HISTORY OF BHARAT HEAVY ELECTRICALS LTD

One of the greatest challenges before the Government of India on attaining freedom in
1947 was to provide a strong base in infrastructure and capital goods for economic and
industrial development. The Government under the leadership of Prime Minister
Jawaharlal Nehru realized that there should be a large manufacturing base and adequate
technically qualified personnel for sustained economic growth. The country's planners
recognized that adequate supply of electric power was a precondition for long term
industrial growth. This could be sustained only with a strong domestic power equipment
industry. Accordingly, the Planning Commission recommended initiating steps towards
setting up a factory for the manufacture of all types of heavy electrical equipment
required for various projects.

As a result, the Government of India signed an agreement on 17th November, 1955, with
Associated Electrical Industries (AEI), UK, for the establishment of a factory at Bhopal
complete in all respects for the manufacture of heavy electrical equipment in India. The
company was registered as Heavy Electricals (India) Limited (HE(I)L) in the Public
Sector under the Ministry of Industry and Commerce on 29th August, 1956.

The first one was at Tiruchirappalli (Tamil Nadu) for high pressure boilers, the second
one at Hyderabad (Telangana) for steam turbo generators and high pressure pumps and
compressors - both of these with collaboration from Czechoslovakia and the third plant at
Haridwar ( Uttarakhand) with erstwhile USSR collaboration for large steam turbo
generating sets and motors and also hydro generating sets including turbines and
generators. These three newly conceived projects were part of Heavy Electricals (India)
Limited for which the work was initiated at Bhopal. All the initial preparatory work was
carried out from Bhopal till November 1964. Government decided to create a separate
corporation for setting-up and managing these three units. Thus Bharat Heavy Electricals
Limited was born and formally incorporated on 13th November, 1964.

The business environment was undergoing a major transformation due to economic

liberalization and lowering of trade barriers in the WTO regime. BHEL had to meet the
increased expectations of all stakeholders. The sea-change in economic and trade policies
have brought into sharper focus the immense potential of some of the strategic moves that
the company had already initiated. Foremost among these were enhancing international
competitiveness through technological upgradation, developing in-house capability for
manufacture of key production inputs, emphasis on exports, and introduction of new
product/business areas. BHEL’s 14th manufacturing unit, Electronics Systems Division
was established at Bangalore.

BHEL became the first public sector company to obtain ISO 9000 and ISO 14000
accreditations. The company became fully geared to enter the next century as a Y2K-
ready enterprise after implementing an elaborate strategy to achieve Y2K readiness on a
timely basis.
 PROFILE OF BHARAT HEAVY ELECTRICALS LTD
Vision

A global engineering enterprise providing solutions for a better tomorrow.

Mission

Providing sustainable business solutions in the fields of Energy, Industry and

Infrastructure.

 Indian engineering company with global presence Over 50 years of experience

 Single source of multiple solutions for energy, industry and infrastructure
segments.
 Catering to all energy types-coal, hydro, nuclear, gas and solar with entire range
and ratings Serving core sectors like transmission, industrial systems and
products, transportation, e-mobility & battery energy storage, renewable energy,
oil & gas, water and defence & aerospace
 16 manufacturing units + 2 repair units + 8 service centres + 4 regional offices in
India Infrastructure to deal with > 150 project sites (across India and abroad)
 1 subsidiary + 3 active joint ventures
 References in over 84 countries
 Executing 24 overseas projects spread over 16 countries for around 7,000 MW
 About 17,000 MW overseas projects contracted
 >190 GW capacity installed globally
 >32,000 AC machines supplied
 >390 electric locos and >340 diesel shunters supplied to railways and industries
 >1.2 GW solar PV portfolio
 >6,40,000 MVA transmission equipment supplied
 Highest investment on R&D and innovation in the Indian engineering field Filing
patents/copyrights applications regularly
 One of India's largest employers in the engineering sector
 About one-third of manpower includes engineers with qualifications, experience
and skills spanning a wide range of technology areas
 PRODUCTS
Power

The power generation segment comprises of nuclear, hydro, thermal, gas and renewable
power plant businesses. BHEL has been in this segment for over five decades, having
commissioned its first thermal-based set in 1969. The company has proven turnkey
capabilities for executing power projects from concept to commissioning. BHEL offers a
wide variety of efficient supercritical sets up to 1,000 MW rating, including 660/ 700/
800 MW. The company also offers state-of-the-art emission control equipment for
thermal-based plants for lower carbon footprint and compliance with the world standard
emission norms.

Transmission

BHEL is a leader in the field of power transmission in India with a wide range of
transmission systems and products and having a proven track record across the globe.
BHEL undertakes turnkey transmission projects from concept to commissioning on EPC
basis which includes execution of EHV & UHV substations/ switchyards, both AIS and
GIS types ranging from 33 kV to 76kV, HVDC converter stations (up to ±800 kV), and
reactive power compensation schemes.

Rail Transportation

BHEL is a leading designer and manufacturer of Rail Transportation systems like semi
high-speed trains, Electric Locomotives, Diesel Electric Shunting Locomotives and
Electrical Multiple Units. BHEL also manufactures critical equipment like Converters/
Inverters, Motors, Transformers, Bogies, Train Control Management System (TCMS).

Defence and aerospace

BHEL is a reliable supplier of equipment and services to Indian defence forces for almost
three decades with dedicated engineering and manufacturing facilities .Major products
include super rapid gun mount (upgraded), strategic naval equipment, integrated platform
management systems, thermos-pressed components, electrical machines, turret castings
for T72 tanks, simulators, castings and forgings, etc. BHEL has been a reliable supplier to
ISRO for solar panels and batteries for their satellites.

Oil and Gas

BHEL supplies complete onshore drilling rigs capable of drilling up to 9,000 metres, with
AC-SCR system or AC drives incorporating the latest state-of-the-art technology, and
also mobile rigs, work-over rigs. BHEL also supplies onshore drilling rig equipment like
draw works, rotary-table, travelling block, swivel, mast and substructure, mud systems,
Artificial lift system (surface units of Sucker Rod Pumps) .
 CORPORATE GOVERNANCE

BHEL functions within a sound Corporate Governance framework, which underlines its
commitment to quality of governance, transparency in disclosures, consistent
enhancement of stakeholders’ value and corporate social responsibility. BHEL
endeavours to transcend beyond the basic and regulatory requirements of corporate
governance, focusing consistently on building confidence of its shareholders, customers,
employees, suppliers and the society at large. The Company’s corporate governance
framework rests upon the cornerstones of transparency, disclosure, independent
monitoring, and fairness to all, especially minority shareholders.

The following factors strengthen Corporate Governance in BHEL:

 Independence and versatility of the Board

 Integrity and ethical behavior of all employees
 Recognition of obligations towards all stakeholders –Shareholders, customers,
employees, suppliers and the society
 High degree of disclosure and transparency levels
 Legal and regulatory compliance in all areas in which the company operates
 Achievement of above goals with compassion for people and environment

.The Company believes in conducting its business in compliance with corporate

governance procedures and Code of Conduct, exemplifies each of the core values,
Which positions BHEL to deliver long-term returns to the shareholders, favourable
outcomes to the customers, attractive opportunities to the employees, opportunity to
the suppliers to partner the company in progress, and enrichment of society.

DIRECTORS
1. Koppu Sadashiv Moorthy- Chairman & Managing Director
2. Jai Prakash Srivastava -Chief Financial Officer & Director
3. Tajinder Gupta -Director & Director-Power
4. G.Murali-Executive Director-Power Sector
5. K Sivaprasad Non Executive Independent Director
6. Lekhasri Samantsinghar Non Executive Independent Director
7. Ramesh Patlya Mawaskar Non executive Iindependent director
 ENVIRONMENTAL SUSTAINABILITY MEASURES

BHEL is contributing to a greener environment through development of environment

friendly technologies and improvement in efficiency of equipment. Continuous
improvement in power cycle efficiency and reduced emissions from coal based power
plants have been achieved over the time by evolution of technology from sub-critical to
supercritical. Attributes of BHEL supplied power plant equipment such as lower auxiliary
power consumption, higher plant efficiency, lower design heat rate and higher operating
availability help in attaining lower life cycle cost. BHEL provides comprehensive
solutions for reducing emissions through supply and commissioning of Flue-gas
Desulphurization (FGD) systems, Selective Catalytic Reduction (SCR) systems, Solar
Photovoltaic plants, Electrostatic Precipitators (ESP).

BHEL also offers zero liquid discharge solutions through supply of Effluent Treatment
Plants and Sewage Treatment Plants (STP). BHEL has developed fully indigenous
Pressurized Fluidized Bed Gasification (PFBG) technology for generating syngas from
high ash Indian Coal. The syngas further acts as a feed for production of industrial
chemicals. There is also conscious effort towards reduction of embodied carbon in
products. Company has opted to replace polluting fuels with cleaner ones, e.g., gas is
now used as a source of heat energy (instead of coal earlier) during production of
products like ceralin, and has also converted furnaces to RLNG from LPG at its
manufacturing plants.

BHEL in association with IGCAR and NTPC has developed Advanced Ultra
Supercritical Technology under the aegis of the National Mission on Clean Coal
Technology. The technology will yield targeted efficiency of 45-46% against efficiency
of ~38% of subcritical and ~41-42% of supercritical sets. In result, this will further
reduce coal consumption and CO2 emission by about 11% as compared to Super Critical
power plants and by about 20% as compared to Subcritical power plants for single unit of
power generation. The R&D phase of the project has been completed successfully.

BHEL has indigenously developed Passivated Emitter Rear Contact (PERC) technology
for high efficiency c-Si solar cells. With this development, BHEL has the know-how and
dedicated cell level R&D facility to support upgradation to PERC technology. In parallel,
BHEL is also working on development of Heterojunction solar cell technology with 24%
efficiency.

In urban mobility sector, there is favourable movement towards Electric mobility as the
future mode of transportation. BHEL has developed Permanent magnet motors, Induction
motors & IGBT controller for E-Buses, Electric Charging Stations for mobility
infrastructure.
 CHAIRMAN’S SPEECH

Key Highlights

• The company achieved revenue from operations of I23,365 Crore as against I21,211
Crore during the previous year, an increase of 10% and made a profit after tax (PAT) of
I448 Crore against a PAT of I410 Crore in the previous year.

• Despite increase in total receivables by nearly 9% during FY 2022-23—primarily on

account of execution of projects with adverse payment terms, there is a reduction in terms
of number of days of Revenue from Operations from 571 days last year to 567 days in
current year and the Trade Receivables in terms of number of days of Revenue from
Operations, have reduced to 102 days as against 107 days during FY 2021-22

• The company secured orders worth I23,548 Crore, excluding taxes, which is the highest
in the last five years. The reporting of order book has been done excluding taxes for
better understanding of all stakeholders, and is in line with the reporting of revenue
numbers. Industry sector segment order booking is at I9,537 Crore – highest in last 13
years with highest-ever orders in the defence sector, which also includes the order for 20
upgraded SRGMs (main gun on Indian warships) for which BHEL is the sole supplier in
the country.

• The company won the only thermal EPC order—2x660 MW, NTPC Talcher Thermal
Power Plant, awarded in the last four years, reasserting its market leadership position in
the segment.

• The company recorded over 25% growth in the Spares & Services Business.

• The total outstanding order book as on 31st March 2023 stands at I91,336 Crore, net of
taxes (PY I90,084 Crore). With the receipt of the prestigious order for 80 nos. “Vande
Bharat” trainsets in April 2023, the total outstanding order book has crossed I1 Lakh
Crore (excluding taxes), which is the highest in last 4 years.
 CHAPTER II
COMPARATIVE BALANCESHEET

The comparative balance sheet is a balance sheet that provides financial figures of assets,
liabilities, and equities for “two or more periods of the same company,” or “two or more
subsidiaries of the same company” or “two or more companies of the same industry” in
the same format so that it can be easily understood and analysed.

ADVANTAGES
 It is effortless to compare the figures for the current year with the previous years
as it gives both the years’ figures in one place.
 It shows the company’s trend by putting several years’ financial figures in one
place like an Increase or Decrease.

 Helps to compare one company’s performance with another company or the

industry’s average performance.

 It also helps in forecasting because it provides the past trend of the company
based on which the management can forecast the company’s financial position.

DISADVANTAGES
 Comparative balance sheets will not give the correct comparison if two
companies have adopted different policies and accounting principles while
preparing the balance sheet.
 While preparing the comparative balance sheet, the inflation effect is not
considered.
 Sometimes, it gives misleading information, thus, misguiding the person who
reads the comparative balance sheet. For example, if a product was unavailable
for last year and is available for the current year, it will show a 100% change over
the previous year.
 TABLE 2.1
COMPARATIVE BALANCE SHEET FOR FIVE YEAR PERIOD 2018-2023 [%]
Change in Change in Change in Change in Change in
2023 over 2022 2022 over 2021 over 2020 over 2019 over
2021 2020 2019 2018
SHAREHOLDERS % % % % %
FUNDS Increase/Decre Increase/Decre Increase/Decr Increase/Decr Increase/Decr
ase ase ease ease ease
Equity Share Capital 0 0 0 0 0
Reserves and 1.11 1.89 1.89 -7.32 8.78
Surplus
TOTAL 1.08 1.84 1.84 -7.16 8.58
SHAREHOLDERS
FUNDS
NON-CURRENT
LIABILITIES
Long Term 0 0 0 -100 0
Borrowings
Deferred Tax 0 0 0 0 0
Liabilities [Net]
Long Term 10.76 -7.79 -7.79 -3.34 -16.31
Provisions
Other Long-Term 8.75 -3.62 -3.62 -22.9 5.48
Liabilities
TOTAL NON- 9.85 -5.95 -5.95 -14.98 -4.21
CURRENT
LIABILITIES
CURRENT
LIABILITIES
Short Term 13.49 -1.84 -1.84 102.87 4.1
Borrowings
Trade Payables 27.69 16.05 16.05 -22.43 18.86
Other Current -9.22 2.9 2.9 -14.81 1.4
Liabilities
Short Term -8.81 -3.08 -3.08 23.99 -3.32
Provisions
TOTAL CURRENT 9.27 5.16 5.16 -1.96 9.8
LIABILITIES
TOTAL 5.46 1.81 1.81 -6.51 7.04
LIABILITIES
ASSETS
NON-CURRENT
ASSETS
Tangible Assets 3.1 -3.7 -3.7 -5.15 10.73
Intangible Assets 8.24 -0.06 -0.06 -5.37 19.8
Capital Work-In- -18.41 4.74 4.74 37.42 -43.22
Progress
FIXED ASSETS 0.01 -2.7 -2.7 -2.32 6.88
Non-Current -0.03 -0.04 -0.04 0.02 -0.07
Investments
Deferred Tax Assets -3.04 -3.54 -3.54 -21.19 -25.84
[Net]
Long Term Loans 0 -100 0
and Advances
Other Non-Current 4.5 8.38 8.38 12.74 4.56
Assets
TOTAL NON- 3.03 5.4 5.4 5.65 0.63
CURRENT ASSETS
CURRENT ASSETS
Current Investments 0
Inventories 2.98 -8.77 -8.77 14.21 21.98
Trade Receivables 3.43 -25.01 -25.01 -40.07 25.92
Cash And Cash -7.14 6.75 6.75 -14.46 -3.77
Equivalents
Short Term Loans 0 -100 0
and Advances
Other Current Assets 21.87 6.88 6.88 -7.07 -1.23
TOTAL CURRENT 7.97 -1.67 -1.67 -14.77 11.39
ASSETS
TOTAL ASSETS 5.46 1.81 1.81 -6.51 7.04
COMPARATIVE INCOME STATEMENT

A comparative income statement showcases the operational results of the business for
multiple accounting periods. It helps the business owner to compare the results of
business operations over different periods of time. Furthermore, such a statement helps in
a detailed analysis of the changes in line-wise items of the income statement.

ADVANTAGES

• It makes analysis simple and fast as past figures can easily be compared with
the current figures without referring to separate past Income Statements.
• It makes comparisons across different companies also easy and helps analyze
the efficiency both at Gross Profit Level and Net Profit Level.
• It shows percentage changes in all income statement line items, which makes
analysis and Interpretation of Topline (sales) and Bottom Line (Net Profit)
easy and more informative.

DISADVANTAGES

• Financial Data reported in the Comparative Income Statement is useful only if

the same accounting principles are followed to prepare such statements. If the
deviation is observed, such a Comparative Income Statement will not serve the
intended purpose.
• A comparative Income Statement is not of much use in cases where the
company has diversified into new business lines, which have drastically
impacted Sales and profitability
• The results of this comparison may not be useful if an account has been shifted
into a different line item at some point during the reporting period.
 TABLE NO. 2.2
COMPARATVE STATEMENT OF PROFIT AND LOSS FOR FIVE YEAR PERIOD 2018-
2023 [%]
Change in Change Change Change Change in
2023 over in 2022 in 2021 in 2020 2019 over
2022 over over 2020 over 2018
2021 2019
% % % % %
Increase/ Increase/ Increase/ Increase/ Increase/
Decrease Decrease Decrease Decrease Decrease
Revenue From Operations 10.15 22.55 -19.34 -29.46 -6.26
Add: Other Income 39.97 -0.55 -36.3 -14.32 9.71
Revenue from Operations 10.66 22.06 -19.79 -29.13 -5.92
[Net Sales] [A]
Less: Cost of Goods sold
Cost of materials 17.88 -36.94 -30.38 -21.13 38.05
consumed
Purchases of Stock-in- 12.45
Trade
Changes in inventories of -110.73 4.22 -149.01 5.21 99.44
Finished Goods, Stock-in-
Trade and Work-in-
Progress
Total Cost of Goods sold 8.78 11.64 -19.23 -22.94 1.47
[B]
Gross Profit[A-B] =[C] 12.29 32.77 -20.36 -34.47 -12.27
Less: Total Operating
expenses
Employee Benefits 3.33 2.69 -1 -1.36 -4.98
expense
Depreciation and -17.11 -33.61 -5.93 5.91 51.08
Amortisation expense
Finance cost [Operating] 47 -4.92 -26.4 76.46 -5.04
Other expenses -61.69 -2.58 -13.1 -25.95 50.03
[Operating]
Total Operating -9.46 -0.97 -5.68 -5.87 14.53
expenses[D]
Net Operating Income[C- 58.53 381.99 -69.49 -67.51 -43.25
D] =[E]
Add: Other income [non- 0 0 0 0 0
operating income]
Less: Non-Operating 0 0 0 0 0
expenses & losses
Net Profit before tax 58.53 -53.43 215.78 -71.89 -37.43
Less: Tax expenses
Current tax 44.2 -587.55 940.79 -99.79 15.34
Deferred Tax 9.08 -111.41 -212.47 679.86 670.72
Total tax -92.32 -102.99 -210.31 -3.34 96.42
Net Profit after tax 59.62 -58.44 418.15 -78.97 -51.26
RATIO ANALYSIS
Ratio analysis is the quantitative interpretation of the company’s financial performance.It
provides valuable information about the organization's profitability, solvency, operational
efficiency and liquidity positions as represented by the financial statements. Ratio
analysis of financial statements is another tool that helps identify changes in a company's
financial situation. A single ratio is not sufficient to adequately judge the financial
situation of the company. Several ratios must be analysed together and compared with
previous year's ratios or even with other companies of the same industry. The
comparative aspect of the analysis is extremely important in financial analysis. It is
important to note that ratios are parameters and not precise or absolute measurements.
Thus, ratios must be interpreted cautiously to avoid erroneous conclusions.
ADVANTAGES

 Performance Evaluation: Ratios provide a comprehensive picture of a

company's financial performance over time. They help in assessing profitability,
liquidity, solvency, and efficiency, enabling stakeholders to make informed
decisions.
 Comparative Analysis: Ratios facilitate comparisons between companies within
the same industry or across different industries. This comparative analysis helps
in benchmarking and identifying areas of strength and weakness relative to
competitors.
 Forecasting and Planning: By analysing trends in ratios over time, businesses
can forecast future financial performance and plan strategies accordingly. It
assists in setting realistic goals and objectives for the organization.
 Decision Making: Ratios aid in decision-making processes such as investment
decisions, credit decisions, pricing strategies, and resource allocation. They
provide valuable insights into the financial health and viability of potential
investments or business initiatives.
 Communication Tool: Ratios serve as a communication tool between
management, investors, creditors, and other stakeholders. They simplify complex
financial information into easily understandable metrics, fostering transparent
communication.

DISADVANTAGES

 Limitation of Data: Ratios rely on financial data extracted from accounting

statements. If the data is inaccurate or manipulated, the ratios may not reflect the
true financial position of the company, leading to misleading conclusions.
 Industry Differences: Different industries may have varying accounting
practices and operational structures, making it challenging to compare ratios
across sectors accurately. This can limit the effectiveness of comparative analysis.
  Lack of Context: Ratios provide numerical insights but may lack contextual
understanding. They do not consider external factors such as economic
conditions, market trends, regulatory changes, or non-financial aspects impacting
the business.
 Timing Issues: Ratios are calculated based on historical financial data, which
may not reflect the current or future conditions of the business accurately.
Changes in the business environment or unexpected events may affect the
relevance of ratio analysis.
 Manipulation Risks: Companies may manipulate financial statements to portray
favourable ratios, misleading investors and stakeholders. This can undermine the
reliability and integrity of ratio analysis, leading to incorrect decisions.

TYPES OF RATIOS
LIQUIDITY
Liquidity ratios measure a company's ability to meet its short-term obligations with its
short-term assets. These ratios are crucial for assessing a company's financial health and
its ability to manage day-to-day operations. Here are some common liquidity ratios:

SOLVENCY
Solvency ratios are financial metrics that assess a company's ability to meet its long-term
financial obligations. These ratios focus on the company's overall financial health and its
ability to sustain its operations in the long run
PROFITABLITY
Profitability ratios are financial metrics that assess a company's ability to generate profits
relative to its revenue, assets, or equity. These ratios measure the efficiency and
effectiveness of a company's operations in generating earnings.
TURNOVER
Turnover ratios, also known as activity ratios, measure how efficiently a company utilizes
its assets and resources to generate revenue. These ratios assess the effectiveness of
management in managing inventory, accounts receivable, and assets.
CURRENT RATIO

The Current Ratio is a liquidity ratio that measures a company’s ability to pay short term
obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and other
payables. Current Ratio that is in line with the industry average or slightly higher is
generally considered acceptable. A Current Ratio that is lower than the industry average
may indicate a high risk of distress or default. Similarly, if a company has a very high
Current Ratio, compared with its peer group, it indicates that management may not be
using its assets efficiently.

FORMULA
Current ratio = Current Asset /Current Liabilities

SIGNIFICANCE
Current Ratio is computed to know the ability of a firm to pay off the short-term
liabilities of a firm with the help of current assets. It is assumed that all the current assets
are likely to be converted into cash to pay off the short-term liabilities of the firm. In
other words, this ratio is calculated to determine the short-term solvency of a firm. 2:1 is
considered an ideal Current Ratio. That means the current assets should be double the
current liabilities of the firm. But if the Current Ratio is very high, it is believed that the
funds are lying idle, and the firm has poor control over its inventory or debtor’s turnover
is slow.

TABLE NO. 2.3

2022-23 2021-22 2020-21 2019-20 2018-19
CURRENT 30082.28 27861.98 28334.02 32703.53 38339.89
ASSETS
CURRENT 23351.44 21371.15 20321.66 22579.41 23030.77
LIABLITIES
CURRENT 1.2 1.3 1.3 1.4 1.6
RATIO

INTERPRETATION
While comparing all the three years, there is a minute increase in the Current Ratio.
Although an ideal Current Ratio is 2:1, a Current Ratio less than 1.0 is generally
considered to be unhealthy and a Current Ratio of more than 2.0 is generally considered
to be healthy. In 2022-2023 the ratio is above 1.0 and can be said that the company has a
healthy Current Ratio for the current year. The Current Ratio is satisfactory.

LIQUID RATIO

Quick ratio indicates whether the firm is in a position to pay its current liabilities within a
month immediately. As such, the quick ratio is calculated by dividing liquid assets (Quick
Current Assets) by current liabilities.

FORMULA
Quick Ratio or Acid Test Ratio = Liquid Assets / Current liabilities

Liquid assets mean those assets which will be converted into cash and cash equivalents
very shortly. All current assets except inventory and prepaid expenses are included in
liquid assets. Inventory is excluded from liquid assets because it has to be sold before it
can be converted into cash. Prepaid expenses too are excluded from the list of liquid
assets because they are not expected to be converted into cash.

SIGNIFICANCE
An ideal quick ratio is said to be 1:1 If it is more, it is better. The idea is that for every
rupee of current liabilities, there should at least be one rupee of liquid assets. This ratio is
a better test of short-term financial position of the company than the current ratio, as it
considers only those assets which can be easily and readily converted into cash. Inventory
is not included in liquid assets as it may take a lot of time before it is converted into cash.

TABLE NO. 2.4

2022-23 2021-22 2020-21 2019-20 2018-19
LIQUID 23326.38 21301.77 21142.79 23798.07 30226.40
ASSETS
CURRENT 23351.44 21371.15 20321.66 22647.41 23055.77
LIABLITIES
LIQUID 0.9 0.9 1.0 1.0 1.3
RATIO

INTERPRETATION
While comparing all the five years, there is a minute decrease in the Liquid Ratio.
Although an ideal Liquid Ratio is 1:1, a Liquid Ratio less than 0.5 is generally considered
to be unhealthy and a Liquid Ratio of more than 1.0 is generally considered to be healthy.
In 2022-2023 the ratio is above 1.0 and can be said that the company has a healthy Liquid
Ratio for the current year. The Liquid Ratio is satisfactory.
DEBT-EQUITY RATIO

This ratio expresses the relationship between long term debts and shareholder's funds. It
indicates the proportion of funds which are acquired by long-term borrowings in
comparison to shareholder's funds. This ratio is calculated to ascertain the soundness of
the long-term financial policies of the firm.

FORMULA

Debt Equity Ratio = Debt / Equity (or) Long term Debt / Shareholders funds

Long term Debts: These include 'long term borrowings' and 'Long term Provisions'
which mature after one year.

Shareholder's Fund = Share Capital and Reserve & Surplus.

SIGNIFICANCE

This ratio is calculated to assess the ability of the firm to meet its long-term liabilities.
Generally, debt-equity of 2:1 is considered safe. If the debt-equity ratio is more than that,
it shows a rather risky financial position from the long-term point of view, as it indicates
that more and more funds invested in the business are provided by long-term lenders. A
high debt-equity ratio is a danger-signal for long-term lenders. The lower this ratio, the
better it is for long-term lenders because they are more secure in that case. Lower than
2:1 debt equity ratio provides sufficient protection to long-term lenders.

The company does not have any long-term debt and hence these ratios are not
applicable.
GROSS-PROFIT RATIO

This ratio establishes a relationship between gross profit and Revenue from Operations
i.e., Net Sales. This ratio is computed and presented in percentage.

FORMULA

Gross Profit Ratio = Gross Profit / Revenue from operations *100

Gross Profit = Revenue from Operations - Cost of revenue from operations

Cost of Revenue from operations = Opening inventory + net purchases + direct expenses
- closing inventory

SIGNIFICANCE

The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio,
but the gross profit ratio should be adequate to not only cover the operating expenses but
also to provide for depreciation, interest on loans, dividends and creation of reserves. The
ratio is compared with earlier years ratio and important conclusions are drawn from such
comparison. For instance, if there is a decline in gross profit ratio in comparison to the
previous year, it may be concluded that Price of materials purchased, freight, wages and
other direct charges may have gone up, but the selling price may not have gone up in
proportion to the increase in costs or the selling prices may have fallen but the prices of
materials, freight, wages and other direct charges may not have fallen relatively.

TABLE NO. 2.5

 2022-23 2021-22 2020-21 2019-20 2018-19
GROSS 13,000.11 11,577.67 8,720.12 10,949.21 16,708.25
PROFIT
REVENUE 23,879.75 21,578.90 17,678.28 22,039.77 31,100.32
FROM
OPERATION
GROSS 54.44 53.65 49.33 49.68 53.72
PROFIT
RATIO (%)

INTERPRETATION

While comparing all the five years, there is a minute increase in the Gross profit Ratio.
Although, there is no ideal standard is fixed for this ratio the higher the gross profit ratio,
the better it is. In 2020-2021 the ratio is above 70 and can be said that the company has a
healthy gross profit ratio for that year. The gross profit ratio is satisfactory.
NETPROFIT RATIO

Net Profit Ratio, also referred to as the Net Profit Margin Ratio, is a profitability ratio
that measures the company’s profits to the total amount of money brought into the
business. In other words, the net profit margin ratio depicts the relationship between the
net profit after taxes and net sales taking place in a business. It is a profitability ratio and
hence, expressed in the form of percentages. Net profit ratio is regarded as a good
measure of the firm’s overall performance, and it becomes more effective when it is used
in conjunction with the evaluation of the working capital of the firm.

FORMULA

NETPROFIT RATIO = Net profit after tax /Revenue from Operations *100

SIGNIFICANCE

It helps in determining the overall efficiency of the business and net profit ratio is not
considered as a reliable indicator of cash flows as it comprises many expenses such as
non-cash expenses, accrued expenses, depreciation and amortization.

TABLE NO. 2.6

2022-23 2021-22 2020-21 2019-20 2018-19

NETPROFIT 5,868.63 3,676.60 8846.25 1707.29 8118.42
REVENUE 23,879.75 21,578.90 17,678.28 22,039.77 31,100.32
FROM
OPERATION
NET PROFIT 24.58 17.04 50.04 7.75 26.1
RATIO
INTERPRETATION

While comparing all the five years, there is a moderate change in the Net profit Ratio.
Although there is no ideal Net profit Ratio, a higher Net profit ratio is generally
considered to be healthy and lower ratio is generally considered to be unhealthy. In 2020-
2021 the ratio is high and can be said that the company has a healthy Net profit Ratio for
that year. The Net profit Ratio is satisfactory.

OPERATING RATIO

Operating ratio is referred to as the ratio that depicts the efficiency of the management by
establishing a relationship between the total operating expenses with the net sales.
Operating ratio is used to determine the efficiency of the management with which it is
possible to generate a certain level of sales or revenue. It also helps in establishing how
the company’s management is instrumental in reducing costs.

FORMULA

Operating Ratio = Operating cost / Revenue from operations *100

Operating cost = Cost of revenue from operation + operating expenses

SIGNIFICANCE

The operating ratio shows the efficiency of a company's management by comparing the
total operating expense of a company to net sales. An operating ratio that is decreasing is
viewed as a positive sign, as it indicates that operating expenses are becoming an
increasingly smaller percentage of net sales. A limitation of the operating ratio is that it
doesn't include debt.

TABLE NO. 2.7

2022-23 2021-22 2020-21 2019-20 2018-19

OPERATING COST 17,604.89 17,614.56 12,816.57 22,478.43 27,302.38
REVENUE FROM 23,879.75 21,578.90 17,678.28 22,039.77 31,100.32
OPERATION
OPERATING RATIO 73.8 81.67 72.58 101.92 87.99
INTERPRETATION

While comparing all the five years, there is a moderate decrease in the Operating Ratio.
Although there is no ideal Operating Ratio, a lower Operating ratio is generally
considered to be healthy and higher ratio is generally considered to be unhealthy.2022-
2023 the ratio is low and can be said that the company has a healthy Operating Ratio for
that year. The Operating Ratio is satisfactory.
OPERATING PROFIT RATIO

Operating Profit Ratio is referred to as the ratio that is used to define a relationship
between the operating profit and the net sales. Operating profit is also known as Earnings
before interest and taxes (EBIT) and net sales can also be defined as the revenue that is
earned from the operations. Operating profit ratio is one type of profitability ratio and is
therefore expressed in the form of a percentage.

FORMULA

Operating profit ratio = Operating profit / Revenue from operations*100

Operating profit = Gross profit – Operating expenses +Operating income

SIGNIFICANCE

The operating profit ratio shows how much profit a company makes from its principal
business in relation to its total sales. Investors can use this indicator to identify whether a
company earns money largely from its core operations or from other sources such as
investment.

TABLE NO. 2.8

2022-23 2021-22 2020-21 2019-20 2018-19
OPERATING PROFIT 6,248.68 3,950.53 4,840.12 -424.42 3,726.27

REVENUE FROM 23,879.75 21,578.90 17,678.28 22,039.77 31,100.32

OPERATION
OPERATING PROFIT 26.19 18.31 27.41 -1.92 12
RATIO
INTERPRETATION

While comparing all the five years, there is a moderate decrease in the Operating profit
Ratio. Although there is no ideal Operating profit Ratio, a lower Operating profit ratio is
generally considered to be healthy and higher ratio is generally considered to be
unhealthy. In 2019-2020 the ratio is low and can be said that the company has a healthy
Operating profit ratio for that year. The Operating profit Ratio is satisfactory.
RETURN ON INVESTMENT RATIO

Return on Investment estimates the loss and gain generated on the amount of money
invested. ROI (Return on Investment) is generally expressed in the percentage to analyse
an organisation’s profit or the earnings of different investments. In simple words, Return
on Investments estimates what you receive back as compared to what you invest. Return
on Investment can be used in different ways to calculate the profitability of the business.

FORMULA

Return on Investment = Netprofit before interest and tax / capital employed*100

Capital employed = Shareholder’s funds + non-current liabilities

SIGNIFICANCE

It is a tool used to calculate various financial investments of a company. It is also used to

manage which actions or projects to go after based on their prospective profitability. ROI
has a wide range of uses. It can be used to measure the profitability of stock shares, to
decide whether to purchase a business, or to evaluate the success of a real estate
transaction.

TABLE NO. 2.9

2022-23 2021-22 2020-21 2019-20 2018-19
NETPROFIT 5,870.68 3,703.31 7951.79 2518.15 8957.27
BEFORE INTREST,
TAX
CAPITAL 36,452.47 35,337.17 35,379.58 37,656.61 41,400.78
EMPLOYED
RETURN ON 16.11 10.48 2.17 6.69 18.72
INVESTMENT
RATIO
INTERPRETATION

While comparing all the five years, there is a slight increase in the Return-on-Investment
Ratio. Although there is no ideal Return on Investment Ratio, a higher Return on
Investment ratio is generally considered to be healthy and lower ratio is generally
considered to be unhealthy. In 2020-2021 the ratio is high and can be said that the
company has a healthy Return on Investment Ratio for that year. The Return-on-
Investment Ratio is satisfactory.
INVENTORY TURNOVER RATIO

The Inventory Turnover Ratio is a financial metric that measures how many times a
company's inventory is sold and replaced over a specific period. It is a crucial indicator of
a company's operational efficiency, especially in managing its inventory.

FORMULA

Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average inventory

Average Inventory is calculated by adding the beginning inventory and ending inventory
for a specific period and dividing by 2.

SIGNIFICANCE

It provides insights into how efficiently a company is managing its inventory. A higher
turnover ratio generally indicates that a company is selling and replenishing its stock
quickly, which can be a sign of effective operational management. The ratio is crucial for
working capital management. A higher turnover ratio means that a company ties up less
capital in inventory, freeing up funds for other operational needs.

TABLE NO. 2.10

2022-23 2021-22 2020-21 2019-20 2018-19
COST OF GOODS 10,879.64 10,001.23 8,958.16 11,090.56 14,392.07
SOLD
AVERAGE 3277 3413 4435 4602 3690
INVENTORY
INVENTORY 3.32 2.93 2.02 2.41 3.90
TURNOVER
RATIO
INTERPRETATION

While comparing all the five years, there is a slight increase in the Inventory Turnover
Ratio. Although there is no ideal Inventory Turnover Ratio, a higher Inventory Turnover
ratio is generally considered to be healthy and lower ratio is generally considered to be

unhealthy. In 2022-20213 the ratio is high and can be said that the company has a healthy
Inventory Turnover Ratio for that year. The Inventory Turnover Ratio is satisfactory.

A high ratio may suggest strong sales and effective inventory management. A low ratio
may indicate slow sales, overstocking, or obsolete inventory.
DEBTORS TURNOVER RATIO

The Debtors Turnover Ratio, also known as the Accounts Receivable Turnover Ratio, is a
financial metric that measures how many times a company's accounts receivable are
collected and replaced over a specific period. It provides insights into how efficiently a
company manages its credit sales and collects payments from its customers.

FORMULA

Debtors Turnover Ratio = Credit sales / Average Trade Receivables

Average Trade Receivable = Opening Trade receivable +Closing Trade receivables/2

SIGNIFICANCE

The ratio provides insights into how efficiently a company manages its credit sales and
collects payments from customers. A higher ratio generally indicates effective credit
management. A high Debtors Turnover Ratio suggests a faster conversion of accounts
receivable into cash, positively impacting a company's cash flow. This can be crucial for
meeting short-term obligations and funding operational activities.

TABLE NO. 2.11

2022-23 2021-22 2020-21 2019-20 2018-19
sales 23,879.75 21,578.90 17,678.28 22,039.77 31,100.3
Denominator
Opening Trade 3024.75 4035.07 4533.50 3935.09 3438.55
Receivables
Closing Trade 3128.35 3024.75 3179.74 5270.43 3935.09
Receivables
Average Trade 3076.55 3529.91 3856.62 4602.76 3686.82
Receivables
Debtors Turnover 7.76 6.11 4.58 4.79 8.44
Ratio
INTERPRETATION

While comparing all the five years, there is a slight change in the Debtors Turnover
Ratio. Although there is no ideal Debtors Turnover Ratio, a higher Debtors Turnover ratio
is generally considered to be healthy and lower ratio is generally considered to be

unhealthy. In 2018-2019 the ratio is high and can be said that the company has a healthy
Debtors Turnover Ratio for that year. The Debtors Turnover Ratio is satisfactory. A high
ratio may suggest strong sales and effective inventory management. A low ratio may
indicate slow sales, overstocking, or obsolete inventory.
WORKING CAPITAL TURNOVER RATIO

The Working Capital Turnover Ratio is a financial metric that measures how efficiently a
company utilizes its working capital to generate sales. It provides insights into the
effectiveness of working capital management and the company's ability to generate
revenue from its investments in current assets and liabilities.

FORMULA

Working Capital Turnover Ratio = Revenue from Operations / Net Working capital

SIGNIFICANCE

It measures how effectively a company utilizes its working capital (current assets and
liabilities) to generate sales. A higher ratio indicates efficient utilization of resources. The
ratio is a key indicator of a company's operational performance. A higher turnover ratio
generally suggests that the company is generating sales more efficiently. Helps evaluate
the effectiveness of working capital management. A high ratio suggests that the company
is efficiently managing its current assets and liabilities to support its sales operations

TABLE NO. 2.12

Working Capital 2022-23 2021-22 2020-21 2019-20 2018-19
Turnover ratio
Sales 23,879.75 21,578.90 17,678.28 22,039.77 31,100.3

Working Capital [WC]

Current assets 30,082.28 27,861.98 28,334.02 32,703.53 38,372.09
Less: Current liabilities 23,351.44 21,371.15 20,321.65 22,579.05 23,030.27
Net Working Capital 6,730.84 6,490.83 8,012.37 10,124.48 15,341.82
Net Sales/Net WC 3.55 3.32 2.21 2.18 2.03
INTERPRETATION

While comparing all the five years, there is a slight increase in the Working Capital
Turnover Ratio. Although there is no ideal Working Capital Turnover Ratio, higher
Working Capital Turnover ratio is generally considered to be healthy and lower ratio is
generally considered to be unhealthy. A higher ratio is generally favourable, indicating
efficient utilization of working capital to generate sales. In 2022-2023 the ratio is high
and can be said that the company has a healthy Working Capital Turnover Ratio for that
year. The Working Capital Turnover Ratio is satisfactory.
TOTAL FIXED ASSETS TO LONG TERM FUNDS

The ratio of Total Fixed Assets to Long-Term Funds is a financial metric that assesses the
proportion of a company's fixed assets relative to its long-term funds. This ratio provides
insights into how well a company is utilizing its long-term funds to acquire and maintain
its fixed assets.

FORMULA

Total Fixed Assets to Long-Term Funds = Total fixed assets / Long term funds

Total Fixed Assets: This includes all the long-term, tangible assets that a company owns
and uses for its business operations.

Long-Term Funds: This represents the capital invested in the company for the long
term. It typically includes long-term debt and equity.

SIGNIFICANCE

The ratio provides insights into the capital structure of a company by assessing the
relationship between fixed assets and long-term funds. A higher ratio may suggest a
capital-intensive structure, indicating that a significant portion of the company's assets is
funded through long-term debt or equity. Monitoring this ratio helps in evaluating the
financial health and stability of a company. A balanced and sustainable capital structure is
often associated with financial well-being.
TABLE NO. 2.13

2022-23 2021-22 2020-21 2019-20 2018-19

TOTAL FIXED 2,829.83 2,829.44 2,907.87 3,128.08 3,202.43
ASSETS
 LONG TERM
FUNDS
Long term debts 0.00 0.00 0.00 0.00 95.45

Shareholder’s funds 2,829.83 2,829.44 2,907.87 3,128.08 3,202.43

TOTAL FIXED 1.00 1.00 1.00 1.00 0.97

ASSETS TO
LONG TERM
FUNDS RATIO

INTERPRETATION

While comparing all the five years, there is no change in the Total Fixed Assets to Long-
Term Funds Ratio. Although there is no ideal Total Fixed Assets to Long-Term Funds
Ratio, because different industries and companies have different capital structures and
financing requirements. It's essential for companies to strike a balance that aligns with
their strategic goals, risk tolerance, and industry dynamics.
PROPRIETARY RATIO

The term "Proprietary Ratio" is often used to refer to a financial ratio that assesses the
proportion of a company's total assets that are financed by its owners' equity, often
expressed as a percentage. It is also known as the Equity Ratio or Net Worth to Total
Assets Ratio.

FORMULA

Proprietary Ratio = Equity / Total assets

Equity: Shareholders funds including Reserves and Surplus

Total Assets: current assets + non-current assets.

SIGNIFICANCE

The proprietary ratio provides insights into the extent to which a company's assets are
financed by its owners' equity rather than external sources such as debt. A higher
proprietary ratio suggests a larger proportion of assets is financed by equity, which can be
an indication of financial stability and a lower level of financial risk. On the other hand, a
lower proprietary ratio might suggest a higher reliance on external financing, including
debt.

TABLE NO. 2.14

2022-23 2021-22 2020-21 2019-20 2018-19
EQUITY 27,262.16 26,971.16 26,484.05 29,181.21 31,431.80

TOTAL ASSETS 59,803.91 56,708.32 55,701.23 60,235.66 64,431.05

PROPRIETARY 0.46 0.48 0.48 0.48 0.49

RATIO
INTERPRETATION

While comparing all the five years, there is only slight changes in the Proprietary Ratio.
Although there is no ideal Proprietary Ratio, a high ratio indicates a larger portion of the
company's assets is financed by equity, suggesting a conservative financing approach.
Generally seen as positive, as it implies lower financial risk and a higher level of
financial stability. A lower ratio suggests a higher reliance on external financing,
including debt, to support the company's assets. While a lower ratio might signal
financial leverage and potential for higher returns, it also implies higher financial risk.
INTERPRETATION

While comparing all the five years, there is a moderate change in the Net profit Ratio.
Although there is no ideal Net profit Ratio, a higher Net profit ratio is generally
considered to be healthy and lower ratio is generally considered to be unhealthy. In 2020-
2021 the ratio is high and can be said that the company has a healthy Net profit Ratio for
that year. The Net profit Ratio is satisfactory.