A Project on,

“A STUDY ON FINANCIAL ANALYSIS OF TATA POWER

LIMITED”

A Project Submitted to
B.K. Birla College(Autonomous), Kalyan for partial
Completion of the degree of Master in Commerce
Under the Faculty of Commerce
By
CHETAN MOHAN MADAKE
ROLL NO. 10

Under the Guidance of

Assistant Professor: Mr. Bharat Bagul

B.K BIRLA COLLEGE ARTS, SCIENCE & COMMERCE

(AUTONOMOUS)BIRLA COLLEGE ROAD KALYAN (W)-421301

SEM III (2021-22)

1|Page
 A Project on,

“A STUDY ON FINANCIAL ANALYSIS OF TATA POWER

LIMITED”

A Project Submitted to
B.K. Birla College(Autonomous), Kalyan for partial
Completion of the degree of Master in Commerce
Under the Faculty of Commerce
By
CHETAN MOHAN MADAKE
ROLL NO. 10

Under the Guidance of

Assistant Professor: Mr. Bharat Bagul

B.K BIRLA COLLEGE ARTS, SCIENCE & COMMERCE

(AUTONOMOUS)BIRLA COLLEGE ROAD KALYAN (W)-421301

SEM III (2021-22)

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 INDEX

Chapter Name of the chapter Page No.

No.
1. Introduction

1.1 Introduction of Financial 10

1.2 Types of Financial Statement 11
1.3 Introduction of Financial Analysis 12
1.4 Types of Financial Analysis 13
1.5 Method of Financial Analysis 15
1.6 Limitations of Financial Statement Analysis 18
1.7 User of Financial Statement Analysis 19
1.8 Introduction of Ratio Analysis 21
1.9 Types of Ratio Analysis 23
1.10 Classification of Ratios 23
1.11 Introduction of Tata Power Limited. 31

2. Research Methodology

2.1 Introduction 37
2.2 Data Collection 38
2.3 Sample Size 39
2.4 Objectives of the Study 39
2.5 Hypothesis 40
2.6 Limitation of the Study 40
2.7 Significance 41
2.8 Scope of the study 41
2.9 Tools and Techniques 41

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3. Review of Literature

3.1 Introduction of Review of Literature 43

4. Data Analysis and Interpretation

4.1 Balance sheet from 2011-20 51
4.2 Statement of profit & Loss from 2011 -2020 56
4.3 Data Analysis 59
4.4 Ratio Analysis 60
4.5 Ratio Analysis & Interpretations 60

5. Conclusion and Suggestion

5.1 Findings 81
5.2 Conclusion 82
5.3 Suggestion 83
5.4 Hypothesis Testing 84
5.5 Bibliography 85

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 B.K. BIRLA COLLEGE OF ARTS, SCIENCE AND COMMERCE
(AUTONOMOUS),
BIRLA COLLEGE ROAD KALYAN(W)-421301

Certificate
This is to certify that Mr. CHETAN MOHAN MADAKE ROLL NO.10 has

worked and duly completed her/his Project Work forthe degree of Master in Commerce under

the Faculty of Commerce in the subject of “COMMERCE” and her/his project is entitled,

“A STUDY ON FINANCIAL ANALYSIS OF TATA POWER LIMITED ”

under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is her/ his own work and facts reported by her/his personal findings and investigations.

Name and Signature of Guiding Teacher

Assistant Prof. Bharat Bagul

Date of submission:

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 B.K. BIRLA COLLEGE OF ARTS, SCIENCE AND COMMERCE
(AUTONOMOUS),
BIRLA COLLEGE ROAD KALYAN(W)-421301

Declaration by Learner

I, the undersigned Mr. CHETAN MOHAN MADAKE declare that the work

embodied in this project work titled “ COMMERCE”, forms my own contribution to

the research work carried out under the guidance of Assistant Prof. Bharat Bagul
is a result of my own research work and has not been previously submitted to any other
University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented
in accordance with academic rules and ethical conduct.

Name and Signature of the learner

CHETAN MOHAN MADAKE

Certified by

Name and signature of the Guiding Teacher

Mr. Bharat Bagul

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 Acknowledgment

To list who all have helped me is difficult because they are so numerous and the depthis so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the B.K. Birla collage (AUTONOMOUS) University of
Mumbai for giving me chance todo this project.

I would like to thank my Principal, Dr. Avinash Patil for providing the necessary
facilitiesrequired for completion of this project.

I take this opportunity to thank our Coordinator Mr. BipinChandra Wadekar,

for her moralsupport and guidance.

I would also like to express my sincere gratitude towards my project guide

Assistant Prof. Bharat Bagul whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in
the completion of the project especially my Parents and Peers who supported me throughout
my project.

Mr. Chetan Mohan Madake

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 INDEX OF TABLE

Table No. Title Page No.

1.1 Generation Capacity of TPC 30
4.1 Balance Sheet of TATA POWER 50
LIMITED from 2011 to 2020
4.2 Statement of Profit and loss of 55
TATA POWER LIMITED from
2011 to 2020
4.3 Gross Profit Ratio 59
4.4 Net Profit Ratio 61
4.5 Operating Profit Ratio 62
4.6 Total Asset Turnover 63
4.7 Fixed Asset Turnover 65
4.8 Total Debt to Asset Ratio 66
4.9 Total Debt to Equity Ratio 67
4.10 Long term Debt to Equity Ratio 68
4.11 Equity Multiplier 70
4.12 Return on Asset 71
4.13 Return on Equity 73
4.14 Current Ratio 74
4.15 Quick Ratio 76
4.16 Cash Ratio 77
4.17 Net Working Capital Ratio 78

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 INDEX OF GRAHAS

Graph Title Page No.

No.
4.1 Gross Profit Ratio 60

4.2 Net Profit Ratio 61

4.3 Operating Profit Ratio 62

4.4 Total Asset Turnover 63

4.5 Fixed Asset Turnover 65

4.6 Total Debt to Asset Ratio 66

4.7 Total Debt to Equity Ratio 67

4.8 Long term Debt to Total Asset Ratio 69

4.9 Equity Multiplier 70

4.10 Return on Asset 71

4.11 Return on Equity 73

4.12 Current Ratio 74

4.13 Quick Ratio 76

4.14 Cash Ratio 77

4.15 Net Working Capital Ratio 78

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 FINANCIAL ANALYSIS OF TATA POWER LIMITED

CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION OF FINANCIAL STATEMENTS:

Financial statements are reports prepared by a company’s management to present the

financial performance and position at a point in time. Financial accounting and reporting
places such a high emphasis on the accuracy, reliability, and relevance of the information
on these financial statements as financial statements are the main source of financial
information for decision making. In other words, financial statements are written formal
records that convey the financial activities and conditions of a business or entity. Financial
statements should be clear and concise so that it should be understandable for both the
entity and for readers.

It consists of four major components for businesses usually include Income Statements,
Balance sheets, Statement of Retained Earnings, and Cash flows. It may also require
additional detailed disclosures depending on the relevant accounting framework.

These statements are prepared to give outsiders of the company that is investors and
creditors, more information about the company’s financial positions. These statement sare
often audited by governments’ agencies, accountants, firms, etc. to ensure accuracy, and
for tax, financing or investing purposes.

Financial statements record financial data, which must be evaluated through financial
statement analysis to become more useful to investors, shareholders, managers, and other
interested parties. These statements allow analysts to measure liquidity, profitability,
company-wide efficiency, and cash flow.

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1.2 TYPES OF FINANCIAL STATEMENT:

There are three main types of financial statements:-

1. Balance sheet
2. Income statement
3. Cash flow statement

BALANCE SHEET:

The balance sheet provides an overview of assets, liabilities, and stockholders’ equity as a
snapshot in time. The date at the top of the balance sheet tells you when the snapshot was
taken, which is generally the end of the financial year. The balance sheet equation,
otherwise known as the accounting equation, can be expressed as Assets= Liabilities+
Stockholders’ Equity. The balance sheet identifies how assets are funded, either with
liabilities, such as debt, or stockholders’ equity, such as retained earnings and additional
paid in capital. Assets are listed on the balance sheet in order of liquidity. Liabilities are
listed in the order in which they will be paid. Short term or current liabilities are expected
to be paid within the year, while long-term or noncurrent liabilities are debts expected to
be paid in over one year. In simple terms, Balance sheet is a picture of the company on
that date. Investors and creditors can use the balance sheet to analyze how companies are
funding capital assets and operations as well as current investor information.

INCOME STATEMENT:

Also known as profit or loss report or statement of comprehensive income, Or statement

of revenue and expenses report. A profit and loss statement provides information on the
operation of the enterprise. These include sales and the various expenses incurred during
the stated period. Unlike the balance sheet, the income statement covers a range of time,
which is a year for annual financial statements and a quarter for quarterly financial
statements. The income statement provides an overview of revenues, expenses, net income
and earnings per share. It usually provides two to three years of data for comparison.

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Most companies issue annual income statement,but quarterly and semiannual income

statements are also common. Users can analyses the income statement to see if companies
are operating efficiently and producing enough profit to fund their current operations and
growth. The statement of owner’s capital summarizes all owner investments and
withdrawals from the company duringa period. It also reports the current income or loss
recorded in retained earning

CASHFLOW STATEME:

The cash flow statement provides an overview of company’s cash flows from operating
activities, investing activities, and financing activities. The cash flow statement merges the
balance sheet and the income statement. Due to accounting convention, net income can
fall out of alignment with cash flow. The cash flow statement reconciles the income
statement with the balance sheet in three majorbusiness activities. These activities include
operating, investing and financing activities. Operating activities include cash flows made
from regular business operations. Investing activities include cash flows from the
acquisition and dispositionof assets, such as real estate and equipment. Financing activities
include cash flows from debt and equity investment capital.

1.3 INTRODUTION OF FINANCIAL ANALYSIS

FINANCIAL STATEMENT ANALYSIS-

Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of changes in equity. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and
future prospects of an organization. Financial statement analysis is an evaluativemethod
of determining the past, current, and projected performance of a company. Several
techniques are commonly used as part of financial statement analysis including horizontal
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analysis, which compares two or more years of financial data in both dollar and percentage

form; vertical analysis, in which each category of accounts on the balance sheet is shown
as a percentage of the total account; and ratio analysis, which calculates statistical
relationships between data.

Financial analysis is the process of examining a company’s performance in the context

of its industry and economic environment in order to arrive at a decision or
recommendation. Often, the decisions and recommendations addressed by financial
analysts pertain to providing capital to companies specifically, whether to invest inthe
company’s debt or equity securities and at what price. An investor in debt securities is
concerned about the company’s ability to pay interest and to repay the principal lent. An
investor in equity securities is an owner with a residual interest in the company and is
concerned about the company’s ability to pay dividends and the likelihood that its share
price will increase.
In other words financial statement analysis is a study of relationship among various factors
in a business as disclosed by financial statements of a firm. The analysis show the trend of
the factors and will help in evaluation of component parts. Analysis of financial statement
is to obtain better insight into a firm’s position and performance.

1.4 TYPES OF FINANCIAL ANALYSIS:

• EXTERNANL ANAYSIS:

This analysis is done by outsiders who do not have access to the detailed internal
accounting records of the business firm. These outsiders include investors,
potential investors, creditors, potential creditors, government agencies, credit
agencies, and the general public.

For financial analysis, these external parties to the firm depend almost entirely on
the published financial statements. External analysis, thus serves only a
limited purpose. However, the recent changes in the government regulations
requiring business firms to make available more detailed information to the public
through audited published accounts have considerably improved the position of the
external analysis.

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• INERTAN ANALYSIS:

The analysis conducted by persons who have access to the internal accounting
records of a business firm is known as internal analysis. Such an analysis can,
therefore, be performed by executives and employees of the organization as well
as government agencies which have statutory powers vested in them. Financial
analysis for managerial purposes is the internal type of analysis that can be effected
depending upon the purpose to be achieved.

• HORIZONTAL ANALYSIS:

Horizontal analysis refers to the comparison of financial data of a company for

several years. The figures for this type of analysis are presented horizontally over
a number of columns. The figures of the various years are compared with standard
or base year. A base year is a year chosen as beginning point.

This type of analysis is also called ‘Dynamic Analysis’ as it is based on the data
from year to year rather than on data of any one year. The horizontal analysis makes
it possible to focus attention on items that have changed significantly during the
period under review. Comparison of an item over several periods with a base year
may show a trend developing. Comparative statements and trend percentages are
two tools employed in horizontal analysis.

• VERTICAL ANALYSIS:

Vertical analysis refers to the study of relationship of the various items in the
financial statements of one accounting period. In this types of analysis the figures
from financial statement of a year are compared with a base selected from the same
year’s statement.
It is also known as ‘Static Analysis’. Common-size financial statements and
financial ratios are the two tools employed in vertical analysis. Since vertical
analysis considers data for one time period only, it is not very conducive to a
proper analysis of financial statements. However, it may be used along with
horizontal analysis to make it more effective and meaningful.

• LONG-TERM:

Long-term analysis involves the study of firm’s ability to meet the interest costs
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 and repayment schedules of its long-term obligations. The solvency, stability and
profitability are measured under this type of analysis.

• SHORT-TERM:

Short-term analysis measures the liquidity position of a firm, i. e. the short - term
paying capacity of a firm or the firm’s ability to meet its current obligations.

1.5 METHODS OF FINANCIAL ANANLYSIS:

• Common size statements.

• Comparative financial statements.
• Trend ratios.
• Funds flow analysis.
• Cash flow analysis.
• Break-even and cost-volume profit analysis.
• Ratio analysis.

➢ COMMON SIZE STATEMENTS: The figures shown in financial statements are

converted to percentages so as to establish each and every element of the financial
statement. COMMON SIZE STATEMENTS ARE DIVIDED AS UNDER: o
COMMON SIZE INCOME STATEMENT: In common size income statement, the
sales figure is taken as 100% and all other figures are compared as percentage to
sales. This helps in getting the idea of efficiency of the firm in generating revenue
which leads to profitability. Through this it is easy to analyses the different
components of cost as proportion to sales.

• COMMON SIZE BALANCE SHEET: The total of assets side orliabilities side is taken
as 100%. And all other figures on the both sides are compared with this. This statement
reveals the proportion of fixed assets to current assets, composition of fixed assets and
current assets, proportion of long-term funds to current liabilities and provisions,
composition of current liabilities and so on. It is also helpful for inter- firm comparison.

➢ COMPARATIVE FINANCIAL STATEMENTS: These are statements of

financial position of a business are designed to compare a particular financial
statement with prior period statements or with the same financial report generated

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 by another company. Analyst and business managers use the income statement,
balance sheet, and cash flow statement for comparative purposes. Comparative
financial statements reveal:

o Absolute date (money values or rupee amounts).

o Increase or decrease in absolute date in terms of money values.
o Increase or decrease in absolute date in terms of percentages.
o Comparison in terms of ratios.
o Percentage of totals.

• COMPARATIVE INCOME STATEMENT: this shows the absolute figures of two

or more periods and absolute change from one period to another. User can easily
understand as they are presented side by side.
• COMPARATIVE BALANCE SHEET: balance sheets as on two or more different
dates are used for comparing the assets, liabilities, and the net worth of the
company.

➢ TREND RATIOS: It is a calculation based on statistical technique called ‘index

numbers’. It is calculated for more than one year. In trend ratios items that are
calculated can be related. Trend analysis should be made for at least four
consecutive years.
The financial statements of one year should be selected as base statement and
financial items of it should be assigned with value as 100.
➢ FUND FLOW ANALYSIS: Funds flow analysis means analyzing the movement of
funds within a company by comparing successive balance sheets
to note where additional funds have come from and where they have been deployed
in the business. Funds flow statement is a statement prepared to analyses the
reasons for changes in the financial position of a company between 2 balance
sheets. It shows the inflow and outflow of funds i.e. sources and applications of
funds for a particular period. In other words, a funds flow statement is prepared to
explain the changes in the working capital position ofa company. There are 2 types
of inflows:

• Long term funds raised by issue of shares, debentures or sale of fixed assets
• Funds generated from operations.

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➢ CASH FLOW ANALYSIS: Cash Flow Analysis is the evaluation of a company’s
cash inflows and outflows from operations, financing activities, and investing
activities. In other words, this is an examination of how the company is generating its
money, where it is coming from, and what it means about the value of the overall
company. Cash Flow Analysis is a technique used by investors and businesses to
determine the value of overall companies as well as the individual branches of large
companies by looking at how much excess cash they produce. They typically use the
Statement of Cash Flows, a document that shows the actual cash that came in and out
of the business during a certain period from investing activities, financing activities,
and operational activities, as well as a few other reports.

➢ BREAK-EVEN AND COST-VOLUME PROFIT ANALYSIS: Cost-volume-

profit (CVP) analysis is used to determine how changes in costs and volume affect
a company's operating income and net income. In performing this analysis, there
are several assumptions made. CVP analysis is most often used to determine a
company's break-even point. This is the level of sales where the company will not
incur a loss, yet not make a profit. Break-even analysis, a subset of cost- volume-
profit (CVP) analysis, is used by management to help understand the relationships
between cost, sales volume and profit. This technique focuses on how selling
prices, sales volume, variable costs, fixed costs and the mix of product sold affects
profit.

➢ RATIO ANALYSIS: Ratio analysis compares relationships between financial

statement accounts. This means that one income statement or balance sheet account is
being compared to another. These relationships between financial statement accounts
will not only give a manager or investor an idea of the how healthy the business is on
a whole, it will also give them keen insights into business operations. Ratio analysis
is used to evaluate various aspects of a company’s operating and financial
performance such as its efficiency, liquidity, profitability and solvency. When
investors and analysts talk about fundamental or quantitative analysis, they are usually
referring to ratio analysis. Ratio analysis involves evaluating the performance and
financialhealth of a company by using data from the current and historical financial
statements. The data retrieved from the statements is used to - compare a company's
performance over time to assess whether the company is improving or deteriorating;
compare a company's financial standing with the industry average; or compare a
company to one or more other companies operating in its sector to see how the
company is doing in the market. In simple terms ratio analysis is the most important

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 technique of financial analysis in which quantities are converted into ratios for
meaningful comparisons, with past ratios and ratios of other firms in the same or
different industries. Ratio analysis determines trends and exposes strengths or
weaknesses of a firm.

1.6 LIMITATION OF FINANCIAL STATEMENT ANALYSIS

The limitations of financial statements are those factors that a user should be aware of
before relying on them to an excessive extent. Knowledge of these factors could resultin a
reduction of invested funds in a business, or actions taken to investigate further. The
following are all limitations of financial statements 11 Dependence on historical costs.
Transactions are initially recorded at their cost. This is a concern when reviewing the
balance sheet, where the values of assets and liabilities may changeover time. Some
items, such as marketable securities, are altered to match changes in their market values,
but other items, such as fixed assets, do not change. Thus, the balance sheet could be
misleading if a large part of the amount presented is based on historical costs. Inflationary
effects. If the inflation rate is relatively high, the amounts associated with assets and
liabilities in the balance sheet will appear inordinately low, since they are not being
adjusted for inflation. This mostly applies to long-term assets. Intangible assets not
recorded. Many intangible assets are not recorded as assets. Instead, any expenditures
made to create an intangible asset are immediately charged to expense. This policy can
drastically underestimate the value of a business, especially one that has spent a large
amount to build up a brand image or to develop new products. It is a particular problem
for start-up companies that have created intellectual property, but which have so far
generated minimal sales. Based on specific time period. A user of financial statements
can gain an incorrect view of the financial results or cash flows of a business by only
looking at one reporting period. Any one period may vary from the normal operating
results of a business, perhaps dueto a sudden spike in sales or seasonality effects. It is
better to view a large number of consecutive financial statements to gain a better view of
ongoing results. Not always comparable across companies. If a user wants to compare the
results of different companies, their financial statements are not always comparable,
because the entities use different accounting practices. These issues can be located by
examining the disclosures that accompany the financial statements. Subject to fraud. The
management team of a company may deliberately skew the results presented. This
situation can arise when there is undue pressure to report excellent results, such as when a
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bonus plan calls for payouts only if the reported sales level increases. One might suspect
the presence of this issue when the reported results spike to a level exceeding the industry
norm. No discussion of non-financial issues. The financial statements do not address

nonfinancial issues, such as the environmental attentiveness of a company's operations, or

how well it works with the local community. A business reporting excellent financial
results might be a failure in these other areas. Not verified. If the financial statements have
not been audited, this means that no one has examined the accounting policies, practices,
and controls of the issuer to ensure that it has created accurate financial statements. An
audit opinion that accompanies thefinancial statements is evidence of such a review. No
predictive value. The information in a set of financial statements provides information
about either historical results or the financial status of a business as of a specific date. The
statements do not necessarily provide any value in predicting what will happen in the
future. For example, a business could report excellent results in one month, and no sales
at all in the next month, because a contract on which it was relying has ended. Financial
statements are normally quite useful documents, but it can pay to be aware of the
preceding issues before relying on them too much.

1.7 USERS OF FINANCIAL STATEMENT ANALYSIS

There are different users of financial statement analysis. These can be classified into
internal and external users. Internal users refer to the management of the company who
analyzes financial statements in order to make decisions related to the operations of the
company. On the other hand, external users do not necessarily belong to the company but
still hold some sort of financial interest. These include owners, investors, creditors,
government, employees, customers, and the general public. These users are elaborated on
below

1. Management- The managers of the company use their financial statement analysis
to make intelligent decisions about their performance. For instance, they may gauge
cost per distribution channel, or how much cash they have left, from their
accounting reports and make decisions from these analysis results.
2. Owners- Small business owners need financial information from their operations
to determine whether the business is profitable. It helps in making decisions like
whether to continue operating the business, whether to improve business strategies
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 or whether to give up on the business altogether.
3. Investors- People who have purchased stock or shares in a company need financial
information to analyze the way the company is performing. They use financial
statement analysis to determine what to do with their investments in the company.

4. So depending on how the company is doing, they will eitherhold onto their
stock, sell it or buy more.
5. Creditors- Creditors are interested in knowing if a company will be able to honour
its payments as they become due. They use cash flow analysis of the company’s
accounting records to measure the company’s liquidity, or its ability to make short-
term payments.

6. Government- Governing and regulating bodies of the state look at financial

statement analysis to determine how the economy is performing in general so they
can plan their financial and industrial policies. Tax authorities also analyze a
company’s statements to calculate the tax burden that the company has to pay.
7. Employees- Employees need to know if their employment is secure and if
there is a possibility of a pay raise. They want to be abreast of their company’s
profitability and stability. Employees may also be interested in knowing the
company’s financial position to see whether there may be plans for expansion and
hence, career prospects for them.
8. Customers- Customers need to know about the ability of the company to service
its clients into the future. The need to know about the company’s stability of
operations is heightened if the customer (i.e. a distributor or procurer of specialized
products) is dependent wholly on the company for its supplies.
9. General Public- Anyone in the general public, like students, analysts and
researchers, may be interested in using a company’s financial statement analysis.
They may wish to evaluate the effects of the firm on the environment, or the
economy or even the local community. For instance, if the company is running
corporate social responsibility programs for improving the community,the public
may want to be aware of the future operations of the company.

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1.8 INTRODUCTIONS OF RATIO ANALYSIS

Introduction:
To evaluate the financial condition and performance of a firm, the financial analyst yields
certain yardstick frequently used as a ratio, or index, relating two pieces of financial data
to each other. Analysis and interpretation of various ratios should give experienced, skilled
analyst a better understanding of the financial conditions and performance of the firm than
they would obtain from analysis of financial data alone.
What is Ratio?

Ratio analysis is a powerful tool of financial analysis.

A Ratio is defined as - The indicated quotient of two mathematical expressions and as the
relationship between two or more things In financial analysis a ratio is used as benchmark
for evaluating the financial position and performance of a firm. Ratios help to
summarize large quantities of financial data and to make qualitative judgments about the
firm‘s financial performance.
The financial statements are prepared and presented annually are of little use for guidance
of prospective investors, creditors and even management. If relationships between various
related items in the financial statement are established, they can provide useful clues to
gauge accurately the financial health and ability of business to make profit. This
relationship between two related items of financial statement is known as – “Ratio”.
Ratio can be expressed in three different ways such as:
• Percentage- for example, the Return on Investment is 30%.
• Rates- for example, Price Earning Ratio is 5 times.
• Proportion- for example, Debt-Equity Ratio is 1:2.
Standards of comparison:
The ratio analysis involves comparison for a useful interpretation of the financial
statement. A single ratio itself does not indicate favorable condition. It should be compared
with some standards. The standards may consist of:
• Past ratio: Ratios calculated from the past financial statement of the same firm
• Competitors‟ ratio: Ratio of some selected firms especially the most
successful competitor, at the same point in time.
• Industry ratios: Ratios of the industry to which the firm belongs.
• Projected ratios: Ratios developed using the projected financial statement of the
same firm.

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TYPES OF RATIO ANALYSIS:
The ratio analysis involves comparison for useful interpretations of the financialstatements
a single ratio in itself does not indicate favorable or unfavorable condition. It should be
compared with some standard. Standards of comparison may consist of:
• Time Series Analysis:
The easiest way to evaluate the performance of a firm is to compare its current
ratios with the past ratios. Such analysis is known as the time series (or trend)
analysis. It gives an indication of the direction of change and reflects whether the
firm‘s financial performance has improved, deteriorated or remained constant over
time. The analyst should not simply determine change, but more importantly, he
should understand why ratios have changed. The change, for example, may be
affected by changes in the accounting policies without a material change in the
firm‘s performance.

• Pro-forma Analysis:
Sometimes future ratios are used as the standard of comparison. Future ratios can
be developed from the projected financial statements. The comparison of current
or past 158 ratios with future ratios shows the firm‘s relative strengths and
weaknesses in the past and future. If the future ratios indicate weak financial
position, corrective actions should be initiated

• Cross-Sectional Analysis:
Another way of comparison is to compare ratios of one firm with someselected
firms in the same industry at the same point in time. This kind of comparison is
known as the cross-sectional analysis. In most cases, it is more useful to compare
the firm‘s ratio with ratio of few carefully selected competitors, who have similar
operations. This kind of a comparison indicates the relative financial position and
performance of the firm. A firm can easily resort to such a comparison, as it is not
difficult to get the published financial statements of the similar firms.

• Industry Analysis:
To determine the financial condition and performance of a firm, its ratios may be
compared with average ratios of the industry analysis, helps to ascertainthe
financial standing and capability of the some point of time to determine the
position of company in the industry.

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1.9 TYPES OF RATIO:

Several ratios, calculate from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated. The ratios can be classified for
the purpose of exposition. Into four broad groups, viz,

• Liquidity Ratio: Measure the firms ability to meet current obligations;

• Leverage ratios: Show the proportions of debt and equity in financing the
• firm‘s acts;
• Profitability Ratio: Measure overall performance and effectiveness of the firm;
• Activity Ratios; Reflect the firm‘s efficiency in utilizing its assets

The present study is based on the profitability ratios which would give a clear idea how
ratios are interrelated with the designing of the firm‘s impact of the industrial policy.
However, the other ratios also directly or indirectly affect to the financial performance of
the companies.
Accounting ratios are relationship expressed in mathematical terms between figures which
are connected with each other in some manner. Obviously, no purpose will be served by
comparing two sets of figures which are not at all connected with eachother. Moreover,
absolute figure are also unfit for comparison.

1.10 CLASSIFICATIONS OF RATIOS:

Ratio can be classified into different categories depending upon the basis of classification.
The traditional classification has been on the basis of the financial statement to which the
determinants of a ratio belong. On this basis the ratios could beclassified as:
• Profitability ratios,
• Turnover ratio, and
• Financial ratio.

Profitability ratios:
Profitability is an indication of the efficiency with which the operations of the business
23 | P a g e
are carried on. Poor operational performance may indicate poor sales and hence poor
profits. A lower profitability may arise due to the lack of control over the expenses.
Bankers, financial institutions and other creditors look at the profitability
ratios as an indicator whether or not the firm earns sub stability more than it pays interest
for the use of borrowed funds and whether the ultimate repayment of their debts appears
reasonably certain. Owners are interested to know the profitability as it indicates the return
which they can get on their investments.
Profit is the difference between revenues and expenses over a period of time. Profit is the
ultimate output of a company and it will have no future if it fails to makesufficient profits.
Therefore, the financial manager should continuously evaluate the efficiency of the
company in terms of profit. The Profitability Ratios are calculated to measure the operating
efficiency of the company.
Generally, two major types of profitability ratios calculated
• Profitability in relation to sales
• Profitability in relation to the investment
The profit is commonly measured by Profit after Tax (PAT) which is the result of the
impact of all factors on the firm‘s earnings. Taxes are not controllable by management. To
separate the influence of taxes Profit before Tax (PBT) may be computed. If the firm‘s
profit has to be examined from the point of view of all the investors the appropriate measure
of profit is operating profit. Operating profit is Earnings before Interest and Tax (EBIT).
This measure of earnings shows earnings arising directly from the commercial operations
of the business without the effect of financing.
For the Analysis of performance of Tata Power Limited the following ratios are used:
1. Current ratio
2. Quick ratio
3. Cash ratio
4. Proprietary ratio
5. Net profit ratio
6. Expenses ratio
7. Debt equity ratio
8. Gross ratio
9. Current debt to net worth
10. Stock Turnover Ratio
11. Working Capital Turnover Ratio
12. Inventory to Working Capital Ratio

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 13. Sales to Fixed Assets Ratio
14. Total Assets Turnover Ratio
15. Fixed Assets to Long term Funds Ratio

Current ratio-
Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes
cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses
are also included in current assets as they represent the payments that will not made by

the firm in future. All obligations maturing within a year are included in current liabilities.
These include creditors, bills payable, accrued expenses, short-term bank loan, income-tax
liability in the current year. The current ratio is a measure of the firm's short-term solvency.
It indicated the availability of current assets in rupees for everyone rupee of current
liability. A current ratio of 2:1 is considered satisfactory. The higher the current ratio, the
greater the margin of safety; the larger the amount of current assets in relation to current
liabilities, the more the firm's ability to meet its obligations. It is a cured -and-quick measure
of the firm's liquidity.
Current ratio is calculated by dividing current assets and current liabilities
Current Assets
Current Ratio =
Current Liabilities

Quick ratio –

Quick Ratio establishes a relationship between quick or liquid assets and current liabilities.
An asset is liquid if it can be converted into cash immediately or reasonably soon without
a loss of value. Cash is the most liquid asset, other assets that are considered to be relatively
liquid asset and included in quick assets are debtors and bills receivables and marketable
securities (temporary quoted investments)
Inventories are converted to be liquid. Inventories normally require some time for realizing
into cash; their value also tends to fluctuate. The quick ratio is found out by dividing quick
assets by current liabilities.

Current Assets - Inventories

QUICK RATIO = -------------------------------------------
Current liabilities

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Generally, a quick ratio of 1:1 is considered to represent a satisfactory currentfinancial
condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it
should be used cautiously. Accompany with a high value of quick ratiocan suffer from
the shortage of funds if it has slow- paying, doubtful and long duration outstanding
debtors. A low quick ratio may really be prospering and paying its current obligation in
time.

Cash ratio –

Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its

equivalent current liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst stays look at cash ratio.
Trade investment is marketable securities of equivalent of cash. If the companycarries a
small amount of cash, there is nothing to be worried about the lack of cash ifthe
company has reserves borrowing power. Cash Ratio is perhaps the most stringent
Measure of liquidity. Indeed, one can argue that it is overly stringent. Lack ofimmediate
cash may not matter if the firm stretch its payments or borrow money at short notice.

Cash & Bank Balance

Cash Ratio = --------------------------------------

Current liabilities

Proprietary ratio –

The total shareholder's fund is compared with the total tangible assets of the company.This
ratio indicates the general financial strength of concern. It is a test of the soundness of
financial structure of the concern. The ratio is of great significance to creditors since it
enables them to find out the proportion of shareholders funds in the total investment of
business.

Shareholders Fund

Proprietary Ratio = ----------------------------------------- x 100

Total Assets

Net profit ratio –

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Net profit is obtained when operating expenses, interest and taxes are subtracted from the
gross profit. Net profit margin ratio established a relationship between net profit and sales
and indicates management's efficiency in manufacturing, administering and selling
products.
This ratio shows the earning left for shareholders as a percentage of net sales. It measures
overall efficiency of production, administration, selling, financing. Pricing and tax
management. Jointly considered, the gross and net profit margin ratios provide a
valuable understanding of the cost and profit structure of the firm and enable the
analyst to identify the sources of business efficiency / inefficiency.

➢ Net profit ratio

Net profit before tax

• Net profit before tax = ---------------------------------------x 100

Net sales

Net profit after tax

• Net profit before tax = ------------------------------------x 100

Net sales
Debt Equity Ratio-

Debt-equity ratio is the ratio which expresses the relationship between debt and equity.
Debt, generally, refers to long-term liabilities.
Debt / Shareholder’s Equity
Equity, for the purpose of this ratio, means owners, or proprietors, funds. Owners,
fund comprises capital, all accumulated reserves and profits. Of course, if there are losses
and fictitious assets, they should be adjusted in, i.e., deducted from, the owners,funds. The
standard or ideal debt equity ratio is 2:1. As such, if the debt is less than two times the
equity, the logical conclusion is that the financial structure of the concern is sound, and so,
the stake or risk of the long-term creditors is relatively less. On the other hand, if the debt
is more than two times the equity, the conclusion is that the financial structure of the
undertaking is weak, and so, the stake of the long-term creditors is relatively more.

Operating Expenses Ratio-

It explains the changes in the profit margin ratio. A higher operating expenses ratio is

27 | P a g e
unfavorable since it will leave a small amount of operating income to meet interest,
dividends. Operating expenses ratio is a yardstick of operating efficiency, but itshould be
used cautiously. It is affected by a number of factors such as external uncontrollable
factors, internal factors. This ratio is computed by dividing operating expenses by sales.
Operating expenses equal cost of goods sold plus selling expenses and general
administrative expenses by sales.

Expenses
Operating Expenses ratio = -----------------------------x 100
Net sales

Gross profit Ratio-

Gross profit ratio (gross profit ratio) is a profitability ratio that shows the relationship
between gross profit and total net sales revenue. It is a popular tool to evaluate the
operational performance of the business. The ratio is computed by dividing the gross profit
figure by net sales.

Gross profit
Gross profit ratio = ------------------------------
Net sales

Stock Turnover Ratio-

This is also called as Inventory Turnover or Stock velocity. This ratio is calculated to
consider the adequacy of the quantum of capital and its justification for investing in stock
or inventory. Inventory Turnover is the number of times obtained by dividing cost of sales
by average stock. The logic behind establishing the relationship between Average Stock
and cost of sales seems to be that stock should be compared with cost of sales because the
stock is at cost price.

Stock Turnover Ratio = Cost of Goods Sold/Average Stock

28 | P a g e
Stock turnover is used to measure the efficiency of sales. If a concern is able to effect
higher volume of sales with lower quantum of stock, then it can be concluded that
marketing efficiency of the concern is very sound and high. Concerns having too high
stock turnover ratio may be operating with low margin of profit. However, too high stock
turnover may be a symptom of over-trading.
If the stock turnover is low or of smaller magnitude then it may be assumed to
indicate (i) that there is slump in the business, (ii) that there is over investment in stock,
(iii) that the closing stock has been increased just to take the advantage of expected rise in
selling price or to meet the estimated rise in future sales, (iv) that stock has been valued
incorrectly or improperly, (v) that items of stock have been included in an unbalanced
manner or in disproportionate manner.

Current Debt to Net Worth-

The debt to net worth ratio also referred to as the total debt to total net worth is a simple
calculation that can help you in evaluating the financial health of a given company
by comparing the level of debt it has with its total net worth a high ratio tells that you are
considering investing in has already financed by a high level of debt and its riskier
investment compared with other companies on the other hand the low ratio indicates that

the business has a low debt burden which means it can easily cover or meet its debt
obligations without having to sell a lots of assets

current liabilities

Current debt to net worth = ---------------------------------

Net worth

Working Capital Turnover Ratio-

Working capital turnover ratio is the ratio between working capital and turnover. Working
capital is the excess of current assets over current liabilities. Turnover meansnet sales, i.e.,
total sales less sales returns.

Working Capital Turnover Ratio = Net Sales/Working Capital

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This ratio indicates the efficient or inefficient utilization of the working capital of an
enterprise. There is no standard or ideal working capital turnover ratio. Though thereis
no standard working capital turnover ratio, one can say that a higher workingcapital
turnover ratio indicates the efficiency and a lower working capital turnover ratio indicates
the inefficiency of the management in the utilization of working capital.

Inventory to Working Capital Ratio-

Inventory to working capital ratio is the ratio of inventory to working capital.Inventory
or stock refers to closing stocks of raw materials, work-in-progress andfinished goods.
Working capital is the excess of current assets over current liabilities.

Inventory to working capital ratio= Inventory/Working capital*100

As per the standard or ideal inventory to working capital ratio, the inventories should not
absorb more than 75% of the working capital. As such a low inventory to working capital
ratio (i.e., a ratio of less than 75%) indicates under stocking, and so, a high liquid position,
while a high inventory to working capital ratio (i.e., a ratio over 75%) indicates
overstocking, and so, a low liquid position.

Sales to Fixed Assets Ratio (Fixed Assets Turnover Ratio)-

Fixed Assets Turnover ratio is the ratio between fixed assets and turnover.

Sales to Fixed Assets Ratio = Net Sales/Fixed Assets

This ratio indicates as to what extent the fixed assets of a concern have contributed to
sales. In other words, it indicates as to what extent the fixed assets have been utilized.

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The standard fixed assets turnover ratio is 5 times. So, fixed assets turnover ratio of 5 times
or more indicates better utilization of fixed assets. In this context, it may be noted that a
very high fixed assets turnover ratio means under trading, which is not good for the
business.
Total Assets Turnover Ratio-
Total assets turnover ratio is the ratio between total assets and sales.
Total Assets turnover ratio = Net sales/Total Assets
This ratio indicates the efficiency or inefficiency in the use of total resources or assets of
a concern. It is a measure of the overall performance of the business. The standard or idle
total assets turnover ratio is that the sales should be at least two times the value of the
assets. A total assets turnover ratio more indicates that the assets of the concern have been
utilized effectively. In this context, it may be noted that a very high total assets turnover
ratio indicates overtrading.
Fixed Assets to Long Term Funds Ratio-
The fixed assets are shown as a proportion to long term funds as follow: Fixed
Assets to Long Term Funds Ratio = Fixed Assets/Long-Term Funds
This ratio indicates the proportion of long term funds deployed in fixed assets. Fixed assets
represent the gross fixed assets minus depreciation provided on this till the date of
calculation. Long term funds include share capital, reserve and surplus and long term loans.
The higher the ratio indicates the safer the funds available in case of liquidation. It also
indicates the proportion of long-term funds that is invested in working capital.

1.11 INTRODUCTIONN OF TATA POWER LIMITED

About the Company:

TATA Power Company (TPC) proposes to set up a coal based thermal power plant having
capacity of 1000 MW near Naraj Marthapur, Cuttack Sadar Tehsil, Cuttack District in
the state of Orissa. The proposed power plant will comprise of the boiler- generator

configuration of 2X125 MW+ 2X125 MW + 2X250 MW with an ultimate capacity of

1000 MW. TPC was established in 1915. It is the pioneer in the generation of electricity in

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India and is the largest Private Sector Integrated Utility in the country having
approximately 2300 MW capacity with presence in Generation, Transmission, and
Distribution. TPC has a presence in all areas of the power sector includingthermal, hydro,
solar, wind, transmission and distribution. Tata Power owns, operates and maintains
thermal power plants in several Indian states, including Maharashtra, Karnataka and
Jharkhand. It provides reliable and economic power supply to the city of Mumbai, the
commercial capital of India. It is now also present in distribution inthe national capital
Delhi since 2002 catering to 8 lakhs consumers through a Joint Venture Company, North
Delhi Power Limited (NDPL).

Table 1.1 shows the generation Capacity of TPC.

Table. 1.1
Index

Plant Total

Thermal 1838.8

Trombay 1330

Jojabera 427.5

Belgaum 81.3

Hydro 447

Wind 17

Total 2302.8
(Source: EIA Report for 1000 MW Coal Based Thermal Power plant)

Tata Power Limited is an Indian electric utility company based in Mumbai, Maharashtra,
India and is part of the Tata Group. The core business of the company is to generate,
transmit and distribute electricity. With an installed electricity generation capacity of
10,577MW, it is India's largest integrated power company. Tata Power hasbeen ranked 3rd
in 2017 Responsible Business Rankings developed by IIM Udaipur. In February 2017,
Tata Power became the first Indian company to ship over 1 GW solar modules.

Tata Power, formerly known as Tata Electric, is a pioneer in technology adoption,with

many firsts to its credit, supporting the country's energy independence.
32 | P a g e
The Visionary who lit up India:

“Clean, Cheap and abundant power is one the basic ingredients for the economic progress
of the city, state or Country”

Sri Jamsetji Tata, Founder, Tata Group

History:

The firm started as the Tata Hydroelectric Power Supply Company in the year, 1910,
which amalgamated with the Andhra Valley Power Supply Company in 1916. It
commissioned India’s Second hydro-electric project in 1915 in Khopoli for 72 MW. Then
second and third power plants were installed in Bhivpuri (75 MW) in 1919 and Bhira (300
MW) in 1922.

Operations:

Tata Power, together with its subsidiaries & joint entities, has a generation capacity of
10857 MW of which 32% comes from clean energy sources. The company has the
distinction of being among the top private players in each sector of the value chain
including solar rooftop and value-added services.

Tata Power is a pioneer credited with steering the energy sector on technology,process
and platform. Powering emerging technologies for the 'smart' customer, Tata Power's latest
business integrated solutions, focusing on mobility and lifestyle, is poised for multifold
growth.

With its 103 years track record of technology leadership, project execution excellence,
world-class safety processes, customer care and driving green initiatives, Tata Power is
committed to 'lighting up lives' for generations to come.
Tata Power has operations in India, Singapore, Indonesia, South Africa and Bhutan. Tata
Power Group has its operations based in 35 locations in India. The thermal power
stations of the company are located at Trombay in Mumbai, Mundra in Gujarat, Jojobera
and Maithon in Jharkhand, Kalinganagar in Odisha, Haldia in Bengaland Belgaum in Kar
nataka. The hydro stations are located in the Western Ghats of Maharashtra and the wind

farms in Ahmednagar, Supa, Khanke, Brahmanwel, Gadag, Samana and Visapur. The
company installed India’s first 500 MW unit at Trombay, the first 150 MW pumped

33 | P a g e
storage unit at Bhira, and a flue gas desulphurization plant for pollution control at
Trombay. It has generation capacities in the States of Jharkhand and Karnataka, and a
distribution company in Delhi, servicing over one million consumers spread over 510
square km in the North Delhi. The peak load in this area is about 1,150 MW. Tata Power
announced on 24 July 2012, commissioning of the second unit of 525 MW capacity of the
Maithon mega thermal project in Dhanbad. The first unit of identical capacity was
commissioned in September 2011.

Major power plant :

• Mundra Ultra Mega Power Plant. A 4,000 MW (5×800 MW) coal-based thermal
power plant at Mundra, Kutch district, Gujarat. This plant is fully functional.
• Trombay Thermal Power Station. A 1,580 MW thermal power plant at Trombay,
near Mumbai, Maharashtra. This plant is fully functional.
• Maithon Power Plant. A 1,050 MW (2×525 MW) coal-based thermal power plant
at Maithon, Dhanbad district, Jharkhand. This plant is fully functional. This power
plant is owned by Corporation.
• Jojobera Power Plant. A 427.5 MW (67.5 MW and 3×120 MW) coal-based thermal
power plant at Jojobera, near Jamshedpur, East Singhbhum district, Jharkhand.
This plant is fully functional.

A. International operations:
The company has executed overseas projects in the Middle East, Africa and South
East Asia including the Jebel Ali 'G' station (4×100 MW + desalination plant) in
Dubai, AlKhobar II (5×150 MW + desalination plant) and Jeddah III (4×64 MW +
desalination plant) in Saudi Arabia, Shuwaikh (5×50 MW) in Kuwait, EHV
substations in UAE and Algeria, and power plant operation and maintenance
contracts in Iran and Saudi Arabia.
B. Strategic Engineering Division:
The firm's Strategic Engineering Division (SED) has engaged in defence systems
and engineering for over four decades. It works with the MoD and laboratories
to provide products and solutions for the defence requirements of the country It

0 has already cleared the Joint Receipt Inspection (JRI) for thefirst two lots of
Pinaka launchers and command posts; the third and fourth lots have successfully
undergone factory acceptance tests. Tata Power's Strategic Electronics Division

34 | P a g e
 won a tightly contested Rs. 1,000-crore contract for modernising 30 Indian Air
Force airbases.

Problems:

In cause of dramatically higher coal prices as assumed in the plannings and a fixed price
arrangement the Mundra plant in 2012 made big losses. After three successive years of

losses as a result, cash flow was becoming an issue for the company. In January 2014 the
company sold a 30 percent stake in Indonesian coal company PT Arutmin for Rs.500
million. In July 2014 it signed an option to sell a 5 percent stakein Indonesian coal
company Kaltim Prima Coal for Rs. 250 million.

Future Project:

Tata Power has a 51:49 joint venture with Power Grid Corporation of India for the 1,200
km (750 mi) Tata transmission project, India’s first transmission project executed with
public-private partnership financing.

Tata Power has plans to expand generation capacity of 4,000 MW Mundra plant, the
country's first operational ultra-mega power project, to 5,600 MW.

The company has also a 74:26 joint venture with Damodar Valley Corporation for 1,050
MW coal-based thermal power plant at Maithon in Dhanbad district of Jharkhand, named
as Maithon Power Limited. The both units are commissioned on 24 July 2012. It has
another a 74:26 joint venture with Tata Steel Limited for thermal power plants to meet the
captive requirements of Tata Steel, under name Industrial Energy Limited.

Tata Power has announced its partnership with Sunengy an Australian firm to build India's
first floating solar plant based on Liquid Solar Array technology.

In 2016, Tata Power made significant inroads into the renewable energy market in India
by means of its acquisition of Welspun Renewables, for a record price of Rs. 1.3 billion,
the largest acquisition in the India renewables sector.

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Shareholding:

As on 15 November 2017, Tata Group held 32.47% shares in Tata Power. Around 210,000
individual shareholders hold approx. 14% of its shares. Life Insurance Corporation of India
is the largest non-promoter shareholder in the company with 12.90% shareholding.

Shareholders- Shareholding

Promoter-Tata Group Companies-32.47%

Foreign Institutional Investors-24.53%

Insurance companies-21.59%

Individual Shareholders-14.08%

GDRs-3.22%

Others-4.11%

Total-100%

The equity shares of Tata Power are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where
it is a constituent of the S&P CNX Nifty. Its Global Depository Receipts (GDRs) are listed
on the London Stock Exchange and the Luxembourg Stock Exchange.

36 | P a g e
CHAPTER 2
RESEARCHMETODOLOGY

2.1 INTRODUCTION:

Research design or research methodology is the procedure of collecting, analyzing and

interpreting the data to diagnose the problem and react to the opportunity in sucha way
where the costs can be minimized and the desired level of accuracy can be achieved to
arrive at a particular conclusion.

The sample of the stocks for the purpose of collecting secondary data has beenselected
on the basis of Random Sampling. The stocks are chosen in an unbiased manner and
each stock is chosen independent of the other stocks chosen. The stocks are chosen from
the power sector.

The sample size for the number of stocks is taken as 1 for fundamental analysis of stocks
as fundamental analysis is very exhaustive and requires detailed study.

Research methodology is a way to systematically solve a research problem. It is a

scientific method to find out facts or to provides solutions to specific problem. The
researcher needs to follow a systematic procedure to conduct research. Scientific
research in any field of knowledge cannot be conducted in haphazard manner. Research
cannot be based on merely based on one’s beliefs and imagination. To get best research
result, researcher needs to adopt the scientific method of inquiry or investigation.

It is a science of studying how research is done scientifically. Essentially it is the

procedure by which the researchers go about their work of evaluating and predicting
phenomenon. It aims to give the work plan of research. It provides training in choosing
methods materials, scientific tools and techniques relevant for solution ofthe problem.

It helps in decision making. It involves the study of cause and effect relationship various
factors and helps to identify behavior, pattern, trends in certain variables.
Methodology is the systematic, theoretical analysis of the methods applied to a field
of study. It comprises the theoretical analysis of the body of methods and principles
associated with a branch of knowledge. Typically, it encompasses concepts such as

37 | P a g e
paradigm, theoretical model, phases and quantitative or qualitative techniques. A
methodology does not set out to provide solutions - it is, therefore, not the same as a
method. Instead, a methodology offers the theoretical underpinning for understanding
which method, set of methods, or so-called “best practices” can be applied to specific
case, for example, to calculating a specific result.

Research, in simplified terms means searching for the facts and replies to the various
queries and also for the solutions to the various problems. Research is an inquiry or an
investigation with a specific purpose to fulfill, it helps in clearing the various doubtful
concepts and tries to solve or explain the various unexplained procedures or
phenomenon.

According to the encyclopedia of social science, research can be explained as “the

manipulation of generalizing to extend, connect or verify knowledge.”

2.2 DATA COLLECTION

Data is one of the vital aspects of any research studies. Every research is based on the
data which is analyzed and interpreted to get information. There are two sources of data
primary data collection applies surveys, questionnaires, experiments or direct
observations, secondary data collection may be conducted by collecting information
from a diverse source of documents or electronically stored information. In this research
paper, secondary data collection will be used. The study is based on secondary data.
Secondary data means data that are already available i.e., they refer to the data which
have already been collected and analyzed by someone else. When the researcher utilizes
secondary data, then he has to look into various sources from where he can obtain
them. In this case he is certainly not confronted with the problems that are usually
associated with the collection of original data. Secondary data may either be published
data or unpublished data. Usually published data are available in: Various publications
of the central, state are local governments; Various publications of foreign governments
or of international bodies and their subsidiary organizations; Technical and trade
journals; Books, magazines and newspapers; Reports and publications of various
associations connected with business and industry,banks, stock exchanges, etc.

Reports prepared by research scholars, universities, economists, etc. in different fields;

and public records and statistics, historical documents, and other sources of published
information. The sources of unpublished data are many; they may be found in diaries,
38 | P a g e
letters, unpublished biographies and autobiographies and also may be available with
scholars and research workers, trade association, labor bureaus and other public\private

individuals and organization.

SECONDARY DATA COLLECTION IN RESERCH METHODOLOGY

Researcher must be very careful in using secondary data. Before using secondary data,
must see that they possess following characteristics: Reliability of data: the reliability
can be tested by finding out such things about the said data: (a) who collected the data?
(b) What were the sources of data? (c) Were they collected by using proper methods
(d) at what time were they collected? (e) Was there any bias of the compiler? (t) What
level of accuracy was desired? Was it achieved?

Suitability of data: The data that are suitable for one enquiry may not necessarily be
found suitable in another enquiry. Hence, if the available data are found to be unsuitable,
they should not be used by the researcher. In this context, the researcher must very
carefully scrutinize the definition of various terms and units of collection used at the
time of collecting the data from the primary source originally. Similarly, the object,
scope and nature of the original enquiry must also be studied. If the researcher finds
differences in these, the data will remain unsuitable for the present enquiry and should
not be used.

Adequacy of data: If the level of accuracy achieved in data is found inadequate for the
purpose of the present enquiry, they will be considered as inadequate and should not
be used by the researcher. The data will also be considered inadequate, if they are related
to an area which may be either narrower or wider than the area of the present enquiry.

SECONDARY DATA

• The Secondary data like annual reports of is collected from the company’s website.

• Secondary data collected from various book, journals and websites.

2.3 SAMPLE SIZE: The sample size for the number of stocks is taken as 1 for
fundamental analysis of stocks as fundamental analysis is very exhaustive and requires
detailed study.

2.4 OBJECTIVE OF THE STUDY:

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The purpose of the study is to device the ways through which the energy supply of the
country is to be increased so as to contain the rising demand of energy in India taking
experiences from India. The objectives of the Research are as follows:

The primary objective of equity research is to analyze the earnings persistence.

1. To study and examine the relevance of fundamental analysis in investment

decisions making process.

2. To analyses and compare the financial position and performance of Tata Power
Limited.

3. To identify the financial strengths and weakness of Tata Power Limited.

2.5 HYPOTHESIS:
1. Ho: Financial Performance of Tata Power Limited equally in the last seven
year.
H1: Financial Performance of Tata Power Limited is not equally in the last
seven year.

2.6 LIMITATION OF THE STUDY

The study is based on secondary data collected from the secondary data source, internet
and websites of various banks concerned. Therefore, the quality of the study depends
upon the accuracy, reliability, and quality of secondary data source. The published data
is not uniform and not properly disclosed by the Airlines. Analysis is limited for a period
of seven years.

Limitations of the study There are number of limitations in the research which are
acknowledged as under:-

• This study has been conducted purely to understand Equity analysis for
investors.

• The study is restricted to 3 companies based on Fundamental analysis.

• The study is limited to the companies having equities.

40 | P a g e
 • Detailed study of the topic was not possible due to limited size of the project.
• Suggestions and conclusions are based on the limited data of 3 years.
• The future is uncertain.

2.7 SIGNIFICANCE:

To start any business capital plays major role. Capital can be acquired in two ways by
issuing shares or by taking debt from financial institutions or borrowing money from
financial institutions. The owners of the company have to pay regular interest and
principal amount at the end. Stock is ownership in a company, with each share of
stock representing a tiny piece of ownership. The more shares a person own, the more
of the company he owns The more shares he own, the more dividends he earn when the
company makes a profit. In The financial world, ownership is called “Equity”.

2.8 SCOPE OF THE STUDY:

The Scope of the study is very wide. The Selection of the company under the study is
not made on the basis of any recognized system of sampling. The criteria are for the
selection of a company. However, the researcher has selected Air India limited The 43
study is based on the financial statement of the seven years i.e. from 2012-2019and
the data is analyzed on the basis of techniques and tools.

2.9 TOOLS AND TECHNIQUES:

Ratio analysis

Ratio analysis is a quantitative procedure of obtaining a look into a firms functional

efficiency, liquidity, revenues, and profitability by analyzing its financial records and
statements. Ratio analysis is a quantitative method of gaining insight into a company's
liquidity, operational efficiency, etc.

Meaning of ratio analysis:

When investors and analysts talk about fundamental or quantitative analysis, they are
usually referring to ratio analysis. Ratio analysis involves evaluating the performance
and financial health of a company by using data from the current and historicalfinancial
statements. The data retrieved from the statements is used to compare a company's

41 | P a g e
performance over time to assess whether the company is improving or deteriorating, to
compare a company's financial standing with the industry average, or to compare a
company to one or more other companies operating in its sector to see how the company
stacks up.
Ratio analysis can be used to establish a trend line for one company's results over a large
number of financial reporting periods. This can highlight company changes that would
not be evident if looking at a given ratio that represents just one point in time.
Comparing a company to its peers or its industry averages is another useful application
for ratio analysis. Calculating one ratio for competitors in a given industry and
comparing across the set of companies can reveal both positive and negative
information. Since companies in the same industry typically have similar capital
structures and investment in fixed assets, their ratios should be substantially the same.
Different ratio results could mean that one firm has a potential issue and is
underperforming the competition, but they could also mean that a certain company is
much better atgenerating profits than its peers.

Trend analysis
Trend analysis is fundamentally, a method for understanding how and why things have
changed or will change-over time.

Statement of retained earnings

The statement of retained earnings (retained earnings statement) is financial statements
that outlines the changes in retained earnings for a company over a specified period.

Income statements
Income statements are financial statements that show you the company’s income and
expenditure. It also shows whether a company is making profit or loss for a given period.

Balance sheet

Balance sheet is financial statement that reports company assets, liabilities and
shareholders’ equity at a specific point in time, and provides a basis for computing rates
of return and evaluating its capital structure. It is a financial statement that provides a
snapshot of what a company owns and owes, as well as the amount invested by
shareholders.

42 | P a g e
CHAPTER 3

REVIEW OF LITERTURE

3.1 INTRODUTION OD REVIEW OF LITERATURE:

A possible definition of a literature review is: "The selection of available documents

on the topic, which contain information, ideas, data and evidence written from a
particular standpoint to fulfill certain aims or express certain views on the nature of
the topic and how it is to be investigated and the effective evaluation of these
documents in relation to the research being proposed" (Hart, Doing a literature review:
releasing the social science research imagination, 1998). This can only be done in a
structured and systematic way.

The main purpose of a literature review within the context of research is to establishits
originality; that is, that the work proposed has not already been done. Almost always
something related has been done; the review organizes these, discusses them, and points
out their limitations, some of which will be addressed in the research. A second purpose
is to place the proposed research in context, that is, to show its importance within a
wider problem area. This must be established from the opinionsof others, who define
the context and identify important unsolved problems. This means existing literature on
the topic has been used. A third purpose is to compare methodological approaches to
the research problem. There are almost always several ways to address a research
problem, and here they are compared, in order to justifythe approach to be taken in
the proposed research. Note that this may combine aspects of several previous
approaches.

Without a literature review somebody will not be able to acquire an understanding of

the topic. The literature review is part of somebody’s academic development and is
needed to become an expert in the field. The literature review is integral to the success
of academic research. It is not just a stage to be undertaken.

Since power cannot be stored for marketing but must be sold the instant it is produced,
it was generally assumed that power sector had to be vertically integrated monopoly
43 | P a g e
of generation, transmission and distribution. And since power was vital for every
country, it was also assumed that the monopoly had to be in the hands of the government.

Theoretically, in a country where generation, transmission and distribution are in the

hands of Public Sector Undertakings (PSUs) it could be expected that the investment

requirements consistent with adequate and reliable supply, would be fully met by the
undertakings or through government planning/budgetary process. But this did not
happen during the last few decades and the quality and reliability of supply of power
deteriorated in most countries. Yet the dogma that electricity supply, like other public
services, should be provided by the state, persisted in most countries.

Roopa (2016) brought into the focus a very interesting point in her study on ‘Quality in
Governance of Demutualized Stock Exchanges over Mutualized Stock Exchanges– A
Case Study’. In this study, two most prominent stock exchanges of India; National Stock
Exchange and Bombay Stock Exchange were analyzed. The focus was on quality of
markets and governance of stock exchange. This study concluded that NSE is having
better quality market that BSE. It says that NSE has played a very crucial role in
transforming Indian stock markets by adopting innovative technology and hence
reducing the cost for the benefit of investors.

Paltrinieri (2015) has examined the reason for merger between Dubai Financial
Markets, Nasdaq-Dubai and Abu Dhabi Securities Exchange. The study revealed that
‘contraction both in market capitalization and in trading value in the three UAE stock
exchanges was caused by subprime financial crisis and market fragmentation’ and this
caused a merger between them.

Mishra (2015) has analyzed the trading statistics of different stock exchanges available
in India. To study the concept she examined the Indian capital market andits trend in
globalized economy along with the challenges of Indian capital market. Through her
study she concluded that, as capital market is a crux of any economy, hence it is very
crucial to enhance the market for the betterment of an economy. More over she also
suggested that one should invest in stock market because of the availability of
diversified portfolio at low cost with transparent trading in stock exchanges. And lastly,
she concluded her study by saying that SEBI has worked a lot for the better trading in
capital market but at slow rate in comparison to global competitive markets.
44 | P a g e
Government of India (2014) POWERGRID Corporation of India Limited, the Central
Transmission Utility (CTU) of the country under Ministry of Power has successfully
entered into the business of telecommunication through convergence of power sector
with
telecom sector by making available low cost and high quality telecom infrastructure on
its
existing and planned transmission structure. This has resulted in optimization of return
on assets and value creation through new initiatives.

Fiorio et al. (2007) questioned the wide spread believes that public ownership can be

impediment to other reforms and that it to production inefficiency. To test for thus a
reform paradigm in general, they considered electricity prices and survey data on 36
consumer satisfaction in the EU-5. Their empirical finding rejected the prediction that
privatization leads to lower prices, or to increased consumer satisfaction. They also
found that country specific features tends to have higher explanatory power and the
progress toward reform paradigm and is not systematically associates with lower prices
and higher consumer satisfaction.

Based on the literature review on cross-country studies related to electricity market

reforms, we may argue that evidence on impact of the reform process is quite limited
and will take more time to emerge. Therefore there exists a huge research gap in this
area.

Kale (2004) The Electricity (Supply) Act 1948 placed primary responsibility for
electricity system development with new state level agencies implemented under the
Act – the State Electricity Boards (SEBs). The phrase „semi-autonomous‟ in the extract
from the Act preamble is telling. Kale notes that the level of autonomy from state control
of the new SEBs was contested within the states, with some states (e.g. Mysore and
Madras – now Karnataka and Tamil Nadu) resisting the call for independent SEBs.
These states already owned and managed their states‟ electricity systems and benefited
from the control over resources this entailed Kale also cites constitutional debate
discussion arguing for autonomous SEBs.
Government of India (2003) On 10th June, 2003, the Electricity Act was notified by
the Govt. of India. This Act seeks to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and generally for taking

45 | P a g e
measures conducive to development of electricity industry, promoting competition
therein, protecting interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff ensuring transparent policies regarding subsidies,
promotion of efficient and environmentally benign policies, constitution of Central
Electricity Authority, Regulatory Commissions

and establishment of Appellate Tribunal and for matters connected therewith or

incidental thereto. The Act extends to the whole of India except the state of Jammu &
Kashmir.

Debojit Chakraborty (1997) This study of researcher tries to establish a relationship

between “major economic indicators and stock market behavior”. It also analyses the
stock market reactions to changes in the economic climate. The factors considered are
inflation, money supply, and growth in GDP, fiscal deficit and credit deposit ratio. To
find the trend in the stock markets, the BSE National Index of Equity Prices (Natex)
which comprises

100 companies was taken as the index. The study shows that stock market movements
are largely influenced by, broad money supply, inflation and fiscaldeficit apart from
political stability.

Khan Ali M Younus (1996) made an attempt to study the various Personnel Policies
and Practices in Bharat Heavy Electrical Limited (BHEL) A study of BHEL’s personnel
policies and practices i.e. recruitment, promotion, transfer benefits, training and
development, industrial welfare, pay and allowances, award and incentives. The study
shows that BHEL’s personnel policies are commensurate with national economic
policy and conforms to the global standards. The study also reveals that the personnel
of BHEL are skilled, experienced and hard working. BHEL’s schemes, programmes
and policies as regards recruitment, promotion, transfer benefits, training and
development, industrial welfare, pay and allowances, award and incentives have been
suitably tuned to the changing needs and times. HBEL has been making continuous
investment in the development of its personnel for success and growth.

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Government of India (1996) The policy of the Government of India offers all areas
of power production and supply to private entrepreneurs for investment, be it power
generation, distribution, Renovation and Modernization or co-generation. Driven by the
large demand for power in the country, the policy offers enormous opportunities for the
investors. Broad features are that the private sector can set up thermal projects of any
size. Debt equity ratio up to 4:1 is permissible for all prospective private enterprise
entrants to the electricity sector. At least 11% of the total equity must come through
promoters‟ contribution. Up to 100% Foreign equity participation is permitted for the
projects set up by the foreign private investors.

A CMIE (1995) This study on Initial Public Offering (IPO) points out that average
annualized returns obtained from issue date to list date by IPOs was 339%. But these
returns fade away with time, so that after one-month of listing, they drop to 256%.
Annualized returns after three months fell to 206% and subsequently to 120% after one
year from listing. Returns on IPOs are also highly volatile in the first few days of listing.
By the end of sixty days from listing, the volatility drops to 25 % of what it was in the

first ten days of listing Government of India (1995).

In 1995, the government strengthened its policy for private investment in generation
projects over 1000 MW and which would supply electricity to more than one state,
terming them as Mega power projects. The policy was intended to introduce a
competitive bidding for awarding the projects. CEA, POWERGRID and NTPC were
to provide catalytic support to private investors by identifying potential sites, arranging
the transmission of power and for preparing feasibility report respectively. The policy
did not propose any fiscal concessions. Some of these shortcomings were addressed in
the revised policy of 1998 (Revised Mega Power Policy). Nineteen projects, 14 in the
public sector and 5 in the private sector, were declared to be mega power projects. To
alleviate risks to private investors on account of payment security, the Power Trading
Corporation (PTC) was setup to purchase power from the identified projects and to
sell it to identified SEBs. This included the adoption of a new package of security
mechanism consisting of Letter of Credit and recourse to state government’s share of
Central Plan Allocations. Establishment of Regulatory Commissions and privatization
47 | P a g e
of distribution in cities with a population exceeding one million were included as pre-
conditions in the policy. Import of capital equipmentfor such projects was exempted
from customs duty. The projects were also granted income tax holiday for 10 years and,
which could be claimed in any block of 10 years within the first 15 years. The policy
was further liberalized by according mega project status to all inter-state thermal
projects of 1000 MW and above, and to all inter-state hydro projects of 1000 MW and
above In the Mega Power Policy, following four distribution reform measures were
also laid down by the Ministry of Power required to be undertaken by the States
purchasing power from the mega power projects:

• Timely release of subsidy as per Section 65 of Electricity Act

2003.Ensure that Discoms approach SERC for approval of annual
revenue requirement/tariff determination in time according to the
SERC

• regulation. Setting up special courts as provided in the Electricity Act

2003 to tackle theft related cases.

• Ring fencing of SLDCs.

Jamie Carstairs (1995) In India, the private power initiative of 1991 has offered one
solution to the financing problem i.e. the private financing of generation against long
term power purchase agreements. However, this approach encounters a major
problem,

the financial weakness of the purchasing agents, the state electricity boards that play
a dominant role in most state's power sectors. At present the SEBs is mostly loss
making; even the best performers realize returns on assets well below the cost of
capital that they now face. The situation is likely to become worse as costs
rise, further weakening the ability of the SEBs to sign credible long-term power
purchase contracts. The private sector has responded by trying to reduce its exposure
to SEBs through obtaining guarantees from state and central governments.

Sahadevan and Thirpal Raju (1995) This study investigates into the lead-lag
relationship between money supply and stock return in the Indian context. The study
has attempted to trace the relationship between stock returns and money supply using
48 | P a g e
monthly observation on SENSEX, RBI Index, M1 and M3 for a period spanning over
14 years ending March 1994.The result reveals that supply variations in money have
a lag 40 effect on stock return and hence, stock market is not found efficient with
respect to monetary data.

Pattabhi Ram.V.15 (1995) emphasized the need for doing fundamental analysis ‘and
doing Equity Research (ER) before selecting shares for investment. He opined that
the investor should look for value with a margin of safety in relation to price. The
margin of safety is the gap between price and value. He revealed that the Indian stock
market is an inefficient market because of the absence of good communication
network, rampant price rigging, the absence of free and instantaneous flow of
information, professional broking and so on. He concluded that in such inefficient
market, equity research will produce better results as there will be frequent mismatch
between price and value that provides opportunities to the long-term value oriented
investor. He added that in the Indian stock market investment returns would improve
only through quality equity research.

Subhash Chander and Ashwani Kansara (1994) This study has surveyed the
perceived significance of the information contained in the abridged prospectus
attached to the application form for shares / debentures of companies. For an existing
company, the information necessary for investment decisions could be obtained from
newspapers, magazines, annual reports, prospectus etc. But for a new company,
abridged prospectus is the main important document which provides information for
investment decisions. The study shows that the majority of investors are casual
investors. The investors regard abridged prospectus as well as the investment journals
as the prime source of information for their investment decisions. Investment
decisions also depend upon

unofficial premium quoted in business magazines, expert analysis, market trends,

political considerations, etc.

Carter Randal7 (1992) offered to investors the underlying principles of winning on

the stock market. He emphasized on long term vision and a plan to reach the goals.
Headvised the investors that to be successful, they should never be pessimists. He
revealed that - though there has been a major economic crisis almost every year, it
49 | P a g e
remains true that patient investors have consistently made money in the equities
market. He concluded that investing in the stock market should be an un-emotional
endeavor and suggested that investors should own a stock if they believe it would
perform well.

Gupta (1981) This research is an extensive study titled `Return on New Equity
Issues'which states that the investment performance of new issues of equity shares,
especially those of new companies, deserve separate analysis. The factor significantly
influencing the rate of return on new issues to the original buyers is the `fixed price'
at which they are issued. The return on equities includes dividends and capital
appreciation. The study presents sound estimates of rates of return on equities, and
examines the variability of such returns over time.
The findings of this study suggest that the market seems to function largely on a
`hitor miss' basis rather than on the basis of informed beliefs about the long-term
prospects of individual enterprises. The main reason for the market's irrationality
appears to be the preponderance of speculative influences over investment influences.

50 | P a g e
 CHAPTER 4

DATA ANALYSIS AND INTERPERTATION

4.1 BALANCE SHEET OF TATA POWER LIMITED FROM 2011

TO 2020

Particulars 2020-Mar 2019-Mar 2018-Mar 2018-Mar2 2016-Mar

12mths 12mths 12mths 12mths 12mths
EQUITES AND
LIABILITIES
SHAREHOLDER'S FUND
Equity Share Capital 270.5 270.5 270.5 270.5 270.48
TOTAL SHARE 270.5 270.5 270.5 270.5 270.48
CATIPAL
Reserves and Surples 17,795.52 16,535.01 14,629.38 12,944.05 11,362.90
TOTAL RESERVES AND 17,795.52 16,805.51 14,899.88 13,214.55 11,633.38
SURPLUS
TOTAL 18,066.02 16,805.51 14,899.88 13,214.55 11,633.38
SHAREHOLDERS
FUNDS
Minority Interest 2,332.04 2,166.66 2,015.29 1,868.99 1,749.81
NON-CURRENT
LIABILITIES
Long Term Borrowing 32,695.14 31,139.23 22,356.31 25,142.96 22,413.88
Deferred Tax Liabilities 1,174.04 1,056.81 516.56 1,751.14 2,096.86
[Net]
Other Long Term 5,989.55 2,587.55 2,513.53 3,668.90 3,651.31
Liabilities
51 | P a g e
Long Term Provision 407.4 333.6 300 270.68 243.53
TOTAL NON-CURRENT 40,266.13 35,117.19 25,686.40 30,833.68 28,405.58
LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 11,844.36 13,875.38 18,827.28 16,279.79 14,588.91
Trade Paybles 5095.44 5,481.49 5,609.82 5,529.00 4,401.36
Other Current Liabilities 10,527.74 9,123.15 13,277.86 13,487.09 7,518.24

Short Term Provision 116.42 93.55 193.44 207.69 262.43

TOTAL CURRENT 27,583.96 28,573.57 37,908.40 37,503.57 26,770.94
LIABILITIES
TOTAL CAPITAL AND 89,748.15 84,162.93 82,009.97 82,920.79 70,059.71
LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 44,662.61 41,101.50 41,431.61 43,235.42 36,103.41
Intangible Assets 1,361.18 1,561.82 1,583.08 1,705.80 307.34
Capital Work-In-Progress 1,611.52 2,575.70 1,652.60 1,923.24 1,134.16
FIXED ASSETS 47,636.31 45,239.02 44,667.29 47,119.14 37,755.66
Non-Current Investments 13,835.33 13,374.89 11,992.77 10,755.23 11,446.83
Deferred Tax Assets[Net] 74.24 89.49 118.17 91.53 3.2
Long Term Loans And 80.88 90.56 131.73 77.16 390.37
Advance
Other Non-Current Assets 2,725.11 2,671.44 2,783.39 3,378.66 3,339.62
TOTAL NON-CURRENT 65,993.44 63,106.97 61,334.92 63,095.29 52,941.22
ASSETS
CURRENT ASSETS
Current Assets
Current Investment 699.51 166.98 436.16 1,097.78 335.95
Investories 1,752.35 1,706.42 1,623.08 1,599.56 1,373.40
Trade receivables 4,425.90 4,445.26 2,788.93 3,832.12 3,540..24
Cash And Cash 2,094 787.45 1,185.78 953.3 663.16
Equivalents
Short Term Loans And 33 87.18 784.8 655.44 410.27
Advance
Other Current Assets 14,749.77 13,862.67 13,856.30 11,686.30 10,795.47
TOTAL CURRENT 23,754.71 21,056.96 20,675.05 19,825.50 17,118.49
ASSETS
52 | P a g e
TOTAL ASSETS 89,748.15 84,162.93 82,009.97 82,920.79 70,059.71
OTHER ADDITIONAL
INFORMATION
CONTINGENT
LIABILITIES
COMMITMENTS
Contingent liabilities 6,282.82 5,218.16 6,332.12 6,949.92 12,471.15
BONUS DETAILS
Bonus Equity Share 1.13 1.13 1.13 1.13 1.13
Capital
NON-CURRENT
INVESTMENTS
Non-Current Investments 66.94 89.14 92.39 204.07 374.43
Quoted Market Value
Non-Current Investment 565.74 772.27 11,900.38 1,075.07 1,384.00
Unquoted Book Value
CURRENT
INVESTMENT
Current Investment 0 0 0 32.66 24.35
Quoted Market Value
Current Investment 699.51 166.98 436.16 1,065.12 311.6
Unquoted Book Value

Particulars 2015-Mar 2014-Mar 2013-Mar 2012-Mar 2011-Mar

12mths 12mths 12mths 12mths 12mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUND
Equity Share Captial 270.48 237.29 237.29 237.29 237.29
TOTAL SHARE 270.48 237.29 237.29 237.29 237.29
CAPITAL
Reserve and Surplus 14,040.11 12,154.96 12,089 12,427 13,782.25

TOTAL RESERVES 14,040.11 12,154.96 12,090 12,428 13,728.25

AND SURPLUS

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TOTAL 14,310.59 12,392.25 12,326.88 12,664.99 14,019.54
SHAREHOLDERS
FUND
Minority Interest 2,492.59 2,273.31 2,064.60 1,631.27 1,414.26
NON-CURRENT
LIABILITIES
Long Term Borrowing 32,618.38 30,469.94 31,599.34 29,733.11 21,979.83
Deferred Tax Liabilities 1,401.37 1,137.88 1,025.41 647.05 482.05
[Net]
Other Long Term 1,029.12 974.57 949.11 1,181.30 1,371.41
Liabilities
Long Term Provissions 921.38 914.59 1,164.59 1,043.50 886.79

TOTAL NON- 36,020.25 33,497.16 34,738.45 32,604.96 24,720.08

CURRENT
LIABILITIES
CURRENT LIABILITES
Short Term Borrowing 4,586.56 4,706.78 3,547.18 2,187 1,619.32

Trade Payables 4,586.56 4,706.78 3,540.85 2,750.13 2,023.45

Other Current Liabilites 10,518.67 11,545.48 8,776.13 7,376.60 5,508.87
Short Term Provisions 770.47 900.36 778.41 888.01 1,030.99

TOTAL CURRENT 21,111.12 21,726.72 16,642.57 13,201.48 10,182.63

LIABILITIES
TOTAL CAPITAL AND 75,442.85 71,398.26 67,281.41 61,612.09 50,343.74
LIABILITIES
ASSETS
NON-CURRENT
ASSETS
Tangibles Assets 37,748.14 36,795.04 35,395.28 22,585.11 11,789.35
Intangible Assets 365.20 266.52 233.83 223.95 19.95
Capital Work-In- 3,571.73 3,298.07 2,284.27 12,634.31 18,670.25
Progress
FIXED ASSETS 41,768.82 40,450.23 37,468.27 35,468.27 30,491.51

Non-Current- 2,732.57 2,678.72 2,642.71 2,645.42 2,609.22

Investments
Deferred Tax Assets [Net] 5.85 14.96 24.88 8.31 6.80
Long Term Loans And 1,776.01 1,529.35 1,603.85 1,355.04 1,668.61
Advance
Other Non-Current 7,622.48 7,032.08 7,148.99 5,820.56 4,105.04
Assets
TOTAL NON- 60,526.49 58,037.38 55,131.29 50,142.00 43,109.26
CURRENT ASSETS
CURRENT ASSETS
54 | P a g e
Current Investments 605.57 340.54 477.40 777.48 231.78
Inventories 1,844.17 2,073.27 2,026.51 1,684.69 1,128.74

Trade Receivables 5,563.95 4,542.61 3,305.01 2,271.35 1,668.94

Cash And Cash 1,500.85 1,555.01 1,989.89 3,694.12 2,206.59

Equivalents
Short Term Loans And 3,569.83 3,326.70 3,299.91 2,421.67 1,636.07
Advance
Other Current Assets 1,831.99 1,522.75 1,051.40 620.78 362.36
TOTAL CURRENT 14,916.36 13,360.88 12,150.12 11,470.09 7,234.48
ASSETS
TOTAL ASSETS 75,442.85 71,398.26 67,281.41 61,612.09 50,343.74

OTHER ADDITIONAL
INFORMATION
CONTINGENT
LIABILITIES,
COMMENTS
Contigent Laibilities 12,142.70 10,463.18 6,209.55 4,794.11 7,243.15

BONUS DETAILS
Bonus Equity Share 1.13 1.13 1.13 1.13 1.13
Capital
NON-CURRENT
INVESTMENTS
Non-Current Investments 975.46 768.09 651.58 714.13 786.57
Quoted Market Value
Non-Current Investments 2,258.62 2,195.00 2,185.53 2,123.77 2,081.51
Unquoted Book Value
Current Investment 0 0 0 0 0
Quoted Market Value
Current Investment 605.57 340.54 477.4 777.48 231.78
Unquoted Book Value
(Table 4.1 Source: Annual Report)

55 | P a g e
 4.2 STATEMENT OF PROFIT AND LOSS FROM 2011-2020:

Statement of Profit & Loss from 2011-2010

PROFIT & LOSS 2020-Mar 2019-Mar 2018-Mar 2017-Mar 2016-

ACCOUNT OF TATA Mar
POWER COMPANY (in
Rs. Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths

INCOME

REVENUE FORM 28,147.60 28,788.47 25,922.84 26,868.20 28,799.73

OPERATIONS [GROSS]
Less:Excise/Service 0 0 0.22 0 0
Tax/Other Levies
REVENUE FORM 29,136.37 29,881.06 26,840.05 27,587.59 29,500.89
OPRATING
REVENUES
Other Income 562.61 386.15 432.69 585.9 91.34

TOTAL REVENUE 29,689.98 30,267.21 27,272.74 28,173.49 29,592.23

EXPENSES

Cost Of Materials 957.18 919.35 748.97 1,009.67 1,136.61

Consumed
Operating And Direct 214 248.23 281.99 224.13 679.75
Expenses
Employee Benefit 1,440.64 1339.05 1,381.92 1,261.11 1,227.51
Expenses
Finance Costs 4,493.73 4,170.00 3,764.48 3,364.96 3,235.81

Depreciation And 2,633.56 2,393.13 2,346.17 1,955.59 1,648.73

Amortisation Expenses
Other Expenses 2,342.78 2,260.15 2,373.89 2,217.76 2,157.68

TOTAL EXPENSES 28,320.84 29,699.05 26,674.77 26,999.34 27,238.44

56 | P a g e
PROFIT/LOSS BEFORE 1,378.14 568.16 597.97 1,174.15 2,353.79
EXTRAORDINARY
ITEMS AND TAX
Exceptional Iterms 37.47 1,849.10 692.68 -952.89 -1,073.08

PROFIT /LOSS 1,415.61 2,417.26 1,290.65 221.26 1,80.71

BEFORE TAX
TAX EXPENSES-
CONTINUED
Current Tax 494.30 524.66 663.69 553.32 593.54

Other Direct Tax 0.00 0.00 0.00 0.00 0.00

TOTAL TAX 641.49 1,088 161.97 350.46 680.31

EXPENSES

PROFIT/LOSS AFTER 774.12 1,329.67 1,128.68 -129.20 600.40

TAX AND BEFORE
EXTRAORDINARY
ITEM
PROFIT /LOSS FORM 774.12 1,329.67 1,128.68 -129.20 600.40
CONTINUING
OPERATIONS
PROFIT/LOSS FOR 363.89 1,203.83 1,056.94 -126.16 600.40
THE PERIOD

Minority Interest -299.06 -247.47 -202.55 -203.08 -124.19

CONSOLIDATED 1,017.38 2,356.19 2,408.30 896.55 662.20

PROFIT/LOSS AFTER
MI AND ASSOCIATED
OTHER ADDITIONAL
INFORMATION
EARNINGS PER
SHARE
Basic EPS (Rs.) 3.00 8.00 8.00 3.00 2.00

Diluted (Rs.) 3.00 8.00 8.00 3.00 2.00

DIVIDEND AND
DIVIDEND
PERCENTAGE
Equity Share Dividend 351.99 351.99 423.64 423.65 363.59

Tax On Dividend 72.37 71.66 0 0 0

57 | P a g e
PROFIT & LOSS
ACCOUNT OF TATA
POWER COMPANY (in 2015- 2014- 2013- 2012-
Rs. Cr.) Mar Mar Mar Mar 2011- Mar
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
REVENUE FORM
OPERATIONS [GROSS] 32,260.24 35,109.15 32,513.26 25,645.46 18,921.30
Less:Excise/Service
Tax/Other Levies 3.97 19.67 16.67 18.41 12.12
REVENUE FORM
OPRATING
REVENUES[NET] 32,256.27 35,089.51 32,496.59 25,627.05 18,909.18
TOTAL OPERATING
REVENUES 34,366.85 35,648.70 33,025.43 26,001.40 19,450.76
Other Income 416.74 227.26 369.20 268.76 410.50
TOTAL REVENUE 34,783.59 35,875.96 33,394.63 26,270.16 19,861.26
EXPENSES
Cost Of Materials
Consumed 697.84 721.88 386.74 358.87 373.39
Operating And Direct
Expenses 4,038.92 4,620.29 3,656.13 3,713.78 2,070.51
Employee Benefit
Expenses 1,545.67 1,349.90 2,635.53 1,527.09 866.15
Finance Costs 3,699.27 3,439.90 2,635.53 1,527.09 866.15
Depreciation And
Amortisation Expenses 2,174.21 2,729.62 2,051.69 1,334.64 981.06
Other Expenses 4,347.98 4,573.64 3,972.30 3,488.67 2,282.35
TOTAL EXPENSES 33,299.85 34,900.89 31,267.95 23,962.25 16,704.38
PROFIT/LOSS
BEFORE
EXTRAORDINARY
ITEMS AND TAX 1,483.74 975.07 2,126.68 2,307.25 3,156.88
Exceptional Iterms 0.00 0.00 0.00 -1,800.00 0.00
PROFIT /LOSS
BEFORE TAX 1,483.74 975.07 1,276.68 507.25 3,156.88

58 | P a g e
TAX EXPENSES-
CONTINUED
Current Tax 826.57 831.89 912.69 1,405.17 970.28
Less:MAT Credit
Entitlement 18.29 -88.31 29.91 51.21 54.00
Deferred Tax 266.50 129.69 307.25 120.69 76.90
Other Direct Tax 0 0.00 0.00 0.00 0.00
TOTAL TAX
EXPENSES 1,074.92 1,008.92 1,177.96 1,475.96 974.97
PROFIT/LOSS AFTER
TAX AND BEFORE
EXTRAORDINARY
ITEM 408.82 -33.31 98.72 -968.29 2,181.91
PROFIT /LOSS FORM
CONTINUING
OPERATIONS 408.82 -33.31 98.72 -968.29 2,181.91
PROFIT/LOSS FOR
THE PERIOD 408.82 -33.31 98.72 -968.29 2,181.91
Minority Interest -289.37 -272.03 -208.07 -190.16 -196.50
CONSOLIDATED
PROFIT/LOSS AFTER
MI AND ASSOCIATED 167.83 -259.97 -85.43 -1,087.68 2,059.60
OTHER ADDITIONAL
INFORMATION
EARNINGS PER
SHARE
Basic EPS (Rs.) 0 -2.00 -1.00 -5.00 9.00
Diluted (Rs.) 0 -2 -1.00 -5 8.00
DIVIDEND AND
DIVIDEND
PERCENTAGE
Equity Share Dividend 351.99 338.45 273.17 296.92 296.92

Tax On Dividend 67.04 54.62 46.13 55.98 42.53

(Table 4.2 Source: Annual Report)

4.3 DATA ANALYSIS:

Data analysis is a process of inspecting, cleansing, transforming, and modeling data

with the goal of discovering useful information, informing conclusions, and supporting
decision-making and is playing a role in making decisions more scientific and helping

59 | P a g e
 the business achieve effective operation.

4.4 RATIO ANALYSIS:

Ratio is a relationship between two figures expressed mathematically. Financial ratios

provide numerical relationship between two relevant financial data. Financial ratio are
calculated from the balance sheet and profit and loss account. The relationship can be
either expressed as a percent or as a quotient. Ratios summarize the data for easy
understanding, comparison and interpretations. Ratios for investment purposes can be
classified into profitability ratios, turnover ratios, and leverage ratios. Profitability ratios
are the most popular ratios since investors prefer to measure the present profit
performance and use this information to forecast the future strength of the company.
The most often used profitability ratios are return on assets, price earnings multiplier,
price to book value, price to cash flow, and price to sales, dividend yield, return on
equity, present value of cash flows, and profit margins.

4.5 RATIO ANALYSIS & INTERPRETATION:

• Profitability Ratio:

• Gross profit ratio = Gross Profit / Sales * 100

YEAR 2014- 2015- 2016- 2017- 2018- 2019- 2020-
MAR MAR MAR MAR MAR MAR MAR
Gross 35,109.15 32,260.24 28,799.73 26,868.20 25,922.84 28,788.47 28,147.60
profit
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

Ratio -0.72 0.48 2.23 3.18 8.83 7.78 3.42

in %
(Table 4.3 source: Done by Researcher)

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 GROSS PROFIT RATIO
99

98

97

96

95

94

93

92

91

90
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

GROSS PROFIT RATIO

(Graph 4.1 source: Done by Researcher)

INTERPRETATION:

A higher gross profit margin indicates that a company can make a reasonable profit on
sales as long it keeps over head costs in control.

In year 2014, the gross profit margin was 97.86. In year 2015, the gross profit margin
was 92.74.

In year 2016, the gross profit margin was 97.32. In year 2017, the gross profit margin
was 95.36.

In year 2018, the gross profit margin was 95.05. In year 2019, the gross profit margin
was 95.11. In year 2020, the gross profit margin was 94.77.

The above analysis shows that there has been certain down fall between the year 2014
& 2016. After 2016 it has been decreased, the highest gross profit was only in the year

2014 and the lowest among these years is in the year 2015.

61 | P a g e
 ▪ Net Profit Ratio = Net Profit / Sales * 100

YEAR 2014- 2015- 2016- 2017- 2018- 2019- 2020-

MAR MAR MAR MAR MAR MAR MAR
Net -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38
Profit
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

Ratio -0.72 0.48 2.23 3.18 8.83 7.78 3.42

in %

(Table 4.4 source: Done by Researcher)

Net Profit Ratio

10

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

-2

Net Profit Ratio

(Graph 4.2 source: Done by Researcher)

INTERPRETATION:

A high net profit margin means that a company is able to effectively control its costs and
provide goods and services at a price significantly higher than its costs. Therefore, a high

62 | P a g e
 ratio can result from efficient management.

In year 2014, the net profit margin was (0.72%). In year 2015, the net profit margin was
0.48%.

In year 2016, the net profit margin was 2.23%. In year 2017, the net profit margin was
3.18%.

In year 2018, the net profit margin was 8.83%. In year 2019, the net profit margin was
7.78%. In year 2020, the net profit margin was 3.42%.
The above analysis shows that the net profit margin for initial and last years is less as
compared to middle years that is 2016 & 2017. The highest net profit ratio was recorded
in year 2018 and the lowest was in year 2014.

• Operating Profit Ratio = Operating Profit/Sales * 100

YEAR 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Operating -33.31 408.82 2,353.79 1,174.15 597.97 568.16 1,378.14
Profit
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

Ratio (in -0.09 1.17 7.95 4.16 2.19 1.87 4.64

%)
(Table 4.5 source: Done by Researcher)

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 OPERATING PROFIT RATIO
9

0
2014-MAR 2015-MAR 2016-MAR 2017-MAR 2018-MAR 2019-MAR 2020-MAR
-1

OPERATING PROFIT RATIO

(Graph 4.3 source: Done by Researcher)

INTERPRETATIONS:

Higher operating margins are generally better than lower operating margins, so it might
be fair to state that the only good operating margin is one that is positive and increasing
over time.
In year 2014, the operating profit ratio was (0.09%). In year 2015, the operating profit
ratio was 1.17%.

In year 2016, the operating profit ratio was 7.95%. In year 2017, the operating profit
ratio was 4.16%.

In year 2018, the operating profit ratio was 2.19%. In year 2019, the operating profit
ratio was 1.87%. In year 2020, the operating profit ratio was 4.64%.

The above analysis shows that in year 2016 the operating profit ratio was highest
whereas it was lowest in year 2014. In the rest of the years operating profit ratio is
average.

• ACTIVITY RATIO:

64 | P a g e
 • Total Asset Turnover Ratio = Net Sales / Total Assets

YEAR 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Net 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98
Sales
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Assets
Ratio 0.5 0.46 0.42 0.33 0.33 0.35 0.33
(In%)
(Table 4.6 source: Done by Researcher)

TOTAL ASSETS TURNOVER RATIO

0.6

0.5

0.4

0.3

0.2

0.1

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

TOTAL ASSETS TURNOVER RATIO

(Graph 4.4 source: Done by researcher)

INTERPTRETATIONS:

The higher the asset turnover ratio, the more efficient a company is at generating
revenue from its assets. Conversely, if a company has a low asset turnover ratio, it
indicates it is not efficiently using its assets to generate sales.

In year 2014, the total asset turnover ratio was 0.50%. In year 2015, total asset turnover
ratio was 0.46%.

In year 2016, the total asset turnover ratio was 0.42%. In year 2017, total asset turnover
ratio was 0.33%.
65 | P a g e
 In year 2018, the total asset turnover ratio was 0.33%. In year 2019, total asset turnover
ratio was 0.35%. In year 2020, total asset turnover ratio was 0.33%.

The above analysis shows that total asset turnover ratio in year 2014 is higher as
compared to the rest of years. The total asset turnover ratio was lowest in year 2017,
year 2018 & year 2020.

▪ Fixed Asset Turnover Ratio = Net Sales / Fixed Assets

YEAR 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Net Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

Fixed 40,450.23 41,763.82 37,755.66 47,119.14 44,667.29 45,239.02 47,636.31

Asset
Ratio (In 0.88 0.83 0.78 0.59 0.61 0.66 0.62
%)
(Table 4.7 source: Done by researcher)

FIXED ASSEST TURNOVER RATIO

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

FIXED ASSEST TURNOVER RATIO

(Graph 4.5 source: Done by Researcher)

66 | P a g e
 INTERPRETATIONS:

A higher fixed asset turnover ratio than its competitors, it shows the company is using
its fixed assets to generate sales better than its competitors.

In year 2014, the fixed asset turnover ratio was 0.88%. In year 2015, fixed asset
turnover ratio was 0.83%.

In year 2016, the fixed asset turnover ratio was 0.78%. In year 2017, fixed asset
turnover ratio was 0.59%.

In year 2018, the fixed asset turnover ratio was 0.61%. In year 2019, fixed asset
turnover ratio was 0.66%. In year 2020, fixed asset turnover ratio was 0.62%.
The above analysis shows that fixed asset turnover ratio in year 2015 & 2016 was higher
compare to the rest of the years which shows the company’s assets were performing
better in those years. The lowest ratio was recorded in year 2017.

• FINANCIAL LEVERAGE RATIO:

▪ Total Debt to Asset = Total Debt / Total Assets

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Total 33,497.16 36,020.25 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Debt
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,010 84,162.93 89,748.15
Assets
Ratio (In 1 1 1 1 1 1 1
%)
(table 4.8 source: Done by researcher)

67 | P a g e
 TOTAL DEBT TO ASSET
1.2

0.8

0.6

0.4

0.2

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

TOTAL DEBT TO ASSET

(Graph 4.6 source: Done by researcher)

INTERPRETATION:

The debt to asset ratio is very important in determining the financial risk of acompany.
A ratio greater than 1 indicates that a significance portion of asset is funded with debt
and that a company has a higher default risk. Therefore lower the ratio, safer the
company.

In year 2014, the total debt to asset ratio was 0.46%. In year 2015, total debt to asset
ratio was 0.47%.

In year 2016, the total debt to asset ratio was 1%. In year 2017, total asset to asset
ratio was 1%.

In year 2018, the total debt to asset ratio was 1%. In year 2019, total debt to asset ratio
was 1%. In year 2020, the total debt to asset ratio was 1%.
The above analysis shows in year 2020 total debt to asset ratio was highest which
means the company was not safe. Also as of now the company is under debt only, but
in initial years company was safe as the ratio was less then 1.

▪ Total Debt to Equity Ratio = Total Debt / Shareholder’s Equity

68 | P a g e
Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-
Mar Mar Mar Mar Mar Mar Mar
Total Debt 33,497.16 36,020.25 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15

Shareholder’s 237.29 270.48 270.48 270.5 270.5 270.5 270.5

Equity
Ratio (In %) 1.41 1.33 2.59 3.06 3.03 3.11 3.31

(Table 4.9 source : Done by Researcher)

DEBT EQUITY RATIO

3.5

2.5

1.5

0.5

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

DEBT EQUITY RATIO

(Graph 4.7 source: Done by Researcher)

A higher ratio indicates that the company is getting more of its financing by borrowing
money, which subjects the company to potential risk if debt levels are too high. A lower
ratio indicates that the company is not too much dependent on its borrowed funds.

In year 2014, the total debt to equity ratio was 1.41%. In year 2015, total debt to equity
ratio was 1.33%.

In year 2016, the total debt to equity ratio was 2.59%. In year 2017, total debt to equity
ratio was 3.06%.

In year 2018, the total debt to equity ratio was 3.03%. In year 2019, total debt to equity

69 | P a g e
 ratio was 3.11%. In year 2020, the total debt to equity ratio was 3.31%.

The above analysis shows total debt to equity in 2019 & 2020 was the higher as
compared to 2014 & 2015. The total debt to equity was highest in 2020 and lowest in
2015.

▪ Long Term Debt to Total Asset = Long Term Debt / Total

Assets

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Long 30,469.94 32,618.38 22,413.88 25,142.96 22,356.31 31,139.23 32,695.14
term Debt
Total 71,398.26 75,442.85 70,059.71 82,920.97 82,900.97 84,162.93 89,748.15
Assets
Ratio (In 0.42 0.43 0.31 0.30 0.27 0.36 0.36
%)

(Table 4.10 source: Done by Researcher)

LONG TERM DEBT TO TOTAL ASSETS

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

LONG TERM DEBT TO TOTAL ASSETS

(Graph 4.8 source: Done by Researcher)

70 | P a g e
 INTERPRETATIONS:

A higher ratio indicates that the company is getting more of its financing by borrowing
money, which subjects the company to potential risk if debt levels are too high.
Although a ratio result that is considered indicative of a "healthy" company varies by
industry, generally speaking, a ratio result of less than 0.5 is considered good.
In year 2014, the total debt to asset ratio was 0.42%. In year 2015, total debt to asset
ratio was 0.43%.

In year 2016, the total debt to asset ratio was 0.31%. In year 2017, total asset to asset
ratio was 0.30%.

In year 2018, the total debt to asset ratio was 0.27%. In year 2019, total debt to asset
ratio was 0.36%. In year 2020, the total debt to asset ratio was 0.36%.

The above analysis shows that initially company was having more long term debts to
asset ratio and after that the long term debts to asset ratio is almost same in all the years
and is less than 0.5 which means company is performing good.

▪ Equity Multiplier = Total Asset / Shareholder’s Equity

Year 2014- 2015- 2016- 2017- 2018-Mar 2019- 2020-

Mar Mar Mar Mar Mar Mar
Total Assets 71.398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15

Shareholder’s 237.29 270.48 270.48 270.5 270.5 270.5 270.5

Equity
Ratio (In %) 1.41 1.33 2.59 3.06 3.03 3.11 3.31

(Table 4.11 source: Done by Researcher)

71 | P a g e
 EQUITY MULTIPLIER
3.5

2.5

1.5

0.5

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

EQUITY MULTIPLIER

(Graph 4.9 source: Done by researcher)

INTERPRETATION:

A high multiplier indicates that a significant portion of a firm’s assets are financed by
debt, while a low multiplier shows that either the firm is unable to obtain debt from
lenders or the management is avoiding the use of debt to purchase assets.

In year 2014, the equity multiplier was 3.00%. In year 2015, equity multiplier was
2.78%.

In year 2016, the equity multiplier was 2.59%. In year 2017, equity multiplier was
3.06%.

In year 2018, the equity multiplier was 3.03%. In year 2019, equity multiplier was
3.11%. In year 2020, the equity multiplier was 3.31%.

The above analysis shows that in the last two years equity was higher as compared to
the rest of the years which means the performance of the company was better before
2017.

• RETURN RATIO:

72 | P a g e
 ▪ Return on Asset = Net Profit / Total Asset

Year 2014- 2015- 2016- 2017-Mar 2018-Mar 2019- 2020-

Mar Mar Mar Mar Mar
Net profit -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38

Total 71,398.26 75,442.85 70,059.71 82,920.97 82,900.97 84,162.93 89,748.15

Assets
Ratio (In -0.0036 0.0042 0.0094 0.0108 0.293 0.0279 0.0113
%)

(Table 4.12 source: Done by researcher)

RETURN ON ASSEST
0.035

0.03

0.025

0.02

0.015

0.01

0.005

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar
-0.005

-0.01

RETURN ON ASSEST

(Graph 4.10 source: Done by researcher)

INTERPRETATION:

ROAs over 0.05 are generally considered good and over 0.20 are excellent. However,
ROAs should always be compared amongst firms in the same sector.

In year 2014, the return on asset ratio was (0.0036%). In year 2015, return on asset
ratio was 0.0022%.
73 | P a g e
 In year 2016, the return on asset ratio was 0.0094%. In year 2017, the return on asset
ratio was 0.0108%.

In year 2018, the return on asset was 0.0293%. In year 2019, the return on asset ratio
was 0.0279%. In year 2020, the return on asset was 0.0113%.

The above analysis shows that return on assets of all years is not excellent. Only in
the year 2018, year 2019 the returns was good.

▪ Return on Equity = Net Profit / Shareholder’s Equity

Year 2014- 2015- 2016- 2017- 2018-Mar 2019-Mar 2020-

Mar Mar Mar Mar Mar
Net profit -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38

Shareholder’s 237.29 270.48 270.48 270.5 270.5 270.5 270.5

Equity
Ratio (In %) -1.09 0.62 2.44 3.31 8.90 8.71 3.76

(Table 4.13 source: Done by Researcher)

RETURN ON EQUITY
10

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

-2

RETURN ON EQUITY

74 | P a g e
 (Graph 4.11 source: Done by Researcher)

INTERPRETATION:

A higher ROE suggests that a company’s management team is more efficient when it
comes to utilizing investment financing to grow their business (and is more likely to
provide better returns to investors). A low ROE, however, indicates that a company may
be mismanaged and could be reinvesting earnings into unproductive assets.

In year 2014, the return on asset ratio was (1.09%). In year 2015, return on asset ratio
was 0.62%.

In year 2016, the return on asset ratio was 2.44%. In year 2017, the return on asset ratio
was 3.31%.

In year 2018, the return on asset was 8.90%. In year 2019, the return on asset ratio was
8.71%. In year 2020, the return on asset was 3.76%.

The above analysis shows that return on equity of year 2018 & 2019 is excellent. And
it was not good in the year 2014 but in the rest of the years it’s good.

❖ LIQUIDATION RATIO:

▪ Current Ratio = Current Assets /Current Liabilities

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Current 13,360.88 14,916.36 17,118.49 19,825.50 20,675.05 21,055.96 23,754.71
Assets
Current 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio (In 0.61 0.70 0.63 0.55 0.54 0..73 0.86
%)

(Table 4.14 source: Done by Researcher)

75 | P a g e
 CURRENT RATIO
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

CURRENT RATIO

(Graph 4.12 source: Done by researcher)

INTERPRETATION:

A current ratio that is in line with the industry average or slightly higher is generally
considered acceptable. A current ratio that is lower than the industry average may
indicate a higher risk of distress or default. Similarly, if a company has a very high
current ratio compared to their peer group, it indicates that management may not be
using their assets efficiently.
In year 2014, the current ratio was 0.61%. In year 2015, current ratio was 0.70%.

In year 2016, the current ratio was 0.63%. In year 2017, the current ratio was 0.55%.

In year 2018, the current ratio was 0.54%. In year 2019, the current ratio was 0.73%. In
year 2020, the current ratio was 0.86%.

The above analysis shows that the current ratio in year 2020 is the highest is not good
for the company whereas the other year’s ratio is good and not very harmful for the
company.

▪ Quick Ratio = Quick Assets / Quick Liabilities

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
76 | P a g e
Quick 6,097.62 7,064.80 4,203.40 4,786.42 3,974.71 5,232.71 6,520.08
Assests
Quick 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio (In 0.28 0.33 0.15 0.13 0.10 0.18 0.23
%)

(Table 4.15 source: Done by Researcher)

QUICK RATIO
0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

QUICK RATIO

(Graph 4.13 source: Done by Researcher)

INTERPRETATION:

The higher the ratio result, the better a company's liquidity and financial health; the
lower the ratio, the more likely the company will struggle with paying debts. Ideal Ratio
is 1.

In year 2014, the Quick ratio was 0.28%. In year 2015, Quick ratio was 0.33%.

In year 2016, the Quick ratio was 0.15%. In year 2017, the Quick ratio was 0.13%.

In year 2018, the Quick ratio was 0.10%. In year 2019, the Quick ratio was 0.18%. In
year 2020, the Quick ratio was 0.23%.

The above analysis shows the quick ratio of year 2018 is the lowest as compared to
rest of the years which means that company has problem with debts. The rest of the
77 | P a g e
 year’s ratio is also no so good enough for the company as they are less than 1.

▪ Cash Ratio = Cash and Cash Equivalents / Current Liabilities

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Cash and 1,555.01 1,500.85 663.16 954.3 1,185.78 787.45 2,094.18
Cash
Equivalen
Current 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio (In 0.03 0.07 0.02 0.02 0.03 0.02 0.07
%)
(Table 4.16 source: Done by Researcher)

CASH RATIO
0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

CASH RATIO

(Graph 4.14 source: Done by Researcher)

INTERPRETATIONS:

A cash ratio is expressed as an amount, larger or smaller than 1. When the ratio is
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 determined, if the outcome is equal to 1, the corporation has exactly the same sum of
current liabilities as assets and cash equivalents are paying off those debts.

In year 2014, the cash ratio was 0.03%. In year 2015, cash ratio was 0.07%.

In year 2016, the cash ratio was 0.02%. In year 2017, the cash ratio was 0.02%.

In year 2018, the cash ratio was 0.03%. In year 2019, the cash ratio was 0.02%. In year
2020, the cash ratio was 0.07%.

The above analysis shows in all the years the cash ratio is smaller than 0.5 which is not
good. So the overall analysis suggests that the cash ratio of this company is not good.

▪ Net Working Capital to Sales Ratio = Working Capital / Sales

Year 2014- 2015- 2016- 2017- 2018- 2019- 2020-

Mar Mar Mar Mar Mar Mar Mar
Working 36,643.08 34,472.00 43,889.43 55,329.07 58,583.45 49,629.53 51,338.67
Capital
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.24 30,267.21 29,698.98

Ratio (In 1.02 0.99 1.48 1.96 2.14 1.63 1.72

%)
(Table 4.17 source: Done by Researcher)

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 NET WORKING CAPITAL TO SALES RATIO
2.5

1.5

0.5

0
2014-Mar 2015-Mar 2016-Mar 2017-Mar 2018-Mar 2019-Mar 2020-Mar

NET WORKING CAPITAL TO SALES RATIO

(Graph 4.15 source: Done by Researcher)

INTERPRETATIONS:

A high turnover ratio shows that management is being very efficient in using a
company’s short-term assets and liabilities for supporting sales. In contrast, a low ratio
may indicate that a business is investing in too many accounts receivable and inventory
to support its sales, which could lead to an excessive amount of bad debts or obsolete
inventory.

In year 2014, the Net Working Capital to Sales Ratio was 1.02%. In year 2015, Net
Working Capital to Sales Ratio was 0.99%.

In year 2016, the Net Working Capital to Sales Ratio was 1.48%. In year 2017, the
Net Working Capital to Sales Ratio was 1.96%.

In year 2018, the Net Working Capital to Sales Ratio was 2.14%. In year 2019, the
Net Working Capital to Sales Ratio was 1.63%. In year 2020, the Net Working Capital
to Sales Ratio was 1.72%.
The above analysis shows that the Net Working Capital to Sales Ratio of the year
2018 is highest and rest of the years the ratio is average, so company should take some
initiative.

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CHAPTER 5

CONCLUSION AND SUGGESTION

5.1 FINDINGS:
From the study analysis on Power industry and data analysis and interpretations of
the ratios of Tata power Ltd the followings findings have been given:

• Power Industry has led India’s economic growth and this sector’s
contribution to national GDP has raised.
• Debt equity share ratio of Tata power goes high as compared to last years
which is to be risk of defaulting on, or being unable to repay, your debt
increases as your debt-to-equity ratio rises. A reasonable amount of debt can
help you grow your small business, but too much can overburden you with
high interest payments.
• The power sector in India has grown at almost double the rate of the rate
of other country’s power sector.
• The overall performance of the company is good and there is a continuous
flow of project business. The companies are continuing its drivers for
volume with a continuous focus on profitability.
• By analyzing the current trend of Indian Economy and power industry I have
found that being a developing economy there is lot of scope for growth and
this industry still has to cross many levels so there are huge opportunities to
invest in.
• Net profit margin of Tata power is in negative as compared to others
companies and a negative net profit margin results from the "net" part of
the equation — the balance between revenue and expenses is off. It means
that the money you make from selling your products or services is not
enough to cover the cost of making or selling those products or services.

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5.2 CONCLUSION:

• Global recession had an effect on the growth of Power industry but it was a short
term phenomenon. The industry is bouncing back. One factor favoring this point is
that India has become a hot destination for companies of diverse nature to invest
in. In spite of it being a tough year for all the companies across the globe, Indian
market has given good performance as compared to other companies in the world.
A continuous effort at cost cutting and improving productivity will help the
companies in making reasonable profits despite the impact of higher commodity
prices and weaker rupee.

• Fundamental approach is valid and can produce superior returns to investors who
are committing funds in equity shares in Indian stock market on a long term
perspective. Investors should access the relative performance of the economy, the
state of the industry and also the financial health of the companies before choosing
a particular share as the medium for their financial investment. The linkage of the
Indian stock market system with the external world, real economic activities of the
country, capital intensity in the industry, earnings growth of individual firms, all are
worth to consider for assessing the actual worth of a stock. Size effect is visible and
investment in medium/small segments delivers better returns than the returns by
large cap stocks. PE ratio could be effectively used as a tool for locating mispriced
stocks in Indian stock market. Portfolio investment again helps the investors to
blow up the returns and minimize the risks from their stock market investments.
The results could be reinforced by assessing the performance of stocks from several
international markets.
❖ The study is made on the topic financial performance using ratio analysis with
seven years data in Tata power Limited..
❖ The current and liquid ratio indicates the short term financial position of Tata
power Limited whereas debt equity and proprietary ratio show the long term
financial position.
❖ Similarly, profitability ratio are helpful in evaluating the efficiency of
performance in Tata Power Limited.
❖ The financial performance of the company for the seven years is analyzed and
it is proved that the company is financially sound.

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5.3 SUGGESTION:
• By analyzing the Powers companies with the help of equity analysis, it has been
revealed that this industry has a lot of potential to grow. So recommending
investing in Powers industry with no doubt is going to be a good and smart
option because this industry is booming like never before not only in India but
all over the world.
• Long term investors can include these top power companies in his portfolio
because the growth rates and earnings are good compared to others stocks.
Therefore investors can include this in their portfolio to earn the higher return
on their investment.
• There are various factors which effects on stock market, so an investor must
be aware of all those.

• Short term investors should look on various support and resistance of stocks to
buy or sell and make profit.
• An investor must take research about stock of company and its previous data
before investing.
• Current ratio must be improved by Tata power and it should be in ideal ratio 2:1
so that there are possibilities to meet the current obligations for the company.
• Company which is less popular in stock market must adopt some strategies for
investors to encourage them to invest in their company.

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5.4 HYPOTHESIS TESTING:
As per the above analysis, hypothesis analysis are as follows:

1. H0 - Tata power ltd have performed equally well in the last seven years.

H1 - Tata power ltd have not performed equally well in the last seven years.

2. H0 - There is no significant difference in profitability ratio in last seven years.

H1 - There is significant difference in profitability ratio in last seven years.

3. H0 - There is no significant difference in Liquidity ratio in last seven years.

H1 - There is significant difference in Liquidity ratio in last seven years.

4. H0 - There is significant difference in Financial Leverage ratio in last seven years.

H1 - There is no significant difference in Financial Leverage ratio in last seven

years.

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5.5BIBLIOGRAPHY:

➢ https://www.tatapower.com/
➢ https://www.equitymaster.com/
➢ https://economictimes.indiatimes.com/
➢ https://en.wikipedia.org/wiki/Tata_Power
➢ https://www.investopedia.com/
➢ https://www.tatapower.com/pdf/investor-relations/96Annual-Report
➢ https://www.equitymaster.com/research-it/annual-results-analysis/
➢ https://economictimes.indiatimes.com/tata-power-company-
ltd/profitandlose/companyid-12918.cms
➢ https://www.equitymaster.com/research-it/annual-results-analysis/

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