ACKNOWLEDGEMENT

I take this opportunity to express my gratitude to Mr. Vaibhav Gupta who has been instrumental in the successful completion of this project.

I am thankful to his guidance and constant supervision for providing necessary information regarding the successful completion of the project. I would like to express my gratitude towards employees of SJVN Ltd. for their kind co-operation and encouragement.

The guidance and support received from all the members who contributed to this project, was vital for the success of the project. I am grateful for their constant support and help.

SUDHIR NEGI

1

PREFACE

The training at SJVN Limited involved the day to day working at Finance department. This project helped me to get the deeper understanding of the process of Financial Statement Analysis and how decisions are taken to strengthen the financial position.

For this study three years Balance Sheets have been taken for trend analysis and ratio analysis. Main objective in undertaking this project is to supplement academic knowledge with absolute practical exposure to day to day functions of the business organization.

Financial analysis which is the topic of this project refers to an assessment of the viability, stability and profitability of a business. This important analysis is performed usually by finance professionals in order to prepare financial or annual reports. These financial reports are made with using the information taken from financial statements of the company and it is based on the significant tool of Trend Analysis and Ratio Analysis. These reports are usually presented to top management as one of their basis in making crucial business decisions.

2

DECLARATION

I Sudhir Negi, student of HIMACHAL PRADESH UNIVERSITY BUSINESS

SCHOOL SUMMERHILL, SHIMLA hereby declare that I have completed the

project on “RATIO ANALYSIS OF SJVN LTD and its comparison With NHPC”

in Partial Fulfillment of the Requirements for the Degree in Master of Business

Administration Session (2012-14). The information submitted is true and original

to the best of my knowledge.

Place: Sudhir Negi

Date:

3

CERTIFICATE

This is to certify that the project “RATIO ANALYSIS of SJVN Ltd and its comparison with NHPC Ltd” has been submitted to HIMACHAL PRADESH UNIVERSITY BUSINESS SCHOOL, SHIMLA by Sudhir Negi in partial fulfillment of the requirement for the award of degree in Masters of business Administration, is a bonafide work carried out by him under my supervision and guidance and no part of this work has been submitted for any other degree or diploma.

(Project Coordinator) (Project Advisor)

Place:

Date:

4

Contents

Sr. No.

Title

1.2.3.4.5.6.7.8.9.10.11.

12.13.

Company ProfileVision, Mission and ObjectivesSJVNL’S ProjectsAwards and achievementsOrganizational structureBoard of DirectorsFinancial overviewBalance sheet of SJVNL– As on 31st march 2011, 12 and 13Balance sheet of NHPC– As on 31st march 2011, 12 and 13Ratios:

Liquidity ratios Solvency ratios Activity ratios Profitability ratios

ConclusionBibliography

Company Profile

5

SJVN LTD

The SJVN Ltd (formerly Satluj Jal Vidyut Nigam Limited-SJVNL ) was incorporated on May 24, 1988 as a joint venture of the Government of India ( GOI ) and the Government of Himachal Pradesh (GOHP) to plan, investigate, organize, execute, operate and maintain Hydro-electric power projects. The present authorized share capital of SJVN is Rs 7000 crores.

The Nathpa Jhakri Hydro – Electric Power Station – NJHPS (1500 MW) was the first project undertaken by SJVN for execution. In addition to the financial assistance from the World Bank, SJVN has also been financed as loan by a Consortium of European Banks, the Power Finance Corporation (PFC) and various domestic commercial banks.

Besides the social and economic upliftment of the people in its vicinity, the 1500 MW NJHEP has been designed to generate 6612 MU of electrical energy in a 90% dependable year with 95 % machine availability. It is also providing 1500 MW of valuable peaking power to the Northern Grid.

Out of the total energy generated at the bus bar, 12 percent is supplied free of cost to the home state i.e. Himachal Pradesh. From the remaining 88% energy generation, 25% is supplied to HP at bus bar rates. Balance power has been allocated to the beneficiary states / UTs of Northern Region by Ministry of Power, Government of India.

Besides above, indirect benefits have also accrued to the region by way of increase in agriculture and industrial production. In addition, the project has provided gainful employment to a large number of skilled and unskilled workers and has also opened the landlocked hinterland by providing essential facilities such as schools, hospitals etc. for the people of the area. Thus, 1500 MW NJHPS has ushered in the social and economic upliftment of the persons living in the vicinity of the Project i.e. of society at large.

VISION6

To be best in class Indian power-company globally admired for developing

affordable clean power and sustainable value to all stake holders.

MISSIONTo drive socio-economic growth and optimize stakeholders interests by:

Developing and operating projects in cost effective and socio-environment

friendly manner.

Nurturing human resources talent with care.

Adopting innovative practices for technological excellence.

Focusing on continuous growth and diversification.

OBJECTIVES

• Operating and maintaining power stations with maximum performance efficiency.

• Establishing and following sound business, financial and regulatory policies.

• Taking up of other hydro power projects.

• Completion of the new projects allocated to SJVN in an efficient and cost effective manner.

• Use of the best project management practices for the project implementation by applying latest universally accepted Project Management Techniques, and by enabling its Engineers, to become certified Project Managers through further trainings.

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• Dissemination of available in-house technical and managerial expertise to other utilities / projects.

• Creating work culture and work environment conducive to the growth and development of both the organization and the individuals through introduction of participative management philosophy.

• Fulfilling social commitments to the society. Achieving constructive cooperation and building personal relations with stakeholders, peers, and other related organization.

• Striving clean and green project environment with minimal ecological and social disturbances.

• To strive for acquiring Nav Ratna Status.

8

SJVN’s Hydroelectric Projects

NJHEP

Nathpa Jhakri Hydro Electric Project

9

The Nathpa Jhakri Hydroelectric Station of 1500 MW capacity is the country’s largest hydropower plant. The run of the river project is located on River Sutlej, a major tributary on the Indus basin, in Shimla district of Himachal Pradesh in North India. The Nathpa Jhakri plant is designed to generate 6950.88 (6612) million units of electricity each year but quality management at the plant has enabled generation to exceed yearly targets.

A Memorandum of Understanding for execution of the Nathpa-Jhakri project was signed between Government of India and Government of Himachal Pradesh in July, 1991.

The Nathpa Jhakri Hydroelectric project has been financed on a 50:50 debt equity ratio basis. The project had the backing of World Bank. The project was completed at a cost of Rs 8187 Crore.

The Nathpa Jhakri project was commissioned in May, 2004 and officially dedicated to the nation by Prime Minister Manmohan Singh on May 28, 2005.

Power Allocation to various states and UTs

Sl.No. State Allocation (In MW)

Percentage to the installed capacity

1 Haryana 64 4.27

2 Himachal  Pradesh  547 36.47

3 Jammu & Kashmir 105 7.00

4 Punjab 114 7.60

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5 Rajasthan 112 7.47

6 Uttar Pradesh 221 14.73

7 Uttaranchal 38 2.53

8 Chandigarh 08 0.53

9 Delhi 142 9.47

10 Unallocated quota at the disposal of the Central Govt.

149 9.93

TOTAL 1500 100

RHEP

RAMPUR HYDRO ELECTRIC PROJECT

The Rampur project with a generation potential of 412 MW is located on River Satluj, a major tributary of Indus basin, in Shimla and Kullu district of Himachal Pradesh in North India. The project is designed as a cascade run of the river plant to India’s largest hydroelectric power plant, the 1500 MW Nathpa Jhakri plant. The Rampur project has the potential to generate 1969.68 million units of electricity each year.

The Rampur Hydroelectric Project involves financing of the project on a 70:30 debt-equity ratio basis. The Rampur Project is backed by the World Bank. Construction of Rampur Project began in February, 2007 and all the six units of 68.67 MW each is scheduled to be commissioned by March 2014.The Rampur Project is a very environment friendly project as it does not involve construction of any diversion dam or any de-silting chambers and does not inundate any land. 

Luhri Hydro Electric Project

11

The Luhri Project with a generation potential of 588 MW is located on River Satluj, a major tributary of Indus basin, in Shimla/Kullu/Mandi district of Himachal Pradesh in North India. The project is designed as a standalone run of the river project. The Luhri project has the potential to generate 2244 million units in a 90% dependable year. The Memorandum of Understanding for execution of Luhri project was signed with the Government of Himachal Pradesh on October 27, 2008.

The estimated cost of the project at January, 2013 price level is Rs. 7137.02 crores. The Project shall be financed on 70:30 debt equity ratio. The equity portion is to be shared between the Govt. of India (GOI) and govt. of Himachal Pradesh (GOHP).

 

Devsari Hydro Electric Project The Devsari project with a generation potential of 252 MW is located on River Pinder, on Ganga basin, in Chamoli district of Uttarakhand state in North India. The project is designed as a standalone run of the river project. The Devsari project has the potential to generate 936.90 million units of electricity each year.

A Memorandum of Understanding for execution of Devsari project was signed with the Government of Uttarakhand on November 21, 2005.The Devsari Hydroelectric Project involves financing of the project on a 70:30 debt-equity ratio basis. The estimated cost of the project at June, 2012 price levels is Rs 1790.09 crores. Construction period of the project is 5 years.

Naitwar Mori Hydro Electric Project The Naitwar Mori Project with a generation potential of 60 MW is located on River Tons, a major tributary of River Yamuna on the Ganga basin, in Uttarkashi district of Uttarakhand state in North India.

The project is designed as a standalone run of the river project. The Naitwar Mori project has the potential to generate 265.5 million units of electricity each year.

12

A Memorandum of Understanding for execution of Naitwar Mohri project was signed with the Government of Uttarakhand in November 21, 2005.The Naitwar Mori Hydroelectric Project involves financing of the project on a 70:30 debt-equity ratio basis. The estimated cost of the project at March 2012 price levels is Rs 664.6 crores. Construction period of Naitwar Mori project is 4 years.  

Jakhol Sankri Hydro Electric Project The Jakhol Sankri Project with a generation potential of 51 MW is located on River Supin, a tributary of River Tons and part of River Yamuna on the Ganga basin, in Uttarkashi district of Uttarakhand state in North India.

The project is designed as a standalone run of the river project. The Jakhol Sankri project has the potential to generate 216.26 million units of electricity each year. A Memorandum of Understanding for execution of Jakhol Sankri project was signed with the Government of Uttarakhand in November 21, 2005. Construction period of Jakhol Sankri project is 48 months.

Arun III Hydro Electric ProjectMemorandum of Understanding (MOU) was signed with the Govt. of Nepal for the execution of 900 MW Arun – III HE Project on 02.03.2008. Proposed to be located in the Sankhuwasabha Distt. of Nepal which is 657 Km from Kathmandu via Birat Nagar. The Survey license for generation was issued by Govt. of Nepal during July 2008 & extended upto 17.07.2013. TOR clearance for IEE of roads issued by Govt. of Nepal on 20.04.2010.

Letter of intent issued on 23.05.2010 to carry out infrastructure work at Dam & Power House site. Detailed Project Agreement is in the process of examination by GoN before signing. FSR & commercial viability for 900 MW was approved by CEA on 23.02.2010. Final DPR submitted to CEA on 31.03.2011 and under examination for vetting.

13

Dhaulasidh Hydro Electric ProjectThe Dhaulasidh Project with a generation potential of 66 MW is located on River Beas, part of the Indus basin, in Hamirpur district of Himachal Pradesh in North India. The project is designed as a run of the river project with a small live storage that would be utilized for peaking power during the lean season. The Dhaulasidh project design holds potential of generating 253.18 million units of electric energy each year

The Dhaulasidh Hydroelectric Project involves financing of the project on a 70:30 debt-equity ratio basis. The estimated cost of the project at June, 2012 price levels is Rs 774.1 crores including IDC. Construction period of the project is 54 months.

Wangchu Hydro Electric ProjectWangchu HEP with the revised installed capacity of 570 MW as a run of river scheme on the river Wangchu in Bhutan will annually generate 1968.55 MU of energy.

DPR is submitted to CEA/MOE (RGoB) on dated 30.12.11 and under examination. A presentation was given to RGoB authorities on 13.04.12. The Project shall be financed on 70: 30 debt equity ratio.

Kholongchu Hydro Electric ProjectKholongchu HEP with the installed capacity of 600 MW on the river Kholongchu in Bhutan will annually generate 2568.88 MU of energy.

The DPR was submitted to CEA for vetting in March 2011 and is under examination & approved in principle by CEA on 05.11.2012. RGoB approved DPR on 23.05.2013.The formation of SPV for the execution of the project is underway .The Project shall be financed on 70: 30 debt equity ratio.

14

Hydroelectric EnergyHydroelectric energy is made by moving water. Hydro comes from the Greek word for water. Hydroelectric energy has been in use for thousands of years. Ancient Romans built turbines, which are wheels turned by flowing water. Roman turbines were not used for electricity, but for grinding grains to make flour and breads. 

Water mills provide another source of hydroelectric energy. Water mills, which were common until the Industrial Revolution, are large wheels usually located on the banks of moderately flowing rivers. Water mills generate energy that powers such diverse activities as grinding grain, cutting lumber, or creating hot fires to create steel. 

Harnessing Hydroelectricity To harness energy from flowing water, the water must be controlled. A large reservoir is created, usually by damming a river to create an artificial lake, or reservoir. Water is channeled through tunnels in the dam. 

15

The energy of water flowing through the dam's tunnels causes turbines to turn. The turbines make generators move. Generators are machines that produce electricity. 

Engineers control the amount of water let through the dam. The process used to control this flow of water is called the intake system. When a lot of energy is needed, most of the tunnels to the turbines are open, and millions of gallons of water flow through them. When less energy is needed, engineers slow down the intake system by closing some of the tunnels. 

During floods, the intake system is helped by a spillway. A spillway is a structure that allows water to flow directly into the river or other body of water below the dam, bypassing all tunnels, turbines, and generators. Spillways prevent the dam and the community from being damaged. Spillways, which look like long ramps, are empty and dry most of the time.

Hydro Potential

INDIA is endowed with economically exploitable and viable hydro potential assessed to be about 84,000 MW at 60% load factor (1,48,701 MW installed capacity). In addition, 6780 MW in terms of installed capacity from Small, Mini, and Micro Hydel schemes have been assessed. Also, 56 sites for pumped storage

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schemes with an aggregate installed capacity of 94,000 MW have been identified. However, only 19.9% of the potential has been harnessed so far.

Advantages of Hydro power

A renewable source of energy - saves scarce fuel reserves. Non-polluting and hence environment friendly. Long life - The first hydro project completed in 1897 is still in operation at

Darjeeling. Cost of generation, operation and maintenance is lower than the other sources of

energy. Ability to start and stop quickly and instantaneous load acceptance/rejection makes

it suitable to meet peak demand and for enhancing system reliability and stability. Has higher efficiency (over 90%) compared to thermal (35%) and gas (around

50%). Cost of generation is free from inflationary effects after the initial installation. Storage based hydro schemes often provide attendant benefits of irrigation, flood

control, drinking water supply, navigation, recreation, tourism, pisciculture etc. Being located in remote regions leads to development of interior backward areas

(education, medical, road communication, telecommunication etc.)

Khirvire Wind Power Project in Maharashtra - 47.6 MW Letter of Award (LoA) for the Khirvire Wind Power Project has been issued to M/s Gamesha Wind Turbines Pvt Limited, Chennai on 19.10.2012. The Scheduled Commissioning for the project is 18.08.2013.The Contract Agreement for the project has been signed on 14.12.2012.

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Solar Power Project

Solar PV Project in Gujarat - 5 MW DPR has been prepared by M/s Gujarat Power Corp. Ltd. for 5 MW Solar PV Plant for plot no. 89 as allocated to SJVN at Charnka Solar Park. The land of 25.95 acres has been blocked at the above mentioned plot by M/s GPCL in favour of SJVN.The 5 MW solar power project is expected to generate approximately 8.02 MU per year. The project is to be registered under REC mode. The project involves financing of the project on a 70:30 debt-equity ratio basis.

Buxar Thermal Power Project (1320)Public sector enterprise SJVN has acquired 100 per cent equity in Buxar Bijlee Company and it has been allotted a coal block in the Deocha-Pachami belt in West Bengal for its upcoming 1,320-MW power plant at Chausa in Bihar.

A memorandum of understanding (MoU) was signed in January 2013 for the joint venture between SJVN and Bihar Power Infrastructure Company. Based on supercritical technology, the project will have two generating units of 660MW each of these will produce 9,090 million units of electricity annually.

ISO 9001-2008 CertificationIn order to develop SJVN as a world class company in the power sector, ISO-9001-2008 certification has been achieved and efforts are being made throughout the organisation to promote all round efficiency and professionalism in the work culture. Further, efforts are being made for creating cohesive and conducive work culture in the organisation.

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AWARDS & ACHIEVEMENTS

Vishwakarma Awards to SJVN for CSR, Health, Safety & Environment.

SJVN Bags SCOPE Commendation Certificate

SJVN Awarded Gold Shield

SJVN Ltd. is conferred with the Greentech Environment Excellence Award 2010

SJVN Limited conferred with Scope Gold Medal Award

SJVN’s Former CMD Honoured with India Power Award 2010

SJVN Bags Scope Excellence Award

SJVNL Former CMD Honoured with National Achievement Award for Corporate Leadership

HIND GAURAV AWARD AND GOLD MEDAL

SJVN Bagged Green Tech Gold Award in Hydro Power Sector

19

20

BOARD OF DIRECTORS

R.P. Singh

Chairman cum Managing Director

FULL TIME DIRECTORS

Mr.R.N.Misra Mr.A.S.Bindra

Director (Civil) Director (finance)

Mr.N.L.Mishra R.K.Bansal

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Director (personnel) Director (Electrical)

Financial OverviewThe financial position of SJVN, for 3 years, is as under:

(  In Crores)

INCOME DETAILS  2010-2011 2011-12 2012-13

INCOME FROM OPERATIONS 1829.74 1909.79 1680.42

OTHER OPERATING INCOME 149.42 177.10 168.00

TOTAL REVENUE 1976.16 1927.50 1682.10

NET PROFIT AFTER TAX 912.13 1068.68 1052.34

PAID-UP-CAPITAL 4136.63 4136.63 4136.63

RESERVES & SURPLUS 3068.89 3685.65 4273.38

NETWORTH OF SJVN

The Net worth of SJVN is as under:

Year Net worth(  in crores)

2006-07 4925.29

2007-08 5406.40

2008-09 6047.34

2009-10 6653.76

2010-11 7205.52

2011-12 7822.28

2012-13 8410.01

CAPITAL STRUCTURE AND CREDIT WORTHINESS OF SJVN

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The total credit worthiness in the company in equity, reserves/surplus and loan funds as on 31.03.2013 was 10286.28 Crore. The source wise detail is as under:

1. Paid-up-Capital

(a) Government of India 2666.61 Crore

(b) Govt. of H.P. 1055.02 Crore

(c) Others 415.00 Crore

Total    4136.63 Crore

 2. Reserves and Surplus

Reserves and Surplus 4273.38 Crore

 3. Loans

Long term borrowings 1876.27 Crore

The company is making profits and paying dividends to the shareholders.

It has the capacity to fund the equity portion of the projects from its internal resources to a considerable extent.

The company has developed a good rapport with its creditors with the faultless repayment of loans

Therefore its creditworthiness has increased over the period of time after the first venture of the company; the Nathpa Jhakri HPS came into operation.

NON FINANCIAL PERFORMANCE

Year MOU Gross Target Gross Achieved

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2011 6700.005 7140.077 2012 6900 7610.257 2013 7000 6777.777

Highlights of the year 2011-12

The Nathpa Jhakri Power station established a new milestone by generating 7610 million units of energy during FY 2011-12. The generation this year was not only 470 MU more than last year‘s record production of 7140 MU but also 710 MU more than the MOU targets assigned by the Ministry of Power, Govt. of India.

Plant Availability Factor during the year peaked at 104.26% against the normative average of 82%.

Highlights of the year 2012 -13

During quarter ending June 2012, SJVN’s 1500 MW NJHPS has achieved the PAF of 108% as against 103.6%.during the corresponding period of last year. As a result additional income of Rs 5.28 crore was earned.

In month of July 2012 NJHPS created yet another record by generating 1186MUs.The plant recorded the highest ever single day generation of 39.015 MUs on 27th of July 2012.

For the first time, with opportune planning not a single component was sent for hard coating during the full year 2011-12, as these were coated in the In- house coating workshop at project site Jhakri.

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Balance Sheet of SJVN as on 31 March 2011, 2012, 2013

In lakhs

SR.NO PARTICULARS As at 31.03.2013 (Audited)

As at 31.03.2012 (Audited)

As at 31.03.2011 (Audited)

A EQUITY & LIABILITIES

1 Shareholders’ Fund

a) Share Capital 4,13,663 4,13,663 4,13,663

b) Reserves & Surplus 4,27,338 3,68,565 3,06,889

Sub Total- Shareholder's Funds 8,41,001 7,82,228 7,20,552

2 Non-Current Liabilities

a) Long Term Borrowings 1,87,627 1,50,134 1,35,885

b) Other Long Term Liabilities 95,028 94,695 93,276

c) Long Term Provisions 5,484 4,359 3,228

Sub-Total Non-Current Liabilities 2,88,139 2,49,188 2,32,389

3 Current Liabilities

a) Short Term Borrowings -

3069,969

b) Trade Payables 2,686 2,069 2,684

c) Other Current Liabilities 57,677 52,763 59,511

d) Short Term Provisions 59,431 57,728 48,216

Sub-Total- Current Liabilities 1,19,794 1,12,866 1,20,380

TOTAL EQUITY & LIABILITIES 12,48,934 11,44,282 10,73,321

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B ASSETS

1 Non-Current Assets

Fixed Assets :

Tangible assets Intangible assets Capital work in progress

5,81,912

71

2,98,154

6,22,889

93

2,02,296

6,61,955

104

1,23,966

b) Non-Current Investment 494 - -

c) Deferred Tax Asset (Net) 16,982 12,177 6,970

d) Long Term Loans & Advances 14,793 17,994 18,392

e) Other Non-Current Assets 67 93 109

Sub-Total- Non Current Assets 9,12,473 8,55,542 8,11,496

2 Current Assets

a) Inventories 3,051 2,847 2,288

b) Trade Receivables 35,864 57,951 9,535

c) Cash & Bank Balances 2,42,245 1,88,876 2,06,356

d) Short Term Loans & Advances 11,652 1,473 18,545

e) Other Current Assets 43,649 37,593 25,101

Sub- Total- Current Assets 3,36,461 2,88,740 2,61,825

TOTAL ASSETS 12,48,934 11,44,282 10,73,321

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Balance Sheet of NHPC as on 31st March 2011, 2012, 2013

In Lakhs

SR.NO PARTICULARS As at 31.03.2013 (Audited)

As at 31.03.2012 (Audited)

As at 31.03.2011 (Audited)

A EQUITY & LIABILITIES

1 Shareholders’ Fund

a) Share Capital 12,30,074 12,30,074 12,30,074

b) Reserves & Surplus 15,53,976 14,05,279 12,27,994

Sub Total- Shareholder's Funds 27,84,050 26,35,353 24,58,068

2 Non-Current Liabilities

a) Long Term Borrowings 17,41,752 16,27,280 13,70,253

b) Other Long Term Liabilities 2,16,638 2,15,584 2,09,788

c) Long Term Provisions 72,192 1,18,745 1,05,390

Sub-Total Non-Current Liabilities 20,30,582 19,61,609 16,85,431

3 Current Liabilities

a) Short Term Borrowings -

18,000 -

b) Trade Payables 17,941 21,895 24,189

c) Other Current Liabilities 2,76,660 2,80,126 2,44,448

d) Short Term Provisions 3,41,267 3,58,993 3,45,883

Sub-Total- Current Liabilities 6,35,868 6,79,014 6,14,520

TOTAL EQUITY & LIABILITIES 54,50,500 52,75,976 47,58,019

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ASSETS

Non-Current Assets

a) Fixed Assets 37,74,900 35,71,806 33,06,366

b) Non-Current Investment 2,40,061 2,49,914 2,65,996

c) Long Term Loans & Advances 1,23,874 1,42,862 1,62,111

d) Other Non-Current Assets 94,437 1,18,193 87,082

Sub-Total- Non Current Assets 42,33,272 40,82,775 38,21,555

2 Current Assets

a) Inventories 5,707 4,381 3,371

b) Trade Receivables 2,04,905 2,05,218 30,479

c) Cash & Bank Balances 5,61,601 6,00,397 5,35,008

d) Short Term Loans & Advances 2,09,956 1,89,006 1,30,334

e) Other Current Assets 2,35,059 1,94,199 2,37,272

Sub- Total- Current Assets 12,17,228 11,93,201 9,36,464

TOTAL ASSETS 54,50,500 52,75,976 47,58,019

Ratio Analysis: Ratio analysis is a process of determining and interpreting relationships between the items of financial statements to provide a meaningful understanding of the performance and financial position of an enterprise. Ratio analysis is an accounting tool to present accounting variables in a simple, concise, intelligible and understandable form.

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A) Liquidity ratios: Liquidity ratios measure the short-term solvency, i.e., the firm’s ability to pay its current dues. They comprise of Current Ratio and Liquid Ratio.

1) Current Ratio:

Current Ratio is a relationship of current assets to current liabilities and is computed to assess the short-term financial position of the enterprise.

Current Ratio =

SJVN LTD NHPC LTDYEAR Current

AssetsCurrent Liabilities

Current Ratio

Current Assets

Current Liabilities

Current Ratio

2011 261825 120380 2.17 : 1 936464 614520 1.52 : 12012 288740 112866 2.55 : 1 1193201 679014 1.75 : 12013 336461 119794 2.80 : 1 1217228 635868 1.91 : 1

2011 2012 20130

0.5

1

1.5

2

2.5

3

SJVN LTDNHPC LTD

The current ratio of SJVN is rising year by year. At the end of each year SJVN’s cash & bank balance is more than 1.5 times of the total current liabilities which indicates that it has excellent short term solvency. On the other hand NHPC is improving in covering its short term solvency position. But, SJVN’s Current Ratio is far better than NHPC.

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2) Liquid Ratio:

Liquid Ratio is a relationship of Liquid assets with current liabilities and is computed to assess the short-term liquidity of the enterprise in its correct form. Liquid assets put against the current liabilities give the liquid ratio.

Liquid Ratio =

Liquid Assets

Current Liabilities

Liquid Assets = Current Assets – (Stock + Prepaid Expenses)

SJVN LTD NHPC LTDYear Liquid

AssetsCurrent Liabilities

Liquid Ratio

Liquid Assets

Current Liabilities

Liquid Ratio

2011 259537 120380 2.15 : 1 933093 614520 1.51 : 12012 285893 112866 2.53 : 1 1188820 679014 1.75 : 12013 333410 119794 2.78 : 1 1211521 635868 1.90 : 1

2011 2012 20130

0.5

1

1.5

2

2.5

3

SJVN LTDNHPC LTD

As the contribution of inventory is very less or forms a very small portion of the Current Assets. So, there is not a considerable impact on the short term solvency

30

position of the company due to inventory. SJVN’s liquid ratio is more than required and on the other hand NHPC’s liquid ratio is quite adequate enough.

B) Solvency Ratios: The term solvency implies ability of an enterprise to meet its long-term indebtedness and thus, solvency ratios conveys an enterprise’s ability to meet its long-term obligations. Important solvency ratios are: Debt-Equity Ratio, Total Assets to Debts Ratio and Proprietary Ratio.

1) Debt-Equity Ratio:

The Debt- Equity Ratio is computed to ascertain soundness of the long-term financial position of the firm. This ratio expresses a relationship between debt (external equities) and the equity (internal equities).

Debt Equity Ratio= External EquitiesInternal Equities

SJVN LTD NHPC LTDYear Debt Equity Debt-Equity

ratio Debt Equity Debt-Equity

ratio

2011 135885 720552 0.18 : 1 1370253 2458068 0.55 : 12012 150134 782228 0.19 : 1 1627280 2635353 0.61 : 12013 187627 841001 0.22 : 1 1741752 2784050 0.62 : 1

2011 2012 20130

0.1

0.2

0.3

0.4

0.5

0.6

0.7

SJVN LTDNHPC LTD

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Debt-Equity Ratio of SJVN is very low which means very less use of debts. The creditors have excellent risk cover. Debt-Equity Ratio of NHPC is low, but more than SJVN. The Debt-Equity ratio of SJVN depicts that it largely depends on equity rather than debt.

2) Total Assets to Debt Ratio:

It establishes the relationship between total assets and total long-term debts. Total Assets do not include fictitious assets like preliminary expenses underwriting commission, share issue expenses, discount on issue of shares/debentures, etc., and debit balance of Profit & loss Account. Debts means Long Term debts refer to debts that will mature after one year. It includes debentures, bonds and loans from financial institutions.

Debt Ratio = Total Assets Long-term Debts

SJVN LTD NHPC LTDYear Total

Assets Debts Total

Assets to Debt Ratio

Total Assets

Debts Total Assets to Debt Ratio

2011 1073321 135885 7.89 : 1 4758019 1370253 3.47 : 12012 1144282 150134 7.62 : 1 5275976 1627280 3.24 : 12013 1248934 187627 6.65 : 1 5450500 1741752 3.12 : 1

2011 2012 20130

1

2

3

4

5

6

7

8

SJVN LTDNHPC LTD

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The higher Total Assets to Debt ratio gives a risk cover to the long term lenders. SJVN have a more than twice Total Assets to Debt ratio in comparison to NHPC. These two companies have excellent credit Worthiness.

3) Proprietary Ratio:

Proprietary Ratio establishes the relationship between the proprietor’s funds and total assets. Proprietor’s funds mean share capital plus reserves and surplus, both of capital and revenue nature.

Proprietary ratio=Shareholders FundsTotal Assets

SJVN LTD NHPC LTDYear Proprietor’s

FundsTotal Assets

Proprietary Ratio

Proprietor’s Funds

Total Assets

Proprietary Ratio

2011 720552 1073321 0.67 : 1 2458068 4758019 0.51 : 12012 782228 1144282 0.68 : 1 2635353 5275976 0.49 : 12013 841001 1248934 0.67 : 1 2784050 5450500 0.51 : 1

2011 2012 20130

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

SJVN LTDNHPC LTD

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The Proprietary ratios of the SJVN are more as compared to NHPC at the end of all three years. This means proprietors’ funds have a larger share in the SJVN’s total assets than Loan funds. While NHPC’s total assets are equally contributed by proprietor’s funds and loan funds.

C) Activity Ratios: These ratios measure the effectiveness with which a concern uses resources at its disposal. The result is expressed in integers rather than as a percentage. Activity Ratios are also known as Turnover Ratios.

1) Debtors’ Turnover Ratio: Debtors’ Turnover Ratio establishes the relationship between net credit sale and Average Debtors of the year. Average Debtors are calculated by dividing the sum of debtors in the beginning and at the end by 2.

Debtors’ Turnover Ratio = Total Sales Average Debtors

SJVN LTD NHPC LTDYear Total Sales Average

DebtorsDebtors’ Turnover Ratio

Total Sales Average Debtors

Debtors’ Turnover Ratio

2011 182974 9535 19.19times 399963 30479 13.12times2012 192750 33743 5.71times 546249 117848.5 4.63times2013 168210 46907.5 3.58times 500197 205061.5 2.43times

2011 2012 20130

2

4

6

8

10

12

14

16

18

20

SJVN LTDNHPC LTD

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Due to change in grouping of items as per schedule vi the debtors for year 2011 has been taken as average debtors.

The Debtor’s Turnover Ratio were exceptionally well for SJVN at the end of the year 2011. Thereafter in 2012 & 2013 DTR plunged but not to the unsatisfactory level. This steep downfall was due to rise in Trade Payables. On the other hand NHPC had DTR lower than SJVN.

2) Debt Collection Period:

It provides an approximation of the average time that it takes to collect debtors. It is computed by dividing 365 by the number of debtors’ turnover.

Debt Collection Period = 365 Debtors’ Turnover

SJVN LTD NHPC LTD

Year DTR DCP DTR DCP

2011 365 19.9 18 days 365 2.62 139 days2012 365 5.71 64 days 365 4.63 79 days2013 365 3.58 102 days 365 2.43 150 days

2011 2012 20130

20

40

60

80

100

120

140

160

SJVN LTDNHPC LTD

35

Debt Collection Period gives approximation of time period which is required to collect the debtors. SJVN has better Debt Collection Period than NHPC.

3)Working Capital Turnover Ratio: Working Capital Turnover Ratio establishes the relationship between working capital and sales. It indicates the number of times a unit invested in working capital produces sales. This ratio indicates whether the working capital has been effectively utilised or not.

Working Capital Turnover Ratio = Net Sales Working Capital

SJVN LTD NHPC LTDYear Sales Working

CapitalW.C. Turnover Ratio

Sales Working Capital

W.C. Turnover Ratio

2011 182974 120380 1.51 422525 321944 1.312012 192750 175874 1.09 565469 514187 1.092013 168210 216667 0.77 504913 581360 0.86

2011 2012 20130

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

SJVN LTDNHPC LTD

The Working Capital ratio in 2011 is higher in case of SJVN as compared to NHPC. In 2012 both of them had same Working Capital Ratio. In 2013 SJVN has low WCTR than NHPC.

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D) Profitability Ratios: Profit as compared to the capital employed indicates Profitability of the enterprise. Thus, Profitability is of utmost importance for a concern. If a concern goes on losing money, its financial condition will definitely be bad sooner or later. Thus a measure of profitability is the overall measure of efficiency.

Net Profit Ratio = Net Profit Net Sales

SJVN LTD NHPC LTDYear Net Profit Sales Net Profit

RatioNet Profit Sales Net Profit

Ratio2011 91213 182974 49.85% 216667 422525 51.27%2012 106868 192750 55.44% 277177 565469 49.01%2013 105234 168210 62.56% 234822 504913 46.50%

20112012

2013

0

10

20

30

40

50

60

70

SJVN LTDNHPC LTD

The Net Profit Ratio of the business firm indicates that how good that firm has done its business operations. Here SJVN’s Net Profit Ratio is on the rise consistently. In case of NHPC Net Profit Ratio is on the Decline. So, from Net Profit Ratio it can be said that SJVN LTD is performing than NHPC LTD for year 2011, 2012 & 2013.

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Conclusion:

The short-term solvency of SJVN and NHPC has a rising trend. But, the short-term solvency of SJVN is far better than NHPC. SJVN is in better position to pay off its Current Liabilities.

The profitability ratio of SJVN has rising trend. On the other hand NHPC has a declining trend in its profitability. This shows that SJVN is performing better year by year While NHPC is not performing well as compared to previous years.

The long-term solvency position of both of the companies is good. SJVN has preferred more use of equity. On the other hand NHPC has preferred more debt in proportion as compared to the SJVN.

Working capital positions of both of the companies have a decreasing trend. The Working Capital has increased more in proportion as compared to Sales in case of both of the firms

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Bibliography

JOURNALS

Corporate booklet of SJVNL

Satluj Vani-Bi- monthly house journal

Annual Reports of SJVNL & NHPC

BOOKS

Financial Management by IM Pandey

Analysis of FINANCIAL STATEMENTS by T.S.GREWAL’

SITES

http://www.sjvn.nic.in

www.nhpc.co.in

www.studymode.com

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