTPC and

BHEL

Submitted to:-

Mr. Amarjeet Saini

Submitted by:-

Name Md. Sagir Alam

Roll no: - RS (1901) B-39

Registration no: - 10906119

MBA

193(LSM)


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First of allI would like to take this opportunity to express my gratitude towards all

those people who have helped me in the successful completion of this term paper,

directly or indirectly. I would also like to express my sincere gratitude towards

Mr. Amarjeet sir (my term paper guide) for his guidance and help which she

willingly provided at every step of my term paper.

Next, I would like to express my sincere ineptness to Wikipedia.org, and Google

for providing us with all necessary information for completion of this term paper.

Finally, I would like to thank all my family and friends for their encouragement,

support and good wishes

ACKNOWLEDGEMENT


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Index-

Introduction of working capital.

Cycle of working capital management.

Introduction of NTPC

Balance sheet of NTPC

Analysis of NTPC

Introduction of BHEL

Balance sheet of BHEL

Analysis of BHEL

Comparative analysis between NTPC and BHEL

Conclusion.

Bibliography.


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INTRODUCTION OF WORKING CAPITAL-

Working capital, also known as net working capital or NWC, is a financial metric which

represents operating liquidity available to a business. Along with fixed assets such as plant andequipment, working capital is considered a part of operating capital. It is calculated as current

assets minus current liabilities. If current assets are less than current liabilities, an entity has

a working capital deficiency, also called a working capital deficit.

Working Capital = Current Assets Current Liabilities

A company can be endowed with assets and profitability but short ofliquidity if its assets cannot

readily be converted into cash. Positive working capital is required to ensure that a firm is able to

continue its operations and that it has sufficient funds to satisfy both maturing short-term debt

and upcoming operational expenses. The management of working capital involves managinginventories, accounts receivable and payable and cash.

Current assets and current liabilities include three accounts which are of special importance.

These accounts represent the areas of the business where managers have the most direct impact:

accounts receivable (current asset)

inventory (current assets), and

accounts payable (current liability)

The current portion ofdebt (payable within 12 months) is critical, because it represents a short-

term claim to current assets and is often secured by long term assets. Common types of short-

term debt are bank loans and lines of credit.

An increase in working capital indicates that the business has either increased current assets (that

is received cash, or other current assets) or has decreased current liabilities, for example has paid

off some short-term creditors.

By definition, working capital management entails short term decisions - generally, relating to

the next one year period - which is "reversible". These decisions are therefore not taken on thesame basis as Capital Investment Decisions (NPV or related, as above) rather they will be based

on cash flows and / or profitability.

One measure of cash flow is provided by the cash conversion cycle - the net number of

days from the outlay of cash forraw material to receiving payment from the customer. As a

management tool, this metric makes explicit the inter-relatedness of decisions relating to
http://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Liquidityhttp://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Accounts_payablehttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Liquidityhttp://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Accounts_payablehttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Material


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inventories, accounts receivable and payable, and cash. Because this number effectively

corresponds to the time that the firm's cash is tied up in operations and unavailable for other

activities, management generally aims at a low net count.

In this context, the most useful measure of profitability is Return on capital (ROC). Theresult is shown as a percentage, determined by dividing relevant income for the 12 months by

capital employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm

value is enhanced when, and if, the return on capital, which results from working capital

management, exceeds the cost of capital, which results from capital investment decisions as

above. ROC measures are therefore useful as a management tool, in that they link short-term

policy with long-term decision making. See Economic value added(EVA).

Cycle of working capital-

Management of working capital Guided by the above criteria, management will use a

combination of policies and techniques for the management of working capital. These policies

aim at managing the current assets(generallycash and cash equivalents, inventoriesanddebtors)

and the short term financing, such that cash flows and returns are acceptable.
http://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Debtor


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Cash management. Identify the cash balance which allows for the business to meet day to

day expenses, but reduces cash holding costs.

Inventory management. Identify the level of inventory which allows for uninterrupted

production but reduces the investment in raw materials - and minimizes reordering costs -

and hence increases cash flow; see Supply chain management; Just In Time (JIT); Economic

order quantity (EOQ); Economic production quantity

Debtors management. Identify the appropriate credit policy, i.e. credit terms which will

attract customers, such that any impact on cash flows and the cash conversion cycle will be

offset by increased revenue and hence Return on Capital (or vice versa); seeDiscounts and

allowances.

Short term financing. Identify the appropriate source of financing, given the cash

conversion cycle: the inventory is ideally financed by credit granted by the supplier;

however, it may be necessary to utilize a bankloan(or overdraft), or to "convert debtors tocash" through "factoring".
http://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Just_In_Time_(business)http://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_production_quantityhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Just_In_Time_(business)http://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_production_quantityhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)


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Introduction of NTPC

NTPC, India's largest power company, was set up in 1975 to accelerate power

development in India. It is emerging as an Integrated Power Major, with a significantpresence in the entire value chain of power generation business. NTPC ranked 317th in

2009, Forbes Global 2000 ranked the Worlds biggest companies. With a current

generating capacity of 31,704 MW, NTPC has embarked on plans to become a 75,000

MW company by 2017. NTPC has been ranked No. 1 in 'Best Workplaces for Large

Organizations' and eighth overall in 2008 by Great Places to Work in collaboration with

the Economic Times.

NTPC Limited, Indias largest power company with an installed capacity of 29,894 MW

is presently operating 15 coal based, 7 gas based power stations and 4 joint ventures.

NTPC contributed around 28.5% of the countrys entire power generation during theyear 2007-08 and plans to become a 75,000 MW power company by 2017. NTPC has

moved ahead by diversifying its portfolio to emerge as an integrated power major with

presence across the entire energy value chain. NTPC has been allocated 6 coal mine

blocks which are expected to produce 48 million tons per annum.

With its excellent practice in Human Capital Management, NTPC is the most admired

organization in public sector. Powered by dynamic and dedicated workforce, NTPC has

ambitious growth plans and to make it happen NTPC is looking for promising, energetic

young Graduate Engineers & Finance / HR professionals with brilliant academic record

to join the organization as:


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Balance Sheet of NTPC In crores

Mar

'05Mar '06 Mar '07 Mar '08 Mar '0

12

mths12 mths 12 mths 12 mths 12 m

Sources Of Funds

Total Share Capital8,245.5

08,245.50 8,245.50 8,245.50 8,245

Equity Share Capital8,245.5

08,245.50 8,245.50 8,245.50 8,245

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves33,530.

8036,713.20 40,351.30 46,021.90 50,74

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net worth41,776.

3044,958.70 48,596.80 54,267.40 58,99

Secured Loans4,778.1

06,173.50 7,479.60 7,314.70 8,969

Unsecured Loans12,647.

1014,464.60 17,661.50 19,875.90 25,59

Total Debt 17,425. 20,638.10 25,141.10 27,190.60 34,567


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20

Total Liabilities59,201.

5065,596.80 73,737.90 81,458.00 93,56

Mar '05 Mar '06 Mar '07 Mar '08 Mar '0

12


Application Of Funds

Gross Block42,996.

1045,917.60 50,604.20 53,368.00 62,35

Less: Accum. Depreciation20,791.

4022,950.10 25,079.20 27,274.30 29,41

Net Block22,204.

7022,967.50 25,525.00 26,093.70 32,93

Capital Work in Progress10,038.

6013,756.00 16,962.30 22,478.30 26,40

Investments20,797.

7019,289.10 16,094.30 15,267.20 13,98

Inventories1,777.7

0

2,340.50 2,510.20 2,675.70 3,243

Sundry Debtors1,374.7

0867.80 1,252.30 2,982.70 3,584

Cash and Bank Balance 367.30 176.80 750.10 473.00 271.8

Total Current Assets3,519.7

03,385.10 4,512.60 6,131.40 7,099

Loans and Advances5,491.1

06,555.10 8,781.70 9,936.20 7,826

Fixed Deposits5,711.00

8,294.60 12,564.50 14,460.20 15,99

Total CA, Loans & Advances14,721.

8018,234.80 25,858.80 30,527.80 30,92

Deferred Credit 0.00 0.00 0.00 0.00 0.00


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Current Liabilities5,884.6

04,910.30 5,422.20 5,548.40 7,439

Provisions2,676.7

03,740.30 5,280.30 7,360.60 3,249

Total CL & Provisions 8,561.30

8,650.60 10,702.50 12,909.00 10,68

Net Current Assets6,160.5

09,584.20 15,156.30 17,618.80 20,23

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets59,201.

5065,596.80 73,737.90 81,458.00 93,56

Contingent Liabilities 16,680.00

16,429.80 25,218.80 29,361.80 66,08

Book Value (Rs) 50.67 54.53 58.94 65.81 71.55

NTPC Previous Years

Key Financial Ratios ------------------- in Rs. Cr. -------------------

Mar

'05Mar '06 Mar '07 Mar '08 Mar '09

Investment Valuation Ratios

Face Value 10.0010.00 10.00 10.00 10.00

Dividend Per Share 2.40 2.80 3.20 3.50 3.60

Operating Profit Per Share

(Rs)8.84 9.00 12.32 13.98 12.79

Net Operating Profit Per

Share (Rs)27.3731.71 39.58 44.98 50.91


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Free Reserves Per Share

(Rs)39.7343.24 47.38 52.34 56.25

Bonus in Equity Capital -- -- -- -- --

Profitability Ratios

Operating Profit Margin(%) 32.3028.40 31.13 31.07 25.11

Profit Before Interest And

Tax Margin(%)21.3018.66 22.84 23.44 18.06

Gross Profit Margin(%) 37.1032.62 33.28 25.31 19.48

Cash Profit Margin(%) 31.0327.30 25.25 23.74 21.10

Adjusted Cash Margin(%) 28.8224.31 24.58 23.74 21.10

Net Profit Margin(%) 23.2020.20 19.39 18.51 18.11

Adjusted Net Profit

Margin(%)20.9917.20 18.69 18.51 18.11

Return On Capital

Employed(%)13.1512.26 14.69 15.15 12.27

Return On Net Worth(%) 13.9012.95 14.13 13.66 13.90

Adjusted Return on Net

Worth(%)12.5711.02 13.61 13.57 12.18

Return on Assets Excluding

Revaluations8.57 7.84 8.13 7.86 --

Return on Assets Including

Revaluations8.57 7.84 8.13 7.86 --

Return on Long Term

Funds(%)13.1512.26 14.69 15.15 12.27

Liquidity And Solvency Ratios

Current Ratio 1.72 2.11 2.42 2.36 2.89

Quick Ratio 1.44 1.84 2.18 2.16 2.59

Debt Equity Ratio 0.42 0.46 0.52 0.50 0.59

Long Term Debt Equity Ratio 0.42 0.46 0.52 0.50 0.59


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Debt Coverage Ratios

Interest Cover 16.7911.59 9.49 10.28 11.91

Total Debt to Owners Fund 0.42 0.46 0.52 0.50 0.59

Financial Charges CoverageRatio

5.73 5.04 6.29 7.31 7.97

Financial Charges Coverage

Ratio Post Tax5.56 4.93 5.35 5.82 7.08

Management Efficiency Ratios

Inventory Turnover Ratio 14.0812.31 14.10 33.59 28.21

Debtors Turnover Ratio 24.4723.32 30.78 17.52 12.78

Investments Turnover Ratio 43.4225.14 30.51 33.59 28.21

Fixed Assets Turnover Ratio 0.74 0.76 0.82 0.70 0.67

Total Assets Turnover Ratio 0.38 0.40 0.44 0.46 0.45

Asset Turnover Ratio 0.52 0.57 0.65 0.70 0.67

Average Raw Material

Holding-- -- -- -- --

Average Finished GoodsHeld

-- -- -- -- --

Number of Days In Working

Capital98.28131.98 167.21 171.01 173.56

Profit & Loss Account Ratios

Material Cost Composition 0.07 0.09 0.07 0.07 0.07

Imported Composition of

Raw Materials Consumed-- -- -- -- --

Selling Distribution Cost

Composition0.20 0.15 0.17 0.12 0.13

Expenses as Composition of

Total Sales-- -- -- -- --


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Cash Flow Indicator Ratios

Dividend Payout Ratio Net

Profit38.6945.23 44.11 45.53 42.31

Dividend Payout Ratio Cash

Profit 28.9333.45 33.83 35.33 32.83

Earning Retention Ratio 57.2346.91 54.23 54.17 51.75

Cash Earning Retention

Ratio68.8562.44 65.20 64.49 63.70

Adjusted Cash Flow Times 2.42 2.95 2.89 2.86 3.62

Mar'05 Mar '06 Mar '07 Mar '08 Mar '09

Earnings Per Share 7.04 7.06 8.33 8.99 9.95

Book Value 50.6754.53 58.94 65.81 71.55

Working capital analysis report of NTPCWorking capital is the difference between current assets and current liabilities of the

company. Through the balance sheet of the NTPC we calculate the following things.

In 2005 the Total CA, Loans & Advances of the company is 14,721.80 crore, and

in 2009 it is 30,925.30 crore, means there are 110.06 % increase in current

assets during the five years of time.

In 2005 the total CL & Provisions of the Co. is 8,561.30 crore and in 2009 it is10,688.70 crore which show that there are 24.84% increase in current liabilities.

From the above we can say that the Co. has done well in last 5 years. It has

able to decrease their current liabilities in last 5 years.


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In 2005 the S. Debtor of the Co. was 1,374.70 crore, and in 2009 it is 3,584.20

crore which show that there is 160.73% increase in Debtors.

In 2005 the Current Liab. Of Co. was 5,884.60 crore, and in 2009 it is 7,439.20

crore which show that there is 26.4% increase in C. Liab.

Note: I have considered C. Liab. As Creditor.

From the above we can said that the Co.s have more chance of Bad Debt

because it Debtors has increased but when we talk about the Creditor we can

say that Co. is trying to reduce its C. Liab and is relying on Cash Payment to get

the Cash advantages.

Cash and Bank Balance 367.30(2005) and 271.80(2009)

It has been decreased by 26% in last 5 years. Here the co. has done well

because it is utilizing its fund in various areas.

Fixed Deposits 5,711.00(2005) and 15,999.80(2009)

It is increased by 180.11% in last 5 years. The co. approach is here to get Bank

Interest on cash that is why it has reduced its Cash in Hand and utilizing it in

Bank.

Loans and Advances 5,491.10(2005) and 7,826.10(2009)

It has been increased by 42.52% in last 5 years. Here the Co. has increased its

loans and Advances to get interest thereon, which is a good approach adopted

by co.

Provisions 2,676.70(2005) and 3,249.50(2009)


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It is increased by 21.4% in last 5 years. Here co. has increased its provision to

think of about Bad Debts, which is good approach. Also co. has not increased its

too much high.

Net Current Assets 6,160.50(2005) and 20,236.60(2009)

It is increased by 228.5% in last 5 years. We know that this is the Working

Capital of the co. and it has increased tremendously in last 5 years, which is

showing the co. effective working capital management.

The Current Ratio of Co. in 2005 was 1.72:1 and in 2009 it is 2.89:1.

We know the better C. Ratio is 2:1, Here the Co.s clearly shows that its payingcapacity has been increased in last 5 years because Co. has reduced its C .Liab.

The Quick Ratio in 2005 - 1.44:1 and in 2009 - 2.59:1

Good=1:1

Here the Co. has enough cash to pay its C. Liab easily. It becomes more capable

in last 5 years in terms of Quick Asset.

Inventory Turnover Ratio 14.08(2005) and 28.21(2009)

From this ratio it is clearly shown that that the co. ratio has become twice and we

can say that the co. has done well enough in last 5 years.

Debtors Turnover Ratio 24.47(2005) and 12.78(2009)

From this ratio we can say that there is a decline in this ratio, this is becauseCo.s Debtors has increased in last 5 years. This shows that the Co. is not able to

get the payment on time. Co. have to wait long to get payment from its debtors.


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Introduction of BHEL

BHEL is the largest manufacturer of rotating electrical machines in the country, and has

established itself as an industry leader. There are approximately about 30,000 BHEL

make HT machines all across the country in various industries and power plants. Since

nineties, BHEL has been adding about 1000 HT machines per year to this population of

machines.

Rotating electrical machines of various types and ratings are required for the operation

of any industrial plant or power plant. Failure or breakdown of a rotating electrical

machine can occur for various reasons at any time during the life of the machine. For

any plant, the cost of downtime as a result of failure or breakdown of an electrical

machine would be enormous. The costs of replacement of these machines often usedfor very critical operations, are quite exorbitant and the process of procurement very

cumbersome. So, most of the times, the industry/power plant goes in for

repair/reconditioning of their old machines.

At this critical juncture, BHEL, Electrical Machines Repair Plant (EMRP) steps in to

cater to this need of the industry. The technological expertise of BHEL as the premier

manufacturer of electrical machines in India is available to the industry through EMRP.

Phase I of this unit of BHEL was set up in 1978 to cater to repair and maintenance of

traction machines for the Indian Railways. With time, Railways developed in-housefacilities for repair of traction machines. Consequently, Phase II of EMRPs operation

was launched.

During Phase II, EMRP developed facilities for industrial machines, from coil

manufacturing to total service of industrial rotating machines, and the product profile

expanded to include large and medium range industrial machines, mini/midi hydro

generators. EMRP has successfully revamped many machines. Over the years, EMRP

has evolved into a Unit that is capable of offering total service to various industries for

all types of rotating electrical machines.

In India, when any industrial plant or power plant is set up, the rotating electrical

machines required for the operation of the plant are procured from various companies

from all over the world. EMRP has developed the capability to repair rotating electrical

machines of both BHEL and non-BHEL make having technology of the sixties or

technology of the nineties. In short, EMRP uses Tomorrow's technology in Yesterday's


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equipment. In most cases of imported, non-BHEL or very old machines, technical

details / drawings are often not available.

Balance Sheet of Bharat Heavy

Electricals------------------- in Rs. Cr. -------------------


12


Sources Of Funds

Total Share Capital 244.76 244.76 244.76 489.52 489.52

Equity Share Capital 244.76 244.76 244.76 489.52 489.5

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves5,782.1

37,056.62 8,543.50 10,284.69 12,44

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net worth6,026.8

97,301.38 8,788.26 10,774.21 12,93

Secured Loans 500.00 500.00 0.00 0.00 0.00

Unsecured Loans 36.98 58.24 89.33 95.18 149.3

Total Debt 536.98 558.24 89.33 95.18 149.37

Total Liabilities6,563.8

77,859.62 8,877.59 10,869.39 13,08


12mths

12 mths 12 mths 12 mths 12 m

Application Of Funds

Gross Block3,628.5

03,821.62 4,134.61 4,443.03 5,224


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Less: Accum. Depreciation2,584.7

02,839.79 3,146.31 3,462.21 3,754

Net Block1,043.8

0981.83 988.30 980.82 1,469

Capital Work in Progress 98.12 191.27 306.58 658.47 1,212

Investments 8.95 8.29 8.29 8.29 52.34

Inventories2,916.1

13,744.37 4,217.67 5,736.40 7,837

Sundry Debtors5,972.1

47,168.06 9,695.82 11,974.87 15,97

Cash and Bank Balance1,392.8

61,483.97 2,068.91 1,511.02 1,950

Total Current Assets10,281.

1112,396.40 15,982.40 19,222.29 25,76

Loans and Advances1,921.3

34,186.27 5,517.59 7,366.17 4,616

Fixed Deposits1,785.0

12,650.01 3,740.00 6,875.00 8,364

Total CA, Loans & Advances13,987.

4519,232.68 25,239.99 33,463.46 38,74

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities7,248.9

98,905.14 11,957.32 16,632.97 23,41

Provisions1,325.4

53,649.32 5,708.25 7,608.68 4,975

Total CL & Provisions8,574.4

412,554.46 17,665.57 24,241.65 28,39

Net Current Assets5,413.0

16,678.22 7,574.42 9,221.81 10,35

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets6,563.8

87,859.61 8,877.59 10,869.39 13,08


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Contingent Liabilities 609.68 769.95 976.05 1,673.19 2,546

Book Value (Rs) 246.24 298.31 359.06 220.10 264.3

Key Financial Ratios of Bharat

Heavy Electricals------------------- in Rs. Cr. -------------------

Mar

'05Mar '06 Mar '07 Mar '08 Mar '0

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 8.00 14.50 24.50 15.25 17.00

Operating Profit Per Share (Rs) 53.25 90.85 144.84 76.54 85.55

Net Operating Profit Per Share

(Rs)393.81549.17 709.38 399.19 543.6

Free Reserves Per Share (Rs) 219.29267.56 348.80 209.99 254.2

Bonus in Equity Capital -- -- -- 50.00 50.00Profitability Ratios

Operating Profit Margin (%) 13.52 16.54 20.41 19.17 15.73

Profit Before Interest And Tax

Margin (%)10.90 14.36 18.47 16.73 13.96


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Gross Profit Margin (%) 15.38 18.11 22.41 17.65 14.47

Cash Profit Margin (%) 11.78 13.97 14.88 15.59 12.12

Adjusted Cash Margin (%) 9.18 11.71 15.07 15.59 12.12

Net Profit Margin (%) 9.58 12.19 13.51 13.87 11.36

Adjusted Net Profit Margin (%) 6.98 9.92 13.70 13.87 11.36

Return On Capital Employed (%) 21.22 29.35 42.84 41.56 37.00

Return On Net Worth (%) 15.82 23.00 27.48 26.53 24.25

Adjusted Return on Net Worth (%) 11.53 18.72 27.86 27.07 23.28

Return on Assets Excluding

Revaluations6.30 8.23 9.10 8.14 --

Return on Assets Including

Revaluations6.30 8.23 9.10 8.14 --

Return on Long Term Funds (%) 21.22 29.35 42.84 41.56 37.00

Liquidity And Solvency Ratios

Current Ratio 1.63 1.53 1.43 1.38 1.36

Quick Ratio 1.22 1.17 1.13 1.09 1.02

Debt Equity Ratio 0.09 0.08 0.01 0.01 0.01

Long Term Debt Equity Ratio 0.09 0.08 0.01 0.01 0.01

Debt Coverage Ratios

Interest Cover 17.11 39.28 87.78 127.55 157.7

Total Debt to Owners Fund 0.09 0.08 0.01 0.01 0.01

Financial Charges Coverage Ratio 19.80 43.46 93.42 135.94 168.5

Financial Charges Coverage Ratio

Post Tax15.40 33.77 62.37 90.12 114.0

Management Efficiency Ratios

Inventory Turnover Ratio 3.41 3.68 4.24 3.88 3.70

Debtors Turnover Ratio 1.82 2.05 2.06 1.80 1.90

Investments Turnover Ratio 3.79 4.15 4.64 3.88 3.70


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Fixed Assets Turnover Ratio 8.31 11.87 14.62 4.48 5.20

Total Assets Turnover Ratio 1.47 1.72 1.97 1.81 2.05

Asset Turnover Ratio 2.67 3.54 4.27 4.48 5.20

Average Raw Material Holding 76.99 75.00 78.98 88.75 80.96

Average Finished Goods Held 12.48 11.47 10.27 12.03 9.74

Number of Days In Working

Capital202.17178.86 157.05 169.89 140.0

Profit & Loss Account Ratios

Material Cost Composition 52.88 52.81 49.30 53.22 58.56

Imported Composition of Raw

Materials Consumed32.58 28.71 30.94 27.73 27.81

Selling Distribution Cost

Composition1.89 1.45 1.27 1.22 1.09

Expenses as Composition of Total

Sales8.29 5.27 6.31 4.80 6.70

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 23.33 24.09 28.67 30.54 31.02Dividend Payout Ratio Cash Profit 18.97 21.02 26.04 27.66 28.03

Earning Retention Ratio 68.01 70.40 71.73 70.07 67.69

Cash Earning Retention Ratio 75.67 74.91 74.30 72.83 70.92

Adjusted Cash Flow Times 0.59 0.35 0.03 0.03 0.04

Mar

'05 Mar '06 Mar '07 Mar '08 Mar '0

Earnings Per Share 38.95 68.60 98.66 58.41 64.11

Book Value 246.24298.31 359.06 220.10 264.3


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Working capital analysis report of BHEL

Net Current Assets 5,413.01(2005) and 10,353.18(2009)

The W. Capital of the Co. is increased by 91.26% in last 5 years. This is showing

that Co.s C. Asset has become approximately double than its C. Liab.

Total CA, Loans & Advances 13,987.45(2005) and 38,743.86(2009)

The total CA, Loans & Advances has been increased by 176.99% in last 5 years.

Total CL & Provisions 8,574.44(2005) and 28,390.68(2009)

This has been increased by 231.10% in last 5 years means Co. is relying heavily

in Credits.

Cash and Bank Balance 1,392.86(2005) and 1,950.51(2009)

The co. cash balance has increased by 40% in last 5 years means co. use to

keep more cash in hand to make immediate payment and gain opportunity

advantage.

Fixed Deposits 1,785.01(2005) and 8,364.16(2009)

The Co. deposits have also been increased by 368.5% in last 5 years. Here the

co. has utilizing its funds properly.


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Loans and Advances 1,921.33(2005) and 4,616.67(2009)

It has been increased by 140.28% in last 5 years.

Sundry Debtors 5,972.14(2005) and 15,975.50(2009)

It has been increased by 167.5% in last 5 years.

Current Liabilities 7,248.99(2005) and 23,415.10(2009)

Note: C. Liab. Is treated as Creditor.

It has been increased by 223% in last 5 years.

If we talk about both its debtor and creditor then we can say that the co. is

using credit purchase policy heavily to get the benefit from it. On other hand it is

also able to get amount from its debtor on time which is good for the Co.

Provisions 1,325.45(2005) and 4,975.58(2009)

It has been increased by 275.38% in last 5 years. Here the co. approach is to

keep itself in safe mode.

Ratios

Current Ratio 1.63:1(2005) and 1.36:1(2009)

Here the co. C. Ratio in 2009 is not good in comparison to 2005. It means co.

has increased its C. Liab. In last 5 years. The co. must think of about it.

Quick Ratio 1.22:1(2005) and 1.02(2009)

After analyzing the Q. Ratio we can say that the co. was more able to make quick

payment in 2005 but right now in 2009 it has also a good ratio.

Inventory Turnover Ratio 3.41(2005) and 3.70(2009)


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As per this ratio there is only slightly changes has came in last 5 years. Here co.

ratio has increased and this is a good sign for Co.

Debtors Turnover Ratio 1.82(2005) and 1.90(2009)

Here also not much more changes have occurred in last 5 years. Here the co.

collection time has decreased, this is good for Co.

Comparison between NTPC and BHEL

C. Ratio (2:1)


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If we talk about C. Ratio then the BHEL has Current Ratio 1.63:1(2005) and

1.36:1(2009) and NTPC has in 2005 was 1.72:1 and in 2009 it is 2.89:1.

In terms of their C. Ratio NTPC has an edge over the BHEL in 2009. NTPC

has more effectively managed its C. Asset over its C. Liab.

Q. Ratio (1:1)

If we talk about in terms of Q. Ratio then the BHEL has Quick Ratio 1.22:1(2005)

and 1.02(2009) and NTPC has Quick Ratio in 2005 - 1.44:1 and in 2009 - 2.59:1

respectively.

Here both the Co.s has ability to make quick payment easily but NTPC

has again edge over the BHEL in 2009 because it has 2.59 Quick Asset in

comparison to BHEL 1.02.

Inventory Turnover Ratio

If we talk about the Inventory Turnover Ratio then BHEL has Inventory Turnover

Ratio 3.41(2005) and 3.70(2009) and NTPC has Inventory Turnover Ratio

14.08(2005) and 28.21(2009) respectively.

We can see a huge gap in Inventory Turnover Ratio between both the

companies, here the Inventory Turnover Ratio of NTPC far more than the BHEL.

Here the NTPC has edge over BHEL because it can produce twice a year.

Debtors Turnover Ratio

If we talk about the Debtor Turnover Ratio then BHEL has Debtors Turnover

Ratio 1.82(2005) and 1.90(2009) and NTPC has Debtors Turnover Ratio

24.47(2005) and 12.78(2009) respectively.


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Here we can also see a huge gap between both the companies ratio. Here

the BHEL has an edge over the NTPC. BHEL collection time has decreased

where as it is increased in case of NTPC.

Net Current Assets

If we talk about the N. Current then BHEL Net Current Assets 5,413.01(2005)

and it is 10,353.18(2009). The W. Capital of the Co. is increased by 91.26% in

last 5 years. This is showing that Co.s C. Asset has become approximately

double than its C. Liab. In case of NTPC the Net Current Assets 6,160.50(2005)

and 20,236.60(2009). It is increased by 228.5% in last 5 years. We know that this

is the Working Capital of the co. and it has increased tremendously in last 5

years, which is showing the co. effective working capital management.

Cash and Bank Balance

BHEL cash balance has increased by 40% in last 5 years where as NTPC Cash

and Bank balance has been decreased by 26% in last 5 years.

Fixed Deposits

BHEL F. Deposit have been increased by 368.5% in last 5 years where as NTPC

F.D. is increased by 180.11% in last 5 years.

Loans and Advances

BHEL Loans and Advances have been increased by 140.28% whereas NTPC

has been increased by 42.52% in last 5 years.


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Sundry Debtors

BHEL Debtors has been increased by 167.5% whereas NTPC Debtors has been

increased by 160.73% in last 5 years.

Conclusion:

As we know the both of company are renowned for its excellence and considered as

one of the best Indian Companies. But when we talk about its comparison then it

become difficult to do so. Here I have done the analysis of both the companies for last

five years in terms of their W.Capital.

As per C. Ratio and Inventor Turnover Ratio NTPC has edge over BHEL. In terms

of Q. Ratio Both are same but in terms of Debtor turn over BHEL has edge over NTPC.

If we talk about the N. Current Asset then BHEL W. Capital of the Co. is increased by

91.26% in last 5 years. This is showing that Co.s C. Asset has become approximately

double than its C. Liab. In case of NTPC it is increased by 228.5% in last 5 years. We

know that this is the Working Capital of the co. and it has increased tremendously in last

5 years, which is showing the co. effective working capital management.

Overall I can say that the W. Capital Management of NTPC is good than the BHEL fromthe above analysis. Because it has an edge over the Ratio as well as in C. Asset and C.

Liab.


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Bibliography-

www.moneycontrol.com

www.wikipedia.com

www.capitaline.com
http://www.money/http://www.wikipedia.com/http://www.capitaline.com/http://www.money/http://www.wikipedia.com/http://www.capitaline.com/


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www.ntpc.com

www.bhel.com

www.investopedia.com

www.capitaline.co

www.moneybhai.com

www.planware.org

www.workingcapital.htm
http://www.ntpc.com/http://www.bhel.com/http://www.investopedia.com/http://www.capitaline.co/http://www.moneybhai.com/http://www.workingcapital.htm/http://www.ntpc.com/http://www.bhel.com/http://www.investopedia.com/http://www.capitaline.co/http://www.moneybhai.com/http://www.workingcapital.htm/

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