Power Grid Corporation of India

Balance Sheet
in Rs . Crore Mar '11 Mar '10 Difference

Sources Of Funds Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

4629.73 0 0 16579.61 0 21209.34 36,325.07 4,557.70 40882.27 62092.11

4208.84 0 0 11585.08 0 15793.72 31,345.78 3,071.01 34416.79 50210.71

420.89 0 0 4994.53 0 5415.62 4,979.29 1,486.69 6,465.48 11,881.40

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

50,343.35 13,127.80 37,215.55 26,633.02 1,365.05 381.51 3,162.09 1,558.89 5,102.49 3,013.74 2,121.17 10,237.40 0 10,485.86 2,875.46 13,361.32 -3,123.92 2.41 62,092.11

43,186.09 11,141.02 32,045.07 20,438.37 1,453.22 344.9 2,214.86 3,277.64 5,837.40 3,494.92 0 9,332.32 0 10,603.54 2,458.29 13,061.83 -3,729.51 3.56 50,210.71

7157.26 1986.78 5,170.48 6,194.65 -88.17 36.61 947.23 -1,718.75 -734.91 -481.18 2,121.17 905.08 0.00 -117.68 417.17 299.49 605.59 -1.15 11,881.40 7,552.63 8.28

35,167.14 27,614.51 45.81 37.53

------------------- in Rs. Profit & Loss account Cr. ------------------Mar '11 Mar '10

Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses

Crore 8,388.70 0 8,388.70 827.04 0 9,215.74 0.03 75.63 1,042.95 182.38 178.94 155.05 -202.76 1,432.22 Mar '11

Crore 7,127.45 0 7,127.45 491.79 0 7,619.24 0.03 68.27 959.26 164.71 185.38 116.57 -169.91 1,324.31 Mar '10

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

6,956.48 7,783.52 1,786.28 5,997.24 2,199.39 1.86 3,795.99 31.26 3,827.25 1,123.25 2,696.89 1,432.19 0 810.23 132.33

5,803.14 6,294.93 1,586.12 4,708.81 1,979.69 1.78 2,727.34 -86.13 2,641.21 595.31 2,040.94 1,324.28 0 631.34 105.67

46,297.25 42,088.41 5.83 4.85 17.5 15 45.81 37.53

FINANCIAL RATIOS Liquidity Ratios Current Ratio Acid Test Ratio Cash Ratio Leverage Ratios Debt/Equity Debt/Assets Interest Coverage Ratio

Mar '11

Mar '10

0.69 0.73 0.38

0.65 0.68 0.42

2.02 0.66 4.35

2.18 0.68 3.96

Turnover Ratios Total Assets Turnover Ratio Inventory Turnover Ratio Debtors Turnover Ratio Profitablity/Valuation Ratios Opearting Profit Margin Gross Profit Margin Net Profit Margin Return on Net Worth Return on Capital Employed

0.13 23.09 3.12

0.81 22.18 3.97

84.07% 57.86% 29.24% 12.62% 8.61%

81.34% 53.57% 26.77% 12.92% 8.58%

Book Value EPS Earning Retention Ratio

45.81 5.83 64.71

37.53 4.85 65.41

FUND FLOW
Short Term Sources Provision Cash and bank balance 417.17 1718.75 Short Term Uses Capital WIP Debtors Fixed Deposit Current liabilities 6194.65 947.23 2121.17 117.68

Unsecured loans Loans and advances For LTS

Total Long Term Sources Equity Reserves Secured loans Investment Acc. Depreciation

1486.69 481.18 5312.4

9416.69

Inventories
Total Long Term Uses Gross Block To STU

36.61
9417.34

420.89 4994.53 4979.29 88.17 1986.78

7157.26 5312.4

Total

12469.7

Total

12469.7

OPERATING CYCLE TIME

Inventory days Add: Debtors collection period (days) Less: Creditors payment period (days) 101.89 116.97 0.00

Operating cycle time (days)

218.86

COST OF CAPITAL
Cost of equity
D (DPS) P (MPS) b (retained earnings) r (return on b) G (Growth rate) Dividend/no. of shares Market price of share (PAT-Dividend)/PAT (PAT- pref dividend)/ Networth b*r 1.75 105.95 0.69 0.13 0.09

Cost of equity (Ke) Cost of debt (assumed)

D/P + G

10.42% 14%

Source

Amount (in crores)

Weights

Pre tax cost

ESC R+S Acc. depreciation

4629.73 16579.61 13,127.80 34337.14 36325.07 70662.21

48.59% 51.41% 100.00%

10.42% 14%

Secured loans Total

Tax rate assumed 30%

Post tax cost Weighted average cost (Weight*Post tax cost)

10.42% 9.80%

5.06% 5.04%

WACC

10.10%

Sr.No
1) 2) 3) 4) 5) 6)

1) 2) 3)

1) Analysis of ratios
The current ratio has increased to 0.69 from 0.65. The main reason for this increase in debtors, fixed deposits and loans and advances. This is not good for the company as majority of the cash is yet to be received which may hamper equity ratio decreased dueobligations. in the ESC and decrease in borrowings via loans. Debt to meeting current liabilities to increase Interest coverage ratio increased to 4.35 indicating reduction in interest payments due to repayment of loans while maintaining profit margin. Fixed asset turnover ratio decreased from last year which shows that company is not properly managing its fixed Debtors turnover decreased which shows that it is taking less time for the company to receive cash for daily Operating profit margin increased drastically due to inrease in rate of per unit of electricity.

2) Analysis of Fund Flow

There has been an increase in the usage of funds especially for current assets- debtors, fixed deposits- and fixed Cash and bank balance have decreased indicating the use of funds which is immediately reflected in increased WIP. The long term usage of funds is less than short term usage indicating a positive working capital which is supplemented by long term sources of funds.

3) Analysis of Operating cycle time

It takes 218.86 days for Power Grid Corporation of India to complete one operating cycle of production. It is mainly due to the collection period that it takes so much time. Reason being increase in sundry debtors.

4) Analysis of Cost of Capital

Power Grid Corporation of India has 48.49% portion equity and 51.51% debt as part of its capital structure. The WACC is 10.10%; this can be lowered if debt portion increases as it can gain tax exemption and subsequently reduce the cost of borrowing. However this should be supplemented with an interest rate lower than the tax

creased WIP.