Financial Management Bhel 2010

Tej Inder SinghRoll No. 29MBA -General -Section AAssignment no 1Company: BHELIndustry: Power Sector

Contents

1. Executive summary of the company and its industry.

2. Company’s capital expenditures analysis.

3. Account balances for properties, plant and equipment.

4. Company’s capital structure in comparison with its competitors.

5. Beta measure of the company.

6. Weighted average cost of capital(WACC) of the company.

7. Company’s debt-equity ratio in comparison to its competitors.

8. Du-Pont analysis of the company.

9. Comments:

a) Working capital position.

b) Cash position.

c) Short term financing.

d) Credit policy.

e) Inventory management policy.

Tej Inder Singh Roll No. 29 MBA -General -Section A Assignment no 1

Company: BHEL

1BHARAT HEAVY ELECTRICALS

Introduction :

In the post Independence era when India was moving towards industrialization themajor thrust of the govt. was in the core sector and this sector was given to the publicsector. With this objective, Heavy Electricals (I) Limited was setup in Bhopal inAugust, 1956 with a view to reach self sufficiency in the industrial product and powerequipment. This plant was setup under technical collaboration of M/s AEI, U.K.

Three more plants were subsequently setup Tiruchy, Hyderabad and Haridwar withSoviet and Czechoslovakian assistance in May 1965, Dec 1965 and Jan 1967 respectively.As there was need for an integrated approach for the development of powerequipment to be manufactured in India, Heavy Electronics Ltd. Bhopal was mergedinto BHEL in 1974.

BHEL has now become the largest Engineering and Manufacturing Company. Itsheadquarters is located at Delhi.

BHEL Objectives :

A dynamic is one which keeps its aim high adopts itself quickly to changingenvironment. So here we are in BHEL.

The objectives of the company have been redefined in the corporate plan for the 90’s.

Business Mission :

To maintain leading position as supplier of quality equipment, systems and services inthe field of conversion, transmission, utilization and conversion of energy forapplication in the areas of electric power, transportation, oil & gas explorations andindustries.

Utilize company’s capabilities and resources to extend business into allied areas andother priority sector of the economy like defense, communication and electronics.


Company: BHEL

Growth :

To ensure a steady growth by enhancing the competitive edge of BHEL in existingbusiness new areas and international market so as to fulfill national expectation fromBHEL.

Profitability :

To provide a reasonable and adequate return on capital employed, primarily throughimprovement in operational, efficiency, capacity utilization and productivity andgenerate adequate internal resources to finance the company’s growth.

Focus :

To build a high degree of customer confidence by providing increased value for hismoney though International standards of product quality performance and superiorcustomer service.

People Orientation :

To enable each employees to achieve his potential, improve his capabilities perceivehis role and responsibilities and participate and contribute to the growth andsuccess of the company.To invest in human resources and continuously and alive tothere need.

Technology :

To achieve technological excellence in operation by development of indigenoustechnologies and efficient absorption and adoption of imparted technologies to suitbusiness and priorities and provide competitive advantage to the company.

Image :

To fulfill the expectation which stakes holders like government as owner. Employees,customers and the country at large have from BHEL.


Company: BHEL

BUSINESS AREAS

BHEL covers a wide area of business. These areas are mentioned below.

Power:

Provide a gamut of equipment for Thermal, Hydro and Nuclear Power Plants.Range includes products and systems for the power generation, transmission andutilization.

Transmission:

BHEL is manufacturing transmission equipments for all voltage rating including the400 KV class transformers switch gears, control and relay panel, insulators, capacitorsand other substation equipments.

Industry:

Offers a comprehensive range of electrical, electronic and mechanical equipmentfor a host of industries fertilizers, petrochemicals, refineries, paper, sugar, rubber,cement, coal, steel, aluminum and mining.

Transportation:

BHEL offers a variety of transportation equipment to meet the growing needs ofcountry. 65% of Indian Railways are equipped with BHEL manufactured tractionequipment. Underground metro also runs on drives and control supplied byBHEL.BHEL has taken up the manufacturing of locomotive to provide a pollution freetransportation. BHEL also offers a battery operated passenger van to DelhiGovernment.

Oil and Gas:

Equipment for oil and gas exploration and transportation is manufactured by BHEL.The range covers super deep drill rigs with matching draw works and hostingequipment.

Non Conventional:

BHEL is playing a vital role in helping to harness the vest renewable sources of solar,wind and biogas energy. BHEL has supplied several water heating system, windmillsgenerators and photo voltaic system.


Company: BHEL

Tele Communication:

BHEL has entered the field of telecom with electronics PABX system based onindigenous technology from C-DOT.

Manufacturing Technologies:

BHEL has 14 manufacturing plants, which are spread different parts of the countryhaving unique manufacturing and testing facilities, CNC machines, turbine bladeshape system, system bener, 8000-ton hydraulic press, heavy-duty lathe mailingmachines and many more are available.

ACTIVITY PROFILE OF BHEL

Power Sector Projects:♦ Thermal sets and auxiliaries.

♦ Steam generators and♦ Industrial fans.♦ Electrostatic Precipitators.♦ Air pre-heaters.♦ Nuclear power equipment.♦ Hydro sets and auxiliaries.♦ Motors♦ Transformers♦ Rectifiers♦ Pumps♦ Heat exchange♦ Capacitors♦ Porcelain/Ceramic insulators♦ Seamless steel tubes♦ Castings and forgings

System/Services:

♦ Turnkey power station♦ Data acquisition system♦ Power system♦ HVDC commissioning system♦ Erection and commissioning system♦ Modernization and rehabilitation


Company: BHEL

Transportation Sector :

♦ Diesel electric generators♦ AC/DC locomotives and loco shunters♦ Traction system for Railways♦ Electric trolley buses

Industry Sector :

♦ Boilers♦ Valves♦ T G Sets♦ Power devices♦ Solar cells♦ Photo Voltaic cells♦ Gas turbines♦ Off rigs♦ Blow out preventers♦ Wind mills♦ Control system for electric devices

Tej Inder SinghRoll No. 29MBA -General -Section AAssignment no 1Company: BHEL

2Company’s capital expenditure analysis.

Rs. In crores

Sr. No. Year Capital Expenditure Change as comparedwith previous year

1 2008-09 700.46 407.64

2 2007-08 292.82 61.39

3 2006-07 231.43 70.51

4 2005-06 160.92 -2.07

5 2004-05 162.99 61.19

Here in this case, the Capital Expenditures is not constant. Capital expenditure has changes considerablychanged. Its has been maximum for the year 2008-09, while for the year 2005-06 it showsunderinvestment. For the year 2008-09 the capital expenditure is very large owing to the new projectsundertaken by the company.

Data is taken from SCHEDULE 5 :FIXED ASSETS

-100

0

100

200

300

400

500

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

capital expenditure

capital expenditure


Particulars Cost As at31.03.2008

Additions/adjustmentsduring theyear

Deductions/adjustmentsduring theyear

Cost As at31.03.2009

Factory/ Office Complex

Freehold land (incl. 4.22 0.15 4.37Leasehold land 6.15 0.05 6.20Roads, bridges and culverts 7.05 1.39 0.04 8.40Buildings 347.67 135.29 2.04 480.92Leashold buildings 3.04 0.08 3.12Drainage, s 12.48 1.18 0.07 13.59Railway siding 7.91 0.76 8.67Locomotives and wagons 16.01 11.44 27.45Plant & Machinery 2482.55 360.54 8.91 2834.18

Electronic data processingeuipment

98.43 22.17 5.26 115.34

Electrical installations 95.19 20.80 0.13 115.86Construction Equipment 250.36 125.54 0.42 375.48

Vehicles 18.77 0.51 0.73 18.55Furniture & fixtures 14.63 4.88 0.02 19.49

Office & other equipments 74.00 7.85 1.15 80.70Fixed assets costing uptoRs.10000/-

55.95 8.01 0.30 63.66

Capital expenditure 0.44 0.44

Assets Given on Lease 497.15 497.15

EDP Equipment taken on lease 146.16 99.31 27.67 217.80

Office & other equipment taken 1.52 0.38 0.41 1.49Intangible Assets

Internally developed

SoftwareOthers 2.46 2.52 4.98

Software 68.87 20.68 0.54 89.01Technical Know-how 22.86 22.86

Others 8.80 8.80

4242.67 823.53 47.69 5018.51


3Account balances for properties, plant and equipment.

Rs. In crores

As we may see , change in properties, equipments and plant machinery has been the highest for the year2008-09 which is 22%. While for previous years the company didn’t not focus on technology up gradation.As we may see that it had shown negative trend in regard to properties, equipments and plantmachinery.

The above increase is due to globalization and increasing competition that company has focusedconsiderably on it.

Sr. No. YearAs at 31st march

Properties,equipment

& plant machinery

Change whencompared withprevious year

% change

1 2009 1137.39 252.6 22.20

2 2008 884.79 -1.91 -0.21

3 2007 886.70 8.05 0.90

4 2006 878.65 -62.86 -7.15

5 2005 941.51 -54.08 -5.74

6 2004 995.59 -75.42 -7.57

7 2003 1071.01


-10

-5

0

5

10

15

20

25

2009 2008 2007 2006 2005 2004

change in properties, equipment ,plant andmachinery

change in properties, equipment ,plant and machinery


4Company’s capital structure in comparison with its competitors.

The term capital structure refers to the percentage of capital (money) at work in a business by type.Broadly speaking, there are two forms of capital: equity capital and debt capital.

In other words, capital structure refers to the way a corporation finances its assets through somecombination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80 billion in debt is saidto be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in thisexample, is referred to as the firm's leverage. In reality, capital structure may be highly complex andinclude tens of sources.The Modigliani-Miller theorem, proposed by Franco Modigliani and MertonMiller, forms the basis for modern thinking on capital structure, though it is generally viewed as a purelytheoretical result since it assumes away many important factors in the capital structure decision. Thetheorem states that, in a perfect market, how a firm is financed is irrelevant to its value. This resultprovides the base with which to examine real world reasons why capital structure is relevant, that is, acompany's value is affected by the capital structure it employs. These other reasons include bankruptcycosts, agency costs, taxes, information asymmetry, to name some. This analysis can then be extended tolook at whether there is in fact an optimal capital structure: the one which maximizes the value of thefirm.

For BHEL, currently the debt employed is very less, which means that the debt is much lower than equity.In other words the firm prefers equity over debt.

Where as other companies, of the same industry, when compared with BHEL show a better mix of debtand equity. Suzlon energy and BGR energy employs a good mix of debt and equity in the capital structureas compared to BHEL..

http://en.wikipedia.org/wiki/Corporation

http://en.wikipedia.org/wiki/Assets

http://en.wikipedia.org/wiki/Stock

http://en.wikipedia.org/wiki/Debt

http://en.wikipedia.org/wiki/Hybrid_security

http://en.wikipedia.org/wiki/Leverage_(finance)

http://en.wikipedia.org/wiki/Modigliani-Miller_theorem

http://en.wikipedia.org/wiki/Franco_Modigliani

http://en.wikipedia.org/wiki/Merton_Miller

http://en.wikipedia.org/wiki/Merton_Miller

http://en.wikipedia.org/wiki/Bankruptcy_costs

http://en.wikipedia.org/wiki/Bankruptcy_costs

http://en.wikipedia.org/wiki/Agency_costs

http://en.wikipedia.org/wiki/Taxes

http://en.wikipedia.org/wiki/Information_asymmetry


BHEL Comparison With its Competitors

Rs in crores

company Total Debt Networth capital structure

debt equityBHEL 149.37 12,938.81 1.14126 98.85874Larsen 6,556.03 12,459.69 34.4769 65.5231Suzlon Energy 7,329.48 6,580.32 52.6929 47.30708BEML 567.64 1,915.37 22.861 77.13904BGR Energy 707.8 561.15 55.7784 44.2216

0

20

40

60

80

100

BHEL Larsen Suzlon Energy BEML BGR Energy

equity

debt


0

20

40

60

80

100

BHEL Larsen SuzlonEnergy

BEML BGREnergy

equity

equity

0

10

20

30

40

50

60

BHEL Larsen SuzlonEnergy

BEML BGREnergy

debt

debt


5Beta measure of the company

BETA measure of the company is 0.94

(Source :http://www.reuters.com/finance/stocks/overview?symbol=BHEL.BO)


6WACC of the Company

The weighted average cost of capital is defined by:

Where,

The following table defines each symbol:

Symbol Meaning UnitsC weighted average cost of capital %Y required or expected rate of return on equity, or cost of equity" %B required or expected rate of return on borrowings, or cost of debt % tc corporate tax rate %D total debt and leases (including current portion of long-term debt and

notes payable)rs

E total market value of equity and equity equivalents rsK total capital invested in the going concern rs

Or

WACC = wd (1-T) rd + we re

wd = debt portion of value of corporation

T = tax rate

rd = cost of debt (rate)

we = equity portion of value of corporation

re = cost of internal equity (rate) Amount in “%”

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

WACC 14.4 11.5 11.6 12.3 13.4

Taken from Economic Value Added (EVA), balance sheet 2008-09


7 Company’s debt-equity ratio in comparison with its competitors.

Sr. No Year Debt/Equity Ratio % change

1. 2008-09 : 2007-08 0.01 : 0.01 0.0

2. 2007-08 : 2006-07 0.01 : 0.01 0.0

3. 2006-07 : 2005-06 0.01 :0.08 -87.5

4. 2005-06 : 2004-05 0.08 :.09 -14.2

5. 2004-05 :2003-04 0.09 : 0.10 -10.90

Five Year high Value is: 0.09

Five Year low Value is: 0.01

2008-09 : 2007-08 2007-08 : 2006-07 2006-07 : 2005-06 2005-06 : 2004-05 2004-05 :2003-04

debt-equity % change 0 0 -87.5 -14.2 -10.9

-100

-80

-60

-40

-20

0

Axi

s Ti

tle

debt-equity % change


Competitors : DEBT-EQUITY RATIO

Debt-Equity Ratio: Debt equity ratio shows the relationship between long-term debts and shareholdersfunds’. It is also known as ‘External-Internal’ equity ratio.Debt Equity Ratio = Debt/EquityWhere :Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan fromfinancial institution etc.Equity (Shareholders’ Funds) = Share Capital (Equity + Preference) + Reserves and Surplus – FictitiousAssetsObjective and Significance: This ratio is a measure of owner’s stock in the business. Proprietors arealways keen to have more funds from borrowings because:(i) Their stake in the business is reduced and subsequently their risk too(ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits. Dividendon shares is not so allowed by Income Tax Authorities.The normally acceptable debt-equity ratio is 2:1.

BHEL0% Larsen

17%

Suzlon Energy35%

BEML9%

BGR Energy39%

debt-equity ratio

Sr. No. Year BHEL LARSEN SUZLONENERGY

BEML BGRENERGY

1 2008-09 0.01 0.52 1.11 0.29 1.26


8Du Pont analysis for the company

WHAT IS THE DUPONT MODEL? DESCRIPTION

The DuPont Model is a technique that can be used to analyze the profitability of a company usingtraditional performance management tools. To enable this, the DuPont model integrates elements of theIncome Statement with thos of the Balance Sheet.

ORIGIN OF THE DUPONT MODEL. HISTORY


The DuPont model of financial analysis was made by F. Donaldson Brown , an electrical engineer whojoined the giant chemical company's Treasury department in 1914. A few years later, DuPont bought 23percent of the stock of General Motors Corp. and gave Brown the task of cleaning up the car maker'stangled finances. This was perhaps the first large-scale reengineering effort in the USA. Much of the creditfor GM's ascension afterward belongs to the planning and control systems of Brown, according to AlfredSloan, GM's former chairman. Ensuing success launched the DuPont model towards prominence in allmajor U.S. corporations. It remained the dominant form of financial analysis until the 1970s.

CALCULATION OF DUPONT. FORMULA

Return on Assets = Net Profit Margin x Total Assets Turnover = Net Operating Profit After Taxes / Sales xSales / Average Net Assets

USAGE OF THE DUPONT FRAMEWORK. APPLICATIONS

• The model can be used by the purchasing department or by the sales department to examine ordemonstrate why a given ROA was earned.• Compare a firm with its colleagues.• Analyze changes over time.• Teach people a basic understanding how they can have an impact on the company results.• Show the impact of professionalizing the purchasing function.

STRENGTHS OF THE DUPONT MODEL. BENEFITS

• Simplicity. A very good tool to teach people a basic understanding how they can have an impact onresults.• Can be easily linked to compensation schemes.• Can be used to convince management that certain steps have to be taken to professionalize the

purchasing or sales function. Sometimes it is better to look into your own organization first. In steadof looking for company takeovers in order to compensate lack of profitability by increasing turnoverand trying to achieve synergy.

LIMITATIONS OF THE DUPONT ANALYSIS. DISADVANTAGES

• Based on accounting numbers, which are basically not reliable.• Does not include the Cost of Capital.• Garbage in, garbage out.

ASSUMPTIONS OF THE DUPONT METHOD. CONDITIONS

• Accounting numbers are reliable.


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

ROI 0.146 0.086 0.108 0.301 0.321

As we can see ROE has fallen for the year 2008-09 as compared to the previous year. But if we see overallthe has a ROI close to 3 for years mentioned. Company is consisderably having returns at an average 2.8.

For ROI the company’s return on investments has substantially increased when compared to the year2004-05.

0

0.2

0.4

0.6

0.8

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

Axi

s Ti

tle

Du Pont Analysis

ROI

ROE

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

ROE 0.262 0.353 0.423 0.309 0.291


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

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

ROI

ROI

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

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

ROE

ROE


9a)Working Capital Position

Working capital= current assets – current liabilities

(in Rs. Crores)

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

4897.08 6010.75 6642.87 7883.88 8568.17

Source :From balance sheet.

What Does Working Capital Mean?A measure of both a company's efficiency and its short-term financial health. The working capitalratio is calculated as:

Positive working capital means that the company is able to pay off its short-termliabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory).

As we can see here, the working capital for BHEL is increasing every year. The financial base isstrong. In last five years, working capital has increased .The firm can hold good in investing activities, or other activities of similar nature as the currentassets exceeds current liabilities.

0

2000

4000

6000

8000

10000

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

working capital

working capital


BALANCE SHEET YEAR 2008-09

(Rs. in Crore)

Schedule AS AT 31.3.2009 AS AT 31.3.2008

SOURCES OF FUNDS

Shareholders’ Fund

Share Capital 1 489.52 489.52

Reserves & Surplus 2 12449.29 12938.81 10284.69 10774.21

Loan Funds

Secured Loans 3 0.00 0.00

Unsecured Loans 4 149.37 149.3713088.18

95.18 95.18 10869.39

APPLICATION OF FUNDS

Fixed Assets

Gross Block 5 5224.87 4443.47

Less: Depreciation/Amortisation to-date 3713.251511.62

3403.081040.39

Less : Lease Adjustment Account 41.22 59.13

Net Block 1470.40 981.26

Capital Work-in-Progress 6 1156.97 2627.37 658.03 1639.29

Investments 7 52.34 8.29

Deferred Tax Assets Net (Refer note no. 20 of Schedule 19) 1840.30 1337.93

Current Assets, Loans and Advances

Current Assets 8

Inventories 7837.02 5736.40

Sundry Debtors 15975.50 11974.87

Cash & Bank Balances 10314.67 8386.02

Other current assets 350.21 421.09

Loans and advances 9 2423.6736901.07

1387.8027906.18

Less:

Current Liabilities & Provisions

Current Liabilities 10 23357.32 16576.45

Provisions 11 4975.5828332.90

3445.8520022.30

Net current assets 8568.17 7883.88

13088.18 10869.39


d) Credit policy

Debtors’ Turnover Ratio: Debtors turnover ratio indicates the relation between net credit sales andaverage accounts receivables of the year. This ratio is also known as Debtors’ Velocity.Debtors Turnover Ratio = Net Credit Sales/Average Accounts ReceivablesWhere Average Accounts Receivables = [Opening Debtors and B/R + Closing Debtors and B/R]/2Credit Sales = Total Sales – Cash SalesObjective and Significance: This ratio indicates the efficiency of the concern to collect the amount duefrom debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio,better it is as it proves that the debts are being collected very quickly.

The final result shows us that the credit policy, which is understood as the amount of credit the companyis allowing and the amount of sales.This gives the idea about the policy of the firm. Here the firm has strict credit policies and as the resultthe ratio for last five years is almost constant and the value is around 2.Though we may see the variation in the debtors’s turnover ratio , for the year 2005-06 its 2.02 which hasconsiderably fallen to 1.79 for the year 2007-08 but has again picked up for the year 1.90, closing to 2.0. aswe know higher the ratio the better it is, hence company is considerably at an average of 1.8.

Responses to confirmation of outstanding balances of deductible expenditure.Sundry debtors, creditors, contractor’s advances,deposits and stocks/materials lying with subcontractors/fabricators were received in few cases, some of them seeking details. The reconciliations withrequirement the parties are carried out as an ongoing process.

1.61.71.81.9

22.1

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

debtor's turnover ratio

debtor's turnover ratio

YEAR 2004-05 2005-06 2006-07 2007-08 2008-09BHEL Credit policy 1.82 2.02 1.95 1.79 1.90


e) Inventory management policy

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

3.54 3.8 4.6 3.8 3.7

This ratio is a relationship between the cost of goods sold during a particular period of time and the costof average inventory during a particular period. It is expressed in number of times. Stock turn over ratio /Inventory turn over ratio indicates the number of time the stock has been turned over during the periodand evaluates the efficiency with which a firm is able to manage its inventory. This ratio indicates whetherinvestment in stock is within proper limit or not.

Inventory Turnover Ratio = Net Sales / InventorySignificance:Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventoryturnover/stock velocity indicates efficient management of inventory because more frequently the stocksare sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratioindicates an inefficient management of inventory. A low inventory turnover implies over-investment ininventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slowmoving goods and low profits as compared to total investment.

To get the idea about the company policy for the inventories, we have found out the ratio of sales and theinventory.This ratio for the firm moves around value 4.That means that the firm is moving its inventories. Overallthe firm is doing well.

0

2

4

6

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

inventory turnover ratio

inventory turnover ratio


0

5000

10000

15000

20000

25000

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

short term financing

short term financing


0

2

4

6

8

10

12

14

16

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

WACC

WACC

Tej Inder SinghRoll No. 29MBA -General -Section AAssignment no 1

Company: BHEL

Inventory ValuationI. Inventory is valued at actual/estimated cost or net realizable value, whichever is

lower.II. Finished goods in Plant and work in progress involving Hydro and Thermal sets

including gas based power plants, boilers, boiler auxiliaries, compressors and industrial turbo sets are valued at actual/estimated factory cost or at 97.5% of the realizable value, whichever is lower.

III. In respect of valuation of finished goods in plant and work-in-progress, costmeans factory cost; actual/estimated factory cost includes excise duty payable on

manufactured goodsIV. In respect of raw material, components, loose tools, stores and spares cost

means weighted average cost.V. a) For Construction contracts entered into on or after 01.04.2003:

Where current estimates of cost and selling price of a contract indicatesloss, the anticipated loss in respect of such contract is recognizedimmediately irrespective of whether or not work has commenced.

b) For all other contracts:Where current estimates of cost and selling price of an individuallyidentified project forming part of a contract indicates loss, the anticipatedloss in respect of such project on which the work had commenced, isrecognized.

c) In arriving at the anticipated loss, total income including incentives onexports/deemed exports is taken into consideration.

VI. The components and other materials purchased / manufactured againstproduction orders but declared surplus are charged off to revenue retainingresidual value based on technical estimates.


Company: BHEL

InventoriesYEAR 2008-09

Figures in Rs. Crore

Financial year 2008-09 2007-08Inventories 7837 5736

Inventory increased by Rs. 2101 crore over previous year in tune with the increase in volume ofoperations. In terms of days of turnover, it has increased from 98(ninety eight) days in 2007-08 to 102 days in 2008-09.

YEAR 2007-08


Financial year 2007-08 2006-07Inventories 5736 4218

Inventory increased by Rs. 1518 crore over previous year in tune with the increase in volume ofoperations. In terms of days of turnover, it has increased from 82 days in 2006-07 to 98 days in2007-08. The inventory build up is also part of the strategies of the management consideringlong lead time for certain special steel material and to meet shorter delivery requirementsthe customers.


Company: BHEL

YEAR 2006-07

Figures in Rs. CroreFinancial year 2006-07 2005-06


Inventory increased by Rs. 473.30 crore or 12.64% over previous year in tune with theincrease in volume of operations. In terms of days of turnover, it has decreased from94(ninety four) days in 2005-06 to 82 days in 2006-07.

YEAR 2005-06



Inventory increased by 28.40% over previous year, i.e. from Rs. 2916.1 crore in 2004-05 to Rs. 3744.4crore in 2005-06. Inventory, in number of days of turnover, decreased from 103 days in 2004-05 to 94days in 2005-06.

YEAR 2004-05



Inventory increased by 38.60% over previous year, i.e. from Rs.2103.9 crore in 2003-04 to Rs. 2916.1 crorein 2004-05. Inventory, in number of days of turnover, increased from 89 days in 2003-04 to 103 days in2004-05. The increase is mainly attributed to higher inventory holding for steel and pipes onaccount of uncertainty of availability, longer deliveries from vendors, steel price increase and tomeet higher turnover targets for the year 2005-06. The increase is also due to some finished goodsawaiting customer clearance.


Company: BHEL

b) Cash position

Cash and Bank balances

YEAR 2008-09Figures in Rs. Crore

Financial year 2008-09 2007-08Cash & Bank balances 10315 8386

The cash and cash equivalents have increased from Rs. 8386 crore in 2007-08 to Rs. 10315 crore in 2008-09reflecting the sound liquidity of the company.The company has no accumulated losses as at March 31, 2009 and it has not incurred any cash losses in thefinancial year ended on that date or in the immediately preceding financial year.

YEAR 2007-08Figures in Rs. Crore

Financial year 2008-09 2007-08Cash & Bank balances 8386 5809

The cash and cash equivalents have increased from Rs. 5809 crore in 2006-07 to Rs. 8386 crore in 2007-08reflecting the sound liquidity of the company.The company has no accumulated losses as at March 31, 2008 and it has not incurred any cash losses in thefinancial year ended on that date or in the immediately preceding financial year.

YEAR 2006-07

Financial year 2006-07 2005-06Cash & Bank balances 5808.91 4133.97

The cash and cash equivalents have increased from Rs. 4133.97 crore in 2005-06 to Rs.5808.91 crore in2006-07 reflecting the sound liquidity of the company. The company has no accumulated losses as at



Company: BHEL

March 31, 2007 and it has not incurred any cash losses in the financial year ended on that date or in theimmediately preceding financial year.

YEAR 2005-06 Figures in Rs. Crore


Cash and bank balances, including short term deposits, at the year-end stood at Rs. 4134.0 crore as against Rs. 3177.9crore at the end of last year.The company has no accumulated losses as at March 31, 2006 and it has not incurred any cash losses in thefinancial year ended on that date or in the immediately preceding financial year.

YEAR 2004-05 Figures in Rs. Crore

Cash and bank balances, including short term deposits, at the year-end stood at Rs. 3177.9 crore as against Rs. 2659.6crore at the end of last year.The company has no accumulated losses as at March 31, 2005 and it has notincurred any cash losses in the financial year ended on that date or in the immediately precedingfinancial year.



Company: BHELy

YEAR 2008-09 AS AT 31.3.2009 AS AT 31.3.2008Cash and Bank BalancesCash & Stamps in hand 0.97 0.95

Cheques, Demand Drafts in hand 386.42 265.94

Remittances in transit 0.02 56.42

Balances with Scheduled BanksCurrent Account 1534.08 1172.57

Deposit Account 8364.16 6875.00

Balance with non-scheduled BanksCurrent Account

Maximum Balance(Rs. in crore)

during the year2008-09 2007-08

- Standard Chartered bank, Libya 0.22 0.09 0.00 0.05

- Bank Muskat, Oman 356.19 125.20 14.91 4.22

- Barclays Bank Ltd, Zambia 0.01 0.01 0.01 0.01

- Bank of commerce, Malaysia 0.31 0.05 0.05 0.31

- CIMB Berhad 0.32 0.02 0.32 0.02

- Indo Jambia Bank, Lusaka 1.18 0.92 0.16 0.79

- Commercial Bank of Ethopia 3.38 3.04 0.05 3.04

- Bank of Bhutan, Bhutan 0.04 0.08 0.01 0.02

- Jamahouria Bank, Libya 4.34 4.75 0.95 3.61

- National Bank of Egypt 0.13 0.43 0.13 0.10

- Standard Chartered bank, Bangladesh 72.69 3.24 1.02 0.32

- Bank of Khartoum, Sudan 15.47 6.33 11.36 2.65

- Standard Chartered bank, Dubai 0.22 - 0.05 0.00

10314.67 8386.02

Other Current AssetsInterest Accrued on Banks Deposits andinvestments

350.21 421.09

350.21 421.09

Summary of Current AssetsInventories 7837.02 5736.40

Sundry Debtors 15975.50 11974.87

Cash & Bank Balances 10314.67 8386.02

Other Current Assets 350.21 421.09

34477.40 26518.38

Tej Inder Singh Roll No. 29 MBA ‐General ‐Section A Assignment no 1 Company: BHEL

Short Term Financing

YEAR 2004‐05 2005‐06 20o6‐o7 20o7‐o8 2008‐09

BHEL short‐term financing

7120.44 8807.74 11732.86 16576.45 23357.32

Taken from SCHEDULE 10 : CURRENT LIABILITIES

It includes Sundry Creditors, Accruals, Advances from the customers, Deposits from

contractor, other liabilities and interest accrued but not due.

The short term financing means the financing that you have got and you will utilize it in next one year. Here the short term financing, which inclues

YEAR 2008‐09

SCHEDULE 10 : CURRENT LIABILITIES

AS AT 31.03.2009 AS AT 31.03.2008 Acceptances 67.14 59.83

Sundry Creditors

‐ Total outstanding dues of Micro & Small Enterprises

(incl. interest) 96.50 38.87

‐ Other Sundry Creditors 5756.35 5852.85 4385.13 4424.00

Advances received from customers & others

16435.42 11394.62

Deposits from Contractors & others

325.68 233.81

‐ Unclaimed dividend * 1.31 0.91

Other liabilities 674.44 462.56

Interest accrued but not due 0.48 0.72

23357.32 16576.45

Financial Management Bhel 2010

Documents

bhel growth

bhel industry

bhel objectives

bhel business areasbhel

manufacturing company

competitive edge of

development of power

mechanical equipment