(Synopsis Outline)

B.K. BIRLA COLLEGE OF ARTS, SCIENCE AND COMMERCE

(AUTONOMOUS), KALYAN

MASTER OF COMMERCE
[M.COM] PART II

SEM III (2021-22)

A Synopsis on

“FINANCIAL ANALYSIS OF TATA POWER LIMITED”

Submitted to,
B.K. BIRLA COLLEGE OF ARTS, SCIENCE AND OMMERCE
(AUTONOMOUS), KALYAN

Nmae of Student : Nimesh Dilip More

Roll No:- 04

Student ID :- 43097

Email ID :- nimeshmore710@gmail.com

Under the Guidance of

Dr/Mr./Mrs Bharat Bhagul Sir

 CERTIFICATE

This is to certify that MR. NIMESH DILIP MORE has worked

and duly completed her Project Work for the degree of Bachelor in
Commerce (Accounting and Finance) during the academic year
2020- 2021 under the faculty of commerce in the subject of
“Financial Management” and her project is entitled, “FINANCIAL
ANALYSIS OF TATA POWER LIMITED” under the guidance of
Mr. BHARAT BHAGUL.

This is to further certify that the entire work has been done by the
learner and that no part of it has been submitted previously for any
Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and
investigation.

Course Coordinator Principal

Project Guide Internal Examiner External Examiner

 DECLARATION

I the undersign MR. NIMESH DILIP MORE here by, declare that the
work embodied in this project work titled “FINANCIAL ANALYSIS OF
TATA POWER LIMITED” forms my own contribution to the research
work carried out under the guidance of Mr. BHARAT BHAGUL is
result of my own research work and has not been previously submitted to
any other University for any other Degree/ Diploma to this or any other
University.

Wherever reference has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

NIMESH DILIP MORE

Roll No. 04
 INDEX

Chapter Name of the chapter Page

No. No.
1. Introduction
1.1 Introduction of Financial Statement 1
1.2 Types of Financial Statement 2
1.3 Introduction of Financial Analysis 3
1.4 Types of Financial Analysis 4
1.5 Methods of Financial Analysis 6
1.6 Limitations of Financial Statement Analysis 9
1.7 Users of Financial Statement Analysis 11
1.8 Introduction of Ratio Analysis 12
1.9 Types of Ratios Analysis 14
1.10 Classifications of Ratios 15
1.11 Introduction of Tata Power Limited. 22

2 Research Methodology
2.1 Introduction 28
2.2 Objectives of the Study 30
2.3 Limitations of the Study 31
2.4 Significance 32
2.5 Scope of the Study 32
2.6 Hypothesis 32
2.7 Tools and Techniques 33

3 Review of Literature
3.1 Introduction of Review of Literature 35

4 Data Analysis and Interpretation

4.1 Balance sheet from 2011-2020 42
4.2 Statement of Profit & Loss from 2011-2020 47
4.3 Data Analysis 51
4.4 Ratio Analysis 51
4.5 Ratio Analysis & Interpretations 51

5 Conclusion and Suggestion

5.1 Findings 72
5.2 Conclusion 72
5.3 Suggestions 73
5.4 Hypothesis Testing 74
5.5 Bibliography 75

INDEX OF TABLES

Table No. Title Page

No.
1.1 Generation Capacity of TPC 23

4.1 Balance Sheet of TATA POWER LIMITED from 2011 to 42

2020
4.2 Statement of Profit and loss of TATA POWER LIMITED 47
from 2011 to 2020
4.3 Gross Profit Ratio 51

4.4 Net Profit Ratio 53

4.5 Operating Profit Ratio 54

4.6 Total Asset Turnover 55

4.7 Fixed Asset Turnover 57

4.8 Total Debt to Asset Ratio 58

4.9 Total Debt to Equity Ratio 59

4.10 Long term Debt to Total Asset Ratio 61

4.11 Equity Multiplier 62

4.12 Return on Asset 63

4.13 Return on Equity 64

4.14 Current Ratio 66

4.15 Quick Ratio 67

4.16 Cash Ratio 68

4.17 Net Working Capital Ratio 69

INDEX OF GRAPHS

Graph Title Page

No. No.
4.1 Gross Profit Ratio 52

4.2 Net Profit Ratio 53

4.3 Operating Profit Ratio 54

4.4 Total Asset Turnover 56

4.5 Fixed Asset Turnover 57

4.6 Total Debt to Asset Ratio 58

4.7 Total Debt to Equity Ratio 60

4.8 Long term Debt to Total Asset Ratio 61

4.9 Equity Multiplier 62

4.10 Return on Asset 64

4.11 Return on Equity 65

4.12 Current Ratio 66

4.13 Quick Ratio 67

4.14 Cash Ratio 69

4.15 Net Working Capital Ratio 70

 FINANCIAL ANALYSIS OF TATA POWER LIMITED

CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION OF FINANCIAL STATEMENTS:

Financial statements are reports prepared by a company’s management to present the

financial performance and position at a point in time. Financial accounting and
reporting places such a high emphasis on the accuracy, reliability, and relevance of
the information on these financial statements as financial statements are the main
source of financial information for decision making. In other words, financial
statements are written formal records that convey the financial activities and
conditions of a business or entity. Financial statements should be clear and concise so
that it should be understandable for both the entity and for readers.

It consists of four major components for businesses usually include Income

Statements, Balance sheets, Statement of Retained Earnings, and Cash flows. It may
also require additional detailed disclosures depending on the relevant accounting
framework.

These statements are prepared to give outsiders of the company that is investors and
creditors, more information about the company’s financial positions. These statements
are often audited by governments’ agencies, accountants, firms, etc. to ensure
accuracy, and for tax, financing or investing purposes.

Financial statements record financial data, which must be evaluated through financial
statement analysis to become more useful to investors, shareholders, managers, and
other interested parties. These statements allow analysts to measure liquidity,
profitability, company-wide efficiency, and cash flow.

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1.2 TYPES OF FINANCIAL STATEMENTS:

There are three main types of financial statements:-

1. Balance sheet
2. Income statement
3. Cash flow statement

BALANCE SHEET:

The balance sheet provides an overview of assets, liabilities, and stockholders’ equity
as a snapshot in time. The date at the top of the balance sheet tells you when the
snapshot was taken, which is generally the end of the financial year. The balance
sheet equation, otherwise known as the accounting equation, can be expressed as
Assets= Liabilities+ Stockholders’ Equity. The balance sheet identifies how assets are
funded, either with liabilities, such as debt, or stockholders’ equity, such as retained
earnings and additional paid in capital. Assets are listed on the balance sheet in order
of liquidity. Liabilities are listed in the order in which they will be paid. Short term or
current liabilities are expected to be paid within the year, while long-term or
noncurrent liabilities are debts expected to be paid in over one year. In simple terms,
Balance sheet is a picture of the company on that date. Investors and creditors can use
the balance sheet to analyze how companies are funding capital assets and operations
as well as current investor information.

INCOME STATEMENT:

Also known as profit or loss report or statement of comprehensive income, Or

statement of revenue and expenses report. A profit and loss statement provides
information on the operation of the enterprise. These include sales and the various
expenses incurred during the stated period. Unlike the balance sheet, the income
statement covers a range of time, which is a year for annual financial statements and a

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quarter for quarterly financial statements. The income statement provides an overview
of revenues, expenses, net income and earnings per share. It usually provides two to
three years of data for comparison. Most companies issue annual income statement,
but quarterly and semiannual income statements are also common. Users can analyse
the income statement to see if companies are operating efficiently and producing
enough profit to fund their current operations and growth. The statement of owner’s
capital summarizes all owner investments and withdrawals from the company during
a period. It also reports the current income or loss recorded in retained earnings.

CASHFLOW STATEMENT:

The cash flow statement provides an overview of company’s cash flows from
operating activities, investing activities, and financing activities. The cash flow
statement merges the balance sheet and the income statement. Due to accounting
convention, net income can fall out of alignment with cash flow. The cash flow
statement reconciles the income statement with the balance sheet in three major
business activities. These activities include operating, investing and financing
activities. Operating activities include cash flows made from regular business
operations. Investing activities include cash flows from the acquisition and disposition
of assets, such as real estate and equipment. Financing activities include cash flows
from debt and equity investment capital.

1.3 INTRODUCTION OF FINANCIAL ANALYSIS:

FINANCIAL STATEMENT ANALYSIS-

Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of changes in equity. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and

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future prospects of an organization. Financial statement analysis is an evaluative
method of determining the past, current, and projected performance of a company.
Several techniques are commonly used as part of financial statement analysis
including horizontal analysis, which compares two or more years of financial data in
both dollar and percentage form; vertical analysis, in which each category of accounts
on the balance sheet is shown as a percentage of the total account; and ratio analysis,
which calculates statistical relationships between data.

Financial analysis is the process of examining a company’s performance in the

context of its industry and economic environment in order to arrive at a decision or
recommendation. Often, the decisions and recommendations addressed by financial
analysts pertain to providing capital to companies specifically, whether to invest in
the company’s debt or equity securities and at what price. An investor in debt
securities is concerned about the company’s ability to pay interest and to repay the
principal lent. An investor in equity securities is an owner with a residual interest in
the company and is concerned about the company’s ability to pay dividends and the
likelihood that its share price will increase.

In other words financial statement analysis is a study of relationship among various

factors in a business as disclosed by financial statements of a firm. The analysis show
the trend of the factors and will help in evaluation of component parts. Analysis of
financial statement is to obtain better insight into a firm’s position and performance.

1.4 TYPES OF FINANCIAL ANALYSIS:

 EXTERNAL ANALYSIS:
This analysis is done by outsiders who do not have access to the detailed
internal accounting records of the business firm. These outsiders include
investors, potential investors, creditors, potential creditors, government
agencies, credit agencies, and the general public.

For financial analysis, these external parties to the firm depend almost entirely
on the published financial statements. External analysis, thus serves only a

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 limited purpose. However, the recent changes in the government regulations
requiring business firms to make available more detailed information to the
public through audited published accounts have considerably improved the
position of the external analysis.

 INTERNAL ANALYSIS:
The analysis conducted by persons who have access to the internal accounting
records of a business firm is known as internal analysis. Such an analysis can,
therefore, be performed by executives and employees of the organization as
well as government agencies which have statutory powers vested in them.
Financial analysis for managerial purposes is the internal type of analysis that
can be effected depending upon the purpose to be achieved.

 HORIZONTAL ANALYSIS:
Horizontal analysis refers to the comparison of financial data of a company for
several years. The figures for this type of analysis are presented horizontally
over a number of columns. The figures of the various years are compared with
standard or base year. A base year is a year chosen as beginning point.

This type of analysis is also called ‘ Dynamic Analysis’ as it is based on the

data from year to year rather than on data of any one year. The horizontal
analysis makes it possible to focus attention on items that have changed
significantly during the period under review. Comparison of an item over
several periods with a base year may show a trend developing. Comparative
statements and trend percentages are two tools employed in horizontal analysis.

 VERTICAL ANALYSIS:
Vertical analysis refers to the study of relationship of the various items in the
financial statements of one accounting period. In this types of analysis the
figures from financial statement of a year are compared with a base selected
from the same year’s statement.

It is also known as ‘Static Analysis’. Common-size financial statements and

financial ratios are the two tools employed in vertical analysis. Since vertical
analysis considers data for one time period only, it is not very conducive to a

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 proper analysis of financial statements. However, it may be used along with
horizontal analysis to make it more effective and meaningful.

 LONG-TERM:
Long-term analysis involves the study of firm’s ability to meet the interest
costs and repayment schedules of its long-term obligations. The solvency,
stability and profitability are measured under this type of analysis.
 SHORT-TERM:
Short-term analysis measures the liquidity position of a firm, i.e. the short-
term paying capacity of a firm or the firm’s ability to meet its current
obligations.

1.5 METHODS OF FINANCIAL ANALYSIS:

 Common size statements.

 Comparative financial statements.
 Trend ratios.
 Funds flow analysis.
 Cash flow analysis.
 Break-even and cost-volume profit analysis.
 Ratio analysis.

 COMMON SIZE STATEMENTS: The figures shown in financial statements

are converted to percentages so as to establish each and every element of the
financial statement. COMMON SIZE STATEMENTS ARE DIVIDED AS
UNDER: o COMMON SIZE INCOME STATEMENT: In common size
income statement, the sales figure is taken as 100% and all other figures are
compared as percentage to sales. This helps in getting the idea of efficiency of
the firm in generating revenue which leads to profitability. Through this it is
easy to analyse the different components of cost as proportion to sales.
 COMMON SIZE BALANCE SHEET: The total of assets side or
liabilities side is taken as 100%. And all other figures on the both sides

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 are compared with this. This statement reveals the proportion of fixed
assets to current assets, composition of fixed assets and current assets,
proportion of long-term funds to current liabilities and provisions,
composition of current liabilities and so on. It is also helpful for inter-
firm comparison.

 COMPARATIVE FINANCIAL STATEMENTS: These are statements of

financial position of a business are designed to compare a particular financial
statement with prior period statements or with the same financial report
generated by another company. Analyst and business managers use the income
statement, balance sheet, and cash flow statement for comparative purposes.
Comparative financial statements reveal:
o Absolute date (money values or rupee amounts).
o Increase or decrease in absolute date in terms of money values.
o Increase or decrease in absolute date in terms of percentages.
o Comparison in terms of ratios.
o Percentage of totals.
 COMPARATIVE INCOME STATEMENT: this shows the absolute
figures of two or more periods and absolute change from one period to
another. User can easily understand as they are presented side by side.
 COMPARATIVE BALANCE SHEET: balance sheets as on two or
more different dates are used for comparing the assets, liabilities, and
the net worth of the company.

 TREND RATIOS: It is a calculation based on statistical technique called

‘index numbers’. It is calculated for more than one year. In trend ratios items
that are calculated can be related. Trend analysis should be made for at least
four consecutive years. The financial statements of one year should be selected
as base statement and financial items of it should be assigned with value as
100.

 FUND FLOW ANALYSIS: Funds flow analysis means analyzing the

movement of funds within a company by comparing successive balance sheets

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 to note where additional funds have come from and where they have been
deployed in the business. Funds flow statement is a statement prepared to
analyse the reasons for changes in the financial position of a company between
2 balance sheets. It shows the inflow and outflow of funds i.e. sources and
applications of funds for a particular period. In other words, a funds flow
statement is prepared to explain the changes in the working capital position of
a company. There are 2 types of inflows:
 Long term funds raised by issue of shares, debentures or sale of fixed
assets
 Funds generated from operations.

 CASH FLOW ANALYSIS: Cash Flow Analysis is the evaluation of a

company’s cash inflows and outflows from operations, financing activities,
and investing activities. In other words, this is an examination of how the
company is generating its money, where it is coming from, and what it means
about the value of the overall company. Cash Flow Analysis is a technique
used by investors and businesses to determine the value of overall companies
as well as the individual branches of large companies by looking at how much
excess cash they produce. They typically use the Statement of Cash Flows, a
document that shows the actual cash that came in and out of the business
during a certain period from investing activities, financing activities, and
operational activities, as well as a few other reports.

 BREAK-EVEN AND COST-VOLUME PROFIT ANALYSIS: Cost-volume-

profit (CVP) analysis is used to determine how changes in costs and volume
affect a company's operating income and net income. In performing this
analysis, there are several assumptions made. CVP analysis is most often used
to determine a company's break-even point. This is the level of sales where the
company will not incur a loss, yet not make a profit. Break-even analysis, a
subset of cost- volume-profit (CVP) analysis, is used by management to help
understand the relationships between cost, sales volume and profit. This
technique focuses on how selling prices, sales volume, variable costs, fixed
costs and the mix of product sold affects profit.

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  RATIO ANALYSIS: Ratio analysis compares relationships between financial
statement accounts. This means that one income statement or balance sheet
account is being compared to another. These relationships between financial
statement accounts will not only give a manager or investor an idea of the how
healthy the business is on a whole, it will also give them keen insights into
business operations. Ratio analysis is used to evaluate various aspects of a
company’s operating and financial performance such as its efficiency,
liquidity, profitability and solvency. When investors and analysts talk about
fundamental or quantitative analysis, they are usually referring to ratio
analysis. Ratio analysis involves evaluating the performance and financial
health of a company by using data from the current and historical financial
statements. The data retrieved from the statements is used to - compare a
company's performance over time to assess whether the company is improving
or deteriorating; compare a company's financial standing with the industry
average; or compare a company to one or more other companies operating in
its sector to see how the company is doing in the market. In simple terms ratio
analysis is the most important technique of financial analysis in which
quantities are converted into ratios for meaningful comparisons, with past
ratios and ratios of other firms in the same or different industries. Ratio
analysis determines trends and exposes strengths or weaknesses of a firm.

1.6 LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

The limitations of financial statements are those factors that a user should be aware of
before relying on them to an excessive extent. Knowledge of these factors could result
in a reduction of invested funds in a business, or actions taken to investigate further.
The following are all limitations of financial statements 11 Dependence on historical
costs. Transactions are initially recorded at their cost. This is a concern when
reviewing the balance sheet, where the values of assets and liabilities may change
over time. Some items, such as marketable securities, are altered to match changes in
their market values, but other items, such as fixed assets, do not change. Thus, the

9
balance sheet could be misleading if a large part of the amount presented is based on
historical costs. Inflationary effects. If the inflation rate is relatively high, the amounts
associated with assets and liabilities in the balance sheet will appear inordinately low,
since they are not being adjusted for inflation. This mostly applies to long-term assets.
Intangible assets not recorded. Many intangible assets are not recorded as assets.
Instead, any expenditures made to create an intangible asset are immediately charged
to expense. This policy can drastically underestimate the value of a business,
especially one that has spent a large amount to build up a brand image or to develop
new products. It is a particular problem for start-up companies that have created
intellectual property, but which have so far generated minimal sales. Based on
specific time period. A user of financial statements can gain an incorrect view of the
financial results or cash flows of a business by only looking at one reporting period.
Any one period may vary from the normal operating results of a business, perhaps due
to a sudden spike in sales or seasonality effects. It is better to view a large number of
consecutive financial statements to gain a better view of ongoing results. Not always
comparable across companies. If a user wants to compare the results of different
companies, their financial statements are not always comparable, because the entities
use different accounting practices. These issues can be located by examining the
disclosures that accompany the financial statements. Subject to fraud. The
management team of a company may deliberately skew the results presented. This
situation can arise when there is undue pressure to report excellent results, such as
when a bonus plan calls for payouts only if the reported sales level increases. One
might suspect the presence of this issue when the reported results spike to a level
exceeding the industry norm. No discussion of non-financial issues. The financial
statements do not address nonfinancial issues, such as the environmental attentiveness
of a company's operations, or how well it works with the local community. A business
reporting excellent financial results might be a failure in these other areas. Not
verified. If the financial statements have not been audited, this means that no one has
examined the accounting policies, practices, and controls of the issuer to ensure that it
has created accurate financial statements. An audit opinion that accompanies the
financial statements is evidence of such a review. No predictive value. The
information in a set of financial statements provides information about either
historical results or the financial status of a business as of a specific date. The
statements do not necessarily provide any value in predicting what will happen in the

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future. For example, a business could report excellent results in one month, and no
sales at all in the next month, because a contract on which it was relying has ended.
Financial statements are normally quite useful documents, but it can pay to be aware
of the preceding issues before relying on them too much.

1.7 USERS OF FINANCIAL STATEMENT ANALYSIS:

There are different users of financial statement analysis. These can be classified into
internal and external users. Internal users refer to the management of the company
who analyzes financial statements in order to make decisions related to the operations
of the company. On the other hand, external users do not necessarily belong to the
company but still hold some sort of financial interest. These include owners, investors,
creditors, government, employees, customers, and the general public. These users are
elaborated on below

1. Management- The managers of the company use their financial statement

analysis to make intelligent decisions about their performance. For instance,
they may gauge cost per distribution channel, or how much cash they have left,
from their accounting reports and make decisions from these analysis results.
2. Owners- Small business owners need financial information from their
operations to determine whether the business is profitable. It helps in making
decisions like whether to continue operating the business, whether to improve
business strategies or whether to give up on the business altogether.
3. Investors- People who have purchased stock or shares in a company need
financial information to analyze the way the company is performing. They use
financial statement analysis to determine what to do with their investments in
the company. So depending on how the company is doing, they will either
hold onto their stock, sell it or buy more.
4. Creditors- Creditors are interested in knowing if a company will be able to
honour its payments as they become due. They use cash flow analysis of the
company’s accounting records to measure the company’s liquidity, or its
ability to make short-term payments.

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 5. Government- Governing and regulating bodies of the state look at financial
statement analysis to determine how the economy is performing in general so
they can plan their financial and industrial policies. Tax authorities also
analyze a company’s statements to calculate the tax burden that the company
has to pay.
6. Employees- Employees need to know if their employment is secure and if
there is a possibility of a pay raise. They want to be abreast of their company’s
profitability and stability. Employees may also be interested in knowing the
company’s financial position to see whether there may be plans for expansion
and hence, career prospects for them.
7. Customers- Customers need to know about the ability of the company to
service its clients into the future. The need to know about the company’s
stability of operations is heightened if the customer (i.e. a distributor or
procurer of specialized products) is dependent wholly on the company for its
supplies.
8. General Public- Anyone in the general public, like students, analysts and
researchers, may be interested in using a company’s financial statement
analysis. They may wish to evaluate the effects of the firm on the environment,
or the economy or even the local community. For instance, if the company is
running corporate social responsibility programs for improving the community,
the public may want to be aware of the future operations of the company.

1.8 INTRODUCTION OF RATIO ANALYSIS:

Introduction:
To evaluate the financial condition and performance of a firm, the financial analyst
yields certain yardstick frequently used as a ratio, or index, relating two pieces of
financial data to each other. Analysis and interpretation of various ratios should give
experienced, skilled analyst a better understanding of the financial conditions and
performance of the firm than they would obtain from analysis of financial data alone.

What is Ratio?

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Ratio analysis is a powerful tool of financial analysis.
A Ratio is defined as - The indicated quotient of two mathematical expressions and as
the relationship between two or more things In financial analysis a ratio is used as
benchmark for evaluating the financial position and performance of a firm. Ratios
help to summarize large quantities of financial data and to make qualitative judgments
about the firm‘s financial performance.
The financial statements are prepared and presented annually are of little use for
guidance of prospective investors, creditors and even management. If relationships
between various related items in the financial statement are established, they can
provide useful clues to gauge accurately the financial health and ability of business to
make profit. This relationship between two related items of financial statement is
known as – “Ratio”.
Ratio can be expressed in three different ways such as:
 Percentage- for example, the Return on Investment is 30%.
 Rates- for example, Price Earning Ratio is 5 times.
 Proportion- for example, Debt-Equity Ratio is 1:2.
Standards of comparison:
The ratio analysis involves comparison for a useful interpretation of the financial
statement. A single ratio itself does not indicate favorable condition. It should be
compared with some standards. The standards may consist of:
 Past ratio: Ratios calculated from the past financial statement of the same firm
 Competitors‟ ratio: Ratio of some selected firms especially the most
successful competitor, at the same point in time.
 Industry ratios: Ratios of the industry to which the firm belongs.
 Projected ratios: Ratios developed using the projected financial statement
of the same firm.
TYPES OF RATIO ANALYSIS:
The ratio analysis involves comparison for useful interpretations of the financial
statements a single ratio in itself does not indicate favorable or unfavorable condition.
It should be compared with some standard. Standards of comparison may consist of:
 Time Series Analysis:
The easiest way to evaluate the performance of a firm is to compare its current
ratios with the past ratios. Such analysis is known as the time series (or trend)

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 analysis. It gives an indication of the direction of change and reflects whether
the firm‘s financial performance has improved, deteriorated or remained
constant over time. The analyst should not simply determine change, but more
importantly, he should understand why ratios have changed. The change, for
example, may be affected by changes in the accounting policies without a
material change in the firm‘s performance.

 Pro-forma Analysis:
Sometimes future ratios are used as the standard of comparison. Future ratios
can be developed from the projected financial statements. The comparison of
current or past 158 ratios with future ratios shows the firm‘s relative strengths
and weaknesses in the past and future. If the future ratios indicate weak
financial position, corrective actions should be initiated
 Cross-Sectional Analysis:
Another way of comparison is to compare ratios of one firm with some
selected firms in the same industry at the same point in time. This kind of
comparison is known as the cross-sectional analysis. In most cases, it is more
useful to compare the firm‘s ratio with ratio of few carefully selected
competitors, who have similar operations. This kind of a comparison indicates
the relative financial position and performance of the firm. A firm can easily
resort to such a comparison, as it is not difficult to get the published financial
statements of the similar firms.
 Industry Analysis:
To determine the financial condition and performance of a firm, its ratios may
be compared with average ratios of the industry analysis, helps to ascertain
the financial standing and capability of the some point of time to determine
the position of company in the industry.

1.9 TYPES OF RATIOS:

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Several ratios, calculate from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated. The ratios can be classified
for the purpose of exposition. Into four broad groups, viz,
 Liquidity Ratio: Measure the firms ability to meet current obligations;
 Leverage ratios: Show the proportions of debt and equity in financing the
 firm‘s acts;
 Profitability Ratio: Measure overall performance and effectiveness of the firm;
 Activity Ratios; Reflect the firm‘s efficiency in utilizing its assets

The present study is based on the profitability ratios which would give a clear idea
how ratios are interrelated with the designing of the firm‘s impact of the industrial
policy. However, the other ratios also directly or indirectly affect to the financial
performance of the companies.
Accounting ratios are relationship expressed in mathematical terms between figures
which are connected with each other in some manner. Obviously, no purpose will be
served by comparing two sets of figures which are not at all connected with each
other. Moreover, absolute figure are also unfit for comparison.

1.10 CLASSIFICATIONS OF RATIOS:

Ratio can be classified into different categories depending upon the basis of
classification. The traditional classification has been on the basis of the financial
statement to which the determinants of a ratio belong. On this basis the ratios could be
classified as:
 Profitability ratios,
 Turnover ratio, and
 Financial ratio.

Profitability ratios:
Profitability is an indication of the efficiency with which the operations of the
business are carried on. Poor operational performance may indicate poor sales and
hence poor profits. A lower profitability may arise due to the lack of control over the
expenses. Bankers, financial institutions and other creditors look at the profitability

15
ratios as an indicator whether or not the firm earns sub stability more than it pays
interest for the use of borrowed funds and whether the ultimate repayment of their
debts appears reasonably certain. Owners are interested to know the profitability as it
indicates the return which they can get on their investments.
Profit is the difference between revenues and expenses over a period of time. Profit is
the ultimate output of a company and it will have no future if it fails to make
sufficient profits. Therefore, the financial manager should continuously evaluate the
efficiency of the company in terms of profit. The Profitability Ratios are calculated to
measure the operating efficiency of the company.
Generally, two major types of profitability ratios calculated
 Profitability in relation to sales
 Profitability in relation to the investment
The profit is commonly measured by Profit after Tax (PAT) which is the result of the
impact of all factors on the firm‘s earnings. Taxes are not controllable by management.
To separate the influence of taxes Profit before Tax (PBT) may be computed. If the
firm‘s profit has to be examined from the point of view of all the investors the
appropriate measure of profit is operating profit. Operating profit is Earnings before
Interest and Tax (EBIT). This measure of earnings shows earnings arising directly
from the commercial operations of the business without the effect of financing .
For the Analysis of performance of Tata Power Limited the following ratios are
used:
1. Current ratio
2. Quick ratio
3. Cash ratio
4. Proprietary ratio
5. Net profit ratio
6. Expenses ratio
7. Debt equity ratio
8. Gross ratio
9. Current debt to net worth
10. Stock Turnover Ratio
11. Working Capital Turnover Ratio
12. Inventory to Working Capital Ratio

16
 13. Sales to Fixed Assets Ratio
14. Total Assets Turnover Ratio
15. Fixed Assets to Long term Funds Ratio
Current ratio-
Current ratio is an acceptable measure of firm’s short-term solvency Current assets
includes cash within a year, such as marketable securities, debtors and inventors.
Prepaid expenses are also included in current assets as they represent the payments
that will not made by the firm in future. All obligations maturing within a year are
included in current liabilities. These include creditors, bills payable, accrued expenses,
short-term bank loan, income-tax liability in the current year. The current ratio is a
measure of the firm's short-term solvency. It indicated the availability of current
assets in rupees for everyone rupee of current liability. A current ratio of 2:1 is
considered satisfactory. The higher the current ratio, the greater the margin of safety;
the larger the amount of current assets in relation to current liabilities, the more the
firm's ability to meet its obligations. It is a cured -and-quick measure of the firm's
liquidity.
Current ratio is calculated by dividing current assets and current liabilities
Current Assets
Current Ratio =
Current Liabilities
Quick ratio-
Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or reasonably
soon without a loss of value. Cash is the most liquid asset, other assets that are
considered to be relatively liquid asset and included in quick assets are debtors and
bills receivables and marketable securities (temporary quoted investments)
Inventories are converted to be liquid. Inventories normally require some time for
realizing into cash; their value also tends to fluctuate. The quick ratio is found out by
dividing quick assets by current liabilities.
Current assets – Inventories
QUICK RATIO =
Current liabilities
Generally, a quick ratio of 1:1 is considered to represent a satisfactory current
financial condition. Quick ratio is a more penetrating test of liquidity than the current

17
ratio, yet it should be used cautiously. Accompany with a high value of quick ratio
can suffer from the shortage of funds if it has slow- paying, doubtful and long
duration outstanding debtors. A low quick ratio may really be prospering and paying
its current obligation in time.
Cash ratio-
Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its
equivalent current liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst stays look at cash ratio.
Trade investment is marketable securities of equivalent of cash. If the company
carries a small amount of cash, there is nothing to be worried about the lack of cash if
the company has reserves borrowing power. Cash Ratio is perhaps the most stringent
Measure of liquidity. Indeed, one can argue that it is overly stringent. Lack of
immediate cash may not matter if the firm stretch its payments or borrow money at
short notice.
Cash & Bank Balance
Cash Ratio =
Current liabilities
Proprietary ratio-
The total shareholder's fund is compared with the total tangible assets of the company.
This ratio indicates the general financial strength of concern. It is a test of the
soundness of financial structure of the concern. The ratio is of great significance to
creditors since it enables them to find out the proportion of shareholders funds in the
total investment of business.
Shareholders Fund
Proprietary Ratio = x 100
Total Assets
Net profit ratio-
Net profit is obtained when operating expenses, interest and taxes are subtracted from
the gross profit. Net profit margin ratio established a relationship between net profit
and sales and indicates management's efficiency in manufacturing, administering and
selling products.
This ratio shows the earning left for share holders as a percentage of net sales. It
measures overall efficiency of production, administration, selling, financing. Pricing
and tax management. Jointly considered, the gross and net profit margin ratios

18
provide a valuable understanding of the cost and profit structure of the firm and
enable the analyst to identify the sources of business efficiency / inefficiency.
 Net profit ratio

 Net profit before tax = Net profit before tax

x100
Net sales

 Net profit after tax = Net profit after tax

x 100
Net sales
Debt Equity Ratio-
Debt-equity ratio is the ratio which expresses the relationship between debt and equity.
Debt, generally, refers to long-term liabilities.
Debt / Shareholder’s Equity
Equity, for the purpose of this ratio, means owners, or proprietors, funds. Owners,
fund comprises capital, all accumulated reserves and profits. Of course, if there are
losses and fictitious assets, they should be adjusted in, i.e., deducted from, the owners,
funds. The standard or ideal debt equity ratio is 2:1. As such, if the debt is less than
two times the equity, the logical conclusion is that the financial structure of the
concern is sound, and so, the stake or risk of the long-term creditors is relatively less.
On the other hand, if the debt is more than two times the equity, the conclusion is that
the financial structure of the undertaking is weak, and so, the stake of the long-term
creditors is relatively more.
Operating Expenses Ratio-
It explains the changes in the profit margin ratio. A higher operating expenses ratio is
unfavorable since it will leave a small amount of operating income to meet interest,
dividends. Operating expenses ratio is a yardstick of operating efficiency, but it
should be used cautiously. It is affected by a number of factors such as external
uncontrollable factors, internal factors. This ratio is computed by dividing operating
expenses by sales. Operating expenses equal cost of goods sold plus selling expenses
and general administrative expenses by sales.
Expenses

19
Expenses ratio = x 100
Net sales

Gross Profit Ratio-

Gross profit ratio ( gp ratio ) is a profitability ratio that shows the relationship
between gross profit and total net sales revenue. It is a popular tool to evaluate the
operational performance of the business . The ratio is computed by dividing the gross
profit figure by net sales.
Gross profit ratio = gross profit

Net sales
Stock Turnover Ratio-
This is also called as Inventory Turnover or Stock velocity. This ratio is calculated to
consider the adequacy of the quantum of capital and its justification for investing in
stock or inventory. Inventory Turnover is the number of times obtained by dividing
cost of sales by average stock. The logic behind establishing the relationship between
Average Stock and cost of sales seems to be that stock should be compared with cost
of sales because the stock is at cost price.
Stock Turnover Ratio = Cost of Goods Sold/Average Stock
Stock turnover is used to measure the efficiency of sales. If a concern is able to effect
higher volume of sales with lower quantum of stock, then it can be concluded that
marketing efficiency of the concern is very sound and high. Concerns having too high
stock turnover ratio may be operating with low margin of profit. However, too high
stock turnover may be a symptom of over-trading.
If the stock turnover is low or of smaller magnitude then it may be assumed to
indicate (i) that there is slump in the business, (ii) that there is over investment in
stock, (iii) that the closing stock has been increased just to take the advantage of
expected rise in selling price or to meet the estimated rise in future sales, (iv) that
stock has been valued incorrectly or improperly, (v) that items of stock have been
included in an unbalanced manner or in disproportionate manner.
Current Debt to Net Worth-
The debt to net worth ratio also referred to as the total debt to total net worth is a
simple calculation that can help you in evaluating the financial health of a given

20
company by comparing the level of debt it has with its total net worth a high ratio tells
that you are considering investing in has already financed by a high level of debt and
its riskier investment compared with other companies on the other hand the low ratio
indicates that the business has a low debt burden which means it can easily cover or
meet its debt obligations without having to sell a lots of assets
Current debt to net worth = current liabilities

Net worth

Working Capital Turnover Ratio-

Working capital turnover ratio is the ratio between working capital and turnover.
Working capital is the excess of current assets over current liabilities. Turnover means
net sales, i.e., total sales less sales returns.
Working Capital Turnover Ratio = Net Sales/Working Capital
This ratio indicates the efficient or inefficient utilization of the working capital of an
enterprise. There is no standard or ideal working capital turnover ratio. Though there
is no standard working capital turnover ratio, one can say that a higher working
capital turnover ratio indicates the efficiency and a lower working capital turnover
ratio indicates the inefficiency of the management in the utilization of working capital.
Inventory to Working Capital Ratio-
Inventory to working capital ratio is the ratio of inventory to working capital.
Inventory or stock refers to closing stocks of raw materials, work-in-progress and
finished goods. Working capital is the excess of current assets over current liabilities.
Inventory to working capital ratio= Inventory/Working capital*100
As per the standard or ideal inventory to working capital ratio, the inventories should
not absorb more than 75% of the working capital. As such a low inventory to working
capital ratio( i.e., a ratio of less than 75%) indicates under stocking, and so, a high
liquid position, while a high inventory to working capital ratio(i.e., a ratio over 75%)
indicates overstocking, and so, a low liquid position.
Sales to Fixed Assets Ratio (Fixed Assets Turnover Ratio)-
Fixed Assets Turnover ratio is the ratio between fixed assets and turnover.
Sales to Fixed Assets Ratio = Net Sales/Fixed Assets
This ratio indicates as to what extent the fixed assets of a concern have contributed to
sales. In other words, it indicates as to what extent the fixed assets have been utilized.

21
The standard fixed assets turnover ratio is 5 times. So, fixed assets turnover ratio of 5
times or more indicates better utilization of fixed assets. In this context, it may be
noted that a very high fixed assets turnover ratio means undertrading, which is not
good for the business.

Total Assets Turnover Ratio-

Total assets turnover ratio is the ratio between total assets and sales.
Total Assets turnover ratio = Net sales/Total Assets
This ratio indicates the efficiency or inefficiency in the use of total resources or assets
of a concern. It is a measure of the overall performance of the business. The standard
or idle total assets turnover ratio is that the sales should be at least two times the value
of the assets. A total assets turnover ratio more indicates that the assets of the concern
have been utilized effectively. In this context, it may be noted that a very high total
assets turnover ratio indicates overtrading.
Fixed Assets to Long Term Funds Ratio-
The fixed assets are shown as a proportion to long term funds as follow:
Fixed Assets to Long Term Funds Ratio = Fixed Assets/Long-Term Funds
This ratio indicates the proportion of long term funds deployed in fixed assets. Fixed
assets represent the gross fixed assets minus depreciation provided on this till the date
of calculation. Long term funds include share capital, reserve and surplus and long
term loans. The higher the ratio indicates the safer the funds available in case of
liquidation. It also indicates the proportion of long-term funds that is invested in
working capital.

1.11 INTRODUCTION OF TATA POWER LIMITED:

About the Company:

TATA Power Company (TPC) proposes to set up a coal based thermal power plant
having capacity of 1000 MW near Naraj Marthapur, Cuttack Sadar Tehsil, Cuttack

22
District in the state of Orissa. The proposed power plant will comprise of the boiler-
generator configuration of 2X125 MW+ 2X125 MW + 2X250 MW with an ultimate
capacity of 1000 MW. TPC was established in 1915. It is the pioneer in the generation
of electricity in India and is the largest Private Sector Integrated Utility in the country
having approximately 2300 MW capacity with presence in Generation, Transmission,
and Distribution. TPC has a presence in all areas of the power sector including
thermal, hydro, solar, wind, transmission and distribution. Tata Power owns, operates
and maintains thermal power plants in several Indian states, including Maharashtra,
Karnataka and Jharkhand. It provides reliable and economic power supply to the city
of Mumbai, the commercial capital of India. It is now also present in distribution in
the national capital Delhi since 2002 catering to 8 lakhs consumers through a Joint
Venture Company, North Delhi Power Limited (NDPL).

Table 1.1 shows the generation Capacity of TPC.

Table 1.1

index

Plant Total
Thermal 1838.8
Trombay 1330
Jojobera 427.5
Belgaum 81.3
Hydro 447
Wind 17
Total 2302.8
(Source: EIA Report for 1000 MW Coal Based Thermal Power plant)

Tata Power Limited is an Indian electric utility company based in Mumbai,

Maharashtra, India and is part of the Tata Group. The core business of the company is
to generate, transmit and distribute electricity. With an installed electricity generation
capacity of 10,577MW, it is India's largest integrated power company. Tata Power has
been ranked 3rd in 2017 Responsible Business Rankings developed by IIM Udaipur.
In February 2017, Tata Power became the first Indian company to ship over 1 GW
solar modules.

23
Tata Power, formerly known as Tata Electric, is a pioneer in technology adoption,
with many firsts to its credit, supporting the country's energy independence.

The Visionary who lit up India:

“Clean, Cheap and abundant power is one the basic ingredients for the economic
progress of the city, state or Country”

Sri Jamsetji Tata, Founder, Tata Group

History:

The firm started as the Tata Hydroelectric Power Supply Company in the year, 1910,
which amalgamated with the Andhra Valley Power Supply Company in 1916. It
commissioned India’s Second hydro-electric project in 1915 in Khopoli for 72 MW.
Then second and third power plants were installed in Bhivpuri (75 MW) in 1919 and
Bhira (300 MW) in 1922.

Operations:

Tata Power, together with its subsidiaries & joint entities, has a generation capacity of
10857 MW of which 32% comes from clean energy sources. The company has the
distinction of being among the top private players in each sector of the value chain
including solar rooftop and value-added services.

Tata Power is a pioneer credited with steering the energy sector on technology,
process and platform. Powering emerging technologies for the 'smart' customer, Tata
Power's latest business integrated solutions, focusing on mobility and lifestyle, is
poised for multifold growth.

With its 103 years track record of technology leadership, project execution excellence,
world-class safety processes, customer care and driving green initiatives, Tata Power
is committed to 'lighting up lives' for generations to come.

Tata Power has operations in India, Singapore, Indonesia, South Africa and Bhutan.
Tata Power Group has its operations based in 35 locations in India. The thermal
power stations of the company are located at Trombay in Mumbai, Mundra in Gujarat,

24
Jojobera and Maithon in Jharkhand, Kalinganagar in Odisha, Haldia in Bengaland
Belgaum in Kar nataka. The hydro stations are located in the Western Ghats of
Maharashtra and the wind farms in Ahmednagar, Supa, Khanke, Brahmanwel, Gadag,
Samana and Visapur. The company installed India’s first 500 MW unit at Trombay,
the first 150 MW pumped storage unit at Bhira, and a flue gas desulphurization plant
for pollution control at Trombay. It has generation capacities in the States of
Jharkhand and Karnataka, and a distribution company in Delhi, servicing over one
million consumers spread over 510 square km in the North Delhi. The peak load in
this area is about 1,150 MW. Tata Power announced on 24 July 2012, commissioning
of the second unit of 525 MW capacity of the Maithon mega thermal project in
Dhanbad. The first unit of identical capacity was commissioned in September 2011.

Major power plant:

 Mundra Ultra Mega Power Plant. A 4,000 MW (5×800 MW) coal-based

thermal power plant at Mundra, Kutch district, Gujarat. This plant is fully
functional.
 Trombay Thermal Power Station. A 1,580 MW thermal power plant at
Trombay, near Mumbai, Maharashtra. This plant is fully functional.
 Maithon Power Plant. A 1,050 MW (2×525 MW) coal-based thermal power
plant at Maithon, Dhanbad district, Jharkhand. This plant is fully functional.
This power plant is owned by Corporation.
 Jojobera Power Plant. A 427.5 MW (67.5 MW and 3×120 MW) coal-based
thermal power plant at Jojobera, near Jamshedpur, East Singhbhum district,
Jharkhand. This plant is fully functional.
A. International operations:
The company has executed overseas projects in the Middle East, Africa and
South East Asia including the Jebel Ali 'G' station (4×100 MW + desalination
plant) in Dubai, AlKhobar II (5×150 MW + desalination plant) and Jeddah III
(4×64 MW + desalination plant) in Saudi Arabia, Shuwaikh (5×50 MW) in
Kuwait, EHV substations in UAE and Algeria, and power plant operation and
maintenance contracts in Iran and Saudi Arabia.
B. Strategic Engineering Division:
The firm's Strategic Engineering Division (SED) has engaged in defence
systems and engineering for over four decades. It works with the MoD and

25
 laboratories to provide products and solutions for the defence requirements of
the country It has already cleared the Joint Receipt Inspection (JRI) for the
first two lots of Pinaka launchers and command posts; the third and fourth lots
have successfully undergone factory acceptance tests.Tata Power's Strategic
Electronics Division won a tightly contested Rs. 1,000-crore contract for
modernising 30 Indian Air Force airbases.

Problems:

In cause of dramatically higher coal prices as assumed in the plannings and a fixed
price arrangement the Mundra plant in 2012 made big losses. After three successive
years of losses as a result, cash flow was becoming an issue for the company. In
January 2014 the company sold a 30 percent stake in Indonesian coal company PT
Arutmin for Rs.500 million. In July 2014 it signed an option to sell a 5 percent stake
in Indonesian coal company Kaltim Prima Coal for Rs. 250 million.

Future Project:

Tata Power has a 51:49 joint venture with Power Grid Corporation of India for the
1,200 km (750 mi) Tata transmission project, India’s first transmission project
executed with public-private partnership financing.

Tata Power has plans to expand generation capacity of 4,000 MW Mundra plant, the
country's first operational ultra-mega power project, to 5,600 MW.

The company has also a 74:26 joint venture with Damodar Valley Corporation for
1,050 MW coal-based thermal power plant at Maithon in Dhanbad district of
Jharkhand, named as Maithon Power Limited. The both units are commissioned on 24
July 2012. It has another a 74:26 joint venture with Tata Steel Limited for thermal
power plants to meet the captive requirements of Tata Steel, under name Industrial
Energy Limited.

Tata Power has announced its partnership with Sunengy an Australian firm to build
India's first floating solar plant based on Liquid Solar Array technology.

In 2016, Tata Power made significant inroads into the renewable energy market in
India by means of its acquisition of Welspun Renewables, for a record price of Rs. 1.3
billion, the largest acquisition in the India renewables sector.

26
Shareholding:

As on 15 November 2017, Tata Group held 32.47% shares in Tata Power. Around
210,000 individual shareholders hold approx. 14% of its shares. Life Insurance
Corporation of India is the largest non-promoter shareholder in the company with
12.90% shareholding.

Shareholders- Shareholding

Promoter-Tata Group Companies-32.47%

Foreign Institutional Investors-24.53%

Insurance companies-21.59%

Individual Shareholders-14.08%

GDRs-3.22%

Others-4.11%

Total-100%

The equity shares of Tata Power are listed on the Bombay Stock Exchange, where it is
a constituent of the BSE SENSEX index, and the National Stock Exchange of India,
where it is a constituent of the S&P CNX Nifty. Its Global Depository Receipts
(GDRs) are listed on the London Stock Exchange and the Luxembourg Stock
Exchange.

27
 CHAPTER 2

RESEARCH METHODOLOGY

2.1 INTRODUCTION:

Research design or research methodology is the procedure of collecting, analyzing

and interpreting the data to diagnose the problem and react to the opportunity in such
a way where the costs can be minimized and the desired level of accuracy can be
achieved to arrive at a particular conclusion.

The sample of the stocks for the purpose of collecting secondary data has been
selected on the basis of Random Sampling. The stocks are chosen in an unbiased
manner and each stock is chosen independent of the other stocks chosen. The stocks
are chosen from the power sector.

The sample size for the number of stocks is taken as 1 for fundamental analysis of
stocks as fundamental analysis is very exhaustive and requires detailed study.

Research methodology is a way to systematically solve a research problem. It is a

scientific method to find out facts or to provides solutions to specific problem. The
researcher needs to follow a systematic procedure to conduct research. Scientific
research in any field of knowledge cannot be conducted in haphazard manner.
Research cannot be based on merely based on one’s beliefs and imagination. To get
best research result, researcher needs to adopt the scientific method of inquiry or
investigation.

It is a science of studying how research is done scientifically. Essentially it is the

procedure by which the researchers go about their work of evaluating and predicting
phenomenon. It aims to give the work plan of research. It provides training in
choosing methods materials, scientific tools and techniques relevant for solution of
the problem.

It helps in decision making. It involves the study of cause and effect relationship
various factors and helps to identify behavior, pattern, trends in certain variables.

Methodology is the systematic, theoretical analysis of the methods applied to a field

of study. It comprises the theoretical analysis of the body of methods and principles
associated with a branch of knowledge. Typically, it encompasses concepts such as

28
paradigm, theoretical model, phases and quantitative or qualitative techniques. A
methodology does not set out to provide solutions - it is, therefore, not the same as a
method. Instead, a methodology offers the theoretical underpinning for understanding
which method, set of methods, or so-called “best practices” can be applied to specific
case,for example, to calculating a specific result.

Research, in simplified terms means searching for the facts and replies to the various
queries and also for the solutions to the various problems. Research is an inquiry or an
investigation with a specific purpose to fulfill, it helps in clearing the various doubtful
concepts and tries to solve or explain the various unexplained procedures or
phenomenon.

According to the encyclopedia of social science, research can be explained as “the

manipulation of generalizing to extend, connect or verify knowledge.”

DATA COLLECTION

Data is one of the vital aspects of any research studies. Every research is based on the
data which is analyzed and interpreted to get information. There are two sources of
data primary data collection applies surveys, questionnaires, experiments or direct
observations, secondary data collection may be conducted by collecting information
from a diverse source of documents or electronically stored information. In this
research paper, secondary data collection will be used. The study is based on
secondary data. Secondary data means data that are already available i.e., they refer to
the data which have already been collected and analyzed by someone else. When the
researcher utilizes secondary data, then he has to look into various sources from
where he can obtain them. In this case he is certainly not confronted with the
problems that are usually associated with the collection of original data. Secondary
data may either be published data or unpublished data. Usually published data are
available in: Various publications of the central, state are local governments; Various
publications of foreign governments or of international bodies and their subsidiary
organizations; Technical and trade journals; Books, magazines and newspapers;
Reports and publications of various associations connected with business and industry,
banks, stock exchanges, etc.

Reports prepared by research scholars, universities, economists, etc. in different fields;

and public records and statistics, historical documents, and other sources of published

29
information. The sources of unpublished data are many; they may be found in diaries,
letters, unpublished biographies and autobiographies and also may be available with
scholars and research workers, trade association, labor bureaus and other
public\private individuals and organization.

SECONDARY DATA COLLECTION IN RESEARCH METHODOLOGY

Researcher must be very careful in using secondary data. Before using secondary data,
must see that they possess following characteristics: Reliability of data: the reliability
can be tested by finding out such things about the said data: (a) who collected the data?
(b) What were the sources of data? (c) Were they collected by using proper methods
(d) at what time were they collected? (e) Was there any bias of the compiler? (t) What
level of accuracy was desired? Was it achieved?

Suitability of data: The data that are suitable for one enquiry may not necessarily be
found suitable in another enquiry. Hence, if the available data are found to be
unsuitable, they should not be used by the researcher. In this context, the researcher
must very carefully scrutinize the definition of various terms and units of collection
used at the time of collecting the data from the primary source originally. Similarly,
the object, scope and nature of the original enquiry must also be studied. If the
researcher finds differences in these, the data will remain unsuitable for the present
enquiry and should not be used.

Adequacy of data: If the level of accuracy achieved in data is found inadequate for the
purpose of the present enquiry, they will be considered as inadequate and should not
be used by the researcher. The data will also be considered inadequate, if they are
related to an area which may be either narrower or wider than the area of the present
enquiry.

From all this we can say that it is very risky to use the already available data. The
already available data should be used by the researcher only when he finds them
reliable, suitable and adequate. But he should not blindly discard the use of such data
if they are readily available from authentic sources and are also suitable and adequate
for in that case it will not be economical to spend time and energy in field surveys for
collecting information. At times, there may be wealth of usable information in the
already available data which must be used by an intelligent researcher but with due
precaution.

30
2.2 OBJECTIVES OF THE STUDY:

The purpose of the study is to device the ways through which the energy supply of the
country is to be increased so as to contain the rising demand of energy in India taking
experiences from India. The objectives of the Research are as follows:

The primary objective of equity research is to analyze the earnings persistence.

 To find out potentiality of selected companies through current ratios.

 To check companies performance on the basis of historical data.
 To study and examine the relevance of fundamental analysis in investment
decisions making process.
 To analyze which company is giving best returns to the shareholders
 To analyses and compare the financial position and performance of Tata
Power Limited.
 To identify the financial strengths and weakness of Tata Power Limited.
 To study the profitability and loss of Tata Power Limited.
 To assess the return on investments.
 To determine the solvency position of Tata Power Limited.
 To provide suggestions for improving financial efficiency of the Tata Power
Limited.
 To guide and determine the dividend action.

2.3 LIMITATIONS OF THE STUDY:

The study is based on secondary data collected from the secondary data source,
internet and websites of various banks concerned. Therefore, the quality of the study
depends upon the accuracy, reliability, and quality of secondary data source. The
published data is not uniform and not properly disclosed by the Airlines. Analysis is
limited for a period of seven years.

Limitations of the study There are number of limitations in the research which are
acknowledged as under:-

 This study has been conducted purely to understand Equity analysis for
investors.

31
  The study is restricted to 3 companies based on Fundamental analysis.
 The study is limited to the companies having equities.
 Detailed study of the topic was not possible due to limited size of the project.
 Suggestions and conclusions are based on the limited data of 3 years.
 The future is uncertain.

2.4 SIGNIFICANCE:

To start any business capital plays major role. Capital can be acquired in two ways by
issuing shares or by taking debt from financial institutions or borrowing money from
financial institutions. The owners of the company have to pay regular interest and
principal amount at the end. Stock is ownership in a company, with each share of
stock representing a tiny piece of ownership. The more shares a person own, the more
of the company he owns The more shares he own, the more dividends he earn when
the company makes a profit. In The financial world, ownership is called “Equity”.

2.5 SCOPE OF THE STUDY:

The Scope of the study is very wide. The Selection of the company under the study is
not made on the basis of any recognized system of sampling. The criteria are for the
selection of a company. However, the researcher has selected Air India limited .The
43 study is based on the financial statement of the seven years i.e. from 2012-2019
and the data is analyzed on the basis of techniques and tools.

2.6 HYPOTHESIS:

Hypothesis is an assumption or concession made for the sake of argument. It is an

interpretation of a practical situation or condition taken as the ground for action. It is a
tentative assumption made in order to draw out and test its logical or empirical
consequences.

A hypothesis in a scientific context is a testable statement about the relationship

between two or more variables or a proposed explanation for some observed
phenomenon. In a scientific experiment or study, the hypothesis is a brief summation

32
of the researcher's prediction of the study's findings, which may be supported or not
by the outcome. Hypothesis testing is the core of the scientific method.

There are two types of hypothesis, are as follows:

Null hypothesis:

Null hypothesis (H0) exists when a researcher believes there is no relationship

between the two variables, or there is a lack of information to state a scientific
hypothesis. This is something to attempt to disprove or discredit.

Alternative hypothesis:

Alternative hypothesis (H1) is an attempt to disprove a null hypothesis; here

researchers will seek to discover an alternative hypothesis. Here are the findings
according to which the hypothesis is going to be conducted. These findings are related
to equity analysis and comparison of share price performance of two petroleum
companies. Hypothesis can be related to the performance of share price and equity of
two the power companies.

2.7 TOOLS AND TECHNIQUES:

Ratio analysis

Ratio analysis is a quantitative procedure of obtaining a look into a firms functional

efficiency, liquidity, revenues, and profitability by analyzing its financial records and
statements. Ratio analysis is a quantitative method of gaining insight into a company's
liquidity, operational efficiency, etc.

Meaning of ratio analysis:

When investors and analysts talk about fundamental or quantitative analysis, they are
usually referring to ratio analysis. Ratio analysis involves evaluating the performance
and financial health of a company by using data from the current and historical
financial statements. The data retrieved from the statements is used to compare a
company's performance over time to assess whether the company is improving or
deteriorating, to compare a company's financial standing with the industry average, or
to compare a company to one or more other companies operating in its sector to see
how the company stacks up.

33
Ratio analysis can be used to establish a trend line for one company's results over a
large number of financial reporting periods. This can highlight company changes that
would not be evident if looking at a given ratio that represents just one point in time.
Comparing a company to its peers or its industry averages is another useful
application for ratio analysis.

Calculating one ratio for competitors in a given industry and comparing across the set
of companies can reveal both positive and negative information.

Since companies in the same industry typically have similar capital structures and
investment in fixed assets, their ratios should be substantially the same. Different ratio
results could mean that one firm has a potential issue and is underperforming the
competition, but they could also mean that a certain company is much better at
generating profits than its peers.

Trend analysis

Trend analysis is fundamentally, a method for understanding how and why things
have changed or will change-over time.

Statement of retained earnings

The statement of retained earnings (retained earnings statement) is financial

statements that outlines the changes in retained earnings for a company over a
specified period.

Income statements

Income statements are financial statements that show you the company’s income and
expenditure. It also shows whether a company is making profit or loss for a given
period.

Balance sheet

Balance sheet is financial statement that reports company assets, liabilities and
shareholders’ equity at a specific point in time, and provides a basis for computing
rates of return and evaluating its capital structure. It is a financial statement that
provides a snapshot of what a company owns and owes, as well as the amount
invested by shareholders.

34
 CHAPTER 3

REVIEW OF LITERATURE

3.1 INTRODUCTION OF REVIEW OF LITERATURE:

A possible definition of a literature review is: "The selection of available documents

on the topic, which contain information, ideas, data and evidence written from a
particular standpoint to fulfill certain aims or express certain views on the nature of
the topic and how it is to be investigated and the effective evaluation of these
documents in relation to the research being proposed" (Hart, Doing a literature review:
releasing the social science research imagination, 1998). This can only be done in a
structured and systematic way.

The main purpose of a literature review within the context of research is to establish
its originality; that is, that the work proposed has not already been done. Almost
always something related has been done; the review organizes these, discusses them,
and points out their limitations, some of which will be addressed in the research. A
second purpose is to place the proposed research in context, that is, to show its
importance within a wider problem area. This must be established from the opinions
of others, who define the context and identify important unsolved problems. This
means existing literature on the topic has been used. A third purpose is to compare
methodological approaches to the research problem. There are almost always several
ways to address a research problem, and here they are compared, in order to justify
the approach to be taken in the proposed research. Note that this may combine aspects
of several previous approaches.

Without a literature review somebody will not be able to acquire an understanding of

the topic. The literature review is part of somebody’s academic development and is
needed to become an expert in the field. The literature review is integral to the success
of academic research. It is not just a stage to be undertaken.

Since power cannot be stored for marketing but must be sold the instant it is produced,
it was generally assumed that power sector had to be vertically integrated monopoly
of generation, transmission and distribution. And since power was vital for every
country, it was also assumed that the monopoly had to be in the hands of the
government.

35
Theoretically, in a country where generation, transmission and distribution are in the
hands of Public Sector Undertakings (PSUs) it could be expected that the investment
requirements consistent with adequate and reliable supply, would be fully met by the
undertakings or through government planning/budgetary process. But this did not
happen during the last few decades and the quality and reliability of supply of power
deteriorated in most countries. Yet the dogma that electricity supply, like other public
services, should be provided by the state, persisted in most countries.

Roopa (2016) brought into the focus a very interesting point in her study on ‘Quality
in Governance of Demutualized Stock Exchanges over Mutualized Stock Exchanges–
A Case Study’. In this study, two most prominent stock exchanges of India; National
Stock Exchange and Bombay Stock Exchange were analyzed. The focus was on
quality of markets and governance of stock exchange. This study concluded that NSE
is having better quality market that BSE. It says that NSE has played a very crucial
role in transforming Indian stock markets by adopting innovative technology and
hence reducing the cost for the benefit of investors.

Paltrinieri (2015) has examined the reason for merger between Dubai Financial
Markets, Nasdaq-Dubai and Abu Dhabi Securities Exchange. The study revealed that
‘contraction both in market capitalization and in trading value in the three UAE stock
exchanges was caused by subprime financial crisis and market fragmentation’ and this
caused a merger between them.

Mishra (2015) has analyzed the trading statistics of different stock exchanges
available in India. To study the concept she examined the Indian capital market and
its trend in globalized economy along with the challenges of Indian capital market.
Through her study she concluded that, as capital market is a crux of any economy,
hence it is very crucial to enhance the market for the betterment of an economy.
Moreover she also suggested that one should invest in stock market because of the
availability of diversified portfolio at low cost with transparent trading in stock
exchanges. And lastly, she concluded her study by saying that SEBI has worked a lot
for the better trading in capital market but at slow rate in comparison to global
competitive markets.

Government of India (2014) POWERGRID Corporation of India Limited, the

Central Transmission Utility (CTU) of the country under Ministry of Power has

36
successfully entered into the business of telecommunication through convergence of
power sector with telecom sector by making available low cost and high quality
telecom infrastructure on its existing and planned transmission structure. This has
resulted in optimization of return on assets and value creation through new initiatives.

Fiorio et al. (2007) questioned the widespread believes that public ownership can be
impediment to other reforms and that it to production inefficiency. To test for thus a
reform paradigm in general, they considered electricity prices and survey data on 36
consumer satisfaction in the EU-5. Their empirical finding rejected the prediction that
privatization leads to lower prices, or to increased consumer satisfaction. They also
found that country specific features tends to have higher explanatory power and the
progress toward reform paradigm and is not systematically associates with lower
prices and higher consumer satisfaction.

Based on the literature review on cross-country studies related to electricity market

reforms, we may argue that evidence on impact of the reform process is quite limited
and will take more time to emerge. Therefore there exists a huge research gap in this
area.

Kale (2004) The Electricity (Supply) Act 1948 placed primary responsibility for
electricity system development with new state level agencies implemented under the
Act – the State Electricity Boards (SEBs). The phrase „semi-autonomous‟ in the
extract from the Act preamble is telling. Kale notes that the level of autonomy from
state control of the new SEBs was contested within the states, with some states (e.g.
Mysore and Madras – now Karnataka and Tamil Nadu) resisting the call for
independent SEBs. These states already owned and managed their states‟ electricity
systems and benefited from the control over resources this entailed Kale also cites
constitutional debate discussion arguing for autonomous SEBs.

Government of India (2003) On 10th June, 2003, the Electricity Act was notified by
the Govt. of India. This Act seeks to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry, promoting competition
therein, protecting interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff ensuring transparent policies regarding subsidies,
promotion of efficient and environmentally benign policies, constitution of Central

37
Electricity Authority, Regulatory Commissions and establishment of Appellate
Tribunal and for matters connected therewith or incidental thereto. The Act extends to
the whole of India except the state of Jammu & Kashmir.

Debojit Chakraborty (1997) This study of researcher tries to establish a relationship

between “major economic indicators and stock market behavior”. It also analyses the
stock market reactions to changes in the economic climate. The factors considered are
inflation, money supply, and growth in GDP, fiscal deficit and credit deposit ratio. To
find the trend in the stock markets, the BSE National Index of Equity Prices (Natex)
which comprises 100 companies was taken as the index. The study shows that stock
market movements are largely influenced by, broad money supply, inflation and fiscal
deficit apart from political stability.

Khan Ali M Younus (1996) made an attempt to study the various Personnel Policies
and Practices in Bharat Heavy Electrical Limited (BHEL) A study of BHEL’s
personnel policies and practices i.e. recruitment, promotion, transfer benefits, training
and development, industrial welfare, pay and allowances, award and incentives. The
study shows that BHEL’s personnel policies are commensurate with national
economic policy and conforms to the global standards. The study also reveals that the
personnel of BHEL are skilled, experienced and hard working. BHEL’s schemes,
programmes and policies as regards recruitment, promotion, transfer benefits, training
and development, industrial welfare, pay and allowances, award and incentives have
been suitably tuned to the changing needs and times. HBEL has been making
continuous investment in the development of its personnel for success and growth.

Government of India (1996) The policy of the Government of India offers all areas
of power production and supply to private entrepreneurs for investment, be it power
generation, distribution, Renovation and Modernization or co-generation. Driven by
the large demand for power in the country, the policy offers enormous opportunities
for the investors. Broad features are that the private sector can set up thermal projects
of any size. Debt equity ratio up to 4:1 is permissible for all prospective private
enterprise entrants to the electricity sector. At least 11% of the total equity must come
through promoters‟ contribution. Up to 100% Foreign equity participation is
permitted for the projects set up by the foreign private investors.

38
A CMIE (1995) This study on Initial Public Offering (IPO) points out that average
annualized returns obtained from issue date to list date by IPOs was 339%. But these
returns fade away with time, so that after one-month of listing, they drop to 256%.
Annualized returns after three months fell to 206% and subsequently to 120% after
one year from listing. Returns on IPOs are also highly volatile in the first few days of
listing. By the end of sixty days from listing, the volatility drops to 25 % of what it
was in the first ten days of listing Government of India (1995).

In 1995, the government strengthened its policy for private investment in generation
projects over 1000 MW and which would supply electricity to more than one state,
terming them as Mega power projects. The policy was intended to introduce a
competitive bidding for awarding the projects. CEA, POWERGRID and NTPC were
to provide catalytic support to private investors by identifying potential sites,
arranging the transmission of power and for preparing feasibility report respectively.
The policy did not propose any fiscal concessions. Some of these shortcomings were
addressed in the revised policy of 1998 (Revised Mega Power Policy). Nineteen
projects, 14 in the public sector and 5 in the private sector, were declared to be mega
power projects. To alleviate risks to private investors on account of payment security,
the Power Trading Corporation (PTC) was setup to purchase power from the
identified projects and to sell it to identified SEBs. This included the adoption of a
new package of security mechanism consisting of Letter of Credit and recourse to
state government’s share of Central Plan Allocations. Establishment of Regulatory
Commissions and privatization of distribution in cities with a population exceeding
one million were included as pre-conditions in the policy. Import of capital equipment
for such projects was exempted from customs duty. The projects were also granted
income tax holiday for 10 years and, which could be claimed in any block of 10 years
within the first 15 years. The policy was further liberalized by according mega project
status to all inter-state thermal projects of 1000 MW and above, and to all inter-state
hydro projects of 1000 MW and above In the Mega Power Policy, following four
distribution reform measures were also laid down by the Ministry of Power required
to be undertaken by the States purchasing power from the mega power projects:

 Timely release of subsidy as per Section 65 of Electricity Act

2003.Ensure that Discoms approach SERC for approval of annual
revenue requirement/tariff determination in time according to the

39
 SERC regulations. Setting up special courts as provided in the
Electricity Act 2003 to tackle theft related cases.
 Ring fencing of SLDCs.

Jamie Carstairs (1995) In India, the private power initiative of 1991 has offered one
solution to the financing problem i.e. the private financing of generation against long
term power purchase agreements. However, this approach encounters a major
problem, the financial weakness of the purchasing agents, the state electricity boards
that play a dominant role in most state's power sectors. At present the SEBs is mostly
loss making; even the best performers realize returns on assets well below the cost of
capital that they now face. The situation is likely to become worse as costs rise,
further weakening the ability of the SEBs to sign credible long-term power purchase
contracts. The private sector has responded by trying to reduce its exposure to SEBs
through obtaining guarantees from state and central governments.

Sahadevan and Thirpal Raju (1995) This study investigates into the lead-lag
relationship between money supply and stock return in the Indian context. The study
has attempted to trace the relationship between stock returns and money supply using
monthly observation on SENSEX, RBI Index, M1 and M3 for a period spanning over
14 years ending March 1994.The result reveals that supply variations in money have a
lag 40 effect on stock return and hence, stock market is not found efficient with
respect to monetary data.

Pattabhi Ram.V.15 (1995) emphasized the need for doing fundamental analysis ‘and
doing Equity Research (ER) before selecting shares for investment. He opined that the
investor should look for value with a margin of safety in relation to price. The margin
of safety is the gap between price and value. He revealed that the Indian stock market
is an inefficient market because of the absence of good communication network,
rampant price rigging, the absence of free and instantaneous flow of information,
professional broking and so on. He concluded that in such inefficient market, equity
research will produce better results as there will be frequent mismatch between price
and value that provides opportunities to the long-term value oriented investor. He
added that in the Indian stock market investment returns would improve only through
quality equity research.

40
Subhash Chander and Ashwani Kansara (1994) This study has surveyed the
perceived significance of the information contained in the abridged prospectus
attached to the application form for shares / debentures of companies. For an existing
company, the information necessary for investment decisions could be obtained from
newspapers, magazines, annual reports, prospectus etc. But for a new company,
abridged prospectus is the main important document which provides information for
investment decisions. The study shows that the majority of investors are casual
investors. The investors regard abridged prospectus as well as the investment journals
as the prime source of information for their investment decisions. Investment
decisions also depend upon unofficial premium quoted in business magazines, expert
analysis, market trends, political considerations, etc.

Carter Randal7 (1992) offered to investors the underlying principles of winning on

the stock market. He emphasized on long term vision and a plan to reach the goals. He
advised the investors that to be successful, they should never be pessimists. He
revealed that - though there has been a major economic crisis almost every year, it
remains true that patient investors have consistently made money in the equities
market. He concluded that investing in the stock market should be an un-emotional
endeavor and suggested that investors should own a stock if they believe it would
perform well.

Gupta (1981) This research is an extensive study titled `Return on New Equity Issues'
which states that the investment performance of new issues of equity shares,
especially those of new companies, deserve separate analysis. The factor significantly
influencing the rate of return on new issues to the original buyers is the `fixed price' at
which they are issued. The return on equities includes dividends and capital
appreciation. The study presents sound estimates of rates of return on equities, and
examines the variability of such returns over time.

The findings of this study suggest that the market seems to function largely on a `hit
or miss' basis rather than on the basis of informed beliefs about the long-term
prospects of individual enterprises. The main reason for the market's irrationality
appears to be the preponderance of speculative influences over investment influences.

41
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

4.1 BALANCE SHEET OF TATA POWER LIMITED FROM 2011

TO 2020:

Particulars 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 270.5 270.5 270.5 270.5 270.48
TOTAL SHARE CAPITAL 270.5 270.5 270.5 270.5 270.48
Reserves and Surplus 17,795.52 16,535.01 14,629.38 12,944.05 11,362.90
TOTAL RESERVES AND 17,795.52 16,535.01 14,629.38 12,944.05 11,362.90
SURPLUS
TOTAL SHAREHOLDERS 18,066.02 16,805.51 14,899.88 13,214.55 11,633.38
FUNDS
Minority Interest 2,332.04 2,166.66 2,015.29 1,868.99 1,749.81
NON-CURRENT
LIABILITIES
Long Term Borrowings 32,695.14 31,139.23 22,356.31 25,142.96 22,413.88
Deferred Tax Liabilities [Net] 1,174.04 1,056.81 516.56 1,751.14 2,096.86
Other Long Term Liabilities 5,989.55 2,587.55 2,513.53 3,668.90 3,651.31
Long Term Provisions 407.4 333.6 300 270.68 243.53
TOTAL NON-CURRENT 40,266.13 35,117.19 25,686.40 30,833.68 28,405.58
LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 11,844.36 13,875.38 18,827.28 16,279.79 14,588.91
Trade Payables 5,095.44 5,481.49 5,609.82 5,529.00 4,401.36
Other Current Liabilities 10,527.74 9,123.15 13,277.86 13,487.09 7,518.24
Short Term Provisions 116.42 93.55 193.44 207.69 262.43
TOTAL CURRENT 27,583.96 28,573.57 37,908.40 35,503.57 26,770.94

42
LIABILITIES
TOTAL CAPITAL AND 89,748.15 84,162.93 82,009.97 82,920.79 70,059.71
LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 44,662.61 41,101.50 41,431.61 43,235.42 36,103.41
Intangible Assets 1,362.18 1,561.82 1,583.08 1,705.80 307.34
Capital Work-In-Progress 1,611.52 2,575.70 1,652.60 1,923.24 1,134.16
FIXED ASSETS 47,636.31 45,239.02 44,667.29 47,119.14 37,755.66
Non-Current Investments 13,835.33 13,374.89 11,992.77 10,775.23 11,446.83
Deferred Tax Assets [Net] 74.24 89.49 118.17 91.53 3.2
Long Term Loans And 80.88 90.56 131.73 77.16 390.37
Advances
Other Non-Current Assets 2,725.11 2,671.44 2,783.39 3,378.66 3,339.62
TOTAL NON-CURRENT 65,993.44 63,106.97 61,334.92 63,095.29 52,941.22
ASSETS
CURRENT ASSETS
Current Investments 699.51 166.98 436.16 1,097.78 335.95
Inventories 1,752.35 1,706.42 1,623.08 1,599.56 1,373.40
Trade Receivables 4,425.90 4,445.26 2,788.93 3,832.12 3,540.24
Cash And Cash Equivalents 2,094.18 787.45 1,185.78 954.3 663.16
Short Term Loans And 33 87.18 784.8 655.44 410.27
Advances
OtherCurrentAssets 14,749.77 13,862.67 13,856.30 11,686.30 10,795.47
TOTAL CURRENT 23,754.71 21,055.96 20,675.05 19,825.50 17,118.49
ASSETS
TOTAL ASSETS 89,748.15 84,162.93 82,009.97 82,920.79 70,059.71
OTHER ADDITIONAL
INFORMATION
CONTINGENT
LIABILITIES,
COMMITMENTS
Contingent Liabilities 6,282.82 5,218.16 6,332.12 6,949.92 12,471.15

43
BONUS DETAILS
Bonus Equity Share Capital 1.13 1.13 1.13 1.13 1.13
NON-CURRENT
INVESTMENTS
Non-Current Investments 66.94 89.14 92.39 204.07 374.43
Quoted Market Value
Non-Current Investments 565.74 772.27 11,900.38 1,075.07 1,384.00
Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted 0 0 0 32.66 24.35
Market Value
Current Investments Unquoted 699.51 166.98 436.16 1,065.12 311.6
Book Value

Particulars 15-Mar 14-Mar 13-Mar 12-Mar 11-Mar

12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 270.48 237.29 237.29 237.29 237.29
TOTAL SHARE CAPITAL 270.48 237.29 237.29 237.29 237.29
Reserves and Surplus 14,040.11 12,154.96 12,089.59 12,427.70 13,782.25
TOTAL RESERVES AND 14,040.11 12,154.96 12,089.59 12,427.70 13,782.25
SURPLUS
TOTAL SHAREHOLDERS 14,310.59 12,392.25 12,326.88 12,664.99 14,019.54
FUNDS
Minority Interest 2,492.59 2,273.31 2,064.60 1,631.27 1,414.26
NON-CURRENT
LIABILITIES
Long Term Borrowings 32,618.38 30,469.94 31,599.34 29,733.11 21,979.83
Deferred Tax Liabilities [Net] 1,401.37 1,137.88 1,025.41 647.05 482.05
Other Long Term Liabilities 1,079.12 974.57 949.11 1,181.30 1,371.41

44
Long Term Provisions 921.38 914.77 1,164.59 1,043.50 886.79
TOTAL NON-CURRENT 36,020.25 33,497.16 34,738.45 32,604.96 24,720.08
LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 4,586.56 4,706.78 3,547.18 2,186.74 1,619.32
Trade Payables 5,235.42 4,574.00 3,540.85 2,750.13 2,023.45
Other Current Liabilities 10,518.67 11,545.58 8,776.13 7,376.60 5,508.87
Short Term Provisions 770.47 900.36 778.41 888.01 1,030.99
TOTAL CURRENT 21,111.12 21,726.72 16,642.57 13,201.48 10,182.63
LIABILITIES
TOTAL CAPITAL AND 75,442.85 71,398.26 67,281.41 61,612.09 50,343.74
LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 37,748.14 36,795.04 35,395.28 22,585.11 11,789.35
Intangible Assets 365.2 266.52 233.83 223.95 19.95
Capital Work-In-Progress 3,571.73 3,298.07 2,284.27 12,634.31 18,670.25
FIXED ASSETS 41,763.82 40,450.23 37,986.72 35,468.27 30,491.51
Non-Current Investments 2,732.57 2,678.72 2,642.71 2,645.42 2,609.22
Deferred Tax Assets [Net] 5.85 14.96 24.88 8.31 6.8
Long Term Loans And 1,776.01 1,529.35 1,603.85 1,355.04 1,668.61
Advances
Other Non-Current Assets 7,622.48 7,032.08 7,148.99 5,820.56 4,105.04
TOTAL NON-CURRENT 60,526.49 58,037.38 55,131.29 50,142.00 43,109.26
ASSETS
CURRENT ASSETS
Current Investments 605.57 340.54 477.4 777.48 231.78
Inventories 1,844.17 2,073.27 2,026.51 1,684.69 1,128.74
Trade Receivables 5,563.95 4,542.61 3,305.01 2,271.35 1,668.94
Cash And Cash Equivalents 1,500.85 1,555.01 1,989.89 3,694.12 2,206.59
Short Term Loans And 3,569.83 3,326.70 3,299.91 2,421.67 1,636.07
Advances
OtherCurrentAssets 1,831.99 1,522.75 1,051.40 620.78 362.36

45
TOTAL CURRENT 14,916.36 13,360.88 12,150.12 11,470.09 7,234.48
ASSETS
TOTAL ASSETS 75,442.85 71,398.26 67,281.41 61,612.09 50,343.74
OTHER ADDITIONAL
INFORMATION
CONTINGENT
LIABILITIES,
COMMITMENTS
Contingent Liabilities 12,142.70 10,463.18 6,209.55 4,794.11 7,243.15
BONUS DETAILS
Bonus Equity Share Capital 1.13 1.13 1.13 1.13 1.13
NON-CURRENT
INVESTMENTS
Non-Current Investments 975.46 768.09 651.58 714.31 786.57
Quoted Market Value
Non-Current Investments 2,258.62 2,195.00 2,185.53 2,123.77 2,081.51
Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted 0 0 0 0 0
Market Value
Current Investments Unquoted 605.57 340.54 477.4 777.48 231.78
Book Value
(Table 4.1 Source: Annual Report)

46
4.2 STATEMENT OF PROFIT AND LOSS FROM 2011 TO 2020:

Statement of Profit & Loss from 2011-2020

PROFIT & LOSS 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

ACCOUNT OF TATA
POWER COMPANY (in Rs.
Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
REVENUE FROM 28,147.60 28,788.47 25,922.84 26,868.20 28,799.73
OPERATIONS [GROSS]
Less: Excise/Sevice Tax/Other 0 0 0.22 0 0
Levies
REVENUE FROM 28,147.60 28,788.47 25,922.62 26,868.20 28,799.73
OPERATIONS [NET]
TOTAL OPERATING 29,136.37 29,881.06 26,840.05 27,587.59 29,500.89
REVENUES
Other Income 562.61 386.15 432.69 585.9 91.34
TOTAL REVENUE 29,698.98 30,267.21 27,272.74 28,173.49 29,592.23
EXPENSES
Cost Of Materials Consumed 957.18 919.35 748.97 1,009.67 1,136.61
Operating And Direct Expenses 214 248.23 281.99 224.13 679.75
Employee Benefit Expenses 1,440.64 1,339.05 1,381.92 1,261.11 1,227.51
Finance Costs 4,493.73 4,170.00 3,761.48 3,364.96 3,235.81
Depreciation And Amortisation 2,633.56 2,393.13 2,346.17 1,955.59 1,648.73
Expenses
Other Expenses 2,342.78 2,260.15 2,373.89 2,217.76 2,157.68
TOTAL EXPENSES 28,320.84 29,699.05 26,674.77 26,999.34 27,238.44
PROFIT/LOSS BEFORE 1,378.14 568.16 597.97 1,174.15 2,353.79
EXCEPTIONAL,
EXTRAORDINARY ITEMS
AND TAX
Exceptional Items 37.47 1,849.10 692.68 -952.89 -1,073.08

47
PROFIT/LOSS BEFORE 1,415.61 2,417.26 1,290.65 221.26 1,280.71
TAX
TAX EXPENSES-
CONTINUED
OPERATIONS
Current Tax 494.3 524.66 663.69 553.32 593.54
Less: MAT Credit Entitlement 0 0 0 0 0
Deferred Tax 330.95 544.02 -840.23 -664.88 155.1
Other Direct Taxes 0 0 0 0 0
TOTAL TAX EXPENSES 641.49 1,087.59 161.97 350.46 680.31
PROFIT/LOSS AFTER TAX 774.12 1,329.67 1,128.68 -129.2 600.4
AND BEFORE
EXTRAORDINARY ITEMS
PROFIT/LOSS FROM 774.12 1,329.67 1,128.68 -129.2 600.4
CONTINUING
OPERATIONS
PROFIT/LOSS FOR THE 363.89 1,203.83 1,056.94 -126.16 600.4
PERIOD
Minority Interest -299.06 -249.47 -202.55 -203.08 -124.19
CONSOLIDATED 1,017.38 2,356.19 2,408.30 896.55 662.2
PROFIT/LOSS AFTER MI
AND ASSOCIATES
OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 3 8 8 3 2
Diluted EPS (Rs.) 3 8 8 3 2
DIVIDEND AND
DIVIDEND PERCENTAGE
Equity Share Dividend 351.99 351.99 423.64 423.65 363.59
Tax On Dividend 72.37 71.66 0 0 0

48
PROFIT & LOSS 15-Mar 14-Mar 13-Mar 12-Mar 11-Mar
ACCOUNT OF TATA
POWER COMPANY (in Rs.
Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
REVENUE FROM 32,260.24 35,109.15 32,513.26 25,645.46 18,921.30
OPERATIONS [GROSS]
Less: Excise/Sevice Tax/Other 3.97 19.64 16.67 18.41 12.12
Levies
REVENUE FROM 32,256.27 35,089.51 32,496.59 25,627.05 18,909.18
OPERATIONS [NET]
TOTAL OPERATING 34,366.85 35,648.70 33,025.43 26,001.40 19,450.76
REVENUES
Other Income 416.74 227.26 369.2 268.76 410.5
TOTAL REVENUE 34,783.59 35,875.96 33,394.63 26,270.16 19,861.26
EXPENSES
Cost Of Materials Consumed 697.84 721.88 386.74 358.87 373.39
Operating And Direct Expenses 4,038.92 4,620.29 3,656.13 3,713.78 2,070.51
Employee Benefit Expenses 1,545.67 1,349.35 1,322.95 1,146.26 825.93
Finance Costs 3,699.27 3,439.90 2,635.53 1,527.09 866.15
Depreciation And Amortisation 2,174.21 2,729.62 2,051.69 1,334.64 981.06
Expenses
Other Expenses 4,347.98 4,573.64 3,972.30 3,488.67 2,282.35
TOTAL EXPENSES 33,299.85 34,900.89 31,267.95 23,962.91 16,704.38
PROFIT/LOSS BEFORE 1,483.74 975.07 2,126.68 2,307.25 3,156.88
EXCEPTIONAL,
EXTRAORDINARY ITEMS
AND TAX
Exceptional Items 0 0 -850 -1,800.00 0
PROFIT/LOSS BEFORE 1,483.74 975.07 1,276.68 507.25 3,156.88
TAX

49
TAX EXPENSES-
CONTINUED
OPERATIONS
Current Tax 826.57 831.89 912.69 1,405.17 970.28
Less: MAT Credit Entitlement 18.29 -88.31 29.91 51.21 54
Deferred Tax 266.5 129.69 307.25 120.69 76.9
Other Direct Taxes 0 0 0 0 0
TOTAL TAX EXPENSES 1,074.92 1,008.38 1,177.96 1,475.54 974.97
PROFIT/LOSS AFTER TAX 408.82 -33.31 98.72 -968.29 2,181.91
AND BEFORE
EXTRAORDINARY ITEMS
PROFIT/LOSS FROM 408.82 -33.31 98.72 -968.29 2,181.91
CONTINUING
OPERATIONS
PROFIT/LOSS FOR THE 408.82 -33.31 98.72 -968.29 2,181.91
PERIOD
Minority Interest -289.37 -272.03 -208.07 -190.16 -196.5
CONSOLIDATED 167.83 -259.97 -85.43 -1,087.68 2,059.60
PROFIT/LOSS AFTER MI
AND ASSOCIATES
OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 0 -2 -1 -5 9
Diluted EPS (Rs.) 0 -2 -1 -5 8
DIVIDEND AND DIVIDEND
PERCENTAGE
Equity Share Dividend 351.99 338.45 273.17 296.92 296.92
Tax On Dividend 67.04 54.62 46.13 55.98 42.53
(Table 4.2 Source: Annual Report)

50
4.3 DATA ANALYSIS:

Data analysis is a process of inspecting, cleansing, transforming, and modeling data

with the goal of discovering useful information, informing conclusions, and
supporting decision-making and is playing a role in making decisions more scientific
and helping the business achieve effective operation.

4.4 RATIO ANALYSIS:

Ratio is a relationship between two figures expressed mathematically. Financial ratios

provide numerical relationship between two relevant financial data. Financial ratio are
calculated from the balance sheet and profit and loss account. The relationship can be
either expressed as a percent or as a quotient. Ratios summarize the data for easy
understanding, comparison and interpretations. Ratios for investment purposes can be
classified into profitability ratios, turnover ratios, and leverage ratios. Profitability
ratios are the most popular ratios since investors prefer to measure the present profit
performance and use this information to forecast the future strength of the company.
The most often used profitability ratios are return on assets, price earnings multiplier,
price to book value, price to cash flow, and price to sales, dividend yield, return on
equity, present value of cash flows, and profit margins.

4.5 RATIO ANALYSIS & INTERPRETATIONS:

 Profitability Ratio:
 Gross profit ratio = Gross Profit / Sales * 100

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Gross 35,109.15 32,260.24 28,799.73 26,868.20 25,922.84 28,788.47 28,147.60
Profit
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98
Ratio
(In %) 97.86 92.74 97.32 95.36 95.05 95.11 94.77
(Table 4.3 source: Done by Researcher)

51
(Graph 4.1 source: Done by Researcher)

INTERPRETATION:

A higher gross profit margin indicates that a company can make a reasonable profit on
sales as long it keeps over head costs in control.

In year 2014, the gross profit margin was 97.86. In year 2015, the gross profit margin
was 92.74.

In year 2016, the gross profit margin was 97.32. In year 2017, the gross profit margin
was 95.36.

In year 2018, the gross profit margin was 95.05. In year 2019, the gross profit margin
was 95.11. In year 2020, the gross profit margin was 94.77.

The above analysis shows that there has been certain down fall between the year 2014
& 2016. After 2016 it has been decreased, the highest gross profit was only in the year
2014 and the lowest among these years is in the year 2015.

 Net Profit Ratio = Net Profit / Sales * 100

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net Profit -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

52
Ratio
(In %) -0.72 0.48 2.23 3.18 8.83 7.78 3.42
(Table 4.4 source: Done by Researcher)

(Graph 4.2 source: Done by Researcher)

INTERPRETATION:

A high net profit margin means that a company is able to effectively control its costs
and provide goods and services at a price significantly higher than its costs. Therefore,
a high ratio can result from efficient management.

In year 2014, the net profit margin was (0.72%). In year 2015, the net profit margin
was 0.48%.

In year 2016, the net profit margin was 2.23%. In year 2017, the net profit margin was
3.18%.

In year 2018, the net profit margin was 8.83%. In year 2019, the net profit margin was
7.78%. In year 2020, the net profit margin was 3.42%.

53
The above analysis shows that the net profit margin for initial and last years is less as
compared to middle years that is 2016 & 2017. The highest net profit ratio was
recorded in year 2018 and the lowest was in year 2014.

 Operating Profit Ratio = Operating Profit / Sales * 100

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Operating -33.31 408.82 2,353.79 1,174.15 597.97 568.16 1,378.14
Profit
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98
Ratio (In %) -0.09 1.17 7.95 4.16 2.19 1.87 4.64
(Table 4.5 source: Done by Researcher)

(Graph 4.3 source: Done by Researcher)

INTERPRETATIONS:

Higher operating margins are generally better than lower operating margins, so it
might be fair to state that the only good operating margin is one that is positive and
increasing over time.

54
In year 2014, the operating profit ratio was (0.09%). In year 2015, the operating profit
ratio was 1.17%.

In year 2016, the operating profit ratio was 7.95%. In year 2017, the operating profit
ratio was 4.16%.

In year 2018, the operating profit ratio was 2.19%. In year 2019, the operating profit
ratio was 1.87%. In year 2020, the operating profit ratio was 4.64%.

The above analysis shows that in year 2016 the operating profit ratio was highest
whereas it was lowest in year 2014. In the rest of the years operating profit ratio is
average.

 ACTIVITY RATIOS:
 Total Asset Turnover Ratio = Net Sales / Total Assets

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98
Sales
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Assets
Ratio
(In %) 0.50 0.46 0.42 0.33 0.33 0.35 0.33
(Table 4.6 source: Done by Researcher)

55
(Graph 4.4 source: Done by Researcher)

INTERPTRETATIONS:

The higher the asset turnover ratio, the more efficient a company is at generating
revenue from its assets. Conversely, if a company has a low asset turnover ratio, it
indicates it is not efficiently using its assets to generate sales.

In year 2014, the total asset turnover ratio was 0.50%. In year 2015, total asset
turnover ratio was 0.46%.

In year 2016, the total asset turnover ratio was 0.42%. In year 2017, total asset
turnover ratio was 0.33%.

In year 2018, the total asset turnover ratio was 0.33%. In year 2019, total asset
turnover ratio was 0.35%. In year 2020, total asset turnover ratio was 0.33%.

The above analysis shows that total asset turnover ratio in year 2014 is higher as
compared to the rest of years. The total asset turnover ratio was lowest in year 2017,
year 2018 & year 2020.

 Fixed Asset Turnover Ratio = Net Sales / Fixed Assets

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

56
Sales
Fixed 40,450.23 41,763.82 37,755.66 47,119.14 44,667.29 45,239.02 47,636.31
Asset
Ratio
(In %) 0.88 0.83 0.78 0.59 0.61 0.66 0.62

(Table 4.7 source: Done by Researcher)

(Graph 4.5 source: Done by Researcher)

INTERPRETATIONS:

A higher fixed asset turnover ratio than its competitors, it shows the company is using
its fixed assets to generate sales better than its competitors.

In year 2014, the fixed asset turnover ratio was 0.88%. In year 2015, fixed asset
turnover ratio was 0.83%.

In year 2016, the fixed asset turnover ratio was 0.78%. In year 2017, fixed asset
turnover ratio was 0.59%.

In year 2018, the fixed asset turnover ratio was 0.61%. In year 2019, fixed asset
turnover ratio was 0.66%. In year 2020, fixed asset turnover ratio was 0.62%.

57
The above analysis shows that fixed asset turnover ratio in year 2015 & 2016 was
higher compare to the rest of the years which shows the company’s assets were
performing better in those years. The lowest ratio was recorded in year 2017.

 FINANCIAL LEVERAGE RATIO:

 Total Debt to Asset = Total Debt / Total Assets

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Total 33,497.16 36,020.25 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Debt
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Assets
Ratio
(In %) 0.46 0.47 1 1 1 1 1
(Table 4.8 source: Done by Researcher)

(Graph 4.6 source: Done by Researcher)

INTERPRETATION:

The debt to asset ratio is very important in determining the financial risk of a
company. A ratio greater than 1 indicates that a significance portion of asset is funded

58
with debt and that a company has a higher default risk. Therefore lower the ratio,
safer the company.

In year 2014, the total debt to asset ratio was 0.46%. In year 2015, total debt to asset
ratio was 0.47%.

In year 2016, the total debt to asset ratio was 1%. In year 2017, total asset to asset
ratio was 1%.

In year 2018, the total debt to asset ratio was 1%. In year 2019, total debt to asset ratio
was 1%. In year 2020, the total debt to asset ratio was 1%.

The above analysis shows in year 2020 total debt to asset ratio was highest which
means the company was not safe. Also as of now the company is under debt only, but
in initial years company was safe as the ratio was less then 1.

 Total Debt to Equity Ratio = Total Debt / Shareholder’s Equity

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Total Debt 33,497.16 36,020.25 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Shareholder’s 237.29 270.48 270.48 270.5 270.5 270.5 270.5
Equity
Ratio (in %) 1.41 1.33 2.59 3.06 3.03 3.11 3.31
(Table 4.9 source: Done by Researcher)

59
(Graph 4.7 source: Done by Researcher)

INTERPREATATION:

A higher ratio indicates that the company is getting more of its financing by
borrowing money, which subjects the company to potential risk if debt levels are too
high. A lower ratio indicates that the company is not too much dependent on its
borrowed funds.

In year 2014, the total debt to equity ratio was 1.41%. In year 2015, total debt to
equity ratio was 1.33%.

In year 2016, the total debt to equity ratio was 2.59%. In year 2017, total debt to
equity ratio was 3.06%.

In year 2018, the total debt to equity ratio was 3.03%. In year 2019, total debt to
equity ratio was 3.11%. In year 2020, the total debt to equity ratio was 3.31%.

The above analysis shows total debt to equity in 2019 & 2020 was the higher as
compared to 2014 & 2015. The total debt to equity was highest in 2020 and lowest in
2015.

 Long Term Debt to Total Asset = Long Term Debt / Total

Assets

60
Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar
Long 30,469.94 32,618.38 22,413.88 25,142.96 22,356.31 31,139.23 32,695.14
Term
Debt
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Assets
Ratio
(In %) 0.42 0.43 0.31 0.30 0.27 0.36 0.36
(Table 4.10 source: Done by Researcher)

(Graph 4.8 source: Done by Researcher)

INTERPRETATIONS:

A higher ratio indicates that the company is getting more of its financing by
borrowing money, which subjects the company to potential risk if debt levels are too
high. Although a ratio result that is considered indicative of a "healthy" company
varies by industry, generally speaking, a ratio result of less than 0.5 is considered
good.

61
In year 2014, the total debt to asset ratio was 0.42%. In year 2015, total debt to asset
ratio was 0.43%.

In year 2016, the total debt to asset ratio was 0.31%. In year 2017, total asset to asset
ratio was 0.30%.

In year 2018, the total debt to asset ratio was 0.27%. In year 2019, total debt to asset
ratio was 0.36%. In year 2020, the total debt to asset ratio was 0.36%.

The above analysis shows that initially company was having more long term debts to
asset ratio and after that the long term debts to asset ratio is almost same in all the
years and is less than 0.5 which means company is performing good.

 Equity Multiplier = Total Asset / Shareholder’s Equity

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Total Assets 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Shareholder's 237.29 270.48 270.48 270.5 270.5 270.5 270.5
Equity
Ratio (In %) 3.00 2.78 2.59 3.06 3.03 3.11 3.31
(Table 4.11 source: Done by Researcher)

(Graph 4.9 source: Done by Researcher)

62
INTERPRETATION:

A high multiplier indicates that a significant portion of a firm’s assets are financed by
debt, while a low multiplier shows that either the firm is unable to obtain debt from
lenders or the management is avoiding the use of debt to purchase assets.

In year 2014, the equity multiplier was 3.00%. In year 2015, equity multiplier was
2.78%.

In year 2016, the equity multiplier was 2.59%. In year 2017, equity multiplier was
3.06%.

In year 2018, the equity multiplier was 3.03%. In year 2019, equity multiplier was
3.11%. In year 2020, the equity multiplier was 3.31%.

The above analysis shows that in the last two years equity was higher as compared to
the rest of the years which means the performance of the company was better before
2017.

 RETURN RATIO:
 Return on Asset = Net Profit / Total Asset

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38
Profit
Total 71,398.26 75,442.85 70,059.71 82,920.79 82,009.97 84,162.93 89,748.15
Asset
Ratio
(In %) -0.0036 0.0022 0.0094 0.0108 0.0293 0.0279 0.0113
(Table 4.12 source: Done by Researcher)

63
(Graph 4.10 source: Done by Researcher)

INTERPRETATION:

ROAs over 0.05 are generally considered good and over 0.20 are excellent. However,
ROAs should always be compared amongst firms in the same sector.

In year 2014, the return on asset ratio was (0.0036%). In year 2015, return on asset
ratio was 0.0022%.

In year 2016, the return on asset ratio was 0.0094%. In year 2017, the return on asset
ratio was 0.0108%.

In year 2018, the return on asset was 0.0293%. In year 2019, the return on asset ratio
was 0.0279%. In year 2020, the return on asset was 0.0113%.

The above analysis shows that return on assets of all years is not excellent. Only in
the year 2018, year 2019 the returns was good.

 Return on Equity = Net Profit / Shareholder’s Equity

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net Profit -259.97 167.83 662.2 896.55 2,408.30 2,356.19 1,017.38
Shareholder's 237.29 270.48 270.48 270.5 270.5 270.5 270.5
Equity

64
Ratio (In %) -1.09 0.62 2.44 3.31 8.90 8.71 3.76
(Table 4.13 source: Done by Researcher)

(Graph 4.11 source: Done by Researcher)

INTERPRETATION:

A higher ROE suggests that a company’s management team is more efficient when it
comes to utilizing investment financing to grow their business (and is more likely to
provide better returns to investors). A low ROE, however, indicates that a company
may be mismanaged and could be reinvesting earnings into unproductive assets.

In year 2014, the return on asset ratio was (1.09%). In year 2015, return on asset ratio
was 0.62%.

In year 2016, the return on asset ratio was 2.44%. In year 2017, the return on asset
ratio was 3.31%.

In year 2018, the return on asset was 8.90%. In year 2019, the return on asset ratio
was 8.71%. In year 2020, the return on asset was 3.76%.

The above analysis shows that return on equity of year 2018 & 2019 is excellent. And
it was not good in the year 2014 but in the rest of the years it’s good.

65
  LIQUIDITY RATIO:
 Current Ratio = Current Assets / Current Liabilities

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Current 13,360.88 14,916.36 17,118.49 19,825.50 20,675.05 21,055.96 23,754.71
Assets
Current 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio
(In %) 0.61 0.70 0.63 0.55 0.54 0.73 0.86
(Table 4.14 source: Done by Researcher)

(Graph 4.12 source: Done by Researcher)

INTERPRETATION:

A current ratio that is in line with the industry average or slightly higher is generally
considered acceptable. A current ratio that is lower than the industry average may
indicate a higher risk of distress or default. Similarly, if a company has a very high
current ratio compared to their peer group, it indicates that management may not be
using their assets efficiently.

66
In year 2014, the current ratio was 0.61%. In year 2015, current ratio was 0.70%.

In year 2016, the current ratio was 0.63%. In year 2017, the current ratio was 0.55%.

In year 2018, the current ratio was 0.54%. In year 2019, the current ratio was 0.73%.
In year 2020, the current ratio was 0.86%.

The above analysis shows that the current ratio in year 2020 is the highest is not good
for the company whereas the other year’s ratio is good and not very harmful for the
company.

 Quick Ratio = Quick Assets / Quick Liabilities

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Quick
Assests 6,097.62 7,064.80 4,203.40 4,786.42 3,974.71 5,232.71 6,520.08
Quick 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio
(In %) 0.28 0.33 0.15 0.13 0.10 0.18 0.23
(Table 4.15 source: Done by Researcher)

(Graph 4.13 source: Done by Researcher)

67
INTERPRETATION:

The higher the ratio result, the better a company's liquidity and financial health; the
lower the ratio, the more likely the company will struggle with paying debts. Ideal
Ratio is 1.

In year 2014, the Quick ratio was 0.28%. In year 2015, Quick ratio was 0.33%.

In year 2016, the Quick ratio was 0.15%. In year 2017, the Quick ratio was 0.13%.

In year 2018, the Quick ratio was 0.10%. In year 2019, the Quick ratio was 0.18%. In
year 2020, the Quick ratio was 0.23%.

The above analysis shows the quick ratio of year 2018 is the lowest as compared to
rest of the years which means that company has problem with debts. The rest of the
year’s ratio is also no so good enough for the company as they are less than 1.

 Cash Ratio = Cash and Cash Equivalents / Current Liabilities

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Cash and 787.45 1,500.85 663.16 954.3 1,185.78 787.45 2,094.18
Cash
Equivalent
Current 21,726.72 21,111.12 26,770.94 35,503.57 37,908.40 28,573.57 27,583.96
Liabilities
Ratio
(In %) 0.03 0.07 0.02 0.02 0.03 0.02 0.07
(Table 4.16 source: Done by Researcher)

68
(Graph 4.14 source: Done by Researcher)

INTERPRETATIONS:

A cash ratio is expressed as an amount, larger or smaller than 1. When the ratio is
determined, if the outcome is equal to 1, the corporation has exactly the same sum of
current liabilities as assets and cash equivalents are paying off those debts.

In year 2014, the cash ratio was 0.03%. In year 2015, cash ratio was 0.07%.

In year 2016, the cash ratio was 0.02%. In year 2017, the cash ratio was 0.02%.

In year 2018, the cash ratio was 0.03%. In year 2019, the cash ratio was 0.02%. In
year 2020, the cash ratio was 0.07%.

The above analysis shows in all the years the cash ratio is smaller than 0.5 which is
not good. So the overall analysis suggests that the cash ratio of this company is not
good.

 Net Working Capital to Sales Ratio = Working Capital / Sales

Year 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Working
Capital 36,643.08 34,472.00 43,889.43 55,329.07 58,583.45 49,629.53 51,338.67
Sales 35,875.96 34,783.59 29,592.23 28,173.49 27,272.74 30,267.21 29,698.98

69
Ratio
(In %) 1.02 0.99 1.48 1.96 2.14 1.63 1.72
(Table 4.17 source: Done by Researcher)

(Graph 4.15 source: Done by Researcher)

INTERPRETATIONS:

A high turnover ratio shows that management is being very efficient in using a
company’s short-term assets and liabilities for supporting sales. In contrast, a low
ratio may indicate that a business is investing in too many accounts receivable and
inventory to support its sales, which could lead to an excessive amount of bad debts or
obsolete inventory.

In year 2014, the Net Working Capital to Sales Ratio was 1.02%. In year 2015, Net
Working Capital to Sales Ratio was 0.99%.

In year 2016, the Net Working Capital to Sales Ratio was 1.48%. In year 2017, the
Net Working Capital to Sales Ratio was 1.96%.

In year 2018, the Net Working Capital to Sales Ratio was 2.14%. In year 2019, the
Net Working Capital to Sales Ratio was 1.63%. In year 2020, the Net Working
Capital to Sales Ratio was 1.72%.

70
The above analysis shows that the Net Working Capital to Sales Ratio of the year
2018 is highest and rest of the years the ratio is average, so company should take
some initiative.

71
 CHAPTER 5

CONCLUSION AND SUGGESTION

5.1 FINDINGS:

From the study analysis on Power industry and data analysis and interpretations of
the ratios of Tata power Ltd the followings findings have been given:

 Power Industry has led India’s economic growth and this sector’s
contribution to national GDP has raised.
 Debt equity share ratio of Tata power goes high as compared to last years
which is to be risk of defaulting on, or being unable to repay, your debt
increases as your debt-to-equity ratio rises. A reasonable amount of debt
can help you grow your small business, but too much can overburden you
with high interest payments.
 The power sector in India has grown at almost double the rate of the rate
of other country’s power sector.
 The overall performance of the company is good and there is a continuous
flow of project business. The companies are continuing its drivers for
volume with a continuous focus on profitability.
 By analyzing the current trend of Indian Economy and power industry I
have found that being a developing economy there is lot of scope for
growth and this industry still has to cross many levels so there are huge
opportunities to invest in.
 Net profit margin of Tata power is in negative as compared to others
companies and a negative net profit margin results from the "net" part of
the equation — the balance between revenue and expenses is off. It means
that the money you make from selling your products or services is not
enough to cover the cost of making or selling those products or services.

5.2 CONCLUSION:

 Global recession had an effect on the growth of Power industry but it was a
short term phenomenon. The industry is bouncing back. One factor favoring
this point is that India has become a hot destination for companies of diverse

72
 nature to invest in. In spite of it being a tough year for all the companies
across the globe, Indian market has given good performance as compared to
other companies in the world. A continuous effort at cost cutting and
improving productivity will help the companies in making reasonable profits
despite the impact of higher commodity prices and weaker rupee.
 Fundamental approach is valid and can produce superior returns to investors
who are committing funds in equity shares in Indian stock market on a long
term perspective. Investors should access the relative performance of the
economy, the state of the industry and also the financial health of the
companies before choosing a particular share as the medium for their financial
investment. The linkage of the Indian stock market system with the external
world, real economic activities of the country, capital intensity in the industry,
earnings growth of individual firms, all are worth to consider for assessing the
actual worth of a stock. Size effect is visible and investment in medium/small
segments delivers better returns than the returns by large cap stocks. PE ratio
could be effectively used as a tool for locating mispriced stocks in Indian
stock market. Portfolio investment again helps the investors to blow up the
returns and minimize the risks from their stock market investments. The
results could be reinforced by assessing the performance of stocks from
several international markets.

5.3 SUGGESTIONS:

 By analyzing the Powers companies with the help of equity analysis, it has
been revealed that this industry has a lot of potential to grow. So
recommending investing in Powers industry with no doubt is going to be a
good and smart option because this industry is booming like never before not
only in India but all over the world.
 Long term investors can include these top power companies in his portfolio
because the growth rates and earnings are good compared to others stocks.
Therefore investors can include this in their portfolio to earn the higher return
on their investment.
 There are various factors which effects on stock market, so an investor must
be aware of all those.

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  Short term investors should look on various support and resistance of stocks to
buy or sell and make profit.
 An investor must take research about stock of company and its previous data
before investing.
 Current ratio must be improved by Tata power and it should be in ideal ratio
2:1 so that there are possibilities to meet the current obligations for the
company.
 Company which is less popular in stock market must adopt some strategies for
investors to encourage them to invest in their company.

5.4 HYPOTHESIS TESTING:

As per the above analysis, hypothesis analysis are as follows:

1. H0 - Tata power ltd have performed equally well in the last seven years.

H1 - Tata power ltd have not performed equally well in the last seven years.

2. H0 - There is no significant difference in profitability ratio in last seven years.

H1 - There is significant difference in profitability ratio in last seven years.

3. H0 - There is no significant difference in Liquidity ratio in last seven years.

H1 - There is significant difference in Liquidity ratio in last seven years.

4. H0 - There is no significant difference in Financial Leverage ratio in last seven

years.

H1 - There is no significant difference in Financial Leverage ratio in last seven

years.

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5.5 BIBLIOGRAPHY:
 https://www.tatapower.com/
 https://www.equitymaster.com/
 https://economictimes.indiatimes.com/
 https://en.wikipedia.org/wiki/Tata_Power
 https://www.investopedia.com/
 https://www.tatapower.com/pdf/investor-relations/96Annual-Report
 https://www.equitymaster.com/research-it/annual-results-analysis/
 https://economictimes.indiatimes.com/tata-power-company-
ltd/profitandlose/companyid-12918.cms
 https://www.equitymaster.com/research-it/annual-results-analysis/

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