Introduction:-

BHEL is the largest engineering and manufacturing enterprise

in India in the energy-related/infrastructure
sector, today. BHEL was established more than 40 years ago,
ushering in the indigenous Heavy Electrical Equipment
industry in India - a dream that has been more than realized
with a well-recognized track record of performance. The
company has been earning profits continuously since 1971-
72 and paying dividends since 1976-77.

BHEL manufactures over 180 products under 30 major

product groups and caters to core sectors of the Indian
Economy viz., Power Generation & Transmission, Industry,
Transportation, Telecommunication, Renewable Energy, etc.
The wide network of BHEL's 14 manufacturing divisions,
four Power Sector regional centres, over 100 project sites,
eight service centres and 18 regional offices, enables the
Company to promptly serve its customers and provide them
with suitable products, systems and services -- efficiently
and at competitive prices. The high level of quality &
reliability of its products is due to the emphasis on design,
engineering and manufacturing to international standards by
acquiring and adapting some of the best technologies from
leading companies in the world, together with technologies
developed in its own R&D centres.

BHEL has acquired certifications to Quality Management

Systems (ISO 9001), Environmental Management Systems
(ISO 14001) and Occupational Health & Safety Management
Systems (OHSAS 18001) and is also well on its journey
towards Total Quality Management.

1
BHEL has:-

• Installed equipment for over 90,000 MW of power

generation -- for Utilities, Captive and Industrial users.
• Supplied over 2,25,000 MVA transformer capacity and
other equipment operating in Transmission &
Distribution network up to 400 kV (AC & DC).
• Supplied over 25,000 Motors with Drive Control System
to Power projects, Petrochemicals, Refineries, Steel,
Aluminum, Fertilizer, Cement plants, etc.
• Supplied Traction electrics and AC/DC locos to power
over 12,000 kms Railway network.
• Supplied over one million Valves to Power Plants and
other Industries.

BHEL's operations are organised around three business

sectors, namely Power, Industry - including Transmission,
Transportation, Telecommunication & Renewable Energy -
and Overseas Business. This enables BHEL to have a
strong customer orientation, to be sensitive to his needs and
respond quickly to the changes in the market.

BHEL, ranking among the major power plant equipment

suppliers in the world, is one of the largest exporters of
engineering products & services from India. Over the years,
BHEL has established its references in around 60 countries
of the world, ranging from the United States in the West to
New Zealand in the Far East. BHEL's export range covers
individual products to complete Power Stations, Turnkey
Contracts for Power Plants, EPC Contracts, HV/EHV
Substations, O&M Services for familiar technologies,
Specialized after-market services like Residual Life
Assessment (RLA) studies and Retrofitting, Refurbishing &
Overhauling, and supplies to manufacturers & EPC
contractors.

2
BHEL has assimilated and updated/adopted the state-of-the-
art-technologies in the Power and Industrial equipment
sectors acquired from world leaders. BHEL has successfully
undertaken turnkey projects on its own and possesses the
requisite flexibility to interface and complement international
companies for large projects, and has also exhibited
adaptability by manufacturing and supplying intermediate
products to the design of other manufacturers and original
equipment manufacturers (OEMs). The success in the area
of rehabilitation and life extension of power projects has
established. BHEL as a reliable alternative to the OEMs for
such power plants.

BHEL's vision is to become a world-class engineering

enterprise, committed to enhancing stakeholder value. The
company is striving to give shape to its aspirations and fulfill
the expectations of the country to become a global player.

The greatest strength of BHEL is its highly skilled and

committed 43,300 employees. Every employee is given an
equal opportunity to develop himself and grow in his career.
Continuous training and retraining, career planning, a positive
work culture and participative style of management – all
these have engendered development of a committed and
motivated workforce setting new benchmarks in terms of
productivity, quality and responsiveness.

3
4
BOARD OF DIRECTORS

CHAIRMAN AND MANAGING DIRECTOR

Shri K. Ravi Kumar

Chairman & MD & Director (Power)
(Additional Charge of the post of CMD w.e.f. 01.03.2008)
Bharat Heavy Electricals Limited
"BHEL House",
Siri Fort,
New Delhi-110 049.

PART TIME OFFICIAL DIRECTORS

Shri B.S.Meena, IAS
Additional Secretary & Financial Advisor,
Ministry of Steel,
Ministry of Heavy Industries & Public Enterprises,
Udyog Bhavan,
New Delhi– 110011.

Dr. Surajit Mitra, IAS

Additional Secretary
Ministry of Heavy Industries & Public Enterprises
Deptt. of Heavy Industry,
Udyog Bhavan,
New Delhi-110011.

PART TIME NON-OFFICIAL DIRECTORS

Shri Sanjay Madanlal Dadlika
Maharashtra Pradesh Congress Committee
Gandhi Bhawan
Nariman Point,
Opp. Mantralya,
Mumbai

5
Shri Shekhar Datta
E/8, Sea face Park,
50, Bhulabhai Desai Road,
Mumbai-400026

Shri Ashok K. Aggarwal

Managing Director.
Gopal Group,
240, Okhla Industrial Area, Phase III,
New Delhi – 110020

Shri Madhukar
E-115, Sector-52,
Noida-201301, (U.P.)

Shri Manish Gupta

20, Suren Tagore Road,
Kolkata – 700019

Shri S. Ravi
Ravi Rajan & Co.
Chartered Accountants
D-4, Rectangle-1,
Room No. 505-A (5th Floor),
Distt. Centre, Saket,
New Delhi-110017

FUNCTIONAL DIRECTORS
Shri C. S. Verma
Director (Finance)
Bharat Heavy Electricals Limited
"BHEL House",
Siri Fort,
New Delhi – 110049

Shri B.P. Rao

Director (IS & P)
Bharat Heavy Electricals Limited
Integrated Office Complex,
Lodhi Road
New Delhi -110003

6
Shri C.P. Singh
Director (E,R & D)
Bharat Heavy Electricals Limited
"BHEL House",
Siri Fort,
New Delhi -110049

Shri Anil Sachdev

Director (Personnel)
Bharat Heavy Electricals Limited
"BHEL House",
Siri Fort,
New Delhi – 110049

COMPANY SECRETARY

N. K Sinha
Company Secretary.

7
FINANCIAL STATEMENTS
OF
BHEL
(2003-04 to 2007-08)

8
Balance Sheet
As on 31.03.2004
(Rs. in crores)
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 244.76
Reserves & Surplus 5051.18 5295.94

Loan Funds
Secured Loans 500.00
Unsecured Loans 40.02 540.02
5835.96
APPLICATION OF FUNDS
Fixed Assets
Gross Block 3459.60
Less: Depreciation/Amortization to-date -2411.50
1048.10
Lease Adjustment Account 46.04
Net Block 1094.14
Capital Work-in-Progress 108.55 1202.69
Investments 28.98
Deferred Tax Assets Net 498.51
Current Assets, Loans and Advances
Current Assets
Inventories 2103.88
Sundry Debtors 4608.48
Cash & Bank Balances 2659.63
Other current assets 13.51
Loans and advances 1039.19
10424.69
Less:
Current Liabilities & Provisions
Current Liabilities 5196.91
Provisions 1139.94
6336.85
Net current assets 4087.84
Miscellaneous expenditure 17.94
5835.96

9
PROFIT AND LOSS ACCOUNT
for the year ended 31st March, 2004 (Rs. In crores)
EARNINGS
Turnover (Gross) 8662.46
Less Excise Duty -643.43
Turnover (Net) 8019.03
Other operational income 312.7
Other income 119.11
Interest Income 80.95
Exchange Variation
Accretion/Decretion to Work-in-progress & -30.62
Finished Goods
8501.17
OUTGOINGS
Consumption of raw Material & components 3451.52
Consumption of stores & spares 183.13
Erection and Engineering exp.
- payment to subcontractors 594.45
Employees' remuneration & benefits 1639.5
Other expenses of manufacture 1083.64
Administration,selling and distribution
Interest & other borrowing costs 60.08
Exchange variation 36.29
Depreciation & amortisation 198
Provisions 20.86
Less : Cost of jobs done for internal use -23.62
7243.85
Profit before prior period adjustments
and extra-ordinary items 1257.31
Less : Extra-ordinary items -229.81
Profit before prior period adjustments 1027.5
Add/-less : Prior period Adjustments (Net) -12.74
Profit before tax 1014.76
Less: Provision for taxation 356.6
Profit after tax 658.15
Add: Balance of profit brought
forward from last year 51.92
Foreign project reserve written back 10.61
Profit available for appropriation 720.69
Less: Appropriation-
– Foreign Project Reserve 1.38

10
– Bonds Redemption Reserve 100
– General Reserve 350
– Dividend 146.86
– Corporate Dividend tax 19 617.24
Balance carried to Balance Sheet 103.45

MANAGEMENT DISCUSSION AND

ANALYSIS

Turnover for the year has touched an all time high for the third year in succession
thereby touching the figure of Rs. 86625 million against Rs. 74822 million in 2002-
2003, an increase of 15.77%. Value addition for the year 2003-2004 stood at Rs.
36800 million as against Rs. 32475 million for the year 2002-2003, registering an
increase of 13.32%. Profit before tax for the year stood at Rs. 10148 million and is
higher by 26.47% compared to profit before tax of Rs. 8024 million in 2002-2003.
Gross margin as a percentage of a value of production (net of excise duty)
increased to 16.14% as against 15.21% in 2002 2003. Profit before tax as a
percentage of value of production increased from 11.70% in 2002-2003 to 12.87%
in 2003-2004. Profit after tax at Rs. 6582 million has increased by 48.08% over the
previous year’s Profit after tax of Rs. 4445 million. Net working capital (other than
cash and bank balances) decreased by Rs. 8432 million during the year. The
factors contributing to the decrease are:

a) Increase in Advances from Customers by Rs. 13314 million over previous year.
b) Increase in Other current liabilities and Provisions by Rs. 3281 million.

However, increase in debtors (by Rs. 5327 million), increase in inventory (by Rs.
1028 million), increase in Other current assets loans and advances (by Rs. 1021
million) and decrease in Creditors (by Rs. 787 million) have marginally offset the
decrease in working capital. Although, debtors and inventory have gone up in
absolute terms, in terms of number of sales days, Sundry debtors declined from
199 days in 2002-2003 to 194 days in 2003-2004. Inventory in number of days of
turnover declined from 98 days in 2002-2003 to 89 days in 2003-2004. Cash and
bank balances, including short term deposits, at the year-end stood at Rs. 26596
million as against Rs. 13209 million at the end of last year. Equity remained at Rs.
2448 million. Net worth increased by Rs. 5699 million to Rs. 52781 million. Debt-
Equity Ratio declined from 0.11 in 2002-2003
to 0.10 in 2003-2004.

Balance Sheet

11
as on 31.03.2005
(Rs. in crores)
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 244.76
Reserves & Surplus 5782.13 6026.89

Loan Funds
Secured Loans 500.00
Unsecured Loans 36.98 536.98
6563.87
APPLICATION OF FUNDS
Fixed Assets
Gross Block 3628.93
Less: Depreciation/Amortisation to-date -2619.34
1009.59
Lease Adjustment Account 34.65
Net Block 1044.24
Capital Work-in-Progress 95.31 1139.55
Investments 8.95
Deferred Tax Assets Net 518.27
Current Assets, Loans and Advances
Current Assets
Inventories 2916.10
Sundry Debtors 5972.14
Cash & Bank Balances 3177.86
Other current assets 47.17
Loans and advances 1229.69
13342.96
Less:
Current Liabilities & Provisions
Current Liabilities 7120.44
Provisions 1325.42
8445.86
Net current assets 4897.10
Miscellaneous expenditure 0.00
6563.87

PROFIT AND LOSS ACCOUNT

for the year ended 31st March, 2005 (Rs. In crores)
EARNINGS

12
Turnover (Gross) 10336.39
Less Excise Duty -809.26
Turnover (Net) 9527.13
Other operational income 420.04
Other income 101.72
Interest Income 133.93
Exchange Variation 0
Accretion/Decretion to Work-in-progress &
Finished Goods 539.77
10722.59
OUTGOINGS
Consumption of raw Material &
components 4891.78
Consumption of stores & spares 205.89
Erection and Engineering exp.
- payment to subcontractors 773.61
Employees' remuneration & benefits 1650.37
Other expenses of manufacture 1159.95
Administration,selling and distribution
Interest & other borrowing costs 81.4
Exchange variation 31.94
Depreciation & amortisation 218.86
Provisions 126.24
Less : Cost of jobs done for internal use 19.13
9120.95
Profit before prior period adjustments
and extra-ordinary items 1601.65
Less : Extra-ordinary items -17.99
Profit before prior period adjustments 1583.66
Add/-less : Prior period Adjustments (Net) -2.03
Profit before tax 1581.63
Less: Provision for taxation 628.23
Profit after tax 953.4
Add: Balance of profit brought
forward from last year 103.45
Foreign project reserve written back 3.23
Profit available for appropriation 1060.08
Less: Appropriation-
– Bonds Redemption Reserve 100
– General Reserve 500
– Dividend 195.8
– Corporate Dividend tax 26.64 822.45

13
Balance carried to Balance Sheet 237.63

MANAGEMENT DISCUSSION AND

ANALYSIS
Turnover for the year has touched an all time high for the fourth year in succession
thereby touching the figure of Rs. 103364 million against Rs. 86625 million in
2003-2004, an increase of 19.32%.
Value addition for the year 2004-2005 stood at Rs. 42540 million as against Rs.
36800 million for the year 2003-2004, registering an increase of 15.60%.
Profit before tax for the year stood at Rs.15816 million and is higher by 55.85% as
compared to profit before tax of Rs. 10148 million in 2003-2004. Gross margin as a
percentage of a value of production (net of excise duty) increased to 18.76% as
against 16.14% in 2003-03. Profit before tax as a percentage of value of
production increased from 12.87% in 2003-2004 to 15.77% in 2004-05.
Profit after tax at Rs. 9534 million has increased by 44.85% over the previous
year’s Profit after tax of Rs. 6582 million.
Net working capital (other than cash and bank balances) decreased by Rs.2910
million during the year. The factors contributing to the increase are:-

a) Increase in sundry debtors by Rs. 13636 million over previous year.

b) Increase in inventory by Rs.8122 million.
c) Increase in Other current assets and loans and advances by Rs. 2242 million.

However, increase in current liabilities and provisions by Rs. 21090 million, has
marginally offset the increase in working capital.
Increase in inventory by 38.60% over previous years. Inventory in number of days
of turnover declined from 89 days in 2003-04 to 103 days in 2004-05.
Cash and bank balances, including short term deposits, at the year-end stood at
Rs. 31779 million as against Rs. 26596 million at the end of last year. Equity
remained at Rs. 2448 million. Net worth increased by Rs. 7488 million to Rs.
60629 million. Debt-Equity Ratio declined from 0.10 in 2003-04 to 0.19 in 2004-05.

Balance Sheet
as on 31.03.2006
(Rs. in crores)

14
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 244.76
Reserves & Surplus 7056.61 7301.37

Loan Funds
Secured Loans 500.00
Unsecured Loans 58.23 558.23
7859.60
APPLICATION OF FUNDS
Fixed Assets
Gross Block 3822.06
Less: Depreciation/Amortisation to-date -2852.76
969.30
Lease Adjustment Account 12.97
Net Block 982.27
Capital Work-in-Progress 184.57 1166.84
Investments 8.29
Deferred Tax Assets Net 673.72
Current Assets, Loans and Advances
Current Assets
Inventories 3744.37
Sundry Debtors 7168.06
Cash & Bank Balances 4133.97
Other current assets 84.49
Loans and advances 1199.87
16330.76
Less:
Current Liabilities & Provisions
Current Liabilities 8807.74
Provisions 1512.27
10320.01
Net current assets 6010.75
Miscellaneous expenditure 0.00
7859.60

PROFIT AND LOSS ACCOUNT

for the year ended 31st March, 2006 (Rs. In crores)
EARNINGS
Turnover (Gross) 14525.49
Less Excise Duty -1151.46

15
Turnover (Net) 13374.03
Other operational income 276.89
Other income 109.77
Interest Income 160.25
Exchange Variation 9.7
Accretion/Decretion to Work-in-progress &
Finished Goods 386
14316.64
OUTGOINGS
Consumption of raw Material &
components 6865.54
Consumption of stores & spares 233.85
Erection and Engineering exp.
- payment to subcontractors 1047.12
Employees' remuneration & benefits 1878.5
Other expenses of manufacture 1179.75
Administration,selling and distribution
Interest & other borrowing costs 58.74
Exchange variation 0
Depreciation & amortisation 245.93
Provisions 282.75
Less : Cost of jobs done for internal use -36.38
11755.83
Profit before prior period adjustments
and extra-ordinary items 2560.83
Less : Extra-ordinary items -0.19
Profit before prior period adjustments 2560.64
Add/-less : Prior period Adjustments (Net) 3.52
Profit before tax 2564.16
Less: Provision for taxation -885.19
Profit after tax 1678.97
Add: Balance of profit brought 237.83
forward from last year
Foreign project reserve written back 6.93
Profit available for appropriation 1923.73
Less: Appropriation-
– Bonds Redemption Reserve 100
– General Reserve 1200
– Dividend 354.9
– Corporate Dividend tax 49.77 1704.67
Balance carried to Balance Sheet 219.05

16
 MANAGEMENT DISCUSSION AND
ANALYSIS
Turnover for the year has touched a new high for the fifth year in succession
thereby reaching the figure of Rs. 145255 million against Rs. 103364 million in
2004-05, an increase of 40.53%.
Value addition for the year 2005-06 stood at Rs. 56828 million as against Rs.
42540 million for the year 2004-05, registering an increase of 33.58%.
Profit before tax for the year stood at Rs. 25644 million and is higher by 62.14% as
compared to profit before tax of Rs. 15816 million in 2004-05. Gross margin as a
percentage of value of production (net of excise duty) increased to 20.98% as
against 18.76% in 2004 05. Profit before tax as a percentage of value of
production (net of excise duty) increased from 15.77% in 2004-05 to 18.75% in
2005-06.
Profit after tax at Rs. 16792 million has increased by 76.13% over the previous
year’s Profit after tax of Rs. 9534 million. Net working capital (other than cash and
bank balances) increased by Rs. 1576 million during 2005-06 over the previous
year. The factors contributing to the increase are:

a) Increase in Sundry Debtors by Rs. 11960 million.

b) Increase in Inventory by Rs. 8283 million.
c) Increase in Other Current Assets and Loans and Advances by Rs. 74 million.

However, increase in Current Liabilities and Provisions by Rs. 18741 million has
offset the increase in Current Assets thereby making marginal impact on the
working capital over that of previous year.

Sundry Debtors increased from Rs. 59721 million in 2004-05 to Rs. 71681 million
in 2005-06, an increase of 20.03%. In terms of number of sales days, Sundry
debtors decreased from 211 days in 2004-05 to 180 days in 2005-06. Inventory
increased by 28.40% over previous year, i.e. from Rs. 29161 million in 2004-05 to
Rs. 37444 million in 2005-06. Inventory, in number of days of turnover, decreased
from 103 days in 2004-05 to 94 days in 2005-06. Cash and bank balances,
including short term deposits, at the year-end stood at Rs. 41340 million as against
Rs. 31779 million at the end of last year. Equity remained at Rs. 2448 million. Net
worth increased by Rs.12745 million to Rs. 73014 million. Debt-Equity Ratio
declined from 0.09 in 2004-05 to 0.08 in 2005-06.

Balance Sheet
as on 31.03.2007
(Rs. in crores)
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 244.76

17
Reserves & Surplus 8543.51 8788.27

Loan Funds
Secured Loans 0.00
Unsecured Loans 89.33 89.33
8877.60
APPLICATION OF FUNDS
Fixed Assets
Gross Block 4135.05
Less: Depreciation/Amortisation to-date -3117.05
1018.00
Lease Adjustment Account -29.26
Net Block 988.74
Capital Work-in-Progress 302.54 1291.28
Investments 8.29
Deferred Tax Assets Net 935.16
Current Assets, Loans and Advances
Current Assets
Inventories
Sundry Debtors 9612.81
Cash & Bank Balances 5808.91
Other current assets 199.70
Loans and advances 1140.87
16762.29
Less:
Current Liabilities & Provisions
Current Liabilities 11732.86
Provisions 2604.23
14337.09
Net current assets 2425.20
Miscellaneous expenditure 0.00
4659.93

PROFIT AND LOSS ACCOUNT

for the year ended 31st March, 2007 (Rs. In crores)
EARNINGS
Turnover (Gross) 18738.95
Less Excise Duty -1501.42
Turnover (Net) 17237.53
Other income 823.56
Accretion/Decretion to Work-in-progress & 181.19

18
Finished Goods
18242.28
OUTGOINGS
Consumption of raw Material &
Erection and Engineering exp. 10017.19
Employees' remuneration & benefits 2368.95
Other expenses of manufacture 1660.07
Administration,selling and distribution
provisions 171.86
Interest & other borrowing costs 43.33
Depreciation & amortisation 272.97
Less : Cost of jobs done for internal use 28.36
14506.72
Profit before prior period adjustments 3735.56
Add/-less : Prior period Adjustments (Net) 0.51
Profit before tax 3736.07
Less: Provision for taxation -1321.37
Profit after tax 2414.7
Add: Balance of profit brought 219.06
forward from last year
Foreign project reserve written back 1.45
Profit available for appropriation 2635.21
Less: Appropriation-
– General Reserve 1500
– Dividend 599.66
– Corporate Dividend tax 92.83 2192.49
Balance carried to Balance Sheet 442.72

MANAGEMENT DISCUSSION AND

ANALYSIS

Secured loan of Rs. 500 crore towards bonds were redeemed during the year and
repaid on its maturity. Unsecured Loan represents assets taken on lease. Gross
Block and capital Work in progress increased by Rs. 312.99 crore, and Rs. 117.97
crore during the year due to Capital expenditure incurred on ongoing capacity

19
augmentation program at various manufacturing units and the erection and
commissioning facilities at project sites. There was no change in the Investments
during the year. A deferred Tax asset has increased by Rs. 261.44 crore to Rs.
935.16 crore as on 31.3.2007. Inventory increased by Rs. 473.30 crore or 12.64%
over previous year in tune with the increase in volume of operations. In terms of
days of turnover, it has decreased from 94 days in 2005 06 to 82 days in 2006-07.
Debtors in absolute terms increased by Rs. 2527.75 crore mainly due to increase
in turnover. In terms of day of turnover it increased from 180 days in 2005-06 to
189 days in 2006-07. The cash and cash equivalents have increased from Rs.
4133.97 crore in 2005-06 to Rs. 5808.91 crore in 2006-07 reflecting the sound
liquidity of the company. Loans & advances have decreased by Rs 59 crore. Other
current assets represent interest accrued on bank deposits and investments.
Turnover increased by 29.01% during the year, Power segment and industry
segment contributed 73.56% and 26.44% respectively for the total revenue of the
company. The Net profit for the year rose by Rs. 735.54 crore or 43.80%.The
company has paid interim dividend of 125%, Rs.305.95 crore.

Balance Sheet
as on 31.03.2008
(Rs. in crores)
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 489.52
Reserves & Surplus 10284.69 10774.21

20
Loan Funds
Secured Loans 0.00
Unsecured Loans 95.18 95.18
10869.39
APPLICATION OF FUNDS
Fixed Assets
Gross Block 4443.47
Less: Depreciation/Amortisation to-date -3403.08
1040.39
Lease Adjustment Account -59.13
Net Block 981.26
Capital Work-in-Progress 658.03 1639.29
Investments 8.29
Deferred Tax Assets Net 1337.93
Current Assets, Loans and Advances
Current Assets
Inventories 5736.40
Sundry Debtors 11974.87
Cash & Bank Balances 8386.02
Other current assets 421.09
Loans and advances 1186.34
27704.72
Less:
Current Liabilities & Provisions
Current Liabilities 16576.45
Provisions 3244.39
19820.84
Net current assets 7883.88
Miscellaneous expenditure 0.00
10869.39

PROFIT AND LOSS ACCOUNT

for the year ended 31st March, 2008 (Rs. In crores)
EARNINGS
Turnover (Gross) 21401.01
Less Excise Duty -2096.37
Turnover (Net) 19304.64
Other income 1444.76
Accretion/Decretion to Work-in-progress & 827.26
Finished Goods
21576.66

21
OUTGOINGS
Consumption of raw Material &
Erection and Engineering exp. 11820.87
Employees' remuneration & benefits 2607.69
Other expenses of manufacture 1644.23
Administration,selling and distribution
provisions 778.25
Interest & other borrowing costs 35.42
Depreciation & amortisation 297.21
Less : Cost of jobs done for internal use 38.32
17145.35
Profit before prior period adjustments 4431.31
Add/-less : Prior period Adjustments (Net) -0.92
Profit before tax 4430.39
Less: Provision for taxation -1571.05
Profit after tax 2859.34
Add: Balance of profit brought 442.72
forward from last year
Foreign project reserve written back 1.02
Profit available for appropriation 3303.08
Less: Appropriation-
– General Reserve 2000
– Dividend 746.52
– Corporate Dividend tax 126.87 2873.39
Balance carried to Balance Sheet 429.69

MANAGEMENT DISCUSSION AND

ANALYSIS

The net increase in reserve & surplus in 2007-08 is Rs. 1741 crore. Gross Block
and capital Work in progress increased by Rs. 308 crore and Rs. 355 crore
respectively during the year. There was no change in the Investments during the
year. Deferred Tax assets have increased by Rs. 403 crore. Inventory increased
by Rs. 1518 crore over previous year in tune with the increase in volume of
operations. In terms of days of turnover, it has increased from 82 days in 2006-07
to 98 days in 2007-08. Debtors in absolute terms increased by Rs. 2362 crore

22
mainly due to increase in turnover. In terms of days of turnover it increased from
187 days in 2006-07 to 204 days in 2007-08. The cash and cash equivalents have
increased from Rs. 5809 crore in 2006-07 to Rs. 8386 crore in 2007-08 reflecting
the sound liquidity of the company. Loans & advances have increased by Rs. 45
crore. The increase in current liabilities is mainly due to increase in advances
received from customers by Rs. 3702 crore and in sundry creditors & liabilities by
Rs. 1141 crore. Turnover increased by 14.2% during the year,

ACCOUNTING RATIOS

PROFITABILITY RATIO
A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or the same ratio from a previous period is indicative
that the company is doing well.

Some examples of profitability ratios are Return on Capital Employed, Net Worth
Ratio, Return on Equity & Earning per Share. It is important to note that a little bit
of background knowledge is necessary in order to make relevant comparisons
when analyzing these ratios.

For instances, some industries experience seasonality in their operations. The

retail industry, for example, typically experiences higher revenues and earnings for
the Christmas season. Therefore, it would not be too useful to compare a
retailer's fourth-quarter profit margin with its first-quarter profit margin. On the other
hand, comparing a retailer's fourth-quarter profit margin with the profit margin from
the same period a year before would be far more informative.

LIQUIDITY RATIO

Liquidity ratios measure a business’s ability to cover its obligations, without having
to borrow or invest more money in the business. The idea is that there should be
sufficient cash and assets that can be readily converted into cash to cover liabilities
as they come due.

One of the most common liquidity ratios is:

Current Ratio = Current Assets / Current Liabilities

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Current assets basically include cash, short-term investments and marketable
securities, accounts receivable, inventory, and prepaid expenses. Current liabilities
include accounts payable to vendors and employees, and installments on notes or
loans that are due within one year. This ratio could also be seen as a measure of
working capital – the difference between current assets and current liabilities. A
company with a lot of working capital will be in a better position to expand and
improve its operations. On the contrary, a company with negative working capital
does not have sufficient resources to meet its current obligations, and therefore is
not in a position to take advantage of opportunities for growth.

SOLVENCY RATIO
Solvency ratios are measures to assess a company’s ability to meet its long-term
obligations and thereby remain solvent and avoid bankruptcy. Two general, overall
solvency ratios include:

Solvency Ratio = Total Assets / Total Liabilities, &

Solvency Ratio = Net Worth (Total Capital or Equity) / Total Liabilities

These ratios basically tell whether a company owns more than it owes. The higher
the ratio, the more solvent the company.

ANALYSIS & INTERPRETATION of ACCOUNTING RATIOS

of BHEL

(in percentage)
2003- 2004- 2005- 2006- 2007-
Accounting Ratios 04 05 06 07 08
Profitability Ratios:
A. Gross Profit to Capital Employed 29.2 40.2 52.1 68.2 69
B. Return on Net Worth 12.5 15.8 23 27.5 26.5
C. Return on Equity 268.9 390 686 987 584
D. Earning per Share 26.89 39 68.6 98.7 58.4
E. Gross Profit Margin 12.4 16.1 18.1 20.2 20.9
F. Net Profit Margin 7.6 9.2 11.6 12.9 13.4

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Liquidity Ratio:
A. Current Ratio 1.64 1.58 1.61 1.5 1.38

Solvency Ratio

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