DECLARATION

I hereby declare that the following documented Summer Training Project Report

titled Working Capital Management at BHEL, Jhansi, is an authentic work done by

me. This summer training project was undertaken in the partial fulfillment of the

Master of Business Administration (full time) Programme of Dr. Hari Singh Gour

Central University, Sagar Madhya Pradesh.

KARTIK GUPTA

.
1
Page

1
 CERTIFICATE OF SUPERVISOR

This is to certify that the summer Training Project Report Working Capital

Management In BHEL, Jhansi submitted in partial fulfillment for the award of the

degree of Master of Business Administration in Financial Management from Dr. Hari

Singh Gour (a central) University, Sagar, Madhya Pradesh was carried out by Kartik

Gupta under the guidance of Professor Yashwant Singh Thakur head of the

department. This has not been submitted to any other University for the award of any

degree/diploma/certificate.

Date./......./.........

Place.......................

Signature of Guide

Dr. Yashwant Singh Thakur

Head of the department

2
Page

2
 ACKNOWLEDGEMENT

We take this opportunity to express our heartfelt gratitude to all people who have

extended their assistance and provided us information during the tenure of project and

we are greatly indebted to them for guiding and supporting us throughout the project

sparing some of their valuable time.

We would like to express our deep and sincere gratitude to our project guide Dr.

Yashwant Singh Thakur (Head of the Department) for the valuable advice, precious

time and support that he offered to us and his effort to help us work independently.

Last but not the least we would like to thank all the respondents for giving their

precious time and relevant information we required, without which this project would

have been different story.

KARTIK GUPTA
3
Page

3
 PREFACE

Management studies are expected to be not only theoretical but also practical to equip

the students coming out of any Managerial Educational Institution after having been

mounded and shaped with the Knowledge of various Managerial Function would be

able contributing their respective share in the achievement of both organization and

individual motive. This would enrich not only the individuals but also the whole

humanity.

Finance is regarded as the lifeblood of a business enterprise. This is because, in

the modern money market economy, finance is one of the basic foundations of all

kinds of economic activities. It is the master key, which provides access to all the

sources being employed in manufacturing and merchandising activities. Hence

effective management of every business enterprises is closely linked with efficient

management of its finances.

Thus Financial Management is mainly concerned with the proper management of

funds. The financial manager must, therefore realize that the action have far reaching

consequence for the firms because these action will influences the size, profitability,

growth, risk, survival of the firms. Therefore, he must have a clear understanding and

a strong grasp of the nature and scope of finance functions.

Working on a relevant and particular project is a part and parcel of any specialized

courses of higher education. To fulfill this requirement as a student of M.B.A., I have

chosen the project on Working Capital Management at BHEL, Jhansi.

4
Page

4
 TABLES OF CONTENTS

S.No CHAPTERS PAGE

NO.

1 EXECUTIVE SUMMARY

2 COMPANY OVERVIEW

3 INTRODUCTION TO TOPIC

4 RESEARCH METHODOLOGY

5 DATA ANALYSIS AND INTERPRETATION

6 FINDINGS AND SUGGESTION

7 CONCLUSION
5
Page

5
 CHAPTER 1

EXECUTIVE SUMMARY
6
Page

6
 EXECUTIVE SUMMARY
7
Page

7
 CHAPTER 1

COMPANY OVERVIEW
8
Page

8
 INTRODUCTION

In the post independence era when India was moving towards Industrialization, the

major thrust of the Government was in the core sector i.e.; the public sector. With this

objective, Heavy Electrical (I) Limited was set up in Bhopal in August 1956 with a

view to reach self sufficiency in Industrial products and power equipments. This plant

was set up under technical collaboration of M/s AEI, U.K.

Three more plants were subsequently set up at Tiruchy, Hyderabad and Haridwar with

Soviet and Czechoslovakian assistance in May 1965, Dec 1965 and Jan 1967

respectively. As there was a need for an integrated approach for the development of

power equipment to be manufactured in India, Heavy Electrical Ltd. Bhopal was

merged into BHEL in 1974.

BHEL is the largest engineering and manufacturing enterprise in India in the energy

related/infrastructure sector, today. The company has been earning profits

continuously since 1971-72 and paying dividends since 1976-77.

BHEL manufactures over 180 products under 30 major product groups and caters to

core sectors of the Indian economy viz. Power Generation and Transmission,

Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide

network of BHELs 14 manufacturing divisions, four power sector regional centers,

over 100 project sites, eight service centers and 18 regional offices, enable the

company to promptly serve its customers and provide them with suitable products,

systems and services efficiently and at competitive prices. The high level of quality

and reliability of its products is due to the emphasis on design, engineering and

manufacturing to international standards by acquiring and adapting some of the best

9
Page

9
 technologies from leading companies in the world, together with technologies

developed in its own Research and Development centers.

BHEL has acquired certification to Quality Management Systems (ISO 9001),

Environment Management Systems (ISO14001) and Occupational Health & Safety

Management Systems (OHSAS 18001) and is also well on its journey towards Total

Quality Management.

BHELs operations are organized around three business sector, namely power

Industry including Transmission, Transportation, Telecommunication and

Renewable Energy and Overseas Business. This enables BHEL to have a strong

customer orientation, to be sensitive to his needs and respond quickly to the changes

in the market.

The greatest strength of BHEL is its highly skilled employees. Every employee is

given an equal opportunity to develop himself and grow in his career. Continuous

training and retaining, career planning, a positive work culture and participative style

of management all these have engendered development of a committed and

motivated workforce, setting new benchmarks in terms of productivity, quality and

responsiveness.

BHEL, ranking among the major power plant equipment suppliers in the world is one

of the largest exporters of engineering products and services from India. Over the

years BHEL has established its references in around 60 countries of the world,

ranging from United States in the west to New Zealand in the Far East. BHELs

export range covers individual product to complete Power Stations, Turnkey contracts
10

for Power Plants, EPC Contracts, HV/EHV Substations, etc.

Page

10
 BHEL has assimilated and updated the state-of-the-art technologies in the Power and

Industrial equipment sectors acquired from world leaders. BHEL has successfully

flexibility to interface and complement international companies for large projects, and

has also exhibited adaptability by manufacturing and supplying intermediate products

to the design of other manufacturers and original equipment manufacturers (OEMs).

11
Page

11
 BHEL JHANSI UNIT
By the end of 5th five year plan, it was envisaged by the planning commission that the

demand for power transformer would raise in the coming years. Anticipating the

countrys requirement BHEL decided to set up a new plant, which would manufacture

power and other type of transformers in addition to the capacity available at BHEL

Bhopal. The Bhopal plant was engaged in manufacturing of transformers Upto 220

KVA, class and instrument transformers.

This unit of Jhansi was established about 16 km from the city on Lalitpur road. It is

called second generation plant of BHEL and was setup in 1974at an initial cost of Rs.

21.03 crores. In 1976, the commercial production of the unit started with an output of

53 lacs in a year.

This plant of BHEL is equipped with the most modern manufacturing processing and

testing for the manufacture of power, special transformer and Instrument

Transformers, Diesel shunting Locomotives and AC\DC Locomotives. The layout of

the plant is such that it is well streamlined to enable smooth material flow from the

raw material stages top finished goods. All the feeder bays have been laid

perpendicular to main assembly bay and in each feeder bay raw material smoothly

gets converted to subassemblies, which after inspection are sent to main assembly

bay. The raw material that is needed for manufacturing is used only after through

material testing in the testing lab and with strict quality checks at various stages of

productions. This unit of BHEL is basically engaged in the production and

manufacture of transformer section, in 1958-88 it undertook the repowering of

DIESEL. Subsequently it started manufacturing complete Diesel Electric Shunting

12

Locomotives of various ranges.

Page

12
 VISION, MISSION AND VALUES OF BHEL

VISION
A world class, innovative, competitive and profitable engine, providing total business

solutions.

MISSION
To be the leading Indian Engineering enterprise providing quality products, systems

and services in the fields of energy, transportation, industry, infrastructure, and other

potential areas.

VALUES
Meeting commitments made to external and internal customers.

Foster learning, creativity and speed of response.

Respect for dignity and potential of individuals.

Loyalty and pride in the company.

Team Playing.

Zeal to Excel.

Integrity and fairness in all matters.

13
Page

13
 OBJECTIVES OF BHEL
Business Mission

To maintain the leading position as supplier of transmission, utilization and

conservations of energy, for application in the areas of electric power, transportation,

oil and gas exploration and industries. Utilize companys capabilities and resources to

expand business into allied areas and other priority sectors of the economy like

defense, communication and electronics.

Growth

To ensure a study growth by enhancing the competitive edge of BHEL in existing

business, new areas and international operations so as to fulfill national expectations

from BHEL.

Profitability

To provide a responsible and adequate returns on capital employed primarily through

improvements in operational efficiency, capacity, utilization and productivity and

generate adequate internal resources to finance the companys growth.

Customer Focus

To build a high of customers confidence by providing increased value for his money

through international standards of product quality, performance and superior customer

service.
14
Page

14
 People Orientation

To enable each employee to achiever his potential, improve his capabilities, perceive

his role and responsibilities and participate and contribute positively to the growth and

success of the company. To invest in human resources continuously and be alive to

their needs.

Technology

To achieve technological excellence in operations by the development of indigenous

technologies along with the efficient absorption of imported technologies to suit

business needs and priorities to provide a competitive edge to the company.

15
Page

15
 SHARE HOLDING PATTERN:

BHEL is a public sector unit and thus government has the major share holder of this

organization. The share holding pattern is as follows:

Government 67%

Indian institution 11%

FIIs 10%

Public 12%

SHARE HOLDING PATTERN

PUBLIC
12%
FII's
10%

INDIAN
INSTITUTION
11% GOVERNMENT
67%
16
Page

16
 BHELs PRODUCTION FACLITIES & PRODUCTS

JHANSI FACILITY

Power Transformers; freight Loco Transformers, Instrument Transformers,

Dry type Transformers, AC, Loco, Diesel Electric Loco etc.

BHOPAL FACILITY

Hydro Sets, Nuclear Turbines, Thermal Sets, Marine Turbines, AC Motors & Large

Electric Motors, Power Transformers, Traction Machines & Controls for Traction and

Industrial Applications, Diesel Generating Sets, Switch Gear, Capacitors, Industrial

Turbines.

HYDERABAD FACILITY

Thermal sets, Gas Turbine Generator Sets, Combined Cycle/Cogan Plants, Industrial

TG Sets, Compressors, Oil Rigs, Mills, Switchgear, Heat Exchanger etc.

HARIDWAR FACILITY

Thermal Sets, Nuclear Generators, Hydro Sets, Industrial Machines, Control Panels,

Light Trainer Aircrafts, Gas Turbines, Defense Equipment, Electric Arc Furnaces for

melting Steel etc.

TRICHY FACILITY

Utility & Industrial Bowlers, Valves, Nuclear Steam Generators, Steam less Steel
17

Tubes.
Page

17
 BANGALORE FACILITY

Variable Speed Drives, Programmable Logic & Digital Controllers, Metes, Photo

Voltaic/Solar panels, Insulators, Telecom Products & simulators.

RANIPAT FACILITY

Boiler Auxiliaries-fans, Air Preheaters.

RUDRAPUR FACILITY

Wind Mills, Solar Water Heaters & Solar Lanterns.

GOINDWAL FACILITY

Industrial valves.
18
Page

18
 BUSINESS AREA

BHEL covers a wide area in production. These areas are mentioned in following

details

POWER

Provide a gamut of equipment Thermal, hydro and Nuclear power plant range.

Include product and system for power generation, transmission and utilization.

TRANSMISSION

BHEL is manufacturing transmission equipment for all voltage ratings including the

400KV class transformers, switchgears, control and relay panels, insulators,

capacitors and other substation equipments.

INDUSTRY

BHEL offers a comprehensive range of electrical, electronics and mechanical

equipment for a host of industries like fertilizers, petrochemicals, refineries, paper,

sugar, rubber, cement, coal, steel, aluminum, mining etc.

TRANSPORTATION

BHEL offers a variety of transportation equipments to meet the growing needs of the

country, 65% of Indian railways are equipment with BHEL manufactured traction

equipment. Underground Metro also runs on drives and controls supplied by

BHEL.BHEL have taken up the manufacturing of Locomotives to provide a pollution

free transportation. BHEL also offers a battery operated passenger Van to Delhi
19
Page

Government.

19
 OIL AND GAS

Equipment for oil and gas exploration and transportation are manufactured by BHEL.

The range covers super deep rigs, mobile and desert rigs with matching draw works

and hoisting equipment.

NON-CONVENTIONAL ENERGY

BHEL plays a vital role in helping to harness the vast renewable source of solar wind

and biogas energy. BHEL has supplied several water heating systems, windmills,

biogas generators and photovoltaic systems.

TELE-COMMUNICATIONS

BHEL has entered the field of tele-communication with electronic PABX system

based on indigenous technology from C-DUCT.

20
Page

20
 MANUFACTURING TECHNOLOGY

14 manufacturing plants spread over different parts of the country have unique

manufacturing and testing facilities.CMC machines shape turbine blade system,8000

ton Hydraulic press. Other heavy-duty machine tools like lathe, milling and shaping

assist in other precision processes related to metalworking.

RESEARCH AND DEVELOPMENT

BHEL professional R&D team assisted by technicians validates all advanced

designing processes.

A few output are-

Direct ignition of pulverized coal.

Magnetic Hydro dynamics.

Aerostatic bearings

AFTER SALES SERVICE

BHEL has 8 organized service centers geographically distributed through the country

that also undertake power plant renovation and rehabilitation activities.

21
Page

21
 EXPORTS

BHEL exports its products and services to over 45 countries.

22
Page

22
 ACTIVITY PROFILE OF BHEL

PRODUCTS OF BHEL

1. Indian Railway WCAM 3 manufactured by BHEL

2. Boiler (Steam generator) under collaboration with combustion engineering,

USA

3. Gas Generator

4. Hydro generator

5. Steam turbine under collaboration with Siemens, Germany

6. Gas turbine under collaboration with GE, USA

7. Hydro turbine

8. Transportation equipments

9. Traction machine

10. AC motors

11. Transformers

12. Switchgear

13. Oil field equipments under collaboration with National Oil well Varco

14. Boiler Drum

15. Water wall panel, coils, super heaters, Re heaters, SOFA Panels, Burners

Panels, Piping and Headers.

16. Wind mill

17. Valves

18. Electrostatics Precipitators (ESP)

19. R&D Products

23
Page

23
 POWER SECTOR PROJECTS

Thermal sets and auxiliaries

Steam generators and auxiliaries

Electronic precipitators

Air pre heaters

Nuclear power equipment

Hydro sets and auxiliaries

Motors

Transformers

Rectifiers

Pumps

Heat exchangers

Capacitors

Porcelain/ceramic insulators

Seamless steel tubes

Casting and forgings

24
Page

24
 SYSTEM SERVICES

Turkey power stations

Data acquisition system

Power system

HVDC Commissioning system

Erection and commissioning

Modernization and rehabilitation

TRANSPORTATION SECTOR

Diesel electric generator

AC/DC locomotives

DC locomotives and loco shutters

Traction system for Railways

Electric trolley buses

25
Page

25
 INDUSTRY SECTOR

Boilers

Valves

T.G.Sets

Power devices

Solar cells

Photo voltaic cells

Gas turbines

Compressors

Drive turbines

Oilrigs

Blow out

Windmills

Control system for electric devices

26
Page

26
 MAJOR CUSTOIMERS IN BUSINESS SECTOR

POWER GENERATION

State Electricity Board (SEB)/Power Corporations

National Thermal Power Corporation

Nuclear Power Corporation

Damodar Valley Corporation etc.

POWER TRANSMISSION

State Electricity Board

West Bengal Power Development Corporation Ltd.

Rashtriya Ispat Nigam Ltd.

Indian Organic & Chemicals Ltd.

National Fertilizers Ltd.

PETROLEUM INDUSTRY

Indian Oil Corp. Ltd.(IOC)

Indian Petro Chemicals Ltd.(IPCL)

Hindustan Petroleum Corp Ltd(HPCL)

Bharat Petroleum Corp Ltd.(BPCL)

Oil & Natural Gas Commission(ONGC)

Gas Authority of India Ltd.(GAIL)

27
Page

27
 TRANSPORTATION

Indian Railways

Port Trusts viz Mumbai, Kolkata, Chennai etc.

Steel Plants

Cement Plants

State Electricity Boards

Urban Transport Authorities

OIL AND GAS SECTOR

Oil & Natural Gas Corporation

Oil India Ltd.

Gas Authority Of India Ltd,

Mazagon Docks Ltd.

28
Page

28
 VARIOUS DEPARTMENT AT BHEL JHANSI

TRANSFORMER COMMERCIAL (TRC)

The objective of the department is interaction with the customers. It brings out tenders

and notices and also responds to them. It is this department that bags contracts of

building transformers. After delivery regarding faults, this department does failures

and maintenance. All such snags are reported to them and they forward the

information to the concerning department.

One of the major tasks of this department is to earn decent profits over all

negotiations. Transformer industry has become very competitive. The company

offering the lowest price gets the contract but this process may continue does the work

on very low profits. To avoid such a situation, a body by the name of India Electrical

and Electronics Manufacturers Association (IEEMA) was set up. This association

helps to maintain a healthy competitive atmosphere in the manufacturing of electrical

appliances.

TRANSFORMER ENGINEERING (TRE)

The transformer manufactured in BHEL Jhansi range from 10 MVA to 250 MVA and

up to 400 KV. The various transformers manufactured in this unit are:-

29
Page

29
 POWER TRANSFORMER

a) Generator transformer

b) System transformer.

c) Auto transformer.

SPECIAL TRANSFORMER

a) Freight loco transformer

b) ESP transformer

c) Instrument transformer

d) Dry type transformer

It is a sub part of Fabrication. It is the preparation shop while the other two bays

form the assembly shop. This section has the following machines:

Planner machine To reduce thickness

Shearing machine

CNC / ANC Flame Cutting machine To cut Complicated shaft items using

Oxy-Acetylene flame

Bending machine

Rolling machine

Flattening machine

Drilling machine

Nibbling machine
30

Pantograph flame cutting machine

Page

30
 BAY-1

It is also a sub part of Fabrication. It is an assembly shop where different parts of

tank come from bay 0. Here welding processes are used for assembly, after which a

rough surface is obtained Grinder operating at 1200 rpm is used to eliminate the

roughness.

BAY-2

It is also a sub part of Fabrication It is an assembly shop dealing with making

different objects mentioned below.

Tank assembly

Cross Feed Assembly

Tank Covers Assembly

Core Clamp Assembly

End Frame Assembly

Foot Assembly

Pin And Pad Assembly

Before assembly, short blasting (firing of small materials i.e., acid pickling) is done

on different parts of jobs to clean the surface before painting.

31
Page

31
 NON- DESTRUCTIVE TEST

1. Ultrasonic test to detect the welding fault on the CRO at the fault place high

amplitude waves are obtained.

2. Die Penetration test Red solution is put at the welding and then cleaned.

After some time white solution is mixed. Appearance of a red spot indicates

a fault at the welding.

3. Magnetic crack detection Magnetic field is created and then iron powder is

put at the welding. Sticking of the iron powder in the welding indicated a

fault.

4. X-Ray Test: It is same as human testing and the fault is seen in X-ray film.

BAY-3

Here are basically three sections in the bay:

Machine section

Copper section

Tooling section
32
Page

32
 BAY- 4

It is the winding section.

There are four types of coil fixed in a transformer, they are :

1. Low voltage coil (LV)

2. High voltage coil (HV)

3. Tertiary coil

4. Tap coil

The type of winding depends upon job requirement. Also, the width and thickness

of the conductors are designed particulars and are decided by design department.

Conductors used for winding is in the form of very long strips wound on a spool, the

conductor is covered by cellulose paper for insulation.

For winding first the mould of diameter equal to inner dia meter of required coil is

made .The specification of coil are given in drawing. The diameter of mould is

adjustable as its body is made up of wooden sections that interlock with each other.

This interlocking can be increased or decreased to adjust the inner diameter of coil.

The moulds are of following types

1. Belly types

2. Link types

3. Cone type
33
Page

33
 BAY-5

It is core and punch section. The lamination used in power, dry, ESP transformer etc

for making core is cut in this section.

CRGO (cold rolled grain oriented) silicon steel is used for lamination, which is

imported in India from Japan, U.K. Germany. It is available in 0.27 and 0.28 mm

thick sheets, 1mt wide and measured in Kg. The sheets is coated with very thin layer

of insulating material called Carlites.

For the purpose of cutting and punching the core three machines are installed in

shop.

BAY-6

Single-phase traction transformer for AC locomotives is assembled in this section.

This Freight locomotive transformers are used where there is frequent change in

speed. In this bay core winding and all the assembly and testing of traction

transformer is done.

Three-phase transformers for ACEMU are also manufactured in this section. The

supply lines for this transformer are of 25 KV and power of the transformer is 6500

KVA. The tap changer of rectifier transformer is also assembled in this bay.
34

Rectified transformer is used in big furnace like the thermal power stations / plants
Page

(TPP).

34
 BAY-7

1. This is the insulation shop. Various types of insulations are

2. AWWW - All Wood Water Washed press paper.

3. The paper is 0.2-0.5mm thick cellulose paper and is wound on the

conductors for insulation.

4. PRE COMPRESSED BOARD: This is widely used for general insulation

& separation of conductors in the forms of blocks.

5. PRESS BOARD: This is used for separation of coils e.g. L.V. from H.V. It

is up to 38 mm thick.

6. UDEL(Un Dignified Electrical Laminated) wood or Perm wood

7. This is special type of plywood made for insulation purposes.

8. FIBRE GLASS: This is a resin material and is used in fire prone areas.

9. BAKELLITE

10. GASKET- It is used for protection against leakage.

11. SILICON RUBBER SHEET- It is used for dry type transformer.

BAY- 8

It is the instrument transformer and ESP transformer manufacturing section.

35
Page

35
 INSTRUMENT TRANSFORMER

These are used for measurement. Actual measurement is done by measuring

Instruments but these transformers serve the purpose of stepping down the voltage

to protect the measuring instrument. They are used in AC system for measurement

of current voltage and energy and can also be used for measuring power factor,

frequency and for indication of synchronism. They find application in protection of

power system and for the operation of over voltage, over current, earth fault and

various other types of relays.

36
Page

36
 ESP TRANSFORMER

The Electrostatic Precipitator transformer is used for environmental application. It is

used to filter in a suspended charge particle in the waste gases of an industry. They

are of particular use in thermal power stations and cement industry.

The ESP is a single-phase transformer. It has a primary and secondary. The core is

laminated and is made up of CRGOS. It is a step up transformer. An AC reactor is

connected in series with primary coil. The output of the transformer must be DC the is

obtained by rectifying AC using a bridge rectifier (bridge rectifier is a combination of

several hundred diodes). A radio frequency choke (RF choke) is connected in series

with the DC output for the protection of the secondary circuit and filter circuit. The

output is chosen negative because the particles are positively charged.

The DC output from the secondary is given to a set of plates arrange one after the

others. Impurity particles being positively charged stick to these plates, which can be

jerked off. For this a network of plates has to be setup all across the plant. This is very

costly process in comparison with the transformer cost. A relive vent is also provided

to prevent the transformer from bursting it higher pressure develops, inside it. It is the

weakest point in the transformer body. An oil temperature indicator and the secondary

supply spark detector are also provided.

One side of the transformer output is taken and other side has an marshalling box
37

which is the control box of the transformer.

Page

37
 BAY-9

In this bay power transformer are assembled. After taking different input from

different bays 0-9 assembly is done Power transformer is used to step and step down

voltages at generating and sub-stations. There are various ratings 11KV, 22KV,

manufactured, they are

1. Generator-transformer.

2. System

3. Auto-transformer.

A transformer in a process of assemblage is called a job. The design of the

transformer is done by the design department & is unique of each job; depends on the

requirement of customer. The design department provides drawing to the assembly

shop, which assembles it accordingly. The steps involved in assembly are:

Core building

Core Lifting.

Unlacing.

Delacing and end-frame mounting.

High voltage terminal gear and low volt terminal gear mounting

Vapor phasing and oil soaking

Final servicing and tanking.

38

Case fitting.
Page

38
 STORE

There are three sections in store:

1. Control Receiving Section

2. Custody Section

3. Scrap Disposal Section

LOCOMOTIVE PRODUCTION (LMP)

There are following products are manufactured at Loco shops

Alternating Current Locomotive (ac Loco)

WAG-5H

AC./D.C. Loco

WCAM-2P

WCAM-3

W-broad gauge

A-running in AC mode

C-running in DC mode

G-hauling goods train

P-hauling passenger train

M-hauling passenger & goods train

Diesel Electric Locomotive Shunting (DESL)

39

350 HP
Page

700 HP

39
 Single Power Pack (SPP): One 700 HP m/c is made as a single unit.

It is a meter gauge locomotive

Twin Power Pack (TPP): 2 350HP m/c are combined in 1 engine

& can be operated individually or in combination depending on load.

450 HP

1400 HP

1150 HP

1350 HP

2600 HP

1150 HP and 1350 HP DESL s are non-standard locomotives and are modified

versions of 1400 HP DESL based on requirement of customer.

Under mention are the new non-conventional products designed and

developed for Indian Railways based on their requirement.

OHE (Overhead electric) recording and testing cars

UTV(Utility vehicle )

RRV(Rail cum road vehicle)

DETV( Diesel electric tower car)

BPRV(Battery power road vehicle)

BCM(Blast cleaning machine)

200 T Well wagon for BHEL Haridwar

Metro Rake-Kolkata Metro Railways

40
Page

40
 LOCOMOTIVE MANUFACTURING (LMM)

This section deals with manufacturing of locomotives. The main parts of the

locomotive are under frame: The frame on which a locomotive is built Super

structure: The body of locomotive is called superstructure or Shell and is made of

sheet of

Mild steel

DC motor

Alternator

Compressor

Flower

Static Rectifier-MSR

Static Converter-SC Exchanger

Bogie-The wheel arrangement of a loco is called a bogie. A bogie essentially

contains

1-wheel axle arrangement

2-Suspension

3-Brake rigging

Traction transformer: It is fixed on under frame and gets supply from an overhead

line by equipment called pantograph. The type of pantograph depends on supply.

This transformer steps down voltage and is fitted with a tap changer. Different taps
41

are taken from it for operating different equipment. One tap is taken and is rectified
Page

into DC using MSR and is fed to the DC motor.

41
 Railways has two types of power supplies 25 KV, 1 Phase, 50 Hz AC

-1500 V DC

An AC/DC loco is able to work on both of these supplies. For e.g. WCAM-3.

WORK ENGINEERING & SERVICES (WE&S)

This department looks after the commissioning and maintenance of all the

machinery used in the factory. It also has 3 two-stage air compressors for supplying

compressed air to the various bays.

The department has 03 different divisions:

Electrical Engineering

Electronics Engineering

Mechanical Engineering

ELECTRICAL ENGINEERING:

This division looks after all the electrical machinery and power distribution of the

factory. Snags detected in the system are immediately reported to this dept by the

concerning department WE&S takes prompt action to rectify it.

The factory has a feeder of 11KV .The total load sanctioned for the factory is

2500MVA But the maximum demand reaches the range of 1700-2000 MVA.
42

Here are various sub-stations (SS) inside the factory, for distribution of power to
Page

different sections.

42
 o SS -1 Supplies Bay-6 to Bay 9

o SS -3 Supplies Bay 1to Bay-4

o SS -4 Supplies Boiler and loco

plant

o SS -5 Supplies Bay -5

o SS -6 Supplies Administrative

building

TECHNOLOGY

This department analyses the changes taking place in the world. and suggest

changes accordingly. This is very important because the products must not get

obsolete in the market otherwise they will be rejected by the customer.

43
Page

43
 FUNCTIONS:

Technology functions can be classified as:

1. Processing Sequence - The sequence of process of manufacturing is decided

for timely and economic completion of the job.

2. Operation time estimate - It includes incentive scheme management.

3. Allowed operation time - It includes incentive amount.

4. Facilities identification - It includes looking for new equipment or plant or

tools to increase productivity.

5. Special process certification - Special processes are the ones requiring

expertise for example identifying errors, cracks, air bubbles in welding.

6. Special tools requirement - Special tools are allotted, if possible, when

required else the design has to be reconsider.

7. Productivity projects compilation - It includes the initial analysis of the

problem and their appropriate solution to enhance productivity.

8. The principle of working is that

IF YOU DO NOT MAKE THE CHANGES IN YOUR COMPANY, THE

CUSTOMER WILL CHANGE YOU.

CENTRAL QUALITY SERVICE

First we get acquainted with a few terms concerning this department.

QUALITY

It is the extent to which products and services satisfy the customer needs.
44
Page

44
 QUALITY ASSURANCE

All those plants and systematic action necessary to provide adequate confidence that a

product or service will satisfy the given requirement is called quality assurance.

QUALITY CONTROL

The operational technique and activities that are used to fulfill requirement for quality

are quality control.

QUALITY INSPECTION

Activities such as measuring, testing, gauging one or more characteristics of a product

or service and comparing these with specified requirement to determine conformity

are termed quality inspection.

45
Page

45
 FINANCE DEPARTMENT OF BHEL JHANSI

The finance department has various sub departments:

Price Store Ledger (PSL)

Sales Section

Pay

Excise duty

Stock Verification

Cash

Revenue

Miscellaneous work

Travel Allowances (TA)

Provident Fund (PF)

Vouchers (Bills) & Foreign Purchase (FP)

Books & Budgets and MIS

Fixed Assets

Cost Section
46
Page

46
 PRICE STORE LEDGER (PSL)

There are three important things in price store ledger:

1. Material pricing

2. Accounting

3. M.I.R. (management information report)

Material pricing is done by multiplying Quantity x Price.

Accounts are maintained taking the help of certain vouchers:

SRV = Store Receipt Voucher

MIV= Material Issue Voucher

SRN = Store Return Voucher

MTV = Material Transfer Note

RCDV = Receipt Come Dispatch Voucher

DMIV = Direct Material Issue Voucher

In the management information report following things is reflected:

Receipt Issue, Direct & Indirect Material, Suspense Balance Status, Non Moving &

Slow Moving items.

SALES SECTION

Payment is done in three modes:

1. Advance payment

2. Payment at the time of dispatch

47

3. Cash on delivery
Page

47
 In case of foreign purchase a license is required from DGTD; this license is of two

types:

1. Quantity base

2. Value base

The accounting of sales is done in this section. The activity of this section starts when

the commercial section starts issuing a work order. Work order part 2 financial

summarize the financial terms of the contract. It contains the information like the

name of the customer & consignee, descriptions of the goods to be produced and sold,

quantity, sales value, terms of delivery and payment price valuation clauses, sales tax,

excise duty, bank guarantee, etc.

PAY

This section credits the salary of the employees on every 25th of the month.

Calculation of salary is done from 15th of the previous month to 14th of the current

month.

Two modes of crediting the salary are

1. Cash

2. Bank (if it is more than 20,000)

It is also assigned the other personal payment to employees it looks after gratuity,

provident fund, and bonuses insurance facilities extend to employees.

Employees leave encashment, official travelling reimbursement and this section deals

with other welfare expenses. Its also entrusted with clearance of medical claims.
48
Page

48
 EXCISE

This department is a small department which levies 12% excise on the products

manufactured and 3% cess on excise.

STOCK VERIFICATION

This department appointed two employees for verification of the stock. There are two

types of stock i.e. for BHEL township stock verification and for BHEL office or

industry verification.

BHEL township include: - verification of their township buildings, colleges and

schools furniture & fittings etc.

BHEL office and industry include: - verification of chairs, tables, AC, Coolers, etc.

CASH

This section is responsible for banking of all the money worth received by the

customer and disbursement of all authorized payment of the company to suppliers,

contractors in the form of cheque, cash, drafts, postal orders etc.

BHEL has two major institutions from which it makes most of the transactions:

HDFC

SBI

Cash section prepares these statements for management information.

Daily Cash Flow

49

Weekly Cash Flow

Page

49
 Cash flow focuses on following:

Operating result statement

Statement of outstanding letter of credit & bank guarantee

Daily bank transfers statement

REVENUE

This department maintains record of the revenue collected from following:

Bharat Ghar and Guest House

Bus pass

Crane

Drum

Ground rent

Holiday homes

I card

Library

Mb medical

Meter checking

Rent , water , electricity, Connection charges

Retired employees health schemes

Recruitment application scheme

Swimming pool, Tanker water

Tender cost

Testing charges
50

Vendor license fees

Page

Vocational trainee, Vocational trainee processing

50
 MISCELLANEOUS

This section deals with miscellaneous expenses, which are out of routine work like

payment of contract worker, gifts, etc.

TRAVEL ALLOWANCES (TA)

T. A. stands for travelling allowance. It deals with two things as under:

LTC = leave travel concession

LTA = leave travel assistance

This section checks whether the claims credited are as per the norms of the company

or not.

PROVIDENT FUND (PF)

P.F. stands for provident fund and it was started in 1952. It is of two types:

CPF = cumulative provident fund

GPF = government provident fund

Provident Fund is 12 % of (basic salary +dearness allowance)

51
Page

51
 VOUCHERS AND FOREIGN PURCHASE

Passing of Bills

The Bills Passing process starts after the account section gets the purchase order,

SRVs and bills from suppliers. The accountants section then makes payment.

Terms of Payment are of three kinds:

10% in advance payment

100% after receipt and acceptance

Partial advance and the remaining after the receipt and acceptance

Foreign Purchase

There are certain items, which are to be imported. A license is required for such items.

The license can be acquired from DGTD. There is also a provision for forward cover.

BUDGET & BOOKS and MIS

This is one of the most crucial tasks in the finance department. To have a balanced

budget or surplus in budget is favorable for the organization. This helps in estimating

the tender cost.

The book section deals with maintaining the books of accounts as per the movement

of cash and stock of the organization. It prepares the trading, profit & loss and the

balance sheet.
52
Page

52
 Budget

Budget is a target setting for operations. There are two types of budget prepared by

BHEL:

Revenue budget consist of consolidated production programmed and related

expenses to carry out that program.

Capital budget includes the fixed assets.

Preparation of budgets is done at three levels:

Internal level

Corporate level

Government level

Management Information System

Three types of information system are generated in BHEL:

a. Internal for the unit

b. For the Corporate Office

c. For Government

Every months information is generated regarding allocation of funds on various

aspects for each department and is send to every department. Information is generated

mainly for control purpose. Other information generated in:- Cash flow, Inventory
53

level (non-moving and slow moving items), Inventory of finished goods.

Page

53
 FIXED ASSETS

This department managed all fixed assets working and maintenance work.

There are following heads under fixed assets management:-

Assets code

Description of assets

Purchase Order No.

Date of comm.

Location

Gross block as on 1 April 2017

Adjustment Gross Block

Gross Block

Accumulated as on 30 March 2018

Rate of depreciation

Period

Adjustment depreciation

Acc. depreciation

Net block

WDV
54
Page

All fixed assets adjustment shown as under this format.

54
 COST SECTION

This section is responsible for accounting and reporting of costs. It determine direct

labour rates and engineer rates and overhead recovery factors of manufacturing,

engineering, commercial and administration for cost estimation.

It furnishes cost reports to management about:-

a. Profitability- Product Wise/ Order Wise

b. Variance- Estimated and Actual Cost

c. Performance- Efficiency and Operating Results

55
Page

55
 SWOT ANALYSIS OF BHEL

STRENGTHS:

The company has 180 products under 30 major product groups cater to the needs of

the core sector like power, industry, transmission, transportation, defense,

telecommunications and, oil business.

BHEL ability to acquire modern technology and make it suitable to Indian conditions

has been an exceptional strength of the company.

Strong relationship with NTPC is strength as NTPC is planning a capacity expansion

of Rs.52 billion and based on the past, 85% of NTPC projects have been bagged by

BHEL the Company also enjoys purchase price preference.

WEAKNESSES:

PSU status is a big weakness for BHEL as it is subject to their rules and regulations

and is forced to carry a huge amount of labor force, which it is not able to retrench.

The company offers very stringent credit facilities to the customers and this is a

weakness when compared in the face of rising competition.

On the other hand the customers in the power segment, SEBs, have a huge amount of

receivables standing against their name in the companys balance sheet. This is a

major weakness for the company.

The company is vertically integrated, which could have been avoided by outsourcing

its components for power generation and transmission. This could have reduced the
56

cost.
Page

56
 OPPORTUNITIES:

The power sector reforms are expected to pick up in the near future in India, which

would directly benefit BHEL.

Increase in defense budget will increase the top line for the company.

NTPC is planning additional capacities to the tune of 2800MW,at a cost of Rs 52 bn.

BHEL could benefit a lot as it had happened in the past that significant portions of the

projects of NTPC are handled by BHEL. Nearly, 85% of the NTPC projects were

assigned to BHEL only.

The business of modernization and renovations of power plants is expected to grow in

India. The disinvestments plans of the government would bring in new resources and

experience into the company.

Joint venture with Siemens in the name of Power Plant Performance Improvement Ltd

(PPIL) is a major strength for the company. The tie up is beneficial as there is a lot of

scope for business.

THREATS:

The global trend of consolidation has already resulted in a fall in turnover of the

company and this will prove to be a major threat in the years to come, as well. The

company is dependent on NTPC to a great extent.

Recently, the government has permitted its import of second hand capital goods that

are 10 years old without a license. This move will definitely increase competitive
57

pressures for BHEL.

Page

57
 CHAPTER 2

INTRODUCTION TO TOPIC
58
Page

58
 WORKING CAPITAL MANAGEMENT

Working capital refers to firm investment in short term assets-cash, short term

securities, accounts receivable & inventories.

-Weston & Brigham

Working capital can be classified regularly on its requirement. There are two concepts

of working capital

1. Gross working capital

2. Net working capital

GROSS WORKING CAPITAL

Gross working capital may be defined as firms investment in current assets. Current

assets which can be converted into cash within a year and include cash, short term

securities, debtors, bill receivable and stock. The gross working capital concept works

over two aspects of current assets management.

1. Optimum investment in current assets

2. Financing of current assets with some cash in the beginning. This cash may be

to the suppliers of raw materials to meet labor costs and other overheads.

These three combined would generate WIP, which will be converted into

finished goods on the completion of the production process. On sale these

finished goods get converted into debtors, the firm will again have cash. This
59
Page

cash will again be used for financing raw materials, WIP, etc.

59
 3. Thus, there is a complete cycle when cash gets converted into raw materials,

WIP, finished goods, debtors and finally again cash.

NET WORKING CAPITAL

Net working capital refers to the difference between current assets and current

liabilities. Current liabilities are those claims of outsiders, which are expected to

mature for payment within a year and include creditors, bills payable and outstanding

expenses. Net working capital may be negative or may be positive.

60
Page

60
 OPERATING CYCLE

Stock

Reorder Sales

Supplier
Cash
Management

Operating cycle involved in the conversion of sales into cash. Operating cycle is the

time duration required to convert sales. After the conversion of resources into

inventories into cash.

Operating cycle of a manufacturing company involves three phases

1. Acquisition of resources

2. Manufacture of goods

3. Sale of the product

61
Page

61
 It is clear that working capital is required because of the time gap between the sales

and their actual realization in cash. This time gap is technically termed as operating

cycle of the business. Funds required in investment of inventories; debtors and other

current assets keep on changing shape and volume. Like a company, the operating

cycle is the length of time necessary.

In case of manufacturing company, the operating cycle is the length of time necessary

to complete the following cycle of events:

1. Conversion of cash into raw materials.

2. Conversion of raw materials into work-in-process;

3. Conversion of work in process into finished goods;

4. Conversion of finished goods into accounts receivable, and

5. Conversion of accounts receivable into cash.

62
Page

62
 ANALYSIS OF WORKING CAPITAL MANAGEMENT

The analysis of working capital is primarily a test of short-term solvency. There are

dangers in having too little or too much of working capital. Therefore, the managers

have to be very vigilant about the fluctuations in the items that make up working

capital.

The question to be studied and answered in connection with the analysis of working

capital is:

1. Is the management utilizing working capital effectively?

2. Is the amount of working capital is adequate, excessive or insufficient?

3. Does the firm have favorable credit rating?

4. Is the current financial position improving?

Tools for Working Capital Analysis

Working Capital Ratio Analysis

Movement of Working Capital Analysis

Cash Flow Analysis

Working Capital Budget

Working Capital Report

63
Page

63
 This project reflects the analysis of working capital through ratios as a means for

checking the efficiency with which working capital is being used in the company.

These ratios would increase of decrease that measures the working capital

management of BHEL. These are as follows:

Current Ratio

Quick Ratio

Cash Ratio

Working capital Turnover

Total Asset Turnover

Return on Capital employed

64
Page

64
 BALANCED WORKING CAPITAL

The firm should maintain a sound working capital position. A balanced working

capital results in smooth production and no hindrances. Excessive working capital

means holding cost and idle funds, which earn no profits for the firm.

Dangers facts of excessive Working Capital

Unnecessary accumulation of inventories.

Defective credit policy and slack collection period.

There is managerial inefficiency.

Dangerous facts of inadequate Working Capital

Stagnant growth and it becomes difficult for the firm to undertake profitable

projects

It becomes difficult to implement operating plans

Operating efficiencies are affected

Fixed assets are not efficiently utilized

Firm loses its reputation in the market

A firms net working capital position is not only important as index liquidity but it

also acts as a measure of the firms risk.

65
Page

65
 GUIDELINES AND SOURCES OF FUNDS FOR

WORKING

CAPITAL REQUIREMENT OF BHEL

CASH CREDIT FROM BANKS

The requirement of working capital will be met either from internal resources or

borrowing from banks. All the banking transactions have been centralized at corporate

office, New Delhi. The corporate office negotiates with requirements of banks for

total cash credit required for the company as whole.

WORKING CAPITAL LOAN FROM GOVERNMENT

The funds for working capital over and above cash credit limit may also be arranged

through government loans.

RECEIPTS FROM CUSTOMERS

The bulk of working capital requirements are met from the customers in accordance

with the contract conditions as approved by the board .The entry of the receipt is

made in the centralized account.

66
Page

66
 FIXED DEPOSITS FROM MEMBERS OF PUBLIC

Subject to the approval of the government and board of directors, the funds may be

raised from public by fixed deposits under the provisions of the company rules to

meet the working capital requirements of the company.

PROVISION OF FUNDS FOR SITE OFFICES

Funds required to site offices will be provided by divisions under which they are

functioning. Current accounts will be authorized to be opened with branches of SBI.

OTHER SOURCES OF FUNDS

Bill rediscounting scheme of IDBI. This scheme was introduced in 1965.The

manufacture of indigenous capital equipment can push up the sales of their product by

offering the prospective purchaser deferred payment facilities.

The IDBI does not discount the bills of exchange but rediscounts it by any other

approved banks...
67
Page

67
 MOTIVES FOR HOLDING CASH

Transaction motive transaction motive requires a firm to hold cash to

conduct its business in the ordinary course.

Precautionary motive precautionary motive is the need to hold cash to meet

contingencies in the future.

Speculative motive speculative motive relates to the holding of cash for

investing in profit making opportunities as and when they arise.

TECHNIQUE OF CASH MANAGEMENT

Cash planning

Cash forecasting & budgeting.

RECEIVABLES MANAGEMENT

The customers from whom receivables or book debts have to be collected in the future

are called trade debtors .Trade credit always create trade debtors or accounts

receivables. Trade credit arises when a firm sells its product or services on credit and

does not receive cash immediately.

When a firm makes an ordinary sale of service and does not receive payments , the

firm grants trade credit and creates accounts receivable that would be collected in the
68

future.
Page

68
 The characteristic of credit sales are

It involves element of risk

It is based on economic value

It is futuristic

Credit policy is prepared in the receivable management and it is the combination of

three decision variables:

Credit Standards

Credit Terms

Collection Effort

GOALS OF CREDIT POLICY

Firms always follow two types of credit policy

Lenient credit policy - To sell on credit to customers on liberal terms and

standards

Stringent credit policy -To sell on credit on a high selective basis only to those

who always posses good credit worthiness and are able to pay in future.
69
Page

69
 MONITORING RECEIVABLES

A firm needs to continuously monitor and control its receivable to ensure collection

on time

Two methods to monitor receivables management:

Average Collection period=Debtors*360/Credit Sales

Ageing schedule: It breaks down receivables according to the length of time for which

they have been outstanding.

RECEIVABLE MANAGEMENT AT BHEL, JHANSI

The main products of BHEL are heavy industrial goods with long operating cycle.

BHEL grants liberal term regarding trade credit to ensure that potential customers by

its products at favorable selling prices.

To utilize its excess capacity, BHEL is granting liberal trade credits to its main

customers like railways, power industries and other private parties.

All BHEL, units are having their commercial departments and Regional Operational

Divisions (RODs). To carry out the job of recovery from customers, the sales section

also takes part in receivables management by preparing and sending invoices and

reminders to customers at appropriate time. They keep records of money received

from customers as advances, as against dispatch of finished goods and money

recoverable on account of price variation, claims and conversion of deferred

70

department into debtors.

Page

70
 Monitoring is done on basis of work orders and schedule is prepared regarding

outstanding balances. The terms and conditions with the customer are finalized

according to the credit policy laid down by corporate office BHEL.

INVENTORY MANAGEMENT

Inventories are the most significant part of current assets of a large majority of

companies in India .The large size of inventory maintained by the firms as a

considerable amount of funds which is required to be committed to them. A firm

neglecting the management of inventories will be jeopardizing its long run

profitability and may fail ultimately.

In a manufacturing firm the level of inventory depends on the operation cycle ,and a

long operating cycle bearing firm needs to maintain high level of Inventory.

NATURE OF INVENTORIES

Inventory is stock of raw material which is required for manufacturing so as to make

sales .inventory can be at various stages:

Raw material

Work in progress

Finished goods

Supplies or stores and spares(not very common but BHEL maintains it)
71
Page

71
 NEED FOR INVENTORY

It has also same needs as receivable management, viz:

Transaction motive

Precautionary motive

Speculative motive

TECHNIQUES OF INVENTORY MANAGEMENT

EOQ(Economic Order Quantity)

a) Ordering cost: order placing, transportation cost

b) Carrying cost: warehousing, handling

Reorder point

Safety stock

a) Cost of running out of goods

b) Material cost

c) Order cost

d) Carrying cost
72
Page

72
 CHAPTER 3

RESEARCH METHODOLOGY
73
Page

73
 RESEARCH METHODOLOGY

Research methodology is a methodology for collecting all sorts of information and

data pertaining to the subject in question. The objective is to examine all the issues

involved and conduct situational analysis. The methodology includes the overall

research design, sampling procedure and fieldwork done and finally the analysis

procedure.

RESEARCH DESIGN

Research design outlines the methods used for data collection, measurement and

analysis (Cooper & Schindler, 2001) to obtain answers to research questions. The

researcher collected data from selected various respondents sampled in the study

using descriptive survey design. Descriptive survey research method was used in

order to obtain accurate information for large numbers of people with a small sample

to explore relationships between variables because it allows generalizations across the

population.

DATA SOURCES

After identifying and defining the research problem and determining specific

information required to solve the problem. The researcher will look for the type and

sources of data which may yield the desired results, while deciding about the method

of data collection to be used for the study, there are two types of data. They are as

follows:
74

Primary Data
Page

Secondary Data

74
 PRIMARY DATA

Primary data is original research that is obtained through first-hand investigation.

Primary data includes information collected from interviews, experiments, surveys,

questionnaires, focus groups and measurements. The designed questionnaire consisted

of closed and open-ended items. Close-ended items enabled the respondents to choose

what they felt was best from the given alternatives while open-ended items enabled

them to express their opinions in details.

SECONDARY DATA

Secondary data means data that are already available i.e. they refer to the data which

have been collected and analyzed by someone and can save both money and time of

the researcher. Secondary data may be available in the form of company records,

trade publications, libraries etc. secondary data sources are as follows:

Various websites

Journals

Research papers.

My research is fully based upon Secondary data, which I gained from Annual reports

of the company. Annual reports include Trading and manufacturing account, Profit

and loss account, and Balance Sheet.

75
Page

75
 TOOLS OF ANALYSIS

The tool used for the analysis of financial position of the company and working

capital management of the company is RATIO ANALYSIS.

SAMPLING DESIGN

A sample design is made up of two elements.

Sampling method- Sampling method refers to the rules and procedures by which some

elements of the population are included in the sample. Some common sampling

method are simple random sampling, stratified sampling, and cluster sampling.

Estimator- the estimation process for calculating sample statistics is called the

estimator. Different sampling methods may use different estimators. For example, the

formula for computing a mean score with a simple random sample is different from

the formula for computing a mean score with a stratified sample. Similarly, the

formula for the standard error may vary from one sampling method to the next.

The best sample design depends on survey objectives and on survey resources.

SAMPLE SIZE

Sample size determination is the act of choosing the number of observations or

replicates to include in a statistical sample. The sample size is an important feature of

any empirical study in which the goal is to make inferences about a population from

a sample.
76
Page

76
 SAMPLE UNIT
A sample unit is one of the units into which an aggregate is divided for the purpose

sampling, each unit being regarded as individual and indivisible when the selection is

made.

The sample unit of this survey was the senior accountants and managers of the Bharat

Heavy Electricals Limited, Jhansi Uttar Pradesh.

LIMITATIONS OF THE STUDY

1. Since time available is only six weeks for the project work, a detailed analysis

was not possible.

2. The researcher was not able to focus on qualification factors, which influences

the financial position of the organization.

3. The study was limited to BHEL, so the result could not be generalized to

macro level.

4. Ratio analysis is only tools used for the financial statement analysis.

5. Since the finance and accounting is an organization being a very sensitive

area, analysis is based on the assumed data of BHEL.

6. As the study is only for one particular company, inter firm comparison is not

possible.
77
Page

77
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

78
Page

78
 RATIO ANALYSIS

CURRENT RATIO

Current ratio represent margin of safety for creditors, higher the creditor greater the

margin of safety.

Large amount of current assets in relation to current liabilities is more the firms

ability to meet its current obligations.

So, current ratio = current assets/ current liabilities

TABLE 1

Year 2011-12 2012-13 2013-14 2014-15 2015-16

CR 1.88 2.18 2.76 3.15 3.12

GRAPH 1

CR
3.5

2.5

1.5 CR

0.5
79

0
2011-12 2012-13 2013-14 2014-15 2015-16
Page

79
 Analysis:

From the above ratios it can be seen that current ratio for the year 2014-15 has growth

by approx. 3% from the previous year that indicates that short term solvency of the

firm has gone grow. But the current ratio of last 3 years is less than 1 and on an

average it is 1.2616:1. This means every 1 Re. of current liabilities there is 1.2616 of

current assets available to meet the short term obligation. So this indicates that the

short term liquidity position of the company is very good and short term conditions

are safe as far as payment is concerned although as a conventional rule, a current ratio

is 2 to 1 is considered far better.

80
Page

80
 QUICK RATIO

This ratio provides a better measure of overall liquidity. A firms inventory cannot be

easily being converted into cash so it is not taken into account here. A ratio of 1:1 is

considered satisfactory ratio. Ratio is computed by following method:

Quick Ratio = Current Assets Stock

Current Liabilities

TABLE 2

Year 2011-12 2012-13 2013-14 2014-15 2015-16

QR 1.19 1.36 1.79 2.024 1.79

GRAPH 2

QR
2.5

1.5

QR
1

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis:

The liquid ratio is 1:1 is considered to be satisfactory in case of any organization

whereas in case of BHEL Jhansi liquidity ratio is not even approaching one; hence

there is liquidity problem in payment in time. Here payments to creditors are not
81

made in time due to lack of cash/ liquid fund.

Page

81
 CASH RATIO

Cash is the most liquid assets and it should be Minimum in the firm as the excess of

cash in hand or bank implies loss of interest i.e. the wrong utilization of funds, which

could have been utilized/ invested elsewhere. There is nothing to be worried about

lack of cash if the company has the reserve borrowing power.

Cash Ratio = _____Cash_______

Current Liabilities

TABLE 3

Year 2011-12 2012-13 2013-14 2014-15 2015-16

CR 0.0937 0.000735 0.000218 0.000396 0.000195

GRAPH 3

CR
0.1
0.09
0.08
0.07
0.06
0.05
CR
0.04
0.03
0.02
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis:

This cash ratio graph shows that the cash ratio 2012-13 decrease because cash flow

decrease in past financial year but current liabilities increase so this ratio 0.093 down
82

and 2012-13 to 2015-16 not more variable.

Page

82
 TURNOVER RATIO

Turnover ratio is just an Inter firm analysis a firm just to know its financial standing

and check status in comparison of other competitors.

Turnover Ratio= Turnover/ Working Capital

TABLE 4

Year 2011-12 2012-13 2013-14 2014-15 2015-16

TR 2.75 2.08 1.54 0.87 0.82

GRAPH 4

TR
3

2.5

1.5
TR
1

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis:

Turnover ratio shows that manufacturing BHEL, Jhansi unit financial position is not

good because sales is decrease constantly year by year.

83
Page

83
 INVENTORY TURNOVER RATIO

It shows how rapidly the inventory is turning into receivable through sales. High ratio

is indicative of good inventory management. A low ITR implies excessive inventory

levels. Ratio should neither be low nor too high.

ITR= Sales/ Average Inventory

TABLE 5

Year 2011-12 2012-13 2013-14 2014-15 2015-16

ITR 3.88 3.33 2.62 1.77 1.40

GRAPH 5

ITR
4.5
4
3.5
3
2.5
2 ITR
1.5
1
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis:

Inventory turnover ratio indicates that how quick inventories are uncontrolled into

sales. It gives the position of the inventory management of the company. The average

of this ratio for past five years comes out to be 2.6 which show that for every ratio 2.6

of net sales. The efficiency of BHEL, Jhansi in turning its inventory for year 2015-16
84

has dropped from last five years which indicates that in the plant.
Page

84
 RETURN ON CAPITAL EMPLOYED

Return on capital employed of financial year

Return on capital employed = PBIT/ Capital Employed

Where, PBIT= Profit before Interest and Tax

TABLE 6

Year 2011-12 2012-13 2013-14 2014-15 2015-16

ROCE 0.226 0.133 0.00828 -0.118 0.267

GRAPH 6

ROCE
0.3
0.25
0.2
0.15
0.1
ROCE
0.05
0
2011-12 2012-13 2013-14 2014-15 2015-16
-0.05
-0.1
-0.15

Analysis:

In this graph ROCE, in 2011-12 was 0.226 and decreased to three year 2014-15 was -

0.118 but in 2015-16 was 0.267 from this point it start falling down and reached at

2015-16 was 0.267.

85
Page

85
 DEBTORS TURNOVER RATIO

This ratio expresses the amount of unrealized debts out of credit sales. Thus, debtors

turnover ratio is calculated to obtain the information regarding success or failure of

organization in collection of debts. This ratio is also known as Receivable Turnover

Ratios.

Debtors Turnover Ratio = Credit Sales / Avg. Receivables

Avg. Collection Period (Days) = 365 / Debtors Turnover Ratio

TABLE 7

Year 2011-12 2012-13 2013-14 2014-15 2015-16

DTR 2.120 2.114 1.609 1.022 0.982

GRAPH 7

DTR
2.5
2
1.5
1 DTR
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis:

This ratio was indicates that how quick debtors are collected and higher ratio show

better position of the company. Here from the graph is clear that in 2011-12 debtors

were collected normally but from 2012-13 to 2015-16 is condition has worsened as

ratio and decrease it means debt are not being collected rapidly.
86
Page

86
 CREDITORS TURNOVER RATIO

This ratio is also known as Payable Turnover ratio. It depicts the relation between

Credit Purchase and Creditors. This ratio indicates the condition of an organization

with regard to payment of creditors. Higher ratio indicates quicker payment and vice-

versa.

Creditors Turnover Ratio = Net Credit Purchase or Consumption/ Creditors

Credit Payment Period (days) = 365/ credit turnover ratio

TABLE 8
Year 2011-12 2012-13 2013-14 2014-15 2015-16

CTR - 2.51 2.63 2.27 2.34

GRAPH 8

CTR ..
2.7

2.6

2.5

2.4

2.3 CTR ..

2.2

2.1

2
2011-12 2012-13 2013-14 2015-16

Analysis:

This ratio was indicates that how quick creditors are collected and higher ratio show

better position of the company. Here from the graph it is clear that in 2011-12 to

2012-13 creditors were collected quickly but from 2012-13 to 2015-16 is condition
87

has worsened as ratio has decrease it mean creditors are not being collected rapidly.
Page

87
 WORKING CAPITAL

The goal of working capital management is to ensure that a firm is able to continue its

operations and that it has sufficient ability to satisfy both maturing short-term debt

and upcoming operational expenses. The management of working capital involves

managing inventories, accounts receivable and payable, and cash.

Working Capital = Current Assets Current Liabilities

In 2014

WC = 52395 25998

= 26397

In 2015

WC = 49041 22727

= 26314

In 2016

WC = 47051 21432

= 25619
88
Page

88
 TABLE 9

Year 2014 2015 2016

WC (Rs. in Cr.) 26397 26314 25619

GRAPH 9

30000

25000

20000
Year
15000
WC (Rs. In Cr.)
10000

5000

0
1 2 3

Analysis:

In 2014 working capital is Rs. 26397, In 2015 it decreases to Rs. 26314 and in 2016 it

decreases to Rs. 25619.

89
Page

89
 CHAPTER 5

FINDINGS AND SUGGESTIONS

90
Page

90
 FINDINGS

Current ratio indicates that the short term liquidity position of the company is

very good and short term conditions are safe as far as payment is concerned

although as a conventional rule, a current ratio is 2 to 1 is considered far

better.

Liquid ratio is 1:1 is considered to be satisfactory in case of any organization

whereas in case of BHEL Jhansi liquidity ratio is not even approaching one;

hence there is liquidity problem in payment in time. Here payments to

creditors are not made in time due to lack of cash/ liquid fund.

Cash ratio graph shows that the cash ratio 2012-13 decrease because cash flow

decrease in past financial year but current liabilities increase so this ratio 0.093

down and 2012-13 to 2015-16 not more variable.

Turnover ratio shows that manufacturing BHEL, Jhansi unit financial position

is not good because sales is decrease constantly year by year.

Inventory turnover ratio indicates that average of this ratio for past five years

comes out to be 2.6 which show that for every ratio 2.6 of net sales. The

efficiency of BHEL, Jhansi in turning its inventory for year 2015-16 has

dropped from last five years which indicates that in the plant.

ROCE, in 2011-12 was 0.226 and decreased to three year 2014-15 was -0.118

but in 2015-16 was 0.267 from this point it start falling down and reached at

2015-16 was 0.267.

91
Page

91
 Debtor Turnover Ratio was indicates that the graph is clear that in 2011-12

debtors were collected normally but from 2012-13 to 2015-16 is condition has

worsened as ratio and decrease it means debt are not being collected rapidly.

Creditor Turnover Ratio was indicates that the graph it is clear that in 2011-12

to 2012-13 creditors were collected quickly but from 2012-13 to 2015-16 is

condition has worsened as ratio has decrease it mean creditors are not being

collected rapidly.

In 2014 working capital is Rs. 26397, In 2015 it decreases to Rs. 26314 and in

2016 it decreases to Rs. 25619.

92
Page

92
 CONCLUSION

At the end of this project Im feel that I have gained a lot of knowledge about this

Jhansi unit and Working Capital Management procedure followed in BHEL Jhansi

unit.

In rotation work I learned about its working routine and collecting a lot of information

related to stream like Engineering and physics and employees mutual relations.

So, through this project I have learned:

Object of finance

Analysis of finance

Analysis of estimation of working capital

Analysis of receivable management

Inventory management of BHEL Jhansi

The firm BHEL liquidity position in terms of short term and long term are

good.

The efficiency of the company is also good but last some years not batter.
The above analysis enables the company to understand the financial position
and financial soundness of BHEL Jhansi unit.
93
Page

93
 BIBLIOGRAPHY

(Bharat Heavy Electricals Limited)

Bharat Heavy Electricals Limited. (n.d.). Retrieved october 2017, from BHEL:

http://www.bhel.com/home

(WCM)

WCM. (n.d.). Retrieved october 2017, from edupristine: http://www.edupristine.com

(Working Capital Management, 2017)

Working Capital Management. (2017). Working Capital Management , 2.

(Ratio Analysis)

Ratio Analysis. (n.d.). Retrieved october 2017, from

https://www.myaccountingcourse.com/financial-ratios/

Ratio Analysis. (n.d.). Retrieved october 2017, from Management study Guide:

http://managementstudyguide.com/ratio-analysis.htm
94
Page

94