“A STUDY OF FINANCIAL ANALYSIS OF THE CENTRAL PUBLIC SECTOR

ENTERPRISES LISTED ON PSU INDEX OF BOMBAY STOCK EXCHANGE

WITH SPECIAL REFERENCE TO MANUFACTURING ENTERPRISES
BETWEEN FINANCIAL YEAR 2003- 04 TO 2012- 13”

A SYNOPSIS SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY

FOR AWARD OF THE DEGREE OF

DOCTOR OF PHILOSOPHY (PH.D.)
IN THE FACULTY OF MANAGEMENT

SUBMITTED BY
PARDESHI BHUSHAN DATTUSINGH

UNDER THE GUIDANCE OF

DR. HANSRAJ D. THORAT

RESEARCH CENTRE
PIMPRI CHINCHWAD EDUCAATION TRUST’s
S.B.PATIL INSTITUTE OF MANAGEMENT
PRADHIKARAN, NIGDI, PUNE 411044.
 Introduction
 The concept of public enterprises emerged after World War I
and Great Depression 1929.
 In India, post independence the intervention of the government
was inevitable in all the sectors of the economy.
 CPSEs were setup to dismantle the accumulated problems and
accelerate the economic development.
 During last six decades the CPSEs played a very vital role in
shaping the Indian Economy and are the instrument of the
government to design the policies and implementation.
 As the article 39 (b) and (c ) of the Constitution of India, the
ownership and control of the maternal resources of the
community are so distributed as best to sub serve the common
good and that system does not result in the concentration of
wealth and means of production to the common detriment.
 Introduction Contd…
 On the eve of first five year plan (1951-56) only 5 CPSEs were
operating with an investment of Rs. 29 crore now as on 31st
March 2013 there are 277 CPSEs with total investment of Rs.
8,50,599 crore. Total capital employed Rs. 15,32,007 crore and
giving employment to 14.04 lakh people.
 The success of any business is largely depends on its effective
financial management practices.
 The analysis of a firm’s financial statements is undertaken with
the reason of extracting significant information relating to firm’s
objectives, profitability, efficiency and degree of risk.
 The economic consequences of corporate sickness are
enormous.
 Need and Importance of the Study
 The CPSEs are assigned an important role of brining up the socio
economic balance in the nation and Many CPSEs have transformed
their business and heading towards sustainability.
 Still many CPSEs are facing several issues such as poor performance ,
continuous losses, risk aversion, ineffective governance, high operating
cost and low rate of return on capital, over capitalization, etc. forcing
the enterprises towards insolvency.
 During 2005-06 to 2011-12 around 30 percent CPSEs are loss making.
 In 2011-12 out of 64 loss making CPSEs, the BIFR recommended
winding up of 19 CPSEs and planning to take review on 16 more CPSEs.
 The failure of any CPSEs affect the balance of socio economic balance
of nation.
 Privatization either fully or partially is not the 100 percent solution.
 Need and Importance of the Study
Contd…
 The failure of CPSEs not only affects the stockholder, employees,
customers but also to the economy in general. The accumulated
deficits over the period of time is causing considerable drain on
the central exchequer.
 The study shed light on the financial analysis of he CPSEs for
better understanding and evaluating the results of business
operation and explain how healthy a business is doing.
 The study finds the interrelationship and consequences of the
problems on the financial performance.
 Objectives of the Study
 To study the financial performance of the selected Central
Public Sector Enterprises.
 To examine the operating efficiency and Managerial performance
of the selected Central Public Sector Enterprises.
 To study the trends in capital output ratio the selected Central
Public Sector Enterprises
 To analyze the quantum of value added in the selected Central
Public Sector Enterprises
 To study the pattern in capital structure and evaluate trends in
sources of capital in the selected Central Public Sector
Enterprises.
 To examine the financial health and viability of the selected
Central Public Sector Enterprises using Altaman’s Z Score
Model.
 Hypotheses of the Study
Ho1: There is no significant impact of liquidity on the profitability of
the selected Central Public Sector Enterprises.
Ha1: There is significant impact of liquidity on the profitability of the
selected Central Public Sector Enterprises.
Ho2: There is no Significant Impact of Fixed Assets on the Profitability
of the Selected CPSEs.
Ha2: There is Significant Impact of Fixed Assets on the Profitability of
the Selected CPSEs.
Ho3: All the variables of working capital management have the equal
impact on profitability of the selected CPSEs.
Ha3: All the variables of working capital management do not have the
equal impact on profitability of the selected CPSEs
Ho4: There is no impact of Working Capital, Retained Profit, EBIT,
Market Value of Equity and Net Sales on the financial health of the
selected CPSEs.
Ha4: There is impact of Working Capital, Retained Profit, EBIT, Market
Value of Equity and Net Sales on the financial health of the selected
CPSEs.
 Scope of the study
 The study confined to financial analysis of CPSEs in India and
engaged in to manufacturing activities.
 The study restricted to 23 holding CPSEs which are listed on
PSU Index of Bombay Stock Exchange.
 Financial performance examined by evaluating liquidity,
profitability, turnover or operational efficiency and solvency
through different ratios and the interrelationship between
various aspects of financial management and profitability.
 The aspects of productivity and efficiency are measured in terms
of management performance ratio, capital output ratio. The
quantum of gross and net value added.
 The financial health and viability is evaluated through Altaman’s Z
score Model.
 Limitations of the study
 The study cover only 23 holding CPSEs and that are primarily
into manufacturing sector. So, the findings may not be applicable
to all the CPSEs as a whole.
 The study includes only ten years from 2003-04 to 2012-13.
 The study considered aspects like liquidity., profitability, turnover,
solvency and capital structure only.
 The study largely based on ratio analysis, which has its own
limitations.
 Research Methodology
 The study is exploratory in nature and follows exploratory research
design.
a. Sampling procedure and sample size

277 PSUs in India

78 PSUs listed in BSE

60 PSUs included in BSE

PSU Index

35 CPSEs 25 PSBs

27 CPSEs Manufacturing 8 CPSEs

Sector Service Sector

23 Holding CPSEs 2 Subsidiary CPSEs 1 State PSE

 Research Methodology Contd…

a. Sampling procedure and sample size (Contd…)

 The researcher selected 23 Holding CPSEs engaged in Manufacturing activities
and which are listed on PSU index of BSE as a sample size by using census
method i.e 100 percent.
 List of Selected holding manufacturing CPSEs

Sr. Sr. Sr.

Name of CPSE Name of CPSE Name of CPSE
No. No. No.
Oil and Natural Gas Steel Authority Of India Bharat Heavy Electricals
1 9 17
Corporation Ltd Ltd. Ltd.
Indian Oil Corporation National Aluminium Co.
2 10 18 Bharat Electronics Ltd.
Ltd. Ltd.
3 Gail (India) Ltd. 11 Hindustan Copper Ltd. 19 HMT Ltd.

4 Oil India Ltd. 12 Moil Ltd. 20 BEML Ltd.

Bharat Petroleum
5 13 NTPC Ltd. 21 Balmer Lawrie & Co. Ltd.
Corporation Ltd.
Hindustan Petroleum
6 14 NHPC Ltd. 22 National Fertilizers Ltd.
Corporation Ltd.
Neyveli Lignite Rashtriya Chemicals &
7 Coal India Ltd. 15 23
Corporation Ltd. Fertilizers Ltd.
8 NMDC Ltd. 16 SJVN Ltd.
(Source: Bombay Stock Exchange)
 Research Methodology Contd…

b. Sources of Data
◦ The present study is carried out majorly with the secondary data.
◦ The secondary data are collected from the various issues of
Public Enterprises Survey (Volume I) published by the
Department of Public Enterprises, Ministry of Heavy Industries
and Public Enterprise, Government of India.
◦ Further data were collected from the Bombay Stock Exchange.
◦ Some of the vital and policy related data is collected from the
Department of Industrial Policy and Promotion, Ministry of
Commerce and Industry, Government of India.
◦ The secondary data is also collected from the published annual
reports, books, journals, periodicals, magazines, newspapers, Ph.D.
theses, internet articles and various websites of statutory and
non statutory bodies and research organizations.
 Research Methodology Contd…

c. Data Analysis
The collected data have been edited, classified, analyzed and presented in
a manner to make the findings more appropriate and meaningful. The
softwares were used like Ms-Excel and Statistical Package for Social
Science (SPSS-20).
d. Financial and Statistical Tool used for Data Analysis
 In the present study the financial tool like ratio analysis is used to
evaluate the financial and other important measures.
 The Altaman’ Z Score Model 1968 and the Revised Model 1983 are used
to examine the financial health and viability.
 The statistical measures like averages, standard deviation, Coefficient of
variation, Compound Annual Growth Rate, Simple and Multiple
Correlation, Multiple Regression, etc. were used for data analysis.
 The simple and Multiple Correlation (Karl Pearson), Regression and
Multiple Regression has been applied to test the hypotheses.
 Research Methodology Contd…

e. Period of study
 The length of the study is not limited but the reference period covers
10 years from 2003-04 to 2012-13.
 The study period represent the major events in terms policies and
guidelines such as
◦ The revised guidelines on divestment in 2004-05.
◦ The National Common Minimum Programme, 2004
◦ The guidelines on privatization, in January 2005,
◦ The government approved the constitution of a National Investment
Fund (NIF) into which the realization from sale of minority
shareholding of the government in profitable CPSEs would be
channelized and
◦ The present disinvestment policy 2009.
 So this period is chosen in order to give more meaningful financial
evaluation of CPSEs and represent the financial performance in the
selected CPSEs.
 Chapter Scheme
Chapter I Research Design and Research Methodology
This chapter involves the introductory part of the study, statement of problem, significance of
study, objectives of the study, hypotheses of the study, scope and Limitation of the study,
Research methodology adopted for doing the research and key operational concepts are
included.
Chapter II Theoretical Background
In this chapter the various concepts related to the study are discussed.
Chapter III Review of Literature
The researcher studied and evaluated the articles from various books, research articles,
magazines, Ph. D theses, Government and non Government Reports, internet articles related
CPSEs, financial analysis and financial health.
Chapter IV Central Public Sector Enterprises in India – An Overview.
This chapter is divided in to three parts. Part I covers the historical and present status of
CPSEs in India and policies related to CPSEs. Part II studies the profile, area of activities and
operations. Part III shows the manufacturing sector in India.
Chapter V Data Analysis and Interpretation
The collected data from secondary source analyzed, presented and interpreted by using
financial and statistical tools.
Chapter VI Findings, Conclusion and Suggestions
Based on Chapter V, the researcher has provided the findings and conclusions. Some helpful
suggestions are given to CPSEs in this chapter.
 Bibliography
 Annexure/Appendices
 Testing of Hypotheses
Ho1: There is no significant impact of liquidity on the
profitability of the selected Central Public Sector
Enterprises.
Ha1: There is significant impact of liquidity on the profitability
of the selected Central Public Sector Enterprises.

 The Karl Pearson’s correlation coefficient between CR and NPR is

0.777, the results indicates that there is a strong positive relationship.
 The impact of fixed assets on the profitability is measured by fitting
the regression equation. The NPR is taken as dependent variable and
CR have been considered as an independent variable. The equation
has been fitted in the study as y = a+bx, where ‘a’ is constant and ‘b’
is regression coefficient. It is observed that the simple regression
equation of NPR = -16.924 + 36.989x. When one unit increases the
CR, 36.989 units increase the NPR. The p=0.008 at 1 percent level of
significance, which is less than 0.05 (p<0.05). Hence, the hypothesis
‘there is no significant impact of liquidity on profitability of the
selected CPSEs’ is rejected.
 Testing of Hypotheses
Ho2: There is no Significant Impact of Fixed Assets on the
Profitability of the Selected CPSEs.
Ha2: There is Significant Impact of Fixed Assets on the
Profitability of the Selected CPSEs.

• The Karl Pearson’s correlation coefficient between FATR and NPR is 0.877, the
results indicates that there is a strong positive relationship.

• The impact of fixed assets on the profitability is measured by fitting the

regression equation, NPR is taken as dependent variable and FATR have been
considered as an independent variable. The equation has been fitted in the study
as y= a+bx, where ‘a’ is constant and ‘b’ is regression coefficient. It is observed
that the simple regression equation of NPR = 2.150 + 12.307(x). When one unit
increases the FATR, 12.307 units increase the NPR. The p = 0.01at 1 percent
level of significance, which is less than 0.05 (p<0.05). Hence, the hypothesis
‘there is no significant impact of fixed assets on profitability of the selected
CPSEs’ is rejected.
 Testing of Hypotheses
Ho3: All the variables of working capital management have the equal impact on
profitability of the selected CPSEs.
Ha3: All the variables of working capital management do not have the equal
impact on profitability of the selected CPSEs

• The Karl Pearson’s coefficient of correlation between NPR and WCTR is

(0.662), NPR and ITR (0.492), NPR and DTR (0.268) NPR and CTR (0.660).
The result indicates that there is a strong positive association between the
profitability and WCTR, CTR, and CATR and there is a moderate positive
association between the profitability and ITR whereas the relationship
between NPR and DTR is low and positive.
• The impact of liquidity on the profitability of the selected CPSEs is measured
by fitting the regression equation.
• WCTR The p=0.081 at 5 percent level of significance, which is less than
0.05 (p<0.05)
• ITR the p=0.761 at 5 percent level of significance, which is greater than
0.05 (p>0.05).
• DTR the p = 0.463 at 5 percent level of significance, which is greater than
0.05 (p>0.05).
• CTR p = 0.335 at 5 percent level of significance, which is greater than
0.05 (p>0.05).
All the variables of Working Capital Management have equal significant impact
on profitability is rejected, in case of WCTR but in case of ITR, DTR and
CTR the hypothesis can not be rejected.
 Testing of Hypotheses
Ho4: There is no impact of Working Capital, Retained Profit, EBIT, Market Value of Equity and
Net Sales on the financial health of the selected CPSEs.
Ha4: There is impact of Working Capital, Retained Profit, EBIT, Market Value of Equity and
Net Sales on the financial health of the selected CPSEs.
• The coefficient of correlation between Z Score and Working Capital is 0.555, Z Score
and Retained Profit is 0.920, Z Score and EBIT is 0.939, Z Score and Market Value of
Equity is 0.820 and Z Score and Net Sales is 0.757. The result indicates that there is a
strong positive association between the Z Score and the measures of Z Score.The
impact of liquidity on the profitability of the selected CPSEs is measured by fitting the
regression equation.
• X1 The p=0.000 at 5 percent level of significance, which is less than 0.05 (p<0.05).
• X2 The p=0.000 at 5 percent level of significance, which is less than 0.05 (p<0.05).
• X3 The p=0.005 at 5 percent level of significance, which is less than 0.05 (p<0.05).
• X4 The p=0.000 at 5 percent level of significance, which is less than 0.05 (p>0.05).
• X5 The p=0.000 at 5 percent level of significance, which is less than 0.05 (p<0.05).

• It is concluded that the hypothesis ‘there is no significant impact of Working Capital,

Retained Profit, EBIT, Market Value of Equity, and Net Sales on the financial health of the
selected CPSEs. is rejected.
• coefficient of determination (R2) is 0.999 Hence, it can be concluded that the
contribution of these Z Score Model variables for improving the Financial Health of the
selected CPSEs is 99.9 percent during the study period.
 Findings
1. Current Ratio and Liquid Ratio- It is found that the most of selected
CPSEs have maintained good proportion of current assets and liquid assets
against current liabilities in the study period, which reflects sound short term
liquidity position except in case of HPCL and BPCL is 1.18 times and 1.12 times
respectively.
2. Absolute Liquid Ratio - It is found that the cash and cash equivalent is
fluctuating in most of the CPSEs. The average ratio among all the CPSEs was
ranging between 0.20 times to 6.98 times indicating that these resources were
considered sufficient to meet the short term obligations. The cash reserve is
found to be excessive in all the selected CPSEs except HPCL, BPCL and IOCL.
3. The proportion of Current Assets and Liquid Assets to Total Assets -
it is noticed that the proportion of current assets and liquid assets in relation to
the total assets is very low in NHPC, SJVN, NTPC, HMT and ONGC in the
study period. It is found that these CPSEs have created fixed assets significantly
during the study period. It is observed that HPCL, HCL, BPCL, CIL, IOCL have
maintained balance in the proportion of fixed assets and current assets during
the study period.
 Findings Contd…
4. The current liabilities to total assets ratio revealed that the short term
liquidity position is satisfactory and sufficient resources are available in the
selected CPSEs to meet the immediate obligations on maturity.
5. It is found that the Karl Pearson’s correlation coefficient between CR and
NPR is 0.777 showing a strong positive relationship between the profitability
and the liquidity of the selected CPSEs. The regression equation NPR = -
16.924 + 36.989x shows that when one unit increases the Current Ratio,
36.989 units increase the Net Profit Ratio. Hence, there is a significant impact
of liquidity on the profitability.
6. Gross Profit Ratio - The average Gross Profit ratio is found to be ranging
from 3.68 percent to 99.44 percent in the selected CPSEs during the study
period. The performance in terms of gross profitability is satisfactory for
NALCO, NTPC, HCL, BEL, GAIL. The gross profit ratio was very low in case
of HPCL, BPCL and IOCL. However, HMT has reported loss during the study
period. This indicates that the under utilization of capacity, over investment in
current assets and fixed assets and increase in the cost of goods sold in the
study period.
 Findings Contd…
7. Net Profit Ratio - it is noticed that NMDC, NHPC, MOIL, SJVN,
OIL, ONGC has shown better performance than the other selected
CPSEs over the study period. It is found that these CPSEs have
earned more income over the sales revenue and adequate returns
generated for the owners. In case of HPCL, BPCL, IOCL, NFL, RCF,
BEML and BLCL the performance in terms of profitability is not
satisfactory. It revealed that, these CPSEs have just managed to earn
the profit on an above the fixed cost and other overhead cost
during the study period.
8. The return on assets and total assets turnover ratio is
indicating that all the selected CPSEs have made heavy investments
in the total assets but these investments does not produce the
satisfactory results in the study period.
9. The current assets turnover and fixed assets turnover ratio
in all the selected CPSEs is not satisfactory. In case of BPCL, HPCL,
IOCL, BLCL, GAIL, ONGC the current assets turnover ratio is
satisfactory.
10. The return on capital employed and capital turnover ratio
indicating that BPCL, HPCL, IOCL, BLCL, BEL, RCF, NFL have
judiciously utilised the capital for generating adequate sales and
return. However, the other selected CPSEs have shown relatively
low performance.
 Findings Contd…
11. During the study period, CIL has shown better profitability as compared to
other CPSEs. However, HMT is the only CPSE who have reported loss during
the study period. Overall, the profitability position of the sample CPSEs is
satisfactory during the study period.
12. Debt equity ratio was high in case of HPCL (0.95 times), BPCL (0.84 times),
IOCL (0.66 times). It can be inferred that the Oil refinery and marketing
CPSEs have used more debt as source of financing than the other CPSEs.
13. It is found that the results of all the long term liquidity and solvency ratios are
mostly favourable to BEL, BHEL, MOIL, NALCO, NMDC, ONGC, and OIL
showing the strong solvency position during the study period. At the same
time, the solvency position of other selected CPSEs is satisfactory in the study
period.
14. Inventory Turnover ratio - It was noticed that effective inventory
management. In case of BEL, BEML the inventory conversion period was more
than 6 month.
15. The debtors turnover ratio was low in case of BHEL, HMT, BEL, BEML,
NFL and NLCL and the collection period was more than 6 months. There is
an urgent need to formulate receivable management for all the CPSEs as the
performance was relatively satisfactory.
 Findings Contd…
16. There is strong positive relationship between fixed assets and profitability
and there is significant impact of fixed assets on profitability.
17. it is found the equation of multiple regression coefficient of NPR=58.135+
1.433.WCTR - 0.864.ITR + 0.010.DTR + 0.159.CTR show that working
capital turnover ratio has a significant impact on the profitability whereas the
other variable of working capital such as inventory, debtors, cash have
insignificant impact on the profitability of selected CPSEs in the study
period..
18. Efficiency in Working Capital Management- It is found that in case of
BPCL, NMDC, CIL and HMT has shown inefficiency in managing working
capital, as the profitability of these CPSEs was very low in utilization of
working capital funds in the study period.
19. It is found majority of CPSEs have managed the working capital relatively
satisfactory.The profitability over the Working capital is satisfactory.
20. it is found that the labour productivity is at appreciable level in all the
selected CPSEs and it indicates that labour intensity is more in the selected
CPSEs.
21. The outcomes of various management performance ratios was healthier in
case of BLCL, BEL, BHEL, BPCL, CIL, GAIL, HPCL, IOCL, MOIL, NALCO,
NHPC, NMDC, NTPC , ONGC and OIL. The performance of management is
reasonably good in all the selected CPSEs.
22. Capital output ratio was high in case of CIL, NHPC and SJVN where the
CPSEs are employing more capital input per unit of output. However, in case
of HMT, CIL, ONGC and MOIL the capital intensity is moderate.
Findings Contd…
23. It is found that the average GVA and NVA is in range between Rs.
24723 lakh to Rs. 760785 lakh adding a substantial value to the
business as well as to the society.
24. It is found that MOIL and NMDC is debts free CPSE. However, BLCL,
BEL, CIL, HCL, NALCO, ONGC and OIL have became debts free
CPSEs during the study period. The other selected CPSEs are
relatively using less debts in capital. However, HPCL, BPCL and IOCL
have more debts proportion in capital structure It is found that the
generation of internal resources in the selected CPSEs is relatively low
because of low retained profit.
25. It is noticed that the Z Score of MOIL is 3.94 showing too healthy
financial position but there is inconsistency in the financial
performance.
26. The Z score of IOCL, BLCL and BPCL is in healthy zone and have
good consistency in financial performance as the coefficient of
variance is low. In case of NTPC there is more consistency financial
performance but the Z Score is in distress zone.
 Findings Contd…
27. It is found that BEML, BEL, BHEL, CIL, GAIL, HCL, NALCO, ONGC,
SJVN have Z score in distress zone indicating a low performance in
working capital, profitability , solvency position. However, in case of
NLCL, NHPC and HMT the Z score is very low if proper measures
are not taken the CPSEs may became insolvent.
28. The EBIT is having strong correlation with all the variables of Z Score.
However the Market value of equity is having very low correlation.
29. The Z Score is significantly depend on EBIT to total assets than the
other variables.
 Conclusions
 The CPSEs were set up to have the all round development of the nation
by maintaining the equilibrium in the economic profit and attempting
social justice.
 The poor performance is badly affecting the financial position and
forcing them towards insolvency.
 The study reveals that the financial ratios are the important tools for
measuring the financial performance and efficiency of these CPSEs.
 All the CPSEs have maintained sound short term liquidity position over
the study period. At the same time the selected CPSEs have invested
more funds in the current assets, which resulted in blockage of funds
and created the pressure on the earnings and the utilization of assets.
 The Karl Pearson’s correlation coefficient between CR and NPR is
0.777 showing a strong positive relationship between the profitability
and the liquidity of the selected CPSEs.
 Conclusions Contd…
 The result of profitability ratios shows that BHEL, CIL, MOIL, NALCO,
NHPC, NMDC, ONGC, and OIL has better profitability among the
selected CPSEs. However, the profitability of HPCL, BPCL, IOCL, NFL, RCF,
BEML and BLCL is not satisfactory in the study period.
 There is strong positive relationship between the fixed assets management
and profitability. It is found that fixed assets have significant impact on the
profitability. It is observed that except NMDC (27.36 percent) and MOIL
(26.67) the other selected CPSEs are failed to utilize the total assets
efficiently to earn income.
 It is noticed that MOIL and NMDC are the debts free CPSEs. While BLCL,
BEL, CIL, HCL, NALCO, ONGC and OIL have become debts free CPSEs by
reducing the debt finance in planned manner. The generation of internal
resources in the other CPSEs is relatively low, indicating the poor
profitability and less retained profit in the study period.
 The long term liquidity and solvency ratios revealed that BEL, BHEL, MOIL,
NALCO, NMDC, ONGC, and OIL have a sound solvency position during
the study period. At the same time, the solvency position of other selected
CPSEs is satisfactory in the study period.
Conclusions Contd…
 The outcomes of the various management performance ratios was
healthier in case of BLCL, BEL, BHEL, BPCL, CIL, GAIL, HPCL, IOCL,
MOIL, NALCO, NHPC, NMDC, NTPC, ONGC and OIL during the
study period. Therefore, it can be concluded that the Management
performance of these CPSEs was reasonably good among the selected
CPSEs during the study period.
 It is observed that all the selected CPSEs have added adequate value
during the study period
 The Altaman’s Z-Score helps in predicting the financial solvency of the
selected CPSEs. It is possible to the CPSEs to reduce the rate of
bankruptcy through use of Z-Score by identifying and control the
variables that induce the financial failure.
 The study further shows that out of the selected CPSEs MOIL, BPCL
and NMDC fall under the safe zone, where the solvency is highest and
there is no uncertainty of bankruptcy in the near future. The financial
health is sound and the financial performance and efficiency in
management of the resources and business is good.
Conclusion Contd…
 This study finds out the financial health of BLCL, HPCL, IOCL, NFL,
OIL, SAIL and RCF are in gray zone. The financial health of these CPSEs
is considered average and the failure in the situation is uncertain. Out
of the total 23 CPSEs 12 CPSEs are fall under the Distress zone where
the failure is certain in the future if proper measurements are not taken
to improve the performance and efficiency.
 The EBIT is having strong correlation with all the variables. However,
Market Value of Equity and Net Sales have low positive correlation with
working capital. The analysis shows that Z Score is significantly depends
on EBIT to Total assets of the selected CPSEs, so the other variable
becomes less significant.
 The overall analysis shows that few CPSEs have very good performance
in the study period. In case of BHEL, CIL, MOIL, NALCO, NHPC,
NMDC, ONGC, and OIL these CPSEs have performed well on all the
areas. Still there are the areas where these CPSEs has to pay more
attention and they have lots of scope in future.
 Conclusion Contd…
 It is matter of concern in case of HMT, it is high time for the
policy maker and the authority to give attention on the financial
viability of this CPSE if urgent measures are not taken then it will
be a huge loss for the socio economics.
 Suggestions
 It is found that the CPSEs have made heavy investment in the total
assets but it does not produce the satisfactory returns in the study
period. The excess investment in total assets did not add adequate
gross value in the selected CPSEs in the study period.. The CPSEs
should try to utilize the fixed assets optimally to improve the returns.
 It is found that the role of inventories are predominant in all the
CPSEs and shows that the CPSEs have maintained the inventories
properly. It is better to all the CPSEs to utilize the excess cash to
invest in inventories may increase the liquidity and help in increasing
the sales revenue.
 It is found in many CPSEs that they are following restrictive or liberal
credit and collection policy. It also found that there is no proper
credit and collection policy available. The CPSEs should relax its
credit and collection policy to enhance the sales level to improve
profitability and the restrictive credit and collection policy may not be
favourable as it increased the fear of bad debts.
Suggestions Contd…
 As many CPSEs are not using the current liabilities as a source of
financing. The CPSEs should use the current liabilities as a source of
financing optimally without affecting the liquidity and profitability.
 All the CPSEs should try to reduce the cost of goods sold which is
affecting the profitability. The CPSEs can reduce the cost of goods
sold by reducing the components stores and spare consumed
factory and administrative overheads.
 The selected CPSEs have shown relatively low performance in
utilization of capital to earn extra income. The CPSEs should
allocate the capital employed optimally.
 There is no proper proportion of the debt and equity financing. The
use of debts is relatively low in the selected CPSEs. The CPSEs
should raise maximum debt capital in the capital structure so as to
enjoy the benefits of trading on equity.
 The CPSEs should try to improve the retained profit and internal
sources of capital as to improve the performance.
Suggestions Contd…
 It is found that the percentage of equity capital as compared to the
total capital structure it is very low. The CPSEs should raise the
equity capital by divesting the government stake. The issue of equity
capital will help the CPSEs to make compliance of SEBI norms of
share holding. The CPSEs can use Employees Stock Option Scheme
to increase the equity capital and maintain the interest of employees
in the growth of the CPSEs.
 The low ratio in these CPSEs indicates that higher labour cost
involved in operation due to excess employees. The CPSEs should
motivate the employees and trade unions to improve the
productivity by reducing the labour cost.
 The capital intensity was moderate generation of output was also
moderate where as the labour intensity is more. The CPSEs must
use the modern techniques and know how and capital to improve
the capacity utilization.
Suggestions Contd…
 The CPSEs may opt the disposing of the idle real properties by
excess unproductive fixed assets can be realized or lease out these
properties to reduce the operating cost.
 It is recommended that financial ratios should be regularly
calculated to and used as a performance measurement tool of the
CPSEs in India. The effective use of these information on the
financial health, should be use as an warning signal to sensitize the
development of the CPSEs.
Scope for further Research
There is scope for the further research
on the CPSEs. The research can be done
on the following areas:
◦ The Research can be extended to Services
Sector CPSEs.
◦ The research might be done on the particular
sector of the economy.
◦ A comparative study can be done by
comparing the performance of public sector
and private sector enterprises.
Thank you