AMRIT Old
AMRIT Old
AMRIT Old
STATEMENTS
USING RATIO ANAYLSIS OF
NATIONAL THERMAL POWER
CORPORATION
AND
TATA POWER COMPANY LTD.
SUBMITTED TO
PUNJAB UNIVERSITY, CHANDIGARH
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE DEGREE OF
MASTER OF COMMERCE
SUBMITTED TO:
SUBMITTED BY:
DR. MANPREET KAUR
AMRIT KAUR
MAAN
(ASSISTANT PROFESSOR)
M.COM 2ND
SEMESTER
ROLL NO. 6831
DECLARATION
I, AMRIT KAUR MAAN, hereby declare that this project is the record of
authentic work carried out by me during the academic year 2015 2016 and has
not been submitted to any other University or Institute towards the award of any
degree.
DATE: _______
AMRIT KAUR MAAN
MCOM 2ND SEMESTER
ROLL NO. 6831
SHRI GURU GOBIND SINGH
COLLEGE,
CERTIFICATE OF APPROVAL
This is to certify that Ms. Amrit Kaur Maan, student of MCOM 2nd Semester
in the Post Graduate Department of Commerce, Shri Guru Gobind Singh
College, Sector-26, Chandigarh has completed the project, Comparative
Analysis of Financial Statements using Ratio Analysis of National Thermal
Power Corporation and Tata Power Company Limited under my
supervision and guidance. She has done a lot of hard work in preparing the
project report.
DATE: _______
DR. MANPREET KAUR
(ASSISTANT PROFESSOR)
SHRI GURU GOBIND SINGH
COLLEGE
SECTOR- 26, CHANDIGARH
ACKNOWLDGEMENT
EXECUTIVE SUMMARY
India is one of the emerging giants of the world economy and international
energy markets. Energy development in India is transforming the global
energy system. India is increasingly exposed to changes in world energy
markets. The staggering pace of Indian economic growth in the past few
years, out ripping that of all other major countries, has pushed up sharply
their energy needs, a growing share of which has to be imported. The
momentum of economic development look set to keep their energy demand
growing strongly. As they become richer, the citizen of India are using more
energy to run their offices and factories, and buying more electrical
appliances
and cars. These developments are contributing to a big
improvement in their quality of life.
The consequences for India, the OECD and the rest of the world of unfettered
growth in global energy demand are, however, alarming. If government
around the world stick with current policies-the underlying premise of our
reference scenario-the worlds energy need would be well over 50% higher in
2030 than today, China and India together account for 45% of the increase in
demand in this scenario.
Globally, fossil fuels continue to dominate the fuel mix. These trend lead to
continued growth in energy-related emissions of carbon-dioxide (co2) and to
increased reliance of consuming countries to imports of oil and gas, much of
them from the Middle East and Russia. Both developments would heighten
concerns about climate change and energy security.
The challenges for all countries is to put in motion a transition to a more
secure, lower-carbon energy system, without undermining economic and social
development. There has so far been more talk than action in most countries.
Were all the policies that governments around the world are considering today
to be implemented, as we assume in an alternative policy scenario, the
INDEX
CHAPTE
R
TOPIC
PAGE
NO.
INTRODUCTION
1. SCENARIO OF POWER IN INDIA
INDUSTRY PROFILE
1. UNDERTAKING/COMPANY OVERVIEW
2. HISTORY
3. VISION, MISSION AND VALUES
4. OPERATIONS
5. LISTINGS AND SHAREHOLDERS
6. AWARDS AND RECOGNISTIONS
7. FUTURE GOALS
LITERATURE REVIEW
1. RATIO ANALYSIS
2. CLASSIFICATION OF RATIOS
RESEARCH METHOLOGY
1. MEANING
OF
RESEARCH
METHODOLOGY
2. OBJECTIVE OF THE STUDY
3. SCOPE OF THE STUDY
4. SOURCES OF INFORMATION
DATA
ANALYSIS
AND
INTERPRETATION
7-9
II
III
IV
10-21
2-27
28-31
32-46
VI
1. CURRENT RATIO
2. LIQUIDITY/QUICK RATIO
3. INVENTORY/
STOCK
TURNOVER
RATIO
4. DEBTOR TURNOVER RATIO
5. FIXED ASSET TURNOVER RATIO
6. DEBT TO EQUITY RATIO
7. NET PROFIT MARGIN RATIO
8. WORKING CAPITAL RATIO
CONCLUSIONS AND SUGGESTIONS
BIBLIOGRAPHY
APPENDIX
47-49
50
51
Chapter I
INTRODUCTION
1.
Electricity consumption in India has more than doubled in the last decade,
outpacing the economic growth. If we analyze the various statistics of Indian
power sector, we will find that the generating capacity has gone up
tremendously from a meager 1712MW in 1950 to a whooping 303,083 MW
today.
The critical role played by the power industry in the economic progress of a
country has
to be emphasized. A self sufficient power industry is vital for a nation to achieve
economic stability.
The electricity sector in India is predominantly controlled by Government of
India's public sector undertakings (PSUs). Major PSUs involved in the generation
of electricity include National Thermal Power Corporation (NTPC), National
Hydroelectric Power Corporation (NHPC) and Nuclear Power Corporation of India
(NPCI). Besides PSUs, several sector players like Tata Power and Reliance Energy,
are also involved in the generation and intra-state distribution of electricity. The
Power Grid Corporation of India is responsible for the inter-state transmission of
electricity and the development of national grid.
India is world's 6th largest energy consumer, accounting for 3.4% of global
energy consumption. Due to India's economic rise, the demand for energy has
grown at an average of 3.6% per annum over the past 30 years.
G,-,Generation,T,-,Transmission,D,,Distribution
Source: http://powermin.nic.in (Ministry,of,Power)
%
Nuclea
Thermal (MW)
Installe
Renewable (MW)
(MW)
Total
Growth
(MW
(on
yearly
basis)
Capacit
y
as on
Coal
Dies
Gas
el
Sub-
Hyd
Total
el
Thermal
Other
Sub-Total
Renewabl Renewabl
e
31Dec-
756
98
854
508
508
1,362
1,004
149
1,153
560
560
1,713
1,200
188,898
5,780
41,267
35,777
77,044
993
210,675
5,780
42,783
42,727
85,510
919
211,670
5,780
42,783
42,849
85,632
1947
31Dec-
8.59%
1950
31 Mar
2015
31 Mar
2016
31 May
2016
169,11
23,06
185,17
24,50
186,24
24,50
SOURCE: https://en.wikipedia.org/wiki/Electricity_sector_in_India
271,72
2
301,96
5
303,08
3
11.98%
11.13%
9.88%
The,two,companies,chosen,by,us,for,our,assignment,are,NTPC,which,is,the,benchm
ark,company,in,the,Power,sector,reporting,the,highest,turnover,year,on,year,and,TA
TA,Power,Limited,,another,major,play-er,in,power,production,and,transmission.,
Chapter-II
INDUSTRY
PROFILE
1.
2.
3.
4.
5.
6.
7.
Overview:
The company has also ventured into oil and exploration and coal
mining activities. It is the largest power company in India with an electric
power generating capacity of 45,548 MW.[5] Although the company has
approx. 16% of the total national capacity it contributes to over 25%
of total power generation due to its focus on operating its power
plants at higher efficiency levels (approx. 80.2% against the national Plant
Load Factor rate of 64.5%).[5]
It was founded by Government of India in 1975, which now holds 74.96%
of its equity shares on 30.09.2015 [6] (after divestment of its stake in
2004, 2010, 2013, and 2014)
The total installed capacity of the company is 47,178 MW (including JVs) with
18 coal based, 7 gas based stations and 1 Hydro based station. 9 Joint
Venture stations are coal based and 9 renewable energy projects. The
capacity will have a diversified fuel mix and by 2032, non fossil fuel based
generation capacity shall make up nearly 28% of NTPCs portfolio.
NTPC has been operating its plants at high efficiency levels. Although the
company has 17.73% of the total national capacity, it contributes 24% of
total power generation due to its focus on high efficiency.
In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of
5.25% as fresh issue and 5.25% as offer for sale by the Government of India.
NTPC thus became a listed company in November 2004 with the Government
holding 89.5% of the equity share capital. In February 2010, the
Shareholding of Government of India was reduced from 89.5% to 84.5%
through a further public offer. Government of India has further divested 9.5%
shares through OFS route in February 2013. With this, GOI's holding in NTPC
has reduced from 84.5% to 75%. The rest is held by Institutional Investors,
banks and Public.
NTPC is not only the foremost power generator; it is also among the great
places to work. The company is guided by the People before Plant Load
Factor mantra which is the template for all its human resource related
policies. NTPC has been ranked as 6th Best Company to work for in India
among the Public Sector Undertakings and Large Enterprises for the year
2014, by the Great Places to Work Institute, India Chapter in collaboration
with The Economic Times.
2. History:
1975 to 1994
The company was founded in November 1975 as "National Thermal Power
Corporation Private Limited". It started work on its first thermal power
project in 1976 at Shaktinagar (named National Thermal Power
Corporation Private Limited Singrauli) in Uttar Pradesh. In the same year,
its name was changed to "National Thermal Power Corporation Limited". In
1983, NTPC began commercial operations (of selling power) and earned
profits of INR 4.5 crores in FY 1982-83. By the end of 1985, it had achieved
power generation capacity of 2000 MW. In 1986, it completed
synchronisation of its first 500 MW unit at Singrauli. In 1988, it
commissioned two 500 MW units, one each in Rihand and Ramagundam. In
1989, it started a consultancy division. In 1992, it acquired Feroze Gandhi
Unchahar Thermal Power Station (with 2 units of 210MW capacity each)
from Uttar Pradesh Rajya Vidyut Utpadan Nigam of Uttar Pradesh. By the
end of 1994, its installed capacity crossed 15,000 MW.
1995 to 2004
In 1995, it took over the Talchar Thermal Power Station from Orissa State
Electricity Board. In the year 1997, Government of India conferred it with
"Navratna" status. In the same year it achieved a milestone of generation
of 100 billion units of electricity in a year. [ In 1998, it commissioned its
first naptha-based plant at Kayamkulam with a capacity of 350 MW. In
1999, its plant in Dadri, which had the highest plant load factor (PLF) in
India of 96%, was certified with ISO-14001. During 2000, it commenced
construction of its first hydro-electric power project, with 800 MW capacity,
in Himachal Pradesh. In 2002, it incorporated 3 subsidiary companies:
"NTPC Electric Supply Company Limited" for forward integration by
entering into the business of distribution and trading of power; "NTPC
Vidyut Vyapar Nigam Limited" for meeting the expected rise in energy
trading; "NTPC Hydro Limited" to carry out the business of implementing
and operating small and medium hydro-power projects. In the same year
its installed capacity crossed 20,000 MW.
Listing: NTPC got listed on BSE and NSE on 5 November 2004. Against the
issue price of INR 62 per share, it closed the first day of listing with INR
75.55 per share. On the day of listing, it become the third largest company
in India in terms of market capitalisation.
2005 to present
In October 2005, the company's name was changed from "National Thermal
Power Corporation Limited" to "NTPC Limited".The primary reason for this
change was the company's foray into hydro and nuclear based power
generation along with backward integration by coal mining. In 2006, it
entered into an agreement with Government of Sri Lanka to set up two units
of 250 MW each in Trincomalee in Sri Lanka. During 2008 and 2011, NTPC
entered
into Joint
Ventures with
BHEL, Bharat
Forge, NHPC, Coal
India, SAIL, NMDC and NPCIL to expand its business of power generation. By
the end of 2010, its installed capacity crossed 31,000 MW.
The company in 2009 joined forces with other state enterprises Rashtriya
Ispat Nigam, Steel Authority of India, Coal India, National Minerals
Development Corporation and National Thermal Power Corporation to invest
in coal mining operations through a joint venture vehicle named
International Coal Ventures Private Limited (ICVL). In July 2014 ICVL acquired
a 65 percent stake in the Benga coal mine in Mozambique from the Rio Tinto
Group.
B Business Ethics
C Customer Focus
4.
Operations:
NTPC operates from 55 locations in India, one location in Sri Lanka and 2 locations in
Bangladesh.
Headquarters: In India, it has 8 regional headquarters (HQ):
Sr.
Headquarter
No.
City
NCRHQ
Delhi
ER-I HQ
Patna
Sr.
Headquarter
No.
City
ER-II HQ
Bhubaneswar
NRHQ
Lucknow
SR HQ
WR-I HQ
Mumbai
WR-II HQ
Raipur
Hydro HQ
Delhi
Secunderaba
d
Scheduling and generation dispatch: The Scheduling and Dispatch of all the
generating stations owned by National Thermal Power Corporation is done by
respective Regional Load Dispatch Centres which are the apex body to ensure
integrated operation of the power system grid in the respective region. All these Load
Dispatch Centres come under Power System Operation Corporation Limited (POSOCO).
5.
The equity shares of NTPC are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where
it is a constituent of the S&P CNX Nifty. As of 30, Sep. 2015, Government of India held
around 74.96% equity shares in NTPC. Over 680,000 individual shareholders hold
approx. 1.92% of its shares. Life Insurance Corporation of India is the largest nonpromoter shareholder in the company with 10.03% shareholding.
6.
NTPC was ranked 2nd among the 250 largest Power Producers and Energy Traders in
the world by Platts in 2015. On overall basis NTPC ranked 56th amongst Platts 250
Companies.
7.
Future Goals:
Overview:
Tata Power had its inception in 1915, establishing India's first large hydro-electric
project in Khopoli, Maharashtra and driven by its late founder, Shri Jamshetji N. Tata's
pioneering vision. Tata Power is Indias largest integrated power company with a
growing international presence.
The Company together with its subsidiaries and jointly controlled entities has an
installed gross generation capacity of 9184 MW and a presence in all the segments
of the power sector viz. Fuel Security and Logistics, Generation (thermal, hydro, solar
and wind), Transmission, Distribution and Trading. It has successful public-private
partnerships in Generation, Transmission and Distribution in India namely Tata
Power Delhi Distribution Limited" with Delhi Vidyut Board for distribution in North
Delhi, 'Powerlinks Transmission Ltd.' with Power Grid Corporation of India Ltd. for
evacuation of Power from Tala hydro plant in Bhutan to Delhi and 'Maithon Power
Ltd.' with Damodar Valley Corporation for a 1050 MW Mega Power Project at
Jharkhand.
Tata Power is serving more than 2.6 million distribution consumers in India and has
developed the countrys first 4000 MW Ultra Mega Power Project at Mundra (Gujarat)
based on super-critical technology. It is also one of the largest renewable energy
players in India with a clean energy portfolio of 1749 MW.
Its international presence includes strategic investments in Indonesia through a 30%
stake in the leading coal company PT Kaltim Prima Coal (KPC), 26% stake in mines at
PT Baramulti Suksessarana Tbk ("BSSR"); in Singapore through Trust Energy
Resources to securitize coal supply and the shipping of coal for its thermal power
generation operations; in South Africa through a joint venture called Cennergi to
develop projects in sub-Sahara Africa; in Zambia through 50:50 joint venture with
ZESCO for 120 MW Hydro which has become operational in 2016; in Georgia through
AGL which is a joint venture with Clean Energy, Norway & IFC for development of 185
MW hydro project which is scheduled to be commissioned in 2016; in Australia
through investments in enhanced geothermal and clean coal technologies and in
Bhutan through a hydro project in partnership with The Royal Government of Bhutan.
With its track record of technology leadership, project execution excellence, world
class safety processes, customer care and driving green initiatives, Tata Power is
poised for a multi-fold growth and committed to 'lighting up lives' for generations to
come.
2.
History:
The firm started as the Tata Hydroelectric Power Supply Company in 1911, which
amalgamated with the Andhra Valley Power Supply Company in 1916. It commissioned
Indias first large hydro-electric project in 1915 in Khopoli for 72 MW. Then second and
third power plants were installed in Bhivpuri (78 MW) in 1919 and Bhira (300 MW) in
1922.
3.
VISION:
To be the most admired and responsible Integrated Power Company with
international footprint, delivering sustainable value to all stakeholders.
MISSION:
Executing
quality, cost and time
projects
safely
with
predictable
benchmark
VALUES:
Our Values are SACRED to us
4.
Operations:
Tata Power has operations in India, Singapore, Indonesia, South Africa and Bhutan.Tata
Power Group has its operations based in 35 locations in India.
The thermal power stations of the company are located
at Trombay in Mumbai, Mundra in Gujarat, Jojobera
and Maithon inJharkhand, Kalinganagar in Odisha, Haldia in West
Bengal and Belgaum in Karnataka. The hydro stations are located in the Western Ghats
of Maharashtra and the wind farms in Ahmednagar, Supa, Khanke,
Brahmanwel, Gadag, Samana and Visapur.
The company installed Indias first 500 MW unit at Trombay, the first 150 MW pumped
storage unit at Bhira, and a flue gas desulphurization plant for pollution control at Trombay. It
has generation capacities in the States of Jharkhand and Karnataka, and a distribution
company in Delhi, servicing over one million consumers spread over 510 square km in the
North Delhi. The peak load in this area is about 1,150 MW. Tata Power announced on 24 July
2012, commissioning of the second unit of 525 MW capacity of the Maithon mega thermal
project in Dhanbad. The first unit of identical capacity was commissioned in September
2011.
5.
As on 31 March 2013, Tata Group held 32.47% shares in Tata Power. Around 210,000
individual shareholders hold approx. 14% of its shares. Life Insurance Corporation of
India is the largest non-promoter shareholder in the company with 12.90% shareholding.
The equity shares of Tata Power are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where it is
a constituent of the S&P CNX Nifty.
Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange and
the Luxembourg Stock Exchange.
6.
Tata Power won two awards at the Power Line Award 2013: Best
Performing Private Discom' award for its Delhi distribution arm Tata Power Delhi
Distribution Limited and Runners up award for 'Best Performing Renewable
Company'.
In 2011, Tata Power was conferred the BML Munjal award for
excellence in learning and development for the year 2011. Tata Power won the
award in private sector category.
7.
Future Goals:
The company has also a 74:26 joint venture with Damodar Valley
Corporation for 1050 MW coal-based thermal power plant at Maithon in Dhanbad district
of Jharkhand, named as Maithon Power Limited. The both units are commissioned on
24.07.2012. It has another a 74:26 joint venture with Tata Steel Limited for thermal
power plants to meet the captive requirements of Tata Steel, under name Industrial
Energy Limited.
Tata Power has announced its partnership with Sunengy an Australian firm
to build India's first floating solar plant based on Liquid Solar Array technology.
Chapter-3
LITERATURE
REVIEW
1. RATIO ANALYSIS
2. CLASSIFICATION OF RATIOS
1.
RATIO ANALYSIS:
that of the assets of the company, it shows the unsound position of the
business. In this case the business has to make it possible to repay its loans.
Helpful in analysis of financial statement: Ratio analysis help
the outsiders just like creditors, shareholders, debenture-holders, bankers to
know about the profitability and ability of the company to pay them interest
and dividend etc.
Helpful in comparative analysis of the performance: With
the help of ratio analysis a company may have comparative study of its
performance to the previous years. In this way company comes to know about
its weak point and be able to improve them.
To simplify the accounting information: Accounting ratios are
very useful as they briefly summarize the result of detailed and complicated
computations.
2. CLASSIFICATION OF RATIOS:
Ratios may be classified in a number of ways to suit any particular purpose.
Different
kinds of ratios are selected for different types of situations. Mostly, the
purpose for which
the ratios are used and the kind of data available determine the nature of
analysis.
Chapter- V
RESEARCH
METHODOLOGY
1.
MEANING OF RESEARCH
METHODOLOGY
2.
3.
4.
SOURCES OF INFORMATION
For the purpose of this research, I have selected NTPC and Tata Power
which are the largest PSU and Private Company respectively in the
power industry in India.
4. Sources of Information:
This project involved a systematic and scientific search for information,
diagnosis of the present ratios and the use of practical knowledge to develop
an improved ratio analysis for the financial statements of the entities.
For a research, researcher may depend either on primary data on
secondary data. Primary data is usually collected with the help of
questionnaires. Secondary data is collected from published journals or
magazines or reports.
RESEARCH DESIGN: In the present study, most of the information is
collected Secondary Sources.
Secondary data regarding sales figures, gross profit, operating cost and other
operating expenses, operating profit, net profit, capital employed,
shareholders fund, total assets etc was collected from the companys annual
report to analyze the profitability, operational efficiency i.e. the firms ability
to earn maximum profits by the best utilization of its resources. The report
covers the data for the period of 2011 to 2015.
Chapter- VI
DATA ANALYSIS
AND
INTERPRETATION
1. Current Ratio:
Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio is also known as "working capital ratio ". It is a measure
of general liquidity and is most widely used to make the analysis for short term
financial position or liquidity of a firm. It is calculated by dividing the total of the
current assets by total of the current liabilities. Following formula is used to calculate
current ratio:
Current Ratio=
Current
Assets
Current
Current
2015
2014
2013
2012
2011
Ratio
NTPC
Tata
1.43
1.33
1.69
0.97
1.83
1.30
1.97
1.57
2.13
1.55
Power
2.5
2
1.5
NTPC
TATA POWER
0.5
0
2015
2014
2013
2012
2011
Interpretation:
A relatively high current ratio is an indication that the firm is liquid and has
the ability to pay its current obligations in time and when they become due.
On the other hand, a relatively low current ratio represents that the liquidity
position of the firm is not good and the firm shall not be able to pay its
Quick
Liquidity Ratio
= Assets
Current
liabilities
Quick Ratio
2015
2014
2013
2012
2011
NTPC
Tata Power
1.23
1.64
1.51
1.13
1.68
1.64
1.80
1.66
1.93
1.82
2
1.8
1.6
1.4
1.2
NTPC
TATA
0.8
0.6
0.4
0.2
0
2015
2014
2013
2012
2011
Interpretation:
This ratio measures the firm's capacity to pay off current obligations
immediately and is more rigorous test of liquidity than the current ratio.
Usually a high liquid ratio an indication that the firm is liquid and has the
ability to meet its current or liquid liabilities in time and on the other hand
a low liquidity ratio represents that the firm's liquidity position is not good.
As a convention, generally, a quick ratio of "one to one" (1:1) is considered
to be satisfactory.
Since both NTPC and Tata Power have quick ratio exceeding 1:1 in previous 5
financial years, they are in good liquid position, i.e both will be able to meet their
immediate obligations promptly.
Though liquidity ratio of NTPC has been gradually declining since 2011 due
to declining current ratio, its favourable because it exceeds 1:1 ratio.
NTPC has more liquidity than Tata Power in all the years except 2015.
Average Inventory
at cost
Turnover Ratio
NTPC
Tata Power
2015
2014
2013
2012
2011
9.92
13.52
16.32
16.87
15.2
12.97
12.16
12.59
9.96
11.0
18
16
14
12
10
NTPC
TATA
6
4
2
0
2015
2014
2013
2012
2011
Interpretation:
Inventory turnover ratio measures the velocity of conversion of stock into
sales. Usually a high inventory turnover/stock velocity indicates efficient
management of inventory because more frequently the stocks are sold;
the lesser amount of money is required to finance the inventory. A low
inventory turnover ratio indicates an inefficient management of inventory.
In case of NTPC, stock turnover ratio has been gradually declining which is
because although the average inventory is increases, so are the debtors.
Debtors Turnover
2015
2014
2013
Ratio
NTPC
11.42
13.61
11.73
17.08
5.99
6.59
8.31
9.21
Tata Power
2012
2011
13.6
4.91
18
16
14
12
10
NTPC
TATA
6
4
2
0
2015
2014
2013
2012
2011
Interpretation:
This ratio indicates the number of times the debtors are turned over a
year. The higher the value of debtors turnover the more efficient is the
management of debtors or more liquid the debtors are. Similarly, low
debtors turnover ratio implies inefficient management of debtors or less
liquid debtors.
NTPC has had a fluctuating graph. The debtor turnover ratio for 2011 is
13.62 which shows efficient management and effective sales policy and
it further increased in 2012. After that it fell in 2013, rose again in 2014
to 13.61, and was 11.42 in 2015.
Tata Power experienced a steep increase in the ratio in 2012 which is
very good for the company since it shows the speed with which the
money is being recovered from the debtors. But after 2012 gradually
starts declining which is not a good sign and therefore it means that
credit sales have been made to the debtors who do not deserve so
much of credit and therefore the company must revise its sales policy.
Cost
Fixed Asset Turnover Ratio
= of Sales
Net Fixed
Assets
Fixed Assets
Turnover Ratio
NTPC
Tata Power
2015
201
2013 2012
2011
0.57
4
0.62
0.64
0.76
0.76
0.54
0.58
0.71
0.68
0.66
0.8
0.7
0.6
0.5
NTPC
0.4
TATA
0.3
0.2
0.1
0
2015
2014
2013
2012
2011
Interpretation:
To ascertain the efficiency & profitability of business the total fixed assets are
compared to sales. The more the sales in relation to the amount invested in
fixed assets, the more efficient is the use of fixed assets. It indicates higher
efficiency. If the sales are less as compared to investment in fixed assets it
means that fixed assets are not adequately utilized in business. Of course
excessive sale is an indication of over trading and is dangerous.
NTPC has constantly had better,fixed,asset,usage efficiency,compared,to,Tata
Power except for in year 2013. But a,very,high,turnover
ratio,can,also,mean,that,the,company,is,ill prepared,for
,scaling,up,operations,to, meet,increased,demand,and,that
it,is,maintaining,bare,minimum ,fixed,assets.
NTPC had high fixed asset turnover ratio for years 2011 and 2012, which
indicates efficient utilization of fixed assets in generating sales. After that it
started to decline.
Similarly Tata Power had increasing fixed asset turnover till year 2013 after
which it started to decline.
2011
201
2013
2012
2011
0.73
0.74
0.87
0.71
0.67
0.96
0.73
0.66
0.63
0.59
1
0.9
0.8
0.7
0.6
0.5
NTPC
0.4
Tata Power
0.3
0.2
0.1
0
2015
2014
2013
2012
2011
Interpretation:
Debt to equity ratio indicates the proportionate claims of owners and the
outsiders against
the firms assets. The purpose is to get an idea of the cushion available to
outsiders on the
liquidation of the firm. However, the interpretation of the ratio depends upon
the
financial and business policy of the company
Generally, a ratio of 2:1 is considered to be safe for the long term lenders and a
ratio below 2:1 provides sufficient protection to the long term lenders and thus
they are more secure and a higher ratio thus would indicate a more risky
financial position of the firm.
The debt- equity ratio for all the years and of both NTPC and Tata Power has
been less than 2:1 and this is indicative of a sound financial position of the firm.
Profit
after
Net Profit Margin Ratio
=
tax
Revenue
Earnings per Share Ratio
NTPC
Tata Power
201
20
14
14.04
15.23
19.21
11.64
11.05
10.71
14.8
6
13.7
6
16.5
3
13.6
0
20
18
16
14
12
NTPC
10
TATA
8
6
4
2
0
2015
2014
2013
2012
2011
Interpretation:
NP ratio is used to measure the overall profitability and hence it is very useful
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm
shall not be able to achieve a satisfactory return on its investment. This ratio
also indicates the firm's capacity to face adverse economic conditions such as
price competition, low demand, etc. Obviously, higher the ratio the better is the
profitability. But while interpreting the ratio it should be kept in minds that the
performance of profits also be seen in relation to investments or capital of the
firm and not only in relation to sales.
NTPC saw a fluctuating graph with Net Profit Margin Ratio initially decreasing
due to increase in operating expenses. It increased in 2013 with increase in
sales, but decreased to 14.04 in 2015.
Tata Power had an almost constant graph showing an overall good position of
the company.
Chapter- VI
CONCLUSIONS
AND
SUGGESTIONS
There is a huge crisis over energy in the world especially in the field of
electricity. India is also victim of the same condition. In spite of several efforts
taken by the governments in this regard, there is enormous possibility exists.
NTPC and Tata Power are key organizations in India as far as the supply of
power is concerned. After successfully conducting this project work, it can be
said that the financial health of both NTPC and Tata Power is sound enough and
it appears positive in accordance with its balance sheet and profit & loss A/c
which are available to me.
Some other findings are:
1. The liquidity position of NTPC has been gradually declining while that of Tata
Power shows a fluctuating trend. NTPC is has a better liquid position than Tata
Power on an average.
2. The quick ratio of NTPC shows a declining trend with 1.93, 1.80, 1.68, 1.51,
1.23. Whereas the quick ratio of Tata Power shows a fluctuating trend.
3. The inventory turnover ratio for NTPC declined drastically from 15.21 to 9.92
between 2011-2015 and that of Tata Power increased slowly from 11.08 to
12.27 between 2011-2015.
4. Debtor Turnover ratio for both NTPC and Tata Power show a fluctuating trend
with NTPC having 11.42 and Tata Power having 5.99 in 2015.
5. Fixed Asset Turnover Ratio is high for all years on average for both NTPC and
Tata Power which indicates they are efficiently utilizing fixed assets.
6. The debt- equity ratio for all the years and of both NTPC and Tata Power has
been less than 2:1 and this is indicative of a sound financial position of the
firm, although an increasing trend shows more usage of debt as a source of
finance.
7. Net Profit Margin ratio showed fluctuating trend in both NTPC and Tata Power.
8. NTPC and Tata Power belong to power sector industry where gestation
period for new projects is always more than 3-5 years, therefore a part of
capital gets blocked in such projects.
SUGGESTIONS:
1. Looking at the profitability, size and promising future prospects, we can say
that for NTPC Ltd. And Tata Power there is still a room for including more of
debt into its capital structure as debt is a cheaper source of finance so thereby
it would lead to more of profitability.
2. The company can increase its sources of funds to make effective research
and development system for more profits in the years to come.
3. The liquid ratio of NTPC decreasing year after year. Though the ratio is above 1 in
all the five years, it is preferable to improve upon the situation. This may be due to the
fact that the stock is major composition of current assets, which excludes liquid
assets. The firm should try to clear the stocks.
4. The inventory turnover ratio for the five years in Tata Power indicated a good
inventory policy and efficiency of business operations of the company, whereas NTPC
showed a declining trend. Thus the management should rethink the inventory policy.
5. Efforts should be taken to increase the overall efficiency in return out of
BIBLIOGRAPHY
REFERENCE BOOKS:
1. Financial Management,
OTHER SOURCES:
1. Annual Reports of NTPC from 2011-15
2. Annual Reports of Tata Power from 2011-15
WEBSITES:
www.ntpc.co.in
https://en.wikipedia.org/wiki/NTPC_Limited
www.tatapower.com
https://en.wikipedia.org/wiki/Tata_Power
financials.morningstar.com
money.livemint.com
money.rediff.com
www.moneycontrol.com
https://www.google.co.in
ANNEXURE