34368705 summer training report of bhel co

7/31/2019 34368705 Summer Training Report of Bhel Co

1/74

SUMMER TRAINING REPORT

ON

FOR

BHEL, HARDWAR

Submitted in partial fulfillment for the requirement for award of the degree of

Master of Business Administration

(2008-10)

MAHARISHI MARKANDESHWAR UNIVERSITY

MULLANA

CONTENTS

Submitted To:

Mrs. Santosh Anand

Accounts Officer

HEEP, Hardwar.

Submitted By:

Charu Lamba

MBA- III Sem.

MMIM, MULLANA


2/74

BHEL Profile

Introduction Of HEEP

Historical Profile

Key Competitors

Major Milestone

Total Quality Focus

Policy And Strategy

Excellence Initiative

Customer Focus

Overview Of Finance Function

Financial Analysis And EVA An Introduction

Financial Analysis of HEEP.

Liquidity Ratios

Turnover Ratios

Leverage Ratios

Profitability Ratios

Other Ratios

Limitation of Study.

SWOT Analysis

Conclusion And Suggestion


3/74

A C K N O W L E D G E M E N TA C K N OW LED GEMEN T

I express my sincere thanks to the Management of HEEP(Heavy Electrical Equipment

Plant) of BHEL, Ranipur, Haridwar Unit for giving me an opportunity to gain exposure on

matter related to Project under the esteem guidance of Mrs. Santosh Anand (Accounts

Officer).

I hereby take this opportunity to put on records my sincere thanks to Mr. Mitra under the

light of whose able guidance I could complete this project in an effective and successful

manner.

I am also indebted to Mr. Subodh Gupta (Finance Manager) and Mr.Vivek Goyal

(Sr.Accounts officer Books&budget), for their valuable information and inputs, which

added dimensions and meaning to my project.

I am also thankful to the rest of the staff of the SALES section and BOOK section for

their valuable suggestion and cooperation to achieve the task.

With sincere thanks

Charu Lamba

MBA- III Sem.

MMIM, MUlLANA


4/74

DECLARATION

I hereby declare that the study entitled Ratio Analysis in the context of H.E.E.P. BHEL

being submitted by me in the partial fulfillment of the requirement for the award of

Master of Business Administration by DMS; Ajmer is a record of my own work.

The study was conducted at finance department, H.E.E.P. BHEL.

The matter embodied in this project report has not been submitted to any other

university or institution for the award of degree.

(CHARU LAMBA)


5/74

PREFACE

As a part of my MBA programme, I was asked to undergo 42 working days summer

training in any organization, to give the exposure to practical management and to get

familiar with the various activities taking place in the organization.

I got an opportunity to undergo my summer training in the reputed organization BHEL

Hardwar where I was allowed to work on the project titled Financial Analysis at

H.E.E.P. Hardwar BHEL.

In this project, an attempt has been made to study the performance of BHEL Hardwar.

The salient feature of this report is the comprehensive coverage and latest information

about the topic of the study.

Financial data of last 7 years have been taken.


6/74


7/74

B.H.E.L. A CORPORATE GIANT

Established in the late 50's BHARAT HEAVY ELECTRICALS LIMITED (BHEL) is a

name which is recognized across the industrial world. It is one of the largest engineering

and manufacturing enterprises in INDIA and is one of the leading international

companies in the power field. BHEL offers a wide spectrum of products and services for

core sectors like power transmission, industrial transportation, oil and gas,

telecommunicationetc. Besides supply of non-conventional energy systems. It has also

embarked into other areas including defence and civil aviation. A dynamic 63000 strong

team embodies the BHEL philosophy excellence through continuous striving for state of

the art technology. With corporate headquarters in NEW DELHI, fourteen manufacturing

units, a wide spread regional services network and projects sites all over India and even

abroad, BHEL is India's industrial ambassador to the world with export presence in

more than 50 countries.

BHEL's range of services extent from project feasibility studies to after sales services,

successfully meeting diverse needs through turnkey capability.

BHEL has had a consistent track record of growth, performance and profitability. The

World Bank in its report on the Indian Public Sectors, has described BHEL as one of

the most efficient enterprises in the industrial sector, at par with international standards

of efficiency". BHEL has acquired ISO 9000 certificate for most of its operations and has

taken up Total Quality Management (TQM).

All the major units/divisions ofBHEL have been upgraded to the latest ISO-9001: 2000

version quality standard certification for quality management. All the major

units/divisions ofBHEL have been awarded ISO-14001 certification for environmentalmanagement systems and OHSAS-18001 certification for occupational health and

safety management systems.

BHEL occupies an all-important niche as evident by its ranking by CII amongst top eight

PSUs based on financial performance. Recently in survey conducted by business India,

BHEL has been rated as seventh Best Employer in India.


8/74

International Business:-

BHEL has, over the years, established its references in over 60 countries of the world.

These references encompass almost the entire range ofBHEL products and services,

covering Thermal, Hydro and Gas based turnkey power projects, substation projects,

and rehabilitation projects; besides a wide variety of products like: Transformers,

Compressors, Valves and Oil field equipment, Electrostatic Precipitators, Insulators,

Heat Exchangers, Switchgears, Castings and Forgings etc.

Some of the major successes achieved by BHEL have been in Gas-based power

projects in Oman, Libya, Malaysia, Saudi Arabia, Iraq, Bangladesh, Sri Lanka, China,

Kazakhstan; Thermal Power Projects in Cyprus, Malta, Libya, Egypt, Indonesia,

Thailand, Malaysia; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan,

Nepal, Taiwan and Substation projects & equipment in various countries. Execution of

these overseas projects has also provided BHEL the experience of working with world-

renowned Consulting Organizations and Inspection Agencies.

The Company has been successful in meeting demanding requirements Internationalmarkets, in terms of complexity of the works as well as technological, quality and other

requirements viz. HSE requirement, financing package, associated O&M services to

name a few. BHEL has proved its capability to undertake projects on fast-track basis.

BHEL has also established its versatility to successfully meet the other varying needs of

various sectors, be it captive power, utility power generation or for the oil flexibility to

exhibited adaptability by manufacturing and supplying intermediate products.


9/74

B.H.E.L. IN INDIA

# REGIONAL OFFICES (POWER SECTORS)

***********************************

1. NEW DELHI (NORTHERN REGION)

2. CALCUTTA (EASTERN REGION)

3. NAGPUR (WESTERN REGION)

4. CHENNAI (SOUTHERN REGION)

# BUSSINESS OFFICES

*******************

1. BANGLORE

2. BARODA

3. BHUBANESHWAR

4. MUMBAI

5. CALCUTTA

6. CHANDIGARH

7. GUWAHATI

8. JABALPUR

9. JAIPUR

10. LUCKNOW

11. CHENNAI

12. NEW DELHI

13. PATNA


10/74

# MANUFACTURING UNITS

1. BANGALORE

2. BHOPAL

3. GOINDWAL

4. HARIDWAR

5. HYDERABAD

6. JAGDISHPUR

7. JHANSI

8. RUDRAPUR

9. RANIPET

10.TIRUCHIRAPALLY

# SERVICE CENTRES

1. BANGLORE

2. BARODA

3. CALCUTTA

4. CHANDIGARH

5. SECUNDRABAD

6. NEW DELHI

7. NAGPUR

8. PATNA

9. VARANASI


11/74


12/74

COMPANY PROFILE

BHEL is India's largest engineering company and one of its kind in this part of the

hemisphere. It manufactures a wide range of state of the art power generation

equipment and systems besides equipment for industry, transmission, defence,

telecommunication and oil business.

The first plant of BHEL was set up in Bhopal in 1956, which signaled the dawn of the

heavy electrical industry in India. In the early 60's three more major plants were set up

in Haridwar, Hyderabad and Tiruchirapalli. The company now has 14 manufacturing

divisions, 10 services centers and power sectors regional centers besides project sites

spread all over India and also abroad to provide prompt and effective service to

customers.

BHEL's business broadly covers conversions, transmission, utilizations and

conservation of energy in core sectors of economy that fulfill vital infrastructure needs of

the country. Its product have established an enviable reputation of high quality and

reliability, which is largely due to emphasizes placed all along on contemporary some of

the best technologies of the world from the leading companies in U.S.A., EUROPE, and

JAPAN together with technologies from its own R&D centers technologies B.H.E.L. has

consistently upgraded its design and manufacturing facilities to international standards

by acquiring and assimilating.


13/74

VISION

A WORLD-CLASS, INNOVATIVE, COMPETITIVE AND PROFITABLE ENGINEERING

ENTERPRISE PROVIDING TOTAL BUSINESS SOLUTIONS.

MISSION

TO BE THE LEADING INDIAN ENGINEERING ENTERPRISE PROVIDING QUALITY

PRODUCTS SYSTEM AND SERVICES IN THE FIELDS OF ENERGY,

TRANSPORTATION, INDUSTRY, INFRASTRUCTURE AND OTHER POTENTIAL

AREAS.

VALUES

MEETING COMMITMENTS MADE TO EXTERNAL AND INTERNAL CUSTOMERS.

FOSTER LEARNING, CREATIVITY AND SPEED OF RESPONSE.

RESPECT FOR DIGNITY AND POTENTAIL OF INDIVIDUALS.

LOYALTY AND PRIDE IN THE COMPANY.

TEAM PLAYING.

. INTEGRITY AND FAIRNESS IN ALL MATTERS..


14/74

BUSINESS MISSIONTo maintain a leading position as suppliers of quality equipment, systems and services

in the field of conversion of energy, for application in the areas of electric power

transportation, oil and gas exploration and industries. Utilize company's capabilities and

resources to expand business into allied areas and other priority sectors of the economy

like defence, telecommunications and electronics.

BUSINESS OBJECTIVES

GROWTH: -

To ensure a steady growth by enhancing the competitive edge of BHEL defence,

telecommunication and electronics in existing business, new areas and international

operations so as to fulfill national expectations from BHEL.

PROFITABILITY: -To provide a reasonable and adequate return on capital employed, primarily through

improvements in operational efficiency, capacity utilization productivity and generate

adequate internal resources to finance the company's growth.

CUSTOMER FOCUS: -

To build a high degree of customer confidence by providing increased value for his

money through international standards of product quality, performance and superior

services.


15/74

PEOPLE- ORIENTATION: -

To enable each employee to achieve his potential, improve his capabilities, perceive his

role and responsibilities and participate and contribute positively to the growth and

success of the company. To invest in human resources continuously and be alive to

their needs.

TECHNOLOGY: -

Achieve technological excellence in operations by development of indigenous

technologies and efficient absorption and adaptations of imported technologies to suit

business need and priorities and provide the competitive advantage to the company.

IMAGE: -

To fulfill the expectations which stakeholders like government as owner, employees,

customers and the country at large have from BHEL.


16/74

CONTRIBUTION OF BHEL IN VARIOUS CORE SECTORS

BUSINESS SECTORS: -

BHEL's operations are organized around three business sectors, mainly power, industry

and international operations. This enables BHEL to have a strong customers

orientation, to be sensitive to his needs and respond quickly to the changes in the

market.

POWER SECTORS: -

Power is the core sector of BHEL and comprises of thermal, nuclear gas, diesel and

hydro business. Today BHEL supplied sets, accounts for nearly 66 % of the total

installed capacity in the country as against nil till 1969-70.

BHEL manufactures boilers auxiliaries, TG sets and associate controls, piping and

station C & I up to 500 MW rating with technology and capability to go up to 1000 MW

range. The auxiliary products high value capital equipment like bowl and tube mills,

pumps and heaters, electrostatic precipitators, gravimetric feeders, fans, valves etc.

BHEL has contracted so far around 240 thermal sets of various ratings, which includes

14 power plants set up on turnkey basis. Nearly 85 % of World Bank tenders for thermal

sets floated in India have been won by the company against international competition.

BHEL has adopted the technology to the needs of the country and local conditions. This

has led to the development of several technologies in house. The fluidized bed boiler

that uses low graded high-ash abrasive Indian coal is an outcome of such an effort.

With large-scale availability of natural gas and the sudden increase in demand, BHEL

began to manufacture gas turbines and now possesses two streams of gas turbine

technology.

It has the capability to manufacture gas turbines up to 200 MW rating and custom built

combined cycle power plants. Nuclear steams generators, turbine generators, sets and

related equipment of 235 MW rating have been supplied to most of the nuclear power


17/74

plants in India. Production of 500 MW nuclear sets, for which orders have been

received.

BHEL has developed expertise in renovation and maintenance of power plant

equipment besides specialized know how of residual life assessment, health diagnostic

and life extensions of plants. The four power sectors regional centers at New Delhi,

Chennai, Kolkata and Nagpur will play a major role in giving a thrust to this business

and focus BHEL's efforts in this area.

INDUSTRY SECTORS:-

BHEL is a major producer of large size thyristor devices. The products include

centrifugal compressors, high speed industrial drive turbines, industrial boilers and

auxiliaries, waste heat recovery boilers, gas turbines, electric motors, drives, and

control equipments, high voltage transformers, switch gears and heavy castings and

forgings.

Company in India with the capability to make simulators for power plants, defence

industrial process plants and other applications. An entry has been made in aviation

industry for which BHEL has set up facilities and is now producing two seater aircraft.

TRANSMISSION:-

A wide range of transmission products and systems are produced by BHEL to meet the

needs of power transmission and distribution sector. These include:

Dry Type Transformers

SF6 Switch Gears

400 KW Transmission Equipment

High Voltage Direct Current System

Series and Shunt Compensation Systems

In anticipation of the need for improved substations, a 33 KV gas insulated sub station

with micro processors base control and protection system has been done.


18/74

TRANSPORTATION:-

65 % of trains in Indian Railways are equipped with BHEL's traction and traction

control equipment. These include:

Broad Gauge 3900 HP AC / DC locomotives

Diesel Shunting Locomotives up to 2600 HP

5000 HP AC Loco with thyristor control

Battery Powered Road Vehicles and Locomotives

RESEARCH AND DEVELOPMENT:-

BHEL has a corporate R & D center supported by R & D groups at each of the

manufacturing divisions. The dedicated effort of BHEL's R & D engineers have

produced several new products like automated storage retrieval system automated

guide vehicles for material transportation etc. Establishment of Asia's largest fuel

evaluation test facility at Tiruchi was high light of the year. This facility will enable

evaluation of combustion, heat transfer and pollution parameters in boilers.

Major R & D achievement include:

Design manufacture and supply of countries first 17.2 MW industrial steam turbines.

Development of 4700 HP AC / DC loco for Indian Railways.

Development of largest capacitor voltage transformers of 8800 PF 400 KV rating.

Development and application low cost ROBOTS for job loading/unloading.

According to ex- CMD Mr. R.K.D. Shah, "BHEL is spending Rs. 60 Crores on Research

and Development. Earning from product which has been commercialized has gone up

26 % to Rs. 760 Crores."


19/74

Human Resource Development Institute:-

BHEL has envisioned becoming "A World Class Engineering Enterprise committed to

enhancing stakeholder value". Force behind realization of this vision and the source of

our competitive advantage is the energy and ideas of our 44,000 strong highly skilled

and motivated people. The Human Resource Development Institute situated in NOIDA,

a corner-stone of BHEL learning infrastructure, along with Advanced Technical

Education Center (ATEC) in Hyderabad and the Human Resource Development Center

at the manufacturing Units, through various organizational developmental efforts ensure

that the prime resource of the organization the Human Capital is Always in a state of

Readiness, to meet the dynamic challenges posed by a fast changing environment. It is

their constant endeavor to take the HRD activities to the strategic level of becoming

active partner to the (organizational) pursuits of achieving the organizational goals.


20/74

TECHNICAL COLLABORATIONS

PRODUCT COLLABORATIONS

# Thermal Sets, Hydro Sets, Motors & Prommashexport

Control Gears. RUSSIA

# Bypass & Pressure Reducing Systems Sulzer Brother Ltd.

SWITZERLAND

# Electronic Automation System for Siemens AG.

Steam Turbine & Generators GERMANY

# Francis Type Hydro Turbines General Electric

CANADA

# Moisture Separator Reheaters Baloke Duerr GERMANY

# Christmas Trees & Conventional Well National Oil Well

Head Assemblies, USA

# Steam Turbines , Generators and Axial Siemens AG.

Condensers GERMANY

# Cam Shaft Controllers and Tractions Siemens AG.

Current Control Units GERMANY


21/74

DIVISIONS OF BHEL

There are 20 Divisions of BHEL, they are as follows:

1. HEEP, Haridwar

2. HPEP, Hyderabad

3. HPBP, Tiruchi

4. SSTP & MHD, Tiruchi

5. CFFP, Haridwar

6. BHEL, Jhansi

7. BHEL, Bhopal

8. EPD, Bangalore

9. ISG, Bangalore

10. ED, Bangalore

11. BAP, Ranipet

12. IP, Jagdishpur

13. IOD, New Delhi

14. 14. COTT, Hyderabad

15. IS, New Delhi

16.CFP, Rudrapur

17. HERP, Varanasi

18. Regional Operations Division ARP, New Delhi

19. TPG, Bhopal

20. Power Group (Four Regions and PEM)


22/74

MAJOR COMPETITORS OF BHEL

1. Ansaldo Italy

2. Asea Brown Boueri Switzerland

3. Beehtel USA

4. Block & Neatch USA

5. CNMI & EC China6. Costain U.K.

7. Electrim Poland

8. Energostio Russia

9. Electro Consult Italy

10. Franco Tosi France

11. Fuji Japan

12. GEC Alsthom U.K.

13. General Electric USA

14. Hitachi Japan

15. LMZ Russia

16. Mitsubishi Japan

17. Mitsui Japan

18. NEI U.K.

19. Raytheon USA

20. Rolls Royce Germany

21. Sanghai Electric Co. China


23/74

RECENT ACHIEVEMENTS OF BHEL

1. BHEL's R&D ops contribute Rs 1,151 cr to turnover in 2005-06 [May 19

2006]

2. BHEL to manufacture 800 mw thermal sets [Apr 14 2006]

3. BHEL inks agreement with IIT Madras for new courses [Apr 25 2006]

4. BHEL secures Rs. 80 cr. export order from EETC [May 10 2006]

BHEL net profit up 62 pc(the tribune,3 June 2006)

5. Workers participation in management yields savings at BHEL, Haridwar ,

Nov 16.

6. Management Board and will ensure an increased output of the generating units

by as much as twenty per cent. Earlier, one unit each of the above machines was

renovated and updated by the BHEL resulting in a similar output increase for

these machines. More than a hundred sets of different capacities supplied by

BHEL, Haridwar, are commissioned at various power stations all over the

country. The hydro sets are tailor-made to suit varying hydroelectric parameters.

Mr. Dhar said that at the Haridwar Plant, excellent engineering and

manufacturing facilities are available to supply kaplan, francis, pelton and

reversible hydro turbines along with matching generators and associated

equipment. (UNI)


24/74

The Heavy Electrical Equipment Plant (HEEP) located in Haridwar, is one of the major

manufacturing plants of BHEL. The core business of HEEP includes design and

manufacture of large steam and gas turbines, turbo generators, hydro turbines and

generators, hydro turbines and generators, large AC/DC motors and so on.

Heavy Electrical Equipment Plant, Haridwar of this Multi-unit corporation with 7467

strong highly skilled technicians, engineers, specialists and professional experts is the

symbol of Indo Soviet and Indo German Collaboration. It is one of the four major

manufacturing units of the BHEL. With turnover of 164059 lacs and PBT of Rs.32489

lacs HEEP added 3000 MW of power to the National grid during 2005-06.

HEEP is engaged in the manufacture of Thermal and Nuclear Sets up to 1000MW,

Hydro Sets up to HT Runner dia 6300mm, associated Apparatus Control gears, AC&

DC Electrical machines and large size Gas Turbine of 60-200 MW. HEEP Haridwar

contributes about 44% of Indias total installed capacity for power generation with total

capacity of Thermal, Nuclear & Hydro Sets of over 45000MW currently working at a

Plant Load Factor of 76% and Operational Availability of 86%. Inspite of acute recession

in economy, BHEL Haridwar received recent orders for Mejia-5&6, Sipat, Bhatinda,

Chandrapura, Bakreshwar, Santaldih, Bhilai, and Dholpur.


25/74

HISTORICAL PROFILE:-

The construction of heavy electrical equipment Plant commenced in Oct.1963after

indo- soviet technical co-operation agreement in Sept.1959The first product to roll out

from the plant was an electric motor in January 1967.This was followed by first 100

MW Steam Turbine in Dec.1969and first 100MW Turbo Generator in August 1971.The

plants break even was achieved in March 1974.BHEL went in for technical

collaboration with M/s Siemens, Germany to undertake design and manufacture to large

size thermal sets upto a unit rating of 1000 MW in the year 1976.First 200 MWTG set

was commissioned at Obra in 1977.The continuum of technological advancement

subsequently saw the commissioning of 500 MW TG Set in 1984 .The technical

cooperation of Gas Turbine manufacture was also signed with M/s Siemens Germany.

First 150 MW ISO rating gas Turbine was exported to Germany in Feb1995.Our 250

MW thermal set up at Dahanu Plant of BSES made a history by continuous operation

for over 150 days and notching up a record plant load factor greater than 100%.

KEY COMPETITORS:-

Power Sector Giant of the World viz. Siemens Germany, ABB, General electric of USA

etc. are the major competitors of HEEP. All these are the MNCs and enjoy huge

financial and R&D backup.

CORPORATE CITIZEN:-

HEEP Haridwars Strategic plans and its policy & strategy are commensurate with

BHEL Corporate / strategic Plan . As first PSU to adopt Corporate Planning as a

process . Board meetings for long range development , BHEL has always guided other

PSUs in their Corporate planning process .Board meeting , monthly Management

Committee meetings, Annual Revenue Budget exercise , Mid term reviews , Apex TQcouncil reviews, Personnel Heads Meet, Quality Heads Meet , Technology Meets ,

Product committees meetings, Inter-Unit Quality Circle Meets etc. are the some of crore

strengths of BHEL Corporations vast network.


26/74

KEY CUSTOMERS AND SUPPLIERS:-

HEEPs customer profile ranges from State Electricity Boards,Government Power

utilities like NTPC, NPC, NHPC to IPPs like Reliance Energy. HEEP has also supplied

Gas Turbine sets to overseas customers in Libya & Iraq. Power Sector Regions of

BHEL are its key internal customers. In view of expected market scenario,BHEL has

strategically decided that HEEP will concentrate on coal based Higher Rating Thermal

Sets for domestic market to fulfil the countrys vision of adding 107,000 MW capacity to

achieve Power on Demand by 2012. Our key customer, NTPC has drawn up plan for

capacity addition of 20,000MW by 2012. HEEP has planned for execution of 34,619MW

by 2012.

FAVOURABLE BUSINESS ENVIRONMENT:-

Power Sector has to grow over 10% annually to reach the 7% GDP level. Thus, the

demand for thermal sets will remain high. Central Electricity Authority (CEA) is the

guiding authority for Power Sector strategies in our country. BHEL representatives,

along with representatives from various domestic customers, are an integral part of

various committees formed by CEA. This enables us to guide and understand the

market requirements and future challenges. To meet the 11th Five Year Plan target of

adding 61,000MW, CEA has planned addition of 23 nos. standardized 500MW sets for

faster project execution and cost reduction. BHEL, including HEEP, is a part of this

process. CEA has standardized for the next capacity of 800MW sets and has asked

BHEL to prepare itself for manufacturing and supply in the 11th Five Year Plan. BHEL

has tied up with Siemens for upgradation of technology. Further CEAs stress on R&M

of ageing Power Plants is also providing business opportunity to unit.


27/74

MAJOR CHALLENGES:-

The favorable business scenario has given the unit a major challenge of establishing

Power Infrastructure of the country in close co-ordination with its key customers. HEEP

has committed itself to meet the countrys requirements. To cater to the needs of higher

rating sets of 800MW, HEEP has collaboration with Siemens.

STRATEGIC CHALLENGES:-

Key Business

Cycle time reduction

State of the art technology

Cost reduction Operational

Timely delivery

Material cost reduction

Productivity improvement

Effective utilization of machines

Human Resource

Motivation of employees

Skill & Knowledge management


28/74

MAJOR MILE STONES:-

1975 Job Redesign concept launched for FIRST time in India.

1978 well documented Suggestion Scheme launched.

1982 Launched Productivity Movement & Quality Circle. Concept

1993 of ISO 9001 quality System.

1995 Adopted EFQM model of TQM for achieving Business Excellence.

1997 BHEL one of the 9 PSEs declared Navratna by Govt. of India .

1997 National Productivity Award for HEEP by the President of India.

1998 Certificate of Merit by National Productivity Council for Outstanding

Performance for 2nd consecutive year.

1998 Accreditation of U stamp.

1999 Accreditation of Stamp from National Board of Boiler and Pressure Vessel

Inspector, USA .

1999 AD-Merkblatt HPO Recertification by RWTUV for Gas Turbine Combustion

Chambers

1999 INSAAN Award for Excellence in Suggestion for 9th consecutive

year

1999 Launching of 5s concept1999 PCRI recognized as Environmental Lab by Haryana State Board for

Prevention and Control of Pollution

1999 Accreditation of ISO 14001-Enviornment management system

2000 CII Site Visit for CII-EXIM Business Excellence Award-2000

2001 Top Management TQM Workshop at Rishikesh and HRDC

2001 INSAAN Award for excellence in Suggestion for 11 th consecutive

year

2001 Launching of QTM & RCA at HEEP Haridwar by CMD

2002 Launching of delivery Index, Turnover Index and Manufacturing

Index

2002JBE Workshop of Apex TQM Group at Theri to evolve Business

policy


29/74

2003 Commendation for Strong Commitment to Excel in CII-EXIM

Bank Award

2004 Commendation for Significant Achievement in CIIEXIM

Bank Award.

2005 Award given by Institute of Cost and Works Accountants of

India for "Excellent Work in the field of Management

Accounting and Cost Concepts".

2006 BHEL celebrated its 50 years in August 2006.


30/74

OVERVIEW OF FINANCE FUNCTIONS

Role of finance functionFinance function is the backbone of any organization. The finance function plays a very

critical role in the maximization of shareholders who provide the funds to the company.

This objective is being achieved by the finance department, which provides the carious

information on the financial parameters such as cash flows, profitability, cost and

margin, assets, working capital and shareholder value for the purpose of efficient

utilization of resources resulting in better profitability of the company. The importance of

the finance functions cannot be undetermined in any organization as

many companies have perished not due to bad production management but due to poor

financial management function acts like radar of the ship, which guides the direction of

the ship and saves it from the perils of the sea. In the same way finance department

provides timely and relevant information to various levels of management for the

purpose of decision-making.

The various activities undertaken by the finance department achieve theaforesaid objectives, may be summarized as follows-

Maintenance of account books, cost records.

Preparation of salary bills and other related payment to employees: PP, bonus, TA,

departmental advances of PF accounts etc.

Preparation of Profit & Loss a/c and Balance Sheet.

Generation of various MIRs for management use: MIRs relating to turnover,

profitability, cash requirements, inventory.

Coordination with company auditors, Govt. auditors, cost auditors and tax auditors. Decisions relating to purchase and sales.

Investment decisions: capital investment decisions and working capital management

decisions.


31/74

Financing decisions: decisions relating to financing-mix or capital structure or

leverage.

Dividend policy decisions.

COST SECTION

Cost- section of the company is divided into following two sections viz,

PRODUCT COST & CENTRAL COST and these deals with the following functions: -

(i) Determination of periodic profits including inventory valuation.

(ii) Determination of pricing policy of the company.

(iii) Work related to capital expenditures of the company.

(iv) Developing variance Management Information report for different parts of

management for purpose of cost control and reduction.

(v) Valuation of work in progress and finished goods.

(vi) Interaction with management of top management link for achieving cost control

and cost reduction and thereby improving bottom line of the company.

(vii) Preparation of cost sheet of different product and their analysis for future

planning.

BOOKS AND BUDGET SECTION

This section deals mainly with the following:-

(i) Preparation of operating budget for the company as a whole.

(ii) Co-ordination with various functions of organization with regard to generation and

submission of important MIR's to corporate office.

(iii) Preparation of annual accounts of the company.

(iv) Coordination with company auditors with regard to company accounts.

(v) Maintenance and accounting of fixed assets accounts.

(vi) Preparation of long term profit plans based on broad objectives of the company.

ADMINISTRATION SECTION:


32/74

The is the general administration section of the company which administrates the wholedepartment and keep on viewing the troubles of the department and tales the measuresto get rid of the problem.

CASH SECTION:

This section helps the company in maintaining the cash and bank receipt, to makethe requisitions for receipt of funds whenever required to the corporate and to makepayments. It records the daily receipt and release of the funds. The banks by which thetransactions are made are SBI, HSBC, PNB, HDFC and others.

SALES SECTION

Sales accounts section will deal mainly with the following items :-

(i) Scrutiny and vetting of estimates / quotation for sale of products / services,

wherever financial concurrence is required.

(ii) Scrutiny and vetting of agreements for sales of products and services

(iii) Invoicing for sale / advance or progressive payment / erection income and other.

(iv) Maintenance of subsidiary records like sales journals / sales daybook, sundry

debtors ledgers, advances from customer ledger etc.

(v) Payments, recovery and accounting of sales tax, excise duty.

(vi) Accounting of claims on carriers/ insurance companies for missing items /

damages on outward consignments.

(vii) Scrutiny, payments and accounting of bills of carriers and insurers and other

miscellaneous claims relating to the outwards consignments.

(viii) Calculation and scrutiny of data for payments of royalties to the collaborators.

(ix) Review and reconciliation as well as follow up of recovery of outstanding dues

from the customers in coordination with the commercial department.


33/74

STORES SECTION

For the convenience of performance of various function it is divided in to further three

sections which are as follows: -

a) Stores bills.

b) Stores review.

c) Foreign payment.

They deal mainly with the following items of works:

(i) Payment of suppliers bills including bills for advances -indigenous and foreign.

(ii) Pricing of stores receipt vouchers including fixed assets vouchers and fixed

assets receipt vouchers.

(iii) Maintenance of accounts of advances to suppliers, claims recoverable, claims for

short suppliers, rejections and rectifications of materials and sundry creditors.

(iv) Opening of letter of credit and arranging payments to foreign suppliers under

foreign credit / differed payment agreements.

(v) Payment of bills for ocean freight, port trust dues, custom duty, local agents

commission and clearing agents bills, transit insurance bills, bills of contractors

for transport /handling etc. and accounting of such payments are made at

regional offices.

(vi) Maintenance of accounts of material issued on loan and materials issued to

subcontractors.

(vii) Keeping account of earnest money and security deposits received from tender

and suppliers.

(viii) Adjustment of stores in transit to be made at the close of the year.


34/74

PAYROLL SECTION

This section deals mainly with the following functions:

(i) Preparation of monthly wage bills.

(ii) All account work related to personal payments and disclose profit and loss

account of the company.

(iii) Dealing with income tax authority with regard to personal taxation of employee.

(iv) Dealing with other statutory authority such as P.F. Commissioner, ESI (employee

state insurance).

(v) To ensure correct payment of salary and wages and other benefits to employees

in, telephone and miscellaneous payments.

(vi) Preparation of monthly wage bills.

(vii) All account work related to personal payments and disclose profit and loss

account of the company.

(viii) Dealing with income tax authority with regard to personal taxation of employee.

(ix) Dealing with other statutory authority such as P.F. Commissioner, ESI (employee

state insurance).

WORKS SECTION

Works section of the company is dealing with the following functions:

(i) Payments of contractors bills including bills for advance.

(ii) Maintenance of accounts of contractors with regard to security deposits, earnest

money, progressive payments.

(iii) 215 maintenance of accounts of materials issued on loans to contractors.

(iv) All accounting work related to capital expenditure in progress on erection of plant

& machinery and building.


35/74

(v) All other miscellaneous work relating to hiring of various facilities.

INTERNAL AUDIT SECTION:

The company has its own internal audit section which facilitates the company in makingthe accounts relating to every thing of the company. The accounts which are preparedby internal audit section are

1. P & L A/C2. Cash flow statement

PRICE STORE HEDGER SECTION

The main purpose of PSH section is to keep the records of inventory both in the termsof quantity and value. The pricing of issues is calculated on monthly average basis. Theterms which are recorded in the reference of inventory are :

1. Opening Stock2. Receipt3. Issue4. Closing Stoke.


36/74

Hierarchy

i


37/74

FINANCIAL ANALYSIS AND EVA ANALYSIS. I discussed the project with my

instructor and coordinator Mrs. SANTOSH ANAND (Sr.A/0) at H.E.E.P., BHEL,Haridwar.

She approved the project. After that, a simple course of action has been

followed for working on this project. Entire information and data were gathered from the

respective annual report of BHEL, Haridwar. All the figures are taken from their Balance

Sheet of the respective years and the other internal documents, which were personally

shown by the members of company in our interest.


38/74


39/74

FINANCIAL ANALYSIS

Financial analysis is the process of determining the operating and financialcharacteristics of a firm from accounting data and financial statement. The goal of suchanalysis is to determine efficiency and performance of the firm management, as

reflected in the financial records and reports. Its main aim is to measure the firm'sliquidity, profitability and other indications that business is conducted in a rational andorderly way.Here ratio analysis is taken as the primary tool for examining the firm's financial positionand EVA for performance of BHEL Haridwar. There are two views points in receivingand evaluating financial data:

1. External Analysis :-This is performed by outsiders to the firm such as creditors, stock holders,or investments analysis. It makes use of existing financial statements andinvolves a limited access to confidential information on a firm.

2. Internal Analysis :-This is performed by the corporate finance and accounting departments

and is more detailed than external analysis. These departments haveavailable more details and current information than is available tooutsiders. They are able to prepare Performa, or future statements andare able to produce a more accurate and timely analysis of the firm'sstrength and weaknesses.

Financial statement contain a wealth of information which, if properly analysed andinterpreted, can provide valuable insights in to firms performance and position. Financialstatement analysis may be done for a variety of purpose, which may range from simple

analysis of the short term liquidity position of the firm to comprehensive assessment ofthe strengths and weaknesses of the firm in various areas.The principle tool for financial statement analysis is Financial Ratio Analysis. A ratio isan arithmetical relationship between two figures. Financial ratio analysis is a study ofratios between various items or groups of items. Financial ratio have been classified asfollows: -


40/74

TYPES OF FINANCIAL RATIOS

LIQUIDITY RATIOS

ACTIVITY RATIOS

LEVERAGE RATIOS

PROFITABILITY RATIOS

OTHER RATIOS


41/74

LIQUIDITY RATIOS: - Liquidity refers to the ability of the firm to meet its obligationsin the short run, usually one year. Liquidity ratios are generally based on the relationshipbetween current assets and current liabilities (the sources for meeting short-termobligations).

LEVERAGE RATIOS: - Financial leverage refers to the use of debt finance. Whiledebt capital is a cheaper source of finance, it is also a riskier source of finance.Leverage ratios helps in assessing the risk arising from the use of debt capital.

ACTIVITY RATIOS : -They are also called Turnover ratios or Asset managementratios. They measures how efficiently the assets are employed by the firm. These ratiosare based on the relationship between the level of activity and the level of variousassets.

PROFITABILITY RATIOS: - Profitability reflects the final result of businessoperations. There are two types of profitability ratio. Profit margin ratios and rate of

return ratios. A profit margin ratio shows the relationships between profit and sales.Rate of return reflects the relationship between profit and investment.

OTHER RATIOS: - In this project we have analysed some other ratios of BHEL.Such as EPS, PER, Personal payment per employee, Turnover per employee, Overtimeper employee etc.


42/74

ADVANTAGES OF RATIOS: -

The ratio analysis is one of the most powerful tools of financial analysis. It is use as adevice to analysis and interpret the financial health of enterprise. Just like a doctorexamines his patient by recording his body temperature, blood pressure etc. Before

making his conclusion regarding the illness and before giving his treatment, a financialanalyst analyses the financial statement with various tools of analysis beforecommenting upon the financial health or weaknesses of an enterprise. 'A ratio is knownas a symptom like blood pressure, the pulse rate or the temperature of the individual.' Itis with help of ratios that the financial statements can be analysed and decision madefrom such analysis.

1. HELPS IN DECISION-MAKING: Financial statements are prepared primarilyfor decision making. But the information provided in financial statements is not anend in itself and no meaningful conclusions can be drawn from these statementsalone. Ratio Analysis helps in making decisions from the information provided in

these financial statements.

2. HELPS IN FINANCIAL FORECASTING AND PLANNING: Ratio analysisis of much help in financial forecasting and planning. Planning is looking ahead andthe ratios calculated for a number of year's work as a guide for the future.Meaningful conclusions can be drawn for future from these ratios. Thus, ratioanalysis helps in forecasting and planning.

3. HELPS IN COMMUNICATING: The financial strength and weaknesses of afirm are communicated in a more easy and understandable manner by the use ofratios the information contained in a financial statement is conveyed in a meaningfulmanner to the one for whom it is meant. Thus, ratios help in communication andenhance the value of financial statements.

4. HELPS IN CO-ORDINATION: Ratios even helps in coordination, which isutmost importance in effective business management. Better communication ofefficiency and weakness of an enterprise results in better co-ordination in theenterprise.

5. HELPS IN CONTROL:Ratio analysiseven helps in making effective control ofthebusiness. Standard ratios can be based upon Performa financial statements andvariance or deviations, if any, can be found by comparing the actual with thestandards so as to take corrective action at the right time. The weaknesses orotherwise, if any, come to the knowledge of the management which helps ineffective control of the business.


43/74

USES OF FINANCIAL STATEMENTS TO DIFFERENT PARTIES

The analysis and interpretation of financial statements is an important accountingactivity. The end users of business statements are interested in these statements

primarily as an aid to determine the financial position and the results of the operations.There are different parties interested in the financial analysis of their statements andtheir aims and their objectives also differ significantly. The following are the use ofstatement analysis to different parties:

TO THE FINANCIAL EXECUTIVES : - The first party interested in thefinancial statement analysis is the finance department of the business concern itselfto the financial managers such analysis provides a deep insight into the financialcondition of the enterprises and the view of the past performance which helps infuture decision making. The financial statements give vital information concerningthe position of the enterprise as well the result of the operations.

TO THE TOP MANAGEMENT : - The top management of the concern is alsoincreased in the analysis of these statements because it helps them reachingconclusions regarding:

Performance appraisal of overall business activities.

Enquiry about current financial position and long term strategic planning.

Queries concerning the relationships of earnings to trends in sales etc.

Queries concerning the relationships of earnings to investment.

TO THE CREDITORS:-The analysis of these statements is very essential to thecreditors. Also some aspects of enterprise operations are of interest to creditors inregard to liquidity of funds, soundness of financial structure, profitability of theoperations, effectiveness of working capital management etc.

TO THE INVESTORS AND OTHERS :- Investors presents as well asprospects are also interested in the measurement of earning capacity of thesecurities. Investors have been increasingly concerned with the cash generationcapability of an enterprise, primarily in terms of the flexibility available to suchenterprises to acquire other business and new assets on an advantage basis for thispurpose.


44/74

PROBLEMS OF FINANCIAL STATEMENTS

There are certain problems and issues encountered in financial analysis which call forcare, circumspection and judgement in such exercise.

DEVELOPMENT OF BENCHMARKS:- given the diversity of BHEL productlines, it is difficult to find suitable benchmarks for evaluating its financial performanceand conditions. Hence even for such firm, the financial analyst may run into difficulty.If information is available only about industry average or some other standard andnot about the entire dispersion of ratios for various firms in the industry, it may not bepossible to draw meaningful inferences.

WINDOW DRESSING:- firm may resort to window dressing to project afavorable financial picture. When window dressing is suspected, the financial analystshould look at the average data available as per resource.

PRICE LEVEL CHANGES:- In India financial accounting takes intoconsideration price level changes. As a result, balance sheet figures are distortedand profits are misreported. Hence financial statement analysis can be vitiated.

VARIATIONS IN ACCOUNTING POLICIES :- Business firms have somelatitudes in accounting treatment like depreciation, valuation of stocks research anddevelopment expenses, foreign exchange transactions, installment sales,preliminary and preoperative expenses, provision of reserve and revaluation of

assets. Due to diversity of accounting practices found in practice, comparativefinancial statement analysis may be vitiated.


45/74

LIQUIDITY RATIOS

Current Ratio (CR)

This ratio indicates the extent of the soundness of the current financial position of an

undertaking and the degree of safety provided to the creditors. It is a measure of firmsshort term solvency. It indicates the availability of current assets in rupees for every onerupee of current liability. The higher the current ratio, the larger is the amount of rupeeavailable per rupee of current liability, the more is the firms ability to meet currentobligations and greater is the safety of funds of short term creditors. A ratio of greaterthan one means that the firm has more current assets than current claims against them.

Current Ratio = Current Assets/Current Liabilities

The current ratios for last 7 years for HEEP, Hardwar have been calculated as under.

(Figures of CA and CL in Rs/

Lacs)

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Currentassets

100962 80044 100608 112836 139668 139029 150562

Currentliabilities

71641 61375 82133 99390 110923 123322 149892

Current

Ratio

1.41 1.30 1.22 1.13 1.25 1.127 1.004

RATIO

YEARS


46/74

INFERENCE: From the above ratios it can be seen that Current Ratio for year 2007-08 has dropped by approx. 11 % from the previous year which indicates that short termsolvency of the firm has gone down. But the current ratios of last seven years aregreater than one and on an average it is 1.206:1. This means for every one Re. of

current liabilities there is Rs. 1.206 of current assets available to meet the short termobligation. So this indicates that the short-term liquidity position of the company is verygood and short-term conditions are safe as far as payment is concerned, although, as aconventional rule, a current ratio of 2 to 1 is considered far better.

Quick Ratio (QR)

Quick ratio is a more refined tool to measure the liquidity of an organization. Itestablishes relationship between quick, or liquid, assets and current liabilities. An asset

is liquid if it can be converted into cash immediately or reasonably soon without a loss ofvalue. Quick Ratio is a better test of financial strength than the current ratio, because itexcludes very slow moving inventories and the items of current assets, which cannot beconverted into cash easily. This ratio shows the extent of cushion of protection providedfrom the Quick assets to the current creditors. A Quick ratio of 1:1 is usually consideredsatisfactory.

Quick Ratio = Quick Assets / Current Liabilities

(Quick Assets = Current Assets Inventories)

The Quick Ratios for last 7 years for HEEP, Hardwar have been calculated as under.

(Figuresare in Rs/ Lacs)

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Quickassets

57501 47674 61457 53860 69870 100334 82739

Currentliabilities

71641 61375 82196 99390 110923 150056 149892

QuickRatio

0.80 0.78 0.75 0.54 0.63 0.67 0.55


47/74

INFERENCE: The liquid ratio of 1:1 is considered to be satisfactory in case of anyorganization whereas in case of BHEL Hardwar Liquidity Ratio is not even approachingone, hence there is liquidity problem in payment in time. Here payments to creditors arenot made in time due to lack of cash/liquid fund.

YEARS

RATIO


48/74

ACTIVITY RATIOS

Inventory Turnover Ratio (ITR)

A considerable amount of a companys capital may be tied up in the raw material, work-in-progress and finished goods. It is important to ensure that the level of stock is kept aslow as possible, consistent with the need to fulfill customer order in time. InventoryTurnover Ratio indicates the efficiency of the firm in producing and selling its product. Itshows how rapidly the inventory is turning into receivables through sales. Generally, ahigh inventory turnover is indicative of good inventory management. A low inventoryturnover implies excessive inventory levels than warranted by production and salesactivities, or a slow moving or obsolete inventory.

Stock turnover Ratio = Cost of Goods Sold / Avg. Inventory

(Average Inventory is the average of opening and closing balances of inventoryfor each year)

The Inventory Turnover Ratios for last 7 years for HEEP, Hardwar have been calculatedas under.


Ye ar 20 01 -02 2 00 2- 03 2 00 3- 04 20 04 -05 20 05 -06 20 06- 07 20 07- 08

COGS 108811 101336 97432 140697 164059 210494 235940

Avg.

inventory

45414 37915 35792 49095 64387 62023 67725

ITR 2.40 2.67 2.72 2.87 2.55 3.39 3.48

RATIO

YEARS


49/74

INFERENCE: Inventory turnover ratio indicates that how quick inventories are convertedinto sales. It gives the position of the inventory management of the company. The average ofthis ratio for past 7 years comes out to be 2.86 which show that for every Re 1 of averageinventory there is Rs2.86 of net sales. The efficiency of HEEP, Hardwar in turning its

inventory for year 07-08 has improved from the last year which indicates that there has beenbetter management of inventory in the plant. The average figure is also satisfactory.

Debtors Turnover Ratio (DTR)

Debtor Turnover Ratio measures whether the amount of resources tied up in debtors isreasonable and whether the company has been efficient in converting debtors into cash.It indicates the number of times debtors turnover each year. Generally, the higher thevalue of debtors turnover, the more efficient is the management of credit.

Debtors Turnover Ratio = Credit Sales/Average Debtors

(Average Debtors is the average of opening and closing balances of debtors foreach year)

The Debtors Turnover Ratio for last 7 years for HEEP, Hardwar have been calculatedas under.

(Figures are in Rs/ Lacs)

Y ea r 20 01 -02 20 02 -03 20 03 -04 20 04 -05 2 00 5- 06 20 06- 07 2 007 -08

Credit

sales

119298 115596 114608 166598 199388 258690 286264

Avg.

debtors

52490 46161 48642 52209 56630 73981 83607

Ratio 2.27 2.50 2.35 3.19 3.52 3.49 3.42


50/74

INFERENCE: This ratio indicates that how quick debtors are collected and higherratio shows better position of the company. Here from the graph and the ratio of the last7 years it is clear that the debtors are collected quickly and efficiently as the DebtorTurnover Ratio is increasing year by year from 2.27 times in year 2001-02 to 3.52 timesin year 2005-06. This indicates that average collection period is short and so there areless or say no bad debts for the company. Although, this ratio is on a slight decliningtrend for past 2 years, the average of 7 years comes out to be 2.9. Since the liquidity

position of the firm depends on the quality of debtors to a great extent therefore anaverage of 2.9 shows that the liquidity position of the firm is good.

Fixed Assets Turnover Ratio

Fixed assets are used in the business for producing goods to be sold. The effectiveutilization of fixed assets will result in increased production and reduced cost. It also

ensures whether investment in the assets have been judicious or not.Fixed Assets Turnover Ratio = Sales / Fixed Assets

The Fixed Assets Turnover Ratio for last 7 years for HEEP, Hardwar have beencalculated as follows.

RATIO

YEARS


51/74


Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Sales 119298 115596 114608 166598 199388 258690 286264

Fixed

Assets

43644 52619 54668 59170 60233 67225 86904

Ratio 2.73 2.19 2.09 2.81 3.31 3.84 3.29

INFERENCE: The graph above shows that the fixed assets turnover ratio was on anincreasing trend for past 3 years until 2007-08 where it faced a decline. The reason thatcould be attributed to such a decline is that the utilization of funds in the form of fixedassets has been significantly higher for the year 2007-08. as compared to previousyears. Moreover, this hike is not in proportion to the increase in net sales. Thus,

efficiency of the firm in utilizing its fixed assets has fall down from last year but anaverage figure of 2.89 indicates that the firm has been utilizing its fixed assets efficientlywith respect to net sales.

Total Assets Turnover Ratio

RATIO

YEARS


52/74

This ratio shows the relationship between sales and total assets of the company andalso compares total sales with total assets. It shows the firms ability in generating salesfrom all financial resources committed to total assets.

Total assets turn over ratio= Net Sale/ Total Assets

Lower Total Assets Turnover Ratio indicates lack of proper utilization of invested assetsand if it is higher then it means that company is utilizing its invested properties in animpressive manner.

The Total Assets Turnover Ratio for last 7 years for HEEP, Hardwar have beencalculated as under.


Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Net sale 119298 115596 114608 166598 199388 258690 286264

Total

assets

108243 94678 114753 129401 153564 184819 179861

Ratio 1.10 1.22 0.99 1.28 1.29 1.39 1.59

RATIO

YEARS


53/74

INFERENCE: The total assets turn over ratio is the relationship between total assetsand sales. As can be seen from the above graph, the Total Assets Turnover Ratio atHEEP Hardwar is on an increasing trend for last 7 years except for the year 2003-04where it faced a downfall of 0.23 points, although it was well sufficient for the company.The average of TAT Ratio for last 7 years comes out to be 1.26 which implies that, onan average, HEEP Hardwar generates a sale of Rs.1.26 for one rupee investment infixed and current assets together.

LEVERAGE RATIOS

Debt Ratio

Several Debt Ratios may be used to analyze the long term solvency of the firm. It wouldbe of relevance to know the proportion of the interest-bearing debt (also called fundeddebt) in the capital structure of the firm. Thus, debt ratio can be computed by dividingtotal debt by capital employed or net assets. Total debt includes short and long termborrowings from financial institutions, debentures/bonds, deferred paymentarrangements for buying capital equipments, bank borrowings, public deposits and anyother interest bearing loan.

Debt Ratio = Total Debt/Capital Employed

The Debt Ratio for last 7 years for HEEP, Hardwar have been calculated as under.



54/74

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Total Debt 238 308 447 364 499 899 1291

Capital

Employed

36601 33302 32557 30011 42641 34763 29969

Ratio 0.0065 0.0092 0.0137 0.0121 0.0117 0.0258 0.0430

INFERENCE: From the above graph, it can be seen that the debt ratio of HEEP,Hardwar has steep inclination right from 2001-02 to 2007-08. The trend in middle years

is rather fluctuating. A higher debt ratio implies that claims of creditors on the companyare greater than those of owners. Moreover, all debt that has been raised by HEEP is inthe form of unsecured loan. This tends to introduce inflexibility in the firms operationsdue to increasing interferences and pressures from creditors. However, besides facing asteep incline, this ratio is still very small which supports greater claim of owners thancreditors. An average of 0.017 for past 7 years implies that out of the total capitalemployed in the firm 1.7% has been employed through the route of debt and rest is stillin the hands of equity holders i.e. owners.

Debt Equity Ratio (DER)

This ratio indicates the relationship between loan fund and net worth of the company,which is known as gearing. If the proportion of debt to equity is low a company is said tobe low-geared and vice versa. A debt equity ratio of 2:1 is the norm accepted byfinancial institutions for financing projects.

The higher the gearing, more volatile is the return to the shareholders.

YEARS


55/74

Debt Equity Ratio = Total Debt/Net Worth

The Debt Equity Ratio for last 7 years for HEEP, Hardwar has been calculated asunder.


Ye ar 2 00 1-0 2 20 02 -03 2 00 3- 04 2 004 -05 2 00 5-0 6 2 00 6- 07 20 07 -08

Total debt 238 308 447 364 499 899 1291

Net Worth 53697 62410 67756 82644 102423 130005 160836

Ratio 0.0044 0.005 0.0065 0.0044 0.0048 0.0069 0.0080

INFERENCE: The Debt Equity Ratio describes the lenders contribution for eachrupee of owners contribution. The Debt Equity Ratio of HEEP Hardwar for last 7 years

forms a fluctuating trend with 0.44% in the year 2001-02 to 0.80% in year 2007-08. Anaverage DE Ratio of these 7 years is 0.005 which implies that lenders have contributedRs. 0.005 for each rupee contributed by owners. This generates a greater claim ofowners than creditors which is a satisfactory situation from creditors point of view,since, a high proportion of equity provides greater margin of safety for them.

RATIO

YEARS


56/74

Proprietor Ratio Or (Share Holder Equity Ratio)

It is assumed that larger the proportion of the shareholders equity, the stronger isthe financial position of the firm. This ratio will supplement the debt-equity ratio. In thisratio a relationship established between the shareholders fund and the total assets. Areduction in shareholders equity signally the over dependence on outside source forlong term financial needs and this carries the risk of higher level of gearing. This ratioindicates the degree to which unsecured creditors are protected against loss in theevent of liquidation.

Prop Ratio =Net Worth / Total Assets

The Proprietor Ratio for last 7 years for HEEP, Hardwar has been calculated as under.


Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Net Worth 53697 62410 67756 82644 102423 130005 160836

Total Assets 108243 94678 114753 129401 153564 184819 179861

Ratio 0.49 0.65 0.59 0.63 0.66 0.70 0.89

RATIO

YEARS


57/74

INFERENCE:

There is increase in shareholders fund but there is no fresh investment in FA is madeand this may affect future profitability of the company.

Total Liabilities to Total Assets Ratio

Current liabilities (non- interest bearing current obligations) are generally excluded from

the computation of leverage ratios. One may like to include them on the ground thatthey are important determinants of the firms financial risk since they representobligations and exert pressure on the firm and restrict its activities. Thus, to assess theproportion of total funds short and long-term provided by outsiders to finance totalassets, the following ratio may be calculated:

TL to TARatio = Total Liabilities /Total Assets

The TA to TL Ratio for last 7 years for HEEP, Hardwar has been calculated as under.


Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Total

Liabilities

71945 61683 82643 99754 111422 150955 151183

Total Assets 108243 94678 114753 129401 153564 184819 179861

Ratio 0.66 0.65 0.72 0.77 0.725 0.81 0.84


58/74

INFERENCE:

Here from the data and the ratio of last 7 years it is clear that the companys financialposition is sound and is capable of meeting its liabilities out of its total assets. From thelast five years data we see that the solvency ratio is increasing slowly and it hasincreased from 0.66 in 2001-02 to 0.84 in 2007-08. But it indicating a sound financialposition of the company.

Fixed Assets to Net Worth Ratio

This ratio shows that how efficiently the fixed assets are utilized by the company. Thisalso shows that what portion of net worth is invested in the fixed assets.

Fixed Assets to Net Worth Ratio = Fixed Assets / Net Worth

The FA To NW Ratio for last 7 years for HEEP, Hardwar have been calculated asunder.


Year 2001-

02

2 00 2- 03 2 00 3- 04 2 00 4- 05 2 00 5- 06 2 00 6- 07 2 00 7- 08

Fixed 7281 14634 14082 16565 13896 16858 29299

RATIO

YEARS


59/74

Assets

Proprietor

Funds

53697 62410 67756 82644 102423 130005 160836

Ratio 0.13 0.23 0.20 0.20 0.13 0.12 0.18

INFERENCE: Here this ratio is going on decreasing and the average comes out tobe 0.18 which means for every Re. 1 of Proprietor Fund there are Rs. 0.18 of Fixed

Assets indicating that Fixed Assets are utilized properly but there are no freshinvestments made in Fixed Assets which may effect the future profitability of thecompany.

Fixed Assets Ratio

This ratio indicates the proportion of long funds deployed in fixed assets. Fixed assetsminus depreciation provided on this till the date of calculation. The higher the ratioindicates the safer the funds available in case of liquidation. It also indicates the portionof long-term fund that is invested in the working capital.

Fixed Assets Ratio = Capital Employed / Net Fixed Assets

The Fixed Assets Ratio for last 7 years for HEEP, Hardwar have been calculated asunder.


Ye ar 20 01- 02 2 00 2- 03 2 00 3-0 4 2 004 -05 20 05- 06 2 00 6- 07 2 007 -08

RATIO

YEARS


60/74

Capital

Employed

36601 33302 32557 30011 42641 34763 29969

Net Fixed

Assets

7281 14634 14082 16565 13896 16858 29299

Ratio 5.02 2.27 2.31 1.81 3.06 2.06 1.02

INFERENCE: This ratio indicates that proportion of long funds deployed in fixedassets here the fixed assets ratio is increasing. But from the data we found that thereare no fresh investments made in Fixed Assets. But there is continuous decrease inlong-term funds, which may affect the future profitability of the company.

Interest Coverage Ratio

This ratio shows how many times the profit covers the interest. It shows the margin ofcover to lenders of the company. It is always desirable to have profit more than theinterest payable. In case profit is either equal or lesser than the interest, the position willbe unsafe and it will show that there is nothing left for the shareholder and the positionof lender is also unsafe. The net income of the company should be ideally 6 or 7 timesof the fixed interest charges.

Interest Coverage Ratio = Profit before interest and tax / Interest

The Interest Coverage Ratio for last 7 years for HEEP, Hardwar have been calculatedas under.

(Figures

RATIO

YEARS


61/74

are in Rs/ Lacs)

Y ea r 2 00 1- 02 2 00 2- 03 2 0 03 -04 20 04 -05 2 005 -06 20 06 -07 20 07 -08

PBIT 7205 11083 12324 22338 31552 42957 50324

Interest 632 -622 -474 -623 -937 -390 -410

Ratio 11.4 -17.8 -26 -35.8 -33.67 -110.15 -122.74

INFERENCE: Interest Coverage Ratio had increased in 2001-02 while after that it isdecreasing year by year as it shows negative. It is clear that there is no risk for lendersand share holders

YEARS

RATIO


62/74

PROFITABILITY RATIOS

Gross Profit Ratio (GPR)

This ratio measures the gross profit margin on the total net sales made by the company.The ratio measures the efficiency of the companys operation and this can also becompared with the previous years results to ascertain the efficiency partners withrespect to the previous year. When every thing is normal the gross profit margin shouldremain unchanged, irrespective of the level of production and sales, since it is based onthe assumption that all costs deducted when computing gross profit, which are directlyvariable with sales. A stable gross profit margin is therefore the norm.

Gross Profit Ratio =Gross Profit / Net Sales

The Gross Profit Ratio for last 7 years for HEEP, Hardwar have been calculated asunder.


Y ea r 2 00 1- 02 20 02- 03 20 03- 04 2 00 4- 05 2 00 5-0 6 2 00 6- 07 20 07 -08

Gross Profit 10487 14260 17176 25901 35329 48196 50324

Net Sales 119298 115596 114608 166598 199388 258690 286264

Ratio 0.0879 0.1233 0.1498 0.1554 0.1771 0.1863 0.1757


63/74

INFERENCE: Gross Profit Ratio is increasing year by year. It has come to 17.57% in 2006-07 from 8.7% in 2001-02. For improving the more profitability of the company, company should

take in plans relating to cost reduction and cost control. Efforts should also be made to take up

contracts having greater margins such as renovation / retrofitting etc. In addition to regularcontracts which has very less margin.

Net Profit Margin

This ratio established relationship between net profit and net sales. Net profit ratioshows the operational efficiency of the managerial inefficiency and excessive sellingand distribution expenses. In the same way, increase shows better performance.Increase or decrease in the ratio is determined in comparison to pervious yearsperformance.

Net Profit Margin = Profit After Tax / Net Sales 100

The Net Profit Margin for last 7 years for HEEP, Hardwar have been calculated asunder.

(Figures

are in Rs/ Lacs)

Ye ar 20 01 -02 2 002 -03 20 03- 04 2 00 4- 05 2 00 5- 06 20 06 -07 20 07 -08

PAT 4354 7078 7248 13726 21553 26400 30933

Net Sales 119298 115596 114608 166598 199388 258690 286264

Ratio 4 7 7.4 10.3 13.1 12.54 10.8

RATIO

YEARS


64/74

INFERENCE:Net profit of last six years is continuously increasing indicating a goodoperating efficiency of the company. The average of net profit ratio comes out to be9.07% which means that for every Ra 100 of net sales profit margin is of Rs 9.07 andthis is a satisfactory position for the company and also indicates that Managerial skillsare efficient. The companys performance is good.

Net Profit To Fixed Assets Ratio

This ratio shows relationship of net profit to fixed assets and also indicates, whetherfixed assets are being properly used or not. It will be in the favor of the business, if thisratio higher.

Net Profit to Fixed Assets Ratio = Net Profit / Fixed Assets

The Net Profit to Fixed Assets Ratio for last 7 years for HEEP, Hardwar have beencalculated as under.


Ye ar 2 001 -02 20 02 -03 20 03 -04 2 00 4- 05 20 05 -06 2 00 6- 07 2 007 -08

Net Profit 4354 7078 7248 14553 21553 26400 30933

Fixed Assets 7281 14634 14082 16565 13896 26858 29299

Ratio 0.87 0.57 0.65 0.87 1.45 0.98 1.05

RATIO

YEARS


65/74

INFERENCE:Here this ratio is going on increasing however in 2002-03 to 2005-06. itincreased from 0.57 in year 2002-03 to 1.45 in year 2005-06, indicating that the fixedassets of the company is being used effectively. But there is no fresh investment madein Fixed Assets during these years and can affect future profitability of the company.The earning capacity of the company from utilization of Fixed Assets is improving yearby year.

Return On Investment (ROI)

Return on investment ratio measures, how effectively the capital employed in thebusiness is used. It shows the earning capacity of the net assets of the business. Theratio judges the performance of the business. It can be used for comparing theperformance of even dissimilar business or different department of the same business.

Return on Investment = Profit After Tax/Share Holder Funds 100

The Return on Investment for last 7 years for HEEP, Hardwar have been calculated asunder.

RATIO

YEARS


66/74


Y ea r 2 00 1- 02 2 002 -03 20 03 -04 2 00 4- 05 20 05 -06 20 06 -07 20 07 -08

Profit After

Tax

4354 7078 7248 14523 21553 26400 30933

Share Holder

Funds

53697 62410 67756 82644 102423 130005 160836

Ratio 8.10 11.34 10.69 17.57 21.04 20.30 19.23

INFERENCE: Return on investment is increasing year by year that is 8.11 in year2001-02 and it increased to 20.25 in year 2006-07. it is indicating that the capitalemployed in the business is used effectively and the performance of the company isincreasing hence, company should not invest in the fixed assets and R & Dexpenditures.

Return On Equity

Return on equity is a measure of great interest to equity share holders. Return on equityis defined as equity earning / avg. equity. The numerator of this ratio is equal to PATand the denominator includes all contribution made by equity share holders (Paid-up +reserve & surplus). Return on equity measures the profitability of equity funds investedin the firm. it is regarded as a very important measures as it reflects the productivity ofthe ownership capital employed in the firm.

Return On Equity = PAT / Average Equity

RATIO

YEARS


67/74

The Return On Equity for last 7 years for HEEP, Hardwar have been calculated asunder.


Y ea r 2 00 1- 02 20 02 -03 20 03- 04 2 00 4-0 5 2 00 5- 06 20 06 -07 2 007 -08

PAT 4354 7078 7248 14523 21553 26400 30933

AVG.EQUITY

4570 4570 4570 4570 4570 4570 4570

RATIO 0.95 1.54 1.58 3.17 4.71 5.73 6.76

INFERENCE: From the above graph we can see, return on equity is increasing byleaps& bounds. As in 2001-02 it was 0.95 & in 2007-08 it has increased up to 6.76, so itis indicating good financial position of the company

OTHER RATIOS

YEARS

RATIO


68/74

Turnover Per Employee

This ratio is calculated by dividing turnover of the company by the number of employeesworking in the company. This indicating how efficiently manpower is used to generateturnover.

Turnover Per Employee (TPE). = Turnover / No. of Employees

The TPE for last 7 years for HEEP, Hardwar have been calculated as under.


Yea r 20 01- 02 20 02- 03 20 03- 04 2 00 4- 05 20 05 -06 2 006 -07 20 07 -08

Turnover 108811 101336 97432 140697 164059 210494 235940

No. of Emp. 7463 7222 6811 6434 6195 6577 6800

Ratio 14.58 14.03 14.30 21.86 26.48 32.00 34.70

INFERENCE:As this ratio is increasing continuously year by year this indicates thatthe Human Resources of the company is utilized effectively and are generating highturnover which is good for the company. Hence companys performance is good.

Collectable Debts As A Percentage Of Turnover

This ratio indicates how effectively debtors are collected out of turnover.

YEARS

RATIO


69/74

Collectable Debts As a Percentage of Turnover = Collectable debts/Turnover100

The Ratio for last 7 years for HEEP, Hardwar have been calculated as under.

(Figures

are in Rs/ Lacs)Y ear 20 01- 02 20 02- 03 2 00 3- 04 2 004 -05 2 00 5- 06 20 06- 07 2 007 -08

Collectable

debts

26745 21373 39335 29938 37566 44743 48590

Turnover 108811 101336 97432 140697 164059 210494 235940

Ratio 25 22.3 40 21.28 22.89 21.26 20.59

INFERENCE:

The above graph shows fluctuating ratio year by year. Hence, efforts should be madethat goods are dispatched to only customers who are making timely payments.

YEARS

RATIO


70/74

LIMITATIONS OF STUDY

It took a lot of time in collection of data as the data available in BHEL Hardwar isso wide and covers great deal of extensive information.

No printed data was available for the current year as the annual report for 2006-07 is still in the process.

All the data collected was from the secondary sources and I had to rely on thedata collected by them.

The conclusion given regarding BHEL is based on the present economiccondition.


71/74

CONCLUSIONS AND SUGGESTIONS

During my Summer Training at BHEL, Hardwar on the project Financial Analysis andEVA, I have observed some weak and strong points of the company, which arefollowing:

As it is not only the analysis which makes the decision, furthermore good judgmentsand interpretation depends upon the intelligence and ability of the analyst.

On seeing the liquidity position of BHEL. I conclude that it is not very good as thecurrent assets are in the form of inventories and debtors. The debt collectionperiod is high and inventories are least liquid current assets. So maintaining the

inventories are relatively costly affair for the company and the management musthave to investigate properly. It is very necessary so that fund should not beblocked unreasonably. Efficient inventory management is required in BHEL.

On seeing the leverage position of the BHEL, I conclude that it is very good asthe stake of owners in company is continuously increasing and its long term debtcontinuously decreasing it means that company is paying its debt promptly andcreditors will not face any risk in investing in BHEL as also BHEL is givingassured ROI.

On seeing turnover, fixed assets and current assets turnover of company goeson increasing which is a good indicator as it brings commensurate gain and alsothe average collection goes on decreasing but management should take more

efficient steps to reduce it. On seeing the profitability of the BHEL its overall performance is very good. A

continuous increase in the values of EPS and DPS results, investors feel safe toinvest money in BHEL.

On seeing the performance over EVA it can be said that company is doing goodin their core field. And growth of the EVA shows the units strong position in theirbusiness. This growth is also shows a good sign from shareholders point of view.


72/74

STRENGTH (S): -

Low cost producer of quality equipment due to cheap labour and fully

depreciated plants.

Flexible manufacturing set up.

Entry barrier due to high replacement cost of its manufacturing facilities.

WEAKNESSES (W): - High working capital requirement due to its exposure to cash starved

SEBs (State electricity boards) and High WIP.

Inability to provide project financing.

OPPORTUNITIES (O): - High-expected growth in power sectors (7000 MW/p.a. needs to be

added) High growth forecast in Indias index of industrial production would

increase demand for industrial equipment such as motors and

compressors.

THREATS (T): -

Technical suppliers are becoming competitors with the opening up of the

Indian economy.

Fall in global power equipment prices can effect profitability.


73/74

BIBLIOGRAPHY

To complete th is summer t rain ing project report the fol lowing sources

were referred:

Books and budget manual

www.google.com

www.bhel.com

www.indiatimes.com
http://www.google.com/http://www.bhel.com/http://www.google.com/http://www.bhel.com/


74/74

34368705 summer training report of bhel co

Documents