CERTIFICATE

This is to certify that MR. NEERAJ GUPTA, a student of IMT CDL Ghaziabad has completed project wor on FINANCIAL PERFORMANCE

ANALYSIS OF NTPC under my !uidance and super"ision#

I certify that this is an ori!inal wor and has not been copied from any source#

$i!nature of Guide

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&ame of 'roject Guide

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Date

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SYNOPSIS ON FINANCIAL PERFORMANCE ANALYASIS OF NTPC

(As a partial fulfillment for the award of PGPM Degree under Institute of Management Technolog ! Gha"ia#ad $CD% &''($&')'* Name Enrolment No. Address for Correspondence 'o(!le No. 'ajor area of spec!al!.at!on !n /%!c% project /or0 !s to (e underta0en Neeraj Gupta 0811000921 Tc- 22, NTPC !d"ut Na#ar, Gautam $ud% Na#ar, &adr! , P!n-201008 )91-9***00+2,* )91-99*,2,2111!nance

2esume of Project Gu!de attac%ed 3es P%one No. of Project Gu!de &ate of 4u(m!ss!on

Study Centre:

INSTITUTE OF MANAGEMENT TECHNOLOGY(CDL) GHAZIABAD

PREFACE
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It gives me immense pleasure in presenting my Synopsis of project on, Financial Performance Analysis of National Thermal Power Corporation t!"#" This project will !efine the concept of Financial Performance Analysis in !etail"# It is interesting an! at the same time, challenging also to analy$e the Financial Performance Analysis of such a large organi$ation" This project stu!y contains necessary information relate! to the company vi$" % its journey from the year it was foun!e! to the present year, total capacity, pro!uct profile, mar&et share, sales figure, financial performance through ratio analysis of NTPC"

To err is human ' I hope that I will (e e)cuse! for such errors though an utmost care has (een ta&en (y me to ma&e this Synopsis of project error free"

INTRODUCTION OF FINANCIAL PERFORMANCE ANALYSIS

It has (een sai! that we must measure what we e)pect to manage an! accomplish" *ithout measurement, we have no reference to wor& with an! thus, we ten! to operate in the !ar&" +ne way of esta(lishing references an! managing the financial affairs of an organi$ation is to use ratios" ,atios are simply relationships (etween two financial (alances or financial calculations" These relationships esta(lish our references so we can un!erstan! how well we are performing financially" ,atios also e)ten! our tra!itional way of measuring financial performance- i"e" relying on financial statements" .y applying ratios to a set of financial statements, we can (etter un!erstan! financial performance of company" ,atio analysis with ,eturn on /0uity since this one ratio is at the heart of financial management- namely we want to ma)imi$e returns for the sharehol!ers of the company" Secon!ly, we have three ways of influencing ,eturn on /0uity" *e can change our profit margins, we can change our turnover of assets, or we can change our use of financial leverage" There are several !etail ratios that we can monitor, such as aci! test, inventory turnover, an! !e(t to e0uity" 1etail ratios help us monitor specific financial con!itions, such as li0ui!ity or profita(ility" ,atios are (est use! when compare! or (enchmar&e! against another reference, such as an in!ustry stan!ar! or 2(est in class2 within our in!ustry" This type of comparison helps us esta(lish financial goals an! i!entify pro(lem areas" It shoul! (e note! that ratios !o have limitations" After all, ratios are usually !erive! from financial statements an! financial statements have serious limitations" None%the%less, if we want to analy$e a set of financial statements, ratio analysis is pro(a(ly one of the most popular approaches to un!erstan!ing financial performance"

COMPANY

INTRODUCTION

NTPC imite! 3Formerly National Thermal Power Corporation4 is the largest power generation company in In!ia" For(es 5lo(al 6777 3,an&ing of the * orl!8s (iggest companies4 for 6779 ran&e! it :;<th in the worl!" It is an In!ian pu(lic sector company liste! on the 1elhi an! .om(ay stoc& e)changes although at present the 5overnment of In!ia hol!s =>"?@ 3after !ivestment the sta&e (y In!ian government on ;9 +cto(er 67794 of its e0uity" * ith a current generating capacity of :;;:> A* , NTPC has em(ar&e! on plans to (ecome a <?,777 A* th company (y 67;<" It was foun!e! on < Novem(er , ;9<?" +f the ;= Navratna8s only NTPC t!" met the stiff criteria set (y the government" So that 5overnment of In!ia has i!entifie! NTPC as one of the jewels of Pu(lic sector BAaharatnas8% a potential glo(al giant" It is the only pu(lic sector company in In!ia which is awar!e! (y BAaharatna8 awar! up to ;9th Aay, 67;7" MAHARATNA STATUS TO NTPC: 5overnment of In!ia, 1ept" +f Pu(lic /nterprises, Ainistry of Ceavy In!ustries ' Pu(lic /nterprises vi!e +ffice th Aemoran!um !ate! ;9 Aay, 67;7 has conveye! grant of Aaharatna status to NTPC apart from three other Central Pu(lic Sector /nterprises 3CPS/s4" Since, presently NTPC has re0uisite num(er of non%official 1irectors on its .oar!, therefore, only NTPC is eligi(le to e)ercise !elegate! Aaharatna powers" NTPC after (eing nominate! among Aaharatna# has changes its tagline from Powering In!ia# to Transforming ives#

NTPCs core business is ;" /ngineering, construction an! operation of generating plants power

6" Provi!es consultancy to power utilities in In!ia an! a(roa!" The total installe! capacity of the company is :;;:> A* 3inclu!ing DEs4 with ;? coal (ase! an! < gas (ase! stations, locate! across the country" In a!!ition un!er DEs, : stations are coal (ase! ' another station uses naphthaF N5 as fuel" NTPC has a!opte! a multi%pronge! growth strategy which inclu!es capacity a!!ition through green fiel! projects, e)pansion of e)isting stations, joint ventures, su(si!iaries an! ta&eover of stations" NTPC Co! "#re$ To Res% O& In$i#: NTPC also sustaine! its Aar&et ea!ership position in 6779% ;7" It contri(ute! 6="G@ of total electricity generate! in the country out of a total installe! mar&et share of ;=";7@ "

S'#re o& (ener#%in( c#"#ci%) *#s on +,s% M#rc' -../0

O12ECTI3E OF THE STUDY

4 ') # &in#nci#5 "er&or! #nce #n#5)sis is re6uire$7 4 'en # &in#nci#5 "er&or! #nce #n#5)sis is re6uire$7 4 '#% #re %'e "ur"oses %o be ser8e$ b) un$er%#9in( &in#nci#5 "er&or! #nce #n#5)sis e:ercise H

T'e &in#nci#5 "er&or! #nce #n#5)sis is (ener#55) c#55e$ &or in %'e &o55o;in( circu! s%#nces: ,<0 Financial Performance Analysis through ,atio analysis is one of the most common tools of managerial !ecision ma&ing" -<0 For pu(licly tra!e! companies, the relationship of earnings to e0uity or ,eturn on /0uity is of prime importance since management must provi!e a return for the money investe! (y sharehol!ers" ,eturn on /0uity is a measure of how well management has use! the capital investe! (y sharehol!ers" ,eturn on /0uity tells us the percent returne! for each !ollar 3or other monetary unit4 investe! (y sharehol!ers" +<0 * e can meet our o(ligations over the short%run" Cigher li0ui!ity levels in!icate that we can easily meet our current o(ligations" * e can use several types of ratios to monitor li0ui!ity" =<0 A secon! group of !etail ratios is asset management ratios" Asset management ratios measure the a(ility of assets to generate revenues or earnings" They also compliment our li0ui!ity ratios"

><0

Profita(ility ,atios measure the level of earnings in comparison to a (ase, such as assets, sales, or capital" An! from everage ,atios measure the use of !e(t an! e0uity for financing of assets"

?<0

Some ratios that warrants some attention is Aar&et Ealue ,atios" These ratios attempt to measure the economic status of the organi$ation within the mar&etplace" Investors use these ratios to evaluate an! monitor the progress of their investments"

@<0 A ratio is a comparison of one num(ers to anotherI mathematically, a simple !ivision pro(lem" Financial ratios involve the comparison of various figures from the financial statements in or!er to gain information a(out a companyJs performance" A<0 The .alance Sheet an! the Statement of Income are essential, (ut they are only the starting point for successful financial management" Apply ,atio Analysis to Financial Statements to analy$e the success, failure, an! progress of your (usiness There are (asically two uses of financial ratio analysisK I0 II0 To trac& in!ivi!ual firm performance over time, an! To ma&e comparative ju!gments regar!ing firm

performance"

SCOPE OF THE STUDY

,<0 I% Si! "5i&ies &in#nci#5 s%#%e! en%s: It can simplify

the comprehension of financial statements" ,atios can tell the whole story of changes in the financial con!ition of the (usiness" -<0 I% F#ci5i%#%es in%er &ir! co! "#rison: It can provi!e !ata for inter%firm comparison" ,atios can highlight the factors associate! with successful an! unsuccessful firm" They can also reveal strong firms an! wea& firms, overvalue! an! un!ervalue! firms" +<0 I% He5"s in "5#nnin(: It can help in planning an! forecasting" ,atios can assist management, in its (asic functions of forecasting" Planning, co%or!ination, control an! communications" =<0 I% M#9es in%r# &ir! co! "#rison "ossib5e: analysis can also ma&es possi(le comparison of the performance of !ifferent !ivisions of the firm" The ratios can also (e helpful in !eci!ing a(out their efficiency or otherwise in the past an! li&ely performance in the future" ><0 I% He5" in in8es%! en% $ecisions: It can help in investment !ecisions in the case of investors an! len!ing !ecisions in the case of (an&ers etc" ?<0 I% S"o% Tren$s in 1usiness: Financial Performance Analysis through ,atio Analysis can ena(le the (usiness ownerFmanager to spot tren!s in a (usiness" An! (y comparing our own ratios for several successive years, ,atios

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watching especially for any unfavora(le tren!s that may (e starting" @<0 I% Pro8i$e e#r5) ;#rnin( in$ic#%ions: ,atio analysis may provi!e the all%important early warning in!ications that allow you to solve your (usiness pro(lems (efore your (usiness is !estroye! (y them"

All the a(ove mentione! a!vices can give (enefit for the company through Financial Performance analysis (y the attention of the company management"

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Rese#rc' Me%'o$o5o()
,esearch metho!ology forms an important part of any research project" It is a way to systematically solve the research pro(lem < This project has (een prepare! with limite! access to recor!s an! relate! !ocuments relating to the financial perform ance of NTPC" The financial !ata has (een referre! in most of the cases" The annual report of 677=%79 has (een ta&en into consi!eration"

T;o consi$er#%ions &or rese#rc' ! e%'o$o5o() un$er rese#rc' re"or% #re ;"4 ,/S/A,CC 1/SI5N" 6"4 S/C+N1A,L 1ATA" *,0 RESEARCH DESIBN ,esearch !esign was a!opte! for the /)ploratory ,esearch Stu!y#" The function of research !esign is to provi!e the collection of relevant evi!ence with minimum e)pen!iture of efforts, time ' money" The research !esign use! here is e)ploratory in nature, very fle)i(le ' ju!gmental in or!er to stu!y the pro!ucts an! services provi!e! (y the National Thermal Power Corporation 31a!ri4" %K SAMPLINB DESIBN

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The sampling !esign use! for the stu!y was Stratifie! Sampling#" The !ifferent strata or homogeneous groups forme! were%K ;" /)ecutives 6" Supervisors SAMPLINB UNIT The sampling unit was National Thermal Power Corporation#,1a!ri" SAMPLE SICE In total G employees of Finance 1epartment Cas a!vise! !uring the stu!y" TYPES OF DATA In the survey !ata were collecte! (y the %K *-<0 SECONDARY DATA Secon!ary !ata consists of the information that alrea!y e)ists somewhere ' has (een collecte! for a !ifferent purpose through the statistical process" Ay secon!ary !ata sources for the research project were DATA COLLECTION Secon!ary !ata were collecte! from the following sources%K 3A4 .oo&s relate! to the topic 3.4 Company !ocuments 3C4 Aaga$ines 314 *e(sites 13

STATISTICAL TOOLS USED Statistical tools use! in the project stu!y are%K ;"4 6"4 :"4
4.) 5.)

TA. /S PI/ CCA,TS .A, 5,APCS IN/ GRAPHS ,ATI+ ANALYSIS R#%io #n#5)sis

,atio analysis is an important an! age%ol! techni0ue of financial analysis" A ratio is a comparison of one num(ers to anotherI mathematically, a simple !ivision pro(lem" C5#ssi&ic#%ion o& r#%ios: ,<0 Pro&i%#bi5i%) r#%ios K A class of financial metrics that are use! to assess a (usinessJs a(ility to generate earnings as compare! to its e)penses an! other relevant costs incurre! !uring a specific perio! of time" 5ross profit ratio Net profit ratio +perating ratio /)pense ratio ,eturn on e0uity capital ,eturn on capital employe! ratio 1ivi!en! yiel! ratio 1ivi!en! payout ratio /arnings per share ratio Price earning ratio

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-<0 Li6ui$i%) r#%ios: A class of financial metrics that is use! to !etermine a companyJs a(ility to pay off its short% terms !e(ts o(ligations" 5enerally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short%term !e(ts" Current ratio i0ui! F Aci! F Muic& ratio Accounting ratios that measure a !ifferent accounts within their

+<0 Ac%i8i%) r#%ios:

firmJs a(ility to convert

(alance sheets into cash or sales" Stoc& turnover ratio 1e(torJs turnover ratio Average collection perio! Cre!itorJs turnover ratio * or&ing capital turnover ratio Fi)e! assets turnover ratio =<0 Le8er#(e r#%ios or 5on( %er! so58enc) r#%ios: Any ratio use! to calculate the financial leverage of a company to get an i!ea of the companyJs metho!s of financing or to m easure its a(ility to meet financial o(ligations" 1e(t /0uity ,atio Proprietary or /0uity ratio Interest coverage ratio Capital gearing

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C'#"er%iD#%ion Sc'e!e

I II III I3 3 3I 3II 3III IH H HI HII HIII HI3 H3 H3I i0 ii0 iii0 i80 H3

In$us%r) o8er8ie; Abou% NTPC L%$< NTPC co!"#re$ %o res% o& In$i# Reco(ni%ions E A;#r$s Po;er %o Co!!on;e#5%' B#!es -.,. NTPCs ObFec%i8es S4OT #n#5)sis o& NTPC NTPCGs &u%ure s%r#%e() Po;er su""5) uni%s in In$i# His%or) o& NTPC S%r#%e(ies o& NTPC ProFec%s o& NTPC Subsi$i#ries E 2oin% 3en%ures o& NTPC In$us%r) Co!"e%i%i8e Forces De!#n$ #n$ su""5) o& "o;er in$us%ries in In$i# Me%'o$s o& #ccessin( &in#nci#5 "er&or!#nce R#%io #n#5)sis o& NTPC Co!"#rison o& r#%ios be%;een NTPC E Re5i#nce Co!"#rison o& r#%ios be%;een NTPC E TATA Po;er Tren$ #n#5)sis o& NTPC 1ib5io(r#"')

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Re&erences 1oo9s : o T"S 5rewal, Analysis of Financial Statements, Sultan Chan!, pp >"?% >"G?" o Asho& :>?7"
o

.anerjee,

Financial

Accounting

A :G>%

managerial /mphasis, e)cl (oo&s, pp

Prasanna Chan!ra, Fun!am entals of Financial Aanagement, TAC, chpt" 6:%6? .

In%erne% 4 ebsi%es:
o

httpKFFwww"scri(!"comF!ocF<97?;=:FP+* /,% S/CT+,%,/P+,T%IIPA% CC/NNAI in!ia"html H*CAN5 +.A NC+NT httpKFFwww"in!iahousing"comFinfrastructure%in% in!iaFpower%sector% httpKFFwww"realinstitutoelcano"orgFwpsFportalFriel canoNengFContent /OTPFelcanoF/lcanoNinFQonasNinFA,IG%67;7

httpKFFiea"orgFcountryFnNcountry"aspH C+RNT,LNC+1/PIN www"ntpc"co"in www"accountingformanagers"com www"google"com 3search engine4

o o o

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