SUMMER TRAINING REPORT

ON

WORKING CAPITAL MANAGEMENT

OF
PARICHHA THERMAL POWER PROJECT
SESSION 2020-21
Submitted towards the partial fulfilment of the requirement of the award of
degree of Master of Business Administration (M.B.A.)

Submitted By AMIT KUMAR RAI

Roll No. 05
Batch 2020-2022
Institute of Management Studies
Bundelkhand University, Jhansi

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 ACKNOWLEDGEMENT

It gives me great pleasure to present this project report. It indeed goes without
saying that the success of my study on Working Capital Management of Parichha
Thermal Power Plant, Jhansi was due to the direct as well as indirect guidance and
assistance provided to me by account and technical staff of thermal plant. I take this
opportunity to acknowledgement by their help and valuable assistance in providing
technical input or reviewing the report.
I herby express my sincere thanks and gratitude toward the management of
Parichha Thermal Power Plant, Jhansi for giving me an opportunity in their organization.
My respectful thank to the management and employees of organization for their
valuable assistance, suggestion and their timely guidance in completing my project report.
I acknowledge and extend my thanks to MR. S.P. KUSHWAHA (Deputy chief
account officer), PTPP for his through inspection and guidance during my training session.
I am delirious about the tremendous support and guidance provided to me by Mr.
SANDEEP KUMAR (AAO). His expert opinion and effort to direct my views in the right
direction which helped me in the successful completion of this project.
I shall be failing in my duty if I don’t express my gratitude to Prof. POONAM
PURI (HOD, MBA Department, INSTITUTE OF MANAGEMENT STUDIES
BUNDELKHAND UNIVERSITY, JHANSI) and DR. SHIPRA SAXENA who helped
me rise up to this level.

Place : Parichha Amit Kumar Rai

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 PREFACE

Management of working capital has always been a fascinating subject from the
academic point of view and it must be admitted in the real world situation also
efficiency with which working capital is Managed in a concern is of great significance
for its overall well being Its growth and decline. Management of working capital is
an important aspect of the over all financial management package. This is true in case
of Company like P.T.P.P. where large chunk of fund invested happens to be in
current assets, the paper attempts to working capital Management of P.T.P.P. one
of the largest electricity generating organization.

This issue has been tackled from all point of view using simple tools as well as
the norms found in general in any company of the Indian Corporate scenario. The analysis
of the company, components wise as well as overall, has been remarkably encouraging
over the last five years.

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TABLE OF CONTENTS
CHAPTER 1
➢ Introduction of UPRVUNL and PTPP
• Vision
• Mission
• Introduction
• History
• Organisation Structure
• Future Capacity Addition
• Joint Ventures
• Introduction of PTPP
• Environmental Policies and management

CHAPTER 2
➢ Research and Methodology
• Introduction
• Source of Research data
• Research Design
• Scope of study
• Objective of study
• Limitation of study

CHAPTER 3
➢ Introduction of Working Capital
• Theoretical Basis of Working Capital Management
• Constituents of Working Capital
• Working Capital Cycle
• Factors determining the size of Working Capital
• Type of Working Capital
• Types of Working Capital Approaches
• Needs of Working Capital

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 • Importance of Working Capital
• Component of Working Capital

CHAPTER 4
➢ Data Analysis and Interpretation
• Objective of the Project
• Working Capital Management in PTPP
• Scope of the study
• Limitation of Study
• Working Capital Overall Turnover Ratio
• Inventory Management in PTPP
• SWOT Analysis
• Conclusion
• References

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 CHAPTER 1
INDTRODUCTION OF
UTTER PRADESH RAJYA VIDYUT UTPADAN
NIGAM LIMITED AND PARICHHA THERMAL
POWER PROJECT

VISION
UPRVUNL is wholly owned state thermal power utility with present generating capacity
of 5474 MW, operating 4 Thermal Power Stations within Uttar Pradesh. Poised to
contribute in the growth of state, we're in the process of adding further 3960 MW capacity
with super critical technology to our existing fleet.

MISSION
UPRVUNL will be leader in generating, transmitting and distributing electric energy
most efficiently through collaborations with its partners by using its technical people as
its competitive advantage while balancing and serving the interest of all of its
stakeholders.

INTRODUCTION

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UPRVUNL is wholly owned state thermal power utility with present generating capacity
of 5474 MW, operating 4 Thermal Power Stations within Uttar Pradesh. Poised to
contribute in the growth of state, we're in the process of adding further 3960 MW capacity
with super critical technology to our existing fleet.

Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) was constituted on
dated 25.08.1980 under the Companies' Act 1956 for construction of new thermal power
projects in the state sector. The first Thermal Power Station constructed by UPRVUNL
was Unchahar Thermal Power Station of 2X210 MW capacity and it was transferred to
NTPC on dated 13.02.1992. On dated 14.01.2000, in accordance to U.P. State Electricity
Reforms Acts 1999 and operation of U.P. Electricity Reforms Transfer Scheme 2000, U.P.
State Electricity Board, till then responsible for generation, transmission and distribution
of power within the state of Uttar Pradesh, was unbundled and operations of the state
sector thermal power stations were handed over to UPRVUNL.

Today it is looking after operations of 4 thermal power plants located in different parts of
U.P., with a total generation capacity of 5474 MW with planting facility as follows.

Name of Power Station Installed Derated Capacity Total

Capacity Capacity

ANPARA, 3X210 MW 3X210 MW = 630 MW 2630 MW

SONEBHADRA 2X500 MW 2X500 MW = 1000 MW
2X500 MW 2X500 MW = 1000 MW

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 OBRA, 1X100 MW 1X94 MW = 94 MW 1094 MW
SONEBHADRA 5X200 MW 5X200 MW = 1000 MW

PARICHHA, 2X110 MW 2X110 MW = 220 MW 1140 MW

JHANSI 2X210 MW 2X210 MW = 420 MW
2X250 MW 2X250 MW = 500 MW

HARDUAGANJ, 1X110 MW 1X110 MW = 110 MW 610 MW

ALIGARH 2X250 MW 2X250 MW = 500 MW

Total UPRVUNL Generation Capacity 5474 MW

As on 01.04.2020 UPRVUNL has 1475 executives and 4966 non-executives on its roll.

HISTORY/ BACKGROUND
Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) was constituted on
dated 25.08.1980 under the Companies' Act 1956 for construction of new thermal power
projects in the state sector. The first Thermal Power Station constructed by UPRVUNL
was Unchahar Thermal Power Station of 2X210 MW capacity and it was transferred to
NTPC on dated 13.02.1992. On dated 14.01.2000, in accordance to U.P. State Electricity
Reforms Acts 1999 and operation of U.P. Electricity Reforms Transfer Scheme 2000, U.P.
State Electricity Board, till then responsible for generation, transmission and distribution
of power within the state of Uttar Pradesh, was unbundled and operations of the state
sector thermal power stations were handed over to UPRVUNL.

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ORGANIZATION STRUCTURE

CHAIRMA
N

MANAGIN
G
DIRECTOR

Director Directo
(Personnel , Director r Director (Project and
Management and (Technical) (Financ Commercial)
Administration) e)

CE (Project
Chief
Planning
Engineer CE (Thermal CGM
and
( Human Operation) (Finance)
Monitoring
Resources)
Management)

Chairman
(UPRVU GM CE
CE (Civil)
Sewa (Accounts) (Commercial)
Ayog)

General CE
GM CE (Coal
Manager (Environment
(Audit) Block)
( Medical) & Safety)

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 Company
CE (Fuel)
Secretary

CE (R&M) New Projects

CE CE (Panki
(Pragati(IT) 660 MW)

CE
CE (Anpara
(Harduaganj
TPS)
660 MW)

CE
CE (Obra
(Jawaharpur
TPS)
1320 MW)

CE (Parichha CE (Obra
TPS) 1320 MW)

CE
(Harduaganj
TPS)

CE ( Panki
TPS)

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FUTURE CAPACITY ADDITIONS
UP Rajya Vidyut Utpadan Nigam Ltd has envisaged the latest technologies of thermal
power plants with minimum coal consumption having minimal effect on environment and
producing low cost electricity for the people of Uttar Pradesh. Presently 3960MW is being
added in existing installed capacity based on latest Super Critical Technology. Also
3300MW is being added in Joint Ventures with NTPC Ltd and NLC India Ltd. A total of
6225 MW (in which 2265 MW is the capacity share from Joint Ventures) of new power
projects are being under construction and expected to be commissioned during the period
of FY 2018-22.

The details of the under construction projects are as under:

S.No Project Location Capacity Addition

1 Harduaganj Extension-II Harduaganj, Aligarh 1X660 MW

2 Obra ‘C’ Extension Obra, Sonebhadra 2X660 MW

3 Jawaharpur Jawaharpur, Etah 2X660 MW

4 Panki Extension Panki, Kanpur 1X660 MW

Total 3960 MW

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JOINT VENTURES

S.No Project Ownership Location Capacity Capacity Share of

UPRVUNL

1 Meja TPS NTPC and Meja, 2X660 990 MW (75% of Installed

UPRVUNL Allahabad MW capacity)

2 Ghatampur UPRVUNL and Ghatampur, 3X660 1275 MW (64.39% of

TPS NLC Kanpur MW Installed capacity)

Total 3300 MW 2265

Total Future Capacity Addition of UPRVUNL 6225 MW

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INTRODUCTION OF PARICHHA THERMAL POWER
PLANT

LOCATION

It is located in district JHANSI about 25 KM before JHANSI, on KALPI-JHANSI road.

Jhansi is well connected by air/rail and road route from all major cities.

GENERATING UNITS AT PARICHHA THERMAL POWER STATION

All the units of this station are coal fired thermal power plants, having a total generating
capacity of 1140 MW and consists of following units

Units Installed Derated Date of Date of Original

No. Capacity Capacity Synchronization Commercial Equipment
Operation Manufacturers

1 01 Stage 110 31.03.1984 01.10.1985 M/s Bharat Heavy

Electricals Limited,
India.

02 110 110 31.03.1985 Dec.1985 M/s Bharat Heavy

Electricals Limited,
India.

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 2 03 210 210 May.2006 24.11.2006 M/s Bharat Heavy
Electricals Limited,
India.

04 210 210 28.12.2006 01.12.2007 M/s Bharat Heavy

Electricals Limited,
India.

3 05 250 250 15.05.2012 17.07.2012 M/s Bharat Heavy

Electricals Limited,
India.

06 250 250 17.09.2012 18.04.2013 M/s Bharat Heavy

Electricals Limited,
India.

The coal to all these units is fed from coal mines of BCCL, ECL by means of railways.

ENVIRONMENT POLICIES AND MANAGEMENT

PURPOSE:

As the state owned power generator, with its presence across the energy value chain,
UPRVUNL recognizes that protecting the environment is essential for sustainable
business.

In the context of Environment Policy, the definition of environment covers all the domains
of environment – Physical, Chemical, Biological and Socio- economic aspect.

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The intent of this policy is to meet environmental expectations and provide actionable
guidance, as UPRVUNL strives to foster a culture of excellence and challenges itself for
continual improvement.

POLICY STATEMENT:

“To provide cleaner energy by committing to highest possible levels of performance

in environmental compliance, practices and stewardship.”

APPLICABILITY:

This policy shall apply to all establishments of UPRVUNL, and each employee shall be
made a partner in implementing the policy.

PRINCIPLES:

This policy is based on the following principles:

• Consideration of Environmental factors right from the stage of planning, design and
operation of projects to ensure that principles of conservation and sustainability are
adhered to.

• Impact of UPRVUNL’s business environment can be minimized by adopting best

environment management practices and state-of the art technology.

• Accepting accountability for all operations and expeditiously respond to any

aberration.

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 • Continuous monitoring and sharing of environmental indicators with stakeholders
ensures UPRVUNL’s commitment towards continual improvement in environmental
performance.

• Develop each employee as environmental steward by improving his awareness

levels while soliciting his commitment.

POLICY:

UPRVUNL shall achieve these objectives by:

STEWARDSHIP:

UPRVUNL shall:

• Adopt a pro-active approach, place environmental aspects as one of the prime

consideration on decision-making process.

• Identify and manage environmental impacts due to business activities, by adopting latest
environment management technologies and practices.

• Evaluate performance of environment protection equipment, program and practices, with

respect to legal provisions and prepare action plans for concerned functional groups.

• Ensure efficient and optimal use of resources such as land, water, fuel construction
materials, oils and chemicals etc, especially the nonrenewable.

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• Spearhead waste management by reducing, re-using recycling, recovering and safe
disposal.

• Adopt more environment friendly and energy-efficient practices.

• Provide innovative technological solutions to environment related issues.

• Benchmark parameters to establish and adopt best practices.

• Take up environmentally befitting projects in areas of climate change, renewable energy,

conservation and responsible consumption of natural resources under Sustainable
Development initiatives.

• Adopt principles of green procurement by incorporating appropriate provisions in

contracts and procurements.

• To formulate and adopt separate Policies for Ash, Rehabilitation & Resettlement,
Community Development – Corporate Social Responsibility and Sustainable
Development.

COMPLIANCE AND ASSURANCE:

• UPRVUNL shall continue to comply with all relevant environmental regulations,

standards and other codes of practice, by operating and maintaining the assets within
bounds of permits, consents, and licenses.

• Concerned group shall oversee compliance assurance of operating stations through

reviews and appraisals.

• All clearances, along with any futuristic requirements shall be accounted for in new
establishments and expansions.

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STAKEHOLDER ENGAGEMENT:

UPRVUNL shall continue to identify all stakeholders and engage with them at appropriate
levels, to exchange views on environmental concerns and mitigation measures thereof.

CAPACITY BUILDING:

UPRVUNL shall ensure all employees are made environmentally aware, to enable them
to integrate its principles into their activities and decisions.

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 CHAPTER 2

RESEARCH AND METHODOLOGY

INTRODUCTION
Research in general refers to the search of knowledge. The other way of defining research
could be a systematic and collection of information. In simple words research is the careful
investigation or enquiry of markets especially through search for new facts in any branch
of knowledge.

Research is scientific and systematic search for gaining information and knowledge on a
specific topic or phenomena. Research refers to the systematic method consisting of:

• Enunciating the problem

• Formulating the problem

• Collecting the fact or data

• Analyzing the facts

• Research certain conclusion either in the form of solution toward the concerned
problem or in certain general for some theoretical formulation.

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“Research methodology is the process used to collect information and data to solve
the research problem. It may be understood as the science of studying how research
is done. Research in the common refers to search for knowledge.”

SOURCE OF RESEARCH DATA

Data collection is the most important aspect of a survey. While collecting data utmost care
must be exercised because data constitute the foundation on which the super structure of
the analysis is built. If the data are inaccurate and inadequate the entire analysis maybe
misleading. Both primary and secondary mode of data collection has been used in this
project.

There are mainly two sources through which the data required:

• PRIMARY DATA

The primary data is that data which is collected fresh or first hand, and for the first time
and which is original in nature. In this study the primary data has been collected from
personal interaction with the accountant and other staff members.

• SECONDARY DATA

The secondary data are those which have been already collected and stored and which
have been already passed through statistical process. It helps in saving effort and time to
collect data. The secondary data consists of reality available companies already compiles
statistical statement. Secondary data consists not only published record and reports but
also unpublished records. The major source of secondary data collected for this project
includes:

• Profit & loss A/C

• Cost sheets & trial balance of five year.

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RESEARCH DESIGN

The research design constitutes the blueprint for the collection, measurement and analysis
of data. It aids the scientists in the allocation of his limited resources by posing actual
choices.
“Research design is the plan and structure of investigation so convinced as to obtain
answer to research question.”
So in brief research design must contain at least following points:
• Clear statement of research problem
• Procedure and technique to be used for gathering information
• Method used in processing and analyzing the data.

There are two type of research design are:

• Research design in case of exploratory research

• Research design in case of descriptive research.

SCOPE OF THE STUDY

This study has widened the scope for studying the company on various parameters:
• The present study can be extended to access the present working condition of the
company.
• The study can be used to design a plan for short-term borrowing from the market.
• From the present study we can know the area of short term capital utilization.
• The result of marketing success can be interpreted to assess the credit paying capacity
of the company.

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OBJECTIVES OF THE STUDY
MAIN OBJECTIVE

To analyze the advertising strategy in power plant

Study of advertising is important because all business are to make profits and a
enchanting concern can do that by increasing its sales at remunerative prices. This is
possible if the product is widely polished to the audience the final consumer and through
convincing argument it is persuaded to buy it, if an appropriate advertising strategy is
followed.

SUB OBJECTIVES OF THE STUDY

• To understand the advertising procedure of the company,

• To study the advertising budget of the company,
• To analyze the sales of the company,
• Consumer satisfaction,
• To earn the sufficient cost effective flow of goods,
• To verify the level from point of origin to point of consumption.

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LIMITATION OF STUDY

Efforts had been made to collect the relevant information through the services available
still some relevant information could not be gathered.

The time duration could not provide ample opportunity to study every detail of
management of the company.

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 CHAPTER 3

INTRODUCTION OF WORKING CAPITAL

MANGEMENT

THEORETICAL BASIS OF WORKING CAPITAL

MANAGEMENT

Working capital is the amount of funds necessary to cover the cost of operating the
enterprise.

It also refers to some total of all current assets employed in the business process, which
is known as Gross Working capital concept. Gross concepts of working capital are useful
in making correct estimate of working capital needs of the firms.

Net working capital is the portion of current assets(C.A.) which can not be financed by
current liabilities(C.L.).

WORKING CAPITAL= CURRENT ASSETS- CURRENT LIABALITIES

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CONSTITUENTS OF WORKING CAPITAL:-

1. CURRENT ASSETS:

It refers to the assets which are used for day to day business operations of the firm. It
mainly constitutes of the following:

i. Inventories:- It represents all the raw materials and components of work in

progress and finished goods.
ii. Trade debtors:- It comprises credit sales to customers.
iii. Prepaid expense:- The expenses which have been paid for goods and
services whose benefit have yet to be received.
iv. Loan and advances:- Loan and advances given by the firm to other firm for
short period of time.
v. Investments:- Is short term. It is surplus funds invested in the share and
short term bond.
vi. Cash and Bank balances:- Assets represents cash in hand and at bank
which is reserved for meeting the operational requirement.

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 2. CURRENT LIABILITIES :-

It is a part of working capital represent obligation which the firm has to clear to the outside
parties in a short period generally with in a year and this is mainly comprise of the
following:

i. Sundry credit:- Liabilities which are steam out of purchases of raw material on
credit terms usually for a period of one or two months.
ii. Bank o/d;- Withdrawals in excess of credit balance standing in the firm’s currents
a/c with the banks.
iii. Short term loans:- short term borrowing by the firm from bank and other firm’s
part of C.L. as short term loans.

WORKING CAPITAL CYCLE

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FACTORS DETERMINING THE SIZE OF WORKING
CAPITAL
There may be various factors which can be determine the size of the working capital :-

i. Nature of Business:-

Magnitude of working capital business enterprise is to a considerable degree of function

of the nature and character of the business. e.g.:

a) In enterprise engaged in the manufacturing of essential product of daily

consumption would need less amount of working capital.
b) If the enterprise dealing in luxuries product it will require a large reserve of net
working capita
ii. Size of business:-

Requirement of working capital can also be determined by the size of the business. Firms
engaged in the same line of business activity may have different working capital
requirement because of varying business size. e.g.;

a) 10 – 20 % of W.C is required in Hotels and restaurants.

b) 20 – 30 % of W.C in services and semi manufacturing organizations.

c) 80 – 90 % of W.C in hi-tech or heavy industry like steel , cement etc.

iii. Production cycle:-

Time lag between procurement of raw material to collection of cash. e.g.

a) Bakery industry—regular basis of requirement of W.C.

b) Many venture projects require high amount of W.C but the W.C is pre-collected.

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iv. Business cycle: -

Business cycle of the enterprise also determines the W.C. requirement.→

In times of economic and business oscillations, the management has to carry enough W.C
to handle the situation of the upward and downward swings.

v. Production policy: -

W.C requirements also depends upon the various production policy adopted by the
business organization. e.g.;

a) Line Vs Batch production policy

b) Seasonal Vs Bulk

→Progressive accumulation of stock affects the requirements of W.C .Higher The

accumulation, higher is the W.C requirement. e.g.; Automobile sector

→Diversification of the business also require the high amount of W>C>

vi. Credit policy: -

Credit policy adopted by the firm also affect the W>C requirements. It may depend on
the:-

•Economy conditions

•Prevailing trade practices

•Collection procedure

•Customer patronage

•Terms of creditors Vs terms of debtors

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vii. Growth & expansion of the company: -

As a company grows, it is logical to expect that a larger amount of W.C is required.→ It

is very difficult to determine precisely the relationship between the growth in the volume
of the business of the company and increase in the working capital.

viii. Vagaries (deliberation/factors) in supply of R.M:-

•Regular basis of supply of R.M, the W.C is constant

•Sporadic supply of R.M, the W.C is not constant.

ix. Profit level: -

Higher profit margin would improve the prospects of generating more internal funds
thereby contributing to the W.C.

→ Profit level of any enterprise depends on the:-

•Nature of the product

•Market holding

•Intensity of completion

•Effective quality management. e.g.:-

Marico created its monopoly so the W.C requirement is very less for monopoly company,
because their profit level is very high.

x. Level of taxes: -

Level of taxes also decides the requirement of W.C.

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 xi. Price level changes:-

Changes in the price level also affect the requirements of the W.C.→ rising prices
necessitate the use of more funds for maintaining an existing level of activity.

xii. Depreciation
xiii. Operating efficiencies

TYPES OF W.C.
There are two types of W.C, which are as follows:-

1. Fixed / Regular / Permanent W.C.:-

Any business activity dose not comes to an end after the realization of cash from customer.

→ For the company having continuous business process, regular supply of W.C
requirement.

→Fixed W.C is determined at the starting of the project planning.

2. Variable / Temporary W.C:-

It fluctuates with the demand.

→ Any amount over and above the permanent level of W.C is temporary, fluctuating or
variable W.C.
→A amount of W.C needed to meet fluctuations in demand consequent upon changes in
production and sales as a result of seasonal changes.

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TYPES OF WORKING CAPITAL APPROACHES
These three working capital approaches are best explained with the help of the following
graph and equations. First, we need to understand the graph properly. The red horizontal
lines represent the lines of 3 strategies. The simple line is Conservative strategy, below
that line with spaces, is hedging strategy and below that dotted line is an aggressive
strategy. These lines indicate the extent of utilization of long-term sources. Higher the
line, bigger is the investment through the long-term source of finance.

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For equations, we will use the following abbreviations:

FA = Fixed Assets

PWC = Permanent Working Capital

TWC = Temporary Working Capital

A. HEDGING (MATURITY MATCHING) STRATEGY

This is a meticulous strategy of financing the working capital with moderate risk and
profitability. In this strategy, each of the assets would be financed by a debt instrument of
almost the same maturity. It means if the asset is maturing after 30 days, the payment of
the debt which has financed it will also have its due date of payment after almost 30 days.
Hedging strategy works on the cardinal principle of financing i.e. utilizing long-term
sources for financing long-term assets i.e. fixed assets and a part of permanent working
capital and temporary working capital are financed by short-term sources of finance.
Here, funds are applied as below and can be clearly seen in the above diagram.

Long Term Funds will Finance >> FA + PWC

Short Term Funds will Finance >> TWC

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 B. CONSERVATIVE STRATEGY

As the name suggests, it is a conservative strategy of financing the working capital with
low risk and low profitability. In this strategy, apart from the fixed assets and
permanent current assets, a part of temporary working capital is also financed by long-
term financing sources. It has the lowest liquidity risk at the cost of higher interest outlay.
Here, funds are applied as below and can be clearly seen in the above diagram.

Long Term Funds will Finance >> FA + PWC + Part of TWC

Short Term Funds will Finance >> Remaining Part of TWC

C. AGGRESSIVE STRATEGY

This strategy is the most aggressive strategy out of all the three. The complete focus of
the strategy is in profitability. It is a high-risk high profitability strategy. In this strategy,
the dearer funds i.e. long term funds are utilized only to finance fixed assets and a part of
the permanent working capital. Complete temporary working capital and a part of
permanent working capital also are financed by the short-term funds.

It saves the interest cost at the cost of high risk. Here, funds are applied as below and can
be clearly seen in the above diagram.

Long Term Funds will Finance >> FA + Part of PWC

Short Term Funds will Finance >> Remaining Part of PWC + TWC

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NEEDS FOR WORKING CAPITAL

An effective operation of a business is based on the proper management of working

capital. Initially, the business unit should forecast the adequate working capital. In this
context, working capital forecasting is getting more importance than the management of
working capital. Generally, each business unit requires adequate amount of capital. The
reason is that capital is required for the establishment of a business units and its proper
functioning.
Fixed assets such as Land and Building, fixtures, furniture, machinery, plant and other
fixed assets are required for the establishment of a business. A portion of capital is used
to acquire the fixed assets. Such capital is called fixed capital. After the establishment,
the business unit should function properly.
▪ Functioning means carrying the activities like trading, service or manufacturing.
▪ Trading means buying and selling of goods without making any alteration in the
goods.
▪ Service means rendering of intangible things like electricity, parcel service, courier
service, telephone, lorry service and the like. Manufacturing means conversion of
raw materials into finished goods which is meant for sale.
Therefore, the business unit requires capital for its proper functioning i.e. meeting the
expenses of day to day activities. Such capital is called working capital. The other names
of working capital are Circulating Capital and Revolving Capital.

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IMPORTANCE OF WORKING CAPITAL
Working capital is the life blood and nerve center of business. Working capital is very
essential to maintain smooth running of a business. No business can run successfully
without an adequate amount of working capital. The main advantages or importance of
working capital are as follows:

1. STRENGTHEN THE SOLVENCY

Working capital helps to operate the business smoothly without any financial problem
for making the payment of short-term liabilities. Purchase of raw materials and payment
of salary, wages and overhead can be made without any delay. Adequate working capital
helps in maintaining solvency of the business by providing uninterrupted flow of
production.

2. ENHANCE GOODWILL
Sufficient working capital enables a business concern to make prompt payments and
hence helps in creating and maintaining goodwill. Goodwill is enhanced because all
current liabilities and operating expenses are paid on time.
3. EASY OBTAINING LOAN
A firm having adequate working capital, high solvency and good credit rating can
arrange loans from banks and financial institutions in easy and favorable terms.
4. REGULAR SUPPLY OF RAW MATERIAL
Quick payment of credit purchase of raw materials ensures the regular supply of raw
materials fro suppliers. Suppliers are satisfied by the payment on time. It ensures regular
supply of raw materials and continuous production.

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5. SMOOTH BUSINESS OPERATION
Working capital is really a life blood of any business organization which maintains the
firm in well condition. Any day to day financial requirement can be met without any
shortage of fund. All expenses and current liabilities are paid on time.

6. ABILITY TO FACE CRISIS

Adequate working capital enables a firm to face business crisis in emergencies such as
depression.

COMPONENTS OF WORKING CAPITAL

1. CASH MANAGEMENT:
Cash is one of the important components of current assets. It is needed for performing all
the activities of a firm, i.e. from acquisition of raw materials to marketing of finished
goods. Therefore it is essential for a firm to maintain an adequate cash balance. One of the
important functions of a finance manager is to match the inflows and outflows of cash so
as to maintain adequate cash.

2. RECEIVABLES MANAGEMENT:
The term receivable is defined as any claim for money owed to the firm from customers
arising from sale of goods or services in normal course of business. The term account
receivable represents sundry debtors of a firm. It is one of the significant components of
working capital next to cash and inventories.

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The total volume of accounts receivable depends on its credit sale and debt collection
policy—these two significantly influence the requirement of working capital. Liberal
credit policy increases the volume of sales but at the same time it also increases the
investment in receivables. Therefore, examination of costs and benefits associated with
credit policy is one of the important tasks of a finance manager.

3. INVENTORY MANAGEMENT:
Inventory constitutes a major part of total working capital. Efficient management of
inventory results in maximization of earnings of the shareholders. Efficient inventory
management consists of managing two conflicting objectives: Minimization of investment
in inventory on the one hand; and maintenance of the smooth flow of raw materials for
production and sales on the other.

Therefore the objective of a finance manager is to calculate the level of inventory where
these conflicting interests are reconciled. Like cash, a firm holds inventory for transaction,
precautionary and speculative motives.

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 CHAPTER 4

DATA ANALYSIS & INTERPRETATION

OBJECTIVE OF THE PROJECT

➢ TO UNDERSTAND WORKING CAPITAL POLICIES.

➢ TO STUDY THE GENERAL PROBLEM FACED IN SUPPLY CHAIN.

➢ TO IDENTIFY THE FINANCIAL STRENGTHS & WEAKNESS OF THE

COMPANY.

➢ THROUGH THE NET PROFIT RATIO & OTHER PROFITABILITY RATIO,

UNDERSTAND THE PROFITABILITY OF THE COMPANY.

➢ EVALUATING COMPANY S PERFORMANCE RELATING TO FINANCIAL

STATEMENT ANALYSIS.

➢ TO KNOW THE LIQUIDITY POSITION OF THE COMPANY WITH THE

HELP OF CURRENT RATIO.

➢ TO FIND OUT THE UTILITY OF FINANCIAL RATIO IN CREDIT ANALYSIS

& DETERMINING THE FINANCIAL CAPACITY OF THE FIRM.

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WORKING CAPITAL MANAGEMENT IN PARICHHA
THERMAL POWER PROJECT (Sample)

1) NET WORTH

The net worth of the company at the end of fiscal 2021 was approx. Rs 4439.32cr. an
increase of approx.. Rs. 318.23cr. over the previous year mainly due to retained earnings.

2) FIXED ASSETS

During the year we lost approx. Rs. 58 cr. to our gross block mainly on account of
capitalization of capital works in progress pertaining to projects which were
commercialized during the year. With capital expenditure being incurred on various on-
going projects the capital work in progress has shown a substantial increase.

2021 2020 %Change

Gross Block Rs5,628,327,307 Rs6,121,164,568 8%

Net Block Rs1,115,684,322 Rs1,443,827,443 23%

Capital In Progress Rs3,358,222 Rs73,996,326 95%

Construction Store And Rs84,055,349 Rs68,537,706 24%

Advance

Total Fixed Assets Rs4,600,056,556 Rs4,819,871,157 4%

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 3) CURRENT ASSETS

The current assets and current labilities as March 31, 2021 and March 31, 2020 and the
change there in were as follows:

2021 2020 Change

Current assets Amount Amount Amount

Inventories Rs1,914,681,099 Rs1,997,617,957 Rs82,936,858

Sundry Rs623,135,641 Rs686,096,259 Rs62,960,618
debtors
Cash and bank Rs252,385,415 Rs113,130,432 Rs139,254,982
balances
Other current Rs3,218,459 Rs3,218,459 Rs0
assets
Loan and Rs28,056,022 Rs33,218,459 Rs5,162,437
advances
Total current Rs4,600,056,556 Rs4,819,871,157 Rs219,814,601
assets

4) CURRENT LIABILITIES
2021 2020 CHANGE
Current Amount Amount Amount
Assets
Liabilities Rs2,880,109,497 Rs2,103,514,936 Rs776,594,561
Provisions Rs296,332,173 Rs300,656,415 Rs4,324,242
Total Rs3,176,441,670 Rs2,404,171,351 Rs772,270,319
current
liabilities

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SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The study of
working capital is based on tools like:-

➢ Trend Analysis

➢ Ratio Analysis

➢ Working capital leverage

➢ Operating cycle etc

Further the study is based on last 5 years Annual Reports of Parichha Thermal Power.
And even factors like Competitors’ analysis, industry analysis were not considered while
preparing this project.

LIMITATION OF THE STUDY

Working capital and Analysis of Financial Statements is powerful tool of determining
company’s strength and weakness. But the analysis is based on the information available
in the financial statements, which are as follows:
It is only a study of interim report.
Working capital study is only based upon monetary information and non-monetary
factors are ignored.
It does not consider change in price level.
As working capital is prepared on the basis of going concern, it does not give extract
position. Thus accounting concept and conventions causes a serious limitation to
financial analysis.
Analysis is only a mean and not an end in itself. Different people may interpret the
same analysis in different ways.

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OTHER LIMITATION:

1. LIMITED DATA
This project has completed with annual reports; it just constitutes one part of data
collection i.e. secondary. There were limitations for primary data collection because of
confidentiality.

2. LIMITED PERIOD:-
This project is based on five year annual reports. Conclusions and recommendations are
based on such limited data. The trend of last five year may or may not reflect the real
working capital position of the company

3. LIMITED AREA:-
Also it was difficult to collect the data regarding the competitors and their financial
information. Industry figures were also difficult to get.

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WORKING CAPITAL OVERALL TURNOVER RATIO

1. CURRENT RATIO
CURRENT RATIO= CURRENT ASSETS
CURRENT LIABILITIES

YEAR 2020-21 2019-20

CURRENT ASSETS Rs4,600,056,556 Rs4,819,871,157
CURRENT LIABILITIES Rs3,176,441,670 Rs2,404,171,351
RATIO 1.4 2.0

2. QUICK RATIO
QUICK RATIO= CURRENT ASSETS – INVENTORY
CURRENT LIABILITIES

YEAR 2020-21 2019-20

INVENTORY Rs1,914681,099 Rs1,997,617,957
CURRENT LIABILITIES Rs3,176,441,670 Rs2,404,171,351
RATIO 0.84 1.17

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 INVENTORY MANAGEMENT IN P.T.P.P.

1. INVENTORY TO TOTAL CURRENT ASSETS

INVENTORY TO TOTAL CURRENT ASSETS= INVENTORY

CURRENT ASSESTS

YEAR 2020-21 2019-20

INVENTORY Rs1,914681,099 Rs1,997,617,957
CURRENT ASSESTS Rs4,600,056,556 Rs4,819,871,157
RATIO 0.4160 0.4767

2. FUEL TO TOTAL INVENTORY

FUEL TO TOTAL INVENTORY= INVENTORY
FUEL
YEAR 2020-21 2019-20
INVENTORY Rs1,914681,099 Rs1,997,617,957
FUEL Rs945,963,000 Rs812,195,197
RATIO 2.02 2.45

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 SWOT ANALYSIS OF PTPP
STRENGTH OF PTPP:
• The company has kept with itself sufficient liquid funds to meet any kind of cash
requirement
• Efficient working capacity of plants.
• Efficient and timely completion of projects.
• A minimum risk factor.
• Best-integrated project management systems.
• Company with an excellent record and high profits.
• An early starter-more than 30 years experience in power sector.
• Highly motivated and dedicated workers and officers- no industrial relations
problem.
• Excellent growth prospects with significant additions, modifications and
Replacement Efficient and timely completion of projects. A minimum risk factor.
Best-integrated project management systems.
•Company with an excellent record and high profits. An early starter-more than 30
years experience in power sector.
•Highly motivated and dedicated workers and officers- no industrial relations
problem.
•Excellent growth prospects with significant additions, modifications and
replacements.
•Employee-friendly personnel policies.
•Low project cost of PTPP’s plant
.

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WEAKNESSES OF PTPP:

•Depleting raw materials.

• Plant has become old and needs investment for Renovation & Modernization.

OPPURTUNITIES:

•Demand and supply gap.

•Upcoming hydro and nuclear sector.
•Huge opportunity in consultancy services.

THREATS:

• Rising prices of raw materials

• Huge competition from SEB’s, Reliance Energy, Tata power and other Private

Development.

• Coming up of other sources of power Rising prices of raw materials

• Huge Capital requirement for expansion, diversification, horizontal & vertical

integration and R.M.

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 CONCLUSION
Summarizing the overall project work done during these 45 Days, it can be said that the
project was a good learning experience. Through it, I got an opportunity to communicate
with entire staff of Finance department . The entire staff of finance department was very
cooperative and they helped me in all the phases of my project. I also got the opportunity
to learn about inventory management at the same time problems faced by the PTPP.

These 45 Days has given me an opportunity to conceptualize and implement a new

initiative. I learned how to interpret working capital and ratio analysis with the help of
guidance given by Mr. SANDEEP KUMAR. There were lot of difficulties in the
beginning of the project but slowly it got the grip on the road towards future.

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REFERENCES

1. Stephen Bush “Seizing new treasures with aggressive cash management”

2. Allensius “ management working capital”
3. Gamble, Richard H. “ working capital managers: muscling onto a large role”
4. Financial management
5. Annual reports of P.T.P.P
6. Website- https:/www.upruvnl.org
7. Audited report of Parichha Thermal Power Project.

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