A PROJECT STUDY REPORT ON Training Undertaken at Raj.Rajya vidhut Utpadan Nigam Ltd. Comparative Analysis Of Financial Performance Of Two Fiscal Years Submitted in partial fulfilment for the Award of degree of Master of Business Administration Submitted By: - Submitted To: - Manpreet kaur Ms. Nisha Goyal MBA
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A
PROJECT STUDY REPORT
ON
Training Undertaken at
Raj.Rajya vidhut Utpadan Nigam Ltd.
Comparative Analysis Of Financial Performance Of Two
Fiscal Years
Submitted in partial fulfilment for theAward of degree of
Master of Business Administration
Submitted By: - Submitted To: -
Manpreet kaur Ms. Nisha Goyal
MBA 2nd Sem. Assistant Professor
2010-12
ARYA INSTITUTE OF ENGINEERING &TECHNOLOGY
KUKUS, JAIPUR
Preface The underlying aim of the project of summer training as an integral part of M.B.A
program is to give presentation by the students on the issue. The topic of my
project report is “Comparative Analysis of Financial Performance of Two
Fiscal Years” contains complete information about it. Although we have tried our
best to prepare this report an error free report , every effort has been made to
offer the most authenticate position of accuracy.
This report provides an opportunity to students to learn and expand their knowledge that
we evaluate & compare financial position of JVUNL. They would be able to know the
exact reason behind this, methods taken to tackle it and hence take necessary steps for it.
The report also helps the student to devote his/her skill to analyze the problem to suggest
alternative solutions, to evaluate them and to provide feasible recommendations on the
provided data.
ACKNOWLEDGEMENT
I express my sincere thanks to my project guide Ms. Nisha Goyal (Faculty of
MBA) Department for guiding me right from the inception till the successful
completion of the project. I sincerely acknowledge her for extending her valuable
guidance, support for literature, critical reviews of project and the report and above
all the moral support she had provided me with all stages of this project.
I would also like to thank the supporting staff of JVUNL,at for their help and
cooperation throughout the project.
MANPREET KAUR
MBA Third Semester
Table of Contents
1. Executive summary
2. Introduction of industry
3. Industry profile of Raj. Rajya Vidhut Utpadan Nigam
4. Research methodology
a. Title of study
b. Duration of study
c. Objective of study
d. Type of research
e. Scope of study
f. Limitation of study
5. Facts & findings
6. Analysis & interpretation
7. SWOT
8. Conclusion
9. Recommdations &
10. Appendix
11. Bibliography
INDUSTRY PROFILE
The electricity sector in India is predominantly controlled by the Government of
India's public sector undertakings (PSUs). Major PSUs involved in the generation
of electricity include National Thermal Power Corporation (NTPC), Damodar
Valley Corporation (DVC), National Hydroelectric Power Corporation (NHPC)
and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level
corporations, such as Maharashtra State Electricity Board(MSEB), Kerala State
Electricity Board, (KSEB),in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL four
distribution Companies and one controlling body GUVNL, and one generation
company GSEC), are also involved in the generation and intra-state distribution of
electricity. The Power Grid Corporation of India is responsible for the inter-state
transmission of electricity and the development of national grid.
The Ministry of Power is the apex body responsible for the development of
electrical energy in India. This ministry started functioning independently from 2
July 1992; earlier, it was known as the Ministry of Energy. The Union Minister of
Power at present is Sushilkumar Shinde of the Congress Party who took charge of
The area of operation of Ajmer Discom is 1.82Lacs. sq. km. the area of
Jodhpur Discom is equivalent to area of Gujarat (1.96Lacs.sq.km.).The
area of Jodhpur Discom is more than three times of area of Punjab(0.50
Lacs.sq.km.
Jaipur Vidyut Prasaran Nigam limited
JAIPUR VIDYUT VITRAN NIGAM LIMITED(Jaipur Discom) has been established
under the Companies Act,1956 by Govt. of Rajasthan, Jaipur Discom has been
created with the principal object of engaging in the business of distribution and
supply of electricity in 12 districts of Rajasthan, namely Jaipur, Dausa, Alwar,
Bharatpur, Dholpur, Kota, Bundi, Baran, Jhalawar, Sawaimadhopur, Tonk and
Karoli. The area of operation of Jaipur Discom is 72474 sq. km. And the
population in this area is 196 lacs as per 1991 census. The power supply in the
Jaipur Discom is managed by 8 distribution circles i.e. Jaipur City , Jaipur Distt.,
Dausa, Alwar, Bharatpur, Kota , Jhalawar and Sawaimadhopur.
Administrative Structure
Jaipur Discom is managed by the Board of Directors. CMD is controlling day to
day affairs of the company. He is assisted by various Head of Departments at
the corporate level. The field organisation is divided into 8 operation and
maintenance circles. Each circle is further divided into divisions and sub
divisions which are the lowest operational unit. The brief details of the
organisational structure are as under:-
Circles : 8
Divisions : 37
Sub Divisions : 153
Besides O&M setup, the field set up also consists of metering & protection civil
& vigilance etc.
Some of the important information for Jaipur Discom is as under:
-Population Density(Persons/sq.km) 289 165
District 12 32
Employees 15011 35,988
Electrical (As on 31.3.2006) (Tentative)
Total connected load(MW) 5395.856
33kV lines (kms) 8465 31560
33/11 kV S/S (Nos./capacity in MVA) 696/3357 MVA 2366/10332 MVA
Domestic connected load (MW) 1514.46
Agriculture connected load (MW) 1411.91
Mixed Load (MW) 819.43
Industrial connected load(MW) (Ind.
+PWW)1630.86
Domestic electrification 42.46% 46.62%
Organizational Structure of RVPN
Chairman and Managing Director(CMD)
Tech.Assit.-CMD P.S.-CMD Company secratory
Director (Technical)
Zon.C.E (T&C) Jaipur
Zon.C.E (T&C) Jodhpur
Zon.C.E (T&C) Ajmer
Zon.C.E (civil) Jaipur
Chief Engg. (PPM&R)
Chief Engg. Protection
S.E. TCC -1 Jaipur
S.E. TCC-2
S.E. TCC-4 Jodhpur
S.E.
S.E TCC-3 Jaipur
S.E. TCC-3
S.E.
Jaipur Circle
Sr.AO (MPP)
S.E. (400kv) Design
S.E. (Pro.) Jaipur
S.E.(Pro.)
S.E. TCC-2 S.E.
S.E. TCC-3
S.E. S.E.(Pro.)
Chairman and Managing Director(CMD)
P.S.-CMD
Chairman and Managing Director(CMD)
Tech.Assit.-CMD P.S.-CMD Company secratory
Research Methodology
S.E.(I.S.P.)
AO (R.P.C.C)
S.E.( M.I.S.)
Training centre
Chief Eng. (IT-training)
Dy. Chief Eng.(RPPC)
Secratory (Admin.)
Advisor (legal)
Land Acqi. officer
Dy.Director(Head qua.)
Dy.secratory (pension)
Assist.Sec.
Assist. Sec.
Assist.sec. (G.A.D)
A.C.P.
R.O.(G.D.S.)
Title of project:-
Comparative analysisof financial performance of two fiscal years
Objectives
As electricity works as blood in the body of any state. Power is an extremely
important infrastructure for economic development of any state or nation.
So study of agencies which are involved in electricity related functions as
generation, transmission and distribution are very important and rationale enough.
The objective of this study is to study the financial status of such large
organization. In this study the financial performance of year 2009nd 2010 has
been compare to find out the difference between them because being a
government body with duty of transmission of electricity plays a important role in
development, so improvement is essential. So the main concern of this study is to
check out whether the performance of organization has improved or declined
Type of resarch Research
The methodology used is to gain an insight into various dimensions and aspects
of the study so as to determine the feasibility and viability of the project for
granting financial assistance.
In Initial Stage, primary data was be collected through extensive literature study
specific to financial papers to collect relevant information. The books and manuals
of Rajasthan Vidyut Vitran Nigam have formed a part of secondary data along with
many personal discussions and interviews with the people of the organization. It
also includes study of various magazines and journals websites used as a
medium for collection of relevant information. Second Stage involves applying the
knowledge gained and transforming it into real practice by having hands-on
experience. It also includes the study of related procedures – Documentation,
Financial Analysis.
Primary Data-
Primary data is collected through observation method.
Secondary Data
Secondary data is collected through the manuals of organization as
1- Annual Reports Of Accounts.
2- Budget Estimates.
Accept these manuals data is collected from websites of electricity departments.
Scope of the study
The study is concerned with Rajasthan Rajya Vidyut Vitran Nigam ltd. In rajasthan
all electricity generation, transmission and distribution functions are taken care by 5
agencies they are RVPN, RVUN, AVVNL, JVVNL, and JDVVNL.
Among them RVPN is concerned with transmission of generated electricity to all
three Discoms. This organization takes care of transmission and substations . So
this is a very important agency in electricity circulation in state so study on this
agency covers a wide scope –
Overview of electricity industry in India.
Overview of electricity industry in Rajasthan.
Overview of energy department of Rajasthan.
Overview of all five agencies involved in electricity industry of Rajasthan.
Overview of regulation authority i.e. RERC.
Introduction of RVPN as whole.
Deep insight of finance department of RVPN.
Study of financial status of RVPN comprises of various revenue and expenditure
sources.
Study of financial performance of RVPN in 2010.
Study of financial performance of RVPN in 2009.
Comparision between both year’s financial performance Purpose of the
study
Purposes of conducting this kind of study are-
To get work experience in such a big organization
To add up practical knowledge with the theoretical knowledge.
To understand the work practices which are followed in organization.
To get exposure with corporate world.
LIMITATIONS
The Company restricts sharing of important data, as most of the information
is confidential and is not approachable.
Since all the systems in the division remains busy most of the time, there is
limited access to computers during training hours that leads to certain
problems while preparing the report.
Study is not very exhaustive and many concepts cannot be studied due to
time and other constraints.
Senior Officers and Employees though very helpful, are not able to give much of
their time due to their own time constraint
Facts & findings-
RVUN registered healthy growth in revenues of about 48% from 880 crore in year
2008-09.
However, the company faced loss of 767 crore at operating level primarily due to
Significant increase in employee costs on implementation of the sixth pay
commission recommendations and actuarial valuation undertaken in 2009 to
comply with AS-15 issued by ICAI. Loss for the year was 719 crore.
RVUN has filed a petition with RERC for reimbursement of additional employee
costs incurred in FY2009.Total debt increased from 3,503 crore in FY2008 to
4,570 crore in FY2009.
Gearing levels were high at 7.8 times in FY2009 on account of reduced networth
due to losses in the year.
Current assets include 690.8 crore (FY2009) of grants and subsidy receivable
from GoR (`691.4 crore – FY2008). Current ratio declined from 0.95 in FY2008 to
0.65 in FY2009 mainly due to increase in pension liabilities post actuarial valuation
and implementation of 6th pay commission.
Along that T&D and wheeling losses are main cause of losses .Electric power
transmission and distribution losses include losses in transmission between
sources of supply and points of distribution and in the distribution to consumers,
including pilferage.
In 2007-08 T&D losses of RVUN were 4.61% and in 2008-09 the losses were
declined to 4.34%. the reason behind decline in the losses is upgrading the
transmission capacity and by establishing new grid station and increasing the
transmission lines.
Along that subsidies provided to agriculture and industries also cause a losses to
RVUN.
So we can say that while the performance of RVUN is improved in 2009 with
comparison of 2008 but till is facing huge losses.
The loan burden has increased on this organizations
Data Analysis
Introduction
Financial performance is a subjective measure of how well a firm can use assets
from its primary mode of business and generate revenues. This term is also used
as a general measure of a firm's overall financial health over a given period of
time, and can be used to compare similar firms across the same industry or to
compare industries or sectors in aggregation.
There are many different ways to measure financial performance, but all
measures should be taken in aggregation. Line items such as revenue from
operations, operating income or cash flow from operations can be used, as well as
total unit sales. Furthermore, the analyst or investor may wish to look deeper into
financial statements and seek out margin growth rates or any declining debt.
In this report the analysis of performance of RVUN is done on the following bases-
1) On the basis of Comparative Balance Sheet.
2) On the basis of Comparative Profit and Loss account.
3) Changes in Working Capital
4) Changes in Revenues and Expenditure.
Accept this the capital structure of RVUN is also described as
1) Share Capital and reserves and surpluses
2) Loan Financing
Rajasthan rajya vidhut utpadan nigam Ltd.
SHEDULE NO 1: SHARE CAPITAL
Particular ACCOUNT CODE
31ST MARCH 2010
31ST MARCH 2009
Authorized Capital 1500000000 equity shares of Rs. 10
15000000000 15000000000
Issued subscribed & paid up 1104000000(939000000) equity share of Rs. 10 each fully paid up & issued (out of this share) issued for consideration other than cash
56400 11040000000
9390000000
TOTAL 11040000000 9390000000
Under the Rajasthan Power Sector Reform Scheme 2009 the government of
Rajasthan has restructured the whole power sector of Rajasthan, So RVPN has
Constituted. For the purpose of providing financial soundness The Government of
Rajasthan has floted share in the market every year. In 2007 and 2008 it was of
amount 10,000,000,000 while in 2009 it was increased to 15,00,000,000 . From this
authorized capital 9,390,000,000 in 2008 and 11,040,000,000 was subscribed. In
2009 it was 73.6% and in 2008 it was 93.9%.
SHEDULE NO. 2 .RESERVE FUND: RESERVE SURPLUS
PARTICULERS 31ST MARCH 2010 31ST MARCH 2009Subsidiary towards cost of capital asset As par last balance sheetLess_trasfer to schedule 3
120303872 120303872
NIL 120303872
Grants towards cost of capital assetAs per last balance sheetLess _transfer schedule 3
177574556 177574556
NIL 177574556
Exchange varrince NIL 2503825Surplus_ net revenue
NIL NIL
TOTAL 300,382,253
NOTE- Till 2008 contributions, grants and subsidies towards cost of capital
assets have not been reduced from the cost of assets, but have been treated as
“capital reserves”. Further, depreciation pertaining to such fixed assets is fully
charged to revenue. Because of this in 2008 there was a capital reserve of Rs.
300,382,253 while in 2009 it was remain nil because grants and subsidies were
not transferred .
Interpretation- Till 2009 except Consumer’s Contribution for deposit works all
grants and subsidies were transferred to Capital Reserve while from 2010in the
absence of details for identification of these grants with specific assets , the
average remaining useful life of such assets is estimated at seven year from
01.04.2009. Consequently the balances appearing in Reserves and surplus being
rs. 29.79 crores is transferred to profit & loss account in seven equal installment
commencing from 2010.
Any grant and subsidy received thereafter shall be recognized in the P&L account
in proportion to the useful life of the assets.
LOAN FUNDS
The capital structure of RVUN is also comprises of Loan funds. RVUN takes
loans from both governments as state and central government. The loan structure
of RVUN is as follows-
RVUN has to follow a long procedure for taking loan. The steps for
approval and sanctioning a loan are as follows-
Secured Loans
Short Term
Long Term
Preparation of scheme and sending letter to bank with Rate of Interest and conditions
Responding letter of bank with terms and condition
Presentation of proposal to board directors(Agenda)
Approval of Board Of Directors
Approval send to Energy Department for issuing concurrence of state govt. and request to FD to move to issue to issue for Government Guarantee in favor of bank on behalf of RVPN
Approval of Government conditions checklist
Counter Guarantee by RVPN with signature of authorized officer
Irrecoverable and unconditional letter of authority for recoveries from P.D A/C of RVPN
Government Guarantee on behalf of RVPN
So, this is the procedure of receiving loan from banks.State and Central
Governments also provides loan to RVUN .
Status of Loan Funs in 2008-09 and 2009-10
Demand Promissory Note
Agreement and Disbursement of Rupees
58%13%
12%
17% LIC
Central Bank of India
Bank Of Ra-jasthan
oriental bank of commerce
50%
25%
25%Bank of Ma-harastraSBBJAllahbad Bank
17%
83%
Long term loansshort term loans
Duration for short term loan is mostly for 2-3 years.
Long term loans are for mostly more than 10 years duration
60
40LICComm. Banks
42%
23%
35% Bank of Ma-harastraSBBJAllahbad Bank
23%
77%
Long term loansShort term loans
Secured long term loan 2010
Secured long term loan 2009
Secured short term loan 2010 Secured short term loan 2009
Secured loan2010 Secured loan 2009
COMPARATIVE ANALYSIS OF FINAL ACCOUNT
Rajasthan rajya vidhut utpadan nigam ltd
Balance sheet at 31st march 2010
Particuler 31st march2010 31st march2009
COMPARED BALANCE SHEET AS AT 31st
MAR.2010
Particulars
31st March, 2010 31st
Mar.2009 Difference %
SO URCES OF
FUNDS
SHAREHOLDERS
FUND
Share Capital 11,040,000,000 9,390,000,000
1,650,000,00
0 17.57%
Reserves and Surplus
Nil 300,382,253
-
300,382,253 -100%
Deffered govt grands 2,081,048,534 1,026,703,235
1,054,345,2
99
102.69
%
LOAN FUNDS
Secured Loans
7,766,695
,404 6,161,314,618
1,605,380,7
86 26.06%
Unsecured Loans 37,930,884,741 28,865,453,871
9,065,430,8
70 31.41%
Total
58,818,628,67
9 45,743,853,977
13,074,774,
702 28.58%
APPLICATION OF
FUNDS
FIXED ASSETS
a) Gross Block 53,267,475,035 44,822,151,998
Less: Accumulated
Depreciatin 17,845,630,972 16,776,933,661
NET BLOCK 35,421,844,063 28,045,218,337 7,376,625,726 26.30%
Capital Works in
Progress 13,196,002,245 6,564,621,230
6,63
1,381,015
101.02
%
Investments 3,447,697 6,628,962 -3,181,265
-
47.99%
CURRENT
ASSETS,LOANS &
ADVANCES
inventories,stores .spe
ars 2,318,327,504 702,834,380
Sundary Debtors 9,648,897,079 9,005,441,031
Interpretation
Shareholder Fund-
In RVUN the shareholders funds comprises of Three elements which
are
1) Share Capital- The share capital of RVUN is provided by Rajasthan Govt. under
the Rajasthan Power Sector Reforms Scheme. In 2009 the share capital has
increase around 18%.
2) In 2009 no reserves and surpluses were maintained. all amount related with
reserves ia transferred to P&L account so reserves have gone 100% negative.
3) In 2009 deferred grants and subsidies have been increased with 102%
4) Loans have also increased in good percentage. The growth in secursd loan was
recorded 26% and in unsecured loans it was 36%.
Application of funds
1) Fixed assets have increased with 27% in 2009 it indicates sufficient investment
in capital works.
2) Current assets have increased with just around 8% which indicates no major
changes in Working Capital.
3) Current liabilities in 2009 have increased with a huge difference of around
97% .
The main part of these liabilities is of employees cost which has increased due to
sixth pay commission.
5) Due to increases in expenditure mainly in employee cost huge losses were
recorded inbalanse sheet . the loss of the fiscal is Rs.7,192,319,630.
RATIO ANALYSIS
To interpret the balance sheet of RVPN following ratios have been calculated
Current Ratio
Liquidity Ratio
Assets turn over ratio
Fixed Assets turn over ratio
Current Assets turn over ratio
Net Profit Ratio
Current Ratio
Current ratio of firm measures it short term solvancy and reflects its ability to meet
short term obligations when they are due. Current Ratio of 2:1 is considered
satisfactory.
If this ratio is higher it is good from the creditors point of view.
2010 2009
Current Assets 22587803745 20895633409
Current Liabilities 19689082842 9947949488
Current Ratio 1.15:1 2.10:1
The current ratio of RVUN in 2009 was 2:1 that is an ideal and satisfactory ratio
but in this year the ratio has become down due to great changes in Current
liabilities.
Liquidity Ratio
Liquidity Ratio is an indication of a firms ability to meet unexpected demand
for working capital.A quick ratio of 1:1 is condsidered as an ideal ratio. A high
liquidity ratio compared to current atio may indicate under-stocking while a low
ratio indicates over stocking
2010 2009
Quick Assets 20,269,476,241 20,192,799,029
Current Liabilities 19689082842 9947949488
Liquidity Ratio 1:1 2:1
The liquidity Ratio of RVPN in 2009 was 2:1 which was not good . it depicts the
over stocking of assets. While in 2010 this ratio has come down to 1:1 that is the
ideal ratio for any firm in coaping with need of working capital.
Total assets turn over ratio
This ratio expresseses the relationship b/w cost of goods sold or net sales
and total assets or investments of a firm.
A high total assets turn over ratio is the indicator of effective utilation of
investment in assets whereas lower assets turn over ratio indicates that assets are
not properly utilised incomparison to sales .
2010 2009
Net sales 10597815083 8766372522
Total assets 58009647808 48940851746
Total Assets Turnover
Ratio
0.18 times 0.18times
In both years the Total Assets Turnover Ratio was 0.18times which is not at the
sufficient level . the main cause of this low ratio is the social concern of RVPN
because it has to sale electricity on very cheaper rates.
Fixed assets turnover ratio
The atio expresses the relationshp b/w fixed assets and net sales . the higher
the ratio,the greater is the intensive utilisation of fixed assets lower ratio means
under utilisation of fixe assets ans accesive investment in these assets.
2010 2009
Net sales 10597815083 8766372522
Fixed Assets 35421844063 28045218337
Fixed Assets Turnover
Ratio
0.30times 0.31times
In both years the Fixed Assets Ratio is also same but it’s again not satisfactory
Current assets turn over ratio
The ratio expresses the relationship between current assets and net sales.
Net profit ratio
2010 2009
Net Sales 10597815083 8766372522
Current Assets 22587803745 20895633409
Current Assets Turnover
Ratio
0.47 times 0.42 times
Net Profit Margin Ratio
The ratio measures the relationsthip between net profit and sales of the firm a high
net profit ratio would only meah addiquete retuens to the owner.
2010 2009
Net Profit -7192319630 8026076
Net Sales 10597815083 8766372522
Net Profit Margin
Ratiossss
-67.87% 0.092%
This ratio is an indication of overall profitability and efficincy of the business RVPN
is going in huge losses in 2010 while in 2009 it was not in losses but there were
no profits at all. This ratio shows the lower performance of the company.
COMPARITIVE PROFIT & LOSS ACCOUNT
S
INCOME
31ST MARCH
2010 2009 DIffrence %
Revenue from sale of Power 1,799,370,728 1,533,796,115 265,574,613 17.31%