PROJECT REPORT

ON

"RATIO ANALYSIS"
WITH REFERENCE TO NATIONAL THERMAL POWER CORPORATION, RAMAGUNDAM

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE REQUIEMENTS FOR

THE AWARD OF DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION

BY
SATYANAND PONAGANTI (13XB1E00C3)
Under the guidance of

Mr.Rajeshwar Goud

(Assistant Professor)

KYASA INSTITUTE OF MANAGEMENT STUDIES,

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY,
HYDERABAD, INDIA

(JULY 2015)

1
 C E R T I FI CAT E

This is to certify that the project work entitled “RATIO ANALYSIS” is a work done and

submitted by SATYANAND PONAGANTI, bearing roll no.13XB1E00C3. He has

undergone training under my supervision and guidance during the academic year 2014-15, in

partial fulfillment of the requirement for the award of the degree of Master of Business

Administration by the KYASA INSTITUTE OF MANAGEMENT, JNTU HYDERABAD.

PROJECT GUIDE

R. JAYARAMACHANDRAN
MANAGER (FIN)
NTPC LTD, RAMAGUNDAM

DECLARATION

2
 I hereby declare that this project titled “RATIO ANLYSIS” carried out at NTPC

Limited, Ramagundam, submitted by me as a part of partial fulfillment for the award of the

MASTER OF BUSINESS ADMINISTRATION at KYASA INSTITUTE OF

MANAGEMENT, JNTU UNIVERSITY, HYDERABAD is a record of bonafide work

done by me.

To best of my knowledge and belief, this project is not submitted to any other

University or Institution for the award of any Degree or any Diploma / Certificate or

published any time before.

Date:

Place:
(SATHYANAND PONAGANTI)

3
 ACKNOWLEDGEMENTS

I take this opportunity to acknowledge all the people who were involved in the completion of
this project. I would first of all thank the company, NTPC Limited, for giving me a chance to
work in this project.

I take this opportunity to gratefully acknowledge the assistance and contribution of the people
who had faith in this project. I would begin by extending my sincere gratitude to Shri B.S.
Kumar, HOF and Shri R. JAYARAMACHANDRAN, Manager (F&A), NTPC Limited,
Ramagundam for giving me a chance to work with NTPC Limited.

I would like to point the support given by Shri P.M.G.V. Srinivas, DGM (HR-ED), Shri
M.V.R. Sharma, Assistant Manager (HR-ED), Mr. L. Haridas, Engineer (HR-ED), B.
Bhaskar Reddy, Sub-Officer (HR-ED) Syed Yusuf, Sub-Officer, T.V. Subramanyam, Jr-
Officer and EDC Staff, NTPC Ramagundam, who have taken almost interest on guiding me
for my project. I thank every employee of NTPC, Ramagundam, for their Co-operation and
guidance in completion of my project work.

I would like thank Principal Archana., and Mr.Rajeshwar Goud, Asstt. Professor, Human
Resources Deptt., Kyasa institute of Management studies, JNTU University, Hyderabad for
his timely guidance and constructive inputs which helped me complete my project
successfully.

Lastly, I am grateful to the Professors, Faculty, and the Non-technical staff of Kyasa institute
of Management, JNTU University, Hyderabad for their lectures and academic support.

SATHYANAND PONAGANTI

4
 CHAPTERIZATION SCHEME

The present study is presented into 5 chapters. The following chapterization scheme
represents as follows,

Chapter1: - Includes Nature and Importance of the study, Objectives and Scope of the study
and Methodology and Limitations of the study.

Chapter2: - Includes Introduction to National Thermal Power Corporation, Ramagundam

Super Thermal Power Station Profile.

Chapter3: - Includes “Financial Analysis by Ratios in NTPC” it covers Nature of Ratios,

Usage and Significance of Ratios and Types of Ratios.

Chapter4: - Deals with the “Analysis & Interpretations” where the findings are derived
from the study.

Chapter5: - Deals with the “Findings and Conclusion and Suggestions” drawn from
analysis and findings of the study.

Annexure: Bibliography and Financial Statements.

5
 CONTENTS

S.NO TITLE PAGENO

1 INTRODUCTION 1-5

2 PROFILE OF NTPC LIMITED 6 - 26

3 THEORETICAL FRAME WORK 27 - 37

4 DATA ANALYSIS AND

INTERPRETATION 38 - 54

5 CONCLUSIONS &
SUGGESTIONS 55 - 60

6
 CHAPTER-I

INTRODUCTION

7
 INTRODUCTION

The Financial Administrator must recognize that every financial decision he makes
will influence, in a very real way, the decision he will make subsequently, even though the
decision may appear to be in unrelated areas and separated by a period of several months. His
decision influence the way in which creditors, potential investors, suppliers and even
prospective employees view the firm from their own points of view. In performing his
various functions, therefore, the financial administrator must equip himself with the
appropriate tools of analysis so that he can determine his firm’s immediate position and
measure the effect of his decision on the future position it will occupy over time.

Financial statements are an important source of information for evaluating the

performance and prospects of a firm. If properly analyzed and interpreted, these statements
can provide valuable insights into a firm’s performance. Analysis of financial statements is of
interest to lenders, investors, security analyst, managers and others.

Financial statements analysis may be done for a variety of purposes, which may range
from simple analysis of the short-term liquidity position of the firm to a comprehensive
assessment of the strengths and weaknesses of the firm in various areas. It is helpful in
assessing corporate excellence, judging creditworthiness, forecasting bond ratings, evaluating
intrinsic value of equity shares, predicting bankruptcy and assessing market risk.

8
 NEED OF THE STUDY

1.Financial analysis is helpful in assessing the financial position end profitability of a

concern.
2.This is done through comparing the ratios for the same concern over a period of years.
3. For one concern against the predetermined standards or far one department of a concern
against other department of the same concern.
4. The financial statements represent the status of the organization. One can judge the
performance by studying the statements.
5. The purpose of financial analysis is to measure the information contained in financial
statements so as to judge the profitability and financial soundness of the firm.
6. Just like a doctor examines a patient by recording the body temperature, blood pressure,
etc.
7. Before making his conclusion regarding the illness and before giving his treatment, a
financial analyst analysis the financial statements with various tools of analysis before
commenting upon the financial health or weakness of an enterprise.
8. The analysis and interpretation of financial statements is essential to bring out the status
behind the figures in financial statements.
9. Financial statements analysis is an attempt to determine the significance and meaning of
the financial statements data that forecast may be made of the future earnings.
10. ability to pay interest and debt maturities (both current and long-term) and profitability of
a sound dividend policy.

9
 OBJECTIVES OF THE STUDY

1. Broadly the objective of the Analysis of Financial Statements is to understand the

information contained in financial statement with a view to know the weakness and
strengths of the firm and to make a forecast about the future prospects of the firm and
thereby enabling the financial analyst to take different decision regarding the operation of
the firm.
2. The main objectives of the analysis are:
3. To assess the present profitability and operating efficiency of the firm as a whole as well
as for its different departments.
4. To assess the short-term as well as the long-term liquidity position of the firm.
5. To examine the solvency of the firm.
6. To find out the ability of the firm to meet its current obligations.
7. The firm and thereby enabling the financial analyst to take different decision regarding
the operation of the firm.
8. We can also find out the relative importance of different components of the financial
position of the firm
9. To identify the reasons for change in the profitability/financial position of the firm.
10. The finaciala statement is useful to the whole business ethics.

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 SCOPE OF THE STUDY

1. Analysis of financial statement can be undertaken by different persons and for different
purposes, therefore, the scope of the AFS may be varying from one situation to another.
2. However, the following are some the techniques of the AFS:
3. Common- size financial statements.
4. Trend percentage analysis.
5. Statement of changes in financial position.
6. Cost-volume-profit relations, and
7. Ratio analysis and others.
8. The last technique i.e. the Ratio Analysis is the most common, comprehensive and powerful
tool of the AFS.
9. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis.
10. It refers to the relationship expressed in mathematical terms between two individual figures
or group of figures connected with each other in some logical manner and are selected from
financial statements of the concern.

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 LIMITATIONS OF THE STUDY

In spite of all the care taken to avoid any limitations, the study may suffer from the
following limitations:

1. There was no scope of gathering sufficient financial information, as it is confidential.

2. All the data presented for financial analysis was limited up to 5-years period only i.e.

3. 2008-2009 to 2013-2014.

4. It is not always possible to make future estimations on the basis of past data.

5. The breakup of the various components of raw materials was not available.

6. As it always does not come true.

7. As the data has been mainly collected from the balance sheet.

8. All the data presented for financial analysis 20010-2011 to 2013-2014.

9. Raw material was unconditional to the company.

10. It is not always possible to make future estimations on the basis of past data.

11. There was no scope of gathering sufficient financial information.

12
 CHAPTER II

PROFILE OF NTPC LIMITED

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 PROFILE OF THE INDUSTRY

Indian electricity

In the pre independent era the power development in India was slow and consisting of
852 MW thermal and 508 MW hydro capacities existed at the time of the independence in the
year 1947. In 1948 the Damodar Valley Corporation (DVC) was incorporated under the DVC
act, with the objective of the generation, transmission an distribution of both Hydro electric
and Thermal power in the Valley area of Damodar River in the State of West Bengal and
Bihar. The Electricity supply act 1948 paved the way for creation of state Electricity Boards
(SEBs). In mid 70's Govt. of India decided to create generating companies in the central
sector to supplement the efforts of the states. NTPC was created in the year 1975 in the
central sector to set up thermal generating units along with associated power evacuation
system. At present, NTPC installed capacity of 36014 MW. NTPC is the 6 th largest in terms of
thermal power generation and the second most efficient in terms of capacity utilization
amongst the thermal utilities in the world.

Only 56% of the Indian population has access to regular power. That's about
500million people without access.

India needs another 100,000 MW to come online by 2017 to keep growth going
100,000 MW implies an additional investment of $100 billion in generation.

The breakdown of India's power generation looks like this:

Hydropower — 32,335 MW (26% of total)

Thermal — 82,500 MW (66% of total)

Nuclear —3,310 MW (3% of total) [to go up to 25% if we get access to nuclear fuel]

Renewable/Alternative — 6,158 (6% of total)

That's about 125,000 MW in current production, with another 41,500 MW in

Execution currently.

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 Total commercial losses of state utilities as a percentage of turn over dropped from
40% in 1999 to 14% in 2005.

The construction of a 1000 MW steam power plant in 1899 by Calcutta Electric

Supply Corporation near Calcutta marked the beginning of thermal power development in
India. In the pre independent era the power development was slow and a mere 1362 MW
consisting of 852 MW thermal and 508 MW hydro capacities existed at the time of the
independence in the year 1947. In 1948 the Damodar Valley Corporation (DVC) was
incorporated under the DVC act, with the objective of the generation, transmission and
distribution of both Hydro electric and Thermal power, in the Valley area of Damodar River
in the State of West Bengal and Bihar.

The Electricity supply act 1948 paved the way for creation of state Electricity Boards
(SEBs). The vertically integrated state electricity Boards were assigned the soul responsibility
of generation and transmission and distribution of electricity with in the state. In mid
seventies it was realized that with the uneven distribution of the coal and hydro resources
with in the country power development only by state electricity boards as spatial units would
not only create large interstate imbalances but it also not be in position to meet the increasing
the power demand . At this junction the Govt. of India decided to create generating
companies in the central sector to supplement the efforts of the state.

Consequently NTPC was created in the year 1975 in the central sector to set up
thermal generating units along with associated power evacuation system. National Hydro
Electric power Corporation (NHPC) was also established in 1975 in the central sector to set
up hydro generating units. North eastern electric power corporation (NEEPCO) was
incorporated in 1976 in the central sector for the development of power project in
northeastern states. In addition to the above company set up under the ministry of power,
govt. of India, another central PSE, namely the Neyveli Lignite Corporation (NLC)
under the administrative control of ministry of coal, is also engaged in thermal power
generation. The NLC is primarily engaged in mining of lignite and its utilization in power
generation.

Central Electricity Regulatory Commission

Commission has been established under the Electricity Regulatory Commissions Act,
1998 to discharge the following functions:

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Main functions of CERC:

 To regulate the tariff of generating companies owned or controlled by the Central

Government.

 To regulate the tariff of generating companies other than those owned or controlled by the
Central Government if such generating companies enter into or otherwise have a
composite scheme for generation and sale of electricity in more than one state.

 To regulate the inter-state transmission of energy including tariff of the transmission

utilities.

 To promote competition, efficiency and economy in the activities of the electricity

industry.

 To aid and advise the Central Government in the formulation of tariff policy which shall
be

i. Fair to the consumers

ii. Facilitate mobilization of adequate resources for the power sector

 To associate with the environmental regulatory agencies to develop appropriate policies

and procedures for environmental regulation of the power sector.

 To frame guidelines in matters relating to electricity tariff.

 To aid and advise the Central Government on any other matter referred to the Central
Commission by that Government

 To license any person for the construction, maintenance and operation of interstate
transmission system.

AIMS & OBJECTIVES

 The National Electricity Policy aims at achieving the following

objectives:

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 Access to Electricity - Available for all households in next five
years.

 Availability of Power - Demand to be fully met by 2012.

Energy and peaking shortages to be overcome and adequate spinning reserve to be
available.

 Supply of Reliable and Quality Power of specified standards in

an efficient manner and at reasonable rates.

 Per capita availability of electricity to be increased to over 1000

units by 2012.

 Minimum lifeline consumption of 1 unit/household/day as a

merit good by year 2012.

 Financial Turnaround and Commercial Viability of Electricity

Sector. '

 Protection of consumers' interests.

COMPANY PROFILE

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 NTPC is India’s largest power utility with an installed capacity of is 44,598 MW, plans to
become a 128,000 MW company by 2032. Established in 1975, NTPC aims to be the world’s
largest and best power major.

NTPC has comprehensive Rehabilitation & Resettlement and CSR policies well integrated
with its core business of setting up power projects and generating electricity. The company is
committed to generating reliable power at competitive prices in a sustainable manner by
optimising the use of multiple energy sources with innovative eco-friendly technologies
thereby NTPC is contributing to the economic development of the nation and upliftment of
the society.

Vision

To be the world’s largest and best power producer, powering India’s growth.

Mission

Develop and provide reliable power, related products and services at competitive prices,
integrating multiple energy sources with innovative and eco-friendly technologies and
contribute to society.

Core Values – BE COMMITTED

 B Business Ethics

 E Environmentally & Economically Sustainable

 C Customer Focus

 O Organisational & Professional Pride

 M Mutual Respect & Trust

 M Motivating Self & others

 I Innovation & Speed

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 T Total Quality for Excellence

 T Transparent & Respected Organisation

 E Enterprising

 D Devoted

NTPC overview

NTPC is India’s largest energy conglomerate with roots planted way back in 1975 to
accelerate power development in India. Since then it has established itself as the dominant
power major with presence in the entire value chain of the power generation business. From
fossil fuels it has forayed into generating electricity via hydro, nuclear and renewable energy
sources. This foray will play a major role in lowering its carbon footprint by reducing green
house gas emissions. To strengthen its core business, the corporation has diversified into the
fields of consultancy, power trading, training of power professionals, rural electrification, ash
utilisation and coal mining as well.

NTPC became a Maharatna company in May 2010, one of the only four companies to be
awarded this status. NTPC was ranked 431 st in the ‘2015, Forbes Global 2000’ ranking of the
World’s biggest companies.

Growth of NTPC installed capacity and generation

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The total installed capacity of the company is 44,598 MW (including JVs) with 17 coal based
(33675 MW) and 7 gas based stations (4017 MW), 7 Joint Venture stations (6196 MW) (6
coal based and 1 gas based), 1 Hydro (600 MW) and 8 renewable energy projects (110MW).
The company has set a target to have an installed power generating capacity of 1,28,000 MW
by the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16%
Gas, 11% Nuclear and 17% Renewable Energy Sources including hydro. By 2032, non fossil
fuel based generation capacity shall make up nearly 28% of NTPC’s portfolio.

NTPC has been operating its plants at high efficiency levels. Although the company has
17.73% of the total national capacity, it contributes 25.91% of total power generation due to
its focus on high efficiency.

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as
fresh issue and 5.25% as offer for sale by the Government of India. NTPC thus became a
listed company in November 2004 with the Government holding 89.5% of the equity share
capital. In February 2010, the Shareholding of Government of India was reduced from 89.5%
to 84.5% through a further public offer. Government of India has further divested 9.5%
shares through OFS route in February 2013. With this, GOI's holding in NTPC has reduced
from 84.5% to 75%. The rest is held by Institutional Investors, banks and Public.

NTPC is not only the foremost power generator; it is also among the great places to work.
The company is guided by the “People before Plant Load Factor” mantra which is the
template for all its human resource related policies. NTPC has been ranked as “6th Best
Company to work for in India” among the Public Sector Undertakings and Large Enterprises
for the year 2014, by the Great Places to Work Institute, India Chapter in collaboration with
The Economic Times.

Diversified growth

In line with the corporation’s mission and goal of reducing dependency on fossil fuels, NTPC
has chalked out a road map that envisages an installed capacity of 128 GW by the year 2032
with a well-diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear energy, 9%
renewable energy and 8% hydro power based capacity.

As such, by the year 2032, 28% of NTPC’s installed generating capacity will be based on
carbon free energy sources. Further, the coal based capacity will increasingly be based on

20
high-efficient-low-emission technologies such as Super-critical and Ultra-Super-critical.
Along with this growth, NTPC will utilize a strategic mix of options to ensure fuel security
for its fleet of power stations.

Opening its doors to opportunities that were coming its way and due to transformations in the
business environment, NTPC made changes in its strategy and diversified the business
adjacencies along the energy value chain. In its pursuit of diversification NTPC has
developed strategic alliances and joint ventures with leading national and international
companies.

Hydro Power – Tapping into the vast hydropower resource in the country and the desire to
look beyond fossil fuels stimulated NTPC to enter into the hydro power business with the 800
MW Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up
in Uttarakhand.

Renewable Power - In order to broad base its fuel mix NTPC has plan of capacity addition
of about 1,000 MW through renewable resources, such as solar and wind energy by 2017.

Nuclear Power - It is the fourth-largest source of energy in the country after thermal, hydro-
electric and renewable sources. A Joint Venture Company "Anushakti Vidhyut Nigam Ltd."
has been formed (with 51% stake of NPCIL and 49% stake of NTPC) for the development of
nuclear power projects in the country.

Coal Mining - In a major backward integration move to create fuel security, NTPC has
ventured into coal mining business with an aim to meet about 20% of its coal requirement
from its captive mines by 2017. The Government of India has so far allotted 10 coal blocks to
NTPC.
Power Trading - 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary
was created for trading power, leading to optimal utilization of NTPC’s assets. It is the
second largest power trading company in the country. In order to facilitate power trading in
the country, ‘National Power Exchange Ltd.’, a joint venture of NTPC, NHPC, PFC and TCS
has been formed for operating a Power Exchange.

Fly Ash Utilisation – NTPC has converted the generation of fly ash into a business
opportunity. The ash is used as a raw material by cement companies and brick manufacturers.
Therefore, NVVN is engaged in the business of fly ash export and sale to domestic

21
customers. Joint ventures with cement companies are being planned to set up cement grinding
units in the vicinity of NTPC stations.

Power Distribution - NTPC Electric Supply Company Ltd.’ (NESCL), a wholly owned
subsidiary of NTPC, was set up for distribution and supply of power. NESCL is engaged in
the ‘Grameen Vidyutikaran Yojana’ programme for rural electrification.

Equipment Manufacturing - Enormous growth in power sector necessitates augmentation

of power equipment manufacturing capacity. Recognizing this as an ideal business
opportunity, NTPC has ventured into this sector as well. NTPC has formed JVs with BHEL
and Bharat Forge Ltd. for power plant equipment manufacturing. NTPC has also acquired
stake in Transformers and Electricals Kerala Ltd. (TELK) for manufacturing and repair of
transformers.

Business development

NTPC is India’s biggest power major with a commissioned capacity of 44598 MW. It feeds a
fourth of India's electricity needs or as we say "NTPC lights up every fourth bulb in the
country". It is one of the most efficient power companies in India, having operations that
match global standards.

Commensurate with our country's growth challenges, NTPC has embarked upon an ambitious
plan to attain a total installed capacity of 128,000 MW by 2032. Towards this goal, NTPC has
adopted a multi prong strategy which includes Greenfield projects, Brownfield projects, joint
ventures and acquisition of existing plants route. Besides, the corporation has also adopted
the diversification strategy in related business areas such as coal mining, power trading, and
manufacturing etc to ensure robust growth of the company.

NTPC POWER FOR NATIONAL PROGRESS:

The corporate mission of NTPC is to make available to the nation reliable and quality
power in increasingly large quantities. NTPC has become the premier power utility in the
country since is inception and is today the largest producer of electric power in the country.
NTPC is today all geared to continue playing the lead role in India's power scenario.

REGION COAL GAS Solar TOTAL

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 Northern 9,015 2,334 35 11,384

Western 10,840 1,313 50 12,203

Southern 4,600 370 15 4,985

Eastern 9,220 - 10 9,230

Hydro 600

JVs 4,229 1,967 6,196

TOTAL 37,904 5,984 110 44,598

The efficiency of working of power plant and their maintenance have been
unsatisfactory as a result of which the power generating capacity already could not have been
fully utilized. Power is the single factor which changed the way of living. The NTPC limited
was established on November 7, 1975 which has become the most important infrastructure
input for improving the standard of living, meet the growing demand and to fulfill the needs
of the country .NTPC today generates one fourth of the total power in the country and it is
ranked 9th largest thermal power generating utility in the world.

The company, which has completed its thirty years of existence on November 7, 2005,
has made its foray into hydro- power and is planning to go into nuclear too.

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 84.5% of the total equity shares of the company and the balance 15.5% is held by
Flls, 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.

VISION 2017:

NTPC prides itself on being an angle organization able to identify and adapt to the
changing face of Indian economy. In order to power India's growth in the future, the company
has mapped out balanced and well research course to release the goal of becoming 66000MW
Pus Company by 2017. By the year 2017 NTPC hopes to consolidate its global presence to
become an Indian MNC. Continuous its diversification plans both in terms of improving fuel

23
economy and entitling completely new areas. The company hopes to enter 2017 with multiple
businesses under the NTPC umbrella. Beyond the success of IPO, NTPC aims to continue to
be one of the top 5 companies in India in terms of market capitalization. A large turnover of
over 140 000 cores by 2017 has been set for the NTPC houses.

AWARDS

 NTPC has been awarded Special Jury Commendation in recognition of the

commendable work done as a socially responsible company by FICCI Corporate
Social Responsibility Award 2012-13 Jury

 The Golden Peacock Award for CSR to NTPC representatives, in the presence of
prominent leaders from various sectors during the '8th International Conference on
Corporate Social Responsibility - 2014', on 17th January, 2014.

 NTPC has been awarded ‘Greentech CSR Award 2012’ in Gold Category in Power
Sector by Greentech Foundation

 NTPC received the ‘Good Corporate Citizen Award-2011’ by PHD Chamber of

Commerce

 The Company received SCOPE Meritorious Award for CSR and Responsiveness for
2010-11

 The company NTPC received the ‘GSBA-Top Rankers Excellence Award 2011’ in the
‘Best Finance Professional’ category.

 Golden Peacock Award for CSR for the year 2011.

CORPORATE GOVERNANCE AWARDS & RECOGNITIONS

In recognition of excellence in Corporate Governance, NTPC bags five PR awards at PRSI

 NTPC Limited has been awarded with Golden Peacock Global Award for Excellence
in Corporate Governance -2014.

 Award for Excellence 2011 - Good Corporate Citizen Award by PHD Chamber of
Commerce and Industry.

24
  ‘ICSI National Award for Excellence in Corporate Governance – 2009’ by the
Institute of Company Secretaries of India.

 ‘Golden Peacock Global Award for Excellence in Corporate Governance’ by World

Council for Corporate Governance in the years 2007 and 2009.

 ‘Golden Peacock National Award for Excellence in Corporate Governance’ by World

Council for Corporate Governance in the year 2008.

The 29th All India Public Relations Conference held on 13th -15th December at
Chennai.

NTPC received four PR awards at the National Convention of Public Relations

Society of India held at Chennai. These awards belonged to Event Management Bulletin,
Mass Awareness Campaign and House Journal Categories. The awards were received by Shri
T. S. Rajpoot, DGM (Corporate Communication), Shri J. P. Sharma, Sr. Manager (PR) of
NTPC Corporate Office and Shri Manjul Tewari, Manager (PR) of NTPC's Dadri project.

In the "Event" category Annual General Meeting (AGM) of NTPC has been awarded.
In the "Bulletin" category - NTPC's monthly in-house video magazine "Power Vision" was
adjudged and awarded in the Mass Awareness Campaign category.

NTPC's efforts about usage of Fly ash a by-product of thermal generation were
accepted by jury for the award. The house journal "Roshni" of NTPC Dadri was awarded for
its tasteful presentation and contents. Have been specified for the proposed expansion
combined cycle power plants at “ANTA”, “AURIAYAKAWAS” and “GANDHAR”, new
designs or control room have been developed for NTPC’S future coal gas based stations.

NTPC Ltd has been ranked top awardees' for MoU Award for Excellence in
Performance, instituted by DPE, consecutively for two years, 2004-05 and 2005-06 with
'Excellent' rating. Dr. Manmohan Singh, Honorable Prime Minister of India presented the
MoU Awards to Shri. Sankaralingam, CMD, NTPC Ltd. NTPC has been ranked fifth among
the top ten "Best companies to work for in India" by Mercer, HR Consulting-Business
Today Survey 2005.

WINNING ACCOLADES

25
  SCOPE Meritorious Award for best practices in Human Resources Management on
the occasion of Public Sector Day 2010-11.

 Most Respected Company in the Power Sector 2011 by Business world.

 PSU Excellence Award 2010 in the Best Financial Performance Category by Indian
Chamber of Commerce and Department of Public Enterprises.

 Award for “Best HR Strategy in line with Business” and award for “Talent
Management” at the Asia Best Employer Brand Ceremony held at Singapore in 2010.

 NTPC limited has been ranked 6th in Aon Hewitt Best Employers in India 2011 Study
of Best Employers in the country and one of the Top 25 Best Employers in Asia
Pacific in the sixth Aon Hewitt Best Employers in APAC 2011 study.

 Cll-Exim Bank Excellence Award has conferred Commendation for Anta and Korba
stations for “Strong Commitment to Excel” and Commendation for “Significant
Achievement” for Dadri Station.

 NTPC Dadri Stage II has been declared winner of International Project Management
excellent Award (Silver Category) in mega size project by IPMA International.

 Six employees of NTPC conferred PM’s Shram Awards.

The company is headed by Chairman and Managing Director (CMD) along with 6
functional directors. The functional directors are present on the Board of the company on a
full time basis for managing their functional areas. The six full time functional directors are
in the area of Operation, Projects, Commercial, Finance, Human Resources and Technical.
Apart from the functional directors, NTPC Board of Directors also consists of 2 nominated
directors from the Govt. of India and 4 non-official directors who are eminent persons from
the various, fields.

OPERATIONAL PERFORMANCE (2013-2014)

 Generated 233.26.07 Bus during 2013-2014 of electricity which was 25.48% of the
total power generated in India (without Bhutan import).

26
 The total power generated by the Company including its JVs and subsidiary was
240.31 BUs which was 27.57% of the total power generated in India (without Bhutan
import).

 The power generated by the Company has registered anincrease of 0.69% over the
previous year’s generation of 220.54 BUs.

 During the year 2013-14, the Company added 2,820 MW

 The total generation contributed by coal stations is 199.054 BUs during the year
against generation of 195.282 BUs last year registering a growth of 1.93%.
Generation could have been still higher but due to less grid demand, there was
generation loss of 5.93 BUs.

 NTPC coal based stations recorded the highest PLF in the country with 81.5% PLF
compared to national average PLF of 65.55%, 59% for state sector, 62% for private
sector and 76% for other central sector companies.

 During the year, 6 coal based stations out of 15 achieved more than 90% PLF.

 During the year 2013-14, NTPC group has generated 27.40% of the country’s total
power generation with an installed capacity of about 18.52% of the total installed
capacity in the country.

 The gas stations having a capacity of 3,955 MW achieved annual generation of 23.014
BUs at a PLF of 65.22% as against 25.255 BUs last year mainly due to less grid
demand which accounted for a generation loss of 10.176 BUs.

 The average declared capacity of gas based stations of the year was 93.81% as
compared to 92.60% during previous year.

 Plant Load Factor (PLF) of NTPC’s coal stations stood at a healthy 88.29% during
2010-11 against National average PLF OF 75.08%.

 Three coal stations achieved PLF of more than 95%. Seven other stations achieved
more than 90% PLF.

27
  Seven NTPC COAL stations figure among the top 10 stations in the country in terms
of PLF.

SURGING AHEAD

 NTPC crossed Rs.50,000 crore mark for Net Sales in the Last Financial Year. It
recorded Net Sales of Rs. 71,490 crore in Financial Year 2013-14.

 Amongst ten largest companies in India in terms of market capitalization with a

market capitalization of Rs.1,10,814.04 Cr. (@134.50) as on 25.05.2015.

 First super critical unit (660 MW) of NTPC at SIPAT declared commercial on
01.10.2011.

 The company is in rapid expansion phase gradually diversifying its present fuel mix.

 Multi-pronged growth strategy including capacity addition through Greenfield

projects, expansion of existing stations and joint ventures.

 NTPC working on a basket of new projects of more than 40,000 MW for

implementation.

Keeping the significance of power supply in sight, NTPC has been chosen for the
purpose of the study as it has many units control. Ramagundam super thermal power station
(RSTPS) has been selected for the study.

PROFILE OF NTPC, RAMAGUNDAM

ABOUT RAMAGUNDAM SUPER THERMAL POWER STATION (RSTPS):

RSTPS spread over 10000 acres of land situated in Karimnagar dist, of units in two
stages. This is biggest power station in southern in India supplying in Andhra Pradesh. It has
an installed capacity of 2600mw supplying power to all the southern states. The generation
units are connected to 400kv switch yard through the step up generator transformers. The coal
source for RSTPS is south Godavari coal fields of M/s SCCL.

28
The water required is obtained from Pochampad dam. The five states of Andhra Pradesh,
Tamilnadu, Karnataka, Kerala and Goa along with union territory of Pondicherry are
benefited by RSTPS. The station has setup the unique distinction of recording 93 days of trip
free operation and maximum continues run of its 500 MW Unit-VI for 405 days during the
year 1994-95

LOCATION:

The 2600 MW Ramagundam Super Thermal Stationt is located in Karimnagar district

of Andhra Pradesh to the south of Godavari Coalfields of M/s SCCL.

Histroy of NTPC, Ramagundam

Ramagundam the saga of super thermal power station was built along the southern
banks of the river Godavari in Karimnagar dist, of commitment and dedication of National
thermal power corporation for achieving the vowed objective of" POWER IN PLENTY",
launched upon by the corporation on more than a decade ago. A unit of NTPC Ltd set up in
1975 with an outlay of Rs.1750 crores, a pivotal power utility in central public sector. The
gigantic 2600 mw super power thermal station now stands as a testimony to that objective
fulfilled, largest self-sustaining power station in south INDIA.
What was barren in 1979 was by 1983-84 humming with activity as the erection of
boils drum, the boils light-up turbine rolling and the synchronization of the first 200 mw unit
was achieved well ahead of schedule.
Erection, operation and engineering staff set pattern for the future. Just as the first
200mw unit was commissioned 4 months ahead of scheduled in October, 1983, the power
plant continued to make a rapid progress and created numerous records in structural erection,
mechanical erection, cable laying and budget utilization, winning allocates not only internally
but also from outside.
At against time the next 200 mw units were also commissioned ahead of scheduled by
3 months and 21/2 months of 3*500 mw units, Ramagundam has created history every time,
for all three units were commissioned within 55 months from the start of the erection
activities.

29
 The first 500mw units have commissioned 1st June 1988. One month ahead of
schedule, the second 500mw units was test synchronized in October, 1989, 9months before
time.
The strength of permanent employee as on 1-12-1983 at the generating capacity of
600MW was 1929 out of which 543 were employed in operation and maintenance area. At
the generating capacity of 1100mw as on June, 1988 this is the biggest power station in whole
of the south India. The fact that all the seven units were commissioned ahead of schedule and
also being on sound operation performance speaks volumes about the managements
successful pursuit in maintaining harmonious industrial relation in an environment of
participative and healthy work culture, which had also enabled the project to achieve this race
feat that too in an area known for radical movement and actions by the unions operating in
this belt.

The massive forestation by NTPC in and around it RAMAGUNDAM power station

(2600MW) has contributed reducing the temperature in the areas by about 3 center for power
efficiency and environment protection (CENPEEP) “has been setup in association with
(USAID) to user in Eco- friendly towards environmental protection in power generation in
the country.

Ramagundam today is a power station radiant with the spirit of self-reliance, looking
boldly to the future for challenges to spur it on. When the nation’s prosperity depends on the
availability of more power, Ramagundam power station is all set to eater to the rising national
demand better and faster.

RSTPS AT GLANCE: (RAMAGUNDAM SUPER THERMAL POWER STATION)

Approved capacity
2600 MW

Stage I : 3X200 MW
Installed Capacity Stage II : 3X500 MW
Stage III : 1X500 MW

Karimnagar, Andhra Pradesh

30
Location

(i)South Godavari Coal Fields of Singrani Collieries for

Stage I& II
Coal Source (ii)M/s. SECL & M/s. MCL for Stage III

MMTC/STC/ADANI EnterprisesLtd for Imported Coal

Sri Ram Sagar Dam on Godavari River, D-83 Canal

from pochampad Reservoir and Yellampalli Project
Water Source

Pondicherry, Goa, Kerala, Karnataka, Tamil Nadu, AP,

PGCIL (for HVDC)
Beneficiary States

Rs. 2059.22 Cr Stage I & II

Rs. 1818.46 Cr Stage III
Approved Investment

Stage - I: 3x 200 MW
Stage -II: 3x 500 MW
Unit Sizes

Unit -I 200 MW November 1983

Unit -II 200 MW May 1984
Unit -III 200 MW December 1984
Units Commissioned Unit -IV 500 MW June 1988
Unit -V 500 MW March 1989
Unit -VI 500 MW October 1989
Unit-VII 500 MW March 2005

International Assistance IDA

IBRD loan
OPEC
KFW
EXIM Bank, Japan.

31
 SFD

Ramagundam super thermal power station, constructed at a cost of Rs. 1702

crores on 10,000 acres land, symbolizes the extraordinary excellence and commitment of a
dedicated work force. Their skills and commitment also enabled each of the six generating
units to be commissioned well before schedule.

Racing against time, stages-one consisting of three units of 200MW each was
commissioned four, three two months ahead of schedule. The trend of commissioned units
ahead of schedule continued in stage two as well, consisting of three units of 500 MW each.

CORPORATE OBJECTIVES:

The main objectives of the company are as follows:

1. To add generating capacity with in prescribed time and cost.

2. To operate and maintain power stations at high availability ensuring minimum cost of
generation.

3. To develop appropriate commercial policy heading to remunerative tariffs tend minimum

receivables.

4. 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.

5. Received highest credit rating AAA by CRISIL and CAA by ICRA for domestic bonds and
international ratings for Euro bond.

32
33
 CHAPTER-III

THEORETICAL FRAME WORK

34
 METHODS OR DEVICES OF FINANCIAL ANALYSIS:

The analysis and interpretation of financial statements is used to determine the

financial position and results of operations as well. A number of methods or devices are used
to study the relationship between different statements. An effort is made to use those devices,
which clearly analysis the position of the enterprise.

The following methods of analysis are generally used.

1. Comparative statements
2. Trend analysis
3. Common-size analysis
4. Funds flow analysis
5. Cash flow analysis
6. Cost volume profit analysis and
7. Ratio analysis.
From the above methods the “RATIO ANALYISIS” is discussed in this chapter.

1. COMPARATIVE STATEMENT:

The comparative financial statement shows the financial position at different period of
time. The elements of financial position are shown in a comparative form so as to give idea of
financial position at 2 or more periods. Two financial statements (balance sheet and income
statement) are prepared in a comparative form for financial analysis purposes. These
statements enable an in–depth study of financial position operating results. Comparative
statement can be prepared for both income statements and balance sheet.

2. TREND ANALYSIS:

Trend analysis is a technique with the help of which the financial statements can be
analyzed by computing trend for a series of information. This method determines the

35
directions in the data and establishes the percentage relationship that each item in the
statement bears to the dame item in the base year.

3. COMMON – SIZE STATEMENT:

This statement indicates the relationship of various items with some common items
(expressed as percentage of common item). In the income statement the sales figure is taken
as base and all balance sheets the total is expressed as percentage of sales. Similarly in the
other figures are expressed as a percentage to this total. The percentages so calculated can be
easily compared with the corresponding percentages in other periods and meaningful
conclusions can be drawn.

4. FUNDS FLOW STATEMENT:

This statement is prepared in order to reveal clearly the various sources where from
the funds are procured to finance the activities of a business concern during an accounting
period.

5. CASH FLOW STATEMENT:

This statement is prepared to know clearly the various sources of cash inflows and
cash outflows. It is helpful in evaluating the current liquidity of a business concern. Thus it is
helpful in short – term financial analysis.

6. COST VOLUME PROFIT ANALYSIS:

Cost volume profit analysis is a technique for studying the relationship between cost,
volume and profit. Profit of an undertaking depend upon a large numbers of factors. But the
most important of this factors are the cost of manufacture, volume of sale and the selling
prices of the products. In the words of HERMAN C. HERSER, the most significant single
factors in profit planning of the average business is the relationship between the volume of
business, costs and profits. The CVP relationship is an important tool used for the profit
planning of a business

36
 RATIO ANALYSIS

Ratio analysis is a widely used tool for financial analysis. It is defined as the
systematic uses of ratio to interpret the financial statements so that the strengths and
weakness of a firm as well its historical performance and current financial condition can be
determined.

The ratio analysis is one of the most powerful tools of financial analysis. It is the
process of establishing and interpreting various Ratios. It is with the help of ratios that
financial statements can be analyzed more clearly and decisions can be made accurately. A
financial ratio is the relationship between to accounting figures expressed mathematically. A
ratio can be expressed as percentage by simply multiplying the ratio with 100.

NATURE OF RATIO ANALYSIS:

Ratio Analysis is a technique of analysis an interpretation of financial statements it is

the process of establishing and interpreting various ratios for helping in making certain
decisions. However, Ratio Analysis is not an end in itself. It is only a means of better
understanding of financial strengths and weakness of the firm because in the long term just
near “calculation of Ratio does not serve any purpose, unless they are interpreted”.

STEPS INVOLVED:
1. Selection of relevant data from the financial statements depends upon the objective of the
analysis.
2. CALCULATION of Appropriate Ratios from the above data.

37
3. COMPARISON of calculated Ratios of the firm in the past, of the Ratio developed from
projected financial statements or the Ratios of other firms or the comparison with the industry
to which the firm belongs.
4. INTERPRETATION of the Ratios

INTERPRETATION OF THE RATIOS:

The interpretation of the Ratio is an important factor. The inherent limitations of Ratio
Analysis should be kept in mind while interpreting them.

The interpretation of Ratios can be made in the following ways.

1. Single Absolute Ratio:

Generally speaking one cannot draw conclusion when a single is considered is
isolation. But single ratios may be studied in relation to certain thumb ruler, which are based
upon well-proven conventions.
2. Group of Ratios:
Ratios can be interpreted by calculating a group or related ratios. A single supported
by other related additional ratios becomes more understandable and meaningful.

3. Historical comparison:
One of the earliest and most popular ways of evaluating the performance is to
compare its present ratios with past ratios is called comparison overtime. It gives in
indication of the direction of the change and reflects whether the firm performance and
financial position has improved definitude or remained constant over as period of time.

4. Projected Ratios:
Ratios can also calculate for future standards based upon the projected financial
statements. These future ratios are compared with the actual ratios to find variance, if any,
such variance interpreting and taking corrective actions.

38
5. Inter-firm Comparison:
Ratios of one firm can also be compared with the ratios some other firms in the
industry of the same point of time. This helps is evaluating relative financial position and the
performance of the firm.

USES AND SIGNIFICANCE:

a) Managerial uses of Ratio Analysis

Help in decision-making
Help in financial forecasting and planning helps in communicating
Helps in coordinating
b) Helps in control
c) Utility to share holders
d) Utility to coeditor’s creditors
e) Utility to employees
f) Utility to Government

Ratios one firm can also be compared with the ratios some other firm in the industry
at the same point of time. This helps in evaluating relative financial position and the
performance of the firm.
TYPES OF RATIOS:

1. LIQUIDITY RATIOS:
Liquidity Ratio measures the ability of a firm to meet its short-term delegations and
reflect it short-term financial strength or solvency. In fact, liquidity is the pre requisite for the
very survival of a firm.
The important liquidity ratios are:
a) Current ratio
b) Quick or Acid-Test ratio

a) Current Ratio:
The current ratio is a very popular financial ratio. It measures the ability of the firm to
meet the current liabilities. Current assets of the firm and provide the funds needed to pay the

39
current liabilities, prepaid expenses and current liabilities consist of loans and advances, trade
creditors, accrued expenses and provisions.

Current Assets
Current Ratio = -------------------------
Current liabilities

b) Acid Test Ratio or Quick Ratio:

This ratio establishes a relationship between quick or liquid assets and current
liabilities. An Assets is liquid id it can be converted into cash immediately without a loss of
value, cash is the most liquid asset. Other liquid assets are debtors and bills receivables and
marketable securities. Inventories are considered to be less liquid. Quick ratio is found by
dividing the quick assets by total current liabilities.
Quick Assets
Quick Ratio = ------------------------------
Current liabilities

2. LEVERAGE RATIOS:

a) Proprietors or equity Ratio:

It is a variant of debt-equity ratio. It establishes relationship between the
proprietor’s funds and the total tangible assets.

Share Holder Funds

Equity Ratio = ---------------------------------
Total Assets

b) Fixed assets Ratio to Long Term funds:

This ratio exhibits the proportion of the total assets created through debt
including short term and long-term liabilities. This ratio is of considerable significance to the
creditors in as much as it highlights the long-term solvency of the company

Net Fixed Assets

Fixed Assets to Long Term Funds = -----------------------------
Long Term Assets

40
 c) Debt Equity Ratio:
This ratio is calculated to measure the relative claims of our sides against the
firm’s assets. This ratio indicates the relationship between the external equities (or) the
outsider funds and the paternal equities cores shareholder funds.

Outsider Funds
Debt Equity Ratio = ----------------------------
Share Holder Funds

d) Total Liabilities to Total Assets Ratio:

This ratio is small variant of equity ratio can be simply calculated as 100
equity ratio the ratio indicates the relationship between total liabilities to outsiders to total
assets of a firm. There is thumb rule for this ratio. It can be calculated as follows.

Total Liabilities to out side’s

Solvency Ratio = -------------------------------------- X 100
Total Assets

3. ACTIVITY / TURNOVER / EFFICIENCY / RATIOS

These are also known as activity or efficiency ratios. Such ratios are concerned with
measuring the efficiency in assets management of the efficiency with which assets are
managed used is reflected in the speed and rapidity with they are converted into sales.
Thus, these ratios are a test of relationship between sales/cost of goods gold and
assets.
a) Working Capital Ratio:
This is also known as working capital leverage ratio. This ratio indicates whether or
not working capital has been effectively utilized in making sales. In case a company can
achieve higher volume of sales with relative small amount of working capital, it is an
indication of the operating efficiency of the company.

Net Sales
Working Capital Ratio = ------------------------------
Net Working Capital

41
b) Debtors Turnover Ratio:

The first is debtors turn over ration, and it is found by dividing credit sales by average
debtors. The debtor’s turnover indicates the number of times the average that debtors turn
each year. Generally the higher the value of the debtors turn over the more efficient is the
management of credit.

To an outside analyst information about credit sales and opening and closing balance
of debtor may not be available therefore the debtor turnover by the year is calculated as

Credit Sales
Debtor’s Turnover Ratio = ------------------------------
Average debtors

c) Fixed Assets Turnover Ratios:

This Ratio is based on the relationship between net sales and net fixed assets of the
firm it measures the efficiency of a firm in meaning and utilizing time assets fixed assets.

Net Sales
Fixed Assets Turnover Ratio = ------------------------------
Net Fixed Assets
d) Inventory Turnover Ratio:

Every firm as to maintain certain level of inventory of finished goods so as to meet

the requirements of the business inventory turn ratio is normally calculated.

Cost of Goods Sold

Inventory Turn Over Ratio = -------------------------------
Average Inventory

PROFITABILITY RATIOS
a) Operating Profit Ratio:

42
 This ratio expresses the relationship between operating profit and sales with the help
of this ratio one can judge the managerial efficiency, which may not be, reflect the net profit
ratio.

Operating Cost
Operating Profit Ratio = --------------------------- X 100
Net Sales

b) Earnings per Share:

In order to avoid confusion on account of the valid meaning of the term capital
employed, the overall profitability can also be judged by calculated earning per share with the
help of the following formula:

Net Profit After Tax – Pref Dividend

Earnings per Share = ----------------------------------------------------X 100
No. of Equity Shares

c) Gross Profit Ratio:

This gross profit reflects the efficiency with which management produces each unit of
product. This ratio indicates the average spread between the cost of goods and sales revenue.
A high gross profit is a sign of good management.

Gross Profit
Gross Profit Ratio = ------------------------ X 100
Sales

d) Net Profit Ratio:

Net profit is obtained when operating expenses interest and taxes are subtracted from
gross profit. This ratio establishes relationship between new profit and sales indicates
management efficiency in manufacturing administrating and selling the products. This ratio
is all over all measures of the firm ability to turn each rupee sales into net profit.
Net Profit
Net Profit Ratio = --------------------- X 100
Sales

e) Return on Equity Capital Ratio:

43
 In the real sense, ordinary shareholders are the real owners of the company, assume
the highest risk. Preference shareholders have preference over ordinary shareholders in the
payment of dividend as well as capital preference shareholders get a fixed rate of dividend
irrespective of the quantum of profits of the company. The rate of dividend varies with the
availability of profits in case of the ordinary share only. Thus the ordinary shareholders are
more interested in the profitability of a company and the performance of the company should
be judged on the basis of return of equity capital of the company return on equity capital is
the relation between profit of to company and it a equity capital it can be calculate as follows.

Net Profit after Tax – Pref Dividend

Return on Equity Capital Ratio = ----------------------------------------------------
Equity Share Capital

f) Return on Investment Ratio:

Capitals turnover ratio (or) return on shareholders investments popularly known as
ROI is the relationship between net sales and the capital employed. It is calculated to measure
the efficiency with which a firm utilizes its resources. As capital is invested in a business to
make sales and profits, this ratio is a good indicator of profitability of a firm.

Net Profit
Return on Investment Ratio = --------------------------------
Net Worth

44
 CHAPTER-IV

DATA ANALYSIS AND

INTERPRETATION

45
 CURRENT RATIO

(TABLE-1)

Current assets
Current ratio = ------------------------
Current liabilities

Current assets=cash & bank balance + short term loans + receivables+ closing stock

Current liabilities=short term debt + payables

Year Current assets Current Current Ratio Change or %

liabilities
2009-2010 308157 107581 2.86 -0.03
2010-2011 35396.79 13072.91 2.70 -0.16
2011-2012 38912.52 17238.64 2.25 -0.45
2012-2013 41167.08 22610.03 1.82 -0.43
2013-2014 39870.79 25279.80 1.57 -0.25

46
 CURRENT RATIO

Interpretation
The above table shows that the current ratio for all years is more than that of
the thumb rule of 2:1 which means that the liquidity positions of the firm is very sound. In
FY 2012-13 the ration has come down below 2. It can be seen from the annexures that the
increase in current liabilities is mainly due to increase in other current liabilities which is a
result of Rupees Term Loans.

47
 QUICK RATIO
(TABLE-2)

Quick assets
QUICK RATIO = ------------------------
Current liabilities

Quick assets=current assets-(inventory)

Current liabilities= short term debt + payables

Current
Year Quick assets Quick Ratio Change or %
liabilities
2009-2010 274680 107581 2.55 -0.03

2010-2011 31757.67 13072.91 2.42 -0.13

2011-2012 35209.67 17238.64 2.04 -0.38
2012-2013 37109.89 22610.03 1.64 -0.40
2013-2014 34497.44 25279.80 1.36 -0.28

48
 QUICK RATIO

Interpretation:
A high quick Ratio is an indication that the firm is liquid and has ability to meet its
current liabilities in time. The above data clearly indicates that the firm is highly liquid, as
the quick ratio for all the five years is double than that of the thumb rule 1:1.

49
 LEVERAGE RATIOS
DEBT-EQUIY RATIO
(TABLE-3)

Debt
DEBT-EQUIY RATIO= -------------------------
Equity or (net worth)
Debt=long term loans + working capital loans+ current liabilities & provisions

Net worth=share capital + un distributed profit

Year Long term Equity or (net Debt Equity Change or %

debt Worth) Ratio

2009-2010 487583 624375 0.78 -0.01

2010-2011 56864.1 67892.25 0.83 0.05
2011-2012 66116.57 73291.17 0.90 0.07
2012-2013 79484.9 80387.51 0.81 -0.09
2013-2014 92128.98 85815.32 1.07 0.09

50
 DEBT- EQUITY RATIO

Interpretation:
This ratio reflects the relative contribution of creditors and owners of business in its
financing. From the above it is clear that the shareholders fund is more than that of the long-
term debt. So we can infer that the firm assets are financially more by the internal funds
rather than the external funds by which it is using its resources more effectively.

51
 EQUITY RATIO
(TABLE-4)

Share holders fund or (equity)

EQUITY= --------------------------------------
Total assets

Net worth=share capital + undistributed profit

Total assets=total net assets- investment

Equity(net (Equity
Year Total assets Change or %
worth) Ratio)*100
2009-2010 624375 1021156 61.14 0.46
2010-2011 67892.25 112634.46 60.27 -0.87
2011-2012 73291.17 140837.8 52.03 8.24
2012-2013 80387.51 161116.46 49.89 -2.14
2013-2014 85815.32 179554.18 51.79 1.90

52
 EQUITY RATIO

Interpretation:
As the equity ratio represents relationship of the owners funds to total assets, higher
the ratio better the solvency position of the firm. The above ratio shows that the six years
ratio is more than 50% so, we consider that the long term solvency position of the firm is
satisfactory.

53
 NON CURRENT LIABILITIES TO TOTAL ASSSETS
(TABLE-5)
NON CURRENT LIABILITIES TO TOTAL ASSETS =
Total liabilities- CL
--------------------------------
Total assets

Non Current liabilities = Total Liabilities – Current liabilities & Provisions

Total assets=total net assets- investment

Non Current
Year Liabilities Total assets Ratio x 100 Change or %

2009-2010 396781 1021156 38.85 -0.46

2010-2011 44742.21 112634.46 39.72 0.87
2011-2012 48877.93 140837.8 34.70 -5.02
2012-2013 56874.87 161116.46 35.30 0.6
2013-2014 66849.18 179554.18 37.23 1.93

54
 NON CURRENT LIABILITIES TO TOTAL ASSETS

Interpretation:

From the above ratio, the ratio of the company’s liabilities to outsiders in relation to
total assets is in decreasing trend, which means the company’s position is satisfactory. Lower
the total liabilities to outsiders to total assets are more satisfactory in the long-term solvency
position of a firm.

55
 FIXED ASSET TO LONG-TERM DEBTS
(TABLE -6)

Fixed Assets
Fixed assets to long term debts = -------------------------------
Long-term funds

Fixed Assets = Gross Fixed Assets – Deprecation

Net worth (Long term Funds) = Share Capital + Reserves & Surplus + Miscellaneous
Expenditure

Fixed Assets Long Term

Year Ratio x 100 Change or %
Funds
2009-2010 347613 644712 53.92 -1.89
2010-2011 39235.96 70316.37 55.79 1.87
2011-2012 45258.36 76422.39 59.22 3.43
2012-2013 62936.10 83336.92 75.50 6.28
2013-2014 72110.83 89502.38 80.56 7.06

56
 FIXED ASSETS LONG TERM -DEBTS

Interpretations:

The Ratio indicates the extent to which the total fixed assets are financed by long term
funds for the firm. The above ratio shows that the firm has financed nearly 65% of long-term
funds for fixed assets and remaining has been used for working capital requirement, which is
satisfactory.

FIXED ASSETS TURNOVER RATIO

57
 (TABLE-7)

Net sales
Fixed asset turnover ratio = ------------------------------
Fixed assets

Fixed Assets = Gross Fixed Assets – Deprecation

Fixed Asset
Year Net Sales Fixed Assets Turn Over Change or %
Ratio
2009-2010 463226 347613 1.33 0.06
2010-2011 54874 39235.96 1.39 0.06
2011-2012 62052.23 45258.36 1.37 -0.02
2012-2013 65673.93 62936.10 1.04 -0.33
2013-2014 72018.93 72110.83 0.98 -0.06

FIXED ASSETS TURNOVER RATIO

58
Interpretation:

The above ratios indicate that fixed Assets turnover Ratio in the initial years is in the
increasing trend, which is very good. It shows that there is a scope for increase in production
& Sales with the effective use of Fixed Asset

WORKING CAPITAL TURNOVER RATIO

(TABLE-8)

59
 Sales
Working capital turnover ratio = ------------------------
Net working capital

Net Working Capital = Current Assets – Current Liabilities & Provisions

Net Working WC Turn

Year Net Sales Change or %
Capital Over Ratio
2009-2010 463226 200576 2.30 0.23
2010-2011 54874 22323.88 2.45 0.15
2011-2012 62052.23 21673.88 2.86 0.41
2012-2013 65673.93 18557.05 3.53 0.67
2013-2014 72018.93 14590.99 4.13 0.60

WORKING CAPITAL TURN OVER RATIO

60
Interpretation:

From the above ratio it indicates that utilization of the working capital is satisfactory
as it is turned over at least two times in all the six years. i.e., in the year 2011-12 it turned to
2.86% which is satisfactory.

61
 CHAPTER V
CONCLUSIONS & SUGGESTIONS

FINDINGS & CONCLUSIONS

62
 After analyzing the financial position of NTPC evaluating its financial
performance in respect of Ratio Analysis, the following conclusions are drawn from
the study.

1. The progress of NTPC shows that there is an increasing trend in production,

productivity, sales, profit and investment during the last six-years (2008-09) to (2013-
14).

2. The liquidity position of the company has shown significant change during the study
period. The current assets of the company increased from 35396.79 crores in the year
2010-11 to 39870.79 crores in the year 2013-14 where the current liabilities are
increased from 10689 crores in the year 2008-09 to 25279.80 crores in the year 2013-
14.

3. The National Thermal Power Corporation Ltd., NTPC plans to generate 233269
million units MUs of electricity during the financial year 2013-14, the financial target
to earn a gross margin of Rs. 10,562 crores and net profit worth of 16.44% are also
planned during the year in this rule following the company best position.

4. The financial position of NTPC has improved during the study period as its reserves
and surplus are increased during the study period.

5. The sales have also been continuously increasing during the study period. In the year
2010-11 they were 55152.01 crores to 72644.02 crores in the year 2013-14.

6. In the fund flow analysis, the change in working capital is also increasing during the
period 2008-09 to 2013-14. NTPC is using its net working capital very efficiently.

7. Funds from operation is decreased in the year 2009-10

8. Profit before tax is substantially increasing from 12049.60 crores in the year 2010-11
to 13904.65 crores in the year 2013-14.

9. There is an improvement in the long-term solvency position of NTPC during the

study period as its debt equity ratio decreased from 0.90 in 2011-12 to 0.81% in 2012-
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 13. It shows fewer outsiders’ funds are used in financing its assets. Even though the
company is forgoing some of the financial benefits (Tax) derived from debits capital,
it has to increase the debt equity Max to 1:1% to maximize Shareholders value.

10. The performance of NTPC in utilization of Fixed Assets during the study period has
improved, as the fixed assets turnover ratio was increased from 1.27% in the year
2008-09 to 1.37% in the year 2011-12.It is always greater than one during the period
2008-09 to 2012-13 which indicates that resources are utilized very effectively.

11. There is an increase in profit during the study period from 2010-11 to 2013-14. The
reason for profits are the high production, high sales etc, the profitability from 2008-
09 to 2013-14 is indicating that the performance of NTPC is satisfactory because the
net profit increased from 19.56% in the year 2008-09 to 21.23% in the year 2013-14
which shows that there is much need to improve the profitability of NTPC.

12. During the study period NTPC is efficiently administering in controlling the operating
expenses. It is maintaining on an average of 80% of its net sales.

On the whole financial performance of NTPC as improved much during

the study period.

BIBLIOGRAPHY

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 Books:

-Financial Management - Prasanna Chandra

-Management Accounting -S.N.Maheshwari

-Fianacial Management -Khan and Jain

-Research Methodology -C.R.Kothari

- Management Accounting - R.K.Sharma & Shashi K.Gupta

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