CONTENTS

TOPIC EXECUTIVE SUMMARY NTPC INTRODUCTION TO NTPC PRODUCT AND SERVICES FINDINGS AND ANALYSIS BHEL INTODUCTION TO BHEL PRODUCT AND SERVICES FINDING AND ANALYSIS COMPARISON WITH NTPC BEML INTRODUCTION TO BEML PRODUCT AND SERVICES FINDINGS AND ANALYSIS COMPARISON WITH NTPC ANNEXURE BALANCE SHEET OF NTPC PROFIT AND LOSS ACCOUNT BALANCE SHEET OF BHEL PROFIT AND LOSS BALANCE SHEET OF BEML PROFIT AND LOSS PAGES 1 2 3-4 5-8

9-10 10-12 13-16 17 18. 19-20 21-25 26 27-28 29-30 31-32 33-34 35-36 37-38

EXECUTIVE SUMMARY
In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. In reality, capital structure may be highly complex and include dozens of sources. In a perfect market, how a firm is financed and is irrelevant to its value. This result provides the base with which to examine real world reasons why capital structure is relevant, that is, a company's value is affected by the capital structure it employs. Some other reasons include bankruptcy costs, agency costs, taxes, and information asymmetry. This analysis can then be extended to look at whether there is in fact an optimal capital structure: the one which maximizes the value of the firm. In this report we have analyzed the capital structure of BEML, NTPC and BHEL with the help of calculating its leverage ratios. These leverage ratios included debt ratio, debt equity ratio and interest coverage ratios. Leverage of a company gives an idea of the company's methods of financing or to measure its ability to meet financial obligations. We also compared the capital structure of BEML and BHEL with its market leader NTPC to analyze how much these company has to improve to compete efficiently with NTPC. The report also indicates the financial risk involved in the companies, the debt the company has and how it is utilizing its finances for growth and expansion.

INTRODUCTION TO NTPC

Indias largest power company, NTPC was set up in 1975 to accelerate power development in India. NTPC is emerging as a diversified power major with presence in the entire value chain of the power generation business. Apart from power generation, which is the mainstay of the company, NTPC has already ventured into consultancy, power trading, ash utilization and coal mining. NTPC was ranked 337th in the 2012, Forbes Global 2000 ranking of the Worlds biggest companies. NTPC became a Maharatna company in May, 2010, one of the only four companies to be awarded this status.

The total installed capacity of the company is 39,674 MW (including JVs) with 16 coal based and 7 gas based stations, located across the country. In addition under JVs, 7 stations are coal based & another station uses naptha/LNG as fuel. The company has set a target to have an installed power generating capacity of 1, 28,000 MW by the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16% Gas, 11% Nuclear and 17% Renewable Energy Sources(RES) including hydro. By 2032, non fossil fuel based generation capacity shall make up nearly 28% of NTPCs portfolio. NTPC has been operating its plants at high efficiency levels. Although the company has 17.75% of the total national capacity, it contributes 27.40% of total power generation due to its focus on high efficiency. Vision To be the worlds largest and best power producer, powering Indias growth.

Mission Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society.

Products::

Electricity

Services:

Construction Management Environment Engineering and Management Erection and Commissioning Financial Systems and Modeling HRD and Training Information Technology Support & Special Projects Lender's Engineer Services Management Consultancy Materials Management Operation and Maintenance Owner's Engineer Services Project Management Procurement Services Quality Assurance and Inspection Services Restoration, Efficiency Improvement and Renovation and Modernization Research and Development Turnkey Execution

NTPC successfully explored more than one way to generate power. Other than thermal power, it operates in hydro and gas regions too. As a natural progression of its in-depth understanding of the power sector and formidable track record, NTPC has now ventured into three related fields. Consultancy for the power sector, setting up a training institute for the same and R&D.

Consultancy

The Consultancy Wing of NTPC, with an ISO 9001:2000 accreditation, undertakes all the

Consultancy and turnkey project contracts for Domestic and International clients in the different phases of Power plants With the string of achievements behind it, NTPC has emerged as the acknowledged leader in engineering, construction, O&M, RLA/R&M and management of power projects. Power Management Institute

NTPC runs a state-of-the-art Power Management Institute(PMI), at NOIDA. PMI has over the years trained a large number of professionals from NTPC, State Electricity Boards and other power utilities in the country. Also, participants in PMI programmes have come from various South Asian and Middle Eastern countries.

Finding & Analysis LEVERAGE RATIO Debt Ratio = Debt/ Value

PARTICULARS 2012 DEBT 47,338.33 VALUE RATIO

60,000.00 50,000.00 40,000.00

2011 43,188.24 51433.7 0.84

2010 37,797.00 46042.5 0.82

2009 34,567.80 42813.3 0.81

55583.79 0.85

DEBT 30,000.00 20,000.00 10,000.00 0.00 2012 2011 2010 2009 VALUE

INTERPRETATION- This ratio tells us how much the company realize on debt to finance its assets, the lower the companys reliance on debt for asset formation the less risky the company is since excessive debt can lead to a very heavy interest and principle repayment per day. However, when a company chooses to forgo debt and rely largely on equity, they are also giving up the tax reduction effect on interest payments. Thus a company will have to consider both risk and tax issues while deciding upon an optimal debt ratio. The company is financing and relying in more on debt as its ratio is more than 0.5 over the period of 4 years.

5 DEBT- EQUITY RATIO = DEBT/ EQUITY

PARTICULAR DEBT EQUITY RATIO

2012 47,338.33 8,245.46 5.74

2011 43,188.24 8,245.46 5.23

2010 37,797.00 8,245.50 4.58

2009 34,567.80 8,245.50 4.19

50,000.00 45,000.00 40,000.00 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 2012 2011 2010 2009 DEBT EQUITY

INTERPRETATION- The greater the companys leverage the higher the ratio. Companies with higher ratios are thought to be more risky because they have more liabilities and less equity. The companys ratio over the 4 years show that the company has very high debt to equity ratio which typically indicates that the firm has been borrowing aggressive to finance its growth and as a result may experience a burden of additional interest expense. INTEREST COVERAGE RATIO = EBIT/ INTEREST

PARTICULARS EBIT INTEREST RATIO

18,000.00 16,000.00 14,000.00 12,000.00 10,000.00 8,000.00 6,000.00 4,000.00 2,000.00 0.00 2012

2012 16,840.92 1,711.64 9.83

2011 15,231.39 2,027.21 7.51

2010 15,338.90 1,861.90 8.29

2009 13,596.40 1,737.00 7.83

EBIT INTEREST

2011

2010

2009

INTERPRETATION- this ratio is the measure of the number of times a company could make the interest payments on its debt with its earning before interest and taxes. The lower the interest coverage ratio , the higher the companys debt burden and the greater the possibility of bankruptcy and default.

DEGREE OF FINANCIAL LEVERAGE = %Change in EPS / % Change in EBIT PARTICULARS %Change in EPS % Change in EBIT DFL 2012 1.35 10.56 0.12 2011 4.24 (0.7) (6.05) 2010 6.43 12.8 0.50 2009 10.67 (8.29) (1.29)

ANALYSIS OF CAPITAL STRUCTURE Company has same level of equity over the period of 4 years means that company has never issued further equity to finance and expand its capital structure without diluting its control . The companys debt rate level has increased over the period of time to expand its capital structure. The company has adopted trade off theory of capital structure .The company has very high debt to equity ratio which typically indicates that the firm has been borrowing aggressive to finance its growth and as a result may experience a burden of additional interest expense The company has adopted a multipronged growth strategy which includes capacity addition through green field projects, brown field expansions, joint ventures and acquisitions towards its journey to become the worlds largest power producer. In addition to furthering capacity addition through Coal / Gas based thermal power projects, Company has been pursuing enhancement of its power generation portfolio through Hydro, Renewable Energy and Nuclear energy projects. It has 71 Projects under Implementation. The Companys various projects having aggregate capacity of 14,818 MW including 2,890 MW, being undertaken by Joint Venture Companies were under construction as on 31.03.2012 excluding 2,160 MW commissioned