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Introduction

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INTRODUCTION

The project undertaken is on “WORKING CAPITAL MANAGEMENT IN NTPC”. It


describes about how the company manages its working capital and the various steps that are
required in the management of working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to
fund operations, reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM).

The aim of working capital management is to manage the firm’s current assets and current
liability in such a way that maintained a satisfactory level of working capital. This is so because
if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent
and may even be forced into bankruptcy. The current assets should be large enough to cover its
current liabilities in order to ensure a reasonable level of safety. The interaction between Current
Assets and Current Liabilities, and its use in best and possible way is the main theme of the
theory of working capital management.
Working capital refers to the cash a business requires for day-to-day operations or, more
specifically, for financing the conversion of raw materials into finished goods, which the
company sells for payment. Among the most important items of working capital are levels of
inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a
company's efficiency and financial strength. The working capital is an important yardstick to
measure the company’s operational and financial efficiency. Any company should have a right
amount of cash and lines of credit for its business needs at all times.

This project describes how the management of working capital takes place at NTPC.

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COMPANY
PROFILE

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Company Profile

CORE VALUES:
Core Values – BE COMMITTED

 B - Business Ethics
 E - Environmentally & Economically Sustainable
 C - Customer Focus
 O - Organizational & Professional Pride
 M - Mutual Respect & Trust
 M - Motivating Self & others
 I - Innovation & Speed
 T - Total Quality for Excellence
 T - Transparent & Respected Organization
 E - Enterprising
 D - Devoted

NTPC VISION:

“Tobeoneoftheworld’slargest and best powerutilities, poweringIndia’s growth”

NTPC MISSION:

“Develop and provide reliable power, related products and services at competitive prices,
integrating multiple energy sources with innovative and eco – friendly technologies and
contribute to society”.

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COMPANY OVERVIEW:

NTPC Ltd is the largest power generating company in India both in terms of installed capacity
and generated output. The company is engaged in the business of generation and sale of bulk
power. The company has two segments: generation and other business. Their other business
includes providing consultancy, project management and supervision, oil and gas exploration,
and coal mining. The company contributed 28.6% of the total power generation of India. They
were ranked 317th in the 2009, Forbes Global 2000 ranking of the World’s biggest companies.

The company operates their stations at a level of efficiency that exceeds the average in India,
based upon availability factor and average plant load factor (PLF). They have developed a long
term technology roadmap for the induction of high efficiency equipment, including supercritical
and ultra-supercritical machines at their new plants.

NTPC Ltd was incorporated on November 7, 1975 as a private limited company with the name
National Thermal Power Corporation Pvt Ltd. In September 30, 1976, the word Private was
deleted in the company’s name consequent upon the notification issued by the GoI exempting
government companies from the use of word private in their name. In September 1977, the
company acquired the first patch at Singrauli.

During the year 2010-11, the company added capacity of 2,490 MW (including 500 MW through
JV) which is the highest ever in a year since its inception. After commissioning of one unit of
660 MW at Sipat in June 2011, the company became a 34,854 MW company (including 3,364
MW through JV). During the year, the company signed power purchase agreements (PPAs) for
49,000 MW capacity.
NTPC has set new benchmarks for the power industry both in the area of power plant
construction and operations. It is providing power at the cheapest average tariff in the country.
With its experience and expertise in the power sector, NTPC is extending consultancy services to
various organizations in the power business.
NTPC is committed to the environment, generating power at minimal environmental cost and
preserving the ecology in the vicinity of the plants. NTPC has undertaken massive afforestation

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in the vicinity of its plants. Plantations have increased forest area and reduced barren land. As a
responsible corporate citizen, NTPC is making constant efforts to improve the socio-economic
status of the people affected by the projects. Through its Rehabilitation and Resettlement
programs, the company endeavors to improve the overall socio-economic status of Project
Affected Persons.

NTPC was among the first Public Sector Enterprises to enter into a Memorandum of
Understanding (MOU) with the Government in 1987-88. NTPC has been Placed under the
'Excellent category' (the best category) every year since the MOU system became operative.
Recognizing its excellent performance and vast potential, Government of the India has identified
NTPC as one of the jewels of Public Sector ‘Navratnas’- a potential global giant. Inspired by its
glorious past and vibrant present, NTPC is well on its way to realize its vision of being “A world
class integrated power major, powering India’s growth, with increasing global presence”.

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Growth of NTPC installed capacity and generation

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The total installed capacity of the company is 47,178 MW (including JVs) with 18 coal based, 7
gas based stations and 1 Hydro based station. 9 Joint Venture stations are coal based and 9
renewable energy projects. The capacity will have a diversified fuel mix and by 2032, non-fossil
fuel based generation capacity shall make up nearly 28% of NTPC’s portfolio.
NTPC has been operating its plants at high efficiency levels. Although the company has 17.73%
of the total national capacity, it contributes 24% of total power generation due to its focus on
high efficiency.

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh
issue and 5.25% as offer for sale by the Government of India. NTPC thus became a listed
company in November 2004 with the Government holding 89.5% of the equity share capital. In
February 2010, the Shareholding of Government of India was reduced from 89.5% to 84.5%
through a further public offer. Government of India has further divested 9.5% shares through
OFS route in February 2013. With this, GOI's holding in NTPC has reduced from 84.5% to 75%.
The rest is held by Institutional Investors, banks and Public.

NTPC is not only the foremost power generator; it is also among the great places to work. The
company is guided by the “People before Plant Load Factor” mantra which is the template for all
its human resource related policies. NTPC has been ranked as “6th Best Company to work for in
India” among the Public Sector Undertakings and Large Enterprises for the year 2017, by the
Great Places to Work Institute, India Chapter in collaboration with The Economic Times.

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Research
Objective

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OBJECTIVES OF THE STUDY

The objectives of this project were mainly to study the inventory, cash and receivable at NTPC
Ltd., but there are some more and they are –
The main purpose of our study is to render a better understanding of the following:

 To understand the planning and management of working capital at NTPC Ltd.


 To measure the financial soundness of the company by analyzing various ratios.
 To suggest ways for better management and control of working capital at the concern.

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Research
Methodology

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Research Methodology

The project required a detailed study of NTPC’s ‘working capital management’. The work was
aimed at, primarily, understanding the procedure for procurement, and an analysis of the same to
list findings and suggestions (if any).

Research methodology basically consisted of analysis of secondary data.

Secondary data was collected from relevant manuals, company websites, records and bidding
documents of previous projects. Details regarding the same have been provided in the ‘List of
References’ section.

The intern also witnessed the bid opening process for a project tendered, which added a practical
aspect to the policy being analyzed.

The whole process of working capital management is comprehensive and complex. Study of the
same required familiarization with norms and classifications of contracts, items and procedures.

The system was mainly analyzed on its efficiency in meeting the targeted objectives of acquiring
the best possible quality of items at the lowest possible cost.

The project was undertaken in consultation with the employees of the Finance Concurrence
department and their inputs have also been taken into consideration.

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Data Analyze &
Interpretation

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DATA COLLECTION

The following sources have been sought for the preparation of this report:

 Primary sources such as business magazines, current annual reports, book on Financial
Management by various authors and internet websites the imp amongst them being:
www.NTPC.com, www.indiainfoline.com, www.studyfinance.com.

 Secondary sources like previous year's annual reports, reports on working capital for research,
analysis and comparison of the data gathered.

 While doing this project, the data relating to working capital, cash management, receivables
management, inventory management and short term financing was required.

 This data was gathered through the company’s websites, its corporate intranet, and NTPC’s
annual reports of the last three years.

 A detailed study on the actual working processes of the company is also done through direct
interaction with the employees and by timely studying the happenings at the company.

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DATA SAMPLING

There are following steps in my sampling design:

1. Type of universe: The first step in developing any sample design is to clearly define the set of
objects, technically called the universe, to be studied. The universe of the study is the power
sector.

2. Sampling unit decision has to be taken concerning a sampling unit before selecting sample.
Sampling unit is following:

Financial Department, Township Administration, Finance & Account, Civil/ Electrical


Maintenance Department, Control & Instrumentation, Fuel Management, Human Resources and
Electrical Office.

Above are all the sampling units that are used by me for study.

RESEARCH INSTRUMENTS

While doing the research on working capital management, I use some documents that are given
below:

1- NTPC Financial Reports.


2- News Magazine of NTPC.
3- Journals of NTPC (SSTPS).
4- Shakti Sandesh Magazine.
5- NTPC annual Reports
- 39th Edition
- 38th Edition

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Theoretical basis of Working Capital Management (Title)

Working capital is the amount of funds necessary to cover the cost of operating the enterprise.
It also refers to some total of all current assets employed in the business process, which is known
as Gross Working capital concept.
Gross concepts of working capital are useful in making correct estimate of working capital needs
of the firms.
Net working capital is the portion of current assets(C.A) which cannot be financed by current
liabilities(C.L).

W.C.= C.A. – C.L.

Constituents of Working capital:

1) CURRENT ASSETS:
It refers to the assets which are used for day to day business operations of the firm.
It mainly constitutes of the following:

a) Inventories: It represents all the raw materials and components of work in progress and finished
goods.

b) Trade debtors: It comprises credit sales to customers.

c) Prepaid expense: The expenses which have been paid for goods and services whose benefit have
yet to be received.

d) Loan & advances: Loan and advances given by the firm to other firm for a very short period of
time.

e) Investments: Is short term. It is surplus funds invested in the government security share and short
term bond..

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2) CURRENT LIABILITIES:
It is a part of working capital represent obligation which the firm has to clear to the outside
parties in a short period generally within a year and this is mainly comprise of the following:

a) Sundry credit:Liabilities which are steam out of purchases of raw material on credit terms
usually for a period of one or two months.

b) Bank Overdraft: Withdrawals in excess of credit balance standing in the firm’s currents a/c with
the banks.

c) Short term loans: short term borrowing by the firms from bank and other firm’s part of C.L as
short terms loans.

WORKING CAPITAL CYCLE

CASH

RECEIVABLES MATERIALS

FINISHED GOODS

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FACTORS DETERMINING THE SIZE OF WORKING CAPITAL
There may be various factors which can be determine the size of the working capital:

1) Nature of Business: Magnitude of working capital business enterprise is to a considerable


degree of function of the nature and character of the business. Example:
a) In enterprise engaged in the manufacturing of essential product of daily consumption would need
less amount of working capital.

b) If the enterprise dealing in luxuries product it will require a large reserve of net working capital.

2) Size of business: Requirement of working capital can also be determined by the size of the
business. Firms engaged in the same line of business activity may have different working capital
requirement because of varying business size. Example:
a) 10 – 20 % of W.C is required in Hotels and restaurants.
b) 20 – 30 % of W.C in services and semi manufacturing organizations.
c) 80 – 90 % of W.C in hi-tech or heavy industry like steel, cement etc.

3) Production Cycle: Time lag between procurement of raw material to collection of


cash.Example:
a) Bakery industry-regular basis of requirement of W.C.
b) Many venture projects require high amount of W.C but the W.C is pre-collected.

4) Business cycle: Business cycle of the enterprise also determines the W.C requirement.
In times of economic and business oscillations, the management has to carry enough W.C to
handle the situation of the upward and downward swings.

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5) Production policy: W.C requirements also depends upon the various production policy adopted
by the business organization.Example:
a) Line Vs Batch production policy
b) Seasonal Vs Bulk

Progressive accumulation of stock affects the requirements of W.C.Higherthe accumulation,


higher is the W.C requirement. Example: Automobile sector
Diversification of the business also requires the high amount of Working Capital.

6) Credit policy: Credit policy adopted by the firm also affects the Working Capital requirements.
It may depend on the:
 Economy conditions
 Prevailing trade practices
 Collection procedure
 Customer patronage
 Terms of creditors Vs terms of debtors

7) Growth & expansion of the company: As a company grows, it is logical to expect that a larger
amount of W.C is required.
It is very difficult to determine precisely the relationship between the growth in the volume of
the business of the company and increase in the working capital.

8) Vagaries(deliberation/factors) in supply of R.M:


 Regular basis of supply of R.M, the W.C is constant
 Sporadic supply of R.M, the W.C is not constant.

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9) Profit level: Higher profit margin would improve the prospects of generating more internal
funds thereby contributing to the W.C.
Profit level of any enterprise depends on the:
 Nature of the product
 Market holding
 Intensity of completion
 Effective quality management
Example: Marico created its monopoly so the W.C requirement is very less for monopoly
company, because their profit level is very high.

TYPES OF Working capital.

There are two types of W.C, which are as follows:

1) Fixed / Regular / Permanent W.C.: any business activity dose not comes to an end after the
realization of cash from customer.

 For the company having continuous business process, regular supply of W.C requirement.
 Fixed W.C is determined at the starting of the project planning.

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2) Variable / Temporary W.C: it fluctuates with the demand.

 Any amount over and above the permanent level of W.C is temporary, fluctuating or variable
W.C.
 An amount of W.C needed to meet fluctuations in demand consequent upon changes in
production and sales as a result of seasonal changes.

Temporary W.C

Permanent W.C.

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Approaches of W.C.:

1) Hedging / Matching:

 The hedging approaches suggest that long-term funds should be used to finance the fixed
proportion of C.A requirements which are required in a certain amount for a given level of
operation.
 Purely temporary requirements, the seasonal variations over and above the permanent financing
needs should be appropriately financed with short term funds(C.L)
 This approach, therefore divides the requirements of total funds into permanent and seasonal
components, each being financial by a different source.

Variable C.A. S.T. financing

Non-Variable C.A. L.T. financing

Fixed assets

2) Conservative approach:
This approach suggests that the estimated requirement of total funds should be met from long-
term funds should be restricted to only emergency situations or when there is an unexpected
outflow of funds.

Variable C.A. S.T. financing

Non-Variable C.A. L.T. financing

Fixed assets

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3) Aggressive approach:
Suggests that any firm has to use less long-term funds.
 According to this, L.T funds should not be used to finance the whole permanent W.C.
 Some part of permanent W.C should be financed from S.T funds.
 Risk is high in this ratio.

Variable C.A
S.T. financing
Non-Variable C.A

Fixed assets L.T. financing

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NEED OF WORKING CAPITAL

Essentially sales generate working capital so long as cash, costs and expenses are less than sales
income. However sale is not immediately converted into cash. There is a time gap between
conversion of goods and receipt of cash.
Working capital is required for this period in order to maintain the satisfactory level or run the
firm for production of finished goods to sales of goods. So, corporation generally maintain the
working capital an opposition to purchase raw material, pay salaries to employees and wages,
administrative expenses, warehousing expenses and other expenses required for manufacturing
the finished good to be sold to the consumer.
The determination of working capital cycle is helpful for budgeting or forecasting and improving
previous working capital ratio.

IMPORTANCE OF WORKING CAPITAL

Investment in fixed assets are not sufficient to run the business operation. Working capital is
blood of any firm which is need to purchase raw materials, pay salaries and wages,
administrative expenses and day to day requirements.

1. Any corporation’s profitability depend on the effective working capital management.

2. Working capital is necessary for taking decision regarding long term investment.

3. It helps to know about loans & advances ,cash and debtors of the company

4. It is also helpful in minimize cost and expenses.

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WORKING CAPITAL MANAGEMENT IN NTPC (Sample)

1) NET WORTH
The net worth of the company at the end of fiscal 2018 was Rs.449587 million and increase of
Rs.31824 million over the previous year mainly due to retained earnings.

2) LOAN FUNDS
Our loans outstanding as on March 31, 2018 stood at Rs.201, 973 million in comparison to
Rs.170878 million as at March 31, 2017. A summary of the loans outstanding is given below:

2018 2017 % 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 of India 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 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 2006 of the company went up to 0.45
from 0.41 at the end the previous fiscal.

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3) FIXED ASSETS
During the year we added Rs.29334 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.

2018 2017 %change


Gross 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:

2018 2017
Bonds issued under one time settlement scheme 171,762 164,107
Investments in joint ventures 6,818 1,318
Investment in subsidiaries 304 252
Investment of surplus cash in various instruments 8,508 32,504
Others
Bonds against dues 5,306 7,428
Investments of development surcharge on behalf of
customers 193 2,368
Total investments 192,891 207,977

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5) CURRENT ASSETS
The current assets and current liabilities as at March 31st2018 and March 31st2017 and the
changes therein were as follows:

2018 2017 Change


Current assets Amount %of current Amount %of current Amount %
assets assets
Inventories 23,405 15% 17,819 14% 5,586 31%
Sundry debtors 8,678 6% 13,747 11% -5,069 -37%
Cash and Bank
balances 84,714 54% 60,783 47% 23,931 39%
Other Current assets
10,161 6% 9,764 7% 397 4%
Loans and advances
30,287 19% 26,993 21% 3,294 12%
Total current assets
157,245 100% 129,106 100% 28,139 22%

A major part of current asset comprised cash and bank balances. As at March31,2018, 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 31,2017 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, 2018 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.

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Inventories as at March 31, 2018 were Rs. 23,405 million being 15% of current assets as against
Rs. 17,819 million as on March 31, 2017 which was 14% of the current assets as on that date.
Our inventories mainly comprise components and spares and coal which we 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, 2018were 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 tariff for various stations are determined by the regulator.

2018 2017 Change


Current assets Amount %of current Amount %of current Amount %
assets assets
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%

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7) PROVISIONS

As at March 31, 2018 we had provisions for certain liabilities outstanding amounting Rs. 12,300
million as against Rs. 15,161 million on 31 March, 2017. 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.
8) CASH FLOWS
The cash and cash equivalents and cash flows on various activities for the past five years are
tabulated below:

Our net cash from operating activities for the year ended March 31, 2018 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 2018 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.

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2018 2017 2013
Opening cash and Cash equivalents 60,783 66,351 23,894
Net cash from operating activities 62,064 50,998 58,118
Net cash used in investing activities 27,136 64,136 24,597
Net cash flow from financing activities 10,997 7,570 8,873
Intangibles 63
Change in cash and cash equivalents 23,931 5,568 42,457
Closing cash and cash equivalents 84,714 60,783 66,351

CURRENT RATIO

CURRENT RATIO
5
4.5
4
3.5
3
2.5
CURRENT RATIO
2
1.5
1
0.5
0
2016 2017 2018

INFERENCE:

An ideal Current Ratio is 1.5 & 2:1 which indicates good short term financial strength of a
business. In the case of this company it is showing a downward trend 1.78 (2012-13), 1.59
(2013-14) and 1.33 (2017-15) which indicates problem in its working capital management. It
may which is due to decrease in Inventories, Trade Receivables, Cash & Bank Balance and
Increase in Other Current Liabilities & Short Term Provisions.

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1. QUICK RATIO

1. QUICK RATIO
5
4.5
4
3.5
3
2.5
1. QUICK RATIO
2
1.5
1
0.5
0
2016 2017 2018

INFERENCE:

It is vital that a company have enough cash on hand to meet accounts payable, interest expenses
and other bills when they become due. The higher the ratio, the more financially secure a
company is in the short term. A common rule of thumb is that companies with a quick ratio of
greater than 1.0 are sufficiently able to meet their short-term liabilities.

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2. GROSS PROFIT MARGIN

2. GROSS PROFIT MARGIN


5
4.5
4
3.5
3
2.5
2. GROSS PROFIT MARGIN
2
1.5
1
0.5
0
2016 2017 2018

INFERENCE:

A business's ultimate goal is to raise its profit margins. However, decreasing the gross profit
margin temporarily may be beneficial in the long run. A business may decrease its gross profit
margin by lowering the cost of the goods it sells or by using higher quality, and thus more
expensive, materials to make the goods. Lower prices attract new customers, which may
eventually raise profit margins. Likewise, higher quality goods retains customers, which also can
raise profit margins in the future.

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3. INVENTORY TURNOVER RATIO

3. INVENTORY TURNOVER RATIO


5
4.5
4
3.5
3
2.5 3. INVENTORY TURNOVER
RATIO
2
1.5
1
0.5
0
2016 2017 2018

INFERENCE:

The Inventory cost has been increase along with Cost of Revenue from operations due to which
Inventory Turnover ratio has decreased in 2017-15. This situation is not really bad for the
company as it is witnessing increase in its revenue over the past three years.

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4. DEBT-EQUITY RATIO

4. DEBT-EQUITY RATIO
5
4.5
4
3.5
3
2.5
4. DEBT-EQUITY RATIO
2
1.5
1
0.5
0
2016 2017 2018

INFERENCE:

A lower debt to equity ratio usually implies a more financially stable business. Companies with a
higher debt to equity ratio are considered more risky to creditors and investors than companies
with a lower ratio. Unlike equity financing, debt must be repaid to the lender. Since debt
financing also requires debt servicing or regular interest payments, debt can be a far more
expensive form of financing than equity financing. Companies leveraging large amounts of debt
might not be able to make the payments.

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5. DEBTORS TURNOVER RATIO

5. DEBTORS TURNOVER RATIO


6

3
5. DEBTORS TURNOVER RATIO

0
2016 2017 2018

INFERENCE:
The ratio is intended to evaluate the ability of a company to efficiently issue credit to its
customers and collect funds from them in a timely manner. A high turnover ratio indicates a
combination of a conservative credit policy and an aggressive collections department, as well as
a number of high-quality customers. A low turnover ratio represents an opportunity to collect
excessively old accounts receivable that are unnecessarily tying up working capital. Low
receivable turnover may be caused by a loose or nonexistent credit policy, an inadequate
collections function, and/or a large proportion of customers having financial difficulties. It is also
quite likely that a low turnover level indicates an excessive amount of bad debt.

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6. FIXED ASSET TURNOVER RATIO

FIXED ASSET TURNOVER RATIO


6

3 1. FIXED ASSET TURNOVER


RATIO
2

0
2016 2017 2018

INFERENCE:

The fixed-asset turnover ratio is, in general, used by analysts to measure operating performance. It is
a ratio of net sales to fixed assets. This ratio specifically measures how able a company is to generate
net sales from fixed-asset investments.

37
7. INTEREST SERVICE COVERAGE RATIO

Column1
8

4
Column1
3

0
2016 2017 2018

INFERENCE:

The interest coverage ratio (ICR) is a measure of a company's ability to meet its interest
payments. Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time
period, often one year, divided by interest expenses for the same time period. The interest
coverage ratio is a measure of the number of times a company could make the interest payments
on its debt with its EBIT. It determines how easily a company can pay interest expenses on
outstanding debt.

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8. RETURN ON CAPITAL EMPLOYED

RETURN ON CAPITAL EMPLOYED


14

12

10

8
1. RETURN ON CAPITAL
6 EMPLOYED

0
2016 2017 2018

INFERENCE:

Return on capital employed (ROCE) is a financial ratio that measures a company's profitability
and the efficiency with which its capital is employed.A higher ROCE indicates more efficient use of
capital. ROCE should be higher than the company’s capital cost; otherwise it indicates that the
company is not employing its capital effectively and is not generating shareholder value.

39
9. TOTAL ASSET TURNOVER RATIO

TOTAL ASSET TURNOVER RATIO


0.485

0.48

0.475

0.47
1. TOTAL ASSET TURNOVER
0.465 RATIO

0.46

0.455

0.45
2016 2017 2018

INFERENCE:

The Totalasset turnover ratio is a measure of how efficiently a company's assets


generate revenue. It measures the number of dollars of revenue generated by one dollar of the
company's assets.A low asset turnover ratio suggests problems with excess production capacity,
poor inventorymanagement, or lax collection methods. Increases in the asset turnover ratio over
time may indicate a company is "growing into" its capacity.

40
FINDINGS
AND
CONCLUSIONS

41
FINDINGS AND CONCLUSIONS

 The total income of NTPC Ltd. For the year 2017-15 increased by 16.59% to Rs. 57399.49
crores fromRs. 49233.88 crores during 2013-2017

 The net profit after tax increased from Rs 9102.59 crores from Rs 8728.20 crores registering a
growth of 5.29 % over last year.

 Employee’s remuneration and benefits have increased by 15% from Rs 2,412.36 crores in
financial year 2009-10 to Rs 2,789.71 crores in the year 2010-11 of which Rs 69.48 crores is due
to additional commercial capacity.

 During the year 2017-15, company realized 100% payment for current bills raised for sale of
power for the 8th successive year.

 It was observed that a major portion of current assets comprised of Cash and Bank balances.

 The company has established a State- of-the-art IT enabled Project Monitoring Centers (PMC)
for facilitating fast track project implementation.

 The supply of power improved during the year 2017-15 owing to increase in capacity in coal as
well as gas based plants.

 NTPC Ltd. has always discharged its social responsibility as a part of its Corporate Governance
Philosophy. It follows the global practice of addressing CSR issues in an integrated multi stake
holder approach covering the environment and social aspects.

42
LIMITATIONS
&
RECOMMENDATIONS

43
LIMITATIONS & RECOMMENDATIONS

 Gross Profit ratios have continuously gone under various fluctuations in the last five years.
However the ratios are more than the industry standard. Gross profit ratio was lowest last year
i.e. 2018, 31.95% this indicates that overheads cost has not been controlled as required. Such low
margin indicates that the business is unable to control its production cost.
 Majority of the projects undertaken by NTPC are in growth stage or their respective lifecycle.
This is one of the reasons for its low profits in recent years.
 Net profit is the number that really matters, as this is the true indication of profitability. The
total income of NTPC Ltd. For the year 2017-15 increased by 16.59% to Rs 57,399.49 crores
fromRs 49,233.88 crores during 2013-14
 Net profit ratio for NTPC has been highest in the year 2007 i.e. 21.05%. Thereafter it has
continuously declined. It was lowest in the year 2018 i.e. 16.58%
 Though net profits ratio of NTPC have declined they are still decent as compared to its
counterparts in industry.
 In the initial years i.e. during 2018 and 2017current ratio has clearly exceeded the ideal ratio
i.e. 2:1. In 2018 it was 3.22:1 while in the year 2017 it was 3.11:1. Significant improvement has
been shown in proceeding years and the ratio has been best in the year 2013 as compared to other
four years, as during this it was 2.70:1 that is quite close to the ideal ratio.
 In case of NTPC Ltd this returns on total assets ratio is continuously declining which shows
that return as compared to the assets is declining.
 NTPC Ltd. belongs to power sector industry where gestation period for new projects is always
more than 3-5 years, therefore a part of capital gets blocked in such projects.
 In last financial year debt has registered a growth of 14% which seems to be matching with
company’s rate of diversification.

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 The debt-equity ratio at the end of financial year 2013-14 increased to 0.64 from 0.61 at the end
of previous financial year.
 The amount raised through term loans, bonds and foreign currency borrowings was used for
capital expenditure and re-financing while amount raised through deposits have been used for
working capital purposes.
 Looking at the profitability, size and promising future prospects , we can say that for NTPC Ltd.
there is still a room for including more of debt into its capital structure as debt is a cheaper
source of finance so thereby it would lead to more of profitability
 For NTPC Ltd the Fixed assets turnover ratio was highest in the year2008 i.e. 1.41. Company
should put in efforts to increase it further as a higher fixed asset turnover indicates better
efficiency in fixed assets utilization.
 Trends show the increasing value added per employee, it shows that even this aspect is now
been given due attention
 More earnings can be retained for fast-track implementation of new projects with ultimate of
increasing net worth.During all five years more than 60% of net earnings after tax is retained
with an aim efficient reinvestment which will fetch better returns.
 The growth of company through capacity addition and strategic diversification of its operations
would lead to increase in shareholders’ value.

45
Bibliography

46
Bibliography

 Books

Annual Reports of National Thermal Power Corporation Limited. Of 2015-16,-2016-17;2017-18

Financial Management: By I.M. Pandey

Agreement Files of NTPC LT.D

 Websites

www.ntpc.nic

www.investopedia.com

47

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