1 S.

ARVIND KARTHEE / IBS HYDERABAD / HPPPL

A REPORT ON
WORKING CAPITAL CHANGES

By
S.ARVIND KARTHEE
15BSPHH010628
HINDUSTAN POWER PROJECT PRIVATE LIMITED
2 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

A report submitted in partial fulfillment of the requirements of MBA Program of

IBS Hyderabad

Date of Submission : 10th April 2016

Submitted to: Submitted by:
Dr.Vikas Prasad S. Arvind Karthee
(IBS Hyderabad) 15BSPHH010628
Mr. Sanjay Sharma
General Manager
(Hindustan Power Projects Private Limited.)
3 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

ABSTARCT OF WORK DONE

HPPPL accounting department uses MS-Excel and SAP for the purpose of Assessing Optimum level of
Working Capital Finance and .Financing of Working Capital. MS- Excel is used for the purpose of
updating the bills, invoices for the purpose future purpose which would be required about the Chartered
Accountants for Auditing. These bills would be required by the Creditors, non-other than the banks
AXIS BANK and STATE BANK OF INDIA for keeping in check and not to avoid to any type of
mishap in the future.
In the thermal power plants maximum requirements of fuel is a coal. Coal handling plan (CHP) is the
main and major key system to transfer ton of coal fuel to the boiler plant
the handling of this fuel is a great job. The coal has to size, processed, and handled which should be done
effectively and efficiently. Because of this CHP management. Required the coordinated integration of the
operations, maintenance, engineering support, training, and administrative areas of any process in order
to supply constant flow of fuel to boiler to avoid failure of energy supply to consumers. To fulfill this
need the structure of management be a process-centered model, which is significant, as an International
Standard to adopt as a relevant Standard, or best practice to increase the efficiency, reliability, and safety
of the process.
The various processes involved in accounts payable are invoice verification, vendor master, purchase
returns, credit memo, periodic processing for accounts payable etc. Raw material for manufacturing
various products are bought from different vendors from various parts of the country. Some material is
also bought from COAL INDIA LIMITED. A purchase request is made by the user department, on its
approval, a purchase order is made and the order is placed. When the raw material is received at the
plant, a good received note is prepared and the invoice is sent to the finance department for invoice
verification. Invoice verification is done against the purchase order in the system. All the payments are
done from Ahmedabad plant only. Payment procedure is simplified, as the details of the bank is already
fed in the system. The payment is done through checks only.
The procedure for fixed assets involve purchase, transfer, sale, etc. of fixed assets. Procedure to buy a
fixed asset involves number of steps. First the user department has to fill a form called a CEA (COST
EFFECTIVE ANALYSIS) form physically. An internal order number is given to that asset on the basis
of the CEA form. After the approval of CEA form, a purchase requisition is made in the system,
followed by purchase order. As the fixed asset is received, a goods received note is prepared. The
invoices are sent to finance department, where invoices are booked against the existing purchase order
in the system. A cost center is specified for every fixed asset. The depreciation is charged in that cost
center only. When the invoice is booked in the system the asset is created and an asset code is given to
that asset. Within two months of the asset creation, tagging of that asset should be done. For transfer of
any asset from one department to another or from one plant to another, a transfer form is filled. It is
signed by the transferor and transferee department. After this the cost center is changed in the system by
the finance department. If any fixed asset has to be sold or retired, then the permission of the Managing
Director is required.
4 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

As an Intern I am supposed to update and verify all bills and invoices to ease the Work and reduce the
time effort of the work employees of the Accounts and Finance Departments

SAP
SAP stands for Systems, Applications and Products in data processing. It is a custom built ERP
(Enterprise Resources Planning) software. ERP term is used for a software that controls whole
organizations different departments. It replaces business systems with a series of software modules that
communicate with each other seamlessly, replacing current business processes with best practices.
SAP is a leader when it comes to easy integration among all the departments. All business processes are
executed in one SAP system and sharing common information with everyone. It is useful in day to day
operations, logistics, human resource, finance. It helps to manage 4 M’s efficiently; Money, Machine,
Material and Manufacturing. It provides industry specific solutions for different industries other than its
basic SAP modules. SAP suit contains SAP FI, CO, SD, MM, PP, HR, PA and other modules. Although
it will be client's decision whether they want to buy all modules or some specific modules. SAP comes
with some industry specific solutions as well such as Insurance, Security, etc.

SAP is a German multinational software, built in 1972 by five IBM engineers Hopp, Wellenreuther,
Hector, Tschira and Plattner. It has evolved a long way. The various versions of SAP which have
evolved over the years are listed below.

SAP R/1: The first version of SAP was launched in 1972, known as the “R/1 system”. R stands for real-
time data processing. It is one tier architecture in which three layers Presentation, Application and
Database are installed in one system/server.
SAP R/2: In 1979 second version of SAP R/2 was released, with IBM’s database and a dialogue-
oriented business application. R/2 is 2 tier architecture in which three layers Presentation, Application
and Database are installed in two separate server.
SAP R/3: SAP upgraded R/2 to R/3. SAP R/3 is the client/server version of the software and it is 3 tier
architecture in which three layers Presentation, Application and data base are installed in three
server/system.
5 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

INTRODUCTION
ABOUT THE COMPANY
COMPANY PROFILE

SOLAR POWER

The Clean energy arm of Hindustan Power is the leading India’s player in solar power generation. It has
developed solar farms across the country and internationally too. It is penchant for generating clean
energy while mitigating environment effects has ensured that the company is seen as a pioneer in the
field of developing mid-large size solar farms.

Hindustan Power has caused a major change in the scenario of solar power in India and even
internationally. India's first solar power plant of 5 MW capacity and the then Asia’s first 30 MW
capacity was commissioned by the Clean energy arm of the organization . With cumulative installed
capacity of ~ 500 MW and a vision of commissioning 2 GW by 2017, the clean energy arm of the
company remains the leading solar power developer in the country .

Today, it is a dominant solar power development company in India with a large presence across the
country and strategic international markets like Germany, Italy, US, UK and Japan.

Hydro Power
Hindustan Power has devised a blueprint on the right utilization of water to create electricity and serve solutions to
starting from the general people to businesses and government electricity boards.

Water is a natural and useful source of the many energy resources used to produce electricity. Thus
HPPPL is involved in developing hydro power plant on Chenab River and its tributary at Lahaul and
Spiti in Himachal Pradesh with a combined generation capacity of around 520 MW and one project in
Sikkim of 40 MW.The Hydro Power Plant post completion will meet the severe demand for electricity
in these areas.
6 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

Thermal Power
The thermal arm of Hindustan Power is focused on generating power through coal- fired power stations in India.

Moving ahead through high investments and a definite raw coal supply , the company is all set to install
several high power producing thermal power plant that will positively impact the power deficit in the
country.

The thermal arm is developing projects with a combined generation capacity of about 4000 MW in the
states of Madhya Pradesh & Chhattisgarh. Also the company’s thermal Power project at Anuppur,
Madhya Pradesh (2520 MW) is one of the fastest developing projects and its first unit has been
commissioned in May 2015. The commissioning of second Unit (600 MW) scheduled to be achieved in
early part of 2016.

These thermal power plants are expected to help generate developmental opportunities and address
energy shortage in the region.

Natural resources
India has one of the largest coal reserves in the world which we aim to tap suitably towards
providing fuel security to coal based thermal power generation.

Hindustan Power took its first step into mining sector in 2008 aiming towards building a portfolio
of technically feasible and economically viable coal assets in India which has one of the largest coal
reserves in the world.

The most important point to note is that coal remains the dominant source of primary energy. As the
energy pricing is dependent on the coal linkage, it is very critical for the country to have uninterrupted
access to coal. With its dedicated and experienced team, Hindustan Power is working out the most
efficient way to provide lowest cost fuel supply support to the planned coal based thermal power
generation.

As the mining business grows, the company aims to diversify in to mining value chain from consultancy
in mineral & mining domain to most favored supplier of coal to the internal and external customers.
7 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

The company has made considerable progress in its endeavor to develop a commercial coal block
through a Joint Venture with Chhattisgarh Mineral Development Corporation, an entity of Government
of Chhattisgarh.

OBJECTIVES
Objective 1: Optimum Utilization of Working Capital Finance and its Management

PURPOSE, SCOPE AND LIMITATIONS

Purpose: this study is done to completely understand the processes of Working capital

Scope:
1.Understanding Business requirements and key parameters of Working Capital Elements
2.Assessing Optimum level of Working Capital Finance
3.Financing of Working Capital
Limitations: The Company does not allow interns to work on SAP which limits my access to the
software. Assisting the employees on updating and verifying bills and invoices in MS-Excel is the only
work required to do

METHODOLOGY
–   T h e   d a t a   h a s   b e e n   g a t h e r e d   t h r o u g h   i n t e r a c t i o n s   a n d d i s c u s s i o n s   w i t h   t h e 
e x e c u t i v e s   w o r k i n g   i n   t h e   d i v i s i o n .   S o m e   i m p o r t a n t information has been gathered
through couple of unstructured interviews of  the

– Internet websites of the company and extensive usage of the Search

Engine Google.
8 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

MAIN TEXT
Hindustan Power Projects Private Limited have various processes in maintaining working capital
changes
1. Inventory Control / Stock Control
2. CHP
3. Sales Realisation

1. Inventory Control / Stock Control

WHAT IS INVENTORY MANAGEMENT

Inventory management is usually not the direct operating responsibility of the f i n a n c e
manager, the investment of funds in inventory is a very important aspect.

Efficient systems of inventory management will determine.

What to purchase?

How much to purchase?

From where to purchase?

Where to store? Etc.

The term inventory refers to the stock of the product a company is manufacturing for  sales
and components that make up the product. In other words inventory is composed of assets that will be
showed in future in the normal course of business operations. The various forms in which
inventories exist in a manufacturing company are:

1. Raw materials
2. Work in progress(semi-finished goods)
3. Finished goods

The purpose of inventory management is to keep the stocks in such a way that
neither t h e r e i s o v e r - s t o c k i n g , t h e o v e r - s t o c k i n g w i l l m e a n a r e d u c t i o n o f
l i q u i d i t y o f o t h e r   production processes. Under-stocking will result in stoppage of work. Inventory
optimization is a method of balancing capital investment constraints or objectives and service-level
goals over a large assortment of stock-keeping units (SKUs) while taking demand and supply volatility
into account.
9 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

THE BASIC ELEMENTS 

What follows is a brief definition or description of the main elements of the model. As mentioned
earlier, the purpose of this article is solely to provide an overview of the entire process and identify key
linkages. Nonetheless, this information should provide sufficient background to give a sense of what the
entire process involves.

Equipment bill of materials - a document showing the parent/child relationships of all repairable or
replaceable components, assemblies and subassemblies that make up an asset.

Usage data - historical information based on material issues that reflects the dates, quantities and dollar
values of all storeroom parts issued for maintenance work.

Inventory data - basic part master data (primarily on-hand and dollar value) from the CMMS or other
inventory control system.

Critical spares - key parts and/or components of an asset that, if required but not available, could result
in an equipment or plant shutdown, and significant lost production opportunity.

Obsolete material - any material that can no longer be used because of decommissioning, redesign,
damage, inactivity, deterioration or other causes.

Stocking parameters - lead times, minimum/maximum quantities, reordering methods, lot-sizing data
or other information in the CMMS that controls the quantity and timing of replenishment orders.

Prioritize inventory - listing materials in order of relative importance based on set criteria (e.g. usage,
unit cost, on-hand value, lead time, criticality, etc.); in this model, the recommended method is an ABC
analysis based on usage.

Excess inventory - the quantity and associated dollar value of active, automatically replenished
storeroom inventory that exceeds maximum projected inventory levels based on current ordering
parameters; in simplest terms, it is the level of on-hand inventory above the maximum quantity.

Cycle counting - an inventory verification technique where inventory is counted on a periodic schedule
throughout the entire year rather than all at once in a short period of time as in an annual physical
inventory.

Baseline profile - a snapshot of investment, historical usage and other inventory-related data that
provides a starting point for evaluation of benefits from Continuous Improvement activities

Turnover and inventory goals - targets for future storeroom investment levels and associated turnover
rates based on an assumption of future usage rates

Review monthly results - a periodic process for reviewing the accuracy of forecasts, assessing status of
key activities and analyzing recent results
10 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

Action plans - new or revised short-term and long-term targets and/or activities required to achieve
them.

2. COAL HANDLING PROCESS

The basic layout of Coal Handling Plant is coal is unloaded at various unloading station and
transported by conveyors to crushing and screening plant via transfer house. After crushing
required quantity of coal is transported to bunker via transfer house and remaining coal is
stored in stockyard. The minimum stack level is maintained. This coal is reclaimed as per
requirement. From the bunker the coal flows through coal mills to boiler furnace. The main
aim of CHP to maintain level of coal in bunkers for smooth coal supply to boiler
CHP Process listed below

FEEDING
PROCESS
UNLOADING SCREENING
PROCESS PROCESS

BUNKERING COAL HANDLING PROCESS

PROCESS CRUSHING
PROCESS

RECLAIMING
PROCESS STACKING
PROCESS
11 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

1. Unloading Process
The BOBRN wagons will be discharging the material through the discharge gates provided at the
track, mechanism for opening the pneumatic gates of the wagons and feeders below the track
hopper. The loaded rake will be brought to the track hopper by the main line locomotive and the
same locomotive will stay connected to the rake while the unloading operation is in process and
the rake will be hauled out of the plant. It is not necessary to disconnect the loco from the rake
unlike in the case of wagon tippler system
2. Feeding process
The feeding process involves continuous and control coal flow to meet the requirement The
handling as well as the processing tasks of this process has shaped the character of the coal
handling plant. The use of dozers and mobile equipment are done for feeding purpose. The
efficient and economical storage, movement and control of large tonnage coal handling
installations, coal car unloading, storage, reclaim system depend on the proper application of
feeders. These are extensively used in CHP for conveying coal Various types of feeders are used
for these processes. CHP, are given below|
1. Belt Feeder 2. Apron Feeder 3. Vibrating Feeder

3. Screening Process
There are three basic types of screening process. These are [4] scalping, fines removal and
grading. Sufficiently small particles, at least in two dimensions, fall through the openings, whilst
the oversize particles are retained on the surface of the screen. Screening performance can be
affected by many factors, including particle shape, the material's bulk density, the flow ability of a
material and surface moisture. Most importantly, perhaps, is the particle size distribution of the
feed. For scalping operations at the coarse end of the particle distribution, very high screening
capacities can be achieved since most of the particles are much smaller than the screen opening
and pass through quite easily. Vibrating Screens and Roller Screens are generally used in CHP.
But now days roller screen are used.

4. Crushing Process
There are four basic process to reduce material. These are carried by impact, attrition, shear or
compression. In CHP crushing process is the combination of Impact and Attrition Process. Some
process involves Compression crushing. It is very simple process. The output of this process is
important for coal size.

5. Stacking Process
This process involves in dead storage in the form of piles laid directly in the ground. In case of
road transport and aerial transport coal are unloaded in stack yard and the coal is stacked properly
using dozers. When coal supply by railway is excess it would be stacked through a separate
conveyor. For these purpose stacker or telescopic chutes are used.
12 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

6. Reclaiming Process
The stored coal is required to bunkered in case of emergency or improper coal supply. The
reclaiming process involves the lifting of coal from stack yard by means of dozer or reclaimer like
bucket wheel. The dozer feed this coal in hopper. This process is simple process. This process is
simple. The main object of this process to bunker crush coal or non-crush coal as per requirement
of bunker to support the other process feeding.

7. Bunkering Process
This process involves feeding of bins and maintaining the level of these bins. From the conveyor
belt the coal is discharged into bunker or bins with the help of trippers. The tripper is provided
with wheels, which moves on rails parallel to conveyor on each side It can be set in one position
or made to travel slowly backward or forward between stops; to discharge the quantity of coal at
desired location. Motorized trippers are usually used where continuous and uniform distribution
of coal along the conveyors required or where frequent forward or reverse movement is required.
Trippers having rigid welded steel frame to resist shock and minimize distortion. One way or two
way discharge chutes are provided. The bifurcating chute permits the flow and discharge of coal
to the desired side.

3. Sales Realisation

Realization concept in accounting, also known as revenue recognition principle, refers to the
application of accrual concept towards the recognition of revenue income. Under this principle,
revenue is recognized by the seller when it is earned irrespective of whether cash from the
transaction has been received or not
Explanation
In case of sale of goods, revenue must be recognized when the seller transfers the risks and
rewards associated with the ownership of the goods to the buyer. This is generally deemed to
occur when the goods are actually transferred to the buyer. Where goods are sold on credit
terms, revenue is recognized along with a corresponding receivable which is subsequently
settled upon the receipt of the due amount from the customer. In case of the rendering of
services, revenue is recognized on the basis of stage of completion of the services specified
in the contract. Any receipts from the customer in excess or short of the revenue recognized
in accordance with the stage of completion are accounted for as prepaid income or accrued
income as appropriate.

Importance
Application of the realization principle ensures that the reported performance of an entity, as
evidenced from the income statement, reflects the true extent of revenue earned during a
period rather than the cash inflows generated during a period which can otherwise be gauged
from the cash flow statement. Recognition of revenue on cash basis may not present a
consistent basis for evaluating the performance of a company over several accounting
periods due to the potential volatility in cash flows.
13 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

The changes of working capital is calculated on the following format

Particular Explanation Particular Explanation

S.no Serial no. required to It is charged when excess of raw
maintain data O/L- Over Loading materials is required to be carried
Charges
a list of goods sent or services The value of set of coal purchased
Invoice. provided, with a statement of Coal Value by the company
the sum due for these
Basic Par value of coals per unit
Date Coal Value

Quantity purchased for the Royalty Payment made by one party (the
Invoice Qty. power plant "licensee or franchisee ) to another
that owns a particular asset (the
"licensor or franchisor ") for the
right to ongoing use of that asset.
Royalties are typically agreed upon
as a percentage which is 14% paid
by the company
STC-Qty. Sizing Coal sizing chargeable @ 51%

Charged when the Nat. Min Exploration National Mineral Exploration

U/L – Under requirement of coal is below charged @ 2%
loading par thus chargeable
charges
Dist.Min.Foundation Distribution Mineral Exploration
charged @ 30%

.
14 S.ARVIND KARTHEE / IBS HYDERABAD / HPPPL

Particulars Explanation Particular Explanation

Terminal Tax charged @ 2.50% Entry Tax @1
Tax
Forest Tax Tax charged @ Rs.7 CST Central Sales tax charged @ 2%
MP Sadak Tax charged @ 5% Sub Total
Vikas
Paryavaran Tax charged @ 7.5% Under loading Charges
Upkar Reversal
ED Excise Duty charged 6% Net Amount The value interpreted by the buyer
U/Protest-A
ED-B Excise Duty charged 6% Invoice Value The value interpreted by the seller
Total Total expenses for carriage of Difference The difference in the Net Amount
raw materials and the invoice value

Transportation Charges

Particulars Explanation Particular Explanation

RRNo. Railway Receipt to keep Tare Weight The additional of the coal
records intact which is not used
Railway Receipt The invoce value Net Weight Total weight of the coal to be
used
RR Date Date of transportation Railway Freight Charges of transportation via
Railways
Loading Siding Place where the raw
materials is required to be
picked up
Unloading Siding Place where the raw
materials
Wagon Total number of wagons
required to carry the raw
materials
Gross Weight The total weight of the coal
carried by