Nag Final Project

A

Study on

FINANCIAL ANALYSIS

With reference to

HBL POWER SYSTEMS LTD., VIZIANAGARAM.

A project report submitted to JNTU University, Kakinada, In partial fulfillment for the award of the degree of,

MASTER OF BUSINESS ADMINISTRATION

Submitted by

V .NAGENDRA BABU

(Regd.No:116C1E0023)Under the guidance of

Dr.P.S.RavindraAssociate Professor

Miracle Educational Society Group of Institutions

MIRACLE SCHOOL OF MANAGEMENT Miracle Educational Society Group of Institutions

(Approved by AICTE &Affiliated to JNTU, Kakinada)

BHOGAPURAM, VIZIANAGARAM.

2011-2013

1

DECLARATION

I hereby declare that the project work entitled “Study on FINANCIAL ANALYSIS “with

special reference to HBL POWER SYSTEMS LTD., VIZIANAGARAM Ltd.,

Submitted by me to the J.N.T.U.University, Kakinada in partial fulfillment for the award of

degree of Master of Business Administration is entirely based on my own study and findings

and is being submitted for the first time.

It has not been submitted or published earlier for the award of any degree or Diploma

of this university or any other university.

Date:Place: Bhogapuram (V .NAGENDRA BABU)

2

ACKNOWLEDGEMENT

In the presentation of this report, I recall with a sincere gratitude to each of those who have

been a source of immense help and inspiration during the process of my project work.

I take this opportunity to express my deep sense of gratitude and indebtedness to Faculty cum

Project Guide Dr. P s Ravindra Sir for his cooperation extended to me for the

Preparation of this project work.

I also express my sincere thanks to Mr. P.RAMBABU Sir, senior F&a Manager of

HBL power systems ltd. my internal guide of the Project. With His Esteemed Guidance,

support by providing Project Data and valuable time for completion of the Project.

I am profoundly thankful to Head of the Department, Professor Dr.P.S.Ravindra; of

MRCL.College, P.G. Courses for their helpful comments and information regarding the logic

and documentation of the project.

For the successful completion of my project I would like to thank Mr. Kamaya Sir,

Financial manager; of M/S BLACK GOLD PROFILES (P) Ltd., without his guidance the

completion of the project work would not have been possible.

Lastly, I am thankful to my parents, friends and all those people who contributed their part in

the preparation of this project.

(V .NAGENDRA BABU)

3

CONTENTS

CHAPTER 1 –Introduction

Introduction

Need for study

Objectives

Scope

Methodology

Limitations

CHAPTER – 2:

It deals with “steel rolling industries in India and Organizational profile of

Company Profile

CHAPTER 3 –

Theoretical frame work of FINANCIAL ANALYSIS

Meaning & Nature & scope of FINANCIAL ANALYSIS

Objectives Of FINANCIAL ANALYSIS

Limitations of FINANCIAL ANALYSIS

Techniques of FINANCIAL ANALYSIS

CHAPTER 4 – Analyses interpretation of FINANCIAL ANALYSIS

CHAPTER 5 – Summary & Suggestions

4

INTRODUCTION

Financial analysis is the process of identifying the finance strengths and weakness of

the firm by properly establishing relationship between the items of the balance sheet and the

profit and loss account.

The study on financial analysis help in assessing corporate excellence judging credit

worthiness and it also helps in determining the financial performance of the company of this

purpose date are collected for the period of 5 years. Various ratios are used in the study to

find out the liquidity position of the company.

The organization has to submit its true picture of financial position to the potential

lender of money and to the up coming partners for that it wanted to have the first utilize of

the analysis to rectify the problem if any. The process of identifying the finance strengths

and weakness of the firm by properly establishing relationship between the items of the

balance sheet and the profit and loss account. Financial analysis can be undertaken by

management of the firm or by parties out side of the firm viz. owners, creditor’s investors and

others to form judgment about the operating performance and financial position of the firm.

Users of the financial statements can get insight about the financial strength and weakness of

the firm if they properly analyze the information reported in the statements. Management

should be interested in knowing the financial strengths of the firm to make their best use and

able to spot the financial weakness of firm to take suitable corrective action.

5

Introduction to Ratio Analysis:

Financial statements are prepared primarily for decision making. They

play a dominant role in setting the frame work of managerial decision making.

But the information provided in as no meaningful conclusions can be drawn

from these statements alone. However, the information provided in these

financial statements is of immense use in making decisions through analysis and

interpretation of financial analysis is the process of identifying the financial

strength and weakness of the firm by properly establishing relation between the

items of the balance sheet and profit and loss account. There are various

methods or techniques used analyzing financial statements such as comparative

statements schedules of changes in working capital funds analysis etc. The

ration analysis is the most powerful to do financial analysis.

Meaning of Ratio Analysis:

According to accounts hand book by Wixom, kill and Bedford a ratio is

an expression of the quantitative relationship of one number to the other. Thus

in simple language ratio is one number expressed in terms of another and can be

worked by dividing one number to other. Ratio analysis defined as the

systematic use of ratio to interpret the functional statements so that strengths and

weakness of a firm as well as its historical performance and current financial

conditions can be determined.

This relationship can be expressed as

Percentage

Fraction

Proportion of numbers

Importance of Ratio Analysis:

Ratio analysis is relevant is assessing the performance of a company in

respect of the following aspect:-

Liquidity Position:

Companies’ liquidity position can be determined with the help of ratio

analysis. It the company is able to meet its current obligations, its liquidity

position is said to be satisfactory. The greater the ratio, greater the

6

companies .liquidity and vice versa. Ratios of liquidity are particularly useful in

credit analysis by banks and other suppliers of short term loans.

Long-Term Solvency:

Supplies of long term debt are concerned with the company’s long-term solvency and

survival. They analyze the company’s profitability over time through ratio analysis.

Operating Efficiency:

From the management point of view, ratio analysis is useful in

measuring the degree of efficiency in the management and utilization of its

assets.

Profitability:

Through the profitability ratios one can measure the company’s

profitability.

A. Managerial Uses Of Ratio Analysis:

a) Helps in Decision Making:

Financial statements are prepared primarily for decision-making. But the

information provided in financial statements is not an end in itself and no

meaningful conclusions can be drawn from these statements alone. Ratio

analysis helps in making decisions from the information provided in these

financial statements.

b) Helps In Financial Forecasting And Planning:

Ratio analysis is of much help in financial forecasting and planning.

Planning is looking a head and ratios calculated for a number of years work as a

guide for the future. Meaningful conclusions can be drawn for future from these

ratios. This ratio analysis helps in forecasting and planning.

c) Helps In Communicating:

The financial strength and weakness of a firm are communicated in easy

and understandable manner by the use of ratios. The information contained in

the financial statements is conveyed in a meaningful manner to the one for

whom it is meant.

d) Helps In Control:

7

Ratio analysis even helps in making effective control of the business. Standard

ratios can be based upon perform financial statements and variances or deviations,

ill any, can be found by complaining the actual with the standards so as to take

corrective action at the right time.

e) Other Uses:

There are so many uses of the ratio analysis. It is a useful part of the

budget control and standard costing.

B. Utility To Share Holders:

An investor in the company will like to know the financial position of

the concern where is going to invest. Ratio analysis will be useful to investors in

making up his mind whether present financial position of the concern warrants

further investments or not.

C. Utility To Creditors:

The creditors or supplies extend short-term credit to the concern. They

are interested to know whether financial position of the concern warrants their

payments at a specified time or not.

D. Utility To Employees:

The employees are also interested in the financial position of the concern

especially profitability. Their wages increased and amount of fringe benefits are

related to the volume of profits earned be the concern. The employees make use

of information available in financial statements.

E. Utility To Government:

Government is interested to know the overall strengths of the industry.

Government may base its future policies on the basis of industrial information

available from various units. The ratios may be used as indicators of overall

financial strengths of public as well as private sector.

Need For the Study

The Industrial sector and the financial system are undergoing

metamorphic changes following the process of liberalization and reforms. The

underlying principle behind every reform measure re-orientation of monetary

policy techniques, introduction of new money market instruments and

institutions, adoption of stricter prudential norms, inducing structural changes in

8

the financial system and strengthening regulatory arrangements has been to

make the system more competitive, efficient and profitable.

Every performance indicator seems to reflect the impact of thee

reform measures. Profitability of the industry has witnessed a steady

improvement mainly as a result of these measures, but also due to

mobilization of equity and Tier-II capital by a few industries’, Capital

adequacy rations have crossed the norms prescribed for almost all industries.

The industries have begun to focus on minimizing their asset liability

mismatches and on risk management.

At this backdrop, it is felt essential to study the financial

performance of the Lead Acid Division, HBL Power Systems Ltd, which is

one of the representatives of the system. Which is experiencing the recent

reforms?

Objectives of the Study

Keeping in view of the above stated facts the study is planned with

the following objectives.

To study the overview of the Lead Acid Division, HBL Power

Systems Ltd., and highlights of its performance.

To study the financial management practices adopted by the Lead

Acid Division, HBL Power Systems Ltd.

To study the financial performance of the Lead Acid Division,

HBL Power Systems Ltd., with the help of Ratio Analysis, Comparative

Statements, Common size Statements.

To suggest measures required for long- term sustainability and

prosperity of the industry

9

Methodology

Knowing the fact that for any economic investigation research,

methodology plays the most important role, the following methodology has

adapted to study present period.

The present study is aimed at critically examining the financial

performance of the Lead Acid Division, HBL Power Systems Ltd. In order to

carryout the study. The data collected from both primary and secondary

sources.

Primary data consists of information from the discussions with the

heads of the departments, officials and staff of finance department. But

majority of the information for the study is collected from the annual reports

and published reports of the industry were used. The basic understanding of

the subject is referred from different publication from professional institutions

like ICAI, ICWAI, ICSI and the valuable guidelines from different books.

The financial data for a period of five years i.e. from 2004-05 to

2007–08 is collected from the published annual report s of the industry, the

collected data is then analyses with the help of Ratio Analysis, one of the

effective tool for measuring performance of the organization.

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Limitations of the Study

Due to the time constraints it is difficult to study in depth the

performance of a big organization of the size Lead Acid Division, HBL

Power Systems Ltd.

Some of the confidential information was not revealed by the department, hence the qualitative aspects based on the data given by company.

The scope is limited to the HBL POWER SYSTEMS Ltd, but not equally applicable to other company.

The Head and the department’s information may be biased.

11

CHAPTER -II

ORGANIZATION PROFILE

Lead Acid Battery Industry- Profile an Overview

The Widest range of specialized DC Power Systems

HBL IS THE LARGEST MANUFACTURER OF SPECIALIZED

BATTERIES IN India, for Industrial, Telecom, Railways and Defense applications. HBL

offers its customers the most appropriate technology based on the requirement, from the

wide range of batteries-Nickel-cadmium, Silver Zinc, Lead-acid and Lithium batteries.

Chargers for rechargeable batteries are also manufactured in both TR and SMR versions

from 24V to 220V. The company has sales of about US$50 million and very substantial

design and development capabilities, in-house.

Over 25 years of experience in the domestic market and over 10 years in

exporting too many countries including USA, South Korea, West Asia and South East

Asia, has given HBL an understanding of the Customers’ special varied requirements,

several major customers have found the company’s products to be reliable over the years

and have placed repeat orders. The company has adequate marketing and service

personnel who can support the customers at short notice.

The Triumph-HP series is a premium design valve regulated lead acid battery

based n features offered by world class companies. The battery works on the gas

12

recombination principle and has been designed to meet the requirements of a wide range

of applications. This product has been manufactured under the controls.

Established by a for quality/environmental management system that meets the

requirements of ISO 9001-2000: ISO 14001:1996, which has been independently certified

by BVQI.

Products:

Nickel Cadmium Pocket Plate Batteries:

HBL offers a very wide range of Nickel Cadmium Pocket Plate Batteries that match

diverse applications and operating conditions. These are available in tough polypropylene

containers of single cell types and block battery types. Cells of Stainless Steel containers or

structural foam molded containers are also offered as options. Incorporating variations in

electrode design to meet different discharge requirements, HBL batteries are classified into

three types L, M & H. These batteries conform to IEC 60623 and are certified by Intertek

ETL SEMKO. They also conform to BS6260, DIN 40771 and other International Standards.

Benefits :

Exceptionally long & reliable service life

Adaptability to a wide temperature range

No emission of corrosive gases, Safe from flame & explosion

Minimal maintenance, Low life time cost, quick recharging

Range and Applications:

Cell Type Capacity Range Typical Back- up Typical

Application

L-Low Rate

KPL (Single)

KBL (Block)

11 to 480

8 to 1540

Above 3 Hours Fire Alarm Panels

Emergency

Lighting

13

Telecommunication

Switchgear

Protection

M-Medium

Rate

KPM (Single)

KBM (Block)

10 to 395

12 to 1460

60 Minutes to 3

Hours

Switchgear

Protection

Instrumentation

And

Process Control

U.P.S

Motive Power

Emergency

Lighting

H-High Rate

Starting

KPM (Single)

KBM (Block)

10 to 265

9 to 930

Below 60 minutes

Generator

U.P.S

Diesel locomotive

cracking

14

NICKET CADMIUM FIBRE PLATE BATTERIES:

These batteries use Fiber Plate electrodes. The three Dimensional Fiber Structure in

the plate provides a very high conducting density. The Advantages of this technology is its

low internal resistance, high rates of discharge, improved recharge capability and lower

weight with a high cycle life. The Ni-Cad Fiber Plate batteries are designed as L, M, and H

and X types to suit customer’s requirements. These batteries conform to IEC 60623 and are

certified by Intertek ETL SEMKO. They also conform to BS6260, DIN 40771 and other

International Standards.

Features:

Consistent Voltage Output and stable Capacity over lifetime

Long Service life and reliable Operation

Can be used in extreme temperature zones, Ease of recharging the battery

Ease of handling due to lightweight, Low maintenance and low water consumption

Excellent for cyclic applications

Range and Applications:

Cell Series

L-Low RateKFL Range(Single Block)

M-Medium RateKFM Range(Single & Block)

H-High RateKFH Range(Single & Block)

Capacity RangeAh

20 to 1500

11 to 1391

11 to 1026

Typical Backup

Above 3 hours

60 minutes to 3 hours

Below 60 minutes

Typical ApplicationsFire alarms, EmergencyLighting, Telecom, RailwaySignaling,Switchgear protection,Photovoltaic, CatholicProtection.

Switchgear protection,Emergency lighting, MotivePower, Train lighting,Instrumentation and processControl, UPS, Electricvehicles

Generator Starting, UPS,Diesel locomotive cranking,Aircraft/Helicopter ground starting,Electro magnets.

15

X – Ultra HighRageKFX Range(Single & Block)

11 to 120 Below 10 minutes Diesel locomotive cranking,Genset starting AGV’s

Sealed Cylindrical Ni-Cd Battery Packs for Defense Communications:

HBL’s Sealed Cylindrical NICAD Batteries are designed incorporating the latest

technology ensuring high standards. They are available in packs using a wide range of cells

from 110mAH to 8000m Ah for various applications.

Applications:

Memory back-up for interface Digital Equipment

RS.VPS-Mark-I LHP-219

Radio communications, Star-V, RS.VPS Mark II,

Kiran Mark I/IA

Range and Applications

Compact

High Reliability

User friendly

Easy re-chargeability

Maintenance free

Optimal Cell life

Consistent Voltage

Long Shelf life

Enhanced Performance.

PURE LEAD-TIN VRLA MONOBLOCKS:

The Pure Lead-Tin range offers the customer the highest energy density of any lead

acid battery anywhere. The battery is constructed around a complex thin plate, pure lead-tin

grid which packages more power in a smaller space. The plates being made of high purity

lead last longer, offering excellent life. The proven benefits of this superior technology are

high performance, quick recharge capability, high energy density and a long service life. The

6V & 12V monoblocks are available in capacities ranging from 12Ah to 150Ah.

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Benefits:

Maintenance-free and spill-proof. This enables flexible mounting

Wide operating temperature range (-40o C to + 50oC)

High energy density (gravimetric and volumetric)

Good charge retention leading to long storage life

Low internal resistance ensures quick recharge

Excellent high rate capability permits use of smaller capacity batteries

Superior raw materials for good performance and life

Excellent deep discharge recovery characteristics

UL recognized plastic components

These batteries conforms to IEC 60896 and are certified by Intertek ETL SEMKO

Tubular GEL VRLA Batteries:

The solar powered shelters carry batteries that expose them to higher temperatures.

Net result is the need for a heavy duty, robust, deep cycling battery that is also less sensitive

to high temperature.

To meet such rigors of temperatures and varying pattern of usage, HBL introduces “Tubular

Gel VRLA Battery” with unbeatable combination of “Tubular plate and gelled electrolyte.

Applications:

Wireless:

Base Transceiver, station (BTS), Base Switches (MSO), CDMA/3G base stations, main

switches.

Transmission:

Fiber optic system, Digital Microwave radi, Satellite earth stations

Switching:

Local access switches, primary exchanges, Central Office/Secondary exchange, Point of inter

connect switches, Internet & Gateway switches, Telecom collocation.

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Features & Benefits:

Pressure die-cast spine grids-Longer float life, Very good cycling capability required

for Indian conditions, Gelled Electrolyte – Very good heat dissipation, suitable for out door

installation, Antimony-free alloy – long shelf life, Valve regulated – No water additions

during service life, 100% capacity on first discharge. Ready to install, Safe and economical

transportation. No free acid, can be mounted both in horizontal and vertical orientation, ideal

for Solar Powered telecom installations.

TUBULAR ULTRA LOW MAINTENANCE LEADS ACID BATTERY:

Tubular LMLA battery is the combination of traditional advantage of tubular plate with

ultra-low-maintenance feature.

Tubular LMLA battery is a preferred choice for the applications with float, semi cyclic and

cyclic operations along with long service life, high cycle life, Partial state of Charge (PSOC)

& deep cycling requirements.

Taurus:

The “Taurus” Tubular plate low maintenance lead acid battery is the results of the strong

R&D Expertise gained by HBL over a decade of supplying millions of lead acid batteries to

various applications. “Taurus” batteries offer outstanding reliability over an expected service

life of around 15 years in float applications.

This battery offers very low maintenance, extended topping up frequency due to low

antimony alloy & high acid reservoir.

Silver Start- Pure Lead Tin VRLA Monoblocks Batteries for Civil Aviation:

The “Silver Sort” range of On-board Aircraft starting batteries from HBL are

designed using the Thin-plate Pure Lead tin Technology

Features that make these batteries the right choice for Aircraft starting

Applications:

Sealed, maintenance-free: no filling of acid or water

Excellent starting capability: very high peak power

Fast-charge capability: 100% recharge in 2 hours

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More flying hours: long life

Operation in very low temperature:-40o C to + 50o C

Safety inside the aircraft: non-spllable absorbed electrolyte design

Delivered fully charged, ready to use: no commissioning at site

Shock and vibration resistant: ideal for aerobatic use

“Silver Start” batteries conform to International Aviation Standards like:

IEC 60952-I

MIL 8565J.

Range of silver start 24V Aircraft Batteries (see Brochure for selection of battery for

Aircrafts)

10Ah @ 1 hr

18Ah @ 1 hr

25Ah @ 1 hr

42Ah @ 1 h

Nickel Cadmium Pocket Plate Batteries for Aircraft Ground Start:

HBL offers vented type NICAD Pocket Plate High Rate Batteries for ground

starting of MIG Aircrafts. The Batteries are mounted on an electrically driven trolley unit. It

consists of two banks of KPH 140P, each bank consisting of 24 cells.

These Batteries are primarily used for meeting the ground starting and servicing electric

power requirements for MIG Series of aircrafts. Additionally it supplies critical power to the

DC motor as the prime mover of the electrically driven trolley.

Benefits:

Excellent resistance to shock, vibrations, temperature and corrosion.

Exceptionally long and reliable service life

Low maintenance and low life time cost

Flame and explosion proof vent

No sudden death and negligible annual ageing

Quick Recharging and no memory effect

Nickel Cadmium Fiber Plate Batteries for Aircraft Ground Start :

HBL offers vented type NICAD Fiber Plate Batteries for ground starting of MIG

Aircrafts

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These Batteries are primarily used for meeting the starting and servicing electric

power requirements for MIG Series of aircrafts. The Batteries are mounted on an electric

driven trolley unit. It consists of two banks of KFH 160P each bank consisting of 24 cells.

Additionally it supplies critical power to the DC motor as the prime mover of the electrically

driven trolley.

The Batteries use High Rate Fiber Nickel Electrodes thereby giving an excellent

Electrical performance. The benefits of these batteries are low internal resistance, High rates

of discharge and improved recharge capability coupled with long cycle life.

Benefits:

Consistent Voltage Output and stable capacity over life time

Long Service Life

Ease of handling due to light weight

Fast recharge

Long topping of interval due to low water consumption

Can be used in extreme temperature zones

Can withstand mechanical stress

Most reliable

Sintered Plastic Bonded Batteries:

HBL’s Sintered Plastic Bonded Batteries are best suited for applications requiring

high reliability coupled with low maintenance and high performance.

The sintered Plastic Bonded batteries are manufactured using sintered positive

plates and Plastic Bonded negative plates. These are specially designed for High Power

Density and Reduced Water Consumption.

These batteries use polypropylene cell containers with thermally welded lids for

high impact resistance. Flame Retardant containers and lids are optional. All-steel terminal

and fasteners give these batteries the ruggedness required to meet the demanding application

needs. The cells are also provided with reliable flame-arresting vents and are assembled in

stainless steel crates (as an option) for easy handling.

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Benefits:

Optimized performance to suit application requirements.

Fits in a very small space.

Performs even at extremely low temperatures.

No topping with water required for long periods and Long Life.

INDUSTRY PROFILE

VALVE REGULATED POCKET PLATE BATTERIES:

Ultra Low maintenance Nickel Cadmium Valve Regulated Pocket Plate Battery

engineered by HBL redefines convenience. The VRPP has a pocket Plate construction to

guarantee the same reliability and performance as can be expected from a conventional

Nickel Cadmium Pocket Plate battery. The design ensures no water top-up requirement

during its lifetime under normal operating conditions.

Benefits:

Accepts low float voltages, No water top-up during lifetime, Capable of giving high

performance, Exceptionally long and reliable service life, Unsurpassed resistance to

Electrical and Mechanical abuse, Safe from Flame and Explosion These batteries conform to

IEC 60623 and are certified by Intertek ETL SEMKO. They also conform to BS6260, DIN

40771 and other International Standards.

Range: VRPP Batteries are available from 8 AH to 728 AH

Applications:

UPS

Railway Signaling

Telecommunications

Switchgear

Process Control

Emergency Lighting

Fire Alarm System

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Telecommunication:

Valve Regulated Lead Acid Batteries 2V Cells

Triumph HP is a premium design Valve Regulated Lead Acid Battery. The Battery works on

Gas Recombination Principle with AGM technology and heavy duty Lead Calcium Grids.

Available in a wide range: 80 Ah to 5800 Ah.

Benefits:

Does not require water top-up throughout its life

No corrosive fumes and hence no special battery rooms are required

Stackable design minimizes space requirements

Designed for high integrity & long life

Application specific designs

Customized layouts for optimum space utilization

Safe-Explosion-proof, lead-proof & flame-retardant material

Consistent performance over life time

Improved aesthetics

Easy installation

REQUIREMENTS ARE OF UTMOST IMPORTANCE:

Telecommunications

Switch Gear

Process Control Systems

Railway Signaling & Communication

Renewable Energy

The Company’s operations are divided into 3 Segments:

Batteries

Electronics

Others

Further, the company is divided into various divisions depending upon the nature of the

product; each division is treated as a separate company, each having its own funds allocation

and manpower in various departments.

The company manufactures various types of batteries viz., VRLA, Tubular, Monoblocks,

Nickel-Cadmium, Lithium, Silver-Zinc, and Thermal etc.

22

The electronics segment comprises of various divisions manufacturing electronic

equipment like rectifiers, IPS, chargers, embedded systems, data loggers etc.

Apart from batteries and electronics, the company also manufactures bulletproof jackets,

windmills etc. The company has recently taken up railway signaling works contracts.

The company has 3 divisions catering to the ancillary needs of the company, material

components divisions at Shamirpet, Nandigaon, Bhoothpure, Kandivalasa and VSEZ

(Duvvada) units indulge in various ancillary activities like sheet metal fabrication making of

racks, cutting, bending, plating etc. Plastic moldings division at Nandigaon manufactures

various types of boxes, and cell & battery containers.

Annual turnover of the company is around 800 cores.

HBL Company is the result of a merger in 1999 of Hyderabad Batteries Ltd., (HBL)

in corporate in 1977, and SAB NIFE power systems Ltd., incorporated in 1986. The two

companies which were under the same management were merged when foreign percentage of

equity investment in SAB NIFE becomes too small to justify separate legal entities.

The 28 years from 1977 to 2005 can be broken up into two phases of 14 years each.

1977-91 was a small scale industry phase. 1991-2005 was the stage of consolidation. HBL

company is no on a strong foundation. Whether in finance, technology, market position,

infrastructure, ability to attract talent, exports, diversified product Mix.

Future Plans:

Thinking bigger.

Equity focused plans to Reduce Debt even further.

Set up new overseas factories to serve export market (EU) UAE, Malaysia (USA)

(Currently in UK & Malaysia)

Export of high value engineering services using network in Europe (UK, Germany,

France, and Italy).

Use existing size and market access to source design and sub-assemblies from small

high tech companies, both in India and Europe, to do systems integration. Increase

sales/Investment ratio.

Value addition role in production of high-tech products, specially defense,

engineering services exports.

We expect sustained growth with high Incremental Capital Output Ratios because:-

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New business chosen need less capital (compared to manufacturing).

Economies of scale (In existing business)

Systems Integration opportunities need less capital

Financial Performance

Particulars 2008-09 2009-10 2010-11

Net sales

Operating profit before interest, depreciation &

ordinary items

Other income

Finance cost

Depreciation

Provision for tax & tax adjustment

Deferred tax liability

Net profit

Transfer to general reserve

Earning per share

Dividend provided

124390

20485

509

3883

2784

4370

216

9096

8000

3.75

30%

110951

21037

654

3831

2807

4117

240

10042

8000

4.06

30%

99494

8485

2297

4934

3030

145

989

1645

……

.650

10%

Performance Review:

Overall sales of the company for the year 2008-09 has recorded Rs. 124390 Lakes

compared to previous year of Rs. 97276. The represent an increase 50% over the last year.

The year 2009-10 has recorded 1109.51 cores compared to prevision year of Rs. 1243.90

cores.

This represent an increase of 30% for the year 2010-11 has recorded Rs. 99494 lakes

compared to previous year of Rs. 1,10,951 lakes. Profit after tax was Rs.1645 lakes for the

year 2010-11 as compared

The demand for HBL company product is continuing. Over all performance of the

HBL company is expected to grow. This will be the case both in VRLA batteries for

domestic market and NCPP batteries in export market. The demand has necessitated an

increase of additional capacities for manufacturing of VRLA and NCPP batteries. This deem

and for additional capacities has initiated capital expansion in its existing and as well as

setting up of new units at Vizianagaram.

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Subsidiary Companies:

HBL (UK) Limited a 100% subsidiary is UK has had a trademark violation case initiated

against it as a first defendant and the parent company as a second defendant. The legal claims

have created a situation wherein the accounts could not be finalized and audited. In absence

of any authentic information because of the operational difficulties the company is unable to

consolidate the accounts of the subsidiary with the parent company for the current fiscal year.

In the opinion of the management.

HBL Power systems (M) SDN BHD a subsidiary company in Malaysia has reported a

profit of Rs. 11.05 lakes for the year and accumulated loss Rs. 13.22. Lakes up to 31.03.08.

This loss is considered temporary and hence no provision is made in the accounts for the fall

in value of investment.

BHAGIRATH ENERGY SYSTEMS PVT LIMITED a wholly owned subsidiary in Nepal is

in process of winding up. Provision for diminution is the value of investment has been made

based on official liquidator’s certificate of a available cash.

Location of Plants:

Shameerpet, Ranga Reddy District, Andhra Pradesh.

Nandigam, Mahabubnagar District, Andhra Pradesh.

Bhoothpur, Mahabubnagar District, Andhra Pradesh

Kandhivalasa (Pusapatirega) Vizianagaram District, Andhra Pradesh.

VSEN, Visakhapatnam, Andhra Pradesh.

Haridwar, Uttarakhand

IMT, Maneswar, Haryana.

Bankers in HBL battery Ltd:

State Bank of India.

State Bank of Hyderabad.

IDBI Bank Ltd.,

State Bank of Indore.

25

PRODUCT PROFILE:

Batteries:

Nickel Cadmium Sintered Plated batteries

Nickel Cadmium Pocket Plated batteries

Nickel Cadmium Fiber Plated batteries

Silver-zinc aircraft batteries

Silver-zinc torpedo batteries

Sealed Cylindrical Nicked Cadmium batteries

Lithium batteries

Valve Regulated Lead Acid batteries

Sealed Lead Acid batteries

Tubular Vent batteries

Thermal batteries

Monoblocks batteries

Electronics:

Switch Mode Rectifiers

Integrated Power Supplies

Universal Battery Chargers

Rectifiers

Data Loggers

Thyristor based charged

HFTCs

SSIs

Fazes

Moving Target detectors

RF Power Amplifiers

BIT Units

26

Others:

Bulletproof jackets

Windmills

Cell Containers

Battery Containers for in-house use

Steel & Wooden racks

Packing boxes etc.

A

27

THEORITICAL FRAMEWORK

FINANCIAL ANALYSIS

A financial statement is an organized collection of data

according to logical and consistent procedures. Its purpose is to convey an

understanding of some financial aspects of a business firm. It may show a

position of a moment is time as in the case of a balance sheet, or many

reveal a series of activities of over a given period of time, as in the case of

an income statement.

Thus the term financial statement generally refers to two

basic statements: (I) the income statement (II) the balance sheet of course, a

business may also prepare (III) a statement of retained earnings and (IV) a

statement of changes in financial position in addition to the above statement.

Income Statement:

The income statement (also termed as profit and loss

account) is generally considered to be a most useful of all financial statement.

It explains what has happened to a business as a result of operations between

two balance sheets data. For this purpose it matches the revenues and costs

incurred in the process of earnings revenues and shows the net profit earned or

loss suffered during a particular period.

Balance Sheet:

It is a statement financial position of a business at a specified name of

time and the claims (or equities) of the owners and outsiders against those assets

at that line. It is in a way snap shot of the financial condition of the business at

that time.

Statement of Retained Earnings:

The term-retained earnings mean the accumulated excess of earnings

over loss and dividends. The balance shown by then income statement is

28

transferred to the balance sheet through this statement, after making

necessary appropriation. It is thus, a connecting link between the balances

sheet and income statement. It is fundamentally a display of things that have

caused the beginning of the period-retained earnings balance to be changed

in the balance sheet.

The statement is also termed as profit and loss appropriation accounts

in case of companies.

Statement of Changes in Financial Position:

In balance sheet shows the financial condition of the business at a

particular moment of time while the income statement discloses the results

of operation of business over of time. The statement may emphasize any of

the following relating to change in financial position of the business.

Change in the firm’s working capital.

Change in the firm’s cash position

Change in the firm’s total financial position.

The terms funds flow statement and cash flow statement are properly

used for the first and second type of statements while the term statement of

changes in financial position is used for the third type of statement.

Nature of Financial Statement:

Financial statement also called, as financial reports are plain

statements of informed opinion uncompromising in their truthfulness with in

the limits of accepted accounting principles. The balance sheet or

statement of financial position reflects the assets, liabilities and capital as

on a particular date. The profit and loss statement shows the results

achieved earnings includes such schedules as those relating to land,

buildings, equipment investors, long-term investment accrued liabilities,

long-term debts, cost of goods manufactured selling expenses,

administrative and general expenses etc. on the basis of information in those

reports the management is able to review the companies progress to date and

make decisions upon the courses of action to be taken in future.

29

The balance sheet or the position statement is the principle guide to

the main question where business stands on a particular date. It gives

management a snap shot view of financial position of measures the past

performance.

It gives the details of the sales revenue and expense. The difference

between the total revenues and total expenditures constitutes the profit of the

firm. The changes in the values of assets, liabilities and other accounts

are reflected by the source and application of funds statements. The cash

flow budget is used to project cash needs, to identify cash surplus and to

highlight possible critical point on the income and out go cash.

The perform statement of future incomes, expenses assets and

liabilities of the business. The financial statements provide a measure of

performance and are, therefore used as media to facilitate assessment by top

management as to the degree of attainment of planned profit and financial

growth.

In case of joint stock companies governed by the company Act, it is a

legal requirement that the profit & loss account should be so drawn up as to

give a true and fair picture of the profit earned or loss suffered during the

year and the balance sheet gives us on its date a true and fair picture of the

financial position of the company.

Types of Financial Analysis:

Financial analysis can be classified in to different categories depending upon:

On the basis of material used.

On the basis of modus operand

On The Basis Of Material Used:

30

Types of financial analysis

On the basis of material eeeeqeqused

On the basis of modules operandi

Internal analysis

External analysis

l

analysis

Horizontal

analysis

Vertical

analysis

According to the basis, financial analysis can be of two types:

External Analysis:

Those who are outsiders for the business do this analysis. These

persons mainly depend upon the published financial statement. Their

analysis serves only a limited purpose.

Internal Analysis:

Persons who have access to the books do this analysis of account and

at other information related to the business. Such an analysis can be done by

executives and employees of the organization. The analysis is done

depending upon the objective to be achieved through this analysis.

On The Basis Of Modus Operandi:

According to this financial analysis can also be of two types:

Horizontal Analysis:

In case of this type of analysis, financial statements for a number of years

are reviewed and analyzed the current year figures are compared with the

standard or base year. The analysis statement usually contains figures for two

or more years and the change are shown regarding each item from the base

year usually in the form of percentage. Since this type of analysis is based on

the data from year rather than on one date, it is also termed as “Dynamics

Analysis”.

Vertical Analysis:

In case of this type of analysis a study is made of the quantitative

relationship of various items in the financial statements on a particular date.

Since this analysis depends on the data for one period, this is not only very

conductive to a proper analysis of the company’s financial position. It is also

called static analyses as it is frequently used for referring to ratios developed

on one date or for one accounting period.

31

Techniques of Financial Analysis:

A financial analysis can adopt one or more of the following techniques

tolls of financial analysis.

Comparative Finance Statement:

The statements, which have been designed in a way so as to provide

time perspective to the consideration of various elements of financial

position embodied in such statements. In these statements figures for two or

more periods are placed side by side to facilitate comparison.

Both the income statements and balance sheet can be prepared in the

form of comparative financial statement.

The comparative financial statement contains the following items:

Absolute figure (amount in Rs. As given in the final

accounts)

Absolute figures expressed in terms of percentages.

Increase or decrease in absolute figures in terms of money

value.

Increases or decrease in terms of percentages.

Comparison expressed in ratios.

Percentage of totals.

Comparative Income Statement:

The income statement (profit & loss A/c) gives the results of the

operations during a definite period. It reveals the profit earned or loss

incurred by the concern. The comparative study of income statement for

32

Financial Analysis Techniques

Comparative Statement

Common size statement

Funds Flow

Trend

AnalysisRatio

Analysis

more than one year may enable us to know the progress of the concern. First

two columns give figures of various items for two years.

The third and fourth column used to show increase or decrease in

figures in absolute amounts and percentages respectively. The following

steps are adopted in preparing comparative balance sheet.

In first step, find out the changes in absolute figures i.e.,

increase or decrease should be calculated.

In second step, percentage of change should be calculated

with the help of the following formula.

Change in amount

Percentage of Change = -------------------------- X 100

Base year amount

Guidelines for interpretation:

The increase or decrease in sales should be compared with Increase or

decrease in cost of goods sold. If increase in sales is more than the cost

of goods sold. It means that the profitability of the concern is increase.

The amount of gross profit should be studies.

Operating profits should be studied. The expenses should be deducted

from gross profit to find out operating and then operating incomes

should be added.

The next step is some of the non-operating expenses are to be deducted

from the operating profits and non-operating incomes should be added to

get net profits.

The opinion should be formed the profitability of the business

concern and it should be given at the end.

33

Comparative Balance sheet:

The balance sheet prepared on a particular date reveals the financial

position of the concern on the date to study the trends of business over a

period of time comparative balance sheet is prepared. The comparative

study of balance sheet reveals the cause for changes in the financial position

on amount of various transactions. The comparative study light on financial

policies adopted by management.

The comparative balance sheet consists of two columns for the original

data. A third column used to show increase or decrease in various items. A

fourth column containing the percentage of increase of decrease may be

added.

Guidelines for interpretation of Balance sheet:

The short-term financial position can be studied by comparing the

working capital of both the years.

To study the liquidity position changes in liquid assets must be

ascertain if there is any increase in liquid assets. We must understand

that there is an improvement in the liquidity position of the concern

and vice versa.

A high increase in sundry debtors and bills receivables mean an

increase in risk in collecting the amount of dues.

A high increase in closing stock may mean that decrease in the

demand.

Long-term financial position of the business concern can be analyzed

by studying the changes in fixed assets, long-term liabilities and

capital.

Fixed assets must be compared with long-term loans and capital. If

the increase in fixed assets is more than the increase in long-term

financers than a part of fixed assets has been financed from the

working capital, which is not good.

34

If the increase in long term financial is more than the increase in

fixed assets. It means that apart of long-term finance is made

available for the working capital.

If there is an increase in profit &loss Account or reserve balance it

means that there is an increase in profitability of the concern. The

decrease in profits & loss Account reserves means payment of

dividends, capitalization of profit by issue of bonus share may be

assumed.

Common Size Statement:

The common size statement, balance sheet and income statement are

shown in analytical percentage. The figures are shown as percentage of total

assets, total liabilities and sales. The total assets are taken as 100 and

different assets are expressed as percentage of the total. Similarly, various

liabilities are taken as a part of total liabilities.

These statements are also known as component percentage 100%

statements because every individual item is stated as percentage of the total

100. The shortcomings in comparative statements and trend percentages

where changes in items could not be compared with the totals have been

covered up. The common size statements may be prepared in the following

way:

1. The totals of assets or liabilities are taken as 100.

2. The individual’s assets are expressed as a percentage of total assets

i.e. 100 and different liabilities are calculated in relation to total liabilities.

Common Size Income Statement:

The items in income statements can be shown as percentages of sales

to show the relation of each item to sales. A significant relationship can be

established between items of income statement and volume of sales. The

increase in sales will certainly increase selling expenses and not

administrative or finance expenses. In case the volume of sales increases to

a considerable extent, administrative and financial expenses may go up. In

case the sales are declining, the selling expenses should be reduced at once.

35

So, a relationship is helpful in evaluating operational activities of the

enterprise.

Common Size Balance Sheet:

A statement in which balance sheet items are expressed as the ratio

of each liability is expressed as a ratio of total liability is called common

size balance sheet.

The common size balance sheet is a horizontal analysis. The

comparison of figures in different periods is not useful because total figures

may be affected by a number of factors. It is not possible to establish

standard norms for various assets. The trends of year to year not be studied

and even they may not given proper results.

Trend analysis:

Trend analysis is an important and useful technique of financial analysis. It

involves computation of index numbers of the moments of the various financial

items in the financial statements for a number of periods. It enables to know the

changes in the financial position and the operational efficiency between the period

chosen.

Through trend analysis the analyst can give his opinion as to whether

favorable or unfavorable tendencies are reflected by the accounting data.

The comparative and common size balance sheets suffer from a major

limitation i.e. absence of basic standard to indicate whether the proportion of

an item is normal or abnormal but trend analysis overcomes this limitations.

Trend analysis values are calculated for each item in isolation but

conclusions are to be drawn by studying the related items also.

36

Utility and Significance of Financial Statements:

The users of financial statements fall into various categories:

1. The directors of the company use them to create a favorable of the

enterprise so as to attract favorable comments from the shareholders and the

prospective investors.

2. The financial statements are used as media of information regarding

the states of productivity, profitability and financial health of the

enterprises.

3. They are equally useful to the economists, economic theorists, stock

exchanges, investment analysts, exchange and security commissions and

various government departments engaged in economic intelligence.

4. Internal revenue authorities use them for assessment realizable direct

and indirect taxes.

5. The top management uses them for planning and making vital

decisions.

6. The bankers make use of these statements to have sufficient

information to justify the making of loans. The credit managers extend

credit on the basis of the information gathered by these financial statements.

7. Investors who demand a sufficient record financial success also

make use of them.

8. Future oriented managers and accountants utilize profit planning and

budgeting as tools of forward accounting. The financial statements provide a

measure of performance and are, therefore used as a media to facilitate

assessment by top management as to the degree of attainment to planned

profit and financial growth.

37

Limitations of Financial Statements:

1. Financial statements are essential interim reports, and therefore, can not

be final. The actual gain or loss of a business can be determined only

after it has put down its shelters. Income and cost transactions flow

continuously through out the life of the business enterprise. The

existence of contingent assets and liabilities differed maintenance etc.,

make the statement of assets and liabilities imprecise.

2. Financial statements tend to give an appearance of finality and accuracy

because they are expressed in exact money amounts any value may be

ascribed to the amounts presented in the statements depending upon in

value standards of the person dealing with them. Rarely does the value

put on an asset represent the amount of cash, which would be realized on

liquidation. The amount of the assets shown do not as a rule represent

either the amount for which fixed assets could be sold or the amount that

would have to be spent to replace them.

3. Financial statements are complied on the basis of historical costs; there

may be market decline in the value of monetary unit and resultant rise in

prices.

4. In such a case the balance sheet loses its functions as index current

economic realities. Similarly an increase in volume may represent

increase in selling prices.

5. Financial statements do not give to many factors, which have a bearing

financial conditions and operating results because they cannot be stated

in terms of money and are qualitative in nature.

6. Precision of the financial statement information is impossible because

the statements deal with matters that cannot be measured precisely.

7. These statements fail to give the full story.

38

CHAPTER- IV

39

PROFITABILITY: Profit margin indicates how efficient the company’s management is in operating the company and in controlling costs. Profit margin as measured by net income as a percentage of sales.

PROFITABILITY = EBIT/ SALES

PROFITABILITY FOR THE YEAR 2003-04 and 2004-05:

YEAR 2004 -05 2003 -04

Net salesOther incomeLess:expenditure

EBIT

sales

PROFITABILITY

283798174921884409

2587337067

272529091

169020067420933728

1585452395

125682007

2837981749 2837981749 1690200674 1690200674

9.602 7.436

40

ACTIVITY FOR THE YEAR 2003-04 AND2004-05:

YEAR 2004 -05 2003 -04

Sales:

Total net assets:

Fixed assets

Net Current assets

ACTIVITY

2837981749 2837981749 1690200674 1690200674

955464846

1305654901 2261119747

840479305

780097569 1620576874

1.255 1.043

DUPONT Analysis of ROCE 2003-04 & 2004-05

YEAR 2004 -05 2003 -04


EBIT

Fixed assets

Net Current assets

Total net assets:

ROCE

283798174921884409

2587337067

272529091

169020067420933728

1585452395

125682007

955464846

1305654901

2261119747

840479305

780097569

620576874

12.051 7.756

41

DUPONT PROFITABILITY ACTIVITY ROCE

2003-04 7.436 1.043 7.756

2004-05 9.602 1.25512.051

0

2

4

6

8

10

12

14

2003-04 2004-05

PROFITABILITY

ACTIVITY

ROCE

42

DUPONT Analysis The profitability of the firm as shown by the first component has increased from

7.436 to 9.602 for the year 2003-04 to 2004-05.which is good for the company.

Due to the sales rapidly increase at the same time slight increase in expenses. It

caused to increase in EBIT(earnings before interest and tax)

The second component is indicative of the balance sheet i.e. activity of the firm.

The total assets have increased from 1.043 to 1.255 for the year 2003-04 to 2004-

05. This shows a usage of the assets efficiently. Therefore the major causes for

increase of activity is increase of net current assets

When the ROCE increases from 7.756 to 12.051 we can find that total net assets

and sales have increased for the year 2003-04 to 2004-05.

The financial position of the company is found to be satisfied


YEAR 2005 -06 2004 -05


EBIT

sales

PROFITABILITY

367983553229375510

3323790836

385420206

283798174921884409

2587337067

272529091

3679835532 3679835532 2837981749 2837981749

10.474 9.602

43

ACTIVITY FOR THE YEAR2004-05 AND2005-06:

YEAR 2005 -06 2004 -05

Sales:

Total net assets:Fixed assets

Net Current assets

ACTIVITY

3679835532 3679835532 2837981749 2837981749

1235387804

1775285665 3010673469

955464846

1305654901 261119747

1.222 1.255

DUPONT Analysis of ROCE 2004-05 & 2005-06:

YEAR 2005-06 2004-05


EBIT

Fixed assets

Net Current assets

Total net assets:

367983553229375510

3323790836

385420206

283798174921884409

2587337067

272529091

1235387804

1775285665

3010673469

955464846

1305654901

2261119747

44

ROCE 12.799 12.051


2004-05 9.602 1.255 12.051

2005-06 10.474 1.222 12.799

0

2

4

6

8

10

12

14

2004-05 2005-06

PROFITABILITY

ACTIVITY

ROCE





45








.


YEAR 2006-07 2005 -06


EBIT

sales

PROFITABILITY

511849003039518017

4642758143

515249904

367983553229375510

3323790836

385420206

5118490030 5118490030 3679835532 3679835532

10.066 10.474

ACTIVITY FOR THE YEAR2005-06AND2006-07:

46

YEAR 2006 -07 2005 -06

Sales:

Fixed assets

Net Current assets

Total net assets:

ACTIVITY

5118490030 5118490030 3679835532 3679835532

1763483666

3750365970

5513849636

1235387804

1775285665

3010673469

1.353

1.222


YEAR 2006-07 2005 -06


EBIT

Fixed assets

Net Current assets

Total net assets:

ROCE

511849003039518017

4642758143

515249904

367983553229375510

3323790836

385420206

1763483666

3750365970

5513849636

1235387804

1775285665

3010673469

13.619 12.799

47


2005-06 10.474 .222 12.799

2006-07 10.066 1.353 13.619

0

2

4

6

8

10

12

14

16

2005-06 2006-07

PROFITABILITY

ACTIVITY

ROCE









48





YEAR 2007 -08 2006-07


EBIT

sales

PROFITABILITY

972756448437048061

8651681402

1112931143

511849003039518017

4642758143

515249904

9727564484 9727564484 5118490030 5118490030

11.441 10.066

ACTIVITY FOR THE YEAR2006-07AND2007-08:

YEAR 2007 -08 2006 -07

49

Sales:

Fixed assets

Net Current assets

Total net assets:

ACTIVITY

9727564484 9727564484 5118490030 5118490030

2538943725

3750365970

6289309695

1763483666

3750365970

5513849636

1.569 1.353

DUPONT Analysis of ROCE 2006-07& 2007-08:

YEAR 2007 -08 2006 -07


EBIT

Fixed asets

Net Crurent assents

Total net assets:

ROCE

972756448437048061

8651681402

1112931143

511849003039518017

4642758143

515249904

2538943725

3750365970

6289309695

763483666

3750365970

5513849636

17.696 13.619


50

2006-07 10.066 1.353 13.619

2007-08 11.441 1.569 17.951

0

2

4

6

8

10

12

14

16

18

20

2006-07 2007-08

PROFITABILITY

ACTIVITY

ROCE












PROFITABILITY FOR THE YEAR 2007-08 and 2008 -09:

51

YEAR 2008 -09 2007 -08


EBIT

sales

PROFITABILITY

1243895785350885209

11107978389

1381864673

972756448437048061

8651681402

1112931143

12438957853 12438957853 9727564484 9727564484

11.109 11.441

ACTIVITY FOR THE YEAR2007-08AND2008-09:YEAR 2008 -09 2007 -08

Sales:

Fixed assets

Net Current assets

Total net assets:

ACTIVITY

12438957853 12438957853 9727564484 9727564484

2801164515

5091557929

6892722444

2538943725

37503659706198698521

1.804 1.569


YEAR 2008 -09 2007 -08

Net salesOther incomeLess:

1243895785350885209

972756448437048061

52

expenditure

EBIT

Fixed asets

Net Crurent assents

Total net assets:

ROCE

111079783891381864673

8651681402

1112931143

2801164515

5091557929

6892722444

2538943725

3750365970

6289309695

20.048 17.696


2007-08 11.441 1.569 17.951

2008-09 11.109 1.933 21.474

53












54

0

5

10

15

20

25

2007-08 2008-09

PROFITABILITY

ACTIVITY

ROCE

PROFITABILITY FOR THE YEAR 2008-09 and 2009 -10:YEAR 2009-10 2008 -09


EBIT

sales

PROFITABILITY

1109514862465401405

9720715562

1439834467

1243895785350885209

11107978389

1381864673

ACTIVITY FOR THE YEAR2008-09AND2009-10:YEAR 2009-10 2008 -09

Sales:

Fixed assets

Net Current assets

Total net assets:

ACTIVITY

11095148624 11095148624 12438957853 12438957853

3359690439

5132065238

8491755677

2801164515

4091557929

6892722444

1.306 1.804

DUPONT Analysis of ROCE 2008-09& 2009-10:

YEAR 2009-10 2008 -09


EBIT

1109514862465401405

9720715562

1439834467

1243895785350885209

11107978389

1381864673

55

Fixed asets

Net Crurent assents

Total net assets:

ROCE

3359690439

5132065238

8491755677

2801164515

5091557929

6892722444

16.95520.048


2008-09 11.441 1.804 20.048

2009-10 12.97 1.306 16.955


11.441 to 12.97for the year 2008-09to 2009-10.which is good for the company.




The total assets have increased from 1.1.804 to 1.306 for the year 2008-09to 2009

This shows a usage of the assets efficiently. Therefore the major causes for



and sales have increased for the year 2008-09to 2009-10.


56

PROFITABILITY FOR THE YEAR 2009-10and 2010-11:

YEAR 2010-11 2009-10


EBIT

sales

PROFITABILITY

994945550279035717

10127088113

-98596894

1109514862465401405

9720715562

1439834467

9949455502 11095148624

0.99 12.97

ACTIVITY FOR THE YEAR2009-10and2010-11:YEAR 2010-11 2009-10

Sales:

Fixed assets

Net Current assets

Total net assets:

ACTIVITY

9949455502 9949455502 11095148624 11095148624

4127094521

5800879549

9927974070

3359690439

5132065238

8491755677

1.002 1.306

57

DUPONT Analysis of ROCE 2010-11&2009-10:

YEAR 2010-11 2009-10


EBIT

Fixed asets

Net Crurent assents

Total net assets:

ROCE

994945559279035717

10127088113

-98596894

11095248624

65401405

97207155621439834467

4127094521

5800879549

9927974070

3359690439

5132065238

8491755677

0.993

16.955


2009-10 12.97 1.306 16.955

2010-11 0.99 1.022 -0.993

DUPONT Analysis

58

The profitability of the firm as shown by the first component has increased from

12.97 to 0.99 for the year 2009-10 to 2010-11.which is good for the company. Due

to the sales rapidly decrease at the same time slight increase in expenses. It caused

to increase in EBIT(earnings before interest and tax)


The total assets have increased from 1. 1.306 to 1.022for the year 2009-10 to 2010-


increase of activity is decrease of net current assets



The financial position of the company is found to be not satisfied

59

Return on Investment:

Particulars 2004 -05 2003-04INCOME STATEMENT

Profit Before Interest TaxLess: extra ordinary items

Profit Before Tax

Less: Income Tax Provision

Deferred tax

Income & wealth tax

Profit after tax:-

BALANCE SHEET

Fixed assets

Net current assets

investments

Capital in progress

Miscellaneous expenses

Total assets

ROI

272529091

13629144

125682007

1000000

258899947

52500000

19263000

2656547

184480400

124682007

17500000

16445000

4128641

86608366

955464846

1305654901

14435636

76353775

55851777

2357494335

840479305

780097569

13595200

50247208

10791465

1695210747

7.8255.019

60

DUPONT Analysis of Return on Investment for the year 2003-04 to 2004-05:

The Income Statement of the firm as shown by the first component of profit after tax has

increased 86608366 from 184480400 for the year 2003-04 to 2004-05 .which is good for

the company. Due to the more increase in profit after tax at the same time slight increase

in total assets.

The second component is indicative of the balance sheet of the firm. The total assets have

increased from 1695210747 to2357494335 for the year 2003-04 to 2004-05. This shows

a usage of the assets efficiently. Therefore the major causes for increase of total assets in

balance sheet.

When the ROI increases from 5.019 to 7.825 we can find that total assets and profit after

tax have increased for the year 2003-04 to 2004-05.

The Return on Investment of the company is found to be satisfied.

particulars 2005 -06 2004 -05


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

385420206

-

272529091

13629144

385420206

97500000

7732216

8185324

262488666

258899947

52500000

19263000

2656547

184480400

61

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

1235387804

1775285665

184252474

181294231

4338211

3380558385

955464846

1305654901

14435636

76353775

55851777

2357494335

7.765 7.825



increased 184480400 from 262488666 for the year 2004-05 to 2005-06 .which is good

for the company. Due to the more increase in profit after tax at the same time slight

increase in total assets.

The second component is indicative of the balance sheet of the firm. The total

assets have increased from 2357494335 to 3380558385 for the year 2004-05 to

2005-06. This shows a usage of the assets efficiently. Therefore the major causes

for increase of total assets in balance sheet.

When the ROI decreases from 7.825 to 7.765 we can find that total assets and

profit after tax have increased for the year 2004-05 to 2005-06.


particulars 2006 -07 2005 -06

62


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

515249904

-

385420206

-

515249904

152500000

26764000

15217491

320768413

385420206

97500000

7732216

8185324

262488666

1763483666

2019525202

25679644

444287216

11295750

4264271478

1235387804

1775285665

184252474

181294231

4338211

3380558385

7.5227.765


The Income Statement of the firm as shown by the first component of profit after

tax has increased from 262488666 to 320768413 for the year 2005-06 to 2006-

07which is good for the company. Due to the more increase in profit after tax at

the same time slight increase in total assets.



63



When the ROI decreases from7.765 to 7.522 we can find that total assets and



particulars 2007 -08 2006 -07


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

1112931143

10323850

515249904

-

1102607293

370000000

24200000

37103851

670878442

515249904

152500000

26764000

15217491

320768413

2538943725

3750365970

36135700

344821831

8200674

6678467900

1763483666

2019525202

25679644

444287216

11295750

4264271478

10.0457.522

64

1 DUPONT Analysis of Return on Investment for the year 2006-07 to 2007-08:


tax has increased from 320768413 to 670878442 for the year 2006-07 to 2007-08

which is good for the company. Due to the more increase in profit after tax at the

same time slight increase in total assets.



2006708. This shows a usage of the assets efficiently. Therefore the major causes


When the ROI increases from7.522 to10.045 we can find that total assets and



particulars 2008 -09 2007 -08


Profit Before Tax


Deferred tax

Income & wealth tax

381864673

13581692

1112931143

10323850

1368282981

420000000

23076488

15650000

909556493

1102607293

370000000

24200000

37103851

670878442

65

Profit after tax:-

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

2881519479

4091557929

33635700

663740459

5105599

7675559166

2538943725

3750365970

36135700

344821831

8200674

6678467900

11.85 10.045



increased from 320768413 to 670878442 for the year 2007-08to 2008-09 which is good




increased from 6678467900 to 7675559166 for the year 2007-08 to 2008-09. This

shows a usage of the assets efficiently. Therefore the major causes for increase of total

assets in balance sheet.

When the ROI increases from 10.045 to 11.85we can find that total assets and profit after



Particulars 2009-10 2008-09

66


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

1439834467

______ 381864673

13581692

1439834467

415000000

24000000

1004179022

1368282981

420000000

23076488

15650000

909556493

3429789193

5132065238

206121160

78820619_______

8846796210

2881519479

4091557929

33635700

663740459

5105599

7675559166

11.35 11.85



increased from 909556493 to 1004179022for the year 2008-09 to 2009-10 which is good



67


increased from 7675559166 to 9556181782 for the year 2008-09 to2009-10. This shows


balance sheet.


tax have decreased for the year 2008-09 to 2009-10.


particulars 2010-11 2009-10


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

52103188

______

1439834467

______

52103188

98900000

164494886

1439834467

415000000

24000000

1004179022

68

Fixed assets

Net current assets

investments

Capital in progress


Total assets

ROI

4186937065

5800879549

1412184078

937355144

______12337355836

3429789193

5132065238

206121160

78820619

_______ 8846796210

1.333 11.35



increased from 1004179022 to 164494886 for the year 2009-10 to2010-11 which is good

for the company. Due to the more decrease in profit after tax at the same time slight



increased from 9556181782 to12337355836 for the year 2009-10 to 2010-11. This shows


balance sheet.

When the ROI increases from 11.35 11.333we can find that total assets and profit after

tax have decreased for the year 2009-10 to 2010-11.


69

Return on equity:

particulars 2004 -05 2003 -04


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

272529091

13629144

125682007

1000000

258899947

52500000

19263000

2656547

184480400

124682007

17500000

16445000

4128641

86608366

200723230

967524905

1168248135

200723230

817375705

1018098935

15.791 8.507

DUPONT Analysis of Return on Equity for the year 2003-04 to 2004-05


increased 86608366 from 184480400 for the year 2003-04 to 2004-05 .which is good for

the company. Due to the more increase in profit after tax at the same time slight increase

in owners’ equity

70

The second component is indicative of the balance sheet of the firm. The total owners’

equity increased from1018098935 to 1168248135 for the year 2003-04 to 2004-05. This

shows the value of the form increases.

Therefore the major causes for increase of total assets in balance sheet.

When the ROE increases from 8.507 to 15.791 we can find that profit after tax and

owners’ equity had increased for the year 2003-04 to 2004-05.

The Return on Equity of the company is found to be satisfied.

Return on equity of 2004-05 and 2005-06:

particulars 2005 -06 2004 -05


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

385420206

-

272529091

13629144

385420206

97500000

7732216

8185324

262488666

258899947

52500000

19263000

2656547

184480400

220723230

16822616231902984853

200723230

967524905

1168248135

13.79315.791

71

DUPONT Analysis of Return on Equity for the year 2004-05 to 2005-06:


tax has increased 184480400 from 262488666 for the year 2004-05 to 2005-

06 .which is good for the company. Due to the more increase in profit after tax at

the same time slight increase.

The second component is indicative of the balance sheet of the firm. The owners’

equity increased had increased from 1168248135 to 1902984853 for the year

2004-05 to 200-09. This shows a usage of the assets efficiently. Therefore the

major causes for increase of total assets in balance sheet.

When the ROI increases from 10.045 to 11.85we can find that total assets and



72

Return on equity of 2005-06 and 2006-07:particulars 2006 -07 2005 -06


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

515249904

-

385420206

-

515249904

152500000

26764000

15217491

320768413

385420206

97500000

7732216

8185324

262488666

242795550

2155296593

2398092143

220723230

16822616231902984853

13.376 13.793

73



tax has increased from 262488666 to 320768413 for the year 2005-06 to 2006-


the same time slight increase in owners’ equity.








74


particulars 2007 -08 2006 -07


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

1112931143

10323850

515249904

-

1102607293

370000000

24200000

37103851

670878442

515249904

152500000

26764000

15217491

320768413

242795550

2783566236

3026361786

242795550

2155296593

2398092143

22.168 13.376

75



increased from 320768413 to 670878442 for the year 2006-07to 2007-08 which is good




increased from 6678467900 to 7675559166 for the year 2006-07 to 2007-08. This

shows a usage of the assets efficiently. Therefore the major causes for increase of total

assets in balance sheet.




76


particulars 2008 -09 2007 -08


Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

381864673

13581692

1112931143

10323850

1368282981

420000000

23076488

15650000

909556493

1102607293

370000000

24200000

37103851

670878442

242795550

3607905133

3850700683

242795550

2783566236

3026361786

23.62 22.168

77



tax has increased from 320768413 to 670878442 for the year 2007-08to 2008-09

which is good for the company. Due to the more increase in profit after tax at the

same time slight increase in owners’ equity.








78




Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

1439834467 381864673

13581692

1439834467

415000000

24000000

1004179022

1368282981

420000000

23076488

15650000

909556493

253000000

4860324964

5113324964

242795550

3607905133

3850700683

19.63 23.62

79

80

DUPONT Analysis of Return on Equity for the year 2008-09 to2009-10:


tax has increased from 909556493 to 1004179022for the year 2008-09 to 2009-


the same time slight increase in owners’ equity.


assets have increased from 7675559166 to 9556181782for the year2008-09 to




profit after tax have increased for the year2008-09 to2009-10.


81

Return on equity of 2009-10and 2010-11:



Profit Before Tax


Deferred tax

Income & wealth tax

Profit after tax:-

share capital

Reserves & surplus

Owners equity

ROE

52103188 1439834467

52103188

98900000

164494886

1439834467

415000000

24000000

1004179022

253000000

4995415557

5248415557

253000000

4860324964

5113324964

03.13 19.63

82

DUPONT Analysis of Return on equity for the year 2009-10 to 2010-11:


tax has increased from 1004179022 to 164494886 for the year 2009-10 to2010-11

which is good for the company. Due to the more decrease in profit after tax at the

same time slight increase in total assets.


assets have increased from 9556181782 to12337355836 for the year 2009-10 to




profit after tax have decreased for the year 2009-10 to 2010-11.

The Return on Investment of the company is found to be satisfied

83

84

SUMMARY

The project titled “Financial Analysis” in HBL Power systems Limited” is

divided into 5 chapters. Whenever need is felt suggestions have been offered.

Chapter wise summary as follows:

The First Chapter:

It deals with the introduction, need for the study, objectives, methodology

and limitations of the study. The financial management is a financial aspect which

deals with all the financial transactions done in an organization. Every

organization irrespective of its size and machine may be viewed as a financial

entity. The scope of the finance functions was treated by the traditional approach

in the narrow sense of procurement of funds by corporate enterprise to meet their

financial needs. It has now been discarded as it suffers from serious limitations.

The modern approach views the term financial management in a broad

sense are provides a conceptual and analytical frame work for financial decision

making. According to it, the finance function covers both acquisitions of funds as

well as their allocations. The new approach is on analytical way of viewing the

financial problems of a firm. Thus, financial management in the modern sense of

the firm can be listed as financial analysis, planning and control investing

financing. It also involves some of important routine finance functions like

supervision of cash receipts and payments and safeguarding of cash balances.

Custody and safeguarding of securities, insurance policies and other valuable

papers. Apart from thus, objectives of financial management such as profit

maximization, wealth maximization are also clearly illustrated. The methodology

involves primary data and secondary data. The required data has been collected

from the income and expenditure and balance sheets from the years 2003 to 2008

of the board. The information collection from the annual reports of the Board is

more accurate.

85

The Second Chapter:-

It deals with over view of the HBL Power Systems Ltd., and Organization

structure. HBL power systems in corporate in 1977. It has located in Kandivalasa.

Its chairman in Dr.A.J.Prasad. The quality assurance System consists of a

stringent quality control for both raw materials and products are being maintained

as per the standards and being supported by a full fledged inspection and quality

control department. It has got ISO certification in the year 1994 efforts have been

paid to accredit with ISO-9001 implementation 1977. The certificate was issued at

ISO-9001, 14001 versions.

HBL power system’s consideration over all performance of the

organization may impact customer loyalty repeat business and referral,

operational result s such as revenue and market share, flexible and fast responses

to market opportunities. The company provides amenities for employees like

welfare, health and family planning, canteen, educational facilities, Rural

Development, Social Activities , place of worship etc.,

The Third Chapter:-

It deals with theoretical background on Financial Analysis in HBL power

systems Ltd which includes the financial statements of the company like

Income statement

Balance sheet

Return on capital employed.

Return on assets.

Return on equity.

For the purpose of knowing the company’s financial position to compare with the

last year. I t included data analysis and interpretation according to the

financial statement of the company.

86

The fourth Chapter:-

Analysis an interpretation of Return on capital employed. Return on assets. Return

on equity

The fifth Chapter:-

It deals with summary, findings that which include suggestions to company.

FINDINGS

Current Ratio is decreased from 3.58 to 2.98 during April 2003 to March 2008 because of increase in Current Liabilities and decrease in Current Assets.

Quick Ratio is decreased from 2.50 to 2.24 during April 2003 to March 2008 because if decrease in quick assets and decrease in current liabilities.

Net working capital Ratio is increased from 0.53 to 0.53 during April 2003 to March 2008 because of No Change in working capital and increase in net assets.

Debt-equity Ratio is decreased from 1.38 to 0.74 during April 2003 to March 2008 because of decrease in total debt and increased in net worth.

Proprietary Ratio is increased form 0.33 to 0.46 during April 2003 to March 2008 because of increase in net worth and decrease in total assets.

Fixed Asset to Proprietary Ratio is decreased from 1.38 to 0.93 during April 2003 to March 2008 because of increase in fixed assets and increase in net worth.

Net Working capital turnover Ratio is increased from 2.13 to 2.53 during April 2003 to March 2008 because of increase in sales and decrease in working capital.

Net Profit Ratio is decreased from 0.08 to 0.06 during April 2003 to March 2008 because of decrease in profit after tax.

87

SUGGESTIONS

The Liquidity Position of HBL Power Systems has the necessity to

improve the position, it is better to maintain the traditional convention

standards that means Current Ratio is 2:1. Liquidity Ratio is 1:1 and the

Working Capital should be increased.

In the case of Debt-Equity Ratio during the period from 2003-04 to

2007-08 has decreased that means the utilization of outsider’s funds has

reduced by the firm it is better to improve the outsider’s funds why

because the increasing of outsider’s funds leads to decrease the cost of

capital.

In the case of Total Assets Turnover ration coming under Activity

Ratios, the volume of sales has been not improving with the respect to the

total assets so it is suggested to HBL to improve the sales position with

respects to total assets by the optimum utilization of total assets.

In the case of Profitability Ratio’s the firm must to reduce the

operating cost and the same time it should increase the sales volume for

better results.

88

CONCLUSION

After the Detailed Study of the Financial Analysis of HBL Power

Systems Ltd, I conclude that:

The liquidity position of the company is not following

traditional conventional standards.

The position of Debt-Equity of the firm satisfactory.

The firm maintaining better inventory control measures.

The Firm tremendously increased sales region this results the

sales has increased by 28.11% when compare to last financial

year and its generates the firm into profits zone.

89

BIBLIOGRAPHY:-

Text Books Referred:

Financial Management by I.M Pandey

Financial Management by Khan and Jain.

Financial Decision – Policy by R.M Srivastav

Financial Management by Prasanna Chandra

Investment Decision – Making By John J.Hampton.

Management by Heinz weirich and Horold Knoontz.

Financial Management and Policy by James C Van Horne.

Reports and Journals Referred:

Journals of ICWAI

Journals of ICAI

Journals of ICFAI

Annual Reports of HBL Power Systems Ltd from April 2003 to March

2011.

90

39

Documents

Nag Final Project