Analysis of Value Added Ratios Introduction Ratios are the important tools for analysis of financial statements.

However, traditional ratios are not relevant for the analysis of value addition by a company. The value added ratios, as compared to traditional financial ratios, are more important and useful to judge the efficiency and effectiveness of an enterprise as regards to its sales promotion, utilization of funds, capital productivity, labour productivity, and so on. As these ratios are more sensitive to display the vivid picture about the efficiency of management in a highly complex and comparative business environment, therefore those are regarded as the index of managerial performance. Under this backdrop, a modest attempt is made in the present chapter to appraise the performance and productivity of sample companies during the study period, from 2004-05 to 2008-09, by analyzing the following value added ratios. 1.1Net Value Added to Sales Ratio The ratio of Net Value Added to Sales shows the contribution of a firms sales income towards value addition. It is computed by dividing Net value added by the amount of sales and expressed as: Net Value Added to Sales Ratio= NVA x100 Sales

Table-1 NET VALUE ADDED TO SALES RATIO Year/Company 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 3.89 2.01 4.52 4.03 3.77 3.64 MMTC 4.34 -8.04 -6.66 -6.35 1.69 -3.00 SAIL 33.53 47.52 59.56 57.61 59.95 51.63 HPCL 3.92 1.56 3.37 2.47 3.45 2.95 TATA 15.08 14.06 15.2 13.92 10.94 13.84 BHEL 19.03 14.49 15.98 18.17 15.26 16.58 ONGC 57.22 60.57 57.13 60.58 57.71 58.64 RIL 18.57 16.78 17.97 21.06 16 18.07 Avg 19.44 18.61 20.88 21.43 21.09

The Table-1 presents the net value added to sales ratio of all thirteen sample companies during the study period. It may be seen from the data presented in table that the proportion of NVA to sales widely fluctuated throughout the study. The ratio of ONGC depicted highest percentage (58.64 percent on an average) and that of MMTC showed lowest percentage, (-3.00 percent on an average) during the entire period of study. The fluctuations over the years for the sample units indicate the lack of planned approach to its operational activities. It also implies that either wrong investment was made in assets or that assets were not well utilised. Hence, the sample units which showed unsatisfactory ratio should try to increase their sales revenue by adopting an effective sales management strategy to enhance this percentage. 1.2 Net Value Added to Cost of Goods Sold This ratio shows the relationship between Net Value Added and cost of goods sold. It is arrived by dividing the amount of Net Value added by Cost of Goods Sold and can be expressed as follows: Net Value Added to Cost of Goods Sold= NVA x100 Cost of Goods Sold

Table-2 NET VALUE ADDED TO COST OF GOODS SOLD RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 4.01 2.1 4.91 4.38 4.19 3.918 MMTC 3.84 -11.74 -4.79 -2.91 2 -2.72 SAIL 31.16 175.9 172.7 123.4 -84.34 83.764 HPL 4.34 1.68 3.66 2.62 3.7 3.2 TATA 18.55 16.81 18.76 16.72 13.26 16.82 BHEL 24.05 18.11 18.52 22.45 19.21 20.468 ONGC 391.8 500.5 400.5 332.4 338 392.64 RIL 26.11 21.94 24.64 29.06 20.7 24.49 Avg 62.9825 90.6625 79.8625 66.015 39.59

From the table-2 it may be noted that, the Net Value Added to cost of goods sold Ratio had almost similar trend as observed in Net Value Added to Sales Ratio. The mean proportion of NVA to cost goods sold widely fluctuated throughout the study period. The ratio of

ONGCdepicted highest percentage (392.64percent on an average) and that of MMTC showed lowest percentage, (-2.72percent on an average) during the entire period of study. 1.3 Depreciation to Gross Value Added Ratio This ratio shows the relationship between the depreciation and Gross value added and is expressed as follows: Depreciation to Gross Value Added Ratio = Depreciation x100 GVA
Table-1.3 DEPRECIATION TO GROSS VALUE ADDED RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 20.92 33.58 17.15 19.82 17.55 21.804 MMTC 11.89 -9.8 -16.66 -7.63 50.39 5.638 SAIL 49.03 38.7 35.17 40.4 36.84 40.028 HPL 21.81 38.19 18.87 24.84 18.53 24.448 TATA 8.21 7.5 6.67 6.71 7.4 7.298 BHEL 8.71 7.88 6.42 5.27 5.54 6.764 ONGC 6.37 11.59 9.16 9.66 10.5 9.456 RIL 23.61 20.03 19.35 14.68 18.62 19.258 Avg 18.81 18.45 12.01 14.21 20.67

The table 1.3 reveals that, under study period the average figure of this ratio was highest (40.028) in SAIL and lowest (5.638) in MMTC. These figures imply that the sample units have not generated NVA sufficiently through production activities during the reference period. 1.4 Gross Profit to Net Value Added Ratio

Table-1.4 GROSS PROFIT TO NET VALUE ADDED RATIO Year 2004-05 2005-06 2006-07 2007-08 NALCO 76.3 218.4 174.1 199.4 MMTC -296.5 -392 588.4 1866 SAIL 298.2 210.4 167.9 173.6 HPL 245.1 439.2 234.4 242.1 TATA 123.9 116.4 124.9 120.2 BHEL 109.69 137.79 85.79 104.72 ONGC 149.2 145.1 150.1 135 RIL 155.4 140 150.7 130.7 Avg 107.6613 126.9113 209.5363 371.465

2008-09 Avg

270.4 187.72

904.8 534.14

166.8 203.38

196.1 271.38

160.2 129.12

134.64 114.526

143.7 144.62

142 143.76

264.83

Gross profit to Net Value Added ratio shows the relationship to Gross Profit in terms of Net value added. The following table shows Gross Profit to Net value added ratio of total sample companies for the period under study (2004-09). From the table 1.4 it may be noted that this ratio recorded an irregular trend for all most all the sample companies during the entire period under study. The annual average of this ratio showed a rising trend in the year 2008-09. All the sample companies average ratios were found to be positive during the period. 1.5 Profit before Taxes to Net Value Added Ratio The data assembled in Table 1.5 relates to the ratio of Net Profit before taxes to Net value added. It is evident that on an average the ratio declined slightly. The average of this ratio was positive and significant for all companies over the study. It was lowest for ONGC (37.22) and highest for BHEL (94.82). On the whole, the ratio showed an erratic trend.
Table-1.5 PROFIT BEFORE TAXES TO NET VALUE ADDED RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 60.41 25.7 66.1 55.65 19.8 45.53
MMTC

SAIL 43.32 65.02 73.97 63.2 66.7 62.44

HPL 68.05 23.64 61.8 35.44 25.33 42.85

TAT A 89.5 89.71 88.73 88.09 73.08 85.82

BHEL 93.02 94.24 94.79 95.99 96.07 94.82

ONGC 76.52 77.1 10.08 10.69 11.73 37.22

RIL 73.61 78.91 72.38 81.69 81.23 77.56

Avg 66.94 78.77 80.06 69.26 36.2

31.16 175.9 172.7 123.4 -84.34 83.76

1.6 Net Profit to Net Value Added Ratio The ratio of Net profit to Net value added shows how much percentage of value added remained for providers of own capital after meeting all the obligations and depreciation. This relationship has been computed by dividing Net profit after interest and taxes by the amount of Net value added. Net Profit to Net Value Added Ratio = Net Profit after Interest and Taxes x100 Net Value Added

Table-1.6 NET PROFIT TO NET VALUE ADDED (NPNVA) RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALC O 41.46 18.03 44.23 32.91 14.63 30.25 MMTC 8.29 179.1 213.7 115.3 -79.66 87.346 SAIL 23.77 39.68 48.66 43.61 43.35 39.81 HPL 54.11 36.37 51.92 44.09 13.33 39.96 TAT A 84.9 83.12 80.58 79.84 69.3 79.54 BHEL 78.29 88.11 84.47 90.95 87.3 85.82 ONGC 51.58 52.19 51.82 45.94 42.2 48.74 RIL 61.32 66.81 59.5 69.06 67.42 64.82 Avg 50.46 70.42 79.36 65.21 32.23

It is apparent from the Table 1.6 that the annual mean of the ratio marked a fluctuating trend during period under study. In year-wise analysis, it was found to be lowest in 2005-06 and highest (70.42 percent) and lowest in 2006-07 (32.23). Over again in company-wise analysis, highest ratio was found for MMTC (87.34percent) and lowest for SAIL (39.81 percent) during the entire study period. Thus it can concluded that though growth rate of Net profit to Net value added is not so excellent during period under study, as sample companies had kept only 30.25 percent of their Net value added for shareholders after meeting all their obligations and depreciation. 1.7 Net Value Added to Capital Employed Ratio Net Value Added to Capital employed ratio shows the power of each rupee of Capital employed by a company in generating NVA, basing on which the decision of management regarding further investment is taken. A declining trend in this ratio is not desirable from the

socio-economic viewpoint, as it depicts uneconomic utilization of resources of the society. This ratio was computed by dividing the amount of Net value added by the amount of Capital employed as shown below: Value Added to Capital Employed Ratio = Net Value Added x100 Capital Employed
Table-1.7 NET VALUE ADDED TO CAPITAL EMPLOYED (NVACAP) RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 35.27 16.62 42.52 38.04 41.65 34.82 MMTC 1.92 -2.07 -1.05 -0.99 18 3.162 SAIL 16.9 13.8 19.58 21.1 24.05 19.086 HPL 27.97 12.77 31.52 24.37 40.2 27.366 TATA 89.16 92.69 104 91.63 82.01 91.898 BHEL 183.18 170.86 187.67 179.38 137.85 171.788 ONGC 57.23 54.48 52.76 51.87 47.16 52.7 RIL 32.5 30.06 32.77 35.72 19.83 30.176 Avg 55.51 48.65 58.72 55.14 51.34

Figures Presented in table 1.7 shows the trend of value added to capital employed ratio rate during the period from 2004-05 to 2008-09 at current prices. The company-wise analysis depicts all the sample companies had considerable positive ratio during the study period. Varying in between 3.16 percent to 171.78 percent, the highest figure for the ratio was marked in case of BHEL and the lowest 3.16 percent recorded in MMTC. The growth rate of Value Added to Capital Employed was found positive only in case five samples, viz. NALCO, MMTC, SAIL, and HPL during the entire period of study. It is found that, the mean of this ratio has gradually declined over the years with an average of 48.37 percent. 1.8 Operating Profit to Capital Employed Ratio The Operating profit to Capital employed ratio is a measure of the returns that a business is achieving from the capital employed, usually expressed in percentage terms. Otherwise any increase in borrowing will reduce shareholders' earnings, and vice-versa. It is calculated as per the formula below:

Operating Profit to Capital Employed Ratio =

Operating Profit x100 Capital Employed

Table-1.8 OPERATING PROFIT TO CAPITAL EMPLOYED RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 26.49 12.05 36.19 26.98 37.44 27.83 MMTC -1.9 -4.25 -1.66 -1.39 64.77 11.114 SAIL 32.09 21.73 28.03 32.21 35.23 29.858 HPL 24.91 9.33 26.24 17.48 30.67 21.726 TATA 28.62 26.7 31.05 27.57 30.88 28.964 BHEL 94.76 49.51 57.59 54.32 58.41 62.918 ONGC 50.4 50.03 45.68 42.13 40.96 45.84 RIL 33.74 32.02 33.31 28.43 21.09 29.718 Avg 36.13875 24.64 32.05375 28.46625 39.93125

It may be noted from the Table 1.8 that the ratio of Operating profit to Capital employed of all the samples showed positive figures in the entire period of study except MMTC where it recorded negative in first four years. The BHEL and ONGC showed most significant figures in each and every year of study. The highest figure of this ratio (94.76 percent) was found in 200405 in case of BHEL and lowest (-) 4.25 percent in 2005-06 in case of MMTC. Again average of this ratio was maximum (62.92 percent) in BHEL and minimum (11.11 percent) in MMTC during the entire period of study as against industry average of 32.77 percent. From this it may be concluded that the Indian petroleum sector had earned operating profit about one-third of its capital invested by efficient utilization of its resources during the period. 1.9 Gross Value Added to Total Revenue Ratio The ratio of Gross Value Added to Total revenue reflects the percentage of Total revenue that consists of value generated by a concern and portion contributed by the outside parties. Needless to say that a higher proportion of Gross value added in Total revenue is considered as good showing better social performance. It may be calculated by dividing the figure of Gross value added by the figure of Total revenue. Symbolically it is expressed as:

Gross Value Added to Total Revenue Ratio = GVA x 100 Total Revenue
Table-1.9 GROSS VALUE ADDED TO TOTAL REVENUE RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 4.76 2.99 5.42 4.99 4.63 4.55 MMTC 4.14 -8.02 -4.66 -3.71 3.61 -1.72 SAIL 65.15 76.24 87.09 90.32 90.41 81.84 HPL 5.00 2.52 4.13 3.26 4.21 3.82 TATA 17.77 16.39 17.63 15.99 12.87 16.13 BHEL 23.02 18.01 18.78 21.79 18.53 20.02 ONGC 60.2 65.58 59.94 62.95 60.85 61.90 RIL 23.93 20.32 22.1 23.84 19.43 21.92 Avg 25.49 24.25 26.30 27.42 26.81

According to the figures compiled in table-1.9 ratio registered an irregular and erratic trend throughout the period of study with a periodic average of 36.61 percent. The MMTC company recorded lowest figure of the ratio amounting (-) 8.02 percent in 2005-06 and the highest figure recorded as 76.24 in SAIL in 2006-07. It can be believed that value generated by the Indian Petroleum sector as a percentage of total revenue is insufficient during the period of study. 1.10 Net Value Added to Total Revenue Ratio The ratio byestablishing the relationship between Net Value added and total revenue indicates business and social performance in better way. It is calculated by dividing the Net value added by the amount of total revenue as follows: Net Value Added to Total Revenue Ratio = NVA x 100 Total Revenue
Table-1.10 NET VALUE ADDED TO TOTAL REVENUE RATIO Year 2004-05 NALCO 3.76 MMTC 3.65 SAIL 33.21 HPL 3.91 TATA 16.31 BHEL 21.02 ONGC 56.36 RIL 18.28 Avg 19.56

2005-06 2006-07 2007-08 2008-09 Avg

1.98 4.49 4 3.82 3.61

-8.81 -5.43 -3.99 1.79 -2.55

46.73 56.46 53.83 57.1 49.46

1.55 3.35 2.45 3.43 2.938

15.17 16.45 14.91 11.92 14.95

16.59 17.58 20.64 17.5 18.66

57.99 54.45 56.87 54.46 56.02

16.25 17.83 20.34 15.81 17.70

18.43 20.64 21.13 20.72

It may be seen from the data presented in table that the ratio showed positive figures for all samples in the entire study period except MMTC. The industry average of this ratio arrived at 31.98 percent varying in between 27.66 percent in 2005-06 to 36.13 in 2007-08. Taken as a whole, it can be concluded that this sector had generated value about 31.98 percent of total revenue during the period under reference. 1.12 Employed Benefit to Net Value Added Ratio The value generated by a firm is distributed among the various participants who contribute to the process viz. employees, providers of capital and loan, government and the business itself. The ratio of employees benefit to Net value added shows how much percentage of Net value added remained for employees after paying value for other groups of society. It is used to measuring efficiency and utility of labour power of an enterprise. It can be expressed as follows: Employed Benefit to Net Value = Added Ratio Employee Benefits x 100 Net Value Added

Table-1.11 EMPOLYEES COST TO NET VALUE ADDED (ECNVA) RATIO Year 2004-05 2005-06 2006-07 2007-08 NALCO 33.38 58.02 22.98 29.21 MMTC 31.94 -35.43 -39.01 -6.44 SAIL 3.43 2.07 1.89 2.95 HPL 28.45 61.94 24.11 33.71 TATA 7.9 6.62 7.14 7.69 BHEL 1.19 1.17 1.06 1.84 ONGC 10.25 10.25 12.17 15.95 RIL 6.91 7.21 10.43 7.52 Avg 16.53 13.98 5.09 11.55

2008-09 Avg

37.32 36.18

15.03 -6.78

3.53 2.77

26.36 34.91

15.77 9.02

1.73 1.39

12.22 12.16

10.56 8.52

15.31

The ratio of Employees Cost to NVA was depicted in the table 1.11. The absolute figure of this ratio showed an increasing trend throughout the study period. Its annual average was 16.53 percent in the year 2004-05 which became 15.31 percent by the end of the study (200809). In individual company-wise analysis, it is noticed that 4 companies viz. ONGC, NALCO, HPL, and SELAN had paid more than one-third of their NVA for employees cost. In contrast, BHEL was able to manage with least payment towards employees (1.40 percent), followed by RIL 8.53 (percent), TATA (9.02 percent) and so on as against industry average of 18.81 percent. The growth rate of Employees Cost to NVA was found to be significant (more than 10 percent) for companies like NALCO, TATA and RIL. From this it can concluded that the sample companies were unable to control the employees cost during the period under study as compared to their generation of net value. Of course, it might be due to inflationary conditions and rising pressure from trade unions during the same period. 1.12 Government Share to Net Value Added Ratio The government is involved in business to provide public goods; to protect public health and welfare; to stabilize the economy; to protect businesses, consumers, investors, and competition; to conserve the environment; to regulate working conditions; and to protect business property. Therefore every business concern pays to Government in the form of taxes. The ratio of Government share to Net value added shows the percentage of NVA that is paid to Government as taxes. It is determined by dividing the amount of taxes paid to Government by NVA. Symbolically it may be written as: Government share to Net Value = Added Ratio Taxes paid x 100 NVA

Table-1.12 GOVERNMENT SHARE TO NET VALUE ADDED RATIO Year 2004-05 NALCO 18.95 MMTC 22.87 SAIL 19.55 HPL 21.62 TATA 4.59 BHEL 14.73 ONGC 24.94 RIL 12.29 Avg 17.44

2005-06 2006-07 2007-08 2008-09 Avg

7.67 21.87 22.74 5.17 15.28

-3.12 -40.98 8.09 -4.69 -3.56

25.34 25.31 19.58 23.35 22.62

8.92 23.1 14.86 6.4 14.98

6.59 8.14 8.25 3.78 6.27

6.13 10.33 5.04 8.76 8.99

24.9 24.61 24.41 22.73 24.31

12.1 12.88 12.63 13.82 12.74

11.06 10.65 14.45 9.91

The table 1.12 shows Taxes paid to Net Value Added Ratio of sample companies from 2004-05 to 2008-09. It may be noted from the table that the annual average of this ratio shows a decreasing trend during the period of study. It was 17.44 percent in 2004-05, 11.06 percent in 2005-06, 10.65 percent in 2006-07, 14.45 percent in 2007-08 and 9.91 percent in the last year of the study. The company-wise average of the ratio was highest (24.31 percent) in ONGC and lowest (-)3.56 percent for MMTC during the period of study. 1.13 Payment to Shareholders to Net Value Added Ratio Every enterprise has to pay divided to its shareholders as providers of capital. Dividends are required because of the separation of ownership and management. It is a signal of the sustainable income of the corporation: management selects a dividend policy to communicate the level and growth of real income because conventional accounting reports are inadequate guides to current income and future prospects. Under this backdrop, the Payment to Shareholders to Net Value Added Ratiois calculatedto know the percentage of NVA paid to shareholders as dividend and is expressed as follows: Payment to shareholders to Net Value Added Ratio = Dividend x 100 NVA

Table-.1.13 PAYMENT TO SHAREHOLDERS TO NET VALUE ADDED RATIO Year 2004-05 2005-06 NALCO 18.95 6.78 MMTC 4.1 -5.54 SAIL 11.69 12.35 HPL 24.57 10.41 TATA 8.33 6.13 BHEL 5.04 3.42 ONGC 24.17 24.89 RIL 9.73 11.71 Avg 13.32 8.76

2006-07 2007-08 2008-09 Avg

15.35 3.46 5.63 10.034

-0.68 -0.47 8.65 1.212

16.79 13.66 16.88 14.274

23.42 4.62 4.82 13.568

7.21 1.95 2.95 5.314

3.17 3.63 3.77 3.806

23.39 21.86 21.57 23.176

8.18 6.77 9.77 9.232

12.10 6.93 9.25

From the Table 1.13 it is apparent that Payment to Shareholders to Net Value Added Ratio marked a fluctuating trend under the period of study. The annual average of the ratio was 13.32 percent in 2004-05, 8.76 percent in 2005-06, 12.10 percent in 2006-07, 6.93 percent in 2007-08 and 9.25 percent in the last year of the study. The highest (23.176 percent) and the lowest 1.212 percent) ratio, both were found in case of ONGC and MMTC respectively. From the above figures it can be concluded that the petroleum sector of India was unable to have better dividend management during the period of the study. 1.14 Retained Earnings to Net Value Added Ratio Retained earnings are the profits generated by a company that are not distributed as dividends to the shareholders. These are affected by the nature of industry and the age of company. However, the ability to use retained earnings wisely is a sign of good company management. Keeping this in view Retained earnings to NVA ratio was computed by dividing the amount of Retained earnings by the amount of Net value added as expressed below:

Retained Earnings to NVA Ratio = Retained Earnings x 100 NVA

Table-7.14 RETAINED PROFITS TO NET VALUE ADDED RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 NALCO 18.95 6.78 15.35 3.46 5.63 10.11 MMTC -10.11 7.11 -11.43 SAIL 12.08 27.33 31.87 29.96 26.47 HPL 252.7 558.4 233 307.2 189.2 TATA 76.57 76.99 73.37 77.9 66.35 BHEL 73.24 84.69 81.3 87.32 83.53 ONGC 27.4 27.31 28.43 24.08 20.63 RIL 51.58 55.1 51.32 62.28 57.64 Avg 62.80 105.46 62.9 84.6 57.44

Avg

10.034

-1.08

25.542

308.1

74.236

82.016

25.57

55.584

The table 1.14 depicts the figures of the Retained Profit to NVA ratio for the period of study starting from 2004-05 to 2008-09. The absolute figure of this ratio was positive in all the sample companies except MMTC. We found highest (84.69 percent) and the lowest ratio (-) 11.43 percent in MMTC amongst the entire samples during the period of study. Moreover, absolute ratio of three other companies; such as HPL, TATA and BHEL was also found remarkable under the study period. The average of the ratio was 308.10 percent for HPL, 82.01 percent for BHEL and 74.24 percent for TATA were computed for the entire study period. Thus it can be concluded that the sample companies retained more of its earnings for fixed assets to operate. Similarly older companies had retained significantly larger amounts of earnings than identical younger companies. 1.15 Interest to Net Value Added Ratio Representing the efficiency or inefficiency of capital management, this ratio finds out the cost of capital of a company as a percentage of Net value added and expressed as follows: Interest to Net Value Added Ratio = Interest x 100 NVA

Table-1.15 INTEREST TO NET VALUE ADDED (INTNVA) RATIO Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 6.2 16.29 10.93 15.14 42.89 18.29 MMTC 36.91 -40.49 -33.72 -16.97 169.3 23.006 SAIL 53.25 32.91 24.14 33.86 29.77 34.786 HPL 3.5 14.42 14.09 30.86 48.31 22.236 TATA 2.61 3.66 4.13 4.22 11.15 5.154 BHEL 2.61 3.66 4.13 4.22 11.15 5.154 ONGC 13.24 12.65 11.4 13.7 22.85 14.768 RIL 12.14 6.58 6.47 4.13 7.81 7.426 Avg 16.30 6.21 5.19 11.14 42.9

It may be noted from the above Table-1.15 that during the study period (2004-09), the percentage of interest to Net Value Added shows an increasing trend varying in between

16.30percent to 42.9 percent. The annual average was 16.30 percent in 2004-05, only 6.21 percent in 2005-06, 5.19 percent in 2006-07, 11.14 percent in 2007-08 and about 42.9 percent in the last year of the study. The company-wise analysis reveals that on an average, the sample company SAIL had paid highest percentage of Interest, i.e. 34.78 percent of NVA and the company TATA had paid lowest percentage of Interest, i.e. 5.154percent during the period under consideration. However, the growth rate of interest as percentage of NVA was found maximum for NALCO (0.62 percent). 1.16 Rate of Interest The value added is distributed among the various participants who contribute to the process like employees, providers of capital or loan, government and the business itself. The Rate of Interest shows the rate at which the providers of long-term loan are rewarded for the supply funds. It is calculated by dividing the amount of interest paid by the amount of long-term borrowings. Rate of Interest = Interest x 100 LT Borrowings
Table-1.16 RATE OF INTEREST Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 3.6 2.95 4.41 4.48 10.23 5.134 MMTC 0.33 0.35 0.12 0.04 8.02 1.772 SAIL 8.52 2.79 2.49 3.87 3.68 4.27 HPL 3.78 5.41 4.05 4.73 9.16 5.426 TATA 3.49 3.77 5.52 4.48 8.94 5.24 BHEL 6.62 5.68 9.06 7.17 7.22 7.15 ONGC 35.78 29.23 24.65 40.19 52.92 36.554 RIL 7.91 4.09 4.67 3.19 2.4 4.452 Avg 8.75375 6.78375 6.87125 8.51875 12.82125

The rate of interest of the sample companies is presented in the table 1.16. From the table it may be seen that, annual interest rate varied in between 6.78 percent to 12.82 percent during the period of study.. In company-wise analysis, it is found that the rate of interest paid by ONGC was highest (52.92 percent in 2008-09) and for MMTC is lowest (0.04 percent in 2007-08)

during the entire study period. In the same way, it is also observed that on an average ONGC had paid highest rate of interest (36.55 percent) and MMTC had paid lowest (1.77 percent) on its borrowed capital during the period of study. 1.17 Net Value Added to Current Assets Ratio This ratio shows the relationship between Net Value added and current assets. It is fine when Net value added is more than the current assets and vice-versa. The ratio is calculated by dividing the quantity of Net value added by the current assets and expressed as follows: Net Value Added to Current Assets Ratio = NVA x 100 Current Assets
Table-1.17 NET VALUE ADDED TO CURRENT ASSETS Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 21.5 11.23 29.43 21.18 29.24 22.516 MMTC 4.1 -5.54 -0.68 -0.47 8.65 1.212 SAIL 50.2 34.38 48.02 43.78 52.03 45.682 HPL 24.65 10.06 26.11 13.2 26.53 20.11 TATA 61.89 63.98 82.38 70.36 79.74 71.67 BHEL 84.92 90.99 109.42 89.12 86.71 92.232 OIL 80.61 78.57 51.84 51.62 42.05 60.938 ONGC 48.44 43.33 39 52.96 44.62 45.67 RIL 42.49 54.97 66.44 62.98 40.34 22.516 Avg 47.03875 40.875 48.19 42.71875 46.19625

From the Table 1.17 it may be noted that the annual average of Net Value added to Current Assets ratio marked a regular trend from 2004-05 to 2008-09. It was 47.03 percent in the beginning and 46.19 percent at the end. The absolute figures of this ratio were positive for all sample companies except MMTC during the period. The average of this ratio was found to be highest for BHEL with 92.23 percent and lowest for MMTC with 1.21 percent. 1.18 Net Value Added to Long-Term Borrowings Ratio This ratio represents the relationship between Net Value Added and Long- term borrowings of a business organisation. It may be computed by dividing the amount of Net value added by the figure of Long-term borrowings as expressed:

Net Value Added to Long term Borrowing Ratio = NVA x 100 LT Borrowings
Table-1.18 NET VALUE ADDED TO LONG-TERMBORROWINGS Year 2004-05 2005-06 2006-07 2007-08 2008-09 Avg NALCO 58.06 18.14 40.34 29.57 23.86 33.994 MMTC 0.9 -0.86 -0.37 -0.26 4.74 0.83 SAIL 16 8.47 10.34 11.43 12.37 11.722 HPL 108 37.52 28.77 15.33 18.96 41.716 TATA 133.8 102.9 133.7 106 80.2 111.32 BHEL 114.33 123.74 218.45 329.72 328.14 222.876 ONGC 270.3 231.1 216.2 293.4 231.5 248.5 RIL 65.18 62.08 72.14 77.24 30.73 61.474 Avg 95.82125 72.88625 89.94625 107.8038 91.3125

The Table 1.18 gives the data relating to ratio of Net value added to Long-term borrowings of total sample companies for five years period from 2004-05 to 2008-09. It was found that the ratio marked a fluctuating trend in the entire study period. The average of this ratio was found to be highest (222.87 percent) in BHEL throughout the study period and MMTC was found to be the lowest with 0.83 percent. In the conclusion it can be said that the sample companies had generated adequate net value (about 264.8 percent) as compared to their longterm borrowings during the period of study. 1.19 Net Value Added per Share This ratio shows the real profitability belonging to shareholders. It is the residual which remained after paying the dues of outside parties. Increase in Net value added per share shows greater capital productivity. It can be calculated by dividing the amount of Net value added by the figure of total number of shares. Net Value Added per share = NVA Total No. of Equity Shares
Table-1.19 NET VALUE ADDED PER SHARE Year NALCO MMTC SAIL HPL TATA BHEL ONGC RIL Avg

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

75.12 50.64 120.8 122.9 139.7 101.832

0.49 -0.48 -0.28 -0.3 5.37 0.96

NA 2.31 3.48 4.28 5.2 3.8175

69.58 32.87 89.18 76.02 127.4 79.01

198.4 232.6 310.1 315.7 302.5 271.86

22.61 23.35 29.51 38.71 37.19 30.274

188 206.2 152.8 171.3 173.6 178.38

87.87 97.41 144 193.9 144.3 133.496

91.72429 80.6125 106.1988 115.3138 116.9075

It may be noted from table 1.19 that Net value added per share marked an increasing trend on an average during the period of study. It was 91.72 at the beginning of the study (200405) but increased to 116.90 at the end (2008-09). In most of the companies, the figure showed an increasing trend as compared to their earlier years. The figure of SAIL was 2.31 in 2005-06 and continuously increased to 5.2 by 2008-09. In case of TATA, the figure was 198.40 in 2004-05, which increased to 315.70 by 2007-08. The figure of BHEL and RIL also shown similar increasing trend throughout the study period except the year 2008-09. In the company-wise analysis, the average of this ratio was found to be highest (271.86) for TATA and lowest (0.96) for MMTC during the study period. From the above analysis it can be concluded that productivity of sample companies were better and satisfactory from shareholders point of view during the period of study. 1.20 Net Value Added per Employee An employee is the most active element in adding values to any organisation. It organises and regulates all other non-alive elements: land, capital, machine, etc. in an effective way for the benefit of the organisation. Hence, Net value added per employee gives an important message regarding employees efficiency. Increase in net value added per employee indicates better efficiency and vice-versa. This ratio may be computed by dividing the amount of Net value added by the figure of total numbers of employees and be expressed as follows: Net Value Added per Employee = Net Value Added Total No. of Employees

Table-1.20 NET VALUE ADDED PER EMPLOYEE Year NALCO MMTC SAIL HPL TATA BHEL ONGC RIL Avg

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

0.19 0.11 0.31 0.32 0.36 0.258

0.08 0.11 -0.02 -0.03 0.41 0.11

1.68 1.46 1.62 1.72 1.92 1.68

0.22 0.1 0.28 0.24 0.38 0.244

0.76 0.9 1.14 1.18 1.06 1.008

5.26 5.26 4.95 5.65 5.2 5.27

0.74 0.85 0.97 1.11 1.12 0.958

1.01 1.08 0.81 1.11 0.92 0.986

0.5 0.75 1.25 1.41 1.42

It may be observed from the table 1.20 that the proportion of Net value added per employee marked an increasing trend during the study period. The annual average of this ratio was 0.5 in the beginning of the study (2004-05), which increased to 1.42 at the end (2008-09). However, the company-wise analysis reveals that net value added per employee was highest (5.27) in BHEL and lowest (0.11) in MMTC in average. As net value added by the sample companies was satisfactory, it can be concluded that the efficiency of their employees had increased during the period of study.