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Transcript of Project Prav 2
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A
Project Report
on
Ratio Analysis of SJVNL
Submitted in partial fulfilment of the requirement for the award of the degree
Of
MASTER OF BUSINESS ADMINISTRATION
(MBA)
SUBMITTED BY:- SUPERVISED BY:-
PRAVEEN KUMAR SHARMA
ROLL NO2011PGMB056
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ACKNOWLEDGEMENT
I hereby acknowledge the immense contribution ofSJVN Ltd. Who has given me an opportunity to
work in Finance & Accounts Department.
I express my gratitude to Sh. S.L. Sharma and his team for sharing collected observations, writing
skills and gracious persistence which kept the things going.
This experience combined with the theoretical concepts has a synergic effect of a kind on the
individuals development.
PRAVEEN KUMAR SHARMA
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PREFACE
The research provides an opportunity to a student to demonstrate application of his/her knowledge,skill and competencies required during the technical session. Research also helps the student to
devote his/her skill to analyse the problem to suggest alternative solutions, to evaluate them and to
provide feasible recommendations on the provided data.
The report is on the topic ofRATIOANALYSIS OF SJVNL. Although I have tried my level best
to prepare this report an error free report, every effort has been made to offer the most authenticate
position with accuracy.
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DECLARATION
I hereby declare that the following documented Project Report Titled- ratio analysis
of sjvnl is an authentic work done by me.
The study was undertaken as apart of the course curriculum of MBA fulfilment
program of . BAHRA University
PRAVEEN KUMAR SHARMA
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CONTENTS:
CHAPTERS
CHAPTER-1
HISTORY OF SJVNLA. FEATURESB. OBJECTIVESC. SJVNL QUALITY
CHAPTER-2
INTRODUCTIONCHAPTER-3
RESEARCH METHODOLGY FUNCTIONS OF FINANCIAL DEPARTMENT
CHAPTER-4
ANALYSIS AND INTERPRETATIONA. RATIO ANALYSIS
i. SHORT TERMii. LONG TERM
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CHAPTER-5
CONCLUSION, FINDINGS AND SUGGESTIONSANNEXURE
BIBILOGRAPHY
CHAPTER
1
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COMPANY PROFILE
Overview of SJVNL:-
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.
Unit Synchronization Commercial Generation
Unit6 November 23, 2003 January 02, 2004
Unit5 September 29, 2003 October 06, 2003
Unit4 January 22, 2004 March 30, 2004
Unit3 February 13, 2004 March 31, 2004
Unit2 March 09.2004 May 06, 2004
Unit - 1 March 31, 2004 May 18, 2004
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
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ushered in the social and economic upliftment of the persons living in the vicinity of the Project i.e.
of society at large.
SJVNs Future Projects
Since the commissioning of the largest underground 1500 MW Hydro Electric Power Project,
NJHEP with the gigantic efforts made by its engineers, workers and all its associates, the first project
allocated to SJVN, the Corporation expanded its base from a single project to a Multi Project and
thereafter from a presence in a single state to a pan- Indian Corporation and established its footprint
in the neighbouring countries of Nepal & Bhutan.
SJVN is currently constructing the 412 MW Rampur Hydro Electric Project in the state of Himachal
Pradesh. SJVN is also implementing three hydro projects (252 MW Devsari, 60 MW Naitwar Mori
and 51 MW Jakhol Sankri) in the state of Uttarakhand. Further, SJVN has also been allocated Luhri
Hydro Electric Project (775 MW) and Dhaulasidh HEP (66 MW) in the state of Himachal Pradesh
for preparation of Detailed Project Report and subsequent execution. Further, SJVN is entering into a
Joint Venture for the implementation of 1500 MW Tipaimukh HE Project in Manipur with an equity
participation to the extent of 26%.
The company has now gone across the borders and has bagged 900 MW Arun III hydroelectric
projects in Nepal through, competitive bidding. In addition, the corporation has also been assigned
the task of updating/preparing DPRs of two Hydro Electric Projects 600 MW Wangchu HE Project
and 650 MW Kholongchu HE Project in Bhutan by Govt. of India.
SJVN Venturing into Wind Energy Sector
India consumes about 3.7% of world's commercial energy and is ranked as the fifth largest consumer
of energy in the world in terms of energy demand. This is despite having one of the lowest per capita
energy consumption in the world. Continued economic development and increasing population are
pushing up the demand for energy at a higher rate than addition in generation capacity. Peak energy
demand is about 12.7% (for Year 2009-10 as per CEA report) more than the total available energy
for consumption. The energy demand is expected to grow at 5.2% and to have sustainable
development; the electricity energy addition is to be around 10% annually.
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With the growing environment consciousness and reserves of the fossils like coal, crude oil, natural
gas etc. depleting at faster rate and the vast available renewable recourse had a big role towards
meeting up the energy demands of such a vast nation.
In view of the advantages SJVN is venturing into the Wind Energy field with an initial addition of
50MW of wind energy by the end of 2012 to promote and develop more renewable resource of
energy. In pursuit of the above mission SJVN has already started surveying the various potential
locations in India where the wind energy can be exploited economically. The consultant for this new
venture of setting up of the 50MW wind Power Project has already submitted the feasibility report
for establishing the project with the advantages of various locations.
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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 byapplying latest universally accepted Project Management Techniques, and by enabling
its Engineers, to become certified Project Managers through further trainings.
Dissemination of available in-house technical and managerial expertise to otherutilities / projects.
Creating work culture and work environment conducive to the growth anddevelopment of both the organization and the individuals through introduction of
participative management philosophy.
Fulfilling social commitments to the society. Achieving constructive cooperation andbuilding personal relations with stakeholders, peers, and other related organization.
Striving clean and green project environment with minimal ecological and socialdisturbances.
To strive for acquiring Nav Ratna Status.
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VISION:-
TO MAKE INDIA A FOUNTAINHEAD OF HYDRO POWER AND THE ENERGY SOURCE OF
THE FUTURE BY REORGANIZING DEVELOPMENT WITH PASSION AND
PROFESSIONALISM FOR SUSTAINABLE VIABILITY OF THE CORPORATION ON
BEDROCK OF SOUND COMMERCIAL PRINCIPLES.
MISSION:-
TO PLAN, INVESTIGATE, ORGANISE, EXECUTE, OPERATE AND MAINTAIN POWER
PROJECTS IN THE SATLUJ RIVER BASIN IN HIMACHAL PRADESH AND AT ANY OTHER
PLACE IN INDIA & ABROAD.
SJVNL QUALITY POLICY:-
SJVNL is committed to continuously strive for quality and fully satisfying customer needs by means
of state of the art technology, excellence in engineering and continual improvement in quality
management for generating reliable and eco-friendly power.
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SJVNL QUALITY OBJECTIVES:-
Maximum efficiency:-
Operating and maintaining power stations with maximum performance efficiency.
Following sound policies:-
Establishing and following sound business, financial and regulatory policies.
Starting more projects:-
Taking up of other hydro power projects.
Cost effective completion:-
Completion of the new projects allocated to SJVN in an efficient and cost effective manner.
Full utilisation of expertise:-
Dissemination of available in house technical and managerial expertise to other utilises projects.
Conducive work culture:-
Creating work culture and work environment conducive to the growth and development of both, the
organisation and the individuals through introduction of participative management philosophy.
Social responsibility:-
Fulfilling social commitments to the society. Achieving constructive cooperation and building
personal relations with stakeholders, peers, and other related organisation.
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Green business:-
Striving clean and green project environment with minimal ecological and social disturbances.
Aim ratna status:-
To strive for acquiring NAV ratna status.
Quality objectives:-
To keep the organisation abreast of the latest technology in power generation for its adoptionin a phased manner.
To monitor and control the quality of work designing of power projects and procurement ofequipment.
To fulfil the regulatory requirements related to power generation and act as a sociallyresponsible organisation in taking care of the community and the environment.
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CHAPTER
2
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The profile :-
PROJECT UNDER EXECUTION
Sr. No. Project Installed Capacity State
1. Rampur HEP 412 MW Himachal Pradesh
Projects under Survey and Investigation and DPR Preparation
A. In the State of Himachal Pradesh
Sr. No. Project Installed Capacity
1. Luhri HEP 775 MW
2. Dhaulasidh 66 MW
B. In the State of Uttarakhand
Sr. No Project Installed Capacity
1. Devsari HEP 252 MW
2. Naitwar Mori HEP 60 MW
3. Jakhol Sankri HEP 51 MW
C. In the State of Manipur
Sr. No Project Installed Capacity
1. Tipaimukh HEP* 1500 MW
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*This project will be developed by a joint venture company to be established in which SJVN have
agreed to take a 26% equity interest, with NHPC Limited and State of Manipur taking 69% and 5%
equity interest respectively.
D. Projects Abroad
Sr. No Project Installed Capacity Country
1. Arun III 900 MW Nepal
2. Wangchu HEP 600 MW Bhutan
3. Kholongchu HEP 600 MW Bhutan
Future Plans:-
The SJVN proposes to add 5000 MW additional capacity by 2014-15. This would require an
additional investment of about Rs. 29,000 Crores which shall be met mainly from internal accruals
and loans from domestic /multi literal funding agencies.
To achieve the target of setting up of additional 5000 MW SJVN is exploring the possibilities of
taking up new projects in Himachal Pradesh, Arunachal Pradesh, Nepal and Bhutan.
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Profits:-
Authorised Capital Rs. 70000 Million
Value of Assets Rs 111291 Million 31.03.2011
Paid Up Capital Rs. 41,366 Million 31.03.2011
Projects Completed 1 No. (1500 MW)
Projects Under Construction 1 No. (412 MW)
Projects Under Development 8 Nos. (3304 MW)
In 2010-2011
Energy Generated 7140.205 MU
PAF (Plant Availability Factor) 98.318%
Sales 18126.7 Million
Net Profit 9121.3 Million
In 2009-2010
Energy Generated 7018.81 MU
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PAF (Plant Availability Factor) 98.55%
Sales 17697.4 Million
Net Profit 9727.4 Million
Performance Rating "Excellent"
In 2008-2009
Energy Generated 6608.691 MU
Capacity Index 96.08%
Sales 17595.9 Million
Net Profit 10153.2 Million
Performance Rating "Excellent"
In 2007-2008
Energy Generated 6449 MU
Capacity Index 96.671%
Sales 12503.4 Million
Net Profit 7645.10 Million
Performance Rating Very Good
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ORGANISATIONAL STATUS:-
Public Sector SJVN Limited, a joint venture of the Govt. of India and Govt. of Himachal
Pradesh, is a Central Public Sector Undertaking (CPSU) under the Ministry of Power. The
present authorized capital of SJVN is Rs. 4500 crores which is under revision to Rs. 7000
crores. The present installed capacity of SJVN is 1500 MW. The Corporation has achieved
many milestones in construction, operations and investigations activities of its projects
during the last five years.
A Mini Ratna Company
The Corporation has the distinction of being conferred with the much coveted status "Mini
Ratna: Category-I" status by Government of India within only four years of coming into
commercial operations.
Schedule 'A' Company
Meeting the criteria laid down by the Department of Public Enterprises and qualifying the
qualitative and quantitative parameters viz. investment, capital employed, net sales, profits,
employees, and also factors of national importance, complexities of problems faced, level of
technology adopted prospects for expansion and diversification, competitiveness etc., SJVN
has been upgraded as Schedule 'A' PSU.
FUTURE PORTENTS
After successful implementation, commissioning and operations of the country's largest 1500
MW Nathpa Jhakri Hydro Power Station, the Corporation is implementing a number of
hydro power projects in the state of Himachal Pradesh, Uttarakhand and Manipur besides in
neighboring countries viz. Nepal and Bhutan.
With the support and guidance of Ministry of Power, Govt. of India, SJVN is thus emerging
as a rising star in the hydro power sector of the country. For its upcoming projects, the
Company proposes to make an investment of over Rs. 23,000 crore in the next 10 years. The
Company has about 4000 MW capacity projects lined up for commissioning by the year
2020.
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SJVNL bags Excellence Award for Outstanding contribution to Betterment of Society awarded
by Delhi Telgu Academy
SJVNL CMD Honoured with National Achievement Award for Corporate LeadershipShri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred
National Achievement Award by the All India Achievers Foundation AIAF for Corporate
Leadership.
SJVNL CMD Honoured with Leadership Excellence Award for National Development.Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred
Leadership Excellence Award for National Development by Indian Economic Development
and Research Association IEDRA.
SJVNL CMD Honoured with Mother India Award for Udyog Pratibha 2006.Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred Mother
India Award for Udyog Pratibha 2006 by the Indian Organisation for Commerce and Industry
IOCI for outastanding contribution to the Society and Nation.
SJVN bags two Greentech AwardsThe Greentech Foundation, New Delhi has once again adjudged the Environmental
Management practices adopted by SJVNL in its 1500 MW Nathpa Jhakri Hydro Power Station
SJVNL CMD Honoured with Excellence Award 2007Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred
Excellence Award 2007
SJVNL bags Green Tech Gold Award in Hydro Power Sector forPublic Sector Satluj Jal Vidyut Nigam has been awarded the prestigious 9th Annual Green
Tech Environment Excellence GOLD Award 2008
http://sjvn.nic.in/achievement_details.asp?id=17http://sjvn.nic.in/achievement_details.asp?id=16http://sjvn.nic.in/achievement_details.asp?id=15http://sjvn.nic.in/achievement_details.asp?id=14http://sjvn.nic.in/achievement_details.asp?id=13http://sjvn.nic.in/achievement_details.asp?id=12http://sjvn.nic.in/achievement_details.asp?id=12http://sjvn.nic.in/achievement_details.asp?id=13http://sjvn.nic.in/achievement_details.asp?id=14http://sjvn.nic.in/achievement_details.asp?id=15http://sjvn.nic.in/achievement_details.asp?id=16http://sjvn.nic.in/achievement_details.asp?id=17 -
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HIND GAURAV AWARD AND GOLD MEDALShri H.K. Sharma, Chairman & Managing Director, Satluj Ja
l Vidyut Nigam Limited has been awarded Hind Gaurav Award
http://sjvn.nic.in/achievement_details.asp?id=11http://sjvn.nic.in/achievement_details.asp?id=11 -
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SAMPLE SIZE:-
100 employee of different department were questioned in order to collect primary data. It is 15%
employees of SJVNL (New Shimla).
SAMPLE AREA:-
Financial structure
a) Ratio analysisShort term analysis
Long term analysis
b) Comparative study of balance sheet and p&l a/c
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Structure of finance department
FinanceDepartment
Bill-1Section
Bill-2Section
CompilationSection
SalarySection
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BILL-I SECTION
This department deals with the following subjects:-
AMC Telephone bills Vehicle repair & maintenance bills Hospitality/entertainment bills including credit card of directors. Training or seminar Professional subscription / membership fees DBR Medical bills Medical TA bills Hospital bills Imprest
LTC / TA bills Briefcase / newspaper bills All work related to provident fund All work related to pension
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BILL-II SECTION
This department deals with the following subjects:-
Closing of accounts and schedules Legal insurance Income tax returns Service tax returns Consultancy provided by the corporation Contractors / suppliers bills New projects Bank guarantees Monthly cash expenditure reports Weekly cash expenditure reports Quarterly performance reports BEs and Res Balmer lawrie bills Rent Reimbursement of vehicle expenses Advance of govt. Dept. Departmental advances Consultants bills Employees reimbursement bills Other partys bills Feeding of JVs, misc PVs Electricity / water bills
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COMPILATION SECTION
It deals with the following subjects:-
CERC Assets register Fund management Income tax / wealth tax Interest calculation Bank reconciliation Physical verification Sales accounting / MOU Taxation Cash Compilation of accounts
IUT reconciliation Maintenance of bank books and G.I. Feeding of BPVs / JVs etc. Preparation of monthly trial balance & other MIS reports Dealing with various banks HPSEB liaison H.P. secretariat liaison Preparation of cheques of all banks
SALARY SECTION
All works related to HPSEB executives
All works relating to SJVN executives All works relating to HPSEB non-executives
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All works relating to SJVN supervisors and workmen Diary and dispatch
CAPITAL STRUCTURE OF COMPANY
The financial position of SJVN, for the last 3 years, is as under :
( In Crores)
INCOME DETAILS 2010-2011 2009-10 2008-09
SALES 1812.67 1769.74 1759.59
OTHER INCOME 143.15 138.99 269.65
TOTAL INCOME 1955.82 1908.73 2029.24
PBDIT 1758.57 1622.39 1859.87
NET PROFIT 912.13 972.74 1015.32
DIVIDEND (Excluding
Dividend Tax)
330.09 328.20 320.00
SHARE CAPITAL 4136.63 4108.81 4108.81
RESERVES & SURPLUS 3068.89 2528.25 1938.53
Current - Performance (FY: 2010-11)
By the end of 31st March, 2011 a gross energy generation of 7140.205 million units during the FY
2010-11 and a revenue earnings of 1955.82 Crore (Sales 1812.67 Crore + other income
143.15 Crore) during the period.
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NETWORTH OF SJVN
The networth of SJVN for the preceding three years is as under:
Year Networth
( in crores)
2006-07 4925.29
2007-08 5406.40
2008-09 6047.34
2009-10 6653.76
2010-11 7205.52
CAPITAL STRUCTURE AND CREDIT WORTHINESS OF SJVN
The total credit worthiness in the company in equity, reserves/surplus and loan funds as on
31.03.2011 was 8959.44 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
Reserves and Surplus .3068.89 Crore
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Secured Loans 900.13 Crore
Unsecured Loans 853.79 Crore
The company is making profits and paying dividends to the share holders. 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 and as such its
creditworthiness has increased over the period of time after the first venture of the company, the
Nathpa Jhakri HPS came into operation.
The secondary data used in this project is obtained from the annual report of SJVNL.
For analysis of financial statements the following methods have been used:
1) Ratio analysis2) Comparative statements3) Study of cash flow statements
Tools of analysis of financial statements
The tools to carry out financial analysis include:-
Ratio analysis
Comparative statements
Cash flow statements
RATIO ANALYSIS:-
Ratio analysis expresses the relationship between two financial variables taken from financial
statements of an accounting periods in the form of ratio. It is a technique of analysing the
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ANALYSIS OF SHORT TERM FINANCIAL POSITION OF SJVNL
Two type of ratio can be calculated for measuring short term financial position or short term
solvency of the firm.
1) Liquidity ratio2) Current assets movements or efficiency ratio
LIQUIDITY RATIO:-
1) Current ratio:
The current ratio is a financial ratio that measures whether or not a firm has enough resources to payits debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is
expressed as follows:
( rs. in lakhs)
Current Liabilities As on 31/3/2011 As on31/3/2010
Current Liabilities & provisions 132,029 125,409
Current Assets As on 31/3/2011 As on31/3/2010
a) Inventories 2,368 5,867
b) Sundry debtors 26,450 18,929
http://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Financial_ratio -
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c) Cash & Bank Balances 206,378 154,239
d) Short Term Loans & Advances 60,478 64,643
e) Other Current Assets 7,644 5,354
Current Assets 303,318 249,032
Current ratio :-
31-3-2011 = 30,3318/132,029= 2.30
31-3-2010 =249,032/125,409= 1.98
The current ratio for the year 2011 , 2010 is 2.30, 1.98 respectively.
As a conventional rule, a current ratio 2:1 or more considered satisfactory.
But a current ratio 2:1 or more considered acceptable. Thus the current ratio of SJVNL is acceptance.
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2) Quick ratio:-
Quick ratio, expresses a company's ability to repay short-term creditors out of its total cash. The
liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number
of times short-term liabilities are covered by cash. If the value is greater than 1, it means fully
covered.
The formula is the following:
QR = liquid assets / current liabilities
Quick assets = cash & bank balance + other current assets + loans
advances + sundry debtors
Current Liabilities As on 31/3/2011 As on31/3/2010
Current Liabilities & provisions 132,029 125,409
Quick Assets As on 31/3/2011 As on31/3/2010
a) Sundry debtors 26,450 18,929
b) Cash & Bank Balances 206,378 154,239
c) Short Term Loans & Advances 60,478 64,643
d) Other Current Assets 7,644 5,354
Quick Assets 300,950 243,165
Quick ratio:-
31/3/2011 = 300,950/132,029= 2.27
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31/3/2010 = 243,165/125,409= 1.93
Quick ratio 1:1 is considered to represent a satisfactory financial condition.
3) Absolute liquid ratio:-
Absolute liquid ratio = cash &bank balance/ current liabilities
( rs. In lakhs )
As on 31.03.2011 As on 31.03.2010
Cash & Bank Balances 206,378 154,239
Current Liabilities 132,029 125,409
Absolute liquid ratio:-
31.03.2011 = 206,378/132,029= 1.56
31.03.2012 = 154,239/125,409
= 1.22
The absolute ratio for the year 2012, 2010 is 1.56, 1.22 respectively.
The norm for this ratio is 50%. Thus we can see that the absolute liquid ratio of SJVNL in
2011 & 2012 is excellent.
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31/3/2010 = ( 101,747/176,974 )*100= 57.87%
2) Net profit ratio:-Net profit is obtained when operating expenses; interest and taxes are subtracted from the gross
profits. Net profit ratio is measured by dividing net profit after tax by sales.
( Rs. In lakhs )
As on 31.03.2011 As on 31.03.2010
Sales 181,267 176,974
Net profit 91,213 97,274
31/3/2011 = (91,213/181,267)*100= 50.31%
31/3/2010 = (97,274/176,974)*100= 54.96%
These above calculated ratios show the profitability ratio of the SJVNL. There is decrease in
profits from the previous year.
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Last 5years net profits of SJVNL
This figure signifies the steady increase in profits of the SJVN. Although there is decrease in the
profits in 2011 but still the SJVNL profits are good.
In this figure the profits of last 5years are shown i.e. 2007, 2008, 2009, 2010, and 2011.
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Return on investment:-
The term investments may refer to total assets or net assets. The fund employed in net assets is
known as capital employed.
Net assets equal net fixed assets plus currents assets minus current liabilities.
Alternatively, capital employed is equal to net worth plus total debt.
Return on investments = profit before interest and tax/capital employed
Capital employed = fixed assets +current assetscurrent liabilities
( Rs. In lakhs )
As on 31.03.2011 As on 31.03.2010
PBIT 115,620 101,747
Fixed assets 662,059 693,438
Current assets 303,318 249,032
Current liabilities 132,029 125,409
31/3/2011 = 115,620/883,348= 0.13
31/3/2010 = 101,747/817,061= 0.12
The return on investments during 2010 was 0.12 and in 2011 ROI was 0.13.
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ANALYSIS OF LONG TERM FINANCIAL POSITION OR TEST OF SOLVENCY OF
SJVNL
The term solvency refers to the ability of SJVNL to meet its long-term obligations. The term
solvency ratios indicate a firms ability to meet the fixed interest and the cost and repayment
schedules associated with its long term borrowings.
Different types of ratios used for test of solvency are as follows:
1) Debt equity ratio2) Funded debt to total capitalization ratio3) Proprietary ratio4) Solvency ratio5) Fixed assets to net worth ratio6) Ratio of current assets to proprietors funds
1) Debt equity ratio:-Debt equity ratio is also known as external interval equity ratio. It is calculated to measure
the relative claims of outsides and the relationship between the owners (i.e. shareholders)
against the firms assets. This ratio indicates the relationship between external equities and
the internal equities. A higher ratio indicates a risky financial position while a lower ratio
indicates safer financial position.
Debt equity ratio = total debt/net worth
Total debt = secured loan + unsecured loans + current liabilities
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A higher ratio indicates a risky financial position while a lower ratio indicates safer financial
position.
2) Funded debt to total capitalization ratio:-This ratio establishes a link between the long term funds raised from outsider and total long
term funds available in the business.
Funded debt to capitalization ratio =( funded debt/ total
capitalization)*100
(Rs. In lakhs)
As on 31.03.2011 As on 31.03.2010
Secured loans 90,013 105,397
Unsecured loans 85,379 62,791
Shareholders fund 720,552 665,376
funded debt 49,889 65,345
31/3/2011 = (175,392/766,441)*100= 22.8%
31/3/2010 = (168,188/730,721)*100
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= 23.1%
There is no thumb rule for this ratio but it is considered better up to 50% or 55%. The funded
debt to capitalization ratio of SJVNL for the years 2011,2010 is 22.8% & 23.1%.
3) Proprietary ratio or equity ratio:-This ratio establishes the relationship between shareholders fund to total asset of the firm.
The ratio of proprietors fund is an important ratio of determining long term solvency of the
firm.
Equity ratio = (shareholders fund/ total assets)*100
Total asset = fixed assets + current assets
( Rs. In lakhs)
As on 31.03.2011 As on 31.03.2010
Shareholders fund 720,552 665,376
Fixed assets 662,059 693,438
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Current assets 303,318 249,032
31/3/2011 = (720,552/965,377)*100= 74.63%
31/3/2010 = (665,376/942,470)*100= 70.59%
The equity ratio of SJVNL is fluctuating every year. i.e. 74.63%, 70.59%
The liquidity ratio of SJVNL is satisfactory.
4) Solvency ratio:-This ratio indicates the relationship between total liabilities to outsiders total assets of a firm
and can be calculated as:-
Solvency ratio = total liabilities to outsider/ total assets
Total liabilities to outsiders = secured loans + unsecured loans +
current liabilities
(Rs. In lakhs)
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As on 31.03.2011 As on 31.03.2010
Secured loans 90,013 105,397
Unsecured loans 85,379 62,791
Current liabilities 132,029 125,409
Fixed assets 662,059 693,438
Current assets 303,318 249,032
31/3/2011 = 307,421/965,377=0.32
31/3/2010 = 293,597/942,470= 0.31
The solvency ratio for the year 2011, 2010 is 0.32, 0.31 . This is satisfactory.
5) Fixed assets to net worth ratio:-This ratio establishes the relationship between fixed assets and shareholders fund and
indicates the extent to which shareholders funds are sunk into the fixed assets.
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Fixed assets to net worth ratio = (fixed assets (after
depreciation) /shareholders
funds)*100
( Rs. In lakhs)
As on 31.03.2011 As on 31.03.2010
Shareholders fund 720,552 665,376
Fixed assets after depreciation 662,059 639,438
31/3/2011 = (662,059/720,552)*100= 91.88%
31/3/2010 = (639,438/665,376)*100= 96.10%
There is no thumb rule for this ratio. Fixed asset ratio to net worth ratio has increase year by
year.
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6) Ratio of current assets to proprietors fund :-This ratio indicates the extent to which proprietors funds are invested in current assets.
Ratio of current assets to proprietors fund = (current
Assets/shareholders
Fund )*100
( Rs. In lakhs)
As on 31.03.2011 As on 31.03.2010
Shareholders fund 720,552 665,376
Current assets 303,318 249,032
31/3/2011 = (303,318/720,552)*100= 42.09%
31/3/2010 = (249,032/665,376)*100= 37.42%
This ratio shows the satisfactory position of the SJVNL. This indicates the more investments
of funds in current assets.
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GRAPHICAL REPRESENTATION :-
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CONCLUSION:-
Summarizing the above, the following conclusion can be drawn:-
The short term financial position of the company is satisfactory as it seen from the current ratio and
quick ratio. It implies the current liability can be comfortable paid out of the current assets. It also
shows that the company has enough cash and bank balances to meet out contingency that may arise
in future.
The profitability position of the company is very good. The profit earned in the reserve and surplus
so that in future more and more investments can be done in other projects. It is also affects the
shareholder in respect of distribution of profits.
Long term financial position of the company is going to the better day by day as it is seen from the
debt equity ratio which shows that outsiders loans are continuously decreasing as compare to
insiders fund. Large amount of loans has been repaid in last two years. In next 5-10 years the
company has nothing to remain as a loan if this rate of repayment of loan continues. In the near
future the company will have large amount of own funds as compare to outsider liabilities
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SUGGESTIONS
In order to further improvements in profits and to maintain short term liabilities & long term
liabilities financial position, the following suggestions have been made:-
No doubt, SJVNL has good track record of profits as seen from last two years profits & loss account.
The generation, administration and other expenses are increasing thereby the gross profit ratio has
been declined. SJVNL should have make efforts to control the generation, administration & other
expenses so that it will not increase in future.
SJVNL has been paying large amount of interest & finance charges to the different financial
institutions. It has been suggested that SJVNL should restructure their loan plan, so that the
advantages of fluctuating interest rate should have been taken from the present competitive financial
market. The company should try to reconstruct those loans on which higher rate of interest have been
paid till now.
Amount of current liabilities has been continuously increasing which have an adverse effect on the
short term financial position of the company. As seen from the generation process, it has been seen
that not much amount of material is needed to generate energy. Besides, this current liability is
increasing. So that it is suggested, SJVNL should take care of not to increase the amount of current
liabilities in future.
Long term financial position of the SJVNL is satisfactory. To make it better it is suggested that loans
should be paid within next 5-10years, as seen from the last year cash flow statements that the
company is paying large amount of loans. it is suggested that the company should use its own funds
in a better way, so that its long term financial position should be better in use.
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ANNEXURES
NATHPA JHAKRI PROJECT
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HYDRO DAM PROJECT OF SJVNL
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BIBLIOGRAPHY
Annual reports of 2009-10 Annual reports of 2010-11 Annual reports of 2011-12 Memorandum of understanding Detailed project reports Expenditures reportss
Websites:-
www.sjvn.nic.in www.wikipedia.com www.google.com www.valueresearchonline.com www.myiris.com www.amfiindia.com
www.sebiindia.com www.indianfoline.com
Books:-
Financial management by I. M. PANDEY Security analysis and portfolio management Financial management P.S.CHANDRA
http://www.sjvn.nic.in/http://www.sjvn.nic.in/http://www.google.com/http://www.google.com/http://www.valueresearchonline.com/http://www.valueresearchonline.com/http://www.myiris.com/http://www.myiris.com/http://www.amfiindia.com/http://www.amfiindia.com/http://www.sebiindia.com/http://www.sebiindia.com/http://www.indianfoline.com/http://www.indianfoline.com/http://www.indianfoline.com/http://www.sebiindia.com/http://www.amfiindia.com/http://www.myiris.com/http://www.valueresearchonline.com/http://www.google.com/http://www.sjvn.nic.in/ -
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