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A Project Report on

“Financial Analysis of HPPCL and Loan Structure of HPPCL”


“Himachal Pradesh Power Corporation Limited”

Submitted in partial fulfillment of the requirements of

Master of Business Administration

AP Goyal ShimlaUniversity

Session 2017-2019

Suprivised To :- Submitted By:-

Jitender Saumta

MBA 3rd -Semester

RollNo-17001712

1
HIMANCHAL PRADESH POWER CORPORATION LIMITED

(A STATE GOVERNMENT UNDERTAKING)

2
DECLARATION

I JITENDER SAUMTA, Enroll no. 17001712, student of MBA of


School of Business, AP Goyal Shimla University, Shimla, hereby
declare that the research report on SawraKuddu HEP is an original
and authenticated work done by me.

I further declare that it has not been submitted elsewhere by any other
person in any of the institutes for the award of any degree or diploma.

3
Acknowledgement

I am indebted to a number of people who have provided me


priceless guidance and support. Without their invaluable help and
support, this project would never have attained its present mold. I
would like to thanks:

 My Project Manager from HPPCL, Mr. V.K. Gupta for


assigning me the responsibility of this project.

 Mrs. Kusha Pandit, Head of Training and placement cell, for


her invaluable advice, encouragement and constant belief in
his students.

 Mr. Vishal Chauhan Project Guide for her appropriate


advice and suggestions.

Jitendre Saumta

17001712

4
CONTENT

CHAPTER 1 INTRODUCTION

1.1 Introduction to Industry

1.2 Introduction to Company

1.3 Introduction to Topic

CHAPTER 2 NEED & OBJECTIVE

2.1 Need of the study.

2.2 Objectives of the study.

CHAPTER3 RESEARCH METHODLOGY

3.1 Research Design

3.2 Sampling

3.3 Data Collection

3.4 Limitations of the Study

CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

CHAPTER 5 FINDING

5
CHAPTER 6 CONCULSIONS AND SUGGESTIONS

6.1 Conclusion

6.2 Suggestions

REFERENCE

ANNEXURE

6
INTRODUCTION

1.1 Introduction to Industry

Himachal Pradesh Power Corporation Limited (HPPCL) is a


power generating organization and I have done my Six Weeks
training from this organization. It is fast upcoming power
generating utility with all the technical and organizational
capabilities at par with other generating companies like
NTPC/SJVNL/NHPC. Efforts are afoot to further strengthen the
respective departments with professionals of proven credentials
and qualified technical manpower.

My Role was to get associated with the study of financial analysis


and get it implemented at HPPCL. Herein my assignment with the
Finance Department helped me to gain a deep understanding of
the working of the finance Department of an organization.

During the training I have studied working of Financial


Department, financial analysis of HPPCL and Loan Structure of
HPPCL.

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1.2 Introduction to Company

Background

Himachal Pradesh Power Corporation Limited (HPPCL), was


incorporated in December 2006 under the Companies Act 1956,
with the objective to plan, promote and organize the development
of all aspects of hydroelectric power on behalf of Himachal
Pradesh State Government (GoHP) and Himachal Pradesh State
Electricity Board (HPSEB) in Himachal Pradesh.

1 Shongtong Karcham HEP 450 MW

2 Sainj HEP 100 MW

3 Chirgaon Majhgaon HEP 42 MW

4 SawraKuddu HEP 111 MW

5 Kashang HEP 243 MW

6 RenukaJi Dam HEP 40 MW

8
HPPCL has following Projects in hand:

HPPCL is a fast upcoming power generating utility with all the


Technical and Organizational capabilities at par with other
generating companies like NTPC/SJVNL/NHPC. Efforts are
afoot to further strengthen the respective departments with
professionals of proven credentials and qualified technical
manpower.

Mission, Aim and Target

Mission:

Development and prosperity in Himachal Pradesh through Power


generation.

Aim:

To come up as a major power generating company of India with


good managerial and technical capabilities.

Target:

To develop 3000 MW Power generating capacity by March 2019


and; 5000 MW by the year 2022.

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DIVERSIFICATION

HPPCL, apart from Hydro Power Development, intends to


diversify its power development activities in other areas such as
Thermal, renewable sources of energy mainly solar power etc.
with a basic idea to have a long term Corporate Plan for planned
implementation of Power Projects to meet the growing energy
demand, ensuring environment and ecological balance
contributing for towards the progress and prosperity of the State.
For this HPPCL is to meet the challenges of dynamically
transforming business and environment to build a sustainable
relationship with the stakeholders for maximum benefits and
economic growth by achieving performance excellence

Net Worth of HPPCLtd.

The net worth of HPPCLtd. For the proceeding year as under:

Years Net Worth (Rs. In Lakhs)

2011-12 0.50

10
2012-13 1477.45

2013-14 26062

2014-15 38997.82

2015-16 63934.82

2016-17 78934.89

2017-18 92972.71

IN HAND PROJECTS AT GLANCE

The Govt. has allotted 20 Nos Hydroelectric projects with 3104


MW capacity. In assition to Hydro projects HPPCL is also setting
up thermal power plant (2x250 MW) at Raniganj, West Bengal
and solar plant (5MW photo voltaic) at Berradol near Naina Devi
Ji Shrine, District Bilaspur and these are in various stages of
implementation. The following projects are in hand of HPPCL:
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A. Projects under execution (856 MW)

Name of project Capacity

(MW)

Sawara-Kuddu HEP 111 MW

Integrated Kashang 195 MW


HEP

Sainj HEP 100 MW

Shongtong HEP 450 MW

TOTAL 856 MW

1. Sawra-Kuddu Hydro-Electric Project (111 MW)

SawraKuddu HEP has been contemplated as a power generation


development on the Pabbar River in Shimla District (HP). The
project comprises of a piano key weir, an intake structure to draw
78 cusecs discharge through three openings, surface gutter type
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de-silting arrangement divided into three portions, each 80 m long
19.5 m wide and 10.5 m deep for exclusion of silt particles down
to 0.2 mm size, 11.145 km long, 5 m diameter D-shaped Head
Race Tunnel,14 m diameter 82 m high underground restricted
orifice type surge shaft,4 m diameter steel lined pressured shaft,
trifurcating in 2.30 m diameter branch shafts, to feed three 37 MW
capacity each vertical axis Francis turbines, housed in an 90 m x
14 m x 39 m size underground power house cavity located on the
left bank of the Pabbar river near Snail village.

2 Integrated Kashang Hydro-Electric Project (195MW)

Integrated Kashang HEP envisages development of Kashang and


Kerang Streams, tributaries of the river Sutlej comprising four
distinct stages as under:
Stage-I (65 MW): Comprising diversion of the Kashang stream, at
El.2829 m, to an underground powerhouse located on the right
bank of Satluj near Powari Village, developing a head of
approximately 830m.

in Kullu Dist. of HP. The project comprises: a diversion barrage


on the river Sainj near village Niharni, intake arrangement on
right site of barrage for drawing 35.88 cusecs of water, an
underground de-silting arrangement Stage-II & III (130 MW):
Comprising diversion of the Kerang stream, at El. 2872 m, into an
underground water conductor system leading to upstream end of
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Stage-I water conductor system, augmenting the generating
capacity of Stage-I powerhouse, using Kerang waters over the 820
m head available in Kashang Stage-I powerhouse.

2. Sainj Hydro-Electric Project (100 MW)


Sainj HEP has been contemplated as a run of the river
development on river Sainj – a tributary of River Beas, with
two chambers of 145 m x 15 m x 7 m size each, to eject all silt
particles down to 0.2 mm, a 6300 m long 3.76 m diameter
modified horse shoe shaped Head Race Tunnel, an
underground restricted orifice type 9 m diameter, 87 m high
surge shaft and one 2.75 m diameter 550 m long steel lined
pressure shaft taking off from surge shaft, further bifurcating to
feed two Pelton vertical axis turbines, each generating 50 MW
power located in an underground power house on right bank of
river the Sainj near village Suind.
3. Shongtong-KarchamHydro-Electric Project (450 MW)
ShongtongKarchham Hydro Electric Project, a run-of-river
scheme, on the river Satluj in Distt. Kinnaur of HP, envisages
construction of 102.50 m long diversion barrage, near village
Powari, to divert 406 cusecs discharge to four sedimentation
chambers, each 300 m long. Water from sedimentation
chambers is further carried through water conductor system
comprising 8020 m long 10.00 m diameter circular HRT,
terminating in 39.50 m diameter surge shaft and three 5.10 m
14
diameter steel lined (each 211.00 m long) pressure shafts, to
feed three vertical axis Francis Turbines, housed in an
underground powerhouse, located on the left bank of the river
Satluj near village Ralli, to generate 450 MW of power.

B. Projects Under Investigation and DRP stages:


The following 8 projects are under investigation:

S.NO Name of Project Capacity


(MW)

1. Kashang Stage –IV 48 MW

2. Chirgaon-Majhgao HEP 60 MW

3. Surgani Sundla HEP 48 MW

4. Nakthan HEP 520 MW

5. Thana Plaun HEP 191 MW

6. Treveni Mahadev HEP 78 MW

7. Deothal Chanju HEP 33 MW

8. Chanju HEP 48 MW

TOTAL 1026 MW

15
C. Projects under Pre-feasibility Stage:

S.NO Name of Project Capacity


(MW)

1. Khab HEP in Kinnaur 636 MW

2. Chiroti Saichu HEP in 26 MW


Chamba

3. Saichu Sach Khas HEP in 117 MW


Chamba

4. Lujai HEP in Chamba 45 MW

5. Saichu HEP in Chamba 58 MW

TOTAL 882 MW

D. Projects of National Importance:

S.NO Name of Project Capacity


(MW)

1. Renukaji Dam Project 40 MW

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2. Gyspa Dam Project 300 MW

TOTAL 340 MW

E. Thermal Projects:

HPPCL in joint venture (Himachal EMTA Power Limited) is


setting up 2x250 MW Thermal Power Plant at Raniganj, West
Bengal on 50:50 sharing basis.

F. Solar Power Development:

HP Power Corporation Limited has envisaged setting up of 5 MW


Solar PV (Photo Voltaic) grid interactive power plant at Berradol,
near Shri Naina Devi Ji Shrine, District Bilaspur, Himachal
Pradesh in two phases i.e. Phase I- 3MW and Phase II- 2MW.

ORGANISATION STRUCTURE

17
18
WORKING

OF

FINANCE

DEPARTMENT

FINANCE DEPARTMENT

The Finance Department of HPPCL is divided into four sections


namely:

I. Finance & Accounts


II. Budgeting & Banking
III. Audit & Taxation
IV. Financial Concurrence
V. Establishment Division

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FINANCE DEPARTMENT
A brief detail of the above departments is given in the following
sections:

I. FINANCE AND ACCOUNTS


Following work is under taken under this wing:

a) Compilation of accounts of all units for review and annual


closing and all related and follow up matter.
b) Finalization of Balance Sheet and annual reports of HPPCL.
c) Policy matter.
d) Filling of all tax returns and all related tax matters.
e) Compilation of expenditure statements and review thereof.
f) AG/CAG Audit matters and tax audit.
g) Maintenance of General Ledger and drawing of trial balance
of corporate office and related monitoring and follow-up
matter.
h) PUC/Vidhan Sabha and other committee matters.
i) Internal Audit/Statutory Audit ad liaison with Auditors/CAs
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j) Any other work as requirement.

II. AUDIT AND TAXATION

This division of finance department deals with the internal


audit matter of the organization or corporation. It also deals
with resident matters conducted by CAG of India. Further this
department deals with tax matter i.e. cases filing of return and
other matter which are linked with taxation.

III. BANKING AND BUDGETING

This division of Finance Department deals with banking, external


funding and budgeting matters.

Under the Banking Section all the matters relating to banking and
Bank Reconciliation Statement (BRS) is dealt with. Here it is
important to understand what BRS is. A BRS is a statement
prepared by organizations to reconcile the balance of cash at bank
in a company’s own records with the bank statement on a
particular date.

This statement is the most common tool used by organization for


reconciling the balance as per books of company with the bank
statement and is made at the end of every month. The main
objective of reconciliation is to ascertain if the discrepancy is due
to error rather than timing

21
The difference between the two records on a given date may arise
because of the following:

Cheque drawn but not yet presented to the bank.

Cheque received but not yet deposited in the bank.

Interest credited and not recorded in the organization’s book.

Bank charges debited but not recorded in the organization’s book.

Also in HPPCL all the spare funds are kept in various banks as
Fixed Deposit Receipts (FSRs). Following is an indicative list of
the banks with which HPPCL maintains its bank accounts:

 HDFC Bank
 Punjab National Bank
 State Bank of Patiala
 Axis Bank
 Corporation Bank
 IndusInd Bank

22
The External Funding section will deal with all the funds
received from ADB (Asian Development Bank) and World
Bank in future. This will include all the issues pertaining to
finance approved by both the financial bodies.

Under the Budgeting section Detailed Project Report (DPR)


forms the basis of all the budgeting. An estimated expenditure
report is prepared by all the units of HPPCL after which
evaluation is undertaken by the budgeting team of Finance
department.

At all times care is taken to ensure that the entire budget are in
compliance with DPR. Correction of overestimation and
underestimation is also made by the budgeting team.

Compilation of all units’ budgets is done by this wing of Finance


department. Post which the compiled budgeted report is sent to
Board of Directors (BOD) for approval.

IV. FINANCIAL CONCURRENCE:

The Concurrence Department makes sure that all the financial


tenders are prepared according to the DPR.

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Following are the items which are submitted by Concurrence
wing:

1. Reference of indent/item in DPR


2. Whether tender/quotation has been floated.
3. Whether administrative and technical approval obtained
from the competent authority.
4. Comparative statement of tender/quotation.
5. Percentage of increase on scheduled rates.
6. In case of increase, justification thereof.
7. Time limit provided in the contract.
8. Volume of work to be completed within the time, provided
in the contract or as a consequence of any directions.
9. Any LD/Penalties to be imposed due to delay as per terms
ad conditions of the contract.
10. Budgetary provisions.
11. Reference of specific Item No. under which
sanction/approval sought under Delegation of Powers.

V. ESTABLISHMENT DIVISION:

This wing of Finance Department oversees the preparation of all


vouchers, cash book, salary slip preparation, cash disbursement
and claim of the staff. All receipts and payments are looked after
by this cell.

All the matter relating to payment of traveling allowance,


dearness allowance, medical bills, every kind of payments

24
whether to a contractor or firm hired vehicle, office stationery are
dealt by this wing.

Records of all the transactions are maintained in appropriate


books of accounts by the establishment wing of finance
department.

Salary slips normally constitute the following items:

 Basic Pay
 Dearness Pay
 Interim Relief
 Total
 Dearness Allowance (based on fixed percentage)
 House Rent Allowance (HRA)
 Capital allowance
 Livery Allowance
 Washing, Electricity Allowance
 Special Section Allowance
 Arrears
 Total
 Less Pension
 Gross

25
PROJECT

ON

FINANCIAL
ANLYSIS AND
LOAN
STURCTURE

OF HPPCL

26
1.3 Introduction to Topic

FINANCIAL ANAYLYSIS – Meaning of


financial Analysis
Financial statements present accounting data in absolute monetary
terms and reveal very little about the liquidity, solvency and
profitability of the business. Financial analysis is the systematic
numerical calculation of the relationship of one financial fact with the
other to major the profitability, operational efficiency, solvency
growth potentiality of the business.

In words of Myers John N., “Financial Statement Analysis is largely


a study of relationships among the financial factors in a business, as
disclosed by a single set statements, and a study of the trends of these
factors, as shown by a series of statements.”

According to Finney and Miller, “ Financial analysis consists in


separating facts according to some definite plan, arranging them in
groups according to certain circumstances and then presenting them in
convenient and easily readable and understandable form.”

The basic purpose of the financial analysis is to diagnose the


information contained in financial statements so as to judge the
profitability and financial soundness of the firm.

Uses of Financial Analysis :-


 Security Analysis.
 Credit Analysis
 Debt Analysis
 Dividend Analysis
 General Business Analysis
27
 Regulatory Compliance Analysis

Objectives of Financial Analysis :-


 To know the earning capacity
 To know the financial strength
 To know the solvency
 To know the trend of the business
 To make comparison of the performance
 To know the efficiency of management
 To know the capability of payment of interest and dividend
 To present the data in a systematic manner
 To provide useful information.
 To make future line of action

Advantages of Financial Analysis :-


 Measuring the Operational Efficiency of the Business
 Measuring Short-term and long- term Financial Position
 Measuring the Profitability
 Simplified, Systematic and Intelligible Presentation of Facts
 Intra-and Inter- firm Comparison of the performance

Disadvantages of Financial Analysis :-


 Incomplete and inexact information
28
 Qualitative information’s are ignored
 Historical information’s
 Based on accounting concepts and conventions
 Influenced by personal judgments

Process of Financial Analysis :-


 Re-arrangement of Financial statements
 Comparison
 Analysis
 Interpretation

Parties Interested in Financial Analysis –At a


glance
Different parties has different interest of area in financial analysis as shown below :-

1. Management (i) Short-term and long-term solvency,


(ii) Profitability

2. Investors (i) Profitability, (ii) financial Position

3. Lenders (i) Financial Position, (ii) Profitability

4. Suppliers (i) Short-term solvency, (ii) Financial


Position

5. Researchers (i) Growth, (ii) Future Prospectus

29
6. Employees (i) Profitability, (ii) Financial Position

Tools for Financial Analysis :-


 Comparative Financial Statements
 Common Size Statements
 Trend Analysis
 Ratio Analysis
 Funds Flow Analysis
 Cash Flow Analysis
 Break even Point Analysis

There are seven method for financial analysis of the firm.


Here in my project, I took following two methods of financial
analysis.

(1). Ratio analysis


(2). Cash flow statement

RATIO ANALYSIS:-
Ratio analysis is a process of computing, determining and presenting the
relationship of items of financial statement to provide a meaningful
understanding of the performance and financial position of a business concern.

30
According to Myers, “ Ratio analysis is a study of relationship among various
financial factors in business.”

Hence, ratio analysis is a technique of analysis the financial statements by


computing ratio and interpreting it to draw meaningful conclusions.

Objectives of Ratio Analysis :-


1. Measuring the profitability

2. Determining operational efficiency

3. Assessing solvency of the business

4. Measuring financial position

5. Facilitating comparative analysis

6. Indicating overall efficiency

7. Budgeting and forecasting

8. Simplifying accounting figures

Advantages of Ratio Analysis :-


1. Helpful in analysis the financial statement

2. Helpful in simplifying accounting figures

3. Helpful in financial forecasting and planning

4. Helpful in locating weak spot of the business

5. Helpful in comparison

31
Disadvantages of Ratio Analysis:-
1. False accounting data give false ratio

2. Limited use of single ratio

3. Limited comparability

4. Different meaning of different terms

5. Qualitative factors are ignored

Utility/ Significance of Ratio Analysis:-


1. Utility for investors

2. Utility for the creditors

3. Utility for the Employees

4. Utility for the Government

5. Utility for the Management

Classification of Ratios

Liquidity ratio Solvency Turnover Profitability


Ratio Ratio Ratio

32
1. Liquidity Ratios: - These ratios are used to assess the short –
term financial position of the firm. These ratios indicate the
firm’s ability to meet its current obligations out of current
resources. The bankers, suppliers of goods and other short
term creditors are interested in the liquidity of the firm.

Liquidity ratios include five Ratios:-

1. Current Ratio

2. Liquid Ratio

3. Absolute Liquid Ratio

4. Debtor Turnover Ratio

5. Creditor Turnover Ratio

2. Solvency Ratios:- These ratio s are calculated to ascertain the


ability of the firm to pay its long-term liabilities in time. Long-term
creditors and debentureholders are interested to know whether the
company is able to pay regularly interest due to them and to pay the
principal amount when it becomes due.

Some important solvency ratios are:-

1. Debt-equity ratio

2. Equity ratio

3. Funded debt to capitalization ratio

4. Fixed assets to net worth

33
3. Turnover ratio:-Turnover means ‘sales’, so these ratios are
calculated on the basis of ‘cost of goods sold’ or ‘sales’. These ratios
are also known as ‘Performance ratios’ or ‘Activity ratios’. These
ratios indicate how efficiently the total capital, fixed assets and stock
of the business are profitably used.

Some important turn over ratios are:-

1. Inventory turnover ratio


2. Debtor turnover ratio
3. Payables turnover ratio
4. Working capital turnover ratio
5. Fixed assets turnover ratio
6. Current assets turnover ratio

4. Profitability ratio:- The basic aim of every firm is to earn profit.


The efficiency of a business, in general, is measured by its
profitability. All parties are interested in profitability of business.

Some important profitability ratios are :-

1. Gross profit ratio


2. Operating ratio
3. Net profit ratio
4. Return on investment
5. Dividend per share
6. Earnings per share
7. Price earning ratio

Here in the present study only liquidity and solvency ratio has been
calculated because the company is in its pre construction stage and
there is no relevant data about gross profit, net sales, COGS etc.

34
LOAN STRUCTURE
2. Loan funds

a. The company has not taken any loan from the financial
institution or banks or through issue of debenture.

b. The company has not granted any loans on the basis of


security by way of pledge of shares, debentures and other
securities.

Loan Fund

The corporation availed a term loan of R. 75 Crore from PFC. The


following schedule shows the detail:

Schedule III Loan Funds Amount Amount

As at As at
31/03/2013 31.03.2012

Secured Loans

PFC Loan (PVPCL) 287285175 287285175 0

35
Unsecured Loans

PFC Loan (KKPCL)

REC Loan (KKPCL) 380367833 464342833 0

83975000

TOTAL 751628008 0

LOAN FUND:

The company availed Rs. 280.02 Crore and Rs 255 Crore loan for
different projects.

Schedule II Loan Funds Amount Amount

As at 31.03.2014 As at 31.03.2013

SECURED LOAN

PFC Loan 280,221,775 280,221,775

UNSECURED LOAN

36
PFC Loan 255,000,000 380,367,833

REC Loan - 83,975,000

Interest Accrued but Not Due 11,942,477 7,063,400

TOTAL 547,164,252 751,628,008

LOAN FUNDS:

The corporation has availed term loan of Rs. 62.34 Crore from HP
Govt. ADB (Asian Development Bank).The following Schedule of loan
capital shows the details.

Schedule II Loan Funds Amount Amount

As at As at 31.03.2014
31.03.2015

Secured Loan

PFC Loan 50,52,21,775 53,52,21,775

State Govt. ADB 62,34,44,000 -

Interest accrued but not due 2,01,89,671 1,19,42,477

37
TOTAL 1,14,88,55,446 54,71,64,252

LOAN FUNDS:

H.P Govt. (ADB) provided the corporation with Rs. 247.64 Crores as
term loan. The schedule of loan fund shows the detail:

Schedule II Loan Funds Amount Amount

As at 31.03.2016 31.03.2015

Secured Loans

PFC Loan 475,221,775 501,221,775

State Govt. Loans (ADB) 2,476,370,000 623,444,000

Interest Accrued but Not due 64,497,117 20,189,671

TOTAL 3,016,088,892 1,148,855,446

LOAN FUNDS

38
Rs. 721.19 Crores was availed from HP State Govt. (ADB). The
schedule of loan fund is given below:

Schedule II Loan Fund Amount Amount

As at As at 31.03.2016
31.03.2017

SECURED LOANS

PFC LOAN 424,205,775 475,221,775

State Govt. Loan (ADB) 7,211,953,000 2,476,370,000

Interest Accrued but Not due - 64,497,117

TOTAL 7,636,158,775 2,016,088,892

Schedule II Loan Funds Amount Amount

As at As at 31.03.2017
31.03.2018

39
SECURED LOANS

PFC Loan 366,183,000 424,205,775

State Govt. Loan (ADB) 10,984,151,000 7,211,953,000

TOTAL 11,350,334,000 7,636,158,775

2 Need & Objective


2.1 NEED OF STUDY

To know the financial soundness and to have an overview of the fast trends.

2.2 Objective of the study


To check the authorized share capital and the loan structure.

40
RESEARCH METHODOLOGY
1.1 Research Design
A research design is the set of methods and procedures used in collecting and analyzing
measures of the variables specified in the research problem research. The design of a study
defines the study type (descriptive, correlation, semi-experimental, experimental, review,
meta-analytic) and sub-type (e.g., descriptive-longitudinal case study), research
problem, hypotheses, independent and dependent variables, experimental design, and, if
applicable, data collection methods and a statistical analysis plan. A research design is a
framework that has been created to find answers to research questions .

 Research method:-

Profitability ratio

Turnover ratio

Solvency Ratios

Liquidity Ratios

1.2 Sampling
Sampling unit

A sampling unit is one of the units into which an aggregate is divided for the
purpose of sampling, each unit being regarded as individual and indivisible
when the selection is made.

 Sampling size

Sample size is a term used in market research for defining the number of
subjects included in a sample. By sample, we understand a group of subjects
41
that is selected from the general population and is considered a representative
of the true population for that specific study.

For example, if we want to predict how the population in a specific age group
will react to a new product, we can first test it on a sample, that is
representative for the targeted population. The sample size, in this case, will
be given by the number of people in that age group that will be surveyed.

 Sampling method

Sampling methods are classified as either probability or nonprobability. In


probability samples, each member of the population has a known non-zero
probability of being selected. Probability methods include random sampling,
systematic sampling, and stratified sampling. In nonprobability sampling,
members are selected from the population in some nonrandom manner. These
include convenience sampling, judgment sampling, quota sampling, and
snowball sampling. The advantage of probability sampling is that sampling
error can be calculated. Sampling error is the degree to which a sample might
differ from the population. When inferring to the population, results are
reported plus or minus the sampling error. In nonprobability sampling, the
degree to which the sample differs from the population remains unknown.

Random sampling is the purest form of probability sampling. Each member of


the population has an equal and known chance of being selected. When there
are very large populations, it is often difficult or impossible to identify every
member of the population, so the pool of available subjects becomes biased.

Systematic sampling is often used instead of random sampling. It is also called


an Nth name selection technique. After the required sample size has been
calculated, every Nth record is selected from a list of population members. As
long as the list does not contain any hidden order, this sampling method is as
good as the random sampling method. Its only advantage over the random
sampling technique is simplicity. Systematic sampling is frequently used to
select a specified number of records from a computer file.

Stratified sampling is commonly used probability method that is superior to


random sampling because it reduces sampling error. A stratum is a subset of
the population that share at least one common characteristic. Examples of

42
stratums might be males and females, or managers and non-managers. The
researcher first identifies the relevant stratums and their actual representation
in the population. Random sampling is then used to select a sufficient number
of subjects from each stratum. "Sufficient" refers to a sample size large enough
for us to be reasonably confident that the stratum represents the population.
Stratified sampling is often used when one or more of the stratums in the
population have a low incidence relative to the other stratums.

Convenience sampling is used in exploratory research where the researcher is


interested in getting an inexpensive approximation of the truth. As the name
implies, the sample is selected because they are convenient. This
nonprobability method is often used during preliminary research efforts to get
a gross estimate of the results, without incurring the cost or time required to
select a random sample.

Judgment sampling is a common nonprobability method. The researcher


selects the sample based on judgment. This is usually and extension of
convenience sampling. For example, a researcher may decide to draw the
entire sample from one "representative" city, even though the population
includes all cities. When using this method, the researcher must be confident
that the chosen sample is truly representative of the entire population.

Quota sampling is the nonprobability equivalent of stratified sampling. Like


stratified sampling, the researcher first identifies the stratums and their
proportions as they are represented in the population. Then convenience or
judgment sampling is used to select the required number of subjects from each
stratum. This differs from stratified sampling, where the stratums are filled by
random sampling.

Snowball sampling is a special nonprobability method used when the desired


sample characteristic is rare. It may be extremely difficult or cost prohibitive to
locate respondents in these situations. Snowball sampling relies on referrals
from initial subjects to generate additional subjects. While this technique can
dramatically lower search costs, it comes at the expense of introducing bias
because the technique itself reduces the likelihood that the sample will
represent a good cross section from the population.

Analysis and Interpretation

43
. The process by which sense and meaning are made of the data gathered in
qualitative research, and by which the emergent knowledge is applied to
clients' problems. This data often takes the form of records of group
discussions and interviews, but is not limited to this.

1.3 Data Collection


Information collected for the concerned topic is extracted through primary as well as
secondary sources. The study is mainly based on secondary data gathered from annual reports
of last seven years, detailed projects reports, expenditure reports and from the web site of
HPPCL. The published records were analyzed in detail and data being rearranged in suitable
form to be utilized.

1.4 limitations of the study


Sample size
Lack of available and/ or reliable data
Lack of prior research studies on the topic
Measure used to collect the data
Self reported data

44
3 DATA ANALYSIS AND INTERPRETATION

Ratio analysis for 2016-2017

1. Liquidity ratio:-

a. Current ratio :- This ratio is known as working capital ratio. It helps


to measure the ability of the business to pay off its current liability
out of current assets. Therefore, it determines the relationship
between current assets and current liabilities.

It is calculated as:-

Current ratio= Current assets/current liabilities

A ratio equal or near to the thumb of 2:1 i.e. current assets double
the current liabilities is corrected satisfactory.

Calculation of current ratio:-

For 2016:-

Current assets = 33,369.62

Current liabilities = 6,019.08

Current ratio = 33,369.62/6,019.08 = 5.54:1

For 2017:-

Current assets = 42,518.49

Current liabilities = 10,329.48

45
Current ratio = 42,518.49/10,329.48 = 4.12:1

Interpretation:-

The ideal current ratio for any firm is 2:1. The current ratio of the
company is more that the ideal ratio but the current ratio of
company for last two years has decreased from 2016 to 2017.

b. Liquid ratio: - It is also known ‘quick ratio’ and ‘acid test ratio’,
because it measures the firm’s capacity to pay off current obligation
immediately. Liquid ratio of quick ratio is a relationship of liquid
asset or quick assets with the current liabilities. It is calculated as
follows:

Liquid ratio= Liquid assets/current liabilities

Liquid assets are those assets which are either in the form of cash or
cash equivalents or can be converted into cash within a very short
period without a loss of value. All current assets except stock and
prepaid expenses are included in the liquid assets.

Calculation of liquid assets:-

For the year 2016:

Liquid assets = 32,544.79

Current liabilities = 6,019.08

Liquid ratio = 32,544.79/6,019.08=5.41:1


46
For the year 2017:

Liquid assets = 32,544.79

Current liabilities = 10,329.48

Liquid ratio = 41,652.85/10,329.48=4.03:1

Interpretation:-

As per the rule of thumb the ideal quick ratio for a company is 1:1.
Here the quick ratio of the company is higher than the ideal quick
ratio but it has decreased from 2016 to 2017.

Absolute Liquid Ratio :-

This ratio is also known as Super Quick Ratio or cash position ratio.
This ratio establishes a relationship between absolute liquid assets
and current liabilities, There are two components of this ratio, which
are as under:
(a) Absolute liquid assets, which mean marketable securities, cash in
hand and bank balance.
(b) Current liabilities

Absolute Liquidity Ratio = Absolute Liquid Assets/ Current Liabilities

47
This ratio is used to examine absolute liquid position of the firm. If
this ratio is 1:1 it indicates that the firm has enough cash to pay to its
creditors. Secondly, it‘s also shows that the firm is not paying
attention towards credit purchases and avoids the use of short-term
loan from bank.

For 2016:

Absolute liquid asset = 30258.08

Current Liabilities = 6019.08

Absolute liquid ratio =30528.08/6019.08 = 5.07:1

For 2017 :

Absolute liquid Asset = 39185.49

Current liabilities = 10329.48

Absolute liquid ratio = 39185.49/10329.48 = 3.79:1

Interpretation:-

B Solvency Ratio-

Debt-equity ratio:- This ratio expresses the relationship between


long-term debts and shareholders’ funds. This ratio indicates the
proportion of funds which are acquired by long-term borrowing in
comparison to shareholders’ funds.

Debt-Equity Ratio = long-term loans / shareholders’ Funds

48Or

= Debt / Equity
For 2016

Outsiders fund = Rs. 59691.62 lacs

Shareholders fund = Rs. 64651.25 lacs

Debt-equity ratio = 59691.62/64651.25 = 1:1.08

For 2017

Outsiders fund = Rs. 110909.74 lacs

Shareholders fund = Rs. 79676.25 lacs

Debt-equity ratio = 110909.74/79676.25 = 1.39:1

Interpretation:-

Proprietary Ratio – proprietary ratio establishes the relationship


between shareholders funds to total assets of the firm. It determines
long term solvency of the firm. This ratio is particularly useful for the
creditors, who can ascertain proportion of the shareholder funds in
the total assets employed in the firm.

Proprietary Ratio = shareholders’ fund / Total assets

Or

= Equity/ Total assets

49
For 2016 :-

Shareholders fund = Rs. 64651.25 lacs

Total assets = Rs. 124342.87 lacs

Proprietary Ratio = 64651.25 / 124342.87 = 0.51:1

For 2017

Shareholders fund =79676.25 lacs

Total assets =190585.99 lacs

Proprietary Ratio = 79676.25 / 190585.99 = 0.42:1

Interpretation –

Solvency Ratio: - This ratio is a small variant of equity ratio. This ratio
indicates the relationship between the total liabilities to outsiders to
total assets of a firm.

Solvency Ratio = total Liabilities to outsiders / total assets * 100

For 2016

Total liabilities to outsiders = Rs. 59691.62 lacs

Total assets = Rs 124342.87 lacs

Solvency Ratio = 59691.62/124342.87 *100 = 48.00%

For 2017

50
Total liabilities to outsiders = Rs. 110864.74 lacs

Total assets = Rs 190585.99 lacs

Solvency Ratio = 110864.74/ 190585.99 = 58.17%

Interpretation:-

Fixed Assets to Net Worth Ratio:

It is a ratio measuring the solvency of company. This ratio indicates


the extent to which the owners’ cash is frozen in the form of fixed
assets, such as property, plant and equipment, and the extent to
which funds are available for the company’s operations.

Fixed Assets to Net Worth Ratio = fixed assets / shareholders’ fund*100

For 2016

Fixed assets = Rs. 90973.25 lacs

Shareholders fund : Rs. 64651.25 lacs

Fixed to net worth ratio = 90973.25/64651.25*100 = 140.71 %

Fixed assets = Rs.1480967.5 lacs

Shareholders fund: 79676.25 lacs

Fixed to net worth ratio =1480967.5/79676.25*100 = 185.83%

51
Ratio analysis for 2017-2018
Liquid ratio:-
1. Current ratio:
=current assets/current liabilities
For 2017
Current assets = Rs 42518.49 lacs
Current liabilities = Rs 10329.48 lacs
Current ratio = 42518.49/10329.48 =4.12:1

For 2018
Current assets =Rs 45408.71 lacs
Current liabilities = Rs 21277.43 lacs
Current ratio = 45408.71/21277.43 =2.13:1

2. Quick ratio:
=quick assets/current liabilities
For 2017
Quick assets = Rs 41652.85 lacs
Current liabilities = Rs 10329.48 lacs
Quick ratio = 41652.85/10329.48 =4.03:1

For 2018
Quick assets =Rs 45034.78 lacs
Current liabilities = Rs 21277.43 lacs
Quick ratio = 45034.78/21277.43 =2.11:1

52
3. Absolute liquid ratio:
=absolute liquid assets/current liabilities
For 2017
Absolute liquid assets = Rs 39185.49 lacs
Current liabilities = Rs 10329.48 lacs
Absolute liquid ratio = 39185.49/10329.48 =3.79:1

For 2018
Absolute liquid assets =Rs 29306.31 lacs
Current liabilities = Rs 21277.43 lacs
Absolute liquid ratio = 29306.31/21277.43 =1.37:1

Solvency ratio:-

1. Debt-equity ratio:
=outsider funds/shareholders fund
For 2017
Outsider fund = Rs 110909.74
Shareholders fund = Rs 79676.25
Debt equity ratio = 110909.74/ 79676.25 = 1.39:1
For 2018
Outsider fund = Rs. 160144.25 lacs
Shareholders fund = Rs 100288.96
Debt equity ratio = 160144.25 / 100288.96 = 1.59:1

Proprietary ratio
Share holders fund / total assets * 100
For 2017
Shareholders fund = Rs. 79676.25
Total assets = Rs. 190585.99
53
Proprietary ratio = 79676.25/ 190585.99 *100 = 41.80 %
For 2018
Shareholders funds = Rs. 100288.96
Total assets = Rs 260433.20
Proprietary ratio = 100288.96 / 260433.20 *100 = 38.50%

Solvency ratio
= Total liabilities to outsiders/ total assets * 100
For 2017
Total liabilities to outsiders = Rs. 110909.74
Total assets = Rs. 190585.99
Solvency ratio = 110909.74/190585.99*100 = 58.19%
For 2018
Total liabilities to outsiders = Rs. 160144.25
Total assets = Rs. 260433.20
Solvency Ratio = 160144.25/ 260433.20 *100 = 61.49%

Fixed Assets to net worth ratio


= fixed assets ( after depreciation )/Shareholders fund *100
For 2017
Fixed assets = Rs. 148067.51 lacs
Shareholders fund = Rs. 79676.25 lacs
Fixed assets to net worth ratio = 148067.51/79676.25*100
= 185.83%
For 2018
Fixed assets = RS. 215024.5 lacs
Shareholders fund = Rs. 100288.96 lacs
Fixed assets to net worth ratio = 215024.5/100288.96 *100
= 214.40%

Shareholders fund = 79676.25

54
Total assets = Rs. 190585.99

Proprietary Ratio = 79

CASH FLOW STATEMENT


Cash Flow Statement is a statement of changes in cash and cash
equivalents. CFS is one of the important Tool of Financial Analysis.
CFS is useful for short-term financing planning. CFS inflows (receipts)
and outflows (payment) of cash during a particular period. It analysis
the reasons for changes in balance of cash between the dates of two
balance sheets. It indicates the source and uses of cash.

A Cash Flow Statement can be defined as a statement which


summarises sources of cash inflows and uses for cash outflows of a
firm during a particular period of time.

Objectives of cash flow statement:-


1. Useful for short-term financial planning.
2. Analysis of liquidity position.
3. Efficient cash management.
4. Comparative study.
5. Proper study of cash receipts and payment.
6. Helpful in determining the cash flows.
7. Tool of planning.

Limitation of cash flow statement:-


1. Ignore accounting concept of accrual basis.
2. Ignore non-cash transactions.
3. Not a substitute for income statement.
4. Short term analysis.
5. Not based on full information.
55
Presentation of cash flow statement:-
According to AS3-(revised) a Cash Flow Statement should be
presented in a manner that it reports inflows and outflows of cash by
classifying business activities into three categories, namely:-

2. Cash Flows from Operating Activities.


3. Cash Flows from Investing Activities.
4. Cash Flows from Investing Activities.

1. Cash Flows from Operating Activities:- Operating


activities are the main generating activities of a business firm.
Operating activities are those transactions and events whose
cash flows effects the net profit or loss of a business.
2. Cash Flows from Investing Activities:-Investing activities
are those activities which are related to the acquisition and
disposal of long-term assets and other investments not
included in the cash equivalents. Those activities include the
transaction involving purchase and sale of long-term productive
assets like land and building, plant and machinery, etc.
3. Cash Flows from Financing Activities:-Financing activities
are those activities that results in the change in size and
composition of the owner’s capital (including preference share
capital in the case of a company) and borrowing of the business
firm. Cash flows from financing activities can be ascertained by
analyzing the changes in (1) Equity Share Capital, (2) Preference
Share Capital, (3) Debentures, and (4) other Long-term
borrowings.

56
4. CASH FLOW STATEMENT FOR YEAR ENDED 31/03/2018

Particular 31.3.2018 31.3.2017


(a)Cash flow from operating activities

Depreciation
Depreciation 1,114.18
1114.18 472.05
472.05

Finance charges (8538.56) (4946.50)


Inventories 19.88 11.45
Other current assets 471.83 (52.26)

Loan and Advances (14365.75) (299.73)

Long term provision 1144.80 62.06

Other current liabilities 10947.95 4310.40


Total A (9205.68) (422.53)
(b) Cash flow from investing activities

Net Expenditure on fixed assets (3803.01) (7618.91)


Net expenditure on CWIP (55,975.31) (45,096.81)
Investment in JV with EMTA (75.50) (55.00)

Total(b) (59,853.82) (52,770.72)

(c) cash flow from financing activities


Share capital 20,612.71 15,025.00
Repayment of borrowing (580.22) (510.17)

ProceedsA from borrowing 37,721.98 47,355.83

Total (c)E 57,754.46 61,870.66

Gross Total (a+b+c) (11305.04) 8657.41

Add. Opening cash and equivalentsY 39,185.49 30,528.08

57
Closing cash and equivalents 27,880.45 39,185.49

Interpretation :-

a) Operating activities:-
1) From the operating activities we can conclude that depreciation
charges has been increased from Rs. 472.05 lacs in 2017 to Rs.
1114.18 lacs in 2018. It shows that there is an increase in fixed
assets of company.
2) The finance charges have decreased from Rs. ( 4946.50) lacs in
2017 to Rs. ( 8538.56 ) lacs in 2018. It shows that there is a
decrease in finance charges because corporation is not able to
borrow funds from outsiders.
3) There is an increase in inventories. The inventories have increased
from Rs. 11.45 lacs in 2017 to Rs. 19.88 lacs in 2018.
4) There is an increase in other current assets. Other current assets
have increased from rate (52.26) lacs in 2017 to Rs 471.83 lacs in
2018.
5) There is decrease in loan and advances. The loan and advances
have decreased from Rs (299.73) lacs in 2017 to (14365.75) lacs in
2018. It shows that loan and advances from hppcl have recovered
to large extent.
6) The long term provision has increased from Rs 62.06 lacs in 2017
to Rs. 1144.80 lacs in 2018. It shows there is an increase in
provision to protect the interest of employee.
7) There is an increase in other current liabilities . The other current
liabilities have increased from Rs. 4310.40 lacs in 2017 .
b) Cash flow from Investing activities
1) The net expenditure on fixed assets has increased from Rs.
(7618.91) in 2017 to Rs (3803.01) lacs in 2018 it shows that there
is an increase in fixed assets of the company.
2) The net expenditure on CWIP has decreased from Rs. ( 45096.81)
lacs in 2017 to Rs (55975.31) lacs in 2018.

58
3) The investment in Himachal EMTA power limited has decreased
from Rs. (52770.72) lacs in 2017 to Rs. (59853.82) lacs in 2018.

Cash flow from financing activities

1) There is an increase in share capital of company . The share capital of


company has increased from Rs. 15025 lacs in 2017 to Rs. 20612.71 lacs in
2018. It means that company is able to raise funds by issuing share for cash
other consideration.

2)Borrowings refer to the funds which the company has borrowed from
outsiders. Borrowings have decreased from Rs. ( 510.17) lacs in 2017 to Rs.
(580.22) lacs in 2018.

3) Proceeds from borrowing include the interest which the company has paid
on borrowed from outsiders. There is decrease in proceeds from borrowing.
Proceeds from borrowing has decreased from Rs. 47355.83 lacs in 2017 to Rs.
37721.98 lacs in 2018.

4) There is a decrease in cash of Rs 11305.04 during the year. The opening cash
and cash equivalent has decreased from Rs. 39185.49 lacs to Rs. 277880.45
lacs during the year.

CASH FLOW FOR THE YEAR ENDED 31.3.2017

Particular 31.3.2017 31.3.2016


(a)Cash flow from operating activities

Depreciation
Depreciation 1,114.18
472.05 472.05
406.94

Finance charges (4946.50) (1736.63)


Inventories 11.45 6.49
Other current assets (52.26) (75.83)

59
Loan and Advances (299.73) (6682.07)

Long term provision 62.06 30.04

Other current liabilities 4310.40 3720.63


Total A (422.53) (4330.43)
(b) Cash flow from investing activities

Net Expenditure on fixed assets (7618.91) (50284.56)


Net expenditure on CWIP (45096.81) (21521.28)
Investment in JV with EMTA (55.00) (70.00)

Total(b) (52770.72) (26875.84)

(c) cash flow from financing activities


Share capital 15025.00 1034.12
Repayment of borrowing (510.17) (300.00)

Proceeds from borrowing 47355.83 18972.34

Total (c) 61870.66 19706.46

Gross Total (a+b+c) 8657.41 (11499.81)

Add. Opening cash and equivalents 30528.08 42027.89

Closing cash and equivalents 39185.49 30528.08

60
5 FINDING
This project I calculate some ratios; these ratios are very useful to interpret financialposition

6 CONCULSIONS AND SUGGESTIONS


6.1 Conclusion
 The in-depth analysis of key financial ratios in this project
helps in measuring the
financial strength, liquidity conditions and operating
efficiency of the company. It also provides valuable
interpretation separately for each ratio that helps
organization implementing the findings that would help the
organization to increase its efficiency.
 Ratios are only post mortem analysis of what has happened
between two balance sheet dates. For one thing the position
of the company in the interim period not revealed by
analysis, moreover they give no clue about the future. Ratio
analysis in view of its several limitations should be
considered only as a tool for analysis rather than as an end
itself.
 Financial analysis plays a very important role in any
organization .but also ratio provide a increasing and
decreasing data of HPPC LTD.
 Now based on study we must know about financial position
of HPPC LTD. This organization is smoothly running.
61
 Based on the analysis and interpretation . We tried to give
suggestion for the organization as per our best knowledge.
 Finally, project really helps us to knowing the practical
things of the corporate world really. We also enjoyed the
project work in its real spirit.

6.2 Suggestions and Recommendations


Based on the analysis and interpretation . We tried to give
suggestion for the organization as per our best knowledge.

 The organization should conduct weekly meeting for the


valuation of performance.
 The organization is in good condition but they can also
make it better.
 If the company utilizes its working capital then the company
can go heights which itwanted to achieve. The comparative
income statement shows increase in the current year of
netprofit and it depict the companies current profit position.
To improve the efficiency the companywill strive for better
performance and increase the market share the company.
 The suggestions provided through the study will help the
company to improve theoperational performance efficiently.
The suggestions provided through the study will help
thecompany to improve the operational performance
efficiently.

62
Bibliography
Following websites were referred: -

1. www.wikipedia.com
2. http://profit.ndtv.com/stock/hppc-
ltd_hppcl/financials.
3. www.indianfoline.com/company/hppc-
ltd/summary/12076.

Following books were referred for carrying out the project: -

1. Annual Reports of HPPC Ltd.

63

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