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INTRODUCTION
INTRODUCTION
been adjusted as
these are shown separately in the cash flow statement. It is so because current assets and
current liabilities are directly related to operations. Cash paid is deducted from cash
generated from operations in order to get the figure of cash flow before extraordinary
items in order to get the figure of cash provided by or using from operating activitiy
SPECIAL ITEMS:
cash. It is an essential tool for short term financing analysis and is very helpful in the
evaluation of current liability of a business concern. It helps the business
OBJECTIVES OF THE STUDY
PRIMERY OBJECTIVE:
Cash Flow statement is prepared with an objective to high light the sources and uses
of cash and cash equivalents for a period.
Cash flow statement is classified under operating activities and financing activities.
The economic decisions that are taken by users require an evaluation of the ability
of an enterprise to generate cash and cash equivalents and the timing and certainty
of their generation.
SECONDARY OBJECTIVE:
It deals with the provision of information about the historical changes in cash and
cash equivalents of an enterprise by means of a cash flow statement which classifies
cash flows during the period from operating, investing and financing activities.
A basis to assess the ability of enterprise to generate cash ,cash equivalents and the
needs of
An enterprise should prepare a cash flow statement and should present it for each
period for which financial statements are presented.
Users of an enterprises financial statements are interested in how the enterprise
generates and uses cash and cash equivalents.
This is the case regardless of the nature of the enterprises activities and irrespective
of whether cash can be viewed as the product of the enterprise, as may be the case
with a financial enterprise.
Enterprises need cash for essentially the same reasons, however different their
principal revenue-producing activities might be.
They need cash to conduct their operations, to pay their obligations, and to provide
returns to their investors
The choice of area of the study for the project work was given after initial study of
companys cash flows.
Through the company has several departments; the prime of my interest was in
finance. Cash is very important basic input needed to keep the operations of the
business going on a continuous basis.
To analyze the various cash outflows and inflows of company and also to study the
various sources of the cash in this company is needed to study this cash flow
analysis.
The following is the methodology of the study. The collection of data is done in
two principle sources. They are as follows:
1 Primary data.
2 Secondary data.
PRIMARY DATA
The primary data needed for the study is gathered through interview with
concerned officers and staff, either individually or collectively. Some of the information has
been verified or supplemented with personal observation conduct.
SECONDARY DATA
The secondary data needed for the study was collected from published
sources such as pamphlets of annual reports, returns and internal records, reference from
text book and journals of financial management.
In spite of various uses of cash flow statement, it has the following limitations:
Cash flow statement gives the main of inflow and outflow of cash only and does
not show the liquidity position of the company.
This statement is not a substitute of income statement which shows both cash and
non-items. Therefore, net cash flow does not necessary mean net income of the
business.
It cannot replace funds flow statement as it cannot show the financial position of
the concern in totally
CHAPTER-2
REVIEW OF
LITRATURE
Cash is the basic input needed to keep the operations of the business
going on a continuing basis; it is also the final output expected to be realized by selling
the product manufactured by the manufacturing unit. Cash is both the beginning and the
end of the business operations.
Such statement can be prepared from the data made available from
comparative balance sheets, profit and loss account and additional information.
It is an essential tool short-term financial analysis and is very helpful in the
evaluation of current liquidity of a business concern. It helps the business executives of
a business in the efficient cash management and internal financial management. It is
evaluating the cash inflows and out flows of companys during a particular period. It
reveals the cash position of the company.
Cash flows for a period can be classified into the three categories of cash
inflows and cash out flows as given below:
1.
2.
3.
from the transactions and other events that enter into the determination of net profit or
loss. Examples of cash flows from operating activities are;
Cash receipts from the sale of goods and the rendering of services;
Cash receipts from royalties, fees, commissions, and other revenue;
Cash payments to suppliers for goods and services;
Cash payments to and on behalf of employees;
Cash receipts and cash payments of an insurance enterprise for premiums and
claims, annuities and other benefits;
Cash payments or refunds of income taxes unless they cash be specifically identified
with financing and investing activities; and
Cash receipts and payments relating to future contracts, forward contracts, option
contracts, and swap contracts when the contracts are held for dealing or trading
purposes.
Some transactions, such as the sale of an item of plant, may give
rise to a gain or loss which is included in the determination of net profit or loss.
However, the cash flows relating to such transactions are cash flows from investing
activities.
An enterprise may hold securities and loans for dealing or trading purposes in
which case they are similar to inventory acquired specifically for resale. Therefore, cash
flows arising the purchases and sale of dealing or trading securities are classified as
operating activities. Similarly, cash advances and loans made by financial enterprises
are usually classified as operating activities since they relate to the main revenue
producing activity of that enterprise.
made for resources intended to generate future income and cash flows. Examples of
cash flows arising from investing activities are;
Cash payments to acquire fixed assets (including intangibles). These payments
include those relating to capitalized research & development costs and selfconstructed fixed assets;
Cash receipts from disposal of fixed assets (including intangibles)
Cash payments to acquire shares, warrants, or debt instruments of other enterprises
and interests in joint ventures (other than payments for those instruments considered
to be cash equivalents and those held for dealing or trading purposes);
Cash receipts and disposal of shares, or debt instruments of other enterprises and
interests in joint ventures (other than receipts for those instruments considered to be
cash equivalents and those held for dealing or trading purposes);
Cash advances and loans made to third parties (other than advances and loans made
by a financial enterprise);
Cash receipts from the repayment of advances and loans made to third parties (other
than advances and loans made by a financial enterprise);
Cash payments for future contracts, forward contracts, opinion contracts, and swap
contracts except when the contracts are held for dealing or trading purposes, or the
payments are classified as financing activities; and
Cash receipts for future contracts, forward contracts, opinion contracts, and swap
contracts except when the contracts are held for dealing or trading purposes, or the
payments are classified as financing activities; and
When a contract is accounted for as a hedge of an identifiable
position, the cash flows of the contracts are classified in the same manner as the cash
flows of the position being hedged.
funds (both capital and borrowings) to the enterprise. Examples of cash flows arising
from financing activities are;
Cash proceeds from issuing shares or other similar instruments;
Cash proceeds from issuing debentures, loans, notes, bonds, and other short-term or
long-term borrowings; and
Cash repayments of amounts borrow
Cash payments to redeem preference sha
The firms need to hold cash may be attributed to the following three
motives;
1. The Transactions Motive
2. The Precautionary Motive
3. The Speculative Motive
4. The Compensation Motive.
1. The Transactions Motive:
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14
The cash balances held in reserve for such random and unforeseen fluctuations in
cash flows are called as precautionary balances. In other words, a precautionary
motive of holding cash implies the need to hold cash to meet unpredictable obligations.
Thus, precautionary cash balance serves to provide a cushion to meet unexpected
contingencies.
Another factor which has a bearing on the level of such cash balances is the
availability of short term credit. If firm cash borrow at short notice to pay for
unforeseen obligations, it will need to maintain a relatively small balance and vice
-versa. Such cash balances are usually held in the form of marketable securities so that
they earn a return.
Cash flows for a period can be classified into the three categories of cash
inflows and cash out flows as given below:
1. Cash flows from operating activities
2. Cash flows from investing activities
3. Cash flow from financing activities
1. CASH FLOW FROM OPERATING ACTIVITIES:
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financing. Information about the specific components of historical operating cash flows,
in conjunction with other information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the
principal revenue-producing activities of the enterprise. Therefore, they generally result
from the transactions and other events that enter into the determination of net profit or
loss. Examples of cash flows from operating activities are;
Cash receipts from the sale of goods and the rendering of services;
Cash receipts from royalties, fees, commissions, and other revenue;
Cash payments to suppliers for goods and services;
Cash payments to and on behalf of employees;
Cash receipts and cash payments of an insurance enterprise for premiums and
claims, annuities and other benefits;
Cash payments or refunds of income taxes unless they cash be specifically identified
with financing and investing activities; and
Cash receipts and payments relating to future contracts, forward contracts, option
contracts, and swap contracts when the contracts are held for dealing or trading
purposes.
Some transactions, such as the sale of an item of plant, may give
rise to a gain or loss which is included in the determination of net profit or loss.
However, the cash flows relating to such transactions are cash flows from investing
activities.
17
Cash proceeds from issuing debentures, loans, notes, bonds, and other short-term or
long-term borrowings; and
Payment of dividend
19
CHAPTER-3
INDUSTRY
PROFILE
20
Political will: Building further on the initiatives taken by previous governments, the
and the Asian Development Bank (ADB) are funding various infrastructure projects on a
large scale in India. Agencies such as the Japan International Bank for Cooperation
(JIBC), which funded the Delhi Metro (Underground Railway) Project, are also providing
funding to the sector. Various state governments are mobilizing funds from these agencies
to support rural roads and sanitation projects.
in India
infrastructure development. However, due to the public sector's limited ability to meet the
massive infrastructure funding requirements, private sector investment in infrastructure is
critical. Therefore, the Indian government is actively encouraging private investments in
infrastructure. According to World Bank, India needs to invest an additional 3-4 % of GDP
on infrastructure to sustain its current levels of growth in the medium term and to spread the
benefits of growth more widely. (Source: India Country Overview 2009, World Bank)
In order to boost the participation of the private sector in road development, the
Government has planned the following initiatives:
The Government will carry out all preparatory work, including land acquisition and utility
removal. Right of way will be made available to contractor, free from all eencumbrances.
National Highway Authority of India (NHAI)/the Government will provide a capital grant
of up to 40% of the project cost to enhance viability on a case-by-case basis evaluation.
The contractor will receive a 100% tax exemption for five years and 30% relief for the
following five years, which may be utilized in 20 years.
Permitted concession period of up to 30 years.
Duty free importation of specified modern high capacity equipment for highway
construction.
(Source: Public Partnerships in India, Ministry of Finance, Government of India)
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TYPES
OF
CONTRACTS
IN
THE
CONSTRUCTION
AND
INFRASTRUCTURE SECTORS
Build-Operate-Transfer (BOT)
Under this type of Public Private Partnership (PPP) contract, the Government grants to a
contractor a concession to finance, build, operate and maintain a facility for the concession
period. During the concession period, the operator collects user fees and applies these to
cover the costs of construction, debt-servicing and operations. At the end of the concession
period, the facility is transferred back to the public authority. BOT is the most commonly
used approach in relation to new highway projects in India, and is also used in the energy
and port sectors. BOT projects can be annuity-based or toll-based, as defined below:
involvement in developing projects, the NHAI has awarded some highway projects on a toll
basis. In this case, the concessionaire is responsible for constructing and maintaining the
project as well as being allowed to collect revenues through tolls during the concession
period. After the expiry of the concession period, the project is transferred back to the
NHAI.
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Build-Own-Operate-Transfer (BOOT)
BOOT contracts are similar to BOT contracts, except that in this case the contractor owns
the underlying asset, instead of only owning a concession to operate the asset. For example,
in the case of hydroelectric power projects, the contractor would own the asset during the
underlying concession period and the asset would be transferred to the Government at the
end of that period pursuant to the terms of the concession agreement.
Design-Build-Finance-Operate (DBFO)
The NHAI is planning to award new highway project contracts under the DBFO scheme,
wherein the detailed design work is done by the concessionaire. The NHAI
would restrict itself to setting out the exact requirements in terms of quality and other
structures of the road, and the design of the roads will be at the discretion of the
concessionaire. The NHAI expects that the DBFO scheme will improve the design
efficiency, reduce the cost of construction and reduce time to commence operations, in
addition to giving the concessionaire greater flexibility in terms of determining the finer
details of the project in the most efficient manner.
Item Rate Contracts
These contracts are also known as unit-price contracts or schedule contracts. For item rate
contracts, contractors are required to quote rates for individual items of work on the basis of
a schedule of quantities furnished by the customer. The design and drawings are provided
by the customer. The contractor bears almost no risk in these contracts, except the risk of an
escalation in the rate of items quoted by the contractor, as it is paid according to the actual
amount of work on the basis of the per-unit price quoted.
Engineering
Procurement
Construction/Lump-Sum
Turnkey
(EPC/Turnkey)
Contracts
In this form of contract, contractors are required to quote a fixed sum for the execution of
an entire project including design, engineering and execution in accordance with drawings,
designs and specifications submitted by the contractor and approved by the customer. The
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contractor bears the risk of incorrect estimation of the amount of work, materials or time
required for the job. Escalation clauses might exist in some cases to cover, at least partially,
cost overruns.
Operations and Maintenance (O&M) Contracts
Typically an operations and maintenance contract is issued for operating and maintaining
facilities. This could be in sectors such as water, highways, buildings and power. The
contract specifies routine maintenance activities to be undertaken at a predetermined
frequency as well as break-down maintenance during the contract period. While the
contractor is paid for the routine maintenance based on the quoted rates which are largely a
function of manpower, consumables and maintenance equipment to be deployed at the site,
any breakdown maintenance is paid for on a cost-plus basis.
Front End Engineering and Design (FEED) Contracts
Ordinarily, FEED work is carried out as a part of a consultancy assignment where the
consultant provides FEED data to the project owner to enable it to take a decision on
making a tender for construction. In addition to this, the FEED is also a prerequisite to
enable a contractor to bid for EPC/Turnkey projects. A FEED project can be an independent
consultancy project or a part of an EPC/Turnkey contract.
TYPICAL RETURNS FROM PRIVATE INVESTMENTS IN INFRASTRUCTURE
Despite the critical role played by infrastructure development in growth, there still exists a
very wide gap of US$10-15 billion between the current and required levels of private
investments in infrastructure. Returns vary from contract to contract. Typically, in an
annuity, the project Internal Rate of Return (IRR) would be in the range of 12-14 % and
equity IRR would be in the range of 14 -16 %. For toll, where the concessionaire
(contractor) assumes the traffic risk, the project IRR would be in the range of 14- 16 % and
equity IRR would be in the range of 18-20 %.
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ROAD INFRASTRUCTURE
Investment in the roads sector is expected to grow at a Compounded Annual Growth
Rate (CAGR) of 15% over the next five years, with an estimated increase from Rs.1,167
billion in the past five years (fiscal years 2002-2006) to about Rs.2,306 billion in the
next five years (fiscal years 2007-2011).
India continues to need significant investment in the road sector as the population and
economy continues to grow. The Indian road network consists of:
According to the NHAI, roads form the most common type of transportation in India and
accounted for approximately 80.0% of passenger traffic and 65.0% of freight traffic.
National highways accounts for nearly 40.0% of the total road traffic in India.
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The following table sets forth information relating to the status of National Highways:
The number of vehicles grew at an average pace of 10.10% per annum over the period
from FY 2000 to FY 2004. Passenger traffic on roads as a percentage of total passenger
traffic has also witnessed a huge increase from 30% in 1951 to 86% in
2008. (Source: CRISIL Research, Road Network in India, June 30, 2009).
The focus of the road modernization program in India is the Golden Quadrilateral (GQ)
project. The flagship program to develop and upgrade Indian national highways is the
National Highways Development Program (NHDP). Besides NHDP, the road sector in
India is expected to see a greater level of development activity through road
programmes such as Pradhan Mantri Grameen Sadak Yojana (PMGSY), and Special
Accelerated Road Development Programme North East (SARDP-NE) as well as road
projects at the state level.
The scope of the NHDP project is illustrated by the multi-phase approach set forth
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below:
Phase I of NHDP, Golden Quadrilateral Project (GQ) involves four-laning of
approximately 5,846 km of national highways between Delhi, Mumbai, Chennai and
Kolkata. Phase I is almost complete.
Phase II North-South and East-West corridors (NSEW) involves upgrading of the
existing two-lane highways and the four-laning of approximately 7,274 km of
national highways connecting four extreme points of the country. Phase II is
expected to be completed by 2009/2010.
Phase III involves the development of roads, connecting state capitals and places of
economic and tourist importance to Phase I and Phase II. Phase III involves two
development sections Phase IIIA and Phase IIIB. While approval has been received for
the widening and the strengthening of 4,015km in Phase IIIA, only in-principle approval
has been granted for the development of 6,000 km in Phase IIIB.
Phase IV involves the two-laning of a single lane network of approximately 20,000
km. Phase IV has only received an in-principle approval and has been planned
completely on a BOT-annuity basis.
Phase V involves the six-laning of 6,500 km of high-density four-laned roads.
Phase V has only received in-principle approval.
Phase VI involves the construction of expressways covering approximately 1,000
km of national highways. Phase VI has only received an in-principle approval.
Phase VII involves the development of ring roads, by-passes, over-bridges, flyovers,
etc. Phase VII is still in a conceptual stage.
Source: CRISIL, Roads and Highways Annual Review, September 2006.
The table below sets forth the status of the NHDP as at June 30, 2009:
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The targets for completion of the various components of the NHDP are as follows:
(Source: Plan Document, 11th Five Year Plan; CRISIL Research, NHDP Review & Outlook, Feb 23, 2009)
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31
32
33
34
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Increasing Urbanization:
India has witnessed a trend of increased urbanization as people migrate from rural to
urban areas seeking employment opportunities. According to CRIS INFAC estimates,
Indias urban population is expected to grow at a CAGR of 2.6% over the five year
period from financial year 2005 through 2010, as illustrated in the table below.
Urban areas must accommodate this increase in population which, in turn, is expected to
increase in demand for new urban areas and townships (CRIS INFAC
Annual Review on Housing Industry, January 2006).
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38
were
previously
unattractive
to
real
helping fulfill the social obligations of the government, which does not have the
39
these locations has yet to reach optimum levels, these locations attract a large amount of
real estate investment. Growth in these emerging destinations is predominantly led by the
expansion and consolidation plans of corporations in the IT and ITES sectors.
Tier III Cities: Locations such as Jaipur, Coimbatore, Ahmedabad, and Lucknow have a
large talent pool combined with low cost real estate. As such, businesses in the
technology sector have demonstrated a growing interest in these locations as they seek to
expand their operations.
The Retail Segment:
While real estate development in the retail sector is a relatively new phenomenon in
India, the retail sector has been growing rapidly. A.T. Kearneys 2005 Global Retail
Development Index suggests that the Indian retail market has the largest growth
potential of worldwide retail markets. The following factors contribute to the emergence
and growth of the organized retail segment in India:
Increase in per capita income and household consumption;
Changing demographics and improved standards of living;
Changing consumption patterns and access to low-cost consumer credit
Infrastructure improvements and increased availability of retail space.
Historically, the Indian retail sector has been dominated by small independent local
retailers such as traditional neighborhood grocery stores. However, during the
1990s, organized retail outlets gained increased acceptance due to changing demographic
factors such as an increase in the number of women working, changes in the perception
of branded products, the entry of international retailers into the market and the growing
number of retail malls. The size of the organized retail
segment is expected to grow by 25% to 30% per year, reaching approximately Rs.
1,095 billion of sales in 2010. Although operators in the organized retail segment have
concentrated on larger cities, retailers also have announced expansion plans
into towns and rural areas. Major Indian business groups such as Reliance, Bennett &
Coleman, Hindustan Lever, Hero Group and Bharti as well as international retailers
such as Metro, Shoprite, Lifestyle and Dairy Farm International Wal-Mart, Carrefour
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occupation rates since fiscal 2000 and projections through to fiscal 2010:
According to its publication Hotels Annual Review (July 2006), CRIS INFAC
estimates that investments in the hotel industry will total approximately Rs. 90
billion over the next five years.
Special Economic Zones (SEZ):
The Government introduced SEZs in 2000 to provide an internationally competitive
environment for exports free of bureaucratic barriers. SEZs are specifically
designated duty-free zones deemed to be foreign territories for purposes of Indian
customs controls, duties and tariffs. The introduction of SEZs is aimed at attracting
foreign investment and increasing exportsin order to
promote
economic
development and employment. There are three main types of SEZs: integrated SEZs,
43
which may consist of a number of industries; services SEZs, which may operate across a
range of defined services; and sector-specific SEZs, which focus on one particular
industry. Minimum sizes for SEZs are 2,500 acres for a multi-product SEZ,
250 acres for a sector-specific SEZ, and 25 acres for SEZs in certain specific
industries, such as biotech, IT services, gems, and jewellery. Under current legislation,
SEZ developers and tenants are granted various income tax benefits, which are expected
to attract software companies in particular, given that certain tax breaks in existing
software technology parks expire in 2009.
Entertainment:
Indias entertainment industry is currently estimated at approximately Rs. 234 billion
with cinema accounting for a significant amount (28%) of the industry (The Indian
Entertainment and Media Industry (FICCI PwC Report (2006)). While the
entertainment industry is expected to grow approximately 21% annually and reach
approximately Rs. 617 billion by 2010, the Indian cinema industry is expected to
reach approximately Rs. 153 billion in 2010, contributing approximately 25% to
Indias entertainment industry. The key economic advantages of multiplex cinemas
over single-screen cinemas include better occupancy ratios and the ability for cinema
operators to choose to show movies in a larger or a smaller theatre based on
expected audience size. Multiplex cinema operators are therefore able to maintain
higher capacity utilization compared to single-screen cinemas and can provide a
greater number of film showings. As each movie has a different screening duration, a
multiplex cinema operator has the flexibility to decide on the screening schedule so as
to maximize the number of shows in the multiplexes, thus generating a greater number
of patrons. Multiplexes also allow for better exploitation of the revenue potential of the
movie. The key drivers of growth responsible for the expected increase in the number
of multiplex cinemas include an increase in disposable income across an expanding
Indian middle class, favorable demographic changes, strong growth in organized retail
and the availability of entertainment tax benefits for multiplex cinema developers.
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46
Majority of market belonging to unorganized segment: The Indian Real Estate Sector is
highly fragmented with the disorganized segment comprising of the small builders and
contractors accounting for a majority of the housing units constructed. As a result, there
is a lesser degree of transparency in dealings or sharing of data across players.
Demand dependent on many factors: A challenge that the real estate developers face is
generating the requisite demand for the properties constructed. The factors that
influence a customers choice in property is not restricted to quality alone, but is
dependent on a number of other external factors including proximity to urban areas,
amenities such as schools, roads, water supply which are often beyond the developers
sphere of reach. Also, demand for housing units is also influenced by policy decisions
relating to housing incentives.
Increasing Raw Material Prices: Construction activities are often funded by the client
who makes cash advances at different stages of construction. In other words, the final
amount of revenue from a project is pre-determined and the realization of this revenue
is scattered across the period of construction. A big challenge that real estate developers
face is dealing with adverse movements in costs. The real estate sector is dependent on
a number of components such as cement, steel, bricks, wood, sand, gravel and paints.
47
As the revenues from sale of units are pre-decided, adverse price changes in any of the
raw materials directly affect the bottom lines of the developers.
Interest Rates: One of the main drivers of the growth in demand for housing units is the
availability of finance at cheap rates. Rising interest rates may dampen the growth rate
of demand for housing units.
Tax incentives: Interest payment on housing loans are tax deductible and it is one of the
major factors influencing demand. The phasing out available tax incentives could affect
the existent demand for housing units.
48
CHAPTER-4
COMPANY PROFILE
49
4. COMPANY PROFILE
4.1Introduction:Lanco is one of the fastest growing Integrated Infrastructure Enterprises of India,
operating across a synergistic span of verticals comprising Power Generation, Power
Trading, Non-Power Infrastructure, Construction, EPC, Property Development and
Renewable.
Lanco Infratech Ltd's current market capitalisation is approximately Rs. 12,000 Crores
(USD 2.59 billion), of which about 68 % equity stake is held by its promoters. Its gross
revenue as on March 2009 was over Rs. 6,000 Crores (USD 1.3 billion). Lanco is fast
emerging as one of the leading private sector power developers in India with 2087 MW
under operation, 8468 MW under construction, and 1039 MW of projects under
development. Out of the total portfolio of 11594 MW, the company has achieved
financial closure for 4533 MW. Having over two and a half decades of experience in
Construction and Civil Engineering, Lanco has created a niche for itself besides building
powerful knowledge bank and systems which facilitate continuous adoption and
implementation of best practices and technologies. Lanco has strategic global partnership
with top-notch companies which include: OHL of Spain, Westports and Genting of
Malaysia, Harbin, GE, Dongfang, Doosan etc. Today, Lanco is one of India's largest
Power Traders in the private sector.
A people driven organization, Lanco operates from 20 States in India and has a human
resource base of 5500 people. Lanco is also a privileged member of the World Economic
Forum and it has been acknowledged as an elite member of the top two hundred Global
Growth Companies. As part of its business strategy, the company has evolved Lanco's
Vision for 2015: to build a High Performance Organisation with an operating capacity of
15000 MW in Power. Lanco also envisages aggressive growth plan for the Construction
and EPC division to achieve an Annual Turnover of Rs 40,000 Crores(USD 8.64 billion)
by 2015.
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The year 2010 is being celebrated as Lanco's Silver Jubilee Year. It has been twenty five
years since the founder chairman L Rajagopal, taking inspiration from his uncle
Lagadapati Amrappa Naidu, began his career as an entrepreneur. Lanco has risen to its
present level on the strength of their vision and inspiration and under the leadership of L
Madhusudhan Rao, the Chairman of Lanco Group.
4.2Corporate Structure:-
51
52
Innovation
We value and encourage application of creative ideas that enhance the effectiveness of
our business. We freely express ideas and take actions to generate successful Solutions.
4.4Corporate Governance:At LANCO, our objective is to create value for our stakeholders, including our
shareholders, clients, employees, and communities. Good corporate governance standards
that promote the principles of integrity, transparency, and accountability will protect and
likely enhance our stakeholder value. Thus, we believe that good business practices,
transparency in corporate financial reporting, and the highest levels of corporate
governance are essential components of our success.
4.6Lanco Businesses:
Construction
Power
Infrastructure
4.61Construction:LANCO Infratech Ltd has an excellent track record in Construction projects. Its project
expertise spans:
Irrigation and water supply projects, including dams, tunnels, lift irrigation,
sewerage schemes and marine works.
4.62Power: LANCO has proven expertise in power generation from conventional and nonconventional sources of energy including gas, coal, biomass, hydro and wind. Lanco has
operational and under execution projects amounting to over 11000MW.
54
Operational Projects:
Capacity
Plants
Fuel
Location
(MW)
Lanco Kondapalli (Stage
I&II)
601
ABAN Power
120
600
& II)
Gas
Andhra Pradesh
Gas
Tamil Nadu
Coal
Chhattisgarh
(368+233)
(2x300)
Lanco, Chitradurga
Lanco, Tirunelveli
10
10
Hydro
Himachal Pradesh
Hydro
Himachal Pradesh
Total
1349
55
Projects
Capacity (MW)
875
1,320
1,320
Lanco Anpara
1,200
1,200
70
LANCO Energy
500
76
Total
6566
Fuel
Location
(MW)
Lanco Anpara
660
Coal
Uttar Pradesh
Lanco, Babandh I
1320
Coal
Orissa
Fatehpur
1320
Coal
Uttar Pradesh
Hydro
Uttarakhand
76
3376
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Lanco Kondapalli
ABAN Power
Lanco Amarkantaka
Lanco Chitrdurga
Lanco Trivendram
Vamsi Hydro Energies
Vamsi Industrial Power
Under Implementation:
Lanco Kondapalli
Lanco Amarkantaka
Lanco Anpara
Lanco Babandh
Lanco Energy
Power Trading
57
The EPC group at Lanco ensures project delivery cycles, greater capital expenditure
control, sourcing the best service and technology providers and most importantly allows
its clients to focus on their core business.
The core competence of Lanco is its experienced team for managing contracts during all
phases of a project, while meeting the highest international standards
Lanco provides engineering, procurement, construction, project management and
commissioning services on a Turnkey basis to the Power Sector leveraging on the
experience and expertise of its Group companies, its construction capability and
competent manpower.
Lanco has ongoing projects across India and has in place an established network of
resources. The completed list of power projects includes Thermal, Hydro and Non
conventional Energy
4.64Roads:LANCO has constructed roads and highways across India for the National Highways
Authority of India. LANCO has won the contract for construction and operation of two
road projects in Karnataka, the 81 km Bangalore-Hoskote-Mudbagal stretch on National
Highway 4 and the 82 km Neelamangla - Devihalli stretch on National Highway 48 on
Build, Operate and Transfer (BOT) basis under the National Highways Development
Project
(NHDP)
Phase
III.
The concession agreements for the projects have been signed with the National Highways
Authority Ltd. The total project cost is estimated at Rs 1300 crores and involves six
laning of 16 km stretch and four laning of the remaining stretches. The concession
periods are 20 and 25 years for the two projects respectively, including 30 months of
58
construction period? The contracts have been awarded through a competitive bidding
process.
4.7Investors:Lanco Infratech Limited became a listed entity in November 2006 following the Initial
Public Offering of shares. Presently the market capitalization of the company is around
US$ 3 billion. Of the total 240.78 million shares outstanding 67.95% is held by the
founder promoters of the company.
BSE
67.05
67.65
65.75
756,294
NSE
67.65
67.35
65.70
2,592,269
4.8Awards:Lanco
Infratech
Limited
Award for Excellence in Bridge Engineering 1999 from the Indian Institute of Bridge
Engineers.
Lanco
Kondapalli
Power
Pvt
Ltd
OHSAS 18001 :1999 Certification in respect of Environmental Management System by
Lloyd's
Register
Quality
Assurance
Ltd
in
2005.
National Award for Excellence in Water Management 2005 by Cll - GBC Green Business
Centre.
Silver Award in Gas Power Sector for Outstanding Achievement in Environment
59
Management
for
2003-04
from
Greentech
Foundation.
Leadership Efforts towards Environmental Management and Sustainable Initiative among
Corporates for 2002-03 by TERI.
Best Environment Improvement Activity Award 2002 - 03 from FAPCCI.
CM Leadership and Excellence Award in Safety, Health and Environment 2002.
ABAN
Power
Company
Ltd
0HSAS 18001:1999 Certificate from TUV SUD Management Service GmbH Trading as
TUV South Asia Pvt Ltd.
Lanco
Group
Corporate
Communications
2007
PRSI National Award for House Journal (English) - First
PRSI National Award for Corporate Film in English - First
PRSI National Award for Corporate Brochure - First Prize
Prize
Prize
2006
PRSI National Award for In- House Magazine (Content and Layout)Second Prize
PRSI
National
Award
for
Corporate
Campaign
Second
Prize
PRSI National Award for Corporate Brochure - Second Prize
2005
PRSI National Award for In-House Magazine (Content and Layout)-Third Prize
PRSI State (Andhra Pradesh) Award for In- House Magazine (Content and Layout) Second Prize.
60
CHAPTER-5
DATA ANALYSIS
AND
INTERPRETATION
61
Schedules
Rs.
Rs.
1. SOURCES OF FUNDS:
1. Shareholders' Funds:
a. Capital
56,69,92,680
b. Reserves
157,25,55,583
213,95,48,263
2. Loan Funds:
185,73,40,134
a. Secured Loans
48,99,46,869
b. Unsecured Loans
448,68,35,132
337,35,07,089
Less: Depereciation
160,60,60,818
Net Profit
176,74,46,271
6,05,16,710
182,79,62,981
2.Investments
1,500
G1
14,12,92,290
G2
17,81,32,470
G3
4,81,30,040
Loans& Advances
8,61,72,470
62
45,45,72,470
Less: Current Libilities & provisions
a. Liablilites
651,941,573
b. provisions
2,05,61,230
21,79,53,160
K
55 ,48,82,327
232,19,41,484
448,68,35,132
63
Profit and Loss Account for the year ended 31st March, 2008
INCOME:
Gross
Sales
Excise Duty
(including
1341716993
L
49259933
Other Income
1390976079
EXPENDITURE:
2781953005
181903306
M1
99557971
Manufacturing
,
Administration and
892417716
Selling
Other Expenses
598078982
Excise Duty
1497310
Interest
28600214
Depreciation
72918704
Increase/Decrease in stocks
135681510
55178068
and Writeoffs
80503442
741142301
2832301456
4829617
No27
of
Basic
-1.42
Dilted
-1.42
Cash
64
March, 2008
Particulars
Rs.
8,05,03,442
Add/(Less):Adjustments for:
1,85,30,324
Depreciation
7,29,18,704
5,51,78,068
1,58,90,678
12,000
32,16,554
Dividends recevided
33,45,291
Interst received
21,028
38,70,495
1,56,567
14,04,32,984
7,56,567
Interst
21,50,897
7,67,416
1,56,110
519
7,72,096
6,25,95,791
11,43,152
Adjustments for:
6,13,85,596
Inventories
13,90,64,443
19,93,06,887
Trade Payables
13,67,11,096
65
10,58,980
Interest received
21,27,742
34,79,111
sale of investments
22,27,555
Dividends received
7,72,415
Taxes paid
12,000
9,05,990
23,98,369
4,44,32,595
Un secured loans
2,96,83,876
7,04,88,164
14,46,04,635
54,95,170
5,36,25,210
Schedule
1. SOURCES OF FUNDS:
1. Shareholders' Funds:
66
Rs.
Rs.
a.
A.
Capital
A
566993
1,477,272
a. Secured Loans
1961652
b. Unsecured Loans
463580
3361813
b. Reseves
2. Loan Funds:
4469498
1,704,722
Less: Depereciation
1657091
Net Profit
1714634
0.02
2.Investments
3. Current Assets, Loans and Advances
112962
Sundry Debtors
G2
148221
G3
54587
G4
1.1
Loans& Advances
81563
398443
778984
b. provisions
25552
406093
K
558093
4469497
67
Account
for
the
Schedule
year
ended
Rs.
INCOME:
Gross Sales (including Excise Duty
1255575
Rs. 26,30,22,805(Rs.29,00,23,286)
256178
Other Income
999397
EXPENDITURE:
Raw Materials consumed
185864
M1
98768
M2
815540
Other Expenses
4.95
Excise Duty
165471
Interest
16304
Depreciation
1282442
17785
-2,851.60
and Writeoffs
10.3
-2,841.30
-23,219.42
26,028.61
31
st
Basic
-4.96
Dilted
-4.96
-2,809.20
Add/(Less):Adjustments for:
163.04
Depreciation
-10.3
-32.11
-69.87
Dividends recevided
-23.99
Interst received
-23.99
0.13
33.94
Interest
16.11
1,654.71
-6.05
-1,083.59
69
283.3
Inventories
346.53
132919
Trade Payables
1,959.02
-8.61
35.1
Interest received
21.11
8.51
sale of investments
Dividends received
Taxes paid
3.49
59.6
-793.35
Un secured loans
-294.52
221.41
870.46
64.57
481.3
545.87
70
Rs.
a. Capital
566993
b. Reseves
13,591.68
Rs.
1. SOURCES OF FUNDS:
1. Shareholders' Funds:
2. Loan Funds:
19,261.61
16079.06
a. Secured Loans
6,040.28
b. Unsecured Loans
22,119.34
71
14,380.95
33,480.69
Less: Depereciation
18,077.65
Net Profit
15,403.04
559.07
2.Investments
15,962.11
0.02
1,042.05
Sundry Debtors
G2
1,537.42
G3
391.28
G4
21.32
Loans& Advances
1,223.55
a. Liablilites
9,944.67
b. provisions
246.55
4,215.62
-59,756
K
5,975.60
5,607.14
41,380.95
Profit and Loss Account for the Year ended 31 st March, 2010
Schedule
Rs.
Rs.
INCOME:
Gross Sales (including Excise Duty
15,599.
47
Rs. 26,30,22,805(Rs.29,00,23,286)
3,046.7
6
72
12,552.
71
Other Income
973.98
13,526.
69
L
EXPENDITURE:
2,203.5
7
and
Benefits
Manufacturing
,
Administration and
of
M1
1,017.77
M2
10,070.05
Selling
Other Expenses
-5.42
Excise Duty
1,844.9
2
Interest
126.71
Depreciation
15,257.
60
9.65
1,740.5
6
and Writeoffs
1,957.6
1
217.05
1.93
241.33
26.028.
61
25,787.
28
Basic
0.43
Dilted
0.43
73
Cash Flow Statement for the Year Ended 31st March ,2010
Cash Flow From Operating Activites
Profit/(Loss) as per profit and Loss Account
Add/(Less):Adjustments for:
126.71
Depreciation
1,957.61
items
(Deferred
1.93
Revenue
26.21
28.98
0.44
Dividends recevided
19.05
Interst received
10.08
1,844.92
19.99
768.49
-596.62
Interest
provision for doubtful advances
profit on sale of investments
provision for obsolets stores & Raw materials
provision for diminution of investments
stores written off
Operating profit Before working Capital Changes:
Adjustments for:
87.58
Inventories
499.49
74
2,093.51
Trade Payables
1,681.60
1,084.98
138.59
16.36
sale of investments
18.77
Dividends received
14.63
Taxes paid
780.72
1133.2
Un secured loans
1,330.51
2,012.29
2,020.29
154.59
545.87
391.28
75
Rs.
a. Capital
11,711.73
b. Reseves
12,607.63
a. Secured Loans
6,601.83
b. Unsecured Loans
5,581.34
1. SOURCES OF FUNDS:
1. Shareholders' Funds:
24.319.36
2. Loan Funds:
12,183.17
36,502.53
32,484.59
Gross Block
19.592.12
Less: Depreciation
12,892.47
Net Block
39.25
76
2.Investments
12,931.72
1,293.06
1,293.06
Sundry Debtors
G2
1,070.44
G3
736.74
G4
26.42
Loans& Advances
1.904.46
0.02
1,070.44
5,031.12
8,472.77
b. provisions
273
3712.65
K
5,515.18
21,770.26
77
36,502.53
12282.69
Rs. 26,30,22,805(Rs.29,00,23,286)
2143.2
Other Income
10139.49
3733.73
13873.22
EXPENDITURE;
M1
M2
1469.92
10194.83
2737.52
165.51
16331.68
Other Expenses
93.88
Excise Duty
16237.8
Interest
2364.58
Depreciation
Increase)/ Decrease in stocks
6501.01
4136.43
and Writeoffs
27.44
91.97
78
4017.02
-25787.28
21770.26
Rs)
Dilted
(Rs)
3.43
---
79
CASH FLOW STATEMENT FOR THE YEAR ENDED 30th SEPTEMBER, 2011
Rs.
CASH FLOW FROM OPERATING ACTIVITES:
4.017.0
2
165.51
6,501.0
1
27.44
Interest received
91.97
-37.19
78.22
523.74
Interest PAID
for
doubtful
advances
7.95
2,737.5
2
3,492.1
9
11.62
2,215.4
3
80
263.18
539.26
Inventories
1,505.6
7
703.23
-13.73
15.99
73.12
Interest received
4.92
-12.51
Taxes paid
35.81
241.33
899.82
2,647.2
5
1,352.7
4
-650.70
1,821.8
5
345.46
391.28
81
736.74
Rs.
a. Capital
11,711.73
b. Reseves
Rs.
1. SOURCES OF FUNDS:
1. Shareholders' Funds:
12.607.63
24,502.34
2. Loan Funds:
a. Secured Loans
6,601.83
b. Unsecured Loans
5,353.43
36,503
E
Gross Block
Less: Depereciation
12,183.17
32,484.59
19,592.12
12,892.47
Net Block
39.25
12,931.72
2.Investments
0.02
G1
1,293.06
Sundry Debtors
G2
1,070.44
G3
736.74
G4
26.42
82
Loans& Advances
1,931.72
5,031.12
a. Liablilites
8,472.77
b. provisions
8,472.77
3,714.65
21,770.26
36,502.53
Rs.
Rs.
INCOME:
51538.99
7285.09
Rs. 26,30,22,805(Rs.29,00,23,286)
Other Income
44253.9
880.78
EXPENDITURE;
M1
45134.68
6857.43
M2
2479.33
26909.33
Other Expenses
18.14
Excise Duty
1609.45
Interest
N1
129.18
Depreciation
38003.38
-70.6
7201.90
83
and Writeoffs
20.22
7222.12
39.61
21770.26
14374.65
6.14
Dilted
5.66
7,395.61
129.18
213.09
Extraordinary items
39.6
222.54
Dividends recevided
-98.8
Interst received
2.69
1.94
1,609.45
84
233.89
Interst
197.48
8,192.45
4,729.92
4,729.92
Adjustments for:
14,214.84
Inventories
473.29
19,418.04
Trade Payables
11,225,59
96.22
11,321.81
Interest received
326.68
3,447.22
sale of investments
96.66
Dividends received
279.29
Taxes paid
3,397.95
2,030.30
330.7
874
Un secured loans
1,625.64
15,143.52
85
15,943.56
1,223.80
736.73
1,960.53
AMOUNT
S.NO PARTICULARS
2003
SOURCES OF FUNDS
1)SHARE HOLDERS FUNDS:
Share Capital
25796.1
4
17000.0
0
21901.9
3
TOTAL
64698.07
2) Loan funds:
Secured loans
22645.2
3
Unsecured loans
4484.79
27130.02
Total
II
91828.09
APPLICATION OF FUNDS
1) Fixed assets:
86
Gross block
53355.4
4
Less: Depreciation
14266.8
3
Net Block
39088.6
1
Capital wok-in-progress
78.64
39167.25
2)Investments
36233.99
3)Current Assets:
Inventories
2693.46
Sundry Debtors
1838.11
1371.05
1983.03
7885.65
Less:
current
Liabilities
and
provisions
Current liabilities
3557.46
Provisions
36.29
3593.75
4291.90
4)Miscellaneous Expenses
378.60
11756.35
TOTAL
91828.09
87
Amount
(Rs lakhs)
S. No.
Particulars
Amount
88
31-32003
Income
Sales
31590.4
6
Other income
364.26
Total
31954.72
Income
II
Expenditure
Purchase of finished goods for resale
1075.42
29230.0
3
Depreciation
2841.18
5152.67
184.18
finished goods
38483.48
Loss for the year
Debit
balance
6528.76
brought
forward
from
5227.59
previous year
Debit balance carried to balance sheet
89
11756.35
FINDINGS
1. In 2007-2008 year, the cash out flows is more than inflows of cash.
Because purchases, payments amount is higher than the sales,
receivables
amount
i.e.,
[(35521.92)-32728.29]
(2793.63).
The
90
3. During 2009-2010 year, cash outflows are higher than the cash inflows
i.e., [(11144.9)-10719.21]=(425.69). Because purchase of fixed assets,
interest and payments of borrowing interest are more than the sales of
fixed assets, investment. The operating income is Rs 3416.09.
4. In 2010-2011 year, cash inflows are more than the outflows of cash.
Because borrowings, sales of fixed assets, investments are more than the
purchase
and
payment
of
amount
[(20503.09)-20595.73]
=92.64.
Because
Purchase
of
fixed
assets,
investments are more than the sales of fixed assets. Investments. The
operating income is 17085.72.
6. In 2012 year, also cash outflows are higher than cash inflows. [30303.0220471.75]=9831.27. Because Purchase of fixed assets, investments are
more than the sales of fixed assets. Investments. The operating income
is 30303.02.
7. Company putting investments in Sri Vishnu cement Ltd every year.
8. In 2012- 2013 year, cash inflows amount is very less to compare with the
2007 year.
SUGGESTIONS:
To reduce the purchases and utilize this amount in the place of receiving
borrowings.
And try to reduce the provision for doubtful debts and miscellaneous
expenses
Conclusion:Every enterprise needs budgeting for effective running of the business activities.
Budgeting is a way of managing business and industry. It emphasizes that management
should anticipate problems and difficulties. Advance decision should be taken for the
course of activities during the forthcoming budget period. Budgetary control denotes a
formal system based on the concept of budgeting. Budgetary control is essential for
policy planning and control. It also acts as an instrument of coordination. The main
objective of budgetary control is to ensure planning for future budget setting up various
budgets. The requirements and expected performance of the enterprise are anticipated.
Lanco Infratech Ltd has introduced various systems of budgetary control in order to
achieve the future objectives of the organization
92
93
Bibliography
Biblography:1Books:
Management Accounting Principles and Practice, Eighth Edition, R.K. Sharma &
Shashi K. Gupta.
2Websites:
www.lancogroup.com
www.google.com
95