LIVE PROJECT REPORT IN FINANCIAL MANAGEMENT AN ANALYSIS OF BALANCE SHEET OF GMR INFRA LTD

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TITLE

AN ANALYSIS OF FINANCIAL STATEMENTS OF GMR INFRA BY RATIO ANALYSIS

TABLE OF CONTENTS

INTRODUCTION OBJECTIVE METHODOLOGY DATA ANLYSIS FINDINGS CONCLUSION

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INTRODUCTION: GMR Group is an Indian business group that is in to Energy and Infrastructure sectors. It is based in Bangalore, India. The group has emerged as a big player in the airport development space and is presently developing the Delhi and Hyderabad airports. GMR also owns Indian Premier League's (A Twenty20 Cricket league in India) Delhi franchise, Delhi Daredevils. Grandhi Mallikarjun Rao is the Chairman and Managing director of GMR group. With an estimated personal worth of $6.2 billion dollars, G M Rao stands at #198 in Forbes' 2008 World Billionaire list. Key Companies GMR Group is one of the fastest growing infrastructure companies in India and has interests in Airports, Highways, Energy and Urban Infrastructure. It other area of interest is Agri-Business. GMR Holdings Private Limited is the holding company for The GMR Group of Companies. The two main subsidiary companies are

GMR Infrastructure Limited GMR Industries Limited GMR Infrastructure Limited has over 23 subsidiaries in the following sectors Energy Badrinath Hydro Power Vemagiri Power Generation GMR Bajoli Power Project GMR Chattisgarh Power Project Upper Karnali Power Project

GMR Orissa Power Plant Kakinada Barge Mounted Power Plant (Being relocated from Tanirbavi) Highways Tambaram-Tindivanam Tuni-Ankapalli Ambala-Chandigarh Adloor-Gundla Ponchanpalli Tindivanam-Ulunderpet Thondapalli-Jadcherla Airports Hyderabad Airport Delhi Airport. Sabiha Gokcen International Airport, Istanbul, Turkey. Urban Infrastructure SEZ in Krishnagiri District, Tamil Nadu

Apart from this GMR group has interests in several other areas. It's most recent entry was into the field of Sports - specifically into Indian Premier League For Cricket. It bought the IPL Delhi team franchise. The team was named Delhi Daredevils and will be participating in the 59 match 44-day 8team Indian Premier League cricket tournament starting April 18. Also, the company announced the purchase of 50% stake in Intergen N.V. on June 25th 2008 in a transaction valued at US$1.1 billion. This was the largest ever acquisition of a global energy utility by an indian company

OBJECTIVE: The objective of this project is to find out the liquidity, and profitability position of GMR INFRA LTD

RESEARCH METHODOLOGY: The research methodology used here is: Defining the objective Developing the information and resources Collecting the information Analysis of collected information Findings The tool used in this study is Ratio analysis. It is a quantitative investment technique used for comparing a company's financial performance to the market in general. A change in these ratios helps to bring about a change in the way a company works. It helps to identify areas where the management
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needs to change. This is the most prevalent method of analyzing a balance sheet is through ratio analysis. The ratio analysis can be for a single year or it may extend to more than one year. The ratios can also be compared with similar ratios of others concerns to make a comparative study. .First, all ratios will be worked out for each year and each set of comparable items. .The ratios worked out will be put in the context of a trend over several years. .They will be compared with similar companies/ standard ratios. i) ii) for the year concerned, and Over a period of time.

Any number of ratios can be prepared by comparing any two figures available in the balance sheet or profits and loss account or both. But to serve its purpose, the figures compared should be meaningful, having a link between them, and should satisfy the needs of the person who analysis the financial statements. Ratios are also classified differently on different bases. The mostly used one is the financial classification under which the ratios are broadly divided into the following five classes: 1. Liquidity ratios concerned with the short term solvency of the concern or its ability to meet financial obligation on their due dates. 2. Activity ratios concerning efficiency of management of various assets by the concern.

3. Leverage ratios concerning stake of the owners in the business in relation to outside borrowings or long term solvency. 4. Coverage ratios concerned with the ability of the company to meet fixed commitments such as interest on term loans and dividend on preference shares and 5. Profitability ratios concerned with the profitability of the concern. DATA NALYSIS: In this study, Liquidity ratios are used to find out the liquidity position of GMR INFRA LIMITED. by comparing the past three years financial performances from the balance sheet and variations in working capital are studied. Liquidity Ratios: Liquidity implies the firms ability to pay its debts in short run. This ability can be measured by the use of Liquidity Ratios. Short term liquidity involves the relationship between current assets and current liabilities. If a firm has sufficient net working capital it is assumed to have enough liquidity. The current ratio and the quick ratio are the two ratios, which directly measures the liquidity. Current Ratio(Working Capital Ratio): The ratio is worked out by dividing the current assets of the concern by its current liabilities. Current Ratio= current assets/current liabilities.
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Current ratios indicate the relation between current assets and current liabilities. Current liabilities represent the immediate financial obligations of the company. Current assets are the sources of repayment of current liabilities. Therefore, the ratio measures the capacity of the company to meet financial obligation as and when they arise. Textbooks claim a ratio of 1.5 to 2 is ideal; bit in practice this is rarely achieved. This ratio is also known as working capital ratio. Quick Ratio (Acid-Test Ratio): Quick assets represent current assets excluding stock and prepaid expenses. Stock is excluded because it is not immediately realizable in cash. Prepaid expenses are excluded because they cannot be realized in cash. It is a stringent test that indicates if a firm has enough short-term assets to cover its immediate liabilities. It is more reliable than current ratio because it considers only the most liquid assets and does not include the hidden factors like window dressing that may skew the actual scenario. Quick Ratio = Quick Assets/Current liabilities. = (Current Assets-Inventories)/Current Liabilities. One of the defects of current ratio is that it does not measure accurately to meet financial commitments as and when they arise. This is because the current assets include also items that are not easily realizable, such as stock. The acid test ratio is a refinement of current ratio and is calculated to measure the ability of the company to meet the liquidity requirements in the
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immediate future. A minimum of 1: 1 is expected which indicates that the concern can fully meet its financial obligations. This also called as Liquid ratio or Quick ratio.

Working Capital: Working capital, also known as net working capital, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash. Working Capital = Current Assets Current liabilities Profitability Ratios: Profitability Ratios show how successful a company is in terms of generating returns or profits on the Investment that it has made in the business i.e. the Profitability ratios speak about the
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profitability of the company. The higher these ratios the better it is for the company. There are two types of profitability ratios: Profit Margin ratios o Operating Profit Margin ratio o Net Profit Margin ratio Rate of Return ratios o Return on Total Assets (ROTA) o Return on Capital Employed (ROCE) o Return on Net Worth (RONW)

GMR Infrastructure Ltd Profit loss account Mar ' 08 Income: Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses 102.77 5.96 2.92 5.75 14.62 88.14 1.36 89.50 25.37
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Mar ' 07 33.39 0.34 0.84 1.72 2.90 30.50 0.51 31.00 19.96

Mar ' 06 59.60 1.23 0.05 6.01 7.29 52.31 1.22 53.54 18.20

Mar ' 05 46.89 0.37 5.03 5.40 41.49 3.98 45.47 25.44

(Rs crore) Mar ' 04 125.29 5.17 31.29 36.46 88.83 10.17 99.01 41.02

Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax Retained earnings

0.13 64.01 2.84 61.16 1.54 62.70 144.48 144.48

0.20 10.85 2.39 8.46 -5.58 2.88 63.17 63.17

0.22 35.12 -0.04 35.16 0.39 35.55 73.97 73.97

0.25 0.97 18.81 -0.14 18.94 1.76 3.68 24.38 95.68 1.55 0.20 93.93

0.23 0.42 57.34 -0.12 57.47 0.16 57.62 81.45 2.41 0.31 78.74

Balance sheet Mar ' 08 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Mar ' 07 Mar ' 06 Mar ' 05

(Rs crore) Mar ' 04

364.13 5,240.44 469.18 10.00 6,083.74

331.08 1,308.70 177.17 20.00 1,836.95

264.44 104.04 175.89 106.76 651.13

158.66 40.00 174.27 214.23 53.72 640.89

158.66 18.50 146.84 221.34 14.93 560.26

1.71 1.03 0.68

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1.71 0.90 0.81

2.22 1.11 1.11

2.33 0.96 1.37

2.41 0.76 1.65

Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes: Book value of unquoted investments Market value of quoted investments Contingent liabilities Findings : year Current ratio Quick ratio
300 250 200 150 100 50 0

4,780.31 1,324.06 21.30 1,302.76 6,083.74 4,773.72 11.98 3,132.29

1,344.03 493.89 1.78 492.12 1,836.95 1,344.03 14.40 834.73

438.24 214.40 2.63 211.77 651.13 438.24 260.16

442.36 199.92 2.76 197.16 640.89 438.12 9.20 122.91

367.30 199.61 8.30 191.32 560.26 -

2008 62.15 62.15

2007 278.01 277.98

2006 81.55 81.53

2005 72.48 72.47

2004 24.06 24.06

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300 250 200 150 100 50 0

From the above figures it is understood that there is a consistent growth in current ratio up to 2007 but a sudden fall in 2008. this is because of increase in current liabilities.also the same with quick ratio,but in 2008 quick ratio is equal to current ratio because of absence of inventories. From the above figures it is clear that working capital is on increasing trend and it reflects that the company is financing its short tern funds with out any difficulties Year Net profit ratio
70 60 50 40 30 20 10 0

2008 60.21

2007 8.49

2006 58.43

2005 47.92

Regarding profitability of company it is held that there is an increase but in 2007 the net profits of the company declined due to decreade in sales. With regard to liquidity ratios the Total debt/equity ratios for 2008,07,06 are as follows

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year Debt equity ratio

2008 0.08

2007 0.12

2006 0.76

2005 0.83

This shows that there is a decline in the owners stake in the company With respect to coverage ratios the figures are as follows Year 2008 2007 2006 Finance 3.53 1.55 2.94 coverage ratio 2005 1.79

As finance coverage ratio is increasing it shows that company ability to meet its interest and dividend is increasing Conclusion: From the above analysis it is held that overall performance of the conpany is satisfatory

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