summer training report of bhel co
TRANSCRIPT
SUMMER TRAINING REPORTON
FOR
BHEL, HARDWAR
Submitted in partial fulfillment for the requirement for award of the degree of
Master of Business Administration (2008-10)
MAHARISHI MARKANDESHWAR UNIVERSITYMULLANA
CONTENTS
Submitted To:Mrs. Santosh AnandAccounts OfficerHEEP, Hardwar.
Submitted By:Charu LambaMBA- III Sem.MMIM, MULLANA
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
A C K N O W L E D G E M E N TA C K N O W L E D G E M E N 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 LambaMBA- III Sem.MMIM, MUlLANA
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)
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.
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,
telecommunication etc. 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 of BHEL have been upgraded to the latest ISO-9001: 2000
version quality standard certification for quality management. All the major
units/divisions of BHEL have been awarded ISO-14001 certification for environmental
management 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.
International Business:-
BHEL has, over the years, established its references in over 60 countries of the world.
These references encompass almost the entire range of BHEL 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 International
markets, 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.
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
# 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
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.
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..
BUSINESS MISSION
To 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.
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.
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
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.
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."
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.
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
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)
MAJOR COMPETITORS OF BHEL
1. Ansaldo Italy
2. Asea Brown Boueri Switzerland
3. Beehtel USA
4. Block & Neatch USA
5. CNMI & EC China
6. 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
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]
5. BHEL net profit up 62 pc(the tribune,3 June 2006)
6. Workers’ participation in management yields savings at BHEL, Haridwar ,
Nov 16.
7. 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)
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 India’s 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.
HISTORICAL PROFILE :-
The construction of heavy electrical equipment Plant commenced in Oct.”1963”after
indo- soviet technical co-operation agreement in Sept.”1959”The 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
plant’s “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 Feb”1995”.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 MNC’s and enjoy huge
financial and R&D backup.
CORPORATE CITIZEN:-
HEEP Haridwar’s 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
PSU’s in their Corporate planning process .Board meeting , monthly Management
Committee meetings, Annual Revenue Budget exercise , Mid term reviews , Apex TQ
council 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 Corporation’s vast network.
KEY CUSTOMERS AND SUPPLIERS:-
HEEP’s 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 country’s 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 CEA’s stress on R&M
of ageing Power Plants is also providing business opportunity to unit.
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 country’s 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
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 PSE’s 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 concept
1999 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 11th 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
2003 Commendation for Strong Commitment to Excel in CII-EXIM
Bank Award
2004 Commendation for Signif icant 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 it’s 50 years in August 2006.
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.
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:
The is the general administration section of the company which administrates the whole department and keep on viewing the troubles of the department and tales the measures to get rid of the problem.
CASH SECTION:
This section helps the company in maintaining the cash and bank receipt, to make the requisitions for receipt of funds whenever required to the corporate and to make payments. It records the daily receipt and release of the funds. The banks by which the transactions 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.
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 supplier’s 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.
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 contractor’s 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.
(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 making the accounts relating to every thing of the company. The accounts which are prepared by 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 terms of quantity and value. The pricing of issues is calculated on monthly average basis. The terms which are recorded in the reference of inventory are :
1. Opening Stock2. Receipt3. Issue4. Closing Stoke.
Hierarchy of financial department’s sectionsin B.H.E.L (HARIDWAR)
Functional head
Departmental Head
Departmental Head
Departmental Head
Internal audit
Book &budget
Cash
System
Sales
Costing
Store Bill
Foreign payment
Price Store ledger
Pay roll
Administration
Store finance
Work
‘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.
FINANCIAL ANALYSIS
Financial analysis is the process of determining the operating and financial characteristics of a firm from accounting data and financial statement. The goal of such analysis 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's liquidity, profitability and other indications that business is conducted in a rational and orderly way.Here ratio analysis is taken as the primary tool for examining the firm's financial position and EVA for performance of BHEL Haridwar. There are two views points in receiving and 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 and involves 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 have available more details and current information than is available to outsiders. They are able to prepare Performa, or future statements and are able to produce a more accurate and timely analysis of the firm's strength and weaknesses.
Financial statement contain a wealth of information which, if properly analysed and interpreted, can provide valuable insights in to firms performance and position. Financial statement 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 of the strengths and weaknesses of the firm in various areas.The principle tool for financial statement analysis is Financial Ratio Analysis. A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or groups of items. Financial ratio have been classified as follows: -
TYPES OF FINANCIAL RATIOS
LIQUIDITY RATIOS ACTIVITY RATIOS LEVERAGE RATIOS PROFITABILITY RATIOS OTHER RATIOS
LIQUIDITY RATIOS: - Liquidity refers to the ability of the firm to meet its obligations in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets and current liabilities (the sources for meeting short-term obligations).
LEVERAGE RATIOS: - Financial leverage refers to the use of debt finance. While debt 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 management ratios. They measures how efficiently the assets are employed by the firm. These ratios are based on the relationship between the level of activity and the level of various assets.
PROFITABILITY RATIOS: - Profitability reflects the final result of business operations. 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, Overtime per employee etc.
ADVANTAGES OF RATIOS: - The ratio analysis is one of the most powerful tools of financial analysis. It is use as a device to analysis and interpret the financial health of enterprise. Just like a doctor examines his patient by recording his body temperature, blood pressure etc. Before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statement with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. 'A ratio is known as a symptom like blood pressure, the pulse rate or the temperature of the individual.' It is with help of ratios that the financial statements can be analysed and decision made from such analysis.
1. HELPS IN DECISION-MAKING: Financial statements are prepared primarily for decision making. But the information provided in financial statements is not an end in itself and no meaningful conclusions can be drawn from these statements alone. Ratio Analysis helps in making decisions from the information provided in these financial statements.
2. HELPS IN FINANCIAL FORECASTING AND PLANNING: Ratio analysis is of much help in financial forecasting and planning. Planning is looking ahead and the 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, ratio analysis helps in forecasting and planning.
3. HELPS IN COMMUNICATING: The financial strength and weaknesses of a firm are communicated in a more easy and understandable manner by the use of ratios the information contained in a financial statement is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios help in communication and enhance the value of financial statements.
4. HELPS IN CO-ORDINATION: Ratios even helps in coordination, which is utmost importance in effective business management. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.
5. HELPS IN CONTROL: Ratio analysis even helps in making effective control of the business. Standard ratios can be based upon Performa financial statements and variance or deviations, if any, can be found by comparing the actual with the standards so as to take corrective action at the right time. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business.
USES OF FINANCIAL STATEMENTS TO DIFFERENT PARTIES
The analysis and interpretation of financial statements is an important accounting activity. 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 and their aims and their objectives also differ significantly. The following are the use of statement analysis to different parties:
TO THE FINANCIAL EXECUTIVES : - The first party interested in the financial statement analysis is the finance department of the business concern itself to the financial managers such analysis provides a deep insight into the financial condition of the enterprises and the view of the past performance which helps in future decision making. The financial statements give vital information concerning the position of the enterprise as well the result of the operations.
TO THE TOP MANAGEMENT : - The top management of the concern is also increased in the analysis of these statements because it helps them reaching conclusions 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 the creditors. Also some aspects of enterprise operations are of interest to creditors in regard to liquidity of funds, soundness of financial structure, profitability of the operations, effectiveness of working capital management etc.
TO THE INVESTORS AND OTHERS :- Investors presents as well as prospects are also interested in the measurement of earning capacity of the securities. Investors have been increasingly concerned with the cash generation capability of an enterprise, primarily in terms of the flexibility available to such enterprises to acquire other business and new assets on an advantage basis for this purpose.
PROBLEMS OF FINANCIAL STATEMENTS
There are certain problems and issues encountered in financial analysis which call for care, circumspection and judgement in such exercise.
DEVELOPMENT OF BENCHMARKS:- given the diversity of BHEL product lines, it is difficult to find suitable benchmarks for evaluating its financial performance and 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 and not about the entire dispersion of ratios for various firms in the industry, it may not be possible to draw meaningful inferences.
WINDOW DRESSING:- firm may resort to window dressing to project a favorable financial picture. When window dressing is suspected, the financial analyst should look at the average data available as per resource.
PRICE LEVEL CHANGES:- In India financial accounting takes into consideration price level changes. As a result, balance sheet figures are distorted and profits are misreported. Hence financial statement analysis can be vitiated.
VARIATIONS IN ACCOUNTING POLICIES :- Business firms have some latitudes in accounting treatment like depreciation, valuation of stocks research and development 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, comparative financial statement analysis may be vitiated.
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 firm’s short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. The higher the current ratio, the larger is the amount of rupee available per rupee of current liability, the more is the firm’s ability to meet current obligations and greater is the safety of funds of short term creditors. A ratio of greater than 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
Current assets
100962 80044 100608 112836 139668 139029 150562
Current liabilities
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
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 term solvency of the firm has gone down. But the current ratios of last seven years are greater 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 term obligation. So this indicates that the short-term liquidity position of the company is very good and short-term conditions are safe as far as payment is concerned, although, as a conventional 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. It establishes 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 of value. Quick Ratio is a better test of financial strength than the current ratio, because it excludes very slow moving inventories and the items of current assets, which cannot be converted into cash easily. This ratio shows the extent of cushion of protection provided from the Quick assets to the current creditors. A Quick ratio of 1:1 is usually considered satisfactory.
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.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Quick assets
57501 47674 61457 53860 69870 100334 82739
Current liabilities
71641 61375 82196 99390 110923 150056 149892
Quick Ratio
0.80 0.78 0.75 0.54 0.63 0.67 0.55
INFERENCE: The liquid ratio of 1:1 is considered to be satisfactory in case of any organization whereas in case of BHEL Hardwar Liquidity Ratio is not even approaching one, hence there is liquidity problem in payment in time. Here payments to creditors are not made in time due to lack of cash/liquid fund.
YEARS
RATIO
ACTIVITY RATIOS
Inventory Turnover Ratio (ITR)
A considerable amount of a company’s 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 as low as possible, consistent with the need to fulfill customer order in time. Inventory Turnover Ratio indicates the efficiency of the firm in producing and selling its product. It shows how rapidly the inventory is turning into receivables through sales. Generally, a high inventory turnover is indicative of good inventory management. A low inventory turnover implies excessive inventory levels than warranted by production and sales activities, 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 inventory for each year)
The Inventory Turnover Ratios for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
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
INFERENCE: Inventory turnover ratio indicates that how quick inventories are converted into sales. It gives the position of the inventory management of the company. The average of this ratio for past 7 years comes out to be 2.86 which show that for every Re 1 of average inventory 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 been better 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 is reasonable 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 the value 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 for each year)
The Debtors Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
RATIO
YEARS
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
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
INFERENCE: This ratio indicates that how quick debtors are collected and higher ratio shows better position of the company. Here from the graph and the ratio of the last 7 years it is clear that the debtors are collected quickly and efficiently as the Debtor Turnover Ratio is increasing year by year from 2.27 times in year 2001-02 to 3.52 times in year 2005-06. This indicates that average collection period is short and so there are less or say no bad debts for the company. Although, this ratio is on a slight declining trend 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 an average of 2.9 shows that the liquidity position of the firm is good.
RATIO
YEARS
Fixed Assets Turnover Ratio
Fixed assets are used in the business for producing goods to be sold. The effective utilization 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 been calculated as follows.
(Figures are in Rs/ Lacs)
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
RATIO
YEARS
INFERENCE: The graph above shows that the fixed assets turnover ratio was on an increasing trend for past 3 years until 2007-08 where it faced a decline. The reason that could be attributed to such a decline is that the utilization of funds in the form of fixed assets has been significantly higher for the year 2007-08. as compared to previous years. 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 an average figure of 2.89 indicates that the firm has been utilizing its fixed assets efficiently with respect to net sales.
Total Assets Turnover Ratio
This ratio shows the relationship between sales and total assets of the company and also compares total sales with total assets. It shows the firm’s ability in generating sales from 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 assets and if it is higher then it means that company is utilizing its invested properties in an impressive manner.
The Total Assets Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Net 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
INFERENCE: The total assets turn over ratio is the relationship between total assets and sales. As can be seen from the above graph, the Total Assets Turnover Ratio at HEEP Hardwar is on an increasing trend for last 7 years except for the year 2003-04 where 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, on an average, HEEP Hardwar generates a sale of Rs.1.26 for one rupee investment in fixed and current assets together.
RATIO
YEARS
LEVERAGE RATIOS
Debt Ratio
Several Debt Ratios may be used to analyze the long term solvency of the firm. It would be of relevance to know the proportion of the interest-bearing debt (also called funded debt) in the capital structure of the firm. Thus, debt ratio can be computed by dividing total debt by capital employed or net assets. Total debt includes short and long term borrowings from financial institutions, debentures/bonds, deferred payment arrangements for buying capital equipments, bank borrowings, public deposits and any other interest bearing loan.
Debt Ratio = Total Debt/Capital Employed
The Debt Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
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
YEARS
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 company are greater than those of owners. Moreover, all debt that has been raised by HEEP is in the form of unsecured loan. This tends to introduce inflexibility in the firm’s operations due to increasing interferences and pressures from creditors. However, besides facing a steep incline, this ratio is still very small which supports greater claim of owners than creditors. An average of 0.017 for past 7 years implies that out of the total capital employed in the firm 1.7% has been employed through the route of debt and rest is still in 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 to be low-geared and vice versa. A debt equity ratio of 2:1 is the norm accepted by financial institutions for financing projects.
The higher the gearing, more volatile is the return to the shareholders.
Debt Equity Ratio = Total Debt/Net Worth
The Debt Equity Ratio for last 7 years for HEEP, Hardwar has been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
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 lender’s contribution for each rupee of owner’s 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. An average DE Ratio of these 7 years is 0.005 which implies that lenders have contributed Rs. 0.005 for each rupee contributed by owners. This generates a greater claim of owners 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.
Proprietor Ratio Or (Share Holder Equity Ratio)
It is assumed that larger the proportion of the shareholders equity, the stronger is the financial position of the firm. This ratio will supplement the debt-equity ratio. In this ratio a relationship established between the shareholder’s fund and the total assets. A reduction in shareholder’s equity signally the over dependence on outside source for long term financial needs and this carries the risk of higher level of gearing. This ratio indicates the degree to which unsecured creditors are protected against loss in the event of liquidation.
Prop Ratio =Net Worth / Total Assets
The Proprietor Ratio for last 7 years for HEEP, Hardwar has been calculated as under.
RATIO
YEARS
(Figures are in Rs/ Lacs)
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
INFERENCE:There is increase in shareholders fund but there is no fresh investment in FA is made and 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
RATIO
YEARS
the computation of leverage ratios. One may like to include them on the ground that they are important determinants of the firm’s financial risk since they represent obligations and exert pressure on the firm and restrict its activities. Thus, to assess the proportion of total funds – short and long-term – provided by outsiders to finance total assets, the following ratio may be calculated:
TL to TA Ratio = Total Liabilities /Total Assets
The TA to TL Ratio for last 7 years for HEEP, Hardwar has been calculated as under.
(Figures are in Rs/ Lacs)
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
INFERENCE:
Here from the data and the ratio of last 7 years it is clear that the company’s financial
RATIO
YEARS
position is sound and is capable of meeting its liabilities out of its total assets. From the last five years data we see that the solvency ratio is increasing slowly and it has increased from 0.66 in 2001-02 to 0.84 in 2007-08. But it indicating a sound financial position of the company.
Fixed Assets to Net Worth Ratio
This ratio shows that how efficiently the fixed assets are utilized by the company. This also 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 as under.
(Figures are in Rs/ Lacs)
Year 2001-02
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Fixed Assets
7281 14634 14082 16565 13896 16858 29299
Proprietor Funds
53697 62410 67756 82644 102423 130005 160836
Ratio 0.13 0.23 0.20 0.20 0.13 0.12 0.18
RATIO
YEARS
INFERENCE: Here this ratio is going on decreasing and the average comes out to be 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 fresh investments made in Fixed Assets which may effect the future profitability of the company.
Fixed Assets Ratio
This ratio indicates the proportion of long funds deployed in fixed assets. Fixed assets minus depreciation provided on this till the date of calculation. The higher the ratio indicates the safer the funds available in case of liquidation. It also indicates the portion of 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 as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Capital
Employed36601 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
RATIO
YEARS
INFERENCE: This ratio indicates that proportion of long funds deployed in fixed assets here the fixed assets ratio is increasing. But from the data we found that there are no fresh investments made in Fixed Assets. But there is continuous decrease in long-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 of cover to lenders of the company. It is always desirable to have profit more than the interest payable. In case profit is either equal or lesser than the interest, the position will be unsafe and it will show that there is nothing left for the shareholder and the position of lender is also unsafe. The net income of the company should be ideally 6 or 7 times of 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 calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08PBIT 7205 11083 12324 22338 31552 42957 50324
Interest 632 -622 -474 -623 -937 -390 -410Ratio 11.4 -17.8 -26 -35.8 -33.67 -110.15 -122.74
YEARS
RATIO
INFERENCE: Interest Coverage Ratio had increased in 2001-02 while after that it is decreasing year by year as it shows negative. It is clear that there is no risk for lenders and share holders
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 company’s operation and this can also be compared with the previous years results to ascertain the efficiency partners with respect to the previous year. When every thing is normal the gross profit margin should remain unchanged, irrespective of the level of production and sales, since it is based on the assumption that all costs deducted when computing gross profit, which are directly variable 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 as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Gross Profit 10487 14260 17176 25901 35329 48196 50324Net Sales 119298 115596 114608 166598 199388 258690 286264
Ratio 0.0879 0.1233 0.1498 0.1554 0.1771 0.1863 0.1757
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 regular contracts which has very less margin.
Net Profit Margin
This ratio established relationship between net profit and net sales. Net profit ratio shows the operational efficiency of the managerial inefficiency and excessive selling and distribution expenses. In the same way, increase shows better performance. Increase or decrease in the ratio is determined in comparison to pervious year’s performance.
Net Profit Margin = Profit After Tax / Net Sales 100
RATIO
YEARS
The Net Profit Margin for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08PAT 4354 7078 7248 13726 21553 26400 30933
Net Sales 119298 115596 114608 166598 199388 258690 286264Ratio 4 7 7.4 10.3 13.1 12.54 10.8
INFERENCE: Net profit of last six years is continuously increasing indicating a good operating efficiency of the company. The average of net profit ratio comes out to be 9.07% which means that for every Ra 100 of net sales profit margin is of Rs 9.07 and this is a satisfactory position for the company and also indicates that Managerial skills are efficient. The company’s performance is good.
Net Profit To Fixed Assets Ratio
This ratio shows relationship of net profit to fixed assets and also indicates, whether fixed assets are being properly used or not. It will be in the favor of the business, if this ratio 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 been
RATIO
YEARS
calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Net Profit 4354 7078 7248 14553 21553 26400 30933
Fixed Assets 7281 14634 14082 16565 13896 26858 29299Ratio 0.87 0.57 0.65 0.87 1.45 0.98 1.05
INFERENCE: Here this ratio is going on increasing however in 2002-03 to 2005-06. it increased from 0.57 in year 2002-03 to 1.45 in year 2005-06, indicating that the fixed assets of the company is being used effectively. But there is no fresh investment made in 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 year by year.
Return On Investment (ROI)
Return on investment ratio measures, how effectively the capital employed in the business is used. It shows the earning capacity of the net assets of the business. The ratio judges the performance of the business. It can be used for comparing the performance of even dissimilar business or different department of the same business.
Return on Investment = Profit After Tax/Share Holder Funds 100
RATIO
YEARS
The Return on Investment for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Profit After
Tax4354 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 year 2001-02 and it increased to 20.25 in year 2006-07. it is indicating that the capital employed in the business is used effectively and the performance of the company is increasing hence, company should not invest in the fixed assets and R & D expenditures.
RATIO
YEARS
Return On Equity
Return on equity is a measure of great interest to equity share holders. Return on equity is defined as equity earning / avg. equity. The numerator of this ratio is equal to PAT and the denominator includes all contribution made by equity share holders (Paid-up + reserve & surplus). Return on equity measures the profitability of equity funds invested in the firm. it is regarded as a very important measures as it reflects the productivity of the ownership capital employed in the firm.
Return On Equity = PAT / Average Equity
The Return On Equity for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
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
YEARS
RATIO
INFERENCE: From the above graph we can see, return on equity is increasing by leaps& bounds. As in 2001-02 it was 0.95 & in 2007-08 it has increased up to 6.76, so it is indicating good financial position of the company
OTHER RATIOS
Turnover Per Employee
This ratio is calculated by dividing turnover of the company by the number of employees working in the company. This indicating how efficiently manpower is used to generate turnover.
Turnover Per Employee (TPE). = Turnover / No. of Employees
The TPE for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Turnover 108811 101336 97432 140697 164059 210494 235940
No. of Emp. 7463 7222 6811 6434 6195 6577 6800Ratio 14.58 14.03 14.30 21.86 26.48 32.00 34.70
YEARS
RATIO
INFERENCE: As this ratio is increasing continuously year by year this indicates that the Human Resources of the company is utilized effectively and are generating high turnover which is good for the company. Hence company’s performance is good.
Collectable Debts As A Percentage Of Turnover
This ratio indicates how effectively debtors are collected out of turnover.
Collectable Debts As a Percentage of Turnover = Collectable debts/Turnover 100
The Ratio for last 7 years for HEEP, Hardwar have been calculated as under.
(Figures are in Rs/ Lacs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08Collectable
debts26745 21373 39335 29938 37566 44743 48590
Turnover 108811 101336 97432 140697 164059 210494 235940Ratio 25 22.3 40 21.28 22.89 21.26 20.59
INFERENCE:
YEARS
RATIO
The above graph shows fluctuating ratio year by year. Hence, efforts should be made that goods are dispatched to only customers who are making timely payments.
LIMITATIONS OF STUDY
It took a lot of time in collection of data as the data available in BHEL Hardwar is so 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 the data collected by them.
The conclusion given regarding BHEL is based on the present economic condition.
CONCLUSIONS AND SUGGESTIONS
During my Summer Training at BHEL, Hardwar on the project Financial Analysis and EVA, I have observed some weak and strong points of the company, which are following: As it is not only the analysis which makes the decision, furthermore good judgments and 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 the current assets are in the form of inventories and debtors. The debt collection period is high and inventories are least liquid current assets. So maintaining the inventories are relatively costly affair for the company and the management must have to investigate properly. It is very necessary so that fund should not be blocked unreasonably. Efficient inventory management is required in BHEL.
On seeing the leverage position of the BHEL, I conclude that it is very good as the stake of owners in company is continuously increasing and its long term debt continuously decreasing it means that company is paying its debt promptly and creditors will not face any risk in investing in BHEL as also BHEL is giving assured ROI.
On seeing turnover, fixed assets and current assets turnover of company goes on increasing which is a good indicator as it brings commensurate gain and also the 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 to invest money in BHEL.
On seeing the performance over EVA it can be said that company is doing good in their core field. And growth of the EVA shows the unit’s strong position in their business. This growth is also shows a good sign from shareholders point of view.
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 India’s 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.
BIBLIOGRAPHY
To complete this summer training project report the following sources
were referred:
Books and budget manual
www.google.com
www.bhel.com
www.indiatimes.com
