SUMMER TRAINING PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT

SUBMITTED TO: SUBMITTED BY:

PROF. K. K. MALVIYA RUCHI PANDEY
PROJECT GUIDE ROLL NO. 1401170074

UNITED INSTITUTE OF
MANAGEMENT
 INSTITUTE CERTIFICATE

UNITED INSTITUE OF MANAGEMENT NAINI

(ALLAHABAD)

Date ------------------

TO WHOM IT MAY CONCERN

This is to certify that Miss RUCHI PANDEY student of MBA course ( 2014 – 2016) at United

Institute of Management Naini with dual specialization in Finance & Human Resource Management

has satisfactorily completed the summer research project on “WORKING CAPITAL

MANAGEMENT ” IN NATIONAL THERMAL POWER CORPORATION LIMITED

SINGRAULI , SONEBHADRA ( U.P ) – 231223 . This study is done under the guidance of the

undersigned by partial fulfillment for the award of MBA .

I wish her all the best for bright future ahead.

 ACKNOWLEDGEMENT

It has been an honor for me to have my SUMMER TRAINING in NTPC SINGRAULI For the same. I would like to
express my sincere thanks to Mr. Prabhakar Ghosh ( Officer - Fin).

I sincerely thank Mr. Milan Kumar ( DGM - HR - EDC ) for providing me the opportunity to do my summer
training in NTPC LTD.

I would like to specially thank to Mr. Dheeraj Kumar Gupta ( Sr. Officer –HR ) & Dr. Maheshwari Sharan ( Dy.
Manager – PR Cell ) who as my project guide, helped me through their vision and valuable guidance. Without their
valuable efforts, it could not have been possible for me to complete my project.

I sincerely acknowledge the co-operation from all the Executives, of NTPC SINGRAULI who had shown their
interest and tendered their valuable opinion and suggestions.

I also thanks to the entire staff members and teachers of my Institute UNITED INSTITUE OF MANAGEMENT
NAINI (ALLAHBAD) specially Mr. K. K. MALVIYA (PRINCIPAL), UIM for his constant guidance, help and
encouragement during the preparation of this project.

RUCHI PANDEY
Roll No.1401170074
 PREFACE

It’s a matter of honor for me to place before you my best possible efforts in the form of Training report
on “WORKING CAPITAL MANAGEMENT” in NTPC - SINGRAULI

This project has been very inspiring and educative for me in gaining insight of FINANCE Deptt. in an
organization , which is known for achieving excellence in every field around the world.

In November 1975 National Thermal Power Corporation ( NTPC ) was established under the Electricity
( Supply ) Act , 1948.

NTPC Ltd., one of the “ MAHARATNAS ” in Public Sector, the largest Power Utility in country
contributing ¼ of the total power generation.

NTPC Ltd. has over a period of 31 years created various records on Operational Excellence and added to
an excellent organization development.

This project has been undertaken as a part of my “SUMMER TRAINING” for the partial fulfillment of
MBA ( HR ). I wish this would highlight the level of satisfaction among executives regarding to their
related job and performance feedback.
 DECLARATION

I RUCHI PANDEY a student of MBA 3RD SEMESTER UNITED INSTITUTE OF

MANAGEMENT, ALLAHABAD ROLL NO- 1001170108 respectively hereby declare
that the Project Report on “WORKING CAPITAL MANAGEMENT” is the outcome of
my own work and the same has not been submitted to any other University/Institute for
the award of any degree or any Professional diploma.

RUCHI PANDEY
ROLL
NO-1401170074
 CONTENTS
Topic Pg. No.
1. Acknowledgement
2. Preface 1
3. Declaration 2
4. Objective of the study 3
5. Review of Literatures
6. Company profile 5-12
7. Introduction Of working Capital Management
8. Inventory management
9. Conversion periods
10. Cash management
11. Receivable management
12. Managing paybless
13. Working capital and short term financing
14. Scope of the study
15. SWOT Analysis
16. Research methodology
17. Hypothesis

18. Data sources

19. Limitations
20. Data analysis
21. Findings
22. Suggestions
23. Conclusions
24. Bibliography
25. Annexure

OBJECTIVE OF THE STUDY

The objectives of this project were mainly to study the inventory, cash and receivable at NTPC Ltd., but

there are some more and they are –

The main purpose of our study is to render a better understanding of

the concept “Working Capital Management”.

To understand the planning and management of working capital at NTPC Ltd.

To measure the financial soundness of the company by analyzing various ratios.
To suggest ways for better management and control of working capital at the concern.
 Review of Literatures

The project undertaken is on “WORKING CAPITAL MANAGEMENT IN NTPC”. It describes about how

the company manages its working capital and the various steps that are required in the management of

working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations,

reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential

to making investment decisions. A good way to judge a company's cash flow prospects is to look at its

working capital management (WCM).

Working capital refers to the cash a business requires for day-to-day operations or, more specifically, for

financing the conversion of raw materials into finished goods, which the company sells for payment. Among

the most important items of working capital are levels of inventory, accounts receivable, and accounts

payable. Analysts look at these items for signs of a company's efficiency and financial strength.

The working capital is an important yardstick to measure the company’s operational and financial efficiency.

Any company should have a right amount of cash and lines of credit for its business needs at all times.

This project describes how the management of working capital takes place at NTPC .
 COMPANY PROFILE

NTPC Limited is the largest thermal power generating company of India. A public sector company, it was

incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of

the Government of India. At present, Government of India holds 89.5% of the total equity shares of the

company and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. Within a span of 31

years, NTPC has emerged as a truly national power company, with power generating facilities in all the major

regions of the country.

National Thermal Power Corporation is the largest power generation company in India. The Forbes Global

2000 ranking for 2005 ranks it as the 5th leading company in India and the 486th leading company in the

world. It is a public listed (Bombay Stock Exchange) Indian public sector company, with majority shares

owned by the Government of India. At present, Government of India holds 89.5% of the total equity shares of

the company and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. NTPC ranks amongst

the top five companies, in terms of market capitalisation.

NTPC's core business is engineering, construction and operation of power generating plants and also

providing consultancy to power utilities in India and abroad. As on date the installed capacity of NTPC

is 26, 404 MW through its 14 coal based (21,395 MW), 7 gas based (3,955 MW) and 4 Joint Venture

Projects (1,054 MW).

From the above graph it’s been clear that NTPC is creating that leading benchmark in all over the

country, like above graph is dictating that the intensive and remarkable growth covered by NTPC was

started in year 1986-87 from 3000MW with 20000BU and goes to inconsistent growth in year 2006-07

by 30000MW with 200000BU. This shows the effective installed capacity is leading a terrific generation

of power.
NTPC’s core business is engineering, construction and operation of power generating plants. It also

provides consultancy in the area of power plant constructions and power generation to companies in

India and abroad. As on date the installed capacity of NTPC is 27,904 MW through its 15 coal based

(22,895 MW), 7 gas based (3,955 MW) and 4 Joint Venture Projects (1,054 MW). NTPC acquired 50%

equity of the SAIL Power Supply Corporation Ltd. (SPSCL). This JV company operates the captive

power plants of Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has 28.33%

stake in Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company between NTPC,

GAIL, Indian Financial Institutions and Maharashtra SEB Holding Co. Ltd. The present capacity of

RGPPL is 850MW.

NTPC’s share on 31 Mar 2007 in the total installed capacity of the country was 20.18% and it

contributed 28.50% of the total power generation of the country during 2006-07.

NTPC has set new benchmarks for the power industry both in the area of power plant construction and

operations. It is providing power at the cheapest average tariff in the country. With its experience and

expertise in the power sector, NTPC is extending consultancy services to various organisations in the

power business.

NTPC is committed to the environment, generating power at minimal environmental cost and preserving

the ecology in the vicinity of the plants. NTPC has undertaken massive afforestation in the vicinity of its

plants. Plantations have increased forest area and reduced barren land. The massive afforestation by

NTPC in and around its Ramagundam Power station (2600 MW) have contributed reducing the

temperature in the areas by about 3°c. NTPC has also taken proactive steps for ash utilisation. In 1991, it
set up Ash Utilisation Division to manage efficient use of the ash produced at its coal stations. This

quality of ash produced is ideal for use in cement, concrete, cellular concrete, building material.

A "Center for Power Efficiency and Environment Protection (CENPEEP)" has been established in

NTPC with the assistance of United States Agency for International Development. (USAID). Cenpeep is

efficiency oriented, eco-friendly and eco-nurturing initiative - a symbol of NTPC's concern towards

environmental protection and continued commitment to sustainable power development in India.

As a responsible corporate citizen, NTPC is making constant efforts to improve the socio-economic

status of the people affected by the projects. Through its Rehabilitation and Resettlement programmes,

the company endeavors to improve the overall socio-economic status of Project Affected Persons.

NTPC was among the first Public Sector Enterprises to enter into a Memorandum of Understanding

(MOU) with the Government in 1987-88. NTPC has been Placed under the 'Excellent category' (the best

category) every year since the MOU system became operative.

Recognising its excellent performance and vast potential, Government of the India has identified NTPC

as one of the jewels of Public Sector ‘Navratnas’- a potential global giant. Inspired by its glorious past

and vibrant present, NTPC is well on its way to realise its vision of being “A world class integrated

power major, powering India’s growth, with increasing global presence”.

 ORGANISATIONAL VISION

“TO BE ONE OF THE WORLD’S LARGEST AND BEST POWER UTILITIES,

POWERING INDIA’S GROWTH”.

MISSION
MAKE AVAILABLE RELIABLE, QUALITY POWER IN INCREASINGLY LARGE QUALITIES AT

APPROPRIATE TARIFFS, AND ENSURE TIMELY

REALISATION OF REVENUES.

SPEEDILY PLAN AND IMPLEMENT POWER PROJECTS, WITH CONTEMPORARY

TECHNOLOGIES .

IMPLEMENT STRATEGIC DIVERSIFICATIONS IN THE AREAS OF R&M,

HYDRO,LNGAND NON CONVENTIONAL AND ECOFRIENDLY FUELS AN EXPLORE NEW

AREAS LIKE TRANSMISSION, INFORMATION TECHNOLOGY ETC.,

PROMOTE CONSULTANCY AND MAKE PRUDENT ACQUISITIONS

CONTINUOUSLY DEVELOP COMPETENT HUMAN RESOURCES TO MATCH WORLD

STANDARDS.

BE A RESPONSIBLE CORPORATE CITIZEN WITH TRUST ON

 ENVIRONMENT PROTECTION, REHABILITATION AND ASH

UTILISATION .

CORE VALUES

(COMIT)
 CUSTOMER FOCUS

 ORGANISATIONAL PRIDE

 MUTUAL RESPECT AND TRUST

 INITIATIVE AND SPEED

 TOTAL QUALITY
Corporate objectives

 To add generating capacity within prescribed time and cost.

 To operate and maintain power stations at high availability ensuring minimum cost Of generation.

 To maintain the financial soundness of the company by managing the financial

Operations in accordance with good commercial utility practices.

 To develop appropriate commercial policy leading to remunerative tariffs and

Minimum receivables.

 To function as a responsible corporate citizen and discharge social responsibility, In respect of

environment protection and rehabilitation.

 The corporation will strive to utilize the ash produced at its stations to the

Maximum extent possible through production of ash bricks building materials etc.

 To adopt appropriate human resources development policy leading to creation of Team of

motivated and competent power professional.

 To introduce, assimilate and attain self sufficiency in technology, acquire expertise in utility

management practices and to disseminate knowledge essentially as a Contribution to other

constituents of the power sector in the country.

 To develop research & development (R&D) for achieving improved plant Reliability.

 To expand the consultancy operations and to participate in ventures abroad.

 INTRODUCTION TO WORKING CAPITAL

“Working Capital is the Life-Blood and Controlling Nerve Center of a business”

The working capital management precisely refers to management of current assets. A firm’s working capital

consists of its investment in current assets, which include short-term assets such as:

Cash and bank balance,

Inventories,

Receivables (including debtors and bills),

Marketable securities.

Working capital is commonly defined as the difference between current assets and current

liabilities.

Working Capital = Current Assets-Current Liabilities

There are two major concepts of working capital:

Gross working capital

Net working capital

Gross working capital:

It refers to firm's investment in current assets. Current assets are the assets, which can be converted into

cash with in a financial year. The gross working capital points to the need of arranging funds to finance

current assets.

Net working capital:

It refers to the difference between current assets and current liabilities. Net working capital can be positive or

negative. A positive net working capital will arise when current assets exceed current liabilities. And vice-

versa for negative net working capital. Net working capital is a qualitative concept. It indicates the liquidity
position of the firm and suggests the extent to which working capital needs may be financed by permanent

sources of funds. Net working capital also covers the question of judicious mix of long-term and short-term

funds for financing current assets.

Significance Of Working Capital Management

The management of working capital is important for several reasons:

For one thing, the current assets of a typical manufacturing firm account for half of its total assets. For a

distribution company, they account for even more.

Working capital requires continuous day to day supervision. Working capital has the effect on

company's risk, return and share prices,

There is an inevitable relationship between sales growth and the level of current assets. The target sales

level can be achieved only if supported by adequate working capital Inefficient working capital

management may lead to insolvency of the firm if it is not in a position to meet its liabilities and

commitments.
 Liquidity Vs Profitability: Risk - Return trade off

Another important aspect of a working capital policy is to maintain and provide sufficient liquidity to

the firm. Like the most corporate financial decisions, the decision on how much working capital be

maintained involves a trade off- having a large net working capital may reduce the liquidity risk faced

by a firm, but it can have a negative effect on the cash flows. Therefore, the net effect on the value of

the firm should be used to determine the optimal amount of working capital.

Sound working capital involves two fundamental decisions for the firm. They are the determination of:

The optimal level of investments in current assets.

The appropriate mix of short-term and long-term financing used to support this investment

in current assets, a firm should decide whether or not it should use short-term financing. If short-term

financing has to be used, the firm must determine its portion in total financing. Short-term financing

may be preferred over long-term financing for two reasons:

The cost advantage

Flexibility

But short-term financing is more risky than long-term financing. Following table will summarize our

discussion of short-term versus long-term financing.

18
Maintaining a policy of short term financing for short term or temporary assets needs (Box 1) and long-

term financing for long term or permanent assets needs (Box 3) would comprise a set of moderate risk

–profitability strategies. But what one gains by following alternative strategies (like by box 2 or box 4)

needs to weighed against what you give up.

19
 CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified as follows:

On the basis of time

20
On the basis of concept

21
Types of Working Capital Needs

Another important aspect of working capital management is to analyze the total working capital needs

of the firm in order to find out the permanent and temporary working capital. Working capital is

required because of existence of operating cycle. The lengthier the operating cycle, greater would be

the need for working capital. The operating cycle is a continuous process and therefore, the working

capital is needed constantly and regularly. However, the magnitude and quantum of working capital

required will not be same all the times, rather it will fluctuate.

The need for current assets tends to shift over time. Some of these changes reflect permanent changes

in the firm as is the case when the inventory and receivables increases as the firm grows and the sales

become higher and higher. Other changes are seasonal, as is the case with increased inventory required

for a particular festival season. Still others are random reflecting the uncertainty associated with

growth in sales due to firm's specific or general economic factors.

The working capital needs can be bifurcated as:

Permanent working capital

Temporary working capital

Permanent working capital:

There is always a minimum level of working capital, which is continuously required by a firm in order

to maintain its activities. Every firm must have a minimum of cash, stock and other current assets, this

minimum level of current assets, which must be maintained by any firm all the times, is known as

22
permanent working capital for that firm. This amount of working capital is constantly and regularly

required in the same way as fixed assets are required. So, it may also be called fixed working capital.

Temporary working capital:

Any amount over and above the permanent level of working capital is temporary, fluctuating or

variable working capital. The position of the required working capital is needed to meet fluctuations in

demand consequent upon changes in production and sales as a result of seasonal changes.

The permanent level is constant while the temporary working capital is fluctuating increasing and

decreasing in accordance with seasonal demands as shown in the figure.

In the case of an expanding firm, the permanent working capital line may not be horizontal. This is

because the demand for permanent current assets might be increasing (or decreasing) to support a

rising level of activity. In that case line would be rising.

23
24
FINANCING OF WORKING CAPITAL

There are two types of working capital requirements as discussed above. They are:

Permanent or Fixed Working Capital requirements

Temporary or Variable Working Capital requirements

Therefore, to finance either of these two working capital requirements, we have long-term as well as

short-term sources.

25
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

There are many factors that determine working capital needs of an enterprise. Some of these factors

are explained below:

 Nature or Character of Business.

The working capital requirement of a firm is closely related to the nature of its business. A

service firm, like an electricity undertaking or a transport corporation, which has a short

operating cycle and which sells predominantly on cash basis, has a modest working capital

requirement. Oh the other hand, a manufacturing concern like a machine tools unit, which has a

long operating cycle and which sells largely on credit, has a very substantial working capital

requirement.
NTPC carry on activities related to Sugar systems. Though they are primarily an assembling firm

they also have manufacturing facilities in Chennai and Pondicherry. This requires them to keep a

very sizeable amount in working capital.

 Size of Business/Scale of Operations.

NTPC is the leader in its segment in both consumer as well as commercial market share. They

have increased their share in the consumer segment notably in the last four years. This they have

achieved through retail expansion. The scale of operations and the size it holds in the Indian IT

market makes it a must for them to hold their inventory and current asset at a huge level.

26
Rate of Growth of Business.
The rate of growth of sales indicates a need for increase in the working capital requirements of

the firm. As the firm is projected to increase their sales by 80% from what it was in 2006, it is

required to guard them against the increasing requirements of the net current asset by way of

efficient working capital management. The sales and projected sales level determine the

investment in inventories and receivables.

NTPC 2014 2013 2012 2011 2010

PROJECTED
Gross Sales/Income 3400 2833 2381 1967.37 1522.03

from Operations

 Price Level Changes.

Changes in the price level also affect the working capital requirements. It was the reduced

margins in the price of the raw materials that had prompted them to go for bulk purchases thus

making on additions to their net current assets. They might have gone for this large-scale

procurement for availing discounts and anticipating a rise in prices, which would have meant that

more funds are required to maintain the same current assets.

27
 WORKING CAPITAL CYCLE

The upper portion of the diagram above shows in a simplified form the chain of events in a

manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank through

which funds flow. These tanks, which are concerned with day-to-day activities, have funds constantly

flowing into and out of them.

The chain starts with the firm buying raw materials on credit.

In due course this stock will be used in production, work will be carried out on the stock, and

it will become part of the firm’s work-in-progress.

Work will continue on the WIP until it eventually emerges as the finished product.

As production progresses, labor costs and overheads need have to be met.

Of course at some stage trade creditors will need to be paid.

When the finished goods are sold on credit, debtors are increased.

They will eventually pay, so that cash will be injected into the firm.

Each of the areas- Stock (raw materials, WIP, and finished goods), trade debtors, cash (positive or

negative) and trade creditors – can be viewed as tanks into and from which funds flow.

Working capital is clearly not the only aspect of a business that affects the amount of cash.

The business will have to make payments to government for taxation.

Fixed assets will be purchased and sold
Lessors of fixed assets will be paid their rent

Shareholders (existing or new) may provide new funds in the form of cash

28
 Some shares may be redeemed for cash

Dividends may be paid

Long-term loan creditors (existing or new) may provide loan finance, loans will need to

be repaid from time-to-time, and

Interest obligations will have to be met by the business

Unlike, movements in the working capital items, most of these ‘non-working capital’ cash transactions

are not every day events. Some of them are annual events (e.g. tax payments, lease payments, dividends,

interest and, possibly, fixed asset purchases and sales). Others (e.g. new equity and loan finance and

redemption of old equity and loan finance) would typically be rarer events.

SOURCES OF WORKING CAPITAL

29
NTPC has the following sources available for the fulfillment of its working capital requirements in

order to carry on its operations smoothly:

Banks:
These include the following banks –
State Bank of India
Canara Bank
HDFC Bank Ltd.
ICICI Bank Ltd.
Societe Generale
Standard Chartered Bank
State Bank of Patiala
State Bank of Saurashtra
Commercial Papers:
Commercial Papers have become an important tool for financing working capital requirements of a

company.
Commercial Paper is an unsecured promissory note issued by the company to raise short-term

funds. The buyers of the commercial paper include banks, insurance companies, unit trusts, and

companies with surplus funds to invest for a short period with minimum risk.
NTPC issues Commercial Papers and had 4000 commercial papers in the year 2006.

30
 INVENTORY MANAGEMENT

Inventories

Inventories constitute the most important part of the current assets of large majority of companies. On

an average the inventories are approximately 60% of the current assets in public limited companies in

India. Because of the large size of inventories maintained by the firms, a considerable amount of funds

is committed to them. It is therefore, imperative to manage the inventories efficiently and effectively in

order to avoid unnecessary investment.

Nature of Inventories

Inventories are stock of the product of the company is manufacturing for sale and components make up

of the product. The various forms of the inventories in the manufacturing companies are:

Raw Material: It is the basic input that is converted into the finished product through the

manufacturing process. Raw materials are those units which have been purchased and stored for

future production.
Work-in-progress: Inventories are semi-manufactured products. They represent product

that need more work they become finished products for sale.
Finished Goods: Inventories are those completely manufactured products which are

ready for sale. Stocks of raw materials and work-in-progress facilitate production, while stock of

finished goods is required for smooth marketing operations. Thus, inventories serve as a link

between the production and consumption of goods.

Inventory Management Techniques

31
In managing inventories, the firm’s objective should be to be in consonance with the shareholder wealth

maximization principle. To achieve this, the firm should determine the optimum level of inventory.

Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in

unbalanced inventory and inflexibility-the firm may sometimes run out of stock and sometimes pile up

unnecessary stocks.

Economic Order Quantity (EOQ): The major problem to be resolved is how much the

inventory should be added when inventory is replenished. If the firm is buying raw materials, it has

to decide lots in which it has to purchase on replenishment. If the firm is planning a production

run, the issue is how much production to schedule. These problems are called order quantity

problems, and the task of the firm is to determine the optimum or economic lot size. Determine an

optimum level involves two types of costs:-

 Ordering Costs: This term is used in case of raw material and includes all the cost of

acquiring raw material. They include the costs incurred in the following activities:

 Requisition
 Purchase Ordering
 Transporting
 Receiving
 Inspecting
 Storing

Ordering cost increase with the number of orders placed; thus the more frequently inventory is acquired,

the higher the firm’s ordering costs. On the other hand, if the firm maintains large inventory’s level,

there will be few orders placed and ordering costs will be relatively small. Thus, ordering costs decrease

with the increasing size of inventory.

32
 Carrying Costs: Costs are incurred for maintaining a given level of inventory are called

carrying costs. These include the following activities:

 Warehousing Cost
 Handling
 Administrative cost
 Insurance
 Deterioration and obsolescence

Carrying costs are varying with inventory size. This behavior is contrary to that of ordering

costs which decline with increase in inventory size. The economic size of inventory would

thus depend on trade-off between carrying costs and ordering cost.

Compositio 2012 201 2014

n 3
Raw 6349 774 6127

33
 Material 9
Stores and 3713 298 2622

Spares 7
Finished 1337 724 6506

Goods 4 5
Work-in- 595 784 871

progress

The increasing component of raw materials in inventory is due to the fact that the company has gone for

bulk purchases and has increased consumption due to a fall in prices and reduced margins for the year.

Another reason might be the increasing sales, which might have induced them to purchase more in

anticipation of a further increase in demand of the product. And the low composition of work-in-

progress is understandable as because of the nature of the business firm is involved in.

To the question as to whether the increasing costs in inventory are justified by the returns from it the

answer could be found in the NTPC retail expansion. NTPC caters to the need of the two separate

segments:

a) Institutions for which they manufacture against orders and,

b) Retail segment of the market.

They are more into retail than earlier and at present more than 650 retail outlets branded with NTPC

sign ages and more are in the pipeline

The company in order to meet its raw materials requirements could have gone for frequent purchases,

which would have resulted in lesser cash flows for the firm rather than the high expenditure involved

when procuring in at bulk. The reason why the firm has gone for these bulk purchases because of the

lower margins and the discounts it availed because of procuring in bulk quantities.

34
A negative growth in WIP could be because:

a) The time taken to convert raw materials to finished goods is very minimal
b) This is also due to capacity being not utilized at the optimum.

ABC System:
ABC system of inventory keeping is followed in the factories. Various items are categorized into

three different levels in the order of their importance. For e.g. items such as memory,

high capacity processors and royalty are placed in the ‘A’ category. Large number of firms has to

maintain several types of inventories. It is not desirable the same degree of control all the items.

The firm should pay maximum attention to those items whose value is highest. The firm should

therefore, classify inventories to identify which items should receive the most effort in controlling.

The firm should be selective in approach to control investment in various types of inventories. This

analytical approach is called “ABC Analysis”. The high-value items are classified as “A items” and

would be under tightest control. “C items” represent relatively least value and would require

simple control. “ B items” fall in between the two categories and require reasonable attention of

management.

JIT: The relevance of JIT in NTPC Info system can be questioned. This is because they procure

materials on the basis of projections made at least two or three months before. Even at the time of

procurement they ensure that they procure much more than what actually is required by the firm

35
that is they hold significant amount of inventory as safety stock. This is done to counter the threat

involved in default and accidental breakdowns. The levels of safety stock usually vary according to

the usage.

Conversion Periods
Raw Material

Particulars 2012 2013 2014

Raw Material 12107 97971.31 57775.14

Consumption 7
Raw Material 332 268.41 158.28

Consumption/da

y
Raw Material 7072 6960.275 4364.735

Inventory
Raw Material 21 25.93 27.57

Holding Days

The raw material conversion period or the raw material holding cost has reduced from 26 to 21. This is

despite an increase in its consumption. This indicates that the firm is able to convert the raw material at

its disposal to the work-in-progress at a lesser time as compared to the last year. It would be to the

benefit of the firm to reduce the production process and increase the conversion rate still as the firm is

required to meet the increasing demand.

36
 Work-in-progress

Particulars 2012 2013 2014

Cost of 191911 159651.1 113500.33

Production 9
Cost of 525.78 437.4 310.95

Production/da

y
Work in 689.5 827.52 679.455

progress

inventory
WIP Holding 1.31 1.89 2.19

days

The work-in-progress holding time is important for a firm in the sense that it determines the rate of time

at which the production process will be complete or the finished goods will be ready for disposal by the

firm. The firm as it is in the process of assembling should take the least possible time in conversion to

finished goods unlike a hard core manufacturing firm, as any firm would like to have its inventory in the

work-in-progress at the minimum. There would also be less of stock out costs as due to better

conversion rates the firm is able to meet the rise in demand situations. More the time it spends lesser its

efficiency would be in the market. Here the firm has been able to bring down its WIP conversion

periods.

37
 Finished Goods

Particular 2012 2013 2014

s
Cost of 22817 178438.8 124768.92

goods sold 7 5
Cost of 625 488.87 341.832

goods

sold/day
Finished 10310 6875.725 5026.505

goods

inventory
Finished 16 14.06 14.8

goods

inventory

Holding

days

The time taken for the firm to realize its finished goods as sales has increased as compared to last year.

This growth in sales could be traced back to the growing domestic IT market for the commercial as

consumer segment in India. NTPC has around 15% of the market in desktop and it is the market leader

in this segment. So it is only natural that they are able to better their conversion rate of finished goods to

sales.

38
Operating Cycle

Particulars 201 201 2014

2 3
Inventory 38 42 45

conversion period
Average collection 70 63 66

period
Gross operating 108 105 111

cycle
Average payment 22 23 17

period
Operating cycle 86 82 94

The operating cycle of the firm reveals the days within which the inventory procured gets converted to

sales or revenue for the firm. This time period is of importance to the firm as a lag here could

significantly affect the profitability, liquidity, credit terms, and the policies of the firm. All the firms

would like to reduce it to such extend that their cash inflows are timely enough to meet their

obligations and support the operations. That the firm has been able to reduce the ratio is in itself an

achievement as they were having huge stocks of inventory. But the reduction in the cycle could also be

attributed to the boom in the market and the growth it is expected to reach. This boom automatically

ensures the demand for the finished goods and thus helping in it to garner sales for the firm.

Raw Material Consumption

Particular 2012 2013 2014

s
Imported 9200 70784.2 42129.63

39
 7 7
Indigenous 2907 27187.0 15645.51

0 4
% Imports 75.99 72.25 72.92

A major chunk of the imports come from Korea and Taiwan and is purchased in US$. The value of

imported and indigenous raw material consumed give a clear picture that if there is a change in the

EXIM policy of the government it is bound to affect the company adversely as more than 70% of their

consumption is from imports. But this is the scenario witnessed in the industry as a whole and though

NTPC is into expanding its operation to Uttaranchal it in the present state is would be affected by a

change in the import duty structure.

A major chunk of their current assets are in the form of inventory and the change in technology will

invariably be a threat faced by the firm. The question of technology applying here like says a certain

device going say out of fashion or outdated. For e.g. TFT monitors being in demand more than CRT.

40
 CASH MANAGEMENT

Sources of Cash:

Sources of additional working capital include the following:

Existing cash reserves

Profits (when you secure it as cash!)
Payables (credit from suppliers)
New equity or loans from shareholders
Bank overdrafts or lines of credit.
Long-term loans

If you have insufficient working capital and try to increase sales, you can easily over-stretch the

financial resources of the business. This is called overtrading.

Early warning signs include:

Pressure on existing cash

Exceptional cash generating activities e.g. offering high discounts for early cash payment

Bank overdraft exceeds authorized limit.

Seeking greater overdrafts or lines of credit

Part-paying suppliers or other creditors

Paying bills in cash to secure additional supplies

Management pre-occupation with surviving rather than managing

Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a

cheque).

CASH MANAGEMENT IN NTPC

41
The cash management system followed by the NTPC is mainly lock box system.

Cash Management System involves the following steps:

1. The branch offices of the company at various locations hold the collection of cheques of

the customers.
2. Those cheques are either handed over to the CMS agencies or bank of the particular

location take charge of whole collection.

3. These CMS agencies or bank send those cheques to the clearing house to make them

realized. These cheques can be local or outstation.

4. The CMS agencies or bank send information to the central hub of the company regarding

realization/cheque bounced.
5. The central hub passes on the realized funds to the company as per the agreed

agreements.
6. The CMS agencies or concerned bank provides the necessary MIS to the company as per

requirement.

In cash management the collect float taken for the cheques to be realized into cash is irrelevant and non-

interfering because banks such as Standard Chartered, HDFC and CitiBank who give credit on the basis

of these cheques after charging a very small amount. These credits are given to immediately and the

maximum time taken might be just a day. The amount they charge is very low and this might cover the

threat of the cheque sent in by two or three customers bouncing. Even otherwise the time taken for the

cheques to be processed is instantaneous. Their Cash Management System is quite efficient.

Cash-Current Liability

The absolute liquid ratio is the best for three years and the cash balances as to the current liability has

improved for the firm. Firm has large resources in cash and bank balances. While large resources in cash

42
and bank balances may seem to affect the revenue the firm could have earned by investing it elsewhere

as maintenance of current assets as cash and in near cash assets and marketable securities may increase

the liquidity position but not the revenue or profit earning capacity of the firm.

Dividend Policy-Cash

Particulars 2012 2013 2014

Dividend Policy% 210 310 400
Shift in Sales 154295 199886 238136
Cash Balance 4463.43 14582.65 14529.29
Cash in Hand 118.33 128.97 128.97

43
The other notable feature in NTPC statements has been the growing dividend policy of the firm. The

payment of dividend means a cash outflow. Thus cash position is an important criterion at the time of

paying dividends. There is a theory that greater the cash position and ability to pay dividends. The firm

44
has adopted a policy of disbursing the revenue earned as profits to the shareholders as dividends as

could be seen from the increasing % of dividends declared.

Particulars 2014 2013 2012

PBIDT 20466.27 21870.0 16515.92

3
Equity Dividend% 400 310 210

This could mean two things for the firm the amount of cash retained in the business for capital

expenditure purposes are minimal or nil. But rather than investing more in plant and machine which

they can at any point in time by adding on a additional line if need they would like to optimize their

utilization in fixed assets at present. This also means that the percentage of cash in hand maintained by

the firm as a source of liquidity could be reduced, i.e. the amount of idle cash in the business could be

made to a level which the firm feels optimum.

The firm feels that they should retain cash and it would be in the interest of the firm as well as the

shareholders. This would automatically mean as decrease in Earning/share (EPS)(Basic EPS declined

from 8 in 2005 to 6.74 in 2006). It would prompt more of investors being interested in the shares of the

company, which would boost the purchase of the securities and increase the market price/share thus

being beneficial for the firm.

Cash Flows

Cash Flows 2014 2013 2012

Net Cash from Operating activities 15732.18 15495.15 13866.57
Net Cash from Investing activities -13979.71 -14016.89 -11036.61
Net Cash from Financing activities -3308.99 -752.41 -2869.11

45
The firm has disposed of investments worth around 655 Crores to meet its growing needs. The other

notable feature is decline is the firm’s inflows from operations primarily due to the reason that the cash

generated from the operations is the lowest in three years. And the firm’s growing dividend policy has

contributed to the outflows in financing activities.

Cash Flow in Operating Activities

Working Capital Changes

Working Capital Changes 2014 2013 2012

Trade and other receivables -14166 -14510.69 -7106.68
Inventories -5221 -2683.92 -7221.11
Trade Payables and other Liabilities 13026 6419.13 14311.5

The cash from the operation has been subject to considerable change due to the changes that could be

adjusted towards trade receivables and trade payables. The outflows in inventory have become as low as

37% of what it was last year despite an increase in the inventory consumption by 16.64%. The resulting

reduction in the cash outflows might be because of the inventories being procured more on credit. That

the cash from operations has declined has affected the current liability index of the firm.

46
 Cash Flow in Investing Activities

Investments in Mutual Funds 2014 2013 2012

Investments (year end) 13539 12277.44 28059.88
Purchase of Investment -65992 -53075.99 -59249.81
Disposal/Redemption of 65312 65489.84 52087.36

Investment

The investments have reduced from the last year due to the redemption of investments taken place to

meet various needs such as increasing demand in stock or inventory and to ensure better credit and

receivables policy. We can see that the firm has in these three years increased their cash inflow from the

investing activities by way of disposal of investments when in need. That is the firm has redeemed to

realize cash as to meet its expanding operations, fund the inventory procurement and meet the

obligations.

The investments in mutual funds are beneficial to the firm in the context that they contain interest

bearing securities which add up as a source of revenue for the firm unlike cash which remains idle and

unproductive when not in use. This reduction of dividend could be attributed to disposal of investments

in mutual funds and subsidiary. This disposal creates a fund, which can be used by the company as and

when the need arises.

47
Cash vs. Marketable Securities

The investment in marketable securities rather than having large cash balances in something that has

been given thought for by the firm. This is because while a firm gets revenue in the form of interests by

investments, it actually has to pays certain amount money to the banks for maintaining current accounts

and fixed deposits usually have a longer maturity period. That is, the problem with high investments is

that the opportunity to earn is lost, thus a firm has to maintain an optimal cash balance. But the

investment in mutual funds or other marketable securities might create a problem of investment, as they

might not be readily realizable as say liquid cash or the amount deposited in the current account. The

investments in say fixed assets say may earn a fixed rate of interest but they have a maturity period

attached to them.

In NTPC, Standard Chartered is the concentration bank in which all the inflows from the deposit banks

are concentrated and passed on to the disbursement banks for further disbursement.

48
Liquid Cash Balance

The liquid cash maintained in the business is only that much as is required to satisfy the daily

requirements of the firm and not more. The rest of the cash is invested into mutual funds and also held

in fixed deposits and current accounts.

Instruments Used

The instrument used here are primarily cheques comprising of around 97% of what is used in. The rest

2-3% comprise of the letters of credit.

Thus working capital is the lifeline for every business. The main advantages of sufficient working

capital are:

 It helps in prompt payment

 Ensures high solvency in the company and good credit standing.
 Regular supply of material and continuous production.
 Ensures regular payment of salaries and wages and day to day commitments.

49
RECEIVABLES MANAGEMENT

Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every

business needs to know.... who owes them money.... how much is owed.... how long it is owing.... for

what it is owed.

Late payments erode profits and can lead to bad debts.

Slow payment has a crippling effect on business; in particular on small businesses whom can least

afford it. If you don't manage debtors, they will begin to manage your business as you will gradually

lose control due to reduced cash flow and, of course, you could experience an increased incidence of

bad debt.

The following measures will help manage your debtors:

1. Have the right mental attitude to the control of credit and make sure that it gets the

priority it deserves.

2. Establish clear credit practices as a matter of company policy.

3. Make sure that these practices are clearly understood by staff, suppliers and customers.

4. Be professional when accepting new accounts, and especially larger ones.

5. Check out each customer thoroughly before you offer credit. Use credit agencies, bank

references, industry sources etc.

6. Establish credit limits for each customer and stick to them.

7. Continuously review these limits when you suspect tough times are coming or if

operating in a volatile sector.

8. Keep very close to your larger customers.

9. Invoice promptly and clearly.

10.Consider charging penalties on overdue accounts.

50
11.Consider accepting credit /debit cards as a payment option.

12.Monitor your debtor balances and aging schedules, and don't let any debts get too old.

Recognize that the longer someone owes you, the greater the chance you will never get paid. If the

average age of your debtors is getting longer, or is already very long, you may need to look for the

following possible defects.

 Poor collection procedures.

 Lax enforcement of credit terms.

 Slow issue of invoices or statements.

 Errors in invoices or statements.

 Customer dissatisfaction.

 Weak credit judgement.

Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate

attention. Look for the warning signs of a future bad debt. For example…..

1. Longer credit terms taken with approval, particularly for smaller orders.

2. Use of post-dated checks by debtors who normally settle within agreed terms.

3. Evidence of customers switching to additional suppliers for the same goods.

4. New customers who are reluctant to give credit references.

5. Receiving part payments from debtors.

51
Profits only come from paid sales.

The act of collecting money is one, which most people dislike for many reasons and therefore put on

the long finger because they convince themselves that there is something more urgent or important that

demand their attention now. There is nothing more important than getting paid for your product or

service. A customer who does not pay is not a customer.

Here are few ways in collecting money from debtors: -

 Develop appropriate procedures for handling late payments.

 Track and pursue late payers

 Get external help if you own efforts fail.

 Don’t feel guilty asking for money .. its yours and you are entitled to it.

 Make that call now. And keep asking until you get some satisfaction.

 In difficult circumstances, take what you can now and agree terms for the remainder, it

lessens the problem.

 When asking for your money, be hard on the issue – but soft on the person. Don’t give

the debtor any excuses for not paying.

 Make that your objective is to get the money, not to score points or get even.

52
 RECEIVABLES MANAGEMENT IN NTPC :

PARTICULARS 2014 2013 2012 2011

DEBTORS TURNOVER RATIO 13.61 11.73 17.08 13.62
AVERAGE COLLECTION PERIOD 70 63 66 55

A better turnover ratio implies for the firm, more efficiency in converting the accounts receivable to

cash. A firm with very high turnover ratio can take the freedom of holding very little balances in cash, as

their debtors are easily realizable. In case of NTPC, the collection period for the firm is 70 days.

PARTICULARS 2014 2013 2012

PROVISION FOR DOUBTFUL DEBTS(CASH FLOW) 3 49.85 25
DEBTS DOUBTFUL(EXCEEDING 6 MONTHS) 47 134.09 69.8

The debts doubtful have doubled but their percentage on the debts has almost become half. This implies

a sales and collection policy that get along with the receivables management of the firm.

COLLECTION POLICIES:

53
It refers to the collection procedures such as letters, phone calls and other follow up mechanism to

recover the amount due from the customers. It is obvious that costs are incurred towards the collection

efforts, but bad debts as well as average collection period would decrease. Further, a strict collection policy

of the firm is expensive for the firm because of the high cost is required to be incurred by the firm and it

may also result in loss of goodwill. But at the same time it minimizes the loss on account of bad debts.

Therefore, a firm has to strike a balance between the cost and benefits associated with collection

policies.

The steps usually followed in collection efforts are:

Sending repeated letters and reminders to the customers

Personal visits
Using agencies involved in collection process
Making telephonic reminders
Initiating legal actions
Real Time Gross Settlement (RTGS)

Real Time Gross Settlement as such is a concept new in nature and though the firm uses the system with

all the members of the consortium, it is still in its primal stage and will take time before all of the clients

of the firm are willing to accept it. The firm has made a proposal to the consortium of the banks during

appraisal for faster implementation of internet based banking facility by all the banks and adoption of

RTGS payment system through net.

The debtor’s turnover ratio is completely dependent upon the credit policy followed by the firm. The

credit policy followed by the firm should be such that the threat of bad debts and the default rate

involved should be terminated.

PARTICULARS 2014 2013 2012 2011

CREDITORS 16.44 15.68 21.29 21.14

54
 TURNOVER

RATIO
PAYMENT 22 23 17 16

PERIOD

That the creditors turnover ratio has declined and payment period has increased indicate that the

company has got a leeway in making the payment to the creditors by way of increased time.

With creditors they are having pre-agreements and have undertaken arrangements with them, which

they believe to be the best in the business and these are fixed.

(NOTE: Acceptances are not included in the computation of creditors turnover)

55
 MANAGING PAYABLES (Creditors)

Creditors are a vital part of effective cash management and should be managed carefully to

enhance the cash position.

Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity

problems.

Consider the following: -

 Who authorizes purchasing in your company - is it tightly managed or spread among a

number of (junior) people?

 Are purchase quantities geared to demand forecasts?

 Do you use order quantities, which take account of stock holding and purchasing costs?

 Do you know the cost to the company of carrying stock?

 Do you have alternative sources of supply? If not, get quotes from major suppliers and

shop around for the best discounts, credit terms as it reduces dependence on a single supplier.

 How many of your suppliers have a return policy?

 Are you in a position to pass on cost increases quickly through price increases to your

customers?

 If a supplier of goods or services lets you down can you charge back the cost of the

delay?

 Can you arrange (with confidence!) to have delivery of supplies staggered or on a just-

in-time basis?

There is an old adage in business that "if you can buy well then you can sell well". Management of

your creditors and suppliers is just as important as the management of your debtors. It is important to

56
look after your creditors- slow payment by you may create ill feeling and can signal that your

company is inefficient (or in trouble!).

Remember that a good supplier is someone who will work with you to enhance the future viability

and profitability of your company.

Financing Current Assets

The firm has to decide about the sources of funds, which can be availed to make investment in current

assets.

Long term financing:

It includes ordinary share capital, preference share capital, debentures, long term borrowings from

financial institutions and reserves and surplus.

Short term financing:

It is for a period less than one year and includes working capital funds from banks, public deposits,

commercial paper etc.

Spontaneous financing:

It refers to automatic sources of short-term funds arising in normal course of business. There is no

explicit cost associated with it. For example, Trade Credit and Outstanding Expenses etc.

57
Depending on the mix of short and long term financing, the company can follow any of the

following approaches.

Matching Approach

In this, the firm follows a financial plan, which matches the expected life of assets with the expected

life of source of funds raised to finance assets. When the firm follows this approach, long term

financing will be used to finance fixed assets and permanent current assets and short term financing to

finance temporary or variable current assets.

Conservative Approach

In this, the firm finances its permanent assets and also a part of temporary current assets with long term

financing. In the periods when the firm has no need for temporary current assets, the long-term funds

can be invested in tradable securities to conserve liquidity. In this the firm has less risk of facing the

problem of shortage of funds.

Aggressive Approach

In this, the firm uses more short term financing than warranted by the matching plan. Under an

aggressive plan, the firm finances a part of its current assets with short term financing.

Relatively more use of short term financing makes the firm more risky.

58
Current asset to fixed asset ratio:

The financial manager should determine the optimum level of current assets so that the wealth of

shareholders is maximized. A firm needs fixed and current assets to support a particular level of

output.

The level of current assets can be measured by relating current assets. Dividing current assets by fixed

assets gives CA/FA ratio. Assuming a constant level of fixed assets, a higher CA/FA ratio indicates a

conservative current assets policy and a lower CA/FA ratio means an aggressive current assets policy

assuming other factors to be constant. A conservative policy i.e. higher CA/FA ratio implies greater

liquidity and lower risk; while an aggressive policy i.e. lower CA/FA ratio indicates higher risk and

poor liquidity. The current assets policy of the most firms may fall between these two extreme policies.

The alternative current assets policies may be shown with the help of the following figure.

59
In this figure the most conservative policy is indicated by alternative A, where as CA/FA ratio is

greatest at every level of output. Alternative C is the most aggressive policy, as CA/FA ratio is

lowest at all levels of output. Alternative B lies between the conservative and aggressive policies

and is an average policy.

60
 WORKING CAPITAL & SHORT-TERM FINANCING

CONSORTIUM BASED FINANCING

Current Working Capital Limits

NAME OF THE BANK FUND BASED NON-FUND

BASED
STATE BANK OF INDIA 3600 46000
ICICI BANK 1282 19000
HDFC BANK 1200 10000
STANDARD 1200 19000

CHARTERED BANK
STATE BANK OF 715 7500

SAURASHTRA
STATE BANK OF 1300 7700

PATIALA
CANARA BANK 1203 6000
SOCIETE GENERALE 1000 4000
HSBC BANK 1000 18300
TOTAL 12500 137500

In order to finance the working capital needs of the firm in the form of Working Capital Demand Loan,

there is a consortium of nine banks. The consortium if banks provide a fund based limit of 125 Crores

which comprises of cash credit and working capital demand loans and non-fund based limits which has

bank gurantee and letter of credit subject to a limit of 1375 Crores. The Lead Bank in this consortium

of banks is State Bank of India and the second lead bank is ICICI. It is SBI, which fixes the limit on

the basis of consortium. They, in consultation of the company decide the allocation of limit to various

member banks. The allocation cannot be higher than the limits fixed by it. SBI is the biggest

contributor in the consortium for both fund and non-fund based limits with about

61
31.30 in funds and 34.02 in non-fund limits. The ratio of both limits for the year 2006 is 0.23:0.77

It is on the basis of the accounts receivable that the banks come to an agreement with regards to the

limits imposed. Though it is the fund based limits that finance the working capital requirements, the

non-fund based limits are important for the management of the working capital as there might be clients

who are not willing to sell on open credit and might be demanding letters of credit before any advances.

62
 RENEWAL OF LIMITS

LIMITS 2014 2013 2012

FUND 11500 11500 11500

BASED
NON 48500 38500 28500

FUND

BASED
TOTAL 60000 50000 40000

All banks sanction the limits for a period of one year. Thereafter it is to be renewed every year. SBI

appraises the limit on the basis of consortium. The individual banks appraise for their own individual

limit. The non fund based limits of the firm in consortium financing has been subjected to change for the

past two years as per the requirements of the firm and the consent of the lead bank to its proposal. It was

around 385 Crores in 2005 and had been risen to around 485 Crores in 2006.

A proposal has been made by the firm to further appraise the limits by 100 Crores to 585 Crores in

view of the growing operations of the firm with full interchangeability between letter of credit and bank

guarantee limits for operational flexibility. Allocation of the fund based and non based limits among the

banks based on operational convenience rather than allocating the fund based and non fund based on the

same ratio is also among the proposals made by the firm.

The company needs to provide the following information to bank for appraisals:

 Credit Monitoring Appraisal

63
 Write Up on company
 Share holding pattern
 List of the directors

CONSORTIUM MEETING :

All the members of the consortium are required to meet to discuss various issues relating to the working

facilities. As per RBI guidelines, the lead bank, i.e., SBI should ensure that one consortium meeting is

held every quarter snd this meeting has to be arranged by NTPC.

DOCUMENTATION and JOINT DOCUMENTATION:

There are various documents that need to be signed at the time of renewal or inducting any bank to the

consortium. The various documents are as follows:

 Loan agreement
 Hypothecation agreement for movable machinery
 Hypothecation agreement for movables and book debts
 Counter Indemnity

64
The above are the standard agreements asked for by the banks. The common seal has to be witnessed by

the company secretary and one of the directors of the company.

As of 2005, no additions or deletions were made to the consortium of the banks. But over the years the

number of banks in the consortium have been reduced. Indian Banks and State Bank of Hyderabad are

the two banks which were earlier a part of the consortium.

Joint Documentation is executed between the company and the consortium of banks for the working

capital facilities extended by the consortium to the company. The joint documentation is valid for three

years. The documents comprising joint documentation are:

 Working Capital consortium agreement

 Joint deed of documentation
 Inter se agreement between bankers
 Letter of authority to lead bank by other consortium banks
 Letter of authority to second lead bank by other consortium banks
 Undertaking to create charge on the assets of the company.

ALLOCATION OF LIMIT BY LEAD BANK

SBI appraises the limit on behalf of the consortium. It in consultation with the company decided the

allocation of the limit to various member banks. The allocation of any member bank cannot be higher

than the limit sanctioned by it. The drawing power for it fund based limits out of the consortium are

determined on the basis of the stock statement submitted by the company. NTPC is required to submit

the stock statement to all member banks in consortium for every month.

FINANCIAL FOLLOW UP REPORTS ( FFRI & FFRII):

Every quarterly and half quarterly intervals, the firm submits Financial Follow Up Reports I and II. FFR

I is an extract of the balance sheet. In this report, the company is required to submit the details of sales,

65
current assets and current liabilities for the quarter and the estimates for the current year. FFR II – the

company is required to prepare P&L, B/S and Cash Flow in a different format. The information is to be

provided for the last year (actual), current year half yearly results (actual) and the estimates for the next

year.

SHORT TERM FINANCING

Other than the investment in current assets, the firm also has to be concerned with short-term to long-term debt as

this plays a very important role in determining the amount of risk undertaken by the firm. That is , the firm not only

has to be concerned about current assets but also the sources through which they are financed. A firm before

financing in either of the two, has to take into consideration various aspects. While short term might seem the ideal

way to finance your assets than the long term due to shorter maturity period and also less of costs are involved,

there is an inherent risk in short term financing due to fluctuating interest rates and due to the reason that the firm

might be unable to reay the amount in a shorter span of time.

SECURED 2013 2012 2011 2010

LOANS
SHORT TERM 3849 4991.28 6903.7 4987.52
LONG TERM 0 530.07 0 3461.36
TOTAL 3849 5521.35 6903.7 8448.88
%SHORT TERM 100 90.4 100 59.03

Under secured loan cash credit, along with non fund based facilities, foreign currency term loan from banks are

secured by way of hypothecation of stock-in-trade, book debts as first charge and by way of second chanrge on

all the immovable and movable assets of the parent company. Term loan in Indian rupees from a bank is subject

to a prior charge in favour of company’s bankers on book debts and stock in trade for working capital facilities.

66
UNSECURED LOANS 2014 2013 2012 2011
SHORT TERM 15104 2593.39 63.94 76.84
LONG TERM 11 17 169.51 3261.42
TOTAL 15115 2610.39 233.45 3338.26
% SHORT TERM 99.93 99.348 27.38 2.3

Here NTPC has a major portion of their financing done through short term financing than long term

financing. The preference of short term financing to long term as such is not the part of any policy

employed by the firm but it was due to the reason that the interest rates in short term were more investor

friendly and the cost involved in them were also low. At present, we can see that the firm is moving

more towards long term financing as the interest terms in the long term has reduced compared to the

short term.

67
 YEAR- END COMMERCIAL PAPERS

PARTICULARS 2014 2013 2012 2011

COMMERCIAL 4000 2500 --- 3000

PAPERS

The credit rating by ICRA continued at ‘A1+’indicating highest safety to company’s commercial paper

program of Rs. 75 Crores. It acts as an effective tool in reducing the interst cost and is used for financing

inventories and other receivables. As and when the firm issues commercial papers, it sends a letter to the

leader of the consortium, i.e., SBI to reduce from the fund based limits the amount it has issued in the

form of the commercial papers. Suppose the firm issues 30 Crores as commercial papers and the fund

based limits are say 115 Crores. Then firm sends a letter to SBI to reduce the existing fund based limits

from 115 to 85 Crores.

In terms of desirability, the commercial papers are cheaper and advantageous to the firm compared to

the consortium financing. The main advantage being the interest rate which is lower than the bank rates

existing under consortium financing. But the firm depends on both and for working capital financing, it

is dependent on the banks for funds sich as working capital demand loans and cash credits. There is no

point in the firm not making use of the fund based limits in the consortium banking as their commercial

papers are restricted to 75 Crores.

MERITS OF COMMERCIAL PAPERS:

68
 It is an alternative source of raising short-term finance, and proves to be handy during

periods of tight bank credit.

 It is a cheaper source of finance in comparison to the bank credit.

DEMERITS OF COMMERCIAL PAPERS:

 It is an impersonal method of financing.

 It is always available to the financially sound and highest rated companies.
 The amount of lonable funds available in the commercial paper market is limited to the

amount of excess liquidity of the various purchasers of commercial paper.

SWOT ANALYSIS OF NTPC

69
 STRENGTH OF NTPC:

• The company has kept with itself sufficient liquid funds to meet any kind of cash requirement.

70
• Efficient working capacity of plants.

• Efficient and timely completion of projects.

• A minimum risk factor.

• Best-integrated project management systems.

• Company with an excellent record and high profits.

• An early starter-more than 30 years experience in power sector.

• Highly motivated and dedicated workers and officers- no industrial relations problem.

• Excellent growth prospects with significant additions, modifications and Replacement Efficient and

timely completion of projects. A minimum risk factor. Best-integrated project management systems.

•Company with an excellent record and high profits.An early starter-more than 30 years experience in

power sector.

•Highly motivated and dedicated workers and officers- no industrial relations problem.

•Excellent growth prospects with significant additions, modifications and replacements.

•Employee-friendly personnel policies.

•Low project cost of NTPC’s plants.

WEAKNESSES OF NTPC:

•Depleting raw materials.

•Some of the Plant have become old and need investment in Renovation & Modernization.

OPPURTUNITIES:

•Demand and supply gap.

71
•Upcoming hydro and nuclear sector.

•Huge opportunity in consultancy services.

THREATS:-

•Rising prices of raw materials

•Huge competition from SEB’s, Reliance Energy, Tata power and other Private Development.

•Coming up of other sources of power Rising prices of raw materials

•Huge competition from SEB’s, Reliance Energy, Tata power and other Private Development.

•Coming up of other sources of power.

•Huge Capital requirement for expansion, diversification, horizontal & vertical integration and R & M.

SCOPE OF THE STUDY

This project is vital to me in a significant way. It does have some

importance for the company too. These are as follows –

72
This project will be a learning device for the finance student.

Through this project I would study the various methods of the working capital

management.

The project will be a learning of planning and financing working capital.

The project would also be an effective tool for credit policies of the companies.

This will show different methods of holding inventory and dealing with cash and

receivables.

This will show the liquidity position of the company and also how do they maintain a

particular liquidity position.

73
 RESEARCH METHODOLOGY

This project requires a detailed understanding of the concept – “Working Capital

Management”. Therefore, firstly we need to have a clear idea of what is working

capital, how it is managed in NTPC , what are the different ways in which the

financing of working capital is done in the company.

The management of working capital involves managing inventories, accounts

receivable and payable and cash. Therefore one also needs to have a sound

knowledge about cash management, inventory management and receivables

management.

Then comes the financing of working capital requirement, i.e. how the working

capital is financed, what are the various sources through which it is done.
And, in the end, suggestions and recommendations on ways for better

management and control of working capital are provided.

Pl an of Study:
A proper and systematic approach is essential in any project work. Proper planning should be done for
conducting the data collection, completion and presentation of the project. Each and every step must be
so planned that it leads to the next step automatically. This systematic approach is a blend of planning
and organization and major emphasis is given to interdependence of various steps. The plan of this study
is as follows: Research Purpose
The purpose of the research was to know the criteria on which investment of the company is raised
every year and a favorable rate of return is arrived at, increasing the net result of the company as per
their budget.

74
Research Objective:
The main objective of the research is:
 To know the investment decisions.
 To analyze the investment depending on internal rate of return.

Classification of Data
The data used for this study is Primary data and Secondary data.
Primary data:
This includes the information collected mainly from the office. This has served as primary
source of data for this study.
Secondary data:
This includes the information gathered from various websites.
Sample size:
The sample size selected is of 5 years.
Sampling Technique:
The sampling procedure employed for this project is judgmental sampling, a convenience
sampling technique in which elements are based on the judgment of researcher.
Statistical Analysis:
Information collected was classified and tabulated for further analysis.
Calculations were done for the interpretation of the data e.g. Discount factor, Averages, etc.
The report is covered with various data and tables on which the project has been carried out.
Software tools used for the data analysis:
The software tool used for data analysis is MS WORD & MS EXCEL.

HYPOTHESIS OF THE STUDY

75
A hypothesis of the study is the statement created by the trainee when they speculate upon the outcome

of a project or experiment.

The following are the hypothesis of the study:

1) The firm is facing difficulty in paying short-term debt.

2) The firm is not properly managing the sundry debtor.

3) The current liabilities are increasing than current assets year by year.

DATA SOURCES:
The following sources have been sought for the prep of this report:

76
 Primary sources such as business magazines, current annual reports, book on

Financial Management by various authors and internet websites the imp amongst

them being : www.NTPC.com, www.indiainfoline.com, www.studyfinance.com .

Secondary sources like previous years annual reports, reports on working capital

for research, analysis and comparison of the data gathered.

While doing this project, the data relating to working capital, cash management,

receivables management, inventory management and short term financing was

required.
This data was gathered through the company’s websites, its corporate intranet,

NTPC’s annual reports of the last five years.

A detailed study on the actual working processes of the company is also done

through direct interaction with the employees and by timely studying the

happenings at the company.

Also, various text books on financial management like ICFAI’s book, Khan &

Jain, Prasanna Chandra and I.M.Pandey were consulted to equip ourselves with

the topic.

LIMITATION

The study is limited to three years only.

77
 Price level changes are not considered.

Time is short for deep research.

Separate records of the all units are not available.

No comparison made with other firm’s ratio while during the study period and

making conclusion time.

The readjusted and regroup figure slightly affects the ratio figures.

Study is limited with the one unit of NTPC.

The data is used in the project have been taken from annual report only. Hence,

grouping and sub grouping and annuliasation of data may slightly affect the results.

ANALYSIS

DATA ANALYSIS

CURRENT RATIO

78
Inference:

The above diagram shows that in the year 2015 is 1.43%, in year 2014 is 1.69 and in

year 2013 is 1.83, in year 2012 is 1.97 & in year 2011 is 2.13. These ratios of liquidity indicate the

over capitalization of current assets.

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 QUICK RATIO

Inference:

The above data shows the quick ratio of the company in year 2011, 2012,2013,2014 &

2015 is 1.93, 1.8, 1.68, 1.51 & 1.23 respectfully. The ratios show the company enjoys the high

liquidity position; it is good however too much liquidity is not beneficial for the company

80
 DEBT EQUITY RATIO

Inference:

In the above data it shows that the Debt equity ratio of company is in 2011, 2012 ,2013,2014

& 2015 is 0.59, 0.63, 0.66, 0.73 & 0.96 respectfully .It is below the standard and it is not good for

company.

81
 Inventory Turnover Ratio

Inference:

In the above data it shows that the Inventory turnover ratio of company is in

2011,2012,2013,2014 & 2015 is 15.13,16.76,16.19,13.4 & 9.92 respectfully. Ratio shows the

liquidity position of the company is good.

82
 DEBTORS TURNOVER RATIO

Inferences:

In the above graph it shows that the Debtors turnover ratio of company is in

2011,2012,2013,2014 & 2015 is 13.62, 17.08, 11.73, 13.61 & 11.42 respectfully .It shows that the

performance of business is better and all the available resources are well utilized.

83
 INVESTMENT TURNOVER RATIO

Inferences:

In the above graph it shows that the investment turnover ratio of company is in 2011, 2012,

2013, 2014 & 2015 is 15.13, 16.76, 16.19, 13.4 & 9.92respectfully .It shows the better utilization of

the working capital incurred in the operation.

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 FIXED ASSETS TURNOVER

Inferences:

In the above graph it shows that the Fixed Assets turnover of company is in 2011, 2012,

2013, 2014 & 2015 is 0.76, 0.76, 0.64, 0.62 & 0.57 times respectfully .It shows the better utilization

of the Fixed Assets, which incurred in the operation.

85
 TOTAL ASSETS TURNOVER RATIO

Inferences:

In the above graph it shows that the Total Assets Turnover of company is in 2011, 2012,

2013, 2014 & 2015 is 0.51, 0.52, 0.49, 0.49 & 0.46 times respectfully. It shows that the collection

policy of the company is too liberal.

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 DIVIDEND PAYOUT RATIO NET PROFIT

Interfaces:

In the above graph it shows that the Gross Profit ratio of company is in 2011, 2012, 2013,

2014 & 2015 is 34.42, 35.76, 37.57, 43.2 & 20.03 respectfully.

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 DIVIDEND PAYOUT RATIO CASH PROFIT

Inferences:

In the above graph it shows that the Dividend payout ratio cash profit of company is in

2011, 2012, 2013, 2014 & 2015 is 27.03, 27.44, 29.6, 31.36 & 13.53 respectfully. It shows good sign,

which is in increasing trend, which shows that the company enjoys good credit in market.

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 EARNING RETENTION RATIO

Inferences:

In the above graph it shows that the Earning Retention ratio of company is in 2011, 2012,

2013, 2014 & 2015 is 58.03, 62.99, 56.53, 56.85 & 79.3 respectfully .It is the increasing in trend the

operation expenses, is in desired parameters.

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 CASH EARNING RETENTION RATIO

Inferences:

In the above graph it shows that the Cash Earning Retention ratio of company is in 2011,

2012, 2013, 2014 & 2015 is 68.51, 71.82, 66.86, 68.67 & 86.14 respectfully .It is the increasing in

trend, which is not good for the company future.

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 FINDINGS

1. Working capital of the company are decreasing year on year basis..

2. Positive working capital indicates that company has the ability of payments of short terms liabilities.

3. Working capital decreased because of increment in the current assets is more than increase in the
current liabilities. It indicates that company increasing their control over WC.

4. Company’s current assets were always more than the requirement it affect on profitability of the
company.

5. Current assets are more than current liabilities indicate that company used long term funds for short
term requirement, where long term funds are most costly then short term funds.

6. Current assets components, cash and bank are near about 42% of total CA, It shows that management
of cash is not up-to mark.

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 RECOMMENDATIONS S UG G E S T I O N

Although NTPC, SINGRAULI has satisfied the ratios. The following are the suggestion being made

out by me as observed during study of the performance through ratio analysis:

 Company should increase its sales of all the production units with increase in the sales of the

company that can be able to increase its financial position.

 Company should decrease the operating expenses to increase its operating profit.

 Maximize the production capacity.

 Maintain the amount of current sales level and try to increase it.

 Maximize the utilization of fixed assets and working capital.

 All other management, personal and administrative suggestion to be incorporated.

 To follow the strict credit collection policy.

 Reduce the current assets and quick assets ratio to maintain the standard ratio.

 Cash ratio performance is poor. So make policies to improve it.

 Return on investment is in satisfactory position and they try to maintain it in future.

 Try to start those companies, which are closed due to non-availability of funds.

 Try to best utilization of the available resources.

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 Try to maintain the standard ratio in the financial ratios.

C O N C LU S I O N

If these ratios are properly followed the capital investment in the current assets is above the standard

ratio and the cash position of the company would substantially improve.

The Turnover Ratio give good sign of the success but in the debtor’s turnover ratio shows that

company provided more credit period of payment to its customer, which is not beneficial for it.

The Profitability Ratio all indicates good sign but increase in the operating and financial expenses of

the company, which is not good sign for the company future.

Return on Investment ratio is satisfactory, it indicate the overall performance of the company is good

and they enjoy a good position of profitability.

93
 BIBLOGRAPHY

M.Y.KHAN AND P.K. FINANCIAL MANAGEMENT

(Tata McGraw- Hill Publishing Company Limited, NEW DELHI)

 LK NARANG AND SP JAIN FINANCIAL MANAGEMENT

(KALYANI PUBLISHERS,NEW DELHI),2000.

ANNUAL REPORTS OF THE NTPC.

Financial Management – I.M Pandey

Inventory Record Accuracy – Roger B. Brooks & Larry W. Wilson

Management Accounting – N. Vinayakam, I.B. Sinha.

www.ntpc.com

www.ntpc.in

www.google.com

94
 ANNEXURE

FINANCIAL STATEMENTS FOR NTPC LTD.

Last 5 year Balance Sheet:

Although debt as a percent of total capital increased at NTPC Ltd. over the last fiscal year to 21.53%, it

is still in-line with the IT Services industry's norm. Additionally, even though there are not enough liquid

assets to satisfy current obligations, Operating Profits are more than adequate to service the debt.

Accounts Receivable are among the industry's worst with 28.44 days worth of sales outstanding. This

implies that revenues are not being collected in an efficient manner. Last, inventories seem to be well

managed as the Inventory Processing Period is typical for the industry, at 21.29 days.

Standalone Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.46
Equity Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.46
Share Application
0.00 0.00 0.00 0.00 0.00
Money
Preference Share
0.00 0.00 0.00 0.00 0.00
Capital
Reserves 73,411.89 77,569.86 72,142.05 65,045.71 59,646.79
Networth 81,657.35 85,815.32 80,387.51 73,291.17 67,892.25
Secured Loans 23,017.83 12,311.00 9,404.05 9,156.30 30,558.47
Unsecured Loans 55,514.50 50,094.75 43,849.61 36,751.97 9,177.21

95
Total Debt 78,532.33 62,405.75 53,253.66 45,908.27 39,735.68
Total Liabilities 160,189.68 148,221.07 133,641.17 119,199.44 107,627.93
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 128,323.66 116,855.56 103,124.82 81,723.48 72,665.61
Less: Revaluation
0.00 0.00 0.00 0.00 0.00
Reserves
Less: Accum.
49,474.59 44,744.73 40,188.72 36,465.12 33,429.65
Depreciation
Net Block 78,849.07 72,110.83 62,936.10 45,258.36 39,235.96
Capital Work in
56,493.49 44,888.67 37,109.42 41,827.86 35,495.33
Progress
Investments 9,032.13 9,757.86 10,760.10 11,206.38 12,344.84
Inventories 7,453.00 5,373.35 4,057.19 3,702.85 3,639.12
Sundry Debtors 7,604.37 5,220.08 5,365.49 5,832.51 1,434.96
Cash and Bank Balance 12,878.81 15,311.37 16,867.70 16,146.11 16,185.26
Total Current Assets 27,936.18 25,904.80 26,290.38 25,681.47 21,259.34
Loans and Advances 24,773.85 26,892.02 24,020.46 16,863.73 17,403.41
Fixed Deposits 0.00 0.00 0.00 0.00 0.00
Total CA, Loans &
52,710.03 52,796.82 50,310.84 42,545.20 38,662.75
Advances
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 28,020.58 23,151.15 19,730.83 17,819.04 15,358.52
Provisions 8,874.46 8,181.96 7,744.46 3,819.32 2,752.43
Total CL & Provisions 36,895.04 31,333.11 27,475.29 21,638.36 18,110.95
Net Current Assets 15,814.99 21,463.71 22,835.55 20,906.84 20,551.80
Miscellaneous
0.00 0.00 0.00 0.00 0.00
Expenses
Total Assets 160,189.68 148,221.07 133,641.17 119,199.44 107,627.93

Contingent Liabilities 65,900.89 81,582.53 73,660.54 53,173.05 44,055.80

Book Value (Rs) 99.03 104.08 97.49 88.89 82.34

96
 FINANCIAL STATEMENTS FOR NTPC LTD.

Last 4 year Cash Flow Statement:

Cash Flow ------------------- in Rs. Cr. -------------------

Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 10546.65 13904.65 16578.63 12326.16 12049.60

Net Cash From Operating
14234.70 15732.18 15495.17 13866.57 11085.03
Activities
Net Cash (used in)/from
-14562.60 -13979.71 -14016.89 -11036.61 -7655.69
Investing Activities
Net Cash (used in)/from
-1878.08 -3308.99 -752.41 -2869.11 -1703.56
Financing Activities
Net (decrease)/increase In
-2205.96 -1556.33 725.87 -39.15 1725.78
Cash and Cash Equivalents
Opening Cash & Cash
15311.37 16867.70 16141.83 16185.26 14459.48
Equivalents
Closing Cash & Cash Equivalents 13105.41 15311.37 16867.70 16146.11 16185.26

97
 FINANCIAL STATEMENTS FOR NTPC LTD.

Last 5 year Profit & Loss Statement:

Standalone Profit & Loss

------------------- in Rs. Cr. -------------------
account
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Income
Sales Turnover 73,915.69 72,018.93 65,673.93 62,052.23 55,062.65
Excise Duty 669.64 0.00 0.00 0.00 0.00
Net Sales 73,246.05 72,018.93 65,673.93 62,052.23 55,062.65
Other Income 2,116.32 2,688.89 4,785.69 2,778.42 2,344.65
Stock Adjustments 0.00 0.00 0.00 0.00 0.00
Total Income 75,362.37 74,707.82 70,459.62 64,830.65 57,407.30
Expenditure
Raw Materials 48.34 47.60 46.35 45.24 31.33
Power & Fuel Cost 49,500.86 46,510.29 41,661.34 42,171.65 35,796.37
Employee Cost 3,669.78 3,867.99 3,360.12 3,090.48 2,789.71
Other Manufacturing
0.00 0.00 0.00 0.00 0.00
Expenses
Selling and Admin Expenses 0.00 0.00 0.00 0.00 0.00
Miscellaneous Expenses 4,275.30 3,815.67 3,521.78 3,007.36 4,472.36
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 57,494.28 54,241.55 48,589.59 48,314.73 43,089.77
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit 15,751.77 17,777.38 17,084.34 13,737.50 11,972.88

PBDIT 17,868.09 20,466.27 21,870.03 16,515.92 14,317.53
Interest 2,743.62 2,406.59 1,924.36 1,711.64 1,420.96
PBDT 15,124.47 18,059.68 19,945.67 14,804.28 12,896.57
Depreciation 4,911.65 4,142.19 3,396.76 2,791.70 2,485.69
Other Written Off 0.00 0.00 0.00 0.00 0.00

98
Profit Before Tax 10,212.82 13,917.49 16,548.91 12,012.58 10,410.88
Extra-ordinary items 333.83 -12.84 29.72 313.58 1,638.72
PBT (Post Extra-ord Items) 10,546.65 13,904.65 16,578.63 12,326.16 12,049.60
Tax 255.79 2,929.91 3,959.24 3,102.43 2,947.01
Reported Net Profit 10,290.86 10,974.74 12,619.39 9,223.73 9,102.59
Total Value Addition 57,445.94 54,193.95 48,543.24 48,269.49 43,058.44
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 2,061.38 4,741.15 4,741.16 3,298.19 3,133.26
Corporate Dividend Tax 417.40 804.74 781.87 527.92 514.77
Per share data (annualised)
Shares in issue (lakhs) 82,454.64 82,454.64 82,454.64 82,454.64 82,454.64
Earning Per Share (Rs) 12.48 13.31 15.30 11.19 11.04
Equity Dividend (%) 25.00 57.50 57.50 40.00 38.00
Book Value (Rs) 99.03 104.08 97.49 88.89 82.34

99
Last 5 year FINANCIAL RATIO

Key Financial Ratios

Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share 2.50 5.75 5.75 4.00 3.80
Operating Profit Per Share (Rs) 19.10 21.56 20.72 16.66 14.52
Net Operating Profit Per Share
88.83 87.34 79.65 75.26 66.78
(Rs)
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) 21.50 24.68 26.01 22.13 21.74
Profit Before Interest And Tax
14.38 18.25 19.90 16.88 16.52
Margin(%)
Gross Profit Margin(%) 14.79 18.93 20.84 17.63 17.22
Cash Profit Margin(%) 19.72 20.25 20.79 18.04 17.33
Adjusted Cash Margin(%) 19.72 20.25 20.79 18.04 17.33
Net Profit Margin(%) 14.04 15.23 19.21 14.86 16.53
Adjusted Net Profit Margin(%) 13.65 14.69 18.34 14.22 15.85
Return On Capital Employed(%) 8.08 11.01 12.56 11.51 10.99
Return On Net Worth(%) 12.60 12.78 15.69 12.58 13.40
Adjusted Return on Net Worth(%) 12.19 12.80 13.56 12.15 10.99

100
Return on Assets Excluding
99.03 104.08 97.49 88.89 82.34
Revaluations
Return on Assets Including
99.03 104.08 97.49 88.89 82.34
Revaluations
Return on Long Term Funds(%) 8.08 11.01 12.56 11.51 10.99
Liquidity And Solvency Ratios
Current Ratio 1.43 1.69 1.83 1.97 2.13
Quick Ratio 1.23 1.51 1.68 1.80 1.93
Debt Equity Ratio 0.96 0.73 0.66 0.63 0.59
Long Term Debt Equity Ratio 0.96 0.73 0.66 0.63 0.59
Debt Coverage Ratios
Interest Cover 4.72 6.78 8.72 8.02 8.33
Total Debt to Owners Fund 0.96 0.73 0.66 0.63 0.59
Financial Charges Coverage Ratio 6.51 8.50 10.49 9.65 10.08
Financial Charges Coverage Ratio
6.54 7.28 9.32 8.02 9.16
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 9.92 13.40 16.19 16.76 15.13
Debtors Turnover Ratio 11.42 13.61 11.73 17.08 13.62
Investments Turnover Ratio 9.92 13.40 16.19 16.76 15.13
Fixed Assets Turnover Ratio 0.57 0.62 0.64 0.76 0.76
Total Assets Turnover Ratio 0.46 0.49 0.49 0.52 0.51
Asset Turnover Ratio 0.47 0.51 0.52 0.55 0.53

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --
Number of Days In Working
49.60 58.36 61.72 66.54 75.77
Capital
Profit & Loss Account Ratios
Material Cost Composition 0.06 0.06 0.07 0.07 0.05
Imported Composition of Raw
-- -- -- -- --
Materials Consumed
Selling Distribution Cost
-- -- -- -- --
Composition
Expenses as Composition of Total -- -- -- -- --

101
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 20.03 43.20 37.57 35.75 34.42
Dividend Payout Ratio Cash Profit 13.55 31.36 29.60 27.44 27.03
Earning Retention Ratio 79.30 56.85 56.53 62.99 58.03
Cash Earning Retention Ratio 86.14 68.67 66.86 71.82 68.51
AdjustedCash Flow Times 5.28 4.12 3.72 3.92 3.99

Mar '15 Mar '14 Mar '13 Mar '12 Mar '11

Earnings Per Share 12.48 13.31 15.30 11.19 11.04

Book Value 99.03 104.08 97.49 88.89 82.34

102