FINANCIAL REPORTING AND ANALYSIS

PROJECT REPORT ON

FINANCIAL STATEMENT ANALYSIS OF NHPC LTD.

Submitted to:

Dr. A.P. DASH, NSB

Submitted on: 16-11-2023

Submitted by: Group 2
Sl No Name NSB ID
1 Abhrajit Nath 23PGDM00A024
2 Dhaneesh K 23PGDM05A015
3 Ratnesh Kumar Mishra 23PGDM00A021
4 Siddharth N A 23PGDM02A032
5 Thabir Kumar Meher 23PGDM07A028

Table of Contents
P a g e 1 | 29
Abstract..............................................................................................................................................................................4
NHPC Ltd- An introduction................................................................................................................................................5
Financial Highlights............................................................................................................................................................7
Financial statement analysis.............................................................................................................................................8
Liquidity ratios...............................................................................................................................................................9
Current ratio......................................................................................................................................................9
Quick ratio....................................................................................................................................................... 10
LEVERAGE RATIOS....................................................................................................................................................... 11
Debt to Equity Ratio.................................................................................................................................13
Debt to Capital Ratio………………………………………………………………………… …………………………………………………….14
Profitability Ratios.......................................................................................................................................................14
Return on Equity (ROE):..................................................................................................................................15
Return on Assets (ROA):..................................................................................................................................16
Return on Capital Employed (ROCE):..............................................................................................................17
Net Profit Ratio................................................................................................................................................19
Earnings Per Share (EPS)..................................................................................................................................19
Book Value Per Share......................................................................................................................................20
Dividend Payout Ratio.....................................................................................................................................21
Price Earnings Ratio.........................................................................................................................................22
Turnover Ratios........................................................................................................................................................... 22
Asset Turnover Ratio.......................................................................................................................................23
Coverage Ratio.............................................................................................................................................................24
Interest Coverage Ratio...................................................................................................................................24
Cash Coverage Ratio........................................................................................................................................25
Asset Coverage Ratio.......................................................................................................................................25
Z score..........................................................................................................................................................................26
Discussion and Conclusion..............................................................................................................................................28
References....................................................................................................................................................................... 29

P a g e 2 | 29
Table of Figures
Figure 1 NHPC project location.................................................................................................. 6
Figure 2 NHPC standalone Generation trend.............................................................................6
Figure 3 Standalone Financial highlights for FY 2023................................................................7
Figure 4 Statement of Assets and liability...................................................................................8
Figure 5: Current ratio trend over years......................................................................................9
Figure 6: Current ratio of NHPC & NTPC..................................................................................10
Figure 7: Quick ratio trend over years.......................................................................................11
Figure 8: Quick ratio NHPC vs NTPC.......................................................................................11
Figure 9: Debt to Equity ratio trend...........................................................................................12
Figure 10: Quick ratio NHPC vs NTPC.....................................................................................13
Figure 11 Debt to capital ratio trend over the years..................................................................13
Figure 12 :D/C ratio NHPC vs NTPC........................................................................................14
Figure 13 Return on Equity Trend.............................................................................................16
Figure 14 Return on Assets Trend............................................................................................17
Figure 15 Return on Capital Employed trend............................................................................18
Figure 16 Net Profit Margin ratio...............................................................................................19
Figure 17 Earnings per share Trend.........................................................................................20
Figure 18 Book value per share Trend..................................................................................... 21
Figure 19 Price earnings ratio trend..........................................................................................22
Figure 20 Asset Turnover ratio trend........................................................................................23
Figure 21 Interest coverage ratio trend.....................................................................................24
Figure 22 Cash coverage ratio trend........................................................................................ 25
Figure 23 Asset coverage ratio.................................................................................................26

P a g e 3 | 29
Abstract
This project report employs a rigorous ratio analysis to dissect the financial statements
of NHPC, shedding light on its operational efficiency, profitability, and overall financial health.
By delving into key financial ratios, including liquidity, solvency, and efficiency metrics, the
report provides a nuanced understanding of NHPC's performance.

The analysis scrutinizes NHPC's financial performance using the following statements-

i) income statement, ii) balance sheet, and iii) cash flow statement

We will use various financial ratios which will unravel different questions such as- Does
the company is able to generate profits, how they manage their debts, and how they utilize
their assets effectively. Comparative industry benchmarks serve as a yardstick, enabling a
comprehensive evaluation of NHPC's competitive standing.

The report identifies areas of strength, such as liquidity resilience and prudent debt
management, along with areas for improvement, fostering a holistic view of NHPC's financial
landscape. Furthermore, macroeconomic factors are considered to contextualize the
company's financial performance within the broader economic environment.

In conclusion, the ratio analysis not only dissects the current financial state of NHPC,
but also provides strategic recommendations for stakeholders. As NHPC navigates the
complexities of the market, the findings of this report serve as a roadmap for informed
decision-making, laying the foundation for sustainable growth and financial success.

P a g e 4 | 29
NHPC Ltd- An introduction

NHPC Limited stands as India's primary hydropower development organization,

equipped to oversee all stages from the conceptualization to the commissioning of hydro
projects. The company has further expanded its portfolio into Solar & Wind energy
development.

Originally incorporated in 1975 under the Companies Act, 1956, NHPC Ltd. (formerly
National Hydroelectric Power Corporation Ltd.) holds the mandate to strategically plan,
promote, and organize the comprehensive and systematic development of power,
encompassing both Conventional and Non-Conventional Sources, both in India and abroad.
Having successfully concluded its IPO in 2009, NHPC is now a listed company on both NSE
and BSE. NHPC has a paid-up share capital of ₹10,045.03 crore and an authorized share
capital of ₹15,000 crore as of September 30, 2023. It also has investment base amounting to
₹77,132.43 crore.

NHPC's total installed capacity, recorded as of September 30, 2023, stands at 7,097.20
MW, inclusive of 1,546 MW in Joint Ventures. This capacity encompasses 6,971.20 MW
generated from 22 Hydro Power Stations, 76 MW from Solar Power Projects, and 50 MW from
Wind Power Project. Notably, NHPC's hydro share of 6,971.20 MW constitutes approximately
14.88% of the country's total installed Hydro capacity, which amounts to 46,850.18 MW.

NHPC, along with its Joint Ventures (JVs) and subsidiaries, is actively involved in
constructing 15 projects, amassing a combined installed capacity of 10,449 MW. This includes
notable hydroelectric initiatives such as in the state of Arunachal Pradesh- one in Subansiri
Lower HEP of 2,000 MW and Dibang Multipurpose Project of 2,880 MW, as well as the
Parbati-II HEP (800 MW) in Himachal Pradesh. Additionally, NHPC is progressing with three
Solar Projects totaling 1,000 MW under the MNRE CPSU scheme in Gujarat (600 MW),
Rajasthan (300 MW), and Andhra Pradesh (100 MW). Simultaneously, subsidiaries and JV
companies are spearheading six Hydroelectric projects and three Solar projects. These
endeavors encompass diverse locations, including Jammu & Kashmir, Sikkim, and Madhya
Pradesh. Moreover, NHPC has projects under clearance and survey & investigation stages,
further expanding its footprint in the renewable energy landscape.

P a g e 5 | 29
 Figure 1 NHPC project location
* Source-CEA as on 31.03.2023

Figure 2 NHPC standalone Generation trend

( *source- Investor presentation)

P a g e 6 | 29
Financial Highlights
The summary of the annual report of the company shows some of the key financial
findings for the fiscal year that concluded in March 2023. These criteria are derived from the
annual report's financial statements, which include the cash flow, income, and balance sheets.

Figure 3 Standalone Financial highlights for FY 2023

(* source: Investor’s presentation)

P a g e 7 | 29
 Figure 4 Statement of Assets and liability
(* source: Investors presentation)

Financial statement analysis

In this case study, the financial statements of NHPC Ltd., which are i) cash flow statement,
ii) profit and loss statement, and iii) balance sheet, were examined using ratio analysis. For the
period 2022-23 to draw insights from them and compare the same with peer competitors in the
same sector from an investor/ stakeholder perspective. The annual report of the company is
taken as reference for the purpose of calculating all the required ratios and drawing the
conclusions with respect to its financial position. These tools for analysis are categorized into
six ratios as below-

1. Liquidity ratios
2. Leverage ratios
3. Profitability ratios
4. Turnover ratios
5. Coverage ratios
6. Market ratios

P a g e 8 | 29
 All these categories have multiple ratios which have unique meaning and significance.
These ratios are calculated for NHPC ltd and its temporal changes are also indicated to
conclude its changes from past financial year.

Liquidity ratios

Liquidity ratios are essential to check whether the company is able to pay off its current
short-term debts or not. These metrics gauge the company's capability to meet debt
obligations and its financial safety net. Liquidity ratios are determined through calculations
such as the current ratio, quick ratio and cash flow ratio. A higher liquidity ratio indicates the
firm can deal with its current liabilities without further raising the debt.

Current ratio
The current ratio is the ratio of current asset to current liability of the business. It
demonstrates to us the company's capacity to settle immediate debt.

Current Asset
Current Ratio =
Current Liability
For NHPC Ltd its current ratio for the as per annual report March 2023 is coming around 1.77

Current Ratio from 2019-23

3

2.5
2.5 2.43

2.07
2 1.93
1.77

1.5

0.5

0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Figure 5: Current ratio trend over years

From Fig.1 over the past years the current ratio of NHPC Ltd is decreased to 1.77. This
may be due to increase in current liabilities due to short term payables to suppliers. It has
fallen by 0.834% compared to Mar-22 level. As a standalone, it does not provide any

P a g e 9 | 29
meaningful insight, so we need to compare it with industry peers. So, for that purpose the
current ratio of NHPC is compared with that of NTPC ltd.

Current Ratio-NHPC vs NTPC

2.5

2
1.77

1.5

1.04
1

0.5

0
1

NHPC NTPC

Figure 6: Current ratio of NHPC & NTPC

From the trend it is very clear that current ratio of NHPC is better than that of
NTPC both being working in the same power sector. Both are capital intensive sector, even
though mode of power generation and size of the company is different.

Quick ratio

The quick ratio is a crucial liquidity indicator that evaluates a business's capacity to pay
short-term debt with its most liquid assets. It is also known as the acid-test ratio. Without
depending on inventory, the quick ratio — which is computed as
(total of cash , marketable securities ,∧receivables)/current liabilities —offers immediate liquidity
insight of the company. A greater quick ratio indicates a more robust capacity to meet short-
term obligations, demonstrating stability and adaptability in the face of unforeseen financial
pressures. In order to assess a company's short-term liquidity position and its ability to
effectively manage financial obligations, creditors and investors frequently use the quick ratio.

According to the Mar-2023 annual report, NHPC Ltd.'s quick ratio is 2.05. Below is a
trend for the same over the previous few years;

P a g e 10 | 29
 Quick ratio from 2019-23
3

2.48
2.5 2.41
2.05

2 1.91
1.75

1.5

0.5

0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Figure 7: Quick ratio trend over years

It is evident from that NHPC is maintaining a healthy quick ratio over the years. The quick ratio
for NTPC ltd for the year ended Mar-2023 is 0.86

NHPC vs NTPC
2.5

2.05
2

1.5

1 0.86

0.5

0
NHPC NTPC

Figure 8: Quick ratio NHPC vs NTPC

NHPC’s quick ratio is in a better position compared to that of NTPC ltd. For the financial
year ended 2022-23.

LEVERAGE RATIOS

Leverage ratios are essential tools, providing a clear measure of a company's reliance on
debt for funding operations and expansion. While well-managed debt can yield positive
returns, excessive dependence carries substantial risks, potentially leading to default and
financial troubles. The appropriateness of leverage varies by industry, with some sectors

P a g e 11 | 29
relying more on debt. Regulatory guidelines, especially for banks, set specific limits on
acceptable leverage. Leverage ratios are most informative when examined against historical
data or compared with peer groups, offering valuable insights into a company's debt strategy
within its industry context. Some of the important leverage ratios used to analyze the financial
statement of NHPC Ltd is given below.

Debt to Equity Ratio for 2019-2023

0.9

0.78 0.79
0.8
0.72
0.69
0.7
0.6
0.6

0.5

0.4

0.3

0.2

0.1

0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Figure 9: Debt to Equity ratio trend

But this ratio did not provide any useful information as a standalone as its healthiness
depends on the type of industry it is working and the investment funding requirement of that
industry. So, the same for NTPC Ltd is compared with. Debt to equity ratio of NTPC ltd is 1.33
which is higher than that of NHPC ltd. Which indicates that NTPC is into higher capital
investments raised through debt funding.
P a g e 12 | 29
 D/E ratio : NHPC vs NTPC

NTPC 1.33

NHPC 0.79

0 0.2 0.4 0.6 0.8 1 1.2 1.4

Figure 10: Quick ratio NHPC vs NTPC

D
By comparing the total liabilities of a company to its total capital, the debt-to-capital ratio, or
D/C ratio, evaluates the financial leverage of the latter. This metric provides insights into the
capital structure a financial solvency of a business, making it useful for gauging how well the
company could navigate a potential decline in sales revenue.

Ratio of Debt to Capital = Debt / Debt + Equity from Shareholders

The debt to capital ratio of NHPC ltd comes to 0.444 which is around the same for past few
years. The trend for the same is given below.

Debt to capital ratio over the years

0.5
0.45 0.44
0.427
0.408 0.414
0.4
0.362
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Figure 11 Debt to capital ratio trend over the years

The debt to capital ratio of NTPC Ltd for the FY 2022-2023 is 0.599. Comparison trend
for the same is shown below.

P a g e 13 | 29
 D/C ratio : NHPC vs NTPC
0.7
0.599
0.6

0.5
0.44
0.4

0.3

0.2

0.1

0
NHPC NTPC

Figure 12 :D/C ratio NHPC vs NTPC

Profitability Ratios
A company's capacity to make a profit in relation to its revenue, assets, and equity over
a specified period of time is evaluated using profitability ratios. They demonstrate how well a
business makes use of its resources to generate revenue and add value for investors. They
are crucial because they can shed light on a company's performance and financial health for
both investors and businesses. It aids companies in determining their sources of income and
areas where they can cut costs to maximize profits.

Significance of profitability ratios for businesses

Profitability ratios can help businesses to:
 Track their financial performance over time
 Identify areas where they can improve their efficiency and profitability
 Make informed decisions about pricing, marketing, and investment
 Compare their performance to other companies in their industry
Significance of profitability ratios for investors
They can help investors to:
 to assess a company's investment potential and risk
 Determine which businesses are making significant profits and are most likely to do so
in the future.
 Compare the profitability of different companies in the same industry
 Evaluate the risk of making an investment in a specific business.

P a g e 14 | 29
Some common profitability ratios include:
Profitability ratios are useful for evaluating a company's performance against its peers,
over time, and across industries. Profitability ratios should be utilized in conjunction with other
financial measures, such as liquidity and solvency ratios, as they are but one indicator of a
company's overall health.

Return on Equity (ROE):

The return on equity ratio is a useful tool for evaluating how effectively a business uses
its equity to generate profit. By evaluating returns, ROE provides a straightforward metric. By
comparing a company's ROE to the average of the industry, it is feasible to identify the
company's competitive advantage or lack thereof. Return on equity (ROE) examines the firm's
overall profitability for its owners and investors by utilizing net income as the numerator.

Return on equity ratio = EBIT / Equity

The company witnessed an enhancement in its Return on Equity (ROE), which reached
10.82% in FY23, compared to 10.56% in FY22. The ROE is a metric that gauges a firm's
proficiency in generating profits utilizing the capital invested by its shareholders in the
organization.
Return on Equity (%) NHPC NTPC
FY 2022-23 7.58 12.38
FY 2021-22 7.27 12.58

P a g e 15 | 29
 Return on Equity (ROE)
14
12.38 12.58
12

10
Percentage (%)

8 7.58 7.27

0
FY 2022-23 FY 2021-22
NHPC NTPC

Return on Assets (ROA):

The return on asset ratio is used to assess how well a business uses its resources to
turn a profit. This ratio, which compares a company's profit, or net income, to the total capital
invested in assets, shows how well the business is doing. A higher return signifies a greater
level of productivity and efficiency in the management's utilization of economic resources. It is
worth noting that different industries exhibit varying levels of return on assets. Industries
characterized by a substantial requirement of fixed assets for operations and a higher capital
intensity generally demonstrate a lower return on assets due to the greater denominator in the
formula. However, it is possible for a company with a significant asset base to achieve a large
return on assets if their income reaches a sufficiently high level.

Return on assets ratio = EBIT / Total assets

The return on assets (ROA) exhibited by the organization stands at 5.13% in the fiscal year
2023, as opposed to the 5.03% observed in the fiscal year 2022.
Return on Assets (%) NHPC NTPC
FY 2022-23 5.13 4.49
FY 2021-22 5.03 4.54

P a g e 16 | 29
 Return on Assets (ROA)
5.2 5.13
5.03
5

4.8
Percentage (%)

4.6 4.54
4.49

4.4

4.2

4
FY 2022-23 FY 2021-22
NHPC NTPC

Return on Capital Employed (ROCE):

A measure of profitability called Return on Capital Employed (ROCE) assesses how
well a business uses its capital to produce profits. Investors commonly use it to determine
whether a company is suitable for investment because it is considered to be one of the most
valuable profitability ratios.

.
.
The company witnessed an enhancement in its Return on Capital Employed (ROCE)
and achieved a standing of 7.58% in the fiscal year 2023, as opposed to the 7.27% recorded in
the fiscal year 2022. The ROCE serves as a metric that evaluates the firm's capacity to
generate earnings from its aggregate capital, which encompasses both shareholder capital
and debt capital, utilized within the organization.
Return on Capital Employed (%) NHPC NTPC
FY 2022-23 7.58 11.02
FY 2021-22 7.27 9.15

P a g e 17 | 29
 Return on Capital Employed (ROCE)
12
11.02

10
9.15

8 7.58
7.27
Percentage (%)

0
FY 2022-23 FY 2021-22
NHPC NTPC

P a g e 18 | 29
Net Profit Ratio
An essential profitability metric, net profit ratio illustrates the connection between net
sales and net profit after taxes. We refer to it as net profit margin when we express it as a
percentage.
Formula for net profit ratio is:
Net Profit Margin Ratio = Net income /Total Revenue

As compared to 42.34% in the period under review, the company's profitability ratio for FY23
stands at 41.15%.

Net Profit Margin ratio (%) NHPC NTPC

FY 2022-23 41.15 10.50
FY 2021-22 42.34 13.87

Net Profit Margin ratio

45 42.34
41.15
40

35

30
Percentage (%)

25

20

15 13.87
10.5
10

0
FY 2022-23 FY 2021-22
NHPC NTPC

Figure 16 Net Profit Margin ratio

Earnings Per Share (EPS)

Earnings Per Share is the profitability ratio, which shows how profitable a business is.
This amount is determined by dividing the net profit realized by the shares that are currently in
circulation.

P a g e 19 | 29
To compute EPS, following formula is used:
Earnings per share = Total PAT /Total no . of shares
Increased earnings per share will lead to increased profit for the company. As compared to the
same period last year, EPS stands at 3.82 in FY23 and 4.79 in fiscal 22.

Earnings per share (%) NHPC NTPC

FY 2022-23 3.82 17.73
FY 2021-22 4.79 16.62

Earnings per share

20
17.73
18
16.62
16

14

12
Percentage (%)

10

6 4.79
3.82
4

0
FY 2022-23 FY 2021-22
NHPC NTPC

Figure 17 Earnings per share Trend

P a g e 20 | 29
The Earnings per share of the company is at Rs. 35.25 during FY23, when compared to Rs.
33.34 during FY22.
Book value per share (Rs.) NHPC NTPC
FY 2022-23 35.25 143.23
FY 2021-22 33.34 132.06

Book value per share

160
143.23
140 132.06

120

100
Percentage (%)

80

60

40 35.25 33.34

20

0
FY 2022-23 FY 2021-22
NHPC NTPC

Figure 18 Book value per share Trend

Dividend Payout Ratio

The amount of net income the business generates is taken into consideration when
calculating the dividend payout ratio. The following formula can be used to calculate this:

Dividends per share

Dividend Payout Ratio (DPR) =
Earnings per share
The Dividend per share of the company stands at Rs. 1.85 in FY23, as opposed to Rs.
1.81 in FY22.
Dividend per share (Rs.) NHPC NTPC
FY 2022-23 1.85 7.25
FY 2021-22 1.81 7.00

P a g e 21 | 29
Price Earnings Ratio

Finding out if a company's stock is overvalued or undervalued will help to determine its
valuation.
Price-to-earnings (P/E) ratio for the company in FY23 was 11.7, a considerable rise
over the P/E ratio of 5.6 in the prior fiscal year.
Price earnings ratio NHPC NTPC
FY 2022-23 11.7 13.0
FY 2021-22 5.6 7.87

Price earning ratio

14 13

12 11.7

10
Percentage (%)

7.87
8

6 5.6

0
FY 2022-23 FY 2021-22
NHPC NTPC

Figure 19 Price earnings ratio trend

P a g e 22 | 29
Turnover Ratios
Turnover ratio analysis looks at how often a company can finish a cycle of a specific
metric in a given amount of time. The inventory turnover ratio, for instance, shows how many
times a company can sell all of its inventory in a given amount of time. Additionally, turnover
ratios can be changed to find the number of days needed by a company to complete a cycle
for a particular metric in a specified amount of time.
A
I
I

Asset Turnover Ratio

Net sales
Asset Turnover Ratio =
Avg . total assets
(Total assets at the end of FY +Total assets at the beginning of FY )
Average total assets =
2
The Net profit ratio of the company is at 0.13% during FY23, when compared to 0.12% during
FY22.

Asset Turnover ratio (%) NHPC NTPC

FY 2022-23 0.13 0.44
FY 2021-22 0.12 0.33

Asset Turnover ratio

0.5
0.45 0.44

0.4
0.35 0.33
Percentage (%)

0.3
0.25
0.2
0.15 0.13 0.12
0.1
0.05
0
FY 2022-23 FY 2021-22

NHPC NTPC

Figure 20 Asset Turnover ratio trend

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Coverage Ratio
The capacity of a business to meet its financial obligations is gauged using a coverage
ratio. Greater ability to meet financial obligations is indicated by a higher ratio, whereas lesser
ability is indicated by a lower ratio. Lenders and creditors often use coverage ratios to assess a
potential borrower's financial health.

The various types of coverage ratios include:

1. I
2. C
3. A

Interest Coverage Ratio

Operatinginco me
Interest coverage ratio =
Interest expense

Interest coverage Ratio % (Post Tax) NHPC NTPC

2021-22 11.56 4.57

2022-23 14.65 4.44

16
INTEREST COVERAGE RATIO
14
12
10
8
6
4
2
0
2021-22 2022-23
NHPC NTPC

Figure 21 Interest coverage ratio trend

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Cash Coverage Ratio
The capacity of an organization to cover interest costs using its cash reserves. The
cash coverage ratio is an additional ratio that is utilized to evaluate the relationship between
the annual interest expense and the cash balance of the company. This is a very cautious
metric because it compares the company's interest expense to its debt, focusing only on cash
on hand and ignoring all other assets.

Total cash
Cash coverage ratio =
Total interest expense

Cash coverage Ratio NHPC NTPC

2021-22 7.09 1.71

2022-23 8.94 1.46

CASH COVERAGE RATIO

10
9
8
7
6
5
4
3
2
1
0
2021-22 2022-23

NHPC NTPC

Figure 22 Cash coverage ratio trend

Asset Coverage Ratio

P a g e 25 | 29
 ((Total assets – Intangible assets) – (Current liabilities – Short−term debt))
Asset coverage ratio =
Total debt obligations

Asset coverage Ratio NHPC NTPC

2021-22 3.16 2.00

2022-23 3.04 2.07

ASSET COVERAGE RATIO

3.5

2.5

1.5

0.5

0
2021-22 2022-23

NHPC NTPC

Figure 23 Asset coverage ratio

Z score
A numerical indicator called Altman's Z-Score model is used to forecast the likelihood of
bankruptcy. Five financial ratios are combined in Altman's Z-score model to predict a
company's likelihood of going bankrupt during the next two years.

The three different interpretations of the score are as below:

Altman’s Z-score model Inference

P a g e 26 | 29
 0 to 1.8 Distress There is a greater likelihood that a company will
zone file for bankruptcy when the Z-score is lower.
When a company's Z-score falls below 1.8, it
indicates financial distress and a high likelihood of
bankruptcy.
1.8 to 3.0 Grey zone A score of 1.8 to 3 indicates that the business is in
the middle ground and has a moderate likelihood
of declaring bankruptcy.
3.0 to 4.0 Safe zone If a business receives a score of three or higher, it
is considered safe and is not likely to declare
bankruptcy.

Z score formula:

Z score NHPC NTPC

FY 2022-23 1.43 1.40
FY 2021-22 1.17 1.21

As per the reference values, the Z-score of the NHPC is on a negative area as of now,
but as it is a capital-intensive business, their peers also having comparatively low z-score.
Also, the power sector is in energy transition stage and high growth expected in green energy
sector in the coming decade. This will be acting as catalyst to the NHPC future business.

P a g e 27 | 29
Discussion and Conclusion
The project report employs a rigorous ratio analysis to dissect the financial statements
of NHPC, shedding light on its operational efficiency, profitability, and overall financial health.
By delving into key financial ratios, including liquidity, solvency, and efficiency metrics, the
report provides a nuanced understanding of NHPC's performance.

The analysis scrutinizes NHPC's financial performance using various financial ratios,
such as liquidity ratios, leverage ratios, turnover ratios, coverage ratios, and market ratios.
These ratios are derived from the company's annual report for the fiscal year that concluded in
March 2023.

The report identifies areas of strength for NHPC, such as liquidity resilience and prudent
debt management. It also highlights areas for improvement, fostering a holistic view of NHPC's
financial landscape. The findings of this report serve as a roadmap for informed decision-
making, laying the foundation for sustainable growth and financial success.

Furthermore, the report considers macroeconomic factors to contextualize NHPC's

financial position within the broader economic environment. Comparative industry benchmarks
are used as a yardstick to evaluate NHPC's competitive standing.

Overall, the ratio analysis not only dissects the current financial state of NHPC but also
provides strategic recommendations for stakeholders. It helps stakeholders make informed
decisions about pricing, marketing, and investment. Additionally, it assists investors in
assessing NHPC's investment potential and risk, determining which businesses are making
significant profits, and evaluating the risk of making an investment in NHPC.

In conclusion, the financial statement analysis of NHPC Ltd. provides a comprehensive

evaluation of the company's financial performance, highlighting its strengths and areas for
improvement. The findings of this analysis serve as a valuable tool for stakeholders and
investors in understanding NHPC's financial position and making informed decisions

P a g e 28 | 29
References

 NHPC Ltd. Annual reports, 2022-2023, ,https://www.nhpcindia.com/welcome/page/111,

 NHPC Ltd. Website Investor corner, https://www.nhpcindia.com/welcome/main_page/9

 NTPC Ltd. Financial results, https://www.ntpc.co.in/investors/financial-results

 Accounting: Text and Cases (The Financial Accounting Chapters, 13th edition, by

Robert N. Anthony, David F. Hawkins, Kenneth A. Merchant, Prakash Singh)

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