Financial Report on BHEL

Submitted to: Dr. Sudhindra Bhat

Submitted by: Mayank raj Roll no: 18 H Section MBA 2012-14 batch

Executive summary:The following report explains about growth of heavy electrical sector in India by taking reference of BHEL (Bharat heavy electrical ltd.). India is a developing and power starving nation so there will be a growing demand for power, exponentially. Growth can be monitored by ratios: Liquidity ratios Turnover ratios Coverage ratios Expense ratios Profitability

Rest of the key points is in industrial overview

Industry overview:Bharat heavy electrical ltd. comes under heavy industry in India, which comprises heavy engineering industry, machine tool industry, heavy electrical industry and industrial industry. A very few no. of companies comes under this sector such as:1) Cement corporation of India limited, 2) HMT ltd. 3) Heavy Engineering Corporation limited 4) Instrumentation ltd As per government reports, the growth in industrial sector in India have registered a growth of 10.3% in the financial year of 2010-11. IIP (index of industrial production) for heavy industry sector have registered growth of 20% in the financial year of 2010-11. The collective revenue of the heavy industry was U.S$ 9.4 bn in the financial year of 2010-11.

 100% FDI is allowed in heavy industry. Heavy industry sector comprises of two segments:a) Capital goods o Electrical machinery It includes the equipment for power generation, transmission and distribution such as generators, transformers, motors etc.

o Non electrical machinery It includes machinery of different industries such as cement machinery, sugar machinery etc. b) Equipment segment It comprises of equipment such as material handling equipment such as railway engines, cranes etc. and oil field equipment.

Company overview:Bharat heavy electrical limited is Indias largest engineering and manufacturing company in terms of turnover. o It was established in the year of 1964. o BHEL comes under the ministry of heavy industries and public enterprises. o The company has 15 manufacturing units, 2 repair units, 4 regional office, 8 service centers and 8 overseas offices. o Company has been earning profit continuously since 1971-72 and paying dividend 1976-77. BHEL specialize in design, manufacture, engineer, testing and construction of heavy electrical goods which is essential for many core industries such as

o Power BHEL supplies steam turbines, generators and boilers of up to 800MW rating. o Transmission BHEL supplies power transformers, dry type transformers, instrument type transformers, vacuum etc. o Transportation Most of Indian railway electric locomotives are supplied by BHEL

o Oil & gas BHEL supplies equipment to ONGC (oil and natural gas Corporation) for onshore and offshore drilling. o Defence o Renewable energy BHEL supplies solar power street lighting, rural water pumping system etc..

Ratio analysis Column1 liquidity ratio Column2 Column3 Mar 12 current ratio quick ratio debt equity ratio Column4 Mar 11 Column5 Mar 10 Column6 Mar 09 1.5820702 Column7 Mar 08 1.6862561

1.867385741 1.94372966 1.53339383

1.352018841 1.45633376 1.20179712 1.24432298 1.33742629 0.00486458 0.00506802 0.00802583 0.01154434 0.00883406

current ratio
2 1.5 1 0.5 0 Mar Mar Mar Mar Mar 12 11 10 09 08 current ratio

Ideal Current ratio for heavy industries can be 1.5.

Current ratio of BHEL is higher than 1.5

Quick ratio is almost equal throughout five year. Apart from inventory current asset and current liability are equal.

Debt equity ratio of BHEL is continuously falling i.e debt of company is reducing and equity is increasing

turnover ratio

Column1 DTR debtor's velocity ITR Inventory holding period asset turnover ratio total asset tunover ratio Fixed asset turnover ratio Netprofit ratio

Mar 12 1.821214431 0.151767869 2.741751646 0.228479304 1.260442713 0.968685592 8.586075091 14.67767109

Mar 11 2.10084712 0.17507059 3.01185675 0.25098806 1.23054775 0.95231022 9.61007321 14.2329543

Mar 10 1.60969996 0.13414166 2.82528211 0.23544018 2.0755657 1.63627174 10.8058709 12.9438231

Mar 09 1.66443241 0.1387027 2.71359396 0.22613283 2.03161479 1.63561244 14.1617536 11.8021567

Mar 08 1.62726359 0.1356053 2.55237308 0.21269776 1.79276574 1.35782597 14.1857765 14.6736138

Debt turover ratio is almost constant throughout the five year. Reason of this response could be very limited number of buyers.

As the debt equity ratio is almost constant so debtors velocity.

ITR
3.2 3 2.8 2.6 2.4 2.2 Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 ITR

There is a continuous increase in inventory turnover ratio. It can occur due to continuous growth of India. Due to slowdown in 2012, the ratio decreases.

Similar as ITR

Asset turnover ratio increases till 2010 because of high GDP & IIP of India. Asset turnover ratio reduces in 2011 and 2012 because of lower GDP & IIP of India.

Similar as Asset turnover ratio.

Fixed asset turnover ratio

15 10 5 0 Mar Mar Mar Mar Mar 12 11 10 09 08 Fixed asset turnover ratio

Fixed asset turnover ratio decreases continuously.

Netprofit ratio
15 10 5 0 Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 Netprofit ratio

Net profit ratio is almost constant or increasing steadily.

coverage ratio

Column1 interest coverage ratio dividend coverage ratio

Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 200.9021061 164.543029 196.731642 157.886031 125.079616 N.A N.A N.A N.A N.A

interest coverage ratio

250 200 150 100 50 0 interest coverage ratio

Interest coverage ratio is increasing i.e the interest, that BHEL is paying is reducing steadily or income is increasing.

Column1 expense ratio

Column2 COGS ratio operating expences ratio

Column3 Column4 Mar 12 Mar 11 0.768528059 0.77389132 2.948602423 2.6664059

Column5 Column6 Mar 10 Mar 09 0.78834977 0.80508 3.23838802 3.69640777

Column7 Mar 08 0.75739174 3.99722471

COGS ratio
0.82 0.8 0.78 0.76 0.74 0.72 Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 COGS ratio

COGS ratio is decreasing i.e net sales of BHEL is increasing continuously.

operating expences ratio

4 3 2 1 0 Mar Mar Mar Mar Mar 12 11 10 09 08 operating expences ratio

OER is decreasing till 2011 because of increase in administrative expense continuously.

Column1 profitablity ratio

Column2

Column3 Mar 12 0.214792675 0.016926537 0.231471941 2.13349297 0.27745642 0.03199674 27.72 53.48526643

Column4 Mar 11 0.21322534 0.01362373 0.22610868 1.67646564 0.29826574 0.02854989 117.69 311.892102

Column5 Mar 10 0.19789729 0.01788024 0.21165023 3.71116184 0.27081375 0.03740947 84.15 161.185986

Column6 Mar 09 0.1823488 0.01615975 0.19492 3.28303859 0.2425424 0.03320939 61.22 118.564685

Column7 Mar 08 0.22735598 0.02271959 0.24260826 4.07308966 0.26538744 0.04109072 55.82 94.124382

operating profit ratio net profit ratio gross profit ratio return on asset return on capital employed return on shareholder's equity earning per share dividend per share

Operating profit ratio is increasing steadily but constant almost for 2011 and 2012.it is because of proportional increase in EBIT and net sales.

Gross profit ratio increases steadily i.e profit of BHEL is increasing steadily.

return on asset
5 4 3 2 1 0 Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 return on asset

Total asset increase sharply in the year of 2011 that is why there is decrease in Return on asset.

Return on capital employed is almost constant throughout five year.

return on shareholder's equity

0.06 0.04 0.02 0 Mar Mar Mar Mar Mar 12 11 10 09 08 return on shareholder's equity

earning per share

120 100 80 60 40 20 0 Mar Mar Mar Mar Mar 12 11 10 09 08 earning per share

Similar as Dividend per share.

dividend per share

350 300 250 200 150 100 50 0 Mar Mar Mar Mar Mar 12 11 10 09 08

As we have already seen that BHEL continuously paid dividend till 1976. Dividend per share decrease sharply in 2012 and maximum in 2011.

dividend per share

The Company Future Outlook:

Due to the slowdown in Indian GDP and IIP, BHEL is treading at 52 week low share price at Rs. 229 (197.80-364.) Dividend and share are paid regularly from 1976. There is huge potential in Indian economy predicted by many analysts, so buying its share for long term will be profitable. Company is profitable if you are holding it for longer period.