Improvement of Working Capital Management by Bringing Efficiency in Billing Process

Improvement of Working Capital

Management by bringing

efficiency in billing process

Submitted By:

Nagendra Singh (4108079079)

MBF (2008-10)

INDIAN INSTITUTE OF FINANCE

Delhi/Greater Noida

Improvement of Working Capital Management by bringing efficiency in billing process

CANDIDATE’S DECLRATION

I hereby declare that this project Report entitled “Improvement of

Working Capital Management by bringing efficiency in billing process “is a

bonafide record of work done by me during the course of summer project

work and that it has not previously formed the basis for the award to me

for any degree/diploma, associate ship, fellowship, or other similar title of

any other institute/society.

Date:

__________________________ ____________________________

Nagendra Singh

K E C I N T E R N AT I O N A L LT D . P a g e 1 1 1


PREFACE

Finance is the lifeblood of an industry. The subject matter of Financial

Management has been changing at rapid pace. About a decade ago, the scope of

Financial Management was circumscribed to the raising of funds, whenever

needed, the financial decision making, and problem solving. But now it has

become an integral part of any business enterprise and growth of any business

enterprise depends largely on their financial strategy and how finance is being

managed.

The summer training program is designed to give the future managers the feel

of the corporate happenings and work culture. Theses real life situation are

entirely different from the stimulated exercise enacted in an artificial

environment inside the classroom and it is precisely because of this reason that

this summer training has been designed, so that managers of tomorrow does not

fill ill in the case when the times comes to shoulder responsibilities. The summer

training is a bridge between the institution and organization to make us

understand how theoretical knowledge will be applied in the practical field.

It was exactly in this context that I was privileged to join KEC International Ltd.

(Finance and Accounts Division) as a summer trainee. Established in 1945 as

Kamani Engineering Corporation, it was taken over by RPG Groups in 1982 and

renamed to KEC International Ltd. in 1984. It is one of the largest EPC Company

in transmission and distribution sector. The experience that I have gathered

over the past 45 days has certainly provided me with an orientation, which I

believe, will help me shoulder any assignment successfully in future.



ACKNOWLEDGEMENT

First of all I would like to express my whole hearted thanks and deep gratitude to

our parents who have always been my source of inspiration for any challenging

work, project or assignment.

Any work is not perfect and complete without the help and guidance from other

people. This project work of mine “Improvement of Working Capital

Management by bringing efficiency in billing process” would not have

reached its fulfillment, hadn’t it been the guidance given to me by various

people directly or indirectly related to this project.

My gratitude to Prof. J.D. Agarwal (Chairman, IIF, Delhi), and Prof.

Aman Agarwal (Director, IIF, Delhi) for giving me an opportunity to study

at their esteemed institution and providing us state of the art facilities.

I would also extend my sincere thanks to Mr. N.K. Sharma (Head of KEC

Finance department) for providing me an opportunity to do a project work in

their esteemed organization.

I whole heartedly acknowledge the intellectual stimulation of my esteem

Corporate Project Guide, Mr. N.K.Rathi, (Senior Manager) for his continuous

help and guidance throughout the project duration in spite of his busy schedule.

I also like to thank Mr. Atul Agrawal and Mr. Rajesh Vijayvarigya for helping

me whenever I was faced with any difficulty during project.



Finally in this chain I am also thankful to Mr. Yogesh Joshi, (HR department) for

providing Extra & useful knowledge, which helped me to have a deep insight of

the Theoretical aspects of the project and all the officers and Staff of KEC,

without their help my project, would not have been successfully completed.

Executive Summary

Working Capital Management is one of the most crucial issues for the

transmission and distribution sector companies like other construction

companies. There are various reasons behind this. Firstly, the projects are

awarded following a bidding process where the lowest bidder is awarded

the project. Hence every rupee saved through better working capital

management helps to offset the escalation in cost due to various factors,

time overrun and etc. Like any other construction projects these projects

also require a large capital investment. Secondly, the traditional method

of credit analysis such as the heuristic method, deterministic method or

the probabilistic method does not hold good in determining the credit

worthiness of the credit applicant. To compound this problem, since most

of the clients have monopolistic stronghold in the sector hence the

inefficiencies in the working capital management can largely be attributed

to the clients and inefficiency becomes a compliance issue. So judging the

efficiency of working capital management of T&D sector companies

cannot be pitted and compared against other industry benchmarks like

the FMCG or electronic goods.



All the three major players in the transmission and distribution sector,

KEC International,

Jyoti Structures and Kalpataru have adopted different business models to

address the issue of working capital management. Of the top three

companies KEC International has the highest ROCE (Return on Capital

Employed) and working capital turnover primarily due to its outsourced

business models. The tower accessories and line accessories are

outsourced and procured from the client pre-approved sub-vendors.

During this study, I got an opportunity to study the business model of KEC

International and its billing cycle in particular. In a company which has

shown tremendous top line growth over the years and a relatively lower

bottom line growth due to nature of business being market driven and

competition climbing up, many problems can be solved by bringing

efficiency in the working capital management. This is an attempt to study

the inefficiencies in the working capital management on the debtor’s side

and how it can be improved by improving the billing cycle.

It has been a conscious attempt to segregate the inherent inefficiencies in

the system from the inefficiencies occurring primarily due to compliance

issue. At the end some inefficiencies has been identified which are in-built

in the process or can be negotiated with the client and based on them

some recommendations have been suggested.



Table of Content

TITLE PAGE

NO.

Title

Page………………………………………………….....................................

Certificate…………………………………………………………………………………

Declaration………………………………………………………………………………..

Preface……………………………………………………………………………………..

Acknowledgement……………………………………………………..................

.....



Executive

Summary…………………………………………..........................................

..6

Contents………………………………………………………………..

………………….7

Design of the

Study…………………………………………………………………….8-25

o Research

Problem……………………………………………………….10

o Objective of the

study…………………………………………………...10

o Methodology……………………………………………………………..11

o Need for the

project……………………………………………………...12

o Limitations of the

Project………………………………………………..13

o Review of Literature: Working Capital

Management…….....................14-28

Organizational Profile………………………….……………...

……………………….30-62

o RPG Groups……………………………………………………………

o Transmission Sector……………………………………………………

o KEC International Ltd…………………………………………………

o Financial Performance…………………………………………………



Data Analysis…………………………………………………………………………

62-86

Major Findings and

Suggestions…………………………………………………….87-92

SWOT

Analysis………………………………………………………………………..93-94

Bibliography……………………………………………………………………………

95-97

Appendix………………………………………………………………………………98-

110



Research

Design

Research Problem



Analyzing the Operating cycle of the billing process of N-97 (Sasaram-

Fetehpur, 765 KV) project and working on it to shorten the operating cycle

by bringing efficiency in the billing process. There by improving Working

Capital Management.

OBJECTIVE OF THE RESEARCH

Analyzing the operating cycle of the billing process of N-97 project

(Sasaram-Fatehpur, 765 KV).

Improvement of working capital management

Bringing efficiency in the billing system

Reducing the billing cycle time on the client side.

DATA COLLECTION APPROACH



1) Primary Data –

A) Discussions with concerned persons.

2)Secondary Data –

A) Internal Secondary Data- Annual Reports, Files and office

documents.

B) External Secondary Data- Various books, Reports and Internet.

Methodologies Adopted

The following methods were adopted to prepare this report.

1. Literature Review

2. Understanding the industry

3. Understanding the business of KEC

4. Understanding the pilot contracts

5. Understanding the billing cycle



6. Visiting Jothwara factory to collect data and gain a comprehensive view

of the billing cycle.

7. Having a word with site personnel on his visit to factory, understanding

the problems faced by the site personnel

Need for the Project

The power transmission sector is growing at a tremendous space. The

Eleventh Plan is likely to see an investment of around Rs 2,47,500 crore

for the expansion of the transmission infrastructure. Consequently, the

addressable market for the power transmission tower industry from this

opportunity is likely to be Rs 25,000 crore over the Eleventh Plan period.

KEC International is the largest company operating in the transmission

tower space and has observed tremendous top line growth over the past

few years but the major concern in the company (as it is also true for the

entire industry) has been its working capital management.

Due to large requirement in the working capital, there is always a

propensity for the transmission and distribution companies to go for

frequent dilution. Poor working capital turnover has a negative impact on

the margin which as a chain effect, that affects the Return on Capital

Employed (ROCE).



In a scenario (like todays) where the domestic demand is well

supplemented by demands from the outside, KEC International has a

huge order-book. As top-line is no longer a major issue for the company,

there has been a continuous effort from the management to strengthen

the bottom line which can only be done with proper flow of cash and

utilization resources.

Though Working Capital Management is a huge topic by itself and

encompasses cash management, inventory management, debtor’s

management, short term financing and

their various aspects in great depth, this study was primarily focused on

better debtor management by finding the inefficiencies in the billing

processes, initiatives that can be taken to improve the billing process,

identify whether the inefficiencies are inherent to the system or is it a

compliance issue and etc.

LIMITATIONS OF THE PROJECT

The Data has been restricted to available data from secondary data (annual reports, various journals, Data Sheets, publications etc.)

It is assumed that the bill once prepared reaches the site within two days.

The authenticity of data is subject to errors and omissions.

The delay causes and analysis of the erections bills are based on the information collected from site personnel on his visit to site and not from the site.



Working Capital Management: Definition &

Basic Concepts

In a perfect world, there would be no necessity for current assets

and liabilities because there would be no uncertainty, no transaction

costs, information search costs, scheduling costs, or production and

technology constraints. The unit cost of production would not vary with

the quantity produced. Borrowing and lending rates shall be same.

Capital, labour, and product market shall be perfectly competitive and

would reflect all available information, thus in such an environment, there

would be no advantage for investing in short term assets.

However the world we live is not perfect. It is characterized by

considerable amount of uncertainty regarding the demand, market price,

quality and availability of own products and those of suppliers. There are

transaction costs for purchasing or selling goods or securities. Information

is costly to obtain and is not equally distributed. there are spreads

between the borrowings and lending rates for investments and

finanancings of equal risks. Similarly each organization is faced with its

own limits on the production capacity and technology it can employ there

are fixed as well as variable costs associated with production goods. In

other words, the markets in which real firm operated are not perfectly

competitive.

These real world circumstances introduce problem’s which require

the necessity of maintaining working capital. For example,, an

organization may be faced with an uncertainty regarding availability of

sufficient quantity of crucial imputes in future at reasonable price. This

may necessitate the holding of inventory., current assts. Similarly an

organization my be faced with an uncertainty regarding the level of its

future cash flows and insufficient amount of cash may incur substantial



costs. This may necessitate the holding of reserve of short term

marketable securities, again a short term capital asset. In corporate

financial management, the term Working capital management” (net)

represents the excess of current assets over current liabilities.

WORKING CAPITAL

In simple words working capital is the excess of current Assets over

current liabilities. Working capital has ordinarily been defined as the

excess of current assets over current liabilities. Working capital is the

heart of the business. If it is weak business cannot proper and survives.

Sit is therefore said the fate of large scale investment in fixed assets is

often determined by a relatively small amount of current assets. As the

working capital is important to the company is important to keep

adequate working capital with the company. Cash is the lifeline of

company. If this lifeline deteriorates so des the companies ability to fund

operation, reinvest do meet capital requirements and payment.

Understanding Company’s cash flow health is essential to making

investment decision. A good way to judge a company’s cash flow

prospects is to look at its working capital management. The company

must have adequate working capital as much as needed by the company.

It should neither be excessive or nor inadequate. Excessive working

capital cuisses for idle funds laying with the firm without earning any

profit, where as inadequate working capital shows the company doesn’t

have sufficient funds for financing its daily needs working capital

management involves study of the relationship between firm’s current

assets and current liabilities. The goal of working capital management is

to ensure that a firm is able to continue its operation. And that is has

sufficient ability to satisfy both maturing short term debt and upcoming

operational expenses. The better a company managers its working

capital, the less the company needs to borrow. Even companies with cash



surpluses need to manage working capital to ensure those surpluses are

invested in ways that will generate suitable returns for investors.

The primary objective of working capital management is

to ensure that sufficient cash is available to”

Meet day to day cash flow needs.

Pay wages and salaries when they fall due

Pay creditors to ensure continued supplies of goods and services.

Pay government taxation and provider of capital – dividends and

Ensure the long term survival of the business entity.

Need for working capital

the prime objective of the company is to obtain maximum profit thought

the business. The amount of profit largely depends upon the magnitude of

sales. However the sale does not convert into cash instantaneously. There

is always a time gap between sale of goods and receipt of cash. The time

gap between the sales and their actual realization in cash is technically

termed as operating cycle. Additional capital required to have

uninterrupted business operations, and the amount will be locked up in

the current assets. Regular availability of adequate working capital is

inevitable for sustained biasness orpations.if the proper fund is not

provided for the purpose, the business operations will be effected. And

hence this part of finance to be managed well.



Working capital cycle.

Each component of working capital (namely inventory, receivables and

payables) has two dimensions TIME and MONEY. When the comes to

managing working capital TIME IS MONEY. If you can get money to move

fester around the cycle (collect monies due from ebtors more quickly) or

reduce the amount of money tied up ( reduce inventory level relative to

RECEIVABLES

SALES

OVERHEADS

Etc.

PAYABLES

INVENTORY

CASH

Equity & loan



sales). The business will generate more cash or it will need to borrow less

money to fund working capital. As consequences, you could reduce the

cost of bank interest or you will have additional freee4 money available to

support addition sales growth or investment. Similarly, if you can

negotiate improved terms with suppliers e.g. get longer credit or an

increased credit limit , you festively create freed finance to help fund

future sales

a perusal of operational cycle reveals that the cash invested in operations

are recycled back in to cash. However it takes time to reconvert the cash.

Cash flows in cycle into around and out of a business it the business’s

lifeblood and every manager’s primary task to help keep it flowing and to

use the cash flow to generate profits. The shorter the period of operating

cycle. the larger will be the turnover of the funds invested in various

purposes.

Determinants of working capital

Working capital requirements of a concern depends on a number of

factors, each of which should be considered carefully for determining the

proper amount of working capital. It may be however be added that these

factors affect differently to the different units and these keeps varying

from time to time. In general, the determinants of working capital which

re common to all organization’s can be summarized as under:

Nature of business

Need for working capital is highly depends on what type of

business, the firm in. there are trading firms, which needs to invest a lot

in stocks, ills receivables, liquid cash etc. public utilities like railways,

electricity, ete., need much less inventories and cash. Manufacturing

concerns stands in between these two extends. Working capital



requirement for manufacturing concerns depends on various factor like

the products, technologies, marketing policies.

Production policies

Production policies of the organization effects working capital

requirements very highly. Seasonal industries, which produces only in

specific season requires more working capital . some industries which

produces round the year but sale mainly done in some special seasons

are also need to keep more working capital.

Size of business

Size of business is another factor to determines the need for

working capital

Length of operating cycle.

Operating cycle of the firm also influence the working capital .

longer the orating cycle, the higher will be the working capital

requirement of the organization.

Credit policy

Companies; follows liberal credit policy needs to keep more working

capital with them. Efficiency of debt collecting machinery is also relevant

in this matter. Credit availability form suppliers also effects the company’s

working capital requirements. A company doesn’t enjoy a liberal credit

from its suppliers will have to keep more working capital



Business fluctuation

Cyclical changes in the economy also influancthe level of working

capital. During boom period, the tendency of management is to pile up

inventories of raw materials and finished goods to avail the advantage of

rising proves. This creates demand for more capital. Similarly. During

depression when the prices and demand for manufactured goods.

Constantly reduce, the industrial and trading activities show a downward

termed. Hence the demand for working capital is low.

Current asset policies.

The quantum of working capital of a company is significantly

determined by its current assets. Policies. A company with conservative

assets policy may operate with relatively high level of working capital

than its sales volume. A company pursuing an aggressive amount assets

policy operates with a relatively lower level of working capital.

Fluctuations of supply and seasonal variations

Some companies need to keep large amount of working capital due

to their irregular sales and intermittent supply. Similarly companies using

bulky materials also maintain large reserves’ of raw material inventories.

This increase the need of working capital . some companies manufacture

and sell goods only during certain seasons. Working capital requirements

of such industries will be higher during certain season of such industries

period.

Other factors.

Effective co ordination between production and distribution can

reduce the need for working capital . transportation and communication

means. If developed helps to reduce the working capital requirement/.



Working capital concepts.

There are two thoughts that re currently accepted about working capital.

They are

Gross working capital concept.

Net working capital concept.

Gross working capital concept

This thought says that total investment in current assets is the

working capital of the company. This concept does not consider current

liabilities at all. Reasons given for the concept.

1) When we consider fixed capital as the amount invested in fixed

assets. Then the amount invested in current assets should be

considered as working capital.

2) Current asset whatever my be the sources of acquisition, are used

in activities related to day to day operations and their forms keep

on changing. Therefore they should be considered as working

capital.

Net working capital

It is narrow concept of working capital and according to this, current

assets minus current liabilities forms working capital. The excess of

current assets over current liabilities is called as working capital. This

concept lays emphasis on qualitative aspect. This indicates the liquidity

position of the concern/enterprise. The reasons for the net working capital

method are:



1) The material thing in the long fun is the surplus of current assets

over current liability

2) Financial health can easily be judged by with this concept

particularly from the view point of creditors and investors.

3) Excess of current assets over current liabilities represents’ the

amount which is not liable to be returned and which can be relied

upon to meet any contingency.

4) Inter company comparison of financial position may be correctly

done particularly when both the companies have the same amount

of current assets.

If the current assets are higher than current liability it is considered the

financial position of the company is sound. If both current assets and

liabilities are equal , the company has resorted to short term funds for

financing the working capital and long term sources of funds have been

used to finance the acquisition of fixed assets. It doesn’t not indicate the

financial soundness for the company. If the current assets are lesser than

current liabilities there is negative working capital which indicates

financial crisis.

Net working capital concept is more reasonable than the gross working

capital concepts. The balance seet of the company includes group of

liabilities such as bank overdraft, creditors, bills payables, outstanding

expenses etc. if it is not deduct from current assets , the concern may

consider itself quite secured: while the reality is may be that the concern



has very little working capital or has no working capital . there fore it is

reasonable to define working capital as the excess of current assets over

current liabilities.

Kinds of working capital

Working capital can be put in two categories:

1) Fixed or permanent working capital and

2) Fluctuating or temporary working capital

Fixed or permanent working capital

The volume of investment in current assets an change over a period

of time. But always there is minimum level of current assets that must be

kept in order to carry on the business. This is the irreducible minimum

amount needed for maintaining the operating cycle. It is the investment

in current assets. Which is permanently locked up in the business, and

therefore known as permanent working capital.

Variable/temporary working capital

It is the volume of working capital. Which is needed over and above

the fixed working capital in order to meet the unforced market changes

and contingencies. In other words any amount over and about the

permanent level of working capital is variable or fluctuating working

capital . this type of working capital is generally financed from short ter

souse of finance such as bank credit because this amount is not

permanently required and is usually paid back during off season or after

the contingency.

Sources of working capital


Issue of Shares


The company can choose to finance its current assets by

Long term sources

Short term sources

A combination of them.

Long term sources

Long term sources of permanent working capital include equity and preference shares, retained earning, debentures and other long term debts from public deposits and financial institution. The long term working capital needs should meet through long term means of financing. Financing through long term means provides stability, reduces risk or


Sources of Fund

Long term funds

Short term funds

Retained earnings

Issue of Debentures

Long term debt

Commercial Bank

Public deposits

Various Credits

Reserves and other funds


payment. And increases liquidity of the business concern. Various types of long term sources of working capital are summarized as follow:

Issue of shares

It is the primary and most important sources of regular or permanent working capital . issuing equity shares as it does not create and burden on the income of the concern. Nor the concern is obliged to refund capital should preferably raise permanent working capital.

Retained earnings

Retain earning accumulated profits are a permanent sources of regular working capital. It is regular and cheapest. It creates not charge on future profits of the enterprises.

Issue of debentures

It crates a fixed charge on future earnings of the company. company is

obliged to pay interest . management should make wise choice in

procuring funds by issue of debentures.

Long term debt

Company can raise fund from accepting public deposits, debts from

financial institutution like banks, corporations etc. the cost is higher than

the other financial tools.

Other sources sale of idle fixed assets , securities received from

employees and customers are examples of other sources of finance.

Short term sources of temporary working capital



Temporary working capital is required to meet the day to day business

expenditures. The variable working capital would finance from short term

sources of funds. And only the period needed . it has the benefits of ,low

cost and establishes closer relationships with banker.

Some sources of temporary working capital are given below;

Commercial bank

A commercial bank constitutes a significant sources for short term

or temporary working capital . this will be in the form of short term loans,

cash credit, and overdraft and though discounting the bills of exchanges.

Public deposits

Most of the companies in recent years depends on this sources to

meet their short term working capital requirements ranging fro six month

to three years.

Various credits

Trade credit, business credit papers and customer credit are other

sources of short term working capital. Credit from suppliers, advances

from customers, bills of exchanges, promissory notes, etc helps to raise

temporary working capital

Reserves and other funds



Various funds of the company like depreciation fund. Provision for tax

and other provisions kept with the company can be used as temporary

working capital.

The company should meet its working capital needs through both long

term and short term funds. It will be appropriate to meet at least 2/3 of

the permanent working capital equipments form long term sources,

whereas the variables working capital should be financed from short term

sources. The working capital financing mix should be designed in such a

way that the overall cost of working capital is the lowest, and the funds

are available on time and for the period they are really required.

SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following

Existing cash reserves

Profits (when you secure it as cash)

Payables (credit from suppliers)

New equity or loans from shareholder

Bank overdrafts line of credit

Long term loans

If you have insufficient working capital and try to increase sales, you can

easily over stretch the financial resources of the business. This is called

overtrading. Early warning signs include

Pressure on existing cash

Exceptional cash generating activities. offering high discounts for clear

cash payment



Bank overdraft exceeds authorized limit

Seeking greater overdrafts or lines of credit

Part paying suppliers or there creditor.

Management pre occupation with surviving rather than managing.

Adequate working capital

As I stated bout keeping adequate working capital is the mantas

towards the success of financial management. The term adequate

working capital refuters to the amount of working capital to be kept

with the organization to met its daily operations. Large investment in

fixed assets not sufficient to run a business successfully. Adequate

working capital is equally important. Without working capita fixed

assets are like a gun, which cannot shoot, as there are no cartridges.

It is said that “ inadequate working capital is a disastrous: where as

redundant working capital is a criminal waste.” It is clear that the

company can’t invest all its funds in current assets to increase working

capital . at the same time it requires to keep sufficient funds with it. So

a proper leverage between both ends is needed to assure proper

running of the business . it needs to keep adequate working capital

with it. Neither less nor more than needed.

(a) Advantages of adequate working capital

Adequate working capital provides certain benefits to the company

they are:

Increase in debt capacity and goodwill



Adequate working capital represents the financial soundness of the

company. If one company is financially sound it would be able to pay

its creditors timely and properly. It will increase companies goodwill. It

crests confidence among investors and creditors. Thus a firm with

adequate working capital can raise requisite funds from market ,

borrow short term credit form banks, and purchases inventories of raw

material etc., for the smooth operations of its business.

Increase in production inefficiency

With adequate working capital the firm can smoothly carryout

research and development actives and thus adds to it production

efficiency.

Exploitation of favorable opportunities

In the presence of adequate working capital , a company can avail

the benefits of favorable opportunities. Adequate working capital will

help the company to have bulk purchases, seasonal storage of raw

material etc., which would reduce the cost of production, thus adds to

its profit.

Meeting contingencies adverse changes:

A company can easily face certain business and economic crises a

company having adequate working capital can successfully meet

contingencies such as business oscillations, financial crisis arising from

heavy losses etc.,

Available cash discount



Maintenance of adequate working capital enables a company to

avail the advantage of cash discount by making cash payment for to

the suppliers of raw materials and merchandise. Obviously it will

reduce the cost of production and increase the profit of the company.

Solvency and efficiency fixed assets.

It helps to maintain the solvency of the company. So that

payments could be made in time as and when they fall due. Like wise,

adequate working capital also increases the efficiency for fixed assets

insofar as their proper maintenance depends upon the availability of

funds.

Attractive dividend to shareholders

It enables the company to offer attractive dividend to the

shareholders so that sense of security and confidence will increase

among them. it also increases the market values of its shares.

(b) Dangers of inadequate working capital

Having inadequate working capital creates so many of dangers as

it doesn’t fulfill its purpose. Some are given below:

Loss of goodwill and creditworthiness

As the firm fails to on or its current liabilities it loses it goodwill

and creditworthiness among its creditors. Consequently, the firm finds

it difficult to procure the requisite funds for its business operations on



easy terms, which ultimately results in reduced profitability as well as

production interruption.

Firm can’t make use of favorable opportunities

The firm fails to undertake the profitable projects, which not

only prevent the fir from availing the benefits of favorable

opportunities but also stagnate its growth.

Adverse effects of credit opportunities

The firm also fails to avail the attractive credit opportunities but also

stagnate its growth

Operational inefficiencies

In leads the company to operating inefficiencies, as day to day

commitments cannot be met.

Effects on financial capacity

Inadequacy of working capital also weakness the shock absorbing

capacity of the firm because it cannot meet the contingencies arising

form business oscillations, financial losses, due to shortage of working

capital.



Non achievement of profit target

The firm cannot implement operational plans due to unavailability of

fund. Which will lead to non achievement of profit margin.

Dangers of redundant working capital

As the inadequate working capital is dangerous to the firm, redundant

working capital also brings hazardous condition in to the company. Let

us discuss the dangers of redundant working capital to the company.

Low rate of return on capital

Excessive or redundant working capital implies the presence of idle

funds that earn no profit to the firm. So it cannot earn a proper rate of

return on its total investments, whereas profits are distributed on its

total investment, whereas profits are distributed on the whole of its

capital.

Decline in capital and efficiency

Since the rate of return on capital is low the company tempts to make

some adjustment to inflate profit to increase the dividend. Some times

these unearned dividend paid out of the company’s capital to keep up

the show of prosperity by window dressing of accounts. Certain

provision, such as provision for deprecation repairs and renewals are

into made. This leads to decline in operating efficiency of the firm.



Loss of goodwill and confidence.

Lower rate of return leads to lower dividend available to share

holder. This leads to down fall in market value of the company’s share

and markets the shareholder lose their confident in company.

Evils of over capitalization

Excessive working capital is often responsible for giving berth to

the situation of overcapitalization in the company with all its evils.

Over capitalizations is not only disastrous to the smooth survival of the

company but also interests of those associated with the company.

Destruction of turnover ratio

It destructs the control over turnover ratio. Which is commonly used in

the conduct of an efficient business.

It is evident form the foregoing discussion that a company must have

adequate working capital pursuant to its requirements. It should

neither be excessive not inadequate. Both situation are dangerous.

While inadequate working capital adversely affects the business

operations and profitability . excessive working capital remains idle

and earns no profits for the company. So company must assure its

working capital is adequate for its operations.



Blueprint for a good working capital

management policy

General action

Set planning standards for stock days. Debtor days and creditors days.

Having set planning standards (as above) KEEP TO THEM. Impress on

staff that these targets are just important operating budgets and

standards cost.

Instill an understanding amongst the staff that working capital

management produces profits.

Action on stocks

Keep stock levels as low as possible, consistent with not running out of

stock and not ordering stock in uneconomically small quantities. “just

in time” stock management is fine, as long as it is “just in time” and

never fails to deliver on time.

Consider keeping stock in suppliers warehouses drawing on its as

needed and saving warehousing cost.

Action on debtors /customers

Assess ALL significant new customers for their ability to pay. Take

references, examine account , and ask around. Try not to take on new

customers who would be poor payers.



Re assess ALL significant customers periodically. Stop supplying

existing customers who are poor payers, you may lose sales, but you

are after QUALITY of business rather than QUANTITY of business.

Sometimes poor paying customers suddenly (and magically!!) find

cash to settle invoices if their supplies are being cut off. If customers

can’t pay / won’t pay let your competitor have them. Give your

competitor a few more problem.

Consider factoring sales invoices the extra cost may be worth it in

terms of quick payment of sales revenue, less debtor administration

and more time to carry out your business (rather than spend time

chasing debts)

Consider offering discounts for prompt settlement of invoices, but only

if the discounts are lower than the costs of borrowing the money owed

from other sources.

Action on creditors

Do NOT pay invoices too early take advantage of credit offered by

suppliers it’s free!!

Only pay early if the supplier is offering a discount. Even then, consider

this to be an investment. Will you get a better return by using working

capital to settle the invoice and take the discount than by investing the

working capital in some other way?

Establish a register of creditors to ensure that creditors are paid on the

correct date not earlier an not later.

THE CONCEPT OF ZERO WORKING CAPITAL



In today’s world of intense global competition , working capital

management is receiving increasing attention form managers striving

for peak efficiency the goal of many leading companies today, is zero

working capital. Proponent of the zero working capital concept claims

that a movement toward this goal not only generates cash but also

speeds up production and helps business make more timely deliveries

and operate more efficiently. The concept has its own definition of

working capital : inventories+ receivables- payables. The rational here

is (i) that inventories and receivables are the keys to making sales ,

but (II) that inventories can be financed by suppliers through account

payables.

Companies use about 20% of working capital for each sales. So , on

average, working capital is turned over five times per year. Reducing

working capital and thus increasing turnover has two major financial

benefits. First every money freed up by reducing inventories or

receivables, by increasing payables, results in a one time contribution

to cash flow. Second, a movement toward zero working capital

permanently raises a company’s earnings.

The most important factor in moving toward zero working capital is

increased speed. If the production process is fast enough, companies

can produce items as they are ordered rather than having to forecast

demand and build up large inventories that are managed by

bureaucracies. The best companies delivery requirements. This system

is known as demand flow or demand based management. And it builds

on the just in time method of inventory control.



Clearly it is not possible for most firm to achieve zero working capital

and infinitely efficient production. Still, a focus on minimizing

receivables and inventories while maximizing payables will help a firm

lower its investment in working capital and achieve financial and

production economies.

ESTIMATION OF WORKING CAPITAL MANGEMENT

As discussed above a number of factors are responsible for

determining the amount of working capital required by affirm . let us

know discuss the various methods/ technique used in assessment of

firm’s working capital requirements. These methods are.

(i) Estimation of components of working capital method.

This method is based on the basic definition of working capitalizes,

excess of current assets over the current liabilities . in other worked the

amount of different constituent of the working capital such as debtors,

cash inventories , creditors etc are estimated separately and the total

amount of working capital requirement is worked out accordingly.

(ii) Percent sales method



This is the most simple and widely used method in combination with other

scientific methods. According to this methods a ratio is determined for

estimating the future working capital requirement . this is the generally

based on the past experience of management as the ratio varies from

industry to industry. For example if the past experience shows that the

amount of working capital has been 20% of sales and projected amount of

sales for the next year is Rs 10 lakes, the required amount of working

capital shall be Rs Two lakh.

As seen from above the above method is merely an estimation

based on past experience. Their fore a lot depends on the efficiency of

decision maker, which may not be correct in all circumstances. Moreover

the basic assumptions regarding linear relationship between sales and the

working capital may not hold well in all the cases. Therefore this method

is not dependable ands not universally acceptable. At best, this method

gives a rough idea about the working capital.

(iii) Operating cycle approach

The need of working capital arises mainly because of them gap

between the production of goods and their actual realization after sales.

this gap is technically referred as the “operating cycle” or the “cash cycle

” of the business. If it were possible to complete the entire job

instantaneously, there would be no need for current asset (working

capital). but since it is not possible, every business organization is forced

to have current asset and hence operating cycle. It may be divided into

four stages.

1. Raw materials and stores storage space.

2. Work in process stage.



3. Finished goods inventory stage.

4. Debtor’s collection stage.

Duration of operating cycle

the duration of the operating cycle is equal to sum of the duration of

these stages less the credit period allowed by the suppliers of the firm. In

symbol

OC= R+W+F+D-C

WHERE

OC= Duration of the Operating Cycle

R= Raw materials and storage space periods

W= work in process periods.

F= finished goods storage periods

D= debtor collection period

C= Creditors collection period.

The component of the operating cycles has already been

calculated in “ratio

Analysis” which is as follow.

Average stock of raw material

R = --------------------------------------------------------

Average raw material consumption per day



Average stock of stores

S = --------------------------------------------------

Average stores consumption per day

Average work in process inventory

W = ---------------------------------------------------

Average cost of production per day

Average book debts

D = ---------------------------------------------------

Average credit sales per day

` Average trade credit

C = ----------------------------------------------------

Average trade credit purchase per day

Along with fixed assets such as plant and equipment, working capital is

considered a part of operating capital. It is calculated as current assets

minus current liabilities. A company can be endowed with assets and

profitability, but short of liquidity, if these assets cannot readily be

converted into cash.

Working Capital Management is nothing but a relationship between a

firm's short-term assets and its short-term liabilities. The goal of working

capital management is to ensure that a firm is able to continue its



operations and that it has sufficient funds to satisfy both maturing short-

term debt and upcoming operational expenses. The management of

working capital involves managing inventories, accounts receivable and

payable and cash. When current assets are less than current liabilities, an

entity has a working capital deficiency also called a working capital

deficit.



ORGANIZATION PROFILE

RPG Group of Companies



Respond. Perform. Grow. These are the pillars on which RPG has built

its foundations to become one of the largest business houses of India with

a turnover of over US $2.1 billion and assets of over US $2.5 billion. Today

the Group companies have worldwide presence and partnerships with

many of the transnational corporate. A truly global organisation, RPG

Enterprises spans a spectrum of business across industries.

Since its inception in 1979, RPG Enterprises has been one of the fastest

growing groups in India with more than 20 companies operating

successfully in six business sectors power, types, transmission,

technology, retail, entertainment. The group have over 40,000 employees

and over 4, 00,000 shareholders. RPG Enterprises is an exciting place to

work, where excellence performance and entrepreneurship are valued.

VISION

Vision of the group is to focus on market capitalization

through:

Leadership in profitability and revenue growth in our chosen

business.

Being a customer centric organization.

Being the most exciting workplace.

Pillars of RPG

Three pillars of the group are Respond, Perform and

Grow. These pillars imply:



Respond to business opportunities and harness the finest resources.

Perform by inspiring people to come together and work as a team.

Grow to be successful.

History of RPG

The history of RPG began in 1820 when Ramdutt Goenka, from a

small town in Rajasthan, came to Calcutta to do business with the

British East India Company. The following milestones speak of his

enterprising efforts, and the subsequent growth of the RPG group.

By the 1900s the Goenkas establish themselves in diverse

business sectors like banking, textiles, jute and tea.

Sir Hariram Goenka and Sir Badridas Goenka are conferred

knighthood by the British for outstanding contribution to

business and the community.

In 1933, Sir Badridas Goenka becomes the first Indian to be

appointed Chairman of the Imperial Bank of India (now the

State Bank of India).

He is elected President of the Federation of Indian Chambers

of Commerce and Industry (FICCI) in 1945.

Keshav Prasad Goenka (son of Sir Badridas Goenka) continues

the successful trait of entrepreneurship.

In 1950 Goenka’s acquire two British trading houses - Duncan

Brothers and Octavius Steel.

After successful acquisitions in the areas of tea, automobile,

tyre, jute, cotton textile and electric cables, Keshav Prasad

Goenka retires in the 70s. His business is taken over by his

three sons.



One of the sons, Rama Prasad Goenka (better known as RP

Goenka), starts RPG Enterprises in 1979 with Phillips

Carbon Black, Asian Cables, Agarpara Jute and Murphy

India.

The 80s see further acquisitions by the RPG group, the first

being CEAT Tyres of India in 1981. The group then went on to

acquire KEC (1982); Searle India, now RPG Life Sciences

(1983); Dunlop (1984); HMV (1988); and finally CESC,

Harrisons Malayalam, Spencer & Co. and ICIM in 1989.

RP Goenka’s sons Harsh (Chairman) and Sanjeev (Vice-

Chairman) spearhead the group’s management from 1990.

RP Goenka currently oversees the group’s affairs as

“Chairman Emeritus”. Today, RPG has more than 20

companies across 8 business sectors, with a Turnover of

Rs.13,500 cr..



Companies under RPG Group

Transmission – 24%

KEC International Limited

KEC International Limited is one of the largest Power Transmission

Engineering, Procurement & Construction (EPC) companies in the world.

KEC has made an indelible mark on the world map by constantly and

consistently re-engineering itself to retain its position of leadership in the

areas of quality, technology, capacity and capability.

KEC's strengths lie in the areas of Design, Manufacture, Supply and

Construction of Turnkey Projects of Power Transmission lines of voltages

up to 800 kV and in the execution of Railway Electrification projects,

setting up Sub-stations and power Distribution Networks, Optical Fibre

Cable (OPGW) installations, Turnkey Telecom Infrastructure Services and

maintenance of Power Transmission Lines.

To ensure reliable service, KEC is supported by multi-locational

manufacturing facilities, over 60 stringing equipments and a workforce of

about 2500+ employees spread over 20 countries. KEC has successfully

executed contracts from 800 kV to 33 kV in India and abroad. Till date,

KEC has laid down more than 60000 kms of transmission lines of 400 kV

which is 1.5 times the circumference of the earth (40000 kms).



KEC has gone from strength to strength successfully exporting its EPC

services to over 40 countries and widening its client base across the

world. The company has an increasingly strong presence in South Asia,

Middle East, Central Asia and Africa. Recently, it also made a mark in

North America and seeks to serve more opportunities in that region.

During its six decades of existence, KEC has helped transmit power to

various countries that include Argentina, Australia, Brazil, Canada, Egypt,

Ethiopia, Ghana, India, Indonesia, Iran, Iraq, Kenya, Kuwait, Lebanon,

Malaysia, New Zealand, Nepal, Nigeria, Philippines, South Africa, Sri

Lanka, Saudi Arabia, Sudan, Syria, Tajikistan, Thailand, Tunisia, USA, UAE

and Vietnam. Over 60% of the company’s revenue comes from the

international market.

KEC today, boasts of the largest production capacity in the world for tower

manufacturing -- close to 200000 MTs. KEC accomplishes this using three

state of the art manufacturing facilities in the strategically advantageous

locations of Jaipur in Rajasthan, Nagpur in Maharashtra & Jabalpur in

Madhya Pradesh. Besides, it also has three modern tower testing services

at Mumbai, Jaipur and Jabalpur which are capable of testing towers up to

1000kV.

The combined KEC has become a diversified infrastructure EPC global

major with a stated mandate of “Building Infrastructure Globally”. Thus,

from being principally a power transmission play, KEC is today operating

through five major business areas:

Power Transmission – International

Power Transmission – South Asia

Distribution, Substation & Design Services

Telecommunications Infrastructure



Railway Infrastructure

RPG Cables

RPG Cables manufactures and markets power cables in India. The

company also exports cables to Sri Lanka, Malaysia, Russia, Zambia and

other parts of the world. The Company is certified for ISO 9001.

Operations

The company has production facilities in Mumbai, Silvassa and Mysore,

and manufactures high quality power cables and specialty cables in India

with the widest product range.

Products

RPG Cables is a pioneer in the XLPE range of cables in India, and offers a

range of cables up to 132 kv level. The company also manufactures

optical fiber and PIJF cables.

Power – 22%

Noida Power Company Limited



Noida Power Company Limited distributes power in Greater Noida, near

Delhi in Uttar Pradesh, which is being developed as an industrial hub and

an urban settlement. The Company, which has a customer base of

approximately 50,000, reaches out to a population of 4.2 Lakhs spread

across hamlets, villages and a new township spanning an area of 335 sq.

km.

The Company is a joint venture between the RPG Group, a leading

business house in India and Greater Noida Industrial Development

Authority, an autonomous body of U.P. Government responsible for town

planning and infrastructure development. The venture marks the strategic

entry of the Group into privatized distribution of electricity in North India.

Operations

The Company executed an Agreement with the erstwhile U.P. State

Electricity Board (now U.P. Power Corporation Limited) in November 1993

for transfer of the supply arrangements and sourcing of bulk power.

Currently, the peak load served is 90 MVA as against 18 MVA in 1994-95,

reflecting a steady increase in consumer demand.

The load profile is dominated by large and heavy industries that

constitute 68% of energy sale and contribute as much as 74% of the

Company's income. In terms of numbers, the Urban Domestic consumers

constitute the biggest segment. The rural population consumes 9% of the

energy demand and has agriculture as the main source of income. Urban,

institutional and smaller industrial consumers account for the balance

business.

From the very inception, NPCL has focused on process innovations and

business excellence to differentiate its service offerings and earn

recognition in the industry. The leadership takes pride in the fact that



NPCL has become a benchmark in the industry for the parameters such as

Transmission and Distribution Loss (8%), Cost of Delivering Power to

Consumer, Revenue Generated per Employee, etc. The Company has

been recognized by the Union Ministry of Power for the innovative

distribution practices in the rural areas and has also been awarded a

"Silver Shield" for meritorious services in the area of rural distribution

franchisees.

Services

NPCL has the principal role of a service provider to support economic and

lifestyle activity in Greater Noida and to meet the broad needs of the

community at large. Building an efficient and reliable delivery system has

therefore been accorded top priority. A 24-hour Call Centre facilitates

communication with consumers and helps improve trouble call

monitoring. Complaint management is computerized, enabling call

tracking from start to finish.

To provide world-class service to its customers, the Company has

invested in leading-edge technologies such as HVDS, SCADA, AMR, GIS

and ERP, thereby upgrading its processes and systems so as to provide

speedier and friendlier responses to its customers. Also, with effect from

23rd Nov. 2008, the Company has become the first and the only Power

Distribution Company in India to achieve ISO 9001:2000 Certification for

all its operations and support functions.

Pioneer of electricity supply in India, CESC Limited commenced power

generation and distribution in Kolkata, in 1899 with India’s first thermal

power station.



CESC

CESC, one of the few private power utilities, has since grown to a

generating capacity of about 1000 MW across four thermal power plants.

CESC is a vertically integrated Power Company and its operation

encompasses coal mining, generation and distribution of Power. Today,

the Company serves 15 million people spread over its licensed area of

567 sq. km in the twin cities of Kolkata and Howrah in the State of West

Bengal, India. Poised for large growth in demand, CESC is setting up a

number of power stations in the country.

Operations

Operating efficiency of CESC's power stations is amongst the highest in

the country. Alive to its environmental responsibilities, its generating

stations at Budge Budge, Titagarh and Southern have all attained 'zero

effluent' environment friendly status. Budge Budge is also the first

thermal power station in the world to have qualified for carbon credits

under United Nations Frameworks Convention on climate Change. The

Company has demonstrated notable success in controlling distribution

losses.

Services

CESC's emphasis on constant up gradation of services to its 2.2 million

consumers continues with a 24x7 computerized call center. Special care is



taken for building consumer awareness on power consumption, safety

issue and conservation of energy.

Information Technology – 6%

Zensar

Zensar is a globally focused software and services company spread

across nineteen in the world, servicing over 280 active customers,

providing end-to-end services from IT development to Business Process

Outsourcing, from consulting to implementation. Towards supporting our

customers in meeting their business goals, the Company has built and

consolidated a comprehensive portfolio of services in IT and BPO that

offer a sliding range of benefits along the value chain, from cost to value

arbitrage from efficiency gains to lasting business impacts.

Operations

With more than 4600 associates and sales and operations presence

across US, UK, Germany, Sweden, Finland, Middle East, South Africa,

Hong Kong, Singapore, Australia, Japan, Poland and China.

Services

The Company delivers comprehensive services in mission-critical

applications, enterprise applications, e-business, BPO and Knowledge



Services and offers industry and business consulting with industry focused

teams in Retail, Manufacturing, Banking and Insurance, Energy and

Utilities and bringing in best practices culled from individual and

combined experiences.

Retail – 11%

Music World

Music World is India’s largest chain of music stores retailing the widest

range of international and Indian music.



Operations

Music World operates different store formats to service different

consumer groups.

Products

Music World's product portfolio comprises audio CDs and cassettes, VCDs

and DVDs, CD-ROMs and other music accessories. The company is an

important player in the home video market.

Music World has successfully forayed into high end ‘personal audio’

gadgets like Apple iPods, Neo Pods and MP3 players. The company also

offers home theatre systems, speakers and headphones.

The company provides World Space receivers and subscription packs, and

is now also offering the Tata Sky consoles and subscriptions.

Spencer's Retail Limited

Spencer's Retail Limited is one of India's largest and fastest growing

multi-format retailer with 275 stores, including 36 large format stores

across 66 cities in India. Spencer's focuses on verticals like food and

grocery, fruit and vegetables, electrical and electronics, home and office

essentials, garments and fashion accessories, toys, food and personal

care, music and books. Established in 1996, Spencer's has become a

popular destination for shoppers in India with hypermarkets and

convenient stores catering to various shopping needs of its large

consumer base.

Operations



Spencer's has retail footage of over 1 million square feet and over 275

Spencer's stores in 50 cities. The company operates through the following

formats:

The Spencer's Hyper stores are destination stores, of more than 15,000

sq. ft in size. They offer everything under one roof. The merchandise

ranges from fruits & vegetables, processed foods (Ready to Eat, Ready to

Cook, FMCG products),specialty foods including international, sugar free,

organic foods, etc...groceries, meat, chicken, fish, bakery, chilled and

frozen foods, garments, consumer electronics & electrical products, home

care, home décor & home needs, office stationeries, soft toys. Besides,

the stores also comprise book & music retailing, electronic gadgets and IT

accessories. On an average, a Spencer's hyper stocks 70,000 SKUs across

35,000 items.

The Spencer's stores are neighborhood stores ranging from 1500 less

than 15000 sq. ft. These stores stock the necessary range and assortment

in fruit and vegetables, fmcg food and non-food, staples and frozen foods

and cater to the daily and weekly top-up shopping needs of the consumer.

Some of these stores which have floor area of more than 10,000 sq ft

sometimes offer home care products; personal care products, bakery,

chilled and frozen food; baby care, basics in garments and limited range

of electronics and electrical.

Books & Beyond

Books & Beyond, a new vertical of Spencers Retail, is positioned as a

“community engaging store”, that offers a wide selection of reading

options, a comprehensive selection of toys (including the recently



launched Chad Valley range form U.K.) and the entire gamut of art and

stationery related merchandise for home school and office use. Books &

Beyond offers an internationally designed, vibrant and engaging store

environment with consumer activation events like author appearances,

music releases and children’s activities that ensure that customers have a

complete shopping experience.

A feature of Books & Beyond stores is a unique search facility which

shoppers can use to find books of their choice. Books & Beyond

undertakes, at no extra cost, to source those books requested by

shoppers, should they not be readily available in-store.

Operations

The first store of Books & Beyond was launched in 2007 at the Megacity

Mall in Gurgaon, near Delhi. The company has aggressively extended the

footprint of Books & Beyond ever since, with stores in Kolkata, Chennai,

Bengaluru, Hyderabad and Chandigarh. The latest Books & Beyond store

was launched in Jamshedpur on November 7, 2008.

Products

Among the many unique products offered at Books & Beyond are school

text books from Class 1 to 8 (under the NCERT approved syllabus) and

devotional books, videos and religious items.



Entertainment – 1%

Saregama India (popularly known as HMV), is an integrated entertainment

company with the largest music archive in India, and associations with

films, home video, television software and digital distribution of audio and

video content. The company represents BBC World wide Home video in

India, and is also active in related areas like artiste management, event

management and theatrical film distribution.

Operations

Saregama has four regional offices in the metro cities and 13 branch

offices. The company operates with over 200 distributors and dealers

through a unique network of key accounts and corporate sales.

Saregama’s marketing arms RPG Global Music and Saregama Plc cater to

the international music markets that include the UK, USA, continental

Europe, Canada, the Caribbean Islands, South Africa, the Middle East,

South East Asia, Australia, and New Zealand.

Products

Saregama offers a wide collection of music cassettes, CDs, DVDs and

VCDs, and has an extensive library of over 48,000 albums and 300,000

songs in 14 languages. The company caters to different genres of music

from Indian classical to fusion and new age. In the digital space, the



company has initiated retailing music through the Internet and satellite

radio streams, digital downloads and mobile entertainment domains.

Saregama’s extensive songs catalogue is now available online through an

innovative venture called HamaraCD (www.hamaracd.com). This

service allows music lovers to create a customized music CD and have it

delivered anywhere in the world.

Tyres – 21%

CEAT

CEAT –Kelani Associated Holdings (Pvt) Ltd. -A CEAT India Ltd,

Associated Motor Ways PLC & Kelani Tyres PLC joint venture-is the

largest tyre manufacturer in Sri Lanka.

Operations

CEAT Sri Lanka dominates Sri Lanka's domestic tyre market, with a share

of over 60% in the truck and light truck sector. The company is also a

market leader in the farm and three-wheeler sectors in Sri Lanka, and has

the largest dealer network on the island. The company has recently set up

a state- of- the -art radial tyre manufacturing facility of world -class

standard.

In less than a year since the launch of this facility, CEAT radials have

captured a fifth of the domestic radial market.

Products



CEAT Sri Lanka offers a range of tyres for trucks, light trucks, farm

vehicles, two / three wheelers; and radials for cars and vans. The

company also markets tubes and flaps.

Factories

Nungamugoda,Kelaniya

Nagoda,Kalutara

Subsidiary companies

Associated CEAT (Pvt) Ltd

CEAT Srilanka International Tyres ( Pvt) Ltd

Associated Ceat Srilanka Radials (Pvt) Ltd

Export countries

India, Nepal, Pakistan, Bangladesh, Philippines, Malaysia, Singapore,

Egypt, United Arab Emirates, Mauritius, Nigeria, Kenya, Uganda, Ghana,

Afghanistan

Banks

Sampath Bank, Commercial Bank, Nations trust Bank, Hatton National

Bank, DFCC, HSBC

No of employees

800

Trade Associations

Ceylon Chamber of Commerce

Quality Assessment



ISO 9001: 2000

Legal Status

Limited Liability Company

Carbon Black – 9%

Phillips Carbon Black Ltd. (PBCL)

PCBL is a leading carbon black producer in India commanding around 41%

market share. The company has also initiated power generation for

captive consumption and sale to the power grid. PCBL earns Carbon

Credits for this initiative and it is the first Carbon Black Company in the

world to be awarded Carbon Credit under Kyoto Protocol of UNFCCC.

RPG Group recognizing the major turnaround achieved during the last two

years and the growth path PCBL has embarked upon to capture the

opportunities in Carbon Black business has made Carbon Black an

independent Business Sector w.e.f. 1st August, 2008.



PCBL's endeavor is to achieve Leadership not only in terms of Revenue

and Market Share but also in terms of Cost, Quality and Service which will

ensure continuing Profit Leadership.

PCBL stands for People Challenging and Breaking Limits.

Operations

PCBL has three manufacturing units located in Durgapur, Cochin and

Baroda.

Durgapur plant is ISO-9001 and QS-9000 certified. It has also received the

TS 16949 in 2007 and has now initiated the Environmental Management

System (EMS) activities for receiving ISO 14001 Certification.

Both Cochin plant and Baroda Plant are ISO 9002: 1994 certified.

Products

The company designs, manufacturers and markets carbon black. The

major market for Carbon Black is Tyre Industry. Carbon Black is also

required by Non-Tyre rubber based application industry as well as the

plastic industry.

Corporate Social Responsibility (CSR)

PCBL is a staunch believer in CSR activities. Its Cochin plant has bagged

the Environment Management System (EMS) standard accreditation under

ISO 14001:1996 and an award from Kerala State Government under large

corporate category for best environmental practices in 2004. The plant



has an on-line stack monitoring system with access to State Authorities,

250 Kms away.

Cochin plant is the only Carbon Black Plant in Asia to have a solid waste

disposal yard. PCBL follows a system of zero discharge of water outside

the plant. Effluent is treated and reused.

Regular community development is a way of life in all plants. Few of the

practices followed are Pipeline for drinking water for school, free

distribution of books, Merit Awards, Donation of ambulance, Total rain

water harvesting etc.

Specialty – 5%

Harrisons Malayalam Limited

Harrisons Malayalam Limited is India’s largest rubber plantation company

with nine major rubber plantations, and the second largest tea producer

in south India, owning 10 tea plantations. The rubber and tea plantations

are spread over more than 20,000 hectares of land in South India.

Products

The two main products of Harrisons Malayalam Limited are tea and

rubber. Types of tea produced include crush, tear and curl (CTC) and

orthodox dust tea. Mountain Mist, Harrisons Gold, Spencer’s and Surya

are well established tea brands in South India.

The company’s value-added rubber products include centrifuged latex,

PLC, crumb rubber, crepe rubber and technically specified rubber.



Harrisons Malayalam Limited is also India’s largest producer of

pineapples.

Raychem RPG

Raychem RPG is 50:50 Joint Venture between RPG Enterprises, India and

Tyco Electronics, U.S.A . Raychem RPG serves the infrastructure segment

of the economy by providing high end technological solutions.Power,

Telecommunication, Electronics, Oil & Gas / Water / Marine & Offshore /

Petrochemicals and Exports are some of the diverse Sectors that

Raychem caters to.

Operations

The company's manufacturing units are located in Vasai, Kaman, Rabale,

Chakan (in Maharashtra) and Nalagarh (in Himachal Pradesh).

In 2006 the Export Oriented Unit and the Chakan plant were setup. The

Export Oriented Unit manufactures moulded products of Tyco Electronics

while the Chakan plant caters to new projects and product development.

Currently the facility holds two manufacturing plants for Domestic Gas

Flow Meters and Industrial Transformers

Two manufacturing plants in Nallagarh one for Transformers and the

other for Energy meters will be operational in early 2009.

Services

Raychem RPG’s diverse product range is used in the field of

Power Transmission & Distribution

Moulded Components& die cast products



Fibre Management Systems

Corrosion Protection of pipelines

Tanks and bullets

Electric Heat Tracing

RPG Life Sciences

RPG Life Sciences (formerly Searle India) is a wide-ranging

pharmaceutical organization that focuses on current and emerging areas

of health care. The company manufactures and markets a range of bulk

drugs, formulations and biotechnology products.

Operations

RPG Life Sciences has research and development facilities that conform to

international standards. It has Biotech R&D, API R&D and Formulations

R&D. Each of those areas have their respective manufacturing facilities.

The company has TGA (Aus) and MHRA (UK) approved facilities at Thane,

near Mumbai and Ankleshwar, near Gujarat.



Transmission Sector

Expansion of power transmission and distribution (T&D) capacity in India

has fuelled growth of the power T&D EPC industry in the last two years of

the Tenth Plan period (FY02-07); growth in the power T&D EPC industry

was below average in the initial years of the Tenth Plan period. During

XIth Plan, Power Grid is targeting to double its network by adding about

60,000 circuit kms. of transmission lines. This would mean a capital

investment of over Rs. 55,000 crore by year 2012. This transmission

network will support additional generation capacity of 78,000 MW during

XIth Plan. This would double the inter-regional transmission capacity to

37,700 MW.

Power Grid has reported the annual capital investment of Rs. 6615 crore

during the FY 2007-08. If capital expenditure of about Rs. 55,000 crore for

the XIth plan is to be achieved; Power Grid would require capital

investment to the tune of Rs. 12,000 crore every year.

The efforts of Power Grid in creating robust transmission network would

need to be supplemented by involvement of Private Sector. Therefore, the

Government of India took certain initiatives to facilitate private sector

participation in transmission.



Fortunes of the power T&D EPC industry are governed by the capacity

expansion plans of Power Grid Corporation of India (PGCIL) to a large

extent, as it is the central transmission utility in India. PGCIL added more

than twice the transmission capacity in FY07 compared to FY03, which

has directed the revenue growth pattern of the industry.

Historical Growth and EBITDA Growth

Average FY2001-04 Average FY2005-07

Company Revenues

growth (%)

EBITDA Growth

(%)

Revenues

growth (%)

EBITDA

Growth (%)

Kalptaru Power

Transmission

29.4 27.0 67.8 104.5

KEC International 15.8 NM 28.8 45.1

Jyoti Structures 4.1 0.4 51.2 74.8

From FY05 onwards, the industry started posting robust growth with

Kalpataru Power Transmission (KPP) posting a revenue growth of ~81%,

KEC (KECI) of ~18%, and Jyoti Structures (JYS) of ~39% in FY07.

Historically, activity levels are much higher in the later years of five year

plans. PGCIL is likely to invest INR 65 bn in FY08E (~INR 20 bn in

Q4FY08E), ~INR 85 bn in FY09E, and ~INR 300 bn from FY10-12E to

upgrade India’s power transmission network. Hence, in the Eleventh Plan



period, we are likely to see heightened activity in the sector in FY11E and

FY12E.

Besides PGCIL, Damodar Valley Corporation (DVC) and various state

electricity boards (SEBs) also undertake transmission capacity expansion

in India. However, their plans are less dependable than PGCIL’s, as most

of the SEBs is crunched for funds. Further, their poor payment record

does not make them preferred customers.

Besides transmission projects initiated by PGCIL and others, power T&D

EPC companies are also present in power distribution up-gradation

projects for which the nodal agencies are Power Finance Corporation

(PFC) and Rural Electrification Corporation (REC). Also, some distribution

up-gradation projects are initiated by SEBs. The outlay for distribution up-

gradation projects is ~INR 800 bn, equally divided between rural

electrification (Rajeev Gandhi Grameen Viduytikaran Yojana) and

Accelerated Power Development Reform Program.

While power transmission EPC primarily involves transmission lines and

substations, power distribution EPC entails strengthening of the

distribution network. Transmission lines entail tower and conductor

supplies, civil construction, engineering, and testing. Substation projects

include procurement of electrical equipment, civil construction,

engineering and testing.

KEC International Ltd.



Introduction

KEC International is one of the largest Power Transmission EPC companies

in the world. KEC has made an indelible mark on the world map by

constantly and consistently re-engineering itself to retain its position of

leadership in the areas of quality, technology, capacity and capability.

KEC's strengths lie in the areas of Design, Manufacture, supply and

Construction of Turnkey Projects of Power Transmission lines of voltages

up to 800 KV and in the execution of Railway Electrification projects,

setting up Sub-stations and power Distribution Networks, Optical Fiber

Cable (OPGW) installations, Turnkey Telecom Infrastructure Services and

maintenance of Power Transmission Lines.

To ensure reliable service KEC is supported by multi-locational

manufacturing facilities and a workforce spread out over 20 countries.

At KEC manpower is one of the most important resources. KEC employees

participate in regular training programmes and seminars in various areas

of self development. Every employee is instilled with a sense of pride of

his work and workplace & strives to make KEC the International market

leader in the power transmission sector.

KEC has gone from strength to strength successfully exporting towers to

over 20 countries and widening its client base across the world. The

company has an increasingly strong presence in Argentina, Brazil,

Canada, Egypt, Ethiopia, Ghana, India, Indonesia, Iran, Iraq, Kenya,

Kuwait, Lebanon, Malaysia, New Zealand, Nepal, Nigeria, Philippines,

South Africa, Sri Lanka, Saudi Arabia, Sudan, Syria, Thailand, Tunisia, USA,

UAE and Vietnam.



DESIGN CAPABILITIES

To maintain its leadership in the market, KEC is equipped with the latest

in technology. KEC is constantly upgrading its facilities and factory units.

The company has very modern design facilities at Mumbai where over 50

highly qualified and experienced Design Engineers have been deployed.

This Design Division is fully equipped to perform a plethora of

computerized design and engineering activities that design Transmission

Towers of any kind to meet specific client requirements. It has

successfully designed heavy River Crossing towers as well as towers up to

800 KV. The division boasts of ultra modern facilities that include:

3D analysis & design software for optimizing use of Mild Steel and High

tensile Steel.

3D drafting software for automatic generation of shop drawings for

fabrication and code generation for CNC operation for manufacturing.

Software for foundation designing and construction drawings.

Software for development of sag templates and generation of sag tension

charts for line stringing.

Software for development of 3D profile drawing which facilitated

automatic checking of clearances, optimizing of tower quantities and

verifying the adequacy of the tower strength.



CAPABILITIES

400 KV single circuit and double circuit towers.

500 KV double circuit towers with quadruple bundled conductors.

500 KV single circuit rectangular based towers.

800 KV single circuit rectangular based towers.

River Crossing Towers

KV

Circuit

Span

Metre

Height

Metre

Weight

MT

Brahmaputra River

Crossing

400 D/C 1000 142 142

Nile River Crossing500 S/C 1000 135 150

Ganga River

Crossing

400 D/C 1080 140 197

Narmada River

Crossing

220 D/C 880 132 252

Rihand Crossing500 HVDC 1070 155 265



TOWER TESTING

KEC has two of Asia's most sophisticated Tower Testing stations, capable

of testing towers of upto 1000 KV Transmission Line. These testing

stations serve the objective of satisfying customers about design

parameters of tower by subjecting Proto-Towers to various test loads. The

maximum capacity of these testing stations located at Jaipur and Vashi

(Navi Mumbai) is as follows:

VASHI JAIPUR

Tower width 20m x 20m 14m x 14m

Tower height 65m 46m

Uplift per leg 500 MT 175 MT

Overturning moment 20000 tonne mtr 500 tonne mtr

No. of load points 30 17

Load per point 50 MT 25 MT

The tower testing station at the R&D Centre, Vashi, Navi Mumbai is

recognized as an in-house R&D Unit by the Ministry of Science and

Technology, Government of India, vide their reference No.

TU/IV-RD/2110/99-2000 dates 24-04-2000.



MANUFACTURING SKILLS

State-of-the-art Infrastructure

The heart of any manufacturing facility is its infrastructure. KEC has three

manufacturing plants at Jaipur,Nagpur and Jabalpur in India. In these

three plants, KEC can manufacture 1,10,000 tons of towers annually.

KEC meets the world's most stringent quality standards. Its plants are

certified as per ISO 9001 and 14001 for Quality and Environmental

Standards

Well-engineered layouts, mechanized production equipments and large

storage facilities for steel and finished products give KEC an edge to

deliver quality products as per the stringent requirements of its

customers. KEC is constantly upgrading the capabilities of its factories to

meet the changing expectations of its customers.

The factory at Jaipur was built on a plot measuring 230,680 sq. mt. and

started in 1967. It combines highly skilled manpower with modern

manufacturing infrastructure to ensure products of the highest quality.

Built on 120,000 sq. mt. of land, the factory at Butibori, Nagpur was

started in 1996. It incorporates the latest technology for fabrication and

hot dip galvanizing of a variety of structures.



FABRICATION TECHNOLOGY

All tower parts go through multi-purpose CNC machines that are

programmed to carry out various operations such as punching, stamping,

drilling and cutting.

Hydraulic presses along with matching tools, jigs and fixtures ensure that

bent items are handled without distortion. Strategically positioned cranes

simplify material handling without any strain on employees.

All machines are equipped to process steel conforming to various

specifications e.g. BSEN, ASTM, JIS, DIN.

GALVANIZING TECHNOLOGY

The pretreatment of steel is effectively handled with special chemicals to

minimize effluents. The controlled treatment includes degreasing, pickling

and fluxing for an ideal reaction between steel and Zinc.

The pre-heating chamber ensures uniform drying & preheating of steel to

give an excellent surface finish and uniform coating of zinc. The

temperature of Galvanizing Furnace is accurately controlled by

microprocessors.



The waste acids and chemicals are treated as per all applicable

environment Standards.

AT KEC, Quality is a Journey not a Destination

Quality is an integral part of manufacturing process wherein each

operator ensures the quality of work he performs. Specially trained

inspectors, computerized testing equipments and well-planned quality

assurance infrastructure back all quality efforts. Monitoring of quality is

done at every stage ensuring the highest quality standards.

Maintenance and back up systems ensure that process capability of

machines is maintained at the planned performance standards.

Construction Expertise

KEC has more than 60 years of experience in construction of Transmission

Lines.

The company has constructed some of the heaviest and tallest

transmission towers in India and abroad. It has successfully battled

against & constructed towers in difficult terrains like deserts, mountains,

land mines and rivers.

Today, the specialized transmission lines built by KEC span huge raging

rivers are like Nile in Egypt, Kosi in Nepal and Brahmaputra in India.



Besides having 20 teams of highly skilled surveyors, KEC has 13 Total

Stations (comprising Electronic Distance Meters, theodolite and software

for recording survey data like levels, angles and distance. In addition KEC

has the capability and experience of conducting surveys via Geo-

positioned satellite.

KEC has teams of expert engineers & technicians who erect transmission

towers by conventional methods like cranes for towers that are up to 45

meters high and advanced methods like use of helicopters, whenever

required.

KEC's battery of 32 sophisticated lightweight tension stringing machines

& 40 hydraulic mobile cranes (to handle the conductors at erection sites

and at stores) give KEC a distinct edge when it comes to installation of

transmission lines.

CURRENT PROJECTS

INTERNATIOAL PROJECTS

Country Capacity

(KV)

Type Length (Kms.)



Afghanistan110/220 DC 753

Afghanistan - Distribution22 RE

611

Algeria - Hot Line Stringing400 SC

3000

Algeria - T/L400 SC

337

Australia275 DC

Tower Supply

Egypt500 DC

196

Ethiopia132 SC

50

Ethiopia - Distribution15/33 RE

5941

Ethiopia - T/L230/400 SC

477

Ghana330 SC

215

Iraq ( Kurdistan )33/132 SC/DC

4628

Kazakhstan500 SC

725

Kenya11/33 SC

744

Kenya 132 25

Lebanon220 DC

187

Libya 400 SC/DC

733

Namibia350 HVDC

306

Nigeria132/330 SC/DC

401



Oman132/220 DC

65

Saudi Arabia380 D/C OHL

123

Saudi Arabia380 D/C OHL

55

Saudi Arabia380 DC

268

South Africa765 SC

114(Supply)

South Africa400 S/C

Supply

Tajikistan220 DC

118

Tunisia90/150/220 SC/DC

558

UAE ( Abu Dhabi ) 200/220/400 DC 135

UAE ( Sharjah )132 DC

76



DOMESTIC PROJECTS

Capacity

(KV)

Type Location/ Line Length (Kms.)

765 SC Pichor – Malanpur 112

400 DC Agra-Jaipur 110

400 DC Hatta - Bina and LILO lines at Bina &

Rajgarh

167

400 DC Seoni – Khandwa 117

400 DC Jhalod – Dehgam 167

400 DC Biharsharif - Hasanpur 58

400 SC Partabpur – Korba 149

400 DC Kahalgaon - Lakhisarai 124

400 DC Teesta - V - Darjeeling 51

400 SC RAPP - 5 & 6 - Kota 62

165 SC &

DC

Bareilly - Moradabad T/L and 4 Nos

of LILO Lines

165



Quality

At KEC, Quality is a Journey not a Destination.

Quality assurance is an integral part of the manufacturing processes

wherein each operator ensures the quality of the work he performs. All

quality efforts are backed by specially trained inspectors, computerized

testing equipment, well planned quality, assurance infrastructure.

Monitoring of quality is done at every stage ensuring the highest quality

standards.

The maintenance and back up systems ensure that process capability of

machines is maintained at the planned performance standards.

Transmitting Power: The WORLD

OVER

KEC has gone from strength to strength successfully exporting towers to

over 20 countries and widening its client base across the world. The

company has an increasingly strong presence in the Middle East, the

Pacific Rim countries and Africa.

KEC has helped transmit power to various countries that include

Argentina, Brazil, Canada, Egypt, Ethiopia, Ghana, India, Indonesia, Iran,

Iraq, Kenya, Kuwait, Lebanon, Malaysia, New Zealand, Nepal, Nigeria,

Philippines, South Africa, Sri Lanka, Saudi Arabia, Sudan, Syria, Thailand,

Tunisia, USA, UAE and Vietnam. The KEC credo is that no project is

complete till the customer is totally satisfied. KEC has successfully

executed contracts from 33 KV to 800 KV in India and abroad.



Vision:

To be a global leader in Power Transmission EPC business and a

significant player in other related businesses, providing superior

value to all stakeholders.

Mission:

To be a global player in the power transmission and distribution

industries.

To meet customers’ requirements in terms of quality and time.

To employ state of the art technology and institutionalize processes

and to be the most cost effective contraction and manufacturing

company.

To providing a challenging and fulfilling work culture to employees.

HISTORY OF KEC INTERNATIONAL

Established in 1945 as Kamani Engineering Corporation for

manufacturing, enameling and trading of Hollowware.

In 1950 fabrication plant started in Bombay in collaboration with Ms

R Foures, France for supply Bhankra Nangal Dam Project and

transmission projects.

In 1960, first international order was received from New Zealand.



Railway Electrification department set up. First Indian company to

get the order of railway electrical of south eastern railways in 1961.

In 1966 second manufacturing plant in Jaipur was started.

In 1968, full turnkey project was awarded to design manufacturing,

supply and erect transmission line in Sudan.

In 1969 government of India recognized it as the Export house.

After taken over by RPG groups in 1982, company inaugurated

tower testing station at Vashi, Mumbai in 1983. This was the largest

in the country and third of its kind in the world.

In 1984 name changed to KEC International limited and in 1987

turnover of the company crosses Rs. 100 crores.

In 1996, third manufacturing plant in Nagpur was setup.

In 2007, RPG Transmission Ltd. and NITEL merged with KEC

International. Telecom business was also started in this year.

KEC’s Background:

One of the leading Power Transmission EPC companies and the

largest power transmission company in Asia

A more than 60 year old company with expertise in:



o Design, manufacture, supply and construction of Power

o Transmission projects up to 800 KV.

o Execution of Railway Electrification projects.

o Setting up Sub-stations and power Distribution Networks.

o Optical Fibre Cable (OPGW) installations

o Turnkey Telecom Infrastructure Services

Manufacturing plants at Jaipur, Nagpur, Jabalpur and Associated

plants at Nagpur & Tarapur

Plants, specifically designed for towers and structural, production

are capable of producing all types of Tower structures

All three plants have ISO 9001 & ISO 14001 certifications. Nagpur

plant is certified for OHSAS 18001

Supplied over 2 million metric tons of towers till date, for

constructing over 53,000 kms of transmission lines globally.



Team KEC International Ltd.

R. D. Chandak(Managing Director) Vardhan V

Dharkar(CFO)

Mr Chandak is the most well known figure in Mr. Dharker is

a CA with rich exper-

the power transmission EPC space in India. He -ience in

finance. Associated with KEC

has been associated with textile, edible oil and International

since 2007.

Engineering Industries.



Anant Goenka(ED-Supply Chain) K Ramkumar(V

President)Special Projects

Mr. Goenka holds a good experience with Mr. Ram Kumar

brings with him 30 years of

HUL, Accenture Mumbai, & Morgan Stanley experience across

precision manufacturing,

Hong Kong. Associated with KEC International Consumer Durables

& Project Management

since 2007. Industries.

Associated with KEC since 1993.

Deepak Lakhpati (VP) Eng. Services Vimal Kejeriwal(Ex.

Director)Int. Business

Dr. Lakhapati brings with him 33 years of Mr.

Kejriwal is a CA. He has more than

experience in engineering transmission lines two

decades of experience in corporate

across the globe. As a member of CIGRE, Paris, finance.

Joined KEC in 2002 as CFO and

he is associated with KEC since 1998. was

elevated to Ex Director, IB in 2006.



Some Salient Points of KEC Business model:

KEC International has a distinct business model as compared to its

competitors in the industry. The salient points of its business models and

key competitive advantage are as follows:

Play on global power T&D EPC space

Substantial investments have been planned in emerging markets,

primarily Africa and Middle East, in the power T&D EPC space. KEC

International (KECI), with significant presence in Africa, Central Asia, and

the Middle East, apart from India, is likely to be one of the beneficiaries of

the global power T&D expansion.

Strong project management capabilities

KECI has executed projects in diverse terrains—across Kazakhstan, Saudi

Arabia, Iraq, and Afghanistan. While this kind of project profile does raise

the risk profile of the business, we believe, over the years, KECI has

acquired the necessary skills to manage projects in difficult terrains. It is

currently working on ~60 projects simultaneously, which denotes its

superior project management capabilities.



Diversifying into EPC for railways

In the Eleventh Plan, Indian Railways has an ~INR 430 bn outlay for

expanding capacity.

KECI has pre qualifications from Indian Railways as the company was

earlier been involved in setting up infrastructure for it. KECI has recently

bagged two railway electrification projects from Northern and Central

Railways. We believe entry into EPC for railways is likely to further raise

revenue visibility for the company.

Upside from telecom business

Merger with NITEL gives KECI presence in the high-growth telecom towers

market.

NITEL provides EPC solutions in building communication networks and

owns 384 telecom towers in four clusters of Mizoram, Meghalaya, and

Chattisgarh. Simply put, it is a play on telecom infrastructure in India.

Aggressive order accretion

In the past two quarters, KECI has had a higher order accretion than

peers. This can be attributed to the company’s significant presence in

international markets compared to peers, who are more active in the

domestic market. Higher order accretion lends KECI higher revenue

visibility compared to JYS and KPP.



Major Risks:

Economic Slowdown

The infrastructure spending by the government is the most important key

to economic growth.

However economic slowdown would lead to government funds being

diverted towards priority sectors such as social services which could

adversely affect spending on power.

Competition

With the rapidly expanding Indian market presenting a host of

opportunities, there are many players who are venturing in this business.

In addition there is a threat from the unorganized players to capture a

minor share of the market as these players have low overhead they put

pressure on margin (18-20 active players)

Political Scenario

Every year the political scenario keeps changes. During the course of

project if the government changes there is a possibility of changes in

rules and regulations and delay in public policy adversely affecting the

projects.

Delay in Contracts execution



EPC contracts accounting generally follows a percentage completion

method, where the revenue is proportional to the percentage of the

contracts being executed. The delays in the completion of the contracts

could affect top line growth, delaying revenue booking.

Commodity Risk

Increase or decrease in price of raw materials is generally passed on to

the client. Since little these price variation over last year has been

significant it has put a huge pressure on margins.

Currency Risk

Some contracts being partly compensated in local currency of the

respective countries, any significant movement in exchange rate leads to

currency risk thereby imparting the margins for KEC.

Shortfall in meeting FIVE year plan targets

GOP could complete only 56% of 10th five year plan target of 41000

MW.11th plan target has been increased to 76000 MW. It is feared that

there may be a shortfall of funds to the extent of Rs 45000 crs if target

have to be met.



Plans for Future

Consolidation in business - Enhances KEC’s resource base, service

offerings and geographical reach.

Cost efficiency – Achieve cost synergies through rationalization of

administrative functions. Pursue operational synergies in project

management, asset management, equipment and workforce utilization

and procurement cost savings.

Increase presence in the international market by looking into newer

markets.

Commercial benefits - Largest manufacturing capacity in world for

transmission and telecom towers

Continuously improve in design capability through continuous focus of

R&D.

Industry trends - Optimally positions KEC to take advantage of

positive industry trends



Diversification into high growth telecom infrastructure business

Create share holder values.

KEC International Ltd., Jaipur

In 1982 Kamani Engineering Corporation was taken over by RPG

Groups and in 1984 it was renamed to KEC International Ltd. In

Jaipur it was established in 1985. It is situated in 14 -15, Jhotwara

Ind. Area; Jaipur, Rajasthan with a factory area of 47 acres. The

major activities at jaipur plant are Proto finalization, Tower testing

and Manufacturing of tower parts with a capital investment of 13

million US$. The current manpower consists of 89 Managers, 40

Supervisors, 295 Workmen and 103 Contractor approximately.

TEAM KEC JAIPUR

Rajesh Koolwal - Chief Manager

D S Shekhawat - Div. Manager – Material

Raj Rajeshwar Singh - Sr. Manager Production

C M Sharma - Sr. Manager – Plant Engg.



Rohit Jhalani - Sr. Manager Projects

S S Naruka - Sr. Manager - IT

M C Dixit - Manager - Galvanizing

Manish Agarwal - Manager – Procurement

Atul Agarwal - Manager – F & Accounts

R C Saxena - Manager - HR

Shukla Kumar - Manager – Quality Assurance

R M Gupta - Manager – Material Mgmt.

KEY STRENGTH OF JAIPUR WORKS



Fabrication Process





Galvanizing Process



Performance of KEC

International Ltd.





Performance of KEC International, Jaipur



FINANCE & ACCOUNTS

The term finance and accounts is totally different. Finance is the

arrangement of the funds for the smooth running operations of the

organizations whereas Accounts is the bookkeeping or keeping record of

funds for the organizations. Accounts provide a good platform for the

organizations in taking decisions and in maintaining cash. In each every

organization both of them plays a role of heart i.e. central control of the

organization. It controls and checks the outgoing and incoming

transactions and provides a good worth to the companies. In the KECIL

the finance part is only of 5%and accounts portion is of 95%. While rest

part of the finance is being handled and overall control by Mumbai Head-

office



Objectives of Finance & Accounts

100% statutory payment compliances on scheduled dates.

Timely & error free payments to employees.

A/R Bills submission to customers-2 days on getting – full set of

documents.

Cost reduction through feedback to all concerned over previous

year.

Finance /Accounts

Audit

Budgeting Taxation

MIS Information System

Payroll Billing



Prompt and proper response to all internal and external customers

and processing of supplies bills before due dates for timely

payment.

Finalization of Accounts

Monthly with 10 days

Quarterly within- 20 days.

Annual within 30 days

Preparation & submission of all types of reports & returns to

corporate & various government departments on scheduled dates.

Prompt response to corporate office & other unit offices of KECIL.

MAIN INPUTS/ OUTPUTS TO THE ACCOUNTS

& FINANCE DEPARTMENT



INPUTS

M.M (Material Management)- Production, Despatch, Inventories

Data.

Purchase/General Stores- Consumer Bills, P.O, GRN

Mass Production- Purchase Order of Steel & Zinc

Raw Yard- Steel received GRN

Finished Yard- third Party Fabricator (GRN), Despatch Advice Note

Time Office- Attendance Records

OUTPUTS

Payments to Suppliers

Maintaining The Financial Records

Statutory Compliance [Sale Tax, Income tax, P.F, ESIC (Employees

State Insurance Corporation), Excise Duty, Service tax, TDS].

Employees Salaries & Wages.

Domestic Billing



Functional Areas Covered By Finance & Account

Department

ACCOUNTS /FINANCE

COMMERCIALS

BUDGET/MIS

PAYROLL

TAXATION

AUDIT

At Jaipur only 5% of Finance part is being taking place and rest of the

responsibilities is being taking care by the Mumbai Head Office. They

provide Jaipur KECIL sufficient funds as they give the requirements.

Salient Points of KEC Business model:

KEC International has a distinct business model as compared to its

competitors in the industry. The salient points of its business models and

key competitive advantage are as follows:

Play on global power T&D EPC space

Substantial investments have been planned in emerging markets,

primarily Africa and Middle East, in the power T&D EPC space. KEC

International (KECI), with significant presence in Africa, Central Asia, and



the Middle East, apart from India, is likely to be one of the beneficiaries of

the global power T&D expansion.

Strong project management capabilities

KECI has executed projects in diverse terrains—across Kazakhstan, Saudi

Arabia, Iraq, and Afghanistan. While this kind of project profile does raise

the risk profile of the business, we believe, over the years, KECI has

acquired the necessary skills to manage projects in difficult terrains. It is

currently working on ~60 projects simultaneously, which denotes its

superior project management capabilities.

Diversifying into EPC for railways

In the Eleventh Plan, Indian Railways has an ~INR 430 bn outlay for

expanding capacity.

KECI has pre qualifications from Indian Railways as the company was

earlier been involved in setting up infrastructure for it. KECI has recently

bagged two railway electrification projects from Northern and Central

Railways. We believe entry into EPC for railways is likely to further raise

revenue visibility for the company.

Upside from telecom business

Merger with NITEL gives KECI presence in the high-growth telecom towers

market.

NITEL provides EPC solutions in building communication networks and

owns 384 telecom towers in four clusters of Mizoram, Meghalaya, and

Chattisgarh. Simply put, it is a play on telecom infrastructure in India.



Aggressive order accretion

In the past two quarters, KECI has had a higher order accretion than

peers. This can be attributed to the company’s significant presence in

international markets compared to peers, who are more active in the

domestic market. Higher order accretion lends KECI higher revenue

visibility compared to JYS and KPP.

Major Risks:

Economic Slowdown

The infrastructure spending by the government is the most important key

to economic growth.

However economic slowdown would lead to government funds being

diverted towards priority sectors such as social services which could

adversely affect spending on power.

Competition

With the rapidly expanding Indian market presenting a host of

opportunities, there are many players who are venturing in this business.

In addition there is a threat from the unorganized players to capture a

minor share of the market as these players have low overhead they put

pressure on margin (18-20 active players)

Political Scenario



Every year the political scenario keeps changes. During the course of

project if the government changes there is a possibility of changes in

rules and regulations and delay in public policy adversely affecting the

projects.

Delay in Contracts execution

EPC contracts accounting generally follows a percentage completion

method, where the revenue is proportional to the percentage of the

contracts being executed. The delays in the completion of the contracts

could affect top line growth, delaying revenue booking.

Commodity Risk

Increase or decrease in price of raw materials is generally passed on to

the client. Since little these price variation over last year has been

significant it has put a huge pressure on margins.

Currency Risk

Some contracts being partly compensated in local currency of the

respective countries, any significant movement in exchange rate leads to

currency risk thereby imparting the margins for KEC.

Shortfall in meeting FIVE year plan targets



GOP could complete only 56% of 10th five year plan target of 41000

MW.11th plan target has been increased to 76000 MW. It is feared that

there may be a shortfall of funds to the extent of Rs 45000 crs if target

have to be met.

Plans for Future

Consolidation in business - Enhances KEC’s resource base,

service offerings and geographical reach.

Cost efficiency – Achieve cost synergies through rationalization

of administrative functions. Pursue operational synergies in

project management, asset management, equipment and

workforce utilization and procurement cost savings.

Increase presence in the international market by looking into newer

markets.

Commercial benefits - Largest manufacturing capacity in world

for transmission and telecom towers

Continuously improve in design capability through continuous focus

of R&D.

Industry trends - Optimally positions KEC to take advantage of

positive industry trends

Diversification into high growth telecom infrastructure business



Create share holder values.

FINANCIAL PERFORMANCE

Financial year 2008-2009 was a year of challenges and uncertainty for

businesses across various segments of industries, with the financial

crises, volatile commodity prices, sharp movements in the currency,

crashing stock market and server liquidity crises. KEC was also not

insulated from the above changes, even though the company continued



its focus on delivering quality products and services on time with prudent

project execution and management of resources.

Prominent workforce and management resulted in achieving a net

turnover of Rs 3427.39 crores and net profit Rs 116.29 crores in the

current financial year, against net turnover of Rs 2814.47 crores

and net profit of Rs 172.16 crores in 2007-08.

The EBITDA is 8.77% as against 12.60% in last year. The EPS in the

current financial year is Rs 23.57 as against Rs 39.56 in 2007-08.

During the year operation performance of the company has

generated a positive net cash flow of the Rs 369.80 crores as

against Rs. 4.34 crores in the previous year.

Debt equity ratio has improved to 1.11:1 as compare to 1.20:1

during the previous year.

As on 31 March the aggregated paid up equity shares capital of the

co. consisted of for 93,44,606 equity shares of Rs. 49.34 crores.

As of June 30th 2009, the market price of share in

BSE………………………………….. & NSE…………………………….

Total expenditure in R&D was 202.48 lakhs, approximately .06% of

total turnover.

Total Foreign exchange earned Rs 2,11,721.76 lakhs and used Rs

140586.88 lakhs in 2008-09.



FINANCIAL STATEMENT

Rs in Crores

For the year ended

31st March 09

For the year ended

31st March 08

Gross Sales 3,481.34 2,853.88

EBITDA 300.57 354.57

Interest 99.98 67.65

Profit before Non-Cash

items/Tax

200.59 286.92

Depreciation and

Amortization

22.75 25.07

Profit before tax 177.84 261.85

Provision for taxation 61.55 89.69

Profit after taxation 116.29 172.16

Appropriations:

Balance as per last

account

239.45 117.25

Capital redemption

Reserve

10.40 3.88

Transfer to general

Reserve

11.63 17.22

Proposed dividend 24.67 24.67

Tax Dividend 4.19 4.19

Balance transferred

to balance sheet

304.85 239.49



Categories of Shareholders as on 31 st March

2009

Category No. of Shares

held

Percent of

Shareholdings

Promoters 2,06,04,739 41.76

Mutual Funds /UTI 1,56,49,578 31.71

Financial Institutions,

Insurance Companies and

banks including (Foreign

Banks)

30,80,352 6.24

Foreign institutional

investors

24,00,880 4.87

General public 57,42,158 11.62

NRI & Foreign Companies 2,07,833 0.42

Other Companies 14,99,153 3.04

Clearing Members 1,22,732 0.25

Director and Relatives 37,001 0.07

Total 4,93,44,606 100.00



Shareholders as on 31 st March 2009





Data Analysis

Types of Bills in KEC:



A typical transmission tower project can be sub-divided into two major

parts.

i) Supply of the tower material and its accessories

ii) Erection of the towers.

The supply contracts generally include the fabrication, galvanizing and

supply of various type of tower & tower parts, tower extensions, stubs,

hangers, D-Shackles, pack washers, bolts and nuts, cleats, earthing and

various other tower and line accessory materials for aviation

requirements, wind measuring equipments, and etc.

KEC International has a distinct business model. It manufactures and

galvanizes only the tower materials at its three factories at Jaipur,

Butibourri and Jabalpur and outsources the tower and line accessories to

various small and medium sub-vendors.

The bills generated by the factories towards the materials manufactured,

galvanized and supplied from the three factories are known as supply

bills. The bills are generated by the factories and sent to the site for

approval of the client before payment realization.

The bills generated by the sub-vendors for the manufacturing, galvanizing

and supply of tower accessories and line accessories are known as bought

out bills.



The third kind of bill is known as erection bill and generated at the site

and encompasses activities like survey (both detailed survey and check

survey), soil investigation, constructing the tower foundations (excavation

of soil, concreting, supply and reinforcement of placement steel,

transportation and installation of stub including bolts and nuts), benching

protection of tower footings, transportation and installation of earthing of

towers, transportation and installation of the following tower accessories

(like danger plate, number plate, phase cut, circuit plate, anti-climbing

device, bird guard), transportation of GS Earthwire, hardware fittings and

etc.

Supply bills are generated once the client issues the MICC, erection bills

are generated as soon as the JMC s are be obtained.

From the above diagram it is evident that there are bills have been

broadly classified under two heads.

i) The progress bills are those bills which are raised as and when the

work is completed



ii) The price variation bills are those bills those are raised to

compensate for the escalation.

Say the contracts are floated on Jan1, 2006 and the contractor bids for

the tender based on the current value that is as the prices in January.

However the when the contract is executed say during June 2008 already

thirty months have passed and the prices of petrol, diesel, steel, cement,

labour and zinc( used for galvanizing) increases due to inflation. To

compensate for this increase in price of steel, cement, labour, zinc and

petrol/diesel, there is a provision of price variation bills.

Like progress bills, price variation bills also have three components

namely supply bills, erection bills and bought out bills.

We will cover and analyze the inefficiencies in the individual billing cycle

later.

Every billing process requires some documents to be enclosed with the

original bills for client approval and payment process. Missing enclosures

are the biggest contributor to the delay in the billing process. It was one

of my deliverables to create a checklist of all the enclosures so which can

be sent at sites and factories and so as to minimize the delay due to

missing enclosure.



Brief Definition of the Bills

Supply Bills:

Supply Bills are generated at the factories at Butibourri, Jaipur, and

Jabalpur of the tower materials like the tower members, stubs and etc. All

the factories generate progress supply bills but only Butibourri factory

generate the price variation bills.

Before we dig deep into the supply billing process let us jot down the

enclosures that we must submit with the supply bills. The enclosures with

the supply billing process are as follows:

MICC/CIP

Dispatch Note/Packing List

Guarantee Certificate

Insurance Certificate

Receipted L/R

Invoice Original/ Excise Invoice

MRC Certificate

MRHOV Certificate



FLOW CHART REPRESENTATION OF

SUPPLY BILLS

Approves the bill

&

clears the bill

After material dispatch the bill is

prepared and the following docs

are enclosed( dispatch note+

Insurance Certificate+ Guarantee

Certificate+ Tax Invoice+ Excise

Invoice + MICC + CIP)

After the material reaches the site,

they are unloaded and stacked. Client checks the bills,

annexure and the

Client issues the MRC & MRHOV enclosures and sends the bill/bills

for

Certificate which are enclosed with payment to Regional HQ

the bills along with the LR

Certificates


KEC FactoryKEC Factory

KEC Site OfficeKEC Site Office

KEC H.O.KEC H.O.

Client Site OfficeClient Site Office

Client Regional H.O.Client Regional H.O.


Inefficiencies in the Supply Billing Cycle:

Let us cite some MICC wise bill details from N-97 contract and through

that we can identify the inefficiency.

Contrac

t

No.

Bill No. MICC

No.

E.CIP L.CIP MICC

Date

Bill

Date

Bill

Receivin

g Date

Paymen

t

Realize

d

N-97 1,3 3630

7

2Dec08 24Dec0

8

26Dec0

8

26Dec0

8

28Dec0

8

19Feb0

9

5,6 3690

5

18Dec08 15Jan0

9

31Jan09 31Jan0

9

02Feb0

9

28feb0

9

8,9 3705

7

18Dec08 25Jan0

9

06Feb0

9

13Feb0

9

15Feb0

9

27Feb0

9

28,29 3735

8

18Dec08 06Feb0

9

23Feb0

9

28Mar0

9

30Mar0

9

31Mar0

9

19,20 3754

0

18Dec08 23Feb0

9

03Mar0

9

25Mar0

9

27Mar0

9

30Mar0

9

30,31,32 3811

3

14th Jan

09

06Mar0

9

24Mar0

9

25Mar0

9

28Mar0

9

31Mar0

9

From the above table we have categorized the total billing cycle in five

stages. The first stage is the period between the date at which the first

CIP was issued and the last CIP was issued under a particular MICC. The

second stage is the period between the last CIP issued and the date on



which the MICC certificate was issued. The third stage represents the

period between the date on which MICC was issued and the Bill was

raised. Though at the site the date of receiving the bill is not registered

but on an average it has been assumed that the bill takes two days to

reach the site after being dispatched from the factory. The fourth stage

depicts the proportion of time that the bills take in reaching the site from

the factory. The fifth stage is the payment realized stage, i.e. payment

received by the company.

Some Major Questions Unanswered:

Looking at the above table one can observe that the total time

between the date of issuance of the last CIP and the date of

issuance of MICC certificates are 16, 13, 17, 8, 18 days respectively.

Technically the client should be issuing the MICC certificate on the

same day or within one or two day from the date of issuance of CIP.

Again the period between the day on which the first CIP under that

particular MICC was issued and the day on which the last CIP was

issued is a major area of concern. For example as per MICC No.



2009-3118 and MICC No. 2009-37358 the stage 1 seems to be 50

days. If we look at the following pie charts

As per MICC No. 2009-38113

Stage 1 seems to be the most extended one. In case of MICC No.38113

stage 1 seems to be a staggering 50 days or 68% of the total 75 days. In

case of MICC No. 37358, the number of days between the first CIP and the

last CIP is 50 days or 49 % of the total cycle time.



As per MICC No. 2009-37358



Numerical Analysis of Loss as per Supply Bill No: 30 of

N-97 Contract:

Bill Value = Rs.1,81,13,474

Earliest CIP Date= 23/1/09

Latest CIP Date= 6/3/09

MICC Date= 24/3/09

CIP Delayed Time = 42days

MICC Delayed Time = 18 days

Considering that the ideal CIP Date= 30 days and MICC Date = 4 days

And 10% as the rate of interest;

We get interest loss per day = (18113474 * 0.1)/365 = Rs 4963

As there had been an excess time taken to get the last CIP hence loss

incurred = (12*4963) =

Rs 59544

And there had been an excess time taken to get the MICC hence the loss

incurred = (14*4963) =

Rs 69842



So when the two losses are coupled together the opportunity lost =

(59544 + 69842) =

Rs 129386

As we can see that supply forms the biggest portion of the

revenues hence a delay in supply bills has much more

detrimental effect than anticipated.



Erection Bills:

Erection Bills are generated by the site and generally includes heads like

survey, foundation, erection, supply and placement of reinforcement

steel, soil investigation and etc.

Enclosures with the erection bills:

Original Bills & Annexure

Joint Measurement Certificate

Measurement Book

Abstract Book

Payment Advice Note



FLOW CHART FOR ERECTION BILLS

Bill

forwarded to the DGM (1day)

DGM marks

the bill and forwards it to the

manager (3days)

Manager

marks the bill and forwards it to the


Bill is prepared

DGM receives the Bill

Manager receives the bill

Assuming 2 Saturdays&2 Sundays in a billing cycle


site engineer

(2days) Manager receives

Site

engineer checks the bills, the enclosures

& sends the

signed bill to the

manager

(transit time=2 days)

Manager signs the bill &

forwards the bill to

the DGM (2 days)

DGM

approves the bill (2days) + Transit by

Courier or

reserved post ( 2days)

The bills remain in queue(5days)

+ checking the bills and

approving the bills(3days)


Releases the payment

Fin Dept. receives the signed & approved bill

DGM receives the signed bill

Manager receives the signed bill

Site engineer receives the bill

Erection Billing CycleTime = 30days


The Joint Measurement Certificate is the common measurement taken by

the site engineer of the client and the site engineer of KEC. JMCs are

issued after major activities. Once the site JMC is obtained then it is

approved by the head of the department, in most cases the DGM and

countered signed by the authorized signatory of KEC.

All the measurements approved by the client are then filled in a

measurement book.

Measurement books are filled once a month and the quantities are

updated each month and the cumulative quantity is added monitored.

Measurement books can run into pages as all the items in the bills have to

be filled in since the starting of the project. For example, even if there is

no work under foundation head in a particular month and the same item

has been done and noted in any of the previous month hence the up to

date quantity under the foundation head has to be entered in the

Measurement Book.

As measurement books are generally lengthy and runs into pages hence a

synopsis of the measurement book is prepared which is known as abstract

book.

Both measurement books and abstract books are client’s document but

are generally filled up by the contractor’s representative and then verified

and approved by the client.

But the quantity mentioned in measurement books and abstract books

are sometimes with held for certain reasons, or their might be some error

in the calculation by the KEC personnel or incase the quantity exceeds the

quantity mentioned in the LOA and therefore the client manager restricts

the with held or restricted quantity and issues a payment advice note for

the finance department.



All the enclosed documents are absolute mandatory documents to be

enclosed with the erection bills.

Marking Process:

As shown in the flow chart after the bill is prepared it is initially sent to the

DGM of the client who then marks the name of the manager who would

look in to the bill and assign the name of the site engineer. Once the

manager receives the bill from the DGM, he marks the name of the

engineer on the bill and forwards it to the respective engineer. The site

engineer on the client side receives the bill, checks it alongside the

enclosures. After verifying he signs and approves the bill and forwards it

to the manager. The manager again rechecks the bill and the enclosures

and after his approval the bill reaches the DGM. After getting approval

from the DGM then only the bills are forwarded to the finance department

for the approval and payment process. This entire marking and the

reverse marking process on an average eats up around 15-16 days which

should have been ideally been completed within 4-5 days.

But as this is a client system hence this process is more of a compliance

issue.

FLOW CHART OF MARKING PROCESS


KECOffice

KECOffice

Client MgrClient MgrClientDGM

ClientDGM

Marking &Forwarding the

Bill (3days)


Bill

Preparation &

Forwarding (1day)

Major Causes of Delay at Site:


Client R.H.QClient R.H.QClient DGMClient DGM Client Mgr.Client Mgr.

Client Site Engg

Client Site Engg

Total No. of days

16

Total No. of days

16

Client R.H.QClient R.H.Q KEC H.OKEC H.O

Marking &Forwarding the

Bill(3days)

Checking Bills, Enclosures, Signing, Forwarding (4days)

Signing the approved

bill(2days)

Signing & Forwarding the

Bill (3days)

Awaited in the queue (5days)

+ Bill Processing (3days)


Delay in obtaining JMC:

Generally the JMC should be signed by the client at the time of

taking measurement but the JMCs are generally signed after

completion of all the works for a particular tower. The major conflict

takes place between the client and the contractor in terms of the

state of the soil strata encountered during excavation for the tower

foundation. This conflict arises as there are different rates for

different types of soil strata. Say, for example in project N-36, the

unit rate of excavation in dry soil is Rs.141 per cum, Rs.195 for Wet

soil, Rs.510 for dry fissured rock and Rs. 1176 for hard rock.

Marking System:

Marking system as mentioned earlier eats up 15-16 days. The DGM,

manager and the site engineer are unavailable for signing and

approving the bills and this causes the main delay in the marking

process.

Abstract Book and Measurement Books do not

reach site at time:

The abstract books and the measurement books seldom reach site

from the client finance department once it has been put up for

approval and payment realization. This problem generally occurs

incase of the Price variation Bills.

Enclosures & Test Reports:



Though there are fewer enclosures with erection bills as compared

to the supply and the boughtout bills, but the client can ask for

various other test reports and documents such as quality plan

documents, metal reconciliation, manufacturer’s test report, test

report of re-bars, test report of cement and etc. If we cannot

produce those documents immediately the billing approval process

gets delayed.

Bill Processing:

When the bills finally reach the finance department for final

checking and approval they are processed in a queued manner. The

person entrusted with the responsibility of checking and approving

the bill might be looking after bills of several companies and hence

the processes the bills in first cum first served manner.

Unavailability of client representative:

It has been one of the major complains from the site billing

personnel that often the signatory authority from the client’s side is

unavailable for signing the crucial documents. This might happen

during the marking process or the reverse marking process.

Quantity Amendment:



Quantity amendment is a major cause of delay in the billing

process. If the quantity of a bill exceeds the quantity mentioned in

the Letter of Award, the contractor usually has to get the quantity

amended. If contractor is not proactive or fail to anticipate quantity

amendment then quantity amendment can also contribute in the

delay of the bill getting approved.

Time extensions:

Say, the completion date of the project is 31-12-2008 and for any

reason the project gets extended for three more months. Unless the

time extension is approved from the client, client can exercise its

right and deduct liquidated damages from the bill quantity. If later

proved that the time extension was due to some delay from on part

of the client, they release the deducted amount but in this process

the working capital gets tied

Deductions in Erection Bills:

Difference due to billed amount and the bill passed.

Error in calculation.

There is a mismatch in the claim and what the client has

approved. For example: while excavating for the tower

foundations we might have claimed wet soil, but the client

site engineer approves the soil strata as dry soil. As the

excavation rate for the wet soil is much higher than the dry

soil hence there is a mismatch in the bill value as per the

client and as per our site engineer.



Brought out bills

Bought-Out bills are raised by our sub-vendors. Tower accessories

like bolts, nuts, spring washers, circuit plates, earthings, sign-plates are

delivered by our sub-vendors and these bills are monitored and controlled

by our head office. After the initial processing they are forwarded to the

site for the final processing and payment realization.

Similar to the supply bills, there are many enclosures to the bought-out

bills. The enclosures with the bought-out bills are:

Original MICC/CIP

Dispatch Note/Packing List

Guarantee Certificate

Insurance Certificate

Receipted L/R

Invoice Original/ Excise Invoice

MR Certificate

MRHOV Certificate



The particulars, and significance of the enclosure on the billing cycle has

been furnished as Annexure-I.

FLOW CHART OF BROUGHTOUT BILLS



Approves the bill & clears the bill

(5days in queue

+3-4 days for bill

processing and

payment)

Sends Bill+ CIP+MICC+ Test

Reports+ Challan + Packing List+ G.

Certificate+ Ins. Certificate+ Tax

Invoice + Excise Invoice(15 days from date of dispatch)

Attaches

Dispatch

Note/Packing List+

Insurance Certificate+

G. Certificate+ Tax

Sends material Invoice + Excise

Invoice+ LR(7 days)

Attaches MRC, MRHOV

Certificates


SUB-VENDORSUB-VENDORKEC H.O.KEC H.O.

KEC Site Office.

KEC Site Office.

Client R. H.Q.Client R. H.Q.


Total Bought-Out Billing cycle

time = 45 days(approximately)

Checks the

bill & annexure and the enclosures

and sends the bill for

payment to Regional HQ(7

In the bought-out billing process as head office is responsible for

procuring the material from the sub-vendors. They place an order to the

sub-vendors already approved by the client. As soon as the material is

prepared or anticipated to be prepared, the sub-vendor generates a call

for inspection through the client’s inspection management system. The

client representative comes and inspects the material and issues an

interim report. This is known as CIP. When materials as per all the CIPs

are prepared and the client have inspected material for all the batches

they issue material inspection and clarification certificate or MICC.

The sub-vendors prepare sends the material along with copies of packing

certificate and dispatches the bill, the guarantee certificate, the insurance

certificate, the invoices the

MICCs, the CIPs, the test reports and all the other enclosures along with

the bills and send the bills to the head office. The head office again

prepares the bills, attaches the guarantee certificate, the insurance

certificates, the tax invoices, LRs, the excise invoice and sends the bills to

the site. Site receives the bills and attaches the MRC and the

MRHOV Certificate and sends them to the site client office. The client

office then processes the bills in a manner similar to that of a supply or

erection bill.


Client Site OfficeClient Site Office


Analysis of Brought-out bills

Let us try to look at some bought-out bills from project N-97.

Bill no. MICC

no.

CIP date MICC

date

Bill

date

Bill

receivin

g date

Paymen

t

realized

date

5 36905 18/12/08 31/1/09 31/1/09 2/2/09 28/2/09

8 37057 18/12/08 6/2/09 13/2/09 15/2/09 27/2/09

19 37540 18/12/08 3/3/09 25/3/09 27/2/09 30/3/09

30 38113 18/12/08 24/3/09 25/3/09 28/3/09 31/3/09

As per MICC No: 37540 the entire billing cycle has been classified into 4

stages. The 1st stage is the period between the date of issuance of CIP

and the date of issuance of MICC. Stage 2 depicts the duration between

the date of issuance of MICC and the date on which the bills were raised.

The third stage is the transit period from the office to the site. And the

final stage is the duration of time taken in processing and approving the

bill.



As per MICC No. 37540

Even as per MICC No. 37540 it is evident that the first stage that is the

stage depicting the duration between the CIP and MICC is the most

prolonged. Even in the supply bills we have seen the same trend of

extended delay in obtaining MICC after CIP.



Price Variation Bills:

Price variation bills are majorly bills to compensate for the increase in

price of steel, cement, zinc, labor and aluminum.

There are three kinds of price variation bills. The supply price variation

bills, the erection price variation bills, and the bought-out price variation

bills.

Price Variation Bills for Concreting:

Price Variation formula for Concerting:

P= P0/100 (20 + 20HSD/HSD0 + 30C/C0 + 20SC/SC0 + 10W/W0)

Price Variation Bills for Reinforced and other steel works:

P= P0/100 (20 + 65IS/IS0 + 10HSD/HSD0 + 05W/W0)

Price Variation formula for Erection (excluding Reinforced and



other steel works and concerting:

P= P0/100 (20 + 22HSD/HSD0 + 58W/W0)

P – Price payable as adjusted in accordance with the above formula

P0 – Price quoted/confirmed

HSD0 – Wholesale price index number for ‘High Speed Diesel Oil’ The

index number is as applicable one month prior to the date of tendering

C0 – Wholesale price index number for Cement

SC0- Wholesale price index number for ‘Structural Clay products’

IS0- Wholesale price index for ‘Iron & St’

Price Variation Formula for Supply Portion:



Transmission line tower using both heavy and light

angles:

P=P0/100 (15 + 18HA/HA0 + 40LA/LA0 + 16Zn/Zn0 +

11W/W0)

Transmission line tower using heavy angles:

P= P0/100 (15 + 58HA/HA0 + 16Zn/Zn0 + 11W/W0)

Transmission line tower using light angles:

P= P0/100 (15 + 58LA/LA0 + 16Zn/Zn0 + 11W/W0)

Transmission line accessories and hardware containing

both aluminium and steel

P= P0/100 (20 + 40Al/Al0 + 5Zn/Zn0 + 20Fe/Fe0 + 15W/W0)

Transmission line accessories and hardware containing

aluminium

P= P0/100 (20 + 65Al/Al0 + 15W/W0)

Transmission line and accessories and hardware containing

steel

P= P0/100 (20 + 58Fe/Fe0 + 7Zn/Zn0 + 15 W/W0)

P - Price payable as adjusted in accordance with the above appropriate formula.

P0 - Price quoted/confirmed.

HA0 - Price of heavy angles (refer notes). This price is as applicable on the first

working day of the month, one month prior to the date of tendering.

LA0 - Price of lighter angles (refer notes). This price is as applicable on the first

working day of the month, one month prior to the date of tendering.



Zn0 - Price of electrolytic high grade zinc (refer notes). , This price is as

applicable on the first working day of the month, one month prior to the date of

tendering.

W0 - All India average consumer price index number for industrial workers, as

published by the Labor Bureau, Ministry of Labor, Govt. of India (Base 1982

=100)

Fe0 - Wholesale price index number for iron and steel (refer notes). This index

number is as applicable on the 1st Saturday of the month, three months prior to

the date of tendering.

So all the price variation are based on this formula which has been

developed by IEEMA in consultation with its member, which are fixed over

the period. The total manufacturing cost was studied along with process.

Then the total inputs which are raw materials, labour, machinery cost,

margin and transportation were found out. Based on that the total

weightage was calculated and further the ratio was developed.

Now if we see the transmission line tower with only light angle is seen we

can say that the cost break in manufacturing of tower is 58% steel, 16%

Zinc, 11% labour contribution and 15% is margin and others expenses.

Any variation in steel, zinc and labour price will be paid by PGCIL, SEB’s

and others. No price variation will be given for the margin factor.

Enclosures with Price Variation Bills:

• Bar Chart details together with bill-wise claim of structures

• Computation with Price variation rates



• A copy each of price circulars referred in the statement such as IEEMA

Bulletins

• Statement bill wise & challan wise dispatch details

• Statement of Computation of Price Variation bills

Major Findings



&Suggestio

ns

FINDINGS

General:

Revenue growth of 43.2% year on year largely due to higher tower

sales.

Operating margins decline 620 bps year on year to 7% due to lower

margins on tower sales business and losses on Forex fluctuation.



Healthy order book worth Rs 47 billion executable within 18 months.

Net profit plummets 47.5% year on year on the back of lower

operating profit and higher interest costs

Management Information System is the major area of concern.

High carrying cost of the finished goods.

Supply Bills:

Total time between the date of issuance of the last CIP and the date

of issuance of MICC certificates is 15 days on an average.

The time period between the day on which the first CIP under that

particular MICC was issued and the day on which the last CIP was

issued is a major area of concern.

Erection bills:

JMC (Joint Material Certificate) issuance is delayed due to the

conflicts arising between client and contactor.



Marking process eats up 15-16 days, due to unavailability of the

DGM, Engineer and Manager for signing and approving the bills.

Billing process delayed due to the unavailability of the test reports

and other documents demanded immediately by the client.

Unavailability of the client’s side representative for signing crucial

documents.

Quantity amendment is a major cause of delay in the billing

process.

Brought-out bills:

Duration between the CIP and MICC generation for a particular

batch is the major area of concern.



Suggestions

An automated system is recommended where in as soon as the last

CIP is done and entered into the system, automatically a call for the

MICC would be generated though the client inspection management

system.

For time extension case, proper documentation (client

correspondence) should be maintained from the beginning of the

project. Every project has to mandatorily keep records of the proper

documentation and this can be properly monitored through internal

control systems. There should be a movement register for the bills

and should be maintained at the site.

After factories dispatches bills to the site it generally takes 2-3 days

for the parcel to each the site. After the bills along with the

enclosures reach the site it takes around 2-3 days for the site

people to compile the challans and the respective LRs before

checking the calculations and the other enclosures. As the bills are

prepared mostly in excel format therefore if they can be mailed to

the site from the factories so that by the time the dispatched

material reaches the site, the site people are ready with all the

challans, LRs, MRCs and the MRHOVs and a proper checklist is done.

For a particular lot when the manufacturing is done inspector is

called upon for the CIP on an average the inspector visit, the

company after 7days of receiving the call. In this case we can give a



call when the 60 % of manufacturing of particular lot is done so that

rest of the manufacturing is done by the time inspector visits the

company thereby reducing the timeframe for which they kept finish

goods at finish yard and also reducing the carrying cost of finished

inventory.

One major problem that the site people face is the unavailability of

Abstract Books and Measurement Books for billing purpose esp. for

PV Billing. However, if the idea of multiple ABs and MBs can be

properly sold to the clients it would increase efficiency in the billing

process. The common belief is that it would become more difficult

to monitor the bills but the client as well as the contractor both

maintains databases of the updated bills in softcopy format hence

in current scenario the recommendation of multiple Abs and MBs

can be pushed forward.

Proper transportation system (i.e. good terms with truck operators),

so that the finished goods are dispatched as soon as possible, so

that the carrying cost of finished inventory is reduced.



SWOT Analysis



Strength:

One of the leading Power transmissions EPC Company in Asia.

Excellent vendor relationships & Volumes based Procurements.

Six Decades of Experience working in all types of terrains, excellent

project management capabilities.

Three tower testing stations- Jabalpur, Jaipur and Vashi. Capable of

tower testing upto 1200 KV.

Dedicated skilled workforce with cross country project execution

capability.

Diversified Portfolio: Transmission Distribution, Telecom and

Railways.



Large capacity for Tower manufacturing & supply with ISO 9001 |

ISO 14001 | OHSAS 18001.

Global footprint with client base spread over 40 countries, with

approximately 50% international projects of Australia, Kenya,

Afghanistan, South Africa etc.

Weakness:

Billing process, deals with lots of paper work, which takes a lot of

time.

Jaipur plant does not have efficient Management Information

System.

Authorities in certain part are very centralized which can be

decentralized to increase the efficiency by reducing the time which

is consumed in communication from one level to another and so on.

High debt capital in the business

Opportunities:

Strong order book gives the growth visibility in long run.

Positive outlook of power transmission sector to drive future order

book (PGCIL targets to spend Rs 120 billion in the year and rest Rs

280 billion in FY11-FY12)



Opportunities in countries where it is not yet present. (Diversified its

presence in 20 Countries).

Likelihood of increased government spending in infrastructure

projects like railways, telecom.

Ease in raw material prices to improve margins

Threats:

Turmoil in World Economy

Delay in Government spending on Power

Volatile Commodity prices (steel, zinc, aluminum, cement)

Volatile US dollar

Liquidity constraints

Fund Shortage likely to impact fresh investments by private sector

Availability of adequate and quality manpower to cater to growth in

business



Bibliography

Book Referred in making of Project Report

Financial Management (M Y Khan, P. K. Jain)

Financial Management (M. R. Agarwal)

Financial Management (Prasanchandra)



Finance and Accounting (Michael Muckian)

Analysis of the data for making the project

N-97 project order files for supply and erection by Power

Grid Corporation of India ltd.

N-97 MICCs, CIPs Challans, Excise Invoice Payment Received

Notes

N-97 Brought-out accessories MICC, CIP, Payment Received

Notes

N-97 Bills (Supply)

Journals and research notes referred in making

of project report

KEC International Annual General Meeting Brochure

KEC International Corporate Presentation

KEC International Co. report By KJMC Institutional Research

KEC International Corporate Report by Reliance money

KEC International Corporate Report by IndiaInfoline

KEC International Corporate Report by Edelweiss Capital

Research

Power transmission Towers –What lies Beneath by Edelweiss

Capital Research



Website referred in making of project report

www.kecrpg.com

www.rpggroup.com

www.rpgcables.com

www.noidapower.com

www.cesc.co.in

www.zensar.com

www.musicworld.in

www.google.co.in

www.valuenotes.com/kecinternational

www.bseindia.com


http://www.bseindia.com/

http://www.valuenotes.com/kecinternational

http://www.google.co.in/

http://www.musicworld.in/

http://www.zensar.com/

http://www.cesc.co.in/

http://www.noidapower.com/

http://www.rpgcables.com/

http://www.rpggroup.com/

http://www.kecrpg.com/


Appendix



Supply Bills: MICC/CIP, Dispatch Note/Packing List, Guarantee

Certificate, Insurance

Certificate, Receipted L/R, Invoice Original/ Excise Invoice, MRC

Certificate, MRHOV

Certificate

Erection Bills: Original Bills & Annexure, Joint Measurement Certificate,

Measurement

Book, Abstract Book, Payment Advice Note

Bought-out Bills: Original MICC/CIP, Dispatch Note/Packing List,

Guarantee

Certificate, Insurance Certificate, Receipted L/R, Invoice Original/ Excise

Invoice, MRC

Certificate, MRHOV Certificate

Supply Bills

Documents Particulars Significance

CIP (Customer

Inspection Point)

Issued by :

Client

Issued at:

Factory

The CIP consist the Call

ID, date, time, LOA No,

contract name,

manufacturer CIP no,

Contractor IC no,

inspection date, name of

contractor and

manufacturer,

The CIP is an interim report

and signifies that client

inspection and satisfaction

with the quality of material.

During billing the client

checks whether the

material was inspected and

approved by the client

inspectors. Missing CIP as



Material Quality Plan and

itemized details.

an

enclosure or any mismatch

of data in the CIP leads to

delay in the payment

process.

MICC (Material

Inspection and

Clearance

Certificate)

Issued by: Client

Issued at:

Factory

Many CIPs constitute a

single MICC. It contains

the LOA No, manufacturer

MICC No, Contract Name,

contractor, and item

description in a tabulated

manner. It also contains a

certificate which bears

the CIP ID, CIP Date, Call

ID, Mfr CIP NO,

Manufacturer and the

issuing authority

MICC signifies that the

material offered had been

inspected, the test

certificates reviewed and

authorized for dispatch as

per the CIPs mentioned.

Any mismatch of

information or absence of

MICC leads to hold up of

the approval of bill.

Dispatch

Note/Packing

list/Challan

Issued by :

Factory

Issued at :

Factory

This document contains

the name and the

address of the consignee,

the name and the

address of the

receiver, the contract

code and the date of the

issue of LOA, name of the

line, mode of dispatch,

the wagon/lorry number,

the Challan number, and

the destination. This

document tabulates the

Dispatch list is the

document containing the

list of documents that we

have dispatched. During

the billing process the

client checks

the materials sent that

have been

mentioned in the dispatch

list with

other enclosures such as

MRC,

MRHOV, MICC, CIPs and



materials

dispatched in an item

wise manner mentioning

the sections,

quality(HT/MS), weight,

number of pieces,

quantity dispatched, CIP

number and Work Order

Number

etc. If the quantity

mentioned

in dispatch list is greater

than the

quantity mentioned in the

CIP and

MICC this indicates we

haven’t inspected the

entire lot of material and

leads to delay in the

payment process.

Insurance

Certificate

Issued by :

Factory

Issued at :

Factory

Contains the transporter

name and

transit policy no., date,

description of goods,

marks and no., quantity

of material, sum insured

for cargo value, basis of

valuation, Bill no and date

and the details of the

journey. This

document ensures that in

case of any damage of

the goods during

transportation the

consignee shall obtain a

cargo survey as per the

terms of the bill of lading

and/or other contract of

affreightment and shall

lodge an immediate claim

This is an assurance that

the client generally

demands from KEC and

hence if this document is

not attached to the final

bill the client

can exercise its right of not

approving the bill.



against the cargo

concerned. Loss or

damage certificate to be

obtained from the

carriers and immediate

notice in writing should

be given to the insurance

company and the

insurance company will

pay against any payable

claim.

Guarantee

Certificate

Issued by :

Factory

Issued at:

Factory

This document contains

the LOA no and date, the

contract code, the bill

numbers to which this

certificate is an enclosure

and an declaration by the

company that in case any

member/parts of the

towers and line material

are found to be defective

in terms of material or

workmanship then the

company will be obligated

to replace such parts

found defective within 12

months of commissioning

of the line sans any

additional cost

Guarantee certificate is a

compulsory enclosure with

the bill as per the contract

document. If not enclosed

with the bill the client can

exercise its right to not

approve the bill.

Tax Invoice

Issued by :

Contains the consignee

address, the consignor

The tax invoice is a

collection of multiple



Factory

Issued at :

Factory

address, invoice no. &

date, contract code &

number, excise invoice

no., and description of

material with qty, price

per unit, amount

consignments and the

client pays according to

this invoice.

Excise

Invoice

Issued by :

Factory

Issued at :

Factory

Consists the Consignee

details, the contract

reference with date,

destination, dispatch note

reference, Date & Time of

removal, Mode of

Transport,

Lorry no, and details of

the material prepared

and transported net the

central excise duty,

education cess,

secondary and higher

secondary education

cess, central sales tax

While dispatching the

material from the factory it

is mandatory to issue an

excise invoice. The client

reimburses the excise duty

as per the excise invoice.

Lorry Receipt

Issued by:

Transporter

Issued at:

Factory

The name and address of

the consignee and the

consignor, the

consignment note as in

consignment no and date,

the source and the

destination of

the consignment, mode

of packing, invoice No.,

Consignor’s sales tax no

The factory is the original

obtains the original LR

from the transporter and

sends to the site for receipt

which the client matches

the quantity of the material

mentioned in the LR

receipt with the details of

the material mentioned in

the dispatch note, packing



and central sales tax no.,

excise gate pass details,

service tax and education

cess, and the description

of

consignment( packages,

the details of the

materials, weights)

list, MRC, MRHOV and in

case of any mismatched

data or missing LR receipt

the client can exercise its

right to with-held the

payment.

MRC (Material

Receipt

Certificate)

Issued by:

Client

Issued at: Site

(after receiving the

material)

MRC consist contract

code, the contract no.,

the consignee address,

bill no., the MRC No., and

a statement of completed

tower parts in tabular

fashion furnishing the

following details like MICC

No. & Date, MICC

Quantity, Dispatch Note

no.,

Excise Invoice no., L/R

No., L/R Date, Excise

Duty, Edu cess, L/R Qty.,

Billable Quantity

Client issues MRHOV based

on the quantity mentioned

in Material Receipt

Certificate

MRHOV (Material

Receipt Hand Over

&

Voucher Certificate)

Issued by:

Client

Location of Store, Name

and address of supplier,

name of work, name &

address of executing

agency, control no., LOA

No. & date, and the

description of material

furnishing the following

Client approves the bill

based on the amount in the

MRHOV

Certificate.



Issued at: Site

(After formal

handling of the

material to the

client)

details: code of material,

description, unit, quantity

received, rejected and

take-instock (for each

HT,MS, B&N), value as

per LOA, Stock Ledger

reference, Mode of

dispatch viz. Carrier

name & RR/GR/LR with

date

Bought-out Bills:

Documents Particulars Issued

By

Issued

At

Significance

CIP Contains Call ID

No., Call date

& time, LOA No.,

Manufacturer

CIP No., Contract

Name,

Contractor IC No.,

Contractor

details, Inspection

date,

Manufacturer

details, Inspection

date, Material

Client Sub-

Contrac

tor

Factory

The CIP is an

interim

report and

signifies

that client

inspection

and

satisfaction

with

the quality of

material.

During

billing the



Quality Plan,

Details of

annexure, Manual

CIP

Details, and

details of total qty

ordered, qty

offered, qty

accepted

in a tabular format

client

checks

whether the

material was

inspected

and

approved by

the

client

inspectors.

Missing CIP

as an

enclosure or

any

mismatch of

data in

the CIP leads

to delay

in the

payment

process.

MICC Contains LOA No.,

Manufacturer

MICC No.,

Contract name,

contractor details,

details of item

inspected, CIP

Details, MICC

Details,

Client Sub-

Contact

or

Factory

The client

certifies

that the

material

offered is

inspected/

test

certificates

reviewed

and



authorized

for

dispatch as

per CIP

details.

Though this

certificate

doesn’t

absolve the

contractor

of his

contractual

responsibiliti

es yet

this

document is

a

mandatory

enclosure

with the bill

for

payment of

billable

items as per

the LOA.

Dispatch

Note/Pac

king List

Contains the

name & address

of

the consignee &

consignor, LOA

No. & date, CST

KEC

HO

KEC

HO

Client

matches the

items

dispatched

mentioned in



No, details of

item materials to

be dispatched

the

packing list

with the

details

furnished in

MRC ,

MRHOV,

CIP, MICC

and

approves the

billed

amount only

if there

is no mis-

match in all

the

documents

Insuranc

e

Certifica

Te

This document

contains Policy

Issuing office,

broker agent,

certificate

number, policy

number, name of

the insured,

details of the

insured, period of

insurance, receipt

details, the

details of the

cargo insured,

KEC

H.O

KEC

H.O

The insurer

agrees to

provide

insurance

against loss

damage

liability or

expense to

the extent

mentioned

in this

document.

Insurance



transshipment

destination,

number of units,

the details of the

L/R copies

(AWB,B/L,C/N No.

and date),packing

details, basis of

valuation(ex-

works + %

escalation), marks

and numbers,

deductibles, mode

of transit, sum

insured, voyage

details(source

and destination),

premium, port

details( source

and destination),

service tax, and

amount payable

certificate

is a

mandatory

enclosure

with the

bill which

hence

mismatch or

missing

insurance

certificate

leads to the

client not

approving

the bill.

Guarantee

Certificate

Contains the

Invoice No. & date

and the name of

the material

KEC

H.O

KEC

H.O

This

document

signifies that

KEC is

guaranteeing

against

the



manufacturin

g

defect for a

period of

12 months

from the

date of

dispatch

Tax

Invoice

This document

contains the

manufacturer’s

name, the buyer’s

name the

consignee’s name,

the

invoice no. &

date, delivery

note

& terms/mode of

payment,

supplier’s ref,

buyer’s order no.

& date, dispatch

document no. &

date, dispatch

through and

destination, and

terms of

delivery,

description of

goods

Supplier Supplier’s

Office

This

document

provides the

information

regarding

the taxes

payable like

excise duty,

excise

duty cess,

higher

education

cess, CST

payable,

Freight

Outward.

This

document is

a

compulsory

enclosure

with the bills



dispatched along

with qty, rate

and amount,

company’s VAT

TIN, Company’s

CST No.,

Buyer’s VAT

TIN/Sales Tax no.

and if

found

missing the

client can

exercise its

right of not

approving

the bill.

Excise

Invoice/

Challan

Contains the

name and factory

address and also

the head office

address of the

supplier, the TIN

no, UPTT no., CST

no., the

central excise

registration no.,

name 7 excisable

commodity

tariff no sub

heading no., No. &

dt. Of notification

under which

any concessional

rates of duty

claimed, PLA No.,

the P.O. no &

date, the challan

no., date, and

the description of

Supplie

r

This

document

shows

the client the

calculations

against

UPTT/CST,

and

taxes

payable

against

C-Form,

freight

Charges.



the material

dispatched ( incl.

no. of

packages, total

qty net, total price

of goods, detail of

deductions/

additions,

assessable

value (both per

unit and total),

rate of ED, total

ED paid, serial

no. & date of debit

entry for duty,

consignee CST No,

LR/GR/Truck no.,

Mode of

transportation,

Date & time of

preparation of

challan, date &

time of removal,

LR

Receipt

Contains the

transporter’s

name

& address, the

consignor’s name

& address, the

consignee’s name

and address, the

Transporter Supplier This

document

signifies that

the

materials

have been

transported



consignment

note & code no.,

the booking

branch address &

the code, the

origination and

the destination of

the journey,

person liable to

pay

service tax,

description of

material that have

been

transported, the

weight declared

and the weight

charged, details

regarding the

place of payment

of

the bill, the details

of packing,

private mark,

consignor CST

No., Consignee

CST No., ST

No., Bill No.,

Value, Consignor

value, the lorry

and the

client

generally

matches the

material

list from the

LR

receipt with

other

documents

like

MICC, CIP,

Challan

and etc and

based on

this issues

the MRC

and the

MRHOV

subsequently

.



no.

Material

Receipt

Certificate

MRC consist

contract code, the

contract no., the

consignee

address, bill no.,

the MRC No.,

and a statement

of completed

tower parts in

tabular fashion

furnishing the

following details

like MICC No. &

Date, MICC

Quantity,

Despatch Note

no.,

Excise Invoice no.,

L/R No., L/R

Date, Excise Duty,

Edcess, L/R

Qty., Billable

Quantity

Client Site

(after

receiving

the

material)

Client issues

MRHOV

based on

the quantity

mentioned in

Material

Receipt

Certificate

Material

Receipt

Handling

Over &

Verificat

ion

Location of Store,

Name and

address of

supplier, name of

work, name &

address of

Client SiteA(A

fter

formal

handing

over of

the

Client issues

MRHOV

based on

the quantity

mentioned in

Material



Certifica

Te

executing agency,

control no.,

LOA No. & date,

and the

description of

material

furnishing

the following

details: code of

material,

description, unit,

quantity received,

rejected and

take-in-stock (for

each HT,MS,

B&N), value as per

LOA, Stock

Ledger reference,

Mode of

dispatch viz.

Carrier name &

RR/GR/LR with

date

material

to the

client)

Receipt

Certificate.

Client

approves the

bill

based on the

amount

in the

MRHOV

certificate

Test

Certificate

This document

contains the name

of the supplier,

the title

containing the

name of the

material on which

the test has

Supplier Supplier’s

Factory

This

document

signifies that

the

materials

received at

the site have



been carried out,

LOA no. &

date, CIP

Inspection call

request

no & date, name

of contractor

and contractor’s

P.O., the details

of test reports in a

tabular

fashion, the

limiting values,

the

name and

signature of the

witness from the

client’s side and

the name &

address of the

supplier’s

representative

who

prepared the bill

been

tested by the

subcontracto

r in the

presence of a

client’s

representativ

e. This is

a mandatory

enclosure

and not

attaching the

test

report

violates the

contractual

clauses

hence

attracts

delay

in the billing

procedure.



Erection Bills:

Documents Particulars Issued

By

Issued

At

Significance

Bill &

Annexure

This document

contains the

name & the

address of the

bill approving

official from

the client’s side,

the invoice

no & date, the

project no, the

contract

agreement no and

date, description

of the

billing period, the

gross bill

value, the

retention, the

advance, and the

net payable.

The annexure

contains the

detailed break-up

of the bill

Site

Office

KEC

Site

Office

The bill

contains the

amount of

work

executed and

the total

amount

billed. The

annexure

contains the

detailed

break up of

the bill and is

mainly

for reference

by the

client. The

client

matches this

qty with

the JMC and

based on

this approves

the



and contains the

RA Bill No

& date, the

description of

items billed, the

number of

units, the unit

erection

charges, quantity

(up to

previous month,

during the

month, and up to

date), and

the amount(up to

previous

month, during the

month, and

up to date)

billed

amount.

Joint

Measurement

Certificate

This document

contains the

name of the client,

the

Running Bill no &

date,

name of work,

Agreement/LOA/

Work Order

no. & date,

number & date of

previous bill, date

Site

Office

Counter

signed

by the

Client

This

document

certifies that

the

measurement

recorded in

the JMC

are from such

and

such

Measurement



of

measurement,

Actual date of

completion, the

item no. of

bill of quantity,

description of

work, quantity

executed( up

to date and since

previous),

unit and total

amount( up to

date & since

previous)

Book and also

furnishes the

names

of the client’s

and the

contractor’s

representativ

es. This

document

also

certifies that

quantity

of work

shown in the

JMC has been

executed as

per the

schedules

mentioned

in the

contract and

there is no

outstanding

against

the

contractor.

Failing

to enclose

the JMC

definitely

delays the



bill approval

process

and hence

ties up

working

capital


Improvement of Working Capital Management by Bringing Efficiency in Billing Process

Documents

project duration

project report

course of summer project

scope of financial management

busy kec international

large capital investment

billing processschedule

bidding process