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Project

Subject: Analysis of Financial Statements


Financial Analysis of Power sector
companies

Objective:To analyse the performance of the selected


company on various parameters using techniques like
comparative statement analysis, common size analysis and
ratio analysis.

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INDEX
Topics Page No.
General Analysis 3
1) GDP Growth 3
2)Inflation trends 3
3)Monetary policy changes and impact. 4
4) Impact of global economic trends 4
Sector Analysis
1)Sector Growth 4
2)Contribution to GDP 5
3) Regulatory framework 6
4) Competitive advantage peculiar to the 6
sector
5) Forecasted sector growth 7
Individual Companies
1) Orient Green Power India Ltd. 8
2) Tata Power Company Ltd. 20
3)Torrent Power Ltd 26
4)Suzlon Engergy Ltd 38
5)National Thermal Power Corporation 51
Limited

Industry Comparison 61

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INDUSTRY: POWER
Power is one of the most critical components of infrastructure crucial for the economic growth
and welfare of nations. The existence and development of adequate infrastructure is essential for
sustained growth of the Indian economy.

India’s power sector is one of the most diversified in the world. Sources of power generation
range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to
viable non-conventional sources such as wind, solar, and agricultural and domestic waste.
Electricity demand in the country has increased rapidly and is expected to rise further in the years
to come. In order to meet the increasing demand for electricity in the country, massive addition to
the installed generating capacity is required.

In May 2018, India ranked 4th in the Asia Pacific region out of 25 nations on an index that
measures their overall power.

General Analysis of the economy and its impact:

1) GDP growth
 After a few challenging years, during which the global economy witnessed stalling growth
and intermittent turbulence, 2017 benefitted from the strengthening of a broad based
cyclical global recovery which began mid-way through 2016.
 Global GDP is expected to have picked up to 3 % in 2017 from 2.4 % in 2016, while
Global output is estimated to have grown by 3.7 % in 2017, supported by a broad-based
recovery, encompassing more than half of the world’s economies.
 A rebound in trade and investment aided by supportive financing conditions
accommodative policies and the moderating impact of weak commodities, has enabled
revival and improved business sentiments across both advanced and developing
economies.
 Growth in advanced economies is estimated to have rebounded to 2.3 % on the back of
pick up in capital spending, a turnaround in inventories, and improving external demand.
 India has been responsible for almost 10% of the increase in global energy demand since
2000.

2) Inflation trends:

 The Indian economy witnessed implementation of major structural reforms during the
year, the prominent ones being the implementation of the Goods & Services Tax (GST)
and new Indian Bankruptcy code.

 Teething issues surrounding the uncertainties associate with implementation of such


reforms, coupled with continuing pressure from last years, demonetization initiative
impacted business sentiments and growth rate during the first half of the fiscal. However,

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the economy stabilized and started showing early signs of revival during the latter half of
the year.
 Improving global macros, persistent efforts from the government to enhance infrastructure
spending and PSU capex coupled with initial signs of revival of the private capex
investment cycle is expected to help the country retain its tag of fastest growing large
economy in the world.

3) Monetary policy changes and impact:

 Some of the key demand drivers for Renewable energy include – the Government’s push
to supplement conventional vehicles with Electric Vehicles (EV) in the mere future, which
is expected to have a larger implication on energy and allied sectors.

4) Impact of global economic trends:


 The Indian power sector has undergone progressive transformation in recent times marked
by substantial growth in capacity addition, introduction of power trading, enhanced
Transmission & Distribution (T&D) system resulting in reduced power loss and theft.
 The accelerated pace of capacity addition over the past few years has led to a situation
where in the supply potential is greater than the projected demand – a phenomenon, that
has occurred for the first time in the sector’s history.
 A record capacity of 76.4 GW was added over the last three years. This growth in
capacity was on the back of expectation that the demand for electricity will pick up pace in
sync with economic growth.

Sector Analysis

1) Sector Growth:-

● India is the world's third largest producer and third largest consumer of electricity.
● Total installed capacity of power stations in India stood at 346.62 Gigawatt (GW) as of
November 2018. Renewable power plants constituted 33.60% of total installed capacity.
● The gross electricity consumption was 1,149 kWh per capita in the year 2017-18.
● The year 2018 saw robust growth, peak demand grew by 8 per cent to 177 gigawatt (GW),
in energy terms the growth was 6.5 per cent since last year.
● Government initiatives of 24x7 power and power to all households, by March 2019, have
reached most people. Many states achieved more than 90 per cent availability of power to
its consumers.

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2) Contribution to GDP:-

Indian power sector is undergoing a significant change that has redefined the industry
outlook. Sustained economic growth continues to drive electricity demand in India. The
Government of India’s focus on attaining ‘Power for all’to accelerate capacity addition in
the country, and the increasing competitive intensity at both the market and supply sides
(fuel, logistics, finances, and manpower) is the key. At the same time, the competitive
intensity is increasing at both the market and supply sides (fuel, logistics, finances, and
manpower).
Different measures will improve demand side pull and will see healthy growth in the
sector. The only constraint that surfaced last year was coal supply. Therefore, for
sustainable growth of the sector, we need to add more renewable capacity, improve fuel-
supply chain for coal and gas plants, and efficient utilisation of existing capacity through
smart portfolio optimisation by state discoms in long- and short-term.

3) Regulatory Framework:

The Government of India has identified power sector as a key sector of focus so as to
promote sustained industrial growth. Some initiatives by the Government of India to boost
the Indian power sector:

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 As of September 2018, a draft amendment to Electricity Act, 2003 has been introduced. It
discusses separation of content & carriage, direct benefit transfer of subsidy, 24*7 Power
supply is an obligation, penalisation on violation of PPA, setting up Smart Meter and
Prepaid Meters along with regulations related to the same.
 UjwalDiscoms Assurance Yojana (UDAY) was launched by the Government of India to
encourage operational and financial turnaround of State-owned Power Distribution
Companies (DISCOMS), with an aim to reduce Aggregate Technical & Commercial
(AT&C) losses to 15 per cent by FY19.
 As of August 2018, the Ministry of New and Renewable Energy set solar power tariff caps
at Rs 2.50 (US$ 0.04) and Rs 2.68 (US$ 0.04) unit for developers using domestic and
imported solar cells and modules, respectively.
 The Government of India approved National Policy on Biofuels – 2018, the expected
benefits of this policy are health benefits, cleaner environment, employment generation,
reduced import dependency, boost to infrastructural investment in rural areas and
additional income to farmers.

Investment Scenario:

Between April 2000 and June 2018, the industry attracted US$ 14.18 billion in Foreign
Direct Investment (FDI), accounting for 3.64 per cent of total FDI inflows in India.

Some major investments and developments in the Indian power sector are as follows:
 In November 2018, Renascent Power Ventures Pte Ltd acquired 75.01 per cent stake in
Prayagraj Power Generation Company Limited (PPGCL) for US$ 854.94 million.
 In August 2018, Kohlberg Kravis Roberts & Co (KKR) acquired Ramky Enviro Engineers
Limited for worth US$ 530 million.
 In April 2018 ReNew Power made the largest M&A deal by acquiring Ostro Energy for
US$ 1,668.21 million.

4) Competitive advantage peculiar to the sector:

Around 60 per cent of the nation’s generation comes from coal. There has been
insufficient supply of domestic coal to thermal power plants and a spike in the price of

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imported coal. In 2016-17, the price of imported coal was about $30 per tonne and it has
reached $55 per tonne in 2018-19.
● India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing
business - "Getting Electricity" ranking.
● Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14.
● As of April 28, 2018, 100 per cent village electrification achieved under DeenDayal
Upadhyaya Gram Jyoti Yojana (DDUGJY).

5) Forecasted sector growth:

 The Government of India has released its roadmap to achieve 175 GW capacities in
renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind
power. The Union Government of India is preparing a 'rent a roof' policy for supporting its
target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.
 Coal-based power generation capacity in India, which currently stands at 190.29*GW is
expected to reach 330-441 GW by 2040.
 India could become the world's first country to use LEDs for all lighting needs by 2019,
thereby saving Rs 40,000 crore (US$ 6.23 billion) on an annual basis.
 All the states and union territories of India are on board to fulfil the Government of India's
vision of ensuring 24x7 affordable and quality power for all by March 2019, as per the
Ministry of Power and New & Renewable Energy, Government of India.
 Cross-border trade guidelines have been recently issued. The guidelines are favorable for
cross-border transactions through exchanges. Things as of now have not been moving as
fast in the SAARC region as they are in BBIN (Bangladesh, Bhutan, India and Nepal)
region.
 Many regulations such as re-designing of real time market, ancillary services regulations
and linking of DSM prices with exchanges prices have been proposed which, if
implemented, will help in absorbing more renewable in the grid.

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COMPANY: ORIENT GREEN POWER COMPANY LTD.

About Company:
Orient Green Power Company Limited, a leading Indian renewable energy-based independent
power producing company, develops, owns, and operates a portfolio of wind energy power plants
in India. The company is also one of the top two independent operators and developers of wind
farms in India based on aggregate installed capacity. There has been no change in the activities
being carried out by the company since its incorporation. The company has grown its business by
acquiring operating and development renewable energy assets from third parties and by
developing Greenfield projects.

 Orient Green Power Company was incorporated under the Companies Act on
December 6, 2006 in Chennai, Tamil Nadu.
 It was granted the certificate for commencement of business on January 8, 2007 by
the RoC.

Business and Market Share:


 One of the leading wind energy generating Companies and its wind assets currently
aggregates to 425 MW. . It has an additional 44 MW of assets under development.
 Orient Green Power Company Limited (OGPL) is India’s largest listed renewable-only
power generation company focused on developing, owning and operating a diversified
portfolio of wind energy power plants.
 Headquartered in Chennai, Tamil Nadu, OGPL’s wind assets are spread across Tamil
Nadu, Andhra Pradesh, Gujarat and Karnataka.
 Further, it also owns and operates a 10.5 MW wind power plant in Croatia.

Market Capital ( Rs in Mn): 3190.58

Top Peers in the industry:

Name P/E Mar Cap.(Crores) Sales Qtr(Crores)


NTPC Ltd 12.84 132,637 24,120
Power Grid Corporation of India Ltd 11.68 103,847 8,471
NHPC Ltd 10.58 24,661 1,571
Adani Transmission Ltd 344.77 24,647 240
Tata Power Company Ltd 17.99 19,610 1,999

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Major competitors:

Operating
Year Earnings 1-Year Efficiency Efficiency Leverage

PAT Asset
PE( ROE( Return( Margin ROCE Turnover Debit/Eq
Name End X) %) Growth %) (%) (%) Ratio (x) uity (x)

Orient
Green
Power 2018/03 0 -16.42 -15.4 -54.64 NA -7.37 0 0.48
Industry
Average - 10.48 -2.86 -93.94 -47.36 -19.67 1.98 0.19 0.61
Guj. Inds.
Power 2018/03 13.37 10.42 6.66 -26.12 17.93 13.42 0.38 0.25

Nava
Bharat
Ventures 2018/03 9.47 5.99 102.97 -23.75 12.35 8.38 0.43 0.12
BF Utilities 2018/03 24.53 17.02 116.71 -49.96 106.53 12.09 0.07 0.46

Energy
Developme
nt 2018/03 0 0.78 -59.35 -55.24 3.45 2.36 0.15 0.1

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Core management team:
Company : Orient Green Power Company Ltd
Industry : Power Generation And Supply
Independent /
Remunerations Executive / Non-
Name Designation -Unit Curr(Rs) Non-Executive Independent Qualifications
FCA ICWAI ICS
National Diploma in
N Rangachary Chairman 125,000.00 Non-Executive Independent Commerce
BE & ME in
T Shivaraman Vice Chairman 0 Non-Executive Non-Independent Chemical
Non Executive
R Sundararajan Director 185,000.00 Non-Executive Non-Independent BE(Mech) MBA
Independent
A L Suri Director 45,000.00 Non-Executive Independent BE
Independent
R Ganapathi Director 225,000.00 Non-Executive Independent BTech
Company
P Srinivasan Secretary 3,220,420.00 NA NA NA
S Managing BTech &
Venkatachalam Director 6,630,000.00 Executive NA Management
P Non Executive
Krishnakumar Director 0 Non-Executive Non-Independent Mechanical Engineer
Addtnl
Chandra Independent
Ramesh Director 0 Non-Executive Independent NA

The Company has following committees of the Board:

1. Audit Committee

2. Nomination & Remuneration Committee

3. Stakeholder’s Relationship Committee

4. Risk Management Committee

5. Investment/Borrowing Committee

6. Corporate Social Responsibility Committee

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Shareholding pattern:
FY18 No of Shares % Share Holding

Promoters 365812640 48.73%

Others 200546939 26.71%

General Public 112668180 15.01%

Financial Institutions/Banks 54273353 7.23%

Foreign Institutions 17422864 2.32%

% Share Holding
2.32%
7.23% Promoters

Others
15.01% 48.73%
General Public
26.71%

Financial
Institutions/Banks

Sales & Profitability Trend:


Figures in Rs Comparative Comparative
2018 2017 2016
Lakhs 2018 2017
Sales 39,864.45 38,542.63 30,802.18

3% 25%
Profitability -7,142.99 -9,590.00 -34,014.31

-26% -72%

The increase in the Sales of the company shows growth of 25 % in the year 2017 and 3% in the
year 2018 w.r.t to previous year. This increase in sales is due to the increase in sale of power and
the increase in Renewable energy Certification (REC) instrument in the FY2017-18.

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Comparative & Common Size P&L A/C:
(All amounts are in Indian Rupees in Lakhs )
Comparative Comparative 2017- Common Common
Particulars 2018-2017 2016 size 2018 size 2017
A Continuing Operations
1 Revenue from operations -6.0% 28.5% 89.5% 98.6%
2 Other income 650.4% -54.9% 10.5% 1.4%
3 Total revenue (1+2) 3.4% 25.1% 100.0% 100.0%
4 Expenses 0.0% 0.0%
(a) Employee benefits expense -4.0% 3.4% 3.6%
(b) Finance costs -5.9% -0.1% 53.0% 58.3%
(c) Depreciation and amortization expense -9.5% -11.0% 31.0% 35.4%
(d) Other expenses -7.0% 7.4% 21.4% 23.8%
Total expenses -7.1% -2.2% 108.8% 121.1%
5 Profit/(Loss) before tax (3 - 4) -56.8% -51.8% -8.8% -21.1%
6 Tax expense: 0.0% 0.0%
(a) Current tax expense -27.8% 0.5% 0.7%
(b) Deferred tax -100.0% 0.0% 0.0%
7 Profit/(Loss) after tax from Continuing
Operations (5-6) -55.9% -49.8% -9.3% -21.9%
B Discontinued Operations 0.0% 0.0%
8 Profit/(Loss) from Discontinued Operations (before
tax) 161.3% -92.4% -8.6% -3.4%
9 Profit/(Loss) on disposal of assets / settlement of
liabilities attributable to the discontinued operations -100.0% 0.0% 0.0%
10 Tax expense on discontinued operations 108.6% 0.0% -0.4%
11 Profit/(Loss) after tax from Discontinued
Operations (8-9) 193.8% -93.2% -8.6% -3.0%
12 Profit/(Loss) for the year (7+11) -25.5% -71.8% -17.9% -24.9%

Comparative & Common Size Balance Sheet:


(All amounts are in Indian Rupees in Lakhs unless otherwise stated)
Comparative Comparative Common Common
Particulars 2018-2017 2017-2016 size 2018 size 2017
ASSETS
1 Non -current assets
(a) Property, plant and equipment -19.9% -7.9% 78.5% 81.9%
(b) Capital work-in-progress 12.8% 68.5% 0.3% 0.2%
(c) Goodwill on consolidation 0.0% 0.0% 0.5% 0.5%
(d) Other intangible assets -3.6% -33.9% 0.2% 0.2%

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(e) Financial assets 0.0%
(i) Investments -100.0% -15.0% 0.0% 0.0%
(ii) Loans 252.5% 36.0% 2.2% 0.5%
(iii) Other financial assets -27.8% -19.9% 1.4% 1.6%
(f) Other non-current assets -1.3% -0.4% 6.0% 5.1%
Total non-current assets -17.2% -7.6% 89.2% 90.0%
2 Current Assets 0.0% 0.0%
(a) Inventories -82.2% 14.3% 0.1% 0.5%
(b) Financial assets 0.0% 0.0%
(i) Investments
(ii) Trade receivables -17.3% 12.5% 4.1% 4.1%
(iii) Cash and cash equivalents 25.4% -34.2% 0.7% 0.5%
(iv) Other financial assets -58.3% 2.9% 1.7% 3.4%
(c) Other current assets 415.7% -60.0% 1.3% 0.2%
Total current assets -24.6% 0.4% 7.9% 8.7%
Assets classified as held for sale 94.5% 62.3% 2.9% 1.3%
Total assets -16.4% -6.4% 100.0% 100.0%
EQUITY AND LIABILITIES
1 Equity
(a) Equity share capital 1.5% 0.0% 31.6% 26.1%
(b) Other equity 51.0% -10240.4% -9.2% -5.1%
Equity attributable to the owners of
the Company -10.6% -19.8% 22.4% 20.9%
Non - controlling interests 182.3% -49.0% 0.3% 0.1%
Total equity -9.9% -20.0% 22.7% 21.0%
2 Liabilities
Non-current liabilities
(a) Financial liabilities
(i) Borrowings 14.8% -22.1% 63.5% 46.2%
(ii) Other financial liabilities -32.3% -12.2% 0.8% 1.0%
(b) Provisions -23.2% 8.0% 0.1% 0.1%
(c) Deferred tax liabilities (Net)
(d) Other non-current liabilities -91.4% 79.9% 0.0% 0.3%
Total non-current liabilities 13.1% -21.7% 64.5% 47.6%
Current liabilities
(a) Financial liabilities
(i) Borrowings -75.8% -9.8% 0.7% 2.6%
(ii) Trade Payables -64.9% -8.1% 1.1% 2.6%
(iii) Other financial liabilities -70.1% 88.1% 8.6% 24.1%
(b) Provisions -19.4% -65.5% 0.0% 0.0%
(c) Other current liabilities -24.4% 71.3% 1.8% 2.0%
Total current liabilities -67.2% 58.6% 12.3% 31.3%
Liabilities directly associated with
assets held for sale 1299.1% 0.5% 0.0%
Total liabilities -18.2% -2.0% 77.3% 79.0%
Total equity and liabilities -16.4% -6.4% 100.0% 100.0%

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Analysis:
● The major investment of fund for the company is in the Plant and equipment (tangible
asset)for all 3 years ie. Around 80% which shows that it is a growing company.
● Since the company is in loss, the company has not declared dividend for all 3 years.
● The Company has delivered an impressive revenue growth over a period of FY13 – FY18
aided largely by its steadily improving asset base and attractive tariff rates.
● The strengthening of the grid infrastructure enabling better integration of Tamil Nadu into
the National Grid which permits Tamil Nadu to transfer excess power to meet the
requirement of power deficit states.
● The revenue increased in the year 2017 by 28% and then decreased slightly in the next
year 2018 by 6%. The improved performance is on the back of a number of strategic
initiatives under taken by the Company in recent times to address some of its legal issues
and position itself to optimize opportunities in the environment.
● The cash proceeds from monetizing 8 unviable Biomass units to Janati Bio Power Pvt.
Ltd.(transfer occurred on 31st Dec 2017) would also be partly deployed towards repaying
debt and hence reduce interest rates.
● Reduction in debt resulted in annual saving encouraging financial institutions to refinance
more debt. Hence this will improve cash flows of the firm.
● The transfer of debt against assets and proceeds from sale will result in moving out of
biomass related debt of Rs. 330 crore resulting in strengthening the financial position of
the Company in FY 2019 and accelerate value creation for Shareholders. Further, the
Company is also working towards completing the sale of the remaining units and expects
to complete the same shortly.
● Lastly, the Company is also working towards re-financing part of its debt by negotiating
with the bankers towards lowering interest rates and extending tenure of the loans. The
Company is confident that the combination of these initiatives will help transform its
financial position. Further, the pickup in REC trading will also help it improve its profits
and cash flows.
● During the year under review, there is almost no change in the Share Capital of the
Company
● The Company generated revenues worth Rs. 78 crore under the REC mechanism during
the year as against Rs. 38 crore in the previous year, growth of 3x. OGPL liquidated its
entire REC inventory during the year hence improving revenue by reducing loss.
● Inability to operate the plants at high utilization levels on a consistent basis, a pre-requisite
for running the business viably coupled with limited working capital, hampered the ability
to run the biomass business profitably; in turn dragging down the overall performance of
the business. The Biomass business has contributed to about 30%-40% of the Company’s
losses over the last three years. Further, against a high operating margin for Wind
business, the Biomass business has been consistently running at a negative margin. Post
the sale of biomass business, OGPL will transform into a pure wind energy generating
company.

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● Long term debt of the Company stood at Rs. 1,507 crore as against Rs. 1,312 crore during
last year.
● Debt – equity ratio as of March 2018 stood at 2.8 as against 2.3 during March 2017..
● All the current and short term liabilities were reduced which means the company can use
the money for long term and can invest to earn interest income.
● The company has invested huge amount of money in the tangible asset which will then
help increase the income.
● Current asset has shown decline over previous year hence the current asset cannot be
easily converted into cash.

Multi-Step Profit & Loss A/c:

Particulars 2018 2017 2016


All amounts are in Indian Rupees in Lakhs
Sales 35,697.53 37,987.33 29,572.12
Less: Excise duty 0.00 0.00 0.00
Net Sales 35697.53 37987.33 29572.12
Less: COGS 0.00 0.00 0.00
Gross Profit 35697.53 37987.33 29572.12
Add: Other Income 4166.92 555.30 1230.06
Less: Other Expenses 9888.49 10586.21 9901.33
EBDIT 29975.96 27956.42 20900.85
Less: Depreciation 12359.20 13654.16 15342.73
EBIT 17616.76 14302.26 5558.12
Less: Interest 21135.31 22453.15 22485.51
PBT -3518.55 -8150.89 -16927.39
Less: Tax 196.71 272.45 -131.67
PAT -3715.26 -8423.34 -16795.72

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Analysis:
● The Revenue growth was primarily driven by strong performance of wind business which
delivered revenue growth of 28% on a Y-o-Y basis. Timely onset of wind season and
better than normal wind availability contributed to the rapid growth.
● EBITDA for the year2018 stood at Rs. 29,97 5 lakhs as against Rs. 20,900 lakhs generated
during previous year2016; higher by 34%. Higher revenue coupled with better cost
management and higher operating leverage resulted in driving the operating profitability of
the business.
● Depreciation for the year 2018 stood at Rs. 12,359 lakhs as against expense of Rs. 15,342
lakhs registered during the year2016 , lower by 19% due to sale of some of the capacities.
● Interest expense for the year 2018 stood at Rs. 21135 lakhs as against an outgo of Rs.
22453 lakhs during last year, lower by 6%. This is the second consecutive year of reduced
finance cost. Over the years, despite reporting healthy operating performance though,
higher interest expense used to soak up most of the profitability resulting in making
business report losses. As such, in an attempt to resurrect the business and enhance the
financial position, the Company has been working towards structuring a large chunk of its
debt in the wind business under 5/25 scheme. It has also completed 5/25 for senior lenders
to extend the tenure of loans amounting to Rs. 76,438.00lakhs of debt under subsidiary
Beta wind farm private limited by 10 years from 2023 up to 2033.
● Loss after tax for the year2018 stood at Rs. 3715 lakhs as against loss of Rs.8423 lakhs
reported during last year which is 56% less due to liquidation of REC inventory.
● Key reasons impacting the overall profitability of the business has been the subdued
performance of the biomass business.
● Other income of the company has been increased in the year 2018 by around 650% from
previous year due to increase in loans given. This other income from interest earned
reduced the loss by 58% in the year 2018 from previous year.
● The amount of interest received from investment is less in comparison to the interest paid
to debenture holders.

Key ratios of company and analysis:


Profitability Ratios
Particulars Numerator Denominator 2018 2017 2016
ROCE EBIT Total Capital Employed 0.08 0.07 0.02
ROE Net Profit Total Equity (0.07) (0.14) (0.23)
ROA Net Income Total Asset (0.02) (0.03) (0.06)
Gross Profit Margin Gross Profit Net Sales 1.00 1.00 1.00
Net Profit Margin Net Profit Net Sales (0.10) (0.22) (0.57)
EBIT Margin EBIT Net Sales 0.49 0.38 0.19

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Profitability ratio Analysis:
● Gross profit margin remains 1 as there in no COGS being the utility company.
● The Net Profit Margin is improved as company has sold its loss making biomass units
resulting in decrease in debt and with the increased revenue from REC Sale.
● For debenture holders EBIT margin is of more importance as it provides them with an idea
of whether the company is in the position to pay interest and there is an increase in the
EBIT margin by 31% in the year 2018 from previous year.
● The ROE is showing improvement YOY which is a good sign for the equity shareholder
giving clear picture of increased return they are going to earn.
● There is an increase in ROCE of 15% from PY showing optimum utilization of funds to
raise sales.
● Also the ROA of the company is improved gives information of asset utilization to
generate revenue.

Long Term Solvency Ratios


Particulars Numerator Denominator 2018 2017 2016
Debt Ratio Total Liabilities Total Assets 0.77 0.79 0.75
Debt to Equity Ratios Total Debt Total Equity 2.83 2.32 2.37
Total Debt to Tangible Net Worth Total Debt Tangible Net Worth 2.94 2.40 2.44
Interest Coverage Ratio EBIT Interest Expenses 0.83 0.64 0.25
Cash Flow from
CFO to Debt Ratio Operations Total Debt 0.21 0.22 0.12

Short Term Solvency Ratio


Particulars Numerator Denominator 2018 2017 2016
Current Ratio Current Assets Current Liabilities 0.64 0.28 0.44
Quick Ratio Current Assets except Inventory Current Liabilities 0.63 0.26 0.42
Cash Ratio Cash and Cash Equivalents Current Liabilities 0.06 0.02 0.04

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Solvency ratio Analysis:
 Company’s debt ratio has remained constant over the years as the increase in borrowed
amount of money is same as that of Total Asset.

 The Debt to Equity is calculated to check whether the equity shareholders are liable to
cover all the debts in case the company faces any downturn or financial crises. Currently
the Debt to equity ratio is improved in the year 2018 w.r.t PY.
 Debt to tangible net worth of the company indicates the liquidation value of the company
in the event of bankruptcy or sale. Here the Ratio is large means the company is risky for
the investors as it has high debt.

 Interest coverage ratio is calculated for the debenture holders to check whether the
company is in the position to pay interest to its debenture holders out of the profit (EBIT)
generated.

 Short term solvency ratio of the company has increased from PY means the ability to meet
short term obligation of firm in improved.

Activity Ratios
Particulars Numerator Denominator 2018 2017 2016
Inventory Turnover Ratios COGS or Net sales Average Inventory 131.16 24.89 22.15
Day Inventory 365 Inventory Turnover 2.78 14.66 16.48
Receivables Turnover Total Sales Average Receivables 3.70 3.26 2.85
Day Receivables 365 Receivables Turnover 98.64 112.09 129.99
Fixed Asset Turnover Total Sales Average fixed assets 0.19 0.16 0.12
Asset turnover net sales Average total assets 0.15 0.13 0.10

Turnover ratio Analysis:


● The Inventory turnover has increased drastically in 2018 by 426 % from PY with decrease
in inventory turnover showing increase in sales.
● The receivables from the debtors are able to recover at a faster rate as compared to 2017.
● The fixed asset turnover has seen a slight increase from 2016 of 0.12 to 0.19 in 2018.

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DuPont Analysis:
DuPont Analysis
Particulars Numerator Denominator 2018 2017 2016
Net profit margin Net income Net sales (0.10) (0.22) (0.57)
Asset Turnover Net sales Asset 0.15 0.13 0.10
Equity Multiplier Asset Shareholders’ equity 4.41 4.76 4.07

Dupont Analysis Net profit margin * Asset Turnover * Leverage Ratio (0.07) (0.14) (0.23)

Analysis of DuPont
● The Net Profit Margin is improved as company has sold its loss making biomass units
resulting in decrease in debt and with the increased revenue from REC Sale.
● The Return on Asset has also improved and it shows a positive impact as company is able
to generate return on the amount invested in the Assets of the company.
● The ROE is showing improvement in 2018 and this increase is due to decrease in loss
PAT.
● The Equity Multiplier is seen to remain constant for all 3 years.
● Hence DUPONT Analysis for the company also shows improvement from the year 2016
to the year 2018 by 69 %.

52 Share price Trend:

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