PROJECT REPORT FINANCIAL ANALYSIS OF TATA POWER LTD.

UNDER THE EXPERT GUIDANCE OF: Dr. ARCHANA SINGH FACULTY DSM, DTU

SUBMITTED BY: 1. 2. 3. 4. 5. PIYUSH GUPTA PRITI PRIYANSHA RASTOGI PUSHPADEEP SHOKEEN RAHUL SHARMA
1

CERTIFIC ATE

This is to certify that PIYUSH GUPTA,PRITI,RAHUL SHARMA, PRIYANSHA RASTOGI, PUSHPADEEP SHOKEEN ; students of Delhi School of Management have completed a project on Financial Analysis of TATA POWER Limited under the guidance of Prof. Archana Singh using financial accounting & accounting standards and have submitted a satisfactory report of the project. The contents of this Project work, in full or in parts, have neither been taken from any other source nor have been submitted to any other Institute or University. We wish them success in the future.

Prof. Archana Singh DSM, DTU

Prof. S.K Garg H.O.D, DSM, DTU

DECLARAT ION

We PIYUSH GUPTA,PRITI,RAHUL SHARMA, PRIYANSHA RASTOGI, PUSHPADEEP SHOKEEN; students of Delhi School of Management would like to state that we have developed a project report on Financial Analysis of TATA POWER Limited under the guidance of Prof. Archana Singh using financial accounting & accounting standards and have submitted a satisfactory report of the project. The contents of this Project work, in full or in parts, have neither been taken from any other source nor have been submitted to any other Institute or University.

PIYUSH GUPTA 2K12/MBA/46 PRITI BHUNKAR 2K12/MBA/47 PRIYANSHA RASTOGI 2K12/MBA/48 PUSHPADEEP SHOKEEN 2K12/MBA/49 RAHUL SHARMA 2K12/MBA/50 BATCH 2012-14 DELHI SCHOOL OF MANAGEMENT DELHI TECHNOLOGICAL UNIVERSITY

ACKNOWLEDGE MENT

It is a great pleasure that we are presenting this project on Financial Analysis of TATA POWER Ltd. We gratefully acknowledge our profound indebtedness towards our esteemed guide Prof. Archana Singh, DSM, DTU for her invaluable guidance, excellent supervision and constant encouragement during the entire duration of the project work. This project would never have been possible without her guidance and supervision. We also express our sincere thanks to Prof. S.K. Garg, Head of Department, Delhi School of Management, DTU for providing us the best possible help. We are also thankful to all the faculty members of Delhi School of Management, Delhi Technological University, Delhi. And last but not the least we are heartily thankful to fellow students and batch mates of Delhi School of Management for their support and encouragement throughout our work.

PIYUSH GUPTA 2K12/MBA/46 PRITI BHUNKAR 2K12/MBA/47 PRIYANSHA RASTOGI 2K12/MBA/48 PUSHPADEEP SHOKEEN 2K12/MBA/49 RAHUL SHARMA 2K12/MBA/50 BATCH 2012-14 DELHI SCHOOL OF MANAGEMENT DELHI TECHNOLOGICAL UNIVERSITY

Contents OBJECTVE OF STUDY EXECUTIVE SUMMARY

CHAPTER 1 - INTRODUCTION

ABOUT TATA POWER INDIAN POWER SECTOR AT A GLANCE Mission: Excellence in POWER Arena BOARD OF DIRECTORS SWOT Analysis 2 - FINANCIAL STATEMENTS Understanding Annual Reports Basis of Preparation of Financial Statemens Balance Sheet of TATA POWER LTD Profit & Loss Account of TATA POWER ltd

CHAPTER

CHAPTER 3 - RATIO ANALYSIS

LIQUIDITY & SOLVENCY RATIOS: CURRENT RATIO QUICK RATIO DEBT EQUITY RATIO LONG TERM DEBT EQUITY RATIO INTEREST COVERAGE RATIO TURNOVER / EFFICIENCY RATIO TOTAL ASSET TURNOVER RATIO CURRENT ASSET TURNOVER RATIO FIXED ASSET TURNOVER RATIO

 PROFITABILITY RATIO BASED ON SALES: GROSS PROFIT RATIO OPERATING PROFIT RATIO NET PROFIT RATIO BASED ON CAPITAL EMPLOYEED RETURN ON CAPITAL EMPLOYEED RETURN ON ASSET

CHAPTER 4 - CASH FLOW STATEMENT CASH FLOW ANALYSIS

CHAPTER 5 - CONCLUSION

OBJECTIVE OF STUDY

The main objective of this study is to carry on brief study on Analysis of three year balance sheet of TATA POWER Ltd. through comparative balance sheet in Comparative Statement through this we are able to get the difference of various assets and liabilities of the TATA POWER Limited. Other objectives of this project are as follows: Comparative study of three year Annual reports.

EXECUTIVE SUMMARY
This project is based on Balance Sheet and Profit & Loss accounts of the T A T A POWER Limited. It is done to find out whether the TATA POWER are improving our capital structure or not. Further, in this Project Chapter 1 includes the Introduction of the sector and Company wherein we told about the Objectives of the study and profile of the TATA POWERs Limited. Chapter 2 includes the Financial Statements and basis of preparation of Financial Report wherein we have discussed the Policy of Accounting and Finance Policy of TATA POWER LTD.. Chapter 3 includes the Ratio Analysis wherein the Ratios of four consecutive years are analyzed. Chapter 4 includes the Cash flow Analysis wherein the Cash flow Statements from 2010-2012 of TATA POWER LTD. are analyzed, throwing light on the inflow and outflow of cash. Chapter 5 represents the conclusion based on the annual report.

CHAPTER 1 INTRODUCTION

Tata Power is Indias largest integrated power company with a significant international presence. From Fuel and Logistics to Generation and Transmission to Distribution and Trading... exploring various renewable sources of energy in India and globally, we now have a significant presence in wind, solar, hydro and geothermal energy space. Our technology leadership is legendary and we have demonstrated successful public-private partnerships in Generation, Transmission and Distribution - "North Delhi Power Limited" with Delhi Vidyut Board for distribution in North Delhi, 'Powerlinks Transmission Ltd.' with Power Grid Corporation of India Ltd. for evacuation of Power from Tala hydro plant in Bhutan to Delhi and 'Maithon Power Ltd.' with Damodar Valley Corporation for a Mega Power Project at Jharkhand. Today, we are poised for multifold growth. We are one of the largest renewable energy players in India and are developing the countrys first 4000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology. Our international presence includes strategic investments in Indonesia through 30% stake in coal mines and a geothermal project; in Singapore through Trust Energy Resources to securitise coal supply and the shipping of coal for its thermal power generation operations; in South Africa through a joint venture called Cennergi to develop projects in South Africa, Botswana and Namibia; in Australia through investments in enhanced geothermal and clean coal technologies and in Bhutan through a hydro project in partnership with The Royal Government of Bhutan. While we have ambitious growth plans we are committed to 'responsible growth'. From focusing on producing clean and green power to investing and implementing ecofriendly technologies; reducing our carbon footprint to joining global initiatives to combat climate change; scouting for clean power sources internationally to driving energy conservation and efficiency; creating sustainable livelihood for communities to green buildings and villages; we are doing all that we can to carry forward our green legacy. We are excited to redefine the contours of Indian 'Power' Sector and committed to 'lighting up lives' for generations to come.

The Indian Power Industry is one of the largest and most important industries in India as it fulfils the energy requirements of various other industries. It is one of the most critical components of infrastructure that affects economic growth and the well-being of our nation. India has the worlds 5th largest electricity generation capacity and it is the 6th largest energy consumer accounting for 3.4% of global energy consumption. Due to the fast-paced growth of the Indian economy, the countrys energy demand has grown at an average of 3.6% p.a. over the past 30 years. In India, power is generated by State utilities, Central utilities and Private players. The share of installed capacity of power available with each of the three sectors can be seen in the pie-chart below:

As per the latest Report of CEA (Central Electricity Authority) i.e. as on 31-03-2011, the Total Installed Capacity of Power in India is 173626.40 MW. Of this, more than 75% of the installed capacity is with the public sector (state and central), the state sector having the largest share of 48%.

Thermal Power: - In India, major proportion of power is generated from thermal sources where the main raw material used is coal. Around 83% of thermal power is generated using coal as a raw material whereas 16% of thermal power is generated with the help of Gas and 1% of thermal power is generated with the help of Oil. Hydro Power: - Hydroelectric power or hydroelectricity is electrical power which is generated through the energy of falling water. India has hydro power generation potential worth 1,50,000 MW, of which only 25 % has been harnessed till date. Nuclear Power: - A Nuclear Power Plant is a thermal power station in which the heat source is one or more nuclear reactors. A nuclear reactor is a device to initiate and control a sustained nuclear chain reaction. In the process, heat is generated which is then used to generate electricity. Renewable Energy Sources: The energy obtained from renewable sources like sun, wind, biomass can be converted into power. Renewable energy sources have great potential to contribute to improving energy security of India and reducing green-house gas emissions. India is among the five largest wind power generators in the world. As seen in the graph below, there is a positive correlation between the GDP Growth rate and the growth in Power Generation. As will be seen in the later part of this Shastra, India is currently facing acute shortage of power. The Indian growth story looks positive which will lead to higher economic growth and more demand for power. In order to sustain the growth in GDP, India needs to add power generation capacity commensurate with this pace.

Plant Load Factor, a critical efficiency parameter in the power industry is a measure of the actual output of a power plant compared to the maximum output it can produce.

The State sector, that has the highest installed capacity is the least efficient. The private sector utilities have clocked good efficiency rates and the Central utilities have managed to achieve competent efficiency rates. Going forward, with private players being encouraged to enter the Power Sector, the state utilities will be required to work on improving their efficiency. Looking at the table below, it can be clearly observed that hydro-power producers like NHPC and SJVN operate at substantially higher profit margins than thermal power producers. This is because thermal power producers are required to spend a lot on Fuel (Coal, Gas, Oil). Looking at the companies with a diversified portfolio of power, NTPC is the largest company (on Net Sales), but Tata Power has registered the highest growth rates in Sales and Net Profit. Among hydro power producers, NHPCs performance has been very good, its Net Profit growing at a CAGR of 28%.

1) Demand-Supply Gap:
2)

India has always been a power-deficient country. The demand for power is huge in India. As seen in the above graph, the supply of power in India has not been able to meet its demand. Under the Governments Power for all by 2012 plan, it has targeted per capita consumption of 1000 kWh by the end of the 11th Five Year Plan (2007-2012) as compared to levels of 734 kWh in 2008-09. In order to provide per capita availability of over 1000 kWh of electricity by year 2012, it is estimated that capacity addition of more than 1,00,000 MW would be required. This shows that huge capacity additions are required at good efficiency rates, indicating that the opportunities available in this sector are huge. 2) Government: The role of the Government in the development of Indian power industry has been very crucial. Governments policies aim at protecting consumer interests and making the sector commercially viable. Government regulates this industry in various ways (Tariff control, Subsidies, environment norms, etc.) due to its linkages to various industries and to the growth of the economy. - Regulatory role of Government: - As far as regulation is concerned, Electricity Act, 2003 is a very important Act as it allowed private sector participation in the generation of power, thus creating competition. It also allowed 100% FDI participation in the power generation, transmission and distribution, thus inducing investments in the power sector. - Government Schemes: - The Government is investing in this industry through various development schemes: o The Rural Electrification Program is an effort to lighten up villages which have faced acute
o o

shortage of Power over the years. Power for All by 2012 plan aims at a per capita consumption of 1000kWh by the end of the 11th Five Year Plan (2007-12). The Accelerated Power Development and Reform Programme (APDRP) programme is being implemented so that the desired level of 15 per cent AT&C (Aggregate Technical and Commercial) loss can be achieved by the end of 11th plan (Currently it is 30%).

- Projects under pipeline: - The Government of India is planning nine Ultra Mega Power Projects (UMPP) of 4 GW each with an estimated individual investment of US$ 4 billion (Rs. 192 billion). Four of these projects are expected to be commissioned between 2011 and 2017. The UMPP is an initiative by the government to collaborate with power generation companies to set up 4,000 MW projects to ease the countrys power deficit situation.

3) Raw Materials: Thermal power segment, which has the largest capacity generation share in the Indian power industry, is dependent on inputs like coal, oil and gas for the generation of power. Coal shortages and the low thermal quality of coal supplies cause disruptions in power generation and result in lower plant load factors. When domestic supply of coal is insufficient, coal is imported. This is unfavourable for power companies as it leads to rise in costs. With these problems associated with thermal power, the Power Companies enter in to Long Term Agreements (LTA) with coal suppliers or acquire coal mines to ensure regular supply of coal. Besides, currently coal players in India are adopting aggressive strategies by acquiring Coal mines outside India. Domestically, a good number of coal mines have received environmental clearances. Such actions will be beneficial for thermal power players. Gas-based power plant face problems because of shortages in gas supply. The discoveries in the Krishna-Godavari Basin are expected to improve gas availability in India which is a big positive for Indias gas-based plants. 4) Transmission and Distribution: Transmission of electricity is defined as the bulk transfer of power over a long distance at a high voltage. Transmission and Distribution is as important as generation. The capacity additions to meet Indias growing power demand should be supplemented by adequate transmission infrastructure. Globally, every dollar invested in generation has an equal amount invested in transmission and distribution. However, in India traditionally every dollar invested in generation has a corresponding half a dollar invested in transmission and distribution. Due to this, transmission capacity in India lags behind the generation capacity. Huge investments are required in Transmission and Distribution if Indias power sector is to meet the rising power demand. 5) FDI Equity Flows in Power Sector: -

In India, 100% FDI is allowed in the Generation, Transmission and Distribution segments of the Power Sector. The FDI inflow in the Power Sector has been on the rise in the last 5 years. This trend is expected to continue in the coming years considering the huge opportunities available in the sector. FDI inflow is important for the power sector because it brings in money and Indias power sector is in huge need of investments. More importantly, FDI also brings in advanced technology making the sector more efficient. Hence, this proves to be a major growth driver for the power sector. 6) Growth Drivers for Power from Nuclear, Hydro and Renewable Energy Sources: With the thermal power generation segment facing the issue of shortages of coal (major raw material), other power generation sources like nuclear, hydro and renewable energy sources will get attention in the coming years.

Nuclear power projects account for 2.75% of Indias total installed capacity which is about 4.77 GW. The Planning Commissions expert committee on an Integrated Energy Policy has suggested in its report that there is a possibility of reaching a nuclear power capacity of 21-29 GW by 2020 and 48-63 GW by 2030. The hydro power segment offers investment opportunities as India is considered to have hydro power generation potential worth 1,50,000 MW; of which only 25% has been harnessed till date Using renewable sources to generate electricity has several advantages like a perennial energy source, potential for lower reliance on imported fossil fuels and lower CO2 emissions. However, at present the major hurdle facing rapid expansion of renewable power is high initial cost as compared to the competing fuels. But taking in to consideration the environmental concerns, this segment receives encouragement from the Government. Its share in the countrys total generation capacity has increased from 1.1% in 2001-02 to 10.63% as on 31st March, 2011 and is expected to increase in the future. These three non-thermal sources of power also offer good investment opportunities. Companies are diversifying their power portfolios to take advantage of opportunities available in hydro power and renewable energy sources. Power Sector is a highly capital-intensive industry with long gestation periods, before the commencement of revenue generation. Since most of projects have a long time frame (4-5 years of construction period and operating period of over 25 years), there are some inherent risks which this sector faces. Availability of Coal: Coal is the mainstay of the power production in India and is expected to remain so in the future. India has limited coal reserves, plus, availability of domestic coal is a challenge on account of various bottlenecks such as capacity expansion of Coal India Limited (the largest coal producing company in the world, coal block allocation, tribal land acquisition, environmental and forest clearances, etc. Transportation of coal is a big concern in itself. Within the country, coal is transported by Indian Railways and in case of imports; coal is to be unloaded at ports. In both cases, India currently faces capacity shortage. Hence, a project developer has to account for and manage its logistics chain in a manner that ensures regular fuel supply which is a big challenge. Dependence on Equipment Suppliers: The power sector is heavily dependent on Equipment suppliers. In fact, equipment shortages have been a significant reason for India missing its capacity addition targets for the 10th five year plan. While the shortage has been primarily in the core components of boilers, turbines and generators, there has been lack of adequate supply of Balance of Plant (BOP) equipment as well. These include coal handling, ashhandling plants, etc. Apart from these, there is shortage of construction equipment as well. Hence, inadequate supply of equipments is a cause of concern for the power companies. Aggregate Commercial and Technical Losses: The Aggregate Technical and Commercial Loss (AT&C) is defined as the power lost due to inefficient transmission and distribution infrastructure. Indias AT&C losses are as high as 30% compared with 510% in the developed markets which means out of every 100 units produced, 30 are lost during transmission and distribution. Technical losses are due to inadequate investments over the years for system improvement works. Commercial losses are mainly due to low metering efficiency, pilferage and theft of power. This is a huge problem for the power sector. Other Roadblocks leading to Demand Supply Gap: The power sector has other concerns like shortage of skilled manpower for construction and commissioning of projects, contractual disputes between project authorities, contractors and their sub-

vendors, delay in readiness of balance of plants by the executing agencies. Difficulties have been experienced by developers in land acquisition, rehabilitation, environmental and forest related issues, inter-state issues, geological surprises (particularly for Hydro projects) and contractual issues. These issues continue to pose challenges to maintain the pace of development of power projects. India has stepped its development agenda and power is an inevitable element of economic growth and development. Growth in the power sector is related to Indias GDP growth rate and hence, in order to sustain the growth of 8-9% in GDP, India needs to continuously add power generation capacity to commensurate with this pace. Although, the Indian power sector is one of the fastest growing sectors in the world and energy availability has increased by around 36% in the past 5 years, the demand for power outstrips its supply. Nearly 60 crore Indians do not have access to electricity. The energy and peaking deficits have been hovering around double digits for the past two years and the condition might worsen in the coming years considering the huge demand of power from Indias rising population and rapid industrialization and urbanization. Hence, there is no slowing down of demand for the Power Sector, thus offering ample scope for rapid capacity expansion. The Government is investing in this industry through various development schemes like Rajeev Gandhi Rural Electrification Program, Power for all by 2012 and Accelerated Power Development and Reform Programme (ARDRP), Ultra Mega Power Projects etc. It has also been is encouraging participation of private players in this Sector. Renewable energy sources are also being encouraged considering the growing environmental concerns. Hence, the future prospects of nuclear power, hydro power and power from renewable energy sources are also good Looking at the above points, the long term future prospects of the Indian Power Sector appear to be Green (Very Good). It is very important that while investing in a company, an investor selects an industry, where the longterm future prospects are bright. We have seen that in the long run the Indian Power sector is expected to have good growth. Also, it is equally important that the company has an excellent financial track record( i.e. Green 10 Year X-Ray) and its long-term future prospects are Green (Very Good). *The 10 YEAR X-RAY facilitates analysis of the financial performance of the company considering the five most important parameters. A 10 Year period will normally encompass an entire business cycle. Analysing the performance over this time frame is essential to understand how a company has fared during the good as well as bad times. The five most important parameters that one needs to look at are Net Sales Growth Rate, EPS Growth Rate, Book Value Per Share (BVPS) Growth Rate, Return on Invested Capital (ROIC) and Debt to Net Profit Ratio. Given below is the MoneyWorks4me assessment for a few Power companies: At MoneyWorks4me we have assigned colour codes to the 10 YEAR X-RAY and Future Prospects of the companies, as Green (Very Good), Orange (Somewhat Good) and Red (Not Good).

While investing, one must always invest in the stocks of a company that operates in an industry with bright long-term prospects. Further, the companys 10 YEAR X-RAY and future prospects should also be Green. In the case of the power sector, though, it is poised for good growth in the future, it remains to be seen whether the above companies can completely take benefit of this growth and reflect it in their performance. Because of the very nature of the power sector (capital intensive+high debt), most of these companies have had muted growth in one or more of their parameters. Hence, investors with some appetite for risk can consider investing in these companies, but only at the right price. (i.e. when the market offers an attractive discount). To find out the right price to invest in these companies, become a member of MoneyWorks4me.com. Disclaimer: This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/ies. The person should use his/her own judgment while taking investment decisions.

Vision: To be the most admired and responsible Integrated Power Company with international footprint, delivering sustainable value to all stakeholder. Mission: We will become the most admired and responsible Power Company delivering sustainable value by:

Operating our assets at benchmark levels Executing projects safely, with predictable benchmark quality, cost and time Growing the Tata Power businesses, be it across the value chain or across geographies, and also in allied or new businesses Driving Organizational Transformation that will make us have the conviction and capabilities to deliver on our strategic intent Achieving our sustainability intent of Leadership with Care, by having leading and best practices on Care for the Environment, Care for the Community, Care for the Customers and Shareholders, and Care for the People

Values: Our Values are SACRED to us

Safety - Safety is a core value over which no business objective can have a higher priority Agility Speed, Responsiveness and being through Collaboration and Empowering Employees Proactive, achieved

Care - Care for Stakeholders - our Environment, Customers & Shareholders both existing and potential, our Community and our People (our employees and partners) Respect -Treat all stakeholders with respect and dignity Ethics - Achieve the most admired standards of Ethics, through Integrity and mutual Trust Diligence - Do everything (set direction, deploy actions, analyze, review, plan and mitigate risks etc) with a thoroughness that delivers quality and Excellence in all areas, and especially in Operations, Execution and Growth

BOARD OF DIRECTORS

Mr Ratan N Tata (Chairman) Mr Tata has been on the Board since 1989. Mr Tata holds a B.Sc. (Architecture) degree with Structural Engineering from Cornell University, USA and has completed the Advanced Management Programme at Harvard University, USA. He is an eminent industrialist with wide business experience across a variety of industries. He joined the Tata group in 1962 and he is the Chairman of Tata Sons Ltd., the apex body of the Tata group and other major Tata Companies. Mr Ramabadran Gopalakrishnan Mr Gopalakrishnan is a graduate in Physics from Calcutta University and an Engineer from IIT, Kharagpur. He is the Executive Director of Tata Sons Ltd., Chairman of Rallis India Ltd., Vice Chairman of Tata Chemicals Ltd. and a Director of several other companies like Tata Motors Ltd., ICI India Ltd., Castrol India Ltd. etc. Prior to joining the Tata Group in 1998, he was with Hindustan Lever for 31 years, where he rose from being a Management Trainee to being Vice Chairman of Hindustan Lever Limited. Dr Homiar S Vachha Dr Vachha has a post-graduate degree and a doctorate in Economics from the University of Bombay (Gold medalist in Industrial Economics). He was the General Manager of ICICI Limited in a career spanning over 25 years. He was in charge of Market Research and Industry Studies Department as also in charge of the Economics Department. He was the ICICI nominee director on the Board of several large companies. He was appointed as Nominee Director on the Board of the erstwhile The Andhra Valley Power Supply Company Limited in 1993. On ceasing to be such nominee director, he was re-appointed on the Board of that Company and continued as Director till its amalgamation with the Company in 2000. He has been subsequently appointed on the Board of the Company in 2001. He is also on the board of other companies. Mr Nawshir H Mirza Mr Mirza is a Fellow of the Institute of Chartered Accountants of India and was a Senior Partner of Ernst & Young. He is an Advisor to Jardine Matheson & Co. Ltd., Hong Kong. He is an independent Director on the Boards of several companies. Mr Deepak M Satwalekar Mr Satwalekar was the Managing Director and CEO of HDFC Standard Life Insurance Company Limited since November 2000 and prior to this, he was the Managing Director of HDFC Limited from 1993 - 2000. Mr Satwalekar obtained a Bachelors Degree in Technology from the Indian Institute of Technology, Bombay and a Masters Degree in Business Administration from The American University, Washington DC. He has considerable experience in the fields of finance, infrastructure and corporate governance. Mr Piyush G Mankad (IAS Retired) Mr Mankad is a retired civil servant with a distinguished career of over 40 years in the prestigious Indian Administration Service, which he joined in 1964, topping his batch. He was educated at Delhi University and later at Cambridge, UK, where he obtained a Post Graduate Diploma in Development Studies, with distinction. Some of the important positions that he has held include Counsellor (Economic) in the Indian Embassy, Tokyo; Controller of Capital Issues, Ministry of Finance; Finance Secretary, Government of India and Executive Director for India and four other countries and Board Member, Asian Development Bank, Manila, which was his last assignment till July 2004. He is a member of the Board of several companies including Tata International Limited, Tata Elxsi Limited, Kingfisher Airlines Limited and Max India Limited.

Mr Ashok K Basu Mr Basu is the former Secretary - Steel, Secretary - Power and Chairman of Central Electricity Regulatory Commission. Mr Basu was a key member in the formulation and clearance of the Electricity Act, 2003, both as Secretary (Power) and later as Chairman (CERC), and has a very deep knowledge of the power business in India. Mr Basu is also on the Boards of two Tata Group Companies - Tata Metaliks Limited and The Tinplate Company Of India Limited and is also Member (Industry and Infrastructure) of the West Bengal Planning Commission. Mr Thomas Mathew T (LIC Nominee) Mr Mathew is a post-graduate in Economics and holds a Bachelor's Degree in Law. He also holds a post-graduate diploma in Management from the International Institute of Advanced Marketing. He is the Managing Director of LIC since March 2006. He is the Nominee Director of LIC on the Boards of Larsen & Toubro Ltd. and Corporation Bank. He is also Chairman of LIC Mutual Fund Trustee Co. Pvt. Ltd., and Director on the Board of LIC (Lanka) Ltd., Colombo. Mr Cyrus P Mistry (Director) Mr Mistry is a graduate of Civil Engineering from Imperial College, UK (1990) and has a M.Sc. in Management from London Business School (1997). He joined the Board of Shapoorji Pallonji & Co. Ltd as Director in 1991 and was appointed the Managing Director, Shapoorji Pallonji Group in 1994. Mr Mistry was associated with the Company as Director from 1996 to 2006 He joined the Board of Tata Sons Limited in 2006 and was appointed Deputy Chairman in November 2011. He is also on the Board of Afcons Infrastructure Ltd., Construction Federation of India, Imperial College Advisory Board, on the Board of Governors of NICMAR, and is a Fellow of the Institute of Civil Engineers. Mr Anil Sardana (Managing Director) Mr Sardana was the Managing Director of Tata Teleservices Limited for over 3 years and additionally on Tata Teleservices (Maharashtra) Limited for the last 7 months. An Electrical Engineer from Delhi College of Engineering, a Cost Accountant (ICWAI) and a Post Graduate Diploma in Management from Delhi, Mr Sardana brings with him over three decades of proven expertise in the power sector and has worked with companies like NDPL (a subsidiary of Tata Power), NTPC and BSES. Earlier, Mr Sardana served as the Executive Director (Business Development & Strategy) for Tata Power from 1st March 2007 to 3rd August 2007 and continued to be on its Board till 1st July 2008. Mr Sowmyan Ramakrishnan (Executive Director) Mr Ramakrishnan holds a B.Tech degree from IIT Madras and also has a Management Degree from IIM, Ahmedabad. He joined the Tata Administrative Services in 1972 and during his long tenure, handled a multitude of national as well as international projects. He is on the Board of several group companies. Mr Sankaranarayanan Padmanabhan (Executive Director) Mr Padmanabhan is a gold medallist in Electronics and Communication Engineering from PSG College of Technology, Coimbatore, Tamil Nadu as well as a Glaxo gold medallist for the Marketing Stream from the Indian Institute of Management, Bangalore. Prior to joining the Company, he was the Executive Director and Head Global Human Resources of Tata Consultancy Services Limited. He has rich experience in large-scale project build-up and delivery, and is highly acclaimed for global sourcing and value creation in operational efficiencies.

17

SWOT ANALYSIS

The energy sector has witnessed mixed news during the current fiscal so far. While crude prices firmed up in
the global market, the government's freeze on prices of petro-products affected margins of oil companies in 1QFY05. However, the government took a series of steps starting mid-June including excise duty reduction and price increases. This was followed by another series of duty cuts (this time excise as well as custom duties). Given this backdrop, we feel that there is a compelling reason for a SWOT analysis on the oil sector at the current juncture. Strengths

Consumption growth (MMT) Diesel (%) change Petrol (%) change LPG (%) change FY01 FY02 38 36.5 -3.9% 6.6 7 6.1% 7 7.7 10.0% FY03 FY04 36.6 37.3 0.3% 1.9% 7.6 7.9 8.6% 3.9% 8.4 9.3 9.1% 10.7%

Developing

economy: Historically, demand for

petroleum products has traced the economic growth of the country. With GDP expected to grow at near 7% in the long-term, the energy sector would benefit from the same, going forward. To put things in perspective, diesel sales grew by nearly 12% (which constitutes 40% of the entire petro-products basket), petrol sales by 9% and a

double-digit growth in LPG (liquefied petroleum gas) in 1QFY05. While this rate is not likely to sustain, we expect the industry to witness a 4% growth in the entire product basket in FY05 and beyond.

Government decisions: The recent price increases and also the decision to allow oil companies to

increase prices within a band of 10% augurs well for the industry. This step is likely to reduce government interference and provide some autonomy to oil companies when it comes to increasing petrol and diesel prices in order to protect margins. Further, the duty cuts are also likely to result in reduced under-recoveries by way of subsidies on LPG and kerosene.

Customs duties Excise duty old (%) new (%) Petrol Diesel Kerosene 26 11 16 23 8 12

Excise duties Customs duty old (%) new (%) crude oil Petrol diesel LPG Kerosene 10 20 20 10 10 10 15 15 5 5

Weakness: Crude prices: Nearly 70% of India's [ Images ] crude requirements are fulfilled by imports and this figure is likely to increase going forward. Crude prices have breached the $45 barrier again and are likely to remain at around $40 per barrel range. As per IEA, India is one of the most inefficient countries among developing nations as far as energy usage is concerned. Such high crude prices are likely to impact margins of oil marketing companies. Given the political implications, retail prices may continue to lag the rise in input cost. Lack of freedom: Although the government has decided to provide autonomy to oil companies to increase petrol and diesel prices within a 10% band, other products such as LPG and kerosene continue to remain under the government controlled price mechanism. As per the current estimates, the subsidies on LPG amount to Rs 90 per cylinder after factoring in duty cuts and that on kerosene is over Rs 6 per litre. While the government has managed to reduce its share in subsidies, select oil companies are being forced to absorb the losses. Government: Hands-off

Year (Rs) 2002-03 2003-04 2004-05

Opportunities:

Subsidies LPG/cylinder Kerosene/litre 67.75 45.17 22.85 2.45 1.63 0.81

Equity Oil: Major oil marketing companies are now venturing into upstream exploration and production activities so as to secure crude supply. To put things in perspective, IOC and OIL India are likely to jointly bid for oil fields aboard. At the

Supply as a (%) age of allocation

Supply Power Others* 52.0% 51.0%

same time, ONGC's [ Get Quote ] wholly owned subsidiary, ONGC Videsh [ Images ] (OVL) has acquired stakes in over 9 countries in its quest to attain the 20 MMT (million metric tonnes) by 2020. This backward integration is an opportunity for IOC to secure at least 25% of its crude oil requirements for the refineries. Natural Gas: Natural gas has the potential to be the fuel of the future with demand outpacing supply by more than two times. Such high scarcity of natural gas provides a big opportunity for oil companies.

Fertilizer 65.0%

The below mentioned table indicates the allocation to the various core sectors and the shortage faced by them, thereby giving an idea of the potential for growth. Although Petronet LNG [ Get Quote ] has now started importing natural gas, the future holds promise as Reliance Industries' [ Get Quote ] Krishna Godavari Basin goes into commercial production in FY06 and Shell commences its terminal at Hazira. More exploration activities are in the pipeline and this could reduce the country's dependence on crude in the long term. Threats: Competition: Until FY04, oil-marketing companies had complete control over the downstream marketing business while private sector players were restricted to only refining. However, with entry of private players such as Reliance, Essar Oil [ Get Quote ] and Shell (in the waiting), the sector is likely to witness increased competition going forward. The oil PSUs had hitherto developed a fortnightly pricing mechanism, which is likely to discontinue. The price of petrol and diesel is artificially kept high so as to cross-subsidize LPG and kerosene. Since private players will not be bound to provide for these subsidies, PSU marketing players are likely to suffer from lower throughput per outlet. Continuing government interference: During the first six months of the current fiscal year, the oil marketing companies were refrained from increasing product prices due to political reasons. This affected margins of downstream players. Going forward, if the government interference continues, oil-marketing companies will be at a disadvantage. Although we believe the industry is likely to witness increased competition, the initial retail rush by private sector players has slowed down. PSU marketing companies have already stepped up their expansion plans and to that extent, have created significant entry barriers for private players. Although throughput per outlet (sales per outlet) is likely to decline in the future, we believe that any substantial entry of the private players would indirectly benefit the PSUs, as the government's pricing policy will not hold much water and the market forces would determine pricing

CHAPTER 2 - FINANCIAL STATEMENTS

The financial statements have been prepared in compliance with the requirements of the

Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India. The Groups consolidated financial statements have been prepared in compliance with the standard AS 21 on Consolidation of Accounts and presented in a separate section of the Annual Report. The Management Discussion and Analysis on Financial performance relates to consolidated Financial statements of the Company and its subsidiaries. 2.1 UNDERSTANDING ANNUAL REPORTS

Investment capital is always moving between different markets, industries, and nations. Thegoal of accounting information is to provide economic decision makers with useful information, according to Williams, Haka, Bettner, and Carcello (2006, p. 670). Users of financial statements determine market and financial trends within a company and in the external business environment through the use of financial statements. Different users use financial statements differently and address different needs, such as data providing investors on whether they should buy or sell certain companies stocks. In the examination of HCLT annual reports for 2005 to 2009, the researcher needs to use general tools of analysis, such as ratios, financial leverage, examine the cost of capital and other financial incentives for the company. Financial analysis can be classified into four categories: 1. External Analysis: It is conducted by those persons who do not have access to the detailed record of the enterprise and therefore have to depend on published accounts and directors and auditors reports. Such type of analysis is performed by investors, government agencies and research scholars. 2. Internal Analysis: It is conducted by the management for the reason that the management wishes to know the financial position and operational efficiency of the organization. The important feature of this analysis is that as the management has access to all information relating to the organization so the analysis is more detailed, extensive and correct. 3. Horizontal Analysis: This analysis is made to review and analyse financial statements for a number of years and are, therefore, based on financial data taken for those years. It is time series analysis. It is useful for long-term trend analysis and planning. 4. Vertical Analysis: This analysis is made to review and analyse the financial statements of one year only. Such analysis is called Static analysis as it is frequently used for referring to ratios developed for one date or for one accounting period. Such an analysis is useful in comparing the performance of several companies of the same type or divisions or departments of one enterprise.

20

Techniques A financial analyst can adopt the following tools and techniques for analysis of the financial statements: 1. Comparative Financial Statements: These are statements in which figures for two or more periods are placed side by side along with change in figures in absolute and percentage terms to facilitate comparison. Both profit and loss account and balance sheet are prepared in the form of comparative financial statements. 2. Common-Size Financial Statement: These statements express figures of a financial statement and percentage of a common base. In the profit and loss account the sale figure is assumed to be 100 and all figures are expressed as a percentage of sales. Similarly the balance sheet the total of assets or liabilities is taken as 100 and all the figures are expressed as percentage of total. 3. Trend Percentages: They are immensely helpful in making comparative study of the financial statements for several years. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. A year, usually the earlier year is taken as base year. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated. 4. Ratio Analysis: This expresses the relationship between two accounting figures taken from financial statements of an accounting period in the form of a ratio. 5. Funds Flow Statement: They show changes in working capital position. It shows the source and uses of the working capital. 6. Cash Flow Statement: They show changes in cash position from one accounting period to another. It defines the sources from which cash was received and the purpose for which it was used. Limitations: Analysis of financial statements helps the interested parties to ascertain the strength and weakness of the enterprise, but at the same time it suffers from certain limitations. Since financial analysis is based on Financial Statements thus the limitations of Financial Statements are carried on to Financial Analysis, thus limitations of financial analysis is same as financial statements.

21

2.2

Basis of Preparation of Financial Statements

The Financial Statements are prepared under historical cost convention and fair valuation under scheme approved by the High Court, in accordance with the generally accepted accounting principles (GAAP) in India and provisions of the Companies Act, 1956 read with the Companies (Accounting Standards) Rules, 2006 (Accounting Standard Rules) as well as applicable pronouncements of the Institute of Chartered Accountants of India (the ICAI). A) Depreciation/ Amortisation Policy (i) Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 except in case of the following assets which are depreciated as given below. (a) Telecom Electronic Equipments - 18 years (b) Furniture, Fixtures and Office Equipments - 10 years (c) Customer Premises Equipments - 3 years (d) Vehicles - 5 years (e) Ducts and Cables - 18 years (ii) Leasehold Land is depreciated over the period of the lease term. (iii) Intangible assets, namely Telecom Licenses and Brand Licence are amortised equally over the period of Licenses. IRC and Software are amortised from the date of acquisition or commencement of commercial services, whichever is later. The life of amortisation of the intangible assets are as follows. (a) Telecom Licenses - 12.5 to 20 years (b) Brand License - 10 years (c) Indefeasible Right of Connectivity - 15, 20 years (d) Software - 5 years (iv) Depreciation on additions is calculated pro rata from the following month of addition.

B) Inventories of Stores and Spares Inventories of stores and spares are accounted for at cost, determined on weighted average basis or net realisable value, whichever is less.
22

23

25

CHAPTER 3 - RATIO ANALYSIS

Companies use calculations between different sets of data on the annual report to determine the short-term financial health and long-term financial health of the firm. Ratios also provide the changes in a company caused by internal and external factors often not displayed in individual financial statement information, such as the cost of goods sold. A ratio is a simple mathematical expression of the relationship of one item to another. ADVANTAGES: Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company. The advantages of ratio analysis can be summarized as follows: Ratios facilitate conducting trend analysis, which is important for decision making and forecasting. Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and solvency of a firm. Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons. The comparison of actual ratios with base year ratios or standard ratios helps the management analyze the financial performance of the firm. LIMITATIONS: Ratio analysis has its limitations. These limitations are described below: A ratio in isolation is of little help. It should be compared with the base year ratio or standard ratio, the computation of which is difficult as it involves the selection of a base year and the determination of standards. Inter-firm comparison may not be useful unless the firms compared are of the same size and age, and employ similar production methods and accounting practices. Even within a company, comparisons can be distorted by changes in the price level. Ratios provide only quantitative information, not qualitative information. Ratios are calculated on the basis of past financial statements. They do not indicate Future trends and they do not consider economic conditions CONCLUSION: Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company. Similarly, decisions affecting the amount and ratio of debt or equity used have an effect on the financial structure and overall cost of capital of a company. Understanding the inter-relationships among the various ratios, such as turnover ratios and leverage and profitability ratios, helps managers invest in areas where the risk adjusted return is maximum. In spite of its limitations, ratio analysis can provide useful and reliable information if relevant data is used for analysis.
26

RATIO ANALYSIS

LIQUIDITY & SOLVENCY RATIOS: 1. CURRENT RATIO:

a. Current Ratio:- This ratio explains the relationship between current assets and current liabilities of a business.
Current ratio=current assets/current liabilities

Current Assets:-Current assets includes those assets which can be converted into cash with in a years time. Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment + Debtors(Debtors Provision) + Stock(Stock of Finished Goods + Stock of Raw Material + Work in Progress) + Prepaid Expenses. Current Liabilities :- Current liabilities include those liabilities which are repayable in a years time. Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation + Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable with in a Year. Significance :- According to accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio. It means that current assets of a business should, at least , be twice of its current liabilities. The higher ratio indicates the better liquidity position, the firm will be able to pay its current liabilities more easily. If the ratio is less than 2:1, it indicate lack of liquidity and shortage of working capital. The biggest drawback of the current ratio is that it is susceptible to window dressing. This ratio can be improved by an equal decrease in both current assets and current liabilities.
Also known as liquidity ratio, cash asset ratio and cash ratio.

For FY 2011-12: Current assets:5026.59Cr Current liabilities:3797.79Cr Current ratio:1.323 For FY 2010-11: Current assets:6012.71Cr Current liabilities:2760.74Cr Current ratio:2.177 For FY 2009-10: Current assets:5954.26Cr Current liabilities:2168.27Cr Current ratio:2.746

2. QUICK RATIO:

Quick Ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Even the quick ratio has been decreasing therefore companys position is not as good as it was in 2009.

Quick ratio indicates whether the firm is in a position to pay its current liabilities with in a month or immediately. Liquid Assets means those assets, which will yield cash very shortly. Liquid Assets = Current Assets Stock Prepaid Expenses Significance :- An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. This ratio is a better test of short-term financial position of the company.
Quick ratio=(current assets-inventories)/current liabilities For FY 2011-12 Current assets:5026.59Cr Inventories:854.47Cr Current liabilities:3797.79Cr Quick Ratio:1.098 For FY 2010-11 Current assets:6012.71Cr Inventories:629.57cr Current liabilities:2760.74Cr Quick Ratio:1.9498 For FY 2009-10 Current assets:5954.26Cr Inventories:589.36cr Current liabilities:2168.27Cr Quick Ratio:2.4742

LEVERAGE OR CAPITAL STRUCTURE RATIO (B) Leverage or Capital Structure Ratio :- This ratio disclose the firms ability to meet the interest costs regularly and Long term indebtedness at maturity. These ratio include the following ratios : a. Debt Equity Ratio:- This ratio can be expressed in two ways: First Approach : According to this approach, this ratio expresses the relationship between long term debts and shareholders fund. Long Term Loans:- These refer to long term liabilities which mature after one year. These include Debentures, Mortgage Loan, Bank Loan, Loan from Financial institutions and Public Deposits etc. Shareholders Funds :- These include Equity Share Capital, Preference Share Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit & Loss Account. Second Approach : According to this approach the ratio is calculated as follows:Debt equity ratio is calculated for using second approach. Significance :- This Ratio is calculated to assess the ability of the firm to meet its long term liabilities. Generally, debt equity ratio of is considered safe. If the debt equity ratio is more than that, it shows a rather risky financial position from the long-term point of view, as it indicates that more and more funds invested in the business are provided by long-term lenders. The lower this ratio, the better it is for long-term lenders because they are more secure in that case. Lower than 2:1 debt equity ratio provides sufficient protection to long-term lenders.

Debt Equity ratio: long term debt/equity

For FY 2011-12: long term debt:2812.6Cr equity:10762.56Cr Debt Equity ratio:0.2613 For FY 2010-11: long term debt:2378.95Cr equity:10721.97Cr Debt Equity ratio :0.221 For FY 2009-10: long term debt:2461.71Cr equity:9998.75Cr Debt Equity ratio:0.246

Debt Ratio
Debt ratio=total debt/(debt+equity)

For FY 2011-12: Total debt:3590.96Cr Equity:10762.56Cr Debt ratio=0.250 For FY 2010-11: Total debt:4614.32Cr Equity:10721.97Cr Debt ratio=0.300 For FY 2009-10: Total debt:4228.34Cr Equity:9998.75Cr Debt ratio=0.297

. INTEREST COVERAGE: The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its ability to

meet interest expenses may be questionable, which is the current scenario from 2010 onwards.

Interest coverage ratio

Interst coverage ratio=EBIT/Interest For FY 2011-12 EBIT:2197.74Cr Interest:482.79Cr Interst coverage ratio:4.552 For FY 2010-11 EBIT:1571.62Cr Interest:381.64Cr Interst coverage ratio:4.118 For FY 2009-10 EBIT:1682.25 Interest:401.65Cr Interst coverage ratio:4.188

PROFITABILITY RATIO: BASED ON SALES: 1. GROSS PROFIT MARGIN RATIO:

It is a financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. Higher the margin better it is, but the companys Gross profit margin has been decreasing rapidly since 2010 which is affecting the health of the company.

Gross profit ratio=gross profit/sales*100

For FY 2011-12: Gross profit:7617.79Cr Sales:8495.84Cr Gross profit ratio:89.66 For FY 2010-11: Gross profit:6296.49Cr Sales:6918.48Cr Gross profit ratio:91.00 For FY 2009-10: Gross profit:6605.39Cr Sales:7098.27Cr Gross profit ratio:93.05

2. OPERATING PROFIT MARGIN: Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Higher the margin, better it is for company but TATA

POWER LTD. margin has been decreasing every year. Operating Profit ratio=Earning before interest and tax(EBIT)/sales*100 For FY 2011-12: EBIT:2197.74Cr Sales:8495.84Cr Operating profit Ratio:25.86 For FY 2010-11: EBIT:1571.62Cr Sales:6918.48Cr Operating profit Ratio:22.71 For FY 2009-10: EBIT:1682.25Cr Sales:7098.27Cr Operating profit Ratio:23.69

3. NET PROFIT MARGIN: It tells about how effective company in controlling cost is. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss. In 2011, T A T A P O W E R L T D . suffered losses as its net profit margin is negative. Net profit ratio=Profit after tax/Sales*100

For FY 2011-12: PAT:1169.73Cr Sales:8495.84Cr Net Profit Ratio:13.76 For FY 2010-11: PAT:941.49Cr Sales:6918.48Cr Net Profit Ratio:13.60 For FY 2009-10: PAT:938.76Cr Sales:7098.27Cr Net Profit Ratio:13.16
34

 BASED ON CAPITAL EMPLOYED: 1. ROCE ( RETURN ON CAPITAL EMPOYED):

It is similar to Return on Assets (ROA), but takes into account sources of financing. Net Operating Profit After Tax (NOPAT) is equal to EBIT * (1 - tax) -- the return on the capital employed should be measured in after tax terms.

Operating income
In the numerator we have Net Operating Profit After Tax, i.e. operating profit or EBIT less tax less nonoperating items.

Capital employed
In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for a business to function. It is commonly represented as total assets less current liabilities (or fixed assets plus working capital). ROCE uses the reported (period end) capital numbers; if one instead uses the average of the opening and closing capital for the period, one obtains Return on Average Capital Employed(ROACE).

Application
ROCE is used to prove the value the business gains from its assets and liabilities. A business which owns lots of land but has little profit will have a smaller ROCE to a business which owns little land but makes the same profit. It basically can be used to show how much a business is gaining for its assets, or how much it is losing for its liabilities.

Drawbacks of ROCE
The main drawback of ROCE is that it measures return against the book value of assets in the business. As these are depreciated the ROCE will increase even though cash flow has remained the same. Thus, older businesses with depreciated assets will tend to have higher ROCE than newer, possibly better businesses. In addition, while cash flow is affected by inflation, the book value of assets is not. Consequently revenues increase with inflation while capital employed generally does not (as the book value of assets is not affected by inflation).

Return on capital employed:

FY 2011-12:10% FY 2010-11:10% FY 2009-10:11%

2. RETURN ON ASSET: The return on assets (ROA) ratio illustrates how well management is employing the company's total assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base

Return on total asset(rota)

ROTA=(EBIT-Tax)/Total asset For FY 2011-12: EBIT:2197.74Cr Tax:513.14Cr Total Assets:25117.71Cr ROTA:0.067 For FY 2010-11: EBIT:1571.62Cr Tax:170.33Cr Total Assets:21205.30 ROTA:0.066 For FY 2009-10: EBIT:1682.25Cr Tax:320.50Cr Total Assets:16703.56Cr ROTA:0.081

Fixed asset turnover ratio:

The Fixed Assets Turnover Ratio measures how productively the firm is managing its Fixed Assets to generate Sales. This ratio is calculated by dividing Sales by Net Fixed Assets. When comparing Fixed Assets Turnover Ratios of different firms it is important to keep in mind that the values for Net Fixed Assets reported on the firms' Balance Sheets are book values which can be very different from market values.

Fixed asset turnover ratio:

Fixed asset turnover ratio=Net sales/fixed assets For FY 2011-12 Net sales:8495.84Cr Fixed assets:20091.12Cr Fixed asset turnover ratio:0.422 For FY 2010-11 Net sales:6918.48Cr Fixed assets:18437.70Cr Fixed asset turnover ratio:0.375 For FY 2009-10 Net sales:7698.27Cr Fixed assets:12917.57Cr Fixed asset turnover ratio:0.595

Current assets turnover ratio: It is calculated as: net sales current assets

Components: Net sales include sales after returns, if any, both cash as well as credit. Current assets include the assets like inventories, sundry debtors, bills receivables, cash in hand or at bank, marketable securities, prepaid expenses and short term loans and advances. Indications/precautions: A high current assets turnover ratio indicates the capability of the organisation to achieve maximum sales with the maximum investment in current assets. It indicates that the current assets are turned over in the form of sales more number of times. As such, higher the current assets turnover ratio, better will be the situation.

Current asset turnover ratio:

Current asset turnover ratio=net sales/current assets For FY 2011-12: Net sales:8495.84Cr Current assets:5026.59Cr Current asset turnover ratio:1.690 For FY 2010-11: Net sales:6918.48Cr Current assets:2767.60Cr Current asset turnover ratio:2.499 For FY 2009-10: Net sales:7698.27Cr Current assets:5954.26Cr Current asset turnover ratio:1.292

TOTAL ASSET TURNOVER RATIO:

The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. This ratio considers all assets, current and fixed. Those assets include fixed assets, like plant and equipment, as well as inventory, accounts receivable, as well as any other current assets. The calculation for the total asset turnover ratio is:Net Sales/Total Assets

Interpretation: The lower the total asset turnover ratio (the lower the # Times), as compared to historical data for the firm and industry data, the more sluggish the firm's sales. This may indicate a problem with one or more of the asset categories composing total assets - inventory, receivables, or fixed assets. The small business owner should analyze the various asset classes to determine in which current or fixed asset the problem lies. The problem could be in more than one area of current or fixed assets. Since current assets also include the liquidity ratios, such as the current and quick ratios, a problem with the total asset turnover ratio could also be traced back to these ratios. Many business problems can be traced back to inventory but certainly not all. The firm could be holding obsolete inventory and not selling inventory fast enough. With regard to accounts receivable, the firm's collection period could be too long and credit accounts may be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle instead of being used to their full capacity. All of these issues could lower the total asset turnover ratio. What if the total asset turnover is excellent as compared to historical data for the firm and to industry data? That means your firm is utilizing all its assets - its asset base - efficiently to generate sales and that is a very good thing.

For FY 2011-12: Net Sales:8495.84Cr Total Assets:25117.71Cr Total asset turnover ratio:0.338 For FY 2011-11: Net Sales:6918.48Cr Total Assets:21205.30Cr Total asset turnover ratio:0.326 For FY 2009-10: Net Sales:7698.27Cr Total Assets:16703.56Cr Total asset turnover ratio:0.424