CHAPTER I1 OMECTIVES AND METHODOLOGY 'I'he alm of this Chaper is to define the obiectives of the study, outltne the methodology applied for canylng out the present research project, elucidate vanous concepts pertaining to problems under the current study and present a brief outl~ne of the profiles of sample Publtc Sector Enterprises (Heavy and Medtum ting~neenng) engaged In manufacturing act~v~tles chosen for the present study. 11.1 OBJECTIVES OF THE STliDY lhe pnrnary objective of the study has been to examine and analyse various aspects of operating and financial prforrnance of select Public Sector .-. .. ,-. . . -- l'.nterpnw In India so as to underline the broad trends In drfferent aspects of their 'lhereforc. the study IS tntendlng 1) to evaluate the overall perforrnaoec of s e k t P u M i Sector Enterprises (Heavy and Mdimm E+.scri.g) im terms of -urn of vdw-dded by them, capital - omtpat r a b and tmds io productivity during tbe study ptriod; 2) to emmine the chngiog pattern of capital stnctun and evaluate the tmds L. . io internal rod exrernal sources of capital in w k t e d uoih;
Transcript
CHAPTER I1
OMECTIVES AND METHODOLOGY
'I'he alm of this Chaper is to define the obiectives of the study,
outltne the methodology applied for canylng out the present research project, elucidate
vanous concepts pertaining to problems under the current study and present a brief
outl~ne of the profiles of sample Publtc Sector Enterprises (Heavy and Medtum
ting~neenng) engaged In manufacturing act~v~tles chosen for the present study.
11.1 OBJECTIVES OF THE STliDY
lhe pnrnary objective of the study has been to examine and analyse
various aspects of operating and financial prforrnance of select Public Sector .- . .. ,-. . . --
l'.nterpnw In India so as to underline the broad trends In drfferent aspects of their
'lhereforc. the study IS tntendlng
1) to evaluate the overall perforrnaoec of s e k t P u M i Sector Enterprises (Heavy
and Mdimm E+.scri.g) im terms of -urn of vdw-dded by them,
capital - omtpat r a b and t m d s io productivity during tbe study ptriod;
2) to emmine the chngiog pattern of capital stnctun and evaluate the t m d s L. .
io internal rod exrernal sources of capital in w k t e d uoih;
3) to evaluate the relative changes i n mmagerial efficiency in terms of better
utilisation of assets, resources and profit generation in addition to the
management of fun& during the study period;
4) to identify the changing determinants associated wi tk pa~ital formation,
mobilisation of funds and realisation of rates of return during the study
period;
5) to examine the various financial measures of performance to analyse
the different aspects of financial management on proilta8ltity; and
6) to sugget measures for the future growth and development of theselect ----.-- Public Sector E n t e r p r k (Heavy and Medium Engineering) units in India.
IL2 SCOPE OF THE STUDY
The study relates to the problem of evaluating the operating and financial
performance of select Public Sector Enterpnses (Heavy and Medium Engineering)
engaged In manufacturing activities Different aspects of operating efficiency are
measured In terms of trends In capital - output ratlos, slze of value added by - manufacture, partial and total factor productivities and operating cost responsiveness
rat~os. The financ~al performance has been examined by evaluating the trends in size
of work~ng capital, trends in various financial ratios and the inter-relationship
between varlous aspects of financ~al management and profitabil~ty However, the
present study cxcludcs the aspects budgeting financ~ng and dividend
decisions except measuring certain ng capital management. short-term
liquidity and long-term debt and equity pn&ftions. A* from these aspects, the shdy
emphas~s on the functioning of Public Sector Enterpnses in new economic
environment and to draw the probable reasons for the shortcomings of the Public
Sector Enterprises during the study period.
113 METH0DOUX;Y AND SAMPLE
The present study is intended to evaluate the performance of select
Public Sector units engaged in manufacturing activities, wherein the aspects relating
to operating and financial spheres could easily be distinguished. As it is intended to
examine the units of core sector, the units belon~ng to Heavy and Medium
Engineering formed the sample for th~s study. The units engaged in Heaby and
Medium Engineering naturally occupy the capital goods manufacturing units
provid~ng the basis lnfrastructtue for the entire industrial base in our country It
1s well known fact that the Public Sector Enterprises in India which were incorporated
tn the form of joint stock companies are expected to function on sound commercial
principles compared to their counterpans in pnvate sector. Therefore, the current
study 1s concerned with these enterprises incorporated as Central Government
companies. The present study has been carried out by selecting a random sample
of 10 unlts out of the total 39 Central Government Public Sector Enterpnses in Heavy
and Medium Engineering &-ihese sample units were selected on giving due
care tlielr ayc and longi\cty for a pr~od of more than fiftwn !.ears of existence The
sample unlts arc glvtn in Table 11.1
Table IL1
Stratification and Selection of Sample Units
Name of the Company
--- ---- - --* ~ E E % 1 --
I I BhuuHeavy Electnals L r m l 1 1956 1.52,291 i Heavy Englnecnng Corporat~on Ltmlted
I Bharat Heavy Plates and Vessels L~m~ted 10,191
/ Bum Standard I I I Jessops Company Llm~ted i 1973 1 12,898 1
I 10 / / lnd~an Telephone lndustnes L~m~ted 1 1948 I 1.50.713
- - -I- - _L____< ~ource: ~ureau'of G~IIC Enterplses, Public Entnonses Survey, Mrrustry of Industry,
Government of Indra, New Delhr, Vol I, 1993-94, Chapter 1
Il.4 SOlrRCES OF DATA
I he data requ~red fur the present stud) are obtarned from vanous
Issues of Publ~c Sector Entcrpnses Sweys (Volume I ) bang published by the Bureau
of Public Entcrpnscs, Mlnlstry of Industry, Government of lnd~& New Deltu The
Bwcau draws the hedata fiom the Auhttd Balance Sheets and Income and Expedture
sdatalemtnls of the nportcd entefpnsa
11.5 PERIOD OF THE STUDY
It is proposed to study the trends in operating and financial performance
of select Public Sector (Heavy and Medium Engineenng) Enterprises for a period of
twenty o / present study has commenced from 1975-76 and extended
upto 1995-96 keeping 1975-76 as base year. The study period represents three
important phases in the functioning of Public Sector in India. While the first phase of
1975-76 to 1980-81 was considered as the penod of fitability and more focus
on social obligations by Public Sector Enhrpnses, the second phase from 1981-82 to
1985-86 was a phase of planned developmental efforts attempting to revitalise their
performance either through additional doses of capital or through more liberalised
policles for the entry of Public Sector into the financial markets on competitive lines.
At th~s juncture new economic climate brought changes towards globalisation with a \
view to meet challenges at international level. Moreover, aremarkable and
noticeable political disturbus have taken place in India si
would be the Third phase of the present study. Dunng this period, the economic and
political environment has compelled the Government to pursue the struaural changes in
the form of privatisatton and disinvestment in Puhlic Sector Enterprises under the
liberalised economic system for improving their operating and financial efficiencies.
Usually. research stud#= would be undertaken for p o d s extending 5 to 10 years in
m y cases. But in this case the m h e r thought that period of 21 years would be
more rneminghrl Md repmcntatiw in underlying the financial performance in select
Public Sector Enterprises. Therefore, the selection of the study period has not been a
matter ofarb~trary decision
IL6 DATA ANALYSIS
In order to examine the above mentioned objectives, the current
study has evaluated the data from the said sources under four different heads.
The first head refers to the evaluation of operating performance in
terms of capital output ratios, value added and capital formation. The capital output
ratios have been worked out in addition to an explanation through production function
equation of a Cobb-Douglas model. Besides, the operating performance is measured in
terms of partial and total factor productivities by constructing Kendrick, Solow and
Dlvlsia producttvlty ~ndices.
The xcond category of data analysis is focussed on Managerial
Performance The management of funds have been examined by calculating select
ratios and found out the tnter-relationship among these pertinent ratios.
The third dimension emphasised on financial performance The
overall trends in financial performance is evaluated by computing the required ratios as
suggested by International Labour Organisstion (ILO) and found out the inter-
relat~onsh~ps betwten the related ratios. An aggregate evaluation of various
aspects of performance is undertaken by using the encipal Component Analvsis and .-
the results have becn evaluated through multiple regession equations (7
The fourth dimens~on 1s a specific attempt to establish ,, few
econometric rclat~onsh~ps in ikntifylng the k t e n n i m t s of d i f fe~nt managerial
dacisiow. Thex include (a) Investment decisions, and (b) Financing decisions.
lhcsc models are specified as below
( W I = (1(A WQ.li (RED I NW)1* (DBTFLW I -19 (NVNW), * (INl'Kh
( D B T O U T N W ~ I ~ (DPRNST/CPA~I~ (LIQ),) ... IL1
(REDINW), = f((PATIK),, (REDNW), (JfK), (INVIK),, @W F L W W
( l iK ), I- Cross Fixed Assets Standardised by Paid-Up Capital
( A S.'K h = Changes in sales deflated by paid-up capital for current period (t).
( AS,K;,.I =- Lagged change in Sales
(REDMW)t Gross internal fund (retained earning plus depreciation) deflated by net worth. for current period (1).
(DBTFI.W/NW~.I- Debt flow deflated by net worth, forperiod(t-I).
(NIRJW), = New issues deflated by net worth for period (t).
(INVIK), ;- Inventory investment deflated by paid up capital for the period (t).
(DBTOIJTNW~.I= Debt out&dng divided by Net Worth, for the period (t-I ). It represents financial nsk.
([)PRNST/GFAh.I= Depreciation as a ratio of Gross Fixed Assets for the period (t- I ).
(L-Wh ; Current Liquidty posltion represented by the Ratio of Current Assets ro Total Net Assets
(PATIK), - Profit after tax deflated by paid-up capital for period (1).
(TAX/PBTh = Tax payment deflated by profit after tax for penod (t).
11.7 LIMITATIONS OF THE STUDY
As the data required for the current study is drawn from the published
sources of Bureau of Public !kctor Enterprises, the data is likely to suffer from the
following limitations:
i The combined data may contain an amount of duplication since intercorporate
transactions within groups are not eliminated but are aggregated through
simple summation.
i i l'he valuation of fixed assets, inventones and investment in different
sectors ts said to be characterised not only by imperfections but also bv
widcly varying practices, and
I I I The data drawn from the Public Enterprises Survey 1s some times found different
at every term~nal years with that of the commencement of the other years, may be
due to the enlargement In its scope and sample s~ze In every successive year
11.8 STATISTICAL TOOLS EMPLOYED
W~th a view to evaluate the data d r a w from the combined
statements provided by the Public Enterprises Survey, different statistical tools and
techniques a n employed. Some of them include the Compound Growth Rates,
Comlrrions, Multipk Relyssions, Principal Component Analysis. They arc
illustrated hm under
1l.S.l Compound Growth Rate (CGR)
It is customary to present the trends in economic variables and growth
patterns in the form of Compound Growth Rates (CGR). These growth rates are
worked out to explain the trends in capital employed, turnover, capital productivity,
gross margins, ctc. The formula used in this regard i s as follows:
where.
r = Compound Growth Rate
P,, - Value at nth year
P, ,= Value at the base year
n - Numberofyears.
In order to evaluate the ~nter-relat~onsh~p between vanous variables
under study. slmple correlaaons have been worked out These correlations are
extens~vely used to estimate the mter-relabonshlg between vanous types of
financ~al rauos to wdmllne the relatlve association between them In the present
stud! the rattos of profitabll~ty are correlated w~th other ratlos relatlng to fixed asset
management, worklng cap~td, short-term Ilqud~n, long-term l~quldity and turnoter
mtros 'rhe formula employed 1s
Where
r - Correlation coefficient
Cov,,,, Co-variance of x, y
6, = Standard deviation of x
0 \ = Standard deviation of y
n - number of pairs of observations.
The calculated correlations are tested for their significance at five per
cent level
11.8.3 Multiple Regression Equation
In order to estimate the degree and extent of inter-relationship
between a dependent vanable and the number of Independent variables, multiple l~near
r e p s i o n equation is estimated. The present study has estimated the w-efficients
for regressions of return on investment as dependent on different measures of
management of resources in Public Sector Enterprises The estimated equation:
Wherc
X, = lndependent variables
Y Ikpmnden~ Vanable
H, Kegress~on Coeffic~en! Value
I J Error 'Tenn
The regression coefficients and the overall variamx is tested
computing 1-values and F-ratios. The goodness of fit of the estimated equation IS
worlud out with the help of R-squad and R-adjusttd squad values.
11.8.4 Principal Component Analysir
The Principal Component ~nalysk is a special type of technique to group
the independent variables having multi-collinearity problem to consider for further
analysis. This analysis groups the variables into few independent factors that retain
maximum information contained in the original variable set. The technique has been
used to isolate the independent patterns of selected financial measures of
performance in Public Sector Enterprises. Ascertaining Principal Component for
further analysis involves certain steps which include:
I . Testing the distribution of each of the independent variables for their normality
either by using Shapiro and Wilks Test or Grey's test or any other normality tests;
11 Standardlsanon of the vanables whlch have passed through the above tests.
I I I Flnd~ng all poss~ble ~nter-conelat~ons between all ~ndependent vanables,
IV Ascenairung the factor loading (a,,) for each of the vanable as follows
Whert,
[ . = Sum of Comlatimm of a h column
[$$r,r,,x,] = Sum Total of all columnsand rows
v. Constructing a new set variables considering linear combinations of weighted
variables, weights being corresponding factor loadings;
vi The principal components (P, ,) can be used to est~mate the relationship
between dependent and independent variables.
These estimates can be restated into their original form for
11.8.5 Productivity Modeb
In order to quantify the partial factor and total factor productivities in
select Publ~c Sector Enterprises, the models suggested by Kendrick, Solow and Divisia
have k e n worked o u ~ . The models are briefly given below:
Kendrick Index of total factor produchvity, in case of two factors of
production, namely, Labour (L) and Capital (K) is as follows:
Where Vt, L, and K, are indices of real value added, labout and capital
respectively and w, and r, are the shares of labour and capital in value-added in the base
Year.
Solow Index of total factor productivity is based on the rate of change .n
product~vity. It can be shown as:
Where. A VtNa. A L,/L, and A K,IK, are the rates of change In real value
added, labour and capital and wl, and w~ are the shares of labour and capital in value
added
'I'he total factor product~vity could be ascertained as-
At(1 . AAt) A,,, ' -------- * ------- for base A, = 1
At
Divist Index of Total Factor Product~vity is also based on the rate of
product~\~t? change
Where, A VtNt, A 4/L and A KJK, are log of real value a d d 4 labour
and capital respectively, and
1 wK = - (WK+I + WK)
2
where w~ and w,, are the shares of capital and labour in value added
The toul factor productivity index PI+! is denved by thc followng
relationship
Where, PI 1
11.9 BASIC CONCEPTS USED
Some important concepts used in the study are briefly explained to
avo~d amb~gu~ty in understanding them-
11.9.1 Gorcrnment Compaay
Accordng to Section 617 of the Companies Act, 1956, Government
Compmcs ~ I C those in wluch not less than 5 1 per cent of the p d up capital is held by
the Central Government or by the State Governments or partly by Central and partly by
the State Govcmments and include companies which are the subsidiaries of
Government Companies thus defined.
119.2 Value Added
The Value added is the excess of value of goods and services produced
over the value of Inputs Including hlred services.
11.93 Capital Formation
Cap~tal formation is that part of a country's current output and tmports
whlch IS not consumed or exported dunng that account~ng penod but set as~de as
addrt~ons to 11s stock of cap~tal goods
11.9.4 <:apital Employed
Total Capital Employed as defined by the Bureau of Public Enterprises
represent the m-block, cap~tal expendlure dunng wnstructlon, capital In work-
~n-progress. Inventory and all other assets duly adjusted for accumulated depreclat~on, ~f
any
11.93 Internal Resources
Internal resources repsent the funds generated from wthrn the
mterpnse and an ~ncluslve of surpluses, deprec~atlon-pmns~on and provlslon
towards Won, dividends and other cumnt and noncurrent provisions.
1L9.6 External Sources
This item represents the funds mobilised from outside sources of
business, which include debentures, borrowing from various sources, banks and
financial institutions, government and semi-government agencies and other agencies
including foreign sources and public deposits and bonds
ILlO PROFILE OF THE STUDY UNITS
In order to know the overall funct~oning of the production based Public
Sector Enterprises, which have formed the basis of sample In the present study a
bnef outline of features of the select units are given below:
(a) S i of Capits1 Employed
The select Heavy and Med~um En~neenng unlts are ~nvolved in
manufacturing a vanety of products and thetr total capital employed IS mostly provided
bv the Government e~ther in the form of borrowings or bfferent forms. The Table II.2
clcarl) reflects the sue of the cap~tal employed In study w t s In case of Heavy - Fnglncenn~. the k3Htl.'s capltal has been ralsrng from Rs.41.936 lakhs In 1975-76 to
Ks 2.10.676 lakhs in 1995-96, Similarly, the s ~ u of capital employed in BHPV has
been enhancing fnnn Rs.2.060 lakhs In 1975-76 to Rs. 11,93 1 lakhs in 1998-96. L .-
Howwr. the size of capital employed in HEC, BSL and JCL found repomng negative
figure since 1993-94. Sirnildy. the growth ram in Capid employed by BHEL,
BHPV were 7 per cent and 6.5 per cent respectively dunng the study period. In case of
units h same is negative
Tab
le It
.2
1995-%
I 210676
I :844..3
11931
I -L9=.
-14205
1 39057
1 15627
1 46143
1 641
11
1 102597
1 CGR
1 0.071
1 .-
00669
/ --
-- 1 0
.0849
/ 02016
1 0.0809
i 01578
1 0.1399
Wi
b of
CAPITAI. EWPI,OYED in
Sck
et H
eavy
and
Med
ium
Eng
inee
ring
Bas
ed P
ublic
Sec
tor
En
terp
rise
s du
ring
197
6-77
and
1995
-96
----
- (Rs. In L
.akhs
)
''
: N
caat
ive
Oro
wth
: CG
R :
C'o
mw
und
Gro
wth
Rat
e So
urce
: ~
&a
u of
pub
lic E
nter
prise
s, pu
blic
Ent
ernr
ises S
urve
y, M
inist
ry o
f Ind
ustr
y. G
over
nmen
t of
Indi
a, V
ol. 1
, 199
5-96
, p.
BH
EL
- B
hara
t Heavy E
lsct
rica
ls L
imite
d: H
EC
-- H
eavy
Eng
inee
ring
Cor
pora
tion;
BH
PV - B
hara
t Hea
vy P
late
s and
Ves
sels
Lim
ited;
B
SL
- Bums S
t!mda
rd L
imite
d; JCI.
- Jc
ssop
and
Com
pany
Lim
ited;
BE
L - B
hara
t Ele
ctro
nics
Lim
ited;
BD
L - B
hara
t Dyn
amic
s L
imite
d;
HM
T
- Hin
dust
an M
achi
ne T
ools
Lim
ited;
HC
I, - H
indu
stan
Cab
les
Lim
ited;
and
ITIL
In
dian
Tel
epho
ne I
ndus
trie
s Lim
ited.
BSL
29781
2586
197677
3398
1842
1977-78
1978-79
48517
/ 18663
2938
2042
1979-80
63228
16138
3007
1 2478
' 1980-81
68979
12341
2653
2754
' 1961-82
78484
10513
! 2490
3865
12286
2129
3990
14059
, 2467
4722
1984-85
89962
13477
3418
5590
1985-86
7967
8 4346
5833
, 1986-87
9 1772
4766
445
1 7054
1987-88
5884
! 5252
6386
1988-89
26341
1 8046
8714
, 1989-90
, 19W-91
1991-92
/ 1992-93
I 1993-94
1994-95
ME
DIU
M
JCL
i - E
EL
1
BDL
4925
1 7050
330
' 4738
6940
392
4909
I 5946
1 464
4158
/ 5973
1 502
EN
GIN
EE
IUN
G
470%
4738
5235
5382
1 5557
561 5
5785
6339
649 1
7009
8013
8040
8524
871
1 -2974
-8303
120224
121209
170065
195454
201245
181687
BM
T
8999
9888
1 1595
11246
15220
17134
21030
23481
26854
34045
36768
40171
41361
421 10
4300
0 50636
724
1 '38
7849
43 6
9175
1 617
11212
/ 626
13572
1 85
14630
647
17597
I 1406
23108
1 2149
31863
3 4933
8647
:!::: /
I4918
2940 I
21074
57601
6198"
'iC3;;
4 1254
36063
' 8420
31816
' 9340
18222
' 10085
12487
1 1 154
EC
L
2955
2745
3539
4667
5394
5400
6051
8414
9746
12444
15628
22966
26829
29752
34585
34174
8437
9199
9054
9520
lllL
6675
7641
8567
10114
11968
13748
16172
21334
26170
303%
39792
86573
70646
82178
91190
75758
55934
/ 28776
69814
58314
. 41032
7487
I 9927
I 948
-15321
/ 9997
1 -11294
75679
107734
126513
130033
With regard to Medim Engineering En-, the Capital employed in
BEL has increared progressively from Rs.7050 lakhs in 1975-76 to Rs.39,057 lakhs
in 1995-96. Similarly, the Capital employed in BDL, HMT and lTIL has enhanced
substantially during the study period. Further, the Growth rates of capital employed
was 8 per cent in case of BEL, 20 per cent for BDL, 8 per cent for HMT, 16 per cent for
HCL and 14 per cent for ITIL. The Growth rate of Capital employed in Medium - Engineering units are found better compared to the Heavy Engineering units.
(b) Sizc of Turnover
The marginal growth in Capital employed in Heavy Engineering units
and subsmt~al growth of Capital employed In Medium Enpeering units have enabled
the select Public Sector Enterprises to report varying growth rates in turnover to the
extent of 13 per cent per annurn during 1975-76 and 1995-%. Similarly, the growth
rates in turnover during the study period was 7 per cent for HEC, 14 per cent for
BHPV, 7 per cent for Bum Standard and 4 per cent for JCL. The Table 11.3 clearly
shows the sue of the turnover belowng to select sample units during tbe study period
The growth rate of BHPV turnover was high among the Heavy Engineering group.
The Medium Engneering Public W o r Enterprises have found recording
\anlng gro\\th rates in turnover during the study penod Gross sales generated by the
HkIl.. RI)l,, 1iMr. HCl, and lTlL rose from Rs.5.567 lakhs In 1975-76 to Rs.1,07,567
in 1995-96, Rs.405 lakhs in 1975-76 to Rs.20,317 lakhs in 1995-96, Rs.8,275 lakhs in
1975-76 to Rs.85.818 l&hs in 1995-%. Rs.3.572 l&hs in 1975-76 to Rs.32,122
lakhs in 1995-96 and Rs.7.262 lakhs to Rs.78,262 lakhs in 1995-% respectively.
Tab
le 11
.3
Wa
ib o
f GROSS SALES in
Sdc
et H
eavy
and
Med
ium
Eng
inee
ring
Baw
d P
ublic
Sec
tor
Ent
erpr
ises
dur
ing
1976
77 a
nd 1995-96
(Rs. In L
a1
YW
n
uw
c~
cm
ttm
C
I M
ED
IUM
EN
GIN
EE
RM
G
BEEL
I REC
1 B
W I
B
SL
I JCL
I B
EL
1
BD
L
I E
MT
I ECL
I lT
LL
1975
-76
1 36
713
1 65
83
1 16
56
1 26
51
1 37
68
5567
(
405
1 82
75
1 35
72
1 75
62
Sou-
~
ulo
au
of P
ublic
Ent
erpr
ises. P
ublic,
Swev,M
inistry
of I
ndus
try.
Gw
mc
nt
of I
ndia
, Vol
. I, 1
995-
96, p
. B
HE
L - B
hant
Hea
vy E
lset
rica
ls L
imite
d; H
EC
-Hea
vy E
ngin
eeri
ng C
orpo
ratio
n; B
HPV
- B
hara
t Hea
vy P
late
s and
Vcs
sds
Lim
ited;
B
SL
- Bu
m St
mul
ard
Lim
ited.
JCL -
Jnao
p and
Com
pany
Lim
ited;
BE
L - B
hara
t Ele
ctro
nics
Lim
ited;
BD
L - B
hant
Dyn
amic
s Lim
ited;
H
MT
- H
mdn
st8n
Mac
hine
Too
ls L
imite
d; HCL -
Hin
dusta
n C
able
s Lim
ited;
and
ITIL
- In
dian
Tel
epho
ne ln
dusb
ies
Lim
ited
1995
-%
1 48
3346
CG
R
1 0.
1306
[
0.06
55
1 0.
1446
1
0071
4 1
0037
3 1
0.15
14
[ 0.
2050
1
0.11
78
1 0.
1103
1
0.11
77
CG
R :
Com
poun
d Gro
wth
Rat
e 2493
9 1
2823
8 1
1128
8 81
30
1075
67
203
17
1 85
818
1 32
122
1 78
262
However, the growth rate in turnom of BDL records high among the sample units
during the shdy period.
(e) Cross Margin
Gross margin refers to the operating surpluses More depreciation,
interest and tax. It is one of the indicators to measure the operational performance of a
firm. The absolute size of gross margin earned by the Heavy Engineering units is
not found satisfactory during the study period from 1975-76 to 1995-96 except in case
of the BHEL and BHPV (Table 11.4).
In the case of Medium Engneering enterprises, the Gross margin earned
by the BEL i s raising from Rs. 134 lakhs in 1975-76 to Rs. 10,789 lakhs in 1995-% and
from Rs.34 lakhs in 1975-76 to Rs.4.792 lakhs in 1995-% in case of BDL and from
Rs.2.121 lakhs to Rs.4.265 lakhs in 1995-96 in case of HMT The HCL has mmed a
s~ztllble Gross mugin right from the beghung during the shdy period The size of
Gross margin is enhancing from Rs.503 lakhs in 1975-76 to 9 13 lakhs in 1995-%. The
Gross margin by the ITlL has been raising in almost all the years except in 1995-%.
And the growth rates of Gross margin was 10 per cent per annum for BEL, 26 per cmt
for BDL, 3 per cent for HMT, 2 per cent for HCL.
(d) Net Pmfitr
Profitability is a audc indicator of perfbtmwx in the abscncc of bdter
IIXasum. Tabie 11.5 prsnrtJ the pic- in this & wherein the mson for
~evtrr criticism on t& performum of Ih: Public !kctor Entnpises is evident.
Tab
le 1
1.4
bi
b of C
RO
SS M
AR
GIN
in S
elec
t Hcr
vy a
nd M
edlu
m E
ngin
eeri
nn B
nsed
Pub
lic S
ecto
r E
nter
rris
ea d
urin
p 19
76-7
7 an
d 19
%%
1995-96
1 82518
1 -7449
] 1136
1 -3289
1 -2754
1 10789
1 4792
1 4265
I 913
CO
R
I 0.1021
I ]
0 0752
1 .
I 0 10%
1 0.2657
1 0.0338
1 0.0288
: N
@ve
Orowth; C
GR
:
Com
poun
d G
row
th R
ate
- -
- (R
s. La Lakhs)
Sou
rce:
B-
of Pu
blic E
ntap
rirs
. Public. M
inis
by o
f Ind
ustr
y, G
ovcn
unen
t of
Indi
a, V
ol. 1
, 19
95-9
6, p
. BH
EL -
BhP
at H
emy
Ele
ctri
cal8
Lim
ited;
HEC
- H
eavy
Ens
incu
ing
Cor
pora
tion;
BHPV - B
b
Hea
vy P
late
s and
Ves
sels
Lim
ited;
B
SL
- Bu
m S
tmdr
rd L
ihni
ted,
JCL
- J
esro
p an
d C
ompa
ny L
imite
d; B
EL - B
hara
t Elc
ctro
~cs L
imite
d; B
DL
- B
hd
Dyn
amic
s L
imite
d,
Hbf
T - H
indu
sma
Mac
hine
Too
ls L
imite
d: H
CL -
Hin
dust
an C
able
s Lim
ited;
and
IT
lL - In
dian
Tel
epho
ne In
duqh
ies L
imite
d.
Yc
u
1975-76
1976-77
19n-78
HE
AV
Y E
NG
INE
ER
ING
B
BL
L
10717
10664
99#2
MEDIUM E
NG
INE
ER
ING
BEL
1311
1624
1683
JCL
489
595 70
BDL 34
48
1 79
EEC
. B
HW
1
BSL
2128
248
2382
i 678
- 926
395
HM
T
2121
2113
1985
. 97
- I20
- 531
HCL
503
624
950
ITE.
la
163 1
1700
Tabl
e 11
.5
Mi
b of
CA
PIT
AL
EMPLOYED in
Sel
ect H
eavy
and
Med
ium
Eng
inee
ring
Bas
ed P
ublic
Ser
tor E
nter
prise
s d
uri
n~
19
76-7
7 an
d 19
95-9
6
1916-77
1977-78
1WS-79
1979
-80
19MMI
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
19!32-93
1993-94
1994-95
1995-96
CO
R : N
egat
ive O
low
lh, C
CR
:
Com
poun
d C
irow
ih R
ate
Sou
rce
Bure
au o
f Pub
lic E
ntap
rise
s, m
c E
ntm
risc
s Su
rvey
, Min
istry
of I
ndus
try,
Gov
cmm
enl o
f In
dia,
Vol
. I,
1995
-96,
p.
BHEL
- B
hant
Hemy E
lect
rica
ls L
imite
d; H
EC - H
eavy
Eng
inee
ring
Cor
pora
tion;
BH
PV - B
harn
t Hea
vy P
late
s and
Ves
sels
Lim
ited,
B
SL
- Bur
n8 S
mnd
ard L
imite
d; JC
L - J
esso
p an
d C
ompa
ny L
imite
d; B
EL
- B
hara
t Eltc
tron
ics L
imit
4 B
DL
- Bh
arat
Dynamics
Lim
ited;
H
MT
- Hin
dust
an M
achi
ne Tools
Lim
ited;
HCL
- H
indu
stan
Cab
les L
imite
d; an
d IT
IL - In
dian
Tel
epho
ne I
ndus
trie
s Lim
ited.
2612
2552
2515
3407
2664
21198
3068
3753
73 10
8432
7630
8094
9178
12033
3694
15008
13316
13687
14093
35016
0.1338
326
- 66
- 3026
/ -
60
- 2748
- 538
- 3477
' 33
- 5113
; 48
- 2282
60
-47%
/ 107
- 237
- 932
- %8
- 963
- 889
- 184
200
- 35
134 46
34
- 1192
- 430
- 590
- 344
- 922
- 320
-10107
-1 1593
- 863 1
- 5190
- 5392
- 7045
- 6843
- 2173
445
858
575
- 170
290
65
/ 295
6 - 502
1 48
1 31
-
905
1
I253
252
-3362
1 I*
491
486
730
1548
1327
2458
2708
2353
1995
762
526 3 I
469
48 1
1415
2600
272
-1 1926
- 7920
- 5589
-9951
-19265
-1 2726
- 8050
-27049
-19245 .
I
5 -109
-139
-336
-326
123
391
339
368
160
1372
485
1291 6
985
616
1788
0.2690
-931
i 381
-1169
1 i;
' 46
61
40
70
90
- 591
-
207
383
290
- 294
543
340
50 1
€68 76 1
%8
I294
1658
2oM
661
232
-2481
1211
129
1209
-8433
- 744
- 446
- 393
- 268
- 169
- 80
- 71
121
135
- 138
- 461
- 1036
-12551
- 5167
- 7136
.-
*
538
580
455
80.2
193
1043
1565
1251
1551
1266
2749
1678
2757
2948
3607
5723
8589
8435
- 8191
, -283% *
1024
1494
1447
1445
1932
2369
243
1 221
1 3425
3568
3093
! 3386
1579
2070
0 1074
In absolute terms the s i z of net profits of BHEL bas becn raising from Rs.2,504
I& in 1975-76 to Rs.35.016 in 1995-96 belonging to Heavy Engineering units
and other units of this group have not earned adequate net profits during the study
period.
With regard to Medium Engineering units, BEL and BDL have eamed
significant net profits and they were Rs.243 l& in 1975-76 to Rs.2,070 lakhs in 1995-
96, Rs. 10 Iakhs in 1975-76 to Rs. 1,788 lakhs in 1995-% respectively. Other units
belonging to this group had negative figures during the study period. Except the
BHEI, in Heavy Enpeering group, BEL and BDL in Medium Engineering
enterprises, all other units are found in red, showing either a negative or marginal net
