File report PGCOI

A PROJECT REPORT ON

INTERPRETATION & ANALYSIS OF FINANCIAL STATEMENT

OF

POWERGRID CORPORATION OF INDIA Ltd. (PGCOI)

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF 2 YEAR POST GRADUATE

DEGREE IN

MASTER OF BUSINESS ADMINISTRATION

(2011-2013)

CONDUCTED BY

LALIT NARAYAN MISHRA INSTITUTE OF ECONOMIC DEVELOPMENT & SOCIAL CHANGE, BAILEY ROAD, PATNA -1.

(Recognized by the AICTE, New Delhi, Lalit Narayan Mishra Institute of Economic Development & Social Change is functioning under the Government of Bihar and has been

granted autonomous status by Magadh University, Bodh Gaya).

UNDER THE GUIDENCE OF: SUBMITED BY:

DR. SHYAMA CHARAN JHA ADITYA SHANKAR

(M.B.A., Ph.D) ROLL NO.-11114

FACULTY MEMBER MBA-FINANCE

POWER GRID CORP. OF INDIA LTD.

PREFACE

To attain maturity and perfection in any field, theoretical knowledge must be blended with practical application. Theory of MANAGEMENT needs to be tested and verified in various types of situation. Since a manager works in a dynamic and complex environment, practical training is indispensable for getting acquainted with the environment.

The inclusion of summer training project in M.B.A program is basically done to introduce management students with the real life work conditions and demands.

This project report has been complied in a way to provide an analytical frame work for understanding the theoretical as well as the practical concept of finance management and its importance in the running of any organisation. The topic of my PROJECT relates to the problems and process of management responsible for decision making.

I have tried my level best to present this project in a simple manner so that it could be understood by anyone who goes through it without much difficulty.

I hope this project report will be much useful to all readers and users.

ADITYA SHANKAR


ACKNOWLEDGEMENT

In this project I have made an honest and dedicated attempt to make the

research material as authentic as it could and I earnestly hope that it

provides useful and workable information and knowledge to any person reading it. During this small time frame of two months in which the project

reached its completion, there were a few people whom I would like to

make a mention of and without whose help the project would have never seen the light of the day.

I also thank to my internal guide Dr. S.C. Jha for his timely response, which immensely helped in giving the project the initial direction it needed.

I would like to thank my external guide Mr. Umar Farooque Deputy Manager (Finance) who gave me a free hand as far as going about the project work was concerned and extremely kind and who at times went out of the way to help me.

I am deeply obliged to (PGCIL) for giving me an opportunity to undertake an 8 weeks training in its finance and accounts department and providing me required information and practical knowledge in a friendly way.

Without their co-operation it would have perhaps not been possible to research a few places, which I did, within the stipulated time frame.

ADITYA SHANKAR Roll no: - 11114

LNMI, Patna


Business Summary Power Grid Corporation of India Limited, a central transmission utility, engages in the transmission of power in India. The company involves in planning, coordinating, supervising, and controlling inter-state transmission systems; and operating unified load dispatch centers and regional load dispatch centres’. It owns and operates about 95,329 circuit kilometers (kms) of transmission lines and 156 sub-stations with transformation capacity of about 1,38,673 MVA. The company also owns and operates a telecom network of approximately 25,000 kms connecting approximately 206 cities in India that offers bandwidth capacity leasing, Internet access lines, Ethernet private leased lines, multi protocol label switching based VPN, and broadband Internet services to telecom service providers, government agencies, and international telecom players. In addition, it offers consultancy services for the construction of transmission lines and substations, load despatch centres, and distribution and rural electrification in India, Afghanistan, Bangladesh, Bhutan, Ethiopia, Kenya, Myanmar, Nepal, Nigeria, Tajikistan, Sri Lanka, and the United Arab Emirates. Further, it provides engineering, design, procurement, construction, project management, and construction supervision services, as well as transmission system up gradation, operation, and maintenance services. The company was incorporated in 1989 and is based in Gurgaon, India.



Serial no.

Topic Page no.

1 INTRODUCTION TO TOPIC

Importance Of Finance And Accounts Deptt. In PGCIL

7

Purpose Of Study 8

Defining The Financial Statement 9

Meaning And Relevance Of Financial Statement

10

Its Objective And Significance 10-12

Methodologies Used 13

Scope And Limitation 13

2 ABOUT THE ORGANISATION

Vision And Core Values Of PGCIL 14

Corporate Mission Of Power Grid 14

Objective Of The Organisation 15

Origin Of Power Grid 16

Overview Of Organisation 16-21

Performance of the PGCIL 22-33

Awards And Achievements 33-34

3 ANALYSIS OF FINANCIAL STATEMENT OF PGCIL FOR THE YEAR 2010-2011Balance Sheet 35

Profit And Loss Account 36

Cash flow statement 37-38

Comparative Statement 38-39

Common size statement 40-41

Trend Analysis 41

Ratio Analysis 41-47

4 FINDING 48

5 SWOT ANALYSIS 49-51

6 CONCLUDING OBSERVATION 52

IMPORTANCE OF FINANCE AND ACCOUNTS DEPTT. IN PGCIL

Finance and accounts department plays an important role in every organisation and the same in power grid. The Finance & Accounts Department designs and operates the accounting system of POWERGRID. The accounting system follows the chart of accounts developed by Finance & Accounts Department. The Department also ensures compliance with statutory requirements for maintenance of accounts and preparation of financial statements apart from following established professional accounting standards. The accounting policies of POWERGRID are prepared by Finance & Accounts Department. All accounts related activities are handled by Books Section of Finance & Accounts Department.

Finance & Accounts Department enables efficient cash and bank operation throughout POWERGRID to facilitate timely availability of funds for undertaking its construction activities and meeting its operational requirements. Finance & Accounts Department undertakes financial scrutiny of feasibility reports and cost estimates to assess reasonability of cost and viability of projects. The Finance & Accounts Department provides inputs such as actual cost of transmission assets, its financing details along with terms and condition of financing are derived from underlying financing agreements. The tariff related inputs/activities are handled by Finance & Accounts Department.

A statement showing annual financial resources required for meeting the anticipated annual capital and revenue expenditure is prepared by Finance & Accounts Deptt. Activities related to financial resources statement are handling by Budget section of Finance & Accounts Department.


PURPOSE OF THE STUDY

There is a paper in the fourth semester “Project Report & Viva-Voice” which is needed to be carried out by every student of M.B.A. The duration of the project is of 8 weeks and it should be carried out under the guidance of faculty member.

The project report has been carried out to acquaint management student to get a hand on experience of the work that he is going to perform after the completion of the course.

The project report gives a brief idea about how to apply theoretical knowledge into practice.


DEFINITION OF FINANCIAL STATEMENT

Businesses are mainly concern with the financial activities. In order to ascertain the financial status of the business every enterprises prepares certain statements known as financial statements. Financial statements are a collection of reports about an organization's financial results and condition. They are useful for the following reasons:

• To determine the ability of a business to generate cash, and the sources and uses of that cash.

• To determine whether a business has the capability to pay back its debts.

• To track financial results on a trend line to spot any looming profitability issues.

• To derive financial ratios from the statements that can indicate the condition of the business.

• To investigate the details of certain business transactions, as outlined in the disclosures that accompany the statements.

At the most minimal level, a business is expected to issue an income statement and balance sheet to document its monthly results and ending financial condition. The full set of financial statements is expected when a business is reporting the results for a full fiscal year. They are:

Balance Sheet Income Statement/Profit &Loss Account

These statements give an accounting picture of the firm’s operation and financial position. The financial statements report what has actually happened to assets, earnings and dividends over the past few years.Financial statements are mainly prepared for decision making purposes.

Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise.


MEANING OF FINANCIAL STATEMENT

All financial statements are essentially historical documents. They tell what has happened during a particular period of time. However most users of financial statements are concerned about what will happen in the future. Stockholders are concerned with future earnings and dividends. Creditors are concerned with the company's future ability to repay its debts. Managers are concerned with the company's ability to finance future expansion. Despite the fact that financial statements are historical documents, they can still provide valuable information bearing on all of these concerns.Financial statement analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health of the company. This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.

PURPOSE OF FINANCIAL STATEMENT

Measuring the profitability

Indicating the trend of achievements

Assessing the growth potential of the business

Comparative position in relation to other firms

Assess overall financial strengths

Assess solvency of the firm

OBJECTIVE OF FINANCIAL STATEMENT

"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and


accounting and who are willing to study the information diligently. “ The main objectives are:

Assessment Of Past Performance Assessment of the operational efficiency Prediction of profitability and growth prospects Prediction of bankruptcy and failure Assessment of current position

SIGNIFICANCE OF FINANCIAL STATEMENT

Financial statement analysis is a significant business activity because a corporation's financial statements provide useful information on its economic standing and profit levels. These statements also help an investor, a regulator or a company's top management understand operating data, evaluate cash receipts and payments during a period and appraise owners' investments in the company.

INTERESTED PARTIES

a. Investors b. Management c. Trade unions d. Lenderse. Suppliers and trade creditors f. Tax authoritiesg. Researchersh. Employeesi. Govt. and their agenciesj. Stock exchange


USES OF FINANCIAL STAEMENT ANALYSIS

External Uses of Statement Analysis:

Trade Creditors - Focus on the liquidity of the firm.

Bondholders - Focus on the long-term cash flow of the firm.

Shareholders - Focus on the profitability and long-term health

of the firm.

Internal Uses of Statement Analysis:

Plan - Focus on assessing the current financial position and evaluating potential firm opportunities.

Control - Focus on return on investment for various assets and asset efficiency.

Understand - Focus on understanding how suppliers of funds analyze the firm.

METHODOLOGIES USED

The present project work will be based on the explorative research design in which the data and information are collected to explore the possibility of further research on the subject. Naturally, the research study will require investigative analysis of data and information collected for the purpose. The study will be based on the analysis of data collected through both secondary source and primary sources. The data from secondary sources will be collected from books, Periodicals, Annual Reports of POWERGRID and other published works and use of internet. The primary data will be collected by making survey of the workings of corporation. For the purpose, a questionnaire will be prepared to collect data and relevant information. The analysis of the data will give us relevant result oriented information.


LIMITATION OF FINANCIAL STAEMENT ANALYSIS

1. It is just study of interim reports.

2. It checks just monetary aspect of company's performance and position but it ignores non-monetary aspect of company.

3. It does not analyze the changes in price level of different items of financial statements.

4. Many accounting concepts and conventions are used for preparing financial statement and these concepts and conventions are accepted for analysis. So, analysis is totally affected with these accounting concepts.

5. Analysis of financial statements is just source but not decision or result because person, who writes its interpretation, may also affect the analysis. So, different interpretation by different person may become its limitation.

6. LIFO vs FIFO and different depreciation methods usage may bring difference in result and performance of financial statement, so it is also limitation of financial statement analysis.

7. If one company's accounting period completes at 31st Dec. and other company's accounting period completes at 31st march, we will unable to compare both company's financial statement and it will be the limitation of financial statement analysis.

VISION


World Class, Integrated, Global Transmission Company with Dominant Leadership in Emerging Power Markets Ensuring Reliability, Safety and Economy.

CORE VALUES

Zeal to excel and zest for change. Integrity and fairness in all matters. Respect for dignity and potential of individuals. Strict adherence to commitments. Ensure speed of response foster learning, creativity and team work. Loyalty and pride in power grid.

MISSION

The mission of the corporation is establishment and operation of regional and national power grids to facilitate transfer of electric power within and across the regions with reliability, security and economy, on sound commercial principles.

POWERGRID is committed to:

Establish and maintain an efficient and effective "national grid” with due regard to time, cost, technology, and value additions.

Sustainable development through conservation of natural resources and adopting environment friendly technology on principle of avoidance, minimization and mitigation.

Ensure safe, occupational hazard free and healthy work environment, to the satisfaction of stake holders in all areas of its activities and shall endeavour to continually improve its management systems and practices in conformity to legal and regulatory provisions.

OBJECTIVES:

The Corporation has set following objectives in line with its Mission and its status as ‘Central Transmission Utility’:

Undertake transmission of energy through Inter-State


transmission system.

Discharge all functions of planning and coordination relating to Inter-State transmission system with :

State Transmission Utilities Central Government State Governments Generating Companies Regional Electricity Boards Authority Licensees Transmission Licensees Any other person notified by the Central

Government in his behalf.

Exercise supervision and control over the Inter-State transmission system.

Efficient Operation and Maintenance of Transmission System.

Establish/augment and operate all Regional Load Dispatch Centres and Communication facilities.

To facilitate private sector participation in transmission system through Independent Private Transmission Company/ Joint Ventures.

To assist various SEBs and other utilities in up gradation of skills & sharing of expertise by organizing regular conferences, tailor-made training workshops directed towards specific technological and O&M areas and extending laboratory facilities for testing purposes etc.

Restoring power in quickest possible time in the event of any natural disasters like super cyclone, flood etc. through deployment of Emergency Restoration Systems.

To provide Consultancy Services at national and international level in transmission sector based on the in-house expertise developed by the Organisation.

To participate in long distance trunk telecommunication business ventures.

ORIGIN:


The Power Grid Corporation of India Ltd. was incorporated in Oct. 1989 and it started its operational works in 1991. It has achieved the international standard in the field of power generation and distribution as it is the largest power sector unit in India covering about 45% of total power supply and it has covered 99% of operational efficiency. Power Grid's commendable progress is in the public sector enterprises in the country. Consequently it was awarded various organisational certificates of excellence and finally it was put in the category of "Navaratna" by the Govt. of India in Feb. 2008.

POWERGRID was established under the legislative framework for power development in the country. Its achievement has been recorded in every aspects of power sector utilities business in the country.

ORGANIZATION OVERVIEW

POWERGRID is an Indian state-owned electric utilities company headquartered in Gurgaon, India. Power Grid wheels about 51% of the total power generated in India on its transmission network.

Power Grid has a pan India presence with around 82,045 Circuit-km of Transmission network and 135 nos. of EHVAC & HVDC sub-stations with a total transformation capacity of 91,945 MVA. The Inter-regional capacity is enhanced to 22400 MW.

Power Grid has also diversified into Telecom business and established a telecom network of more than 21,000 km across the country. Power Grid has consistently maintained the transmission system availability over 99.00% which is at par with the International Utilities.

In 1980 the Rajadhyaksha Committee on Power Sector Reforms submitted its report to the Government of India suggesting extensive reforms in the Indian power sector. Based on the recommendations of the Rajadhyaksha Committee, in 1981 the Government of India took the policy decision to form a national power grid which would pave the way for the integrated operation of the central and regional transmission systems. Pursuant to this decision to form a national power grid, Power Grid was incorporated on October 23, 1989 under the companies Act, 1956 as the National Power Transmission Corporation Limited, with the responsibility of planning, executing, owning, operating and maintaining the high voltage transmission systems in the country. The Company received a certificate for commencement of business on November 8, 1990. Subsequently, the name of the Company was changed to Power Grid Corporation of India Limited with effect from October 23, 1992.


POWERGRID has enhanced the inter-regional capacity of National Grid to 22,400 MW. India is divided into 5 Regions - Northern Region(NR), Eastern Region(ER), Western Region(WR), Southern Region(SR) and North-East Region(NER).

When PGCIL was formed then the responsibility of Regional Load Despatch Centres (RLDCs) was handed over to POWERGRID by Central Electricity Authority (CEA). On 25th February, 2009 the National was inaugurated. Now these Regional Load Despatch Centres (RLDCs) and National Load Despatch Center(NLDC) is a separate Organisation named POSOCO (Power system Operation Corporation), a wholly owned subsidiary of POWERGRID.

The Business of POWERGRID comes from the following activities: 1) Transmission (which includes Construction, Operation and Maintenance of Transmission lines and Sub-stations) 2) Telecom (handled by a separate department of POWERGRID known as Telecom Deptt. or POWERTEL) 3) Consultancy 4) Grid Management POWERGRID is also carrying out projects related to distribution, sub transmission and rural electrification works in some of the states.

At a Glance

Incorporated in 1989 for Transmission of Electric Power across the country.

Central Transmission Utility - Navaratna PSU. World's Leading Power Transmission Utility. Technology Leader in EHVAC & HVDC Transmission. Pioneering UHVAC 1200kV Transmission System. Carries about 50% of Generated Power Across Country with

Transmission System as on 31 May 2012, comprising • 94,185 Ckt. kms Transmission line. • 154 EHVAC/HVDC Substations. • 1, 31,025 MVA Transformation Capacity. • 28,000 MW (Approx) Inter-regional Power Transfer Capacity.

Telecom National Long Distance (NLD) operator & Internet Service Provider with about 25000 Km Optical Fibre Network.

Assets of Rs. 63,387 crore as on Mar 31, 2012.



DEVELOPMENT OF TRANSMISSION SYSTEM FOR INDEPENDENT POWER PRODUCERS

In order to meet the growing power demand of the country, Government of India has envisaged Capacity Addition through private sector participation and a number of Independent Power Producers (IPPs) have been setting-up/ plans to set-up power generation plants of different capacity with various time schedules in the country. These power generation plants are mainly coming up in resource rich states, i.e. Odisha, Jharkhand, Sikkim, Madhya Pradesh, Chhattisgarh, Tamil Nadu, Andhra Pradesh etc. and the power generated is required to be transmitted to load centres across the States and Regions.

Being the nodal agency for grant of Long Term Access (LTA) to private producers, the Company has undertaken development of high capacity transmission corridors for evacuation of large quantum of power from various IPP projects.In order to evolve an economical transmission system to transfer such large quantum of power across long distances, 11 Nos. High Capacity Power Transmission Corridors have been planned and approved by CERC.

TELECOM

POWERGRID diversified into Telecom business to utilize spare telecommunication capacity of its Unified Load Dispatch Centre (ULDC) schemes, leveraging its country wide transmission infrastructure. As a part of this, POWERGRID has installed over 25,000 km Telecom Network and connectivity has been provided to all metros, major cities & towns including State capitals in North-Eastern Region, Jammu & Kashmir, etc. Presently, POWERGRID is one of the few telecom players with a marked presence in remote areas and is providing highly reliable services to various customers.

The Company is one of the implementing agencies for the prestigious National Knowledge Network project. The project envisages a gigantic 3 layer Telecom network of all knowledge centres across the country such as IITs, IISc, etc. on high speed connectivity.

CONSULTANCY:

POWERGRID has acquired in-house expertise at par with global standards in the field of Planning, Design, Engineering, Load Despatch and Communication, Telecommunication, Contract, Finance and Project Management and offers its services in these areas at national & international level. The Company has emerged as a strong player in transmission sector in South Asia, Middle-east Asia & African countries and is providing consultancy services. POWERGRID is keenly participating in projects funded by ADB, The World Bank, and other foreign organizations in various countries like Vietnam, China, Kenya, Ethiopia, Uzbekistan, Afghanistan, Ethiopia, Tajikistan & Bangladesh. POWERGRID has also secured consultancy assignments in Afghanistan, Nepal, Bhutan, Nigeria and Dubai against stiff competition from international consultants.

SMART CITY

POWERGRID recently took up the development of Smart City. This will include Smart Generation (Renewable and micro grid), Smart Transmission (Integration of Renewable Energy Sources, Synchrophasor Technology), Smart Distribution (Advance Metering Infrastructure, Outage, Peak Load and Power Quality Management, electric Vehicles and Energy Storage) and Smart Public Services (such as e-governance, e-education, and m-Medical). A pilot project on such lines is being taken up in UT (Pondicherry).

INTERNATIONAL CO-OPERATION -- TOWARDS SAARC GRID

POWERGRID is playing an active role in preparing a roadmap for developing SAARC market for electricity on a regional basis to develop a cross country power-grid, harnessing each other’s capacities and resources in order to address the growing energy need in the region.

Presently, various interconnections exist between India & Nepal and between India & Bhutan. Further, an asynchronous interconnection between India & Bangladesh through 500MW HVDC back-to-back terminal is under implementation and expected to complete in early XII Plan. In addition, an interconnection between India and Sri Lanka through HVDC bipole link including submarine cable for sea portion is being finalised.


COMPANY PERFORMANCE

POWERGRID, the Central Transmission Utility (CTU) of the country, is responsible for providing matching transmission network for generation capacity programme under Central Sector, implementation of various system strengthening schemes, load dispatch & communication schemes and inter-regional links. During X five year Plan, POWERGRID made an investment of about Rs. 18,920 Crore against the approved outlay of Rs. 21,370 Crore.

The key financial parameters have witnessed a quantum jump during the X five year Plan period as indicated below:

On the physical performance front, POWERGRID added about 19,170 Ckt. Kms of Extra High Voltage transmission lines, 36 no. of EHV sub-stations and Power transformation capacity of about 25,130 MVA during X Plan, thereby enhancing its overall transmission network to 59,461 Ckt. Kms, 104 sub-stations and 59,417 MVA of transformation capacity by end of X Plan.


ASSET GROWTH

Gross fixed assets were Rs.63,387, 50,343. Rs. 43,202 crore, Rs. 40,319 crore and Rs 35,417 as at March 31,2012, 2011, 2010, 2009 and 2008 respectively. Fixed assets consist of plant and machinery such as transmission lines, substations, HVDC , ULDC, Telecom equipment and other transmission equipment; buildings; land; office equipment; fixtures; and motor vehicles. Fixed assets value increased by 22.06% in Fiscal 2008 as compared to Fiscal 2007, increased by 13.84% in Fiscal 2009 as compared to Fiscal 2008, increased by 7.15% in Fiscal 2010 as compared to Fiscal 2009 , increased by 16.53% in Fiscal 2011 as compared to Fiscal 2010 and increased by 25.91% in Fiscal 2012 as compared to Fiscal 2011 . These increases are mainly due to the commissioning of new transmission assets.


Turnover Growth

The company’s financial performance during FY 2011-12 has been spectacular, achieving a turnover of Rs. 10,785 Crore and a Net Profit of Rs. 3,255 Crore as compared to Rs. 9,099 Crore and Rs. 2,697 Crore respectively during FY 2010-11. With the addition of huge transmission network, the gross asset base of the Company has been enhanced to more than Rs. 63,387 Crore in FY 2011-12 from Rs. 50,343 Crore in FY 2010-11. At the end of FY 2011-12, the company has a Net Worth of Rs 23,488 Crore and Capital Employed of Rs 45,254 Crore

The company could excel in its financial performance due to prudent financial management, with key indicators registering impressive growth at the end of FY 2011-12 since 1992-93:

Turnover at Rs 10,785 Crore ,up by 17.01 times from Rs 634 Crore Profit at Rs 3,255 Crore , up by 13.73 times from Rs 237 Crore Gross Block at Rs 63,387 Crore , up by 18.00 times from Rs 3,521 Crore


Manpower Growth

At the end of FY 2007-08, the company has a Net Worth of Rs 13,575 Crore (provisional) and Capital Employed of Rs 24,680 Crore. There has been an impressive growth in the earning potential of the company, which is reflected by the steady growth of return on Net Worth from the level of 5.63% in 1992-93 to 10.46% in 2007-08.

It is worthwhile to mention that this growth has been achieved despite downward revision in tariff norms by CERC and with a marginal addition of only 24% in the manpower. This growing productivity of POWERGRID can also be assessed from the fact that profit per employee has gone up from Rs. 4.5 lakhs in

1992-93 to Rs. 18.58 Lakhs in 2007-08.


CompetitionName Last Price Market Cap.

(Rs. cr.)Sales

TurnoverNet Profit

NTPC 171.65 141,533.40 62,053.58 9,223.73

Power Grid Corp 121.70 56,343.76 10,035.33 3,254.95

Tata Power 96.50 22,900.15 8,495.84 1,169.73

Reliance Power 79.50 22,300.76 66.12 310.86

NHPC 17.80 21,895.32 5,654.69 2,771.77

Neyveli Lignite 79.90 13,404.90 4,866.85 1,411.33

Reliance Infra 454.40 11,950.27 17,906.67 2,000.26

Adani Power 41.05 8,949.04 3,948.90 -293.92

Torrent Power 172.85 8,166.27 7,917.82 1,237.46

JSW Energy 48.55 7,962.47 5,016.42 234.64

SJVN 19.20 7,942.32 1,927.50 1,068.68

Jaiprakash Pow 28.60 7,506.81 1,615.56 402.95

CESC 306.75 3,865.05 4,669.00 565.00

IndiaBPower 11.25 2,973.07 1.15 52.42

KSK Energy Vent 65.45 2,438.87 67.52 0.54

Schneider Elect 87.70 2,096.94 1,353.50 39.76

GVK Power 11.40 1,800.30 27.60 -8.27

BF Utilities 412.25 1,552.85 22.37 -2.27

Guj Ind Power 66.60 1,007.33 1,300.23 118.36

Indiabull Infra 4.55 579.20 0.21 -3.47

Orient Green 10.40 486.80 2.24 5.21

Entegra 11.90 377.41 0.01 -58.41

DPSC 13.55 131.95 - -


Energy Dev 27.05 74.39 60.26 9.15

Bil Energy 58.00 61.31 101.37 -7.51

S E Power 9.95 40.41 1.68 0.17

Indowind Energy 3.75 33.65 29.57 4.19

Advance Meter 18.25 29.30 -- -0.01

AWARDS AND ACCOLADES:

MoU rating of the Company has consistently been in the highest bracket (“Excellent”) since signing of its first MoU with Ministry of Power up to

2009-10. The Company is poised to get “Excellent” rating for FY 2010-11 as well. Six projects of POWERGRID have recently bagged the prestigious National

Awards for Meritorious Performance in Power Sector instituted by the Government of India for the year 2009-10 & 2010-11.

POWERGRID received three Gold Shields and two Silver Shields for Transmission System Availability and one Silver Shield for Early Completion of Transmission Project.

POWERGRID achieved unique distinction of being First Power Utility and Second Company in the world to get certified with Integrated Management System (IMS) as per Publicly Available Specification, PAS 99:2006 and ISO 9001:2008 (Quality), ISO 14001:2004 (Environment) & OHSAS 18001:2007 (Occupational Health & Safety Management System) after extensive audit. POWERGRID also stands audited for Social Accountability Standard, SA 8000:2008.

The Company was conferred with ‘MoU Excellence Award’ for FY 2008-09 by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, and Govt of India for being the top performer in the Energy Sector.

RECENT AWARDS:

POWERGRID has been conferred with three Gold Shields and one Silver Shield in the National Awards for Meritorious Performance in Power Sector 2008-09.

POWERGRID has been conferred with “Emerging Telecom Infrastructure Provider” Award at the INFOCOM CMAI National Telecom Awards 2010.

CMD, POWERGRID has been conferred with the "Best CEO Award 2009" by World HRD Congress.


CMD, POWERGRID has been conferred with “CEOs with HR Orientation Award” by Asia’s Best Employer Brand Awards 2010.

Director (Personnel), POWERGRID has been conferred with “Most Powerful HR Professional of India” by World HRD Congress 2010.

Director (Personnel), POWERGRID has been conferred with the “INDIRA Super Achiever Award 2010”.


TOOLS OF FINANCIAL ANALYSIS

Balance sheet

Profit and loss account

Cash Flow statement

Comparative Statements

Common-Size Statements

Ratio Analysis


COMPARATIVE STATEMENTS:

The Balance sheet and the profit and loss account usually carry financial information for the current year and the previous year.

Comparative statements compare the financial numbers over a period of time and captures changes in the same. The change could be presented in absolute amount or in comparative terms such as percentage.

The purpose of focusing at change in the financial numbers over a period of time is to get an insight into the reasons for changes in financial position and operating results. This analysis is also known as ‘horizontal analysis’.

COMPARATIVE STATEMENTS


Format of a Comparative Balance Sheet

Comparative Balance Sheets of ............... Ltd.as on .................. and ..........

A B C D = C-B E = D × 100/B

Particulars Previous Year

Current Year

Absolute Increase/ Decrease

Percentage Increase/Decrease

A. Fixed Assets: ------- ------- ------- -------

B. Investments:C. Working Capital:Current Assets (i)Less:Current Liabilities (ii)

(i)-(ii) D. Capital Employed: (A+B+C)E Less: Long-term Debts

-------

-------

-------

-------

-------

-------

-------

-------

-------

------

-------

-------

-------

-------

-------

-------

F. Share-holders Funds: (D-E)Represented by:Equity Share CapitalPref. Share CapitalNet Res. & SurplusG. Shareholder's Funds

-------

------

-------

------

---------------------

---------------------

------------------

---------------------

-------

-------

-------

-------

COMMON-SIZE STATEMENTS:


Common size statements express all items of a financial statement as a

percentage of some measure of size of the enterprise. For example, assets may

be chosen as a measure of size for balance sheet and sales may act as a

measure of size for profit and loss account. For example, in case of profit and

loss accounts, each item is expressed as a percentage of sales. Thus, the

common size profit and loss account captures the relationship between sales

and expenses. One can draw conclusion regarding the behaviour of expenses

over period of time by examining these percentages.

This analysis is of immense use while comparing business enterprises which

differ substantially in size as it provides and insight into the structure of

financial statements .an analysis of common size statement will help better

understand the important changes which have occurred in the enterprise over

a period of time. This analysis is also known as ‘vertical analysis’.

COMMON – SIZE FINANCIAL STATEMENTSFORMAT OF A COMMON SIZE BALANCE SHEETA format of a Common Size Balance Sheet is given below:

Common Size Balance Sheetas at ...................

Particulars Previous Year(Rs)

Current Year(Rs)

Previous Year(%)

Current Year(%)

Assets:Fixed AssetsInvestmentsCurrent Assets

- - - -- - - -- - - -

- - - -- - - -- - - -

- - - -- - - -- - - -

- - - -- - - -- - - -

Total Assets - - - - - - - - 100 100

Liabilities:Equity Share CapitalPref. Share CapitalReserves and Surplus (Less Misc. Exp.)Secured LoansUnsecured Loans

- - - -- - - -

- - - -- - - -- - - -

- - - -- - - -

- - - -- - - -- - - -

- - - -- - - -

- - - -- - - -- - - -

- - - -- - - -

- - - -- - - -- - - -


Current LiabilitiesProvisions

- - - -- - - -

- - - -- - - -

- - - -- - - -

- - - -- - - -

Capital & Liabilities - - - - - - - - 100 100

TREND ANALYSIS

Analysis of financial statements using analysing comparative and common size statement signifies that meaningful conclusions could be drawn regarding the operating performance and financial position of the enterprise .Both of the analysis use percentage figures in helping an analyst to form an opinion .These percentages could be calculated for a number of successive years in order to understand trend of a financial statement item and this analysis is known as ‘trend anaysis’.

RATIO ANALYSIS

Ratio analysis is a very powerful analytical tool useful for measuring performance of an organization. The ratio analysis concentrates on the inter-relationship among the figures appearing in the aforementioned four financial statements. The ratio analysis helps the management to analyse the past performance of the firm and to make further projections. Ratio analysis allow interested parties like shareholders, investors, creditors, Government and analysis to make an evaluation of certain aspects of a firm’s performance.

Ratio analysis is a process of comparison of one figure against another, which makes a ratio and the appraisal of the ratios to make proper analysis about the

strengths and weaknesses of the firm’s operations. Ratio analysis is extremely helpful in providing valuable insight into a companies’ financial picture.


Ratio may be expressed in the following three ways:

1. Pure Ratio or Simple Ratio: - It is expressed by the simple division of one number by another.

2. ‘Rate’ or ‘So Many Times’: - In this type, it is calculated how many times a figure is, in comparison to another figure.

3. Percentage: - In this type, the relation between two figures is expressed in hundredth.

CLASSIFICATION OF RATIO:

Financial Ratio Analysis

The Balance Sheet of a company and Statement of Income are important, but these are only the starting point for effective and successful financial management. Applying Financial Ratio Analysis to Financial Statements helps to analyze the failure, success, and progress of a business.

Ratio Analysis enables a business owner or the manager to spot trends in business and to compare the performance and condition of the business with the average performance of similar businesses in similar industries.

Balance Sheet Ratio Analysis

Important Balance Sheet Ratios measure the liquidity and solvency (ability of a business to pay its bills as they become due) and leverage (extent to which the business is dependent on the creditors' funding). These include the following ratios:

Liquidity Ratios

Liquidity ratios indicate the ease of converting assets into cash. Current Ratio, Quick Ratio, and Working Capital are included in Liquidity ratios

Current Ratios:

This is one of the best known measures of financial strength. It is calculated as shown below:

Current Ratio = Total Current Assets/Total Current Liabilities


The main concern of this ratio is to know whether a business has enough current assets to meet current liabilities with a margin of safety for possible losses in current assets, like inventory shrinkage or collectable accounts. In general, the acceptable current ratio is 2 to 1. However, to know whether or not a particular ratio is satisfactory depends on the nature of business as well as on the characteristics of the current assets and liabilities. The minimum acceptable current ratio is 1:1.

Quick Ratios:

The Quick Ratio is also called the "acid-test" ratio and is one of the best measures of liquidity. It is calculated as shown below:

Quick Ratio = (Cash + Government Securities + Receivables)/Total Current Liabilities

The Quick Ratio is a much more accurate measure as compared to the Current Ratio. It excludes inventories and concentrates on the really liquid assets, with a value that is fairly certain. It helps in knowing that incase all sales revenues disappear, could a business meet its current obligations with readily convertible `quick' funds on hand.

An acid-test of 1:1 is considered as satisfactory unless majority of quick assets are in accounts receivable, and the pattern of accounts receivable collection lags behind the schedule for paying the current liabilities.

Working Capital:

It's more a measure of cash flow than a ratio. The result of this working capital calculation must be a positive number. It is arrived at as shown below:

Working Capital = Total amount of Current Assets - Total Current Liabilities

Bankers consider Net Working Capital over time to determine a company's ability to weather financial crisis. Loans are often dependant on the minimum working capital requirements.

Leverage Ratio

The Leverage Ratio or Debt/Worth ratio indicates the extent to which a business is reliant on debt financing (that is creditor money versus the owner's equity):

Debt/Worth Ratio or Liquidity ratio = Total Liabilities/Net Worth

In general, the higher this ratio, the more risky a creditor will perceive its exposure in the business, making it harder to obtain credit.


Income Statement Ratio Analysis

The following important Statement of Income Ratios measure the profitability of a business:

Gross Margin Ratio

This ratio is the percentage of sales left after subtracting the cost of the goods sold from net sales. It measures the percentage of sales remaining (after obtaining or manufacturing the goods sold) available in order to pay the overhead expenses of a company.

Comparison of business ratios to those of similar businesses reveals the relative strengths or weaknesses of business. The Gross Margin Ratio is computed as follows:

Gross Margin Ratio = Gross Profit/Net Sales

(Gross Profit = Net Sales - Cost of Goods Sold)

Net Profit Margin Ratio

This ratio is a percentage of sales left after subtracting Cost of Goods sold and all expenses, except the income taxes. It helps in comparing a company's "return on sales" with the performance of other companies in same industry. It is calculated before the income tax since tax rates and tax liabilities differ from company to company for a wide variety of reasons, making the comparisons after taxes extremely difficult. The Net Profit Margin Ratio is computed as follows:

Net Profit Margin Ratio = Net Profit before Tax/Net Sales

Management Ratios

Other important ratios, also referred to as Management Ratios, also are derived from information based on the Balance Sheet and Statement of Income.

Inventory Turnover Ratio

This ratio reveals how well the inventory is being managed. It is important since more times the inventory can be turned in a specified operating cycle, the greater will be the profit. The Inventory Turnover Ratio is calculated as given below:


Inventory Turnover Ratio = Net Sales/Average Inventory at Cost

Accounts Receivable Turnover Ratio

This ratio gives detail as to how well accounts receivable are being collected. The Accounts Receivable Turnover Ratio is calculated as follows:

(Net Credit Sales/Year)__________________ = Daily Credit Sales

(365 Days/Year)

Accounts Receivable Turnover (as in days) = Accounts Receivable/Daily Credit Sales

Return on Assets Ratio

This measures how effectively the profits are being generated from the assets employed in the business when compared with the ratios of firms in similar businesses. Low ratio indicates an inefficient use of assets. The Return on Assets Ratio is calculated as follows:

Return on Assets = Net Profit before Tax/Total Assets

Return on Investment (ROI) Ratio

The ROI is one of the most important ratios. It is the percentage of returns on funds invested in a business by the owners. This ratio helps the owner in knowing whether or not the effort put into the business has been worthwhile. The ROI is calculated as follows:

Return on Investment = Net Profit before Tax/Net Worth

CALCULATED RATIOS OF LAST 5 YEARPower Grid Corporation of IndiaKey Financial Ratios

Mar '12

Mar '11 Mar '10 Mar '09 Mar '08

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 2.11 1.75 1.50 1.20 1.20


Operating Profit Per Share (Rs) 18.11 15.01 13.78 14.49 10.08

Net Operating Profit Per Share (Rs) 21.68 18.12 16.93 15.63 10.96

Free Reserves Per Share (Rs) -- 29.27 21.58 17.39 18.78

Bonus in Equity Capital -- -- -- -- --

Profitability Ratios

Operating Profit Margin(%) 83.52 82.84 81.34 92.67 91.93

Profit Before Interest And Tax Margin(%)

53.86 51.51 50.09 70.65 64.57

Gross Profit Margin(%) 57.89 56.62 53.57 76.04 71.13

Cash Profit Margin(%) 54.18 52.83 53.94 42.67 50.89

Adjusted Cash Margin(%) 54.18 52.83 53.94 42.67 50.89

Net Profit Margin(%) 30.18 29.24 26.77 23.87 28.49

Adjusted Net Profit Margin(%) 30.18 29.24 26.77 23.87 28.49

Return On Capital Employed(%) 8.51 8.98 8.58 13.10 10.40

Return On Net Worth(%) 13.57 12.71 12.92 12.49 10.53

Adjusted Return on Net Worth(%) 13.64 12.59 13.49 14.24 11.80

Return on Assets Excluding Revaluations

51.80 45.81 37.52 32.14 32.66

Return on Assets Including Revaluations

51.80 45.81 37.52 32.14 32.66

Return on Long Term Funds(%) 8.70 9.20 8.80 13.34 10.62

Liquidity And Solvency Ratios

Current Ratio 0.90 0.69 0.65 0.60 0.68

Quick Ratio 0.96 0.73 0.68 0.61 0.71

Debt Equity Ratio 2.21 1.93 2.18 2.10 1.62

Long Term Debt Equity Ratio 2.14 1.86 2.10 2.08 1.59

Debt Coverage Ratios

Interest Cover 3.38 3.78 3.25 1.74 2.07

Total Debt to Owners Fund 2.21 1.93 2.18 2.10 1.62

Financial Charges Coverage Ratio 4.70 4.36 3.97 2.06 2.56

Financial Charges Coverage Ratio Post Tax

4.00 3.74 3.54 1.87 2.31

Management Efficiency Ratios

Inventory Turnover Ratio 22.79 -- -- -- --

Debtors Turnover Ratio 3.66 3.12 3.97 5.32 5.80

Investments Turnover Ratio 22.79 21.99 20.67 -- --

Fixed Assets Turnover Ratio 0.16 -- -- -- --

Total Assets Turnover Ratio 0.13 0.13 0.14 -- 0.13

Asset Turnover Ratio 0.16 0.17 0.17 0.16 0.13

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital -3.48 -134.06 -188.37 -219.58 -143.46

Profit & Loss Account Ratios

Material Cost Composition -- -- -- -- --

Imported Composition of Raw Materials Consumed

-- -- -- -- --

Selling Distribution Cost Composition

-- 0.24 0.23 0.14 0.18


Expenses as Composition of Total Sales

0.09 0.23 0.03 0.01 0.05

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 34.83 34.94 36.11 34.95 40.79

Dividend Payout Ratio Cash Profit 19.45 19.24 18.32 21.20 24.48

Earning Retention Ratio 65.34 64.71 65.41 69.34 63.58

Cash Earning Retention Ratio 80.60 80.66 82.08 80.45 77.17

AdjustedCash Flow Times 9.08 8.39 8.37 9.42 8.61

Earnings Per Share 7.03 5.83 4.85 4.02 3.44

Book Value 51.80 45.81 37.53 32.16 32.68


FINDINGS There is a huge crisis over energy in the world especially in the field of

electricity. India is also victim of same condition .In spite of several efforts taken by the governments in this regards, there is enormous possibility exists. POWERGRID CORP. is a key organisation as far as the supply of power is concerned .After successfully conducting this project works ,it can be said that the financial health of PGCOI is sound enough and it appears positive in accordance with its balance sheet and profit and loss A/c which are available to me.

Dividend per share has been increased by 20.57 % from last year 1.75 to 2.11.since the dividend per share is increasing which mean lower will be the amount of earning ploughed back in the business.

Operating and net operating profit per share has also increased from 15.01 to 18.11 and 18.12 to 21.68

Gross profit margin has increased by 2.24% as from 56.62% to 57.89% in 2012 which is good for the company and serves as an index of higher profitability.

Net profit margin is an indicator of operational efficiency or inefficiency. Here net profit margin is more than 3.25 from last year as in 2011.

There has been an increase in return on equity from that of the previous year & it is a indication of good performance of the company.

EPS has increased over the years, there by benefiting the shareholder’s. This ratio basically reflects the market’s confidence on company’s equity.

Current ratio measure the solvency of the company in the short term. Current ratio shows a continuous increment from past 5 years.

Quick ratio is used as a measure of the company‘s ability to meet its current obligation. This ratio increases from 0.73 to 0.96.


SWOT ANALYSIS OF PGCOISTRENGTH

Leadership Position in Indian transmission sector (Transmitting 50% of power generated in India).

High Operational efficiency (System availability of over 99% since 2002).

Established track record in expanding transmission systems.

Low operational risks in core business (18-20% Return On Equity)

Diversified business portfolio (Consultancy, Telecom, and DMS).

Strong Financial Position (AAA rating by CRISIL and LAAA rating by ICRA,).

Government support (69.42% of diluted post issue equity capital held by the President of India).

Skilled and experienced senior management team.

Competent and committed work force.

RISK FACTORS

Most of income is derived from transmission of power to state power utilities and many of these entities have had weak credit history in the past.

Flexibility in managing operations is limited to regulatory environment.

Future Tariff could be modified in ways that can have adverse effects on results of operations.

The Electricity Act introduces measures which could result in increased competition.

Transmission projects require a substantial capital outlay and time before any benefits or returns on investments are realized.

New projects and expansion plans are subject to a number of contingencies

Delay in implementation of linked generation projects (Kudankulam and Neyveli) may delay the returns from


associated transmission projects.

Recovery of O&M expenses under current tariff may not compensate all such expenses ¾ Telecom business may be affected by change in technology.

Competition in consultancy business.

OPPORTUNITIES

Technical expertise built up can be used to fetch consultancy business from international markets and enhanced business from SEBs/Pvt sector.

POWER Grid’s existing infrastructure provides excellent opportunity for long distance telecommunication business through optic fibre installation

Lack of sub-transmission system across the country provides ample opportunity for entering into distribution business especially in the major load centres/industrial consumers with low gestation period/cash basis

THREATS

Uncertainty in planning of firm generation capacity addition hampers development of transmission systems/long term plan. Weakness of domestic vendors to meet our future requirements to control the costs and depreciating rupee.

Maintenance requirement will be growing and O&M costs will increase to maintain the availability of our system

Very poor repayment capability of our customers goading the organisation towards sever financial crunch.

Lack of commensurate long term funds to meet the growing transmission requirements.


STRATEGY

Expand and strengthen transmission network.

Maintain efficient operating performance. Develop strong vendor network.

Take advantage of diversification opportunities.

Emphasis on Research and Development. Continue to invest in employee development. Continue to collaborate with customers


CONCLUDING OBSERVATION:

The Power Grid Corporation of India Ltd. is one of the public enterprises in the country which was conferred the title of "Navratna" in May, 2008. The objective of the Power Grid Corporation of India Ltd. is to create a long and vibrant National Grid in the country to ensure the maximum utilization of generation of resources conservation and eco-sensitive right of way and the flexibility to accommodate the evertanity of generation plans.

The Power Grid Corporation of India Ltd. is playing a key role in Indian power sector directly contributing to economic development of the country through the commendable job; it has done in establishing huge and complex transmission network and as a grid operator despite working in tough terrains hostile wealthier conditions etc. In the process, the company has developed strong expertise in various facets of power transmission business including development operation and maintenance of large transmission networks and presently owns and operates around 95,329 Ckt. kms circuit KMs of transmission line along with 156 sub-stations and transformation capacity of about 1,38,673 MVA. Having 28000 MW(Approx)inter-regional transfer Capacity. Telecom National Long Distance (NLD) operator & Internet Service Provider with about 25000 Km Optical Fibre Network.

In a short span of only 23 years of commercial operation, the company has grown by leaps and bounds and has earned a niche for itself amongst the largest transmission utilities in the world.

With excellent progress made in all fronts, the company has exceeded the performance targets set forth and is poised to achieve "Excellent" ratings. The company has received three National Awards for meritorious performance in the field of transmission sector for system availability and early completion of projects one gold and one silver medal was received by North-Eastern Region for achieving high availability of transmission system. POWERGRID has also received IEEMA Power Award 2009 for excellence in power transmission and All India Organisation of Employers Industrial Rotation Award 2007-08. POWERGRID has been conferred with “Emerging Telecom Infrastructure Provider” Award at the INFOCOM CMAI National Telecom Awards 2010.

The future programme of the corporation include the expansion of transmission network maintenance of efficient operation, development of strong vendor network, take advantages of diversification activities, emphasis on Research and Development and collaborations with customer.


SUGGESTION:

After detail study of each and every aspect of the financial statement of PGCOI Ltd. We can conclude that the company’s financial position is good. It has a sound operation and enjoys high level of confidence in the market. But the company should focus on new areas where more scope of growth is available. There is always scope of improvement.

It will be beneficial for the company to pay attention on improving the employee’s productivity that will bring down employee’s cost and help the company improve its productivity and profitability.

They should try to improve the operational and financial performance of state utilities. Company should explore and should diversified into new areas and should try for wider expansion of its business activity like consultancy etc.


BIBLIOGRAPHY:

Annual Report and Balance sheets of PGCOI. I.M.PANDEY, FINANCIAL MANAGEMENT, Vikash publishing House Pvt. Ltd. M.Y.KHAN and JAIN, FINANCIAL MANAGEMENT, Tata Mc Graw Hill

Publishing Company Ltd, New Delhi. Ravi M KISHORE, FINANCIAL MANAGEMENT, Taxman publication. Wikipedia. Information Bulletin: Power Grid. REPORTS AND JOURNALS

o Annual Reports: The Power Grid Corporation of India Ltd.

WEBSITES

o www.powergridindia.com .

o www.moneycontrol.com


http://www.moneycontrol.com/

http://www.powergridindia.com/

File report PGCOI

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