“ANALYSIS OF FINANCIAL PERFORMANCE OF

Engineering/Capital goods industrial equipment”

(A Comparative study of BHEL and BEML)

Project Report Submitted in Partial Fulfillment for the Award of Degree

Of
Bachelor of Commerce with Honors (B. Com (Hons.))

Under the Supervision of: Submitted by:

Mr. Maulik Chandnani Akshara Pradeep

(Associate Professor) Enrollment No:

RNBGU201500037

RNB GLOBAL UNIVERSITIY

BIKANER

November 2017

1
 CERTIFICATE OF ORIGINALITY

This is to certify that the project titled, “To analyze the Financial Statement of
engineering industrial equipment” is an original work and is being submitted in
partial fulfillment for the award of the Bachelor of Commerce from RNB Global
University, Bikaner. This report has not been submitted or published earlier to this
university or to any other university/institution for the fulfillment of the
requirement of a course of study.

SIGNATURE OF SUPERVISOR SIGNATURE OF STUDENT

Akshara.P
ENROLLMENT.NO:
RNBGU201500037
PLACE: Bikaner PLACE: Bikaner
DATE: DATE:

2
 ACKNOWLEDGEMENT

The satiation and euphonies that accompany the success completion of a task
would be incomplete without a mention of people who made it possible. So, with
immense gratitude, I acknowledge all those, whose guidance and encouragement
served as a beacon light and crowned my effort with success.

I have taken efforts in this grand project. However, it would not have been possible
without the kind support and help of many individuals and organizations. I would
like to extend my sincere thanks to all of them.

We are highly indebted to Mr. Maulik chandnani, Assistant Professor of RNB

Global University for his guidance, constant help and for providing necessary
information regarding the stock market operation and various industry sectors.

I express my thanks for his encouragement which help me in completion of this

project.

I would like to express my special gratitude to my parents who gave us continuous

support during the grand project work.

I would also like to thank RNB Global University (Bikaner) for providing me this
unique opportunity for self-learning.

3
 Executive Summary

This report examines the analysis of the statement like Balance sheets and Profit
and Loss A/c of past five years to know the performance of the company in
comparison with other players in the industry. Data of BHEL and BEML is
searched on their websites. Then data of these companies are arranged in the
uniform manner so that financial factors can be drawn out easily. With the help of
theoretical knowledge on the part of ratios and cash flow, all the relevant ratios of
each company for past five years have been founded. With the help of regression
analysis projected performance of various companies for 2016 - 17have been
forecasted. After a thorough study and discussion with the company’s professional,
comments were taken so that Interpretation of these ratios became easy and
accurate.
After analysis of this report we came to know BHEL is the leading

Revenue ₹29,474.99 crore(US$4.6 billion) (2017)[1]

Operating income ₹627.83 crore(US$98 million) (2017)[1]

Net income ₹495.86 crore(US$77 million) (2017)[1]

Total assets ₹61,230.20 crore(US$9.5 billion) (2017)[1]

Number of 39,821(2017)[1
employees

Table of content

4
1. Introduction.......................................................................................................................................6
1.1 Industry Profile................................................................................................................................9
1.2 Company Profile (BHEL)..............................................................................................................10
1.3 Company Profile (BEML).............................................................................................................12
2.Problem of the Study.……………………………………………..………………………………………………………………………14
2.1 Objective of the study........................................................................................................…………14
3. Reseach methodology......................................................................................................................15
3.1 Scope...........................................................................................................................................15
3.2Reseaerch Design .......................................................................................................................15
3.3Data Collection............................................................................................................................15
3.4 Target.........................................................................................................................................15
3.5 Limitations...............................................................................................................................15
4. Equity share data..............................................................................................................................17
4.1 Income data....................................................................................................................................20
4.2 Balance sheet..................................................................................................................................22
4.3 Current Ratio.................................................................................................................................24
4.4 Total Assets...............................................................................................................................25
5. Conclusion............................................................................................................................................. 33

5
 INTRODUCTION

The India Capital market consists of many financial institutes, Banks, Stock
Markets etc. The capital Market is being divided between two parts:

 Primary Market
 Secondary market.

The stock exchange comes in the secondary market & these exchanges are
performing various functions. Stock exchange performs these functions with the
help of middleman called the intermediaries. These intermediates act as a link in
between buyer & seller on the stock exchange. Without the presence of these
intermediaries it is impossible to trade on the stock exchange. Stock exchange is
trading in share, securities, gilt-edge securities, bonds, mutual fund &
commodities. There are 23 stock exchanges in India like BSE, NSE, Bangalore
stock exchange, Cochin stock exchange, Delhi stock exchange, Kolkata stock
exchange & many others.

NATIONAL STOCK EXCHANGE (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the
Indian stock market trading system on par with the international standards. On the
basis of the recommendations of high-powered Pertain Committee, Industrial
Development Bank of India, Industrial Credit and Investment Corporation of India,
Industrial Finance Corporation of India, all Insurance Corporations, selected
commercial banks and others incorporated the National Stock Exchange in 1992.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market

(b) Capital market.

There are two kinds of players in NSE:

(a) Trading members

(b) Participants.

6
Trading at NSE takes place through a fully automated screen-based trading
mechanism, which adopts the principle of an order-driven market. Trading
members can stay at their offices and execute the trading, since they are linked
through a Communication network. The prices at which the buyer and seller are
willing to transact will appear on the screen. When the prices match the transaction
will be completed and a confirmation slip will be printed at the office of the trading
member.

NSE has several advantages over the traditional trading exchanges. They are as
follows: NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since inter
market operations are streamlined coupled with the countrywide access to the
Securities. Delays in communication, late payments and the malpractice's
prevailing in the traditional trading mechanism can be done away with greater
operational efficiency and informational transparency in the stock market
operations, with the support of total computerized network.

7
The geographical location of all the stock exchanges is
shown

8
 Industrial Profile

The Indian Engineering sector has witnessed a remarkable growth over the last few
years driven by increased investments in infrastructure and industrial production.
The engineering sector, being closely associated with the manufacturing and
infrastructure sectors, is of strategic importance to India’s economy.
India on its quest to become a global superpower has made significant strides
towards the development of its engineering sector. The Government of India has
appointed the Engineering Export Promotion Council (EEPC) as the apex body in
charge of promotion of engineering goods, products and services from India. India
exports transport equipment, capital goods, other machinery/equipment and light
engineering products such as castings, forgings and fasteners to various countries
of the world. The Indian semiconductor industry offers high growth potential areas
as the industries which source semiconductors as inputs are themselves witnessing
high demand.
India became a permanent member of the Washington Accord (WA) in June 2014.
The country is now a part of an exclusive group of 17 countries who are permanent
signatories of the WA, an elite international agreement on engineering studies and
mobility of engineers.

The capital goods and engineering turnover in India is expected to reach US$
125.4 billion by FY17.
India exports its engineering goods mostly to the US and Europe, which accounts
for over 60 per cent of the total exports. Recently, India's engineering exports to
Japan and South Korea have also increased with shipments to these two countries
rising by 16 and 60 per cent respectively. Sri Lanka, Nepal and Bangladesh have
also emerged as the major destinations for India's engineering exports.
According to the India Electronics & Semiconductor Association, the Indian
Electronic System Design and Manufacturing (ESDM) market is expected to grow
at a CAGR of 16-23 per cent to reach US$ 228 billion by 2020 from $100 billion
in 2016-17. According to a study by The Associated Chambers of Commerce of
India (ASSOCHAM) and NEC Technologies, the demand for electronic products
in India is expected to grow at a Compound Annual Growth Rate (CAGR) of 41
per cent during 2017-20 to US$ 400 billion by 2020.
According to data from the Engineering Export Promotion Council of India,
engineering exports from India grew 11.33 per cent year-on-year to reach US$
65.23 billion in FY 2016-17. Exports of electrical machinery rose to US$ 4.6
billion in FY 2016-17 from US$ 3.7 billion in FY 2015-16.

9
 BHEL

BHEL is the largest engineering and manufacturing enterprise in India in the

energy related/infrastructure sector. BHEL was established more than four decades
ago ushering in the indigenous heavy electrical equipment in India. BHEL has
built over the years, a robust domestic market position by becoming the largest
supplier of power plant equipment in India, and by developing strong market
presence in select segments of the Industrial sector and the Railways. Currently,
80% of the Nuclear power generated in the country is through BHEL sets. For the
third consecutive year, BHEL’s performance was recognized by the prestigious
publication “Forbes Asia”, which featured BHEL in its fourth annual 'Fabulous 50'
list of the best of Asia-Pacific's publicly-traded companies. The company has been
earning profits continuously since 1971-72 and paying dividends since 1976-77.

VISION:

A world-class engineering enterprise committed to enhancing stakeholder value.

MISSION:

To be an Indian multinational engineering enterprise providing total business

solutions through quality products, systems and services in the fields of energy,
industry, transportation, infrastructure and other potential areas.

BHEL manufactures over 180 products under 30 major product groups and caters
to core sectors of the Indian Economy viz., Power Generation & Transmission,
Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide
network of BHEL's 14 manufacturing divisions, four Power Sector regional
centers, over 100 project sites, eight service centers and 18 regional offices,
enables the Company to promptly serve its customers and provide them with

10
suitable products, systems and services - efficiently and at competitive prices. The
high level of quality & reliability of its products is due to the emphasis on design,
engineering and manufacturing to international standards by acquiring and
adapting some of the best technologies from leading companies in the world,
together with technologies developed in its own R&D centers.

11
 BEML

Bharat Earth Movers Limited, now known as BEML, is an Indian Public Sector
Undertaking, with headquarters in Bangalore. It manufactures a variety of heavy
equipment, such as that used for earth moving, transport and mining.

BEML incorporated in May 1964, and commenced operations on 1 January 1965.

It was wholly owned and operated by India's Ministry of Defense until 1992, when
the government divested 25% of its holdings in the company. BEML is Asia's
second-largest manufacturer of earth moving equipment, and it controls 70% of
India's market in that sector. Its stock trades on the India under the symbol
"BEML", and on the Bombay Stock Exchange under the code "500048". The
company went for Follow on Public offer (FPO) and fixed the price band for its
FPO between Rs. 1,020 and Rs. 1,090.

Vision

To become a market leader, as a diversified company supplying products and

services to Mining & Construction, Railway & Metro and Defence Services and
emerge as an International Player.

Mission

1. Improve competitiveness through organizational transformation and

collaboration / strategic alliances / joint ventures in technology.

2. Grow profitably by aggressively pursuing opportunities in national and

international markets.

3. Attract and build people in a rewarding and inspiring environment by

fostering creativity and innovation.

12
BEML has manufacturing plants in Kolar Gold Fields,
Bangalore, Palakkad and Mysore. It has numerous regional offices throughout the
country. KGF unit is the main unit accounting for the manufacture and assembly of
a wide array of earth-moving equipment such as Bulldozers and Excavators. Rail
coaches are made in the Bangalore complex and the Mysore facility makes dump
trucks and engines of various capacities.

BEML manufactures a wide range of products to meet the needs of Mining,

Construction, Power, Irrigation, Fertilizer, Cement, Steel and Rail Sectors. The
earthmoving equipment includes Bulldozers, Dump Trucks, Hydraulic Excavators,
Wheel Loaders, Rope Shovels, Walking Draglines, Motor Graders and Scrapers.
BEML has recently introduced Road Headers and Slide Discharge Loaders for
underground mining applications. Railway products include Integral Rail coaches,
Electric Multiple Units, Rail Buses, Track Laying Equipment and Overhead
Equipment Inspection Cars. BEML manufactures Heavy Duty Trucks and Trailers
and hydraulic aggregates for transportation sector.
The company also manufactures high power diesel engines and heavy duty
hydraulic aggregates to meet specific customer requirements. The company plans
to diversify into varied activities including underground mining equipment,
underground storage for petro-products, leasing and financial services and joint
ventures abroad.

13
Problem Of The Study
“Comparative Financial Analysis of major engineering /capital goods in India”

OBJECTIVE OF THE STUDY:

 Primary :

To do fundamental analysis and calculate intrinsic value of Public Sector

Enterprises which are represented in NIFTY 50. Here PSEs is considered to be that
companies where Government of India is having more than 50% stake and no other
government is taken into consideration.

 Secondary :

1. Analyzing historical performance.

2. Estimating growth prospect of various companies.

3. Understanding Discounted Cash Flow model and its usage.

4. To learn about linkages between share values, earnings, and expected return on
capital.

14
Research Methodology

SCOPE:

The analysis is based on main activities i.e. operating activities of the company and
other activities are ignored. Assumptions are based on recent annual reports, past
performance, current trends in that sector and statistics of RBI. We have considered
only PSEs that are represented in NIFTY 50 and our assumptions are limited to
those companies only and not all PSEs or any other companies.

RESEARCH DESIGN:

Research design selected for this project is descriptive.

DATA COLLECTION METHOD:

Data for our objective was collected through companies’ website i.e. secondary
data and various other websites to know the current scenario.

TARGET:

Public Sector Enterprises of India representing in NIFTY 50. Here PSEs is those
companies where Government of India is having more than 50% stake and not any
other government.

SAMPLING TECHNIQUE:

Convenience sampling.

SAMPLE SIZE:

6 companies

LIMITATIONS:

1. Intrinsic values are based on operating income only and no other inflows are
considered.

15
2. The study has lack of contact with company personnel acted as
hindrance in the study
3. No company visits are possible so assumptions are based on secondary data,
current scenario
4. Uniformity of Content and Mode of preparation of financial statements was
not there among the various companies. So, it became difficult to compare
among each other.

16
 EQUITY SHARE DATA

BEM
BHEL L
BHEL/
Mar- LTD.
BEML LTD.
17 Mar-
16

High Rs 172 1,609 10.7%

Low Rs 112 807 13.9%

Sales per share

Rs 120.6 715.1 16.9%
(Unadj.)

Earnings per share

Rs 1.9 12.8 14.6%
(Unadj.)

Cash flow per share

Rs 5.3 25.7 20.7%
(Unadj.)

Dividends per share

Rs 0.80 4.00 20.0%
(Unadj.)

Dividend yield (eoy) % 0.6 0.3 170.0%

Book value per share

Rs 132.3 506.7 26.1%
(Unadj.)

Shares outstanding 2,447.

m 41.64 5,878.0%
(eoy) 60

Bonus/Rights/Convers
- - -
ions

Price / Sales ratio x 1.2 1.7 69.8%

17
 EQUITY SHARE DATA

BEM
BHEL L
BHEL/
Mar- LTD.
BEML LTD.
17 Mar-
16

Avg P/E ratio x 76.4 94.7 80.7%

P/CF ratio (eoy) x 26.7 47.0 56.8%

Price / Book Value

x 1.1 2.4 45.1%
ratio

Dividend payout % 43.0 31.4 137.1%

Rs 347,92 50,30
Avg Mkt Cap 691.7%
m 6 1

`0
No. of employees 40.3 8.8 456.7%
00

Rs
Total wages/salary 8,498 7,732 109.9%
m

Rs 7,319. 3,373
Avg. sales/employee 217.0%
Th 0 .4

Rs
Avg. wages/employee 210.8 876.0 24.1%
Th

Avg. net Rs
112.9 60.1 187.7%
profit/employee Th

18
SHARE HOLDING

Indian Promoters % 63.1 54.0 116.9%

Foreign
% 0.0 0.0 -
collaborators

Indian inst/Mut
% 16.6 23.6 70.4%
Fund

FIIs % 15.9 3.5 454.3%

ADR/GDR % 0.0 0.0 -

Free float % 4.4 18.9 23.3%

Shareholders 390,318 67,922 574.7%

Pledged
promoter(s) % 0.0 0.0 -
holding

19
 INCOME DATA
BEML
BHEL BHEL/BEML
Ltd
MAR 17 Ltd.
MAR 16.
Net Sakes Rs m 295,066 29,777 990.9%
Other income Rs m 9,834 392 2,510.5%
Total revenues Rs m 304,899 30,169 1,010.6%
Gross profit Rs m 8,269 1,296 638.0%
Depreciation Rs m 8,498 540 1,573.1%
Interest Rs m 3,513 493 713.2%
Profit before tax Rs m 6,091 655 930.1%
Minority
Rs m -236 0 117,800.0%
Interest
Prior Period
Rs m 0 -9 0.0%
Items
Extraordinary
Rs m 0 0 -
Inc (Exp)
Tax Rs m 1,304 115 1,135.1%
Profit after tax Rs m 4,552 531 857.3%
Gross profit
% 2.8 4.4 64.4%
margin
Effective tax
% 21.4 17.5 122.0%
rate
Net profit
% 1.5 1.8 86.5%
margin

20
 Net Profit Margin

This ratio also indicates the firm's capacity to face adverse economic conditions
such as price competition, low demand, etc. Obviously, higher the ratio the better is
the profitability.

2017 2016 2015 2014 2013

BHEL Net profit margin(%) 1.5 -2.6 4.7 8.9 13.7
BEML Net profit margin(%) 1.8 0.2 -3.0 2.1

16
14
12
10
8
BHEL
6
BEML
4
2
0
2017 2016 2015 2014 2013
-2
-4

21
 Balance sheet

BALANCE SHEET DATA

BEML
BHEL BHEL/BEM
Ltd.
MAR 17 L Ltd.
MAR 16
Current
Rs m 4,29,040 33,431 1,283.4%
assets
Current
Rs m 201,426 13,334 1,510.6%
liabilities
Net working
% 77.1 67.5 114.3%
cap to sales
Current ratio x 2.1 2.5 85.0%
Inventory
Days 91 209 43.7%
Days
Debtors
Days 273 148 184.4%
Days
Net fixed
Rs m 37,695 6,569 573.8%
assets
Share capital Rs m 4,895 418 1,171.9%
"Free"
Rs m 318,995 20,227 1,577.0%
reserves
Net worth Rs m 323,890 21,097 1,535.2%
Long term
Rs m 896 3,627 24.7%
debt
Total assets Rs m 613,475 43,307 1,416.6%
Interest
x 2.7 2.3 117.4%
coverage

22
 BALANCE SHEET DATA
Debt to
x 0 0.2 1.6%
equity ratio
Sales to
x 0.5 0.7 70.0%
assets ratio
Return on
% 1.3 2.4 55.6%
assets
Return on
% 1.4 2.5 55.8%
equity
Return on
% 2.9 4.6 62.6%
capital
Exports to
% 0 0 -
sales
Imports to
% 0 0 -
sales
Exports
Rs m NA NA -
(fob)
Imports (cif) Rs m NA NA -
Fx inflow Rs m 33,350 0 -
Fx outflow Rs m 24,900 0 -
Net fx Rs m 8,450 0 -

23
Current ratio

This means that companies with larger amounts of current assets will more easily
be able to pay off current liabilities when they become due without having to sell
off long-term, revenue generating assets.

The current ratio helps investors and creditors understand the liquidity of a
company and how easily that company will be able to pay off its current liabilities

Findings:-

24
From the above figure we can easily state that among BHEL is having highest
current ratio and it represent that BHEL is having very good liquidity and can pay
off their short-term liability very easily as they are marinating huge cash reserves

Total assets

The basic accounting equation states that assets = liabilities + stockholders' equity.
In the accounting industry, assets are defined as anything that a business owns, has
value, and can be converted to cash. Assets are broken down into two main
categories. These two categories are current assets and noncurrent assets.

Findings:-

From the above figure we can easily state that BHEL have large amount of total
assets
25
 Cash flow analyses

CASH FLOW
From Operations Rs m 5,361 845 634.5%
From
Rs m -3,376 -296 1,140.3%
Investments
From Financial
Rs m 4,674 -1,342 -348.2%
Activity
Net Cashflow Rs m 6,658 -794 -839.1%

Net Cash from Operating Activities

Cash flow operations(Rs 2017 2016 2015 2014 2013

m)
BHEL 5.361 3.744 8.212 45.120 17.586
BEML 8.45 5.478 3.935 -1.362 2.452

26
 50

40

30

BHEL cash flow operation

20
BEML cash flow operation

10

0
2017 2016 2015 2014 2013

-10

Findings:

Cash from operations represents the inflow of cash from primary activities of
business. From the above figure it is clearly stated that Cash from operations is
highest of BHEL and has gained majority of revenue .

Net cash from investment activity

Cash flow investment (RS 2017 2016 2015 2014 2013

m)
BHEL -3,376 -231 6,504 -8679 -11,129
BEML -296 -360 -279 -1,317 -1,048

27
 10,000
5,000
0
2017 2016 2015 2014 2013
-5,000
-10,000 BHEL Cash flow financial
activity (Rs m)
-15,000
BEML Cash flow financial
-20,000 activity (Rs m)

-25,000
-30,000
-35,000
-40,000

Findings:

Cash used in investing means cash outflow in procurement of long term assets
which will yield return in the future. From the above figure it clearly stated that
Cash used in investing is highest in BEML.

Net cash from financial activity

Cash flow financial activity 2017 2016 2015 2014 2013
(Rs m)
BHEL 4,674 1,225 -35,427 5,233 4,725
BEML -1,342 -3,839 -4,266 1,521 56

28
 10,000
5,000
0
2017 2016 2015 2014 2013
-5,000
-10,000 BHEL Cash flow financial
activity (Rs m)
-15,000
BEML Cash flow financial
-20,000 activity (Rs m)

-25,000
-30,000
-35,000
-40,000

Finding:

Cash used in financing means cash outflow in procurement of long term assets
which will yield return in the future. From the above figure it clearly stated that
Cash used in investing is highest in BEML.

Net cash flow

Net cash flow refers to the difference between a company's cash inflows and
outflows in a given period. In the strictest sense, net cash flow refers to the change
in a company's cash balance as detailed on its cash flow statement.

29
Net cash flow(%) FY17 FY16 FY15 FY14 FY13
BHEL 6,658 4,738 -20,711 41,675 11,182
BEML -794 1,280 -610 -1,158 1,460
50,000

40,000

30,000

20,000
BHEL
10,000
BEML
0
2017 2016 2015 2014 2013
-10,000

-20,000

-30,000

Findings:-

From the above table we can state that BHEL is having highest net cash flow from
BEML.

Leverage ratio
A leverage ratio is any one of several financial measurements that look at how
much capital comes in the form of debt (loans), or assesses the ability of a
company to meet its financial obligations

30
Debt to Equity Ratio (x) FY16 FY15 FY14 FY13 FY12
BHEL 0.07 0.10 0.12 0.06 0.01
BEML 0.29 0.39 0.53 0.52 0.41

35

30

25

20
BHEL
15
BEML
10

0
FY16 FY15 FY14 FY13 FY12
-5

Finding:-

From the above figure we can easily state that from the starting BHEL is having
very high ratio of equity in (2012)up to (2015) but at the point of (2016) it started
declining .

Interest Coverage (x) FY16 FY15 FY14 FY13 FY12

BHEL -51.24 24.66 39.05 75.69 196.35
BEML 2.15 1.07 1.11 -0.03 1.33

31
35

30

25

20
BHEL
15
BEML
10

0
FY16 FY15 FY14 FY13 FY12
-5

Return of capital employed

32
Return of capital employed FY16 FY15 FY14 FY13 FY12
(%)
BHEL -2.94 4.55 10.75 23.15 28.57
BEML 3.78 2.40 3.76 -0.14 4.37

35

30

25

20
BHEL
15
BEML
10

0
FY16 FY15 FY14 FY13 FY12
-5

Conclusion

33
The present study is the fundamental analysis of the engineering/ capital
goods Company in India. From the interest of investors, the study gives
good analysis based on which the individual investor can get idea on
which company to invest more or rather rely on it in future to get
maximum returns. The parameters selected for the analysis proves to be
useful for the i n v e s t o r t o d r a w s o m e c o n c l u s i o n o u t o f t h e s a m p l e
c o m p a n i e s . H o w e v e r, a l l t h e t w o s a m p l e c o m p a n i e s ar e h a v i n g
s o m e u n i q u e s t r e n g t h s b a s e d o n w h i c h t h e y c a n expand their
business in future and hence we cannot say that a company is best i n t h e
i n d u s t r y. M o r e o v e r, t h e p a r a m e t e r s t a k e n a r e l i m i t e d f o r t h e
a n a l y s i s w h i l e t h e actual information of the company comes out when
the whole set of parameters is taken for analysis purpose. Hence, we can
say that the present study gives the overview of the standings of the
major engineering /capital goods Company in India on the basis of
certain predetermined parameters.

Bibliography

34
www . bse.india..com
www . nse india. com
www. money control. com
www.hedgeequities.com
https://www.google.co.in/search?
q=BHEL+VS+BEML+comprison&oq

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