A REPORT

ON

“A Comparative Study on Financial Performance of NALCO &

VEDANTA”

SANDIP KUMAR BHUYAN

22BSPHH01C1021

At

National Aluminium Company Limited (NALCO)

 A REPORT

on

“A Comparative Study on Financial Performance of

NALCO & VEDANTA”

By:
SANDIP KUMAR BHUYAN
22BSPHH01C1021

National Aluminium Company Limited (NALCO)

A Report submitted in partial fulfillment of the requirements

ofMBA Program Of IBS Hyderabad

Distribution List:
1. Mr. Abhimanyu Padhi (Company Guide)
2. Professor Dr. Aruna Kumar Dash (Faculty Guide)

Date of Submission: 12th May, 2023

1
 AUTHORIZATION

To Whomsoever It May Concern

This is to certify that this report is submitted in partial fulfillment of the requirements of the
MBAProgram of ICFAI Business School (IBS), Hyderabad.

I, hereby declare that all the work depicted in my project report titled: “A Comparative
Study on Financial Performance of NALCO & VEDANTA” is true to the best of my
knowledge and is a part of partial completion of the Internship Program at National
Aluminium Company Limited (NALCO) under the guidance of Mr. Abhimanya Padhi
(AGM-Finance).

NALCO is authorizing the submission of this project report to IBS Hyderabad in partial
fulfillmentof the requirement of the MBA program of 2022-2024.

“This report has been formally submitted to Prof. Dr. Aruna Kumar Dash, IBS Hyderabad”

Sandip Ku. Bhuyan

22BSPHH01C1021
Batch: 2022-2024
IBS Hyderabad

2
 ACKNOWLEDGMENT

I take this opportunity to express and record my thanks and gratitude to ICFAI Business
School, Hyderabad for granting me the opportunity of doing an internship during the
tenure of my MBA Program enabling me to gain rightful insights into the corporate world.

I would like to convey a deep sense of thanks to my company guide, Mr. Abhimanyu
Padhi, who guided me throughout and provided me with numerous opportunities to put my
skills to use. I would also like to thank everyone on my team who helped me understand the
principles needed to complete the tasks. I was able to learn the workings of the NALCO's
financial operation thanks to their ongoing support and guidance. Furthermore, I would like
to express my heartfelt gratitude to my faculty mentor, Dr. Aruna Kumar Dash, without
whose consistent support and encouragement it would not have been feasible for me to
understand the corporate application of the theories I had studied and acquire new skills.

3
 Table of Contents
AUTHORIZATION............................................................................................................... 2
ACKNOWLEDGMENT......................................................................................................... 3
List of Tables..................................................................................................................... 6
List of Figures ................................................................................................................... 7
EXECUTIVE SUMMARY ...................................................................................................... 8
ABSTRACT ........................................................................................................................ 9
1. Introduction ............................................................................................................ 10
1.1. Objectives of the Study ............................................................................................. 11
1.2. Research Methodology.............................................................................................. 11
1.3. Limitations of the Study............................................................................................ 11
2. Overview of Aluminium Industry in India ................................................................. 12
2.1 Process of manufacturing Aluminium ....................................................................... 13
2.2 Financials of the Aluminium Industry ...................................................................... 14
2.3 Market Influencers ................................................................................................... 16
2.4 Prospects................................................................................................................... 16
3. Brief Profile of National Aluminium Company Ltd .................................................... 17
3.1 Financials of NALCO ............................................................................................... 18
4. Brief Profile of Vedanta Industries Ltd ...................................................................... 19
5. Data Analysis and Interpretation of NALCO (*Figures in Crore)................................. 19
5.1 Analysis of Current Assets, Current Liabilities and Net Working Capital ................ 19
5.2 Analysis of Current Ratio ......................................................................................... 22
5.3 Analysis of Quick Ratio ............................................................................................ 24
5.4 Analysis of Gross Working Capital Turnover Ratio .................................................. 25
5.5 Analysis of Current Assets to Fixed Assets Ratio....................................................... 26
5.6 Analysis of Current Assets to Total Assets Ratio ....................................................... 27
6. Data Analysis and Interpretation of Vedanta (*Figures in Crore) .............................. 28
6.1 Analysis of Current Assets and Current Liabilities ................................................... 28
6.2 Analysis of Current Ratio ......................................................................................... 30
6.3 Analysis of Quick Ratio ............................................................................................ 31
6.4 Analysis of Gross Working Capital Turnover Ratio .................................................. 32
6.5 Analysis of Current Assets to Fixed Assets Ratio....................................................... 33

4
 6.6 Analysis of Current Assets to Total Assets Ratio ....................................................... 34
7. Comparison of Financial Performance between NALCO and Vedanta........................ 35
7.1 Liquidity Analysis ..................................................................................................... 35
7.2 Profitability Analysis ................................................................................................ 39
8. Findings and Conclusion .......................................................................................... 42
9. Recommendations .................................................................................................. 43
10. References........................................................................................................... 44

5
 List of Tables
Sr. No Name Page No
1 Production, Import and export of primary aluminium in India 13
2 Company-wise production of primary aluminium 14
3 Current Assets of NALCO 18
4 Current Liabilities of NALCO 19
5 Net Working Capital of NALCO 20
6 Current Ratio of NALCO 21
7 Quick Ratio of NALCO 23
8 Working Capital Turnover Ratio of NALCO 24
9 Current Assets to Fixed Assets Ratio of NALCO 25
10 Current Assets to Total Assets Ratio of NALCO 26
11 Current Assets of Vedanta 27
12 Current Liabilities of Vedanta 28
13 Current Ratio of Vedanta 29
14 Quick Ratio of Vedanta 30
15 Working Capital Turnover Ratio of Vedanta 31
16 Current Assets to Fixed Assets Ratio of Vedanta 32
17 Current Assets to Total Assets Ratio of Vedanta 33
18 Summary of Major Liquidity Ratios 34-35
19 Summary of major profitability Ratios 38

6
 List of Figures
Sr. No Name Page No
1 India’s share in Global Aluminium Production 12
2 Aluminium Production Process 13
3 Aluminium Consumption (million tonnes) in India 14
4 Sales Performance of NALCO 17
5 Share Performance of NALCO 17
6 Current Assets of NALCO 19
7 Current Liabilities of NALCO 20
8 Net Working Capital of NALCO 21
9 Current Ratio of NALCO 22
10 Quick Ratio of NALCO 24
11 Gross Working Capital Ratio of NALCO 25
12 Current Assets to Fixed Assets Ratio of NALCO 26
13 Current Assets to Total Assets Ratio of NALCO 27
14 Current Assets of Vedanta 28
15 Current Liabilities of Vedanta 29
16 Current Ratio of Vedanta 30
17 Quick Ratio of Vedanta 31
18 Gross Working Capital Ratio of Vedanta 32
19 Current Assets to Fixed Assets Ratio of Vedanta 33
20 Current Assets to Total Assets Ratio of Vedanta 34
21 Current Ratio of Nalco & Vedanta 35
22 Quick ratio of Nalco & Vedanta 36
23 Inventory turnover ratio of Nalco & Vedanta 37
24 Debt Equity ratio of Nalco and Vedanta 38
25 Return on Asset of NALCO & Vedanta 39
26 Return on capital employed ratio of Nalco & Vedanta 40

7
 EXECUTIVE SUMMARY

This project report titled “comparative study on financial performance of nalco and vedanta”
has been made as a part of the Summer Internship Programme of IBS Hyderabad and has
been submitted by Sandip KumarBhuyan, Enrollment Number: 22BSPHH01C1021, MBA
2022-24

NALCO has been designated as a Navaratna CPSE under the Ministry of mines. It was set up
on January 7, 1981 with its headquarters in Bhubaneswar, Odisha. The company is a group
‘A’ CPSE with integrated and diversified activities like mining, metals and power.

The major methodology that has been used for the study is ‘Ratio Analysis’ on the ten years
data along with simple statistical measures like mean and standard deviation. In order to reach
towards an appropriate conclusion, the performance of NALCO has also been compared to
one of its close competitors VEDANTA

The working capital of NALCO has been analyzed from various angles starting from all the
components of current assets to its current liabilities. There were various instance where
NALCO has performed exceptionally well compared to VEDANTA but there were also few
parameters where NALCO needed improvements. As per the findings from the analysis
NALCO was better in terms of liquidity but VEDANTA was more capable to generate sales
in terms of each rupee investment into its working capital. NALCO was also efficient in
generating more sales from its total assets and had a better inventory turnover ratio.

At the end of the report, necessary recommendations are also provided in order to help
NALCO be more stable and effective in terms of its working capital management.
Few of the recommendations include, utilizing the current assets more productively in order
to avoid current assets from lying idle, managing cash and cash equivalents in an efficient
manner, proper utilization of gross working capital, need for reduction in the inventory
turnover time and most importantly NALCO must try to diversify its business operations as
done by its competitors.

8
 ABSTRACT

I, Sandip Kumar Bhuyan, an ICFAI Business School student interning with NALCO, will
submit myresearch on the topic "A Comparative Study on Financial Performance of NALCO
& VEDANTA" for my Summer internship programme 2023.

In the current rapidly changing marketplace, assessing financial performance is crucial for
firms in the manufacturing industry. The financial performance analysis reproduces the
organization's financial position as well as profitability, the level of competition in the same
sector, and extensive information about the cost and profit hubs inside the corporation.
Managers, investors, and creditors can use the various accounting data supplied by financial
analysis to make tactical and investment decisions. As a result, the financial performance of
two major aluminium manufacturing companies in India, Nalco and Vedanta, is examined in
this research study. To examine financial performance, data was collected from various
websites and self-possessed over the ten years from 2010-11 to 2021-22. To study financial
performance, liquidity analysis, profitability analysis, growth analysis, valuation analysis,
margin analysis, solvency analysis, turnover analysis and overall analysis has been employed.

9
1. Introduction

The corporate sector nowadays is thoughtful globally not only in generating revenue by
selling their products in the global markets, which was the outmoded thinking in the past, but
in terms of global dimensions, product superiority, management styles, manpower, marketing
and so on. The corporate sector has to participate with strong global players, essential well-
thought-of preparation to meet the future environmental contests. Therefore, corporate
financial planning, performance, financial structuring and organizational restructuring is
experiencing an extraordinary modification in view of the unending economic liberalization,
increased removal of safety and ofcourse controls.

Finance is provision funds or money resources and financial management connected to proper
application of money resources. Finance function is not only related to just procurement of
funds but also their appropriate management in the business. Financial management is those
managerial activities, which relates to the planning and controlling of financial resources.
Financial management comprises decision making approximately the numerous operations of
business. The shortened results of business operations are obtainable in the profit and loss
account and balance sheet. The balance sheet shows the financial position of a firm at a
particular point of time and profit & loss statement précises the revenues, expenses and the net
profit for a particular period.

Performance assessment of an organization is usually connected to healthy management of

its assets and liability as well as revenue and expenses. Financial ratio analysis is one of the
greatest apparatuses of performance assessment of any organization. To determine the
financial position as well as financial performance of an organization and to make a decision
of how healthy the organization efficiency, its operation and management and how sound
the organization has been able to utilize its assets and produce profit. Financial ratio analysis
is used to measure the liquidity position, asset management condition, profitability and debt
management condition of the company for assessment of performances. It regulates the
superior reporting of liquid assets to short-term liabilities as well as it also evaluates the
ability of the company to survive in the end.

10
1.1. Objectives of the Study

The following are the detailed objectives of the study:

● To analyze the financial performance as well as financial position of NALCO &

VEDANTA from 2010-11 to 2021-22.
● To study the comparative liquidity, long term solvency, efficiency position and profitability
position of NALCO & VEDANTA India from 2010-11 to 2021-22.

1.2. Research Methodology

 Type of Research: Quantitative Descriptive research

 Data Collection: To analyze financial performance of VEDANTA and NALCO data
has been self-possessed from the secondary sources which includes schedules, past notes,
budgets and data published on different websites for the 12 years from 2010-11 to 2021-
22. The composed data have been appropriately re-arranged, classified and tabulated as
per the necessities of the study. Different financial ratios have been employed to study
the financial performance of VEDANTA and NALCO.

1.3. Limitations of the Study

During the course of the research, various issues will arise that could have an adverse impact
onthe study. Few of the concerns are listed below:
● The study is dependent on secondary source data, availability of primary data is very
limited.
● The information used is primarily from historical reports available to the public and the
same doesn’t indicate the current situation of the firm.
● Financial statements disclose only monetary facts i.e which can be measured in monetary
terms. Non -monetary factors are ignored.

● The main report is based on the topic of financial performance, which has a very broad
spectrum, thus all of the points about it will be presented briefly.

11
2. Overview of Aluminium Industry in India

Aluminum is the second most used metal in the world after steel with an annual consumption
of approximately 65 million tonnes (including scrap). It is also the fastest growing metal
which has grown by nearly 20 times in the last sixty years (compared to 6 to 7 times for other
metals).Aluminium is a lightweight, silver-white, metallic element that makes up
approximately 7% of earth’s crust. It weighs one third as much as steel. It is the most greedy
material due to its positive properties and characteristics like malleable, ductile, easily casted
and has excellent corrosion resistance and durability. It is mined in the form of bauxite ore
and exists primarily in combination with oxygen as alumina. According to USGS India ranks
10th in terms of bauxite reserves in the world. The Aluminium production process can be
divided into upstream and downstream activities. The upstream process involves mining and
refining activities, while downstream process involves smelting and casting & fabricating.
Aluminium downstream fabricated products include rods, sheets, extrusions and foils.
Globally, aluminium is produced by two different methods, the primary production process
which involves the conversion of ores to aluminium and the other is secondary production
(recycling) where the aluminium scrap is recycled to produce aluminium again.

India is the fourth largest producer of aluminium in the world with a share of around 5.33%
of the global aluminium output. It has nearly 10% of the world’s bauxite reserves and a
growing aluminium sector that leverages this. Demand in the domestic market is expected
to grow by 8-10 per cent. By 2020, India is expected to have an installed aluminium
capacity of 1.7 to 2 million tonnes per annum. Combined Aluminium production (primary
and secondary) in India stood at 3.6MT in FY20. Aluminium production stood at 3,285,186
tonnes between April 2020 and January 2021. India also holds a fair advantage in cost of
production and conversion costs in alumina. Moreover, rise in infrastructure development
and automotive production are encouraging development in this sector within the
country.The Indian aluminium industry mainly consists of -primary aluminium, aluminium
extrusions, aluminium rolled products and alumina chemicals. The industry meets the
requirements of a wide range of industries including engineering, electrical and electronics,
automobile and automobile components, etc. The principal user segment of the aluminium
industry in India continues to be the electrical and electronics sector followed by automotive,
transportation, building, construction, packaging, consumer durables, industrial and

12
 defence.

Figure 1: India’s share in Global Aluminium Production

Source: World Bureau of Metal Statistics (WBMS), Aluminium Association of India, Economist
Intelligence Unit (EIU), ICRA Management Consulting Services Ltd (IMaCS)

2.1 Process of manufacturing Aluminium

Aluminium production first begins with the mining of bauxite and ends with liquid
aluminium getting converted into various products. The aluminium production process can
be broken down into three stages; first bauxites, which contain aluminium, are extracted
from the ground.
Second, bauxites are processed into alumina or aluminium oxide, and finally pure
aluminium is produced. The aluminium process begins with the mining of bauxite. Bauxite
consists of 45-60% aluminium oxide, along with various impurities such as sand, iron, and
other metals. Approximately it takes 3-4kgs of bauxite to produce 1kgs of alumina and it
takes 2kgs of alumina to produce 1kg of aluminium. The process of Bauxite refining
involves the use of Bayer Process and once the bauxite is converted to alumina, further on
the process of reduction of alumina to aluminium is called Hall- Heroult process.

Bauxite, Alumina and Power constitute the major components of the total operating costs.
Other raw materials used in the manufacturing process included calcined petroleum coke,
caustic soda, aluminium fluoride, fuel/oil and steam/ anthracite coal. The average
electricity consumption for the production of 1 tonne of aluminium is about 15,000 kwh,

13
 whereas for alumina the same is about 260 kwh per tonne. Since it takes 2 tonnes of
alumina to manufacture 1 tonne of aluminium, of the 15,000 kwh, about 500kwh is
consumed during the process of
refining the bauxite to alumina, while
the rest is consumed in the electrolysis
process.

Figure 2: Aluminium Production Process

Source: Blogspot

2.2 Financials of the Aluminium Industry

Demand for aluminium has been weak in the domestic market due to slow down in major end
user industries like power transmission, automobiles, and construction and white goods.
Domestic aluminium demand fell by 0.4% to 21.7 million tonnes during April-Jan FY20 as
compared to thesame period last year.

2020-21 2019-20 Y-o-Y % change

‘000’tonnes
Production 2657 2736 -1.6%
Exports 1545 1276 -2.8%
Imports 146 182 -20.6%
Consumption 1,728.6 1,721.1 -0.4%

Table 1: Production, Import and export of primary aluminium in India

Source: Ministry of Mines, Ministry of Commerce

14
India’s primary aluminium production declined by 1.6% to 2657 thousand tonnes mainly due
to weakness in domestic as well as international demand. India is a net exporter of primary
aluminium. Exports during the period fell by 2.8% to 1,545 thousand tonnes. Import of
primary aluminium fell by a sharp 20.6% to 146 thousand tonnes.

In India primary aluminium industry is dominated by 3 companies: Hindalco and Vedanta

which are privately owned and NALCO which is a public sector undertaking having a
Navratna status.

2020-21 2019-20 Y-o-Y % change

‘000 tonnes
Nalco 367 350.3 -4.6%

Hindalco 1083.7 1,098.3 1.3%

Vedanta Ltd 1165.7 1,127.8 -3.3%

Total Production 2616.4 2576.4 -1.5%

Table 2: Company-wise production of primary aluminium

Source: Ministry of Mines

Production of primary aluminium fell by 4.6% to 350.3 thousand tonnes in April-January

FY20 as compared to the corresponding period last year. Production by Nalco and Vedanta
fell during the period. Hindalco was the only company to report a growth in aluminium
production. The company’s production grew by a marginal 1.3%.

*CAGR 19.58%

15
 Figure 3 : Aluminium Consumption (million tonnes) in India
Source: Care Ratings, Indian Bureau of Mines

Aluminium consumption in India is 2.5 kgs per capita, and it reached 3.40 million tonnes
in FY19. The overall consumption is expected to reach 7.2 million tonnes in the next five
years.

2.3 Market Influencers

Supply of primary aluminium is in excess as India is one of the largest producers of primary
aluminium. However, due to limited scope of value addition within the country, primary
aluminium producers export large quantities of primary aluminium products and companies
import a sizable quantity of downstream products. Aluminum consumption in India at 2.7 kg
per capita is much below the global average of 11 kg per capita. Demand for the metal is
expected to pick up as the scenario improves for user industries, like power, infrastructure and
transportation.
Competition is primarily on quality and price, as being a commodity, differentiation is
difficult. However, the recent spate of consolidation has reduced the competitive pressure in
the industry. Further, increasing value addition to aluminium products has helped some
companies protect themselves from the high volatilities witnessed in this industry. There is a
threat that copper may replace aluminium in electrical applications, magnesium, titanium and
steel may substitute for aluminium in structural and ground transportations due to their
better scope of properties in respective applications. Glass, Polymers, natural fibre materials,
paper and steel may substitute foraluminium in packaging.

2.4 Prospects

Rise in infrastructure development is expected to drive growth in the aluminium sector.

Demand for aluminium is expected to pick up as the scenario improves for user industries like
power, infrastructure and transportation.The Government of India’s “National Mineral
Policy” is expected to bring more transparency, better regulation and enforcement, balanced
socio-economic growth along with sustainable mining practices in the aluminium sector.
Domestic demand is likely to remain robust driven by construction and packaging. However,
in the short term, due to recovery from Covid-19, domestic demand is likely to decline by 20-
25% at the closing of FY22, due to slowdown in Transportation, Building & Construction,
Industrial Equipment, and Consumer Durables. The only green shoot is a marginal growth in

16
 the packaging and pharma sectors.

The increasing share of imports of aluminium products, including scrap, will continue to be a
major concern for domestic aluminum producers. Over the last few years, the domestic rolled
products industry has been witnessing an increase in dumping of imports especially from
China, at unfair prices leading to the pricing pressure. The adoption of strong, lightweight and
formable aluminium sheets in vehicle parts and structures is driving growth in the automotive
body sheet segment. This market is expected to record growth, despite some recent softening
in European and Chinese demand. The Indian government has plans to invest over US$ 1
billion in its "Make in India" initiative. The aluminium industry will benefit from this as there
is great demand to build new production facilities. India's annual aluminium consumption is
expected to double to 7.2 MnT by 2023. In the next few years, India will be the "stand-out
growth market" for aluminium consumption as it pursues development projects to address an
infrastructure shortage, with demand more than tripling to 9.5 million tonnes by 2030 from
2.6 million tonnes this year.

3. Brief Profile of National Aluminium Company Ltd

National Aluminium Company Limited, abbreviated as NALCO, (incorporated 1981) has

units in Odisha at Angul and Damanjodi. It was incorporated as a public sector enterprise of
the Ministry of Mines, Government of India in 1981. It is Asia's largest, and the sixth largest,
integrated aluminium complex, encompassing bauxite mining, alumina refining, aluminium
smelting and casting, power generation, rail and port operations. Commissioned during 1985-
87, NALCO produced and exported alumina and aluminium. The main units of NALCO are
at Damanjodi (Mines & Refinery complex) and Nalconagar, Angul (Smelter & Power Plant
Complex). The Company received Indira Priyadarshini Vrikshamitra Award from Govt. of
India for its contribution in the field of afforestation and wasteland development. The 1200
MW Captive Thermal Power Plant of the Company also received the prestigious Indira
Gandhi Paryavaran Puraskar for the year 2000 from Govt. of India for its outstanding
contributions in the field of environment management. The Company and its Units have
received various National, State and Institutional awards for excellence in Safety &
Environment Management. In January 2021, it announced that it would invest Rs. 30,000
crore (US$ 4,102.51 million) by 2027-28 in capacity expansion and diversification.

17
3.1 Financials of NALCO

Total aluminium metal sales were 3,95,761 MT in 2019-20, a decrease from the previous
year's sales of 4,40,597 MT. The total aluminium sales include 3,38,864 MT of domestic sales
and 56,898 MT of export sales. Total domestic metal sales include 2,67,200 MT from the
Smelter Plant and 71,664 MT from the stockyards. Domestic metal sales were halted in
March 2020 due to the outbreak of the COVID-19 pandemic. The government declared a
statewide lockdown, suspending most industrial activities. As a result, consumer purchases
declined, and an unusually large amount of inventory (approximately 23,000 MT) remained
unsold in March 2020.

Figure 4: Sales Performance of NALCO

Source: Annual Report

18
 Figure 5: Share Performance of NALCO
Source: Equity Master

4. Brief Profile of Vedanta Industries Ltd

Over the years, Vedanta has positioned itself as a leading natural resources conglomerate,
focusing on large scale expansion of its portfolio in India with operational excellence
benchmarked to global standards. For two decades, they have facilitated the growth of the
Indian economy by contributing to the national exchequer and creating thousands of jobs.
They have put in place a comprehensive framework to be the ESG leader in the natural
resources sector. Vedanta is committed to reducing carbon emissions to zero by 2050 or
sooner. The organisation has pledged $5 billion over the next 10 years to accelerate the
transition to net-zero operations. Vedanta Limited is listed on the Bombay Stock Exchange
and the National Stock Exchange.

5. Data Analysis and Interpretation of NALCO (*Figures in Crore)

5.1 Analysis of Current Assets, Current Liabilities and Net Working Capital

Year Current Assets

2010-11 6045.17
2011-12 7022.33
2012-13 7075.81
2013-14 7426.2
2014-15 7712.18
2015-16 7182.02
2016-17 5655.79
2017-18 5613.9
2018-19 5600.7
2019-20 4557.8
2020-21 4,306.33
2021-22 6,485.00
Table 3: Current Assets

Interpretation: The graph below (Fig.) shows that initially the current assets of NALCO has
increased significantly between financial year 2011-2015 and then the company has
drastically decreased the current assets between the years 2016-2021. Surplus current assets

19
indicate a firm's favorable liquidity position, but this isn't always a good thing since when

Current Assets
10000
Current Assets(in cr.)

8000
6000
4000
2000
0

Year

excess current assets aren't needed, it can have a negative impact on profitability and hence
we can see that the company has slowly reduced its current assets.

Figure 6: Current Assets of NALCO

Year Current Liabilities

2010-11 2740.95
2011-12 2676.89
2012-13 3211.93
2013-14 3242.75
2014-15 1967.04
2015-16 2209.24
2016-17 2651.93
2017-18 2440.93
2018-19 2905.12
2019-20 2720.02
2020-21 2,049.80
2021-22 3,099.14

Table 4: Current Liabilities

Interpretation: The graph below (Figure 7) shows that the current liabilities was on the
higher end for the financial year 2013 and 2014 while it was on the lower end for the financial
year 2020. For the other years taken for the study, the current liabilities somewhat oscillates

20
within the same levels.

Current Liabilities
3500

3000
Current Liabilities(in cr.)

2500

2000

1500

1000

500

Year

Figure 7: Current Liabilities of NALCO

Year Net Working Capital

2010-11 3304.22
2011-12 4345.44
2012-13 3863.88
2013-14 4183.45
2014-15 5745.14
2015-16 4972.78
2016-17 3003.86
2017-18 3172.97
2018-19 2695.58
2019-20 1837.78
2020-21 2256.53
2021-22 3385.86

Table 5: Net Working Capital of NALCO

(Net Working Capital = Current Assets – Current Liabilities)

21
 Interpretation: In most cases the Net Working Capital increases with the increase in the
Current Assets and decreases with the decrease in the current assets.
The graph of Net Working Capital is given below.

Net Working Capital

7000
6000
5000
NWC(in cr.)

4000
3000
2000
1000
0

Year

Figure 8: Net Working Capital of NALCO

5.2 Analysis of Current Ratio

Current Current Ratio

Year Current Assets
Liabilities (CA/CL)
2010-11 6045.17 2740.95 2.21
2011-12 7022.33 2676.89 2.62
2012-13 7075.81 3211.93 2.2
2013-14 7426.2 3242.75 2.29
2014-15 7712.18 1967.04 3.92
2015-16 7182.02 2209.24 3.25
2016-17 5655.79 2651.93 2.13
2017-18 5613.9 2440.93 2.3
2018-19 5600.7 2905.12 1.93
2019-20 4557.8 2720.02 1.68
2020-21 4306.33 2049.8 2.1
2021-22 6485 3099.14 2.092
Mean 2.3935

Table 6: Current Ratio of NALCO

Interpretation: The current ratio is the most common and general ratio to test

22
liquidity. It indicates a company's capability to meet short-term obligations using current
assets. The ratio was lowest for the year 2019-20 during which it stood at 1.68 times and
the highest was for the year 2014-15 during which it stood at 3.92 times. The mean value for
the current ratio is 2.45, which indicates that the company maintain Rupee 2.45 of current
assets for every 1 Rupee of current liabilities.. The current ratio for 2014-15 and 2015-16 also
does not show a positive picture for the company since it is above 3 and signifies that the
company might not be much efficient to utilize its current assets during those years. However,
after 2014-15 the ratio slowly decreased and moved towards the banker’s standard which is a
good sign.

Current Ratio
9000
8000
7000
6000
5000
Ratio

4000
3000
2000
1000
0

Year

Figure 9: Current Ratio of NALCO

23
5.3 Analysis of Quick Ratio

Quick Ratio
Current (Quick Assets
Inventories Quick Assets (CA- Current
Year Assets /
(INV) INV) Liabilities Current
(CA)
Liabilities)

2010-11 6045.17 1058.47 4986.7 2740.95 1.82

2011-12 7022.33 1212.7 5809.63 2676.89 2.17
2012-13 7075.81 1380.64 5695.17 3211.93 1.77
2013-14 7426.2 1173.66 6252.54 3242.75 1.93
2014-15 7712.18 1165.56 6546.62 1967.04 3.33
2015-16 7182.02 1126.97 6055.05 2209.24 2.74
2016-17 5655.79 1155.93 4499.86 2651.93 1.7
2017-18 5613.9 1194.08 4419.82 2440.93 1.81
2018-19 5600.7 1210.01 4390.69 2905.12 1.51
2019-20 4557.8 1696.9 2860.9 2720.02 1.05
2020-21 4306.33 1476.32 2830.01 2049.8 1.38
2021-22 6485 646.17 5838.83 3099.14 1.88
Mean 1.92
Standard
0.57
Deviation

Table 7: Quick Ratio of NALCO

Interpretation: The quick ratio, which excludes inventory from current assets, assesses a
company's ability to satisfy short-term obligations with its most liquid assets. During the
period of study taken into consideration, the quick ratio ranges between 1.88 in 2021-22 to
3.33 in 2014-15. The mean for the quick ratio data set is 1.92 while 0.57 is the standard
deviation. A higher quick ratio indicates that a business is more liquid and has better debt
coverage. If we observe the year 2014-15, it shows a quick ratio of 3.33, although it indicates
that the company has the ability to cover its current liabilities by approximately 3 times but it
also somewhat indicates that during 2014-15 the company was not efficient enough to utilize
its current assets. If we further dive deep into the balance sheet of the company, we can
understand the company was holding a lot of cash and bank balance. However, the ratio saw a
little improvement in the year 2015-16 which looks quite good for the company.

24
 Quick Ratio
3.5
3
2.5
2
Ratio

1.5
1
0.5
0

Year

Figure 10: Quick Ratio of NALCO

5.4 Analysis of Gross Working Capital Turnover Ratio

Ratio
Gross Working
(Sales/Working
Year Sales Capital
Capital)
2010-11 5958.98 6045.17 0.99
2011-12 6611.57 7022.33 0.94
2012-13 6916.48 7075.81 0.98
2013-14 6780.85 7426.2 0.91
2014-15 7382.81 7712.18 0.96
2015-16 6816 7182.02 0.95
2016-17 8050.02 5655.79 1.42
2017-18 9618.31 5613.9 1.71
2018-19 11,499.32 5600.7 2.05
2019-20 8471.84 4557.8 1.86
2020-21 8955.79 4306.33 2.07
2021-22 14180.81 6485 2.18
Mean 1.418333333
Standard 0.420904977
Deviation

Table 8: Working Capital Turnover Ratio of NALCO

Interpretation: The efficiency with which the current assets of a firm is utilized is indicated
bythe gross working capital turnover ratio. Ideally higher the ratio, better it is for the business

25
 as it indicates the firm is more efficient in utilization of its current assets. From the above
table, the lowest gross working capital turnover ratio appears to be for the year 2013-14
which is 0.91 and the highest is for the year 2018-19 which is 2.05. Over all the gross
working capital turnover ratio looks to be inefficient for most of the years and the same is
indicated by the mean which stands at 1.28 for the period of study. The company therefore
was not efficient enough to utilize its current assets for most of the years.

Gross Working Capital

Turnover Ratio
2.5
2
1.5
Ratio

1
0.5
0

Year

Figure 11: Gross Working Capital Ratio of NALCO

5.5 Analysis of Current Assets to Fixed Assets Ratio

Year Current Assets Fixed Assets Ratio (CA/FA)

2010-11 6045.17 7200.35 0.84
2011-12 7022.33 7296.79 0.96
2012-13 7075.81 7630.81 0.93
2013-14 7426.2 7560.68 0.98
2014-15 7712.18 7195.15 1.07
2015-16 7182.02 7283.38 0.99
2016-17 5655.79 7710.43 0.73
2017-18 5613.9 8054.68 0.7
2018-19 5600.7 8168.49 0.69
2019-20 4557.8 8911.47 0.51
2020-21 4306.33 9,235.91 0.46
2021-22 6485 9,578.03 0.67
Mean 0.794166667
Standard Deviation 0.189008745

Table 9: Current Assets to Fixed Assets Ratio of NALCO

Interpretation: The current assets to fixed assets ratio is also a measure of a company’s

26
 liquidity. By altering current assets while keeping the number of fixed assets constant, the
trade-off between risk and profitability may be examined. From table 7 it is evident that the
mean of current assets to fixed assets for the period of study is 0.79. The ratio varies
between 0.67 for the year 2021-22 to 1.07 for the year 2014-15. Here we can also observe
the dominance of fixed assets over the current assets thus indicating that the fixed assets
constitute a larger component of the total assets for the period of study except for the year
2014-15.

CA/FA Ratio
1.2
1
0.8
Ratio

0.6
0.4
0.2
0

Year

Figure 12: Current Assets to Fixed Assets Ratio of NALCO

5.6 Analysis of Current Assets to Total Assets Ratio

Current
Year Total Assets Ratio (CA/TA)
Assets
2010-11 6045.17 14613.9 0.41
2011-12 7022.33 15520.78 0.45
2012-13 7075.81 16326.95 0.43
2013-14 7426.2 16548.51 0.45
2014-15 7712.18 16177.67 0.48
2015-16 7182.02 16710.19 0.43
2016-17 5655.79 14501.65 0.39
2017-18 5613.9 14613.8 0.38
2018-19 5600.7 15146.96 0.37
2019-20 4557.8 14549.62 0.31
2020-21 4306.33 14710.58 0.29
2021-22 6485 17277.79 0.37
Mean 0.396666667
Standard
0.054518091
deviation
Table 10: Current Assets to Total Assets Ratio of NALCO

27
 Interpretation: The table above depicts the current assets to total assets ratio which shows a
mean of 0.41. The ratio varies between 0.37 for the year 2021-2022 to 0.48 for the year 2014-
15. It can be understood the Total assets is always higher than the current assets, it is simply
because the total assets also include the components of non-current assets into it. The highest
proportion of current assets as part of total assets is for the year 2014-15 with
approximately 48%. The standard deviation stands at 0.05 indicating that the numbers are
closely compressed towards the mean.

CA/TA Ratio
0.6
0.5
0.4
Ratio

0.3
0.2
0.1
0

Year

Figure 13: Current Assets to Total Assets Ratio of NALCO

6. Data Analysis and Interpretation of Vedanta (*Figures in Crore)

6.1 Analysis of Current Assets and Current Liabilities

Year Current Assets

2010-11 11,067.12
2011-12 1,797.99
2012-13 1,348.80
2013-14 11,149.29
2014-15 9,508.47
2015-16 35,481.68
2016-17 39,378.00
2017-18 23,231.00
2018-19 22,657.00
2019-20 18,836.00
2020-21 20,642.00
2021-22 29,829.00

Table 11: Current Assets

28
Interpretation: The graph below (Fig. 13) shows that initially the current assets of Vedanta
has increased steadily between financial year 2015-2017 and then the company’s current
assets has decreased drastically for the financial year 2021 due to decrease in trade
receivables, cash and cash equivalents, loans, other investments . Later we see the firm has
tried to slowly revive its current assets to previous levels.

Current Assets
45,000.00
Current assets(in cr.)

40,000.00
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00

year

Figure 14: Current Assets of Vedanta

Year Current Liabilities

2010-11 1,496.02
2011-12 3,723.16
2012-13 4,069.96
2013-14 28,881.05
2014-15 22,501.50
2015-16 68,631.85
2016-17 57,611.00
2017-18 49,645.00
2018-19 48,729.00
2019-20 43,905.00
2020-21 36,199.00
2021-22 43,615.00

Table 12: Current Liabilities

Interpretation: The graph below (Fig.14) shows that the current liabilities reached an
surprisingly higher level for the financial year 2015-16 it was mainly due to increase in the
inventories, cash and cash equivalents and other investments while for the years before

29
 financial year 2016-17 or after that the current liabilities showed a steady increase with little
decline for few alternate years.

Current Liabilities
80,000.00
current kiabilities(in cr.)

70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00

year

Figure 15: Current Liabilities of Vedanta

6.2 Analysis of Current Ratio

Current Current Ratio

Year Current Assets
Liabilities (CA/CL)
2010-11 11,067.12 1,496.02 7.40
2011-12 1,797.99 3,723.16 0.48
2012-13 1,348.80 4,069.96 0.33
2013-14 11,149.29 28,881.05 0.39
2014-15 9,508.47 22,501.50 0.42
2015-16 35,481.68 68,631.85 0.52
2016-17 39,378.00 57,611.00 0.68
2017-18 23,231.00 49,645.00 0.47
2018-19 22,657.00 48,729.00 0.46
2019-20 18,836.00 43,905.00 0.43
2020-21 20,642.00 36,199.00 0.57
2021-22 29,829.00 43,615.00 0.68

Table 13: Current Ratio of Vedanta

30
 Interpretation: The current ratio is the most common and general ratio to test
liquidity. It indicates a company's capacity to meet short-term obligations using current
assets. The ratio was lowest for the year 2012-13 and the highest was for the year 2010-11.

Current Ratio
8.00
7.00
6.00
5.00
ratio

4.00
3.00
2.00
1.00
0.00

year

Figure 16: Current Ratio of Vedanta

6.3 Analysis of Quick Ratio

Quick Ratio
Current (Quick Assets
Inventories Quick Assets (CA- Current
Year Assets /
(INV) INV) Liabilities Current
(CA)
Liabilities)
2010-11 11,067.12 636.10 10,431.02 1,496.02 6.97
2011-12 1,797.99 757.29 1,040.70 3,723.16 0.28
2012-13 1,348.80 756.02 592.78 4,069.96 0.15
2013-14 11,149.29 5,678.70 5,470.59 28,881.05 0.19
2014-15 9,508.47 5,442.07 4,066.40 22,501.50 0.18
2015-16 35,481.68 5,228.66 30,253.02 68,631.85 0.44
2016-17 39,378.00 5,540.00 33,838.00 57,611.00 0.59
2017-18 23,231.00 8,149.00 15,082.00 49,645.00 0.30
2018-19 22,657.00 7,657.00 15,000.00 48,729.00 0.31
2019-20 18,836.00 5,689.00 13,147.00 43,905.00 0.30
2020-21 20,642.00 5,555.00 15,087.00 36,199.00 0.42
2021-22 29,829.00 8,563.00 21,266.00 43,615.00 0.49
Mean 0.88
Standard
Deviation 1.84

Table 14: Quick Ratio of Vedanta

31
 Interpretation: The quick ratio, which excludes inventory from current assets, assesses a
company's ability to satisfy short-term obligations with its most liquid assets. During the
period of study taken into consideration, the quick ratio ranges between 6.97 in 2010-11 to
0.59 in 2016-17. The mean for the quick ratio data set is 0.88 while 1.84 is the standard
deviation. A higher quick ratio indicates that a business is more liquid and has better debt
coverage.

Quick Ratio
8.00
7.00
6.00
5.00
Ratio

4.00
3.00
2.00
1.00
0.00

Year

Figure 17: Quick Ratio of NALCO

6.4 Analysis of Gross Working Capital Turnover Ratio

Ratio
Gross Working
(Sales/Working
Year Sales Capital
Capital)
2010-11 7493.08 11,067.12 0.677057807
2011-12 6513.45 1,797.99 3.622628602
2012-13 2187.92 1,348.80 1.622123369
2013-14 28536.53 11,149.29 2.559493026
2014-15 32502.41 9,508.47 3.418258668
2015-16 34094.28 35,481.68 0.960898131
2016-17 36663 39,378.00 0.931052872
2017-18 45524 23,231.00 1.959622918
2018-19 38,644.00 22,657.00 1.705609745
2019-20 35858 18,836.00 1.903695052
2020-21 37440 20,642.00 1.813777735
2021-22 63277 29,829.00 2.121324885
Mean 1.941295234
Standard 0.874565376

32
 Deviation
Table 15: Working Capital Turnover Ratio of Vedanta
Interpretation: The efficiency with which the current assets of a firm is utilized is indicated
by the gross working capital turnover ratio. Ideally higher the ratio, better it is for the business
as it indicates the firm is more efficient in utilization of its current assets. From the above
table, the lowest gross working capital turnover ratio appears to be for the year 2010-11
which is 0.67 andthe highest is for the year 2014-15 which is 3.41.

Gross Working Capital Ratio

4
3.5
3
2.5
ratio

2
1.5
1
0.5
0

year

Figure 18: Gross Working Capital Ratio of Vedanta

6.5 Analysis of Current Assets to Fixed Assets Ratio

Year Current Assets Fixed Assets Ratio (CA/FA)

2010-11 11,067.12 1264.41 8.752793793
2011-12 1,797.99 1673.99 1.074074517
2012-13 1,348.80 1917.89 0.703272868
2013-14 11,149.29 39911.36 0.279351292
2014-15 9,508.47 39548.02 0.240428472
2015-16 35,481.68 55010.52 0.644998084
2016-17 39,378.00 53440 0.736863772
2017-18 23,231.00 55545 0.418237465
2018-19 22,657.00 56737 0.399333768
2019-20 18,836.00 49204 0.382814405
2020-21 20,642.00 48,950.00 0.421695608
2021-22 29,829.00 50,230.00 0.593848298
Mean 1.220642695
Standard Deviation 2.281926426

Table 16: Current Assets to Fixed Assets Ratio of Vedanta

33
 Interpretation: The current assets to fixed assets ratio is also a measure of a company's
liquidity. By altering current assets while keeping the number of fixed assets constant, the
trade-off between risk and profitability may be examined. From table it is evident that the
mean of current assets to fixed assets for the period of study is 1.22. The ratio varies between
0.27 for the year 2013-14 and 8.75 for the year 2010-11. Here we can also observe the
dominance of fixed assets over the current assets thus indicating that the fixed assets
constitute a larger component of the total assets for the period of study except for the year
2010-11.

CA/FA Ratio
10
8
6
ratio

4
2
0

year

Figure 19: Current Assets to Fixed Assets Ratio of Vedanta

6.6 Analysis of Current Assets to Total Assets Ratio

Current
Year Total Assets Ratio (CA/TA)
Assets
2010-11 11,067.12 14197.78 0.779496513
2011-12 1,797.99 17838.1 0.100794928
2012-13 1,348.80 18287.44 0.073755539
2013-14 11,149.29 83489.68 0.133540936
2014-15 9,508.47 78534.4 0.12107395
2015-16 35,481.68 182624.41 0.194287719
2016-17 39,378.00 166184 0.236954219
2017-18 23,231.00 147169 0.157852537
2018-19 22,657.00 150867 0.150178634
2019-20 18,836.00 139450 0.135073503
2020-21 20,642.00 137731 0.149871852
2021-22 29,829.00 148959 0.200249733
Mean 0.202760839

34
 Standard
deviation 0.17901009
Table 17: Current Assets to Total Assets Ratio of Vedanta

Interpretation: The table above depicts the current assets to total assets ratio which shows a
mean of 0.30 The ratio varies between 0.23 for the year 2016-17 to 0.77 for the year 2010-11.
It can be understood the Total assets is always higher than the current assets, it is simply
because the total assets also include the components of non-current assets into it.

CA/TA Ratio
0.9
0.8
0.7
0.6
0.5
ratio

0.4
0.3
0.2
0.1
0

year

Figure 20: Current Assets to Total Assets Ratio of Vedanta

7. Comparison of Financial Performance between NALCO and

Vedanta
The analysis and interpretation of the study are based on the parameters mentioned in
themethodology of the Study.
7.1 Liquidity Analysis

Inventory Turnover
Current Ratio Quick Ratio
Year Ratio
Nalco Vedanta Nalco Vedanta Nalco Vedanta
2021-22 2.09 0.68 1.56 0.49 3.43 3.36
2020-21 2.1 0.57 1.38 0.42 6.07 6.74
2019-20 1.68 0.43 1.05 0.3 4.99 6.3
2018-19 1.93 0.46 1.51 0.31 9.5 5.05
2017-18 2.3 0.47 1.81 0.3 7.96 5.59
2016-17 2.13 0.68 1.7 0.59 6.53 6.62
2015-16 3.71 0.52 3.17 0.44 6.46 6.52

35
 2014-15 3.92 0.42 3.33 0.18 6.33 5.97
2013-14 2.29 0.39 1.93 0.19 5.78 5.03
2012-13 2.2 0.33 1.77 0.15 5.01 2.89
2011-12 2.62 0.48 2.17 0.28 5.45 8.6
2010-11 2.41 7.4 2.03 6.97 5.66 11.78
Average 2.45 1.07 1.95 0.89 6.10 6.20
Maximum 3.92 7.4 3.33 6.97 9.5 4.08
Minimum 1.68 0.33 1.05 0.18 3.43 3.12

Table 18: Summary of Major Liquidity Ratios

Source: Annual Reports

Current Ratio of Nalco & Vedanta

8 7.4

5
3.71 3.92
4
2.13 2.29 2.62 2.41
3 2.09 2.1 2.2
1.93 2.3
1.68
2
0.68 0.57 0.46 0.68 0.48
1 0.43 0.47 0.52 0.42 0.39 0.33

0
2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11

Nalco Vedanta

Figure 21: Current Ratio of Nalco & Vedanta

Interpretation:

Current Ratio is the association between current assets and current liabilities. It designates
the capability to accomplish the current obligation of businesses. Higher the current ratio,
sophisticated is the dependence on long-term sources, better the liquidity but lower the
profitability. A review on table-4 reveals that the current ratio of Nalco and Vedanta has
shown a significant variation in the entire study period. The absolute value of this ratio of
VEDANTA was 1.62 in 2010-11, which increased to 2.07 in 2012-13; but then declined to
1.75 in 2014-15, it again increased in 2015-16 to 1.97 but again declined to 1.58 in 2019-20,
the ratio has shown the differenttrend of NALCO, it came down from 3.92 in 2014-15 to 2.30

36
 in 2017-18 and then it kept on declining to 1.68 in 2019-20. CR of VEDANTA varied from
1.52 to 2.07 and NALCO varied from 1.68 to 3.92. The average current ratio for the study
period of VEDANTA and NALCO are 1.07 and 2.45 respectively, which indicates
VEDANTA recorded lower CR value whereas NALCO recorded higher CR value as
compared to the standard CR of 2:1. Therefore, the liquidity positions of VEDANTA and
Quick Ratio of Nalco & Vedanta
8
6.97
7
6
5
4
3.17
3
3.33 1.93 1.77 2.17 2.03
1.56 1.51 1.81 1.7
2 1.38
1.05
1 0.49 0.59 0.44 0.18
0.42 0.3 0.31 0.3 0.19 0.15 0.28
0
2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11

Nalco Vedanta

NALCO in associations to the standard of current ratio were inacceptable.

Figure 22: Quick ratio of Nalco & Vedanta

Interpretation:
Quick ratio represents a company's short-term liquidity position and gauges the ability of the
company to satisfy its short-term obligations with its most liquid assets. The higher the ratio
result, the better a company's liquidity and financial health; the lower the ratio result, the
more likely the company may have difficulty paying obligations. A result of 1 is regarded as
the ideal quick ratio. It denotes that the company has just enough assets to liquidate in order
to pay off its current creditors. In our study, Nalco maintained a QR of more than 1 with an
average of 2.0 from 2010- 11 to 2019-20, whereas Vedanta maintained a QR of less than one
for three consecutive fiscal years from 2017-18 to 2019-20, indicating that it may not be able
to fully pay off its current liabilities in the short term.

37
 Inventory Turnover Ratio of Nalco & Vedanta
14

12
11.78
10 9.5
7.96 6.53 8.6
8 6.74
6.3 6.46 6.33 5.78 5.45
6 5.01
3.36 6.62 6.52 5.97
5.59 5.66
4 6.07 4.99 5.05 5.03
2.89
3.43
2

0
2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11

Nalco Vedanta

Figure 23: Inventory turnover ratio of Nalco & Vedanta

Interpretation:

Inventory turnover ratio is the relationship between sales and inventory. It demonstrates how
many times inventory is converted into sales in a year. Inventory should be maintained at a
level, which balances production facilities and sales needs. Higher the ITR, lower would be
inventory holding period and vice versa. The study suggests that the inventory turnover ratios
highly deviated for both the companies during the study period. The ITR of Vedanta varied
from 3.12 times to

4.08 times and ITR of NALCO varied from 4.99 times to 9.50 times. The averages ITR are
3.66 times and 6.37 times for Vedanta and NALCO respectively. The average inventory
turnover ratio of Indian Manufacturing Companies was 2.12 times. The average inventory
turnover ratios of both the companies during the study period are higher than the standard set
by CMIE. Thus, it showed efficient management of inventory for both the companies whereas
NALCO has managedinventory management better than Vedanta.

38
7.2 Profitability Analysis
Return on Capital
Debt Equity Ratio Return on Asset (%)
Year Employed (%)
Nalco Vedanta Nalco Vedanta Nalco Vedanta
2021-22 0 0.47 17.08 11.57 28.05 21.9
2020-21 0 0.37 8.83 7.62 10.45 16.83
2019-20 0 0.57 0.95 -4.82 1.96 5.68
2018-19 0.01 0.48 11.43 3.36 22.4 8.2
2017-18 0 0.38 9.18 4.93 9.99 7.91
2016-17 0.01 0.46 4.61 6.66 8.5 12.31
2015-16 0 0.39 4.71 -6.51 5.34 -10.44
2014-15 0 1.02 8.17 2.45 9.3 3.43
2013-14 0 1 3.88 1.28 4.82 1.97
2012-13 0 0.35 3.63 0.66 4.52 0.84
2011-12 0 0.28 5.47 9.41 6.61 11.9
2010-11 0 0.08 7.15 24.17 8.81 27.02
Average 0.00 0.49 7.09 5.07 10.06 8.96
Maximum 0.01 1.02 17.08 24.17 28.05 27.02
Minimum 0 0.08 0.95 -6.51 1.96 -10.44

Table 19:- Summary of major profitability Ratios

Debt Equity Ratio

1.2

0.8
ratio

0.6
Vedanta
0.4
Nalco
0.2

year

39
 Figure 24: Debt Equity ratio of Nalco and Vedanta
Interpretation:
Debt equity ratio measures the long-term solvency of a firm; it is the relationship between
outsider’s funds and insider’s funds. The Vedanta debt equity ratio has shown an increasing
trend, fluctuating from 0.08 to 0.47, whereas the debt equity ratio of NALCO has shown
negligible deviation during the study period, and fluctuated from 0.0 to 0.01. The average
debt equity ratio for the study period of Vedanta and NALCO are 0.49 and 0.00 respectively,
which indicates both the company’s debt equity ratios are far below than the standard ratio of
2:1.

Return on Asset
35
30
25
20
15
ratio

Vedanta
10
Nalco
5
0
-5
-10
year

Figure 25: Return on Asset of NALCO & Vedanta

Interpretation:
Return on assets (ROA) is one of the most important ratios used to assess an organization's
overall efficiency, as the organization's goal is to maximize its profitability. According to
table, Vedanta ROA has been decreasing during the study period. Vedanta’s value of this ratio
ranges between 11.9 and 21.9 percent. Similarly, NALCO's ROA fell from 2010-11 to 2013-
14, but there was a rise in 2014-15 before falling again and reaching a low of 0.95 % in 2019-
20.

40
 Return on Capital Employed
60
50
40
30
ratio

20 Vedanta
10 Nalco
0
-10

year

Figure 26: Return on capital employed ratio of Nalco & Vedanta

Interpretation:
Return on capital employed (ROCE) is a financial ratio used to assess a company's
profitability and capital efficiency by determining how efficiently management can allocate
capital for future growth. A RoCE of more than 15% is deemed adequate for companies in
an expansionary phase. A higher ROCE suggests more profitability when comparing
companies. Typically, investors prefer companies with steady and rising ROCE levels, as
evidenced by NALCO's average ROCE of 10.06 percent against Vedanta’s average ROCE
of 8.96 percent, indicating that ROCE is volatile.

41
8. Findings and Conclusion

From the calculations done as a part of this report regarding the financial performance at
NALCO between the financial years 2010-11 to 2021-22, we can derive the following
findings and conclusions :

1. Showing robust performance across all its business units, the company has posted its
best-ever annual production and sales in FY21-22, registering highest ever revenue from
operations and highest ever net profit (PAT) of Rs 14,181crore and Rs. 2,952 crore
respectively.

2. There were instances during the period of study when NALCO’s current ratio had
become very high indicating lack of proper utilization of current assets, for example in the
financial year 2014- 15 and 2015-16.

3. NALCO was found to be much more liquid compared to VEDANTA in terms of its
ability to meet its short time liabilities with the help of its liquid assets.

4. During the recent period of the study it was evident that NALCO was not as effective as
Vedanta in generating sales from its fixed assets.

5. The net profit margin of Vedanta was at 17% in FY2022 as compared to 19% in
FY2021

42
9. Recommendations

The following recommendations has been arrived at after carefully analyzing all the aspects
of the financial performance at NALCO. The recommendations will help company to
increase performance more effectively and hence will serve as a benefit to the entire firm.

I would like to give the following recommendations:

1. Since NALCO produces different varieties of products, their profit margin should be
evenly balanced to give a sound gross and net profit margin.

2. The firm must try to manage its cash and cash equivalents in an effective way as cash
generally is a non earning asset if not properly deployed.

3. Company should increase its actual production of rolled products so that it will help
toincrease net profit of the company.

4. NALCO must keep required volume of inventory that suits to its forecasted sales so as
to give up a high inventory ratio..

5. NALCO must also try to diversify into different businesses just like some of its major
competitors.

6. NALCO requires strategy of expansion and diversification to be evolving as a major

competitor in aluminium industry.

43
10. References

1. "Financial Statement Analysis: A Practitioner's Guide," by Martin S. Fridson and

Fernando Alvarez.

2. "Financial Statement Analysis: An Integrated Approach," by Mary E. Barth, Wayne R.

Landsman, and Mark H. Lang.

3. PRASANTA, PAUL, (2011, May). Financial Performance Evaluation- A

comparative Study of some Selected NBFCs. Indian Journal of Finance, 5(5), 13-22,
42.

4. "Financial Reporting, Financial Statement Analysis and Valuation," by James M.

Wahlen, Stephen P. Baginski, and Mark Bradshaw.

5. Annual Report of NALCO & VEDANTA from 2010-11 to 2021-22.

6. www.vedantalimited.com

7. www.moneycontrol.com

8. www.nalcoindia.co.in

44