23/04/2010

Submitted to Dr V.K.Vasal.
by Arpan Majumder
Roll no : 2314
MFC Part I

CAPITAL FINANCIAL STATEMENT

GOODS SECTOR ANALYSIS
Acknowledgement

I would like to pay my sincere thanks to Dr. V. K. Vasal, Faculty, University of Delhi, South
Campus for endowing me with the precious insights needed for working out this Project. He
has been very instrumental in communicating the core of this project study and thus without
his direction, the very inception of this work would not have been possible.

Arpan Majumder.
CONTENTS

1. Objective

2. Indian capital goods sector

3. Company overview:

 Alstom

 Bharat Bijlee

 Kalpataru

 Walchandnagar

4. Financial Statement analysis:

 Ratio analysis

 Common Size statements

 Trend analysis

5. References.
Objective

The aim of this work is to analyze the financial statements of the four major companies, in
the Capital Goods Sector of India, through a few introductory techniques and hence arrive at
some interpretations about their financial health.

The parameters judged are numerous ranging from a firm’s short term health to the overall
long term stability.

The analysis has been carried out on the Financial Statements of the respective companies so
as to get appraised of the financial state of the whole group involved in the operations.

Due attempts have been made to standardize the terms, across all the financial statements, so
that the analysis gathers more meaning and yields the best possible results in spirit.

With the conclusion I endeavor to arrive at the optimal determination of the relatively best
company, from the point of view of creditors and investors.
THE INDIAN CAPITAL GOODS SECTOR

The development of a strong and vibrant engineering and capital goods sector has been at the
core of the industrial strategy in India since the planning process was initiated in 1951. The
emphasis that this sector received was primarily influenced by the erstwhile Soviet Union
model, which had made impressive progress by rapid state-led industrialization through the
development of the core engineering and capital goods sector.

The ‘Mahalanobis Model’, which was a ‘supply oriented’ model with a basic emphasis on
increasing the rate of capital accumulation and saving, gave the engineering and capital goods
sector a central place. Superimposed over this were the other objectives of balanced regional
development, prevention of the concentration of economic power and the development of
small-scale industries.

One of the primary objectives was import substitution, which was pursued as a priority.

Owing to these historical factors, today India has a strong engineering and capital goods base.
The Indian capital goods sector is characterized by a large width of products (almost all
major capital goods are domestically manufactured) – a legacy of the import substitution
policy. Even nations with advanced capital goods sectors do not produce the entire range of
capital goods, but instead focus on segments, or sub segments. The range of machinery
produced in India includes heavy electrical machinery, textile machinery, machine tools,
earthmoving and construction equipment including mining equipment, road construction
equipment, material handling equipment, oil & gas equipment, sugar machinery, food
processing and packaging machinery, railway equipment, metallurgical equipment, cement
machinery, rubber machinery, process plants & equipment, paper & pulp machinery, printing
machinery, dairy machinery, industrial refrigeration, industrial furnaces etc. However, the
raw materials used are largely domestic in origin and in many instances the quality of
domestic raw materials is not up to the international standards in terms of dimensional
tolerances and metallurgical properties, which in turn affects the quality of the final product.

According to the estimates made by the Government, the investment requirement for
infrastructure is around USD450 billion during the 11th five year plan. This is going to boost
construction equipment segment to grow further.
In the domestic market, heavy engineering provides growing opportunities in projects such as
refinery upgradation and modernisation of fertiliser plants. The Government of India plans to
add 100,000MW capacity to the power sector to achieve its goal ’Mission 2012: Power for
all’. The focus is also on the construction of several UMPPs which will ensure continuous
growth of the electrical industry, both upstream and downstream, at least for the next few
years. Thus, the power sector provides good business prospects to the capital goods
manufacturing companies in medium- to long-term.

The performance of the Capital Goods sector reveals that its fortunes are inextricably linked
with that of the overall Indian industry. High degree of correlation between the performances
of the two sectors is further accentuated by high elasticity of Capital Goods industry to
changes in industry growth. The Capital Goods value added contributes a fairly constant
proportion (9-12 percent) of the total manufacturing value added, thus establishing that
manufacturing as the key end-user sector of Capital Goods drives the performance of the
latter. Another key determinant of the demand for Capital Goods is the gross investment
undertaken in the economy. The apparent consumption of Capital Goods constitutes a
constant share (17-21 percent) of the total Gross Domestic Investment in the country. On the
supply side the output of Capital Goods is determined by investments in Capital Goods sector
and capacity utilization. The investments in the Capital Goods sector have declined with the
decline in the relative profitability of the Capital Goods sector with respect to other sectors.

The export performance corroborates the inward focus of Capital Goods industry as less than
one-tenth of its sales is directed to exports. Except for few segments within the Capital Goods
sector, almost all of them have single digit exports as percentage of sales figures.

The overall growth rate of index of industrial production (IIP) during FY07 was 11.3%
compared to 8.2% in FY06. The growth rate achieved by the mining, manufacturing and
electricity sectors during FY07 was 5.1%, 12.3% and 7.2% respectively compared to 1.0%,
9.1% and 5.2% during corresponding period of the previous year. The Indian Industry grew
by 11% and manufacturing by 12% in 2006-07, supporting capital goods industry to grow
significantly. Reflecting the buoyant capacity addition in the manufacturing industry, the
capital goods industry grew by a healthy 17.7% in 2006-07.
The severity and worldwide impact of the global downturn was in many ways an
unprecedented event that froze economies around the world for more than two years. Indian
economy was no exception and was bound to witness a slow down.

However, it showed greater resilience than most others and was amongst the first few to
emerge from the downturn. The period from September 2008 to June 2009 impacted
industrial manufacturers most adversely. The gloom created by the global downturn impacted
Indian industry in more ways than one. There was a severe crunch in financial liquidity both
on debt and equity sides, customers backtracked on their orders, there were inventory pileups
and blockages in cash flows, to name a few.

Presently, the engineering sector is showing signs of recovery. This is reflected in IIP
numbers which grew by 11.7 percent in November 2009 within which manufacturing sector
grew by 12.7 percent. Though some end user industries are still cautious in their capital
expenditure plans, the sector continues to benefit from the relatively ‘recession proof’ high
growth infrastructure segments like power generation and transport infrastructure.

The capital goods sector recorded mixed performance with most of the companies catering to
power sector demand doing well. But the deceleration in the economic growth and re-
evaluation, deferment / cancellation of projects by the private sector has impacted the
performance of companies catering to industrial sector. These players' revenues eased despite
impressive order book.

Out of the 26 companies that are part of BSE Capital Goods Index six companies have not
declared their results as of the date of compilation of the aggregates. Hence the aggregate
revenue of the 20 industry majors was up by 23% to Rs 35772 crore. As commodity prices
came down on yoy basis, the material cost as proportion sales has moderated but the staff
cost and other expenses as proportion to sales for most of the players have increased. This
trend was more pronounced for PSU companies such as BHEL, BEL etc. For instance BHEL
provided Rs 890 crore in Q4FY09 itself in this regard compared to Rs 818 crore provided in
entire FY08.

The rising staff costs and other expenditure have primarily lead to marginal 20 bps easing of
operating margins to 16.5%, limiting the growth of operating profit to 22% to Rs 5900 crore.
The industry was impacted by more than doubling (114% rise) of interest costs to Rs 301
crore (up 114%) and 19% rise in provision for depreciation to Rs 397 crore. Finally, the
sector recorded 16% rise in net profit to Rs 3820 crore in the quarter ended March 2009.

On a relative basis, power sector investment is largely unaffected barring delay in award of
fresh contracts. Hence, the companies supplying equipment/ servicing this sector have seen
strong burnout of healthy order book. However, their Operating margins were impacted by
rise in staff and other costs / provisions, which negated the benefit of fall in input costs.

Bucking the general trend of easing of margins, Siemens and Alstom Projects reported
improvement in margins. The former has seen its margin zoom on a low base while the
latter's margin improved due to better order mix. On the flipside, some players catering to the
power sector like ABB, Kalpataru Power Transmission and Bharat Bijlee have seen their
revenue as well as profits fall.

Government of India steps up spends on infrastructure development to perk up the economy

of the country. Equally, with rise in global risk appetite improving the availability of funds
for capital-intensive Power projects. This along with recent modifications in mega power
policy etc is all set to encourage private investments. Moreover, the strong growth
opportunity in merchant power sale well above the rates under Power Purchase Agreements
is to entice private players to flock to these sector with investments. This will augur well for
domestic power equipment players. With more and more private players preferring domestic
equipment producers rather than overseas players enhance the prospects of domestic power
generation equipment majors. Given the fact of strong order book for power equipment
players and availability of expanded capacity, the book to bill ratio to improve driving growth
for the company in the medium term. Also, players catering to power sector are insulated
from wide fluctuations in price due to Price Variance clause in their orders thereby auguring
well on profitability count as well. Overall, the power generation equipment players are set to
see strong growth in the coming periods.
COMPANY OVERVIEW

ALSTOM Projects India Limited.

Alstom Projects India Ltd. (APIL) is a 67% subsidiary of Alstom Group, which is a world
leader in energy and rail transport infrastructure. Alstom Projects India (ALSTOMPROJ) has
full capabilities in engineering, manufacturing, project management and supply of power
generation equipment and also has a significant presence in the transport sector providing
railway equipment and technology solutions. The company was incorporated in 1992. The
chairman of the company is Sunand Sharma and Emmanuel Colombier, the managing
director. 

The company is a major player in the energy and transport infrastructure business supplying
critical electrical and industrial equipment including boilers and turbines and pollution
control equipment for power plants. The power segment is engaged engineering, procurement
and construction of power plants. The transport segment is engaged in designing,
manufacturing, supplying and supporting large scale transportation systems and is among the
world leaders in rail transport. It has six engineering centers in four locations. It has four
manufacturing units; hydro equipment in Vadodara, boilers in Durgapur, and transport in
Coimbatore. 

In 2007, the Alstom Transport led consortium bagged a contract worth Rs 2.55 billion from
the Delhi Metro Rail Corporation (DMRC) for train control and signaling systems to be
completed by March 2010. The company bagged a contract worth Rs 10 billion from the
Gujarat State Electricity Corporation (GSECL) for the construction of a combined cycle
power plant in India. The company has entered into a joint venture (JV) pact with domestic
auto component maker Bharat Forge for manufacturing equipment for power sector. 

The company has strategic partnerships with NTPC, BHEL, and Infosys for various projects.
The registered office is at The International, 5th Floor, 16, Marine Line Cross Road No.1, Off
Maharshi Karve Road, Churchgate, Mumbai-400020. 

Business Segment Analysis

The business of the Company is categorised in two segments, namely, Power and Transport.
Reviews on each of the company’s businesses are as follows:
POWER

This segment is engaged in the business of engineering, procurement, construction and

servicing of power plants and power equipment. Our customers enjoy the most economical,
environmentally friendly and advanced technology. The market for power equipment in 2008
confirmed the trend in 2007 with ordering of over 35 GW. This trend is likely to sustain at
least for the next 3-5 years as the country endeavours to enhance the power generation
capacity. The market is predominantly for coal-fired thermal power plants. Hydro and gas
also make a reasonable contribution. In future, demand for nuclear power is likely to increase
as well.

Subsequent to the enactment of The Electricity Act, 2003, the Private Sector started to play
an important role in the power market. Almost half of the upcoming power generation
capacities are being developed by private companies. The financial crisis and the upcoming
general elections may slow down the process to some extent in 2009 but overall the market
remains buoyant. Notwithstanding, the power generation capacity ordered last year,
electricity generation growth during the year has been the lowest in last eight years. It has
been just 2.71% as compared to 6.33% during the year 2007-08. Low rainfall and shortages
in coal and gas resulted in lower generation from existing facilities whereas, deficiency in the
supply chain prevented addition of planned capacities. Over the longer term, fuel availability
and implementation capability could pose a serious threat to the development of the sector.

The Company has the widest range of products and servicing capabilities to provide clean
power and maintenance support solutions across the spectrum of requirements for the power
market.

TRANSPORT

Railways

To keep pace with the country’s economic growth and forecast growth in passenger and
freight traffic, and to improve the efficiencies of its operations, Indian Railways plan
substantial investments in expansion of its network infrastructure, equipment and up-
gradation and induction of modern technologies. It is also a stated policy now to involve
private sector in partnerships to achieve these growth plans of the Indian Railways. Indian
Railways are exploring the framework for the private sector participation in various projects
for the manufacture of rolling stock and infrastructure development. Due to the complexity
and magnitude of these projects the initial attempts could not proceed as anticipated and it is
expected that these projects will be revived by Indian Railway during this financial year.

Metro

Based on the Delhi Metro experience, several Indian cities have announced Metro systems as
an answer to the urban growth and road traffic congestion. The existing signalling contract
for Lines 1 and 2 of Delhi Metro is under implementation in time for the planned
commencement of services ahead of the Commonwealth Games in 2010. Work on Shahdra to
Dilshad Garden and Vishwavidyala to Jehangirpuri have been executed ahead of schedule for
which the Company has received commendations from Delhi Metro.

The business also supplies signalling equipment to meet the requirements of improving the
safety standards on Indian Railways. It also provides signalling application engineering
services to the various global Alstom units from the dedicated application engineering and
software centre located in Bangalore. This activity is expected to increase with greater role
for this unit in local and overseas projects of Alstom transport.
Column1 Column2 Column3 Column4
   Year Mar 09  Mar 08  Mar 07 
  SOURCES OF FUNDS :
 Share Capital 67.02 67.02 67.02
  Reserves Total 340.49 281.27 266.51
  Equity Share Warrants 0 0 0
   Equity Application Money 0 0 0
  Total Shareholders Funds 407.51 348.29 333.53
   Minority Interest 0 0 0
 Secured Loans 1.13 1.69 2.25
  Unsecured Loans 0 0 0
  Total Debt 1.13 1.69 2.25
   Total Liabilities 408.64 349.98 335.78
  APPLICATION OF FUNDS :
 Gross Block 494.87 377.46 342.43
   Less: Accumulated Depreciation 235.5 208.4 185.56
  Net Block 259.37 169.06 156.87
   Lease Adjustment 0 0 0
 Capital Work in Progress 119.33 50.53 16.83
  Investments 0 0.01 0.01
  Current Assets, Loans & Advances
 Inventories 64.26 61.3 66.9
  Sundry Debtors 627.79 566.2 477.53
 Cash and Bank 367.99 397.13 289.41
  Loans and Advances 1,300.75 761.84 478.39
  Total Current Assets 2,360.79 1,786.47 1,312.23
   Less : Current Liabilities and Provisions
  Current Liabilities 2,239.45 1,578.69 1,046.66
 Provisions 91.92 75.35 88.7
   Total Current Liabilities 2,331.37 1,654.04 1,135.36
  Net Current Assets 29.42 132.43 176.87
  Miscellaneous Expenses not written off 0 0 0
  Deferred Tax Assets 17.8 13.67 13.9
   Deferred Tax Liability 17.28 15.72 14.34
  Net Deferred Tax 0.52 -2.05 -0.44
   Total Assets 408.64 349.98 335.78
 Contingent Liabilities 20.29 20.29 15.37

Column1 Column Column Column

 2 3 4
Mar Mar Mar
   Year 09(12)  08(12)  07(12) 
  INCOME :
2,318.1 1,596.1 1,247.0
 Sales Turnover 6 4 1
   Excise Duty 27.88 49.07 27.33
2,290.2 1,547.0 1,219.6
  Net Sales 8 7 8
  Other Income 49.48 48.45 36.86
 Stock Adjustments 0 0 0
2,339.7 1,595.5 1,256.5
   Total Income 6 2 4
  EXPENDITURE :
1,600.8 1,101.5
 Raw Materials 9 3 848.95
  Power & Fuel Cost 16.09 14.93 14.53
 Employee Cost 238.97 180.67 123.34
  Other Manufacturing Expenses 24.53 13.06 14.84
 Selling and Administration Expenses 131.01 81.45 57.33
  Miscellaneous Expenses 83.09 57.06 41.62
 Less: Pre-operative Expenses Capitalised 0 0 0
2,094.5 1,448.7 1,100.6
   Total Expenditure 8 0 1
  Operating Profit 245.18 146.82 155.93
  Interest 0.1 0.14 0.17
  Gross Profit 245.08 146.68 155.76
  Depreciation 33.1 23.68 16.4
  Minority Interest(before tax) 0 0 0
   Profit Before Tax 211.98 123 139.36
 Tax 71.81 41.96 0.51
  Deferred Tax -2.57 1.61 25.05
  Net Profit 138.12 76.51 111.47
   Minority Interest(after tax) 0 0 0
  Profit/Loss of Associate Company 0 0 0
   Net Profit after Minority Interest & P/L of
Assoc. Co. 138.12 76.51 111.47
 Extraordinary Items 1.87 2.88 0
   Adjusted Net Profit 136.25 73.63 111.47
 Adjst. below Net Profit 0 0 0
   P & L Balance brought forward 132.48 126.03 103.91
  Statutory Appropriations 0 0 0
  Appropriations 91.91 70.06 89.35
  P & L Balance carried down 178.69 132.48 126.03
   Dividend 67.03 53.62 67.02
  Preference Dividend 0 0 0
   Equity Dividend (%) 100 80 100
   EPS before Minority Interest (Unit Curr.) 18.91 10.06 14.93
   EPS after Minority Interest (Unit Curr.) 18.91 10.06 14.93
  Book Value (Unit Curr.) 59.61 50.71 48.43
BHARAT BIJLEE Limited.

Bharat Bijlee (BBL), incorporated in 1946, is one of the oldest companies in the electrical
engineering industry in India. 

The ISO 9001:2000 certified company is a multi-product, multi-division organization

operating in the two business segments of industrial products which comprises transformers,
motors and drives; and projects. Three phase AC induction motors; special products like
torque motors and sugar centrifuge motors; and centrifugal, submersible and other pumps are
manufactured. The manufacturing plant is located on a 193,000 sq. m. campus, with a
working area of approximately 50,000 sq. m. near Kalwa, Mumbai. The PWRLEX
transformer range has increased the manufacturing capacity to more than 8,000 MVA per
annum. 

The projects division undertakes turnkey projects involving outdoor EHV and HV
switchyards upto 220 kV, indoor substations, overhead and underground distribution systems,
industrial electrification involving lighting and power distribution, power system studies,
illumination systems, and power evacuation systems for power projects. The industrial
electronics division is the first and largest Indian manufacturer of microprocessor-based
variable speed drives for batch-type sugar centrifugal machines. Other products offered
include AC drives, DC drives, retrofit AC and DC drives. 

The company has in FY07 entered into trade and technical collaboration agreements with
Tecnoloma SA, Spain for lift automatic door systems and S.A. Sistel, Spain for electronic
printed circuit boards for lift controllers. Transformers are ordered in bulk from prestigious
customers like MSTCL, UPPCL, Reliance Petrochemicals, Enercon, and others. An
important export order from the Occidental Group of Oman was a major breakthrough in the
export business. Motors are ordered by original equipment manufacturers, consultants and
end users. Major projects have been undertaken for Gujarat Ambuja Cement, ICL Sugars,
Raymond Steel, Mahindra & Mahindra and several others. 
The registered office is located at Electric Mansion, 6th Floor, Appasaheb Marathe Marg,
Prabhadevi, Mumbai-400025. 

Business Segment Analysis

Industrial Products:

In this segment the Company manufactures and sells Power and Distribution Transformers, a
wide range of standard and customized Low Tension Motors, and Gearless Machines for the
elevator industry. It also markets Anti-Corrosion products, Submersible Pumps and AC
Variable Speed Drives. During the year, the Transformer business saw its highest ever order
inflow at 10350 MVA. This included prestigious orders from MSETCL (11 Nos. 200 MVA,
220 KV) and PGCIL (7 Nos. 160 MVA, 220 KV). Production for the year was 7589 MVA
compared with 8111 MVA during the previous year. The Transformer plant’s capacity
enhancement to 11000 MVA was completed during the year. With a reasonably robust
unexecuted order book position, the Company is hopeful of utilizing the enhanced capacity
during 2009-10.

The sales turnover of the Motor business was 10.54% lower than in the previous year.
Industry reports have indicated a steep fall in production and sales of LT Motors during the
second half of the year under review and demand continues to be depressed. However,
ongoing product-range extensions, specific initiatives towards market focus and superior
customer responsiveness are expected to contribute to increased sales and market share.
Column1 Column2 Column3 Column4
   Year Mar 09  Mar 08  Mar 07 
  SOURCES OF FUNDS :
 Share Capital 5.65 5.65 5.65
  Reserves Total 193.84 162.85 110.19
  Equity Share Warrants 0 0 0
   Equity Application Money 0 0 0
  Total Shareholders Funds 199.49 168.5 115.84
  Secured Loans 0 5.74 5.71
 Unsecured Loans 11.63 12.3 20.25
   Total Debt 11.63 18.04 25.96
  Total Liabilities 211.12 186.54 141.8
   APPLICATION OF FUNDS :
  Gross Block 99.41 69.4 56.07
 Less : Accumulated Depreciation 31.89 25.37 22.24
   Less:Impairment of Assets 0 0 0
 Net Block 67.52 44.03 33.83
   Lease Adjustment 0 0 0
 Capital Work in Progress 5.07 11.77 0.01
  Investments 7.54 20.29 18.73
  Current Assets, Loans & Advances
 Inventories 88.96 77.35 63.97
  Sundry Debtors 156.92 167.55 142.53
 Cash and Bank 9.71 7.4 10.25
  Loans and Advances 21.22 15.79 70.59
  Total Current Assets 276.81 268.09 287.34
   Less : Current Liabilities and Provisions
  Current Liabilities 113.72 124.42 115.91
 Provisions 28.16 32 81.74
   Total Current Liabilities 141.88 156.42 197.65
  Net Current Assets 134.93 111.67 89.69
  Miscellaneous Expenses not written off 0 0 0
  Deferred Tax Assets 3.42 3.79 3.72
   Deferred Tax Liability 7.36 5.01 4.18
  Net Deferred Tax -3.94 -1.22 -0.46
   Total Assets 211.12 186.54 141.8
 Contingent Liabilities 9.48 13.47 15.37
Column1 Column2 Column3 Column4
Mar Mar Mar
   Year 09(12)  08(12)  07(12) 
  INCOME :
 Sales Turnover 600.77 637.9 536.01
   Excise Duty 58.79 75.09 66.92
  Net Sales 541.98 562.81 469.09
  Other Income 3.05 3.71 4.84
 Stock Adjustments 6.3 9.43 13.38
   Total Income 551.33 575.95 487.31
  EXPENDITURE :
 Raw Materials 361.95 369.42 315.56
  Power & Fuel Cost 4.88 3.96 3.35
 Employee Cost 51.07 40.72 34.23
  Other Manufacturing Expenses 10.54 11.14 13.34
 Selling and Administration Expenses 26.99 24.86 19.07
  Miscellaneous Expenses 8.69 5.67 7.94
 Less: Pre-operative Expenses
Capitalised 0 0 0
   Total Expenditure 464.12 455.77 393.49
  Operating Profit 87.21 120.18 93.82
  Interest 6.77 4.62 7.75
  Gross Profit 80.44 115.56 86.07
  Depreciation 7.08 3.93 2.93
  Profit Before Tax 73.36 111.63 83.14
  Tax 22.53 37.88 28.11
 Fringe Benefit tax 0.59 0.49 0.32
  Deferred Tax 2.71 0.77 -0.37
  Reported Net Profit 47.53 72.49 55.08
  Extraordinary Items 0.26 0.03 -1.01
  Adjusted Net Profit 47.27 72.46 56.09
  Adjst. below Net Profit 0 0 0
  P & L Balance brought forward 13.63 15.98 17.43
  Statutory Appropriations 0 0 0
 Appropriations 36.53 74.84 56.53
   P & L Balance carried down 24.63 13.63 15.98
  Dividend 14.13 16.96 14.13
   Preference Dividend 0 0 0
  Equity Dividend % 250 300 250
   Earnings Per Share-Unit Curr 79.88 123.2 93.24
  Earnings Per Share(Adj)-Unit Curr 79.88 123.2 93.24
   Book Value-Unit Curr 353.08 298.23 205.03
KALPATARU POWER TRANSMISSION LTD.

Incorporated in 1981, Kalpataru Power Transmission (KPT) is one of India's leading

engineering, procurement and construction (EPC) companies providing services to the power
transmission sector. KPT has its manufacturing facility in Gandhinagar, Gujarat. The
promoter of this firm (63% stake) is the Kalpataru Group, a Mumbai based real estate and
property development organisation. Over the years, KPT has diversified its business by way
of entering businesses like real estate, pipelines, rural electrification and distribution, biomass
energy, construction and warehousing and logistics. Their core competencies lie in EPC
services to the power transmission & distribution industry and oil & gas pipeline sectors.

The company`s activities include designing, testing, fabrication, erection and construction of
transmission lines and sub-station structures on a turnkey basis across India and overseas.
The construction division has been involved in the survey, foundation/civil works, erection
and stringing of more than over 6,500 km of turnkey projects in India for various clients such
as the Power Grid Corporation of India and various State Electricity Boards (SEBs). About
400,000 MT of towers and substation structures have already been designed, manufactured
and supplied over the last few years, of which over 100,000 MT have been exported. Over
200 tower tests of 132-500 KV have been carried out successfully, including 100 at the
company`s own testing station. 

Kalpataru Power has two large fabrication plants with an annual installed capacity of 78,000
MT, one of the largest in the world. It is equipped with modern machineries (including seven
CNC machines) and automated temperature controlled galvanizing baths, besides its own
state-of-the-art testing station and R&D centre to test towers up to 800 KV. The company has
exported tower parts to Mexico, Peru, Turkey, Algeria, Malaysia, Philippines, Thailand,
Vietnam, Bangladesh, UAE, Syria and Australia and many other Middle East and African
countries. It has executed jobs for reputed international companies such as ABB, Alstom,
EnelPower, Sumitomo, Downer, Cobra, etc. The company is technically pre-qualified for
domestic and international tenders and has executed jobs funded by the World Bank, ADB,
JBIC/OECF and Arab Fund. 
Kalpataru Power has entered into new strategic areas of business; firstly, civil works for
power projects, in which company has secured multiple jobs from BHEL, L&T (at IOCL,
Panipat) and civil works for Coal Handling plant at Dadri (NTPC). It has also made a
breakthrough in the water pipeline segment with its first job in Ahmedabad with further more
jobs expected shortly, mostly projects funded by ADB, World Bank and/or JNURM. 

The company secured three projects worth Rs 4 billion from Sonelgaz, the state electricity
company of Algeria. The company has been awarded a contract at an estimated value of Rs
3.85 billion for laying of approx. 550 KM pipeline as Part A of Mundra-Bhathinda Pipeline
Project for transportation of crude oil from Mundra to Guru Govind Singh Refinery at
Bhatinda. 

Kalpataru Power Transmission has bagged three orders worth Rs 399 crore from Power Grid
Corporation for 765 KV and 400 KV transmission line projects in Bihar, Chattisgarh and
Assam. These orders have to be executed between 18 to 24 months.

Earlier on 4th March 2009, the company got another order from Power Grid for supply and
erection of transmission towers for 413 kms and for providing 765 KV S/C transmission lines
associated with Sasan Ultra Mega Power Project for Silwar-Satna and Satna-Bina Section.
This work was to commence in March 2009 and scheduled to be completed within 27
months.

In addition to these two orders, the company also got Rs 385 crore order for laying of about
550 KMs of pipeline as Part A of Mundra-Bhatinda Pipeline project for transportation of
crude oil from Mundra to Guru Govind Singh Refinery at Bhatinda. This project was
awarded by Hindustan Mittal Energy, which is a joint venture between Hindustan Petroleum
Corporation and L N Mittal Group. To be executed in three spreads, this project is to be
completed within 18 months from the date of award. All the above orders were disclosed in
March 2009, which together account for Rs 1157 crore. Inclusive of other orders on hand, the
order book of Kalpataru Power Transmission now exceeds Rs 5000 crore.
 Column1 Column2 Column3 Column4
(Rs in Crs)
   Year Mar 09  Mar 08  Mar 07 
  SOURCES OF FUNDS :
 Share Capital 26.5 26.5 26.5
  Reserves Total 843.3 756.64 617.76
  Equity Share Warrants 0 0 0
   Equity Application Money 0 0 0
  Total Shareholders Funds 869.8 783.14 644.26
   Minority Interest 94.71 82.21 62.47
 Secured Loans 752.98 414.98 395.37
  Unsecured Loans 192.15 31.67 3.24
  Total Debt 945.13 446.65 398.61
   Total Liabilities 1,909.64 1,312.00 1,105.34
  APPLICATION OF FUNDS :
 Gross Block 714.5 555.76 399.82
   Less: Accumulated Depreciation 173.09 117.78 81.7
  Net Block 541.41 437.98 318.12
   Lease Adjustment 0 0 0
 Capital Work in Progress 113.27 7.99 5.07
  Investments 0.51 35.58 139.21
  Current Assets, Loans & Advances
 Inventories 326.96 267.75 189.04
  Sundry Debtors 1,416.01 933.2 699.94
 Cash and Bank 58.25 108.46 136.75
  Loans and Advances 697.71 485.23 320.54
  Total Current Assets 2,498.93 1,794.64 1,346.27
   Less : Current Liabilities and Provisions
  Current Liabilities 1,105.21 843.79 609.58
 Provisions 120.34 102.26 77.97
   Total Current Liabilities 1,225.55 946.05 687.55
  Net Current Assets 1,273.38 848.59 658.72
  Miscellaneous Expenses not written off 1.66 2.89 0.05
  Deferred Tax Assets 7.45 2.81 3.81
   Deferred Tax Liability 28.04 23.84 19.64
  Net Deferred Tax -20.59 -21.03 -15.83
   Total Assets 1,909.64 1,312.00 1,105.34
 Contingent Liabilities 321.01 271.42 65.77
 Column Column Column
Column1 2 3 4
Mar Mar Mar
   Year 09(12)  08(12)  07(12) 
  INCOME :
3,277.1 2,705.4 1,640.3
 Sales Turnover 9 7 0
   Excise Duty 46.04 61.4 42.12
3,231.1 2,644.0 1,598.1
  Net Sales 5 7 8
  Other Income 34.61 25.1 12.58
 Stock Adjustments 25.88 22.17 17.53
3,291.6 2,691.3 1,628.2
   Total Income 4 4 9
  EXPENDITURE :
1,671.2 1,322.6
 Raw Materials 0 7 821.27
  Power & Fuel Cost 27.05 20.33 16.85
 Employee Cost 188.94 138.57 65.11
  Other Manufacturing Expenses 821.87 653.9 317.19
 Selling and Administration Expenses 193.28 173.81 89.4
  Miscellaneous Expenses 48.08 27.55 34.35
 Less: Pre-operative Expenses Capitalised 0 0 0
2,950.4 2,336.8 1,344.1
   Total Expenditure 2 3 7
  Operating Profit 341.22 354.51 284.12
  Interest 113.67 67.36 43.91
  Gross Profit 227.55 287.15 240.21
  Depreciation 57.59 38.65 18.16
  Minority Interest(before tax) 0 0 0
   Profit Before Tax 169.96 248.5 222.05
 Tax 40.13 61.05 53.8
  Deferred Tax -0.43 6.08 3.46
  Net Profit 128.27 179.65 163.03
   Minority Interest(after tax) 17.33 14.76 1.71
  Profit/Loss of Associate Company 0 0 0
   Net Profit after Minority Interest & P/L of
Assoc. Co. 110.94 164.89 161.32
 Extraordinary Items -1.06 -0.58 -0.23
   Adjusted Net Profit 112 165.47 161.55
 Adjst. below Net Profit -0.29 -0.09 -1.4
   P & L Balance brought forward 335.66 215.11 98.45
  Statutory Appropriations 0 0 0
   Appropriations 37.12 44.25 43.26
  P & L Balance carried down 409.19 335.66 215.11
   Dividend 19.87 19.88 19.88
  Preference Dividend 0.07 0.24 0
   Equity Dividend (%) 75 75 75
  EPS before Minority Interest (Unit Curr.) 46.95 66.14 60.25
   EPS after Minority Interest (Unit Curr.) 40.42 60.57 59.6
  Book Value (Unit Curr.) 328.04 295.32 242.89
WALCHANDNAGAR

Business Profile 
Walchandnagar Industries was incorporated at Mumbai. The company manufactures sugar
refined spirit, sugar machinery, plastic goods, cement plant paper and pulp plant, water tubes
boilers, time pieces, etc. The company manufactures sugar by the double sulphitation
process. 

The company has also received orders for EPC projects in the field of mineral processing.
The company gets orders for sugar plants, cement plants, steam generating plants and gear
boxes. The order book position for space, defense and nuclear continues to be good. 

The company created a separate division named `Walchand Projects Group` to avail the
growing opportunities in this type of business. Fields of Oil & Gas applications and Nuclear
Power applications bear long term potential for the Company. The Oil & Gas applications
can include the jobs for the on and off shore drilling applications, the nuclear power
applications can be in the core equipment such as Calendria, End shields, Heat Exchangers
etc. Your Company had identified that it would need a suitable land with waterfront for easy
handling and transportation of such large and heavy components and structures. During the
year, the Company acquired on lease about 57 Acres of land at Dahej, near Bharuch in the
state of Gujarat. This land is having necessary water front and is located in the well
developed Dahej industrial area. Presently, the Company is in the process of completing the
work relating to the detailed project report and obtaining various regulatory clearances with
the intention of establishing a green field manufacturing facility capable of addressing the
requirements of Oil & Gas, Nuclear Power and similar heavy engineering works.

Engineering strength and the untiring dedication to excel in this field has been the key focus
of your Company over the decades. During the year, your company took a significant step
forward and established Walchand Technology Group with diverse skill sets in several fields
such as Nuclear Power, Aerospace, Thermal Design, Mechanical Engineering, Non-
conventional Energy, Water Treatment and Water Solutions, etc. The Walchand Technology
Group employs 70 professionals, which are qualified engineers in several disciplines of
engineering. The group focuses on the research & development of engineering applications,
for the potential business opportunities being pursued by the Company.

Column1 Column2 Column3 Column4

(Rs in Crs)
   Year Sep 09  Sep 08  Sep 07 
  SOURCES OF FUNDS :
 Share Capital 7.61 7.61 3
  Reserves Total 419.61 414.25 219.77
  Equity Share Warrants 0 0 0
   Equity Application Money 0 0 0
  Total Shareholders Funds 427.22 421.86 222.77
  Secured Loans 109.92 73.16 20.88
 Unsecured Loans 15.04 15.11 5.16
   Total Debt 124.96 88.27 26.04
  Total Liabilities 552.18 510.13 248.81
   APPLICATION OF FUNDS :
  Gross Block 574.03 556.54 418.53
 Less : Accumulated Depreciation 283.28 259.23 254.68
   Less:Impairment of Assets 0 0 0
 Net Block 290.75 297.31 163.85
   Lease Adjustment 0 0 0
 Capital Work in Progress 52.37 22.26 9.97
  Investments 46.22 41.77 5.35
  Current Assets, Loans & Advances
 Inventories 171.73 120.48 112.58
  Sundry Debtors 266.33 338.01 167.85
 Cash and Bank 41.49 10.48 27.62
  Loans and Advances 108.93 80.62 68.99
  Total Current Assets 588.48 549.59 377.04
   Less : Current Liabilities and Provisions
  Current Liabilities 407.33 378.78 286.57
 Provisions 7.72 14.16 13.27
   Total Current Liabilities 415.05 392.94 299.84
  Net Current Assets 173.43 156.65 77.2
  Miscellaneous Expenses not written off 0 0 0
  Deferred Tax Assets 0.35 1.68 1.12
   Deferred Tax Liability 10.94 9.54 8.68
  Net Deferred Tax -10.59 -7.86 -7.56
   Total Assets 552.18 510.13 248.81
 Contingent Liabilities 277.18 199.74 240.53
Column1 Column2 Column3 Column4
Sep Sep Sep
   Year 09(12)  08(12)  07(12) 
  INCOME :
 Sales Turnover 525.32 727.7 668.31
   Excise Duty 12.71 31.68 35.77
  Net Sales 512.61 696.02 632.54
  Other Income 12.3 4.21 4.61
 Stock Adjustments 33.24 -4.63 0.01
   Total Income 558.15 695.6 637.16
  EXPENDITURE :
 Raw Materials 310.21 439.39 399.51
  Power & Fuel Cost 6.7 7.41 8.22
 Employee Cost 51.61 47.96 37.61
  Other Manufacturing Expenses 83 59.03 69.14
 Selling and Administration Expenses 48.81 61.2 56.81
  Miscellaneous Expenses 0.4 5.14 1.89
 Less: Pre-operative Expenses
Capitalised 0.39 0.97 0.82
   Total Expenditure 500.34 619.16 572.36
  Operating Profit 57.81 76.44 64.8
  Interest 11.94 8.85 4.45
  Gross Profit 45.87 67.59 60.35
  Depreciation 10.52 7.09 5.47
  Profit Before Tax 35.35 60.5 54.88
  Tax 8.88 19.84 15.83
 Fringe Benefit tax 0.34 0.59 0.49
  Deferred Tax 2.73 0.3 3
  Reported Net Profit 23.4 39.77 35.56
  Extraordinary Items -0.02 0.05 0.65
  Adjusted Net Profit 23.42 39.72 34.91
  Adjst. below Net Profit 0 0 0
  P & L Balance brought forward 82.31 50.97 22.48
  Statutory Appropriations 0 0 0
 Appropriations 6.79 8.43 7.07
   P & L Balance carried down 98.92 82.31 50.97
  Dividend 3.8 3.8 3
   Preference Dividend 0 0 0
  Equity Dividend % 50 50 100
   Earnings Per Share-Unit Curr 5.98 10.28 116.83
   Earnings Per Share(Adj)-Unit Curr 5.98 10.28 116.83
   Book Value-Unit Curr 60.22 55.19 413.73

FINANCIAL STATEMENT ANALYSIS

Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements. It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply. After
analysis of financial statements, interpretation of analyzed information is done by decision
maker to forecast future profitability, financial strength and liquidity position of the business.

TYPES OF ANALYSIS

Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions. Accounts for the year 2004-2005 to 2008-2009 have been studied in
this report.

Analysis consists of:

1. Financial Ratio Analysis

2. Common Size Statements
3. Trend Analysis

FINANCIAL RATIO ANALYSIS

Ratio analysis is a very popular tool of financial analysis. Under this system of analysis,
financial statements have been analyzed by computing accounting ratios. Ratios indicate how
a business is performing and provide indications of trends and patterns. They can be
compared to the same ratios in previous years' accounts and the accounts of other businesses
operating in a similar environment.

The ratios can be looked at from three perspectives:

 Creditors
  Investors

 Shareholders

There are various parameters upon which various types of different analysis is done. They
include:

1. Liquidity Analysis.

2. Profitability Analysis.

3. Solvency Analysis.

4. Efficiency Analysis.

LIQUIDITY RATIOS

Liquidity is the ability to convert assets into cash or to obtain cash. It is important from the
point of view of meeting the firm’s short term obligations.

 Current Ratio

It is the ratio of the current assets to current liabilities of the company. It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments.
Besides measuring liquidity, it also measures the margin of safety available in case of
uncertainty of flow of funds.

It provides a measure of degree to which current assets cover current liabilities. The excess of
current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds.

 Quick ratio

It is an indicator of a company's short-term liquidity. The quick ratio measures the

company's ability to meet its short-term obligations with its most liquid assets. The higher the
quick ratio, the better the position of the company.
 Cash + Marketable securities + accounts receivables

Quick Ratio =

Current liabilities

BHARA
ALSTO T KALPATAR WALCHANDNAGA
M BIJLEE U R

LIQUIDITY RATIOS
CURRENT RATIO 1.01 1.95 2.04 1.41 (times)
QUICK RATIO 0.99 1.32 1.77 1.05 (times)

ANALYSIS –

1. Apart from Alstom Projects Ltd all other companies have a healthy current ratio,
which means that the short term liquidity of the company may be suspect.
2. The Quick ratio depicts a picture that all the companies are very much liquid in the
immediate period, thus there is no reason for concern even in the case of Alstom ltd.

PROFITABILITY RATIOS

Profitability ratios are probably the most important ratios studied by any analyst. They are
able to give a good overall picture of a company with respect to its peers. The most important
objectives for the business and, arguably therefore, the most important ratios, are those
concerned with profitability. As obvious from the name, the higher these ratios the better for
the company.

Net profit margin

Net profit margin divided by net revenues, often expressed as a percentage. This number is an
indication of how effective a company is at cost control. The higher the net profit margin is,
the more effective the company is at converting revenue into actual profit. The net profit
margin is a good way of comparing companies in the same industry, since such companies
are generally subject to similar business conditions. However, the net profit margins are also
a good way to compare companies in different industries in order to gauge which industries
are relatively more profitable.

Net Profit Margin = Net Profit * 100 = Profit before Interest and Taxation * 100
 Turnover Turnover

Return on Capital Employed: Net after Tax Profit divided by Net Worth, this is the 'final
measure' of profitability to evaluate overall return. This ratio measures return relative to
investment in the company. Put another way, Return on Net Worth indicates how well a
company leverages the investment in it. May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit.

BHARA
ALSTO T KALPATAR WALCHANDNAG
M BIJLEE U AR
PROFITABILITY RATIOS
NET PROFIT MARGIN 9% 14% 5% 7%
OPERATING PROFIT MARGIN 9% 15% 9% 8%
RETURN ON CAPITAL
EMPLOYED 34% 24% 15% 6%
RETURN ON ASSETS 36% 24% 8% 6%

1. The net profit margin of the four companies though not healthy, but on the
background of the global meltdown, can be said to be satisfactory.
2. Operating profit margin represents the return that the company is able to generate
from its operations over its net revenue. Operating profit margin of the companies is
also very low. Bharat Bijlee has the highest profit margins.
3. But Alstom shows that it is giving the best returns, as far as Capital or Assets at the
stake of the company, despite the fact that it is highly under-leveraged firm, as more
than 99% of its invested capital is in equity. Thus, Alstom has been able to generate
high returns on its assets and equity despite not taking advantage of “trading on
equity.” Walchandnagar has the lowest returns.

LEVERAGE RATIOS

These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity. Long Term Debt /
Equity ratios provide insight into the extent to which non equity capital is used to finance the
assets of the firm.

Ratio = long term liabilities/ shareholders equity

The higher is the ratio, the higher the proportion of assets financed by non-shareholder
parties. Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity.

Debt-Equity Ratio: Total liabilities divided by Net Worth. This ratio helps to clarify the
impact of long-term debt, which can be seen by comparing this ratio with Current Liabilities:
Net Worth. Creditors are concerned to the extent that total liability levels exceed Net Worth.
Debt to equity ratio shows extend to which the company has raised external debt with respect
to the shareholder’s fund. A high debt/equity ratio generally means that a company has been
aggressive in financing its growth with debt. This can result in volatile earnings as a result of
the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company
could potentially generate more earnings than it would have without this outside financing. If
this were to increase earnings by a greater amount than the debt cost (interest), then the
shareholders benefit as more earnings are being spread among the same amount of
shareholders. However, the cost of this debt financing may outweigh the return that the
company generates on the debt through investment and business activities and become too
much for the company to handle. This can lead to bankruptcy, which would leave
shareholders with nothing.

Interest Coverage Ratio: It’s a very useful ratio from the point of view of suppliers of funds
because it shows the no of times earnings cover interest liability. The higher the ratio the
better it is from the viewpoint of lender of funds

BHARA
ALSTO T KALPATAR WALCHANDNAG
M BIJLEE U AR
SOLVENCY RATIOS
DEBT-EQUITY RATIO 0.003 0.058 1.087 0.251
INTEREST COVERAGE RATIO 2451.80 12.88 3.00 8.57
 1. As is evident from the above ratios, these companies have very low component of
debt on their books, apart from Kalpataru which is geared according to market norms.
2. As the debt component is very low the Interest Coverage ratio is very high for these
companies, which means that these companies are not “trading on their equity”, and
thus losing out on opportunity to earn more profits. Only Kalpataru has made use of
this gearing advantage.

TURNOVER RATIOS

These ratios give an indication as to how efficiently a company is utilizing its assets.

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet). It indicates how well the business is using its fixed assets to
generate sales.

Generally speaking, the higher the ratio, the better, because a high ratio indicates the business
has less money tied up in fixed assets for each rupee of sales revenue. A declining ratio may
indicate that the business is over-invested in plant, equipment, or other fixed assets. It also
indicates pricing strategy: companies with low profit margins tend to have high asset
turnover, while those with high profit margins have low asset turnover.

Inventory turnover ratio represents on average inventory basis, how quickly the company is
converting its inventory into finished goods. A ratio showing how many times a
company's inventory is sold and replaced over a period.
 

The days in the period can then be divided by the inventory turnover formula to calculate the
days it takes to sell the inventory on hand or "inventory turnover days".

Although the first calculation is used for our study, COGS (cost of goods sold) may be
substituted because sales are recorded at market value, while inventories are usually recorded
at cost. Also, average inventory may be used instead of the ending inventory level to
minimize seasonal factors. This ratio should be compared against industry averages. A low
turnover implies poor sales and, therefore, excess inventory. A high ratio implies either
strong sales or ineffective buying. High inventory levels are unhealthy because they represent
an investment with a rate of return of zero. It also opens the company up to trouble should
prices begin to fall.

Working Capital turnover ratio shows how well the company is using its working capital
to generate its sales. Working capital turnover ratio establishes a relationship between net
sales and working capital. This ratio measures the efficiency of utilisation of working capital.

Working Capital Turnover Ratio = Net Sales or Cost of Goods Sold/Net Working Capital
Though high working capital turnover ratio signifies efficient use, but on the other hand it
also shows tight liquidity position for the company.

BHARAT
ALSTOM BIJLEE KALPATARU WALCHANDNAGAR
ACTIVITY RATIOS
WORKING CAPITAL TURNOVER
RATIO 77.848 4.017 2.537 3.602
ASSET TURNOVER RATIO 6.038 2.726 2.006 1.306
 INVENTORY TURNOVER RATIO 35.641 6.092 9.882 4.068

1. Alstom has a very high working capital turnover ratio in comparison to the other three
companies, which shows the efficient use of resources, but also shows tight liquidity
position of the company.
2. All four companies have a very low asset turnover ratio, this is due the global
meltdown and also the nature of business of these companies.
3. Again we see that Alstom is the leader by large among the four companies when it
comes to utilisation of resources. It has a very high inventory turnover ratio
suggesting strong sales and efficient management of inventory.

BHARAT
ALSTOM BIJLEE KALPATARU WALCHANDNAGAR
VALUATION RATIOS
PRICE/EARNINGS RATIO 32.76 12.67 26.58 40.87
PRICE/BOOKVALUE RATIO 10.39 2.87 3.28 4.06

1. The P/E ratio depicts that Bharat Bijlee is the least priced and Walchandnagar is the
most highly priced of the four stocks.
2. Again we see that Bharat Bijlee has the least price as far as P/BV ratio is concerned,
where as Alstom has the highest price, which can be attributed to its high returns.

Common Size Financial Analysis

Under common size financial analysis, company financial statements are displayed
as percentages of a common base figure. This type of financial statement allows for easy
analysis between companies or between time periods of a company. The values on the
common size statement are expressed as percentages of a statement component such as
revenue. While most firms don't report their statements in common size, it is beneficial to
compute if you want to analyze two or more companies of differing size against each other.
Formatting financial statements in this way reduces the bias that can occur when
analyzing companies of differing sizes. It also allows for the analysis of a company over
various time periods, revealing, for example, what percentage of sales is cost of goods sold
and how that value has changed over time.

For the purpose of this analysis, balance sheets for all companies as on 31st March 2009 and
the income statement for April 08-March 09 were studied and computations were done on
them.

Analyst’s Perspective

1. On the liabilities side, we see that Alstom has the lowest amount of debt as a
percentage of total assets as compared to other companies. This means that Alstom is
the least levered firm in the category. Bharat Bijlee also has a very low debt
component.
2. On the assets side (application of funds) side it can be seen that Alstom has a very
high Capital Work in Progress (almost 30% of total assets), where other firm have
less than 7% of total assets in working capital.
3. Bharat Bijlee has significant amount of its assets blocked in the form of inventories.
4. Alstom has an unusually high level of current liability, but it also has sufficient
amount of current assets to back them up. So although Alstom has very high
proportions of Sundry Debtors, Cash or Loans and Advances in comparison to the
other companies, it is only to cover for the huge current liabilities.
5. But, when comes to net current assets Alstom has a very low figure, which is not a
very good sign. Bharat Bijlee and Kalpataru has high levels of net current assets.
6. Another point of concern is the amount of contingent liabilities for Kalpataru and
Walchandnagar, 321 and 238 times of the total assets respectively. If even some part
of these liabilities would arise then these companies would be in serious trouble to
meet these liabilities.
Analyst’s Perspective

1. The operating profits of the four firms are almost equal with Bharat Bijlee leading the
pack with 16%. This shows the operational efficiency of the companies.
2. We see that a significant portion of expenditure is in the form of raw materials, which
is common in the capital goods industry. Other expenses are relatively very low in
proportion. But in Kalpataru we see that manufacturing expenses are also significant
(25%), in comparison to the other companies which have very low manufacturing
expenses. Alstom has comparatively higher employee costs than the others.
3. As seen from the table showing data as a % of Operating profit, that the proportion of
Net Profit to Operating Profit is highest for Alstom and Bharat Bijlee, while for
Klapataru it is very low.
TREND ANALYSIS

Trend Analysis provides important information regarding the historical performance and
growth and it can be a great tool for analyzing , planning and forecasting. In our study I have
taken 5 year trend data for each of the company with 04-05 serving as the base year for each
of the company with 100 as the base value.

ALSTOM

1. The reserves of the company have steadily increased, showing constant growth and
profitability.
2. The company follows a policy of debt reduction, which is evident from the constantly
diminishing debt component.
3. There has been a constant increase in the capital assets of the company as well as
work in progress over the years. Though the first may be a good sign but the second
definitely does not project well about the company.
4. Loans & Advances and Current liabilities have increased manifold over the years. So
has the amount of Sundry Debtors, which does not bode well for the company.
5. The sales turnover of the company has increased steadily and constantly showing the
growth phase of the company.

BHARAT BIJLEE
 1. The reserve of the company has increased slowly but steadily, depicting constant
growth in operations.
2. Capital assets and Current assets have increased with the pace of growth of the
company, but we see that Current liabilities had increased significantly in the third
year then decreased subsequently.
3. Sales have increased over time except for the most recent year, which can be
attributed to the recession in the global economy. Similarly Operating profit has
increased throughout except in the last year for similar reason

KALPATARU LTD.

1. Although Sales have increased constantly over the past, the Operating profit has fallen
for the last year due to global market conditions. Also the last year saw unusual
increase in manufacturing expenses.
2. Interest component has increased substantially further decreasing the profit of the
company.
3. Reserves have increased substantially so has the total Debt component of the
company, which shows that the company is expanding by use of external funds.
4. Capital and Current assets have increased considerably, but work in progress has
increased exponentially in the last year, which may be due to cancellation of orders.

WALCHANDNAGAR

1. Sales increased steadily over the past but fell sharply in the last year due to global
recession and market conditions.
2. All expenditures have increased in accordance with the sales but the manufacturing
expenses have risen sharply in the last year, thus low operating profit for the last year.
3. Reserves have increased steadily, Debt component has also increased rather sharply in
the last two years, which shows that the company has gone for external financing for
its operations.
4. Assets, Investments and Current liabilities have all seen a huge rise in the year before
last, depicting the boom previous to the recession.
From the perspective of the creditors, we can see that Alstom and Bharat Bijlee have
negligible debt component, while Kalpataru has high debt. Although Kalpataru has
infavourable Debt-equity ratio, it is well covered as it has a comfortable Interest coverage
ratio. Liquidity of the firms is also very good apart from that of Alstom which has just
enough liquidity. So considering all, it can be said that Bharat Bijlee is the most safe
company for creditors.

From the perspective of the investor, again Bharat Bijlee is the best stock as it has the highest
profitability and also it is highly under priced.

REFERENCES.

 ALSTOM PROJECTS ANNUAL REPORT 2008-09

 BHARAT BIJLEE ANNUAL REPORT 2008-09
 KALPATARU POWER TRANSMISSION ANNUAL REPORT 2008-09
 WALCHANDNAGAR ANNUAL REPORT 2008-09
 WWW.CAPITALINE.COM
 WWW.EQUITYRESEARCHINDIA.COM
 WWW.MYIRIS.COM
 WWW.MONEYCONTROL.COM