Project Prav 2

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A

Project Report

on

Ratio Analysis of SJVNL

Submitted in partial fulfilment of the requirement for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

(MBA)

SUBMITTED BY:- SUPERVISED BY:-

PRAVEEN KUMAR SHARMA

ROLL NO2011PGMB056


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ACKNOWLEDGEMENT

I hereby acknowledge the immense contribution ofSJVN Ltd. Who has given me an opportunity to

work in Finance & Accounts Department.

I express my gratitude to Sh. S.L. Sharma and his team for sharing collected observations, writing

skills and gracious persistence which kept the things going.

This experience combined with the theoretical concepts has a synergic effect of a kind on the

individuals development.



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PREFACE

The research provides an opportunity to a student to demonstrate application of his/her knowledge,skill and competencies required during the technical session. Research also helps the student to

devote his/her skill to analyse the problem to suggest alternative solutions, to evaluate them and to

provide feasible recommendations on the provided data.

The report is on the topic ofRATIOANALYSIS OF SJVNL. Although I have tried my level best

to prepare this report an error free report, every effort has been made to offer the most authenticate

position with accuracy.


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DECLARATION

I hereby declare that the following documented Project Report Titled- ratio analysis

of sjvnl is an authentic work done by me.

The study was undertaken as apart of the course curriculum of MBA fulfilment

program of . BAHRA University



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CONTENTS:

CHAPTERS

CHAPTER-1

HISTORY OF SJVNLA. FEATURESB. OBJECTIVESC. SJVNL QUALITY

CHAPTER-2

INTRODUCTIONCHAPTER-3

RESEARCH METHODOLGY FUNCTIONS OF FINANCIAL DEPARTMENT

CHAPTER-4

ANALYSIS AND INTERPRETATIONA. RATIO ANALYSIS

i. SHORT TERMii. LONG TERM


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CHAPTER-5

CONCLUSION, FINDINGS AND SUGGESTIONSANNEXURE

BIBILOGRAPHY

CHAPTER

1


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COMPANY PROFILE

Overview of SJVNL:-

The SJVN Ltd (formerly Satluj Jal Vidyut Nigam Limited-SJVNL ) was incorporated on May 24,

1988 as a joint venture of the Government of India ( GOI ) and the Government of Himachal Pradesh

(GOHP) to plan, investigate, organize, execute, operate and maintain Hydro-electric power projects.

The present authorized share capital of SJVN is Rs 7000 crores.

The Nathpa Jhakri Hydro Electric Power Station NJHPS ( 1500 MW ) was the first project

undertaken by SJVN for execution. In addition to the financial assistance from the World Bank,

SJVN has also been financed as loan by a Consortium of European Banks, the Power Finance

Corporation ( PFC ) and various domestic commercial banks.

Unit Synchronization Commercial Generation

Unit6 November 23, 2003 January 02, 2004

Unit5 September 29, 2003 October 06, 2003

Unit4 January 22, 2004 March 30, 2004

Unit3 February 13, 2004 March 31, 2004

Unit2 March 09.2004 May 06, 2004

Unit - 1 March 31, 2004 May 18, 2004

Besides the social and economic upliftment of the people in its vicinity, the 1500 MW NJHEP has

been designed to generate 6612 MU of electrical energy in a 90% dependable year with 95 %

machine availability. It is also providing 1500 MW of valuable peaking power to the Northern Grid.

Out of the total energy generated at the bus bar, 12 percent is supplied free of cost to the home state

i.e. Himachal Pradesh. From the remaining 88% energy generation, 25% is supplied to HP at bus bar

rates. Balance power has been allocated to the beneficiary states / UTs of Northern Region by

Ministry of Power, Government of India.

Besides above, indirect benefits have also accrued to the region by way of increase in agriculture and

industrial production. In addition, the project has provided gainful employment to a large number of

skilled and unskilled workers and has also opened the landlocked hinterland by providing essential

facilities such as schools, hospitals etc. for the people of the area. Thus, 1500 MW NJHPS has


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ushered in the social and economic upliftment of the persons living in the vicinity of the Project i.e.

of society at large.

SJVNs Future Projects

Since the commissioning of the largest underground 1500 MW Hydro Electric Power Project,

NJHEP with the gigantic efforts made by its engineers, workers and all its associates, the first project

allocated to SJVN, the Corporation expanded its base from a single project to a Multi Project and

thereafter from a presence in a single state to a pan- Indian Corporation and established its footprint

in the neighbouring countries of Nepal & Bhutan.

SJVN is currently constructing the 412 MW Rampur Hydro Electric Project in the state of Himachal

Pradesh. SJVN is also implementing three hydro projects (252 MW Devsari, 60 MW Naitwar Mori

and 51 MW Jakhol Sankri) in the state of Uttarakhand. Further, SJVN has also been allocated Luhri

Hydro Electric Project (775 MW) and Dhaulasidh HEP (66 MW) in the state of Himachal Pradesh

for preparation of Detailed Project Report and subsequent execution. Further, SJVN is entering into a

Joint Venture for the implementation of 1500 MW Tipaimukh HE Project in Manipur with an equity

participation to the extent of 26%.

The company has now gone across the borders and has bagged 900 MW Arun III hydroelectric

projects in Nepal through, competitive bidding. In addition, the corporation has also been assigned

the task of updating/preparing DPRs of two Hydro Electric Projects 600 MW Wangchu HE Project

and 650 MW Kholongchu HE Project in Bhutan by Govt. of India.

SJVN Venturing into Wind Energy Sector

India consumes about 3.7% of world's commercial energy and is ranked as the fifth largest consumer

of energy in the world in terms of energy demand. This is despite having one of the lowest per capita

energy consumption in the world. Continued economic development and increasing population are

pushing up the demand for energy at a higher rate than addition in generation capacity. Peak energy

demand is about 12.7% (for Year 2009-10 as per CEA report) more than the total available energy

for consumption. The energy demand is expected to grow at 5.2% and to have sustainable

development; the electricity energy addition is to be around 10% annually.


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With the growing environment consciousness and reserves of the fossils like coal, crude oil, natural

gas etc. depleting at faster rate and the vast available renewable recourse had a big role towards

meeting up the energy demands of such a vast nation.

In view of the advantages SJVN is venturing into the Wind Energy field with an initial addition of

50MW of wind energy by the end of 2012 to promote and develop more renewable resource of

energy. In pursuit of the above mission SJVN has already started surveying the various potential

locations in India where the wind energy can be exploited economically. The consultant for this new

venture of setting up of the 50MW wind Power Project has already submitted the feasibility report

for establishing the project with the advantages of various locations.


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OBJECTIVES:-

Operating and maintaining power stations with maximum performance efficiency. Establishing and following sound business, financial and regulatory policies. Taking up of other hydro power projects. Completion of the new projects allocated to SJVN in an efficient and cost effective

manner.

Use of the best project management practices for the project implementation byapplying latest universally accepted Project Management Techniques, and by enabling

its Engineers, to become certified Project Managers through further trainings.

Dissemination of available in-house technical and managerial expertise to otherutilities / projects.

Creating work culture and work environment conducive to the growth anddevelopment of both the organization and the individuals through introduction of

participative management philosophy.

Fulfilling social commitments to the society. Achieving constructive cooperation andbuilding personal relations with stakeholders, peers, and other related organization.

Striving clean and green project environment with minimal ecological and socialdisturbances.

To strive for acquiring Nav Ratna Status.


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VISION:-

TO MAKE INDIA A FOUNTAINHEAD OF HYDRO POWER AND THE ENERGY SOURCE OF

THE FUTURE BY REORGANIZING DEVELOPMENT WITH PASSION AND

PROFESSIONALISM FOR SUSTAINABLE VIABILITY OF THE CORPORATION ON

BEDROCK OF SOUND COMMERCIAL PRINCIPLES.

MISSION:-

TO PLAN, INVESTIGATE, ORGANISE, EXECUTE, OPERATE AND MAINTAIN POWER

PROJECTS IN THE SATLUJ RIVER BASIN IN HIMACHAL PRADESH AND AT ANY OTHER

PLACE IN INDIA & ABROAD.

SJVNL QUALITY POLICY:-

SJVNL is committed to continuously strive for quality and fully satisfying customer needs by means

of state of the art technology, excellence in engineering and continual improvement in quality

management for generating reliable and eco-friendly power.


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SJVNL QUALITY OBJECTIVES:-

Maximum efficiency:-

Operating and maintaining power stations with maximum performance efficiency.

Following sound policies:-

Establishing and following sound business, financial and regulatory policies.

Starting more projects:-

Taking up of other hydro power projects.

Cost effective completion:-

Completion of the new projects allocated to SJVN in an efficient and cost effective manner.

Full utilisation of expertise:-

Dissemination of available in house technical and managerial expertise to other utilises projects.

Conducive work culture:-

Creating work culture and work environment conducive to the growth and development of both, the

organisation and the individuals through introduction of participative management philosophy.

Social responsibility:-

Fulfilling social commitments to the society. Achieving constructive cooperation and building

personal relations with stakeholders, peers, and other related organisation.


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Green business:-

Striving clean and green project environment with minimal ecological and social disturbances.

Aim ratna status:-

To strive for acquiring NAV ratna status.

Quality objectives:-

To keep the organisation abreast of the latest technology in power generation for its adoptionin a phased manner.

To monitor and control the quality of work designing of power projects and procurement ofequipment.

To fulfil the regulatory requirements related to power generation and act as a sociallyresponsible organisation in taking care of the community and the environment.


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CHAPTER

2


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The profile :-

PROJECT UNDER EXECUTION

Sr. No. Project Installed Capacity State

1. Rampur HEP 412 MW Himachal Pradesh

Projects under Survey and Investigation and DPR Preparation

A. In the State of Himachal Pradesh

Sr. No. Project Installed Capacity

1. Luhri HEP 775 MW

2. Dhaulasidh 66 MW

B. In the State of Uttarakhand

Sr. No Project Installed Capacity

1. Devsari HEP 252 MW

2. Naitwar Mori HEP 60 MW

3. Jakhol Sankri HEP 51 MW

C. In the State of Manipur

Sr. No Project Installed Capacity

1. Tipaimukh HEP* 1500 MW


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*This project will be developed by a joint venture company to be established in which SJVN have

agreed to take a 26% equity interest, with NHPC Limited and State of Manipur taking 69% and 5%

equity interest respectively.

D. Projects Abroad

Sr. No Project Installed Capacity Country

1. Arun III 900 MW Nepal

2. Wangchu HEP 600 MW Bhutan

3. Kholongchu HEP 600 MW Bhutan

Future Plans:-

The SJVN proposes to add 5000 MW additional capacity by 2014-15. This would require an

additional investment of about Rs. 29,000 Crores which shall be met mainly from internal accruals

and loans from domestic /multi literal funding agencies.

To achieve the target of setting up of additional 5000 MW SJVN is exploring the possibilities of

taking up new projects in Himachal Pradesh, Arunachal Pradesh, Nepal and Bhutan.


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Profits:-

Authorised Capital Rs. 70000 Million

Value of Assets Rs 111291 Million 31.03.2011

Paid Up Capital Rs. 41,366 Million 31.03.2011

Projects Completed 1 No. (1500 MW)

Projects Under Construction 1 No. (412 MW)

Projects Under Development 8 Nos. (3304 MW)

In 2010-2011

Energy Generated 7140.205 MU

PAF (Plant Availability Factor) 98.318%

Sales 18126.7 Million

Net Profit 9121.3 Million

In 2009-2010



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PAF (Plant Availability Factor) 98.55%



Performance Rating "Excellent"

In 2008-2009


Capacity Index 96.08%



Performance Rating "Excellent"

In 2007-2008

Energy Generated 6449 MU

Capacity Index 96.671%



Performance Rating Very Good


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ORGANISATIONAL STATUS:-

Public Sector SJVN Limited, a joint venture of the Govt. of India and Govt. of Himachal

Pradesh, is a Central Public Sector Undertaking (CPSU) under the Ministry of Power. The

present authorized capital of SJVN is Rs. 4500 crores which is under revision to Rs. 7000

crores. The present installed capacity of SJVN is 1500 MW. The Corporation has achieved

many milestones in construction, operations and investigations activities of its projects

during the last five years.

A Mini Ratna Company

The Corporation has the distinction of being conferred with the much coveted status "Mini

Ratna: Category-I" status by Government of India within only four years of coming into

commercial operations.

Schedule 'A' Company

Meeting the criteria laid down by the Department of Public Enterprises and qualifying the

qualitative and quantitative parameters viz. investment, capital employed, net sales, profits,

employees, and also factors of national importance, complexities of problems faced, level of

technology adopted prospects for expansion and diversification, competitiveness etc., SJVN

has been upgraded as Schedule 'A' PSU.

FUTURE PORTENTS

After successful implementation, commissioning and operations of the country's largest 1500

MW Nathpa Jhakri Hydro Power Station, the Corporation is implementing a number of

hydro power projects in the state of Himachal Pradesh, Uttarakhand and Manipur besides in

neighboring countries viz. Nepal and Bhutan.

With the support and guidance of Ministry of Power, Govt. of India, SJVN is thus emerging

as a rising star in the hydro power sector of the country. For its upcoming projects, the

Company proposes to make an investment of over Rs. 23,000 crore in the next 10 years. The

Company has about 4000 MW capacity projects lined up for commissioning by the year

2020.


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SJVNL bags Excellence Award for Outstanding contribution to Betterment of Society awarded

by Delhi Telgu Academy

SJVNL CMD Honoured with National Achievement Award for Corporate LeadershipShri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred

National Achievement Award by the All India Achievers Foundation AIAF for Corporate

Leadership.

SJVNL CMD Honoured with Leadership Excellence Award for National Development.Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred

Leadership Excellence Award for National Development by Indian Economic Development

and Research Association IEDRA.

SJVNL CMD Honoured with Mother India Award for Udyog Pratibha 2006.Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred Mother

India Award for Udyog Pratibha 2006 by the Indian Organisation for Commerce and Industry

IOCI for outastanding contribution to the Society and Nation.

SJVN bags two Greentech AwardsThe Greentech Foundation, New Delhi has once again adjudged the Environmental

Management practices adopted by SJVNL in its 1500 MW Nathpa Jhakri Hydro Power Station

SJVNL CMD Honoured with Excellence Award 2007Shri H.K. Sharma, CMD of public sector Satluj Jal Vidyut Nigam has been conferred

Excellence Award 2007

SJVNL bags Green Tech Gold Award in Hydro Power Sector forPublic Sector Satluj Jal Vidyut Nigam has been awarded the prestigious 9th Annual Green

Tech Environment Excellence GOLD Award 2008
http://sjvn.nic.in/achievement_details.asp?id=17http://sjvn.nic.in/achievement_details.asp?id=16http://sjvn.nic.in/achievement_details.asp?id=15http://sjvn.nic.in/achievement_details.asp?id=14http://sjvn.nic.in/achievement_details.asp?id=13http://sjvn.nic.in/achievement_details.asp?id=12http://sjvn.nic.in/achievement_details.asp?id=12http://sjvn.nic.in/achievement_details.asp?id=13http://sjvn.nic.in/achievement_details.asp?id=14http://sjvn.nic.in/achievement_details.asp?id=15http://sjvn.nic.in/achievement_details.asp?id=16http://sjvn.nic.in/achievement_details.asp?id=17


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HIND GAURAV AWARD AND GOLD MEDALShri H.K. Sharma, Chairman & Managing Director, Satluj Ja

l Vidyut Nigam Limited has been awarded Hind Gaurav Award
http://sjvn.nic.in/achievement_details.asp?id=11http://sjvn.nic.in/achievement_details.asp?id=11


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SAMPLE SIZE:-

100 employee of different department were questioned in order to collect primary data. It is 15%

employees of SJVNL (New Shimla).

SAMPLE AREA:-

Financial structure

a) Ratio analysisShort term analysis

Long term analysis

b) Comparative study of balance sheet and p&l a/c


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Structure of finance department

FinanceDepartment

Bill-1Section

Bill-2Section

CompilationSection

SalarySection


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BILL-I SECTION

This department deals with the following subjects:-

AMC Telephone bills Vehicle repair & maintenance bills Hospitality/entertainment bills including credit card of directors. Training or seminar Professional subscription / membership fees DBR Medical bills Medical TA bills Hospital bills Imprest

LTC / TA bills Briefcase / newspaper bills All work related to provident fund All work related to pension


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BILL-II SECTION

This department deals with the following subjects:-

Closing of accounts and schedules Legal insurance Income tax returns Service tax returns Consultancy provided by the corporation Contractors / suppliers bills New projects Bank guarantees Monthly cash expenditure reports Weekly cash expenditure reports Quarterly performance reports BEs and Res Balmer lawrie bills Rent Reimbursement of vehicle expenses Advance of govt. Dept. Departmental advances Consultants bills Employees reimbursement bills Other partys bills Feeding of JVs, misc PVs Electricity / water bills


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COMPILATION SECTION

It deals with the following subjects:-

CERC Assets register Fund management Income tax / wealth tax Interest calculation Bank reconciliation Physical verification Sales accounting / MOU Taxation Cash Compilation of accounts

IUT reconciliation Maintenance of bank books and G.I. Feeding of BPVs / JVs etc. Preparation of monthly trial balance & other MIS reports Dealing with various banks HPSEB liaison H.P. secretariat liaison Preparation of cheques of all banks

SALARY SECTION

All works related to HPSEB executives

All works relating to SJVN executives All works relating to HPSEB non-executives


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All works relating to SJVN supervisors and workmen Diary and dispatch

CAPITAL STRUCTURE OF COMPANY

The financial position of SJVN, for the last 3 years, is as under :

( In Crores)

INCOME DETAILS 2010-2011 2009-10 2008-09

SALES 1812.67 1769.74 1759.59

OTHER INCOME 143.15 138.99 269.65

TOTAL INCOME 1955.82 1908.73 2029.24

PBDIT 1758.57 1622.39 1859.87

NET PROFIT 912.13 972.74 1015.32

DIVIDEND (Excluding

Dividend Tax)

330.09 328.20 320.00

SHARE CAPITAL 4136.63 4108.81 4108.81

RESERVES & SURPLUS 3068.89 2528.25 1938.53

Current - Performance (FY: 2010-11)

By the end of 31st March, 2011 a gross energy generation of 7140.205 million units during the FY

2010-11 and a revenue earnings of 1955.82 Crore (Sales 1812.67 Crore + other income

143.15 Crore) during the period.


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NETWORTH OF SJVN

The networth of SJVN for the preceding three years is as under:

Year Networth

( in crores)

2006-07 4925.29

2007-08 5406.40

2008-09 6047.34

2009-10 6653.76

2010-11 7205.52

CAPITAL STRUCTURE AND CREDIT WORTHINESS OF SJVN

The total credit worthiness in the company in equity, reserves/surplus and loan funds as on

31.03.2011 was 8959.44 Crore. The source wise detail is as under:

1. Paid-up- Capital

(a) Government of India 2666.61 Crore

(b) Govt. of H.P. 1055.02 Crore

(c) Others 415.00 Crore

Total 4136.63 Crore

Reserves and Surplus .3068.89 Crore


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Secured Loans 900.13 Crore

Unsecured Loans 853.79 Crore

The company is making profits and paying dividends to the share holders. It has the capacity to fund

the equity portion of the projects from its internal resources to a considerable extent. The company

has developed a good rapport with its creditors with the faultless repayment of loans and as such its

creditworthiness has increased over the period of time after the first venture of the company, the

Nathpa Jhakri HPS came into operation.

The secondary data used in this project is obtained from the annual report of SJVNL.

For analysis of financial statements the following methods have been used:

1) Ratio analysis2) Comparative statements3) Study of cash flow statements

Tools of analysis of financial statements

The tools to carry out financial analysis include:-

Ratio analysis

Comparative statements

Cash flow statements

RATIO ANALYSIS:-

Ratio analysis expresses the relationship between two financial variables taken from financial

statements of an accounting periods in the form of ratio. It is a technique of analysing the


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ANALYSIS OF SHORT TERM FINANCIAL POSITION OF SJVNL

Two type of ratio can be calculated for measuring short term financial position or short term

solvency of the firm.

1) Liquidity ratio2) Current assets movements or efficiency ratio

LIQUIDITY RATIO:-

1) Current ratio:

The current ratio is a financial ratio that measures whether or not a firm has enough resources to payits debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is

expressed as follows:

( rs. in lakhs)

Current Liabilities As on 31/3/2011 As on31/3/2010

Current Liabilities & provisions 132,029 125,409

Current Assets As on 31/3/2011 As on31/3/2010

a) Inventories 2,368 5,867

b) Sundry debtors 26,450 18,929
http://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Financial_ratio


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c) Cash & Bank Balances 206,378 154,239

d) Short Term Loans & Advances 60,478 64,643

e) Other Current Assets 7,644 5,354

Current Assets 303,318 249,032

Current ratio :-

31-3-2011 = 30,3318/132,029= 2.30

31-3-2010 =249,032/125,409= 1.98

The current ratio for the year 2011 , 2010 is 2.30, 1.98 respectively.

As a conventional rule, a current ratio 2:1 or more considered satisfactory.

But a current ratio 2:1 or more considered acceptable. Thus the current ratio of SJVNL is acceptance.


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2) Quick ratio:-

Quick ratio, expresses a company's ability to repay short-term creditors out of its total cash. The

liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number

of times short-term liabilities are covered by cash. If the value is greater than 1, it means fully

covered.

The formula is the following:

QR = liquid assets / current liabilities

Quick assets = cash & bank balance + other current assets + loans

advances + sundry debtors

Current Liabilities As on 31/3/2011 As on31/3/2010

Current Liabilities & provisions 132,029 125,409

Quick Assets As on 31/3/2011 As on31/3/2010

a) Sundry debtors 26,450 18,929

b) Cash & Bank Balances 206,378 154,239

c) Short Term Loans & Advances 60,478 64,643

d) Other Current Assets 7,644 5,354

Quick Assets 300,950 243,165

Quick ratio:-

31/3/2011 = 300,950/132,029= 2.27


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31/3/2010 = 243,165/125,409= 1.93

Quick ratio 1:1 is considered to represent a satisfactory financial condition.

3) Absolute liquid ratio:-

Absolute liquid ratio = cash &bank balance/ current liabilities

( rs. In lakhs )

As on 31.03.2011 As on 31.03.2010

Cash & Bank Balances 206,378 154,239

Current Liabilities 132,029 125,409

Absolute liquid ratio:-

31.03.2011 = 206,378/132,029= 1.56

31.03.2012 = 154,239/125,409

= 1.22

The absolute ratio for the year 2012, 2010 is 1.56, 1.22 respectively.

The norm for this ratio is 50%. Thus we can see that the absolute liquid ratio of SJVNL in

2011 & 2012 is excellent.


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31/3/2010 = ( 101,747/176,974 )*100= 57.87%

2) Net profit ratio:-Net profit is obtained when operating expenses; interest and taxes are subtracted from the gross

profits. Net profit ratio is measured by dividing net profit after tax by sales.

( Rs. In lakhs )

As on 31.03.2011 As on 31.03.2010

Sales 181,267 176,974

Net profit 91,213 97,274

31/3/2011 = (91,213/181,267)*100= 50.31%

31/3/2010 = (97,274/176,974)*100= 54.96%

These above calculated ratios show the profitability ratio of the SJVNL. There is decrease in

profits from the previous year.


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Last 5years net profits of SJVNL

This figure signifies the steady increase in profits of the SJVN. Although there is decrease in the

profits in 2011 but still the SJVNL profits are good.

In this figure the profits of last 5years are shown i.e. 2007, 2008, 2009, 2010, and 2011.


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Return on investment:-

The term investments may refer to total assets or net assets. The fund employed in net assets is

known as capital employed.

Net assets equal net fixed assets plus currents assets minus current liabilities.

Alternatively, capital employed is equal to net worth plus total debt.

Return on investments = profit before interest and tax/capital employed

Capital employed = fixed assets +current assetscurrent liabilities

( Rs. In lakhs )

As on 31.03.2011 As on 31.03.2010

PBIT 115,620 101,747

Fixed assets 662,059 693,438

Current assets 303,318 249,032

Current liabilities 132,029 125,409

31/3/2011 = 115,620/883,348= 0.13

31/3/2010 = 101,747/817,061= 0.12

The return on investments during 2010 was 0.12 and in 2011 ROI was 0.13.


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ANALYSIS OF LONG TERM FINANCIAL POSITION OR TEST OF SOLVENCY OF

SJVNL

The term solvency refers to the ability of SJVNL to meet its long-term obligations. The term

solvency ratios indicate a firms ability to meet the fixed interest and the cost and repayment

schedules associated with its long term borrowings.

Different types of ratios used for test of solvency are as follows:

1) Debt equity ratio2) Funded debt to total capitalization ratio3) Proprietary ratio4) Solvency ratio5) Fixed assets to net worth ratio6) Ratio of current assets to proprietors funds

1) Debt equity ratio:-Debt equity ratio is also known as external interval equity ratio. It is calculated to measure

the relative claims of outsides and the relationship between the owners (i.e. shareholders)

against the firms assets. This ratio indicates the relationship between external equities and

the internal equities. A higher ratio indicates a risky financial position while a lower ratio

indicates safer financial position.

Debt equity ratio = total debt/net worth

Total debt = secured loan + unsecured loans + current liabilities


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A higher ratio indicates a risky financial position while a lower ratio indicates safer financial

position.

2) Funded debt to total capitalization ratio:-This ratio establishes a link between the long term funds raised from outsider and total long

term funds available in the business.

Funded debt to capitalization ratio =( funded debt/ total

capitalization)*100

(Rs. In lakhs)

As on 31.03.2011 As on 31.03.2010

Secured loans 90,013 105,397

Unsecured loans 85,379 62,791

Shareholders fund 720,552 665,376

funded debt 49,889 65,345

31/3/2011 = (175,392/766,441)*100= 22.8%

31/3/2010 = (168,188/730,721)*100


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= 23.1%

There is no thumb rule for this ratio but it is considered better up to 50% or 55%. The funded

debt to capitalization ratio of SJVNL for the years 2011,2010 is 22.8% & 23.1%.

3) Proprietary ratio or equity ratio:-This ratio establishes the relationship between shareholders fund to total asset of the firm.

The ratio of proprietors fund is an important ratio of determining long term solvency of the

firm.

Equity ratio = (shareholders fund/ total assets)*100

Total asset = fixed assets + current assets

( Rs. In lakhs)

As on 31.03.2011 As on 31.03.2010


Fixed assets 662,059 693,438


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31/3/2011 = (720,552/965,377)*100= 74.63%

31/3/2010 = (665,376/942,470)*100= 70.59%

The equity ratio of SJVNL is fluctuating every year. i.e. 74.63%, 70.59%

The liquidity ratio of SJVNL is satisfactory.

4) Solvency ratio:-This ratio indicates the relationship between total liabilities to outsiders total assets of a firm

and can be calculated as:-

Solvency ratio = total liabilities to outsider/ total assets

Total liabilities to outsiders = secured loans + unsecured loans +

current liabilities

(Rs. In lakhs)


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As on 31.03.2011 As on 31.03.2010

Secured loans 90,013 105,397

Unsecured loans 85,379 62,791

Current liabilities 132,029 125,409

Fixed assets 662,059 693,438


31/3/2011 = 307,421/965,377=0.32

31/3/2010 = 293,597/942,470= 0.31

The solvency ratio for the year 2011, 2010 is 0.32, 0.31 . This is satisfactory.

5) Fixed assets to net worth ratio:-This ratio establishes the relationship between fixed assets and shareholders fund and

indicates the extent to which shareholders funds are sunk into the fixed assets.


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Fixed assets to net worth ratio = (fixed assets (after

depreciation) /shareholders

funds)*100

( Rs. In lakhs)

As on 31.03.2011 As on 31.03.2010


Fixed assets after depreciation 662,059 639,438

31/3/2011 = (662,059/720,552)*100= 91.88%

31/3/2010 = (639,438/665,376)*100= 96.10%

There is no thumb rule for this ratio. Fixed asset ratio to net worth ratio has increase year by

year.


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6) Ratio of current assets to proprietors fund :-This ratio indicates the extent to which proprietors funds are invested in current assets.

Ratio of current assets to proprietors fund = (current

Assets/shareholders

Fund )*100

( Rs. In lakhs)

As on 31.03.2011 As on 31.03.2010



31/3/2011 = (303,318/720,552)*100= 42.09%

31/3/2010 = (249,032/665,376)*100= 37.42%

This ratio shows the satisfactory position of the SJVNL. This indicates the more investments

of funds in current assets.


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GRAPHICAL REPRESENTATION :-


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CONCLUSION:-

Summarizing the above, the following conclusion can be drawn:-

The short term financial position of the company is satisfactory as it seen from the current ratio and

quick ratio. It implies the current liability can be comfortable paid out of the current assets. It also

shows that the company has enough cash and bank balances to meet out contingency that may arise

in future.

The profitability position of the company is very good. The profit earned in the reserve and surplus

so that in future more and more investments can be done in other projects. It is also affects the

shareholder in respect of distribution of profits.

Long term financial position of the company is going to the better day by day as it is seen from the

debt equity ratio which shows that outsiders loans are continuously decreasing as compare to

insiders fund. Large amount of loans has been repaid in last two years. In next 5-10 years the

company has nothing to remain as a loan if this rate of repayment of loan continues. In the near

future the company will have large amount of own funds as compare to outsider liabilities


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SUGGESTIONS

In order to further improvements in profits and to maintain short term liabilities & long term

liabilities financial position, the following suggestions have been made:-

No doubt, SJVNL has good track record of profits as seen from last two years profits & loss account.

The generation, administration and other expenses are increasing thereby the gross profit ratio has

been declined. SJVNL should have make efforts to control the generation, administration & other

expenses so that it will not increase in future.

SJVNL has been paying large amount of interest & finance charges to the different financial

institutions. It has been suggested that SJVNL should restructure their loan plan, so that the

advantages of fluctuating interest rate should have been taken from the present competitive financial

market. The company should try to reconstruct those loans on which higher rate of interest have been

paid till now.

Amount of current liabilities has been continuously increasing which have an adverse effect on the

short term financial position of the company. As seen from the generation process, it has been seen

that not much amount of material is needed to generate energy. Besides, this current liability is

increasing. So that it is suggested, SJVNL should take care of not to increase the amount of current

liabilities in future.

Long term financial position of the SJVNL is satisfactory. To make it better it is suggested that loans

should be paid within next 5-10years, as seen from the last year cash flow statements that the

company is paying large amount of loans. it is suggested that the company should use its own funds

in a better way, so that its long term financial position should be better in use.


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ANNEXURES

NATHPA JHAKRI PROJECT


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HYDRO DAM PROJECT OF SJVNL


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BIBLIOGRAPHY

Annual reports of 2009-10 Annual reports of 2010-11 Annual reports of 2011-12 Memorandum of understanding Detailed project reports Expenditures reportss

Websites:-

www.sjvn.nic.in www.wikipedia.com www.google.com www.valueresearchonline.com www.myiris.com www.amfiindia.com

www.sebiindia.com www.indianfoline.com

Books:-

Financial management by I. M. PANDEY Security analysis and portfolio management Financial management P.S.CHANDRA
http://www.sjvn.nic.in/http://www.sjvn.nic.in/http://www.google.com/http://www.google.com/http://www.valueresearchonline.com/http://www.valueresearchonline.com/http://www.myiris.com/http://www.myiris.com/http://www.amfiindia.com/http://www.amfiindia.com/http://www.sebiindia.com/http://www.sebiindia.com/http://www.indianfoline.com/http://www.indianfoline.com/http://www.indianfoline.com/http://www.sebiindia.com/http://www.amfiindia.com/http://www.myiris.com/http://www.valueresearchonline.com/http://www.google.com/http://www.sjvn.nic.in/


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Documents

Project Prav 2