CERTIFICATE

This is to certify that MR. NEERAJ GUPTA, a student of IMT – CDL

Ghaziabad has completed project work on “FINANCIAL PERFORMANCE

ANALYSIS OF NTPC” under my guidance and supervision.

I certify that this is an original work and has not been copied from any source.

Signature of Guide _____________________________

Name of Project Guide ________________________________

Date ________________________________

1
 SYNOPSIS
ON
“FINANCIAL PERFORMANCE ANALYASIS OF
NTPC”

(As a partial fulfillment for the award of PGPM Degree under

Institute of Management Technology, Ghaziabad -CDL 2008-2010)

Name Neeraj Gupta

Enrolment No. 0811000921
Tc- 22, NTPC Vidyut Nagar,
Gautam Budh Nagar,
Address for Correspondence
Dadri ,
Pin-201008
Mobile No. +91-9555006235
+91-9953232114
Major area of specialization in Finance
which project work is to be
undertaken

Resume of Project Guide attached Yes

Phone No. of Project Guide
Date of Submission

Study Centre:

INSTITUTE OF MANAGEMENT TECHNOLOGY(CDL)

GHAZIABAD

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 PREFACE
3
It gives me immense pleasure in presenting my Synopsis of
project on, “Financial Performance Analysis of National
Thermal Power Corporation Ltd.”. This project will define the
concept of Financial Performance Analysis in detail.” It is
interesting and at the same time, challenging also to
analyze the Financial Performance Analysis of such a large
organization.
This project study contains necessary information related to
the company viz. - its journey from the year it was founded
to the present year, total capacity, product profile, market
share, sales figure, financial performance through ratio
analysis of NTPC.

To err is human & I hope that I will be excused for such

errors though an utmost care has been taken by me to
make this Synopsis of project error free.

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INTRODUCTION OF FINANCIAL PERFORMANCE
ANALYSIS

It has been said that we must measure what we expect to

manage and accomplish. Without measurement, we have no
reference to work with and thus, we tend to operate in the
dark. One way of establishing references and managing the
financial affairs of an organization is to use ratios. Ratios are
simply relationships between two financial balances or
financial calculations. These relationships establish our
references so we can understand how well we are
performing financially. Ratios also extend our traditional way
of measuring financial performance; i.e. relying on financial
statements. By applying ratios to a set of financial
statements, we can better understand financial performance
of company.

Ratio analysis with Return on Equity since this one ratio is at

the heart of financial management; namely we want to
maximize returns for the shareholders of the company.
Secondly, we have three ways of influencing Return on
Equity. We can change our profit margins, we can change
our turnover of assets, or we can change our use of financial
leverage.

There are several detail ratios that we can monitor, such as

acid test, inventory turnover, and debt to equity. Detail
ratios help us monitor specific financial conditions, such as
liquidity or profitability.

Ratios are best used when compared or benchmarked

against another reference, such as an industry standard or
"best in class" within our industry. This type of comparison
helps us establish financial goals and identify problem areas.

It should be noted that ratios do have limitations. After all,

ratios are usually derived from financial statements and
financial statements have serious limitations. None-the-less,
if we want to analyze a set of financial statements, ratio
analysis is probably one of the most popular approaches to
understanding financial performance.

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 COMPANY INTRODUCTION
NTPC Limited (Formerly National Thermal Power
Corporation) is the largest power generation company in
India. Forbes Global 2000 (Ranking of the World’s biggest
companies) for 2009 ranked it 317th in the world. It is an
Indian public sector company listed on the Delhi and
Bombay stock exchanges although at present the
Government of India holds 84.5% (after divestment the
stake by Indian government on 19 October 2009) of its
equity. With a current generating capacity of 31134 MW,
NTPC has embarked on plans to become a 75,000 MW
th
company by 2017. It was founded on 7 November , 1975.

Of the 18 Navratna’s only NTPC Ltd. met the stiff criteria set
by the government. So that Government of India has
identified NTPC as one of the jewels of Public sector
‘Maharatnas’- a potential global giant. It is the only public
sector company in India which is awarded by ‘Maharatna’
award up to 19th May, 2010.

MAHARATNA STATUS TO NTPC:

Government of India, Dept. Of Public Enterprises, Ministry of

Heavy Industries & Public Enterprises vide Office
th
Memorandum dated 19 May, 2010 has conveyed grant of
Maharatna status to NTPC apart from three other Central
Public Sector Enterprises (CPSEs). Since, presently NTPC
has requisite number of non-official Directors on its Board,
therefore, only NTPC is eligible to exercise delegated
Maharatna powers.

NTPC after being nominated among “Maharatna” has

changes its tagline from “Powering India” to “Transforming
Lives”

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 NTPC’s core business is-

1. Engineering, construction and operation of power

generating plants

2. Provides consultancy to power utilities in India and

abroad.

The total installed capacity of the company is 31134

MW (including JVs) with 15 coal based and 7 gas based
stations, located across the country. In addition under JVs,
3 stations are coal based & another station uses
naphtha/LNG as fuel. NTPC has adopted a multi-pronged
growth strategy which includes capacity addition through
green field projects, expansion of existing stations, joint
ventures, subsidiaries and takeover of stations.

NTPC Compared To Rest Of India:

NTPC also sustained its Market Leadership position in 2009-
10. It contributed 28.6% of total electricity generated in the
country out of a total installed market share of 18.10%.

Share of generating capacity

(as on 31st March 2009)

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 JUSTIFICATION OF THE RESEARCH

Financial Statements are prepared primarily for decision-making. They

play a dominant role in setting the framework of managerial decisions. But the
information in the financial statement is not an end in itself as no meaningful
can be drawn from these statements alone.

The information provided in the financial statement is of immense use

in making decisions through analysis and interpretation of financial
statements. The financial analysis is the process of identifying the financial
strength and weakness of the firm by properly establishing relationship
between the items of the balance sheet and P&L A/C.

There are various methods or techniques used in analyzing financial

statement such as comparative statement, trend analysis, common size
statement, schedule of changes in working capital, fund flow and cash flow
analysis, cost volume profit analysis and “RATIO ANALYSIS”.

Ratio analysis is one of the most powerful tool of financial analysis. It is

a process of establishing and interpreting various ratios that the financial
statements can be analyzed more clearly and decisions made from such
analysis.

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 Just like a DOCTOR examines his patient by recording his body
temperature, blood pressure etc before making his conclusion regarding the
illness and before giving his treatment, a financial analyst analysis the
financial statement with various tools of analysis before commenting upon the
financial health or weaknesses of an enterprise.

The purpose of financial analysis is to diagnose the information

contained in financial statements so as to judge the profitability and financial
soundness of the firm. Financial statement analysis is an attempt to determine
the significance and meaning of financial statement data so that forecast may
be made of the future earning, ability to pay interest and debt maturities and
profitability of a sound dividend policy.

A financial ratio is the relationship between two accounting figures

expressed mathematically ratio provide clues to the financial position of the
concern. These are the pointers and indicators of financial strength, soundness,
position or weakness of an enterprise. One can draw conclusions about the
exact financial position of a concern with the help of ratios.

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 OBJECTIVE OF THE RESEARCH

Objectives are the ends that states specifically how goal can be
achieved. Every study must have an objective for which all the efforts have
been done. Without objective no research can be conducted and no result can
be obtained.
Financial performance engagement is an analysis of a company’s past
and current financial performance and compares such performance to similar
sized companies within its industry providing insight into a company’s
historical growth, profitability, debt capacity and overall liquidity. All such
factors can be important indicators of a company’s ultimate value. I have
analyzed the five-year history of financial statements as well as financial
information relative to industry. We calculate financial ratios (liquidity,
coverage, leverage and operating) for the company, prepare common size
financial statements, and analyze the information on a trended and composite
basis.
On the basis of objective all the research process is followed.
Objectives are the main aspect of every study. The objective of the study gives
direction to go through the research problem. It guides the researcher and
keeps him on track.

I have two objectives regarding my research project. These are shown

below:-
1. Primary objective
2. Secondary objective

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 1. Primary objective:-
1) To analyze the financial statements of the corporation to its
true financial position by the use of ratios
2) To appraise the financial position using the ratio analysis.

2. Secondary objective:-

1) Identify financial strengths and weaknesses and evaluate financial

performance in relation to the industry performance as a whole, and
acquire useful information concerning competitors.
2) Historical financial ratio analysis can be used as an effective
preliminary step in preparing a budget or in making a forecast.
3) Evaluate past performance and set objectives for future performance.
Also provides an ongoing means to evaluate a company’s
performance financially.
4) Evaluate a proposed sale, merger or acquisition. Determine the
financial strengths and weaknesses of the company and ultimately
the transaction.
5) A greater awareness of financial statements and their
interrelationship can lead to improved profitability or cash flow.
6) Interpret post-retirement obligations and funding implications for
future performance.
7) To determine the expense and investments of the company.
8) To inform the management about the financial condition of
Company.
9) To inform the investor, enabling them to take the investment
decision

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 SCOPE OF THE STUDY

1.) It Simplifies financial statements: It can simplify

the comprehension of financial statements. Ratios can tell
the whole story of changes in the financial condition of the
business.
2.) It Facilitates inter-firm comparison: It can provide
data for inter-firm comparison. Ratios can highlight the
factors associated with successful and unsuccessful firm.
They can also reveal strong firms and weak firms,
overvalued and undervalued firms.
3.) It Helps in planning: It can help in planning and
forecasting. Ratios can assist management, in its basic
functions of forecasting. Planning, co-ordination, control and
communications.
4.) It Makes intra-firm comparison possible: Ratios
analysis can also makes possible comparison of the
performance of different divisions of the firm. The ratios can
also be helpful in deciding about their efficiency or otherwise
in the past and likely performance in the future.
5.) It Help in investment decisions: It can help in
investment decisions in the case of investors and lending
decisions in the case of bankers etc.
6.) It Spot Trends in Business: Financial Performance
Analysis through Ratio Analysis can enable the business
owner/manager to spot trends in a business. And by
comparing our own ratios for several successive years,
watching especially for any unfavorable trends that may be
starting.

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7.) It Provide early warning indications: Ratio analysis
may provide the all-important early warning indications that
allow you to solve your business problems before your
business is destroyed by them.

All the above mentioned advices can give benefit for the
company through Financial Performance analysis by the
attention of the company management.

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 Research Methodology

“Research methodology forms an important part of any

research project. It is a way to systematically solve the
research problem . This project has been prepared with
limited access to records and related documents relating to
the financial performance of NTPC.
The financial data has been referred in most of the cases.
The annual report of 2008-09 has been taken into
consideration.

Two considerations for research methodology under

research report are

1.) RESEARCH DESIGN.

2.) SECONDARY DATA.
(1)
RESEARCH DESIGN
Research design was adopted for the “Exploratory Research
Study”. The function of research design is to provide the
collection of relevant evidence with minimum expenditure of
efforts, time & money. The research design used here is
exploratory in nature, very flexible & judgmental in order to
study the products and services provided by the National
Thermal Power Corporation (Dadri). -:

SAMPLING DESIGN

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The sampling design used for the study was “Stratified
Sampling”. The different strata or homogeneous groups
formed were-:

1. Executives
2. Supervisors
SAMPLING UNIT
The sampling unit was “National Thermal Power
Corporation”,Dadri.
SAMPLE SIZE
In total 6 employees of Finance Department Has advised
during the study.

TYPES OF DATA
In the survey data were collected by the -:
(2.)
SECONDARY DATA

Secondary data consists of the information that already

exists somewhere & has been collected for a different
purpose through the statistical process.
My secondary data sources for the research project were
DATA COLLECTION
Secondary data were collected from the following sources-:
(A) Books related to the topic

(B) Company documents

(C) Magazines

(D) Websites

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 STATISTICAL TOOLS USED

Statistical tools used in the project study are-:

1.) TABLES
2.) PIE CHARTS
3.) BAR GRAPHS
4.) LINE GRAPHS
5.) RATIO ANALYSIS
Ratio analysis
Ratio analysis is an important and age-old technique of
financial analysis. A ratio is a comparison of one numbers to
another—mathematically, a simple division problem.
Classification of ratios:
1.) Profitability ratios : A class of financial metrics that
are used to assess a business's ability to generate earnings
as compared to its expenses and other relevant costs
incurred during a specific period of time.

 Gross profit ratio

 Net profit ratio
 Operating ratio
 Expense ratio
 Return on equity capital
 Return on capital employed ratio
 Dividend yield ratio
 Dividend payout ratio
 Earnings per share ratio
 Price earning ratio

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2.) Liquidity ratios: A class of financial metrics that is
used to determine a company's ability to pay off its short-
terms debts obligations. Generally, the higher the value of
the ratio, the larger the margin of safety that the company
possesses to cover short-term debts.

 Current ratio
 Liquid / Acid / Quick ratio

3.) Activity ratios: Accounting ratios that measure a

firm's ability to convert different accounts within their
balance sheets into cash or sales.

 Stock turnover ratio

 Debtor's turnover ratio
 Average collection period
 Creditor's turnover ratio
 Working capital turnover ratio
 Fixed assets turnover ratio

4.) Leverage ratios or long term solvency ratios:

Any ratio used to calculate the financial leverage of a
company to get an idea of the company's methods of
financing or to measure its ability to meet financial
obligations.

 Debt Equity Ratio

 Proprietary or Equity ratio
 Interest coverage ratio
 Capital gearing

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 Chapertization Scheme

I Industry overview
II About NTPC Ltd.
III NTPC compared to rest of India
IV Recognitions & Awards
V Power to Commonwealth Games 2010
VI NTPC’s Objectives
VII SWOT analysis of NTPC
VIII NTPC's future strategy
IX Power supply units in India
X History of NTPC
XI Strategies of NTPC
XII Projects of NTPC
XIII Subsidiaries & Joint Ventures of NTPC
XIV Industry Competitive Forces
XV Demand and supply of power industries in India
XVI Methods of accessing financial performance
i) Ratio analysis of NTPC
ii) Comparison of ratios between NTPC & Reliance
iii) Comparison of ratios between NTPC & TATA Power
iv) Trend analysis of NTPC
XV Bibliography

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 References

 Books :
o T.S Grewal, Analysis of Financial Statements,
Sultan Chand, pp 4.5- 4.65.
o Ashok Banerjee, Financial Accounting A
managerial Emphasis, excl books, pp 364-
3450.
o Prasanna Chandra, Fundamentals of Financial
Management, TMH, chpt. 23-25 .

 Internet Websites:
o http://www.scribd.com/doc/7905183/POWER-
SECTOR-REPORT-IIPM- CHENNAI
o http://www.indiahousing.com/infrastructure-in-
india/power-sector- india.html
o http://www.realinstitutoelcano.org/wps/portal/riel
cano_eng/Content ?WCM_GLOBAL_CONT
EXT=/elcano/Elcano_in/Zonas_in/ARI6-2010
o http://iea.org/country/n_country.asp?
COUNTRY_CODE=IN
o www.ntpc.co.in
o www.accountingformanagers.com
o www.google.com (search engine)

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