Final_FM Assignment_Power Grid Corporation of India

8/2/2019 Final_FM Assignment_Power Grid Corporation of India

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Power Grid Corporation of India Balance Sheetin Rs . Crore

Mar '11 Mar '10 Difference

Sources Of Funds

Equity Share Capital 4629.73 4208.84 420.89Share Application Money 0 0 0

Preference Share Capital 0 0 0

Reserves 16579.61 11585.08 4994.53

Revaluation Reserves 0 0 0

Networth 21209.34 15793.72 5415.62

Secured Loans 36,325.07 31,345.78 4,979.29

Unsecured Loans 4,557.70 3,071.01 1,486.69

Total Debt 40882.27 34416.79 6,465.48

Total Liabilities 62092.11 50210.71 11,881.40

Application Of Funds

Gross Block 50,343.35 43,186.09 7157.26

Less: Accum. Depreciation 13,127.80 11,141.02 1986.78

Net Block 37,215.55 32,045.07 5,170.48

Capital Work in Progress 26,633.02 20,438.37 6,194.65

Investments 1,365.05 1,453.22 -88.17

Inventories 381.51 344.9 36.61

Sundry Debtors 3,162.09 2,214.86 947.23

Cash and Bank Balance 1,558.89 3,277.64 -1,718.75

Total Current Assets 5,102.49 5,837.40 -734.91Loans and Advances 3,013.74 3,494.92 -481.18

Fixed Deposits 2,121.17 0 2,121.17

Total CA, Loans & Advances 10,237.40 9,332.32 905.08

Deffered Credit 0 0 0.00

Current Liabilities 10,485.86 10,603.54 -117.68

Provisions 2,875.46 2,458.29 417.17

Total CL & Provisions 13,361.32 13,061.83 299.49

Net Current Assets -3,123.92 -3,729.51 605.59

Miscellaneous Expenses 2.41 3.56 -1.15

Total Assets 62,092.11 50,210.71 11,881.40

Contingent Liabilities 35,167.14 27,614.51 7,552.63

Book Value (Rs) 45.81 37.53 8.28


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Profit & Loss account --------------

Mar '11 Mar '10

Income Crore Crore

Sales Turnover 8,388.70 7,127.45Excise Duty 0 0

Net Sales 8,388.70 7,127.45

Other Income 827.04 491.79

Stock Adjustments 0 0

Total Income 9,215.74 7,619.24

Expenditure

Raw Materials 0.03 0.03

Power & Fuel Cost 75.63 68.27

Employee Cost 1,042.95 959.26

Other Manufacturing Expenses 182.38 164.71

Selling and Admin Expenses 178.94 185.38

Miscellaneous Expenses 155.05 116.57

Preoperative Exp Capitalised -202.76 -169.91

Total Expenses 1,432.22 1,324.31

Mar '11 Mar '10

Operating Profit 6,956.48 5,803.14

PBDIT 7,783.52 6,294.93

Interest 1,786.28 1,586.12PBDT 5,997.24 4,708.81

Depreciation 2,199.39 1,979.69

Other Written Off 1.86 1.78

Profit Before Tax 3,795.99 2,727.34

Extra-ordinary items 31.26 -86.13

PBT (Post Extra-ord Items) 3,827.25 2,641.21

Tax 1,123.25 595.31

Reported Net Profit 2,696.89 2,040.94

Total Value Addition 1,432.19 1,324.28

Preference Dividend 0 0

Equity Dividend 810.23 631.34

Corporate Dividend Tax 132.33 105.67

Per share data (annualised)

Shares in issue (lakhs) 46,297.25 42,088.41

Earning Per Share (Rs) 5.83 4.85

Equity Dividend (%) 17.5 15

Book Value (Rs) 45.81 37.53


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FINANCIAL RATIOS Mar '11 Mar '10

Liquidity RatiosCurrent Ratio 0.69 0.65

Acid Test Ratio 0.73 0.68

Cash Ratio 0.38 0.42

Leverage Ratios

Debt/Equity 2.02 2.18

Debt/Assets 0.66 0.68

Interest Coverage Ratio 4.35 3.96

Turnover Ratios

Total Assets Turnover Ratio 0.13 0.81

Inventory Turnover Ratio 23.09 22.18

Debtors Turnover Ratio 3.12 3.97

Profitablity/Valuation Ratios

Opearting Profit Margin 84.07% 81.34%

Gross Profit Margin 57.86% 53.57%

Net Profit Margin 29.24% 26.77%

Return on Net Worth 12.62% 12.92%Return on Capital Employed 8.61% 8.58%

Book Value 45.81 37.53

EPS 5.83 4.85

Earning Retention Ratio 64.71 65.41


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FUND FLOW

Short Term Sources Short Term Uses

Provision 417.17 Capital WIP 6194.65

Cash and bank balance 1718.75 Debtors 947.23

Unsecured loans 1486.69 Fixed Deposit 2121.17

Loans and advances 481.18 Current liabilities 117.68

For LTS 5312.4 Inventories 36.61

Total 9416.69 Total 9417.34

Long Term Sources Long Term Uses

Equity 420.89 Gross Block 7157.26

Reserves 4994.53

Secured loans 4979.29 To STU 5312.4

Investment 88.17

Acc. Depreciation 1986.78

Total 12469.7 Total 12469.7


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OPERATING CYCLE TIME

Inventory days 101.89

Add: Debtors collection period (days) 116.97

Less: Creditors payment period (days) 0.00

Operating cycle time (days) 218.86


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COST OF CAPITAL

Cost of equity

D (DPS) Dividend/no. of shares 1.75

P (MPS) Market price of share 105.95

b (retained earnings) (PAT-Dividend)/PAT 0.69

r (return on b) (PAT- pref dividend)/ Networth 0.13

G (Growth rate) b*r 0.09

Cost of equity (Ke) D/P + G 10.42%

Cost of debt (assumed) 14%

Source Amount (in crores) Weights Pre tax cost

ESC 4629.73

R+S 16579.61

Acc. depreciation 13,127.80

34337.14 48.59% 10.42%

Secured loans 36325.07 51.41% 14%

Total 70662.21 100.00%


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Tax rate

assumed 30%

Post tax cost Weighted average cost

(Weight*Post tax cost)

10.42% 5.06%

9.80% 5.04%

WACC 10.10%


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Sr.No

1)

2)

3)

4)

5)

6)

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2)

3)


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1) Analysis of ratios

The current ratio has increased to 0.69 from 0.65. The main reason for this increase in debtors, fixed deposits

and loans and advances. This is not good for the company as majority of the cash is yet to be received which may

Debt to equity ratio decreased due to increase in the ESC and decrease in borrowings via loans.

Interest coverage ratio increased to 4.35 indicating reduction in interest payments due to repayment of loanswhile maintaining profit margin.

Fixed asset turnover ratio decreased from last year which shows that company is not properly managing its fixed

Debtors turnover decreased which shows that it is taking less time for the company to receive cash for daily

Operating profit margin increased drastically due to inrease in rate of per unit of electricity.

2) Analysis of Fund Flow

There has been an increase in the usage of funds especially for current assets- debtors, fixed deposits- and fixed

Cash and bank balance have decreased indicating the use of funds which is immediately reflected in increased WI

The long term usage of funds is less than short term usage indicating a positive working capital which issupplemented by long term sources of funds.

3) Analysis of Operating cycle time

It takes 218.86 days for Power Grid Corporation of India to complete one operating cycle of production. It is

mainly due to the collection period that it takes so much time. Reason being increase in sundry debtors.

4) Analysis of Cost of Capital

Power Grid Corporation of India has 48.49% portion equity and 51.51% debt as part of its capital structure.

The WACC is 10.10%; this can be lowered if debt portion increases as it can gain tax exemption and subsequently

reduce the cost of borrowing. However this should be supplemented with an interest rate lower than the tax


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Final_FM Assignment_Power Grid Corporation of India

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