Institute of Professional Education and Research (Bhopal

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BUSINESS ENVIRONMENT ASSIGNMENT # 1

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its shareholders and other stakeholders. customers. its board. professional. It is intended to increase the confidence of shareholders and capitalmarket investors. A related but separate thread of discussions focuses on the impact of a corporate governance system on economic efficiency. and mechanisms that try to decrease the principal–agent problem. Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide stakeholders with a level 2   . suppliers. In contemporary business corporations. this aspect is particularly present in contemporary public debates and developments in regulatory policy (see regulation and policy regulation). policies. and policy makers. It involves a set of relationships between a company’s management. Principles of corporate governance    Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. Interests of other stakeholders:Organizations should recognize that they have legal. contractual. It guarantees that an enterprise is directed and controlled in a responsible. including employees. and market driven obligations to non-shareholder stakeholders. They can help shareholders exercise their rights by openly and effectively communicating information and by encouraging shareholders to participate in general meetings. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. local communities. debtholders. executives. and transparent manner with the purpose of safeguarding its long-term success. with a strong emphasis on shareholders' welfare. Ways of mitigating or preventing these conflicts of interests include theprocesses. investors. and institutions which have impact on the way a company is controlled. It also needs adequate size and appropriate levels of independence and commitment Integrity and ethical behavior: Integrity should be a fundamental requirement in choosing corporate officers and board members. social. Internal stakeholders are the board of directors. it deals with prevention or mitigation of the conflict of interests of stakeholders. suppliers. creditors. the main external stakeholder groups are shareholders.Corporate governance Corporate governance is "the system by which companies are directed and controlled". Role and responsibilities of the board: The board needs sufficient relevant skills and understanding to review and challenge management performance. customers and communities affected by the corporation's activities. and other employees. customs. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. An important theme of corporate governance is the nature and extent ofaccountability of people in the business. trade creditors. laws.

of accountability.28.000 MW by the year 2032. Although the company has 17. By 2032. ash utilisation and coal mining. NTPC India’s largest power company. Apart from power generation. one of the only four companies to be awarded this status. NTPC ranked 341 st in the ‘2010. 2010. located across the country. The capacity will have a diversified fuel mix comprising 56% coal. NTPC has already ventured into consultancy. 11% Nuclear and 17% Renewable Energy Sources(RES) including hydro. NTPC became a Maharatna company in May. Forbes Global 2000’ ranking of the World’s biggest companies. The company has set a target to have an installed power generating capacity of 1. which is the mainstay of the company. 3 . NTPC is emerging as a diversified power major with presence in the entire value chain of the power generation business. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear.40% of total power generation due to its focus on high efficiency. 5 stations are coal based & another station uses naptha/LNG as fuel. power trading. The total installed capacity of the company is 36. NTPC has been operating its plants at high efficiency levels. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. NTPC was set up in 1975 to accelerate power development in India. 16% Gas. In addition under JVs. no fossil fuel based generation capacity shall make up nearly 28% of NTPC’s portfolio.014 MW (including JVs) with 15 coal based and 7 gas based stations. it contributes 27. factual information.75% of the total national capacity.

In October 2004.” We are making continuous efforts to adopt the best practices in corporate governance and we believe that the practices we are putting into place for the company shall go beyond adherence to regulatory framework . by the Great Places to Work Institute. fairness. NTPC launched its Initial Public Offering (IPO) consisting of 5. Corporate Governance philosophy stems from our belief that corporate governance is a key element in improving efficiency and growth as well as enhancing investor confidence and accordingly the Corporate Governance philosophy has been scripted as under: “As a good corporate citizen. values and mutual trust amongst all the constituents of organization. India Chapter in collaboration with The Economic Times. business and disclosure practices have been aligned to our Corporate Governance Philosophy. 4 .25% as offer for sale by Government of India. NTPC has been awarded No. NTPC strives to develop mutual trust with the communities that surround its power stations. In February 2010. transparency in functioning. Corporate Governance is a process that aims to meet shareholders aspirations and societal expectations. The rest is held by Institutional Investors and the Public. the Shareholding of Government of India was reduced from 89. professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success.5% through Further Public Offer. openness. the Company is committed to sound corporate practices based on conscience. It is a commitment that is backed by the fundamental belief of maximizing shareholders value. Best Workplace in India among large organisations and the best PSU for the year 2010. rather a culture that guides the Board. People before Plant Load Factor is the mantra that guides all HR related policies. It’s not a discipline imposed by a Regulator. The concept of Corporate Social Responsibility is deeply ingrained in NTPC's culture. Through its expansive CSR initiatives. NTPC thus became a listed company in November 2004 with the Government holding 89. management and employees to function towards best interest of stakeholders.5% to 84. Our corporate structure.5% of the equity share capital.25% as fresh issue and 5. At NTPC.1. In our Company.

at present. Our Company believes that Independent Directors bring with them the rich experience followed in other companies resulting in imbibing the best practices followed in the industry. REPORT ON CORPORATE GOVERNANCE CORPORATE GOVERNANCE RECOGNITIONS In recognition of excellence in Corporate Governance. the following accolades have been conferred on NTPC in recent years: (i) 'ICSI National Award for Excellence in Corporate Governance . The Independent Directors on the Board of the company are appointed by the Government of India through an elaborate procedure of selection whichencompasses induction of professionals and experts in relevant field through a “SearchCommittee” by the Government of India. provide directions to themanagement on operational issues.5% of the total paid-up share capital. 5 . comprises of six full time functional Directors and the ManagingDirector who is also the Chairman of the company. 1956 as the President of India presently holds 84.2009' by the Institute of Company Secretaries of India (ii) 'Golden Peacock Global Award for Excellence in Corporate Governance' by World Council for Corporate Governance in the years 2007 and 2009 (iii) 'Golden Peacock National Award for Excellence in Corporate Governance' by World Council for Corporate Governance in the year 2008 (iv) SCOPE Meritorious Award for Good Corporate Governance for the year 2005-06. the power to appoint Directors vests in the President of India. Company’s functional directors arehighly experienced professionals in their functional areas.Board compositionDiversified Expertise based Board drives NTPC:NTPC Board. As per Articles of Association. BOARD OF DIRECTORS Size of the Board:NTPC is a Government Company within the meaning of section 617 of the Companies Act.The Company has nine Independent Directors and two directors nominated by theadministrative ministry. adoption of systems and best practices in management andoversight of compliance of various legal and other requirements.

The Board also has nine independent Directors who have been appointed by the Government of India through a Search Committee constituted for the purpose. The listing agreements with stock exchanges stipulate half of the Board members to be independent directors. The constitution of the Board is as under: (i) Seven functional Directors including the Chairman & Managing Director. or until further orders from the Government of India. These Directors may be either wholetime Directors or part-time Directors. 6 . The Directors bring to the Board wide range of experience and skills.In terms of the Articles of Association of the Company strength of our Board shall not be less than four Directors or more than twenty Directors. (ii) Two government nominees and (iii) Nine independent directors as per the requirement of the Listing Agreement. whichever event occurs earlier. As on 31st March 2011. We are compliant with Clause 49 (IA) of the Listing Agreement regarding composition of the Board of Directors. Age limit and tenure of Directors:The age limit of the Chairman & Managing Director and other whole-time Directors is 60 Years. Composition:The Board of Directors have an optimum combination of executive and non-executive Directors. the Board comprised eighteen Directors out of which seven were whole-time Directors including the Chairman & Managing Director. Independent Directors are appointed by the Government of India for tenure of three years. Government of India retire from the Board on ceasing to be officials of the Ministry of Power. Two Directors are nominees of the Government of India. Government Nominee Directors representing Ministry of Power. The Chairman & Managing Director and other whole time Directors are appointed for a period of five years from the date of taking over the charge or until the date of superannuation of the incumbent.

etc. • Minutes of meetings of Audit Committee and other Committees of the Board. • Capital Budgets and any updates. • Minutes of meetings of Board of Directors of subsidiary companies. Committees of the Board and Group of Directors constituted by the Board from time to time.Resume of Directors:The brief resume of Directors retiring by rotation and Additional Directors seeking appointment including nature of their experience in specific functional areas. The Ministry of Power.for each meeting of the Board.000/. the Board decides the sitting fee payable to the Independent Directors. Presently. Directors' Report. REMUNERATION OF DIRECTORS:As already stated under the heading Remuneration Committee above. The information regularly supplied to the Board includes: • Annual operating plans and budgets and any updates. • The information on recruitment and promotion of senior officers to the level of Executive Director which is just below the Board level and Company Secretary. 7 . sitting fee of Rs. Information placed before the Board of Directors: The Board has complete access to any information within the Company. • Review of progress of ongoing projects including critical issues and areas needing management attention • Annual Accounts. Government of India has authorized the Board of Directors of the Company to determine the sitting fee payable to Independent Directors within the ceiling prescribed under the Companies Act. dangerous occurrences. • Quarterly financial results. 1956. 15. and many more. names of companies in which they hold directorship and membership/chairmanship of Board/Committees is appended to the notice calling the Annual General Meeting. Accordingly. the remuneration of the Functional Directors and sitting fee payable to the Independent Directors is decided by the Government of India. is being paid to each Independent Director. • Fatal or serious accidents.

Management .NTPC Name Arup Roy Choudhury I J Kapoor D K Jain N NMisra Rakesh Jain Adesh Jain SantoshNautiyal RajibSekharSahoo Ajit M Nimbalkar Homai A Daruwalla SushilKhanna Name A K Singhal B P Singh S P Singh I C P Keshari KanwalNath A K Sanwalka S B GhoshDastidar M GovindaRao S R Upadhyay AnolNathChatterji Designation Chairman and Managing director Director (Commercial) Director (Technical) Director (Operations) Nominee Director Independent Director Independent Director Non Official PartTime Director Non Official PartTime Director Non Official PartTime Director Non Official PartTime Director Designation Director (Finance) Director (Projects) Director (Human Resources) Nominee Director Independent Director Independent Director Non Official PartTime Director Independent Director Non Official PartTime Director Non Official PartTime Director 8 .

70.94.60 220.00 66.70 Jan 10 238.95 Sep 09 214.404 44.00 186.40.418 4.50 206.70 1.90.79.281 99.79.30 198.394 3.111 18.760 2.05 5.10 Nov 09 211.85 201.854 99.59.50 -24.00 199.48.10 19.20 2.95 59.17.27.22.68.99.15 May 09 193.10 235.50 208.10 216.32.87.50 214.161 2.30 180.70 -0.77.98.639 10.00 215.14.89.00 186.15.409 2.51.209 10.93.678 28.40 200.63.00 215.294 19.978 1.97.30 203.70.00 Jun 10 200.24.03.60 21.19.75 185.81.355 4.872 32.817 1.13.89.40 1.201 87.33.56.159 29.342 3.61.20 -1.600 1.367 2.00 1.45 -23.43.424 2.42.87.86.20.25 1.48.40 202.142 77.413 8.00 233.688 2.85 212.57.10 Mar 10 203.65 1.34.94.75 Jun 09 219.36.183 55.463 36.15.95 Jul 09 195.20 201.25 Dec 09 208.55 213.46.420 41.84.50 223.535 17.010 4.17.06.302 37.15 58.02.90 196.00 210.00 212.16.76.10 Jul 10 198.021 1.60 2.57.50 176.70 Aug 09 215.50 207.80 Apr 09 181.40.95 167.00 1.75 -3.086 19.64.81.46.90 3.72.707 8.81.10 188.613 5.80 197.90 220.126 9.50 Apr 10 207.45 205.40 9.55 195.55 -2. of Total Turnover (Rs.78. of Price Price Price Price Shares * Spread No.30 Oct 09 214.76.14.10 190.32.22.57.00 205.66.15 215.00.926 11.107 66.16.58.25 203.914 1.45 Feb 10 216.45 2.44.369 2.30.25 211.00 218.65 -2.00 208.) H-L C-O Mar 09 183.977 1.084 1.635 5.75 91.90 -1.40 199.15 9 .10 -5.05 May 10 207.(C) SHARE PRICES OF NTPC BETWEEN 2009 TO 2011 Month Open High Low Close No.687 60.70 1.90 194.80 -13.70 239.) Trades (Rs.10 203.00 205.50 0.68.173 6.15 3.346 44.49.70 205.75 -0.68.16.61.87.21.70 222.337 46.60 27.454 20.50.50 190.537 17.06.89.88.44.564 1.12.00 241.17.99.84.60 71.65 209.

86.43.95 23.60 197.95 1.72 48.179 28.05 39.75 33.90 32.288 48.20 441.009.95.00 37.384 67.90 171.73 -2.07.707 2.00 168.183.25 76.9 per cent.88 274.938 84.483. since then.5 on 29thApril 2011.429. Cr.823 1.41 2.525 2.00 44.612 66.460.094.313.8 per cent since its coverage initiation CARE Equity Research initiated NTPC‟s coverage with Current Intrinsic Value (CIV) of Rs.82 38.45 175.29 0.313.338.29.058 37.631 20.60 -293.Aug 10 200.75 Sep 10 196.22. based on the current market price of Rs.50 192.246 45.86 -3.532.49.60 65.90 20.246 per share and a valuation grade of 5.50 NTPC‟s stock price down 12.31 611.00 38.032 62.698 46.78.675.28 44.40 -18.06.311.95 182.796.90 16.296.60 Jan 11 201.15 -12.47 57.52.30 1.20 38.605.811.70.90 194.585.70 3.229.63. the benchmark SENSEX in comparison has been lower by around 19. The stock is down 12.326 25.63 30.90 Oct 10 217.567.60 170.901 78.25.10 21.645.211.45.29.90 43.30.15 185.503 66.25 -12.59 2.80 0.20 0.903.00 454.19.50 200.70 23.70 236.24 503.05 193.091 1.00 51.88 32.50 379.10 216.00 47.525. FINANCIAL PERFORMANCE OF NTPC Profit & Loss account of NTPC Mar '11 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised 57.29 48.55.20 184.85 20.172 7.713 18.40 3.209 65.00 59.30 -22.00 203.742 69.67.122.44 1.71.047 Feb 11 189.in Rs.00 221.119.953.72.08.50 194.64 313.8 per cent cumulatively.90 228.35 Dec 10 184.900.70 29.23. However.65 0.05 200.61 3.84.891.28 1.149.00 202.90 2.17 2.00 188.75 Nov 10 196.41 3.74.00 41.70 629.821.123 Mar 11 172.865.77.00 1.90 ------------------.05.00 190. ------------------Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths 10 .80 -817.228.64.70 222.90 1.00 195.79.50 1.60 -4.41.229 22.70 27.90 195.00 583.20 193.55 36.

00 2.64 10.70 82.734.06 0.57 0.00 3.00 8.Total Expenses 41.760.80 12.49 82.90 492.81 518.135.533.46 Mar '11 12 mths 33.36 4.501.80 1.32 2.651.847.70 504.819.992.469.00 75.808.11 8.00 69.20 0.00 0.302.973.50 0.454.994.00 82.63 9.987.00 3.454.00 10.20 26.34 0.896.91 0.915.56 33.70 2.00 0.006.00 MAJOR ACTIVITIES THAT OCCURS BETWEEN 2009 TO 201128-12-2011 25-10-2011 25-07-2011 10-05-2011 31-01-2011 12-11-2010 26-10-2010 26-07-2010 Others Quarterly Results Quarterly Results Audited Results & Final Dividend Quarterly Results & Interim Dividend Others Quarterly Results Quarterly Results 11 .64 11.635.092.601.893.90 0.00 0.00 13.00 2.00 14.517.727.62 26.894.90 0.00 11.60 33.62 33.454.108.13 2.64 9.682.00 64.70 Mar '09 12 mths 10.095.88 17.611.90 2.138.71 17.38 0.206.974.832.00 8.36 2.781.242.494.149.71 2.03 11.402.33 595.90 10.00 6.719.60 7.90 Mar '08 12 mths 11.69 0.71 Mar '10 12 mths 14.73 41.90 82.30 9.17 3.348.04 13.11 Operating Profit PBDIT Interest P BDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Minority Interest Share Of P/L Of Associates Net P/L After Minority Interest & Share Of Associates Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 15.08 0.763.00 2.65 0.00 9.353.888.497.43 82.00 0.63 1.72 0.00 7.454.781.00 -638.23 0.50 12.00 1.90 2.30 11.00 0.81 0.784.504.46 13.470.789.704.00 0.16 532.20 2.900.00 10.529.626.837.60 8.64 9.

The PAPs are 12 . policy etc.survey reports. NTPC is a socially committed organisation and a socially responsible corporate citizen. land records. It attaches great importance to discharging its overall social responsibilities to the community and the society at large where its projects and stations are located. PICs at Corporate Centre and the projects house an array of documents. CSR ACTIVITIES:NTPC believes in growth with a human face. a program that addresses people affected directly or indirectly in the wake of the projects undertaken. Results. action plans. Dividend & Others Analysis: From the time NTPC has started practising corporate governance in their working the share prices of this company has gone up year by year and the impact of this is reflected on the buying and trading of shares and it creates a good image in the market also. and pursuing people-centred development.21-07-2010 17-05-2010 13-03-2010 29-01-2010 29-12-2009 23-10-2009 27-07-2009 22-05-2009 16-03-2009 24-01-2009 Others Audited Results & Final Dividend Interim Dividend Quarterly Results Others Quarterly Results Quarterly Results Audited Results & Final Dividend To approve the Investment proposal Qtr. Public Information Centre (PIC) To disseminate information on the project. In this regard Resettlement and Rehabilitation (R&R) program becomes an area of sharp focus. Intrm.

Village Development Advisory Committee (VDAC) VDACs facilitates finalisation and implementation of RAPs in a participative manner. constitute it and meet regularly since the formulation of RAP till completion and closure of RAPs at respective projects. prompt and accurate flow of information on environmental performance of Stations was developed and installed in NTPC. it is imperative to have an on-line. This system has helped in achieving continuous improvement in NTPC's environment performance through improved monitoring and reporting system by using the trend analysis and advanced data management techniques. adoption of latest technologies and continual environment improvement. namely "Paryavaran Monitoring System" .able to glean information on various facets of the project and also submit any query or grievance. On-line data base managementIn order to have better control on pollution and to achieve effective environment management in and around NTPC stations. The PMS has already been implemented at Corporate Centre. Pollution control systemsWhile deciding the appropriate technology for its projects. maximising ash utilisation and providing green belt all around the plant for maintaining ecological balance. thereby minimising waste. reliable and efficient environment information system on the plant operational and environmental performance parameters at all three levels i. Regional Headquarters and Corporate Centre. In consideration of the above. Block Development Officer. NTPC integrates many environmental provisions into the plant design. which could provide reliable storage. Gram Pradhan. the Regional Headquarters and most of the Stations. a computerized programme. optimum utilisation of equipment. NTPC brought out a comprehensive document entitled "NTPC Environment Policy and Environment Management System". 13 .PMS. NTPC Environment PolicyAs early as in November 1995. In order to ensure that NTPC comply with all the stipulated environment norms. Panchayat representative.e generating Stations. The representatives of PAPs. The policy also envisages efficient utilisation of resources. other representatives of State Government NTPC and NGOs/CBOs. Amongst the guiding principles adopted in the document are company's proactive approach to environment. various state-of-the-art pollution control systems / devices as discussed below have been installed to control air and water pollution. This software facilitates direct transfer of environment reports and other environment related information from stations to the Regional Headquarters and Corporate Centre.

NTPC's CSR-CD Policy establishes NTPC foundation as a trust and initiating scheme for economic self reliance of physically challenged persons (PCP). further articulated in the corporate objectives on sustainable power development. lead the sector in the areas of resettlement and rehabilitation and environment protection including effective ash-utilisation. peripheral development and energy conservation practices. constant endeavour is to institutionalise social responsibility on various levels. Right from social to developmental work of the community and welfare based dependence. to creating greater self reliance.Community DevelopmentThe concept of Corporate Social Responsibility is deeply ingrained in NTPC's culture. 14 . is as follows:   To contribute to sustainable power development by discharging corporate social responsibilities. NTPC's approach towards CSR. Through its expansive CSR initiatives NTPC strives to develop mutual trust with the communities that surround its Power Stations.

THANK YOU 15 .) Interestingly. (2) More independent members on the board of directors. These results suggest that firms with stronger corporate governance mechanisms are less likely to make misleading earnings adjustments and.Impact of corporate governance The results reveal that: (1) A higher level of institutional ownership. 3. as a result. they have lower incentives to cease reporting manageradjusted earnings numbers in the presence of SEC scrutiny. An analysis of the market's reaction to earnings announcements indicates that both a high proportion of institutional ownership and a high percentage of outside directors are associated with a lower market reaction to non-GAAP earnings. the presence of strong corporate governance mechanisms appears to decrease investors' reliance on adjusted earnings measures.