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Financial Analysis Of Neyveli Lignite Corporation Limited Presented To: Ms. Anjali Pandya S.P.B. Patel College-MBA Programme Presented By: Vijay C. Nayi Roll No: 915

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CHAPTER 1INTRODUCTION OF THE COMPANY1.1 HISTORY OF THE COMPANY:Neyveli Lignite Corporation Limited (NLC) is a Government Owned lignite mining company in India. One of the Public Sector undertaking, the company is wholly owned by the Union Government and Administered through the Ministry of Coal. NLC Operates the largest OPEN_PIT lignite mines in India and mines some 24 million tones of lignite per year for Fuel, with an installed capacity of 2490 MW of Electricity per year. Of this, the origin state of Tamil Nadu consume 1167 MW, with the neighboring states (Kerala, Karnataka and Andra Pradesh) consuming most of the rest. The company operates Thermal Power Plants, Three large Mines. The company also supplies a large quantity of sweet water to Chennai, thanks to the Artesian Aquifers in the lignite mines. Mines and thermal power stations, with corresponding capacities:

Mine

MTPA Thermal power station MTPA Station I Station II Station I Expansion 600 1470 420

Mine I 10.5 Mine II 3.0 Mine IA 10.5

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VISIONTo emerge as a leading Mining and Power Company, continue to be a socially responsible company and strive for operational excellence in Mining and Exploration.

MISSIONStrive towards greater cost competitiveness and work towards continued financial strength. Continually imbibe best practices from the best Indian and International Organizations engaged in Power Generation and Mining. Be a preferred employer by offering attractive avenues of career growth and excellent work environment and by developing human resources to match international standards. Play an active role in society and be sensitive to emerging environmental issues.

1.2 PRODUCTION PERFORMANCE:Lignite 5 YEARS PRODUCTION PERFORMANCE OF MINES LIGNITE in LT

YEAR TARGET ACTUAL

2008-09 (Provl) 211.40 213.07

2007-08 200.50 215.86

2006-07 204.00 210.14

2005-06 204.00 204.35

2004-05 210.00 215.67

Overburden 5 YEARS PRODUCTION PERFORMANCE OF MINES Removal of Overburden in LM 3YEAR TARGET ACTUAL 2008-09 (Provl) 1399.00 1463.44 2007-08 1312.00 1358.26 2006-07 1195.00 1280.70 2005-06 1195.00 1196.59 2004-05 1185.00 1204.37

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Power GENERATION OF POWER (GROSS) Billion Units

YEAR TARGET ACTUAL

2008-09 (Provl) 16.29 15.76

2007-08 15.71 17.46

2006-07 15.71 15.79

2005-06 15.71 16.24

2004 -05 15.28 16.74

The main core activity of NLC is Lignite Excavation and power generation using lignite excavated. NLC is having three lignite mines named as Mine I, Mine II and Mine IA. Also raw lignite is being sold to small scale industries to use it as fuel in their production activities. MINES MINE I MINE I A MINE II CAPACITY MINES 10.5 MT / A 3 MT / A 10.5 MT / A OF

NLC is generating power in its Thermal Power Station I, Thermal Power Station -II and in Thermal Power Station I Expansion. All the southern states are beneficiaries of this power generation project.

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THERMAL POWER STATION IPower Generation : 600 MW ( 6 * 50 MW + 3 * 100 MW) in 9 units Power Allocation :

ALLOTED TOTNEB Export Station Consumption NLC (Mines, others)

%79% 12%

schemes Township & 9%

THERMAL POWER STATION I ExpansionPower Generation : 420 MW ( 2 * 210 MW ) in 2 units Power Allocation :

ALLOTED TOKPTCL KSEB TNEB PONDY Unallocated power

ACTUA L22.00 14.00 46.00 3.00 15.00

THERMAL POWER STATION IIPower Generation : 1470 MW ( 7 * 210 MW ) in 7 units Power Allocation :

ALLOTED TOAndhra Pradesh Karnataka Kerala Tamil Nadu Pondicherry NLC (Aux consumption) & Internal

%19 14 10 30 5 7 15

ACTUA L277 MW 199 MW 153 MW 441 MW 80 MW 100 MW 220 MW

1.3 CORPRATE BODY:

Unallocated share

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CHAIRMAN-CUM-MANAGING DIRECTOR SHRI. A. R. Ansari DIRECTORS Dr. Rajiv Sharma Shri. M. F. Farooqui Shri. J. N. Prasanna Kumar Shri. V. Sethuraman Shri. P. Babu Rao Shri. B. Surender Mohan Dr. M. S. Ananth Shri. Y. N. Apparao Sari. Shashi Kumar Dr. Krishana Kumar Shri. Ravindra Sharma Shri. P. K. Choudhury Prof. S. Sadagopan Shri. S. Rammaohan COMPANY SECRETARY Shri. K. Viswanath

REGISTERED OFFICENeyveli House, No.135, Periyar E. V. R. High Road, Kilpauk, Chennai - 600 010.

AUDITORS1). P. B. Vijayaraghavan & Co., Chartered Accountants, No.14 (Old No.27), Cathedral Garden Road, Nungambakkam, Chennai 600 034. 2). Ganesan and Company, Chartered Accountants, No. 9 (Old No.36) South Beach Avenue, M.R.C. Nagar Main Road, R.A.Puram, Chennai 600 028.

PRINCIPAL BANKERS6

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State Bank of India Canara Bank Cenrtal Bank of India Syndicate Bank Calyon Bank United Bank of India Indian Bank Karur Vysya Bank Limited Indian Overseas Bank

DEPOSITORY REGISTERAR & SHARE TRANSFER AGENTIntegrated Enterprises (India) Ltd., 2nd Flour, Kences Tower No.1, Ramakrishna Street, North Usman Road, T. Nagar, Chennai 600 017.

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ANALYSIS OF BALANCE SHEET2.1 TREND ANALYSIS OF BALANCE SHEET:

Trend Analysis involves calculation of percentage changes in financial statement items for a number of successive years. It is an extension of horizontal analysis of several years. It indicates the direction of change in any thing as compared to past. Trend analysis represents the trend of increase or decrease of items of balance sheet. It is expressed in terms of percentage as compared to base year. Here base year is 2006-2007 as we have done the analysis of last three year i.e. 2006-07, 2007-08, and 2008-09. The procedure followed is to assign 100% to base year and to calculate percentage change in each item of other years in relation to base year. In Balance sheet, balances are given for the particular firms. It includes the shareholders funds, loan funds and fixed assets, investments, all taxes also the current assets, loans advances and the current liabilities.

TREND ANALYSIS OF BALANCE SHEET8

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TABLE: 2.1 PARTICULARS SOURCES OF FUNDSSHARE HOLDERS FUNDS: Share Capital Reserve & Surplus

2006-07

2007-08

2008-09

100.00 100.00

100.00 110.67

100.00 117.12

TOTAL SHARE HOLDERS FUNDSLOAN FUNDS: Secured loan Unsecured Loan

100.00100.00 100.00

108.52276.47 110.67

113.67457.13 115.73

TOTAL LOAN FUNDSDEFERRED TAX LIABILITY

100.00100.00

185.3488.42

269.4997.98

SOURCES OF FUND (TOTAL) APPLICATION OF FUNDSFIXED ASSETS: Gross Block Less: Depreciation Net Block Capital Work-In-Progress Advance for Capital Items

100.00

118.20

134.95

100.00 100.00 100.00 100.00 100.00

103.68 108.21 97.28 216.59 78.49

116.67 116.48 116.95 244.63 45.61

TOTAL FIXED ASSETSINVESTMENTS CURRENT ASSET, LOAN & ADVANCES: Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loan & Advances

100.00100.00 100.00 100.00 100.00 100.00 100.00

129.2488.90 98.37 244.75 111.67 68.67 83.69

148.0487.30 117.64 873.99 128.19 81.48 162.70

TOTAL CURRENT ASSET, LOAN & ADV.CURRENT LIABILITIES & PROVISIONS: Current Liabilities Provisions

100.00100.00 100.00

109.00118.54 88.35

140.00166.49 190.26

TOTAL CURRENT LIAB. & PROVISIONS NET CURRENT ASEETSMISCELLANEOUS EXPENDITURE

100.00 100.00100.00

110.93 108.14148.40

172.48 125.65266.02

APPLICATION OF FUNDS (TOTAL)

100.00

118.20

134.95

2.2 INTERPRETATION OF TREND ANALYSIS OF9

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BALANCE SHEET WITH THE HELP OF CHART2.2.1 SHARE CAPITAL:

TABLE 2.2.1

CHART 2.2.1

YEAR2004-05 2005-06 2006-07

SHARE CAPITAL100.00 100.00 100.00

SHARE CAPITAL120.00 100.00 80.00 60.00 40.00 20.00 0.00 2006-07 2007-08 Year SHARE CAPITAL 2008-09

INTERPRETATION:The chart of share capital shows that in the base year i.e. in 2006-07 share capital is Rs. 1677.71 crores and next two year i.e. in year 2007-08 and 2008-09 it is remain same

2.2.2. RESERVES & SURPLUSE:10

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2.2.2. TABLERESERVE & SURPLUS100.00 110.67 117.12

2.2.2. CHARTRESERVE & SURPLUSE120.00 115.00 110.00 105.00 100.00 95.00 90.00 2006-07 2007-08 Year RESERVE & SURPLUSE 2008-09

YEAR2006-07 2007-08 2008-09

INTERPRETATION:The above chart shows that the reserve and surplus of the company is constantly increases from the base year. In 2006-07 it was 6652.80 crores and in year 2007-08 it was increased by 110.67% to Rs.7362.57 crores. In year 200809 it was increased by 117.12% i.e. Rs. 7791.52 crores which shows the company transfers more and more profit in reserve and surplus year by year. This way company invests more profit in the growth of the company.

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2.2.3. TOTAL LOAN FUND: 2.2.3. TABLETOTAL LOAN FUND100.00 185.34 269.49T T LO FU D O AL AN N30 .0 0 0 25 .0 0 0 20 .0 0 0 15 .0 0 0 10 .0 0 0 5 .0 0 0 0.0 0 2 6-0 00 7 2 7-0 00 8 Y ear T T L L ANFU D OA O N 20 9 0 8-0

2.2.3. CHART

Year2006-07 2007-08 2008-09

INTERPRETATION:The chart of loan funds shows the increasing trend of loan funds of the company. In the base year the loan funds of the company was Rs.1505.70 crores and after this year in year 2007-08 it was increased to Rs. 2790.68 crores i.e. by 185.34%. In year 2008-09 it was increased than year 2006-07, it was Rs. 4057.70 crores i.e. by 269.49%. This shows that the company is using more and more debts and is dependent more on outsider investors.

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2.2.4. DEFERED TAX LIABILITY: 2.2.4. TABLEDEFERED TAX LIABILITY100 88.42 97.98DEFERED TAX LIABILITY 102 100 98 96 94 92 90 88 86 84 82 2006-07 2007-08 YEAR 2008-09

2.2.4. CHART

YEAR2006-07 2007-08 2008-09

DEFERED TAX LIABILITY

INTERPRETATION:The above chart shows that the deferred tax liability is not same in every year. It was Rs. 685.28 crores in the base year 2006-07 but it decreased to Rs. 605.89 crores i.e. 88.42%. In the year 2008-09 it increased to Rs. 671.44 crores i.e. 97.98%. This liability arises on account of timing differences. So, here it is not same in every year.

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2.2.5 .TOTAL CAPITAL EMPLOYED: 2.2.5. TABLE 2.2.5. CHART

YEAR2006-07 2007-08 2008-09

TOTAL CAPITAL EMPOYED100 118.2 134.95TOTAL CAPITAL EMPOYED

160 140 120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09 TOTAL CAPITAL EMPOYED

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INTERPRETATION:The chart of total capital employed shows the increasing trend of the company. In base year 2006-07 it was Rs.10521.49 crores and it increased in 2007-08 to 118.20% i.e. Rs. 12436.85 crores. In the year 2008-09 it increased to 134.95% i.e. Rs. 14198.37 crores. This shows that the company employs more capital to run the business.

2.2.6. TOTAL FIXED ASSETS: 2.2.6. TABLETOTAL ASSETSTOTAL FIXED FIXED ASSETS

2.2.6. CHART

YEAR

2006-07 160 100 2007-08 140 129.24 2008-09 120 148.04100 80 60 40 20 0

TOTAL FIXED ASSETS

2006-07

2007-08 YEAR

2008-09

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INTERPRETATION:The above chart shows that the fixed assets of the company increasing during the next two years from the base year. In the year 2006-07 it was Rs. 5826.05 crores and it increased in year 2007-08 to Rs. 7529.43 crores i.e. 129.24%. In the year 2008-09 it increased to Rs. 8625.04 crores i.e. 148.04% from the base year. So, it shows that the company invested in the fixed assets.

2.2.7. INVESTMENTS: 2.2.7. TABLE 2.2.7. CHART

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YEAR2006-07 2007-08 2008-09

INVESTMENTS100 88.9 87.3INVESTMENTS

105 100 95 INVESTMENTS 90 85 80 2006-07 2007-08 YEAR 2008-09

INTERPRETATION:The chart of investments shows mixed trend of capital invested in out side of the company. In the base year it was Rs. 929.41 crores and it decreased in the year 2007-08 to Rs. 826.22 crores i.e. 88.90%. In next year i.e. in 2008-09 it decreased to base year. It was Rs. 811.37 crores i.e. decrease from base year to 87.30%. This means company had got back its money from investments.

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2.2.8. TOTAL CURRENT ASSETS, LOANS AND ADVANCESCURRENT ASSETS, LOANS & ADVANCES100.00 109.00 140.00CURRENT ASSETS, LOANS & ADVANCES 160 140 120 100 80 60 40 20 0 YEAR 200607 200708 200809 CURRENT ASSETS, LOANS & ADVANCES

YEAR2006-07 2007-08 2008-09

2.2.8. TABLE CHART

2.2.8.

INTERPRETATION:The chart represents the increasing trend of current assets, loans and advances. It is quite higher in 2007-08 and reached to Rs. 5883.75 crores i.e. 109.00% than base year 2006-07 Rs. 5398.09. In 2008-09 it increased to Rs. 7557.07 crores i.e. 140.00% compared to base year. In 2007-08 cash and bank balances increased so this was increased higher than 2008-09. So, we can say that company has smooth cash flow.

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2.2.9. TOTAL CURRENT LIABILITIES AND PROVISIONS:

YEAR2006-07 2007-08 2008-09

CURRENT LIAB. & PROVISIONS100.00 110.93 172.48

2.2.9. TABLE

2.2.9. CHART

CURRENT LIAB. & PROVISIONS 200 180 160 140 120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09

CURRENT LIAB. & PROVISIONS

INTERPRETATION:The above chart shows that the current liabilities and provisions have been increasing year by year. In 2006-07 it was Rs. 1653.28 crores and it increased in year 2007-08 to Rs. 1834.04 crores i.e. to 110.93%. In year 2008-09 it increased to Rs. 2851.56 crores i.e. to 172.48% compared to base year. It shows that the current liabilities of the company are increasing because there was increase in creditors every year.

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YEAR2006-07 2007-08 2008-09

NET CURRENT ASSETS100.00 108.14 125.65

2.2.10. NET CURRENT ASSETS: 2.2.10. TABLE CHART 2.2.10.

NET CURRENT ASSETS 140 120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09 NET CURRENT ASSETS

INTERPRETATION:The above chart of net current assets shows the increasing trend. The net current assets of the company increased from 2006-07 Rs. 3744.81 crores to year 2007-08 Rs. 4049.71 crores i.e. 108.14%. In the year 2008-09 it increased to Rs. 4705.51 crores i.e. 125.65% compared to base year. Net assets increased more in year 2007-08 because inventories increased more. This shows that the company has enough amounts of current assets to pay its current liabilities.

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YEAR2006-07 2007-08 2008-09

MISCELLANEOUS EXPENDITURES100.00 148.40 266.02

2.2.11. MISCELLANEOUS EXPENDITURE: 2.2.11. TABLEMISCELLANEOUS EXPENDITURES 300 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 MISCELLANEOUS EXPENDITURES

2.2.11 CHART

INTERPRATATION:The above chart shows the increasing trend for miscellaneous expenditure. In year 2006-07 it was Rs.21.22 crores and it increased in year 2007-08 to Rs. 31.49 crores i.e. 148.40%. In the year 2008-09 it increased to Rs. 56.45 crores i.e.266.02%. This shows that the company is increasing its

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miscellaneous expenditure by not writing off or adjusting Preliminary Project Expenditure and Advance Overburden Removal Expenditure.

CHAPTER 3

ANALYSIS OF PROFIT & LOSS ACCOUNT3.1 TREND ANALYSIS OF PROFIT & LOSS ACCOUNTProfit and Loss Account also called the 'Income Statement'. A financial statement summarizes the result of the operations of an enterprise for a given time by disclosing the revenues earned and the expenses incurred. By measuring the net profit earned by a business, it indicates the degree of operating success of a business in a period. Trend analysis of profit & loss account involves the calculation of percentage change in profit & loss accounts items for a number of successive years. It measures any change in expenses as well as incomes for several years in compensation with the base year. So, it gives information in which items the company has blocked its money as compared to base year so that corrective steps can be taken. Here, we have taken 2006-07 as base year.

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TREND ANALYSIS OF PROFIT & LOSS ACCOUNT TABLE 3.1 PARTICULAR INCOMESales Adjustment relating to previous year sales Other Income Increase/ Decrease in Stocks 100.00 100.00 116.20 -10.23 108.23 105.51

2006-07

2007-08

2008-09

100.00100.00 100.00

141.44109.94 -116.56

159.14111.37 144.66

TOTAL EXPENSESEmployees Remuneration and Benefits Interest Depreciation Other Expenses Less: Expenses Capitalized

100.00100.00 100.00 100.00 100.00 100.00 100.00

130.95152.50 20.33 101.60 104.09 115.95 294.74

148.54225.88 18.83 94.89 164.78 162.90 1639.23

TOTALProfit for the year before extraordinary items

100.00100.00

115.75163.72

161.26121.15

Profit Before TaxTOTAL Income Tax

100.00100.00

162.50103.85

119.5973.05

Profit After TaxSurplus brought forward from previous year

100.00100.00

194.36106.64

144.87117.33

Carried forward

100.00

114.50

119.80

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3.2 INTERPRETATION OF PROFIT & LOSS ACCOUNT WITH THE HELP OF CHART 3.2.1. NET SALES: 3.2.1. TABLENET SALES100 141.44 159.14

3.2.1. CHARTNET SALES 180 160 140 120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09

YEAR2006-07 2007-08 2008-09

NET SALES

INTERPRATATION:The chart of sales shows increasing trend through out the three years. As in 2006-07 the sales of the company was Rs. 2108.11 crores which was

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increased in 2007-08 to Rs. 2981.65 crores i.e. 141.44%. In the year 2008-09 it is increased to Rs. 3354.91 crores i.e. 159.14% compared to base year. So, it shows that the demand of the companys products increase day by day.

3.2.2. OTHER INCOME: 3.2.2. TABLE 3.2.2. CHART

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YEAR2006-07 2007-08 2008-09

OTHER INCOME100 109.94 113.37

OTHER INCOME 115 110 105 OTHER INCOME 100 95 90 2006-07 2007-08 YEAR 2008-09

INTERPRETATION:The chart of Other Income shows increasing trend through out the three years.As in 2006-07 the other incomes of the company was Rs. 597.08 crores which was increased in 2007-08 to Rs. 656.42 crores i.e. 109.94%. In the year 2008-09 it is increased to Rs. 664.98 crores i.e. 113.37% compared to base year. So, we can say that company gets other incomes also from its investments.

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YEAR2006-07 2007-08 2008-09

EMPLOYEES' REMUNERATION & BENEFITS100 152.5 225.88

3.3.3. EMPLOYEESREMUNERATION & BENEFITS: 3.3.3. TABLEEMPLOYEES' REMUNERATION & BENEFITS 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 EMPLOYEES' REMUNERATION & BENEFITS

3.3.3. CHART

INTERPRETATION:The chart of employees remuneration & benefits shows increasing trend through out the three years. As in 2006-07 the employees remuneration & benefits of the company was Rs. 557.49 crores which was increased in 2007-08 to Rs.850.15 crores i.e. 152.50%. In the year 2008-09 it is increased to Rs. 1259.25 crores i.e. 225.88% compared to base year. Company used more revenues in 2008-09 for employees remuneration & benefits.

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3.3.4. INTEREST: 3.3.4. TABLE 3.3.4. CHARTINTEREST

YEAR2006-07 2007-08 2008-09

INTEREST100 20.33 18.83

120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09 INTEREST

INTERPRETATION:The chart of interest shows decreasing trend through out the three years. As in 2006-07 the interest on the borrowings of the company was Rs. 43.28 crores which was decreased in 2007-08 to Rs. 8.80 crores i.e. 20.33%. In the year 2008-09 it is decreased to Rs. 8.15 crores i.e. 18.83% compared to base year. Every year borrowings are decreased, so interest is also decreased.

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3.3.5. DEPRECIATION: 3.3.5. TABLEYEAR2006-07 2007-08 2008-09

3.3.5. CHART

DEPRECIATION100 101.6 94.89DEPRECIATION

104 102 100 98 96 94 92 90 2006-07 2007-08 YEAR 2008-09 DEPRECIATION

INTERPRETATION:The chart of depreciation shows first increasing and then decreasing trend. As in 2006-07 the depreciation of the fixed assets in the company was Rs. 447.34 crores which was increased in 2007-08 to Rs. 454.49 crores i.e. 29

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101.60%. In the year 2008-09 it is decreased to Rs. 424.50 crores i.e. 94.89% compared to base year.

3.3.6. PROFIT BEFORE TAX: 3.3.6. TABLE 3.3.6. CHART

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YEAR2006-07 2007-08 2008-09

PROFIT BEFORE TAX100 162.5 119.59PROFIT BEFORE TAX

180 160 140 120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09

PROFIT BEFORE TAX

INTERPRETATION:The chart of PBT shows increase-decrease trend through out the three years. As in 2006-07 PBT of the company was Rs. 874.66 crores which was increased in 2007-08 to Rs. 1421.29 crores i.e. 162.50%. In the year 2008-09 it is increased to Rs. 1046.01 crores i.e. 119.59% compared to base year. Every year sales is increasing and expenses are also increasing but in comparison less increased so every year profit before tax is increasing.

3.3.7. TAX EXPENSES: 3.3.7. TABLE 3.3.7. CHART

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YEAR2006-07 2007-08 2008-09

TAX EXPENSES100 103.85 73.05TAX EXPENSES

120 100 80 60 40 20 0 2006-07 2007-08 YEAR 2008-09 TAX EXPENSES

INTERPRETATION:The chart of tax expense shows increase-decrease trend through out the three years. As in 2006-07 tax expense of the company was Rs. 307.88 crores which was increased in 2007-08 to Rs. 319.72 crores i.e. 103.85%. In the year 2008-09 it is decreased to Rs. 224.92 crores i.e. 73.05% compared to base year.

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3.3.8. PROFIT AFTER TAX: 3.3.8. TABLE 3.3.8. CHARTPROFIT AFTER TAX

YEAR2006-07 2007-08 2008-09

PROFIT AFTER TAX100 194.36 144.87

250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 PROFIT AFTER TAX

INTERPRETATION:The chart of PAT shows first increasing trend and then decreasing trend. As in 2006-07 PAT of the company was Rs. 566.78 crores which was increased in 2007-08 to Rs. 1101.57 crores i.e. 194.36%. In the year 2008-09 it is increased to Rs. 821.09 crores i.e. 144.87% compared to base year. Every year sales is increasing and expenses are also increasing but in comparison expenses are less increased so every year profit after tax is increasing.

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CHAPTER 4 ANALYSIS OF CASH FLOW STATEMENTINTRODUCTION:The profit and loss account reports only the effects of the current operations of the enterprises on its financial position. The balance sheet shows the financial position of the enterprise at the end of the year. Neither of these statements describes the investments in assets during the period and how those investments are financed. The 'Statements of cash flows' is a relatively new financial statement that reflects the major sources of cash receipts and cash payments of an enterprise. It reports the cash effects during a period of not only the enterprise's operations but also its investing and financial activities. This statement of cash flow provides relevant information about the cash receipts and cash payments of enterprises during the period. Information about an enterprise cash flow is useful in assessing the enterprise liquidity, financial flexibility, profitability, and risk. Cash flow information is widely used by investors, analysts, creditors, managers, and others.

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(A)

CASH FLOW FROM OPERATING ACTIVITIES TABLE 4.1 ( Rs. in corers ) 2007-08 2008-09 1423.95 1053.723.34 535.18 1.97 597.34

PARTICULARS Profit Before TaxADJUSTMENT FOR: Less: Profit on disposal of assets Interest Income Add: Depreciation Other non cash charges Interest charged to P & L A/c NET ADJUSTMENT

2006-07 869.7722.13 471.10

493.23447.34 11.63 43.28

538.52454.49 -20.26 8.88

599.31424.50 232.55 8.15

Operating Profit before working Capital chargesAdjustment for trade and other receivables: Sundry Debtors Loans & Advances Inventories & other current assets Trade payables

502.25 9.02 878.79

443.11 -95.41 1328.54

665.20 65.89 1119.61

79.03 4.40 -95.27 649.53

-123.34 17.03 9.38 233.30

-562.40 -38.00 -88.39 582.34

Cash flow generated from operationDirect Taxes Paid

1516.48-430.24

1464.91-356.14

1013.16-418.68

Cash Flow Before Extra-ordinary 1086.24 Items 7 PPTExtra-Ordinary Items Prior period transaction Capital grants received Capital grants utilized 0.00 5.52 1.97 -0.78

1108.770.00 0.00 1.91 -2.71

594.480.00 -8.71 2.72 -1.07

Net Cash from Operating Activities

1092.95

1107.98

587.42

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(B) CASH FLOW FROM INVESTING ACTIVITIES TABLE 4.2 (Rs.in crores) PARTICULARSPurchase of Fixed Assets/Preliminary expenses Sale of Fixed Assets/Projects from continuing Operation Sale/Purchase of Investments Interest Received

2006-07-1657.15 22.52 1662.01 441.49

2007-08-2102.98 14.13 103.19 607.93

2008-09-1542.18 5.52 103.20 567.45

Net Cash used in Investing Activities 468.87

-1377.73

-866.01

CASH FLOW FROM FINANCING ACTIVITIES TABLE 4.3 (Rs. in crores) PARTICULARS 2006-07 2007-08 2008-09 (C)Long term borrowing (Net) Issue of Shares Interest paid Dividend (including dividend tax) 200.84 -76.58 -0.29 1278.28 -87.05 -431.68 1444.52 10.35 -222.86 -196.27

Net cash used/received in Financing 123.97 activitiesNet Increase/Decrease Cash and Cash 1685.79 Equivalents Cash and Cash Equivalents as at the 2549.12 beginning of the year

759.55489.80 4234.91

1035.74757.15 4725.04

Cash and Cash Equivalents as at the 4234.91 end of the year

4724.71

5482.19

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INTERPRETATION OF CASH FLOW STATEMENT(A) CASH FLOW FROM OPERATING ACTIVITIES:In the year 2006-07 the companys cash flow from operating activities is Rs. 1092.95 crores. In this year cash was high because profit before tax was high. In the year 2007-08 the cash flow from operating activities was increased as compared to previous year. In this year cash flow was Rs. 1107.98 crores. It is increased because a Direct tax was less. In the year 2008-09 the cash flow from operating activities is Rs. 587.42 crores. This year cash flow is decreased as compared to previous year and also 2006-07. Here, cash flow from operating activities is fluctuating. First it is increased in 2006-07 from year 2007-08 and then it is decreased in 2008-09.

(B) CASH FLOW FROM INVESTING ACTIVITIES:Cash flow from investing activities describes how company generates cash from investing activities. The cash flow from investing activities was Rs. 468.87 crores in the year 2006-07. It is decreased in 2007-08 to Rs. (1377.73) crores and in the year 2008-09 it is decreased to Rs. (866.01) crores. The cash flow from operating activities is increasing and then decreasing. In the year 2007-08 the company has purchase more fixed assets and more interest paid because of that this came so low. In the year 2008-09 the company has also purchased more fixed assets so this comes so high compared to the 2006-07. So, we can say that the company is interested in increasing fixed assets so its good for company.

(C) CASH FLOW FROM FINANCING ACTIVITIES:Cash flow from financing activities shows the fluctuation in every year. In the year 2006-07 cash flow from financing activities was Rs. 123.97 crores. In 37

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the year 2007-08 it was Rs. 759.55 crores and in year 2008-09 Rs. 1035.74 crores. In year 2006-07 it was less because company has issue less dividend. In the year 2007-08 the company has got interest from long term investments. In the year 2008-09 it was high because company has more net long term borrowings more dividends paid.

CHAPTER 5RATIO ANALYSIS5.1 INTRODUCTION:Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly established relationships between the items of the balance sheet and profit and loss amount. Ratio analysis is powerful tool to financial analysis. Ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. Ratio analysis involves establishing a relevant financial relationship between two components of financial statement. Two companies may have earned the same amount of profit in a year, but unless the profit is related to sales or total assets, it is not possible to conclude which of them is more profitable. Ratio analysis helps in identifying significant relationship between financial statement items for further investigation. If used with understanding of industry factor and general economic conditions, it can be powerful tool for recognizing a companys strengths as well as its potential trouble spots. It can be classified as below:

LIQUIDITY RATIO PROFITABILITY RATIO ASSETS TURN OVER RATIO FINANCE STRUCTURE RATIO VALUATION RATIO

The all ratios are calculated and interpreted in this chapter.

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5.2 LIQUIDITY RATIO:Liquidity ratios are the ratio, which give the liquidity position for the company i.e. they are computed for seeing whether the company is capable of meeting its short-term obligations from its short-term resources. The failure of the company to meet its obligations due to lack of the sufficient liquidity will result in reducing the creditworthiness of the company. In addition, a very high degree of the liquidity ration is bad because the idle assets earn nothing and also the companys funds will be unnecessarily tied up in current assets. Therefore, the liquidity ratio should be in the proper rate. The different types of liquidity ratios are calculating as under and are interpreted. Liquidity ratio includes the following ratios:

Current Ratio Quick Ratio Net Working Capital Ratio Cash Generated Per Rupee of Sales

5.2.1 CURRENT RATIO:Current Ratio= Current Assets Current Liabilities Where, Current Assets = Stock + Debtors + Bills Receivables + Cash & Bank balance + Prepaid Expenses. Current Liabilities = Creditors + Bills Payable + Bank Over Draft + Out Standing Expenses

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TABLE 5.2.1 (A) YEARCurrent Assets Current liabilities

2006-075398.09 1653.28

(Rs. In Crores) 2007-08 2008-095883.75 1834.04 7586.18 2856.75

CURRNT RATIO

3.26 Times

3.21 Times

2.66 Times

CHART 5.2.2 (A)CURRENT RATIO 3.5 3 2.5 2 1.5 1 0.5 0 2006-07 2007-08 YEAR 2008-09 CURRENT RATIO

TREND ANALYSIS: TABLE 5.2.2 (B) YEARCurrent Assets Current liabilities

2006-07100.00 100.00

2007-08109.00 110.93

2008-09140.53 172.80

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CHART 5.2.2 (B)TREND ANALYSIS350 300 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 CURRENT LIABILITIES CURRENT ASSETS

INTEPRETATION: Current Ratio is a part of liquidity ratio. Pre supposed by the ratio that current liabilities are top be paid from the current assent, therefore a comparison is made in the ratio of current assets and current liabilities, by having current assets as numerator and current liabilities as denominator. The ratio depicts the amount of current assets available for current liabilities. Its a widely used indicator of company abilities to pay its debts in the short term. It shows the amount of Current assets a company has per rupee of current liabilities for the purpose of current liabilities ratio.

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Current assets include loans and advances and current liabilities include provisions. The ideal current ratio is 2:1 or more is acceptable. Higher the current ratio better is the liquidity position and here the current ratio is more than 2:1 in all three years even it is decreased after every year. Current ratio is more because the current liabilities are less than current assets compared to current assets. Overall, the financial position of the company is strong as current ratio is more than 2:1

5.2.2 QUICK RATIO / ACID TEST RATIO:Quick Ratio = Where, Quick Assets = Current Assets - Inventories Quick Liabilities = Current Liabilities Bank Over Draft Quick Assets___ Quick Liabilities

YEARQuick Assets Quick Liabilities

TABLE 5.2.3 (A) (Rs. In Crores) 2006-07 2007-08 2008-094942.60 1653.28 5435.7 1834.04 7050.33 2856.75

QUICK RATIO

3.00 Times

2.96 Times

2.47 Times

CHART 5.2.3 (A)

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53070094.docQUICK RATIO 3.5 3 2.5 2 1.5 1 0.5 0 2006-07 2007-08 YEAR 2008-09 QUICK RATIO

TREND ANALYSIS: TABLE 5.2.4 (B) YEARQuick Assets Quick Liabilities

2006-07100.00 100.00

2007-08109.98 110.93

2008-09142.64 172.80

CHART 5.2.4 (B)

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TREND ANALYSIS350 300 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 QUICK LIABILITIES QUICK ASSETS

INTERPRETATION: The ratio of current assts less inventories to current liabilities less bank over draft. Its a part of liquidity ratio. It is also called acid test ratio, establishes a relationship between quick, or liquid, assets and current liabilities. Assets are liquid if they can be converted into cash immediately or reasonably soon without a loss of value. Cash is most liquid asset. Generally, quick ratio should be 1:1 shows the satisfactory position. Here, in 2006-07 quick assets are more than quick liabilities as inventory is 8% of total current assets. So, quick ratio is more but in next two years it comes less than 3.00 i.e. 2.96 and 2.47. It is decreased in 2008-09 than 2006-07 as inventory is increased but it is up to satisfaction. Overall, company is good at its liquidity as quick ratio is 3.00:1, 2.97:1 and 2.47:1 in 2006-07, 2007-08 and 2008-09 respectively.

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5.2.3 NET WORKING CAPITAL:Net Working Capital = Current Assets Current Liabilities

YEARCurrent Assets Current liabilities

TABLE 5.2.5 (A) (Rs. In Crores) 2006-07 2007-08 2008-095398.09 1653.28 3744.81 5883.75 1834.04 4049.71 7586.18 2856.75 4729.43

NET WORKING CAPITAL

CHART 5.2.5 (A)

NET WORKING CAPITAL 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2006-07 2007-08 YEAR 2008-09

NET WORKING CAPITAL

INTERPRETATION: Net working capital means total current assts minus (-) total current liabilities. This ratio represents the part of the long term fund represented by the net worth and long term debt, which are permanently blocked in the current assets.

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A positive net working capital is a good indicator of liabilities position of the company. Here we can see the all three year net working capital is fluctuated. This ratio shows the company has constantly increased net working capital. Overall the year 2007-08 and 2008-09 is net working capital is high and the year 2006-07 is low.

5.2.4 CASH GENERATED PER RUPEE OF SALES:Cash Generated Per Rupee of Sales = Profit after tax + Depreciation + Non Cash Expenses Sales

TABLE 5.2.4 CASH GENERATED PER RUPEE OF SALES YEAR 20062007200807 08 09 RATIO (Rs.) 0.48 0.52 0.38

CHART 5.2.4

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53070094.docRATIO 0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 RATIO

INTERPRETATION: This Ratio shows that percentages or paisa per rupee of sales, which is available in cash flow. If cash generated per rupee sales is high than sign for good and very reputed company and if cash generated per rupee sales is low than sign for bad and no more reputed company. Cash generated per rupee sales include the profit after taxes, depreciation, non cash expenses and net sales. Here Non cash an expense is include the write off of bad debts. In here given the graph its clearly indicate that cash generated per rupee sales is varying in all the three years. Cash generated per rupee sales in the year 2006-07 is 48 paisa, in 2007-08 is high i.e. 52 paisa and in year 200809 it is 38 paisa.

5.3 PROFITABILITY RATIO:Profitability is the measure of earning ability of the business. Profitability ratios are generally measured in parentage based on the calculation of absolute profit figures. Profit is a positive difference between the sales and the expenses. It measures the degree of operating success of a company in an accounting period. The only reason why investors are interested in a company is that they think they will earn a reasonable return in the form of capital gain and dividend on their investment. Therefore, they are keen to learn about the ability of the company to earn revenues in excess of its expenses. They will not be interested in a company that does not earn a sufficient margin of its sales. It is measured on percentage basis on the calculation of absolute profit figure.

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Profitability ratios are as under:

Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Rate Of Return On Investment (ROI) Rate Of Return On Equity (ROE)

5.3.1 GROSS PROFIT RATIO:Gross Profit Ratio = Gross Profit X 100 Sales

TABLE 5.3.1 (A) YEARGross Profit Sales

2006-07

2007-08

(Rs. In Crores) 2008-09

GROSS PROFIT RATIO

CHART 5.3.1 (A)

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5.3.2 OPERATING PROFIT RATIO:Operating Profit Ratio = Operating Profit X 100 Sales

TABLE 5.3.2 (A) YEAROperating Profit Sales

2006-07441.95 2108.11

(Rs. In Crores) 2007-08 2008-09897.57 2981.65 466.53 3354.91

OPERATING PROFIT RATIO

20.96%

30.10%

13.91%

CHART 5.3.2 (A)OPERATING PROFIT 35 30 25 20 15 10 5 0 2006-07 2007-08 YEAR 2008-09 OPERATING PROFIT

TREND ANALYSIS: TABLE 5.3.2 (B) YEAROperating Profit Sales

2006-07100.00 100.00

2007-08203.09 141.44

2008-09105.56 159.14

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CHART 5.3.2 (B)Trend Analysis400 350 300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Sales Operating Profit

INTERPRETATION: This ratio indicates companys effectiveness in making operating profit. This ratio shows the amount left after meeting all manufacturing and operating of every RS.100 of sales of the company and this position is available for the benefit of shareholders after payment of income tax. This ratio is depended on the operating profit. Operating profit under the sales is the sales minus (-) cost of good sold, administrative selling expenditure and depreciation. High ratio means company is efficient on purchasing raw material, administrative activities and selling & distribution activity. In this case operating profit ratio has been varying year to year. For the year 2006-07 is 20.96%, 2007-08 is 30.10% and 2008-09 is 13.91%. It is decreasing in 2008-09. It means companys expense increased. The main reason in declining operating profit is increase in manufacturing expense.

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5.3.3 NET PROFIT RATIO:Net Profit Ratio = Net Profit X 100 Sales

TABLE 5.3.3 (A) YEARNet Profit Sales

2006-07566.78 2108.11

(Rs. In Crores) 2007-08 2008-091101.57 2981.65 821.09 3354.91

NET PROFIT RATIO

26.90 %

36.95 %

24.50 %

CHART 5.3.3 (A)

NET PROFIT RATIO 40 35 30 25 20 15 10 5 0 2006-07 2007-08 2008-09 NET PROFIT RATIO

TREND ANALYSIS: TABLE 5.3.3 (B) YEARNet Profit Sales

2006-07100.00 100.00

2007-08194.36 141.44

2008-09144.87 159.14

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CHART 5.3.3 (B)TREND ANALYSIS400 350 300 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 SALES NET PROFIT

INTERPRETATION: This ratio indicates how well company is performing. It is the basic criteria for measuring the performance of the company. It measures how many percentage of net profit generated by sales. In this ratio the percentage of net sales ultimately left us a return to the shareholders after meeting all expenses and income tax. Thus, the net profit to net sales ratio is favorable. If it is high then higher ratio increases the market value of share and also shows the good financial position of the company. From above table the NPR is a varying for all three years. In years 200607 is Net Profit Ratio is 26.90% and the year 2007-08 Net Profit Ratio is increased i.e. 36.95% because of sales is high. Whereas in other years it is varying.

5.3.4 RATE OF RETURN ON INVESTMENT (ROI):ROI = EBIT X 100 Total Assets

TABLE 5.3.4 (A) (Rs. In Crores)52

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YEAREBIT Total Assets

2006-07917.94 12153.55

2007-081430.09 14239.40

2008-091054.16 16993.48

ROI

7.55%

10.04%

6.20%

CHART 5.3.4 (A)ROI 12 10 8 6 4 2 0 2006-07 2007-08 2008-09 ROI

TREND ANALYSIS: TABLE 5.3.4 (B) YEAREBIT Total Assets

2006-07100.00 100.00

2007-08155.80 117.16

2008-09114.84 139.82

CHART 5.3.4 (B)

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TREND ANALYSIS300 250 200 150 100 50 0 2006-07 2007-08 YEAR 2008-09 TOTAL ASSETS EBIT

INTERPRETATION: This ratio is an excellent measure of over all performance of a company. It shows how efficiently the company has utilized its assets. This is return investment ratio, it can be return own investment into the company. Rate of return on investment is included the earning before interest & tax and also the total assets. Here, all the three year Rate of return on investment is varying. By looking at the chart 5.3.4.1 conclusion can come that the company has efficiently utilized its assets as the rate of return on investments is the mostly same in all three years or increasing. In year 2006-07 it was 7.55% which was increased in the next year to 10.04%. But after that the R.O.I. decreased and stand at 6.20%. So, company is good at utilizing its total assets.

5.3.5 RATE OF RETURN ON EQUITY (ROE):

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ROE = Profit For Equity X 100 Net Worth

TABLE 5.3.5 (A) YEARProfit For Equity Net Worth

2006-07566.78 8309.29

(Rs. In Crores) 2007-08 2008-091101.57 9008.79 821.09 9412.78

ROE

6.82% CHART 5.3.5 (A)ROE 14 12 10 8 6 4 2 0 2006-07 2007-08 YEAR 2008-09

12.23%

8.72%

ROE

TREND ANALYSIS: TABLE 3.3.5 (B) YEARProfit For Equity Net Worth

2006-07100.00 100.00

2007-08194.36 108.42

2008-09144.87 113.28

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CHART 5.3.5 (B)Trend Analysis350 300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Profit For Equity Net Worth

INTERPRETATION: This is a measure of profitability from the standpoint of the shareholder. This ratio gives a rate at which the shareholders will gain on their equity. This ratio gives the net return on the net worth in the business of the company. Net worth in taken to mean the equity and reserved minus miscellaneous expenses. This ratio is very good indicator of overall efficiency with which the fund available with company is put to use. The higher ratio indicates efficient management and consequently the greater profitability. Here above given the graph, clearly conclude that the return on equity ratio is varied in all the three years. One reason for the better return to equity is the more get the profit for the equity in all three years and rises Net worth in all years. This net worth increased because in the year a miscellaneous expense is less. Here, the rate of return on equity for the year 2006-07 was 6.82% and it was increased in the next year to 12.23%. But then after it decreased in the year 2008-09 and it is 8.72%. This means that the company is paying fewer dividends of its share holders.

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5.4 ASSETS TURNOVER RATIO:Assets turn over ratio is a measure of the efficiency with which assets are utilized. It indicates how many times the assets are turned over in a period. If the turn over ratio is high, the company can be said to be managing its assets efficiently. If the ratio is low, it means the company has more assets than it really needs for its operation. Averages rather than year end amounts of assets are better measure of the level of assets used during the year. The difference will be more pronounced for companies that are growing at very high rates. Assets turn over ratios is as below:

Total Assets Turnover Ratio Net Fixed Assets Turnover Ratio Net Working Capital Turnover Ratio Inventory Turnover Ratio Average Age Of Inventories Debtors Turnover Ratio Average Age Of Debtors

5.4.1 TOTAL ASSETS TURNOVER RATIO:

Total Assets Turnover Ratio = Total Sales Total Assets

TABLE 5.4.1 (A) YEARSales Total Assets

2004-052108.11 11224.14

(Rs. In Crores) 2005-06 2006-072981.65 13413.18 3354.91 16182.11

TOTAL RATIO

ASSETS

T/O

0.19 Times

0.22 Times 0.21 Times

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CHART 5.4.1 (A)TOTAL ASSETS T/O RATIO 0.225 0.22 0.215 0.21 0.205 0.2 0.195 0.19 0.185 0.18 0.175 2006-07 2007-08 YEAR 2008-09

TOTAL ASSETS T/O RATIO

TREND ANALYSIS: TABLE 5.4.1 (B) YEARSales Total Assets

2006-07100.00 100.00

2007-08141.44 119.50

2008-09159.14 144.17

CHART 5.4.1 (B)

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Trend Analysis350 300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Total Assets Sales

INTERPRETATION: This ratio shows the firms ability in generating sales from all financial resources committed to total assets. This ratio measured the relationship between the amount invested in the assets and result accruing in term to sales. In includes the efficiency in the utilization of the assets of the company. If the turnover ratio is high the company can be said to be managing its assets efficiently, if the turnover ratio is low it means the company has more assets than it really needs for its operation, if average than year end amounts of more pronounced for companies that are growing at very high rates. For the all three years assets turnover with sales is varying. Comparison for all three year we can conclude that the year 2007-08 is strong as ratio is 0.22:1. In year 2006-07 is 0.19:1 and in year 2008-09 it is 0.21:1. it is some of low to compare to other year its main reason is in this year other income is very high

5.4.2 NET FIXED ASSETS TURNOVER RATIO:

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TABLE 5.4.2 (A) YEARSales Net Fixed Assets

2006-072108.11 4207.62

2007-082981.65 4024.02

2008-093354.91 4665.89

NET FIXED RATIO

ASSETS

T/O 0.50 Times 0.74 Times 0.72 Times

CHART 5.4.2 (A)NET FIXED ASSETS T/O RATIO 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 YEAR 2008-09 NET FIXED ASSETS T/O RATIO

TREND ANALYSIS: TABLE 5.4.2 (B) YEAR 2006-07Sales Net Fixed Assets 100.00 100.00

2007-08141.44 95.64

2008-09159.14 110.89

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CHART 5.4.2 (B)Trend Analysis300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Net Fixed Assets Sales

INTERPRETATION: This ratio indicates how efficiently the company utilizing its fixed assets. It is assets turnover ratio they can be calculated the sales to Net fixed assets. If higher net fixed assets turnover ratio, it means a company selling better in market and if low, it means company not selling better in market for any products. Here, for all years we can see net fixed assets turnover ratio is continued increased to each year. In the year 2006-07 is 0.50 times is higher, in year 2007-08 is 0.74 times and year 2008-09 is 0.72 times higher. One of the reasons behind that is a sale increasing year to year more than fixed assets. Overall, the year 2007-08 is strong as net fixed assets turnover ratio is higher and in this year more products are sold in market.

5.4.3 NET WORKING CAPITAL TURNOVER RATIO:

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Net Working Capital T/O Ratio = Total Sales Net Working Capital

TABLE 5.4.3 (A) YEARSales Net Working Capital

2006-072108.11 3744.81

(Rs. In Crores) 2007-08 2008-092981.65 4049.71 3354.91 4705.51

NET WORKING RATIO

CAP.

T/O 0.56 Times

0.74 0.71 Times Times

CHART 5.4.3 (A)NET WORKING CAP. T/O RATIO 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 YEAR 2008-09 NET WORKING CAP. T/O RATIO

TREND ANALYSIS: TABLE 5.4.3 (B) YEARSales

2006-07100.00

2007-08141.44

2008-09159.14

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Net Working Capital

100.00

108.14

125.65

CHART 5.4.3 (B)Trend Analysis300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Net Working Capital Sales

INTERPRETATION: This ratio is the relationship between sales and net current assets. It indicates how many times sales generated by net working assets. This ratio calculates sales to net working. High ratio suggests sales are much higher than net working capital turnover in the organization. Net working capital turnover ratio calculates the sales to net working capital. Net working capital is the current assets minus current liabilities. Here, this ratio is increasing from 2006-07 to 2007-08 i.e. 0.56 to 0.74 times and then it is decreasing in year 2008-09 i.e. 0.71 times.

5.4.4 INVENTORY TURNOVER RATIO:Inventory Turnover Ratio = Cost Of Goods Sold Average Inventory

TABLE 5.4.4 (A)63

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YEARCost Of Goods Sold Average Inventory

2006-0747.98

(Rs. In Crores) 2007-08 2008-0944.79 50.21

INVENTORY T/O RATIO

CHART 5.4.4 (A)

TREND ANALYSIS: TABLE 5.4.4 (B) YEARCost Of Goods Sold Average Inventory

2006-07100.00 100.00

2007-08

2008-09

CHART 5.4.4 (B)

INTERPRETATION: This ratio indicates the companys efficiency in inventory management. It measures how fast the inventory is covered in to the sales. Higher ratio indicates healthy inventory management for the company. Here,

5.4.5 AVERAGE AGE OF INVENTORY:64

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Average Age of Inventory = 360 Days Inventory T/O

TABLE 5.4.5 (A) AVERAGE AGE OF INVENTORYYEAR 2006-07 2007-08 2008-09

DAYS

CHART 5.4.5 (A)

TREND ANALYSIS: TABLE 5.4.5 (B)YEAR DAYS 2006-07 100.00 2007-08 2008-09

CHART 5.4.5 (B)

INTERPRETATION:65

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This ratio indicates the waiting period of the investment in inventory in days. Higher the age of inventory is bad for the company as it indicates ideal blocking of capital in inventories. Here,

5.4.6 DEBTORS TURNOVER RATIO:Debtors Turnover Ratio = Credit Sales Average Debtors

TABLE 5.4.6 (A) YEARCredit Sales Average Debtors

2006-072108.11 89.41

(Rs. In Crores) 2007-08 2008-092981.65 218.83 3354.91 781.44

DEBTORS T/O RATIO

23.58 Times CHART 5.4.6 (B)

13.63 Times

4.30 Times

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53070094.docDEBTORS T/O RATIO 25 20 15 10 5 0 2006-07 2007-08 YEAR 2008-09 DEBTORS T/O RATIO

TREND ANALYSIS: TABLE 5.4.6 (B) YEARCredit Sales Average Debtors

2006-07100.00 100.00

2007-08141.44 244.75

2008-09159.14 874.00

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CHART 5.4.6 (B)Trend Analysis1200 1000 800 600 400 200 0 2006-07 2007-08 Year 2008-09 Average Debtors Credit Sales

INTERPRETATION: Debtors turnover ratio is a measure of assessing the ability of the company to promote sales with minimum investment in uncollected debtors. It indicates timely quick collection or pre-matured collections through cash discount incentive, bill discounting or factoring the book dates. Higher ratio is good for the company as money comes from debtors. Here, from 2006-07 to 2007-08 it is decreasing i.e. from 23.58 to 13.63 times. and from 2007-08 to 2008-09 it is decreasing i.e. 13.63 to 4.30 times. Decreasing ratio is good for company.

5.4.7 AVERAGE AGE OF DEBTORS:Average Age of Debtors = 360 Days Average Debtors

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TABLE 5.4.7 (A) AVERAGE AGE OF DEBTORSYEAR 2006-07 2007-08 2008-09

DAYS

15.27 CHART 5.4.7 (A)days

26.41

83.72

90 80 70 60 50 40 30 20 10 0 2006-07 2007-08 YEAR 2008-09

days

TREND ANALYSIS: TABLE 5.4.7 (B)YEAR 2006-07 2007-08 2008-09

DAYS

100.00 5

172.9

548.26

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Trend Analysis600 500 400 300 200 100 0 2006-07 2007-08 Year 2008-09 Days

INTERPRETATION: Higher age of debtors is not good for the company because it indicates poor performance of collection department and indicates ideal blocking of funds in debtors. Here, the ratio is increased from 2006-07 to 2008-09 i.e. from 15.27, 26.41 and 83.72 days respectively. So, it is not good for company. Overall, the ratio is less i.e. more days for collection of money from debtors, so it is not good for company. So, we can say that company performs well as fund is not blocked in uncollected debtors.

5.5 FINANCE STRUCTURE RATIO:Finance structure ratios indicate the relative mix or blending of owners funds and outsiders debt funds in the total capital employed in the business. It should be noted that equity funds are the prime fund which increase progressively through reinvestment of profits, while outside debt funds are supplementary funds and are added at the discretion off the management. Management prefers to choose debt only when it helps in enhancing the earnings of equity. The debt funds carry fixed committed interest rate. When debt funds are used to generate ROI greater than interest costs on debt, the equity earnings are enhanced, but if the interest costs are higher then the ROI, it adversely affects the earnings of owners. Financial structure ratios are as under: 70

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Debt Ratio Equity Ratio Debt Equity Ratio Interest Coverage Ratio

5.5.1 DEBT RATIO:

Debt Ratio =

Long Term Debt Total Capital Employed

TABLE 5.5.1 (A) (Rs. In Crores) YEARLong Term Debt Total Capital Employed

2006-071505.70 10521.28

2007-082790.68 12436.85

2008-094057.70 14198.37

DEBT RATIO

0.14 0.22 0.29 Times Times Times

CHART 5.5.1 (A)DEBT RATIO 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006-07 2007-08 Year 2008-09 DEBT RATIO

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TREND ANALYSIS: TABLE 5.5.1 (B) YEARLong Term Debt Total Capital Employed

2006-07100.00 100.00

2007-08185.34 118.21

2008-09269.49 134.95

CHART 5.5.1 (B)Trend Analysis300 250 200 150 100 50 0 2006-07 2007-08 Year 2008-09 Total Capital Employed Long Term Debts

INTERPRETATION: This debt ratio suggests the proportion of the long-term debt to total capital employed. Long debit is a debt, which is of more than three years and includes interest thereon. Higher the ratio higher the longs term debt in total capital employed and vice-versa. Here in the table 5.5.1(A) we can see that the Debt ratio is fluctuated in all three year. The first year 2006-07 Debt Ratio is 0.14, second year 200708 Debt Ratio is 0.22 and the third year 2008-09 Debt Ratio is 0.29. Here, this ratio is high. So, company has taken more fund by borrowing i.e. taken more loans from financial institutions.

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5.5.2 EQUITY RATIO:Equity Ratio = Net Worth Total Capital Employed

TABLE 5.5.2 (A) YEARNet Worth Total Capital Employed

2006-078330.51 10521.28

(Rs. In Crores) 2007-08 2008-099040.28 12436.85 9469.23 14198.37

EQUITY RATIO

0.80 0.73 0.67 Times Times Times CHART 5.5.2 (A)EQUITY RATIO

0.85 0.8 0.75 EQUITY RATIO 0.7 0.65 0.6 2006-07 2007-08 2008-09

TREND ANALYSIS: YEAR TABLE 5.5.2 (B) 2006-07100.00 100.00

2007-08108.52 118.21

2008-09113.67 134.95

Net Worth Total Capital Employed

CHART 5.5.2 (B)

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Trend Analysis300 250 200 150 100 50 0 2006-07 2007-08 year 2008-09 Net Worth Total Capital Employed

INTERPRETATION: Equity means by the residual interest in the assets of an entity that remains after deducting its liabilities. This ratio suggests the proportion of the Net worth to Total capital employed. Net worth is share capital plus reserved and surplus minus miscellaneous expenses. Higher the ratio the net worth in total employed is high and vice-versa. Total capital employed use a increased net worth plus long term debt and this long term debt includes the secured loans and unsecured loans. Generally, for the three year the equity ratio is stable and some of varying. Here, the year 2006-07 Equity ratio is 0.80 just high to compare other two years. 2007-08 and 2008-09 Equity ratio are 0.73 and 0.67. One reason for that is the year 2006 is long term debt is less to other years, this long term debt is increased because of secured loan into cash credit facility and assets credit scheme, and also unsecured loan into the interest free loan from state governments and loans for state financial institutions was higher than other year. Here, this ratio is low because company has taken more fund by borrowing i.e. by loans.

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5.5.3 DEBT EQUITY RATIO:Debt Equity Ratio = Total Long Term Debt Net Worth

TABLE 5.5.3 (A) YEARTotal Long Term Debt Net Worth

2006-071505.70 8330.51

(Rs. In Crores) 2007-08 2008-092790.68 9040.28 4057.70 9469.23

DEBT - EQUITY RATIO

0.18 0.31 0.43 Times Times Times

CHART 5.5.3 (A)DEBT - EQUITY RATIO 0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006-07 2007-08 2008-09

DEBT - EQUITY RATIO

TREND ANALYSIS: TABLE 5.5.3 (B) YEARTotal Long Term Debt Net Worth

2006-07100.00 100.00

2007-08185.34 108.52

2008-09269.49 113.67

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CHART 5.5.3 (B)Trend Analysis450 400 350 300 250 200 150 100 50 0 2006-07 2007-08 year 2008-09

Net Worth Total Long Term Debt

INTERPRETATION: "Its the ratio of shareholders funds to long term debt." Debt equity ratio measures the relationship of the capital provided by creditors to the amount provided by shareholders. Debt equity ratio is debt to equity. Debt means longs term fund having maturity of accrued thereon. Equity is paid up share capital plus free reserve. Capital issues (Control Act) 1947 suggested the debt equity ratio norms of 2:1. Debt equity ratio indicates longs term solvency position of the business. If higher the debt to equity ratio, the debt fund used in capital structure, greater is the financial risk if low the debt to equity ratio, the little debt fund used in capital structure lower is the financial risk. Debt equity ratio also called the 'leverage ratio'. Here, given the debt to equity ratio is increasing every year. In the year 2008-09 Debt equity ratio is 0.43, it is higher to other years like 2006-07 and 2007-08 i.e. 0.18 and 0.31. One of the main reasons behind is a longterm debt was high to compare to the other years.

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5.5.4 INTEREST COVERAGE RATIO:

Interest Coverage Ratio = EBIT Interest

TABLE 5.5.4 (A) YEAREBIT Interest

2006-071360.39 43.28

(Rs. In Crores) 2007-08 2008-091887.24 8.80 1486.37 8.15

INTEREST RATIO

COVERAGE

31.43 Times

214.46 182.38 Times Times

CHART 5.5.4 (A)INTEREST COVERAGE RATIO 250 200 150 100 50 0 2006-07 2007-08 2008-09 INTEREST COVERAGE RATIO

TREND ANALYSIS: TABLE 5.5.4 (B) YEAR 2006-07EBIT Interest 100.00 100.00

2007-08138.73 20.33

2008-09109.26 18.83

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CHART 5.5.4Trend Analysis250 200 150 100 50 0 2006-07 2007-08 year 2008-09 Interest EBIT

INTERPRETATION: This ratio gives the numbers of times the interest payable in particular years are covering by the income available for such distribution during the year. Interest coverage ratios include the Profit before income tax and Interest expenses like the on fixed loans and other interests. From the above tables, we see that, Interest coverage ratio is fluctuated in all three years. Interest coverage ratio is highest in year 2007-08 214.46 times and then year 2006-07 is 31.43 times and then year 2008-09 is to 182.38 times. Overall, the Interest coverage ratio is not so good, but comparing the year wise ratio it is decreased.

5.6 VALUATION RATIO:Valuation ratios are generally presented on a per share basis and thus are more use full to equity investors. The following four ratios are as under: 78

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Earning Per Share Dividend Payout Ratio P/E Ratio 5.6.1 EARNING PER SHARE (EPS):EPS = Net Profit for Equity Shares No. of Equity Shares

TABLE 5.6.1 (A) YEAR EARNING PER SHARE (Rs.) 2006-07 3.88 (Rs. In Crores) 2007-08 2008-09 6.01 4.89

CHART 5.6.1 (A)EARNING PER SHARE (Rs.) 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 EARNING PER SHARE (Rs.)

INTERPRETATION: EPS i.e. earning Per Share means the amount of net profit per equity share. It is an important measure of corporate performance for shareholders and potential investors. EPS is reporting only for equity share capital. Basic EPS is calculating by dividing the net profit or loss for the period attributable to equity shareholders by the number of equity shares outstanding during the period. 79

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Here, in 2007-08 EPS is 6.01, it is a highest than other year 2006-07 is 3.88 EPS and year 2008-09 is 4.89. A main reason to high the EPS in year 2007-08 because of profit of equity share is much high in this particular year.

5.6.2 DIVIDEND PAYOUT RATIO:Dividend Payout Ratio = Dividend Per Share In Rs. Earning Per Share In Rs.

TABLE 5.6.2 (A) YEARDividend Per Share in Rs. Earning Per Share in Rs.

2006-0712.00 3.88

2007-0820.00 6.01

2008-0920.00 4.89

DIVIDEND PAYOUT RATIO

3.09 3.32 4.09 Times Times Times

CHART 5.6.2 (A)DIVIDEND PAYOUT RATIO 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-07 2007-08 2008-09 DIVIDEND PAYOUT RATIO

INTERPRETATION: This ratio calculates of Dividend per share in Rs (DPS) and Earning per share in Rs (EPS).

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It indicates real return to investor. Dividend declared when the company is earning high profit. Hence it is also indicator of the n performance of the company on a whole. Here for all three years dividend pay out ratio is increasing. In the year 2006-07 Dividend Pay out Ratio is 3.09 times highest to other year 2007-08 which has 3.32 times. In the year 2008-09 Dividend Pay Out Ratio is 4.09 time. Here increase in earning per share is less than increase in dividend per share so the dividend pay out ratio comes in increasing trend.

5.6.4 P/E RATIO:

P/E Ratio = Current Market Price of Share Earning Per Share = =

INTERPRATATION: P/E ratio means a price earning in the capital market. Price earning is a popular measures extensively used in investment analysis. In a recent survey, 40 percent of 300 well know institutional portfolio measures and analysis in the United States ranked P/E ratio as the key factor in picking stocks. It is computing by dividing the current market price of the share by the annual earning per share. Many view the P/E ratio as indicators of the firm's growth prospects. It is device to detect dispraised stocks. A high price-earning ratio indicates the stock markets confidence in the company future earning growth.

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CHAPTER 6 DU PONT CHART6.1 INTRODUCTION:DU PONT CHART is overall conclusion about the whole financial performance or financial analysis of the company. Any person who has bit knowledge about the accounting can judge the company directly looking at the Du Pont Chart and without going into details. Du Pont Chart gives the return on investment i.e. the investment the company willing to pay to its shareholder. Therefore, the shareholder can easily decide looking at the chart whether company is profitable for then or not.

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6.2 Du pont Chart:ROI (In %)2006-07: 7.55% 2007-08: 10.04% 2008-09: 6.20%

Profit Margin (In %) 2006-07: 39.74% 2007-08: 45.64% 2008-09: 29.52%

Total Assets Turn over (In times) 2006-07: 0.19 2007-08: 0.22 2008-09: 0.21

EBIT (In crores) 2006-07: 913.05 2007-08: 1432.75 2008-09: 1061.87

* *

Total Sales (In crores) 2006-07: 2108.11 2007-08: 2981.65 2008-09: 3354.91

NFA (In crores) 2006-07: 6394.58 2007-08: 4521.23 2008-09: 3696.51

NWC (In crores) 2006-07: 3744.81 2007-08: 4049.71 2008-09: 4705.51

Investments (In crores)2006-07: 929.41 2007-08: 826.22 2008-09: 722.37

Total Fixed Assets (Incrores)2006-07: 3809.20 2007-08: 3536.23 2008-09: 3272.39

Depreciation(In crores) 2006-07: 447.34 2007-08: 454.49 2008-09: 424.50

Current Assets(In crores)2006-07: 5398.09 2007-08: 5883.75 2008-09: 7557.07

Current Liabilities(In crores) 2006-07: 1653.28 83 2007-08: 1834.04 2008-09: 2851.56

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CHAPTER 7 SUGGESTIONS AND CONCLUSION7.1 SUGGESTIONS:As far as the Companys over all view is concerned, it is very good in fact but as we have now analyzed the companys all aspects, we are now able to see some aspects of the company, which are not shown in the annual reports. This is so because the company always has to abide by law and has to show only the facts in the annual report, which are advisable. Thus, after the further analysis we came to know about some factors, which the company should take in to consideration. This is because we have analyzed the report and are able to give recommendation and suggestions to the company as follows: The very first thing is that the company having large amount of Reserves and Surplus which should be taken for the use of expansion or the same kind of other activities. The company is not taking the advantage of its good creditability by not using good amount of debt fund. If company does that it would increase the companys profitability, as the company will get the tax advantage. Moreover the companys Cost of Goods Sold is very high. So, company should try to decrease it. The company should try to reduce its loan funds because much of income goes in to the interest. The company should try to decrease its manufacturing and other expenses.

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The company should try to reduce its inventory turnover period. The company should to reduce the investment in capital work in progress because the large amount has been blocked in it.

7.2 CONCLUSION:As the annual reports of the company are made very well and abiding by law, it was very interesting to analyze all the reports. Coming to the point, we have analyzed all the reports, we come to some conclusions. The company is in very good position as the company has the approvals of many good international standards. This also improves the companys image in the mind of the investors and the parties related to the company. The companys liquidity ratios are good and are almost above the standards this shows the companys efficiency with respect to its liquidity. Another Profitability ratios show the companys good profitability, which increase the credit of the company in the minds of investors. The company still can improve its image by improving their collections and payment quicker. As the companys leverage ratios show how much the company is levered, the analysis is positive i.e. the company is fairly levered. The next is that the companys activity ratios are very favorable, the company is efficient.

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ANNEXURES:BALANCE SHEET PARTICULAR SOURCES OF FUNDSSHARE HOLDERS FUNDS: Share Capital Reserve & Surplus

( Rs. in crores ) 2006-07 2007-08 2008-091677.71 6652.80 1677.71 7362.57 1677.71 7791.52

TOTAL SHARE HOLDERS FUNDSLOAN FUNDS: Secured Loan Unsecured Loan

8330.51678.15 827.55

9040.281874.85 915.83

9469.233100.00 957.70

TOTAL LOAN FUNDSDEFERRED TAX LIABILITY

1505.70685.28

2790.68605.89

4057.70671.44

TOTAL FUNDS EMPLOYED

10521.2 8

12436.8 5

14198.37

APPLICATION OF FUNDFIXED ASSETS: Gross Block Less: Depreciation Net Block Capital Work-In-Progress Advance for Capital Items 9336.73 5486.30 3850.43 1618.43 357.19 9680.47 5936.80 3743.67 3505.41 280.35 10893.37 6390.41 4502.96 3959.15 162.93

TOTAL FIXED ASSETSINVESTMENTS CURRENT ASSETS, LOANS & ADVANCES Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances

5826.05 929.41455.49 89.41 4253.06 232.52 367.61

7529.43 826.22448.05 218.83 4749.56 159.67 307.64

8625.04 811.37535.85 781.44 5452.20 189.47 598.11

TOTAL CURRENT ASSETS, LOAN & ADV.

5398.09

5883.75

7557.0786

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LESS: CURRENT LIABILITIES & PROVISION Current Liabilities Provisions

1236.66 416.62

1465.96 368.08

2058.90 792.66

TOTAL CURRNT LIAB. & PROVISIONS NET CURRENT ASSETSMISCELLANEOUS EXPENDITURE

1653.28 3744.8121.22

1834.04 4049.7131.49

2851.56 4705.5156.45

TOTAL ASSETS

10521.4 9

12436.8 5

14198.37

PROFIT AND LOSS ACCOUNTS ( Rs. in crores ) PARTICULAR 2006-07 2007-08 2008-09 INCOMESales Adjustment relating to previous year sales Other Income Increase/ Decrease in Stocks 2610.26 -502.15 3033.02 -51.37 2825.11 529.80

2108.11597.08 38.58

2981.65656.42 -44.97

3354.91664.98 55.81

TOTAL EXPENSESEmployees Remuneration and Benefits Interest Depreciation Other Expenses Less: Expenses Capitalized

2743.77557.49 43.28 447.34 827.98 1876.09 2.09

3593.10850.15 8.80 454.49 861.87 2175.31 6.16

4075.701259.25 8.15 424.50 1364.34 3056.24 34.26

TOTALProfit for the year before extraordinary items Extra-ordinary items Profit after Extraordinary Items Prior Period Adjustments (Net)

1874.00869.77 0.00 869.77 4.89

2169.151423.95 0.00 1423.95 -2.66

3021.981053.72 0.00 1053.72 -7.71

Profit Before TaxIncome Tax For Current year For Previous year Deferred tax Fringe Benefit Tax TOTAL Income Tax

874.66305.00 89.18 -91.04 4.74 307.88

1421.29490.00 -95.61 -79.40 4.73 319.72

1046.01231.00 -84.11 65.55 12.48 224.92

Profit After Tax

566.78

1101.57

821.0987

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Surplus brought forward from previous year Exchange rate variation of previous year Transfer to / from Interest Differential Fund Reserve Transfer to / from Bond Redemption Reserved Transfer to General Reserve Interim Dividend Tax on Interim Dividend Proposed Final Dividend Tax on Proposed Final Dividend Surplus carried to balance sheet Earning Per Share- Basic and Diluted before and after Extraordinary Items. ( Face Value Rs.10)

5751.53 19.55 100.00 30.00 0.00 0.00 201.33 34.22

6133.21 4.15 0.00 90.00 167.77 28.51 167.77 28.51

6748.07 0.45 20.69 15.00 70.00 0.00 0.00 335.54 57.03

6133.21 3.88

6748.07 6.01

7071.35 4.89

BIBLIOGRAPHYAs far as the reference material for the financial analysis of Neyveli Lignite Corporation Limited is concerned, we have taken reference from followings:

Books:R. Narayanswami Financial Accounting Prentice Hall of India Common size and Trend analysis (Chapter-11) I. M. Pandey Financial management Vikas publishing house private ltd Ratio (Chapter-25)

Reports:Annual Reports of Neyveli Lignite Corporation Limited Project Reports of TATA MOTERS

News papers:The Economic Times The Times of India

Web-sites:

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www.nlcindia.com

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