FAM Assignment-NHPC

Company Analysis Report

on
NHPC Limited
(An Government Of India Enterprise)

Submitted To: Submitted By: Shailendra Singh

Mr. P K Mohanty Phone No: 09911640194

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Introduction

NHPC Limited (Formerly known as National Hydroelectric Power Corporation Ltd.),

A Govt. of India Enterprise was incorporated in the year 1975 with an authorized capital of Rs. 2000 million.

NHPC is a Mini Ratna Category-I Enterprise of the Govt. of India with an authorized share capital of Rs. 1,50,000 Million .

NHPC is among the TOP TEN companies in the country in terms of investment ( investment base of over Rs. 3, 17,000 Million Approx.)

Initially, on incorporation, NHPC took over the execution of Salal Stage-I, Bairasiul and Loktak Hydro-electric Projects from Central
Hydroelectric Project Construction and Control Board.

Since then, it has executed 13   projects with an installed capacity of 5175 MW on ownership basis including projects taken up in joint
venture.

NHPC has also executed 5 projects with an installed capacity of 89.35 MW on turnkey basis. Two of these projects have been
commissioned in neighboring countries i.e. Nepal and Bhutan.

Presently NHPC is engaged in the construction of 11 projects aggregating to a total installed capacity of 4622 MW.

NHPC has added   1970 MW during the 10th Plan period and planned to add 5322 MW during 11th Plan period.

9 projects of 8481 MW are awaiting clearances/Govt. approval for their implementation. Detailed Projects reports are being prepared
for 7 projects of 5755 MW.

Since its inception in 1975, NHPC has grown to become one of the largest organizations in the field of hydro power development in the
country.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

COMPANY PROFILE

Authorized Capital Rs. 1,50,000 Million

Value of Assets Rs. 3,17,000 Million Approx.

Paid Up Capital Rs. 111,820 Million 31.03.2009

Projects Completed 13 Nos. (5175 MW)

Projects Under Construction 11 Nos. (4622 MW)

Projects Awaiting Clearances 9 Nos. (8481 MW)

Projects Under Survey and
Investigation Stage 7 Nos. (5755 MW)

Joint Venture Projects 4 Nos. (3686 MW)

Projects on Turnkey Basis 5 Nos. (89.35 MW)

In 2008-2009

Energy Generated 16689.59 MU

Capacity Index 93.61%

Sales Turnover 26980.6 Million

Net Profit Rs. 10752.2 Million

Shailendra Singh
XIMB-EPWP-2010
FAM Assignment-NHPC

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

CORPOATE VISION

A world Class diversified & transnational organization for sustainable development of hydro power and water resources with strong
environment conscience.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

CORPOATE MISSION

To achieve international standards of excellence in all aspects of hydro power and diversified business.

To execute and operate projects in a cost effective environment friendly and socio economically responsive manner.

To foster competent, trained and multi-disciplinary human capital.

To continually develop state of art technologies through innovative R& D and adopt best practices.

To adopt the best practices of corporate governance and institutionalize value based management for a strong corporate
identity.

To maximize creation of wealth through generation of internal funds and effective management of resources.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

CORPOATE OBJECTIVES

To Plan, promote and organize an integrated and efficient development of power in all its aspects through Conventional and Non
Conventional Sources in India and Abroad subject to clause 1 (b), including planning, investigation, research, design and preparation of
preliminary, feasibility and definite project reports, construction, generation, operation and maintenance of power stations and
projects, transmission, distribution, trading and sale of power generated at Stations in accordance with the national economic policy
and objectives laid down by the Central Government from time to time and release of water and other needs to the State Govt. as per
the agreed parameters.

To Plan, promote and organize an integrated and efficient development of Thermal Power in all its aspects through its subsidiary
Company i.e. Narmada Hydroelectric Development Corporation Limited including planning, investigation, research, design and
preparation of preliminary, feasibility and definite project reports, construction, generation, operation and maintenance of power
stations and projects, transmission, distribution, trading and sale of power generated at Stations.

To undertake, where necessary, the construction of inter-state transmission lines and ancillary works for timely and coordinated inter-
state exchange of power.

To coordinate the activities of its subsidiaries, to determine their economic and financial objectives / targets and to review, control,
guide and direct their performance with a view to secure optimum utilization of all resources placed at their disposal.

To act as an agent of Government / Public Sector financial institutions, to exercise all the rights and powers exercisable at any meeting
of any Company engaged in the planning, investigation, research, design and preparation of preliminary, feasibility and definite project
reports, construction, generation, operation, maintenance of Power Stations and Projects, transmission, distribution, trading and sale of
power in respect of any shares held by the Government, Public financial institutions, nationalized banks, nationalized insurance
companies with a view to secure the most effective utilization of the financial investments and loans in such companies and the most
efficient development of the concerned industries.

To carry on the business of purchasing, selling, importing, exporting, producing, trading, manufacturing or otherwise dealing in all
aspects of planning, investigation, research, design and preparation of preliminary, feasibility and definite project reports,
construction, generation, operation and maintenance of Power Stations and Projects, transmission, distribution and sale of Power,
Power Development, including forward, backward or horizontal integration ancillary and other allied industries and for that purpose to
install, operate and manage all necessary plants, establishments and works.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

BOARD OF DIRECTORS

NAME DESIGNATIONS

Shri S. K. Garg Chairman and Managing Director

Shri A. B. L. Srivastava Director (Finance)
Shri D. P. Bhargava Director (Technical)
Shri J. K. Sharma Director (Projects)
Shri R. S. Mina Director (Personnel)
Shri Jayant Kawale Director, Government Nominee
Shri A. K. Mago Independent Director
Smt. Komal Anand Independent Director
Shri Raman Sidhu Independent Director
Shri R. Jeyaseelan Independent Director
Dr. Kuriakose Mamkoottam Independent Director
Shri K. Dharmarajan Independent Director
Shri Vijay Gupta Company Secretary

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

AWARDS

NHPC Limited, India’s premier hydro power ‘Mini Ratna’ Category-I Company of the Government of India has been conferred Second
Prize in the ‘Office Buildings Sector’ for the year 2009 under the National Energy Conservation Awards.

NHPC Limited, India’s hydro power ‘Mini Ratna’ Category-I Company of the Government of India has been conferred the “Amity HR
Excellence Award for Best Socio-Economic Responsive Organization” for the year 2009 by Amity International Business School, NOIDA.

NHPC Limited, India’s hydro power ‘Mini Ratna’ Category-I Company of the Government of India has been conferred the “Jury Award” by
Council of Power Utilities in association with KW Conferences.

Mahavir International gave Mahavir International Award to the company for “Achievements in the field of hydropower development and
commendable efforts in supporting various activities towards social service and human welfare"

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Ratio Analysis of NHPC 2008-09 2007-08

Profitability Ratios

Profit Margin (PM) (Profit After Tax/Sales)X100% % 39.85% 23.32%

Asset Turnover (AT) Sales/Average Total Assets Ratio 0.09 0.09

Return on Assets (RoA) (Profit After Tax/(Average total Assets))X100% % 3.58% 1.99%

Return on Equity (RoE) (Profit After Tax/(Average share holders equity))X100% % 6.10% 3.17%
Earning per share (EPS) Equity/No of shares RS 0.962 0.48

Liquidity Ratios

Current ratios (CR) Current Assets/Current Liabilities Ratio 1.16 1.27

Quick ratios (QR) Quick Assets/Current Liabilities Ratio 1.14 1.24

Debtor Turnover (DT) Sales/Average Debtors Ratio 8.40 7.20

Average debt Collection Period (ADCP) Average Debtors/Sales/360 days Days 42.88 50.01

Inventory Turnover (IT) Cost of Goods Sold/Average Inventories days 24.39 15.60

Solvency Ratios

Debt to Equity ratio (D/E) (Secured loans + Unsecured loans)/Shareholders Equity Ratio 0.68 0.58

Liabilities to Equity Ratio (L/E) (debt+Current liabilities)/shareholder's Equity Ratio 0.89 0.73

Interest Cover (Int Cvr) (Profit before Interest & tax)/Interest Expense Ratio 3.31 3.57

Capital market Ratio

Price Earning Ratio (P/E)) (average stock Price)/Earnings per share Ratio 36.19 72.53
Dividend Yield (DY) Dividend Per Share/Average Stock Price % 0.08% 0.08%
Pice to book Ratio (P/BR)) Market Price per Share/Book value per share Ratio 21.64 22.52
As the company's stock in market came in Sep 2009, I have taken the Average of last 52 week's high & Low
52 week High INR 42.00
52 week low INR 27.60

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Analysis of the Ratios of NHPC

Ananlysis of Profitibility Ratios

PM or Return on Assets, has increased as compared to last year. This gives company more buffer to drop in sales prices. As
Prices of electricity in our Country is more in the hand of Govt, it is important to maintain a good profit margin.
AT ratio of company is very low, it simply means that company has invested lot of amount in acquiring assets. Company is
not generating sale, even equal to 1 rs of invested amount. This also means that company is spending lot of amount in
maintaining assets. Although It may help in generating huge profit & sales in future, as lot of new projects of this company
will be functional in the coming years.
RoA or ROI is low, but has improved from the last year. And will keep on improving as more & more projects of the company
will become operational. At present, this give bad picture on the performance of the company.
Company has given more return on the shareholders value, as compared to ROI or AT, this has also doubled from the last
years %. Although NHPC has to come up in a big way to meet shareholders expectation.
EPS of the NHPC is not that great, but company has managed to improve earning (1 Rs per shar) from the previous year.

Analysis of the Liquidity Ratios

The company has more assets than its liabilities & this means company can implement new processes or procedures to
improve its productivity, without worrying much about its liabilities. NHPC can take independent decisions. Also company
can pays its debt very efficiently & quickly.
Company is not that able to convert debtor into cash, but has improved from the past year.
NHPC's debtors remained outstanding on average is 44 to 45 days, which is quite high. NHPC's Clients are State/Govt run
electricity boards the only reason behind high debt collection period. Although it has improved from 50 days to 43 days.
Company is efficiently managing its inventories, that means company is very much able to meet its operational needs. But
inventory piling is increased as compared to previous year, which has to be controlled.

Analysis of the Solvency Ratios

This ratio has increased, that means company has decided to raise more money through Debt as instead of shareholders
equity, but the ratio is still manageable, as it is still under control. And high assets in hand ensures that company is able to
pay its debt.
This ratio also is under controlled, as company is very much conservative in taking debt or liabilities. Although Libilities of
the company is increased over the last year. Company is well positioned to improve its capex by raising debt in future.
This is bit alarming, as the margin between income & its liability to meet interest expense is not that great. Company has to
improve this figure by improving Sales from new operations (commisioning new plants) & in turn profit.

Analysis of the Capital market Ratio

More clearer picture on the analysis is calculated by comparing NHPC with its sectoral compititors like Power Grid & NTPC.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Sectoral Comparative analysis of key financial Ratios

Industry
Financial Ratios NHPC PGCIL NTPC
Average

Profit Margin (PM) 39.85% 25.69% 19.46% 28.33%

Asset Turnover (AT) 0.09 0.21 0.47 0.26
Return on Assets (RoA) 3.58% 3.47% 9.31% 5.45%
Return on Equity (RoE) 6.10% 11.56% 14.91% 10.86%
Earning per share (EPS) 0.96 4.02 9.95 4.98

Analysis of important ratios vs industry average

Profit Margin:
As compared to Industry Average, NHPC has 10% more profit margin than industry
average & quite more than its peers. This gives edge to company to win over input
cost's behaviour and recession. NHPC can very well take care of its operating
expenses.

Earning per share:

The EPS of NHPC is not as good as its compititors & low as compared to industry
average. This may be because, major of its installed asset is yet not functional &
NHPC will be commision more plants in coming future.

Industry
Financial Ratios NHPC PGCIL NTPC
Average
Current ratios (CR) 1.16 1.19 2.89 1.75
Quick ratios (QR) 1.14 1.16 2.58 1.63
Debtor Turnover (DT) 8.40 5.32 12.76 8.83
Average debt Collection Period (ADCP) 42.88 67.68 28.19 46.25
Inventory Turnover (IT) 24.39 5.51 7.83 12.58

Analysis of important ratios vs industry average

Quick ratio:
Although quick ratio of the company is lower than the industry average, but NHPC has
enough of the funds to meets its short term liabilities.More running cash in hand also
save NHPC from raising debt from market to meet short term liabilities.

Inventory Turnover ratio:

The inventory holding time of the company is very high as compared to the industry
average, as the company is mainly in generation & distribution of power, inventory
holding days should be less, but as its major fund outflow is in term of high payment
of Interest & finance charges-which is mainly because of high investments in fixed
assets.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Industry
Financial Ratios NHPC PGCIL NTPC
Average
Debt to Equity ratio (D/E) 0.68 1.95 0.60 1.08
Liabilities to Equity Ratio (L/E) 0.89 2.51 0.78 1.39
Interest Cover (Int Cvr) 3.31 1.91 5.62 3.61

Analysis of important ratios vs industry average

Debt to Equity ratio:
Debt to Equity ratio is lower as per the industry standards, which means company can
easily raise loans or debt from banks for investment or financial purposes. It also
shows conservativness of the company & it relies more on equity than debt.

Interest Cover ratio:

The interest cover ratio simply shows the margin between earning & payment of
interest liabilities. The interest cover ratio is low as compared to Industry average,
which is already very low. May be the reason is high investement in generation of
power in this sector.The high interest charges paid is mainly because of the payment
to the interest on term loan.

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Graphical Representation (Key Ratios)

Profit Margin (PM)

50%
40%
30%
20%
10%
0%
NHPC PGCIL NTPC Industry Average

Earning per share (EPS)

12
10
8
6
4
2
0
NHPC PGCIL NTPC Industry Average

Quick ratios (QR)

3
3
2
2
1
1
0
NHPC PGCIL NTPC Industry Average

Inventory Turnover (IT)

30
25
20
15
10
5
0
NHPC PGCIL NTPC Industry Average

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Debt to Equity ratio (D/E)

3
2
2
1
1
0
NHPC PGCIL NTPC Industry Average

Interest Cover (Int Cvr)

6
5
4
3
2
1
0
NHPC PGCIL NTPC Industry Average

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

BALANCE SHEET AS AT 31st MARCH, 2009

(Rupees in crore)
31st March, 31st March,
SCHEDULE 2009 2008
SOURCES OF FUNDS
A. SHAREHOLDERS’ FUNDS
i) Share Capital 1 11182.49 11182.49
ii) Reserves and Surplus 2 6798.13 17980.62 6094.57 17277.06

B. LOAN FUNDS
i) Secured Loans 3 8212.38 7003.49
ii) Unsecured Loans 4 4021.65 12234.03 2952.84 9956.33

C. INCOME RECEIVED IN ADVANCE ON ACCOUNT

OF ADVANCE AGAINST DEPRECIATION 1329.47 1303.26

D. DEFERRED TAX LIABILITY (NET)

Deferred Tax Liabilities 2412.97 2017.06
Less: Deferred Tax Recoverable 2412.97 - 2017.06 -
TOTAL 31544.12 28536.65

APPLICATION OF FUNDS
A. FIXED CAPITAL EXPENDITURE
i) Fixed Assets 5
a) Gross Block 21460.08 20639.51
Less: Depreciation 3816.27 3262.66
b) Net Block 17643.81 17376.85
ii) Capital Work In Progress 6 9401.77 6313.2
iii) Construction Stores and Advances 7 1096.85 28142.43 1076.96 24767.01
B. INVESTMENTS 8 2793.6 3049.22
C. CURRENT ASSETS, LOANS AND ADVANCES 9 9
i) Interest Accrued on Investments 81.01 91.91
ii) Inventories 37.16 37.12
iii) Contract Work-in-Progress 19.55 51.16
iv) Sundry Debtors 294.66 348.06
v) Cash and Bank Balances 1899.95 1841.27
vi) Other Current Assets 393.74 216.4
vii) Loans and Advances 1693.2 4419.27 784.55 3370.47

Less: CURRENT LIABILITIES AND PROVISIONS10

i) Liabilities 2150.25 1155.07
ii) Provisions 1663.26 3813.51 1495.32 2650.39
NET CURRENT ASSETS 605.76 720.08
D. MISCELLANEOUS EXPENDITURE
(To the extent not written off or adjusted) 11 2.33 0.34
TOTAL 31544.12 28536.65
Accounting Policies 23
Notes to the Accounts 24
Schedule 1 to 24 form integral part of the Accounts
As per our attached report of even date For and on behalf of the BOARD OF DIRECTORS

Shailendra Singh
XIMB-EPWP-2010
 FAM-Assignment-NHPC

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2009
(Rupees in crore)
SCHEDULE 31st March, 2009 31st March, 2008
INCOME
i) Sales 12 2698.06 2301
Less: Advances Against Depreciation 12A 26.21 2671.85 57.27 2243.73
ii) Revenue from Contract, Project Management 13 48.97 39.19
and Consultancy Works
iii) Other Income 14 540.67 405.02
TOTAL INCOME 3261.49 2687.94

EXPENDITURE
i) Generation, Administration and Other Expenses 15 326.47 263.58
ii) Employees’ Remuneration and Benefits 16 492.51 316.78
iii) Depreciation 17 518.24 443.74
iv) Interest and Finance Charges 18 505.18 453.4
v) Provisions 19 190.97 11.43
vi) Expenditure on Contract, Project Management 20 61.16 31.66
and Consultancy Works
TOTAL EXPENDITURE 2094.53 1520.59

Profit before Tax and Prior Period Adjustments 1166.96 1167.35

Prior Period Adjustments (net) 21 (11.38) 20.7
PROFIT BEFORE TAX 1178.34 1146.65
Provision for Taxation
i) Current Tax 110.54 117.96
ii) Fringe Benefit Tax 9.45 9.5
iii) Adjustments relating to earlier years (16.87) 15.1
iv) Deferred Tax 395.91 248.13
Less: Deferred tax recoverable adjustment 395.91 - 103.12 248.13 - 142.56
PROFIT AFTER TAX 1075.22 1004.09
Balance brought forward 1344.53 715.18
BALANCE AVAILABLE FOR APPROPRIATION 2419.75 1719.27
i) Transfer to Bond Redemption Reserve (14.25) 23.75
ii) Amount written back from Self Insurance Reserve (0.06) -
iii) Tax on Dividend - Write back (8.57) -
iv) Transfer to Self Insurance Reserve 98.74 -
iii) Dividend :
-Interim 125 100
-Proposed 200.00 200.00 200 200
iv) Tax on Dividend :
- Interim 21.24 17
-Proposed 33.99 33.99
BALANCE CARRIED OVER TO BALANCE SHEET 1963.66 1344.53
Earning per share (Equity shares, face value of Rs. 10/- each)
Basic 0.96 0.9
Diluted 0.9 0.9
Expenditure During Construction 22
Accounting Policies 23
Notes to the Accounts 24

Shailendra Singh
XIMB-EPWP-2010
 FAM Assignment-NHPC

Corporate Profile Last 10 years

(Rupees in crore)
FINANCIAL 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-2000
Sales 2671.85 2243.73 1754.12 1614.11 1449.98 1276.09 1172.23 1221 1179.9 1075.7
@ Miscellaneous income 589.64 911.77 433.38 359.55 393.8 551.69 302.96 330.4 575.7 202.6
Profit before interest depreciation & tax
$ 2201.76 2201.93 1610.04 1454.71 1438.86 1477.37 1153.39 1183.5 1209.7 1070.7
Profit after interest & depreciation 1178.34 1146.65 1087.74 812.16 777.53 643.48 555 513.1 484.2 401.2
Profit after interest depreciation & tax
1075.22 1004.09 924.8 742.75 684.58 621.38 510.5 470.9 443.4 401.2
Dividend Paid 325 300 278 223 140 120 75 50 30 15
Reserves & surplus (cumulative) 6798.13 6093.34 5367.05 4709.89 4168.49 3594.27 3065.7 2598.5 2139.1 1690.6
WHAT CORPORATION OWNS
Gross Fixed Assets 21460.08 20639.51 12943.64 12755.52 10876.28 10342.71 8280.95 8113.5 7892.7 7752.7
Depreciation 3816.27 3262.66 2850.92 2527.83 2148.2 1882.95 1672.19 1526.7 1280.1 1029
Net Fixed Assets 17643.81 17376.85 10092.72 10227.69 8728.08 8459.76 6608.76 6586.8 6612.6 6723.7
Capital Workin progress 9401.77 6318.64 11399.92 8844.19 8787.19 6975.83 7078 5218.3 3710.8 2768.6
Construction Stores and Advances 1096.85 1077.34 856.43 778.95 770.14 805.55 621.74 525.5 613 511.5
Investments 2793.6 3049.22 3322.75 3832.81 3769.43 3660.87 2415.66 1965 679.9 0
Net Current Assets 605.76 713.03 -345.6 -225.34 138.69 107.76 1889.77 1512.2 1864.2 2100.9
Miscellaneous Expenditure not w/o. 2.33 0.34 25.8 24.55 1.18 0.71 1.2 2 9.8 1.9
31544.12 28535.42 25352.02 23482.85 22194.71 20010.48 18615.13 15809.8 13490.3 12106.6
WHAT CORPORATION OWES
Net Worth
Share Capital 11182.49 11182.49 11207.04 10576.09 9933.27 8629.03 7240.61 6345.7 5188.2 4446.2
Reserves 6798.13 6093.34 5367.05 4709.89 4168.49 3594.27 3065.7 2598.5 2139.1 1690.06
Income Received inadvance on account
of Advance 1329.47 1303.26 1245.98 1030.18 1071.15 939.4 801.06 648.4 519.9 386.1
Against Depreciation
Borrowings 12234.03 9956.33 7531.95 7166.69 7021.8 6847.78 7507.76 6217.2 5643.1 5583.7
31544.12 28535.42 25352.02 23482.85 22194.71 20010.48 18615.13 15809.8 13490.3 12106.6
OPERATING PERFORMANCE 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000
Generation(M.U.) 16583 14663 13049 12567 11286 11046 9863 8912 8774 8691
(%) Machine availability 93.61 96.13 94.11 98.16 95.3 96.82 96.62 96.86 92.09 91.05
Sales(Rs.incrore) 2671.85 2243.73 1754.12 1614.11 1449.98 1276.09 1172.23 1221 1179.9 1075.7
Manpower(Nos) 12028 12341 12768 13118 13470 13648 13017 13054 11850 12150
** Sales are net after tariff adjustment and
Advance
Against Depreciation
@ Includes receipts against contracts
$ After prior period adjustments

Shailendra Singh
XIMB-EPWP-2010