Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
ON
FOR
BHEL, HARDWAR
Submitted in partial fulfillment for the requirement for award of the degree of
CONTENTS
BHEL Profile
Introduction Of HEEP
Historical Profile
Key Competitors
Major Milestone
Total Quality Focus
Policy And Strategy
Excellence Initiative
Customer Focus
Overview Of Finance Function
Financial Analysis And EVA An Introduction
Financial Analysis of HEEP.
Liquidity Ratios
Turnover Ratios
Leverage Ratios
Profitability Ratios
Other Ratios
Limitation of Study.
SWOT Analysis
Conclusion And Suggestion
ACKNOWLEDGEMENT
I hereby take this opportunity to put on records my sincere thanks to Mr. Mitra under the
light of whose able guidance I could complete this project in an effective and successful
manner.
I am also indebted to Mr. Subodh Gupta (Finance Manager) and Mr.Vivek Goyal
(Sr.Accounts officer Books&budget), for their valuable information and inputs, which
added dimensions and meaning to my project.
I am also thankful to the rest of the staff of the SALES section and BOOK section for
their valuable suggestion and cooperation to achieve the task.
I hereby declare that the study entitled “Ratio Analysis” in the context of H.E.E.P. BHEL
being submitted by me in the partial fulfillment of the requirement for the award of
Master of Business Administration by DMS; Ajmer is a record of my own work.
The matter embodied in this project report has not been submitted to any other
university or institution for the award of degree.
(CHARU LAMBA)
PREFACE
In this project, an attempt has been made to study the performance of BHEL Hardwar.
The salient feature of this report is the comprehensive coverage and latest information
about the topic of the study.
BHEL has, over the years, established its references in over 60 countries of the world.
These references encompass almost the entire range of BHEL products and services,
covering Thermal, Hydro and Gas based turnkey power projects, substation projects,
and rehabilitation projects; besides a wide variety of products like: Transformers,
Compressors, Valves and Oil field equipment, Electrostatic Precipitators, Insulators,
Heat Exchangers, Switchgears, Castings and Forgings etc.
Some of the major successes achieved by BHEL have been in Gas-based power
projects in Oman, Libya, Malaysia, Saudi Arabia, Iraq, Bangladesh, Sri Lanka, China,
Kazakhstan; Thermal Power Projects in Cyprus, Malta, Libya, Egypt, Indonesia,
Thailand, Malaysia; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan,
Nepal, Taiwan and Substation projects & equipment in various countries. Execution of
these overseas projects has also provided BHEL the experience of working with world-
renowned Consulting Organizations and Inspection Agencies.
# BUSSINESS OFFICES
*******************
1. BANGLORE
2. BARODA
3. BHUBANESHWAR
4. MUMBAI
5. CALCUTTA
6. CHANDIGARH
7. GUWAHATI
8. JABALPUR
9. JAIPUR
10. LUCKNOW
11. CHENNAI
12. NEW DELHI
13. PATNA
# MANUFACTURING UNITS
1. BANGALORE
2. BHOPAL
3. GOINDWAL
4. HARIDWAR
5. HYDERABAD
6. JAGDISHPUR
7. JHANSI
8. RUDRAPUR
9. RANIPET
10. TIRUCHIRAPALLY
# SERVICE CENTRES
1. BANGLORE
2. BARODA
3. CALCUTTA
4. CHANDIGARH
5. SECUNDRABAD
6. NEW DELHI
7. NAGPUR
8. PATNA
9. VARANASI
COMPANY PROFILE
BHEL is India's largest engineering company and one of its kind in this part of the
hemisphere. It manufactures a wide range of state of the art power generation
equipment and systems besides equipment for industry, transmission, defence,
telecommunication and oil business.
The first plant of BHEL was set up in Bhopal in 1956, which signaled the dawn of the
heavy electrical industry in India. In the early 60's three more major plants were set up
in Haridwar, Hyderabad and Tiruchirapalli. The company now has 14 manufacturing
divisions, 10 services centers and power sectors regional centers besides project sites
spread all over India and also abroad to provide prompt and effective service to
customers.
MISSION
VALUES
BUSINESS OBJECTIVES
GROWTH: -
PROFITABILITY: -
CUSTOMER FOCUS: -
To build a high degree of customer confidence by providing increased value for his
money through international standards of product quality, performance and superior
services.
PEOPLE- ORIENTATION: -
To enable each employee to achieve his potential, improve his capabilities, perceive his
role and responsibilities and participate and contribute positively to the growth and
success of the company. To invest in human resources continuously and be alive to
their needs.
TECHNOLOGY: -
IMAGE: -
BUSINESS SECTORS: -
BHEL's operations are organized around three business sectors, mainly power, industry
and international operations. This enables BHEL to have a strong customers
orientation, to be sensitive to his needs and respond quickly to the changes in the
market.
POWER SECTORS: -
Power is the core sector of BHEL and comprises of thermal, nuclear gas, diesel and
hydro business. Today BHEL supplied sets, accounts for nearly 66 % of the total
installed capacity in the country as against nil till 1969-70.
BHEL manufactures boilers auxiliaries, TG sets and associate controls, piping and
station C & I up to 500 MW rating with technology and capability to go up to 1000 MW
range. The auxiliary products high value capital equipment like bowl and tube mills,
pumps and heaters, electrostatic precipitators, gravimetric feeders, fans, valves etc.
BHEL has contracted so far around 240 thermal sets of various ratings, which includes
14 power plants set up on turnkey basis. Nearly 85 % of World Bank tenders for thermal
sets floated in India have been won by the company against international competition.
BHEL has adopted the technology to the needs of the country and local conditions. This
has led to the development of several technologies in house. The fluidized bed boiler
that uses low graded high-ash abrasive Indian coal is an outcome of such an effort.
With large-scale availability of natural gas and the sudden increase in demand, BHEL
began to manufacture gas turbines and now possesses two streams of gas turbine
technology.
It has the capability to manufacture gas turbines up to 200 MW rating and custom built
combined cycle power plants. Nuclear steams generators, turbine generators, sets and
related equipment of 235 MW rating have been supplied to most of the nuclear power
plants in India. Production of 500 MW nuclear sets, for which orders have been
received.
INDUSTRY SECTORS:-
BHEL is a major producer of large size thyristor devices. The products include
centrifugal compressors, high speed industrial drive turbines, industrial boilers and
auxiliaries, waste heat recovery boilers, gas turbines, electric motors, drives, and
control equipments, high voltage transformers, switch gears and heavy castings and
forgings.
Company in India with the capability to make simulators for power plants, defence
industrial process plants and other applications. An entry has been made in aviation
industry for which BHEL has set up facilities and is now producing two seater aircraft.
TRANSMISSION:-
A wide range of transmission products and systems are produced by BHEL to meet the
needs of power transmission and distribution sector. These include:
• Dry Type Transformers
• SF6 Switch Gears
• 400 KW Transmission Equipment
• High Voltage Direct Current System
• Series and Shunt Compensation Systems
In anticipation of the need for improved substations, a 33 KV gas insulated sub station
with micro processors base control and protection system has been done.
TRANSPORTATION:-
65 % of trains in Indian Railways are equipped with BHEL's traction and traction
control equipment. These include:
• Broad Gauge 3900 HP AC / DC locomotives
• Diesel Shunting Locomotives up to 2600 HP
• 5000 HP AC Loco with thyristor control
• Battery Powered Road Vehicles and Locomotives
BHEL has a corporate R & D center supported by R & D groups at each of the
manufacturing divisions. The dedicated effort of BHEL's R & D engineers have
produced several new products like automated storage retrieval system automated
guide vehicles for material transportation etc. Establishment of Asia's largest fuel
evaluation test facility at Tiruchi was high light of the year. This facility will enable
evaluation of combustion, heat transfer and pollution parameters in boilers.
Major R & D achievement include:
• Design manufacture and supply of countries first 17.2 MW industrial steam turbines.
• Development of 4700 HP AC / DC loco for Indian Railways.
• Development of largest capacitor voltage transformers of 8800 PF 400 KV rating.
• Development and application low cost ROBOTS for job loading/unloading.
According to ex- CMD Mr. R.K.D. Shah, "BHEL is spending Rs. 60 Crores on Research
and Development. Earning from product which has been commercialized has gone up
26 % to Rs. 760 Crores."
Human Resource Development Institute:-
BHEL has envisioned becoming "A World Class Engineering Enterprise committed to
enhancing stakeholder value". Force behind realization of this vision and the source of
our competitive advantage is the energy and ideas of our 44,000 strong highly skilled
and motivated people. The Human Resource Development Institute situated in NOIDA,
a corner-stone of BHEL learning infrastructure, along with Advanced Technical
Education Center (ATEC) in Hyderabad and the Human Resource Development Center
at the manufacturing Units, through various organizational developmental efforts ensure
that the prime resource of the organization – the Human Capital is “Always in a state of
Readiness”, to meet the dynamic challenges posed by a fast changing environment. It is
their constant endeavor to take the HRD activities to the strategic level of becoming
active partner to the (organizational) pursuits of achieving the organizational goals.
TECHNICAL COLLABORATIONS
PRODUCT COLLABORATIONS
1. HEEP, Haridwar
2. HPEP, Hyderabad
3. HPBP, Tiruchi
4. SSTP & MHD, Tiruchi
5. CFFP, Haridwar
6. BHEL, Jhansi
7. BHEL, Bhopal
8. EPD, Bangalore
9. ISG, Bangalore
10. ED, Bangalore
11. BAP, Ranipet
12. IP, Jagdishpur
13. IOD, New Delhi
14. 14. COTT, Hyderabad
15. IS, New Delhi
16. CFP, Rudrapur
17. HERP, Varanasi
18. Regional Operations Division ARP, New Delhi
19. TPG, Bhopal
20. Power Group (Four Regions and PEM)
MAJOR COMPETITORS OF BHEL
1. Ansaldo Italy
2. Asea Brown Boueri Switzerland
3. Beehtel USA
4. Block & Neatch USA
5. CNMI & EC China
6. Costain U.K.
7. Electrim Poland
8. Energostio Russia
9. Electro Consult Italy
10. Franco Tosi France
11. Fuji Japan
12. GEC Alsthom U.K.
13. General Electric USA
14. Hitachi Japan
15. LMZ Russia
16. Mitsubishi Japan
17. Mitsui Japan
18. NEI U.K.
19. Raytheon USA
20. Rolls Royce Germany
21. Sanghai Electric Co. China
RECENT ACHIEVEMENTS OF BHEL
KEY COMPETITORS:-
Power Sector Giant of the World viz. Siemens Germany, ABB, General electric of USA
etc. are the major competitors of HEEP. All these are the MNC’s and enjoy huge
financial and R&D backup.
CORPORATE CITIZEN:-
HEEP Haridwar’s Strategic plans and its policy & strategy are commensurate with
BHEL Corporate / strategic Plan . As first PSU to adopt Corporate Planning as a
process . Board meetings for long –range development , BHEL has always guided other
PSU’s in their Corporate planning process .Board meeting , monthly Management
Committee meetings, Annual Revenue Budget exercise , Mid term reviews , Apex TQ
council reviews, Personnel Heads Meet, Quality Heads Meet , Technology Meets ,
Product committees meetings, Inter-Unit Quality Circle Meets etc. are the some of crore
strengths of BHEL Corporation’s vast network.
KEY CUSTOMERS AND SUPPLIERS:-
HEEP’s customer profile ranges from State Electricity Boards,Government Power
utilities like NTPC, NPC, NHPC to IPPs like Reliance Energy. HEEP has also supplied
Gas Turbine sets to overseas customers in Libya & Iraq. Power Sector Regions of
BHEL are its key internal customers. In view of expected market scenario,BHEL has
strategically decided that HEEP will concentrate on coal based Higher Rating Thermal
Sets for domestic market to fulfil the country’s vision of adding 107,000 MW capacity to
achieve ‘Power on Demand’ by 2012. Our key customer, NTPC has drawn up plan for
capacity addition of 20,000MW by 2012. HEEP has planned for execution of 34,619MW
by 2012.
STRATEGIC CHALLENGES:-
• Key Business
• Cycle time reduction
• State of the art technology
• Cost reduction
• Operational
• Timely delivery
• Material cost reduction
• Productivity improvement
• Effective utilization of machines
• Human Resource
• Motivation of employees
• Skill & Knowledge management
MAJOR MILE STONES:-
COST SECTION
Cost- section of the company is divided into following two sections viz,
PRODUCT COST & CENTRAL COST and these deals with the following functions: -
(i) Determination of periodic profits including inventory valuation.
(ii) Determination of pricing policy of the company.
(iii) Work related to capital expenditures of the company.
(iv) Developing variance Management Information report for different parts of
management for purpose of cost control and reduction.
(v) Valuation of work in progress and finished goods.
(vi) Interaction with management of top management link for achieving cost control
and cost reduction and thereby improving bottom line of the company.
(vii) Preparation of cost sheet of different product and their analysis for future
planning.
ADMINISTRATION SECTION:
The is the general administration section of the company which administrates the whole
department and keep on viewing the troubles of the department and tales the measures
to get rid of the problem.
CASH SECTION:
This section helps the company in maintaining the cash and bank receipt, to make
the requisitions for receipt of funds whenever required to the corporate and to make
payments. It records the daily receipt and release of the funds. The banks by which the
transactions are made are SBI, HSBC, PNB, HDFC and others.
SALES SECTION
Sales accounts section will deal mainly with the following items :-
(i) Scrutiny and vetting of estimates / quotation for sale of products / services,
wherever financial concurrence is required.
(ii) Scrutiny and vetting of agreements for sales of products and services
(iii) Invoicing for sale / advance or progressive payment / erection income and other.
(iv) Maintenance of subsidiary records like sales journals / sales daybook, sundry
debtors ledgers, advances from customer ledger etc.
(v) Payments, recovery and accounting of sales tax, excise duty.
(vi) Accounting of claims on carriers/ insurance companies for missing items /
damages on outward consignments.
(vii) Scrutiny, payments and accounting of bills of carriers and insurers and other
miscellaneous claims relating to the outwards consignments.
(viii) Calculation and scrutiny of data for payments of royalties to the collaborators.
(ix) Review and reconciliation as well as follow up of recovery of outstanding dues
from the customers in coordination with the commercial department.
STORES SECTION
WORKS SECTION
The company has its own internal audit section which facilitates the company in making
the accounts relating to every thing of the company. The accounts which are prepared
by internal audit section are
1. P & L A/C
2. Cash flow statement
The main purpose of PSH section is to keep the records of inventory both in the terms
of quantity and value. The pricing of issues is calculated on monthly average basis. The
terms which are recorded in the reference of inventory are :
1. Opening Stock
2. Receipt
3. Issue
4. Closing Stoke.
Hierarchy of fi
in B.
‘FINANCIAL ANALYSIS AND EVA ANALYSIS’. I discussed the project with my
instructor and coordinator Mrs. SANTOSH ANAND (Sr.A/0) at H.E.E.P., BHEL,
Haridwar.
She approved the project. After that, a simple course of action has been
followed for working on this project. Entire information and data were gathered from the
respective annual report of BHEL, Haridwar. All the figures are taken from their Balance
Sheet of the respective years and the other internal documents, which were personally
shown by the members of company in our interest.
FINANCIAL ANALYSIS
1. External Analysis :-
This is performed by outsiders to the firm such as creditors, stock holders,
or investments analysis. It makes use of existing financial statements and
involves a limited access to confidential information on a firm.
2. Internal Analysis :-
This is performed by the corporate finance and accounting departments
and is more detailed than external analysis. These departments have
available more details and current information than is available to
outsiders. They are able to prepare Performa, or future statements and
are able to produce a more accurate and timely analysis of the firm's
strength and weaknesses.
• LIQUIDITY RATIOS
• ACTIVITY RATIOS
• LEVERAGE RATIOS
• PROFITABILITY RATIOS
• OTHER RATIOS
LIQUIDITY RATIOS: - Liquidity refers to the ability of the firm to meet its obligations
in the short run, usually one year. Liquidity ratios are generally based on the relationship
between current assets and current liabilities (the sources for meeting short-term
obligations).
LEVERAGE RATIOS: - Financial leverage refers to the use of debt finance. While
debt capital is a cheaper source of finance, it is also a riskier source of finance.
Leverage ratios helps in assessing the risk arising from the use of debt capital.
ACTIVITY RATIOS : - They are also called Turnover ratios or Asset management
ratios. They measures how efficiently the assets are employed by the firm. These ratios
are based on the relationship between the level of activity and the level of various
assets.
OTHER RATIOS: - In this project we have analysed some other ratios of BHEL.
Such as EPS, PER, Personal payment per employee, Turnover per employee, Overtime
per employee etc.
ADVANTAGES OF RATIOS: -
The ratio analysis is one of the most powerful tools of financial analysis. It is use as a
device to analysis and interpret the financial health of enterprise. Just like a doctor
examines his patient by recording his body temperature, blood pressure etc. Before
making his conclusion regarding the illness and before giving his treatment, a financial
analyst analyses the financial statement with various tools of analysis before
commenting upon the financial health or weaknesses of an enterprise. 'A ratio is known
as a symptom like blood pressure, the pulse rate or the temperature of the individual.' It
is with help of ratios that the financial statements can be analysed and decision made
from such analysis.
There are certain problems and issues encountered in financial analysis which call for
care, circumspection and judgement in such exercise.
The current ratios for last 7 years for HEEP, Hardwar have been calculated as under.
RATIO
YEARS
INFERENCE: From the above ratios it can be seen that Current Ratio for year 2007-
08 has dropped by approx. 11 % from the previous year which indicates that short term
solvency of the firm has gone down. But the current ratios of last seven years are
greater than one and on an average it is 1.206:1. This means for every one Re. of
current liabilities there is Rs. 1.206 of current assets available to meet the short term
obligation. So this indicates that the short-term liquidity position of the company is very
good and short-term conditions are safe as far as payment is concerned, although, as a
conventional rule, a current ratio of 2 to 1 is considered far better.
The Quick Ratios for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Quick 57501 47674 61457 53860 69870 100334 82739
assets
Current 71641 61375 82196 99390 110923 150056 149892
liabilities
Quick 0.80 0.78 0.75 0.54 0.63 0.67 0.55
Ratio
RATIO
YEARS
The Inventory Turnover Ratios for last 7 years for HEEP, Hardwar have been calculated
as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
COGS 108811 101336 97432 140697 164059 210494 235940
Avg. 45414 37915 35792 49095 64387 62023 67725
inventory
ITR 2.40 2.67 2.72 2.87 2.55 3.39 3.48
RATIO
YEARS
INFERENCE: Inventory turnover ratio indicates that how quick inventories are converted
into sales. It gives the position of the inventory management of the company. The average of
this ratio for past 7 years comes out to be 2.86 which show that for every Re 1 of average
inventory there is Rs2.86 of net sales. The efficiency of HEEP, Hardwar in turning its
inventory for year 07-08 has improved from the last year which indicates that there has been
better management of inventory in the plant. The average figure is also satisfactory.
The Debtors Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated
as under.
YEARS
INFERENCE: This ratio indicates that how quick debtors are collected and higher
ratio shows better position of the company. Here from the graph and the ratio of the last
7 years it is clear that the debtors are collected quickly and efficiently as the Debtor
Turnover Ratio is increasing year by year from 2.27 times in year 2001-02 to 3.52 times
in year 2005-06. This indicates that average collection period is short and so there are
less or say no bad debts for the company. Although, this ratio is on a slight declining
trend for past 2 years, the average of 7 years comes out to be 2.9. Since the liquidity
position of the firm depends on the quality of debtors to a great extent therefore an
average of 2.9 shows that the liquidity position of the firm is good.
Fixed assets are used in the business for producing goods to be sold. The effective
utilization of fixed assets will result in increased production and reduced cost. It also
ensures whether investment in the assets have been judicious or not.
Fixed Assets Turnover Ratio = Sales / Fixed Assets
The Fixed Assets Turnover Ratio for last 7 years for HEEP, Hardwar have been
calculated as follows.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Sales 119298 115596 114608 166598 199388 258690 286264
RATIO
YEARS
INFERENCE: The graph above shows that the fixed assets turnover ratio was on an
increasing trend for past 3 years until 2007-08 where it faced a decline. The reason that
could be attributed to such a decline is that the utilization of funds in the form of fixed
assets has been significantly higher for the year 2007-08. as compared to previous
years. Moreover, this hike is not in proportion to the increase in net sales. Thus,
efficiency of the firm in utilizing its fixed assets has fall down from last year but an
average figure of 2.89 indicates that the firm has been utilizing its fixed assets efficiently
with respect to net sales.
The Total Assets Turnover Ratio for last 7 years for HEEP, Hardwar have been
calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Net sale 119298 115596 114608 166598 199388 258690 286264
Total 108243 94678 114753 129401 153564 184819 179861
assets
Ratio 1.10 1.22 0.99 1.28 1.29 1.39 1.59
RATIO
YEARS
INFERENCE: The total assets turn over ratio is the relationship between total assets
and sales. As can be seen from the above graph, the Total Assets Turnover Ratio at
HEEP Hardwar is on an increasing trend for last 7 years except for the year 2003-04
where it faced a downfall of 0.23 points, although it was well sufficient for the company.
The average of TAT Ratio for last 7 years comes out to be 1.26 which implies that, on
an average, HEEP Hardwar generates a sale of Rs.1.26 for one rupee investment in
fixed and current assets together.
LEVERAGE RATIOS
Debt Ratio
Several Debt Ratios may be used to analyze the long term solvency of the firm. It would
be of relevance to know the proportion of the interest-bearing debt (also called funded
debt) in the capital structure of the firm. Thus, debt ratio can be computed by dividing
total debt by capital employed or net assets. Total debt includes short and long term
borrowings from financial institutions, debentures/bonds, deferred payment
arrangements for buying capital equipments, bank borrowings, public deposits and any
other interest bearing loan.
Debt Ratio = Total Debt/Capital Employed
The Debt Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005- 06 2006- 07 2007-08
T otal Deb t 238 308 447 364 499 899 1291
Cap i tal 36601 33302 32557 30011 42641 34763 29969
E mp l oyed
Rati o 0.0065 0.0092 0.0137 0.0121 0.0117 0.0258 0.0430
YEARS
INFERENCE: From the above graph, it can be seen that the debt ratio of HEEP,
Hardwar has steep inclination right from 2001-02 to 2007-08. The trend in middle years
is rather fluctuating. A higher debt ratio implies that claims of creditors on the company
are greater than those of owners. Moreover, all debt that has been raised by HEEP is in
the form of unsecured loan. This tends to introduce inflexibility in the firm’s operations
due to increasing interferences and pressures from creditors. However, besides facing a
steep incline, this ratio is still very small which supports greater claim of owners than
creditors. An average of 0.017 for past 7 years implies that out of the total capital
employed in the firm 1.7% has been employed through the route of debt and rest is still
in the hands of equity holders i.e. owners.
This ratio indicates the relationship between loan fund and net worth of the company,
which is known as gearing. If the proportion of debt to equity is low a company is said to
be low-geared and vice versa. A debt equity ratio of 2:1 is the norm accepted by
financial institutions for financing projects.
The higher the gearing, more volatile is the return to the shareholders.
Debt Equity Ratio = Total Debt/Net Worth
The Debt Equity Ratio for last 7 years for HEEP, Hardwar has been calculated as
under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Total debt 238 308 447 364 499 899 1291
Net Worth 53697 62410 67756 82644 102423 130005 160836
Ratio 0.0044 0.005 0.0065 0.0044 0.0048 0.0069 0.0080
RATIO
YEARS
INFERENCE: The Debt Equity Ratio describes the lender’s contribution for each
rupee of owner’s contribution. The Debt Equity Ratio of HEEP Hardwar for last 7 years
forms a fluctuating trend with 0.44% in the year 2001-02 to 0.80% in year 2007-08. An
average DE Ratio of these 7 years is 0.005 which implies that lenders have contributed
Rs. 0.005 for each rupee contributed by owners. This generates a greater claim of
owners than creditors which is a satisfactory situation from creditors’ point of view,
since, a high proportion of equity provides greater margin of safety for them.
Proprietor Ratio Or (Share Holder Equity Ratio)
It is assumed that larger the proportion of the shareholders equity, the stronger is
the financial position of the firm. This ratio will supplement the debt-equity ratio. In this
ratio a relationship established between the shareholder’s fund and the total assets. A
reduction in shareholder’s equity signally the over dependence on outside source for
long term financial needs and this carries the risk of higher level of gearing. This ratio
indicates the degree to which unsecured creditors are protected against loss in the
event of liquidation.
Prop Ratio =Net Worth / Total Assets
The Proprietor Ratio for last 7 years for HEEP, Hardwar has been calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Net Worth 53697 62410 67756 82644 102423 130005 160836
Total Assets 108243 94678 114753 129401 153564 184819 179861
Ratio 0.49 0.65 0.59 0.63 0.66 0.70 0.89
RATIO
YEARS
INFERENCE:
There is increase in shareholders fund but there is no fresh investment in FA is made
and this may affect future profitability of the company.
The TA to TL Ratio for last 7 years for HEEP, Hardwar has been calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Total 71945 61683 82643 99754 111422 150955 151183
Liabilities
Total Assets 108243 94678 114753 129401 153564 184819 179861
Ratio 0.66 0.65 0.72 0.77 0.725 0.81 0.84
RATIO
YEARS
INFERENCE:
Here from the data and the ratio of last 7 years it is clear that the company’s financial
position is sound and is capable of meeting its liabilities out of its total assets. From the
last five years data we see that the solvency ratio is increasing slowly and it has
increased from 0.66 in 2001-02 to 0.84 in 2007-08. But it indicating a sound financial
position of the company.
The FA To NW Ratio for last 7 years for HEEP, Hardwar have been calculated as
under.
(Figures
are in Rs/ Lacs)
Year 2001- 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
02
Fixed 7281 14634 14082 16565 13896 16858 29299
Assets
Proprietor 53697 62410 67756 82644 102423 130005 160836
Funds
Ratio 0.13 0.23 0.20 0.20 0.13 0.12 0.18
RATIO
YEARS
INFERENCE: Here this ratio is going on decreasing and the average comes out to
be 0.18 which means for every Re. 1 of Proprietor Fund there are Rs. 0.18 of Fixed
Assets indicating that Fixed Assets are utilized properly but there are no fresh
investments made in Fixed Assets which may effect the future profitability of the
company.
Fixed Assets Ratio
This ratio indicates the proportion of long funds deployed in fixed assets. Fixed assets
minus depreciation provided on this till the date of calculation. The higher the ratio
indicates the safer the funds available in case of liquidation. It also indicates the portion
of long-term fund that is invested in the working capital.
Fixed Assets Ratio = Capital Employed / Net Fixed Assets
The Fixed Assets Ratio for last 7 years for HEEP, Hardwar have been calculated as
under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Capital 36601 33302 32557 30011 42641 34763 29969
Employed
Net Fixed 7281 14634 14082 16565 13896 16858 29299
Assets
Ratio 5.02 2.27 2.31 1.81 3.06 2.06 1.02
RATIO
YEARS
INFERENCE: This ratio indicates that proportion of long funds deployed in fixed
assets here the fixed assets ratio is increasing. But from the data we found that there
are no fresh investments made in Fixed Assets. But there is continuous decrease in
long-term funds, which may affect the future profitability of the company.
The Interest Coverage Ratio for last 7 years for HEEP, Hardwar have been calculated
as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
PBIT 7205 11083 12324 22338 31552 42957 50324
Interest 632 -622 -474 -623 -937 -390 -410
Ratio 11.4 -17.8 -26 -35.8 -33.67 -110.15 -122.74
RATIO
YEARS
INFERENCE: Interest Coverage Ratio had increased in 2001-02 while after that it is
decreasing year by year as it shows negative. It is clear that there is no risk for lenders
and share holders
PROFITABILITY RATIOS
The Gross Profit Ratio for last 7 years for HEEP, Hardwar have been calculated as
under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
YEARS
INFERENCE: Gross Profit Ratio is increasing year by year. It has come to 17.57% in 2006-
07 from 8.7% in 2001-02. For improving the more profitability of the company, company should
take in plans relating to cost reduction and cost control. Efforts should also be made to take up
contracts having greater margins such as renovation / retrofitting etc. In addition to regular
contracts which has very less margin.
The Net Profit Margin for last 7 years for HEEP, Hardwar have been calculated as
under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
PAT 4354 7078 7248 13726 21553 26400 30933
Net Sales 119298 115596 114608 166598 199388 258690 286264
Ratio 4 7 7.4 10.3 13.1 12.54 10.8
RATIO
YEARS
INFERENCE: Net profit of last six years is continuously increasing indicating a good
operating efficiency of the company. The average of net profit ratio comes out to be
9.07% which means that for every Ra 100 of net sales profit margin is of Rs 9.07 and
this is a satisfactory position for the company and also indicates that Managerial skills
are efficient. The company’s performance is good.
The Net Profit to Fixed Assets Ratio for last 7 years for HEEP, Hardwar have been
calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Net Profit 4354 7078 7248 14553 21553 26400 30933
Fixed Assets 7281 14634 14082 16565 13896 26858 29299
Ratio 0.87 0.57 0.65 0.87 1.45 0.98 1.05
RATIO
YEARS
INFERENCE: Here this ratio is going on increasing however in 2002-03 to 2005-06. it
increased from 0.57 in year 2002-03 to 1.45 in year 2005-06, indicating that the fixed
assets of the company is being used effectively. But there is no fresh investment made
in Fixed Assets during these years and can affect future profitability of the company.
The earning capacity of the company from utilization of Fixed Assets is improving year
by year.
The Return on Investment for last 7 years for HEEP, Hardwar have been calculated as
under.
(Figures are in Rs/ Lacs)
RATIO
YEARS
Return On Equity
Return on equity is a measure of great interest to equity share holders. Return on equity
is defined as equity earning / avg. equity. The numerator of this ratio is equal to PAT
and the denominator includes all contribution made by equity share holders (Paid-up +
reserve & surplus). Return on equity measures the profitability of equity funds invested
in the firm. it is regarded as a very important measures as it reflects the productivity of
the ownership capital employed in the firm.
Return On Equity = PAT / Average Equity
The Return On Equity for last 7 years for HEEP, Hardwar have been calculated as
under.
RATIO
YEARS
INFERENCE: From the above graph we can see, return on equity is increasing by
leaps& bounds. As in 2001-02 it was 0.95 & in 2007-08 it has increased up to 6.76, so it
is indicating good financial position of the company
OTHER RATIOS
Turnover Per Employee
This ratio is calculated by dividing turnover of the company by the number of employees
working in the company. This indicating how efficiently manpower is used to generate
turnover.
Turnover Per Employee (TPE). = Turnover / No. of Employees
The TPE for last 7 years for HEEP, Hardwar have been calculated as under.
RATIO
YEARS
INFERENCE: As this ratio is increasing continuously year by year this indicates that
the Human Resources of the company is utilized effectively and are generating high
turnover which is good for the company. Hence company’s performance is good.
Collectable Debts As A Percentage Of Turnover
This ratio indicates how effectively debtors are collected out of turnover.
Collectable Debts As a Percentage of Turnover = Collectable debts/Turnover ×
100
The Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures
are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Collectable 26745 21373 39335 29938 37566 44743 48590
debts
Turnover 108811 101336 97432 140697 164059 210494 235940
Ratio 25 22.3 40 21.28 22.89 21.26 20.59
RATIO
YEARS
INFERENCE:
The above graph shows fluctuating ratio year by year. Hence, efforts should be made
that goods are dispatched to only customers who are making timely payments.
LIMITATIONS OF STUDY
It took a lot of time in collection of data as the data available in BHEL Hardwar is
so wide and covers great deal of extensive information.
No printed data was available for the current year as the annual report for 2006-
07 is still in the process.
All the data collected was from the secondary sources and I had to rely on the
data collected by them.
The conclusion given regarding BHEL is based on the present economic
condition.
CONCLUSIONS AND SUGGESTIONS
During my Summer Training at BHEL, Hardwar on the project Financial Analysis and
EVA, I have observed some weak and strong points of the company, which are
following:
As it is not only the analysis which makes the decision, furthermore good judgments
and interpretation depends upon the intelligence and ability of the analyst.
On seeing the liquidity position of BHEL. I conclude that it is not very good as the
current assets are in the form of inventories and debtors. The debt collection
period is high and inventories are least liquid current assets. So maintaining the
inventories are relatively costly affair for the company and the management must
have to investigate properly. It is very necessary so that fund should not be
blocked unreasonably. Efficient inventory management is required in BHEL.
On seeing the leverage position of the BHEL, I conclude that it is very good as
the stake of owners in company is continuously increasing and its long term debt
continuously decreasing it means that company is paying its debt promptly and
creditors will not face any risk in investing in BHEL as also BHEL is giving
assured ROI.
On seeing turnover, fixed assets and current assets turnover of company goes
on increasing which is a good indicator as it brings commensurate gain and also
the average collection goes on decreasing but management should take more
efficient steps to reduce it.
On seeing the profitability of the BHEL its overall performance is very good. A
continuous increase in the values of EPS and DPS results, investors feel safe to
invest money in BHEL.
On seeing the performance over EVA it can be said that company is doing good
in their core field. And growth of the EVA shows the unit’s strong position in their
business. This growth is also shows a good sign from shareholders point of view.
STRENGTH (S): -
• Low cost producer of quality equipment due to cheap labour and fully
depreciated plants.
• Flexible manufacturing set up.
• Entry barrier due to high replacement cost of its manufacturing facilities.
WEAKNESSES (W): -
• High working capital requirement due to its exposure to cash starved
SEBs (State electricity boards) and High WIP.
• Inability to provide project financing.
OPPORTUNITIES (O): -
• High-expected growth in power sectors (7000 MW/p.a. needs to be
added)
• High growth forecast in India’s index of industrial production would
increase demand for industrial equipment such as motors and
compressors.
THREATS (T): -
www.google.com
www.bhel.com
www.indiatimes.com