A STUDY ON FINANCIAL STATEMENT ANALYSIS BHARAT HEAVY PLATES &VESSELS LIMITED

A project report submitted in partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY Under The Esteemed Guidance of

Subba Rao Associate Professor

COLLEGE LOGO

COLLEGE NAME
(AFFILIATED TO JNT UNIVERSITY)

(2008-2010)

DECLARATION
I here by solemnly declare that the project report entitled A Study on
FINANCIAL STATEMENT ANALYSIS w.r.t. BHPV LIMITED, Visakhapatnam

submitted by me to the Department of Management Studies, NAME & COLLEGE NAME, affiliated to Andhra University, is a bonafide work done by me in the partial fulfillment for the award of degree of Master of Business Administration and has not been submitted to any other university or published at any time before.
Visakhapatnam Date: NAME

CERTIFICATE
This is to certify that the project report entitled A Study on
FINANCIAL STATEMENT ANALYSIS w.r.t BHPV LIMITED, Visakhapatnam,

being submitted by NAME is a bonafide work done by her in the partial fulfillment for the award of degree of Master of Business Administration, during the period 2008-2010 in COLLEGE NAME under my guidance and supervision.

Visakhapatnam Date: P.V.MOHINI

ACKNOWLEDGEMENT
If words are considered as symbols approval and taken for acknowledgement then they play the role of thanks to exhibit the deep feeling of gratitude. I would like to acknowledge my sincere thanks to Dr P. RAJAGANAPATI, PRINCIPAL, GAYATRI VIDYA PARISHAD COLLEGE FOR DEGREE & P G COURSES, Visakhapatnam, for his encouragement throughout my academic period. I would like to acknowledge my sincere thanks to Prof.S.RAJANI, DIRECTOR, SCHOOL OF MANAGEMENT STUDIES, GAYATRI VIDYA PARISHAD COLLEGE FOR DEGREE & P G COURSES, Visakhapatnam, for her encouragement throughout my academic period. I would like to acknowledge my sincere thanks to Prof.P. PINAKA PANI, HEAD OF THE DEPARTMENT, GAYATRI VIDYA PARISHAD COLLEGE FOR DEGREE & P G COURSES, Visakhapatnam, for his encouragement throughout my academic period. It gives me immense pleasure to express my due thanks to Mrs. P.V.MOHINI, ASSOCIATE PROFESSOR, DEPARTMENT OF MANAGEMENT STUDIES, GAYATRI VIDYA PARISHAD COLLEGE FOR DEGREE & P G COURSES of our college for giving me the opportunity for this project work and for her encouragement and help. Its my pleasure and privilege to acknowledge expressing my deep sense of gratitude to Mr. S.K.MISHRA (HR-Officer) and BHPVLtd for the help & support extended during the course of the project work. My special thanks to my entire correspondent & my family members and my dear friends who cooperated while doing the project without whose support this project would not been in this share.

B.DIVYA

List of Tables

Table. No 5.1 5.2 5.3 5.4 5.5 5.6 5.7

Table Title Current Ratio Quick Ratio Absolute Liquid Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio

Page. No 62 63 65 67 69 71 73

List of Graphs

Graph. No 5.1 5.2 5.3 5.4 5.5 5.6 5.7

Graph Title Current Ratio Quick Ratio Absolute Liquid Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio

Page.no 62 64 66 68 70 72 74

CONTENTS
List of tables List of Graphs
PAGE NO.

CHAPTER-1 INTRODUCTION NEED FOR THE STUDY OBJECTIVES OF THE STUDY METHODOLOGY LIMITATIONS OF THE STUDY

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CHAPTER-2 INDUSTRY PROFILE CHAPTER-3 COMPANY PROFILE CHAPTER-4 THEORETICAL FRAMEWORK OF THE STUDY CHAPTER-5 ANALYSIS & INTERPRETATION OF THE STUDY CHAPTER-6 SUMMARY FINDINGS SUGGESTIONS BIBLIOGRAPHY

6-18

19-36

37-59

46-59

60-64

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CHAPTER-1

INTRODUCTION
Importance of Finance:
Finance is regarded as a life blood of a business enterprise. This is because in the modern money-oriented economy. Finance is one of the basic foundations of all kinds of economic activities. It is the member key which provided access to all the sources for being employed in manufacturing and merchandising activities. It has rightly been said that business needs money to make more money.

Meaning of Business Finance:

In general, Finance may be defined as the provision of money at the time it is wanted. However, as a management function it has a special meaning. Finance function may be defined as the procurement of funds and their effective utilizations. Some of the authoritative definitions are as follows: "Business finance is that business activity which is concerned with the acquisition and concerned of capital funds in meeting financial needs and over all objectives of a business enterprise". "Business Finance can broadly be defined as activity concerned with planning, raising, controlling and administering of the funds used in the business". In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information. The relationship between two accounting figures expressed mathematically, is known as financial ratio. Ratios help to summarize the large quantities of financial data and to make qualitative judgement about the firms financial performance.

NEED FOR THE STUDY 10

The financial statements are mirror which reflects the financial position and operating strength or weakness of the concern. These statements are useful to management. Investors, creditors, bankers, government and public at large. The utility of financial statements to different parties is discussed in detail as follows:

MANAGAMENT:

The financial statements are useful for assessing efficiency for

different cost centers. The management is able to exercise cost control through these statements. The efficient and inefficient spot are brought to the notice of the management. The management is able to decide the course of action to be adopted in future.

CREDITORS:

The trade creditors are to be paid in short period. This liability is met out of

current assets. The creditors will be interested in current solvency of the concern. The calculation of current ratio and liquid ratio will enable the creditors to assess the current financial position of the concern in relation to their debts.

GOVERNMENT:

The financial statements are use to assess tax liability of business

enterprises. The government studies economic situation of the country from these statements. These statements also become a base for framing and amending various laws for the regulation of business.

TRADEASSOCIATION:

These associations provide service and protection to the

members. They may analyze the financial statements for the purpose of providing facilities to these members. They may develop standard ratios and design uniform system of accounts

STOCK EXCHANGES:

The stock exchanges deal in purchase and sale of different

companies. The financial statements enable the stock brokers to judge the financial position of different concerns. The fixation of prices for securities etc, based on these statements.

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OBJECTIVES OF THE STUDY

1.To examine the profitability position of BHPV Ltd. limited through profitability ratios. 2.To indicate the financial performance condition of BHPV Ltd. over the last five years. 3.To make comparison between the ratios during five years.

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METHODOLOGY
Methodology describes the method of achieving the objective through collection of data. The data needed for the study can be categorized into two forms. Primary data Secondary data

Primary data:
Any information that is collected afresh and for the first time is called primary data.The primary data happen to be original in character .The information is gathered from concerned employees.the employees and manager of the financial department have provided the information needed for the study.

Secondary data:
Information which has already been collected by somebody else or someother agency with definite purpose and which has already been processed is called secondary data.The secondary data for the study have been gathered from the balance sheets,profit and loss accounts, annual reports and other books and manuals of the BHPV Ltd.

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LIMITATIONS OF THE STUDY

Every study is conducted under certain limitations. 1. The study relates only to financial data and other areas are not taken into consideration. 2. The study is carried out only for a period of 2 months. 3. It was not possible to get cent percent information. The research was made according to the information available from related departments and through annual reports published.

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CHAPTER-2

INDUSTRY PROFILE
Heavy industry does not have a single fixed meaning as compared to light industry. It can mean production of products which are either heavy in weight or in the processes leading to their production. In general, it is a popular term used within the name of many Japanese and Korean firms, meaning 'construction' for big projects. Example projects include the construction of large buildings, chemical plants, the H-IIA rocket and also includes the production of construction equipment such as cranes and bulldozers. Alternatively, heavy industry projects can be generalized as more capital intensive or as requiring greater or more advanced resources, facilities or management. A section of an economy's secondary industry characterized by capital-intensive and less labor-intensive operations. One way of characterizing heavy industry is that one unit of currency will buy more heavy industry-produced products than it would buy light industryproduced products (for example, more steel can be purchased for $1 than pharmaceuticals). Products made by an economy's heavy industry tend are less likely to be targeted toward end consumers. Steel manufacturing and chemical manufacturing are two types of heavy industries. See also light industry. Heavy industry is often defined by governments and planners in terms of its impacts on the environment. These definitions concentrate on the seriousness of any capital investment required to begin production or of the ecological effect of its associated resource gathering practices and by-products. In these senses, the semiconductor industry is regarded as "heavier" than the consumer electronics industry even though microchips are much more expensive by weight than the products they control. Heavy industry is also sometimes a special designation in local zoning laws.Many pollution control laws are based on heavy industry, since heavy industry is usually blamed for pollution more than any other economic activity

HEAVY INDUSTRY
Heavy Industry in India comprises of the heavy engineering industry, machine tool industry, heavy electrical industry, industrial machinery and auto-industry.These industries provides goods and services for almost all sectors of the economy,including power, rail and road transport. The machine building industry caters the requirements of equipment for basic industries such as steel,non-ferrous metals, fertilizers, refineries,petrochemicals, shipping,paper,cement,sugar,etc.

Industries: Heavy Industries:

India has established a strong and diversified manufacturing base for production of a wide variety of basic and capital goods to meet the requirements of various sectors including heavy electrical, power generation and transmission, process equipment, automobiles, ships, aircrafts, mining, chemicals, petroleum etc. The industrial sector recorded a growth of 9.2 per cent (measured in terms of the Index of Industrial Production) during April-November (2007-08), as compared to growth of 11.6 per cent achieved in the year 2006-07. According to the Index of Industrial Production, capital goods sector posted a growth of 20.8 per cent during April-November (2007-08). The Department of Heavy Industry (DHI) , in the Ministry of Heavy Industries and Public Enterprises, is the nodal authority in India for promoting the growth of the heavy industries. The department is concerned with the development of the heavy engineering industry, machine tool industry, heavy electrical industry, industrial machinery and autoindustry. It deals with 19 industrial sub-sectors, out of which the major ones include:

Boilers:- domestic industry has the capacity to meet the indigenous demand for
boilers. It has the capacity to manufacture boilers with super critical parameters upto 1,000 MW unit size. Bharat Heavy Electricals Limited (BHEL) is the largest manufacturer of boilers in the country accounting for around two-thirds of market share. Expansions are underway to cope up with the country's growth plans.

Cement Machinery:- there are 18 units in the organized sector for the manufacture
of complete cement plant machinery. With an installed capacity of around Rs. 600

crore/annum, the industry is fully capable of meeting the domestic demand. Modern cement plants are designed for zero downtime, high product quality and better output with minimum energy consumed per unit of cement production. The cement plants based on dry processing and pre-calcination technology for capacities upto 7500 TPD are being manufactured in the country.

Dairy Machinery:- there are 16 units in the organized sector, both in private and
public sector, manufacturing dairy machinery equipments such as evaporators, milk refrigerators and storage tanks, milk and cream deodorizers, centrifuges, clarifiers, agitators, homogenisers, spray dryers and heat exchangers.

Electrical Furnace:- are used in metallurgical and engineering industries like

forging and foundry, machine tools, automobiles, etc. Domestically, adequate capacity for production of these products has been established.

Material Handling Equipment:- there are 50 units in the organised sector for
the manufacture of material handling equipment. Besides, there are number of units operating in the small-scale sector. The industry is self sufficient in meeting domestic demand and is also capable of meeting the global competition.

Metallurgical Machinery:- includes equipment for mineral beneficiation, ore

dressing, size reduction, steel plant equipments, foundry equipments and furnaces. Presently, there are 39 units in the organized sector engaged in the manufacture of various types of metallurgical machinery.

Mining Machinery:- majority of the requirement for the mining industry is being
met by the indigenous manufacturers. Presently, there are 32 manufacturers in the organized sector both in public and private sector for underground and surface mining equipment of various types. Out of these, 17 units manufacture underground mining equipment.

Oil Field Equipment:- domestic production covers mainly the on-shore drilling
equipment. Under offshore drilling only offshore platforms and some other technological structures are being produced locally. The major producers of these equipments are BHEL, Hindustan Shipyard, Mazagaon Dock and Larsen & Toubro.

Since the opening up of the petroleum industry in India there is an increase in demand for the oil field and related equipments.

Rubber Machinery:- the range of equipments manufactured in the country

includes inter-mixer, tyre curing presses, tube splicers, bladder curing presses, tyre moulds, tyre building machines, bias cutters, rubber injection moulding machine, bead wires, etc. There are at present 19 units in the organized sector for the manufacture of rubber machinery, mainly required for tyre or tube industry.

Sugar Machinery:- domestic manufacturers occupy predominant position in the

global scenario and are capable of manufacturing from concept to commissioning stage sugar plants of latest design for a capacity upto 10,000 TCD (tons crushing per day). Presently, there are 27 units in the organised sector for the manufacture of complete sugar plants and components with an installed capacity of around Rs.200 crore per annum.

Turbines & Generator sets:- capacity established for the manufacture of various
kinds of turbines such as steam and hydro turbines including industrial turbines is more than 7000 MW per annum. Apart from BHEL which has largest installed capacity, there are units in the private sector engaged in the manufacturing of steam and hydro turbines for power generation and industrial use.

Machine Tools:- domestic industry has established a sound base and there are about
200 machine tool manufacturers in the organized sector, as also around 400 units in the small ancillary sector. It is also in a position to export general purpose and standard machine tools to industrially advanced countries. The machine tools manufactured meet the international standard of quality/precision and reliability. A number of collaborations have also been approved for bringing in the latest technology in this field.

Switchgear and Control Gear:- domestically, the entire range of circuit breakers
including bulk oil, minimum oil, air blast, vacuum, etc are being manufactured. The range of products so produced cover the voltage range of 240V to 800KV and includes switchgear, control gear, air circuit breakers, switches, rewireable fuses and HRC fuses with their respective fuse bases, holders and starters etc. The present size of the

switchgear market is more than Rs.4000 crores. The industry is competitive in the field of design and engineering as the skill sets available in the country are relatively less expensive.

Shunting Locomotives:- for the localized and internal transport facilities are used
in railways, steel plants, thermal power plants, etc. Jhansi Unit of BHEL, among others, is manufacturing such locomotives. BHEL manufactures complete rolling stock i.e. electric locomotives upto 5000 HP, diesel electric locomotives from 350 HP to 3100 HP for both mainline and shunting duty applications. Most of the trains on Indian railways, whether electric or diesel powered are equipped with BHEL's traction with conventional DC drives and state of the art AC drives.

Transformers:- domestic transformers industry is well established with capability

to provide state of art equipments. The industry has the capacity to manufacture whole range of power transformers, distribution transformers as well as special types of transformers for welding, traction and furnaces, etc. Energy efficient transformers with low losses and low noise level are also being developed to meet international requirements.

Textile Machinery:- there are over 600 units engaged in the manufacture of textile
machineries; their components; accessories and spares. Out of these, about 100 units are manufacturing the complete textile machinery. The range includes textile machinery required for sorting, cording, processing of yarns/ fabrics and weaving.

The industries covered by this department provide goods and services for almost all supports the development of a wide range of intermediate engineering products like castings, forgings, diesel engines, industrial gears and gear boxes. The department administers and monitors the performance of 48 Central Public Sector Enterprises (CPSEs) on a regular basis. It acts as a catalyst between these enterprises and other agencies of the Government. It assists them in their effort to improve capacity utilisation, increase profitability, and generate resources. It serves as an interface between PSEs and other agencies for long term policy formulation. It also encourages restructuring of PSEs to make their operations competitive and viable on a long term and sustainable basis. Out of 48 CPSEs under the department, 34 are operating at present and 14 CPSEs are either not in operation or

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have been closed. The total investment (Gross Block) in 34 Operating CPSEs under the department was about Rs. 9589.30 crore as on 31st March, 2007. The CPSEs under the department are engaged in manufacture of engineering or capital goods, consultancy and contracting services. These enterprises produce a wide range of products ranging from machine tools, industrial machinery, boilers, gas or steam or hydro turbines, turbo generators, electrical equipment, railway traction equipment, pressure vessels, AC locomotives, prime movers, agricultural tractors, consumer products such as watches, paper, tyres and salt, etc. The department also maintains a constant dialogue with various industry associations and encourages initiatives for the growth of industry. It assists the industry in achievement of their growth plans through policy initiatives, suitable interventions for restructuring of tariffs and trade, promotion of technological collaboration and up-gradation, and research & development, etc.

Focus on Quality:
Our uncompromising attitude to quality, and our quest for excellence, has ensured that we have grown from modest beginnings into a sizeable operation. Accredited with ISO 9001:2000 and PED certification, we offer complete component like industrial pressure valves, pneumatic pressure valves, gas pressure valves, metal pressure valves, etc., traceability All material is regularly checked and thoroughly approved either in house or by authorised laboratories. And, test results and other documentation are maintained to produce a case history for future reference. The team at Fluid Controls Pvt. Ltd. is a diverse family of engineers, technical experts, and technicians, each with a wealth of experience. Despite the difference in backgrounds and experience, the team has one thing in common Total commitment to client satisfaction: Build long-term partnerships with clients Provide quality service to our clients Deliver products of superior quality

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 Focus on detecting risks and weaknesses Focus on detecting potential for process optimisation for our clients-

Key Clients: India

Some of our reputed clients based across India are as follows: Oil & Gas Industries : Oil and Natural Gas Corporation (ONGC) Indian Oil Corporation Limited Reliance Industries Limited York India Siemens Limited Toyo Larsen & Toubro Gas Authority of India Limited Oil and Natural Gas Corporation Daelim Industrial Co. Ltd Indian Petrochemicals Corporation Limited (IPCL) Punj Lloyd Limited Space/Defence/Nuclear : Bhabha Atomic Research Centre Nuclear Power Corporation of India Limited (NPCIL) Praxair India Indian Space Research Organisation (ISRO) Indcon Projects and Equipment Air Liquide Engineering India Limited Kirloskar Pneumatic Co. Limited John Galt International York India Limited British Oxygen Technimont ICB DMDE

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Metallurgy: Bharat Aluminium Company Limited Jindal Steel Works - Vijaynagar Jindal Steel Works - Hisar Essar Steel Limited Tata Steel Limited Steel Authority of India Limited (SAIL) SMS Demag Pvt. Ltd. Welspun Gujarat Stahl Rohren Mukand Limited Process & Power Industries: Emerson Process Mgmt India Pvt. Ltd. Linde Process Technologies India Ltd. Inox Air Products Limited Lincoln Helios Honeywell Yokogawa Blue Star Limited Forbes Marshall Southern Lubrication Private Limited VA Tech Wabag Bharat Heavy Electricals Ltd. - Hyderabad Bharat Heavy Electricals Ltd. - Hardwar National Thermal Power Corporation (NTPC) Flowserve Sanmar Gujarat Alkalies & Chemicals Limited UT Pumps & Systems VAI Engg & Automation Venu Engineering Services Asea Brown Boveri limited Instrumentation Limited - Kota

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 KSB Pumps Bharat Pumps & Compressors Limited Bharat Heavy Plates & Vessels Limited Chemtrols Engineering Limited Railways Chittaranjan Locomotive Works Diesel Locomotive Works Integral Coach Factory Eastern Railway East Central Railway Southern Railway

Key Clients International

Some of our reputed clients based across the globe are as follows:

EUROPE AND AMERICA Brennan Industries Inc, USA

Econosto BV, The Netherlands Va Tech Wabag, The Netherlands Action Sealtite, UK Amot Controls, UK FTI srl, Italy FP Turbomachinery, The Netherlands Mega Supply scrl, Peru MIDDLE EAST AND AFRICA

CIMAC, Dubai National Petroleum Construction Corp,

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 Abu Dhabi Oman Fertilizer Corporation, Oman Econosto Mid East BV Va Tech Wabag, Muscat Water Development Authority, Oman Eastway Tubes & Fittings, South Africa Alpha MG, Egypt ASIA AND ASIA PACIFIC Nippon Fisher, Japan Able Hydraulics, Singapore Compact Distributors, Singapore South Pacific Viscose, Indonesia Wise Man Automation, The Philippines Shahjeran Resources, Malaysia Key Clients - India Product Portfolio / Application Area

Fittings:
Since its inception in 1974, the key goal of Fluid Controls Pvt. Ltd. has been continuing excellence. With a core team of twelve associates, operations began in Mumbai with the manufacture of pneumatic valves and fittings. Within a short span of time, our focus on quality and our credo of excellence earned us the acclaim of our valued customers. Based on these early successes. Fluid Controls Pvt. Ltd. Commenced manufacturing the range of Double Ferrule Compression Tube Fittings (in Stainless Steel, Brass & Monel) for processing in the oil and gas industries. Designed to meet the stringent standards of BS 4368: Part IV, 1984, the Double Ferrule Fittings are today, the standard for all oil and gas applications. The development of cryogenice in India has also prompted us to develop special fittings for cryogenics and high vacuum applications.

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Valves and Manifolds:

The Company manufacture a wide range of Valves and Manifolds used in conjunction with fittings for specialised applications in instrumentation, oil and gas installations, steam and gas turbibes, low temperature gas and liquid gas systems and fine gas.

Pipe Clamps & Flanges:

We offer a range of Pipe Clamp that provide stability to pipe without any transmission vibration & Flanges to SAE (ISO 6162) and CETOP (ISO 6164) specifications. Specialised instrumentation accessories such as air-distribution Manifolds, seal pots, condensate pots and syphons are also manufactured in division.

Application Area:
Oil & Gas Process Space Defense Nuclear Railways CNG Iron and Steel

Key Client's Registration:

Over the years, we have acquired tremendous success in our sphere of work, which we owe to our range, testing facilities and the facility for 3rd party inspections. During the course of time, we have also acquired key registrations with following: Bharat Dynamics Limited Larsen & Toubro Ltd. National Thermal Power Corporation Naval Science & Technological Laboratory

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 Nuclear Power Corporation of India Limited Oil & Natural Gas Corpn. Ltd. Reliance Industries Limited Research & Development Establishment (Engg.) Research Centre Imarat Steel Authority of India Ltd., Bhilai & Bokaro Tata Honeywell Limited Toyo Engineering India Limited UHDE India Ltd. Bharat Heavy Electricals Ltd. Chittaranjan Locomotive Works Diesel Locomotive Works Dun & Bradstreet Information Services (I) Pvt. Ltd Engineers India Limited Fact Engg & Design Org (FEDO) Gas Turbine Research Establishment Govt. of India (Dept. of Quality Assurance) - DGQA Hindustan Petroleum Corporation Ltd. Indian Farmers Fertilisers Cooperative Ltd. Integral Coach Factory Mecon Limited SAIL-Bhillai

Third Party Inspection:

We also provide the facility of third party inspection of our range to authenticate the quality and performance of our range in the international domain. Various establishments with whom we are associated for these inspections are:

ABS Lloyds Register Nuclear Power Corporation of India Limited Oil & Natural Gas Corpn. Limited

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 PDIL RITES SGS Tata Projects TUV DMDE Establishment BCD Consultants CEIL Chittaranjan Locomotive Works Det Norske Veritas Deutsche Babcock Engineers India Limited IGCAR (Dept. of Atomic Energy) Instrumentation Ltd IRS

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CHAPTER-3

COMPANY PROFILE

Bharat Heavy Plates and Vessels Ltd, Visakhapatnam

Bharat Heavy Plates and Vessels Ltd, it is a public limited company. It is a job order/ shop production industry. According to customer specifications and requirements it produces various products. Fore seeing the countrys need for fabricating equipment of an exclusive factory with the main object of reducing dependence on foreign suppliers and become self sufficient ourselves. Thus the birth of BHPV LTD in the year 1966 to meet the demands of process equipment for core industry like fertilizers, petrochemicals, petroleum and other chemical industries initially. BHPV LTD using different types of materials manufactured and supplied several built equipments such as pressure vessels, heat exchangers, columns, internal trays etc. After executing some important orders, BHPV LTD gained full confidence of customers which cleared the way to enter the line of cryogenic field, pulp cooking plant, evaporation plant and industrial boilers on a total turnkey basis which of later years helped in augmenting turnover of the company and increasing profitability.

INTRODUCTION ABOUT BHPV LTD

In the liberalized economy of India and in the era of globalization a company must rethink its business mission and all functional strategies. In these days companies find themselves competing in a race where the road signs and rules keep on changing. Where there is no finish line, no permanent win. In these days when it was business as usual companies could succeed only by having innovative ideas combined with by effective financial management Therefore, it is not surprising that todays winning companies are those which foresee the future and manage the finance effectively .One can manage finance effectively by managing working capital, capital structure and taking decision on capital budgeting .Ultimately, finance is at its best about value adding, developing new products and raising the worlds standards of living. The heavy engineering industry is a major strength of any economy. These heavy engineering industries which produce capital goods are the most modern of the entire industrial group.

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In India these heavy engineering industries occupy a crucial role in its economic development in view of the huge investment as well as the critical importance to nation. These industries are mostly confined to the public sector only. BHPV Ltd. is the largest fabricator of process equipment in India for the petroleum, chemical and allied industries. It is fully owned by the government of India and is managed by an autonomous board of directors. Situated in the city of destiny of Visakhapatnam on the western see coast of the Deccan plateau, B.H.P.V. Ltd is accessible by road, rail, sea and is well connected to all metropolitan cities by air. M/s. BHARAT HEAVY PLATES AND VESSELS LTD. Vishakapatnam is a public sector undertaking. M/s. BHPV LTD has been selected for the study. The topic selected is A study on the management of working capital with reference to M/s BHPV LTD. Bharat Heavy plates & Vessels Ltd., started off in 1966 as fully owned government company for Design, Manufacture & Supply of capital equipment required for process industries in the core sector such as Fertilizers, oil refineries & Petrochemicals etc. Sri D.Sanjeevayya laid the foundation stone, the then Minister of Industry on 8th Jan 1967 in Visakhapatnam. It comes under the purview of the Department of Heavy Industry, Ministry of Industry. With the technical collaboration of M/s. SKODA Export Company of Czechoslovakia in the year 1968, it got expertise and guidance for establishing the project and for the design & manufacture of various process equipments. BHPV became a fully owned subsidiary of Bharat Heavy Electricals Ltd. Licensed installed capacity is 23210MT. The initial capital outlay is Rs.17.5 crores. The product mix included heat exchangers, columns, and pressure vessels, Storage vessels, piping etc. During the year of it commercial production i.e. 1971-1972 the turnover was just Rs 5 lakhs. Now BHPV has crossed the turnover of 200 crores. Past ten years turnovers are give here: In 1996-97 it has recorded on turnover of Rs 29998 lakhs i.e. all time high. But due to lack of orders in 2003-2004. BHPV has a made turnover is 5956 lakhs only. Fast 10 years turnover are as follows

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YEAR 1997-1998 1998-1999 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

TURNOVER (Rs in lakhs) Rs.29160/Rs.21457/Rs.25670/Rs.23410/Rs.14750/ Rs.5956/Rs.10943/Rs.11967/Rs.18036/Rs.12747/-

HISTORY OF BHPV
Licensed to start construction of plant at Visakhapatnam in 1966, BHPV confronted many obstacles such as water problems, frequent power cuts both at initial stage as well as at the time when construction was going on. In spite of all those obstacles the civil and structural work was completed to a major extent by the end of 31st March, 1967.The licensed and installed capacity is 23210MT.The initial capital outlay being Rs. 17.5 crores. Later after completion of installation work BHPV had received orders for the 1st time from M/S BOKARO steel plant and Fertilizer Corporation of India ltd., for fabrication and supply of equipment. The factory at initial stages had suffered a loss in fabrication and delivery of equipment to customers due to delay in the procurement of required raw material. The factory was scheduled to go into production initially in July, 1967, but due to backlog of some uncompleted construction work the Company went into commercial production only in 1971. Sir K.C.Panth then the Minister of State for steel and heavy engineering inaugurated the initial production in 1970 where some production facilities had already been established by installation of fabricating machinery like bending rolls, welding equipment etc. During the first year production, the company has incurred a loss of Rs 27.47 lakhs mainly due to incidence of fixed expenditure apportion-able to production like establishment,

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depreciation etc. The same loss position was continued till 1978-1979.The continuous losses put BHPV far from profiteering companies. The existence of excessive accumulated interest on loan taken from GOI resulted in heavy loss to the Company. During the first year production, the company has incurred a loss of Rs 27.47 lakhs mainly due to incidence of fixed expenditure apportion-able to production like establishment, depreciation etc. The same loss position was continued till 1978-1979.The continuous losses put BHPV far from profiteering companies. The existence of excessive accumulated interest on loan taken from GOI resulted in heavy loss to the Company. In 1978-1979 the Company had suffered a loss of Rs 538 lakhs due to incidence of delayed delivery of equipment, excessive increase in cost of imported raw materials and other administration costs. In later years the situation was improved through collective and expeditious efforts of employees of the Company.

PROFITEERING YEARS FOR BHPV

After a series of continuous loss years, BHPV for the first fine in its history, in 1979-80 has witnessed several significant events both on financial as well as production fronts. BHPV for the first time in its years of commercial production attained a break-even level with a marginal profit of Rs 33.09 lakhs as against a net loss of Rs 129 lakhs projected at the beginning of the year. During 1980-81 the company for the second consecutive year, earned a net profit (after tax) Rs 48.21 lakhs from its operations. This year BHPV Ltd operations included manufacturing of very critical and sophisticated equipment to core industries. Again in 1981-82 the company operations resulted in a net profit of Rs 60.19 lakhs as against a budgeted loss of Rs 20/- lakhs. Major pending interest on loan from GOI was cleared in this year. During 1982-83 BHPV reached 100% target production and resulted in a net profit of Rs 103.71 lakhs as against the budgeted loss of Rs 95 lakhs. With prestigious work orders from Visakhapatnam steel plant for supply of air and gas separation plants BHPV crossed a target production and its operations resulted in a net profit of Rs 575 lakhs. The year 1986-87 is treated to be the dark year for BHPV. Since its entrance into threshold of profit arena, it could not achieve its set motto of beyond billion barriers. Sinking of

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a ship carrying bulk of raw material and components slackening demand for process equipment etc, resulted in a short fall in production and hence company suffered a loss of Rs 170 lakhs again in 1987-88 BHPVs projects were successfully fabricated and its profits took an upward trend and its operations resulted in PAT of Rs 290 lakhs. It was expected to emerge an increasing trend in the profits of BHPV for the year 1988-89. After 1987-88 profits are in decreasing trend. It got a loss of Rs 590 lakhs during 1995-96. Amidst tight liquidity conditions the company has made a net profit of Rs 1.31 crores(before tax) and Rs 1 crore after tax during 1997-98, Rs 1.23 crores PBT. Details of turnover, profitability for the period from 1996-97 to 2005-06 are as follows

RESASONS FOR SICKNESS OR SUB-OPTIMAL PERFORMANCE Operational Issues

Order Booking: The Company was performing with marginal profits during last ten years due to globalization; the company has been facing problems in normal business operations for last three years due to low order bookings which resulted in to huge losses. However present order book position is improving. Interest Burden on VRS Loans: The Company has been implementing VRS by taking loans from Government of India and 2255 employees were relieved. The company is incurring huge interest burden on these loans, which is severely affecting profitability of company. Financial crisis: The Company has been facing financial crisis, during the last few years. The bank accounts with consortium of banks have become NPAs. In spite of improvement in the present order book, the company couldnt, execute these orders because of liquidity crisis. The bankers are not allowing any kind of operations, which include non-fund based facilities like opening of letter of Credits issues of Bank Guarantees this further worsening the situation of the Company. The company is also not in a position to quote for new orders in certain cases due to non-issuance of Solvency Certificate which is perquisite in pre-bidding stage.

23

 Management Issues AN OVERVIEW OF TOP MANAGEMENT

The company is one of the six subsidiaries of Bharat Yatra Nigam Limited, the Holding Company. At Corporate level the companys affairs are managed by the Board consist of full time Managing Director and CMD, BYNL as the chairman of the board. In addition, 3Ex officio Directors, one Director from DHI (administrative ministry) & 2 Nominated Directors also constitute the Board. Technology & Market Issues: The present plant & machinery & infrastructure utilizing by the company is of 30 years old and have been fully depreciated. Therefore, it needs up gradation to cope up with present technological developments. At present the internal lead time is high when compare to competitors and needs computerization by going in LANS with Centralized control system to reduce the internal lead time. Similarly in the areas of engineering the lead time required for design and drawings is to be reduce which requires implementation of sophisticated process design software. Adverse Market Condition The survival of any company primarily depends on its order book. However, due to Liberalization and globalization, the company faced stiff competition from multinational companies. Lump Sum turnkey (LSTK) Concept adversely affected the companies order book. For quoting for LSTK projects, the company is not eligible despite the capabilities to execute the project in conventional manner.

24

Remedial Action Taken, If Any

Manpower Realization
Implementation of VRS: IN order to reduce the manpower cost, the company has been implementing Voluntary Retirement scheme and 2255 employees have left the company on VSRS. The manpower costs have been substantially reduced from RS 61 crores earlier to RS 30 crores per annum now. How ever, it is still high for the present level of production, which is very low. More over, BHPV is also incurring huge interest burden on loans on account of VRS given earlier, which is severely affecting the profitability of company. Roll back of Retirement age: In the process of manpower restructuring, the company had reduced the retirement age from 60 to 58 years during the year 2001 in order to reduce the manpower cost and to improve operating efficiency.

Product Diversification

The company has undertaken several EPC contracts on EPC/LSTK basis at various locations in India and abroad. The Company R&D Department has developed technology for manufacture of compact Heat Exchange and On Board Oxygen Generating System (OBOGS) for the light Combat Aircraft (LCA) which is being developed indigenously by Aeronautical Development of this technology for the above products indigenously export market for the above products. The in house R&D is capable of developing new techniques and methods in Welding of special materials. by BHPV has made the country self sufficient and also saving in foreign exchange. Therefore, the Company is also expecting

Improvement in Marketing
The steps taken by the management in improving marketing are not sufficient to

meet the present requirements. Therefore, the Regional Offices are to be strengthened to

25

improve the marketing activities and for close monitoring with the Customers for their requirements.

Attempts at Optimization of Resources, Etc. As the order book is low, the capacity utilization is less when compared to the installed capacity; attempts are made to book more orders for effective utilization. Attempts are made to reduce the manpower costs by giving VRS. Attempts are made to reduce consumption of power, water, etc., in order to reduce overhead costs. Attempts are made to develop Compact Heat Exchangers for LCA, by utilizing existing R&D facilities. On 09.05.2008, the company was formally taken over by BHEL, a navaratna PSU, as per the revival scheme sanctioned by GOI.

DRAFT REHABILITION SCHEME

Under preparation for submission to BIFR. Synergy of Business between BHEL and BHPV In addition to improvement in present business of BHPV, the take over by BHEL will have the following advantages: Managerial and marketing support from BHEL. Diversification into High Pressure Power Boilers. Technological Support for new products. Financial Support for up-gradation of manufacturing facilities, Capex and Working Capital Requirements Ensured flow of new orders. Synergy between the two organizations in view of similarity of products/technologies.

26

Business advantage due to excellent Brand Image of BHEL

Factors for revival of BHPV through takeover by BHEL BHEL on its part has worked out the viability of the BHPV takeover, taking into consideration the following: BHEL to enhance the capabilities & capacities of BHPV to build upon its strengths in the existing business of supplying process equipment to sectors like Oil, Petrochemicals, Fertilizers etc. In addition, BHEL plans to enhance BHPVs capabilities & capacities in the area of industrial boilers, heat exchangers, condensers etc. A capital investment of Rs. 235 Crs is envisaged for the up-gradation of required facilities. Expected growth in the market for BHPVs products, especially in process equipment and cryogenics. As per Industry analysis, orders worth Rs. 1700 Crs per annum are expected in the next five years from Oil Refineries and Petrochemical projects to flow to the engineering & fabrication industry. With a market share of BHPV of 15% 18% in the past in this segment, BHPV can become more confident in addressing this market overcoming its financial constraints by participating in some of the tenders with BHEL support. As such, BHPVs financial weakness would be mitigated once its restructuring is completed and BHEL takes over its functioning. The Captive Power Projects (CPP) and Industrial boilers market segment is expected to grow from around Rs. 1800 Crs in 2007-08 to an estimated level of Rs. 2400 crs in next five years based on projected 12 % industrial growth in the coming years. BHPV can target a share of 25% 30% of this market, provided market expectations on delivery and price are fulfilled. Currently, the Trichy unit of BHEL is constrained in targeting the industrial boilers market due to heavy load of boiler orders from the utility segment. In this regard, BHPV can be developed as a dedicated center for industrial boilers by BHEL. The sales turnover from this segment has been projected to reach to level of Rs, 800 Crs by the fifth year after functional take over by BHEL, based on factors like increased volume, better financial capabilities leading to lower working capital borrowing costs etc.

27

BHPV: AN OVERVIEW
1. INTRODUCTION
Incorporation of the Company Primary Objective : 1966 : To manufacture custom built Capital Equipment for the Process Industries such as Fertilizers, Petrochemicals, Petroleum Refineries, Chemicals etc. M/s SKODA EXPORT, Czechoslovakia. 1968 1971 1971 Rs. 17.5 crores Heat Exchangers, columns, Pressure vessels, Technological Structures, Piping etc. 23, 210 M.T.

Technical Collaboration provided by

Commencement of Construction Completion of Construction Commencement of Production Initial Project Cost Initial Product Mix

: : : : :

Installed Capacity Turnover for the year 2006-07 :

Rs. 182 crores

28

2. RESOURCES PRODUCTION FACILTIES

Factory Area Total Covered Area Covered area of Production Shops Power Requirement No. of Ancillary Units : : : : : 197 Acres 90,000 sq. Meters 56,000 sq. Meters 3,000 KW from APSEB 11 Units

IMPORTANT MACHINERY
The factory is provided with comprehensive and modern manufacturing and testing facilities and suitable material handling equipment. The maximum crane lifting capacity is 120 tones, but loads up to 250 tones can be lifted with improvisation Maximum Rolling capacity is 60mm in cold condition and 170mm in hot condition.

BHPV has the largest heat treatment furnace in India, the size being 5.5 meters width, 5.5meters height and 36.5 meters long. One more furnace of 200 Ton capacity and 15mtrs. Bogie length has been added. Other critical equipment available with BHPV are Deep Drawing Hydraulic Press of 1600T capacity.

Single Spindle CNC Deep hole Drilling Machine with Gun Drilling attachment and 2Nos. CNC drilling machines which can employ conventional drills. Another CNC Deep hole drilling machine has been installed recently by HMT. A number of Welding Rotators of capacity up to 250 Tones.

Welding equipment such as manual Arc, Sub merged Arc, TIG, MIG, Plasma including the latest high productive welding equipment such as Twin Head submerged arc welding, and Bi-cathode TIG welding.

29

Tube Fining Machine.

A number of vertical and horizontal boring machines with a maximum capacity of 5 meters dia and 200mm spindle dia respectively. Different types of Non-destruction Testing Equipment. Well equipped Physical and Chemical Laboratories. Metrology section etc. HCL Super-Mini Computer, Two Mini computers 56 CAD Machines and 118 Personal computers.

MANPOWER (As on 31st Mar, 2009)

Workmen / Staff Supervisors Executives Total : : : : 984 129 257 1370

EMPLOYEE WELFARE AMINITIES

Township Area No. of Quarters 20 bed Hospital Protected Water Supply Underground drainage system English medium school with CBSE Syllabus Telugu medium school with AP State Syllabus Special school for mentally handicapped children. Vocational training centre for mentally handicapped 151 Acres 1192

30

Community center for cultural activities & sports open air theatre facilities Kalyana Mandapam

3. DIVERSIFICATION
Originally established for fabrication of process equipment. As a step towards diversification signed collaboration agreement with M/s L Air Liquid Air & Gas separation plants Cryogenic storage systems Further diversified into the area of industrial boilers in the range of 50 200 TPH in

o o

of France in 1971 for manufacture of

collaboration with M/s BHEL in 1981 based on the recommendation of the working group constituted by DHI. Entered into the area of oil & Gas Processing systems in 1990 in collaboration with M/s B.S & B Engg. Co., USA.

4. COLLABORATION AND ABSORPTION OF TECHNOLOGIES

Some of the significant collaborations of BHPV entered include: M/s BSL, France in respect of Field erected Cryogenic Storage Tanks. M/s Delas, France in respect of Defecators. M/s ABB Lummus, Netherlands for Heat Transfer Systems.

Case to case tie ups, BHPV entered into include: Evaporators from M/s Ecodyne Corporation, USA Paper & plus digesters from M/s Kamyr AB, Sweden Gas collection modules from M/s KTO Corporation, USA Large space simulation chamber from M/s HVEC, USA. Primary reformer from M/s Halder Topse, demark Waste heat boiler from Borsig, Germany Feed water heater from delas, France. Argon recovery unit from M/s LAir Liquide, France etc.

31

Hydro cracker reactors from M/s Neo-Pignani, Italy. Vacuum Ejector systems from M/s Korting Hannover, Germany. LPG handling & storage system from M/s Noell-LGA, Germany Ammonia storage system from M/s KTI, Germany etc. By absorbing know-how from various world renowned collaborators, BHPV upgraded its

status from a mere fabricator of process equipment to that of an engineering company of international repute. PROJECTS OF NATIONAL IMPORTANCE EXECUTED/UNDER EXECUTION S.NO. CUSTOMER 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. IOCL, Panipat IOCL, Panipat IOCL, Panipat IOCL, Mumbai IOCL, Chennai PROJECT/EQUIPMENT Hydro cracker reactors-3No.s Reactor, Regenerator & Office Chamber Reformer & WHR Package 150 MT Capacity LPC bullets Sphere

BOKARD STEEL PLANT, Bokaro Argon Recovery unit NRL, Numaligarh HPCL, Visakhapatnam HPCL, VREP II Visakhapatnam HPCL, Visakhapatnam HPCL, Visakhapatnam HPCL, Mumbai BPCL, Mumbai Air Fin coolers/SS Clad Vessels, Spheres etc. CDU Heater with APH System/VDU Heater Clad/CS Columns/CS heat Exchangers etc Co-boiler Revamping of 50TPH oil & gas fired boiler 50 TPH Boiler Nitrogen Plant

Hyundai Heavy Industries, New Cryo Nitrogen plant Delhi Space application centre, 505m Dia thermal vacuus system Ahmedabad TECHNIMONT ICB LTD. Mumbai Nitrogen plant

32

17.

OSWAL CHEMI LTD-Paradeep

FERTILIZER Waste Heat LP boilers

6. CUSTOMER & COMPETITOR PROFILE

MAJOR CUSTOMERS: Fertilizer industry Petroleum refineries Petrochemical complexes Steel plants Chemical industries Power sector Nuclear, Defense & space sectors

MAJOR COMPETITORS Larsen & Turbo GR Engg Lloyd steel } } } for process plants

I.O.L INOX L&T Linda, Germany B.O.C, UK Air products, USA & UK KOBE, Japan Nippon Sanso, Japan HOPM, China PRAXAIR, USA BHEL

} } } } } }

for cryogenics & systems } } }

} }

33

L&T BABCOCK THERMAX } ACC Babcock Ltd.

} }

for industrial boilers

34

7. QUALITY
BHPV is reputed for quality and workmanship of its products. BHPV has received a number of international accreditations such as

LLOYDS REGISTER OF INDUSTRIAL

CLASS I CERTIFICATE FOR FUSION WELDED PRESSURE VESSELS U & U2 STAMPS ON PRESSURE VESSELS S STAMP FOR INDUSTRIAL BOILERS REPAIS OF CODED

ASME ASME

NATIONAL BOARD OF BOILER & R STAMP FOR PRESSURE VESSELS INSPECTORS, VESSELS U.S.A STAMI CARBON UREA REACTORS HALDOR TOPSOE ARBIAN AMERICAN OIL COMPANY

AMMONIA REACTORS AND PRESSURE HEAT EXCHANGERS PROCESS PLANTS

HIGH

As a part of total quality management program, BHPV has acquired ISO 9001

certification during the year 1993-94 particularly to boost up its exports and to be competitive in the international market. Re-certification of ISO 9001 has been obtained in September, 1996. In recognition of high standards of our quality, confederation of Indian industry (CII),

Southern Region, AP presented the Quality Award

8. RESEARCH & DEVELOPMENT

Research & Development department was established in 1975 and is well equipped with high tech equipment to cater to Applies Research and Product Development. R&D has developed 136 Projects so far. Some of the products commercialized include:

35

1. 2. 3. 4. 5. 6. 7.

Titanium Anodes Titanium Air Bottles Cryo Vats Individual Quick Freezing Unit Super Insulated Piping. Super Insulated Cryo Storage tanks D.M. Water Plants A prestigious order for Development of Heat Exchangers for Light Combat Aircraft

(LCA) Phase-II has been received from Aeronautical Development Agency, Bangalore. Some of the Awards received for excellence in R&D include: CIS Award for R&D achievement in 1992-93. The Chelikani Atchuta Rao Memorial Award from FAPCCI for individual achievement in R&D effort in 1996 (Mr. B.S.V. Prasad).

9. ANCILLARISATION
BHPV has developed 11 ancillary industries in its vicinity to cater to its requirements. Apart from offering sufficient work load to these industrial units, BHPV has been assigning work to a number of small sector industries. BHPV provides material, transportation and inspection services to the Ancillaries to help them rise to its quality requirements.

10.

PRESENT STRENGTHS

Excellent Design & Engineering capabilities. State of the Art Manufacturing facilities. Accomplished image as a supplier of Quality Products in domestic and international markets.

High degree of customer confidence. Technological tie-up arrangements. Well trained and qualified work force and Engineers.

36

Sound work culture & harmonious Industrial Relations. Extensive computerization. Capability to supply Projects & Systems on turnkey basis. Project Management Skills.

11. PLANS & STRATEGIES

To grow as an Engineering, Procurement and Construction Company. To enlarge Export Business. To resort to extensive computerization and Automation for reduction of cycle time, improvement of quality and reducing costs. To forge strategic business alliances with International Companies to derive technological and marketing advantages. To strive for continuous updating of technologies to be on par with International Companies. To focus on Human Resources Development. To change the work culture to be compatible with market demands.

12. CONSTRAINTS
Dependence on imports even for common materials like Boiler Quality Plates. Port congestion adding to the delays in importing of materials. Big burden of high internet rates on working capital while competing with Abnormal increase in Bank charges such as commission on Bank Guarantees, Restrictions in shipping imported materials (FOB contracts Vs C&F Contracts) Shortage of Man Power due to V R Scheme several times. Replacement/updating of machinery

International suppliers who have the facility of very low interest rates. retirement of documents etc. resulting in delays.

37

CHAPTER -4

RATIO ANALYSIS
Ratio analysis can be defined as the study and interpretation of relationships between various financial variables, by investors or lenders. It is a quantitative investment technique used for comparing a companys financial performance to the market in general. A change in these ratios helps to bring about a change in the way a company works. It helps to identify areas where the management needs to change.

IMPORTANCE:
Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of financial analysis. It is an important technique of financial analysis. It is a way by which financial stability and health of a concern can be judged. The following are the main points of importance of ratios analysis: Useful in financial position analysis: Accounting ratios reveal the financial position of the concern. This helps the banks, insurance companies and other financial institutions in lending and making investment decisions. . Useful in simplifying accounting figures: Accounting ratios simplify, summarize and systematic the accounting figures in order to make them more understandable an in lucid form. They highlight the inter-relationship which exists between various segments of the business as expressed by accounting statements. Often the figures standing alone cannot help them convey any meaning and ratios help them to relate with other figures . Useful in assessing the operational efficiency: Accounting ratios help to have an idea of the working of a concern. The efficiency of the firm becomes evident when analysis is based on accounting ratios. They diagnose the financial health by evaluating liquidity, solvency, profitability etc. This helps the management to assess financial requirements and the capabilities of various business units. Useful in forecasting purposes: If accounting ratios are calculated for a number of years, then a trend is established. This trend helps in setting up future plans and forecasting. For example, expenses as a percentage of sales can be easily forecasted on the basis of sales and expenses of the past years.

37

Useful in locating the weak spots of the business: Accounting ratios are of great assistance in locating the weak spots in the business even though the overall performance may be efficient. Weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratios. For example, if a firm finds that increase in distribution expenses is more than proportionate to the results expected or achieved, it can take remedial steps to overcome this adverse situation. Useful in comparison of performance: Through accounting ratios comparison can be made between one department of a firm with another of the same firm in order to evaluate the performance of various departments in the firm. Manager is naturally interested in such comparison in order to know the proper and smooth functioning of such departments. Ratios also help him to make any change in the organization structure.

LIMITATIONS OF RATIO ANALYSIS:

Ratio analysis is very important in revealing the financial position and soundness of the business. But, in spite of its advantages, it has some limitations which restrict its use. These limitations should be kept in mind while making use of ratio analysis for interpreting the financial statements. The following are the main limitations of accounting ratios: False results if based on incorrect accounting data: Accounting ratios can be correct only if the data (on which they are based) are correct. Sometimes, the information given in the financial statements is affected but window dressing, i.e., showing position better than what actually is. For example, if inventory values are inflated or depreciation is not charged on fixed assets, not only will one have an optimistic view of profitability of the concern but also of its financial position. So the analyst must always be on the look out for signs of window dressing, if any. No idea of probable happening in future: Ratios are an attempt to make an analysis of the past financial statements; so they are historical documents. Now-a-days keeping in view the complexities of the business, it is important to have an idea of the probable happenings in future.

38

Variations in accounting methods: The two firms results are comparable with the help of accounting ratios only if they follow the same accounting methods or bases. Comparison will become difficult if the two concerns follow the different methods of providing depreciation or valuing stock. Similarly, if the two firms are following two different standards and methods, an analysis by reference to the ratios would be misleading. Moreover, utilization of inbuilt facilities, availability of facilities and scale of operations would affect financial statements of different firms. Comparison of financial statements of such firms by means of ratios is bound to be misleading. Price level changes: Changes in price levels make comparison for various years difficult. For example, the ratios of sales to total assets in 1996 would be much higher than in 1976 due to rising prices, fixed assets being shown at cost and not at market price. Only one method of analysis: Ratio analysis is only a beginning and gives just a fraction of information needed for decision-making. Therefore, to have a comprehensive analysis of financial statements, ratios should be used along with other methods of analysis. No common standard: It is very difficult to lay down a common standard for comparison because circumstances differ from concern and the nature of each industry is different. For example a business with current ratio of more than 2:1 might not be in a position to pay current liabilities in time because of its favorable distribution of current assets in relation to liquidity. Different meanings assigned to the same term: Different terms, in order to calculate ratio may assign different meanings. For example, profit for the purpose of calculating a ratio may be taken as profit before charging interest and tax or profit before tax but after tax and interest. Ignores qualification factors: Accounting ratios are tools of quantitative analysis only. But sometimes qualifications factors may surmount the quantitative aspects. The calculations derived from the ratio analysis under such circumstances may get distorted. For example, though credit may be granted to a customer on the basis of information regarding his financial position, yet the grant of credit ultimately depends on debtors character, honesty, past record and his managerial ability. No use if ratios are worked out for insignificant and unrelated figures: Accounting ratios may be worked for any two insignificant and unrelated figures as ratio of sales and investment

39

in government securities such ratios may be misleading. Ratio should be calculated on the basis of cause and effect is before calculating ratio between two figures.

CLASSIFICATION OF RATIOS:
Ratios may be classified in a number of ways keeping in view the particular purpose. Ratios indicating profitability are calculated on the basis of the balance. This classification is rather crude and unsuitable to determine the profitability and financial position of the business. To achieve this purpose effectively, ratios may be classified as:

PROFITABILITY RATIOS COVERAGE RATIOS TURNOVER RATIOS FINANCIAL RATIOS LEVERAGE RATIOS
These are discussed one by one as follows:

PROFITABILITY RATIOS: Profitability ratios are of

utmost importance for a concern. These ratios are calculated to enlighten the end results of business activities which are the sole criterion of the overall efficiency of a business concern.

GROSS PROFIT RATIO : This ratio tells gross margin on trading and is
calculated as under: Gross profit ratio= gross profit/ net sales*100 The gross profit should be adequate to cover fixed expenses, dividends and building up of reserves. An important factor which will affect the ratio of gross profit to sales is that of the practicing of increasing or reducing the sale price of goods sold by mark-ups and mark-downs. In many industries there is more or less recognized gross profit ratio and experience will indicate whether the ratio of the enterprise being analyzed is not satisfactory.

40

 NET PROFIT RATIO: This ratio is very useful to the proprietors and prospective
investors because it reveals the overall profitability of the concern. This is the ratio of net profit after taxes to net sales and is calculated as follows: Net profit ratio= net profit after tax/ net sales*100 The ratio differs from the operating profit ratio as it is calculated after deducting nonoperating expenses, such as loss on sale of fixed assets etc from operating profit and adding non-operating incomes like interest or dividends on investments, profit on sale of investments or fixed assets to such profit. Higher the ratio gives the idea of improved efficiency of the concern.

OPERATING EXPENSE RATIO: These are calculated to ascertain the relationship that exists between operating expenses and volume of sales. It is calculated as follows: Operating expense ratio= operating expenses/sales *100

PROFITABILITY IN RELATION TO INVESTMENT: RETURN ON ASSETS (ROA): This ratio is calculated to measure the profit after
tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. It is calculated as: Return on assets= net profit after taxes/average total assets*100

RETURN ON CAPITAL EMPLOYED (ROCE): This ratio is an indicator of

the earning capacity of the capital employed in the business. This ratio is calculated as follows; Return on capital employed= earnings before interest and taxes/average capital employed*100

RETURN ON SHAREHOLDERS EQUITY (ROSE): This ratio is a measure

of percentage of net profit to equity shareholders. It is calculated as Return on shareholders equity= net profit after taxes/average shareholders equity*100

41

 EARNINGS PER SHARE (EPS): This helps in determining the market price of
equity shares of the company and in estimating the companys capacity to pay dividend to its equity shareholders. It is calculated as Earnings per share= net profit after tax- preference dividend/ number of equity shares *100

COVERAGE RATIOS: These ratios indicate the extent to which the interests of the
persons entitled to get a fixed return (i.e. interest or dividend) or a scheduled repayment as per agreed terms are safe. The higher the cover, the better it is. Under this category the following ratios are calculated:

FIXED INTEREST COVER: This ratio is very important from lenders point of
view and indicates whether the business would earn sufficient profits to pay periodically the interest charges. It is calculated as Fixed interest cover = net profit after interest and tax/interest charges

FIXED DIVIDEND COVER: This ratio is important for preference shareholders

entitled to get dividend at a fixed rate in priority to other shareholders. It is calculated as follows: Fixed dividend cover = Net profit after interest and tax / preference dividend

TURNOVER RATIOS: These ratios are very important for a concern to judge how well
facilities at the disposal of the concern are being used or to measure the effectiveness with which a concern uses its resources at its disposal. The following are the important turnover ratios usually calculated by a concern. Under this category following ratios are calculated:

TOTAL ASSETS TURNOVER RATIO: This ratio is calculated by dividing the

net sales by the value of total assets. A higher ratio is an indicator of over trading of total assets while a low ratio reveals idle capacity. It is calculated as : Total assets turnover ratio = net sales / total assets

42

 STOCK TURNOVER RATIO: This ratio is also known as inventory turnover

ratio, establishes relationship between cost of goods sold during a given period and the average amount of inventory held during that period. It is calculated as Stock turnover ratio = Cost of goods sold / average stock held during that period.

RECEIVABLES TURNOVER RATIO: This ratio measures the accounts

Receivables in terms of number of days of credit sales during a particular period. This ratio is calculated: Debtor turnover ratio = net credit sales / average debtors The collection period is calculated as: Collection period = 365 days/ debtors turnover ratio.

CREDITORS TURNOVER RATIO: This ratio gives the average credit period
enjoyed from the creditors and is calculated as: Creditors turnover ratio = credit purchases / average accounts payable

FINANCIAL RATIOS: These ratios are calculated to judge the financial position of
the concern from long term as well as short term solvency point of view.

LIQUIDITY RATIOS: These ratios are used to measure the firms ability to meet
short term obligations. They compare short term obligations to short term resources available to meet these obligations. Under this the following ratios are calculated:

CURRENT RATIO: This is the ratio of current assets to current liabilities. It shows a
firms ability to cover its current liabilities with its current assets. It is expressed as follows: Current ratio = current assets/current liabilities

LIQUID RATIO: This is the ratio of liquid assets to liquid liabilities. It shows a firms
ability to meet current liabilities with its most liquid assets. 1:1 ratio is calculated ideal ratio for a concern.

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 ABSOLUTE LIQUIDITY RATIO: In calculating this ratio both receivables and

inventories are excluded from current assets and only absolute liquid assets, such as cash in hand, cash at bank are taken into consideration. Absolute liquidity ratio = cash in hand and at bank+ short term securities/current liabilities

LEVERAGE RATIOS: The following ratios are calculated under this ratio DEBT EQUITY RATIO: This ratio is calculated to measure the relative proportions
of outsiders funds and shareholders funds. It is calculated as follows: Debt equity ratio = total debt/shareholders debt

PROPRIETARY RATIO: A variant of debt to equity ratio is the proprietary ratio

which shows the relationship between shareholders funds and total tangible assets. It is calculated as follows: Proprietary ratio = shareholders fund/total tangible assets

CAPITAL GEARING RATIO: This ratio establishes the relationship between the
fixed interest bearing securities and equity of a company. It is calculated as follows: Capital gearing ratio = fixed interest bearing securities/equity shareholders fund.

44

CHAPTER-5

ANALYSIS AND INTERPRETATION

A ratio is a simple arithmetical expression of the relation ship of one number to another. It may be defined as the indicated co-efficient of two mathematical expressions. The technique of ratio analysis can be employed for ensuring short term liquidity or working capital position of a firm. The following ratios may be calculated for this purpose. 1. Current ratio 2. Acid test ratio 3. Absolute liquid ratio or cash position ratio 4. Inventory turnover ratio 5. Receivables / Debtors turnover ratio 6. Payable / Creditors turnover ratio 7. Working capital turnover ratio

8. Current liabilities to working capital CURRENT RATIO:

Current ratio may be defined as the relation ship between current assets and current liabilities. This ratio is also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm.

CURRENT ASSETS CURRENT RATIO = CURRENT LIABILITIES

46

Table 5.1
Calculation of current ratio of BHPVL from2004-05 to 2008-09 (Rs. In lakhs) YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Current assets 21724.74 24524.40 24895.60 19756.64 23895.29 Current liabilities 31004.72 35399.20 39335.14 32437.50 40713.58 Current ratio 0.70:1 0.69:1 0.63:1 0.60:1 0.59:1

Graph 5.1
Current Ratio 0.72 0.7 0.68 0.66 0.64 0.62 0.6 0.58 0.56 0.54 0.52 2004- 2005- 2006- 2007- 200805 06 07 08 09

Current Ratio

Interpretation: Current ratio is used to analyze the liquidity of a firm. The ideal current ratio is 2:1 i.e. current assets double the current liabilities are considered to be satisfactory. During the fiveyear period the current ratio is not satisfactory. The current ratio was going on decreasing and is below the ideal ratio which indicates that the liquidity position of BHPVL is not satisfactory. The firm was not able to pay its current liabilities.

47

QUICK RATIO:
Quick ratio is also known as Liquid Ratio or Acid Test Ratio. The term liquidity reforms to the ability of a firm to pay its short-term obligation as and when they become due. Quick ratio may be defined as the relation ship between Quick / Liquid assets and Current / Liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss of value.

QUICK ASSETS QUICK RATIO = CURRENT LIABILITIES

QUICK ASSETS = CURRENT ASSETS (INVENTORIES + PREPAID EXPENSES)

Table 5.2
Calculation of quick ratio of BHPVL from 2004-05 to 2008-09 (Rs. In lakhs) YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Current Assets (1) 21724.74 24524.40 24895.60 19756.64 23895.29 Inventory (2) 3398.07 6996.76 5531.49 4550.01 5779.10 QuickAssets (3) = (1-2) 18326.67 17527.64 19364.11 15206.63 18116.19 Current Liabilities 31004.72 35399.20 39355.14 32437.50 40713.58 Quick Ratio 0.59:1 0.50:1 0.49:1 0.46:1 0.44:1

Graph 5.2 48

Quick Ratio 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2004- 2005- 2006- 2007- 200805 06 07 08 09 Quick Ratio

Interpretation: As a convention quick ratio of 1:1 is considered good. The quick ratio is showing a downward trend from the year 2004-05 to 2008-09. This is because of existence of slow paying debtors and increase of current liabilities like interest accrued on loans.

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ABSOLUTE LIQUID RATIO:

Generally debtors and bills receivables are also considered quick assets but yet there may doubts regarding their realization into cash immediately. Absolute liquid assets include cash in hand and cash at bank and marketable securities or temporary investment. The acceptable norms of this ratio are 50% or 0.5:1 or 1:2. This is also called cash ratio.

ABSOLUTE LIQUID ASSETS ABSOLUTE LIQUID RATIO = CURRENT LIABILITIES

ABSOLUTE LIQUID ASSETS = CASH & BANK + SHORT TERM SECURITIES

Table 5.3
Calculation of absolute liquid ratio of BHPVL FROM 2004-05 TO 2008-09 YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Absolute liquid Current liabilities (in Absolute liquid ratio lakhs) 31004.72 35399.20 39335.14 32437.50 40713.58 0.02:1 0.04:1 0.02:1 0.05:1 0.01:1 Assets (in lakhs) 1252.45 921.96 836.67 1465.26 528.55

Graph 5.3 50

Absolute liquid ratio 0.06 0.05 0.04 0.03 0.02 0.01 0 2004- 2005- 2006- 2007- 200805 06 07 08 09
Absolute liquid ratio

Interpretation: The absolute liquid ratio in the year 2007-08 is highest among all. This is because the company is maintaining low levels of absolute liquid assets.

INVENTORY TURNOVER RATIO:

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Every firm has to maintain a certain level of inventory, so as to meet the requirements of the business. But the level of inventory should neither be too high nor too low. Inventory turnover ratio is also known as stock velocity. It would indicate whether inventory has been efficiently used or not.

COST OF GOODS SOLD INVENTORY TURNOVER RATIO = AVERAGE INVENTORY

OPENING INVENTORY+CLOSING INVENTORY AVERAGE INVENTORY = 2

Table 5.4
Calculation of inventory turnover ratio of BHPVL from 2004-05 to 2008-09 YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Cost of goods sold (in Average inventory (in Inventory lakhs) 16798.20 10678.16 11590.52 15114.70 15936.44 lakhs) 6216.41 5197.42 6264.12 5040.75 5164.56 ratio 2.70 2.05 1.85 2.99 3.09 turnover

Invento ry turnover ratio 3.5 3 2.5 2 1.5 1 0.5 0 2004- 2005- 2006- 2007- 200805 06 07 08 09
Inventory turnover ratio

Graph 5.4

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Interpretation: Inventory turnover ratio is recorded highest in the year 2008-09 and lowest in the year 2006-07. The ratio indicates the improper management of inventory which leads to the unnecessary blocking of working capital which is not good for any organization, for which interest is to be paid.

DEBTORS TURNOVER RATIO:

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Debtors turnover ratio indicates the velocity of debt collection of firm. In simple it indicates the number of times average debtors are turned over during a year. Generally the higher the value of debtors turnover the more efficient is the management of debtors / sales or more liquid the debtors. Similarly low debtors turnover implies efficient management of debtors / sales and less liquid debtors.

NET CREDIT ANNUAL SALES DEBTORS TURNOVER RATIO = AVERAGE DEBTORS OPENING DEBTORS + CLOSING DEBTORS AVERAGE DEBTORS= 2

Table 5.5

Calculation of debtors turnover ratio of BHPV Ltd from 2004-05 to 2008-09 YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 SALES 5956 10943 11967 18036 18501 Average debtors 7986.61 6689.81 7295.76 7231.48 8925.46
Debtors turnover ratio

Debtors turnover Ratio 0.75:1 1.64:1 1.64:1 2.49:1 2.07:1

Graph 5.5
3 2.5 2 1.5 1 0.5 0 2004- 2005- 2006- 2007- 200805 06 07 08 09
Debtors turnover ratio

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Interpretation: Debtors turnover ratio is recorded highest in the year 2007-08 and lowest in the year 2004-05. BHPV is able to turnover its debtors 2.07 times in a year.

CREDITORS TURNOVER RATIO:

In the course of business operation a firm has to make credit purchases and in the short term liabilities. The ratio indicates the velocity with which the creditors are turnover in relation

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to purchases. Generally higher the creditors velocity better it is or otherwise lower the creditors velocity less favorable are results. NET CREDIT ANNUAL PURCHASES CREDITORS TURNOVER RATI0= SUNDRY CREDITORS

Table 5.6
Calculation of creditors turnover ratio of BHPVL from 2004-05 to 2008-09 YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Purchases 6618.31 8737.34 3606.76 7759.58 10201.20 Sundry creditors 1775.64 1664.23 1207.26 1111.97 775.44 Creditors turnover Ratio 3.73:1 5.25:1 2.99:1 6.98:1 13.16:1

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Graph 5.6

Creditors turnover ratio 14 12 10 8 6 4 2 0 2004- 2005- 2006- 2007- 200805 06 07 08 09

Creditors turnover ratio

Interpretation: The ratio was recorded highest in 2008-09 and lowest in 2006-07 which is above the limit. The ratio indicates the companys credibility and trust with creditors which are very satisfactory.

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WORKING CAPITAL TURNOVER RATIO:

The working capital turnover ratio indicates the velocity of the utilization of net working capital. The ratio indicates the number of times the working capital is turned over in the course of a year. The ratio measures the efficiency with which the working capital is being used by the firm.

COST OF GOODS SOLD WORKING CAPITAL TURNOVER RATIO= AVERAGE WORKING CAPITAL Table 5.7 Calculation of working capital turnover ratio of BHPVL from 2003-04 to 2007-08 YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 Cost of goods Sold 16202.18 11578.42 11723.72 15272.44 15936.44 Average working Capital -2602.50 -10077.50 -12657.50 -13560.50 -14749.50 Working capital Turnover ratio -6.23:1 -1.15:1 -0.93:1 -1.13:1 -1.08:1

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Graph 5.7

Working capital turnover ratio 0 -1 -2 -3 -4 -5 -6 -7

Working capital turnover ratio

2004-0 2005-0 2006-0 2007-0 2008-0 5 6 7 8 9

Interpretation: The working capital turnover ratio is posing a negative sign over the past five years. BHPVs management of working capital is not satisfactory. There is every need to improve the management of working capital to overcome the deficiencies.

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CHAPTER-6

SUMMARY
The need of the study is the financial statements are mirror which reflects the financial position and operating strength or weakness of the concern.The objective of the study is to examine the profitability position of through profitability ratios,to indicate the financial performance condition of BHPV Ltd over the last five years. Heavy industry is often defined by governments and planners in terms of its impacts on the environment.heavy industry in India comprises of heavy engineering industry,machine tool industry,heavy electrical industry,industrial machinery and auto industry. BHPV Ltd is a public limited company.It is a shop production industry.It is the largest fabricator of process equipment in India for the petroleum,chemical and allied industries.It is managed by an autonomous board of directors.BHPV Ltd started off in 1966. The company could not achieve profits due to increase in cost of production and reduction in the order booking, which resulted in low productivity and consequent loss. However, there is an improvement in order booking from 2004-05 and production also improved from 2005-06. However there are some bottlenecks in achieving the targeted production the main hurdle being lack of working capital. As receivables from the customers dwindled the bank accounts have become NPA (Non Performing Assets). The company is unable to procure materials in time resulting in delay in executing of jobs and levy of LD / Penalty by the customers. The company is forced to approach the customers for procurement of materials etc. The customers are directly issuing cheques in favor of suppliers and charging exorbitant interest on the advances which is causing heavy interest burden and loss credibility of the company. As the company failed to pay salaries, the company received salary support from Government of India in the form of loan, which carries high rate of interest. As it has caused accumulation of interest accrued but not paid, the liabilities swelled and the working capital has become negative and all the ratios vitiated.

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The current assets to total assets ratio is quite high which shows that the profitability of the firm is very poor. This is due to greater investment in current assets, which do not earn any returns. In the past five years the current ratio never reached an ideal ratio of 2:1, which is due to poor credit policy and inefficiency in current assets management. The ideal quick ratio of 1:1 was never achieved during the past five years. The fluctuations in this ratio were due to slow collection from debtors or delay in the debtors or delay in debtors collection period. A high inventory turnover ratio indicates good liquidity position. Procurement of inventory in excess of requirement in some cases and non-availability in respect of other materials due to non-clearance of imported materials in time from ports is resulting in payment of damage charges and causing delays and stoppage of production. BHPV Ltd has to relay on imports for critical raw material such as plates and tubes. The import content is around 60%. Because of lead-time in imports BHPV has lot of material in transit inventory at any point of time. There is a continuous increase in the debtor turnover ratio during the past five years, which is due to the decrease in debtors collection period (the time lag between credit sales and cash collection). The creditors turnover ratio is increasing over the past five years which is due to increase in the creditors collection period which shows the companys financial incapability to pay off debts in time due to lack of working capital. BHPV Ltd raises bills at periodic intervals for the work done at the site depending on the original mile stores identified. However the company recognizes income using the percentage completion method for the work done at sites, which results in accumulation of accrued income. BHPV Ltd raises claims with customers for the extra work done. However customers delay the payment because they would be claiming liquidated damages from BHPV.

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FINDINGS
The company could achieve a marginal profit in 2000-01 and 2001-02, but the company incurred a heavy loss of Rs 187.63 crores in 2002-03 as the order inflow was low due to various reasons resulting in lower productivity and consequent loss. No new projects have come up Non materialization of anticipated expansion programs of oil refineries. However, there is improvement in order booking from 2004-05 and production also improved from 2005-06. However there are some bottlenecks in achieving the targeted production the main hurdle being lack of working capital. As receivables from the customers dwindled most of the bank accounts have become NPA (Non Performing Assets). The company is unable to procure materials in time resulting in delay in execution of jobs and levy of LD/penalty by the customers. The company is forced to approach the customers for procurement of materials etc. The customers are directly issuing cheques in favour of the suppliers and charging exorbitant interest on the advances which is causing heavy interest burden and loss credibility of the company. As the company failed to pay salaries, the company received salary support from Government of India in the form of loan which carries high rate of interest (normal rate of interest :14.5% - 15.5%, and penal rate of interest 17.25% 18.25%). As it has caused accumulation of interest accrued but not plaid, the liabilities swelled and the working capital has become negative and all the ratios vitiated. The current assets to total assets ratio is quite high which shows that the profitability of firm is very poor. This is due to greater investment in current assets, which do not earn any returns. In the past five years the current ratio never reached an ideal ratio of 2:1 which is due to poor credit policy and inefficiency in current assets management. The ideal quick ratio of 1:1 was never achieved during the last 4 years. The fluctuations in this ratio were due to slow collection from debtors or delay in the debtors collection period. A high inventory turnover ratio indicates good liquidity position. Procurement of inventory in excess of requirement in some cases and non availability in respect of other

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materials due to non-clearance of imported materials in time from ports is resulting in payment of damage charges and causing delays and stoppage of production. BHPV has to rely on imports for critical raw material such as plates and tubes. The import content is around 60%. Because of lead time in imports .BHPV has lot of material in transit inventory at any point of time There is a continuous decrease in the debtor turnover ratio during the past 4 years

which is due to the increasing trend of debtors collection period (the lag time between credit sales and cash collection). During 2007-08 the debtors turnover period shows an upward trend. The final installment of the payment it is supposed to receive from the customers is received only after the equipment supplied is integrated with other process stream which often gets delayed. BHPV raises bills at periodic intervals for the work done at the site depending on the original mile stores identified. However the company recognizes income using the percentage completion method for the work done at sites, which results in accumulation of accrued income. BHPV raises claims with customers for the extra work done. However customers delay the payment because they would be claiming liquidated damages from BHPV. BHPVs net profit was low during the post five years due to decline in sales and the high interest burden. . The cash ratio is far less than the ideal proportion of 5:1 which shows the reason for the firm not being able to meet in short term obligations.

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SUGGESTIONS

1. The marketing department should be thoroughly reorganized for the improvement of order book position. 2. Interest free advances should be collected from the customers. With this the liquidity position improves. The bank accounts will again become operative and working capital position will improve. 3. To put continuous efforts to reduce the level of sundry debtors. Necessary steps are to be taken to reduce the delay in collection by reducing transit time and inspection time of customers before acceptance. 4. The company is implementing Voluntary Retirement Scheme and brought the manpower from 4000 to 1512 (as on 31.03.2009). However an assessment is required as to the optimum requirement of man power and necessary steps should be taken accordingly to the completion of the works within time. 5. The company should introduce cost control systems to avoid wasteful expenditure and identify the areas of cost reduction. 6. Since private competitors also actively participating in execution of job orders, the company may therefore take necessary preventive measures to withstand competition in future by acquiring new technology and also take necessary measures to curtail avoidable and unnecessary expenses to enable the company quote competitive rates. The company should go for diversification of products i.e. exploring the possibility of manufacturing the products, which are in demand now. 7. In order to increase its production and profitability, BHPV has to secure more export orders. The company has to identify new export markets. 8. Due to VRS scheme some skilled workers left the organization which is the reason for the delay of job completion in time. So BHPV has to check the man power as per the requirement and existed at present.

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BIBLIOGRAPHY

1. Books:

I.M.Pandey, Financial Management UBS Publishers,2003 Shashi.K.Gupta & R.K.Sharma, Financial Management Kalyani

Publishers,2008,6th Revised Edition M.Y.Khan & P.K.Jain, Financial Management Tata Mc Graw Hill Edition

Publishers,2008,5th

V.K.Bhalla, Financial management & Policy Anmol Publishers,1997

2. Journals and Magazines

Business World

3. Annual Reports of BHPV 4. Websites

www.bhpv.com

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