Sunteți pe pagina 1din 89

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

INTRODUCTION

KALPATARU POWER & TRANSMISSION


The power sector has witnessed several ups and downs over a period of time. The key issue has been power shortage due to inadequate capacity addition and T&D (Transmission & Distribution) losses. The patchy quality of power distributed resulted in lower tariff disbursals leading to huge losses for power producers in the country. The capacity addition targets for the Eighth and Ninth Plans were 30358 mw and 40245 mw respectively. But the actual achievement was 16,422 mw i.e. 53.8% of the Eighth Plan target. The likely capacity addition at the end of Ninth Plan ( March 31, 2002) is about 19,000 mw(47% of the target).The tenth plan however pegs the capacity addition target to 46,185 mw and an addition of 60,855 mw in the Eleventh Plan Period taking it to the total capacity addition of 1,00,000 mw by the end of 2012 . The Accelerated Power Development Programme (APDP) is the key central instrument in the State Power Distribution Sector. The APDP is proposed to be restructured in the forthcoming budget as a mechanism for supporting Power Reforms in the states linked to certain fulfillment criteria by way of benchmarks. The agreement in respect of this being possible only after the MOU has been signed by the respective SEBs for the formation of State Electricity Regulatory Commissions( SERCs).The APDP has been duly rechristened as APDRP ( Accelerated Power Development and Reform Programme).

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

The incentive formula for corporatization of the distribution system is also on the anvil. Recently ,the Naphtha-based Power Projects got a major boost with the waiver granted on total excise duty ( ruling at 16% ) on naphtha and has benefited seven projects viz; projects commissioned in different parts of the country by Reliance Group,Tanir Bavi,Nagarjuna Group, BSES,Essar ,Paguthan ( JV between China Light & Power and PowerGen India ) and GPCL thus bringing down the effective tariffs. The Centre has recently planned the formation of Rs.80, 000 cr. transmission grids across the country to enable easy transfer of electricity from surplus to deficient states. The actual execution would be carried out by Power Grid Corporation and government is exploring the possibility of setting up JVs with various companies to raise funds for the project.

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

INDUSTRY DEMAND The Udesh Kohli Committee set up to analyze the fund requirements in power sector has envisaged the requirement of Rs.8, 00,000 cr. in next 10 years to achieve the estimated installed capacity of 2, 07,266 MW and generation capacity of 1, 00,000 MW by 2012.The banks would be in a position to bring in Rs.3, 80,922 cr. over 10 years with the ceiling on the sector limited to 15%. The Electricity Bill proposed by (CEA) envisages the freeing up of distribution of power which has been the major bottleneck in power sector reforms and suggests the removal of SEB monopoly in power distribution which is subjected to losses due to theft, technical loopholes coupled with bureaucratic structures. The losses are slated to be brought down to 15% from current 50%.

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

ALL ABOUT Kalpataru


1. ABOUT THE COMPANY
The company was established in 1981 is public limited company situated in Gandhinagar. It was started with 5700 shareholders. USD 300 million diversified Kalpatru group, which holds more than 76% of the equity. It is engaged in the business of designing, fabricating/galvanizing & supplying Towers and construction and commissioning of extra high voltage transmission lines (up to 800kv) on a Turnkey / EPC basis in India and overseas. Fabrication plant at Gandhinagar, Gujarat spread over 48,000 sq. mts. With 5 Nos CNC Punching and Drilling M/cs (from Ficep, Italy) and an automatic temperature-control Galvanizing bath (8 Mt*1 Mt*2.4 Mt) with an installed capacity of 54,000 Mt p.a. (second largest in India). It is one of the most sophisticated and cost-efficient Fabrication Plant for Steel Galvanized Towers. The company has its own in-house sophisticated Tower Testing Station and R & D Centre(near Gandhinagar), which is a state-ofthe art facility with a capacity to test square / rectangular base towers(27Mt*27Mt) up to 800 kV D/C as well as Multi-Circuit Towers Max .height 80 mts and is one of the largest in Asia. The company has latest Auto-CAD Design facilities and other proprietary Design and drawing software packages.

The company has of 4,00,000 MTs (Metric Tons) and construction of 6500+kms of EHV (extra High Voltage) lines over the years. The company is the best performer among all Indian Transmission Line (TL) players on almost every financial parameter.

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

It is first company in 1994 to obtain ISO 9001 certification in the Indian Transmission Tower Industry. It is second company in India to get UNFCCC registration for its Certified Emission Reductions (CERs), under the CDM mechanism of Kyoto Protocol for its Biomass Power Plant at Padampur, Ganganagar. The company is generating CERs by using agricultural residues like mustard husk/cotton stalk to prevent environmental degradation, by generating electricity from them.

Established over 3 decades ago in 1969 by Mr. Mofatraj P. Munot, a first generation entrepreneur. The Group employs over 4,000 people. Kalpatru borrows its name from the ancient Indian mythological tree - the Kalpa-Vruksha -beneath which all wishes are fulfilled.

The group's flagship company, Kalpatru Ltd. is a leading real estate developer with premium residential and commercial complexes in Mumbai and Pune. Pioneering the concept of creating lifestyle living, it has built more than 75 landmark edifices in the last 39 years. With a team of 1,000 dedicated, Kalpatru has created an incomparable brand and reputation for itself in the Property Development and Real Estate industry. We pride at being one of the largest Property Groups in India, with development of over 1.5 Million sq.ft at any point of time. Every Kalpatru project reflects a "no compromise" attitude; one that manifests in the architecture, engineering and construction of every project; from towering structures to expansive complexes, Kalpatru has proven its commitment and expertise in every segment of property P.G. RAO INSTITUTE OF MANAGEMENT 8

A KALPATARU POWER TRANSMISSION LIMITED report on summer project development. The residential complexes are replete with landscaped gardens, swimming pools, gymnasium, tennis and squash courts, clubhouses and several innovative amenities. In an age where architecture is mainly utilitarian, Kalpataru endeavors to combine the functional with the aesthetic and maintains the highest standards of quality right down to the last detail.

Strengths of the Company: Design and Engineering Testing station and R &D center Fabrication Galvanization Supply chain (by air, sea, etc.) Construction (of towers)

Customers: Across India : Power Grid Corporation of India (PGCI) State Electricity Boards (SEBs) of Gujarat, Maharashtra, Rajasthan, Andhra Pradesh, Tamil Nadu, Madhya Pradesh, West Bengal, UP.

Pre- qualified for all domestic and international tenders. Qualified bids over 20 countries. Has Trading House status and received various Awards for Meritorious performance in Exports from Engineering Exports Promotion Council (EEPC) and Ministry of Commerce, Government of India. P.G. RAO INSTITUTE OF MANAGEMENT 9

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

International Partners: ABB SAE (Italy) Downers (Australia) Grid Comm. (Australia) Areva/Alstom (France) Cegelec (France) Enel Power (Italy) Cobra (Spain) Sumitomo Electric (Japan) ETA (UAE) Hindalco (Egypt) GYM (Peru), etc. Contracts for power utilizing with:NPC (Philippines) EVN/CPPMB (Vietnam) PEEGT (Syria) TEAIS (Turkey) EEPCO (Ethopia) ZESCO (Zambia) Sonelgar (Algeria) Kahramaa (Qatar)

Group Management Team

Mr. Mofatraj Munot - Group Promoter & Chairman Mr. Parag M. Munot - Exe. Dir., Kalpataru Corporation Mr. Ajay A. Munot - Exe. Dir., Kalpataru Power & JMC
P.G. RAO INSTITUTE OF MANAGEMENT 10

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Mr. Rajesh Golechha - Exe. Dir., International Trading Mr. Anuj A. Munot - Exe. Dir., Kalpataru Corporation Mr. Imtiaz Kanga - Exe. Dir., Kalpataru Corporation Mr. Mahendra G. Punatar - Vice Chairman, Kalpataru Power Mr. Hemant Modi - Vice Chairman, JMC Projects Mr. K. V. Mani - Managing Dir., Kalpataru Power Mr. Suhas Johsi - Managing Dir., Factory & Bldg., JMC Projects Mr. M. D. Kjattar - Managing Dir.- Infrastructure Business, JMC Projects Mr. S. R. Merchant - Dir., Kalpataru Corporation Mr. S. V. Bhansali - Dir., Kalpataru Corporation Mr. S. B. Tambe - Dir., Kalpataru Corporation

Executive Management Team Mr. Dinesh B. Patel President (Operations) Mr. Kamal K. Jain President (Finance & Administration) Mr. B.K. Satish President (Engineering & Marketing) Company Secretary Mr. Bajarang Ramdharani Auditors Mr. Kishan M. Mehta Bankers Indian Bank Oriental Bank of Commerce Union Bank of India P.G. RAO INSTITUTE OF MANAGEMENT 11

A KALPATARU POWER TRANSMISSION LIMITED report on summer project State Bank of India Exim Bank ICICI Bank Ltd. HDFC Ltd. Corporate Office 111, Maker Chambers IV, Nariman Point Mumbai 400 021. India. Tel No.: 91-22-2282 2888 / 2288 4780 Fax No.: 91-22-2204 1548 Factory & Registered Office Plot No. 101, Part III, G.I.D.C. Estate, Sector 28, Gandhinagar 382 028, Gujarat, India Tel No.: 91-79-2321 1951 / /2321 1955 Fax No.: 91-79-2321 1966 / 68 / 71 Email:kptl@kalpatarupower.com Website www.kalpatarupower.com

Tower Design, Testing and Manufacturing The key strength of any Transmission Line player lies in its core capability of design, testing, manufacturing and construction. The company employs latest 3D Design Software and their Engineering Team has perfected the art to deliver cost effective design solutions. Their state of art Tower Testing Station and R & D center can handle up to 800 KV D/C towers with base width of 27 Mtrs * 27 Mtrs and height of 80 Mtrs. They have successfully completed their 100th Tower Tests. Their Fabrication plant with an annual installed capacity of 54000 MTs has been running at 90 % of its capacity to deliver up to 4000 MTs per month for over 36 months. Besides delivering towers to their own projects, they have been reliable supplier of choice to P.G. RAO INSTITUTE OF MANAGEMENT 12

A KALPATARU POWER TRANSMISSION LIMITED report on summer project reputed EPC Contractors like ABB, Areva, Sumitomo, Downer, Gridcom etc with exports to 15 countries. They are the first Indian manufacturing unit to achieve the ISO 9001 Certification since 1994. They are further expanding capacity by another 18000 MTs to exclusively cater to their export requirements and to retain their position as one of the largest tower fabricators across the world.

Property Development
The promoters of Kalpataru Power i.e. Kalpataru Group has set benchmarks of quality, trust and reliability in the Real Estate Industry since over 35 years. The Groups project covering over 2 Million sq.ft. Of residential, commercials; mail developments are spread over Mumbai, Thane and Pune. The companys luxurious apartments at Kalpataru Habitat, Kalpatru Horizon, Kalpatru Residency, Kalpataru Royale and Kalpataru Gardens etc are all about high quality and better lifestyles. Aesthetics, functionality innovation and attention to detail are the hallmarks of various properties developed by the Group. P.G. RAO INSTITUTE OF MANAGEMENT 13

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

The Group also has division that offers Facility Management Services

Civil Construction (JMC Projects) JMC projects (India) Ltd. is one of the leading civil contracting company and is a preferred name when it comes to industrial Structures, factories, Commercial Buildings, InfoTech / Software parks. Besides this, it has done civil works for various Power Plants, Sub-stations, Sugar, Pharma and Automobile Factories.

P.G. RAO INSTITUTE OF MANAGEMENT

14

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Some of its valued customers include Bajaj Auto, Coca Cola, Asian Paints, Power Grid, Infosys, Wipro, IIM Ahmadabad and many more. The company has revenues of approx Rs.2.4 Billion (USD 55 Million) and a manpower strength of over 875 people, besides a fleet of plant & equipment. JMCs edge has been its quality and commitment to timely execution. It has also entered into construction of Express Ways, Roads & Bridges. Kalpataru Power has become a dominant shareholder in JMC since February 2005 and is committed to take JMC to greater height of success.

Division of company

P.G. RAO INSTITUTE OF MANAGEMENT

15

A KALPATARU POWER TRANSMISSION LIMITED report on summer project KALPATARU has four divisions. Transmission & Distribution Division Real Estate Division Infrastructure Division Bio-mass Energy division

1.Transmission & Distribution Division The company continuously strives to enhance its infrastructure capabilities and project management skills to retain its position as one of the leading EPC player in the power T & D Sector in India and across the world. In the domestic markets, the company remains one of the largest and most reliable contractors for Power Grid Corporation of India Ltd (PGCIL) with over 2000 Kms of 400 KV lines under execution. The company has a production capacity of 84000 MTs per annum and the company remains one of the largest and cost competitive Tower Manufacturers in the world.

2. Real Estate Division P.G. RAO INSTITUTE OF MANAGEMENT 16

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Kalpataru Habitat the real estate residential project has been fully sold out except one flat. The project has generated total revenue of Rs. 1448 Million over the last 3 years including revenue of Rs. 275 Million during the reporting year. Looking to the booming real estate markets all over the country and the Kalpataru Groups core competence, the company will further venture into real estate projects.

3 . Infrastructure Division The Infrastructure division is executing the laying of a Cross country Product pipeline, for Bharat Petroleum Corporation Ltd. to execute the subcontract of 16& 8- 442 Kms of the MumbaiManmad-Manliya Pipeline Extension Project worth Rs. 840 Million to be completed within tight completion period.

4. Bio-mass Energy division During the year the Padampur plant has exported 47 Million units. The total revenue was Rs. 181 Million as against revenue of Rs.132 Million in the year 2004-2005. Further, the company is setting up second plan of 7 MW capacity in Tonk District of Rajasthan at a cost of Rs. 300 Million, expected t be commissioned by Auust,2006. The company is second company in India to get UNFCCC registration for its Certified Emission Reductions (CERs), under the CDM mechanism of Kyoto Protocol for its Biomass Power Plant at Padampur, Ganganagar. The company is generating CERs by using agricultural residues like mustard husk / cotton stalk o prevent environmental degradation, by generating electricity from them.

P.G. RAO INSTITUTE OF MANAGEMENT

17

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

18

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

The importance of working capital in any industry needs no special emphasis. Working capital is considered to be life-giving force to an economic entity. Management of working capital is one of the most important functions of corporate management. Every organization, whether profit oriented or not, irrespective of its size and nature of business, needs requisite amount of working capital. Capital to keep an entity working is working capital. The efficient Working capital management is the most crucial factor in maintaining survival, liquidity, solvency and profitability of the concerned business organization. It needs sufficient finance to carry out purchase of raw materials; payment of day-today operational expenses including salaries and wages, repairs and maintenance expenses etc. and funds to meet these expenses are collectively known as working capital. In simplicity, working capital refers to that portion of total fund, which finances the day-to-day working expenses during the operating cycle. The term "working" here implies continuity of production and distribution of want removing goods and services required by the society. Working capital is necessary to finance current assets which include inventories, debtors, marketable securities, bank, cash, short term loans and advances, payment of advance tax and so on.

P.G. RAO INSTITUTE OF MANAGEMENT

19

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

An inadequate working capital as both the phenomena of over capitalization and under capitalization of working capital generates adverse effects on the profitability and liquidity of the concerned firm. The effective working capital necessitates careful handling of current assets to ensure short-term liquidity and solvency of the business. To be more specific, neither under stocking nor overstocking of raw materials, careful maintenance and trade off between credit receiving KPTL meets its working capital needs by borrowing Fund based loans and Non-fund based loans from different banks. Fund based loans include loans like Cash credit, Working capital term loan, Working capital demand loan, Packing Credit, Advance against retention money etc..Whereas Non-fund based loans include Letter of Credit and Bank Guarantee. Generally in any company the requirements of Non-fund based loans is more than Fund based loans.

P.G. RAO INSTITUTE OF MANAGEMENT

20

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

WORKING CAPITAL

Permanent

Temporary

Initial working capital

Regular working capital

Seasonal working capital

Special working capital

P.G. RAO INSTITUTE OF MANAGEMENT

21

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Business activity does not come to an end after the realization of cash from customers. For a company, the process is continuous and, hence, the need for a regular supply of working capital. For all practical purposes, this requirement has to be met permanently as with other fixed assets. This requirement is referred to as permanent or fixed working capital.

Any amount over and above the permanent level of working capital is temporary, fluctuating or variable working capital . This portion of the required working capital is needed to meet fluctuations in demand consequent upon changes in production and sales as a result of seasonal changes.

Amount Of Working capital

Temporary

Permanent

Time

P.G. RAO INSTITUTE OF MANAGEMENT

22

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Figure shows that the permanent level is fairly constant, while temporary working capital is fluctuating-increasing and decreasing in accordance with seasonal demands.

Initial working capital: In the initial period of its operation, a company must have enough money to pay certain expenses before the business yield a cash receipt. In the initial years bank may not grant loans or overdraft. Sales may be made in credit and may be necessary to make payment to creditors. Hence the necessary fund will have to be supplied by the owner in initial year.

Regular working capital: It is the working capital required to continue the regular business operation. It is required to maintain regular stock of raw material and work in-progress, finished goods. Regular working capital is the excess of current assets over current liabilities; it ensures smooth operation of business. P.G. RAO INSTITUTE OF MANAGEMENT 23

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Seasonal working capital: Some business enterprises require additional working capital during the season. For ex: - sugar mill have to purchase sugarcane in particular season and have to employ additional labor to produce. Special working capital: In all enterprise some unforeseen events do occur, when extra funds are needed to tide over such situation. Some of these events are sudden increase in demand of final product, downward movement of price, and sales during depression.

ANALYSIS WORKING CAPITAL CYCLE

P.G. RAO INSTITUTE OF MANAGEMENT

24

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Current assets are needed because sales do not convert into cash instantaneously. There is always an operating cycle involved in the conversion of sales into cash. There is a difference between current and fixed assets in terms of their liquidity. A firm requires many years to recover the initial investment in fixed assets such as plant and machinery or land and buildings. Working capital cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The cycle of a manufacturing company involves three phases: 1. conversion of cash into inventory; 2. conversion of inventory into receivables; Conversion of receivables into cash

P.G. RAO INSTITUTE OF MANAGEMENT

25

A KALPATARU POWER TRANSMISSION LIMITED report on summer project The two components of working capital are current assets and current liabilities. They have a bearing on the cash operating cycle. In order to calculate the working capital needs, what is required is the holding period of various types of various inventories, the credit collection period and the credit payment period. Working capital also depends on the budgeted level of activity in terms of production/sales. As the working capital requirement is related to the cost excluding depreciation and not to the sale price, working capital is computed with reference to cash cost.

Working capital: excess of current assets compared to current liabilities, and indicates amount of excess current assets relative to current liabilities available to conduct revenue generating operations. Total current assets minus current liabilities are value of working capital. Current Assets: cash, marketable securities, notes

receivable, accounts prepaid expenses

receivable,

inventories, supplies, and

Consumed in production of sales revenue

P.G. RAO INSTITUTE OF MANAGEMENT

26

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Current Liabilities: accounts payable, accrued expenses, (e.g. wages payable, interest payable, taxes payable) Operating cost incurred on credit

Inflows- Sources of Working Capital: Income from operations a) Accrued income is sales revenue less all expense incurred in producing sales revenue inflow b) Sales revenue generated by cash sales or on credit through receivables P.G. RAO INSTITUTE OF MANAGEMENT 27

A KALPATARU POWER TRANSMISSION LIMITED report on summer project c) Expenses incurred by immediate payment of cash or credit through Payable Accrual net income a) Determined after deducting noncash expenses b) To convert net income to increase working capital, capitalized expenses added to net income

Sale of long term assets a) Land, building, furniture, equipment, investment b) Sale treated as flow which increases working capital Increase in long term liability a) Create or increase loan, mortgage, or bond achieves this b) Inflow that increases working capital c) Borrowing long tern debt create increase in cash, current assets, or current receivable with no effect to current liability

P.G. RAO INSTITUTE OF MANAGEMENT

28

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Outflows - Uses of Working Capital: Loss from operations a) When loss occurs, expenses have exceeded sales revenue b) Decreases working capital Purchase of long term asset a) Land, building, furniture, equipment, investment b) Outflow that decreases working capital Payment of Long term liabilities a) Payment reducing principal amount owed on long term liability Payment of cash dividends a) Payable obligations b) In partnership, current asset withdrawals by owner are reductions to capital investments

P.G. RAO INSTITUTE OF MANAGEMENT

29

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Working capital management and Financing Activities at KPTL.


As KPTL is mainly into export of power transmission, it needs to have huge amount of working capital so that it can run its day to day activities and production smoothly without any interruption. Further more, as KPTL. Is also engaged in export of power transmission, it needs huge financial assistance for export purpose. KPTL has divided its working capital needs which can be satisfied by two ways. In KPTL working capital financing is mainly divided into two parts: 1) Fund based working capital financing 2) Non-fund based working capital financing. These two pats are further divided into subparts. Fund based financing can be classified into sub parts like 1) Cash Credit 2) Working capital demand loan 3) Working capital term loan 4) Foreign currency term loan 5) Packing credit 6) Advance against retention money Non-fund based working capital can be divided into sub parts like 1) Bank Guarantee or Letter of Guarantee 2) Letter of Credit or Line of Credit

Difference between Fund based and Non-fund based loan

P.G. RAO INSTITUTE OF MANAGEMENT

30

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Fund based loans are actually received in cash whereas Non-fund based loans are not received in cash. Non-fund based loans are given by bank to other parties on the behalf of a company. In Fund based loans there is no limit utilization whereas in Non-fund based loans there is certain limit to which it can be utilized.

Non-FUND BASED WORKING CAPITAL SOURCES


For its export financing purposes as well as for supplying and erection of transmission it mainly uses non fund based working capital i.e. Letter of Credit and Bank Guarantee. BANK GURANTEE: For bid purposes, kptl uses BG as their transaction instrument. At KPTL. Two types of BG are opened: 1) International bank guarantee which is given to the international bidder and is always in dollar form. 2) Domestic bank guarantee which is used for domestic trade purpose.

Non fund based W.C limit (in crores)

2007-08 2000

2008-09 2200

2009-10 2700

Company has a maximum non fund based credit limit sanctioned in current year is 2700 crores which means company can borrow P.G. RAO INSTITUTE OF MANAGEMENT 31

A KALPATARU POWER TRANSMISSION LIMITED report on summer project through bank guarantee and letter of credit maximum of 2700 crores. Company credit limit is increased due to various expectation of tender in future which they have applied and on the basis of successive ratio of company bank has increased its credit limit.

(1) LETTRE OF CREDIT (L/C)

Introduction
A letter of credit, often abbreviated as an LOC or LC, and also referred to as a documentary credit, is a document issued by a financial institution which essentially acts as an irrevocable guarantee of payment to a beneficiary. This means, that once the beneficiary has presented to the issuing or negotiating bank documents complying with the LC terms, the bank is obliged to pay irrespective of any instructions of the applicant to the contrary. In other words, the obligation to pay is shifted from the applicant to the LC issuing bank. The LC can also be the source of payment for a transaction, meaning that an exporter will get paid by redeeming the letter of credit. Letters of credit are used nowadays almost exclusively in international trade transactions of significant value, for deals between a supplier in one country and a wholesale customer in another. P.G. RAO INSTITUTE OF MANAGEMENT 32

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client.

1. Definition :Letter of Credit is a document issued by the importers bank in favour of the exporter giving him the authority to draw bill up to a particular amount (as per the contract price) covering a specified shipment of goods and assuring him of payment against the delivery of shipment documents. The operation of Letter of Credit has been regulated and is governed by UCPDC 500 of ICC, Paris.

Letter of Credits are ideal instruments of setting International Trade Payment


Apart from trust between seller and buyer other factors like Trade and Exchange Control Regulations etc. play a vital role for deciding the method of settlement. Considering all the complexities of international trade and requirements of both seller and buyer the most ideal method of settling international trade payments is documentary credit method. The seller would like to allow the goods to move to the buyer, but he would like to have control over the goods by retaining documents of title to the goods with him, till the buyer makes payment. On the other hand, the buyer wishes to pay the seller for the goods but not before the goods ordered by him are shipped, and evidence of these is produced or a document of title to goods is transferred to him. P.G. RAO INSTITUTE OF MANAGEMENT 33

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

2. Parties to Letter of Credit :There may be three to four parties to a Letter of Credit. a) Applicant / Importer : Importer is the opener* on whose behalf or account Letter of Credit issued by the bank. b) Applicant Bank : The bank who issues or opens the Letter of Credit on behalf of the customer / importer. c) Exporter : Exporter is the Beneficiary of the Letter of Credit who is entitled to receive the payment of his bills according to the terms of Letter of Credit. d) Intermediary bank / Confirming bank : Intermediary bank is the bank usually a branch or the corresponding of the opening bank in the exporting country through which the credit without any obligation on its parts, it is called the Advising or Notifying bank. If the beneficiary bank adds its own undertaking to the credit while advising it to the beneficiary, it becomes the confirming bank. e) Paying / Negotiating bank : The bank which negotiates the beneficiarys bills under the credit and pays for it is known as Paying Negotiating bank.

6. Types of Letter of Credit: a) Revocable Letter of Credit : A Revocable Letter of Credit can be amended or cancelled by the issuing bank at any moment and prior notice to the beneficiary. This credit is of limited in use and is not in much use. b) Irrevocable Letter of Credit : P.G. RAO INSTITUTE OF MANAGEMENT 34

A KALPATARU POWER TRANSMISSION LIMITED report on summer project An Irrevocable Letter of Credit constitute a definite undertaking of the issuing bank for the payment of the bills drown under the credit, provided the beneficiary presents the stipulated documents to the credit nominated bank or to the issuing bank and complies with all the conditions of the credit. c) Restricted and Unrestricted Letter of Credit : Credits which specify any particular bank that is authorized to negotiate etc. are Unrestricted. If a bank is authorized to pay accept or negotiate, the term is known as Restricted.

d) Back to Back Letter of Credit : When the exporter uses his export Letter of Credit as a cover for opening a credit in favour of three local suppliers, the Letter of Credit is called as Back to Back Letter of Credit

P.G. RAO INSTITUTE OF MANAGEMENT

35

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Documents Required Under Letter of Credit.

a) i) Commercial Invoice. ii) Consular Invoice. iii) Legalized Invoice. iv) Combined Certificate of Origin and Value. v) b) Transport Documents: i) Bill of Lading. ii) Air way Bill. iii) Postal Receipt. iv) c) Insurance Policy. e) Financial Documents Bill of Exchange. f) Certificate of Origin. g) Other Documents. I) Packing List. ii ii) Weight Certificate. iii) Certificate of Analysis & Quality. v) Certificate of Inspection. vi) Health Certificate.

(2) BANK GUARANTEE

P.G. RAO INSTITUTE OF MANAGEMENT

36

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

1. Definition :A Bank Guarantee is an irrevocable undertaking of a Bank (Guarantor) to effect payment against presentation of a written statement of the Guarantee holder (beneficiary) to the effect that a given contractually agreed obligation has not been fulfilled. The Guarantee is a unilateral agreement between the Bank and the beneficiary, which is conducted on behalf of a third, party usually the beneficiarys business partner.

The Bank must effect payment within three working days at the most since its reputation as an issuing Bank could otherwise suffer. However, the payment can be refused if the claim is unlawful. The Guarantee undertaking is abstract which means that in any case, even if the underlying transaction is changed or cancelled, the undertaking remains in force until its expiry date- unless of course the beneficiary duly releases the Bank from its liability.

P.G. RAO INSTITUTE OF MANAGEMENT

37

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

2. Legal Requirements :Guarantees are not governed by any particular legal regulations. Issuing Guarantees for foreign beneficiaries is not subject to approval nor need these Guarantees be reported. Guarantees can be issued by authorized dealers under their delegated authorities notified vide FEMA 8/2000 dt 3rd May 2000. Only in case of revocation of Guarantees involving US $ 5000/- or more to be reported to Reserve Bank of India along with the details of claim received or details of claim not honored by the mandatory on revocation.

3. Direct or Indirect Guarantee:Guarantee can be either direct one or Indirect one. i) Direct Guarantee: A Direct Guarantee is one given directly to the beneficiary abroad by the Bank, resulting in a direct legal relationship between the issuing Bank and the beneficiary. The advantage of a direct Guarantee is not only that it is less expensive but also that it is subject to the law of the country in which the Guarantee is issued unless otherwise specified in the Guarantee. If the Guarantee indicates a specific calendar date on which the Guarantee will expire, the Bank and consequently the mandator will be released from their liability even if the letter of Guarantee is not returned.

P.G. RAO INSTITUTE OF MANAGEMENT

38

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

ii)

Indirect Guarantee:

When a beneficiary insists that the Guarantee be issued by a local bank then the Guarantee will be issued through a correspondent of issuing Bank at the country of the beneficiary. In such cases the Guarantee is known as Indirect Guarantee. Such Guarantees will be issued by the correspondent against the counter Guarantee of the mandator. Issuing Indirect Guarantee is more time consuming and always more expensive, because of the cost in addition to the Guarantee commission charged by the foreign Bank. Commission is charged till final validity of the Guarantee and usually it will be collected in advance.

4. Types of Guarantees:a) Tender Guarantees:


o This is also known as BID BOND Guarantee. An importer invites tender in an international, to be sure that the exporters who are competing for the contract are willing and able to adhere to the terms of the offer, he demands a Tender Guarantee in the amount of 1% - 5% of the value of contract. If an exporter is awarded a contract and withdraws his offer, for whatever reasons, the importer can obtain compensation for his loss by claiming payment under the tender P.G. RAO INSTITUTE OF MANAGEMENT 39

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Guarantee in order to cover the cost of a new invitation to tender and also loss incurred, on account of delay in supply. o A tender Guarantee usually runs from three to six months from the tender closing dates, this being the time, the importer needs to examine the offer received. o Frequently, the tender Guarantee contains the requirement that, when the contract is awarded subsequent Guarantees such as Performance Guarantee be provided. b) Advance payment Guarantees: o Exporters customarily insist on an advance payment from the buyer when the capital goods are exported. The advance payment Guarantee in favour of the buyer serves to ensure that the advance payment will be refunded if the seller fails to meet his obligations. The amount of the Advance Payment Guarantee is normally 15% -30% of the contract value. o The validity of the Guarantee depends on the period of time expected for the delivery of the goods. If no exact date can be specified, include a clause stating that the Guarantee will automatically expires when certain requirements have been met (viz. Copies of Invoices, Shipping documents, etc.) or the respective acceptance certificate have been submitted to the issuing bank. c) Delivery Guarantees: o Delivery Guarantee ensures that the seller meets his obligation promptly. Such Guarantees are mainly required for long-term transactions. (Deferred Exports) If seller does not ship the goods in time or shipment is incomplete, the buyer can revoke the Guarantee and obtain compensation for his loss. o If deliveries are to be made in several parts a clause concerning reduction in the guarantee amount shall be incorporated. In some countries P.G. RAO INSTITUTE OF MANAGEMENT 40

A KALPATARU POWER TRANSMISSION LIMITED report on summer project in case of delivery guarantees performance guarantees are used. d) Performance Guarantees: o There are two types of performance guarantees. First type secures warranty obligations viz. proper functioning of the machinery or system or the quality of the goods shipped. The second type is intended to ensure that all the contractual obligations are met viz. The delivery of the goods in time and services performed as per schedule. o Usually these guarantees are 5% - 10% of the contract value and runs longer period than advanced payment, delivery guarantees since they cover obligations that exceeds the dead line for taking delivery e.g. the expiration of technical guarantee.

e) Payment Guarantees: o These guarantees are intended to ensure that the exporter will receive prompt payment from the importer. As a rule the guarantee amount is equivalent to the invoiced amount for the goods purchased and the guarantee extends somewhat beyond the deadline for payment in order to have time for mailing a claim. f) Guarantees covering credit facilities: o These guarantees serve as securities for the proper repayment of loan which customers willing to borrow from abroad (e.g. External Commercial Borrowing). The guarantee amount is usually equal to the amount of the loan and either includes interest or charges of the lending bank. o The guarantee period depends on the time fixed for repayment. Since guarantee amount is expressed in foreign currency and expiry period is longer, there is risk of exchange fluctuations in case of revocation. P.G. RAO INSTITUTE OF MANAGEMENT 41

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

g) Stand by Letter of Credit: o This form o obligation is a special form of the letter of credit, which functions as a guarantee. The external appearance of the stand by letter of credit resembles that of a regular letter of credit. Payment is effected on first demand against presentation of a written declaration that certain conditions have not been met (viz. obligation to deliver goods, repay loan etc.). The presentation of further documents can be stipulated. The International Chamber of Commerces Uniform Customs and Practice govern stand by letter of credit for documentary credits. h) Customs Guarantee for temporary Imports: o Banks issues a guarantee to pay customs in case of the Goods, which are intended, only for temporary imports into country (e.g. Goods for fair, Building, and Machinery etc.).In these cases indirect guarantees are usually required since customs authority only accepts guarantees from Local Banks. The amount of the guarantee is prescribed by the custom authorities and the guarantee is usually unlimited in time because of regulation in the country in question.

FUND BASED WORKING CAPITAL FINANCING


2007-08 2008-09 2009-10

P.G. RAO INSTITUTE OF MANAGEMENT

42

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Fund based W.C (in crores) 300 375 475

Company has get fund based credit sanction of maximum limit of 475 crores in current year which it can be get from the following borrowing options: CASH CREDIT FACILITY:

A major part of working capital requirement of any unit would consist of maintenance of inventory of raw materials, semi finished goods, finished goods, stores and spares etc. In trading concern the requirement of funds will be to maintain adequate stocks in trade. Finance against such inventories by banks is generally granted in the shape of cash credit facility where drawings will be permitted against stocks of goods. It is a running account facility where deposits and withdrawals are permitted. Cash credit facility is of two types (depending upon the type of charge on goods taken as security by bank.) (i) Cash credit - pledge: when the possession of the goods is with the bank and drawings in the account are linked with actual movement of goods from/to the possession of the bank. The physical control of the goods is exercised by the bank. (ii) Cash credit- hypothecation: when the possession of the goods remains with the borrower and a floating charge over the stocks is created in favour of the bank. The borrower has complete control over the goods and the drawings in the account are permitted on the basis of stock statements submitted by the borrower.

PACKING CREDIT 43

P.G. RAO INSTITUTE OF MANAGEMENT

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Pre-shipment Credit (Packing Credit) is offered to the exporters, for financing purchase, processing, manufacturing or packing of goods prior to Shipment.

You can avail any loan or advance on the basis of: (a) Letter of Credit opened in your favor or in favor of some other person, by an overseas buyer; (b) a confirmed and irrevocable order for the export of goods from India; (c) any other evidence of an order or export from India having been placed on the exporter or some other person, unless lodgments of export order or Letter of Credit with the bank has been waived. Packing Credit is granted for a period depending upon the circumstances of the individual case, such as the time required for procuring, manufacturing or processing (where necessary) and shipping the relative goods. Packing credit is released in one lump sum or in stages, as per the requirement for executing the orders/LC. The pre-shipment / packing credit granted has to be liquidated out of the proceeds of the bill dawn for the exported commodities, once the bill is purchased/discounted etc., thereby converting preshipment credit into post-shipment credit.

P.G. RAO INSTITUTE OF MANAGEMENT

44

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Foreign Currency Non-Resident (Bank) - FCNR(B) Accounts

Term deposit can be placed with authorized dealers in India in four specific foreign currencies (US Dollar, Pound Sterling, Euro or Japanese Yen). These accounts earn fixed or floating rate of interest within the ceiling rate of LIBOR/SWAP rates for the respective currency/ corresponding term minus 25 basis points (except on Yen) In this type of fund based financing there is a risk of losing money when the rate o foreign currency is fluctuating

Advance against Undrawn Balances


Usually, in case of certain products exporters are required to draw bills on overseas buyers up to 90 to 98% of FOB value of the contract, the residuary balances i.e. unknown balances is
payable by the overseas buyer after satisfying himself about the quality/quantity of goods. Hence, undrawn balances exist where the overseas buyer makes payment, after making adjustment for difference in weight quality/quantity of goods. Payment of undrawn balances is contingent in nature. Banks may consider granting advances against undrawn balances at concessional rate of interest based on their commercial judgments and the track record of the buyer. Advance against undrawn balances can be made at a concessive rate of interest for a maximum period of 90 days. Such advances are, however, eligible for concessional rate of interest for a maximum period of 90 days only to the extent these are repaid by actual remittances are from abroad and provided such remittances are received in 180 days.

P.G. RAO INSTITUTE OF MANAGEMENT

45

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Working Capital Demand Loan


may sometimes require ad hoc or temporary

borrower

accommodation in excess of sanctioned credit limit to meet unforeseen contingencies. Banks provide such accommodation through a demand loan account or a separate non-operable cash credit
account. The borrower is required to pay a higher rate of interest above the normal rate of interest on such additional credit.

P.G. RAO INSTITUTE OF MANAGEMENT

46

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

47

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

NET SALES
Net Sales = Total Sales Excise Duty

Net Sales
Rs (Crores) Change
Mar '04 342.24 Mar '05 541.32 Mar '06 839.72 Mar '07 1,524.35 Mar '08 1,737.58 Mar '09 1882.49

100

158.17

245.36

445.40

507.71

550.05

P.G. RAO INSTITUTE OF MANAGEMENT

48

A KALPATARU POWER TRANSMISSION LIMITED report on summer project From above Chart, we can say that KPTL had successfully take advantage of increase in a domestic demand as well as in a international market As we can see that, current sales of KPTL is 5.5 Times of a year ended on March -04. A sale of KPTL was increased from Rs 342.24 in 2003-04 Crores to 1882.49 Crores in year 2008-09.

1. PBDIT
PBDIT= Net Sales Operating Expenses

PBDIT
Rs Crores 2003-04 34.17 2004-05 71.29 2005-06 146.53 2006-07 311.75 2007-08 307.99 2008-09

Change

100

208.63

428.83

912.35

901.35

175.36 513.20

P.G. RAO INSTITUTE OF MANAGEMENT

49

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

From the above chart, We can say that profit before depreciation, interest and tax was growing till 2006-07 after it start declining. The reason for it is increase in value of raw material which has decrease the PBDIT of KPTL. Current PBDIT is 5.13 times of the year ended March 04,it has grown from 34.17 crores in 2003-04 to 311.75 crores in 2006-07 after it start decline 175.36 crores in 2008-09.

P.G. RAO INSTITUTE OF MANAGEMENT

50

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

3. PBDT PBDT= PBDIT- Interest

PBDT
Rs Crores 2003-04 22.15 2004-05 49 2005-06 103 2006-07 233 2007-08 223 2008-09

Change

100

221.22

465.01

1051.9 2

1006.7 7

148 668.17

From the above graph we can say that KPTLS PBDT is decreasing from 2006-07 to 2008-09.the reason behind it is the cost of debt is increase from 295.8507 crores as on 31/03/2008 to 485.4397 P.G. RAO INSTITUTE OF MANAGEMENT 51

A KALPATARU POWER TRANSMISSION LIMITED report on summer project crores as on 31/02/2009 as a result the interest increases from 40 crores in 2007-08 to 68 crores in 2008-09.

P.G. RAO INSTITUTE OF MANAGEMENT

52

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

4. PAT
PAT= PBIT- Interest- tax

PAT
Rs In Crores 2003-04 14.05 2004-05 28.72 2005-06 66.54 2006-07 159.5 2007-08 149.95 2008-09

Change

100

204.412 8

473.594 3

1135.23 1

1067.2 6

94.41 671.96

P.G. RAO INSTITUTE OF MANAGEMENT

53

A KALPATARU POWER TRANSMISSION LIMITED report on summer project From the above graph we can say that PAT is increases from 14.05 crores in 2003-04 to 159.5 crores in 2006-07 and decreases to 94.41 crores in 2008-09 there are two reasons behind it one is increase in the value of raw material and other is increase of cost of debt.

P.G. RAO INSTITUTE OF MANAGEMENT

54

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

5. EQUITY DIVIDEND
EQUTITY DIVIDEND
Equity Dividend (%) 200304 30 200405 50 200506 50 200607 75 200708 75 2008-09

75

P.G. RAO INSTITUTE OF MANAGEMENT

55

A KALPATARU POWER TRANSMISSION LIMITED report on summer project From the above chart we can say that KPTL is providing 30% dividend in 2003-04 and it increases to 50 % and stable for two years 2004-05 and 2005-06. Company has a policy to declare a steady rate of dividend of 75% onwards 2006-07 continue to current year.

6.BOOK VALUE PER EQUITY SHARE


Book Value
2003-04 (Rs) 83.46 2004-05 104.14 2005-06 154.02 2006-07 242.2 2007-08 289.52 2008-09

315 377.43

Change

100.00

124.78

184.54

290.20

346.90

P.G. RAO INSTITUTE OF MANAGEMENT

56

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

57

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

7. EARNING PER SHARE EARNING PER SHARE


2003-04 Earnings Per Share (Rs) 12.94 2004-05 26.44 2005-06 61.26 2006-07 60.19 2007-08 56.59 2008-09

35.63 275.347758 9

Change

100

204.33

473.42

465.15

437.33

P.G. RAO INSTITUTE OF MANAGEMENT

58

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

8. NET WORTH
NET WORTH = SHARE CAPITAL + RESERVE & SURPLUS

NET WORTH
Rs In Crores 2003-04 91.38 2004-05 113.8 2005-06 167.93 2006-07 642.44 2007-08 767.77 2008-09

Change

100

124.53

183.77

703.04

840.19

836.95 915.90

P.G. RAO INSTITUTE OF MANAGEMENT

59

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

9. ORDER BOOK ORDER BOOK


Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Rs in Crores

1100

2000

2300

3400

5000

P.G. RAO INSTITUTE OF MANAGEMENT

60

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

10. PRODUCTION CAPACITY PRODUCTION CAPACITY


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

CAPACITY in MT

54000

84000

84000

84000

108000

P.G. RAO INSTITUTE OF MANAGEMENT

61

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

RATIO ANALISYS

A financial ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets, current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios are the company's financial statements that contain figures on assets, liabilities, profits, or losses. Financial ratios are only meaningful when compared with other information. Since they are most often compared with industry data, ratios help an individual understand a company's performance relative to that of competitors; they are often used to trace performance over time

P.G. RAO INSTITUTE OF MANAGEMENT

62

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

1 LIQIDITY RATIOS
(a) CURRENT RATIO = Current Assets Current Liabilities

Rs. In lacs
Current Assets Current Liabilities 45494.88 Ratio(Times)

2006-07

108476.25

2.38:1

2007-08

133041.21

51309.59

2.04:1

2008-09

192570.91

72142.92

2.18:1

P.G. RAO INSTITUTE OF MANAGEMENT

63

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

Interpretation
The Current Ratio represents a margin of safety for creditors. The higher the current ratio, the greater the margin of safety. The larger the amount of current assets in relations to current liabilities, the more the firm's ability to meet its current obligations. The Current Ratio of firm has decreased from 2.38:1 in 2006-07 to 2.18:1 in 2008-09 which is the result of increase in creditors as compare to current assets so firms ability to satisfy its short-term creditors has decreased. But still it is good as it is near to ideal ratio which is 2:1.

(B)

LIQUID RATIO

= Current Assets - Inventories Current Liabilities - BOD

Liquid asserts 2006-07 2007-08 2008-09


Interpretation
3951836819

Liquid liabilities
45494.88 51309.59 72142.92

Ratios
1.16 1.57 1.96

80784.7 141668.69

The liquidity ratio measures the ability of the firm to meet its shortterm strength/solvency of a firm. Liquidity is a pre- requisite for the very survival of a firm. P.G. RAO INSTITUTE OF MANAGEMENT 64

A KALPATARU POWER TRANSMISSION LIMITED report on summer project Liquidity ratio of a firm has increased from 1.16 to 1.96 which means that firm can easily meet its short-term obligations.

P.G. RAO INSTITUTE OF MANAGEMENT

65

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

2 PROFITABILITY RATIOS
a) NET PROFIT MARGIN = PAT Net sales *100

PAT 2006-07 2007-08 2008-09


Interpretation 15949.52 14995.22 9441.09

Net Sales
152435.81 173758.39 188249.85

Ratios (%) 10.46 8.63 5.02

The Net Profit Margin is indicative management's ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or service, the expenses of operating the business (including depreciation) and the cost of borrowed funds, but also to leave a margin of reasonable composition to the owner for providing their capital at risk. The ratio of net profit (after interest and taxes) to sales essentially expresses the cost price effectiveness of the operation. Profit margin of the firm has decreased from 10.46% in 2006-07 to 5.02% in 2008-09 which means that margin of profit on sales has decreased. Profit is decreased because of increase in the value of raw material as compared to last year.

P.G. RAO INSTITUTE OF MANAGEMENT

66

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

3 Working Capital Turnover Ratio


a) WORKING CAPITAL T R = NET SALES NET WORKING CAPITAL

Net Sales 2006-07 2007-08 2008-09


Interpretation 152435.81 173758.39 188249.85

NWC
55864.59 73120.34 110923.57

Ratios 2.73 2.38 1.70

Management is required to maintain an optimum level of working Capital. Remember if an entity is having high inventory levels it will incur high storage costs, theft, insurance costs and stock losses. Like wise having low stock levels will disturb the production run of the company as it will regularly run out of inventories thereby loosing important business opportunities. The same can be said of receivables, having more receivable the company may run the risk of bad debts but also being too strict with debt repayment period may result in loss of customers. Working Capital Turnover Ratio indicates the efficiency of the firm in utilizing the working capital in the business. Working Capital Turnover Ratio has been found to be positive through out the period under study. It varies between 2.73 times and 1.70 times. This ratio signifies that on an average, a rupee of positive working P.G. RAO INSTITUTE OF MANAGEMENT 67

A KALPATARU POWER TRANSMISSION LIMITED report on summer project capital succeed to generate Rs. 1.70 worth of business/sales of the firm, which is obviously an honest situation for the management of the firm.

P.G. RAO INSTITUTE OF MANAGEMENT

68

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

3 Inventory turnover ratio


a) Inventory Turnover Ratio = NET SALES

Inventory

Net Sales 2006-07 2007-08 2008-09


Interpretation 152435.81 173758.39 188249.85

Inventory
15826.99 15370.22 23688.60

Ratios 9.63 11.30 7.95

This ratio measures the number of times, on average; the inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. The inventory turnover ratio is increase in 2007-08 from 9.63 to 11.30. Which shows that inventory is replacing 11.30 times in a year. But it decreases in 2008-09 to 7.95 times which shows firm has to give attention towards inventory of a firm.

P.G. RAO INSTITUTE OF MANAGEMENT

69

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

3 Debtors turnover ratio


a) Debtors Turnover Ratio = NET SALES

Debtors

Net Sales 2006-07 2007-08 2008-09


Interpretation 152435.81 173758.39 188249.85

Debtors
53705.10 65068.31 97715.66

Ratios 2.84 2.67 1.93

Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to firm. Debtors turnover ratio decreases from 2.84 in 2006-07 to 1.93 in 2008-09 because debtors outstanding for the period exceeding 6 months are increased of current year. So it affects the liquidity position of company.

P.G. RAO INSTITUTE OF MANAGEMENT

70

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

71

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

CONCLUSION/SUGGESTION

The company is the best performer among all Indian Transmission Line (TL) players on almost every financial parameter. The company has achieved a record level of turnover of Rs. 8712 Million (USD 195 Million) as against Rs. 5668 Million (USD 128 Million) in the previous year which shows a healthy growth of 54% for the year. During the year the company has setup a 100% Export Oriented Unit (EOU) for design, fabrication and galvanizing of a transmission line towers and structures there of at a cost of Rs. 160 Million at a capacity of 30000 MTs per annum. The division will cater to higher export demand in the international markets particularly in Sub Saharan African countries and Middle East regions. In the first 7 months of its working, the EOU has produced 9786 MTs and booked export revenue of Rs. 528 Million. I have studied and analyzed the Balance Sheet of the company for a period of five years viz. 2001-2002 to 2008-2009 and it has been observed that the company has under its possession huge real estate including land in the most posh locality in Mumbai and industrial belts across the Gujarat .The firm holds legacy of culture and heritage of more than 25 years of existence in industrial

P.G. RAO INSTITUTE OF MANAGEMENT

72

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

map of the country and as a consequence, it has built up "Goodwill" to a remarkable extent.

It has a modern foundry works. Real estate and land is shown in the Balance Sheet at nominal historical cost. Moreover, it has huge idle assets in the form of plant and machineries, material handling equipments and other assets. The management is finally advised to follow the principles of "THREE Es" to manage liquidity, solvency, profitability, survival and growth of the business. Following are the messages of "THREE Es": (i) E1 stands for Economy i. e. at what minimum cost it can produce the goods. (ii) E2 stands for Efficiency i. e. to do the thing right and finally (iii) E3 represents Effectiveness i.e. to do the right thing only. Working Capital Management should not be treated as an isolated management function but it is the part and parcel of overall corporate management functions and impact of corporate management policy and strategy effects working capital management practice of the firm. It is thus necessary to work out and analyze
P.G. RAO INSTITUTE OF MANAGEMENT 73

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

cause-effect relationship of every function of the management to assess its impact on the working capital management.

P.G. RAO INSTITUTE OF MANAGEMENT

74

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

75

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

BALANCE SHEET AS AT MARCH 31, 2009

P.G. RAO INSTITUTE OF MANAGEMENT

76

KALPATARU POWER TRANSMISSION LIMITED


BALANCE SHEET AS ON 31st MARCH 2009 PARTICULARS AS AT 31/3/2009 (Rs in lacs) AS AT 31/3/2008 (Rs in lacs)

A KALPATARU POWER TRANSMISSION LIMITED

SOURCES OF FUNDS : Shareholder's Funds : Share Capital


2,650.00

report on summer project


2,650.00 74,127.03

Reserves & Surplus

81,045.03

83695.03 Loan Funds : Secured Loans 48543.97 Unsecured Loans 16926.66 Deferred Tax TOTAL APPLICATION OF FUNDS : Fixed Assets : Gross Block 35909.22 Less :Depreciation Net Block Capital Work-in-Progress 10069.32 25839.90 999.50 26839.40 Investments 12682.52 65470.62 1279.84 150445.49

76777.03

29585.07 3000.00 32585.07 971.63 110333.73

29597.34 7328.83 22268.50 193.40 22461.90 14751.48

Current Assets, Loans & Advances Accrued value of work done Inventories : Sundry Debtors Cash & Bank Balances Loans & Advances

35532.01 23688.60 97715.65 4451.89 31182.77 192570.91

28567.92 15370.22 65068.31 8917.16 15117.61

P.G. RAO INSTITUTE OF MANAGEMENT


133041.21

77

Less :Current Liabilities & Provisions

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

PROFIT & LOSS ACCOUNT


KALPATARU POWER TRANSMISSION LIMITED
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH 2009 FOR THE YEAR ENDED 31/03/2009 INCOME : (in Rs. In lacs) FOR THE YEAR ENDED 31/03/2008

Sales & Services Gross Less : Excise Duty Sales & Services Net Other Income Increase(Decrease)in Stocks a) Transmission Division b) Real Estate Division TOTAL

191362.20 3112.35 188249.85 3075.63

176820.35 3061.96 173758.39 2148.78

5177.63

(1107.19) (6-95)

196503.10

174793.03

EXPENDITURE :

Material Cost Employee' Emoluments Manufacturing & Operational Expenses Administrative, Selling & Other Expenses Financial Expenses Depreciation 2736.46

106946.78 10861.79 42248.27 11097.16 10558.82

85751.71 9058.49 38302.52 14134.49 5210.19

P.G. RAO INSTITUTE OF MANAGEMENT

78

A KALPATARU POWER TRANSMISSION LIMITED report on summer project


Less : Transferred to Revaluation Reserve 4.65

TOTAL PROFIT BEFORE TAX

2731.81 184444.63

2180.41 154637.80 20155.23

12058.47 Provision for Taxation Current Tax 2190.00 Fringe Benefit Tax 119.17 Deferred Tax 308.21 NET PROFIT FOR THE YEAR AFTER TAX Balance brought forward Less : Prior Year's Adjustment (4.03) Less : Prior Year's Income Tax (10.94) AMOUNT AVAILABLE FOR APROPRIATION Appropriations : Proposed Dividend Add : Corporate Tax On Dividend 1987.50 337.78 2325.28 Transfer to debentures Redemption Reserve Transfer to General Reserve Balance carried over to Balance Sheet 37592.54 TOTAL 41417.82 36316.57 300.00 2000.00 1200.00 31991.69 41417.82 1987.50 337.78 2325.28 36316.97 14995.23 9441.09 21328.98 31991.69 (7.23) 261.56 102.45 4796.00

P.G. RAO INSTITUTE OF MANAGEMENT

79

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

No. of Equity Shares at the end of the year Profit for calculation of EPS (Rs.)

26500000

26500000

9441.09

14995.23

Nominal value of Equity Shares (Rs.) Basic/diluted earnings per Share (Rs.)

10.00

10.00

35.63

56.59

P.G. RAO INSTITUTE OF MANAGEMENT

80

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

CASH FLOW STATEMENT

P.G. RAO INSTITUTE OF MANAGEMENT

81

CASH FLOW STATEMENT OF KALPATARU FOR YEAR ENDED 31ST MARCH 2009

A KALPATARU POWER TRANSMISSION LIMITED

INFLOW/(OUTFLOW)-RS. In lacs

report on summer project 2008-09 2007-08


A. CASH FLOW FROM OPERATING ACTIVITIES:

Net profit before taxation, and extraordinary items Adjustments for : Depreciation Interest Paid Dividend Received Interest Received Amortization of Preliminary and Share Issue Expenses Provision for Diminution in Investments Loss/Profit(-) on sale of Assets Foreign Currency Translation Difference OPERATING PROFIT BEFORE WORKING CAPITAL CHARGES

12058.47

20155.23

2731.81 6844.09 (405.28) (1831.86) 1.30 5.09 (178.19) 19225.43

2180.41 3971.51 (744.97) (812.86) 5.01 (0.16) 6.43 (20.39) 24740.21

Adjustment for: Trade and other Receivables Inventories Margin Deposits with Banks Trade Payables CASH GENERATED FROM/(USED IN) OPERATIONS Income Tax Paid (50594.50) (8318.38) 368.88 21740.65 (17577.92) (2309.17) (14.97) (19902.06) (25605.42) 456.77 134.00 7161.39 6886.96 (4898.45)

P.G. RAO INSTITUTE OF MANAGEMENT


Prior years Adjustment CASH FLOW BEFORE EXTRAORDINARY ITEMS

82
(7.23) (1981.27)

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

83

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

84

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

85

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

P.G. RAO INSTITUTE OF MANAGEMENT

86

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

CASH FLOW

P.G. RAO INSTITUTE OF MANAGEMENT

87

A KALPATARU POWER TRANSMISSION LIMITED report on summer project

BIBLIOGRAPHY

I have referred following Books& websites for the information about the company. Pandey, I. M. Financial Management: New Delhi: Ninth Edition Vikas Publication, 2006, page. 577-600, 658-667. Khan, M. Y. Financial Management: An Overview : New Delhi: Seventh Edition Tata McGraw Hill, 2005, page. 26.128.9.

Ram, Paras. Export: What-Where-How: New Delhi: 40th Edition Anupam Publisher, 2006-07, page. 248-346.

Web References:
www.kalpatarupower.com www.iba.org.in

P.G. RAO INSTITUTE OF MANAGEMENT

88

A KALPATARU POWER TRANSMISSION LIMITED report on summer project http://money.rediff.com/money/jsp/ratio.jsp? companyCode=15150006 http://en.wikipedia.org/wiki/factoring-(finance) http://en.wikipedia.org/wiki/cash_conversion_cycle www.investopidia.com

THANK YOU

P.G. RAO INSTITUTE OF MANAGEMENT

89