FINANCIAL MANAGEMENT PROJECT

Financial Study of K-ELECTRIC

RATIO ANALYSIS

Prepared by

MUHAMMAD WAQAS – 15-IED-MS-EM/PT-01

KHURRAM SHAHZAD AZHAR – 15-IED-MS-EM/PT-17
ZAIN UL ABDIN-13-IED-MS-EM-PT/01

Submitted to

Dr Wasim Ahmad

MSc Engineering Management, UET Taxila

 Financial Study of K-ELECTRIC

1. K-ELECTRIC – Company Profile

K-Electric, formerly known as Karachi Electric Supply Company Limited and commonly referred
to as KE is a Pakistani vertically integrated electric corporation involved in generating,
transmitting and distributing power to around 20 million inhabitants of Karachi. It employs over
11,000 people and covers an area of 6,500 square kilometers with industrial, commercial,
agricultural and residential areas falling under its network.

K-Electric was incorporated on 13 September 1913, under the now repealed Indian Companies
Act, 1882 (currently Companies Ordinance, 1984). In 1952, the Government of Pakistan took
control of the Company by acquiring majority shareholding of KESC. In 2005, the Government
privatized K-Electric. In 2009, The Abraaj Capital, a leading private equity firm based in Dubai,
bought the power utility for a significant equity stake in the Company. Abraaj Group fully controls
KE via the holding company, KES Power Limited which holds 72.58% of its shares.
 Revenue – PKR 190.358 billion (2014-15)

 Net income – PKR 28.324 billion

 Total assets – PKR 367.56 billion

KE is the only vertically-integrated power utility in Pakistan. It produces electricity from its own
generation units with an installed capacity of 1827 MW. It also has power purchase agreements
for 1021 MW from various IPPs (Independent Power Producers).

 Bin Qasim Power Station 1 (Capacity: 840 MW)

 Bin Qasim Power Station 2 (Capacity: 560 MW)

 Korangi Combined Cycle Power Plant (Capacity: 247 MW)

 SITE Gas Turbine Power Station (Capacity: 90 MW)

 Korangi Gas Turbine Power Station (Capacity: 90 MW)

2. Balance Sheet for Last 5 Years (2011-2015)
3. Income Statement for Last 5 Years (2011-2015)
 4. Key Financial Indicators (2010-2015)

5. Net Operating Working Capital (NOWC)

NOWC = All current assets – All current liabilities

NOWC = All current assets – (Accounts payable + Accruals)

All Current All current

YEARS Accounts payable Accruals assets liabilities NOWC
year 2011 75299452 5009065 68758873 80308517 -11549644
year 2012 98892023 3739614 103361691 102631637 730054
year 2013 96214810 5776415 115570714 101991225 13579489
year 2014 108478166 5719543 133171401 114197709 18973692
year 2015 105787466 5866849 138874495 111654315 27220180
*Rupees in ‘000
 6. Total Operating Capital (TOC)

TOC = NOWC + Net fixed assets

YEARS NET FIXED ASSET NOWC TOC

year 2011 167491103 -11549644 155941459
year 2012 169031230 730054 169761284
year 2013 163011738 13579489 176591227
year 2014 170286970 18973692 189260662
year 2015 213869249 27220180 241089429
Rupees in ‘000

7. Free Cash Flow (FCF)

FCF = NOPAT – Net Investment in Operating Capital

FCF = EBIT (1 – Tax rate) – Net Investment in Operating Capital

YEARS EBITDA DEPRE+AMORT EBIT (1-TAX RATE) NOPAT NIIOC FCF

y-2011 3470568 8397491 -4926923 1-0.065 -4828384.54
y-2012 17376005 7105028 10270977 1-0.020 10065557.46 13819825 -3754267.54
y-2013 26749902 8885133 17864769 1-0.723 4948541.013 6829943 -1881401.987
y-2014 30158619 9308323 20850296 1-0.346 13636093.58 12669435 966658.584
y-2015 34337469 9501257 24836212 1-0.879 3005181.652 51828767 -48823585.35
Rupees in ‘000

8. Market Value Added (MVA)

MVA = Common share × Stock price – Common Equity

YEARS COMMON SHARE STOCK PRICE COMMON EQUITY MVA

y-2011 229110.6 2.15 26504 466083.79
y-2012 238212.6 3.24 41642 730166.824
y-2013 258793.7 6.22 53714 1555982.814
y-2014 274196.5 8.49 70967 2256961.285
y-2015 274997.2 8.42 128215 2187261.424
Rupees in ‘000
 9. Earning per share

EPS = Net Income/Common share outstanding

EPS GIVEN IN COMMON

YEARS BL.SHT NET INCOME SHARE COMMON SHARE CALCULATION
y-2011 0.409999974 9393534 229110.6 229110.6
y-2012 0.110000017 2620339 238212.6 238212.6
y-2013 0.260000031 6728637 258793.7 258793.7
y-2014 0.469999982 12887235 274196.5 274196.5
y-2015 1.029999978 28324711 274997.2 274997.2
Rupees in ‘000

10. Cash flow per share

Cash flow per share = Net Income + Depreciation and Amortization

Common share outstanding

YEARS NET INCOME DEP+AMORT COMMON SHARE CFPS

y-2011 9393534 8397491 229110.6 77.65
y-2012 2620339 7105028 238212.6 40.83
y-2013 6728637 8885133 258793.7 60.33
y-2014 12887235 9308323 274196.5 80.95
y-2015 28324711 9501257 274997.2 137.55
Rupees in ‘000

11. Book Value per share

Book Value = Common equity/Common share outstanding

YEARS COMMON EQUITY COMMON SHARE BVPS

y-2011 26504 229110.6 11.57
y-2012 41642 238212.6 17.48
y-2013 53714 258793.7 20.76
y-2014 70967 274196.5 25.88
y-2015 128215 274997.2 46.62
Rupees in ‘000

12. Ratio Analysis for Last 5 Years

 Ratio 2011 2012 2013 2014 2015 Remarks
Quick/Acid Test Ratio 0.34 0.35 0.40 0.44 0.53 Improving each year
Current Ratio 0.57 0.71 0.72 0.76 0.88 Improving each year
Days Sales Outstanding 76 125 days 168 days 116 days 97 Improving since 2013
days days
Fixed Assets Turnover Ratio 0.51 0.55 0.69 0.82 0.69 Improved until 2014
Total Assets Turnover Ratio 0.36 0.34 0.40 0.45 0.40 Improved until 2014
Profit Margin on Sales 11.0 2.83 6.0 9.26 19.07 Improving since 2012
Basic Earning Power -2.08 3.77 6.4 6.80 6.75 Improved until 2014
Return on Total Assets (ROA) 3.97 0.96 2.40 4.20 7.70 Improving since 2012
Return on Equity (ROE) 35.44 6.29 12.5 18.1 22.1 Improving since 2012
Price per Earning Ratio 5.24 29.4 23.9 18.0 8.2 Declining since 2012
Price per Cash flow 2.76 7.93 10.3 10.4 6.12 Improved until 2014
Market/Book Value per share 18.58 18.53 29.96 32.80 18.05 Improved until 2014

So it is evident from the study of Ratio analysis that K-ELECTRIC gradually increased profit every year
until 2014 and then decline in some area in the last financial year of 2014-2015. Overall company
performance is improved.

13. Industrial Average for Electric Utilities Industry

Average
Sr. No Ratio
2004-2015 2014 2015

1 Quick Ratio 0.19 0.17 0.16

2 Return on Assets 2.76% 2.52% 2.64%

3 Return on Equity 10.46% 8.98% 9.53%

4 Inventory turnover ratio 13.97 13.35 14.59

5 Total Assets turnover ratio 0.35 0.30 0.28

6 Price per Earning Ratio (P/E) 19.17 18.22 20.13

7 Price per Cash Flow - 108.82 150.80

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