Ravi Shekhar

7/31/2019 Ravi Shekhar

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LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

Summer Training Report

On

WORKING CAPITAL MANAGEMENT OF NTPC

Submittedto

LOVELY PROFESSIONAL UNIVERSITY

In partial fulfillment of the

Requirements for the award of Degree of

Master of Business Administration

Submitted by:

Ravishekhar Kumar Singh

10907207


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NTPC Power plantSingrauli

PREFACE

Management of working capital has always been a fascinating subject from the

academic point of view and it must be admitted in the real world situation also,

efficiency with which working capital is Managed in a concern is of great significance for

its overall well being Its growth and decline.

Management of working capital is an important aspect of the overall financial

management package. This is true in case of Company like N.T.P.C where large chunk

of fund invested happens to be in current assets, the paper attempts to working capital

Management of N.T.P.C one of the largest electricity generating organization. This

issue has been tackled from all point of view using simple tools as well as the norms found

in general in any company of the Indian Corporate scenario. The analysis of the

company, components wise as well as overall, has been remarkably encouraging over

the last five years.


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ACKNOWLEDGEMENT

A lot of guidance &support was needed to complete this report. It was a work in which , I

have seen the external world with same eyes but in different perception.

I would like to make special thanks to Mr. P. Ghosh for providing me an opportunity

for training in Singrauli Super Thermal Power Station (SSTPS) a unit of (National

Thermal Power Corporation {N.T.P.C}) and enriching, enlightening me with his

valuable insights, innovative ideas and nurturing guidance.

I would also like to thank my Guide Mr. Amarjit Saini for providing me his expert

guidance & direction at every stage of my study, with a deep sense of gratitude that

gives this report a right direction into real shape. I am also thankful to my friends

who have provided their help & support during accomplishment of this report.

Ravishekhar Singh

M.B.A. (3rd

sem)


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CONTENTS

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

REVIEW OF LITERATURE

OBJECTIVE OF THE STUDY

METHODOLOGY

INDIAN POWER INDUSTRY-A RETROSPECT

AN OVERVIEW OF NTPC

SINGRWALI POWER PLANT-A PROFILE OF THE COMPANY

WORKING CAPITAL MANAGEMENT- AN OVERVIEW

COMPARATIVE ANALYISIS OF WORKING CAPITAL

CASH MANAGEMENT ANALYSIS OF NTPC

INVENTORY MANAGEMENT ANALYSIS OF NTPC

FINDINGS

SUGGESTIONS

CONCLUSION

BIBLIOGRAPHY


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EXECUTIVE SUMMARY

LPG or Liberalization, Privatization and Globalization as it is referred in short today have

changed the scenario of corporate world and management of enterprises in our country. It has

now become more important to not just manage an organization but to achieve corporate

excellence simultaneously as the future belongs to learning and performing organizations.

As every business concern irrespective of its size, nature, and age needs funds to carry out

business operations such as purchase of raw materials, payment of wages and other day-to-

day expenses, working capital becomes an important and integral part of business. Working

capital is the life blood and nerve centre of a business because no business can run

successfully without an adequate amount of it. Therefore, to manage working capital in any

sector is a challenging job.The project report titled A Comparative Study on Working Capital Management of

NTPC deals with this matter and is based on the in -house industrial training at Singrawli

Power Plant. Unless organization learn to manage its working capital, success, will be

elusive. Thus, the effectiveness of an organization depends on the strength of its working

capital management as it is core to the whole system. In the context of Indias Power Industry

working capital management holds a greater significance because Power which forms the

backbone of any infrastructural facility, in recent years has become more crucial for

achieving rapid economic growth of our country.

Keeping this background in view, an attempt is made to examine the working capitalpractices in NTPC with special reference to Singrawli Power Plant. The project contain the

basic postulates of working capital, procedures for the analysis of working capital, ratios

being used to define the working capital and the impact of shortcomings in the management

of it . All this had been done to get a clear view of the techniques of working capital

management in Singrawli Power Plant.


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OBJECTIVES OF THE STUDY

To find out the efficiency of working capital management in Singarli power plant

To examine the cash management of NTPC

To evaluate the inventory management of NTPC.


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LITERATURE REVIEW

WORKING CAPITAL MANAGEMENT

Pandey (2005) explains that the management of current assets is similar to fixed assets in the

sense that in both cases a firm analyses their effects on its return and risk. The management

of fixed and current assets, however, differs in three important ways: First, in managing fixed

assets, time is a very important factor; consequently, discounting and compound techniques

play a significant role in capital budgeting and a minor one in the management of current

assets. Second, the large holding of current assets, especially cash, strengthens the firms

liquidity position, but also reduces the overall profitability. Thus, a risk-return trade off is

involved in holding current assets. Third, levels of fixed as well as current assets depend

upon expected sales, but it is only current assets which can be adjusted with sales fluctuations

in the short run. Thus, the firm has a greater degree of flexibility in managing current assets.

Nobanee, AlShattarat and Haddad, (2009) suggest measures of the efficiency of working

capital management where optimal levels of inventory, receivables, and payables are

identified, and total holding and opportunities cost are minimized and recalculating the

operating cycle, the cash conversion cycle, and the net trade cycle according to these optimal

points.

INVENTORY MANAGEMENT

Pandey (2005) explained that inventories constitute about 60 per cent of current assets of

public limited companies in India. The manufacturing companies hold inventories in the form

of raw materials, work-in-progress and finished goods. The objective of the inventory

management should be the maximization of the value of the firm. The firm should therefore

consider costs, return and risk factors in establishing its inventory policy.

Rudloff, Fleischmann, Gimpl-Heersink and Taudes (2008) showed that the gains achievable

by integrating pricing and inventory control are usually small for classical demand functions.


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The benefits of integration with inventory control are substantially increased due to the price

dynamics.

MICHALSKI (2009) presents the consequences for the recipients firm that can result fromoperating risk that is related to delivery risk generated by the suppliers.

RECEIVABLE MANAGEMENT

Pandey (2005) explained that trade credit is very important for a business as it serves as a

marketing tool to maintain or expand the firms sales, but it leads to creation of debtors. A

firms investment in accounts receivable depends on volume of credit sales and collection

period. The financial manager can influence volume of credit sales and collection period

through credit policy. Credit policy includes credit standards, credit terms, and collection

efforts.

CASH MANAGEMENT

Pandey (2005) explained that cash is required to meet a firms transactions and precautionary

needs. Management of cash involves three things; first, managing cash flows into and out of

the firm. Second, managing cash flows within the firm. Third, financing deficit or investing

surplus cash and thus, controlling cash balance at a point of time.

Drew and Lazarus (1996) highlighted the principles of cash management propounded in

Thirukkural an Indian work on management written more than 2000 years ago but very

relevant, practicable and consistent with that of the modern thought.

Ran Zhang (2006) examines management of operating cash flows, its causes, and the markets

reaction to such management.

RISK MANAGEMENT


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Risk management is the identification, assessment, and prioritization of risks (defined in ISO

31000 as the effect of uncertainty on objectives, whether positive or negative) followed by

coordinated and economical application of resources to minimize, monitor, and control the

probability and/or impact of unfortunate events or to maximize the realization of

opportunities. Risks can come from uncertainty in financial markets, project failures, legal

liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from

an adversary. (Hubbard, Douglas (2009))

METHODOLOGY

SECONDARY DATA:

For making this project secondary data were required. Following are the sources of secondary

data:-

Annual Reports

Cost & Budget Reports

Creditors Reports

Debtors Reports

Inventory Reports

Cash Report

Raw Materials Report

Production Reports

Sales Reports

The project report titled A Comparative Analysis on Working Capital Management of

Singarli Power Plant required a comparative analysis of working capital patterns followed

in various Years of NTPC.

This study will assist to evaluate the efficiency of working capital management practices inNTPC Power Plant in particular. This in-depth analysis will help the management of the

companies to reduce the unnecessary blockage of funds and make the best possible use of the

available funds. Here in this study, working capitals of the five years have been calculated

sequentially and an effort has been made to indentify the trend of working capital in the past

five years by analyzing the past five years of working capital. In addition to this, certain

ratios have been derived to give a better picture of the efficiency of the management in

dealing with working capital of the plant. The analysis of past five years working capital only


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based on financial data provided by balance sheet. But working capital analysis also needs

some non-financial details. So this in-depth analysis is confined to Singrauli Power Plant

only. Data of five consecutive years are starting from the year 2004-05 to 2008-09.

POWER SECTOR IN INDIA

Power development in India is the key to economic development. The power sector has

been receiving adequate priority ever since the process of planned development in

1950. Hydro power and coal based thermal power have been the main sources of

generating electricity. Nuclear power development is at slower pace, which was

introduced in late 60s. The concept of operating power systems on a regional basis

crossing the place, the power supply industry have been under constant pressure to

bridge the gap between supply and demand.

Since Independence in 1947, Indian Power sector progress has been rapid. From mere

1713 MWs of Installed capacity in 1950 the capacity at the end of March 2007 rose to

124569 excluding capacity of renewable energy. Total generation in April 2006- March

2007 was 659419 GWs in the utility sector. The per capita consumption of electricity

increased from 15 KWHs in 1950 to 619 in 2006-07.

Decades of economic planning in India following independence placed significant

emphasis on the development of the power sector. Electricity generation capacity with

utilities in India had grown from 1713 MW in December 1950 to over 124,287 MW by

March 2006. However, per capita electricity consumption remains much lower than the

world average and even lower than some of the developing Asian economies.

Investment in the sector has not been able to improve access and keep pace with the

countrys growing demand for electricity.

India has the fifth largest generation capacity in the world with an installed capacity of

152 GW as on 30 September 2009, which is about 4 percent of global power

generation. The top four countries, viz., US, Japan, China and Russia together consume

about 49 percent of the total power generated globally. The average per capitaconsumption of electricity in India is estimated to be 704 kWh during 2008-09.

However, this is fairly low when compared to that of some of the developed and

emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The world average

stands at 2,300 kWh. The Indian government has set ambitious goals in the 11th plan

for power sector owing to which the power sector is poised for significant expansion. In

order to provide availability of over 1000 units of per capita electricity by year 2012, it

has been estimated that need-based capacity addition of more than 100,000 MW would


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be required. This has resulted in massive addition plans being proposed in the sub-

sectors of Generation Transmission and Distribution.

India is world's 6th largest energy consumer, accounting for 3.4% of global energy

consumption. Due to Indias economic rise, the demand for energy has grown at anaverage of 3.6% per annum over the past 30 years. In March 2009, the installed power

generation capacity of India stood at 147,000 MW while the per capita power

consumption stood at 612 kWH. The country's annual power production increased from

about 190 billion kWH in 1986 to more than 680 billion kWH in 2006. The Indian

government has set an ambitious target to add approximately 78,000 MW of installed

generation capacity by 2012. The total demand for electricity in India is expected to

cross 950,000 MW by 2030.

About 75% of the electricity consumed in India is generated by thermal power plants,

21% by hydroelectric power plants and 4% by nuclear power plants. More than 50% ofIndia's commercial energy demand is met through the country's vast coal reserves. The

country has also invested heavily in recent years on renewable sources of energy such

as wind energy. As of 2008, India's installed wind power generation capacity stood at

9,655 MW. Additionally, India has committed massive amount of funds for the

construction of various nuclear reactors which would generate at least 30,000 MW. In

July 2009, India unveiled a $19 billion plan to produce 20,000 MW of solar power by

2020.

The Power sector in India is predominantly controlled by the Government of

India's public sector undertakings (PSUs). Major PSUs involved in the generation ofelectricity are National Thermal Power Corporation (NTPC), National Hydroelectric

Power Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides

PSUs, several state-level corporations, such as Maharashtra State Electricity

Board (MSEB), are also involved in the generation and intra-state distribution of

electricity. The Power Grid Corporation of India is responsible for the inter-state

transmission of electricity and the development of national grid.

The Ministry of Power is the apex body responsible for the generation and development

of power in India. This ministry started functioning independently from 2 July, 1992;

earlier, it was known as the Ministry of Energy. The Union Minister of Power at presentis Sushil Kumar Shinde, who took charge of the ministry on the 28th of May, 2009.

SCENARIO OF POWER IN INDIA
http://en.wikipedia.org/wiki/Sushilkumar_Shindehttp://en.wikipedia.org/wiki/Sushilkumar_Shinde


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Growth of economy calls for watching the rate of growth in infrastructure facilities. Power

sector is one of the major aspects of this infrastructure building. Some prominent people like

the Ex Chairman of GE Jack Welchhave gone to the extent of saying, you dont have a

chance to stand in the 21stcentury without lots of powerWithout this you miss

the next revolution.

Moreover, the growth rate of demand for power in developing countries is generally higher

than that of GDP. In India, the elasticity ratio was 3.06 in 1 st plan, & peaked at 5.11 during 3rd

plan and came down to 1.65 in 80s. For 90s a ratio of around 1.5 was projected. Hence, in

order to support a growth of GDP of around 7%, the rate of growth of power supply of 10%

is required.

If we look at current scenario, electricity consumption in India has more than doubled in the

last decade, outpacing the economic growth. If we analyze the various statistics of Indian

power sector, we will find that the generating capacity has gone up tremendously from a

meager 1712MW in 1950 to a whooping 147000MW today.

The critical role played by the power industry in the economic progress of a country has to be

emphasized. A self sufficient power industry is vital for a nation to achieve economic

stability.

INDIAN POWER INDUSTRY

Before Independence


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The British controlled the Indian power industry firmly before Independence. Then legal and

policy framework was contributing to private ownership, with not much regulation with

regard to operational safety.

Post Independence

Immediately after Independence, the country was faced with capacity restraint. India adopted

a socialist structure for economic growth and all the major industries were controlled by

public sector enterprises. By 1970's, India had nationalized most of its energy assets, due to

its commitment to social goals. By the late 1980's, the Indian economy felt the strain of the

socialist agenda followed since independence. Faced with a serious deterioration in public

finance and balance of payment crisis, the Union government as part of its policy of

economic liberalization allowed greater investment by private sector in the power industry.

The electricity sector in India is predominantly controlled by Government of India's public

sector undertakings (PSUs). Major PSUs involved in the generation of electricity include

National Thermal Power Corporation (NTPC), National Hydroelectric Power Corporation

(NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level

corporations, such as Maharashtra State Electricity Board (MSEB), are also involved in the

generation and intra-state distribution of electricity. The Power Grid Corporation of India is

responsible for the inter-state transmission of electricity and the development of national grid.

India is world's 6th largest energy consumer, accounting for 3.4% of global energy

consumption. Due to India's economic rise, the demand for energy has grown at an average of

3.6% per annum over the past 30 years. In March 2009, the installed power generation

capacity of India stood at 147,000 MW while the per capita power consumption stood at 612

kWH. The country's annual power production increased from about 190 billion kWH in 1986

to more than 680 billion kWH in 2006. The Indian government has set an ambitious target to
http://en.wikipedia.org/wiki/KWHhttp://en.wikipedia.org/wiki/KWHhttp://en.wikipedia.org/wiki/KWH


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add approximately 78,000 MW of installed generation capacity by 2012. The total demand

for electricity in India is expected to cross 950,000 MW by 2030.

Electricity losses in India during transmission and distribution are extremely high and varybetween 30 to 45%. In 2004-05, electricity demand outstripped supply by 7-11%. Due to

shortage of electricity, power cuts are common throughout India and this has adversely

effected the country's economic growth.

Generation

Grand Total Installed Capacity is 147,402.81 MW

Thermal Power

Current installed capacity of Thermal Power (as of 12/2008) is 93,392.64 MW which is

63.3% of total installed capacity.

Current installed base of Coal Based Thermal Power is 77,458.88 MW which comes

to 53.3% of total installed base.

Current installed base of Gas Based Thermal Power is 14,734.01 MW which is 10.5%of total installed base.

Current installed base of Oil Based Thermal Power is 1,199.75 MW which is 0.9% of

total installed base.

The state of Maharashtra is the largest producer of thermal power in the country.

Hydro Power

India was one of the pioneering states in establishing hydro-electric power plants, The power

plant at Darjeeling and Shimsa (Shivanasamudra) was established in 1898 and 1902

respectively and is one of the first in Asia. The installed capacity as of 2008 was

approximately 36647.76. The public sector has a predominant share of 97% in this sector.


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Nuclear Power

Currently, 17 nuclear power reactors produce 4,120.00 MW (2.9% of total installed base).

Renewable PowerCurrent installed base of Renewable energy is 13,242.41 MW which is 7.7% of total installed

base with the southern state of Tamil Nadu contributing nearly a third of it (4379.64 MW)

largely through wind power.

Power for All by 2012

The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This

mission would require that our installed generation capacity should be at least 200,000 MW

by 2012 from the present level of 144,564.97 MW. Power requirement will double by 2020 to

400,000MW.

Todays environment is a tough environment to survive, with the new industries and the new

sectors coming up so strongly and financially sound. But to gain an extra edge over others

they ought to have an extra or special added advantage.

Our people are our most important asset. Nearly every organization report contains a

phrase like this & for good reason. Today, the last great source of competitive advantage is

human capital.

The pressure for Human Resource (HR) departments to deliver increased business value is

growing. Executives are seeking to reduce costs, streamline processes, & free up resources to

focus more on core competencies. Business stakeholders need support from HR departments

to meet human capital demands to drive innovation and growth. Managers want up-to-date

employee information at their fingertips. Employees want the ability to check benefits, track

administrative paperwork, and plan their own retirement accounts


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AN OVERVIEW OFNATIONAL THERMAL POWER CORPORATION.

AN INTRODUCTION:

NTPC Limited is the largest thermal power generating company of India. A public

sector company wholly owned by Government of India, it was incorporated in the year

1975 to accelerate power development in the country. Within a span of 30 years, NTPC

has emerged as a truly national power company, with power generating facilities in all

the major regions of the country.

Recognizing its excellent past performance and its vast potential, the Govt. of the India

has identified NTPC as one of the 'Navratnas'- a potential global giant and also it is

going to be identified as one of the Maharatna- giant among the 'Navratnas'. NTPC

Limited is the largest thermal power generating company of India. A public sectorcompany, it was incorporated in the year 1975 to accelerate power development in the

country as a wholly owned company of the Government of India.

At present, Government of India holds 89.5% of the total equity shares of the company

and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. Within a

span of 30 years, NTPC has emerged as a truly national power company, with power

generating facilities in all the major regions of the country.


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Based on 1998 data, carried out by Data monitor UK, NTPC is the 6th largest in terms

of thermal power generation and the second most efficient in terms of capacity

utilization amongst the thermal utilities in the world.

The Group's principal activity is to generate and sell power to state utilities. It also

provides consultancy to power utilities and maintains power stations. The Group

operates in two segments, namely, Power Generation and Others. The Power generation

segment includes generation and sale of bulk power to SEBs/State utilities. Other

business includes providing consultancy, project management and supervision, oil and

gas exploration and coal mining.

In the Forbes list of World's 2000 largest companies, 2008, NTPC occupies 317th

place. With a current generating capacity of 30,144 MW, NTPC has embarked on plans

to become a 75,000 MW company by 2017.

Presently, Government of India holds 89.5% equity in the company and the balance

10.5% is held by FIIs, Domestic Banks, Public and others.

As on date, NTPC's total installed capacity is 27, 904 MW. NTPC's coal based power

stations are at: Singrauli (Uttar Pradesh), Korba (Chattisgarh), Ramagundam (Andhra

Pradesh), Farakka (West Bengal), Vindhyachal (Madhya Pradesh), Rihand (Uttar

Pradesh), Kahalgaon (Bihar), NTCPP (Uttar Pradesh), Talcher (Orissa), Unchahar (Uttar

Pradesh), Simhadri (Andhra Pradesh), Tanda (Uttar Pradesh), Badarpur (Delhi), and

Sipat (Chattisgarh). NTPC's Gas/Liquid based power stations are located at: Anta(Rajasthan), Auraiya (Uttar Pradesh), Kawas (Gujarat), Dadri (Uttar Pradesh), Jhanor-

Gandhar (Gujarat), Rajiv Gandhi CCPP Kayamkulam (Kerala), and Faridabad

(Haryana). NTPC's Power Plants with Joint Ventures are located at Durgapur (West

Bengal), Rourkela (Orissa), Bhilai (Chhattisgarh), and RGPPL (Maharastra).


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Growth of NTPC installed capacity and generation

SUBSIDIARIES OF NTPC

NTPC Electric Supply Company Ltd (NESCL): NESCL is a wholly owned

subsidiary of NTPC. It was incorporated in August 2002 with the objective to acquire,

establish & operate Electricity Distribution Network in various circles/cities across

India. The company provides consultancy in the area of: Turnkey execution, Project

monitoring, Quality Assurance and Inspection, and Third Party Quality inspection on the

behalf of utility.

NTPC Vidyut Vyapar Nigam Ltd. (NVVN):It was formed to cater to and deal

with the vast potential of power trading in the country and optimum capacity utilization.

NTPC Hydro Limited (NHL):It was set up in December, 2002 to develop smalland medium sized Hydro Electric Power Projects of up to 250 MW capacities.


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NEW PLANTS OF NTPC

The company has formulated a long term Corporate Plan for 15 years upto 2017. The

Corporate Plan seeks to integrate the Companys vision, mission and strategies for growthwith the national plans and to provide the company the cutting edge in the emerging

competitive environment. NTPC is targeting to become a 75,000 MW Plus company by

2017.

(A) Projects approved and under construction for commissioning by 2012 - 13360 MW

Project

(State)

Capacity Under

Construction

(MW)

Fuel

Kahalgaon Stage II Phase I (Bihar) 500 (1x500) Coal

Kahalgaon Stage II Phase II (Bihar) 500 (1x500) Coal

SipatI(Chhattisgarh) 1980 (3x660) Coal

SipatII (Chhattisgarh) 500 (1x500) Coal

Barh - I (Bihar) 1980 (3x660) Coal

Korba-III (Chhattisgarh) 500 (1x500) Coal

Bhilai Exp. Power Project,

JV with SAIL (Chhattisgarh)

500 (2x250) Coal

NCTPP-II, Dadri, Uttar Pradesh 980 (2x490 MW) Coal

Farakka III, West Bengal 500 (1 X 500) Coal

Simhadri - II,Andhra Pradesh 1000 (2x500) Coal

Vallur (JV with TNEB), Tamil Nadu 1000 (2x500) Coal

Aravali Super Thermal Power Project, Jhajjar (JV with

Haryana & Delhi)1500 (3x500) Coal

Koldam HEPP(Himachal Pradesh) 800 (4x200) Hydro


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Loharinag Pala HEPP(Uttaranchal) 600 (4x150) Hydro

Tapovan Vishnughad(Uttaranchal) 520 (4x130) Hydro

Total 13360

B) New projects being pursued for benefits starting in the 11th Plan capacity addition

for Eleventh Plan and beyond

In addition to the above on-going projects, proposals for a host of new power projects as

given below are being pursued for benefits starting in the 11th plan subject to timely linkages,

clearances/approvals.

Sl.

No.Project/ State

Capacity

(MW)Fuel

1 Mauda, Maharastra 1000 Coal

2 Bongaigaon TPP, Assam 750 Coal

3 Barh-II, Bihar 1320 Coal

4 Nabinagar-JV with Railways-Bihar* 1000 Coal

5 North Karanpura, Jharkhand 1980 Coal

6 Rihand - III 1000# Coal

7 Kawas-II CCPP, Gujarat@ 1300 Gas/LNG

8 Jhanor Gandhar-II CCPP, Gujarat@ 1300 Gas/LNG


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NTPC IN SINGRAULI

NTPC/Singrauli, the flagship station of NTPC is situated in Sonebhadra District of Uttar

Pradesh. It has five Units of 200 MW (Turbine: KWU design, Boiler: Combution

Engineering Design) and two Units of 500 MW (Turbine: KWU design; Boiler: Combustion

Engineering Design). Condenser cooling system of all units is open system. It takes water

from Govind Ballabh Pant Reservoir and releases in the same reservoir after a distance of

around 10 KM through open canal. NTPC, Singrauli has its own MGR (Merry Go Round)

system for transportation of coal from NCL Jayant mines. Electricity generated from this

plant goes to northern grid (UP,Harayana,Delhi,Rajsthsan,Panjab, J&K,HP&

Uttaranchal).Start up power can be taken from Rihand hydle or from NTPC,Vindhyachal

(Western grid ). Earlier Whole ash generated was disposed in ash dyke in slurry form. Now

part of ash is being disposed in dry form for brick manufacturing and some part is provided to

cement Manufacturers. The first unit of the station was commissioned in 1982 and the last

one in 1987.Since then NTPC, Singrauli is serving the nation day and night.

During the initial period of operation NTPC Singrauli faced many operational

problems in running the units of 200MW and 500MW. Experienced personnel for running

200MW sets with NTPC at that time were very few and for 500MW sets, were almost nil.

Over the year of operation NTPC, Singrauli has not only overcome the operational problems

but has also developed best practices which are very much useful for future NTPC stations

and have been implemented in other station also.


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SINGRAULI THERMAL POWER PROJECT

1-LOCATION

SUB-DIVISIONAL OFFICE : DUDHI

DISTRICT & STATE : SONEBHADRA, UTTER PRADESH

NEAREST MAJOR ROADHEAD : PIPRI-SINGRAULI

NEAREST MAJOR RAILHEAD : SHAKTINAGAR & RENUKOOT

NEAREST AIRPORT : VARANASI

2- CAPACITY IN MW : STAGE-1 STAGE-2 TOTAL

(MEGA WATT) 600 MW 1400 MW 2000 MW

(3 x 200) (2 x 200+2 x 500 )

Major Achievements of NTPC

Largest thermal power generating company of India.

Sixth largest thermal power generator in the world.

Second most efficient utility in terms of capacity utilization. One of the nine PSUs to be awarded the status of Navratna.

Provides power at the cheapest average tariff in the country.


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HISTORY OF NTPC

1975

IIncorporated in November

1977

NNTPC acquired the first patch of land at Singrauli.

TThe first batch of executive trainees joined the company

1978

TTakeover of management of the Badarpur project

CConstruction of the first transmission network Sanghrauli- Korba- Kanpur of 400 KV

systems started

1982

PPower Management Institute, Delhi, a centre for education was established

1983

IIn the very first year of commercial operation , NTPC earned a profit of Rs 4.51 crore

in the financial year 1982-83

1985 TThis year marked the completion of decade (1975-1985) of NTPCs existence. NTPC

achieved a generating capacity of 220 MW by commissioning 11 units of 200 MW each

at its various projects in country

TThe government of India approved the setting of three gas based combine cycle

projects by NTPC in Kawat in Gujrat, Auraiya in Uttar Pradesh and Anta in Rajasthan.

For these projects, the World Bank agreed to provide US$ 485 million, which was the

largest single loan in the history of bank.

1987

CCrossed the 5000 MW capacity mark

1989

CConsultancy division launched


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1990

Total installed capacity crossed 10000MW

1992

AAcquisition by the company of Feroz Gandhi Unchahar Thermal Power Station (2x210

MW) from Uttar Pradesh Rajya Vidyut Utpadan Nigam Of Uttar Pradesh

1994

CCrossed 15000 MW of installed capacity

1995

NNTPC celebrated 20 yrs of its existence

A new logo was adopted

NNTPC took over the 460 MW Talcher Thermal power Station from Orrisa State

Electricity Board

1997

AAchieved 100 million units generation in one year

1998

CCommissioned the first Naphtha based plant at kayamkulam with a capacity of 350

MW

2000

CCommenced construction of a first hydro- electricity power project of 800 MW

capacity in Himachal Pradesh

2002

TThree wholly owned subsidiaries viz. NTPC Electric Supply Company Limited, NTPC

Hydro Limited, NTPC Vidyut Vyapar Nigam Limited incorporated.

2004

NNTPC became a listed company

NNTPC made its debut issue of euro bonds amounting to USD 200 million in

international market.

2005


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TThe company rechristened as NTPC Limited in line with its changing business

portfolio and transforms itself from a thermal power utility to an integrated power

utility.

2008

NNational Thermal Power Corporation is the largest power generation company in

India. Forbes Global 2000 for 2008 ranked it 411th in the world.

VISION AND MISSION OF NTPC :

VISION: To be one of the worlds largest and best power utilities,powering Indias growth.

To realize this vision, NTPC has drawn up a detailed Corporate Plan for the period

1997-2012 which represents the company's collective optimism and enthusiasm,

inspired by a glorious past, a vibrant present and a brilliant future. The Plan has been

prepared in-house in consultation the committed, competent and confident members of

the NTPC family. The road map that has been charted out was after a thorough scan of

the strengths and weaknesses within the organization as well as opportunities and threats

in the environment. Considering multidimensional opportunities in the energy sector,

NTPC will adopt a multi-pronged growth strategy for capacity addition through

Greenfield sites, expansion of existing stations, takeovers and joint ventures. The

capacity addition plans that we have drawn up for the fifteen-year period using all the

above strategies to enable the corporation to become a 40,000 MW company by 2012

A.D.

MISSION: Develop and provide reliable power, related products andservices at competitive prices, integrating multiple energy sources with

innovative and ecofriendly technologies and contribute to society"

Make available reliable and quality power in increasingly large quantities at

competitive prices and ensure timely realization of revenues.


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Adopt a broad based capacity portfolio including Hydro Power, LNG, Nuclear Power,

and non conventional and eco-friendly fuels

Plan and speedily implement power projects using state-of- the art technologies.

Be an integrated utility by implementing strategic diversifications in areas such aspower trading distribution, transmission, coal mining, coal beneficiation etc.

Develop a strong portfolio of profitable businesses in overseas markets including

technical services, generation assets etc.

Continuously attract and develop committed human resources to match world

standards.

Lead fundamental and applied research for adoption of the state-of-the-art

technologies, breakthrough efficiency improvements and new fuels.

Lead developmental efforts in the Indian power sector including assisting state utility

reform, policy recover etc.

Be a socially responsible corporate entity with thrust on environment protection, ash

utilization, community development, and energy conservation.

ORGANIZATION STRUCTURE AND CULTURE OF NTPC:

Organization Structure


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NTPC : Core Values &Objectives

CORE VALUESThis corporate plan provides details of the overall agenda for NTPC. The successful

delivery of this agenda would require a committed work force that identifies with and

supports the vision. To ensure realization of this corporate agenda, a set of core values

should be central to, and govern each activity of the organization. Known as one of the

NAVRATANS of the PSUS NTPC has its following core values. They are known as

(BCOMIT) as follows:-

B-Business Ethics

C-Customer Focus

O-Organizational & Professional pride

M-Mutual Respect and Trust

I- Innovation & Speed

T-Total quality for Excellence


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CORPORATE OBJECTIVE

BUSINESS PORTFOLIO GROWTH

To further consolidate NTPCS position as the leading thermal power generationcompany in India and establish a presence in hydro power segment.

To broad base the generation mix by evaluating conventional sources of energy toensure long run competitiveness and mitigate fuel-risks.

To diversify across the power value chain in India by considering backward andforward integration into areas such as power trading, transmission, distribution, coalmining, coal beneficiation, etc.

To develop a portfolio of generation assets in international markets. To establish a strong brand in the domestic & international market.

CUSTOMER FOCUS To foster a collaborative style of working with customer growing to be a preferred

brand for supply of quality power.

To expand the relationship with existing customers by offering a bouquet of services in

addition to supply of power e.g. trading, energy consulting, distribution consulting,

management consulting, management practices.

To expand the future customer portfolio through profitable diversification into

downstream business, inter alia retail distribution and direct supply.

To ensure rapid commercial decision making, using customer specific information with

adequate concern for the interests of the customer.

AGILE CORPORATION

To ensure effectiveness in business decisions and responsiveness to change in the

business environment by

Adopting a portfolio approach to new business development.

Continuous and coordinated assessment of the business environment to identify and

respond to opportunities and threats. To develop a learning organization having knowledge based competitive edge in

current and future businesses.

To effectively leverage information technology to ensure speedy decision making

across the organization.

PERFORMANCE LEADERSHIP


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To continuously improve on project execution time and cost in order to sustain long

run competitiveness in generation.

To operate & maintain NTPC stations at par with the best-run utilities in the world with

respect to availability, reliability, efficiencies. To aim for performance excellence in the diversification businesses.

To embed quality in all systems and processes.

HUMAN RESORUCE DEVELOPMENT

To enhance organizational performance by institutionalizing an objective and open

performance management system.

To align individual and organizational needs and develop business leaders by

implementing a career development system.

To enhance commitment of employees by recognizing and rewarding high

performance.

To build and sustain a learning organization of competent world-class professionals.

To institutionalize core values and create a culture of team building, empowerment,

equity, innovation and openness which would motivate employees and enable

achievement of strategic objectives.

FINANCIAL SOUNDNESS

To maintain and improve the financial soundness of NTPC by prudent management of

the financial resources.

To continuously strive to reduce the cost of capital through prudent management ofdeployed funds, leveraging opportunities in domestic and international financial

markets.

To develop appropriate commercial policies and processes this would ensure

remunerative tariffs and minimize receivables.

To continuously strive for reduction in cost of power generation by improving

operating practices.

SUSTINABLE and DEVELOPMENT

To contribute to sustainable power development by discharging corporate social

responsibilities.

To lead the sector in the areas of resettlement and rehabilitation and environment

protection including effective ash-utilization, peripheral development and energy

conservation practices.

To lead developmental efforts in the Indian power sector through efforts at policy

advocacy, assisting customers in the operations and management of power plants etc.


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RESEARCH and DEVELOPMENTS

To pioneer the adoption of reliable, efficient and cost-effective technologies by carrying out

fundamental and applied research in alternate funds and technologies.

To carry out research and development of breakthrough techniques in power plant

construction and operation that can lead to more efficient, reliable and environment friendly

operation of power plants in the country.

To disseminate the technologies to other players in the sector and in the long-run generating

revenue through proprietary technologies.

SWOT Analysis:

Strengths Largest market share in domestic power generation and a broad customer portfolio across

the country.

Excellent track record of performance in project implementation and plant operation.

Diversified thermal generation portfoliomultiple sizes and fuel types.

Highly skilled and experienced human resources, exposed to state-of-the art technologiesin project execution and power generation.

Navaratna status

Strong balance sheetability to raise low cost debt.

Engineering skills in project configuration and package design.

Turnaround ability for old plantsdemonstrated in the takeover plants of Talcher, Tanda& Unchahar.

High credit rating that is indicative of the confidence of lenders.

Thrust on reducing social costs of capacity growthstrong execution of Resettlement andrehabilitation plans.

Weakness Poor financial health of customers.

Functional orientation hampering cross functional perspective in decision making.

Long and multi layered procurement process leading to long lead times and process delay.

Gaps in HR systems such as performance management, rewards and incentives and careerdevelopment.


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Inadequate deployment of a strong knowledge management system that could assist in

improving efficiency and effectiveness in all aspects of the business.

Hierarchy for decision making that affects responsiveness.

Role ambiguity and dilution within different lends of the organization.

Opportunities Expand generation capacities by putting up thermal and hydro capacities, maintain the

position of a dominant generating utility in the Indian Power sector.

Broad base fuel mix by considering imported coal, gas, domestic coal, nuclear power etcwith a view to mitigate fuel risks and maintain long run competitiveness.

Expand services for EPC, R&M and O&M activities in the domestic as well asinternational markets.

Backward integrate into fuel management to exercise greater control and understandingof supply economics.

Improve collections by trading, direct sale to bulk customers and the active role inallocation in new plants.

Execute increased number of power plants that classify for Mega Power Projects status,thereby reducing the cost of the projects and power and power generated.

Forward integrate into the distribution business in India.

Threats Limited experience of operating in a truly liberalized environment with competition.

Limited experience of operating in an independently regulated system.

Redirecting power may be constrained by inter-regional connectivity.

Absence of an independent regular for coal industry and the delay in private investmentslending to the risk of low availability of coal in the future.

WORKING CAPITAL MANAGEMENT-AN OVERVIEW

INTRODUCTION:

Working capital means the funds which are required to meet the daily transactions of the

business .In other words it refers to that part of the firms capital which is required for

financing current assets such as cash, marketable securities, debtors and inventories. Thus

working capital is very significant facet of financial management. Every business concern


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should have adequate working capital to run its operations smoothly. It should have neither

excess working capital nor inadequate working capital because both of these have adverse

effects on firms profitability and liquidity positions. Therefore, business concerns should

maintain adequate working capital. The basic objective of working capital is to manage thefirms current assets and current liabilities in such a way that that a satisfactory leve l of

working capital is maintained.

Working capital policies have a great effect on a firms liquidity and profitability. Therefore,

the working capital should be managed in such a way which will ensure higher profitability

and proper liquidity to the business concern.

The significance of working capital management is to ensure that the organization maintains

a good fit with the changing environment and strives to build the capability to cope with

challenges.

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital:

Balance sheet concept or traditional concept.

Operating cycle concept.

BALANCE SHEET CONCEPT OR TRADITIONAL CONCEPT


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It shows the position of the firm at a certain point of time. It is calculated on the basis of

balance sheet prepared at a specific date. In this method there are two types of working

capital.

Gross working capitalNet working capital

GROSS WORKING CAPITAL

It refers to a firms investment in current assets. The sum of the current assets is the wo rking

capital of the business. The sum of the current is quantitative aspect of working capital which

emphasizes more on quantity than on its quality, but it fails to reveal the true picture of the

financial position of the business because every increase in current liabilities will decreasethe gross working capital.

NET WORKING CAPITAL

It is difference between the current assets and current liabilities or the excess of total current

assets over total current liabilities. It can also be defined as that part of a firms current asset

which is financed with long term funds. It may be either negative or positive. When the

current assets exceed the current liabilities, the working capital is positive and vice-versa.

OPERATING CYCYE CONCEPT

The duration or time required to complete the sequence of events right from the purchase ofraw materials for cash to the realization of sales in cash is called operating cycle or working

capital cycle. The operating cycle consists of three phases:

In phase 1, cash gets converted into inventory. This would include purchase of raw materials,

conversion of raw materials into work-in-progress, finished goods and terminate in the

transfer of goods to stock at the end of the manufacturing process. In the case of trading

organization, this phase would be shorter as there would be no manufacturing activity and


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cash will be converted into inventory directly. The phase will, of course, be totally absent in

case of service organizations.

In phase 2 of the cycle, the inventory is converted into receivables as credit sales are made to

customers. Firms which do not sell on credit will obviously not have phase 2 of the operatingcycle.

The last phase, phase 3, represents the stage when receivables are collected. This phase

completes the operating cycle. Thus, the firm has moved from cash to inventory, to

receivables and to cash again.

FIXED/PERMANENT WORKING CAPITAL

To carry on business, a certain level of working capital is necessary on a continuous and

uninterrupted basis, for all practical purpose, the requirement has to be met as with other

fixed assets. Permanent working capital represents the minimum level of raw materials,

work-in-progress, finished goods, stores, accounts receivables and cash which are in

circulation to ensure continuity of production.

Permanent working capital is again divided into two parts: regular working capital and

reserve working capital. The portion of fixed working capital which is utilized to carry out

the cyclical operation of current assets in the form of conversion of liquid cash into raw


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materials, raw materials into finished goods, finished goods into debtors and debtors into

liquid cash in a continuous manner is known as regular working capital. On the other hand,

the portion of fixed working capital, which is preserved for meeting uncertain and emergent

working needs (like sudden price hike, abnormal scarcity in times of war, natural calamity,etc) is known as reserve working capital.

VARIABLE/TEMPORARY WORKING CAPITAL

Besides fixed working capital, a business may need additional working capital to meet the

growing demands of busy seasons at stated intervals. If the demand for the products of the

business goes up at any time it needs additional funds to pay for more materials, labour and

other expenses and to meet the requirement of cash balance to be maintained in the changed

situation. This additional working capital needed to feed the operating cycle in busy business

periods is known as variable or temporary working capital. It is called variable or temporary

because the business does not need it always but it is required according to the need of the

situation.

Generally the importance of variable working capital is more acute in business concern

having seasonal market demands. Variable or temporary workingcapitalmay be further sub-

divided into (a) seasonal working capital and (b) special working capital.

The additional working capital required by a concern to carry out its operating activities in

busy seasons of high market demands is known as seasonal working capital. Businesses

which mostly have seasonal demands of their products like ice- cream, cold drinks, wool and

likely products manufacturing concern may need huge amount of seasonal working capital. Inother business concerns too the market may rise to the peak in some particular time period.

So in all types of business a portion of working capital may be preserved for meeting

seasonal needs. On the other hand, the portion of working capital that is needed by a concern

to meet the extraordinary requirements of special situations is known as special working

capital. This is called special working capital because it is needed in special situations and not

in normal circumstances.


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Diagrammatic representation of the concept of working capital

IMPORTANCE OF WORKING CAPITAL

The adequate reserve of working capital ensures a steady flow of raw materials to the

production process.

The adequate reserve of working capital indicates the good solvency position of the

concern and helps it to get loan from the market at favorable terms.

The adequate stock of working capital makes it possible for a concern to purchase the

trading goods in cash and cash purchase always carries the benefit of getting cash

discount.

A strong working capital base is probably the only remedy to overcome the oddsituations like dull market conditions, scarcity of raw materials and other components

in case of any emergency, sudden market fluctuations, etc.

A business concern can exploit the market opportunities with the help of adequate

working capital.

The regular flow of adequate working capital makes possible efficient use of fixed

assets, reduces wastage, ensures quick replying of current assets, and establish a well-

tuned working environment.


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A quick rotation of working capital cycle and an efficient management of working

capital reduce cost and increases production and sales. The combined effect of all

these favorably add to the profitability of the concern.

The adequate amount of working capital and its quick rotation increases profit. Therate of dividend of the shareholders also increases as a result of such increase in

profit.

Sufficient working capital helps in research and development to face the present era

of cut throat competition and quick technological advancement.

DETERMINANTS OF WORKING CAPITAL

The total working capital requirement is determined by a wide variety of factors. It should be,

however, noted that these factors affect different enterprises differently. They also vary from

time to time. In general, the following factors are involved in a proper assessment of the

quantum of working capital required:-

GENERAL NATURE OF BUSINESS:The working capital requirements of an enterprise are basically related to the conduct of the

business. According to the nature of business they have to maintain a sufficient amount of

cash, inventories and book debts. The industrial concerns require fairly large amounts of

working capital though it varies from industry to industry depending on their assets structure.

PRODUCTION CYCLE:Another factor which has a bearing on the quantum of working capital is the production

cycle. The term production or manufacturing cycle refers to the time involved in the

manufacture of goods. It covers the time-span between the procurement of raw materials and

the completion of the manufacturing process leading to the production of finished goods. To

sustain such activities the need of working capital is obvious.

BUSINESS CYCLE:

The working capital requirements are also determined by the nature of the business cycle.

The variations in business conditions may be in two directions: (i) upward phase when boom

conditions prevail, and (ii) downward phase when economic activity is marked by a decline.

During the upswing of the business activity the need of working capital is more as opposed to

the downward phase of the business.

PRODUCTION POLICY:The requirement of working capital also depends on the production policy of the firm. In

manufacturing concerns having mostly seasonal demand for the product the production

policy is a significant determinant of working capital.


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CHANGES IN PRICE LEVEL:General increase in price level increases working capital need of a firm because the firm has

to pay more for maintaining the previous level on working capital

GROWTH AND EXPANTION:As a company grows, it is logical to expect that a larger amount of working capital will be

required. The critical fact is however, is that the need for increased working capital funds

does not follow the growth in business activities but precedes it.

AVAILABILITY OF RAW MATERIALS:In case raw materials are easily available on soft terms the firm does not require maintaining

a huge inventory of raw materials. Such a firm does not require blocking up huge amount of

working capital for this purpose. On the contrary if raw materials are scarce and its supply is

irregular and seasonal in nature the firm needs to store a reasonable quantity of raw materials

in hand. The working capital need of such a firm is significantly high.DIVIDEND POLICY:The payment of dividend consumes cash resources and, thereby, affects working capital to

that extent. Conversely, if the firm does not pay dividend but retains the profits, working

capital will increase.


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STRUCTURE OF WORKING CAPITAL

The structure of working capital includes a study of the components of current assets and

current liabilities.

CURRENT ASSETS:The list of current assets comprises inventories (including raw materials, work-in-progress

and finished goods and spares), sundry debtors including receivables, readily realizable

securities and tax reserve certificates, short-term investments, accrued incomes, prepaid

expenses (not in the nature of deferred charge), cash at bank, and cash in hand.

In NTPC Power Plant current assets are:

Sundry debtors

Cash & bank balances

Interest receivable/accrued Loans & advances etc.

CURRENT LIABILITIES:The list of liabilities includes trade creditors, accounts payable, outstanding or accrued

expenses, bank overdraft, outstanding liabilities, short-term loans and borrowings and certain

obligations including different provisions, i.e., provision for taxation, proposed dividend etc.

In Singarwali power Plant current liabilities are:

Sundry creditors

Advances from customers

Security deposit

Other liabilities etc.

FACTORS TO BE CONSIDERED WHILE ESTIMATING WORKING

CAPITAL REQUIREMENT

Total costs incurred on materials, wages and overheads.

The length of time for which raw materials remain in stores before they are issued to

production.

The length of the production cycle or work-in-progress, i.e., the time taken for

conversion of raw materials into finished goods.

The length of the Sales Cycle during which finished goods are to be kept waiting for

sales.

The average period of credit allowed to customers.

The amount of cash required to pay day-to-day expenses of the business.

The amount of cash required for advance payments if any.

The average period of credit to be allowed by suppliers.


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SOURCE OF WORKING CAPITAL FOR SINGRALI POWER PLANT

The allocated amount by the registered office of NTPC in New Delhi gets transferred into the

cash credit account of Singarwli power Plant in State Bank of India, Saktinagar. This cash

credit account is the source of working capital for NTPC. The plant uses this amount to meet

its daily expenditure. At the end of the day the balance of this account is transferred back into

account of NTPC, New Delhi. This practice is done on a daily basis.

WORKING CAPITAL MANAGEMENT IN NTPC

1) NET WORTH

The net worth of the company at the end of fiscal 2009 was Rs.449,587 million an increase of

Rs.31,824 million over the previous year mainly due to retained earnings.

2) LOAN FUNDS

Our loans outstanding as March 31, 2009 stood at Rs.201, 973 million in comparison to

Rs.170,878 million as at March 31, 2008. A summary of the loans outstanding is given

below:

2009 2008 % change

Secured loans

Bonds 47,044 32,077 47%

Foreign CurrencyTerms loans 10,274 12,319 -17%

Other 9 11 -18%

Sub-total 57,327 44,407 29%

Unsecured loansFixed deposits 778 4,159 -81%

Bonds 5000 -100%

Foreign CurrencyBonds/Notes 22,475 8,814 155%

Foreign CurrencyTerms loans 33,336 32,608 2%

Rupee term loans 87,821 75,339 17%Loans from government ofIndia 236 551 -57%

Sub-total 144,646 126,471 14%

Total 201,973 170,878 18%

The change in the loans outstanding is mainly because of the borrowings and repayments

made during the year. During the year the company issued one series of rupee denominated


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bonds through private placement amounting to Rs.10, 000 million. The bonds have been

issued for a period of 14 year with redemptions in equal semi-annual installments beginning

at the end of three years.

The debt to equity ratio at the end of fiscal 2009 of the company went up to 0.45 from 0.41 at

the end the previous fiscal.

3) FIXED ASSETS

During the year we added Rs.29,334 million to our gross block mainly on account of

capitalization of capital works in progress pertaining to projects which were commercialized

during the year. With capital expenditure being incurred on various on-going projects the

capital work in progress has shown a substantial increase.

2009 2008 %changeGross block 460,396 431,062 7%

Net block 230,895 223,148 3%

Capital work-in-progress 103,999 67,063 55%

Construction stores and advances 32,341 32,189 0%

Total fixed assets 367,235 322,400 14%

4) INVESTMENTS

Investments comprise bonds issued by various state governments under the one-time

settlement scheme, equity investments in joint venture and subsidiary companies and

investments out of surplus cash in various instruments as per the policy of the company. The

break-up of investments is as follows:

2009 2008

Bonds issued under onetime settlement scheme 171,762 164,107

Investments in jointventures 6,818 1,318

Investment in subsidiaries

304 252Investment of surplus cashin various instruments

8,508 32,504

Others

Bonds against dues 5,306 7,428

Investments of developmentsurcharge on behalf ofcustomers 193 2,368


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Total investments 192,891 207,977

5) CURRENT ASSETS

The current assets and current liabilities as at March 31,2009 and March 31,2008 and the

changes therein were as follows:

2009 2008 Change

Current assets Amount % ofcurrent

assets

Amount % ofcurrent

assets

Amount %

Inventories 23,405 15% 17,819 14% 5,586 31%

Sundry debtors 8,678 6% 13,747 11% -5,069 -37%

Cash and Bankbalances 84,714 54% 60,783 47% 23,931 39%

Other Current assets10,161 6% 9,764 7% 397 4%

Loans and advances30,287 19% 26,993 21% 3,294 12%

Total current assets157,245 100% 129,106 100% 28,139 22%

A major part of current asset comprised cash and bank balances. As at March31,2009, the

cash and bank balances stood at Rs. 84,714 million being 54% of the total current assets in

comparison to Rs. 60,783 million as at March 31,2008 which was 47% of the total current

assets as on the date. Of these, Rs. 82,887 million were kept as term deposits with banks as

on March 31, 2009 while the term deposits for the last year Rs. 57,050 million.

The next largest component of our current assets is Loans and Advances which mainly

include a sum of Rs. 9,573 million as loan to the government of Delhi subsequent to the

conversion of the dues of Delhi Vidyut Board into loan under the one-time-settlement

scheme. The government of Delhi pays us 8.5% tax-free interest on these Bonds. The other

loans and advances to employees given for various purposes such as building of house,

purchase of vehicles etc. as per the policies of the company.

Inventories as at March 31, 2009 were Rs. 23,405 million being 15% of current assets as

against Rs. 17,819 million as on March 31, 2008 which was 14% of the current assets as on

that date. Our inventories mainly comprise components and spares and coal which we


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maintain for operating our plants. Components and spares were Rs. 12,894 million as against

Rs. 11,904 million in the last year. Coal inventories amounted to Rs. 7,476 million as against

Rs. 3,115 million in the previous year indicating improved coal supply position.

6) CURRENT LIABILITIES

Our current liabilities as at March 31, 2009 were Rs. 49,102 million as against Rs. 52,306

million in the previous year. Our current liabilities mainly comprise creditors for capital

expenditure, creditors for supply of goods and services, deposits and retention money from

contractors. The liabilities for these at the end of the year stood at Rs. 36,057 million as

against Rs. 33,168 million in the previous year. Besides these, we also owed a sum of Rs.

9,886 million to our customers as against Rs. 14,431 million in the previous year. These sums

include amount payable to the customers since we are billing our customers for electricity on

provisional tariffs as per directions of CERC, which are higher than the tariffs estimated by

us as per CERC Regulations. These amounts would be paid or adjusted against future billings

as and when the final tariffs for various stations are determined by the regulator.

2009 2008 Change

Current assets Amount % ofcurrentassets

Amount % ofcurrentassets

Amount %

Liabilities 49,102 80% 52,306 78% -3,204 -6%

Provisions 12,300 20% 15,161 22% -2,861 -19%

Total Current

liabilities 61,402 100% 67,467 100% -6,065 -9%

7) PROVISIONS

As at March 31, 2009 had provisions for certain liabilities outstanding amounting Rs. 12,300

million as against Rs. 15,161 million on 31 March, 2008. This mainly comprised Rs. 6,596

million as proposed dividend which we would be paying to our shareholders after they

approve the same in the shareholders after they approve the same in the shareholders`

meeting. We also had a provision outstanding of Rs. 4,770 million towards retirement

benefits payable to our employees.

8) CASH FLOWS

The cash and cash equivalents and cash flows on various activities for the past five years are

tabulated below:


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Our net cash from operating activities for the year ended March 31, 2009 increased by 22%

from the previous year. The net cash from operating activities was Rs. 62,064 million as

against Rs. 50,998 million for the previous year.

Our net cash used in investing activities decreased to Rs. 27,136 million in fiscal 2006 from

Rs. 64,136 million in the previous year. Cash flows on investing activities arise from

expenditure on setting up power projects, investment of surplus cash in various securities,

investment of development surcharge recovered from customers, investments in joint

ventures and subsidiaries. The cash utilized for purchase of fixed assets increased by 25%

from Rs. 53,699 million in the previous year to Rs. 66,956 million during this year. Cash was

also realized on maturity of certain investments during the year.

During the year we used Rs. 10,997 million of cash on financing activities. In the previous

year we had a net inflow of Rs. 7,570 million from financing activities mainly due to receipt

of Rs. 26,841 million as proceeds from our initial public offering of shares. During the

current year we had inflow of Rs. 29,592 million in the previous year. The cash used for

repayment of long term borrowings this year was Rs. 17,131 million as against Rs. 13,242

million repaid in the previous year. The cash used for paying dividend and the tax thereon

was Rs. 30,087 million as against Rs. 23,397 million in the previous year.

For the year ended march 31st

2009 2008 2007 2006 2005

Opening cash andCash equivalents 60,783 66,351 23,894 13,659 12,015

Net cash fromoperating activities 62,064 50,998 58,118 47,402 29,372

Net cash used ininvesting activities 27,136 64,136 24,597 31,881 28,377

Net cash flow fromfinancing activities 10,997 7,570 8,873 5,271 630

Intangibles 63 15 19

Change in cash and

cash equivalents 23,931 5,568 42,457 10,235 1,644Closing cash and cashequivalents 84,714 60,783 66,351 66,351 13,659

WORKING CAPITAL OVERALL TURNOVER RATIO

1. CURRENT RATIO


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Current Ratio = Current Assets

Current Liabilities

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Current

Assets 167990 194132 135468 129073 157245

Current

Liabilities 31881 34202 65244 52306 49102

Ratio 0.52 0.94 2.0 2.4 3.2

In year 2004-05 management is not good so CR is not good. Therefore liquidity

condition is not good and 2005- 06 also the liquidity condition is not good. But after

government reforms some policies and management styles be change therefore CR

CURRENT RATIO

0

0.5

1

1.5

2

2.5

3

3.5

YEAR

RATIO

Ratio

Ratio 0.52 0.94 2 2.4 3.22004-05 2005-06 2006-07 2007-08 2008-09


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ratio gradually increase and 2006-07. CR is optimal but after that year liquidity

increase so company has to bear additional cost of working capital.

2. QUICK RATIO

Quick Ratio = Current AssetsInventory

Current Liabilities

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Inventory 157596 176420 118088 111296 133840

Current Liabilities 31881 34202 65244 52306 49102

Ratio 4.9 5.1 1.8 2.1 2.7

QUICK RATIO

0

1

2

3

4

5

6

YEAR

RATIO

Ratio

Ratio 4.9 5.1 1.8 2.1 2.72004-05 2005-06 2006-07 2007-08 2008-09


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In quick ratio every year 2004- 2009 additional cost is increase so company has more

liquidity.

1. Cash Turnover Ratio

Cash Turnover Ratio = Interest & Finance Charges

Average cash balance

(In Million)

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Interest & Finance Charges 8677 9916 33697 16955 17632

Average Cash Balance 7939.025 8747.79 5769 33437 72748.5

Ratio 1.09 1.13 5.84 0.5 0.24


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In cash holding period shows how much company hold cash against immediateliquidity. From this figure we can observed that company has very poor cash

management. In this ratio, we see that how many days company hold the cash.

CASH HOLDING PERIOD

0

200

400

600

800

1000

1200

1400

1600

YEAR

DAYS

Days

Days 334 322 62 720 1506

2004-05 2005-06 2006-07 2007-08 2008-09


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2. Cash to Current Liabilities

Cash to Current Liabilities = Cash

Current liabilities

(In Million)

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Cash 12048 5447 6091 60783 84714

Current Liabilities 31881 34202 65244 52306 49102

Ratio 0.37 0.15 0.09 1.16 1.72

CASH TO CURRENT LIABILITIES

0

0.5

1

1.5

2

YEAR

RAtio

Ratio

Ratio 0.37 0.15 0.09 1.16 1.72

2004-05 2005-06 2006-07 2007-08 2008-09


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INVENTORY MANAGEMENT IN NTPC

1. INVENTORY TURNOVER RATIO

Rs. Million

YEAR COST OF

GOOD

SOLD

INVENTORY

OP. BAL.

INVENTORY

CLO. BAL.

AVERAGE

INVENTORY

RATIO

2004-05 1,60,156 20,176 17,712 37,888/2 8.454

2005-06 2,00,562 17,712 17,380 35,092/2 11.43

2006-07 1,94,734 17,380 17,819 35,199/2 11.06

2007-08 2,24,818 17,819 23,405 41,224/2 10.90

2008-09 2,64,842 23,405 25,102 48,507/2 10.91

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

AVERAGE INVENTORY = OPENING BALANCE + CLOSING BALANCE

2


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This ratio is designed to major the efficiency to use of inventory in other words. It major the

efficiency of inventory management as all inventory is used to ultimately facilities sales at

carries a cost, it is to be related to cost of goods sold to major its efficiency. Cost of goods

sold although a cost also indicates it turnover achieves. Its increase over the year would

therefore be natural. The cost of goods sold over the period of 5 years accept follow arising

trends accept for a slide decrease in the year 2004-05. The average inventory shows

controlled level up to the year 2004-05 and increase there after you to the exercise

Renovation & Modernization being a ambartha upon in the older unit such as Singrauli. The

ratio likewise registers generally stable trends showing stability with a receding trends

signifying quite and efficient inventory management.

INVENTORY TURNOVER RAIO

8.454

11.43 11.06 10.9 10.91

0

2

4

6

8

10

12

14

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

RATIO


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2. INVENTORY HOLDING PERIOD

Rs. Million

YEAR INVENTORY

OP. BAL.

INVENTORY

CLO. BAL.

AVERAGE

INVENTORY

COST OF

GOOD

SOLD

RATIO

2004-05 20,176 17,712 37,888/2 1,60,156 43.17

2005-06 17,712 17,380 35,092/2 2,00,562 31.93

2006-07 17,380 17,819 35,199/2 1,94,734 32.98

2007-08 17,819 23,405 41,224/2 2,24,818 32.73

2008-09 23,405 25,102 48,507/2 2,64,842 33.42

INVENTORY HOLDING PERIOD RATIO = AVERAGE INVENTORY * 365

COST OF GOOD SOLD


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The average holding period is reciprocal of inventory turnover ratio and indicated stability &

controlled with the duration ranging from 44 days in 2004-05 and 34 days 2008-09, alter first

year. Period the holding period received to 32 days in 2005-06 year and raise marginally to

33 days in 2006-07. The controlled inventory holding period indicates sound inventory

management with the majors mentioned about despite the fact that due to many spares being

scares the inventory for them is currently being procured for up to 2 years in advances for

uninterrupted operation.

INVENTORY HOLDING PERIOD

43.17

31.93 32.98 32.73 33.42

0

10

20

30

40

50

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

RATIO


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3. INVENTORY TO BILL RECEIVABLE

Rs. Million

YEAR INVENTORY INVENTORY

BILL

RECEIVABLE

RATIO

2004-05 17,712 1,24,399 0.142

2005-06 17,380 4699 3.69

2006-07 17,819 13,747 1.29

2007-08 23,405 8,678 2.69

2008-09 25,102 12,523 2

INVENTORY TO BILL RECEIVABLE RATIO = INVENTORY

BILL RECEIVABLE


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Inventory and receivable are both current assets and in the sequence in the cycles. Inventory

leads to receivable. Receivable are a reflection of sales maximizing Receivable with

controlled inventories would translate as a profitable enterprises the ratio therefore must

follow a receding trends normally and a reversal only in a situation of receivable promptly

services. The ratio follows the mix trends rising from 0.14 2004-05 to 3.69 in 2005-06. The

ratio received to 1.29 in 2006-07 to 2.69 in 2007-08, it finally reduced to 2008-09. It there

after registers increases mainly due to expansion and accelerated Renovation &

Modernization.

INVENTORY TO BILL RECEIVABLE

0.142

3.69

1.29

2.69

2

0

0.5

1

1.5

2

2.5

3

3.54

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

RATIO


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4. FUEL TO TOTAL INVENTORY

INVENTORY TO TOTAL FUEL = INVENTORY

FUEL

(In Million)

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Inventory 20176 17712 17380 17777 23405

Fuel 6757 5015 4407 4583 9053

Ratio 2.99 3.53 3.94 3.88 2.58

INVENTORY TO FUEL

0

1

2

3

4

5

YEAR

RATIO

Ratio

Ratio 2.99 3.53 3.94 3.88 2.58

2004-05 2005-06 2006-07 2007-08 2008-09


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Fuel (Coal, Oil, Naphtha) are a large part of inventory of NTPC. This ratio seeks to determine

a trend of this proportion over the year. It is seem proportion of fuel in the total inventory

ranges between 0.528 to 0.26 up to 2004-05 it then increases 3.94 in 2006-07. While small

fluctuation may be due to incidental events it is seen that with expansion in capacity fewer

assumes a proportions nearing 40% of the total inventory.

FINDINGS


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In current ratio is increases year by year means liquidity increases after 2006 -07.

Liquidity increases mean company has more cash for new project.

Quick ratio is again high means company has high liquidity power to liquidate. Butcompany should invest in the new project.

The company has an excellent short-term liquidity position and it should look

forward to improve it in the future.

Inventory turnover ratio was increased in 2004-05 to 2006-07 but further its constant.

It means Company was able to overcome the short coming to a limit. So many is on

the positive pace which is expected to maintain in future also.

Install capacity ratio was declined in 2004-05 to 2006-07 and then increased in 2007-

08 and 2008-09, which means they are increased install capacity ratio with the control

the inventory and increased production.

Inventory holding period within 5 years slightly up and down but they control holding

period (i.e. 30 days) which means sound inventory management.

SUGGESTIONS


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Singrawli power Plant should concentrate on JIT (Just-in-time) technique of

manufacturing. This will help in minimizing the blockage of funds.

The company should search for more source of raw materials as it will reduce the cost

of production and improve the profitability of the plant.

The management of the plant should incorporate TQM (Total quality management),

particularly in all departments of production to ensure better sales and reduce the

inventory of finished products.

Singrawli power plant should try to fix a standard in respect of holding period of raw

materials. This will help NTPC to reduce the blockage of funds in raw materials and

improve the liquidity of the company. The company should take into account the

irregularities in the supply of raw materials while making such standards because

fluctuations in supply of raw materials affect the production process.

The company should review its credit policy at frequent intervals which will help it to

reduce debtors so that the money can be used for other investment plans.

NTPC should try to invest the excess cash balance after keeping the required amount

because holding of cash as idle is unproductive for the plant.

The plant must make efforts to follow a decreasing trend in current liabilities keeping

the turnover in mind. Since it is a liability, lower the better.

CONCLUSION


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The profitability of the plant is getting affected due to the holding of cash as idle

which is increasing year after year.

Singrauli Power Plant follows a good credit policy of debtors but a risk of bad debts

is always present in high debtors.

The company has an excellent short-term liquidity position and it should look

forward to improve it in the future.

Uneven trend in holding period of raw materials is a problem in Singrawli Power

Plant and this is affecting the liquidity of the company.

Singrauli Power Plant has increased its loans and advances over the four years which

shows that the plant is engaged in modernization of machinery. It is very essential

because it helps the company to compete with other competitors in the market. ThePlant should carry on such modernization plans in future as well.

The working capital ratio in NTPC is low and measures should be adopted to increase

it in future.

The management of the plant had been successful in timely recovery of accrued

interest from the concerned parties.

The holding period of finished and semi-finished product in Singrauli power plant has

increased over the four years though the turnover has gone up. Having such kind of

situation of situation further can cause a major impact on the liquidity of the

company.

On the whole after this detailed study of the working capital management practices in

Singrauli Power Plant, it can be said that it is managing its working capital quite

efficiently and its techniques are in sync with the latest practices of the Indian Power

industry.

BIBLIOGRAPHY

1. Annual report (NTPC) - 2004


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2. Annual report (NTPC) -2005





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http://www.ntpc.com/http://www.ntpc.com/http://www.ntpc.co.in/COMPANYhttp://www.ntpc.co.in/COMPANYhttp://www.ntpc.co.in/INTRODUCTIONhttp://www.ntpc.co.in/INTRODUCTIONhttp://www.ntpc.co.in/INTRODUCTIONhttp://www.ntpc.co.in/COMPANYhttp://www.ntpc.com/


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