TABLE OF CONTENT

CHAPTER PARTICULARS PAGE NO.

EXECUTIVE SUMMARY, INTRODUCTION 5-29
AND DESIGN OF THE STUDY
1.1 Executive Summary 6
1.2 Introduction of the Study 8
1.3 Objective of the Study 24

CHAPTER I 1.4 Research Methodology 25-26

1.4.1 Research Design 25
1.4.2 Nature of Data 25
1.4.3 Methods Data Collection 25
1.4.4 Research Tools 25
1.5 Limitations of the Study 26
CHAPTER II REVIEW OF LITERATURE 27-34
PROFILE 35-65
CHAPTER III 3.1 Industry Profile 37
3.2 Company Profile 55
CHAPTER IV DATA ANALYSIS AND INTERPRETATION 66-84
FINDINGS AND SUGGESTIONS 85-88
CHAPTER V 5.1 Findings 86
5.2 Suggestions 88
CONCLUSION AND BIBLIOGRAPHY 89-92
CHAPTER VI 6.1 Conclusion 89
6.2 Bibliography 91
APPENDICES 93-97

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 CHAPTER - I

EXECUTIVE SUMMARY, INTRODUCTION AND

DESIGN OF THE STUDY

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 1.1 EXECUTIVE SUMMARY

Infrastructure is the basic physical and organizational structures needed for the
operation of a society or enterprise, or the services and facilities necessary for
an economy to function. The term typically refers to the technical structures that
support a society, such as roads, water supply, sewers, power grids, and
telecommunications. Within the Infrastructure of India, the transportation sector
is the most important, including the aviation, ports, roads, rail system and
logistics. The agriculture sector comprises infrastructure-related storage
facilities, construction relating to agro-processing projects and reservation and
storage of perishable goods. Among others essential sectors, real-estate
development, including industrial parks, special economic zones, tourism and
entertainment centers, educational institutions and hospitals and solid waste
management systems, also play significant role in Indian economy.

Sky fab company ltd is a part of the Reliance Group, one of the leading business
houses in India.

Incorporated in 1929, Reliance Infrastructure is one of India’s fastest growing

companies in the infrastructure sector. It ranks among India’s top listed private
companies on all major financial parameters, including assets, sales, profits and
market capitalization.

Reliance Infrastructure companies distribute more than 36 billion units of

electricity to over 30 million consumers across an area that spans over 1,24,300
sq kms and includes India’s two premier cities, Mumbai and Delhi. The
Company generates over 940 MW of electricity through its power stations
located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa.

Reliance Infrastructure has emerged as the leading player in India in the

Engineering, Procurement and Construction (EPC) segment of the power sector.

In the last few years, Reliance Infrastructure has expanded its foot-print much
beyond the power sector. Currently, Reliance Infrastructure group is engaged in
the implementation of projects not only in the fields of generation, transmission,
distribution and trading of power but also in other key infrastructural areas such

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as highways, roads, bridges, metro rail and other mass rapid transit systems,
special economic zones, real estate, airports, cement, etc.

Thus this thesis is about financial statements analysis of Sky fab company ltd.
The main motto behind choosing this company is it is one of the leading private
sector undertaking and in the present context of disinvestment policy of
government of India, many of the investors are interested in knowing the
performance of this company and so the study has been undertaken. The
objectives of the research include analyzing the profitability and solvency
position of the company. In order to analyze the financial statements the Ratio
analysis method was used. The expected results would reveal the liquidity,
profitability and solvency position.

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 1.2 INTRODUCTION OF THE STUDY

Finance is one of the most primary requisites of a business and the

modern management obviously depends largely on the efficient management of
the finance.

Financial statements are prepared primarily for decision making. They

play a dominant role in setting the frame work of managerial decisions. The
finance manager has to adhere to the five R’s with regard to money. This right
quantity of money for liquidity consideration of right quality. Whether owned or
borrowed funds. At the right time to preserve solvency from the right sources
and at the right cost of capital.

The term financial analysis is also known as ‘analysis and interpretation

of financial statements’ refers to the process of determining financial strength
and weakness of the firm by establishing strategic relationship between the
items of the Balance Sheet, Profit and Loss account and other operative data.

The purpose of financial analysis is to diagnose the information contained in

financial statements so as to judge the profitability and financial soundness of
the firm.

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Financial statement:

A financial statement is an organized collection of data according to logical and

consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show a position at a moment
of time as in the case of a balance sheet, or may reveal a series of activities over
a given period of time, as in the case of an income statement. Thus, the term
financial statement generally refers to the basis statements;

i) The income statement

An income statement is a summary of the revenues and expenses of business
over a period of time, usually one month, three months, or one year. It
summarizes the results of the firm’s operating and financing decisions during
that time. Due to income statement Operating decisions of the company
apply to production and marketing such as sales/revenues, cost of goods sold
administrative and general expenses (advertising, office salaries). It provides
operating income/earnings before interest and taxes (EBIT)

ii) The balance sheet

Balance sheets provide the observant with a clear picture of the financial
condition of the company as a whole. It lists in detail the tangible and the
intangible goods that the company owns or owes. These good can be broken
further down into three main categories; the assets, the liabilities and the
shareholder’s equity.
 Assets
Assets include anything that the company actually owns and has disposal
over. Examples of the assets of a company are its cash, lands, buildings, and
real estates, equipment, machinery, furniture, patents and trademarks, and
money owed by certain individuals or/and other businesses to the particular
company. Assets that are owed to the company are referred to as accounts-,
or notes receivables.

 Current Assets include anything that company can quickly monetise. Such
current assets include cash, government securities, marketable securities,
accounts receivable, notes receivable (other than from officers or
employees), inventories, prepaid expenses, and any other item that could be
converted into cash within one year in the normal course of business.
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 Fixed Assets are long-term investments of the company, such as land,
plant, equipment, machinery, leasehold improvements, furniture, fixtures,
and any other items with an expected useful business life usually measured
in a number of years or decades (as opposed to assets that wear out or are
used up in less than one year. Fixed assets are usually accounted as
expenses upon their purchase. They are normally not for resale and are
recorded in the Balance Sheet at their net cost less (less is accounting term
for minus) accumulated depreciation.

 Other Assets include any intangible assets, such as patents, copyrights,

other intellectual property, royalties, exclusive contracts, and notes
receivable from officers and employees.

 Liabilities
Liabilities are money or goods acquired from individuals, and/or other
corporate entities. Some examples of liabilities would be loans, sale of
property, or services to the company on credit. Creditors (those that loan to
the company) do not receive ownership in the business, only a (usually
written) promise that their loans will be paid back according to the term
agreed upon.
 Current Liabilities are accounts-, and notes-, taxes payable to financial
institutions, accrued expenses (eg. wages, salaries), current payment (due
within one year) of long-term debts, and other obligations to creditors due
within one year.

 Long-Term Liabilities are mortgages, intermediate and long-term loans,

equipment loans, and other payment obligation due to a creditor of the
company. Long-term liabilities are due to be paid in more than one year.

Shareholder's equity
The shareholder’s equity (also called as net worth or capital) is money or
other forms of assets invested into the business by the owner, or owners,
to acquire assets and to start the business. Any net profits that are not paid
out in form of dividends to the owner, or owners, are also added to the

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 shareholder’s equity. Losses during the operation of the business are
subtracted from the shareholder’s equity.

iii) A statement of retained earnings

iv) A statement of charge in financial position in addition to the above two
statement.

Financial statement analysis:

It is the process of identifying the financial strength and weakness of a firm

from the available accounting data and financial statement. The analysis is done
by properly establishing the relationship between the items of balance sheet and
profit and loss account the first task of financial analyst is to determine the
information relevant to the decision under consideration from the total
information contained in the financial statement. The second step is to arrange
information in a way to highlight significant relationship. The final step is
interpretation and drawing of inferences and conclusion. Thus financial analysis
is the process of selection relating and evaluation of the accounting
data/information.

Significance of Financial Statement

Financial statement analysis is a significant business activity because a

corporation's financial statements provide useful information on its economic
standing and profit levels. These statements also help an investor, a regulator or
a company's top management understands operating data, evaluate cash receipts
and payments during a period and appraise owners' investments in the company.

Function
1. Financial statement analysis allows a corporation to review operating data and
evaluate periodic business performance. For instance, Company A may analyze
levels of cash, inventories and accounts receivable to appraise short-term assets.
A corporation also may analyze financial statements to gauge levels of cash
flows and owner investments. Alternatively, a regulator, such as the Securities
and Exchange Commission (SEC), may review a company's retained earnings
statement to appraise corporate shareholders' accounts.

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 Time Frame
2. A company's accounting department may perform financial statement analysis
throughout the year or at a specific point in time. As an example, Mr. B., an
accountant at a large retail store, may review the company's financial position at
the end of the year to gauge cash available and inventory quantities on hand.
Alternatively, Mr. B. may review levels of sales and expenses each month to
understand whether the company's expenses are appropriate based on sales.

Types
3. Generally accepted accounting principles (GAAP) and regulatory guidelines,
such as SEC rules, require a company to prepare a full set of financial
statements on a quarterly or annual basis. A full set of financial statements
includes a balance sheet (or statement of financial position), a statement of
income (also known as statement of profit and loss), a statement of cash flows
and a statement of retained earnings (also called statement of owners' equity).

Features
4. Financial statement analysis is a significant business practice because it helps
top management review a corporation's balance sheet and income statement to
gauge levels of economic standing and profitability. Let's say Mr. A., the chief
financial officer (CFO) of a large distribution company, reviews the company's
balance sheet and compares short-term assets, such as cash and inventories, and
short-term liabilities, such as salaries, interest and taxes payable. Mr. A. may
note that the $100 million difference between short-term assets and liabilities
(also called working capital) is a sign of economic health.

Benefits
5. Financial statement analysis may be pivotal for management to understand
levels of cash receipts and disbursements in corporate operations. A statement
of cash flows lists cash flows related to operating activities, investments and
financing transactions. A statement of owners' equity may help an investor
identify a company's shareholders. For example, Mr. A., the CFO of the sample
company, may review cash payments for operating activities to gauge trends in
interest payments.

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Types of Analysis
1) Comparative analysis statement
2) Common-size analysis statement
3) Trend analysis
4) Ratio analysis.

1) Comparative financial statement:

Comparative financial statement is those statements which have been designed

in a way so as to provide time perspective to the consideration of various
elements of financial position embodied in such statements. In these statements,
figures for two or more periods are placed side by side to facilitate comparison.
But the income statement and balance sheet can be prepared in the form of
comparative financial statement.

(i) Comparative income statement:

The income statement discloses net profit or net loss on account of operations.
A comparative income statement will show the absolute figures for two or more
periods; the absolute change from one period to another and if desired; the
change in terms of percentages. Since, the figures for two or more periods are
shown side by side; the reader can quickly ascertain whether sales have
increased or decreased, whether cost of sales has increased or decreased etc.

(ii) Comparative balance sheet:

Comparative balance sheet as on two or more different dates can be used for
comparing assets and liabilities and finding out any increase or decrease in
those items. Thus, while in a single balance sheet the emphasis is on present
position, it is on change in the comparative balance sheet. Such a balance sheet
is very useful in studying the trends in an enterprise.

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2) Common-size financial statement:

Common-size financial statement are those in which figures reported are

converted into percentages to some common base in the income statement the
sales figure is assumed to be 100 and all figures are expressed as a percentage
of sales. Similarly, in the balance sheet, the total of assets or liabilities is taken
as 100 and all the figures are expressed as a percentage of this total.

3) Trend Analysis:

Trend analysis is a study of a company's financial performance over an

extended period of time. Trend analysis helps to understand overall financial
performance over a period of time. In other words it is a detailed examination of
a company's financial ratios and cash flow for several accounting periods to
determine changes in a borrower's financial position. Trend analysis is a key
part of credit underwriting, and is a useful and necessary tool in determining
whether the borrower's financial strength is improving or deteriorating. Key
ratios examined include debt coverage ratio, turnover ratio (conversion of
inventory and receivables to cash), and the quick assets ratio or quick ratio
(current assets divided by current liabilities).

4) Ratio analysis:

Ratio analysis is a widely used tool of financial analysis. The term ratio in it
refers to the relationship expressed in mathematical terms between two
individual figures or group of figures connected with each other in some logical
manner and are selected from financial statements of the concern. The ratio
analysis is based on the fact that a single accounting figure by itself may not
communicate any meaningful information but when expressed as a relative to
some other figure, it may definitely provide some significant information the
relationship between two or more accounting figure/groups is called a financial
ratio helps to express the relationship between two accounting figures in such a
way that users can draw conclusions about the performance, strengths and
weakness of a firm.

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Classification of ratios:
A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios

A) LIQUIDITY RATIOS:
These ratios portray the capacity of the business unit to meet its short term
obligation from its short-term resources (e.g.) current ratio, quick ratio.

i) Current ratio:
Current ratio may be defined as the relationship between current assets and
current liabilities it is the most common ratio for measuring liquidity. It is
calculated by dividing current assets and current liabilities. Current assets are
those, the amount of which can be realized with in a period of one year. Current
liabilities are those amounts which are payable with in a period of one year.

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

ii) Liquid Ratio:

The term ‘liquidity’ refers to the ability of a firm to pay its short-term obligation
as and when they become due. The term quick assets or liquid assets refers
current assets which can be converted into cash immediately it comprises all
current assets except stock and prepaid expenses it is determined by dividing
quick assets by quick liabilities.

Liquid assets
Liquid ratio = -------------------------
Liquid liabilities

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iii). ABSOLUTE LIQUIDITY RATIO:
Absolute liquid assets include cash, bank, and marketable securities. This ratio
is obtained by dividing cash and bank and marketable securities by current
liabilities.

Cash + bank +marketable securities

Absolute liquidity ratio = -----------------------------------------------------
Current liabilities

B) LEVERAGE RATIOS:
Many financial analyses are interested in the relative use of debt and equity in
the firm. The term ‘solvency’ refers to the ability of a concern to meet its long-
term obligation. Accordingly, long-term solvency ratios indicate a firm’s ability
to meet the fixed interest and costs and repayment schedules associated with its
long-term borrowings. (E.g.) debt equity ratio, proprietary ratio, etc.

i) Debt equity ratio:

It expresses the relationship between the external equities and internal equities
or the relationship between borrowed funds and ‘owners’ capital. It is a popular
measure of the long-term financial solvency of a firm. This relationship is
shown by the debt equity ratio. This ratio indicates the relative proportion of
debt and equity in financing the assets of a firm. This ratio is computed by
dividing the total debt of the firm by its equity (i.e.) net worth.

Outsider’s funds
Debt equity ratio = ----------------------------
Proprietor’s funds

ii) Proprietary ratio:

Proprietary ratio relates to the proprietors funds to total assets. It reveals the
owners contribution to the total value of assets. This ratio shows the long-time
solvency of the business it is calculated by dividing proprietor’s funds by the
total tangible assets.

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 Proprietor’s funds
Proprietary ratio = ------------------------------------
Total tangible assets

C) ACTIVITY RATIOS:
These ratios evaluate the use of the total resources of the business concern along
with the use of the components of total assets. They are intended to measure the
effectiveness of the assets management the efficiency with which the assts are
used would be reflected in the speed and rapidity with which the assets are
converted into sales. The greater the rate of turnover, the more efficient the
management would be (E.g.) stock turnover ratio, fixed assets turnover ratios
etc.

i) Fixed assets turnover ratio:

The ratio indicates the extent to which the investments in fixed assets contribute
towards sales. If compared with a previous year. It indicates whether the
investment in fixed assets has been judious or not the ratio is calculated as
follows.
Net sales
Fixed assets turnover ratio = -------------------
Fixed assets

ii) Working capital turnover ratio:

Working capital turnover ratio indicates the velocity of the utilization of net
working capital. This ratio indicates the number of times the working capital is
turned over in the course of a year. It is a good measure over –trading and
under-trading.

Net sales
Working capital turnover ratio = ----------------------------
Net working capital

iii) Return on total assets:

Profitability can be measured in terms of relationship between net profit and
total assets. It measures the profitability of investment. The overall profitability
can be known by applying this ratio.

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 Net profit
Return on total assets = ----------------------------- x100
Total assets

iv) TOTAL ASSETS TURNOVER RATIO:

This ratio is an indicator of how the resources of the organization utilized for
increasing the turnover. It shows the ratio between the total assets and the net
sales of the company. From this ratio one can understand how the assets are
performing and being utilized in achieving the objectives of the company.

Total assets
Total assets turnover ratio = -----------------
Net assets

v) CAPITAL TURNOVER RATIO:

This is a ratio which shows how much sales are entertained from the capital. It
shows how the sales are attracted from the Proprietor's Fund.

Sales
Capital turnover ratio = -----------------------
Proprietor’s fund

D) PROFITABILITY RATIOS:
The profitability ratios of a business concern can be measured by the
profitability ratios. These ratios highlight the end result of business activities by
which alone the overall efficiency of a business unit can be judged, (E.g.) gross
ratios, Net profit ratio.

i) Gross profit ratio:

This ratio expresses the relationship between Gross profit and sales. It indicated
the efficiency of production or trading operation. A high gross profit ratio is a
good management as it implies that cost of production is relatively low.

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 Gross profit
Gross profit ratio = ----------------------------------- x 100
Net sales
ii) Net profit ratio:
Net profit ratio establishes a relationship between net profit (after taxes) and
sales. It is determined by dividing the net income after tax to the net sales for
the period and measures the profit per rupee of sales.

Net profit
Net profit sales = ----------------- x 100
Net sales

iii) Return on Shareholder’s Fund

In case it is desired to work out the productivity of the company from the
shareholder’s point of view, it should be computed as follows:

Net profit after Interest and Tax

Return on shareholder’s fund = ------------------------------------------ X 100

Shareholders’ fund

The term profit here means ‘Net Income after the deduction of interest and tax.
It is different from the “Net operating profit” which is used for computing the
‘Return on total capital employed’ in the business. This is because the
shareholders are interested in Total Income after tax including Net non-
operating Income (i.e. Non- Operating Income - Non-Operating expenses).

iii) EXPENSES RATIO:

There are two main ratios
1) Indirect Expense ratio
2) Direct Expense Ratio

1) Indirect Expense Ratios

This ratio establishes the relationship between various indirect expenses to net
sales.
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a) Administration Expense Ratio:

Administrative expenses
Administrative expenses ratio = ------------------------------- x 100
Sales

b) Selling and Distribution Expense Ratio

Selling & distribution expenses ratio =

Selling &distribution expenses

-------------------------------------------------------------------- x 100
Sales
2) Direct Expense ratio

This ratio establishes the relationship between various direct expenses to net
sales

a) Cost of energy ratio

Cost of energy
Expenses ratio = ------------------------------------------ x 100
Sales

b) Cost of Fuel Ratio

Cost of Fuel
Expenses ratio = ------------------------------------ x 100

Sales

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 c) Cost of tax Ratio

Cost of Tax
Expenses ratio = ------------------------------------ x 100
Sales

d) Expenditure on EPC ratio

Expenditure on EPC
Expenses ratio = ------------------------------------ x 100
Sales

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 IMPORTANCE OF RATIO ANALYSIS

It helps in evaluating the firm’s performance:

With the help of ratio analysis conclusion can be drawn regarding several
aspects such as financial health, profitability and operational efficiency of the
undertaking. Ratio points out the operating efficiency of the firm i.e. whether
the management has utilized the firm’s assets correctly, to increase the
investor’s wealth. It ensures a fair return to its owners and secures optimum
utilization of firms assets

It helps in inter-firm comparison:

Ratio analysis helps in inter-firm comparison by providing necessary data. An

inter firm comparison indicates relative position. It provides the relevant data
for the comparison of the performance of different departments. If comparison
shows a variance, the possible reasons of variations may be identified and if
results are negative, the action may be initiated immediately to bring them in
line.

It simplifies financial statement:

The information given in the basic financial statements serves no useful Purpose
unless it s interrupted and analyzed in some comparable terms. The ratio
analysis is one of the tools in the hands of those who want to know something
more from the financial statements in the simplified manner.

It helps in determining the financial position of the concern:

Ratio analysis facilitates the management to know whether the firms financial
position is improving or deteriorating or is constant over the years by setting a
trend with the help of ratios The analysis with the help of ratio analysis can
know the direction of the trend of strategic ratio may help the management in
the task of planning, forecasting and controlling.

It is helpful in budgeting and forecasting:

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Accounting ratios provide a reliable data, which can be compared, studied And
analyzed. These ratios provide sound footing for future prospectus. The ratios
can also serve as a basis for preparing budgeting future line of action.

Liquidity position:

With help of ratio analysis conclusions can be drawn regarding the Liquidity
position of a firm. The liquidity position of a firm would be satisfactory if it is
able to meet its current obligation when they become due. The ability to met
short term liabilities is reflected in the liquidity ratio of a firm.

Long term solvency:

Ratio analysis is equally for assessing the long term financial ability of the
Firm. The long term solvency s measured by the leverage or capital structure
and profitability ratio which shows the earning power and operating efficiency,
Solvency ratio shows relationship between total liability and total assets.

Operating efficiency:

Yet another dimension of usefulness or ratio analysis, relevant from the View
point of management is that it throws light on the degree efficiency in the
various activity ratios measures this kind of operational efficiency.

Help in investment decisions

It helps in investment decisions in the case of investors and lending decisions in

the case of bankers etc.

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 1.3 OBJECTIVE

1. The purpose of objective of financial analysis is to diagnose the

information contained in financial statements so as to judge the
profitability and financial soundness of the firm.

2. To determine the significance and meaning of the financial statement data

so that forecast may be made of the future earnings, ability to pay interest
and debt maturities (both current and the long term) and profitability of a
sound dividend policy.

3. Compare performance with past performance.

4. To study the efficiency of the operations.

5. To study the risk of operations.

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 1.4 RESEARCH METHODOLOGY:

RESEARCH DESIGN
The descriptive form of research method is adopted for study. The major
purpose of descriptive research is description of state of affairs of the institution
as it exists at present. The nature and characteristics of the financial statements
of Sky fab company ltd have been described in this study.

NATURE OF DATA
The data required for the study has been collected from Primary and secondary
source.
1. The primary data is collected from the questionnaire asked to the
employee.
2. The relevant information taken from annual reports, journals and internet
is secondary data.

METHODS OF DATA COLLECTION

This study is based on the annual report of Sky fab company ltd, magazines,
journals. Hence the information related to, profitability, short term and long
term solvency and turnover were very much required for attaining the objectives
of the present study.

TECHNIQUE USED

Although the ratio analysis has so many limitations but this is best techniques,
which is used internationally, used for measuring the strength and weaknesses
of the company. This is modern method, which shows the overall profitability
of the company, to know the better results the ratios are compared with the
ratios of the other companies.

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 1.5 LIMITATIONS OF THE STUDY

 The period of study is 5 years from 2005-06 to 2009-10

 The company could not provide me the recent data due to financial year
ending.

All the limitations of ratio analysis, common-size statement, comparative

statements, and trend analysis and interpret are applicable to this study.

LIMITATION OF THE RATIO ANALYSIS

The ratio analysis is one of the most powerful tools of the financial analysis.
Though ratios are simple to calculate and easy to understand, they differ from
some serious limitations.
a) Limited use of a single ratio
A single ratio usually does not convey much of the sense. To make a
better interpretation a large number of ratios have to be calculated, which is
likely to confuse the analyst than help him in making any meaningful
conclusions.

b) Lack of Adequate standards

There are no well-accepted standards or rules of thumb for all ratios,
which can be accepted as norms. It renders interpretations of ratios difficult.

c) Window dressing
Financial statements can easily be window dressed to present a better
picture of profitability to the outsiders. Hence one has to be very careful while
making decisions from ratios calculated from such financial statements.

d) Price level changes

While making ratio analysis no consideration is given to the price level
and this makes the interpretations of the ratios invalid.

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 CHAPTER- II
LITERATURE REVIEW

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 LITERATURE REVIEW:
For the purpose of literature review the basic concepts of Fundamental analysis
were studied, and similar studies relating to financial statements analysis are
examined, following are some the articles collected from various blogs and
reports

Article1 : FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is defined as the process of identifying financial

strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account. There are
various methods or techniques that are used in analyzing financial statements,
such as comparative statements, schedule of changes in working capital,
common size percentages, funds analysis, trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations and
also for decision making purposes. They play a dominant role in setting the
framework of managerial decisions. But the information provided in the
financial statements is not an end in itself as no meaningful conclusions can be
drawn from these statements alone. However, the information provided in the
financial statements is of immense use in making decisions through analysis and
interpretation of financial statements.

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement
analysis:

1. Horizontal and Vertical Analysis

2. Ratios Analysis

Article2: ANALYSIS OF FINANCIAL STATEMENTS-SELECTIVE

TOOLS

Any successful business owner is constantly evaluating the performance of his

or her company, comparing it with the company's historical figures, with its
industry competitors, and even with successful businesses from other

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industries. To complete a thorough examination of your company's
effectiveness, however, you need to look at more than just easily attainable
numbers like sales, profits, and total assets. You must be able to read between
the lines of your financial statements and make the seemingly inconsequential
numbers accessible and comprehensible. This massive data overload could seem
staggering. Luckily, there are many well-tested ratios out there that make the
task a bit less daunting. Comparative ratio analysis helps you identify and
quantify your company's strengths and weaknesses, evaluate its financial
position, and understand the risks you may be taking.

Article3: WHY SHOULD I CARE ABOUT FINANCIAL STATEMENT

ANALYSIS?

The detailed information available on financial statements is only of interest to

someone who is doing some extensive research on individual stocks. If you
invest in mutual funds, index funds or ETFs then you don’t need to know the
details but it is useful to know the terminology since fund managers and other
investing types will often talk about details from the financial statements in the
business section of the news.

Article4: FINANCIAL RATIO ANALYSIS FOR PERFORMANCE

CHECK AUTHOR: GOPINATHAN THCCHAPPILLY APR 12, 2009

Used externally, financial ratio analysis can spot better investment options for
investors, and internally, business managers can spot business areas requiring
attention.

Financial analysis using ratios between key values help investors cope with the
massive amount of numbers in company financial statements. For example, they
can compute the percentage of net profit a company is generating on the funds it
has deployed. All other things remaining the same, a company that earns a
higher percentage of profit compared to other companies is a better investment
option.

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Financial Ratios Can Measure Different Things

The Net Profit to Capital Employed ratio mentioned above measures the success
of a company in using funds available to it. There are ratios to measure the
company's:

 Financial health
 Operating performance
 Cash flows and liquidity

Under each category, there are multiple ratios that measure different aspects, or
fine tune the measurements. For example, different profitability ratios measure
profit margins at different stages return on owners' funds and effective tax
burden.

We will be looking at the different ratio categories in separate articles on:

 Profitability Ratios
 Liquidity Ratios
 Debt Ratios
 Performance Ratios

Article5: UNDERSTANING FINANCIAL STATEMENT BY ANA

GONZALEZ RIBIERO ON 6/30/2009

When looking over your investments, do you ever wonder how the value of the
companies you’ve put your money in is determined? What factors decide how
well a company is really doing? What’s the source of the company’s financing?
Will it meet or exceed this quarter’s projections? While some consider the stock
market to be little more than a house of cards, subject to the whims of individual
investors, there are, in fact, some very real and measurable things that can help
you to diagnose the financial health of a company.

Take a statement

It’s not an interrogation but you’ll want to ask the hard questions before you
invest. Only by examining and drawing conclusions from a financial statement,
will you truly know how well a company is doing.

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Know the facts

Investing should never be based on emotion. While you might be tempted to

invest in a company because you like its products or because you’ve just read a
favorable article about it in a magazine or newspaper, you should make sure
you’ve done your research before ponging up your hard earned cash.

Article6: KEY BUSINESS RATIO

Industry Norms and Key Business Ratios:

The following key business ratios were obtained from the public domain and
may not be accurate. However, they will give you a rough idea.

Key Business Ratios can be obtained from companies like D&B (Dun &
Bradstreet) or RMA. Their ratios are developed and derived from the financial
statements in their extensive database. They are based on activities of numerous
industries, includes a combination of financial statements and business ratios to
help the credit community to compare a company's financial performance to its
peer group by industry size and region. For more information and an extensive
list of the key business ratios please contact your local Dun & Bradstreet or
RMA office.

Article7: SEVEN HABITS FOR FINANCIAL STATEMENT ANALYSIS

AND BUSINESS NEWS REPORTING BY CFA INSTITUTE

Journalists and analysts know that “earnings” may not really be earnings and
that press releases can be a way for a company to spotlight good news only.
Add to that the myriad of technical terms, semantic issues, and acronyms and
one can easily get lost trying to discern the real headline. To help navigate
through the maze of financial data, CFA Institute created this checklist to use
when analyzing a company and its financial statements and to better understand
the due diligence that Professionals undertake in developing successful
investment strategies for 2006.

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8. ENVIRONMENTAL AND FINANCIAL PERFORMANCE
LITERATURE, BY DONALD P. CRAM, ON MARCH 27, 2000

"We review the growing literature relating corporate environmental

performance to financial performance. We seek to identify achievements and
limitations of this literature and to highlight areas for further research. Our
primary interest is to assess the adequacy of the literature in informing corporate
managers how, when, and where to make pro-environment investments that will
pay off with financial returns for long-term shareholders. To do so, we create a
conceptual framework that maps the influence of regulators, public health
scientists, environmental advocates, consumers, employees, and other interested
parties upon corporate financial returns. Our discussion has relevance to all
parties interested in influencing corporate actions that affect the environment."

9. JOURNAL OF INDUSTRIAL TECHNOLOGY • VOLUME 19,

NUMBER • FEBRUARY 2003 To APRIL 2003 PAGE, BY Dr. DEVANG P.
MEHTA

"This paper is primarily based on Rogers’ diffusion of innovations theory and

Auger’s empirical study. An empirical research study was conducted to
investigate the perceived financial performance of commercial printing firms
for conducting business-to-customer (B2C) activities using Web technology.
Financial performance was measured using four financial indicators: sales,
profits, costs, and return-on-investment (ROI). The diffusion of innovations
theory states that an innovation brings changes to a company. Web technology
is an innovation that affects company’s performance. This paper investigates the
effect of Web technology on commercial printing firms’ financial performance."

10. JOURNAL OF INTERNATIONAL BUSINESS STUDIES (1995), VOL

26, PAGE 181–202 BY JANET Y. MURRAY, MASAAKI KOTABLE &
ALBERT R. WILDT

"Using a contingency model of global sourcing strategy, this study investigated

the moderating effects of sourcing-related factors on the relationship between

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sourcing strategy and a product's strategic and financial performance. The
results lent some support to the contingency model of global sourcing strategy
in that product innovation, process innovation and asset specificity were
significant moderator variables for financial, but not strategic, performance.
However, the results provided no support for bargaining power of suppliers and
transaction frequency as moderator variables. In other words, in achieving high
financial performance for a product, whether a particular sourcing strategy
should be used for a particular product depended on the levels of product
innovation, process innovation and asset specificity."

11. IMPLICATION FOR FINANCIAL PERFORMANCE AND

CORPORATE SOCIAL RESPONSIBILITIES, BY PHILIPPE
JACQUART, CATHERINE RAMUS & JOHN ANTONAKIS, ON MAY
23, 2004.

"We investigate whether CEO implicit motives predict corporate social

performance and financial performance. Using longitudinal data on 258 CEOs
from 118 firms, and controlling for country and industry effects, we found that
motives significant predicted both financial performance (Tobin's Q and the
CAPM) and social responsibility. In general, need for power and responsibility
disposition were positively predictive whereas need for achievement and
affiliation were negatively predictive of outcomes. Contrary to previous
theorizing, corporate social responsibility had no link to financial performance.
Our findings suggest that executive characteristics have important consequences
for corporate level outcomes."

12. JOURNAL OF OPERATIONAL RESEARCH SOCIETY (2003) VOL-

54, PAGES 48–58, BY E. H. FEROZ

."Ratio analysis is a commonly used analytical tool for verifying the

performance of a firm. While ratios are easy to compute, which in part explains
their wide appeal, their interpretation is problematic, especially when two or
more ratios provide conflicting signals. Indeed, ratio analysis is often criticized
on the grounds of subjectivity that is the analyst must pick and choose ratios in
order to assess the overall performance of a firm. In this paper we demonstrate
that Data Envelopment Analysis (DEA) can augment the traditional ratio
analysis. DEA can provide a consistent and reliable measure of managerial or

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operational efficiency of a firm. We test the null hypothesis that there is no
relationship between DEA and traditional accounting ratios as measures of
performance of a firm. Our results reject the null hypothesis indicating that
DEA can provide information to analysts that is additional to that provided by
traditional ratio analysis. We also apply DEA to the oil and gas industry to
demonstrate how financial analysts can employ DEA as a complement to ratio
analysis."

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CHAPTER III
PROFILE

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 3.1 INDUSTRY PROFLE

INTRODUCTION
Infrastructure is the basic physical and organizational structures needed for the
operation of a society or enterprise, or the services and facilities necessary for
an economy to function. The term typically refers to the technical structures that
support a society, such as roads, water supply, sewers, power grids, and
telecommunications. Infrastructure facilitates the production of goods and
services; for example, roads enable the transport of raw materials to a factory,
and also for the distribution of finished products to markets. In some contexts,
the term may also include basic social services such as schools and hospitals. In
military parlance, the term refers to the buildings and permanent installations
necessary for the support, redeployment, and operation of military forces
Encompassing all things to all people is hardly a useful way to define
infrastructure – clouding investors, governments, and their citizens’ ability to
understand, advocate, and direct capital toward durable, networked assets with
widespread societal benefits. Primary infrastructure components are generally
monopolistic in nature and require large financial commitments for their
development, repair and replacement. They can be built, touched, enabled,
disabled, and function together to form interrelated, dependent systems that
deliver needed commodities and services to society. In doing so, they facilitate
economic productivity and promote a standard of living. Infrastructure can then
be more concisely defined as “The physical components of interrelated systems
providing commodities and services essential to enable, sustain, or enhance
societal living conditions.

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 INFRASTRUCTURE IN INDIA

The time tested Indian organizations provide international investors a lucid

ambiance that ensures the protection of their long-standing endowments. These
entail an independent and vivacious media, a judicial system that can claim
superiority above the government, a refined legal and accounting structure and a
user-friendly infrastructure.

India's self-motivated and extremely viable private sector has been the strength
of character of its financial activities and accounts for more than 76% of its
Gross Domestic Product besides providing significant possibilities for joint
ventures and tie-ups.

At present, India is one of the rapidly emerging markets across the world.
Equipped with highly skilled professionals and technical workforce, that suits
the international standards provide the nation with a discrete cutting edge in
worldwide rivalry.

The road transport of India has been announced as a priority sector with loans
available from the governments at positive provisions. The Monopoly and
Restrictive Trade Practices Act (MRTP Act) was sanctioned in an attempt to
endorse bigger sector to make a foray into the road industry.

To develop the national highways, the National Highways Act has been altered
to assist the diminution of taxes on national motorways, suspension bridges and
passageways. Across the globe, Howrah Bridge at Kolkata is the busiest with
regular stream of 58,000 automobiles and countless pedestrians. Private
contribution in the energy industry has been motivated with the decline of
import tariffs that is a 5 year tariff relief for new energy schemes and a 16%
equity return.

The administration is also considering the latest telecommunications strategy

that targets at the enhancement of quality to an international level and indirectly
triggers the growth of India as a chief manufacturer and exporter of
telecommunication set-ups.

Infrastructure in India include transportation, agriculture, water management,

telecommunications, industrial and commercial development, power, petroleum

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and natural gas, housing and other segments such as mining, disaster
management services, technology-related infrastructure.

Important sectors in Infrastructure in India:

Within the Infrastructure of India, the transportation sector is the most

important, including the aviation, ports, roads, rail system and logistics. The
agriculture sector comprises infrastructure-related storage facilities,
construction relating to agro-processing projects and reservation and storage of
perishable goods. Among others essential sectors, real-estate development,
including industrial parks, special economic zones, tourism and entertainment
centres, educational institutions and hospitals and solid waste management
systems, also play significant role in Indian economy.

Finance for Infrastructure in India:

The rules for government-owned infrastructure companies for raising funds

through initial share offerings are made flexible by the Securities and Exchange
Board of India, which naturally will increase the flow of investment in the
Infrastructure of India. To bridge the wide gap between the potential demand
for infrastructure for high growth and the available supply, there is urgent need
for a close partnership between the public and private sectors, with a vital role
reserved for foreign capital. In India infrastructure sector itself is becoming an
attractive investment area for FDIs. To encourage foreign funds flow into
the Infrastructure in India, the Indian Finance Ministry has allowed Foreign
Institutional Investors (FIIs) also to invest in unlisted companies. FIIs now can
invest 100 per cent of their funds in the Infrastructure in India. In order to make
the core sector more attractive for FDI, the Cabinet Committee on Foreign
Investment (CCFI) has modified the 49 percent cap on foreign equity in the
infrastructure sector to make fund mobilization easier. This major policy
decision which will indirectly raise the foreign equity investment in
infrastructure sector to well over 51 per cent.

Besides, even if allocation in the Infrastructure in India is raised with a greater

inflow of FDI and a large participation of private sector, the immediate problem
will still remain, since, infrastructure is subjected to long gestation period.
Consequently, the inadequacy of Infrastructure in India will continue for quite
some time, unless technology up gradation can be done in the infrastructure
production, including construction activities, for reducing the gestation lags and

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simultaneously improving the quality of products. With this infrastructure
limitation any indiscriminate growth may lead the economy of the country to a
situation of over-heating and a further rise in inflation.

Under the Infrastructure in India the most essential field in which there should
be development is in the urban infrastructure. Except for a few large projects in
a handful of cities, paucity of urban infrastructure projects is a standing
problem. Although city mass transport systems and airports have found place in
developmental plans, essential services such as roads, drinking water, sewerage
management, drainage, and primary health are still greatly under developed.
However, with the economy growing at more than at the rate of 8 per cent, the
government is aiming at an economic growth rate of 8 per cent during the
Eleventh Plan (2008-12), for which the government is taking necessary steps to
develop the Infrastructure in India.

INDIA INFRASTRUCTURE
India to become the second Largest Economy by 2050
Indian Economy
The best barometer of country’s economic standing is measured by its GDP.
India, the second most populated country of more than 1100 million has
emerged as one of the fastest growing economies. It is a republic with a federal
structure and well-developed independent judiciary with political consensus in
reforms and stable democratic environment .In 2008-09 India’s economy-GDP
grew by 6.5% due to global recession. In the previous four years,economy grew
at 9%.The Indian economy is expected sustain a growth rate of 8% for the next
three years upto 2012. With the expected average annual compounded growth
rate of 8.5%, India's GDP is expected to be USD 1.4 trillion by 2017 and USD
2.8 trillion by 2027. Service sector contribute to 50% of India‘s GDP and the
Industry and agriculture sector 25% each.

Investment Opportunities In Indian Infrastructure

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The robust current growth in GDP has exposed the grave inadequacies in the
country’s infrastructure sectors. The strong population growth in India and its
booming economy are generating enormous pressures to modernize and expand
India’s infrastructure. The creation of world class infrastructure would require
large investments in addressing the deficit in quality and quantity. More than
USD 475 billion worth of investment is to flow into India’s infrastructure by
2012. No country in the world other than India needs and can absorb so many
funds for the infrastructure sector. With the above investments India’s
infrastructure would be equal to the best in the world by 2017.
In the next five years planned infrastructure investment in India in some key
sectors are (at current prices): Modernization of highways -US$ 75 billion,
Development of civil aviation US$ 12 billion, Development of Irrigation
system- US$ 18 billion, Development of Ports-US$ 26 billion, Development of
Railways- US$ 71 billion, Development of Telecom- US$ 32 billion,
Development of Power -US$ 232 billion. Thus in the eleventh five year
plan ,investment in the above sectors (Aviation infrastructure ,Construction
infrastructure, Highway infrastructure ,Power infrastructure, Port
infrastructure ,Telecom infrastructure ) will be US$ 384 billions(Rs 17,20,000
Crores) considering the huge infrastructure market potential in India. In addition
to the above, investments to the tune of US$ 91 billions have been planned in
other infrastructure sectors like Tourism infrastructure ,Urban
infrastructure ,Rural infrastructure, SEZs ,and water infrastructure and
sanitation infrastructure thus making the total infrastructure investments in the

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eleventh plan period 2007-08 to 2011-12 as US$475 billions. Domestic and
global infrastructure funds have exposure to Indian infrastructure sectors.

Infrastructure sector targets for Eleventh five year plan ending 2012
Electricity: Additional power generation capacity of about 90,000 MW ,
reaching electricity to all un-electrified hamlets and providing access to all rural
households through Rajiv Gandhi Grameen VidyutikaranYojna (RGGVY)
National Highways: Six-laning 6,500 km of Golden Quadrilateral and selected
National Highways, Four-laning 6,736 km on North-South and East-West
Corridors, Four-laning 12,109 km of National Highways, Widening 20,000 km
of National Highways to two lanes, Developing 1000 km of Expressways,
Constructing 8,737 km of roads, including 3,846 km of National Highways, in
the North East.
 Rural Roads: Constructing 1, 65,244 km of new rural roads, and renewing
and upgrading existing 1, 92,464 km covering 78,304 rural habitations.
Railways: Constructing Dedicated Freight Corridors between Mumbai-
Delhi and Ludhiana-Kolkatta, 10,300 km of new railway lines; gauge
conversion of over 10,000 km and doubling, Modernization and
redevelopment of 21 railway stations, Introduction of private entities in
container trains for rapid addition of rolling stock and capacity, Metro
rails and world class stations
 Ports: Capacity addition of 485 million MT in Major Ports, 345 million
MT in Minor Ports, construction of jetties and berths, Port
connectivity ,channels deepening and port equipments.
 Airports : Modernization and redevelopment of 4 metro and 35 non-
metro airports, Constructing 7 Greenfield airports, Constructing 3 airports
in North East, Upgrading CNS/ATM facilities ,Establishing training
facilities and MRO.
 Telecom and IT : Achieving a telecom subscriber base of 600 million,
with 200 million rural telephone connections, Achieving a broadband
coverage of 20million and 40 million internet connections
 Irrigation: Developing 16 million hectares through major, medium and
minor irrigation works.
Urban Infrastructure: Urban renewal projects for selected cities; one million
plus cities, state capitals and places of historical, religious or tourist importance
under Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
Rural infrastructure :As per Bharat Nirman action proposed in rural

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infrastructure for irrigation, roads, housing, water supply, electrification and
telecommunication connectivity
Construction and Real Estate infrastructure :Development of residential and
retail real estate ,Green buildings ,construction of SEZs, Infrastructure projects,
Infrastructure facilities for Common wealth games 2010.
 Mining Infrastructure :Mineral exploration, Mineral extraction,
processing technology and equipments. Investments in infrastructure
sectors to create demand:
The estimated infrastructure investments in India over USD475 will create
demand for Power equipment , Construction equipment ,Material Handling
equipment ,Electronic and IT systems ,Environment technologies ,Transport
equipment , EPC contracts, Infrastructure companies in India ,Financial services
,Real estate ,Education and training ,Design and Planning services ,
Infrastructure consultants , Advisory and professional services and provide
opportunities for investors, contractors, o&m contractors, developers of
infrastructure projects ,foreign players.

Infrastructure policy in India:

Major policy initiatives such as deregulation, viability gap funding ,India
infrastructure finance company, Committee on infrastructure ,rural
infrastructure programme , National urban renewal mission, public private
partnerships, Launch of private sector infrastructure funds have been
implemented in infrastructure sector.
Road Policy in India: Indian infrastructure policy on roads permit duty free
import of high capacity and modern road construction equipments, complete tax
holiday for any 10 consecutive years out of 20 years. Longer concession periods
of up to 30 years are permitted as per the roads policy of India.
Airports Policy in India: Indian airport infrastructure policy permits 100% tax
exemption for airport projects for 10 years, 100% equity ownership by Non
Resident Indians (NRIs), 100% foreign direct investments (FDI) in India in
existing and Greenfield airport projects, Airport policy of India also allows
49%FDI and 100% NRI investment in airport transport services.
Ports Policy in India: As per Indian port policy all areas of port operation open
for Private Sector Participation .Private sector participation and JVs now
permitted. Ports policy of India also allows 100% income tax exemption for a
period of 10 years.

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Power Policy in India: Indian power policy permit 100 percent FDI (except
atomic energy) in electricity generation, transmission, and distribution and
trading, Establishing power plants without any license, transmission services for
Independent power transmission companies.
Oil, Gas and mining Policy: 100% FDI permitted for mining (except coal).
CASs, levied earlier on crude production, has been abolished for the blocks
offered under NELP. In deepwater exploration royalty for areas beyond 400m
bathymetry will be charged at half the prevailing rate. In petroleum and natural
gas sector 100 FDI is permitted except refining ,subject to sectoral regulations;
and in the case of actual Trading and marketing of petroleum products,
divestment of 26% equity in favour of Indian partner/public within 5 years .In
refining 100% FDI is allowed in private companies and 26% FDI allowed in
Public sector companies.
Real Estate Policy in India: Corporate tax exemption of up to 100% for
industrial parks, SEZs and housing projects are permitted as per Indian Real
Estate Policy.
Telecommunication Policy in India: 74% FDI is allowed in Basic and cellular,
Unified Access Services, National/International Long Distance, V-Sat, Public
Mobile Radio Trucked Services (PMRTS), Global Mobile Personal
Communications Services (GMPCS) and Other value added telecom services,
ISP with gateways, radio paging, end-toend bandwidth. 100% FDI is permitted
in ISP without gateway, infrastructure provider providing dark fiber, electronic
mail and voice mail, subject to the condition that such companies shall divest
26% of their equity in favor of Indian public in 5 years, if these companies are
listed in other parts of the world as per the Indian telecommunication policy.
Why India -India at a glance- Attractive Destination
India has a population of 1.1 billion. More than 30% of the world’s youth live in
India. More than 55% (550 million) of the India’s population is less than 25
years of age. This is nearly twice the total population of the United States.
India’s urban population constitutes around 30%. India is a nation growing
younger (population in working age group projected to increase) as the
developed world faces the problem of aging. India has a huge reservoir of
English speaking, skilled and relatively inexpensive manpower with over 2.6
million engineers (degree and diploma holders), 814,000 software professionals,
growing every year. It also got a well developed banking system, with over
67,000 branches and banking practices conforming to international best
standards with net non performing assets ratio for all commercial banks 1.2%. It

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has a sophisticated, well regulated capital market with 23 stock exchanges of
which the two largest, the National Stock Exchange and Bombay Stock
Exchange ranked as no 3 and 5 in the globe by number of transactions. India has
more billionaires than China. This year there were 15 billionaires in China but
last year in India, there were 20 billionaires, according to the Forbes magazine.
Forty-four per cent of Top 100 Fortune 500 companies are present in India.
Some of the fortune companies present in India are ABB, Accenture, Alctel,
AMD,ANZ, APC, Bosch, CSC, Citibank, Caterpillar, CA, Delphi, Dell,
Dupont, Digital , Delloitte ,Ford,HSBC,Hyundai, Google,Intel,GE,
Oracle ,Microsoft , Nokia, Siemens. India is the fourth largest economy in terms
of purchasing power parity, the tenth most industrialized country in the world,
the tenth largest economy in the world in terms of GDP and is one of the fastest
growing developing economies today in the world. The most remarkable feature
of its impressive growth story, especially over the last decade and a half, is that
it has happened in a solid, democratic environment, making the process
sustainable. The present infrastructure in India is grossly inadequate for the 1.1
billion populations. To improve the infrastructure of India, large investments
have been planned by Indian government.
Infrastructure Potential in India:
Ports infrastructure in India:
India has a long coastline of 7,517 km. The existing 12 major ports control
around 76 % of the traffic. Due to globalization, India’s ports need to gear up to
handle growing volumes. A number of the existing ports have plans for
expansion of capacities, including addition of container terminals. The
government has launched the National Maritime Development Programme, to
cover 276 port projects (including related infrastructure) at an investment of
about INR 600 billion by the year 2012. Also, States are increasingly seeking
private participation for the development of minor ports, especially on the west
ports.
Indian ports are projected to handle 875 million tones(MT) of cargo traffic by
2011-12 as compared to 520MT in 2004-05.There will be an increase in
container capacity at 17% CAGR. Cargo handling at all the ports is projected to
grow at 19 per cent per annum till 2012. Planned capacity addition of 545 mt at
major ports and 345 mt at minor ports. Port traffic is estimated to reach 1350
million tones by 2012 .Containerized cargo is expected to grow at 18 per cent
per annum till 2012. Projected Investment in major ports $16 billions and minor
ports $9billion during 2007-12.

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Airports infrastructure in India:
Passenger and cargo traffic slated to grow at over 20% annually and set to cross
100 million passengers per annum by 2010 and set to cross cargo traffic of 3.3
million tonnes by 2010.Mumbai and Delhi airports have already been handed
over to private players. Kolkata and Chennai airports will also be developed
through JV route.
Railways Infrastructure in India:
Indian Railways is the largest rail network in Asia and worlds second largest
under one management. Indian Railways comprise over one hundred thousand
track kilometres and run about 11000 trains every day carrying about 13 million
passengers and 1.25 million tones of freight every day. The scope for public
private partnership is enormous in railways, ranging from commercial
exploitation of rail space to private investments in railway infrastructure and
rolling stocks. The Golden quadrilateral is proposed to be strengthened to
enable running of more long distance passenger trains and freight trains at a
higher speed. Programmed also envisages strengthening of rail connectivity to
ports and development of multimodal corridors to hinterland. Construction of 4
mega bridges costing about US$ 750 million is also included in the programme.
Construction of a new Railway Line to Kashmir valley in most difficult terrain
at a cost of US$ 1.5 Billion and expansion of rail network in Mumbai area at a
cost of US$900 million has also been taken up. Freight traffic is growing at
close to 10% and passenger traffic at close to 8% annually. Railways have
planned a dedicated rail freight corridor running along the railways Golden
Quadrilateral (GQ). The double-line freight corridor is expected to evolve
systematic and efficient freight movement mechanisms and ease congestion
along the existing GQ. It would leave the existing GQ free for passenger trains.
The 9260 km dedicated freight corridor to be built at a cost of Rs 60,000 crore
(US$ 15 billion) is being funded partially with a US$ 5 billion loan from Japan.
The work is expected to be completed within the next 5–7 years. The first phase
of the project would include the Delhi–Howrah and the Delhi–Mumbai routes
Power Infrastructure in India:
Presently the installed capacity of electric power generation stations under
utilities stood at 130000MW and in the five year plan the generation capacity is
planned to be increased to 2,20,000 MW by 2012.There is a 13% peaking and
8% average shortage of power annually. Central government has already taken
steps to increase capacity by building Ultra mega power projects

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(UMPPs).There is a plan to increase Nuclear power capacity from 3900MW
currently to 10000 MW by end of 11th plan.
Telecom Infrastructure in India:
Even with the rapid growth of telecom sector in India, the rural penetration is
still less than 5%. At 500 minutes a month, India has the highest monthly
'minutes of usage' (MOU) per subscriber in the Asia-Pacific region, the fastest
growth in the number of subscribers at CAGR of more than 50%, the fastest
sale of a million mobile phones (in one week), the world's cheapest mobile
handset and the world's most affordable colour phone.
Highways and Roads infrastructure:
The Indian road network has emerged as the second largest road network in the
world with a total network of 3.3 million km comprising national highways
(65,569 km.), State highways (128,000 km.) and a wide network of district and
rural roads. The US tops the list with a road network of 6.4 million km.
Currently, China has a road network of over 1.8 million km only. Out of the
3.38 million Kms of Indian road network, only 47% of the roads are paved.
Roads occupy a crucial position in the transportation matrix of India as they
carry nearly 65 per cent of freight and 85 per cent of passenger traffic. Over the
past decade several major projects for development of highways linking the
major cities have been planned – and work started on most of them. What is of
significance is that private sector involvement (BOT projects) has finally been
found to be feasible in the Indian context. This has led to an accelerated growth
in this sector – which had long been faced with financial constraints. This has
also facilitated improvement in the quality of the new highways and
introduction of the latest concepts for toll collection, signages etc. The process
of development of the new highways is expected to continue for many years to
come.

Construction Infrastructure in India:

Construction accounts for nearly 7 per cent of Indian GDP and is the second
biggest contributor (to GDP) after agriculture. Construction is a capital-
intensive activity. Broadly the services of the sector can be classified into
infrastructure development (54%), industrial activities (36%), residential
activities (5%) and commercial activities (5%). The main entities in the
construction sector are construction contractors, equipment suppliers, material
suppliers and solution providers. India’s construction equipment sector is
growing at a scorching pace of over 30 per cent annually--driven by huge

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investments by both the Government and the private sector in infrastructure
development. It is estimated that there is USD860 billion worth of construction
opportunities in India
Oil, Gas –Hydrocarbon Infrastructure in India
With the exponential increase in the population of vehicles and industrial
requirement, the consumption of petrol products is likely to increase to 300
MMT by the year 2010. India has established geological reserves of more than 6
billion and exploration acreages are available on offer on continuous basis. It is
estimated that investment over the next 10-15 years shall be in the range of US$
100-150 billion. Additional refining capacity of 110 million tonnes shall be
required by 2010. Opportunities have emerged in business areas linked to
Natural Gas. Private opportunities also exist in infrastructure like jetties, storage
tanks, movement of oil and petro-products. Oil import constitute largest share of
total import and therefore Government has taken many initiatives to mitigate the
situation and attract the foreign investors.100% foreign investment has been
allowed in this sector. Deregulation and de-licensing has been done for the
petroleum products. Rationalization of pricing has taken place by decontrol and
import parity. Private sector can import most products, pipelines, terminals and
tank ages cleared for private investment. JV can be formed for the development
of infrastructure, marketing and, refining activities.
NEW INSTITUTIONAL MECHANISM FOR PPP
The creation of world class infrastructure would require large investments in
addressing the deficit in quality and quantity. , it is necessary to explore the
scope for plugging this deficit through Public Private Partnerships (PPPs) in all
areas of infrastructure like roads, ports, energy, etc. Given the risks involved in
large projects the government has realized that only public sector involvement
with central government development assistance for infrastructure projects is
not adequate to meet the challenge. Recognizing the imponderable risks, which
infrastructure projects entail, with long gestation periods, high costs and budget
constraints, the government has proposed a flexible funding scheme, which will
find support from budgetary allocation to fund public-private-partnerships
(PPPs) for infrastructure projects. The government has proposed India
Infrastructure Finance Company (IIFC) and formulated a scheme to support
PPPs in infrastructure. As part of this scheme, PPP opportunities are to be
awarded through competitive bidding in a transparent manner and for each
project, performance is to be assessed against easily measurable standards,

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based on unambiguously defined criteria, in order to inspire confidence among
investors.
Recently, legal and regulatory changes have been made to enable PPPs in the
infrastructure sector, across power, transport, and urban infrastructure. For
example, the Electricity Act allowed for private sector participation in the
Distribution of electricity in specified area(s) of the distribution licensees under
the role of a “franchisee”. The recognition of the franchisee role is a significant
step towards fostering PPP in the distribution of electricity. In some cases, the
impact of private sector involvement in terms of end-user benefits has been felt
almost immediately. A case in point is the initial Build-Operate-Transfer (BOT)
experience at Jawaharlal Nehru Port, where the Minimum Guaranteed Traffic
requirement at the end of 15 years, identified as part of the concession
agreement, was met in just 2 years. The experiment is being replicated across
other major ports as well.
Special Economic Zone (SEZ) – A New Policy
The Government of India has announced a pragmatic “SEZ” policy, which
offers several innovative fiscal and regulatory incentives to developers of the
SEZs, as well as the units within these zones. Each SEZ is treated as a foreign
territory and units located in it are not subject to either customs tariffs or
domestic duties. Sales to Domestic Tariff Areas are permitted, subject to
payment of applicable customs duties and import policies in force. Inputs,
whether imported or sourced domestically, are free of any taxes. So are exports
made from a SEZ. The only requirement is that the SEZ and the units located
within it are positive foreign exchange earners. This offers foreign companies
tremendous opportunities for taking full advantage of Indian strengths in doing
business in India. This could be either as the developer of the SEZ or as a unit in
a SEZ or both. Presently, the board of approvals for the SEZs granted formal
approvals for 340 SEZs. These 339 SEZs today have lands for development. It
is widely expected that the Special Economic Zones approved for various parts
of the country, once implemented, would contribute substantially to India's
exports and would help connecting the missing links in manufacturing. These
zones aim at providing an internationally competitive and hassle free business
environment for promotion of exports.
India Infrastructure Needs
India's economic development is projected on the basis of the development of
its basic infrastructure in its 600,000 villages inhabited by the 700 million rural
population. Rural India infrastructure needs a completely new visionary outlook

48 | P a g e
 and new initiatives. Agriculture is the main occupation in rural India and most
of the rural population still depends either directly or indirectly on agricultural
activities for their living. But the lack of basic infrastructure for
pursuing agricultural activities has forced a large section of India’s agricultural
labour force to move to non-agricultural sectors for livelihood.

The rural India Infrastructure needs are:

 Rural housing
 Roads
 Healthcare
 Education
 Irrigation
 Drinking Water
 Power
 Telecommunication

Further, the tremendous growth of Indian IT, telecommunication,

manufacturing, and pharmaceutical industry has created an enormous pressure
on the limited world class urban infrastructure available in India. The Ministry
of Finance has realized that economic development of India is directly
connected to the availability of basic and modern urban infrastructure in Indian
cities. The government of India has now formulated policies to forge public and
private partnerships for tackling the problems related to infrastructure.

The urban India Infrastructure needs are:

 Urban housing
 Business premises
 Power
 Urban transport
 Water supply,
 Sewerage
 Airports
 Railways
 Seaports
 Roads
 Bridges

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 Tourism infrastructure
 Solid waste management
 Projects in SEZ
 Health care
 Entertainment
 Communications

Financial limitations of the central government for providing world class

infrastructure made it impossible to meet India Infrastructure needs at every
village and cities in India. So the government of India's Infrastructure
development policy aims at engaging major financial contributions from private
partners for meeting India Infrastructure needs in urban as well as rural India.

This site provides detailed information on infrastructure problems in India. The

site also focuses on the growing problem of infrastructure limitations in India.

Infrastructure Problems in India can be classified into two parts:

 Urban infrastructure problems in India

 Rural infrastructure problems in India

Urban infrastructure problems in India is a age old problem. The Infrastructure

problems in India mostly took a back-seat in the economic development policy
drafts. The meagre budgetary allocation to arrest infrastructure problems in
India has so far proved to be too little to keep pace with other areas of business
development in India. Moreover, the tremendous growth of Indian IT,
telecommunication, manufacturing, and pharmaceutical industries have
consumed the limited world class urban infrastructure available in India.

The Urban infrastructure problems in India are:

 Urban residence
 Business premises
 Power
 Urban transport
 Water
 Sewerage
 Airports
 Railways

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 Seaports
 Roads
 Bridges
 Tourism infrastructure
 Solid waste management
 Projects in SEZ
 Health care
 Entertainment
 Communications

Rural infrastructure problems in India

Rural infrastructure problems in India has gone from bad to worse in recent
years. However, the government of India has taken some important steps to
arrest the age old problems of rural India, such as:

 Connecting 66,800 habitations with all weather roads

 Construction of 1,46,000 km of new rural roads
 Upgrading 1,94,000 km of existing rural roads
 Allocation of investment to the tune of Rs. 1,74,000 crores envisaged
under Bharat Nirman.
 Providing a corpus of Rs. 8000 crores for Rural Infrastructure Development
Fund (RIDF).

With around 600,000 villages and 70% of its population in rural India, the need
of the hour for the government is to develop proper rural infrastructure for
the masses in India. The immediate focus area should cover but not be confined
to the following areas:

 Power
 Irrigation
 Drinking Water
 Rural housing
 Roads
 Health care
 Education
 Telecommunication

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Infrastructure Sector Growth Rate
 Infrastructure Sector Growth Rate in India GDP has been on the rise in
the last few years. The Growth Rate of the Infrastructure Sector in India
GDP has grown due to several reasons and this in its turn has given a
major boost to the country's economy.

 Economy of India
 India gross domestic product (GDP) means the total value of all the
services and goods that are manufactured within the borders of the
country within the specified period of time.
The Indian economy is the twelfth biggest in the whole world for it has the GDP
of US$ 1.09 trillion in 2007. The economy of India is the second major growing
economy in the whole world for it has the GDP growing at the rate of 9.4% in
2006- 2007.

 The Infrastructure Sector in India

 The Infrastructure Sector in India was after independence completely in
the hands of the public sector and this hampered the growth of this sector.
India's less spending on real estate, power, telecommunications,
construction, and transportation prevented the country from sustaining
very high rates of growth. The amount that India was spending on the
Infrastructure Sector was 6% of GDP or US$ 31 billion in 2002.

 The contribution of the Infrastructure Sector in the India GDP

 Infrastructure Sector Growth Rate in India GDP came to 3.5% in 1996-
1997 and the next year, this figure was 4.6%. The Growth Rate of the
Infrastructure Sector in India GDP increased after the Indian government
opened the sector to 100% foreign direct investment (FDI). This was
done in order to boost the Infrastructure Sector in the country. The result
of opening the sector to the private sector has been that Infrastructure
Sector Growth Rate in India GDP has increased at the rate of 9%. It is
estimated that the Growth Rate of the Infrastructure Sector in India GDP
will grow at the rate of 8.5% between 2006 and 2010. The biggest
ongoing project in the Infrastructure Sector in India is the Golden
Quadrilateral, which is improving the main roads that connect the four
cities of Chennai, Mumbai, Delhi, and Kolkata.

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  The Government of India must boost the Infrastructure Sector
 Infrastructure Sector Growth Rate in India GDP thus has increased over
the last few years due to the efforts that have been made by the Indian
government. The government of India must continue to take steps to
improve the Infrastructure Sector in the country. For this in its turn will
help to boost the Indian economy in future.
Challenges in front of Indian Infrastructure Sector

India infrastructure: big ambitions, big potential, big money, little happening.
This is what we feel, sums up, what's happening in the Indian infrastructure
sector. Government's extended enthusiasm about the sector hasn't been able to
get the big infrastructure projects moving. There are lot of PPP projects coming
up but what's going wrong? Many Infrastructure and Power shares are seeing
constant ups and downs in the market. What is keeping the big money away?
Surely the private investor is upbeat on the sector and so is Indian mutual fund.
But the big money from western FIIs and Pension funds doesn't seem to have
embraced the sector gladly.

We believe that there are few sore issues which needs to be taken care of so that
the Indian infrastructure sector can be put on fast track as soon as possible.

1. Dilly Dally attitude of government which ensures unending delays along with
the corrupt governance model especially at the grass root level.

2. Absence of strong long term debt market in India. Corporate bond market is
almost non-existent (specially compared to domestic stock market or int'l bond
market). Indian banks are the only funding source which anyways charge very
high interest rates and come with many more strings attached. Any ways Indian
Banking sector is not the most revered one in the world.

3. Infrastructure projects need long term loans, for which insurance and pension
funds are extremely suitable. If we can't tap the western insurance and pension
funds then we can use our own domestic insurance and pension funds.
However, they are not developed enough. Also, they need to be opened up
further to attract foreign funds. LIC might need to play a decisive role in the
infrastructure projects in India which in turn needs a hell lot of money today.

4. India is competing with the likes of China, Korea and Brazil for infrastructure
related funds. While India plans to spend $500 billion on infra. projects from
2007-2012, China has already come up with a plan of over $550 billion
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investment in infrastructure projects just to fight the recession. According to
some estimates China might be investing over $5000 billion in next 2 decades.
So the competition to get the funds is likely to remain high in years to come.

5. If funds are such a big problem then why can't Indian government just print
money and pay for it. The problem is not only the high budget deficit and high
public debt that we are already running in order to fight the recession. More
importantly the very nature of infrastructure projects which takes years to start
paying the benefits would mean inflation. No matter how the money comes, the
gestation period of infra projects would mean calls to inflation in short term.
Infra projects anyways take a long time to complete and still longer in India.
The time required has to be tightened. This would require minimum
governance. intervention, minimum red tapism, increased transparency,
consistent flow of fund and last but not the least, latest technology. Latest
technology would again require FDI flowing in. So quite a bit of challenges to
face.

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 3.2 COMPANY PROFILE
Reliance Infrastructure, (BSE: 500390) formerly known as Reliance Energy and
prior to that as Bombay Suburban Electric Supply (BSES), Its India's largest
private sector enterprise in power utility. The company is headed by Anil
Ambani. The company's corporate headquarters is situated in Mumbai. The
company is the sole distributor of electricity to consumers in the suburbs
of Mumbai. It also runs power generation, transmission and distribution
businesses in other parts of Maharashtra, Goa and Andhra Pradesh. Reliance
Energy plans to increase its power generation capacity by adding 16,000 MW
with investments of $13 billion.

The Company is in the process of restructuring its various divisions to its

wholly owned subsidiaries with a view to adopting the best management
practices, establish highest operational standards and also to identify separately
the economic value of each of the divisions.

Reliance Infrastructure, a part of Reliance - Anil Dhirubhai Ambani Group, is

India's largest infrastructure company with turnover of over Rs.15,690 crore and
market capitalization of over Rs. 24,450 crore as on March 31, 2010.
Sky fab company ltd is India’s leading utility company having presence in
across the value chain of power business i.e. Generation, Transmission,
Distribution, EPC and Trading and the largest infrastructure company by
developing projects in all high growth areas in infrastructure sector i.e. Roads,
Highways, Metro Rails, Airports and Speciality Real Estate.
Our presence spans across three verticals:
 Engineering, Procurement and Construction
 Energy
 Infrastructure

Engineering, Procurement and Construction

EPC offers a single point solution to the execution of power plants including
project engineering, procurement, construction & commissioning for its clients.
The world of tomorrow will feature abundant energy that will spark a million
smiles and dreams. Our EPC division is ushering this energy revolution with
power plant projects. Along with full service project advisory capabilities, we
manage power plants on a turnkey basis and provide industry specialist services
such as fuel management advice and fiscal advice. Our the turnover of the

55 | P a g e
division was Rs 557 crore (US$ 120 million) and order book position of over Rs
18,530 crore (US$ 4 billion) as on June 30, 2010.
Energy
Our core competency in energy extends to generation, transmission, distribution
and trading. This comprehensive sphere of influence extends our vision of a
highly developed India within our realms. We distributed more than 36 billion
units of electricity to 30 million consumers and generate 941 MW of electricity
from our power stations. Our transmission division is developing 5 transmission
projects, with total project outlay of Rs 6,640 crore (US$ 1.4 billion).
Infrastructure
Reliance Infra has a significant presence in the construction of roads, metros,
airports and real estate. Infrastructure is decidedly the most visible and
important form of development in a nation. We signify this with our 11 road
projects of 970 kms worth about Rs 12,000 crores (US$ 2.6 billion). We are
currently implementing 3 metro rail projects in Mumbai and Delhi worth around
Rs 16,000 crores (US$ 3.4 billion).In the real estate space, we are in various
stages of bidding/negotiation/planning with over 400 million sq. feet of mixed
use built up potential.
Enhancing Our Legacy/ Carrying the Legacy
Our passion to excel in every endeavor emanates from the legacy of our founder
Late Shri Dhirubhai Ambani. His values and ideals stand with us as we
collectively seek to further develop the society, landscape and the nation we are
a proud part of. In the years ahead of us, we will keep exploring the unknown in
our quest for excellence.
Highlights for Company Profile

 One of the largest Indian business conglomerate.

 Leading Private Utility Firm in Transmission.
 Significant presence in EPC, Energy and Infrastructure.

Mission: Excellence in Infrastructure

 To attain global best practices and become a world-class utility.
 To create world-class assets and infrastructure to provide the
platform for faster, consistent growth for India to become a
major world economic power.
 To achieve excellence in service, quality, reliability, safety and
customer care.

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 To earn the trust and confidence of all customers and
stakeholders, exceeding their expectations and make the
Company a respected household name.
 To work with vigour, dedication and innovation with total
customer satisfaction as the ultimate goal.
 To consistently achieve high growth with the highest levels of
productivity.
 To be a technology driven, efficient and financially sound
organisation.
 To be a responsible corporate citizen nurturing human values
and concern for society, the environment and above all people.
 To contribute towards community development and nation
building.
 To promote a work culture that fosters individual growth, team
spirit and creativity to overcome challenges and attain goals.
 To encourage ideas, talent and value systems.
 To uphold the guiding principles of trust, integrity and transparency in all
aspects of interactions and dealings.

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 HISTORY

2000
- BSES Telecom announced the launch of its Internet Services,
Powersurfer.net.
- The BSES Telecom has also formed a joint venture company with the
Hyderabad-based Sriven Multitech Ltd.
- The Business Millennium Award for Environmental Management was
Given to Mumbai-based BSES.
- BSES Telecom, the wholly-owned subsidiary of the power major BSES, has
shortlisted four international companies Cable and Wireless of the UK, MCI
Worldcom, British Telecom and News Skies of the US for setting up Internet
gateways across the country.
- Gujarat Positra Port Infrastrucutre Ltd. has signed an memorandum of
understanding with BSES Ltd. to execute a 261 mw power project.
- BSES Ltd. has signed a memorandum of understanding with Oil and Natural
Gas Commission Ltd. for supply of 1.85 MCMD of gas from Bombay High, for
its 500 MW combined cycle power plant in Saphale, Palghar.
- Reliance Industries has picked up a 26.6% stake in BSES. RIL is entering the
broadband business and expanding its power business in a big way by way of
exploiting its synergies with BSES.
- BSES Ltd has launched a customer-friendly website bsessupply.com.
- BSES Ltd has informed that Shri V M Lal has ceased to act as the Director of
the Company with effect from January 29, 2002. In the casual vacancy so
arisen, Shri R Buddhiraja, IAS, Principal Secretary (Energy) to the Government
of Maharashtra has been appointed on the Board of the Company with effect
from January 29, 2002.
- BSES and its subsidiaries provide electricity service to more than 2.70
million consumers in area covering about 1,23,000 sq. km. And with an
estimated population of about 34 million. BSES operates a state-of-the-art 500
MW Thermal Power Station at Dahanu near Mumbai and supplies the 2001.
- Strategies upto 2000 A.D. - Power generation, transmission and distribution
are areas of core competencies. - 90% of investment to be made in core
activities and the balance in other related activities.
- Other related activities cover those synergetic to the core activities.
- The resources for these projects would be met by BSES and raised through
joint ventures.

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 - Corporate Plan - First Five Years:Core Areas: Power Generation capacity
around 2000 MW Dahanu expansion / Palghar Project: Capacity
- 500 MW Projects at different locations - Capacity - 1500 MW Three to four
distribution networks of similar size as BSES Mumbai.
- Other Areas: Expand EPC & Other contracting activities – Turnover Rs. 750
crores. Coal Beneficiation / Mining. Manufacturing of Energy Meters.
Telecom / IT - Turnover Rs. 100 crores.
- Corporate Plan - 15 years Perspective Plan:Power Distribution - Capacity
8000 MW. Power Distribution Networks - 20 - 25 locations. Contracting
Activities - Turnover Rs. 1500 crores.
Coal Beneficiation / Mining. Composite Financial Services. Fuel Management.
Energy Efficiency / Gas Distribution.
- Upcoming Projects:-Generation: On its balance sheet:Palghar Project
Wind Farm Project
- Through Joint venturesBSES Kerala Power Limited TICAPCO-Srimushnam
Project BSES Andhra Power Limited Maithon Power Limited.
- Distribution: Orissa Distribution Companies Part of Rajasthan Distribution
System. Consultancy of Goa, Andhra Pardesh. It has given consultancy to
Andhra Pradesh State Electricity Board (APSEB) for privatisation of
Distribution System. Also the Goa Power Department has shown interest for
consultancy for restructuring and privatisation of power department. The
assignment is awarded to BSES and it is being executed.
- Related Areas: ST BSES Coal Washeries Limited Utility Powertech Limited
BSES Telecom Limited BSES Infrastructure Finance Limited
- Electric Supply and Transmission Division: BSES has a consumer base of 2
million. Importantly, there is no agriculture load as the company caters to the
urban areas only. It has a good recovery of 99.4%, which helps it to provide
efficient and effective consumer services. It has capital expenditure plans of Rs
120 crore on SCADA and fibre optic.
- The company has managed to maintain the distribution losses at around the
same level during the past five years. Distribution losses were 11.6% during the
year ended March 2001 as compared to 11.5% during the year ended March
2000. It has come down from 14.95% during FY 1993-94.
BSES is taking measures to reduce its distribution losses further along with
improvement in collection mechanism. It is also implementing cost control
measures with financial engineering and tax planning. It also has plans to focus
on commercial customers in future.

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 - Dahanu Power Station: Dahanu Power Station achieved a plant load factor
(PLF) of 82.68% during the year 2000-01. The plant availability was to the tune
of 92.33%.The plant of the company meets 55% of its needs. The demand has
been increasing at around 5% per annum. However, BSES depends on Tata
Power for additional power requirements. It has to purchase this extra power at
much higher costs. The company is taking measures to reduce overhaul period
per unit. It also plans to improve plant availability besides increasing the
dispatches during off peak
hours besides reducing coal transit losses.
- Wind Energy: BSES has invested Rs 41 crore in 7.59 mw wind farm at
Chitradurga, Karnataka. This farm has 33 windmills. It has already started
commercial operations and has one of the highest PLF in the country in the
wind farm segment. For the year 2000-01, its average PLF was 30.11% when
others can manage only 20% to 25% PLF. This farm has an attractive return of
investment (RoI) as the company is allowed 100% depreciation.
- Contracts and EPC Division: This division achieved a turnover of Rs 529
crore during the year ended March 2001 as against Rs 399 crore during the year
ended March 2000 and it. Its turnover was Rs 391 crore during the year ended
March 1999. This division has showed an improved performance and has been
growing at a good rate for the last three years. This division was instrumental in
construction and erection works of 5,000 mw in Indian and other industrial and
infrastructure projects. The cumulative value of works executed by this division
since inception is to the tune of Rs 3,500 crore. It has a good order booking of
Rs 1,400 crore as of June 2001.To keep up the growth in this business, the
company plans to target turnkey jobs with higher margins. It also needs to
diversify into larger civil jobs and other infrastructure sectors. The company
also plans to provide modern tools for faster project implementation and to
provide training inputs for better project management.
- BSES has several group companies - ST-BSES Coal Washery, BSES
Infrastructure Finance, Utility Powertech, Ticapco, BSES Telecom,
BSES
Kerala Power, BSES Andhra Power and three new companies of Orissa. The
company has a strategy of adding value by strategic alliances within the group.
- Coal Washery - JV Company: This JV is a backward integration project for
the Dahanu Power plant. It supplies washed coal to the plant as well as to
others. The total cost of this project is around Rs 60 crore out of which Rs 9
crore is by a US aid. The washery, which is already operational, has a 2.5 mmt

60 | P a g e
per annum capacity and is located at Madhya Pradesh. The return on equity in
this JV exceeds 25%. The company posted revenues of Rs 25 crore with net
profit of Rs 3.7 crore for the year 2000-01.
- BSES Infrastructure Finance (BIFL): This company is in the business of
providing advisory services on new businesses and financial engineering. It also
provides bridge finance and leasing services to group companies. It has tied up
funds for various projects to the tune of over Rs 1,500 crore. It has been a
dividend paying company since inception. It posted revenues of Rs 12.70 crore
and net profit of Rs 3
crore for the year 2000-01.
- Utility Powertech: This is a JV with National Thermal Power Corporation
(NTPC). Utility Powertech has taken up maintenance contracts for NTPC power
stations. It has 250 operational sites with Rs 25 crore orders on hand. The
company is focussing on non-conventional project development including mini
and micro hydel projects. It posted revenues of Rs 39 crore and profit of Rs 1.5
crore for the year 2000-01.
- BSES Telecom: This company has been operational since March 2000. It is
an Internet service provider (ISP) in Mumbai and has a fibre optic network to
support its last mile services. Its utility software division has a customer care
product, which caters to over 6 million consumers of BSES. It is also exploring
alliances for providing utility solutions.
- BSES Kerala Power: This is a 165 mw naptha-based combined cycle Power
plant at Kochi in Kerala. It employs 3 gas turbines of 43.5 mw each. It proposes
to use liquified natural gas (LNG) from the Kochi terminal in future.
- BSES Andhra Power: This is a 220 mw duel fuel combined cycle power
plant at Samalkot. The construction work on civil works is presently in progress
and the expected date of completion is October 2001 for open cycle and
February 2002 for combined cycle. BSES EPC group is doing the EPC work.
- Orissa Power distribution companies: BSES had bid for distribution
companies in Orissa in 1999 when the distribution part was opened up for
privatization. On 1 April 1999, the company with a 51% stake along with the JV
partner, GRIDCO acquired the three companies. The total investment in this
distribution foray was to the tune of Rs 117 crore. World Bank and others are
providing long-term soft loans amounting to Rs 150 crore in three years. The
consumer base is around 8,14,000 with the consumption at around 6,000 million
units. The tariff is one of the lowest for bulk supply. Importantly, agricultural

61 | P a g e
load is less than 6% of the total load. BSES is targeting a turnaround for these
distribution companies in the next 2-3 years.

2002

- BSES Ltd has informed that Shri R V Shahi Chairman & Managing Director
of the Company has relinquished the Office of Chairman & Managing
Director.The Board of Directors has appointed Shri S S Dua as acting Chairman
& Managing Director.
-BSES appointed J P Chalsani as chief executive officer of the southwest Delhi
electricity distribution company and the central-east Delhi electricity
distribution company, in which BSES has a controlling stake.
-Reliance Industries Ltd. increases the stake in the company to 31.54%
-Signs confidentiality agreement for buying out Enron's stake in Dabhol Power
Company
-Issues Non Covertible Debentures (NCD) for Rs 100 crore
-Company's 500-mw Dahanu thermal power station achieves an availability of
100 per cent and a plant load factor (PLF) of 98.92 per cent during March

-Power Ventures increases the holding in the company to 23.88%

-Acquires 51% stake in two Delhi Vidyut Board's power distribution
companies (Central East Delhi Electricity Distribution Company Ltd and South
West Delhi Electricity Distribution Company Ltd.)
-Delhi government signs a share-holding agreement with Bombay Suburban
Electric Supplies (BSES) and Tata Power for power distribution in Delhi
-Changed names of its two power distribution companies in Delhi. While the
South West Delhi electricity Distribution Company was renamed as BSES
Rajdhani Power Ltd, the Central East Delhi Electricity Distribution Company
was christened BSES Yamuna Power Ltd.
-Pulls out of 250 MW power project in Tamil Nadu
-Reliance group increases stake in the company from 38% to 40.29% through
creeping acquisition route
-Reliance Power Ventures acquires 28,28,545 shares of BSES Ltd, increases
the stake to 28.30%
-Completes US$ 120 million Foreign Currency Convertible Bond issue

2003

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 - Company becomes part of the Reliance Group, with Mr Anil D Ambani, Vice
Chairman and Managing Director of Reliance Industries Ltd. unanimously
being appointed by the Board as Chairman of BSES.
-The name of BSES Ltd changed to Reliance Energy Ltd.
-BSES Andhra Power Ltd, BSES Kerala Power Ltd, BSES Rajdhani Power
Ltd, BSES Yamuna Power Ltd, North Eastern Electricity Supply Company of
Orissa Ltd, Southern Electricity Supply Company of Orissa Ltd, Tamil Nadu
Industries Captive Power Company Ltd and Western Electricity Supply
Company of Orissa Ltd cease to be subsidiaries of the Company with effect
from March 29, 2003
-Members approve delisting of company's shares from the following stock
exchanges:
1. Ahmedabad Share & Stock Brokers Association
2. Bangalore Stock Exchange Ltd
3. Calcutta Stock Exchange Association Ltd
4. Delhi Stock Exchange Association Ltd
5. Inter Connected Stock Exchange of India Ltd.
-BSES Andhra Power Ltd. becomes 100-pc subsidiary of Reliance Energy
-Allots equity shares to Bank of New York on options exercised by it
-Anil Ambani, vice-chairman and managing director, Reliance
Industries Ltd, and chairman, BSES Ltd, voted as the MTV Youth Icon of the
Year by young Indians across the country
-Maharashtra Govt. took back its nominee from the company board
-Reliance Salgaocar Power becomes Wholly Owned Subsidiary of the
company
-BSES signs an agreement with US bank for GDR conversion

2004

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 -Reliance decides to revamp Hirma mega thermal power project
-Easy Bill, a Hero group company, inks pact with BSES for bill collection
-Promoters' holding in BSES has dropped by 5.67 per cent to 52.55 percent
-BSES Andhra Power Ltd. & Reliance Salgaocar Power Company Ltd
(RSPCL) merged with the Company
-Janus acquires 4-pc stake in Reliace Energy
-The name of BSES Limited shall be changed to Reliance Energy Limited and
the trading symbol of BSES Limited be changed from BSES to REL w.e.f.
March 12, 2004.

-Mops up 8 million (Rs 805 cr) through a five-year zero-coupon foreign

currency convertible bond (FCCB) issue
-Enters into two foreign currency facility agreements pursuant to which the
Company was required to create security over certain of its
assets by certain specified times after the respective dates of the Facilities
-Life Insurance Corporation of India has informed that they have acquired
55,00,000 equity shares of Reliance Energy Limited.
-Reliance Power Ventures Limited acquires 91,95,622 shares representing
4.99% of voting rights of Reliance Energy Limited via preferential allotment
and the date of acquisition is April 03, 2004.
-Reliance Energy, Govt of UP and Reliance sign the State Support Agreement
-Reliance wins Koldam project over Essar
-Reliance join hands with Temasek to establish first power VF
- launches multilingual power bills on September 16, 2004

2005

-Dahanu of REL's bags CII`s National Award of Excellence 2005

2006

-Reliance Energy join hands with Bajaj for CFL bulbs

-The Company along with its consortium on November 07, 2006 signed
Contract with Ministry of Petroleum and Natural Gas (MoPNG) for exploration
and production of four Coal Bed Methane (CBM) blocks.
2007

64 | P a g e
 -Reliance Energy Ltd has appointed Shri. Lalit Jalan as Whole-time Director on
the Board.
-CRISIL has reaffirmed its outstanding ratings of 'AAA/Stable/P1+' on
Reliance Energy Ltd's (Reliance Energy's) debt programmes.
-Reliance Energy Ltd bagged an Engineering, Procurement and Construction
(EPC) contract from Damodar Valley Corporation (DVC) to set up the 2 x 600
MW coal based power station at Raghunathpur in West Bengal.

2008

- Reliance Infrastructure has bagged the contract for four-laning of the

Gurgoan-Faridabad road and along with this the upgradation of the Ballabgarh-
Sohana road on a build-operate and transfer (BOT) basis.
This project involves the construction of 66 km of road on high density traffic
zone and the project is expected to be completed in two years from the date of
commencement with a concession period of
17 years.
-Company name has been changed from Reliance Energy Ltd to Reliance
Infrastructure Ltd.
-Reliance Infra's Dahanu Thermal Power Station bags award

2009

-Reliance Infra to enter into cement sector

-Reliance Infra agrees to pay marketing margin to RIL
-RInfra gets Kandla-Mundra road project in Gujarat
-Reliance Infrastructure Wins Rs 11,000 cr Mumbai Metro-II Project
-RInfra wins Jaipur-Reengus Road Project from NHAI

2010

- The Anil Dhirubhai Ambani Group (ADAG) firm Reliance Infrastructure (R-
Infra) has inked an agreement with NHAI for developing the Rs 3,000 crore
Delhi-Agra highway project

65 | P a g e
 CHAPTER IV
DATA ANALYSIS AND INTERPRETATION

1) CURRENT RATIO:

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

Year Current Current Ratio

Assets liabilities
2005-06 7353.64 1570.82 4.68140207

2006-07 3871.45 2246.55 1.723286818

2007-08 2384.93 2599.38 0.917499558

2008-09 3227.07 4655.5 0.69317367

2009-10 3735.52 5646.72 0.661538

Figure 1 : CURRENT RATIO

5
4.5
4
3.5 2005-06
2006-07
3
2007-08
2.5 2008-09
2 2009-10
1.5
1
0.5
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows that the current ratio on FY year 2005-06
was 4.68 and then it dip to 1.33 in the FY 2006-07, further move downward to
0.92 and in the FY 2008-09 it dip down to 0.69 and finally in the FY 2009-10 it
again moved down to 0.66. The bench mark current ratio for Infrastructure
Industries is 2:1. The above table shows current ratio is less than 2. Over the
year under study it has been observed that the company has not maintained
favourable liquidity position and this can be treated as a unhealthy sign.
2) LIQUID RATIO:

Liquid assets
67 | P a g e
Liquid ratio = -----------------------

Liquid liabilities

Quick Assets = Total Current Assets (minus) Inventory

Year Quick Quick Quick ratio

Asset Liabilities
2005-06 7058.59 1570.82 4.493570237

2006-07 3578.76 2246.55 1.593002604

2007-08 2084.64 2599.38 0.801975856

2008-09 2786.39 4655.5 0.59851573

2009-10 3466.01 5646.72 0.613809

Figure 2 : LIQUID RATIO

4.5
4
3.5 2005-06
3 2006-07
2.5 2007-08
2 2008-09
1.5 2009-10
1
0.5
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the liquid ratio during the study period
except in the FY 2007-08 to 2009-10 is more than the bench mark Liquid ratio
(i.e.) 1:1.It reached the highest 4.49 in the FY 2005-06 and then in FY 2006-07
it came down to 1.59 and eventually went on decreasing to 0.61 in FY 2009-10.
This shows that the company is not enjoying credit worthiness. It is clear that
the liquid ratio of the company is at an decreasing rate and it is not close to

3) ABSOLUTE LIQUIDITY RATIO:

68 | P a g e
 Cash + bank +marketable securities
Absolute liquidity ratio = -----------------------------------------------------
Current liabilities

Year Cash Current Ratio

and Liabilities
securities
2005-06 5652.9 1570.82 3.598693676

2006-07 2175.92 2246.55 0.968560682

2007-08 87.65 2599.38 0.033719579

2008-09 251.01 4655.5 0.05391687

2009-10 301.82 5646.72 0.05345

Figure 3 : ABSOLUTE LIQUID RATIO

4
3.5
3 2005-06
2006-07
2.5
2007-08
2 2008-09
1.5 2009-10
1
0.5
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the absolute ratio for the study period FY
2005-06 to 2009-10. There is decrease in the absolute ratio. It was 3.60 in the
FY 2005-06. In FY 2006-07 it decreased to 0.97.Further it decreased to 0.34 in
FY 2007-08. Then in FY 2008-09 and FY 2009-10 it was 0.05

4) DEBT EQUITY RATIO:

Outsider’s funds
Debt equity ratio = ------------------------------

69 | P a g e
 Proprietor’s funds

Year Outsiders Proprietors fund Ratio

fund
2005-06 4494.54 7873.28 0.570859921

2006-07 6114.25 9339.24 0.654683893

2007-08 5257.55 11686.96 0.449864635

2008-09 7526.13 11907.44 0.63205273

2009-10 4272.61 15152.19 0.28198

Figure 4: DEBT-EQUITY RATIO

0.7
0.6
0.5 2005-06
2006-07
0.4 2007-08
2008-09
0.3
2009-10
0.2
0.1
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the debt equity relationship of the Reliance
Infrastructure company during the study period. The Bench Mark Debt-Equity
ratio is 2:1. During the FY 2005-06 it was 0.57 and then reached its highest in
the next year and from there it began to slope downwards and ultimately came
to 0.28 in the year 2009-10. In all the years the equity is more when compared
with borrowings. Hence the company is maintaining its debt position.

5) PROPRIETARY RATIO:

70 | P a g e
 Proprietor’s funds
Proprietary ratio = ---------------------------
Total tangible assets

Year Proprieto Tangible Ratio

rs fund assets
2005-06 7873.28 2647.71 297.3618712

2006-07 9339.24 2806.35 332.7895665

2007-08 11686.96 3056.49 382.365393

2008-09 11907.44 3331.37 357.433728

2009-10 15152.19 3468.61 436.8375

Figure 5: PROPRIETARY RATIO

450
400
350 2005-06
300 2006-07
250 2007-08
200 2008-09
150 2009-10
100
50
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows that the Proprietor’s fund ratio as on FY
2005-06 was 297.36 which gradually increased till FY 2009-10. This shows that
the firm has good investment in fixed asset and favourable long term solvency
position over the year under study.
6) FIXED ASSETS TURNOVER RATIO:

Net sales

71 | P a g e
Fixed assets turnover ratio = -------------------
Fixed assets
Year Net sales Fixed assets Ratio
2005-06 4607.89 2873.71 1.603463815

2006-07 6575.25 3104.36 2.118069425

2007-08 7501.2 3636.5 2.062752647

2008-09 10958.79 3904.59 2.80664295

2009-10 10908.06 4079.41 2.673931

Figure 6: FIXED ASSET TURNOVER RATIO

2.5
2005-06
2 2006-07
2007-08
1.5 2008-09
2009-10
1

0.5

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between the fixed assets
and sales. The sale is 1to 2 times more than the fixed assets from FY 2005-06 to
2009 -10. This indicates that fixed assets turnover ratio of the company is
gradually increasing which is a healthy indication that less amount of money is
tied up with fixed assets and thus fixed assets are effectively used to generate
the sales.

7) WORKING CAPITAL TURNOVER RATIO:

72 | P a g e
 Net sales
Working capital turnover ratio = ----------------------------
Net working capital

Year Net sales Net working Ratio

capital
2005-06 4607.89 5782.82 0.796824041

2006-07 6575.25 1624.9 4.046556711

2007-08 7501.2 (214.45) (34.9787829)

2008-09 10958.79 (1428.43) (7.67191252)

2009-10 10908.06 (1911.2) (5.70744)

Figure 7: WORKING CAPITAL TURNOVER RATIO

5
0
2005-06
-5
2006-07
-10
2007-08
-15 2008-09
-20 2009-10
-25
-30
-35

INTERPRETATION AND ANALYSIS

The above table and diagram indicates that working capital turnover ratio is
negative. Generally a negative working capital is a sign of managerial efficiency
in a business with low inventory and accounts receivable, which means they
operate on an almost strictly cash basis.

8) TOTAL ASSETS TURNOVER RATIO:

Total assets
73 | P a g e
Total assets turnover ratio = ----------------------
Net assets
Year Total Net sales Ratio
assets
2005-06 12367.82 4607.89 2.684052788

2006-07 15453.49 6575.25 2.350251321

2007-08 16944.51 7501.2 2.258906575

2008-09 19433.57 10958.79 1.77333173

2009-10 19424.8 10908.06 1.780775

Figure 8: TOTAL ASSET TURNOVER RATIO

2.5

2005-06
2
2006-07
2007-08
1.5 2008-09
2009-10
1

0.5

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between the total assets to
net sales. During all the study period years the relationship between sales to
total assets is Low. The ratio increased from 2.68 (2005-06) to 1.78 (2009-10)
due to the heavy rise in the sales.
9) CAPITAL TURNOVER RATIO:

Sales

74 | P a g e
Capital turnover ratio = ----------------------
Proprietor’s fund
Year Net sales Proprietor Ratio
s fund
2005-06 4607.89 7873.28 0.585256716

2006-07 6575.25 9339.24 0.704045511

2007-08 7501.2 11686.96 0.641843559

2008-09 10958.79 11907.44 0.92033132

2009-10 10908.06 15152.19 0.7199

Figure 9: CAPITAL TURNOVER RATIO

10
9
8
7 2005-06
2006-07
6
2007-08
5 2008-09
4 2009-10
3
2
1
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between the sales and
proprietors funds. It indicates that the sales are in between 0.58 and 0.90 times
less than the proprietor's funds. It shows the firms is not maintaining the better
utilization of own funds.
10) Return on total assets:
Net profit
Return on total assets = ------------------- x100
Total assets

75 | P a g e
Year Net profit Total assets Ratio
After Tax
2005-06 650.34 12367.82 0.052583236

2006-07 801.45 15453.49 0.051862071

2007-08 1084.63 16944.51 0.064010703

2008-09 1138.88 19433.57 0.05860375

2009-10 1151.69 19424.8 0.05929

Figure 10: RETURN ON TOTAL ASSET

0.07

0.06

0.05 2005-06
2006-07
0.04 2007-08
2008-09
0.03 2009-10

0.02

0.01

INTERPRETATION AND ANALYSIS

The above table and figure as on FY 2010 remain modest at 6% indicating that
the long term fixed asset investments are not yet effectively managed to
generate net income.

11) GROSS PROFIT RATIO:

Gross profit
Gross profit ratio = ----------------------------------- x 100

76 | P a g e
 Net sales
Year Gross Net sales Ratio
Profit
2005-06 4607.89 4607.89 40.4825202

2006-07 2028.1 6575.25 30.84445458

2007-08 2530.7 7501.2 33.7372687

2008-09 3045.83 10958.79 27.7934881

2009-10 2949.67 10908.06 27.0412

Figure 11: GROSS PROFIT RATIO

45
40
35
2005-06
30 2006-07
25 2007-08
2008-09
20
2009-10
15
10
5
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between the gross profit
and net sales in percentage. During 2005-06 the gross profit position was
40.48% and in the very next year it slashed down to 30.84% and again raised to
33.73% and finally reached to 27.04% in the year 2009-10. However it can be
noticed that sales are increasing but gross profit is not increasing
proportionately every year. This show there is low efficiency in managing
purchases, production, labour, sales and moderate amount is available to meet
the other expenses.

12) NET PROFIT RATIO:

Net profit
Net profit sales = ----------------- x 100

77 | P a g e
 Net sales
Year Net Profit Net sales Ratio
2005-06 650.34 4607.89 14.11361816

2006-07 801.45 6575.25 12.18889016

2007-08 1084.63 7501.2 14.45941983

2008-09 1138.88 10958.79 10.3923882

2009-10 1151.69 10908.06 10.55816

Figure 12: NET PROFIT RATIO

16
14
12 2005-06
2006-07
10
2007-08
8 2008-09
6 2009-10
4
2
0

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between net profit and net
sales. During 2005-06 it was 14.11% on sales and in2006-07 it decreased
to12.18%. There is an further in percentage of 10.55 in 2009-10 The sales of the
organization are also increasing and the profit of the organization is also
increasingly proportionately .This shows Sky fab company ltd have good
control over direct and indirect cost and they have large amount available to
meet non-operating expenses/losses.

13) RETURN ON SHAREHOLDER’S FUND

Net profit after Interest and Tax

78 | P a g e
 Return on shareholder’s fund = -------------------------------------- X 100

Shareholders’ fund

Year Profit After Proprietor Ratio

Tax s fund
2005-06 650.34 7873.28 8.260089823

2006-07 801.45 9339.24 8.581533401

2007-08 1084.63 11686.96 9.280685482

2008-09 1138.88 11907.44 9.56444038

2009-10 1151.69 15152.19 7.600815

Figure 8: RETURN ON SHAREHOLDER'S FUND

10
9
8
2005-2006
7
2006-2007
6 2007-08
5 2008-09
4 2009-10
3
2
1
0

INTERPRETATION AND ANALYSIS

The above Table and Diagram shows that there is a fluctuation in this ratio and
this is due to fluctuating debt capital and interest burden on the company. It is
evident from this that the percentage return on Owner’s fund is between 7-9 %.

a) 14) ADMINISTRATIVE AND SELLING EXPENSES RATIO:

Administrative and Selling expenses
Administrative expenses ratio = ----------------------------------- x 100

79 | P a g e
 Sales
Year Administration& Net sales Ratio
Selling expenses
2005-06 543.41 4607.89 11.79303325

2006-07 664.99 6575.25 10.1135318

2007-08 847.3 7501.2 11.29552605

2008-09 1277.02 10958.79 11.6529288

2009-10 1040.68 10908.06 9.540468

Figure 14: ADMINSTRATION AND SELLING EXPENSE RATIO

12

10

2005-06
8
2006-07
2007-08
6 2008-09
2009-10
4

INTERPRETATION AND ANALYSIS

The above table and diagram shows the relationship between the administration
and selling expenses and sales in percentage. The administration and selling
expenses during 2005-06 is very high and gradually decreased to 9.54 in year
2009-10.This shows there is a good control on expenditure and may be one of
the reasons to net profit during the study years.

5) COST OF ENERGY EXPENSE RATIO

Cost of energy
Expenses ratio = ------------------------------------------ x 100

80 | P a g e
 Sales
Year Cost of Energy Net sales Ratio
2005-06 1087.56 4607.89 23.60212592

2006-07 1532.43 6575.25 23.30603399

2007-08 2487.69 7501.2 33.16389378

2008-09 4253.99 10958.79 38.8180629

2009-10 3321.94 10908.06 30.45399

Figure 15: COST OF ENERGY EXPENSE RATIO

40
35
30 2005-06
25 2006-07
2007-08
20 2008-09
15 2009-10

10
5
0

INTERPRETATION AND ANALYSIS

The above table and figure show that the cost of energy and net sales are
increasing gradually indicating that there is good control on the expenditure and
ultimately resulting in higher productivity.

16) COST OF FUEL RATIO

Cost of Fuel
Expenses ratio = ------------------------------------ x 100
Sales
81 | P a g e
 Year Cost of fuel Net sales Ratio
2005-06 812.1 4607.89 17.62411863

2006-07 921.27 6575.25 14.01117828

2007-08 1015.52 7501.2 13.53810057

2008-09 1166.78 10958.79 10.6469784

2009-10 1219.83 10908.06 11.18283

Figure 16: COST OF FUEL EXPENSE RATIO

18
16
14 2005-06
12 2006-07
10 2007-08
8 2008-09
2009-10
6
4
2
0

INTERPRETATION AND ANALYSIS

The above table and figure shows that As on FY 2010 the Cost of fuel to sale ,
ratio is 11.18 as compared to FY 2005-06 i.e. 17.62 indicating that increasing in
the net sales is not proportionate with increasing cost of fuel as the ratio is
dipping. This shows that the company has good control over the cost of fuel
over the study period.

7) COST OF TAX RATIO

Cost of Tax
Expenses ratio = ------------------------------------ x 100

82 | P a g e
 Sales

Year Cost of Tax Net sales Ratio

2005-06 114 4607.89 2.474017392

2006-07 124.26 6575.25 1.889814076

2007-08 131.58 7501.2 1.754119341

2008-09 152.96 10958.79 1.39577453

2009-10 154.13 10908.06 1.412992

Figure 17: COST OF TAX EXPENSE RATIO

2.5

2 2005-06
2006-07
1.5 2007-08
2008-09
1 2009-10

0.5

INTERPRETATION AND ANALYSIS

The above table and figure show that the cost of tax and net sales are increasing
proportionately indicating that there is good control on the expenditure and
ultimately resulting in higher productivity. From FY 2005 to FY 2010 the ratio
are marginally varied and remained more or less close to 1.50.

18) EXPENDITURE ON EPC RATIO

Expenditure on EPC
Expenses ratio = ------------------------------------ x 100

83 | P a g e
 Sales

Year Expenditure on Net sales Ratio

EPC
2005-06 728.84 4607.89 15.81721786

2006-07 1969.19 6575.25 29.94851907

2007-08 1335.71 7501.2 17.80661761

2008-09 2339.23 10958.79 21.345696

2009-10 3262.49 10908.06 29.90898

Figure 18: EXPENDITURE ON EPC EXPENSE RATIO

30
25 2005-06
2006-07
20
2007-08
15 2008-09
10 2009-10
5
0

INTERPRETATION AND ANALYSIS

The above table and figure shows that as on FY 2010 the Expenditure on EPC
ratio, had increased as against FY 2009 on account of substantial increase in the
Sales.

84 | P a g e
 CHAPTER V
FINDINGS AND SUGGESTIONS

5.1 FINDINGS

85 | P a g e
This study is carried out with the objective of analyzing the financial
performance of Reliance Infrastructure to examine and understand the role of
finance in the growth of the company. This chapter attempts to highlight the
findings of the study.

1. The profit before interest and tax is in positive during the period of study.

2. The sales, PBIT, PBT, PAT all shows the increasing trend during the
period under review. It depicts that the company is working with more
efficiency.

3. Net Profit ratio shows that the sales of the organization are increasing and
the profit of the organization is also increasingly proportionately. This
shows Sky fab company ltd have good control over direct and indirect
cost and they have large amount available to meet non-operating
expenses/losses.

4. Fixed Assets turnover ratio shows the increasing trend. It depicts that the
company’s fixed assets are utilized properly in relation to the sales. It
indicates that less amount of money is tied up with fixed assets and thus
fixed asset are effectively used to generate the sales.

5. Working capital turnover ratio is negative. Generally a negative working

capital is a sign of managerial efficiency in a business with low inventory
and accounts receivable, which means they operate on an almost strictly
cash basis.

6. The ideal current ratio is 2 which the firm does not obtained and this
shows the company has not maintained favourable liquidity position and
this can be treated as an unhealthy sign.

7. The ideal liquid ratio is 1 which is also not obtained by the firm and So
the company is not in a position to meet the short term obligations.

8. Proprietary ratio of the company fluctuates during the period of study

shows that the firm has good investment in fixed asset and favourable
long term solvency position over the year under study.

86 | P a g e
9. There is decreasing trend in the absolute ratio for all the study years.

10 In all the years the debt equity is more, when compared with borrowings.
Hence the company is maintaining its debt position.

11 .Capital turnover ratio indicates that the sales are in between 0.58 and
0.90 times less than the proprietor's funds which shows the firms is not
maintaining the better utilization of own funds.

12 .Gross profit ratio indicates that sales are increasing but gross profit is not
increasing proportionately every year. This show there is low efficiency
in managing purchases, production, labour, sales and moderate amount is
available to meet the other expenses.

13 The administration and selling expenses during 2005-06 is very high and
gradually decreased to 9.54 in year 2009-10.This shows there is a good
control on expenditure and may be one of the reasons to net profit during
the study years.

5.2 RECOMMENDATIONS

87 | P a g e
1. The company may increase the performance by reducing the borrowed
capital, so that the interest an finance charges will be less.

2. The company may increase the sales if it attempts to move into export
market.

3. The company may reduce the operating inefficiencies through effective

utilization of all the resources.

4. The company may strike a balance between the current assets and current
liabilities to maintain the solvency position.

5. Optimum utilization of Working Capital can be planned so as to result in

sound financial position.

6. The Management must also study the market position and it also find the
demand prevailing in the market for the products and thus this will guide
them to enhance their sales volume.

7. The liquidity position of the company is quite satisfactory. And this must
be improved further for the purpose of proper utilization of the liquid
assets of the company.

8. The sales of the organization can be further increased by improving the

quality through optimum utilization of company's resources (i.e. assets,
raw materials, credit system, etc.) and that in turn will increase the overall
profits of the organization.

9. The Gross Profit ratio can be improved by increasing the gross profit and
the factors decreasing the gross profit ratio should be thoroughly checked
timely whither they are operating factors or any misleading factors.

88 | P a g e
 CHAPTER VI
CONCLUSION AND BIBLIOGRAPHY

89 | P a g e
 6.1 CONCLUSION

 On studying the Ratio Analysis of Sky fab company ltd for a period of
five years from 2005-06 to 2009-10, the study reveals the favourable
financial performance with steady margins.

 It shows that there is a constant increase in the net sales and net profit
which indicates a healthy sign for the company to sustain in market.

 Therefore the company has been able to maintain and grow its market
share to make strong margins in market, contributing to the strong
financial position of the company.

 It can be also noticed from the ratios that company is able to satisfy its
shareholders with maximum returns.

90 | P a g e
 6.2 BIBLIOGRAPHY
Books Referred

R.K. SHARMA and SHASHI K. GUPTA, “Management Accounting and

Business Finance”, Kalyani Publishers.

I.M. PANDEY, “Financial Management”, Vikas Publishing house private

limited, New Delhi, 2006

Advanced Accountancy, M. COM Part – II, Institute of distance and open

Learning, University of Mumbai.

Websites:

www.rinfra.com

www.google.com

www.wikipedia.com

www.investopedia.com

Literature Review Bibliography

1. Environmental and Financial Performance Literature, by Donald P.

Cram, on March 27, 2000
Source: http://web.mit.edu/doncram/www/environmental/envir-fin-
literature.html

2. Journal of Industrial Technology • Volume 19, Number • February 2003

to April 2003 Page2, by Dr. Devang P. Mehta
Source: http://72.14.235.132/search?q=cache:EIGjtsUJQeEJ:www.nait.or
g/jit/Articles/mehta011603.pdf+review+of+literature+on+financial+performance
&hl=en&ct=clnk&cd=2

3. Journal of International Business Studies (1995), Vol 26, Page 181–202 By

91 | P a g e
Janet Y. Murray, Masaaki Kotabe & Albert R. Wildt
Source:
http://www.palgravejournals.com/jibs/journal/v26/n1/abs/8490171a.html

4. Implications for financial performance and corporate social

responsibility, by Philippe Jacquart, Catherine Ramus & John Antonakis,
on May 23, 2004.
Source:
http://www1.icp2008.org/guest/AbstractView?ABSID=10821

5. Journal of the Operational Research Society (2003) Vol- 54,Pages 48–58,

by E H Feroz.
Source:
http://www.palgravejournals.com/jors/journal/v54/n1/abs/2601475a.html

Article1: http://www.accountingformanagement.com/accounting_ratios.htm

Article 2:http://www.articlesbase.com/accounting-articles/analysis-of-financial-
statementsselective-tools-1284945.html

Article3: http://www.abcsofinvesting.net/financial-statements-analysis/

Article4:http://businessfinancialplanning.suite101.com/article.cfm/
financial_ratio_analysis_for_performance_check

Article5: http://www.mint.com/blog/finance-core/understanding-financial-
statements/

APPENDICES
92 | P a g e
1.Which of the following is not a current asset account?

 Inventory

 Prepaid Insurance

 Fixtures

2.Current asset MINUS current liabilities is the

 Current Ratio

 Net Worth

 Working Capital

3.Current assets DIVIDED BY current liabilities is the

 Current Ratio

 Net Worth Ratio

 Working Capital

4.The quick ratio EXCLUDES which of the following accounts?

 Accounts Receivable

 Inventory

 Cash

93 | P a g e
 Use the following information to answer items 5 - 7:
At December 31 a company's records show the following information:

5.The company's working capital is

 $60,000

 $66,000

 $196,000

6.The company's current ratio is

 0:1

 0:1

 1:1

7.The company's quick ratio is

 7:1

 0:1

 0:1

 Use the following information to answer items 8 - 11:

94 | P a g e
For its most recent year a company had Sales (all on credit) of $830,000
and Cost of Goods Sold of $525,000. At the beginning of the year,
its Accounts Receivable were $80,000 and its Inventory was $100,000. At the
end of the year, its Accounts Receivable were $86,000 and its Inventory was
$110,000.

8.The inventory turnover ratio for the year was

 4.8

 5.0

 7.9

10.The accounts receivable turnover ratio for the year was

 6.3

 7.5

 10.0

10.On average how many days of sales were in Accounts Receivable during the
year?

 27

 37

 49

11.On average how many days of sales were in Inventory during the year?

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  14

 46

 73


 Use the following information for items 12 and 13:
A company's net income after tax was $400,000 for its most recent year. The
company's income statement included Income Tax Expense of $140,000
and Interest Expense of $60,000. At the beginning of the year the company's
stockholders' equity was $1,900,000 and at the end of the year it was
$2,100,000.

12.What is the times interest earned for the company?

 6.7

 9.0

 10.0

13.What is the after-tax return on stockholder's equity for the year?

 20%

 25%

 30%

14.The debt to equity ratio is computed as: (Total Liabilities ÷ Total

__________) : 1

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15. Which of the following will likely have the reported amounts on the balance
sheet closest to their current value?

 Current Assets

 Long-term Assets

 Stockholders' Equity

16.A corporation's excellent reputation will be listed among the corporation's

assets on its balance sheet.

 True

 False

17.The current market value of a corporation is approximately the amount

reported on the balance sheet as stockholders' equity.

 True
 False

18.Free cash flow is the cash provided by operating activities minus the cash
used by financing activities.

 True
 False

19.The quality of a manufacturer's earnings are suspect when its net income is
more than the cash flow from which activities?

 Operating
 Investing
 Financing

20.A balance sheet which reports percentages of total assets instead of dollar
amounts is referred to as a

__________

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