A Project Report on

FINANCIAL STATEMENT ANALYSIS

Summer Project Report Submitted For the Partial Fulfillment of

Two Years Full Time Post Graduate Diploma of Management

(2008-2010)

Project supervisor Project by

Prof. Aman Srivastava ABHIMANYUKATOCH

Faculty, JIM Noida PGFB0801

Jaipuria Institute of Management, Noida

1

ACKNOWLEDGEMENTS

The successful completion and compilation of the project depends largely on the support, guidance and mentoring of many individuals. Thus, I take this opportunity to express my gratitude towards all those individuals who have been actively involved in the journey of the said project.

I would like to pay my token of appreciation to Mr. SATISH KUMAR KANWAR GM (Finance) for his sincere help and kind assistance. Further, I like to extend my acknowledgment to the following persons for their persistent help, generous support and valuable co-operation in preparation of this project and without their assistance this would not have been possible.

Mr. Brij Mohan (Dy.Manager)

Again, I greatly appreciate the diligent support provided by all my colleagues, both academic and professional and all the above mentioned persons for their wholehearted support, co-operation and trust.

Also I would like to thank my college mentor Prof. Aman Srivastav for

his valuable suggestions and support.

I express my deep sense of gratitude reverence for my parents and my

friends.

ABHIMANYU KATOCH

2

COMPANY CERTIFICATE

This is to certify that Mr. Abhimanyu katoch S/o Mr. Ranjeet katoch of Jaipuria Institute of Management has undergone Summer Training with us w.e.f. 20th April 2009 to 03rd June on the Project of “Financial Statement Analysis”.

During the tenure of training, we found him to be sincere, diligent and committed to the assignment.

We wish him all success for his future endeavour.

3

COLLEGE CERTIFICATE

This is to certify that the Summer Project Study Report, Titled “FINANCIAL

STATEMENT ANALYSIS” submitted by Mr. Abhimanyu Katoch as Partial

Fulfillment of requirement of two years PGDM (full time) course is a

bonafide work carried by the student at our Institute.

This Summer Project Study is his original work and has not been submitted

to any other University/Institute.

Prof. Aman Srivastava Dr.Vikas Nath

Project Supervisor Program Director-PGDM

Date:

4

Introduction

With the ever increasing size and complex items of modern business it has become

necessary for every business man to base decisions of facts expressed in quantities

form. Many new of ways of using qualitative data in making business decisions have

been developed in recent year from elementary statistical technique. Financial

statement that expresses the relationship between selected financial statement data to

compute ratio and describe their purpose and use in analyzing a firm’s liquidity,

profitability and solvency. Through it we will understand the concept of earning power

and indicate how the materials items not typically of regular operations are presented. It

provides us potential information for decision making over a company in the current

year with the same item or relationship in one or more prior years.

5

Executive Summary

This report is an assigned job as a partial fulfillment of course requirement by honorable

Course teacher Prof. Aman Srivastava. It is the optimum aggregated outcome about

“Financial Statements Analysis on MALANA POWER COMPANY Limited”. The view of

this report is to find out the financial position of MALANA POWER COMPANY Limited.

Accounting procedure is highly important for knowing the condition of a particular

company’s asset, liabilities, net incomes, and retained earnings etc. According to our

survey we found that MALANA POWER COMPANY Limited Limited’s financial position

is comparably standard

6

S.NO. PARTICULARS PAGE NO.

1. ACKNOWLEDGEMENT 2

2. COMPANY CERTIFICATE 3

3. COLLEGE CERTIFICATE 4

4. EXECUTIVE SUMMARY 5

TABLE OF CONTENTS

7

S.NO. PARTICULARS PAGE NO.

CHAPTER 1 INTRODUCTION 10

1.1 GROUP PROFILE 10

1.2 HISTORY 10

1.3 DIVERISIED SECTOR 12

1.4 BUSINESS SEGMENTS 13

1.5 GROUP COMPANIES THEIR PLANTS AND

PRODUCTS14

CHAPTER 2 POWER SECTOR 18

2.1 LNJ GROUP FORAYINTO POWER INDIA 18

2.2 INDIA - LOW PENETRATION AND UNDERSERVED MARKET

20

CHAPTER 3 MILESTONE 21-23

CHAPTER 4 COMPANY ANALYSIS 24

4.1 INTRODUCTION OF COMPANY 24

4.2 PROSPECTUS OF HYDRO GENERATION 27

8

4.3 FINANCIAL HIGHLIGHT 29

CHAPTER 5 ANALYSIS OF FINANACIAL STATEMENT

30

5.1 PUPOSE OF THE REPORT 30

5.2 LIMITATION AND SCOPE OF REPORT 30

5.3 ANALYSIS OF FINANCIAL STATEMENT 31

5.4 STATEMENT CHANGE IN EQUITY 38

CHAPTER 6 CASH FLOW STATEMENT 39

6.1 CASH FLOW STATEMENT 39

6.2 RATIO ANALYSIS OF FINANCIAL STATEMENT 41

6.3 FINDINGS 49

6.4 CONCLUSION 50

BIBLIOGRAPHY 51

9

CHAPTER-1

INTRODUCTION

1.1 Group Profile

“LNJ BHILWARA GROUP” – AT A GLANCE”

The LNJ Bhilwara Group is a diversified conglomerate with the global presence having

interests in Textiles, Graphite Electrodes, Sponge Iron, Power Generation, Power

Consultancy Services, IT Enabled Services and Financial Services. Headquarter in

Noida.

The Group employs 20,000 people and 17 production units located strategically across

the country.

Over the four decades long existence, the Group has come to be identified with quality

and technology. Seven of the Group’s companies have been awarded IS/ISO 9001:

2000 certification for their exemplary quality standards.

The Group boasts of some well-known brands, which includes Mayur Suitings, La Italia

Readymade, Buddy Davis Leisure wears and Geoffrey Hammonds Superfine Suiting.

The Group has successfully integrated its operations into today’s global economy, with

export earnings comprising over 44% of total revenue

The Group today is all geared up to rise up the challenges of the millennium

1.2 History

10

The LNJ Bhilwara Group has its origin in the year 1941, when its founder Chairman;

and has been working as Chairman (Emeritus).

Mr. LNJ after graduation with gold medal in 1945-shouldered major responsibilities of

another family-owned company called Indo Eastern Trading Company engaged in the

export of jute goods that turned out to be one of the 10th largest exporters of jute goods

from India during period 1950-51.

In 1953-54, Mr. LNJ started export of scrap and established a tin container factory in

Rajasthan. After a good dint in this discipline in the year 1959, Mr. LNJ got license for

putting up a medium-size textiles mill at Bhilwara, Rajasthan at a cost of Rs. 60 lakh.

This venture, Rajasthan Spinning & Weaving Mills Ltd (RSWM), the first textile mill of

LNJ Bhilwara Group, proved to be a big success. In the year 1968-69, RSWM

manufactured India’s first polyester viscose blended yarn and subsequently the Group

diversified into various high-tech areas in collaboration with world-renowned

manufactures. This gave birth to Bhilwara Synthetic Ltd (BSL) at Mandpam, Bhilwara,

and Rajasthan in the year 1970 for manufacture of synthetic fabrics which later

diversified into worsted yarns and fabrics.

By 1973-74, the Group had established its identity among top industrial houses in the

country. During this period, a new spinning and weaving mill was set up at Gulabpura in

Bhilwara district of Rajasthan. Today, Bhilwara district is the largest suiting producer in

India. Bhilwara Processor Ltd (BPL) at Mandpam, Bhilwara was set up in 1975. It is the

first process house of Rajasthan with a processing capacity of 2.5 million of fabrics per

month.

In 1973-74, the Group diversified into graphite and set up a graphite plant, Hindustan

Electro Graphite Ltd (now HEG Ltd) at Mandideep, Madhya Pradesh in collaboration

with Pechiney of France. Today HEG operates the largest graphite plant in South Asia.

Bhilwara Spinners Ltd (Bhilspin) at Bhilwara was initially a part of RSWM. In fact it was

the first unit to be set up in 1960. It was incorporated as a company in 1983 for the

manufacture of cotton, blended yarn and polyester sewing threads.In 1985, the Group

11

set up its first knitwear unit at Jammu in technical collaboration with Devanlay S.A. of

France for the manufacture of T-shirts, Polo shirts and men’s underwear.

The expansion of the Group continued and in 1989, LNJ Bhilwara Group set up 100%

Export Oriented Unit at Maral Sarovar, near Indore, Madhya Pradesh which is known as

Maral Overseas Ltd for manufacture of cotton knitted fabrics and cotton knitwear. Apart

from textile, the Group has ventured into high-tech areas like oil drilling, sponge, power

generation and telecommunication.

1.3 LNJ Bhilwara-Diversified Presence across Sector

12

1.4 Business Segments

i. Textiles : Textiles is the core business area of the Group contributing 80% of its

turnover and contributes 80% in terms of Group export turnover as well.

13

ii. Graphite : Graphite Electrodes which are mainly used by steel makers in electric

arc furnaces contribute 13% of the Group turnover and 20% of the export

turnover.

iii. Sponge Iron : Contributes roughly 3% of the turnover and is consumed only

domestically.

iv. Telecom : The Group has entered the field of Mobile Radio Turnking services

with license having been obtained for Bangalore, Hyderabad, Chennai,

Ernakulam, Baroda, Mumbai, Calcutta and Delhi. It also has a joint venture with

Motorola.

v. Power : The Group has three Hydel Power Generation projects under

implementation, two in Himachal Pradesh and one in Madhya Pradesh. Also one

gas-based power project under implementation in Madhya Pradesh.

vi. Power Consultancy Services : Indo Canadian Consultancy Services Ltd (ICCS)

is an independent consultancy firm floated by LNJ Bhilwara Group and RSW

International, a Montreal-based Canadian Consultancy firm which undertakes

engineering, consultancy for hydro and other power projects

1.6Group Companies Their Plants and Products

The various units of the different companies of the Group are:

Plant location Product Range

14

Rajasthan Spinning & Weaving Mills Ltd.

1. Gulabpura Synthetic, Regenerated

Cellulosic, Blended Grey,

Dyed Yarn & Fabrics

2. Banswara Synthetic Regenerated

Cellulosic &Cotton

Blended Grey

Yarn

3. Mandpam

Cotton Mélange Yarns

4. Rishabhdev Synthetic, Blended &

Grey Yarns

5. Bangalore Apparels

6. Mordi (Banswara) Process House

HEG Ltd.

7. Mandideep Graphite Electrodes

8. Durg Steel

9. Durg Waste Heat Recovery

Power.

10. Tawa Hydro Electric Power

Maral Overseas Ltd.

15

11. Maral Sarovar Graphite Electrodes

12. Jammu Cotton Knitted Fabrics,

Knitwear’s & Sweaters

13. Noida Knitwear’s

Malana Power Company Ltd.

14. Malana (Kullu) Hydro Electric Power

AD Hydro Power Ltd.

15. Allain-Duhangan, Manali Hydro Electric Power

Indo-Canadian Consultancy Services Ltd.

16. Noida Power Engineering

Services

17. Mandpam (Bhilwara) Yarns, Worsted &

Synthetic Fabrics,

Readymade and

Accessories

Bhilwara Melba De Witte Pvt. Ltd.

16

18. Mordi- Banswara Specialized Automotive

Fabrics & Furnishing

Fabrics

Bhilwara Spinners Ltd.

19. Bhilwara Synthetic Blended

Grey & Dyed Yarns

Bhilwara Processors Ltd.

20. Mandpam (Bhilwara) Processing of Synthetic

& Worsted Fabrics,

Tops Fiber

Dyeing

Bhilwara Scribe Pvt. Ltd.

21. Bhopal IT Enabled Services

Corporate Office

22. Noida (NCR –Delhi) Corporate and

Marketing Office

17

Regional/Marketing Offices:

23. Mumbai 24. Kolkata

25. Bangalore 26.Delhi

27. Ludhiana

CHAPTER 2

18

POWER SECTOR

2.1 LNJ Bhilwara Group’s foray into the Power Business

Group has been one of the early players in the Power Sector = strong sector knowledge

at the strategic as well as operational level within the Group Successful and timely

completion of 13.5 MW Captive Hydro-electric Project (HEP) in 1997 was the stepping

stone for the Group in the Power Sector. In 1999, Group started construction of 86 MW

Malana, HEP and it was completed in a record time of 30 months. It is being operated

as merchant power plant since its commissioning in July 2001.

Malana HEP showcased Group’s capability and efficiency in execution of Power

Projects in timely and cost effective manner

First merchant power plant in the country

First IPP with inter-state wheeling of Power

One of the few IPPs with a 100% promoter’s equity

19

After Malana HEP, the Group has started developing other power projects. Presently

Allain Duhangan HEP is under construction and is expected to be commissioned by

June 2009.

Indo Canadian Consultancy Services Ltd (ICCS), an engineering consultancy firm, has

contributed to the success of group’s initiative in the Power sector by virtue of its

expertise and extensive experience in the field of hydro plants engineering

Bhilwara Energy has also bagged/ acquired license's to develop hydro power plants in

the state of Punjab, Arunachal Pradesh and in Nepal. All these projects are at various

stages of pre-implementation. The Company also intends to participate in various bids

being invited by the state Govt. agencies in Hydro Power Sector. Bhilwara Energy

intends to achieve the installed capacity over 2700 MW by 2014.Bhilwara Energy Ltd. is

considering financing options for these projects, including the issuance of Equity and

the incurrence of Debt

20

2.2 India - Low penetration and underserved market

Per Capita Consumption of Electricity

Particulars India China

Installed capacity in 2008 (GW) 132 622

Per capita consumption (per kWh) 618 1,684

Capacity growth rate over the past 6 years 4.4% 11.8%

Capacity addition in past 6 years (GW) 30 303

Low penetration providing significant opportunities for future growth Over 400 million

people without appropriate access to electricity large investment required to achieve

Govt. target of per capita consumption of 1,000 KWh by 2012.

21

14

,24

0

8,2

31

8,4

59

7,4

42

6,7

56

6,4

25

2,3

40

1,6

84

61

8

18

,40

8

022

000

Ca

na

da

Un

ited

Sta

tes

Fra

nce

Jap

an

Ge

rma

ny

Un

ited

Kin

gd

om

Ru

ssia

nF

ed

era

tion

Bra

zil

Ch

ina

Ind

ia

(Kw

h/ye

ar)

CHAPTER-3

MILESTONES

1959 Mr. LNJ put up a medium sized textile mill at Bhilwara in Rajasthan at a cost of Rs. 6million. This venture, Rajasthan Spinning & Weaving Mills Ltd.

(RSWM), the first textile mill of the LNJ Bhilwara Group was a big success and continues to be the flagship company of the Group.

1970 Bhilwara Synthetics Ltd. (now BSL Ltd.) was set up at Bhilwara, Rajasthan.

1971 Mr. LNJ identified graphite electrodes for his new venture. RSWM got registration, which was later, transferred in the name of Hindustan Electro Graphite Ltd (now HEG Ltd) incorporated in 1972. Today, HEG Ltd. is India’s No. Graphite electrodes exporter and operates the largest graphite plant in South East Asia & Middle East.

1973-74 The Group set up a new spinning and weaving mill at Gulabpura, (Distt. Bhilwara), in Rajasthan. Today, Bhilwara is the largest synthetic suiting-producing district in India.

1975 The Bhilwara Group incorporated ‘Bhilwara Processors Ltd.’ (BPL) at Mandpam, Bhilwara to put up Rajasthan first process house. Today, Bhilwara Processor Ltd. has a capacity of processing 2.5 million meters of fabric a month.

1980 Bhilwara Spinners Ltd. was established at Bhilwara, Rajasthan to manufacture Synthetic Blended Grey and Dyed yarn.

1985 The Group set up their first knitwear unit at Jammu in J&K. This unit is equipped to produce over 2 lakes pieces of knitted garments per month.

1989 The Group set up a 100% export oriented unit ‘Maral Overseas Limited’ at

22

Maral Sarovar (near Indore) in Madhya Pradesh, for manufacture of cotton yarns, cotton knitted fabrics and cotton knitwear’s.

1992 HEG Ltd. started its Sponge Iron unit at Durg in Chhattisgarh with a capacity to produce 60,000 MT of Sponge Iron.

1993 RSWM Ltd. signed two MOU’s with Himachal Pradesh Government to set up two Hydro Electric Power Generation units in Kullu District with nearly 300 MW of total capacities.

1994 A mélange yarn-manufacturing unit was started by RSWM Ltd. at Mandpam, Bhilwara.

1995 ICCS started its engineering services and signed a JV with RSW International, Canada to offer power engineering consultancy services.

1997 HEG Ltd. commissioned its 13.5 MW captive Hydro Electric Power Plant at Tawa in Madhya Pradesh in record time of 23 months at a cost of less than Rs. 70 crores; this plant being first in the private sector in the state of Madhya Pradesh and second of this size in the country in power sector.

1998 The Group ventured into International quality specialized automotive fabrics through a Joint Venture company, “Bhilwara Melba De Witte Lietaer of Belgium.

2000 Maral Overseas Ltd. set up Maral Fashions, a separate division for the Indian Market. In the same year , Maral Overseas Limited set up its 3rd production units at Noida (Uttar Pradesh) for manufacture and marketing of cotton knitwear’s.

2001 86 MW Malana Hydro Electric Project was formally commissioned by Mr. L.K.Advani, the former Hon’ble Dy.Prime Minister of India at the Project site in Kullu District Himachal Pradesh. The Implementation Agreement for the execution of Allain Duhangan Hydro-Electric Project was signed with the Government of Himachal Pradesh on February 22, 2001.

23

2003 The leading institution of 192 MW Hydro Power Project, International Finance Corporation, Washington conducted its due diligence and proposed $45 million for debt financing, also approved the project and agreed to debt financing of Rs.180 crores, which constitutes about 30% of the total debt competent. IFC also agreed to an equity investment of Rs.31.85 crores in the equity of the company.

2004 HEG Limited signed a contractual agreement with National Iranian Steel Company (NISCO), the largest Steel Manufacturer of Iran, to provide technical assistance and know-how for establishing a Graphite Electrodes manufacturing plant in Iran.

Formation of a Joint Venture with Statkraft Norfund Power Invest AS (SN Power), Norway. The JV will be effective through MPCL and will be flagship entity for Hydro Power Generation. RSWM completed its expansion and modernization programmes with an investment of Rs.180 crores.

2005 Expansion plan of the Graphite Electrodes unit at HEG, Mandideep has been undertaken to double the capacity from 30,000 MT per annum to 60,000 MT per annum.

On the other hand, keeping in view after WTO, the textile units of the Group has also initiated their expansion programmes in full swing. To enhance its operating capacity, RSWM has acquired Jaipur Polyspin Ltd. for manufacturing of Synthetic Blended Yarn. RSWM has also acquired a state-of-the –art process house at Mordi, Banswara, and Rajasthan.

In it’s over 45 year’s long existence, the Group has to be identified with quality and technology. Eight of the Group’s companies have been awarded IS/ISO9001:2000 certification for their exemplary quality standards.

CHAPTER-4

24

COMPANY PROFILE

4.1 Introduction of Company

The Malana Hydropower Plant was commissioned in July 2001. The construction works

commenced in January 1999 and it included several Indian contracts for civil works. The

major electromechanical works were supplied by BHEL

Innovative design & creative scheduling, Reduction in scheduled completion time to 2.5

years as against a normal 5 years. Efficient and early commissioning, leading to lower

than normal costs (less than Rs. 3.75 crore per MW, as against a normal cost of Rs. 5

crore per MW). Out of eight projects allocated through the MOU route by the Govt. of

H.P., Malana is the only project to be completed ahead of time The construction of the

86 MW project was started in January, 1999 and it was commissioned in a record

period of 30 months at a total cost of Rs 3,320 crore million.

The successful commissioning in a record time and at a cost of less than Rs. 40 million

per MW, the Malana Hydroelectric Project has dispelled the myths surrounding Hydel

power. 

The Malana Power Company, an LNJ Bhilwara group power project, has commenced

commercial production nearly six months ahead of schedule. In fact, the project was

commissioned in a record time of 30 months. The cost of the project, however, shot up

from the original estimate of Rs 250 crore to Rs 322.5 crore.

The country's first Hydel power generating unit set up by an IPP, Malana Power has a

generating capacity of 86 mw. At a competitive capital cost of Rs 3.75/mw, the unit will

sell power at Rs 2.45/kw, which is one of the lowest generating costs. Supply,

installation and commissioning of the hydro generating equipment along with auxiliaries

were done by BHEL, while Gammon India undertook civil works for the project.

25

The generated electricity will be wheeled to the LNJ Bhilwara Group manufacturing

facilities in Rajasthan. The Himachal Pradesh State Electricity Board (HPSEB) will

evacuate the generated power till Nalagarh from where it would be transmitted to

Rajasthan by the Power Grid and the Rajasthan State Electricity Board.

About 15 per cent of the generated energy will be provided to HPSEB free of cost for

the first 12 years; later, this could be increased to 20 per cent.

 CSR

The company has been undertaking social welfare activities like construction of roads,

Footpaths cremation ground, Red Cross building, foot bridge and construction of private

houses on a regular basis.

The Malana Power Company Ltd. and its employees are committed to give back to the

society, both locally and globally. Accordingly, the company directs its resources.

Environment

The project is being developed in accordance with environmental and social safeguard

policies issued by IFC. Washington. In addition to planting 1000 fruit plants, MPCL has

also planted 10,000 tree saplings and

74,000 medicinal plants in the Catchment Area of the plant.

Construction of roads

The company has adopted strategies to concentrate efforts on development of strong

infrastructure and support systems in Chowki, Doonkara and nearby Malana Villages.

Permanent metallic roads are built connecting Jari to Chowki up to the foothill of

Malana. Another important link is established by making a bridge over the river Parvati,

which provides the much needed connectivity to important places.

Health

26

Healthcare is an area of prime concern in the Malana Power Company Ltd. In the

vicinity of the manufacturing units, the company has set up several hospitals, mobile

dispensaries and so on. All the hospitals have qualified doctors and provide free

medication. The company has helped in the construction of an X- ray building in the

Government Healthcare Centre and maintaining an acupressure dispensary.

The group has setup the number of schools near its manufacturing units to provide

quality education to the children of the employees and the inhabitants of surrounding

areas.

Social welfare activities

The Company is committed to work for the welfare of society and often holds meetings

with the Gram Panchayat and Self Help Groups in the area to understand the needs of

the people. Activities like construction of roads, footpaths, cremation ground, Red Cross

building, Foot Bridge and the construction of private houses are undertaken on a regular

basis.

Sports, cultural & religious activities

The Company has been sponsoring sports and cultural activities in order to offer

entertainment to the people. For the spiritual development of the people, the group has

also donated to several religious festivals and temples. The company has donated a

significant amount for several activities including the Red Cross Mela at Kullu, District

Athletics Meet and Karate Championship; cultural programmes at Jari, Kashada,

Chowki and the annual function of Jari School.

Education

The Group regards education as the backbone of a nation and takes various initiatives

to impart quality education to the young generation. The Group has set up a number of

schools near its manufacturing units to provide quality education to the children of the

27

employees and the inhabitants of surrounding areas. The company maintains a regular

teaching staff on its role

Joint Venture

Malana Power Company Ltd has collaboration with SN Power. Both the joint venture

partners work in close cooperation and exchange technical and financial expertise to

benefit the Malana Power Company. They interact closely to make improvements in the

operations and efficiency of the plant.

As a result of joint efforts, the company introduced improved maintenance systems. The

association led to the introduction of the innovative Norwegian sediment removal

technology at Malana. Introduction of the state-of-the-art turbine runner coatings

significantly reduced erosion damage to the turbines. The joint venture fittingly

integrates the domestic operating status and knowledge of the Malana Power Company

Ltd. and technical expertise and international experience of SN Power

4.2 Prospects of Hydropower Generation

Hydroelectric projects - Renewable, non-consumptive and environmentally benign

source of energy. Government of India has identified 162 schemes for preliminary

feasibility reports under the 50, 000 MW hydroelectric initiatives during the 12th plan

period (FY 2012– 17).Till recently, issues like dearth of adequately investigated

projects, long clearance and approval procedures, resettlement and rehabilitation

issues, land acquisition problems, power evacuation problems etc. had contributed to

the slow pace of hydropower development in the country. However, considering the

large hydropower potential in the country and the much required energy security,

government is accelerating hydropower reforms. Some of the recent government

initiatives in this space include

Preparation of a shelf of well- investigated projects and streamlining of statutory

clearances and approvals for the same.

Establishment of independent regulatory commissions’

28

Providing for long-term financing for projects,

Govt. of India is also cooperating with Bhutan and Nepal in hydropower development for

over a decade now. Indian companies are setting up hydropower plants in these

countries as both Bhutan and Nepal have huge potential of hydropower generation.

Evacuation from North Eastern region and Nepal

North East India as well as Nepal has huge potential of hydropower generation.

North East India is already connected to Northern, Western and Eastern Grid.

PGCIL is further strengthening the capacity to ensure that evacuation is not a

constraint once the planned power plants in North East are commissioned.

To encourage setting up of hydroelectric plants in Nepal and attract private investment,

Govt. of Nepal has set up a JV with ILFS to develop four 220 k.w double circuit lines

from Nepal to India.

Share of Hydropower in Electricity Generation

57

39.6

16.1 16.1 12.7 8.8 6.5

82.8

98.8

0

20

40

60

80

100

120

Norw ay Brazil Canada Sw eden China Worldaverage

India Japan USA

During April-Feb 2007, share of hydropower gene ration in India was

higher at about 17%

29

MW %age

Identified capacity as per re-assessment study

148,701

Capacity developed 29,572 19.9%

Capacity under construction 13,286 8.9%

Capacity yet to be developed 105,843 71.2%

4.3 Financial Highlights

(Rs. in crore)

PARTICULAR 2004-2005 2005-2006 2006-2007 2007-2008

Turnover 52.46 72.27 74.72 134.88

PBIDT 38.95 52.59 64.02 120.45

Interest 18.85 15.47 13.23 12.33

PBDT 20.10 37.12 50.79 108.12

Depreciation 10.27 10.52 10.77 20.27

PBT 9.83 26.60 40.02 87.85

Taxation (5.85) 10.96 14.06 9.95

PAT 15.68 15.64 25.96 82.85

Net Worth 130.89 306.85 333.18 527.06

Deferred Tax Liability (Net) 9.26 17.90 32.26 22.37

Gross Fixed Assets 328.09 329.46 330.01 331.08

EPS (Rs.) 2.25 1.37 1.98 6.28

Book Value Per Share (Rs.) 19.52 23.44 25.45 40.00

30

CHAPTER 5

ANALYSIS OF FINANACIAL STATEMENT

5.1 Purpose of the Report

As a business expectative of future, we should have to gather experience beside our

survey. We should not concern our lesion only in classroom but to implement it in

practical life that will help us in our future life .A clear objective help in preparation of

well decorated report in which other take the right type of decision .So, we identifying

objectives is very much important. Our purpose of preparing the report is:

To identifying how the company maintaining the accounting procedure

To know about the company’s financial statements

To find out the company’s decision making process through ratio analysis

5.2 Limitation & Scope of the Report

As a student of Jaipuria Institute of Management, Noida 4th Trimester, this is our first

initiative for making a report on “Financial Statements Analysis on Malana Power

Company Limited” by meeting a survey. Beside this we have faced the following

hindrances in preparing this report:

Lack of knowledge and experience

Short of time

Lack of sufficient privileges

Lack of communication facilities

31

The survey report focuses on Financial Statements Analysis on Malana Power

Company Limited. The survey may not be more comparable or more valid. Moreover,

the report is emphasized on the primary data such as interview of the manager of

Malana Power Company Limited. Here we consider only the information that we collect

from our survey.

5.3 Financial Statement Analysis

Financial Statement analysis is the art of transforming the data from financial

statements into information that is useful for informed decision making. The analysis is

used to determine the firm’s financial position so as to identify its current strength and

weakness. To take the rational decisions in keeping with the objective of the firm, the

financial statement is too much significant for the managements. Financial statement

analysis is not only important for the firm’s managements, but also for the firm’s

investors and creditors internally, financial managers use the information provides by

financial analysis to help make financing and investing decisions to maximize the firm’s

value. Externally, stockholders and creditors use financial statement analysis to

evaluate the attractiveness of the firm as an investment by examining its ability to meet

its current and expected future financial obligations. Financial analysis involves the use

of various financial statements. These statements do the several things which are as

follows-

Balance Sheet

Balance sheet is that statement which represents the summary of a firm’s financial

position on a given data that shows the total assets, liabilities and owners’ equity or

stockholders’ equity of a financial year.

Income Statement

Income Statement is that statement which represents the summary of a firm’s revenues

and expenses over a specified period for the purpose of determining the net income or

32

loss for the period. For determining the net income or loss Malana Power Company

Limited represents revenues and expenses to their income statement for the period.

Cash flow statement

The statement of cash flows reports the cash receipts, cash payments, and net change

in cash resulting from operating, investing, and financing activities during the year. For

determining the total cash inflow and outflow of a financial year, Malana Power

Company Limited prepares the cash flow statement.

Stockholders’ Equity

This statement represents the company’s total common stock plus additional paid-in

capital and retained earnings. It also shows the changes in equity during the period. To

identify these things Malana Power Company Limited prepares the Stockholders’

Equity.

Balance Sheet

Property& Assets

The Company has the following Property & Assets: Property, plant and equipment,

capital work-in-progress, investment in subsidiaries, other investment, trade and

other receivables, advances, deposits and prepayments, cash and cash equivalents,

and other assets.

Total Assets

31 December 2008, 31 December 2007

Particulars 2008 2007

Total Assets 74,40,575 51,17,517

33

Through this table, we see that the Total Assets 2323058(45.39%) in 2008 is

greater than then the previous year 2007.

Liability and capital

Liabilities: The liabilities of Malana Power Company limited are as follows-

Deferred liability-staff gratuity, deferred tax liability, bank overdraft, accrued expenses,

other payables and provision for taxation, and other liabilities.

Total Liabilities

31 December 2008, 31 December 2007

(Rs.’000)

Particulars 2008 2007

Total Liabilities 2170023 1785685

34

Through this table, we see that the total liability (21.52%) in 2008 is less than then

the previous year (2007).

Shareholders equity

The sources of shareholders equity are as follows:

Share capital, revaluation surplus, tax holiday reserve, proposed stock dividend,

proposed cash dividend, and retained earnings.

Shareholders equity

31 December 2008, 31 December 2007

Particulars 2008 2007

35

Shareholders equity (capital) 5270552 3331832

Through this table we see that total shareholders equity is 1938720(58.19%) in 2008 is

greater than the previous year (2007).

Liabilities & Shareholders equity

31 December 2008, 31 December 2007

(Rs.’000)

Particulars 2008 2007

Liabilities & Shareholders equity 7377468 5088851

Through the above table we see that the total liabilities and shareholders equity is

2288617 (44.97%) in 2008 is greater than the previous year (2007).

36

Income Statement

Interest Income

Malana Power Company Limited is a Hydro Power company. The company produces

electricity and sales the electricity to HPSEB. About 15 per cent of the generated energy

will be provided to HPSEB free of cost for the first 12 years; later, this could be

increased to 20 per cent.

Net income

Particulars 2008 2007

Total revenue 1346456 775790

Total expenses 518633 516164

Net income 827823 259626

31 December 2008, 31 December 2007

Expense for tax purpose

37

The sources of taxes are provision for tax, current tax & deferred tax, Wealth tax Fringe

Benefit tax:

Profit after tax

31 December 2008, 31 December 2007

Particulars 2008 2007

Profit before tax 878491 400188

Tax 50668 140562

Profit after tax 827823 259626

Through this table, we see that the Profit before tax 568197 in 2008 is grater than then

the previous year (2007)

Earning Per Share

31 December 2008, 31 December 2007

Particulars 2008 2007

Earning per share 6.28 1.98

Basic earnings per share are calculated by dividing the net profit or loss for the period

attributable to equity shareholders by the weighted average number of equity shares

outstanding during the year. Partly paid equity shares are treated as a fraction of an

equity share to the extent that they were entitled to participate in dividends relative to a

fully paid equity share during the reporting year. For the purpose of calculating diluted

38

earnings per share, the net profit or loss for the period attributable to equity

shareholders and the weighted average number of shares outstanding during the period

are adjusted for the effects of all dilutive potential equity shares.

5.4 Statement of Changes in Equity

Owner’s equity summarizes the changes in owner’s equity for a specific period of

time. It discloses the sources of the changes in the various permanent shareholders’

equity accounts that occurred during the period. The statement of shareholders’

equity only shows the net effects on retained earnings.

In following table shows the changes of owner’s equity of Orion Infusion

Ltd. for the year ended 31 December 2008 and 31 December 2007

31 December 2008 31 December 2007

Total stockholder equity Total stockholder equity

5270552 3331832

In 2008 the shareholders’ equity is increased by Rs.1938720 (36.78%) than the

previous year.

So we understood that the change in equity is increased Rs. 1.3678 in 2008 instead of Rs.1 in 2007.

39

CHAPTER-6

CASH FLOW STATEMENT

6.1 Cash flow Statement

Financial document detailing the exchange of cash between a business and the outside

world. The flow is categorized as:

flow "in" from Operations

(cash the company made by selling goods and services)

flow "in" from Financing

(cash the company raised by selling stocks and bonds)

flow "out" to Investing

(cash the company spent investing in its future growth)

Each of these flows can actually flow both ways. Investors like to see that the company

can cover its spending with cash from operations, without having to turn to financing.

The cash flow statement also has to reconcile the net effect of these flows with the

difference in its cash holdings at the beginning and end dates of the reporting period

6.1.1 Cash flows from operating activities

Operating activities includes the cash effects of transactions that create revenues

and expenses. They thus enter into the determination of the net income. The

sources of cash inflows from the operating activities are-

Collection from customers and other sources of income. The sources of cash

outflows from the operating activities are - Financial cost, payment of tax, Provision

for gratuity, Provision for leave encashment, Provision for loyalty bonus scheme,

payment of Direct tax, payment to employees and others

40

Net Cash from Operating Activities

For the year ended 31 December 2008 and 31 December 2007

2008 2007

Cash inflow Cash outflow Cash inflow Cash outflow

1223352 87469 658262 101884

Net Cash from operating activities = 1135883

Net Cash from operating activities = 556378

6.1.2 Cash flows from Investing Activities

The company has been done the following investing activities-

Purchase of property, plant and equipment, investment in share, sale procedure of

property, plant and equipment.

Net Cash from Investing Activities

For the year ended 31 December 2008 and 31 December

2007

2008 2007

Cash inflow Cash outflow Cash inflow Cash outflow

11039 2780125 596907 607133

Net Cash from investing activities = (2769086) Net Cash from investing activities = (10676)

41

6.1.3 Cash Flows from Financing Activities

The company has been done the following financing activities-Medium term loan

repaid, and dividend paid.

Net Cash from Financing Activities

For the year ended 31 December 2008 and 31 December 2007.

2008 2007

Cash inflow Cash outflow Cash inflow Cash outflow

1864631 425027 - 384354

Net Cash from financing activities = (1439604) Net Cash from financing activities = (384354)

6.2 Ratio Analysis of Financial Statements

1. Working Capital

Working capital is the excess of current assets over the current liabilities. It is

calculated by deducting current liabilities from current assets.

Working capital = Current assets - Current liabilities

2008 2007

Current assets

Current liabilities

Current assets

Current liabilities

1387000 563107 360812 28666

Working capital =823893 Working capital = 332146

42

2. Net Working Capital Ratio

Net Working capital Ratio shows efficient use of working capital and quick

turnover of current assets.

Net Working capital Ratio = Current assets - Current liabilities Current liabilities

2008 2007

Working capital

Current liabilities

Working capital

Current liabilities

823893 563107 332146 28666

Net Working Capital Ratio =1.46:1

Net Working Capital Ratio =11.59:1

3. Current ratio

The current ratio is a widely used measure for evaluating company’s liquidities &

short-term debt- paying ability:

Current ratio = Current assets Current liabilities

2008 2007

Current assets

Current liabilities

Current assets

Current liabilities

1387000 563107 360812 28666

Current ratio =2.46:1 Current ratio =12.59:1

4. Acid-Test Ratio

43

The acid-test ratio is a measure of a company’s immediate short-term liquidity.

Acid test ratio = (Current assets – Inventories) Current liabilities

2008 2007

Current assets -

Inventories

Current liabilities

Current assets - Inventories

Current liabilities

1387000-19581 563107 360812-19186 28666

Acid test ratio = 2.46:1 Acid test ratio = 12.59:1

5. Return on Assets

Return on Assets indicates the overall measure of profitability is return on assets.

Return on Assets = Net income Average total assets

2008 2007

Net income Average total assets

Net income Average total assets

827823 74,40,575 259626 51,17,517

Inventory turnover = 11.13% Inventory turnover = 15.87%

6. Total Assets Turnover Ratio

44

Total assets turnover ratio measures how effectively the firm uses its plant and

equipment to help generate sales.

Total assets turnover ratio = Sales Total assets

2008 2007

Sales Total assets Sales Total assets

1348840 74,40,575 747218 51,17,517

Total assets turnover = 0.18:1 Total assets turnover = 0.15:1

7. Operating Ratio

Operating ratio that shows the efficiency of a company's management by comparing operating expense to net sales.

Operating Ratio=Operating Expenses Net sales

2008 2007

Operating Expenses

Net Sales Operating Expenses

Net Sales

92841 1322117 95533 732612

Total assets turnover = 0.07:1 Total assets turnover = 0.13:1

8. Inventory Turnover Ratio

This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.

Inventory Turnover Ratio=Total Sales Average Inventory

2008 2007

45

Total Sales Average Inventory

Total Sales Average Inventory

1348840 19581 747218 19186

Inventory Turnover Ratio=68.89 Inventory Turnover Ratio=38.95

9. Fixed Assets Turnover

Fixed asset turnover is the ratio of Sales to the value of fixed assets. It indicates how well the business is using its fixed assets to generate sales.

Fixed Assets Turnover =Total Sales Fixed Asset

2008 2007

Total Sales Fixed Assets Total Sales Fixed Assets

1348840 2515075 747218 2706205

Fixed Assets Turnover =0.54:1 Fixed Assets Turnover =0.28:1

10. Asset to Equity Ratio

The asset to equity indicates a company's leverage, the amount of debt used to finance the firm. A company's asset to equity depends importantly on the industry in which it operates its size, economic conditions, and other factors.

Assets to Equity Ratio =Total Assets Owners Equity

2008 2007

46

Total assets Owners Equity Total assets

Owners Equity

74,40,575 5270552 51,17,517 3331832

Assets to Equity Ratio=1.41:1 Assets to Equity Ratio=1.54:1

2008 2007

Net income Owners Equity Net income Owners Equity

827823 5270552 259626 3331832

Return on Equity Ratio = 0.16:1 Return on Equity Ratio = 0.08:1

11. Return on Equity Ratio

ROE is referred to as Stockholder's return on investment, it tells the rate that shareholders are earning on their shares.

Return on Equity Ratio =Net Income Owners Equity

12. Profit Margin Ratio

Profit margin ratio Indicates what portion of sales contribute to the income of a company

Profit Margin Ratio=Net Income Total sales

2008 2007

Net income Sales Net income Sales

47

827823 1348840 259626 747218

Profit Margin Ratio = 0.61:1 Return on Equity Ratio = 0.35:1

13. Earning Per Share

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability

Earning Per Share=Net Income Average Number of Share

2008 2007

Net income Avg. No. of Share

Net income Avg. No. of Share

827823 131808864 259626 130933140

Earning Per Share = 0.0063:1 Earning Per Share = 0.35:1

14. Net Profit Ratio -

The ratio of an organization’s net profit to its total sales. Comparing the net profit ratio of companies in the same sector shows which are the most efficient.

Net Profit Ratio=Earning After Taxes Net Sales

2008 2007

Earning After Taxes

Net Sales Earning After Taxes

Net Sales

48

827823 1322117 259626 732612

Net Profit Ratio = 0.63:1 Net Profit Ratio = 0.35:1

15. Interest Coverage Ratio

A ratio used to determine how easily a company can pay interest on outstanding debt

Interest Coverage Ratio=Earning Before Interest& Taxes Interest Expense

2008 2007

EBIT Interest Expense

EBIT Interest Expense

1204469 123255 640272 132342

Interest Coverage Ratio = 9.77 Interest Coverage Ratio = 4.84

6.3 Findings

Malana Power Company Ltd. prepared consolidated financial statement in

accordance to the Indian Accounting Standards.

49

Financial statement has been prepared under the historical cost convention as

modified to include revaluations of certain property, plant and equipment.

Non–derivative financial instrument comprised accounts and other

receivables, cash and cash equivalents, loans and borrowings, and other

payables are shown at transactions cost.

The cost of the day-to-day servicing of property, plant and equipment are

recognized in the profit and loss account as incurred

Provisions are made where an obligation exists for future liabilities in respect

of the past event and where the amount of the obligations can be reliably

measure

All fixed assets are recorded at cost less accumulated depreciation

Malana Power Company Ltd. has followed the straight-line method in terms of

charging depreciation on all fixed assets.

In 2008 The Total Sales of Malana Power Company Ltd. is increased by

Rs.589505 (80.47%) against the base year.

In 2008 The Total liability of Malana Power Company Ltd. is increased by

Rs.2323058 (45.39%) against the base year

The change in equity is increased by Rs.1938720 (58.19%) against the base

year

50

6.4 Conclusion

The study of the financial statement is

fascinating one for analyzing a firms

liquidity, profitability and solvency. It

provided us essential information to

company’s relative performances with

in the industry as well as determining

the company’s competitive

competence position. Financial

statement analysis helps us to take

appropriate financial decision in the

business field at the right time.

51

B ibliography

Annual Report,” Malana Power Company Limited, Financial year 2007-

2008.

M.Y Khan and P.K Jain Fifth Edition Financial Management.

www.google.co.in

www.lnjbhilwara.com

www.malanapower.com

www.investopedia.com

www.yahoofinance.com

www.wikepedia.com

52