A Project Report

On
Ratio Analysis
Of
Northern Coalfield Ltd (A Subsidiary Co. Of
Coal India Ltd)

Under the supervision of: Submitted by:

MR.SHALIL CHARABORTI DHANANJAY KUMAR

(AREA FINANCE MANAGER) Reg.No. 10901937

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 INDEX

SR.No PARTICULARS

1. INTRODUCTION 6-22

• Executive Summary
• Project Details
• Introduction of CIL

• Introduction Of NCL
2. REVIEW OF LITERATURE 23-26
3. RESEARCH METHODOLOGY 27-30
• Introduction of Research Methodology

• Research Objectives

• Research Design

• Tools and Techniques

4. DATA COLLECTION,ANALYSIS AND 31-45

INTERPRETATION

5. FINDING AND RECOMMENDATIONS 46-47

6. REFERENCES 48

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 VISION
“Be the leading energy supplier in the country, through best practices from
mine to market”
MISSION
“The mission of Coal India Limited is to produce and market the planned
quantity of coal and coal products efficiently and economically with due regard
to safety, conservation and environment.”

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 PREFACE

For a management student theoretical knowledge as well as practical orientation

expose on self to experience, one can again be mastering it is best possible time.
MBA curriculum has been finding turned in such way that a student not
apply the theoretical knowledge but also gain it in a practical sense. Thus
objective can be attained thought application of theory tools concept &
techniques of management.
Balanced, theoretical & practical knowledge are essential for every
student is conceived in such a way so as to facilitates practical purpose.
To procure objective the research under to the project “Ratio Analysis
of NCL, Khadia (A Subsidiary Company of Coal India Ltd)”.
Secondary data were collected from websites, and journal of Northern
Coalfield Ltd.
I have tried to satisfy the topic of report by help of facts & finding.

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 ACKNOWLEDGEMENT

It gives me immense pleasure to present the project on “Study on Ratio

Analysis of NCL”. It was a totally different & wonderful experience to be there
in NORTHERN COALFIELD LTD as a summer trainee.
I express my sincere gratitude to Mr. Mr.Shalil Chakraborti, Area
Finance Manager of NCL his project guide who has been so co-operative &
helpful from the first day of training till end. He also helped him a lot in
enhancing knowledge about the technicalities of Finance Sector.
I am also thankful to my faculty guide Ms Anushital Sinha for their
continuous support throughout my training
I confess deep sense of gratitude towards my parents as well as my friends
their constant encouragement and timely suggestion.
In all it was a great experience of working on this project.

Executive Summary
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During the summer internship ,I was working with the Finance department of
NCL(A subsidiary of CIL).NCL is the only subsidiary of CIL producing 100%
of coal from open cast mines there is steep demand in power and energy
generation in country. The major demand of coal on NCL is from power plants,
which contributes more than 96% of the total demand .Coal price in India was
previously regulated by Central Price Regulatory Authority, now this has been
decentralized and the same has been delegated to the Coal India Ltd. The
biggest coal producing company in India .Every countries economic condition
depends upon the performance of its Industry .How the investors are interested
in it as it will help in the increment in the flow of foreign exchange. A sound
and well performing industry will always attract investors as it will give them a
return in a less time period .But it is not easy for layman to understand or to
properly analyze the performance of the company.

To understand the performance of any company we have to do financial

statement analysis .Ratio Analysis is a widely used tool of financial statement
analysis. It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined .The term ratio
refers to the numerical or quantitative relationship between two variables. Ratio
Analysis helps in inter-firm comparison by providing necessary data .An
intrafirm comparison indicates relative position. It provides the relevant data for
the comparison of the performance of different departments. If comparison
shows a variance, the action may be initiated immediately to bring them in line.

In this report I will try to explain on different financial parameters as in ratio or

data analysis are used to know how this company doing and whether it would

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be win-win situation for the prospective investors who are looking forward to
this company as a profitable investment avenues, as it is going to come up with
disinvestment plan.
During 42 days internship program I met a lot of people ,I learnt proper time
management, I learnt that contacting people ,meeting them and convincing
them requires a thorough knowledge about everything and a lot of confidence to
be able to speak in front of them. This training definitely helped me to gain
confidence and made me aware about the great scope and potential in the CIL.

Project Details:

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I have done my summer internship from NCL a subsidiary company of CIL
(Coal India Ltd), Duration of Training from 14.06.2010 to 30.07.2010, Place of
training (NCL, Khadia project) on Ratio Analysis .Under the guidance of Mr.
S.Chakraborty (AFM). I’ll be doing the comparative study of Two years
through liquidity ratios, solvency ratios, activity ratio and profitability ratio.

INTRODUCTION OF COAL INDIA LTD

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The Indian energy sector is largely dependent on coal as the primary source of
energy. After the Indian independence, a greater need for coal production was
felt in the First Five Year Plan. In 1951 a Working party for the coal industry
was set up, which suggested the amalgamation of small and fragmented
producing units. Thus the idea of a nationalized, unified coal sector was
establish.
In the pre nationalized era coal mining was controlled by private owners, and
suffered from their lack of interest in scientific methods, unhealthy mining
practices and sole motive of profiteering. The miners lived in sub-standard
conditions as well. In 1956, the national Coal Development Corporation
(NCDC) was formed with 11 collieries with the task of exploring development
of new coal mines.

The year 2008 witnessed the various initiatives taken by the Ministry of Coal
during the past one year which include issuing comprehensive guidelines to
ensure allocation of coal on ‘cost plus basis’; 197 coal block with Geological
Reserves (GR) of about 43505.62 mt have been allocated so far; introduction of
coal distribution through e-auction by Coal India Limited (CIL); completion of
pilot study sponsored by CFRI on ‘Migration from existing UHV based
gradation of coal to GCV base and efforts being made for signing the National
Coal Wage Agreement-VIII at the earliest.
Coal/Lignite projects sanctioned during the year 2008
 Kakatiya Long wall Project of SCCL for a coal production capacity of

2.747 Mt and net capital requirement of Rs.453.63 crore after accounting

for the revenues projected to be generated during construction of the
project and the related capitalization and for a total outlay of
Rs.620.03 crores (excluding IDC of Rs.18.90 crores).

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  Neyveli Lignite Corporation’s project for development of 1000 MW coal

based Thermal Power Project (2 x 500 MW) at Tuticorin,

Dist. Tuticorin, Tamil Nadu State through a Joint Venture Company
named “NLC Tamil Nadu Power Limited” formed jointly by
Neyveli Lignite Corporation (NLC) and Tamil Nadu Electricity Board
(TNEB) at a capital cost of Rs. 4909.54 Crores with the direction that the
increased Power allocation sought by TNEB be settled expeditiously for
moving ahead with the project.

 Formation of the joint venture company with Tamil Nadu Electricity

Board by the name of “NLC Tamil Nadu Power Limited” as per the
Memorandum of Articles (MoA) and Articles of Association(AoA) for
setting up of 1000 MW coal based thermal power project at Tuticorin,
Tamil Nadu with shareholding of 89 % of the equity capital
by Neyveli Lignite Corporation and 11 % of Tamil Nadu Electricity
Board.
 Composition of Board of Directors of NLC Tamil Nadu Limited, the
joint venture company, with a total of 9 directors.
Coal India Limited (CIL) has been conferred the Navratna status with effect
from 24.10.2008.

Allocation of Coal Blocks

197 coal blocks with Geological Reserves (GR) of about 43505.62 mt have
been allocated so far. 21 coal blocks have come into production till
date. Production from these 21 blocks during 2008-09 (up to Nov, 08) was
around 18.815 million tones. 24 Coal blocks with GR of about
3391.086 mt have been allocated during the year 2008 for various
power/cement/Sponge Iron companies for captive use.
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Coal Linkages

Standing Linkage Committee (Long Term) for Power, Cement and Sponge
Iron consider requirement of coal of consumers at the planning stage and links
the requirement in the long-term perspective from a rational source after
examining factors like quantity and quality required, time frame, location of the
consuming plants, transport logistics, development plan for the coal mine etc.
During the year 2008-09, the Committee has issued/authorized Letter
of Assurance (LOA) to a large number of consumers of the then Core Sector
namely Power, Cement and Steel (Sponge Iron Units) as detailed below:-

Name of the Number ofCapacity approved

Sector applications
approved
Power 8 4460 MW
utilities
IPPs 35 24915 MW
CementCPPs 28 888.5 MW
Total 71 30,263.5 MW

Supply of Coal on “cost plus basis”

In order to ensure allocation of coal on “cost plus basis” in a fair and

transparent manner, comprehensive guidelines have been issued by the
Ministry. Necessary details in this regard have been placed in the website of the
Ministry.

Coal Production

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Coal production during the years 2007-08 and 2008-09 (April- November 2008)
(provisional) is as indicated below:

ALL INDIA COAL PRODUCTION (In million tones)

YEAR CIL SCCL OTHERS TOTAL ANNUAL

GROWTH
%
2007-08 379.49 40.60 36.28 456.37 5.9
2008-09 236.90 28.49 27.31 292.80 8.4
(Apr.- (270.04MT
Nov.08) duringApr.-
(Provisional) Nov.07)

E-auction of coal

Coal distribution through e-auction was introduced by CIL with a view to

provide access to coal for such consumers who are not able to source coal
through the available institutional mechanisms for reasons like the seasonality
of coal requirement, limited requirement of coal not warranting long term coal
linkage etc. Under NCDP, about 10% of annual production of CIL has been
earmarked for offer under e-auction. During the period from April 08 to
October, 08 CIL offered a quantity of about 57 Million Tones of Coal as
compared to 16 Million Tones offered during the same period of the previous
year.
Coal Sector reforms
An Expert Committee set up under the Chairmanship of Shri.
T.L. Sankar to suggest a road map for the Coal Sector Reforms has since

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submitted its final report in October, 2007. Action on most of the
recommendations has already initiated by Ministry of Coal. Actions of the
deliberations have been initiated on some recommendations which require
wider consultations. The report once implemented will help in coal sector
reforms in a big way.

Grading of Coal

CFRI has completed a pilot study sponsored by Coal India Limited and NTPC
on “Migration from existing UHV based gradation of coal to GCV base”. In
view of the resistance for switching over to GCV based grading of Coal by
major consumers, it is proposed to first narrow down the existing bands of
Useful Heat Value (UHV) based grades of coal. To start with, the same is to be
applied at the selected pit head stations of NTPC for a period of 60 days with
effect from 1.12.2008.

National Coal Wage Agreement

Negotiations are going on in the meetings of Joint Bipartite Committee – VIII

(JBCCI-VIII) so that the next wage agreement, i.e. National Coal Wage
Agreement –VIII (NCWA-VIII), could be signed at the earliest. This would
result in the upward revision of pay and allowances of the employees of coal
sector as well as many other benefits in their perks and working conditions.

SOME IMPORTANT TIMELINE

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1972:- Coking coal industry nationalized and Bharat Coking Coal limited
(BCCL) formed to manage operations of all coking coal mines of Jharia
Coalfield.

1973:- Non-Coking coal nationalized; Coal Mines Authority limited (CMAL)

set up to manage these mines; NCDS operations bought under the ambit of
CMAL.

1975:- Coal India Limited formed as a holding company with 5 subsidiaries;

Bharat Coking Coalfields Limited, Central Coalfields Limited (CCL), Western
Coalfields Limited (WCL), Eastern Coalfield Limited (ECL) and Central Mine
Planning and Design Institute Limited (CMPDIL) .

1985:- Northern Coalfield Limited (NCL) and South Eastern Coalfields

Limited (SECL) carved out of CCL and WCL.

1992:- Mahanadi Coalfields Limited (MCL) formed out of SECL to manage

the Telcher and IB Valley Coalfields in Orissa.

2000:- De-regulation of coal pricing and distribution.

2007:- Coal India and four of its subsidiaries NCL, SECL, MCL, and WCL
accorded ‘Mini Ratna’ status.

2008:- Coal India Limited accorded ‘Navratna’ status.

Corporate Structure and Subsidiaries Companies of Coal India Ltd

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Coal India is a holding company with seven wholly owned coal producing
subsidiary companies and one mine planning & Consultancy Company. It
encompasses the whole range of identification of coal reserves, detailed
exploration followed by design and implementation and optimizing operations
for coal extraction in its mines. The producing companies are Eastern
Coalfields limited (ECL), Santoria, West Bengal; Bharat Coking Coal Limited
(BCCL) ,Dhanbad, Jharkhand; Central Coalfields Limited (CCL), Ranchi,
Jharkhand; South Eastern Coalfields Limited (SECL), Chattisgarh; Western
Coalfields Limited(WCL) , Nagpur, Maharastra; Northern Coalfields
Limited(NCL), Singrauli, Madhya Pradesh; and Mahanadi Coalfields
Limited(MCL), Sambalpur, Orissa; The consultancy company is Central Mine
Planning and Design Institute Limited (CMPDIL), Ranchi ,Jharkhand. North
Eastern Coalfields (NEC) a small coal producing unit operating in Mergherita,
Assam is under direct operational control of CIL.

Coal India operates through 79 areas and 473 mines of which 279 are
Underground, 163 opencast and 31 mixed mines. CIL further operates 18 coal
other

INTRODUCTION OF NCL

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Northern Coalfields Limited was formed in April 1986 as a subsidiary company
of Coal India Limited. Its headquarter is located at Singrauli, Distt. Sidhi
(M.P.). Singrauli is connected by road with Varanasi (220 Km.) – a holy city on
the banks of river Ganga, and Rewa (206 Km.) – the state of white tigers and
Sidhi (100 Km.) – district headquarter town of Madhya Pradesh. The nearest
railway station is Singrauli located on the Katni-Chopan branch line running
parallel to the northern boundary of the Coalfield. The nearest railway station
for reaching directly to Delhi and Kolkata is Renukoot that is located on the
Garhwa-Chopan rail-line. Nearest (private) airstrip is at Muirpur (60 Km.).

The area of Singrauli Coalfields is about 2202 Sq.Km. The coalfield can be
divided into two basins, viz. Moher sub-basin (312 Sq.Km.) and Singrauli Main
basin (1890 Sq.Km.). Major part of the Moher sub-basin lies in the Sidhi
district of Madhya Pradesh and a small part lies in the Sonebhadra district of
Uttar Pradesh. Singrauli main basin lies in the western part of the coalfield and
is largely unexplored. The present coal mining activities and future blocks are
concentrated in Moher sub-basin.

The exploration carried out by GSI/NCDC/CMPDI has proved abundant

resource of power grade coal in the area. This in conjunction with easy water
resource from Govind Ballabh Pant Sagar makes this region an ideal location
for high capacity pithead power plants. The coal supplies from NCL has made it
possible to produce about 10515 MW of electricity from pithead power plants
of National Thermal Power Corporation (NTPC), Uttar Pradesh Rajya Vidyut
Utpadan Nigam Ltd (UPRVUNL) and Renupower division of M/s. Hindalco
Industries. The region is now called the "power capital of India". The ultimate
capacity of power generation of these power plants is 13295 MW and NCL is
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fully prepared to meet the increased demand of coal for the purpose. In
addition, NCL is also supplying coal to power plants of Rajasthan Rajya Vidyut
Utpadan Nigam Ltd, Delhi Vidyut Board (DVB) and Hariyana State Electricity
Board.
NCL produces coal through mechanised opencast mines but its commitments
towards environmental protection is total. It is one of very few companies
engaged in mining activities, which has got ISO –14001 Certification for its
environmental systems.
NCL, through its community development programmes, has significantly
contributed towards improvement and development of the area. It is helping
local tribal, non-tribal and project-affected persons in overall improvement of
quality of their life through self-employments schemes, imparting education
and providing health care.

Organizational Objectives of NCL

There are some Organizational objectives of NCl which is mention here:

 To ensure planned production of coal efficiently, matching with

increasing demand of
Coal, which is the prime source of energy for the nation.
 To generate safety awareness amongst employees as also to create safe

working culture.
 To ensure clean, green and pollution free environment at working places
and also at surrounding areas.
 To ensure optimum capacity utilization of men, machinery and available

resources.
 To ensure cost control by developing cost consciousness.
 To ensure strict quality control for better consumer satisfaction.
 To ensure perfect manpower planning and also harness the best out of

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 available human resource.
 To ensure improved quality of life of work force through welfare
measures
 To be concerned for the community especially for the tribal and backward
sections of the society residing in and around mining projects.
 To ensure rehabilitation of project affected people (PAP) as per the
guidelines provided by Coal India Limited and approved by the Ministry
of Coal and also taking PAPs into confidence to elicit their co-operation
in achieving Corporate Objectives.
 To develop good work culture through disciplined, contended and
motivated workforce for achieving Organizational Objectives.
Salient features
TOTAL AREA 2202 Sq.Km.
AREA OF MOHER BASIN 312 Sq.Km.
AREA OF MAIN BASIN 1890 Sq.Km.
ESTIMATED RESERVES OF MOHER
BASIN 8.31 Billion Tonnes
As on 31.03.07
BALANCE MINEABLE RESERVES OF
MOHER BASIN (up to 300 meter depth) As 2.68 Billion Tonnes
on 31.03.07
LIFE OF COALFIELD AT SCHEDULED
37 YRS.
RATE OF PRODUCTION.
JHINGURDA 130-138
m D-E
COAL SEAMS IN MOHER BASIN, PUREWA TOP 9 m D-E
THICKNESS & GRADE PUREWA BOTTOM 12
m C-D
TURRA 20 m C-E
GRADIENT 2 to 5 DEGREES
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Note: Jhingurda seam is the Thickest Coal Seam of India

NCL-At a Glance
 Explored area of the Maher Basin of Singrauli Coalfields is about 210
Sq.Km.
 Presently the coal mining activities are done over an area of about 100
Sq.Km.
 At present NCL produces only power grade coal through

10nos.mechanised opencast mines located in M.P (about 81% of

Prod.)And U.P State (about 19% of Prod).
 NCL is presently the highest profit earning company of CIL.
 The profit (Before tax)of NCL grown from Rs.74.70 crores (1986-87) to
Rs.3131.01 crores(2008-2009).
International Stadards
 ISO 14001 Certification for Environment Management System since
2001and renewed up to 2010.
 ISO 9001: 2000 Certification for Quality Management System 11 May
2009 and valid until 2010

NCL’s ROLE IN REGIONAL DEVELOPMENT (SINGRAULI AREA)

NC L has undertaken several development activities in around Singrauli

Area .These activities have significantly contributed towards the overall
development of the regions.

 NCL has undertaken development activities including infrastructure

facilities.

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  Maintenance and repair of Roads – Shaktinagar to Singrauli & Morwa to
Bargawa
 Drinking water –Hands Pumps, Wells.

 200 Bedded Hospitals.

 Health Centers at 5 Rehabilitation Villages.

 Mobile Ambulance Services for Red Cross Society.

 A forestation- Plantation of 192.3 crore plants till 31st March 2007.

 Setting up Rehabilitation Villages with all infrastructure facilities such as

Roads. Drains, Street Lighting School, Health Centre, Shopping centre,

Community Building.

CONSUMER PROFILE OF NCL

SECTOR COAL % Share

SUPPLIED(MT)
Power 61.714 96.08%
Aluminum 0.714 0.40%
Other 2.260 3.52%

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There are some Awards bagged by NCL for Excellence Performance, Safety
and environment:-
 1986:-Prestigious “INDIRA GANDHI NATIONAL AWARD FOR
EXCELLENCE” given to the BEST ENTERPRISES amongst the Public
Sector.
 1986:-NATIONAL SAFETY AWARDS (By the Hon’ble Pr
President of India
1986:- Three Awards
1987:- Two Awards
1988:- Two Awards
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 1992:- One Awards
2008:- One Awards
 1993:- Four Awards of Excellence (By Hon’ble Prime Minister for
Bina ,Nigahi, Amlohri and Jhingurda Projects
 1992:- National Awards for promotion of Family Planning

 2004:- Jawaharlal Nehru Memorial National Award

 2008:- Certificate of Excellence in Corporate Performance awarded by

CIL
 2008:-SCOPE Meritorious award for environmental excellence&
sustainable development.

Review of Literature
While research of Ratio analysis of NCL, Khadia I have been read some
articles, Review of literature some mentioning here:

John T Grady, April 2010, financial analysis is the cornerstone of credit risk
assessment. Commercial lenders and analysts study financial statements and
perform ratio analysis to identify and understand the risks in lending to a
business. The business's debt service coverage ratio (DSCR) is one of the
key ratios to calculate and analyze as a measure of the borrower's ability to
repay debt. The DSCR measure used by many bankers is the traditional debt

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service coverage ratio (TDSCR). A second, more detailed method to calculate
DSCR is to use the information reported in the borrower's UCA cash flow
statement (UCACFS). The purpose of this article is to apply these two methods
for calculating DSCR. It also will highlight the differences between the two
DSCR calculations and show the added benefit that the UCA-based calculation
can bring to the credit analysis. The important point is that when analyzing a
credit and the debt service ability; do not stop at the traditional DSCR.

Sam Subramanian, May 2010, Fundamental equity traders rely on factors

such as earnings, earnings growth or valuation ratios to select securities.
Technical traders use moving averages, trading volume patterns or price
breakouts. One method is not necessarily better than the other; each has its
merits. By leveraging the strengths of both of these styles, people can not only
increase their success rate in selecting securities, but also improve their
portfolio management. To understand the nuances of the two methods, it helps
to think of a company and its stock as two separate entities. This article has
demonstrated how technical analysis can be used to supplement the
fundamental assessment of a company. Ultimately, that technical analysis can
help to make trading decisions. These analyses also can be combined when
making sale decisions, as positions are unwound. By spreading buy and sell
decisions over wider periods and price points, investors can seek to earn higher
risk-adjusted returns

Kannika Damrongplasit, July 2010, this article uses the 2001 National Drug
Strategy Household Survey to assess the impact of marijuana decriminalization
policy on marijuana smoking prevalence in Australia. Both parametric and
nonparametric methods are used. The parametric approach includes endogenous
probit switching, two-part, sample selection, and standard dummy variable
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models, while the nonparametric approach uses propensity score stratification
matching. Specification analyses are also conducted. A nonparametric kernel-
based test is constructed to select between parametric and nonparametric
models, and the likelihood ratio test is used to choose among parametric
models. Our analyses favor the endogenous switching model where
decriminalization increases the probability of smoking by 16.2%.

John F Wasik, Aug 2010, History shows that you can earn great returns buying
stocks with sky-high share prices. The key is to avoid confusing a stock's price
with its value. As of June 4, 39 stocks trading in the US fetched $100 or more.
This article focuses on five with bright prospects. Google sells for 18 times
estimated 2010 earnings of $27.82 per share. As recently as 2007, Google's
average price-earnings ratio for the year was over 40. Apple sells for 19 times
estimated earnings of $13.38 per share for the year that ends this September.
The company holds $23 billion in cash and has no debt. At $189, AutoZone
shares sell at 13 times estimated earnings of $14.61 per share for the year that
ends this August. The Washington Post Co sells at 22 times estimated 2010
earnings of $20.58 per share, a big jump from the depressed levels of 2008 and
2009. Morningstar estimates Wasco Financial Corp's fair value at $455 per
share.

Robert B Durand, June 2010, In addition to its role as the optimal ex ante
combination of risky assets for a risk-averse investor, possessing the highest
potential return-for-risk trade-off, the tangency or maximum
Sharpe ratio portfolio in the Markowitz [1952, 1991] procedure plays an
important role in asset management because it minimizes the probability that a
future portfolio return falls below the risk-free, or reference, rate; this is a kind
of Value at Risk (VaR) property of the portfolio. In this article the authors
demonstrate the way this VaR, and related quantities, vary along the efficient
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frontier, emphasizing the special role played by the tangency portfolio. The
results are illustrated with ananalysis of the market crash of October 1987, as an
episode of extreme negative market movements, in which the tangency
portfolio performs best (loses least!) among a variety of portfolios.

Suleyman Basak,july 2010, This article analyses the implications of money

illusion for investor behavior and asset prices in a securities market economy
with inflationary fluctuations. We provide a belief-based formulation of money
illusion which accounts for the systematic mistakes in evaluating real and
nominal quantities. The impact of money illusion on security prices and their
dynamics is demonstrated to be considerable even though its welfare cost on
investors is small in typical environments. A money-illusioned investor's real
consumption is shown to generally depend on the price level, and specifically to
decrease in the price level. A general-equilibrium analysis in the presence of
money illusion generates implications that are consistent with several empirical
regularities. In particular, the real bond yields and dividend price ratios are
positively related to expected inflation, the real short rate is negatively
correlated with realized inflation, and money illusion may induce predictability
and excess volatility in stock returns. The basic analysis is generalized to
incorporate heterogeneous investors with differing degrees of illusion.

Paul Cullinane, June 2010, This article outlines the new methodology for
Financial Intermediation Services Indirectly Measured (FISIM), introduced in
Blue Book 2008, on the sector accounts. In particular the impact on interest
payments and receipts, and key aggregates such as household saving ratio and
net lending/borrowing.

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 RESEARCH METHODOLOGY

MEANING OF RESEARCH

Research is a careful and extensive investigation of a phenomenon with an

objective of advanced knowledge. Research in common parlances refers to a
search for knowledge. One can also define it’s a scientific and systematic search
for pertinent information on specific topic. In fact it is an art of scientific
investigation.

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Definition of Research

It is the systematic process of collecting and analyzing information in order to

increase over understanding of the phenomena about which we are concerned or
interested.

MEANING OF METHODOLOGY

Methodology is the procedure of research technique. It is logic of scientific

investigation. It is not a research model employed in a particular project but is
technique which entails the theoretical principal as well as a framework that
provide guidelines about how research is done.

METHODS OF DATA COLLECTION

Methods are tool or an instrument employed together empirical evidence or to

analyze it is a building of scientific knowledge is build through observation,
experiment, generalization and verification.

Data can be collected by two ways:

• Primary data
• Secondary data

PRIMARY DATA: Those data which are directly collected. Example-Interview,

Questionnaire.

SECONDARY DATA: Those data which are collected for the primary data or

which is already available. There is always some information available for

research to study and to understand the magnitude of the problem. Example –
Newspaper, Internet, Journal magazines etc.

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In this report data is secondary data which is collected from the annual report of
NCL.

• Data is taken from P&L a/c of 2 years from 08 to 09.

• Data is taken from the annual report of NCL.
• Evaluate the NCL performance using P&L a/c, Balance sheet.
• Study the various profitability ratios.
• Result can be shown with the help of graph, ratio etc.
• Compare and analyze the result.

Research Topic

My topic of Research is Ratio Analysis of NCL through which we will come to

know about, how NCL is doing in terms of Profitability, liquidity and Capital
structure which would be great interest for the prospective investors, as coal
India is planning for disinvestment and how the coal pricing policy is been
done, what are the basis, what are the statutory conditions that they take into
consideration.

Research objective of my study

 The main objectives of my study to know the financial position of the

company.
 To gain knowledge about financial strength of the company.

RESEARCH DESIGN

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It is a framework or blueprint for conducting the research project. The design
should be conceived keeping in mind the objectives and should clearly define
the activities needed to be understand while conducting the study. It helps the
researcher to foresee various research operations. So in my research there are
different methods or steps which are use by me for taking a good research.

Descriptive Research Design

Descriptive research is use to obtain information concerning the current status

of the phenomena to describe “what exists” with respect to variables or
conditions in a situation. The method involved range from the survey which
describes the status quo, the correlation study which investigates the
relationship between variables, to developmental studies which seek to
determine change over time.

Statement of the problem_ Analysis of Financial performance of NCL

• Identification of information needed to solve the problem _Financial
statement
• Selection of the instruments for gathering the information _Written
• Analyses of the information all collected data were compiled.

Data used:

Secondary data

The whole project is carried out under the supervision of Mr.Shalil

Charaborti (Area Finance Manager) In N.C.L, Khadia project He has
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 provided us the annual report of N.C.L of the two financial year. My project
is based on secondary data. And I have collected this data from different
websites and timely consulted managers out there. All the quantitative work
of secondary data collected by me had been carried on MS Excel. Because
of the user friendly and reliability it was good to use.

Statistical study – In this research I want to do Statistical study for the

fulfill of Quantitative nature

TOOLS and Techniques used for Analysis:

Basic Mathematics and Statistics and ms-excel techniques were used for the
purpose of analysis. I have used ratio analysis as a technique of evaluation.

DATA COLLECTION, ANALYSIS AND INTERPRETATION

Balance Sheet of Northern Coalfields Limited

SOURCES OF FUND 31st Mar 2008 31st Mar 2009

Shareholders’ funds:
Share Capital 17767.28 17767.28
Share Money Pending Allotment - -
Reserves & Surplus 648320.08 589878.63

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Deferred tax Liability 8555.78 13779.34
Loan Fund:
Secured - -
Unsecured 96380.45 81503.87
Total 771023.59 702929.12

APPLICATION OF FUND

Fixed Assets
Gross Block 650833.29 616845.55
Less: Depreciation 459396.48 433618.07
Net Block 191436.81 183227.48
Capital Work-in Progress 25695.77
31684.42
Surveyed off Fixed Assets-Awaiting 678.73 472.29
Disposal
Total F.A 217811.31 215384.19

Investments 8019.20 9164.80

Current Assets, Loans &Advances:
Sundry Debtors 7372.85 5182.79
Inventories 35935.07 29773.51
Cash & Bank Balance 550602.46 395923.24
Loans & Advance 307404.90 307737.07
Other current Assets 26426.60
19908.03
Cost of Removal of Overburden - -
Total Current Assets, Loans & adv 927741.88
758524.64
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Less Current liabilities & provisions 382548.80 280144.51
Net Current Assets 545193.08 478380.13

Total 771023.59 702929.12

P/L Account of Northern Coalfields ltd, Singrauli

(RS.IN LAKHS) (RS.IN LAKHS)

31st March, 31st March,
2008 2009
INCOME:
Sales 545520.71 655194.21
Coal issued for other - -
purpose
Accretion/ Decretion in 3034.08 -2935.11
Stock
Accretion/ Decretion in 1392.53 -517.79
Stock(Workshop)
Other Income 62183.80 83847.85
Extraordinary Income 1571.54 53.03
Total Income 613702.66 735642.19
EXPENDITURE:
Consumption of Stores & 109832.63 119326.32
Spares
Employees Remuneration 58547.04 102783.21
& Benefits
Social Overhead 17147.48 21677.81
Power & Fuel 18878.80 17993.58
Repairs 10524.52 11375.71
Contractual Expenses 42428.29 75718.24
Miscellaneous Expenses 17959.90 24359.22
Overburden Removal 25150.41 2886.50

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Adjustment-Existing
Mines
Total Expenditure 300469.07 376120.59
Gross Operating 313233.59 359521.60
Profit/loss
Interest 3073.47 2436.10
Financial / Commitment 1231.70 2335.34
Charges
Depreciation 30261.92 42208.67
Provisions 1649.88 1498.35
Provision Written Back -244.93 -1481.21
Write off 671.68
Profit/Loss for the year 276589.87 312524.35
Prior period -214.78 576.74
Adjustment
Profit/ Loss Before 276375.09 313101.09
Taxation
Prov for Income Tax 106000.00 122500.00
for the current year
Prov/Adj. for Income -370.66 -737.88
Tax for the earlier year
Prov/Adj. for Deferred -6616.59 -5223.56
Tax for the year
Provision for Fringe 196.00 470.00
benefit tax
Profit After Tax 177166.34 196092.53
Profit Upto The 395421.5 429315.2
Previous Year 7 9
Less: Provision for 1190.53 -
Employee benefits For
the earlier Year
394231.04 429315.29
Profit Available for 571397.38 625407.82
appropriation

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APPROPRIATIONS:
Interim Dividend 50000.0 50000.0
0 0
Final 56299.8 67655.5
Dividend(Proposed) 0 2
106299.80 117655.52
Provision for Dividend 18065.65 19995.55
Tax
Adj for Deemed - -
Dividend Tax for the
earlier year
Transferred to General 17716.63 19609.25
Reserve

BALANCE CARRIED 429315.30 468147.50

TO BALANCE SHEET
Basic and Diluted 9971.49 11036.72
Earnings per share

INTRODUCTION OF FINANCIAL RATIO

As we know that financial ratio are useful indicates of a firm’s performance and
financial Situation .Most ratio can be calculated from the information provided
by the financial statement. Financial ratio can be utilized to analyze trends and
compare the firm’s financial to those of the other firms.

Liquidity Ratio
It refers to the liquidity position of the firms overall financial position. It
provides the information about a firm’s ability to meet its short term financial

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obligations. They are of particular interest to those extending short term credit
to the firm.

Here,
Current Assets = Sundry Debtors + Inventories + Cash and Bank Balance +
Loans and Advance + Other Current Assets.

2008(in Lakhs) 2009(in Lakhs)

Sundry Debtors 5182.79 7372.85
Inventories 29773.51 35935.07
Cash & Bank balance 395923.24 550602.46
Loans & Advance 307737.07 307404.90
Other Current Assets 19908.03 26426.60
Total 758524.64 927741.88

Current Liability & provisions

2008 = 280144.51

2009 = 382548.80

Current Ratio = Current Asset/Current liability

The current ratio is the ratio of current assets to current Liability.

2008 = 758524.64/280144.51 = 2.70:1

2009 = 927741.88/382548.80 = 2.42:1

Interpretation:

As we know that the standard Ratio should be 2:1 but when I calculate the
Current Ratio of NCL then It is 2.70:1 in 2008 and 2.42:1 in 2009. Higher the

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Current ratio better it is signifies higher liquidity. So company manager should
take good decision to reduce this Ratio. Another way of interpretation is to
observe the behavior of this ratio over period of time. It is called time series
Analysis. When I compare the Current Ratio of Two year than Ratio gone
down. It means that the liquidity position of NCL has deteriorated over period
of time. So I can say that NCL is trying to reduce excessive investment in
current Assets.

Note: I assumed that Loans & Advance is shot term assets, which is not
mention in the balance sheet

Net Working Capital = Current Assets – Current Liability

2008 2009
Current Assets 758524.64 927741.88
Current Liability 280144.51 382548.80
Net Working Capital 478380.13 545193.08

Interpretation:

When I calculate net working capital of company, it comes 478380.13 lakhs in

2008 and 545193.08in 2009. As we know that if the net working capital is
positive it’s good for the company. It helps company in operational expenses
and payment of short term liability .As this ratio signify Excess of current assets
over current liability which shows that the company has ample amount to meet
its short term Liability. It has also increased by significant amount which is
good for the company.
Quick Ratio = Quick Assets/ Current Liability

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 Quick Assets = Current Assets – (Inventories + prepaid Expenses)

= Sundry Debtors + Cash and Bank Balance + Loans and

Advance + Other Current Assets

2008(in Lakhs) 2009(in Lakhs)

Sundry Debtors 5182.79 7372.85
Cash & Bank balance 395923.24 550602.46
Loans & Advance 307737.07 307404.90
Other Current Assets 19908.03 26426.60
Total 728751.13 891806.81

Current Liability & provisions

2008 = 280144.51

2009 = 382548.80

Quick Ratio

2008 = 728751.13/280144.51 = 2.60:1

2009 = 891806.81/382548.80 = 2.33:1

Interpretation:

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Generally, a Quick ratio of 1:1 or more is considered to be good for the reason
that it indicates availability of funds to meet the liability 100%. However, this
rule of thumb varies from industry to industry as in current ratio and other ratio.

In case of NCL Quick Ratio is 2.60:1 from 2008 and 2.33:1 from 2009. It
means that the level of Liquidity of NCL is too high. Higher liquidity means
less profitability. But when I compare the ratio from 2008 to 2009 than it can be
seen that it is slightly gone down. So we can say that company has taken some
steps to reduce this higher liquidity.

Profitability Ratio
This ratio offers several different measures of the success of the firm at
generating profits.

Return on Assets = Net income after taxes*100/Total Assets

Net income after taxes

2008 = 177166.34
2009 = 196092.53

Total Assets = Total Fixed Assets + Investments + Total current assets,

Loans and Advance

2008 2009
Total Fixed Assets 215384.19 217811.31
Investments 9164.80 8019.20
Total CA, Loans& Adv 758524.64 927741.88
Total Assets 983070.63 1153572.39

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2008 = 177166.34*100/983070.63 = 18.02%
2009 = 196092.53*100/1153572.39 = 16.99%
Interpretation:

When I do the compare ratio between two year then I can see that Ratio of
return on assets gone down but it’s not in the risky situation. As still the return
is good. So I can say that the company manager should not worry about this
ratio, which gone down.

Return on Equity = Net Income after Tax*100/ Shareholders Funds

Net income after taxes

2008 = 177166.34
2009 = 196092.53

Shareholders’ Funds = Share Capital + Reserves & Surplus

2008 2009
Share Capital 17767.28 17767.28
Reserves and Surplus 589878.63 648320.08
Total 607645.91 666087.36

Return on Equity

2008 = 177166.34*100/607645.91 =29.15%

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 2009 = 196092.53*100/666087.36 = 29.43%

Interpretation:

It is gratifying to note that there has been increase in rate of return. For instance,
the return on assets has slightly increment from 29.15% to 29.43%. This seems
to be a potential for further improvement in its various rate of return by
increasing its gross Profit and operating profit margin.

Net profit ratio = net profit / net sales * 100

2008 = 276375.09 / 545520.71 * 100 = 50.66 %

2009 = 313101.09 / 655194.21*100 = 47.78 %

Interpretation:

When I calculate Net Profit Ratio of NCL then I can say that the profit margin
is gone down from 50.66% in 2008 to 47.78% in 2009.But it seems not worry
about this ratio because after decreasing the ratio, Company has good Profit
margin that is 47.78%.

CAPITAL STRUCTURE RATIO AND SOLVENCY RATIO

Total debt to Total capital = (Current Liability + Long term Liability)

/Total Liability

2008 = (280144.51 + 81503.87) /702929.12 = 0.51

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2009 = (382548.80 + 96380.45) /771023.59 = 0.62

Interpretation:

The ratio seems to be increased to .62 in 2009 from .51 in 2008 in respect of
capital structure of a firm. The first of these indicates what proportion of the
capital of a firm consists of debt. Although no hard and fast rules exist,
conventionally a ratio of 1:2 is considered to be satisfactory.

Debt Equity Ratio = Debt /Equity

2008 = 81503.87 /607645.91 = .13

2009 = 96380.45 /666087.36 = .14

Interpretation:

This ratio measures the degree of indebtedness of a business enterprise. So, it

gives an idea to a long – term lender regarding the safety of the principal. If this
ratio is high, then risk is more in extending a loan. Rule of thumb for this ratio
is 2:1. It means debt could be twice the equity. However, this Ratio like other
ratios varies from industry to industry.

NCL’s debt-equity ratio is too low and it has remained same when compared
with 2008. It means NCL has massive long – term debt raising capacity. If it
ever plans to expand its operation in future. NCL management has a very
conservative approach to financing as it finances.

Proprietary Ratio = Equity / Total Assets

2008 = 607645.91/983070.63 = .61 or 61%

2009 = 666087.36/1153572.39 = .57 or 57%

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Interpretation:

Total assets block of NCL is funded to the tune of 57% by Equity. This
percentage stood at 61% in 2008 .It means during one year 17.34% growth in
total assets has been funded by equity to tune of only 9.61%.Rest of the growth
has been funded primary by current liability which have grown over period of
By 36.55%.

ACTIVITY RATIO OR TURNOVER RATIO

These ratios help in commenting on the efficiency of the firm in managing its
assets. The speed with which assets are converted in to sales is captured in to
sales by activity ratios. The activity of any business enterprise is reflected by
the volume of sales it is able to generate.

Working capital turnover ratio = net sales / working capital

2008=545520.71 / 478380.1 = 1.14 times

2009=655194.21/545193.08 =1.20 times

Interpretation:

When I calculate Working capital ratio I can say that this ratio is very low in
nature. According to analysis higher the ratio better the position of the firm

Inventory turnover ratio = Sales / Average inventory

2008 = 545520.71/29773.51= 18.32 times

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Average Inventory= (29773.51+29773.51)/2=29773.51

Note: - I do not have balance sheet of 2007 .so I assume that 29773.51 is
average stock

2009= 655194.21/32854.29=19.94 or 20 times

Note: Average inventory= (29773.51+35935.07)/2=32854.29

Interpretation:

This ratio of 20 signifies that inventory of NCL is getting rotated over 20

times in 2009 and 18 signifies in 2008. However, going by the basic
nature of the ratio, higher the ratio, better it is. NCL could increase the
existing level of sales or by reducing the investment in inventory to a
level which commensurate to change in the level of sales and this is good
for the organization.

Debtor turnover ratio =Sales /Average debtor

2008= 545520.71/5182.79 = 105 times

Note: I am assuming average debtors is 5182.79

2009=655194.21/6277.82 = 104 times

Note: Average debtor = (5182.79+7372.85)/2=6277.82

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 Interpretation:

It means that debtor of NCL are getting turned over on an average 104
times in a year. Higher a turnover ratio, better it is. However, a too high
debtor’s turnover ratio generally means tight credit policy and hence
denial of opportunity to increase sales by offering liberal credit facility to
customers. Conversely the nature of product and inducting customer may
warrantee no credit, or very limited credit.

RESEARCH FINDING

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While making a comparative study of ratios of different years we came to know
the financial health of the company’s. On the other hand following were some
of the findings:

• While calculating the liquidity ratios we came to know that company

hold the best financial position for payment of Short term liability
• While calculating the turnover ratios we came to know that NCL has in a
better position in the industry which means that the company has the
capability of utilizing its assets to its maximum and that to optimally.
• While calculating the solvency ratios hold the best position which means
that it has an appropriate mix of debt and equity in financing the firm’s
assets.
• While calculating the Net Profit ratio we can say that company has doing
very good financial performance in both the year.

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RECOMMENDATIONS

After doing all data interpretation I have came to the recommendations

part of my research objectives which is mention here:-

• When I calculate liquidity ratio then I can say that company has
better financial position but I want to suggest that NCL should
reduce current ratio and liquid ratio because it can invest that
money in different place.
• I want to suggest second thing is that as we know that NCL is
doing well financial performance, but in 2009 it is goes down
approx 3% .So Company should know the main reason and work
on it.
• In 2009 Return on Asset is gown down by approx 1% .So
Company should increase this ratio because this ratio shows the
efficiency of the company to use its assets.

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 Bibliography:

NCL Annual report

www.scribd.com

www.ncl.nic.in/

Magazine- India Today; Edition June 14,2010

www.proquest.com

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