lcm summer training project study of financial performance of s.e.c.l..ppt

SUMMER TRAINING PROJECT REPORT

A STUDY OF FINANCIAL PERFORMANCE AT

S.E.C.LUNDER THE GUIDANCE OF:Mrs. Anindita Sen

PRESENTED BY – Manoj Kumar YadavROLL NO - 5023609044

• To study the financial statement analysis needs and implications for the S.E.C.L

• To critically analyze the financial performance of S.E.C.L with the help of ratios.

OBJECTIVES

•To analyze the profitability and solvency of the company for the past 3 years.

• To evaluate the financial statements of the past 3 years

COAL INDIA LIMITED

• E.C.L. (1975)• B.C.C.L.(1973)• C.C.L. (1975)• N.C.L. (1986) 

• W.C.L.(1975)•  S.E.C.L.(1986)• M.C.L.(1992)• C.M.P.D.I.L.(1975)

S.E.C.L: A Profile• The largest coal producing

company in the country. • It is one of the eight subsidiaries

of CIL (A Govt. undertaking under Ministry of Coal).

South Eastern Coal fields Ltd.: A Profile• SECL, Coal India’s premier coal

company is operating its coal mines in the state of Madhya Pradesh and Chhattisgarh state which is also geographically located at the heart of the country.

• The SECL family consists of 87590 employees as on 31st March 2005 who are predominantly locals.

• SECL operates through 90 mines spread over eight districts (three of Madhya Pradesh and five of Chhatisgarh).

S.E.C.L: A Profile

Data Analysisand

Interpretation

Common Size Statement AnalysisCommon size statements are particularly useful when comparing data from different companies and also to compare performance of a company over the adjacent years. Key financial changes and trends can be highlighted by the use of common size statements.

Common Size Balance Sheet of S.E.C.L.

Liabilities 2007 2008 2009 2010

Share Capital 3.75 3.23 2.94 2.62

Reserves &Surplus 38.79 36.78 36 36.64

Secured Loan 0.26 0.15 0.10 0.03

Unsecured Loans 3.65 2.88 3.11 2.26

Current Liabilities 33.65 38.20 46.21 46.61

Provisions 18.90 18.76 11.64 11.85

Total 100 100 100 100

Common Size Balance Sheet of S.E.C.L.

Assets 2007 2008 2009 2010

Net Block 17.99 19.39 20.22 20.51Capital WIP 3.23 3.25 4.43 5.11

Surveyed off Assets - - - 0.09Investments 11.56 8.85 7.04 5.37

Deferred Tax Assets 3.34 2.67 0.47 0.59Int. Accrued on

Investments 0.52 0.40 0.32 0.25

Inventories 5.30 4.65 4.04 4.69Sundry Debtors 2.7 2.48 1.62 1.54Cash and Bank 33.49 35.86 44.53 50.87

Loans and Advances 21.87 22.45 17.25 10.98Total 100 100 100 100

Common Size Income Expense Statement of S.E.C.L.

INCOME 2007

2008

2009

2010

Net Sales 90.16

89.19 89.63 89.3

7Coal Issued for Other Purposes 0.59 0.69 0.59 0.55

Accretion/Dectetion in stock 0.32 0.11 -0.27 1.30

Other Income 8.92 10.07 10.05 8.78

Total 100 100 100 10

0

Common Size Income Expense Statement of S.E.C.L.Expenditure (Direct) 2007 2008 2009 2010

Purchase 0.02 0.02 0.02 0.01Internal Consumption of Coal 0.8 0.61 0.59 0.54Employees Remuneration & Benefits 28.63 30.41 39.37 31.05Consumption of Stores & Spares 12.11 11.54 11.24 10.48Power & Fuel 5.53 4.59 3.80 3.50Repairs 1.71 1.50 1.33 1.28Contractual Expenditure 6.68 7.08 7.70 8.47Gross Profit 42.52 44.25 35.95 44.67Expenditure ( Indirect)Social Overheads 5.02 4.80 4.88 4.44Other Expenditure 4.42 4.47 4.34 3.09Interest 0.30 0.18 0.15 0.14Financial Charges 0.01 0.01 0.01 0.01Depreciation 3.1 4.45 3.54 2.31Impairment loss on Fixed Assets 0.05 0.01 0.02 0.02O.B.R. Adjustment 6.5 4.68 3.50 3.02Write-Offs 0.01 0.01 0.01 0.01Provisions (Net) 0.56 -0.09 0.26 0.17Prior Period Expenses -0.56 0.09 0.05 0.35Net Profit Before Tax 25.34 25.67 19.20 29.21Provision for Current Tax 10.35 8.43 6.84 8.74Provision for FBT 0.08 0.01 0.09 -Provision for Deferred Tax -2.73 0.28 2.54 -.23Income Tax For Early Years - - -1.09 0.54Excess Provision for FBT write off - - 0.06 -0.02Net Profit After Tax 17.63 16.86 10.89 20.20Total 100 100 100 100

Interpretation Contribution of R&S is constantly decreasing during the last 4 years Significant increase in creditors Decrease in Provision shows the proper utilization of provisions. Company had paid up most of its Secured loans, hence less dependent on outside funds which is on of the reasons of constant decrease in R&S.

Interpretation Continuous increase in FA Continuous increase in Cash result from pulling back of the Investment Sales or almost constant Decrease in Internal Consumption of Coal

Interpretation Employee remuneration in 2009 is very high.

Financial Statement Trend Analysis Trend Analysis is facilitated by showing changes between years. Can be stated as indexing the statements for a base year or stated as the % of change over the years. Helps the analyst to gain perspective and to gain a feel for the significance of the changes that are taking place

Liabilities 2007 2008 2009 2010Share Capital 100 100 100 100Reserves &Surplus 100 110.19 118.45 135.41Secured Loan 100 65.64 50.38 15.03Unsecured Loans 100 91.61 108.34 88.76Current Liabilities 100 128.09 170.20 192.83Provisions 100 115.33 78.63 89.85

Total 100 116.20 127.62 143.35

Trend AnalysisBase Year 2007

Trend AnalysisINCOME 2007 2008 2009 2010

Net Sales 100 113.57

134.18

148.20

Coal Issued for Other Purposes

100 119.52

135.92

138.76

Accretion/Deccretion in stock

100 42.11 (13.27)

604.80

Other Income 100 129.65

151.92

147.20

Total 100 114.81

134.98

149.53

Base Year 2007

Expenditure (Direct) 2007 2008 2009 2010Purchase 100 87.86 135.35 78.52Internal Consumption of Coal 100 120.96 136.66 139.61Employees Remuneration & Benefits 100 121.92 185.60 162.70Consumption of Stores & Spares 100 109.46 125.31 129.47Power & Fuel 100 95.06 92.74 94.70Repairs 100 100.66 105.11 111.65Contractual Expenditure 100 121.75 155.11 189.62

Gross Profit 100 113.58 108.47 149.26

Expenditure ( Indirect)Social Overheads 100 109.73 131.32 132.17Other Expenditure 100 116.05 132.66 169.16Interest 100 69.66 66.12 67.91Financial Charges 100 53.19 32.30 135.34Depreciation 100 164.62 153.90 111.48Impairment loss on Fixed Assets 100 (11.80) 21.30 47.67O.B.R. Adjustment 100 83.23 73.29 69.86Write-Offs 100 18.41 84.36 67.58Provisions (Net) 100 (18.28) 64.66 46.78Prior Period Expenses 100 544 522 834

Net Profit before tax 100 116.29 102.25 172.22

Provision for Current Tax 100 93.53 89.12 126.00Provision for FBT 100 105.25 139.17 -Provision for Deferred Tax 100 214 431 116.11Income Tax For Early Years 100 - - -Excess Provision for FBT write off 100 - - -Net Profit after tax 100 118.90 116.88 154.32

Brief overview of Income StatementEXPENDITURE 2007-08 2008-09 200-10 INCOME 2007-08 2008-09 2009-10

Operating Expense 4487.98 Net SALES 7181.59

Gross Profit

Non Operating Expense Other Incomes 870.34

NPBT

Tax Provision

NPAT

8051.94

Interpretation 35 % Increase in Reserves. 85% Secured Loans Paid Up. Current Liabilities Doubled. CWI increases by 126% . Heavy decrement of stock in 2009.

Interpretation Debtors Showing Favorable Trend Cash and Bank Doubled up Increasing Trend in Income though there is a Decrement of in 2009.

InterpretationEmployee Expenditure in 2009 shows the extra expenses for deployment of employee in Newly started Projects.

InterpretationGross Profit, NPBT, NPAT all are showing a slight depression in the 2009 and shows heavy recovery in the Next Year.

Ratio Analysis

Current Ratio:

[Current Ratio = Current Assets / Current Liabilities]Or

[Current Assets : Current Liabilities]

A

Despite the Current Ratio being less than 2 the company’s liquidity position is sound.

Liquidity Ratio / Acid Test Ratio:[Liquid Ratio = Liquid Assets / Current

Liabilities]

Liquid Ratio of 1:1 is considered satisfactorily

Debt to Equity Ratio:

[Debt Equity Ratio = External Equities / Internal Equities]

Or[Outsiders funds / Shareholders funds]

As a long term financial ratio it may be calculated as follows:

[Total Long Term Debts / Total Long Term Funds]Or

[Total Long Term Debts / Shareholders Funds]

The company’s Ratio of 0.06 indicates a moderate level of debt in the company. Reduction of Debt – Equity Ratio shows that the company has liquidated its debt in time

Proprietary/Equity Ratio:

Proprietary or Equity Ratio =

Shareholders funds / Total Assets

Creditors loan is safe because Proprietary Ratio is 0.39 as against the satisfactory ratio of 0.5 times.

Reduction of Debt Ratio from 0.07 in 09-10 to 0.05 in 09-10 shows that the company is continuously relying on own funds.

For every rupee of owner’s contribution. Re 0.81 is contributed together by lenders and owners. This reflects that the company is not dependent on borrowed capital.

This ratio shows the efficiency of capital employed in the business by computing how many times capital employed is turned over in a stated period

The Company is using is capital efficiently

The Higher Gross Profit Ratio indicates efficient utilization of production capacity

The Higher NP Ratio indicates the Company has Lower Non Operating Expenses and High Sales Efficiency

RoI is Quite high which indicates good Financial Performance of the Company

For every 1Rs. Investment The company is generating Avg. 50p.

Findings SECL is showing a constant growth from past two years as far as sales are concerned. Profit before tax is growing continuously, which is showing sound financial position of the companyGrowing production indicate that demand is increasing and consumption of coal is also increasing Major portion is from equity share capital and free reserves Unpaid Unsecured Loans comprises of Mostly Loans from the Holding Company

LIMITATIONS • Time has been a limiting factor and it has

been difficult to analyze the various aspects of finance with the prescribed time.

• Financial statements are only in terms of reports. They are not final because the exact finanacial position can be known only when the business is closed.

LIMITATIONS • Financial statements are prepared on the basis

of certain accounting concepts and conventions. Any changes in the method or procedure of accounting limits the utility of financial statements.

• The authenticity of the financial statements has not been checked with the book of accounts of the company.

Recommendations S.E.C.L should concentrate to pay off its short term debt by more flexible payment policies. Large Amount of Funds are stuck in the form of Cash and Bank Balances it should be invested some place more profitable S.E.C.L. has been concentrated in payment of Secured Loans but left out loans form the Holding company it should be paid of as well.

Conclusion As SECL enters a new fiscal year, we believe the company is ideally positioned to drive strong growth in 2010 and beyond. Despite certain shortcomings in the final quarter of 2009, SECL displays strong momentum.Given the company’s objective to continually meet customer needs, we fell that South Eastern Coalfields Limited will continue be a successful company and an attractive investment for potential investors and for existing shareholders