PROJECT OF NCL

A Project Report On Ratio Analysis Of Northern Coalfield Ltd (A Subsidiary Co. Of Coal India Ltd)

Under the supervision of:

Submitted by:

MR.SHALIL CHARABORTI

DHANANJAY KUMAR

(AREA FINANCE MANAGER)

Reg.No. 10901937

Lovely Lovely Professiona Professionall University, University, Phagwara Phagwara Page 1

INDEX SR.No PARTICULARS 1.

INTRODUCTION

•

Executive Summary Project Details Introduction of CIL

•

Introduction Of NCL

• •

6-22

2.

REVIEW OF LITERATURE

23-26

3.

RESEARCH METHODOLOGY

27-30

•

Introduction of Research Methodology

•

Research Objectives

•

Research Design

•

Tools and Techniques

4.

DATA COLLECTION,ANALYSIS AND INTERPRETATION

31-45

5.

FINDING AND RECOMMENDATIONS

46-47

6.

REFERENCES

48


INDEX SR.No PARTICULARS 1.

INTRODUCTION

•

Executive Summary Project Details Introduction of CIL

•

Introduction Of NCL

• •

6-22

2.

REVIEW OF LITERATURE

23-26

3.


27-30

•

Introduction of Research Methodology

•

Research Objectives

•

Research Design

•

Tools and Techniques

4.

DATA COLLECTION,ANALYSIS AND INTERPRETATION

31-45

5.

FINDING AND RECOMMENDATIONS

46-47

6.

REFERENCES

48


VISION

“Be the leading energy supplier in the country, through best practices

from

mine to market” MISSION

“The mission of Coal India Limited is to produce and market the planned quantity of coal and coal products efficiently and economically with due regard to safety, conservation and environment.”


PREFACE

For a management student theoretical knowledge as well as practical orientation expose on self to experience, one can again be mastering it is best possible time. MBA curriculum has been finding turned in such way that a student not apply the theoretical knowledge but also gain it in a practical sense. Thus obje ob ject ctiv ivee can can be atta attain ined ed thou though ghtt appl applic icat atio ion n of theo theory ry tool toolss conc concep eptt & techniques of management. Balan Balance ced, d, theor theoreti etica call & pract practica icall kn knowl owled edge ge are are esse essenti ntial al for for every every student is conceived in such a way so as to facilitates practical purpose. To procure procure objective objective the research research under under to the project “ Ratio Analysis of NCL, Khadia (A Subsidiary Company of Coal India Ltd)”.

Secondary data were collected from websites, and journal of Northern Coalfield Ltd.

I have tried to satisfy the topic of report by help of facts & finding.


ACKNOWLEDGEMENT

It gives me immense pleasure to present the project on “Study on Ratio Analysis of NCL”. It was a totally different & wonderful experience to be there in NORTHERN COALFIELD LTD as a summer trainee. I express my sincere gratitude to Mr. Mr.Shalil Chakraborti, Area Finance Manager of NCL his project guide who has been so co-operative & helpful from the first day of training till end. He also helped him a lot in

enhancing knowledge about the technicalities of Finance Sector. I am also thankful to my faculty guide Ms Anushital Sinha for their continuous support throughout my training I confess deep sense of gratitude towards my parents as well as my friends their constant encouragement and timely suggestion. In all it was a great experience of working on this project.

Executive Summary Lovely Professional University, Phagwara Page 5

During the summer internship ,I was working with the Finance department of NCL(A subsidiary of CIL).NCL is the only subsidiary of CIL producing 100% of coal from open cast mines there is steep demand in power and energy generation in country. The major demand of coal on NCL is from power plants, which contributes more than 96% of the total demand .Coal price in India was previously regulated by Central Price Regulatory Authority, now this has been decentralized and the same has been delegated to the Coal India Ltd. The biggest coal producing company in India .Every countries economic condition depends upon the performance of its Industry .How the investors are interested in it as it will help in the increment in the flow of foreign exchange. A sound and well performing industry will always attract investors as it will give them a return in a less time period .But it is not easy for layman to understand or to properly analyze the performance of the company.

To understand the performance of any company we have to do financial statement analysis .Ratio Analysis is a widely used tool of financial statement analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined .The term ratio refers to the numerical or quantitative relationship between two variables. Ratio Analysis helps in inter-firm comparison by providing necessary data .An intrafirm comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the action may be initiated immediately to bring them in line.

In this report I will try to explain on different financial parameters as in ratio or data analysis are used to know how this company doing and whether it would

Lovely Professional University, Phagwara Page 6

be win-win situation for the prospective investors who are looking forward to this company as a profitable investment avenues, as it is going to come up with disinvestment plan. During 42 days internship program I met a lot of people ,I learnt proper time management, I learnt that contacting people ,meeting them and convincing them requires a thorough knowledge about everything and a lot of confidence to be able to speak in front of them. This training definitely helped me to gain confidence and made me aware about the great scope and potential in the CIL.

Project Details:


I have done my summer internship from NCL a subsidiary company of CIL (Coal India Ltd), Duration of Training from 14.06.2010 to 30.07.2010, Place of training (NCL, Khadia project) on Ratio Analysis .Under the guidance of Mr. S.Chakraborty (AFM). I’ll be doing the comparative study of Two years through liquidity ratios, solvency ratios, activity ratio and profitability ratio .

INTRODUCTION OF COAL INDIA LTD


The Indian energy sector is largely dependent on coal as the primary source of energy. After the Indian independence, a greater need for coal production was felt in the First Five Year Plan. In 1951 a Working party for the coal industry was set up, which suggested the amalgamation of small and fragmented producing units. Thus the idea of a nationalized, unified coal sector was establish. In the pre nationalized era coal mining was controlled by private owners, and suffered from their lack of interest in scientific methods, unhealthy mining practices and sole motive of profiteering. The miners lived in sub-standard conditions as well. In 1956, the national Coal Development Corporation (NCDC) was formed with 11 collieries with the task of exploring development of new coal mines.

The year 2008 witnessed the various initiatives taken by the Ministry of Coal during the past one year which include issuing comprehensive guidelines to ensure allocation of coal on ‘cost plus basis’; 197 coal block with Geological Reserves (GR) of about 43505.62 mt have been allocated so far; introduction of coal distribution through e-auction by Coal India Limited (CIL); completion of pilot study sponsored by CFRI on ‘Migration from existing UHV based gradation of coal to GCV base and efforts being made for signing the National Coal Wage Agreement-VIII at the earliest. Coal/Lignite projects sanctioned during the year 2008 

Kakatiya Long wall Project of SCCL for a coal production capacity of 2.747 Mt and net capital requirement of Rs.453.63 crore after accounting for the revenues projected to be generated during construction of the project and the related capitalization and for a total outlay of Rs.620.03 crores (excluding IDC of Rs.18.90 crores).


 Neyveli

based

Lignite Corporation’s project for development of 1000 MW coal Thermal

Power

Project

(2

x

500

MW)

at Tuticorin,

Dist. Tuticorin, Tamil Nadu State through a Joint Venture Company named

“NLC

Tamil Nadu Power

Limited”

formed

jointly

by

Neyveli Lignite Corporation (NLC) and Tamil Nadu Electricity Board (TNEB) at a capital cost of Rs. 4909.54 Crores with the direction that the increased Power allocation sought by TNEB be settled expeditiously for moving ahead with the project.



Formation of the joint venture company with Tamil Nadu Electricity Board by the name of “NLC Tamil Nadu Power Limited” as per the Memorandum of Articles (MoA) and Articles of Association(AoA) for setting up of 1000 MW coal based thermal power project at Tuticorin, Tamil Nadu with shareholding of 89 % of the equity capital by Neyveli Lignite Corporation and 11 % of Tamil Nadu Electricity Board.



Composition of Board of Directors of NLC Tamil Nadu Limited, the joint venture company, with a total of 9 directors.

Coal India Limited (CIL) has been conferred the Navratna status with effect from 24.10.2008.

Allocation of Coal Blocks

197 coal blocks with Geological Reserves (GR) of about

43505.62 mt have

been allocated so far. 21 coal blocks have come into production till date. Production from these 21 blocks during 2008-09 (up to Nov, 08) was around

18.815

3391.086 mt have

million tones. been

24

allocated

Coal during

blocks the

year

power/cement/Sponge Iron companies for captive use. Lovely Professional University, Phagwara Page 10

with

GR

of

2008 for

about various

Coal Linkages

Standing Linkage Committee (Long Term) for Power, Cement and Sponge Iron consider requirement of coal of consumers at the planning stage and links the requirement in the long-term perspective from a rational source after examining factors like quantity and quality required, time frame, location of the consuming plants, transport logistics, development plan for the coal mine etc. During the year 2008-09, the Committee has issued/authorized Letter of Assurance (LOA) to a large number of consumers of the then Core Sector namely Power, Cement and Steel (Sponge Iron Units) as detailed below:-

Name of the Number

ofCapacity approved

Sector

applications

Power

approved 8

4460 MW

utilities IPPs CementCPPs Total

35 28 71

24915 MW 888.5 MW 30,263.5 MW

Supply of Coal on “cost plus basis”

In order to ensure allocation of coal on “cost plus basis” in a fair and transparent manner, comprehensive guidelines have been issued by the Ministry. Necessary details in this regard have been placed in the website of the Ministry.

Coal Production


Coal production during the years 2007-08 and 2008-09 (April- November 2008) (provisional) is as indicated below: ALL INDIA COAL PRODUCTION (In million tones)

YEAR

CIL

SCCL OTHERS TOTAL

ANNUAL GROWTH

2007-08 2008-09

379.49 40.60 236.90 28.49

36.28 27.31

456.37 292.80

(Apr.-

(270.04MT

Nov.08)

duringApr.-

(Provisional)

Nov.07)

% 5.9 8.4

E-auction of coal

Coal distribution through e-auction was introduced by CIL with a view to provide access to coal for such consumers who are not able to source coal through the available institutional mechanisms for reasons like the seasonality of coal requirement, limited requirement of coal not warranting long term coal linkage etc. Under NCDP, about 10% of annual production of CIL has been earmarked for offer under e-auction. During the period from April 08 to October, 08 CIL offered a quantity of about 57 Million Tones of Coal as compared to 16 Million Tones offered during the same period of the previous year. Coal Sector reforms An Expert Committee set up under the Chairmanship of Shri. T.L. Sankar to suggest a road map for the Coal Sector Reforms has since Lovely Professional University, Phagwara Page 12

submitted its final report in October, 2007. Action on most of the recommendations has already initiated by Ministry of Coal. Actions of the deliberations have been initiated on some recommendations which require wider consultations. The report once implemented will help in coal sector reforms in a big way. Grading of Coal

CFRI has completed a pilot study sponsored by Coal India Limited and NTPC on “Migration from existing UHV based gradation of coal to GCV base”. In view of the resistance for switching over to GCV based grading of Coal by major consumers, it is proposed to first narrow down the existing bands of Useful Heat Value (UHV) based grades of coal. To start with, the same is to be applied at the selected pit head stations of NTPC for a period of 60 days with effect from 1.12.2008.

National Coal Wage Agreement

Negotiations are going on in the meetings of Joint Bipartite Committee – VIII (JBCCI-VIII) so that the next wage agreement, i.e. National Coal Wage Agreement –VIII (NCWA-VIII), could be signed at the earliest. This would result in the upward revision of pay and allowances of the employees of coal sector as well as many other benefits in their perks and working conditions.

SOME IMPORTANT TIMELINE


1972:- Coking coal industry nationalized and Bharat Coking Coal limited (BCCL) formed to manage operations of all coking coal mines of Jharia Coalfield .

1973:- Non-Coking coal nationalized; Coal Mines Authority limited (CMAL) set up to manage these mines; NCDS operations bought under the ambit of CMAL.

1975:- Coal India Limited formed as a holding company with 5 subsidiaries; Bharat Coking Coalfields Limited, Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), Eastern Coalfield Limited (ECL) and Central Mine Planning and Design Institute Limited (CMPDIL) .

1985:- Northern Coalfield Limited (NCL) and South Eastern Coalfields Limited (SECL) carved out of CCL and WCL.

1992:- Mahanadi Coalfields Limited (MCL) formed out of SECL to manage the Telcher and IB Valley Coalfields in Orissa .

2000:- De-regulation of coal pricing and distribution. 2007:- Coal India and four of its subsidiaries NCL, SECL, MCL, and WCL accorded ‘Mini Ratna’ status.

2008:- Coal India Limited accorded ‘Navratna’ status. Corporate Structure and Subsidiaries Companies of Coal India Ltd


Coal India is a holding company with seven wholly owned coal producing subsidiary companies and one mine planning & Consultancy Company. It encompasses the whole range of identification of coal reserves, detailed exploration followed by design and implementation and optimizing operations for coal extraction in its mines. The producing companies are Eastern Coalfields limited (ECL), Santoria, West Bengal; Bharat Coking Coal Limited (BCCL) ,Dhanbad, Jharkhand; Central Coalfields Limited (CCL), Ranchi, Jharkhand; South Eastern Coalfields Limited (SECL), Chattisgarh; Western Coalfields

Limited(WCL)

Limited(NCL),

,

Nagpur,

Maharastra;

Singrauli, Madhya Pradesh;

and

Northern

Coalfields

Mahanadi Coalfields

Limited(MCL), Sambalpur, Orissa; The consultancy company is Central Mine Planning and Design Institute Limited (CMPDIL), Ranchi ,Jharkhand. North Eastern Coalfields (NEC) a small coal producing unit operating in Mergherita, Assam is under direct operational control of CIL.

Coal India operates through 79 areas and 473 mines of which 279 are Underground, 163 opencast and 31 mixed mines. CIL further operates 18 coal other

INTRODUCTION OF NCL


Northern Coalfields Limited was formed in April 1986 as a subsidiary company of Coal India Limited. Its headquarter is located at Singrauli, Distt. Sidhi (M.P.). Singrauli is connected by road with Varanasi (220 Km.) – a holy city on the banks of river Ganga, and Rewa (206 Km.) – the state of white tigers and Sidhi (100 Km.) – district headquarter town of Madhya Pradesh. The nearest railway station is Singrauli located on the Katni-Chopan branch line running parallel to the northern boundary of the Coalfield. The nearest railway station for reaching directly to Delhi and Kolkata is Renukoot that is located on the Garhwa-Chopan rail-line. Nearest (private) airstrip is at Muirpur (60 Km.).

The area of Singrauli Coalfields is about 2202 Sq.Km. The coalfield can be divided into two basins, viz. Moher sub-basin (312 Sq.Km.) and Singrauli Main basin (1890 Sq.Km.). Major part of the Moher sub-basin lies in the Sidhi district of Madhya Pradesh and a small part lies in the Sonebhadra district of Uttar Pradesh. Singrauli main basin lies in the western part of the coalfield and is largely unexplored. The present coal mining activities and future blocks are concentrated in Moher sub-basin.

The exploration carried out by GSI/NCDC/CMPDI has proved abundant resource of power grade coal in the area. This in conjunction with easy water resource from Govind Ballabh Pant Sagar makes this region an ideal location for high capacity pithead power plants. The coal supplies from NCL has made it possible to produce about 10515 MW of electricity from pithead power plants of National Thermal Power Corporation (NTPC), Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd (UPRVUNL) and Renupower division of M/s. Hindalco Industries. The region is now called the "power capital of India". The ultimate capacity of power generation of these power plants is 13295 MW and NCL is Lovely Professional University, Phagwara Page 16

fully prepared to meet the increased demand of coal for the purpose. In addition, NCL is also supplying coal to power plants of Rajasthan Rajya Vidyut Utpadan Nigam Ltd, Delhi Vidyut Board (DVB) and Hariyana State Electricity Board. NCL produces coal through mechanised opencast mines but its commitments towards environmental protection is total. It is one of very few companies engaged in mining activities, which has got ISO –14001 Certification for its environmental systems. NCL, through its community development programmes, has significantly contributed towards improvement and development of the area. It is helping local tribal, non-tribal and project-affected persons in overall improvement of quality of their life through self-employments schemes, imparting education and providing health care.

Organizational Objectives of NCL

There are some Organizational objectives of NCl which is mention here:



To ensure planned production of coal efficiently, matching with increasing demand of



Coal, which is the prime source of energy for the nation. To generate safety awareness amongst employees as also to create safe



working culture. To ensure clean, green and pollution free environment at working places



and also at surrounding areas. To ensure optimum capacity utilization of men, machinery and available

  

resources. To ensure cost control by developing cost consciousness. To ensure strict quality control for better consumer satisfaction. To ensure perfect manpower planning and also harness the best out of




available human resource. To ensure improved quality of life of work force through welfare



measures To be concerned for the community especially for the tribal and backward



sections of the society residing in and around mining projects. To ensure rehabilitation of project affected people (PAP) as per the guidelines provided by Coal India Limited and approved by the Ministry of Coal and also taking PAPs into confidence to elicit their co-operation



in achieving Corporate Objectives. To develop good work culture through disciplined, contended and motivated workforce for achieving Organizational Objectives.

Salient features TOTAL AREA AREA OF MOHER BASIN AREA OF MAIN BASIN ESTIMATED RESERVES OF MOHER

2202 Sq.Km. 312 Sq.Km. 1890 Sq.Km.

BASIN

8.31 Billion Tonnes

As on 31.03.07 BALANCE MINEABLE RESERVES OF MOHER BASIN (up to 300 meter depth) As 2.68 Billion Tonnes on 31.03.07 LIFE OF COALFIELD AT SCHEDULED RATE OF PRODUCTION.

37 YRS. JHINGURDA 130-138 m D-E

COAL SEAMS IN MOHER BASIN,

PUREWA TOP 9 m D-E

THICKNESS & GRADE

PUREWA BOTTOM 12 m C-D

GRADIENT

TURRA 20 m C-E 2 to 5 DEGREES


Note: Jhingurda seam is the Thickest Coal Seam of India

NCL-At a Glance 

Explored area of the Maher Basin of Singrauli Coalfields is about 210 Sq.Km.



Presently the coal mining activities are done over an area of about 100 Sq.Km.



At present NCL produces only power grade coal through 10nos.mechanised opencast mines located in M.P (about 81% of Prod.)And U.P State (about 19% of Prod).

 

NCL is presently the highest profit earning company of CIL. The profit (Before tax)of NCL grown from Rs.74.70 crores (1986-87) to Rs.3131.01 crores(2008-2009). International Stadards



ISO 14001 Certification for Environment Management System since 2001and renewed up to 2010.



ISO 9001: 2000 Certification for Quality Management System 11 May 2009 and valid until 2010

NCL’s ROLE IN REGIONAL DEVELOPMENT (SINGRAULI AREA)

NC L has undertaken several development activities in around Singrauli Area .These activities have significantly contributed towards the overall development of the regions.



NCL has undertaken development activities including infrastructure facilities.




Maintenance and repair of Roads – Shaktinagar to Singrauli & Morwa to Bargawa



Drinking water –Hands Pumps, Wells.



200 Bedded Hospitals.



Health Centers at 5 Rehabilitation Villages.



Mobile Ambulance Services for Red Cross Society.



A forestation- Plantation of 192.3 crore plants till 31 st March 2007.



Setting up Rehabilitation Villages with all infrastructure facilities such as Roads. Drains, Street Lighting School, Health Centre, Shopping centre, Community Building.

CONSUMER PROFILE OF NCL

SECTOR

COAL

Power Aluminum Other

SUPPLIED(MT) 61.714 0.714 2.260


% Share 96.08% 0.40% 3.52%

There are some Awards bagged by NCL for Excellence Performance, Safety and environment:

1986:-Prestigious “INDIRA GANDHI NATIONAL AWARD FOR EXCELLENCE” given to the BEST ENTERPRISES amongst the Public Sector.



1986:-NATIONAL SAFETY AWARDS (By the Hon’ble Pr

President of India 1986:- Three Awards 1987:- Two Awards 1988:- Two Awards Lovely Professional University, Phagwara Page 21

1992:- One Awards 2008:- One Awards 

1993:- Four Awards of Excellence (By Hon’ble Prime Minister for Bina ,Nigahi, Amlohri and Jhingurda Projects



1992:- National Awards for promotion of Family Planning



2004:- Jawaharlal Nehru Memorial National Award



2008:- Certificate of Excellence in Corporate Performance awarded by CIL



2008:-SCOPE Meritorious award for environmental excellence& sustainable development.

Review of Literature While research of Ratio analysis of NCL, Khadia I have been read some articles, Review of literature some mentioning here: John T Grady, April 2010 , financial analysis is the cornerstone of credit risk

assessment. Commercial lenders and analysts study financial statements and perform ratio analysis to identify and understand the risks in lending to a business. The business's debt service coverage ratio (DSCR) is one of the key ratios to calculate and analyze as a measure of the borrower's ability to repay debt. The DSCR measure used by many bankers is the traditional debt Lovely Professional University, Phagwara Page 22

service coverage ratio (TDSCR). A second, more detailed method to calculate DSCR is to use the information reported in the borrower's UCA cash flow statement (UCACFS). The purpose of this article is to apply these two methods for calculating DSCR. It also will highlight the differences between the two DSCR calculations and show the added benefit that the UCA-based calculation can bring to the credit analysis. The important point is that when analyzing a credit and the debt service ability; do not stop at the traditional DSCR.

Sam Subramanian, May 2010, Fundamental equity traders rely on factors

such as earnings, earnings growth or valuation ratios to select securities. Technical traders use moving averages, trading volume patterns or price breakouts. One method is not necessarily better than the other; each has its merits. By leveraging the strengths of both of these styles, people can not only increase their success rate in selecting securities, but also improve their portfolio management. To understand the nuances of the two methods, it helps to think of a company and its stock as two separate entities. This article has demonstrated how

technical analysis can

be used to supplement the

fundamental assessment of a company. Ultimately, that technical analysis can help to make trading decisions. These analyses also can be combined when making sale decisions, as positions are unwound. By spreading buy and sell decisions over wider periods and price points, investors can seek to earn higher risk-adjusted returns

Kannika Damrongplasit, July 2010, this article uses the 2001 National Drug

Strategy Household Survey to assess the impact of marijuana decriminalization policy on marijuana smoking prevalence in Australia. Both parametric and nonparametric methods are used. The parametric approach includes endogenous probit switching, two-part, sample selection, and standard dummy variable Lovely Professional University, Phagwara Page 23

models, while the nonparametric approach uses propensity score stratification matching. Specification analyses are also conducted. A nonparametric kernel based test is constructed to select between parametric and nonparametric models, and the likelihood ratio test is used to choose among parametric models.

Our analyses favor

the

endogenous

switching

model

where

decriminalization increases the probability of smoking by 16.2%.

John F Wasik, Aug 2010, History shows that you can earn great returns buying

stocks with sky-high share prices. The key is to avoid confusing a stock's price with its value. As of June 4, 39 stocks trading in the US fetched $100 or more. This article focuses on five with bright prospects. Google sells for 18 times estimated 2010 earnings of $27.82 per share. As recently as 2007, Google's average price-earnings ratio for the year was over 40. Apple sells for 19 times estimated earnings of $13.38 per share for the year that ends this September. The company holds $23 billion in cash and has no debt. At $189, AutoZone shares sell at 13 times estimated earnings of $14.61 per share for the year that ends this August. The Washington Post Co sells at 22 times estimated 2010 earnings of $20.58 per share, a big jump from the depressed levels of 2008 and 2009. Morningstar estimates Wasco Financial Corp's fair value at $455 per share.

Robert B Durand, June 2010, In addition to its role as the optimal ex ante

combination of risky assets for a risk-averse investor, possessing the highest potential

return-for-risk

trade-off,

the

tangency

or

maximum

Sharpe ratio portfolio in the Markowitz [1952, 1991] procedure plays an important role in asset management because it minimizes the probability that a future portfolio return falls below the risk-free, or reference, rate; this is a kind of Value at Risk (VaR) property of the portfolio. In this article the authors demonstrate the way this VaR, and related quantities, vary along the efficient Lovely Professional University, Phagwara Page 24

frontier, emphasizing the special role played by the tangency portfolio. The results are illustrated with ananalysis of the market crash of October 1987, as an episode of extreme negative market movements, in which the tangency portfolio performs best (loses least!) among a variety of portfolios.

Suleyman Basak,july 2010, This article analyses the implications of money

illusion for investor behavior and asset prices in a securities market economy with inflationary fluctuations. We provide a belief-based formulation of money illusion which accounts for the systematic mistakes in evaluating real and nominal quantities. The impact of money illusion on security prices and their dynamics is demonstrated to be considerable even though its welfare cost on investors is small in typical environments. A money-illusioned investor's real consumption is shown to generally depend on the price level, and specifically to decrease in the price level. A general-equilibrium analysis in the presence of money illusion generates implications that are consistent with several empirical regularities. In particular, the real bond yields and dividend price ratios are positively related to expected inflation, the real short rate is negatively correlated with realized inflation, and money illusion may induce predictability and excess volatility in stock returns. The basic analysis is generalized to incorporate heterogeneous investors with differing degrees of illusion.

Paul Cullinane, June 2010, This article outlines the new methodology for

Financial Intermediation Services Indirectly Measured (FISIM), introduced in Blue Book 2008, on the sector accounts. In particular the impact on interest payments and receipts, and key aggregates such as household saving ratio and net lending/borrowing.



MEANING OF RESEARCH

Research is a careful and extensive investigation of a phenomenon with an objective of advanced knowledge. Research in common parlances refers to a search for knowledge. One can also define it’s a scientific and systematic search for pertinent information on specific topic. In fact it is an art of scientific investigation . Lovely Professional University, Phagwara Page 26

Definition of Research

It is the systematic process of collecting and analyzing information in order to increase over understanding of the phenomena about which we are concerned or interested . MEANING OF METHODOLOGY

Methodology is the procedure of research technique. It is logic of scientific investigation. It is not a research model employed in a particular project but is technique which entails the theoretical principal as well as a framework that provide guidelines about how research is done . METHODS OF DATA COLLECTION

Methods are tool or an instrument employed together empirical evidence or to analyze it is a building of scientific knowledge is build through observation, experiment, generalization and verification. Data can be collected by two ways: •

Primary data

•

Secondary data

PRIMARY DATA:

Those data which are directly collected. Example-Interview,

Questionnaire. SECONDARY DATA:

Those data which are collected for the primary data or

which is already available. There is always some information available for research to study and to understand the magnitude of the problem. Example – Newspaper, Internet, Journal magazines etc. Lovely Professional University, Phagwara Page 27

In this report data is secondary data which is collected from the annual report of NCL. •

Data is taken from P&L a/c of 2 years from 08 to 09.

•

Data is taken from the annual report of NCL.

•

Evaluate the NCL performance using P&L a/c, Balance sheet.

•

Study the various profitability ratios.

•

Result can be shown with the help of graph, ratio etc.

•

Compare and analyze the result.

Research Topic

My topic of Research is Ratio Analysis of NCL through which we will come to know about, how NCL is doing in terms of Profitability, liquidity and Capital structure which would be great interest for the prospective investors, as coal India is planning for disinvestment and how the coal pricing policy is been done, what are the basis, what are the statutory conditions that they take into consideration .

Research objective of my study



The main objectives of my study to know the financial position of the company.



To gain knowledge about financial strength of the company.

RESEARCH DESIGN


It is a framework or blueprint for conducting the research project. The design should be conceived keeping in mind the objectives and should clearly define the activities needed to be understand while conducting the study. It helps the researcher to foresee various research operations. So in my research there are different methods or steps which are use by me for taking a good research.

Descriptive Research Design Descriptive research is use to obtain information concerning the current status of the phenomena to describe “what exists” with respect to variables or conditions in a situation. The method involved range from the survey which describes the status quo, the correlation study which investigates the relationship between variables, to developmental studies which seek to determine change over time.

Statement of the problem_ Analysis of Financial performance of NCL •

Identification of information needed to solve the problem _Financial statement

•

Selection of the instruments for gathering the information _Written

•

Analyses of the information all collected data were compiled.

Data used: Secondary data

The whole project is carried out under the supervision of Charaborti (Area Finance Manager) In N.C.L, Khadia Lovely Professional University, Phagwara Page 29

project

Mr.Shalil He has

provided us the annual report of N.C.L of the two financial year. My project is based on secondary data. And I have collected this data from different websites and timely consulted managers out there. All the quantitative work of secondary data collected by me had been carried on MS Excel. Because of the user friendly and reliability it was good to use. Statistical study – In this research I want to do Statistical study for the

fulfill of Quantitative nature

TOOLS and Techniques used for Analysis: Basic Mathematics and Statistics and ms-excel techniques were used for the purpose of analysis. I have used ratio analysis as a technique of evaluation .

DATA COLLECTION, ANALYSIS AND INTERPRETATION Balance Sheet of Northern Coalfields Limited

SOURCES OF FUND

31st Mar 2008

31st Mar 2009

Shareholders’ funds: Share Capital Share Money Pending Allotment Reserves & Surplus

17767.28 648320.08


17767.28 589878.63

Deferred tax Liability

8555.78

13779.34

Loan Fund: Secured

-

Unsecured Total

-

96380.45

81503.87

771023.59

702929.12

APPLICATION OF FUND

Fixed Assets

Gross Block

650833.29

616845.55

Less: Depreciation

459396.48

433618.07

Net Block Capital Work-in Progress

191436.81

183227.48

25695.77

31684.42 Surveyed off Fixed Assets-Awaiting

678.73

472.29

Disposal Total F.A

Investments

217811.31

215384.19

8019.20

9164.80

7372.85

5182.79

35935.07

29773.51

Cash & Bank Balance

550602.46

395923.24

Loans & Advance

307404.90

307737.07

Current Assets, Loans &Advances: Sundry Debtors Inventories

Other current Assets

26426.60

19908.03 Cost of Removal of Overburden Total Current Assets, Loans & adv

927741.88

758524.64 Lovely Professional University, Phagwara Page 31

-

Less Current liabilities & provisions

382548.80

Net Current Assets Total

280144.51

545193.08 771023.59

478380.13 702929.12

P/L Account of Northern Coalfields ltd, Singrauli

(RS.IN LAKHS)

(RS.IN LAKHS)

31st March,

31st March,

2008

2009

INCOME:

Sales Coal issued for other

545520.71 -

655194.21 -

purpose Accretion/ Decretion in

3034.08

-2935.11

Stock Accretion/ Decretion in

1392.53

-517.79

62183.80

83847.85

1571.54

53.03

613702.66

735642.19

Consumption of Stores &

109832.63

119326.32

Spares Employees Remuneration

58547.04

102783.21

& Benefits Social Overhead

17147.48

21677.81

Power & Fuel

18878.80

17993.58

Repairs Contractual Expenses

10524.52 42428.29

11375.71 75718.24

Miscellaneous Expenses

17959.90

24359.22

Overburden Removal

25150.41

2886.50

Stock(Workshop) Other Income Extraordinary Income Total Income EXPENDITURE:


Adjustment-Existing Mines 300469.07 313233.59

376120.59 359521.60

Interest

3073.47

2436.10

Financial / Commitment

1231.70

2335.34

30261.92

42208.67

Provisions

1649.88

1498.35

Provision Written Back

-244.93

-1481.21

Total Expenditure Gross Operating Profit/loss

Charges Depreciation

Write off

671.68 276589.87

312524.35

-214.78

576.74

Adjustment Profit/ Loss Before

276375.09

313101.09

Taxation Prov for Income Tax

106000.00

122500.00

for the current year Prov/Adj. for Income

-370.66

-737.88

-6616.59

-5223.56

196.00

470.00

177166.34

196092.53

Profit/Loss for the year Prior period

Tax for the earlier year Prov/Adj. for Deferred Tax for the year Provision for Fringe benefit tax Profit After Tax Profit Upto The

395421.5

429315.2

Previous Year Less: Provision for

7

9 -

1190.53

Employee benefits For the earlier Year Profit Available for

394231.04 571397.38

appropriation Lovely Professional University, Phagwara Page 33

429315.29 625407.82

APPROPRIATIONS: Interim Dividend

50000.0

50000.0

Final

0 56299.8

0 67655.5

Dividend(Proposed)

0

2 106299.80 18065.65

Provision for Dividend Tax Adj for Deemed

-

117655.52 19995.55 -

Dividend Tax for the earlier year Transferred to General

17716.63

19609.25

429315.30

468147.50

9971.49

11036.72

Reserve BALANCE CARRIED TO BALANCE SHEET Basic and Diluted Earnings per share

INTRODUCTION OF FINANCIAL RATIO

As we know that financial ratio are useful indicates of a firm’s performance and financial Situation .Most ratio can be calculated from the information provided by the financial statement. Financial ratio can be utilized to analyze trends and compare the firm’s financial to those of the other firms. Liquidity Ratio

It refers to the liquidity position of the firms overall financial position. It provides the information about a firm’s ability to meet its short term financial Lovely Professional University, Phagwara Page 34

obligations. They are of particular interest to those extending short term credit to the firm .

Here, Current Assets = Sundry Debtors + Inventories + Cash and Bank Balance + Loans and Advance + Other Current Assets.

Sundry Debtors Inventories Cash & Bank balance Loans & Advance Other Current Assets Total

2008(in Lakhs) 5182.79 29773.51 395923.24 307737.07 19908.03 758524.64

2009(in Lakhs) 7372.85 35935.07 550602.46 307404.90 26426.60 927741.88

Current Liability & provisions 2008 = 280144.51 2009 = 382548.80 Current Ratio = Current Asset/Current liability

The current ratio is the ratio of current assets to current Liability. 2008 = 758524.64/280144.51 = 2.70:1 2009 = 927741.88/382548.80 = 2.42:1 Interpretation:

As we know that the standard Ratio should be 2:1 but when I calculate the Current Ratio of NCL then It is 2.70:1 in 2008 and 2.42:1 in 2009. Higher the Lovely Professional University, Phagwara Page 35

Current ratio better it is signifies higher liquidity. So company manager should take good decision to reduce this Ratio. Another way of interpretation is to observe the behavior of this ratio over period of time. It is called time series Analysis. When I compare the Current Ratio of Two year than Ratio gone down. It means that the liquidity position of NCL has deteriorated over period of time. So I can say that NCL is trying to reduce excessive investment in current Assets.

Note: I assumed that Loans & Advance is shot term assets, which is not

mention in the balance sheet

Net Working Capital = Current Assets – Current Liability

Current Assets Current Liability Net Working Capital

2008 758524.64 280144.51 478380.13

2009 927741.88 382548.80 545193.08

Interpretation:

When I calculate net working capital of company, it comes 478380.13 lakhs in 2008 and 545193.08in 2009. As we know that if the net working capital is positive it’s good for the company. It helps company in operational expenses and payment of short term liability .As this ratio signify Excess of current assets over current liability which shows that the company has ample amount to meet its short term Liability. It has also increased by significant amount which is good for the company. Quick Ratio = Quick Assets/ Current Liability


Quick Assets = Current Assets – (Inventories + prepaid Expenses)

= Sundry Debtors + Cash and Bank Balance + Loans and Advance + Other Current Assets

Sundry Debtors Cash & Bank balance Loans & Advance Other Current Assets Total

2008(in Lakhs) 5182.79 395923.24 307737.07 19908.03 728751.13

Current Liability & provisions

2008 = 280144.51 2009 = 382548.80 Quick Ratio

2008 = 728751.13/280144.51 = 2.60:1 2009 = 891806.81/382548.80 = 2.33:1

Interpretation:


2009(in Lakhs) 7372.85 550602.46 307404.90 26426.60 891806.81

Generally, a Quick ratio of 1:1 or more is considered to be good for the reason that it indicates availability of funds to meet the liability 100%. However, this rule of thumb varies from industry to industry as in current ratio and other ratio. In case of NCL Quick Ratio is 2.60:1 from 2008 and 2.33:1 from 2009. It means that the level of Liquidity of NCL is too high. Higher liquidity means less profitability. But when I compare the ratio from 2008 to 2009 than it can be seen that it is slightly gone down. So we can say that company has taken some steps to reduce this higher liquidity.

Profitability Ratio

This ratio offers several different measures of the success of the firm at generating profits. Return on Assets = Net income after taxes*100/Total Assets

Net income after taxes 2008 = 177166.34 2009 = 196092.53 Total Assets = Total Fixed Assets + Investments + Total current assets, Loans and Advance

Total Fixed Assets Investments Total CA, Loans& Adv Total Assets

2008 215384.19 9164.80 758524.64 983070.63


2009 217811.31 8019.20 927741.88 1153572.39

2008 = 177166.34*100/983070.63 = 18.02% 2009 = 196092.53*100/1153572.39 = 16.99% Interpretation:

When I do the compare ratio between two year then I can see that Ratio of return on assets gone down but it’s not in the risky situation. As still the return is good. So I can say that the company manager should not worry about this ratio, which gone down. Return on Equity = Net Income after Tax*100/ Shareholders Funds

Net income after taxes 2008 = 177166.34 2009 = 196092.53

Shareholders’ Funds = Share Capital + Reserves & Surplus

Share Capital Reserves and Surplus Total

2008 17767.28 589878.63 607645.91

Return on Equity

2008 = 177166.34*100/607645.91 =29.15%


2009 17767.28 648320.08 666087.36

2009 = 196092.53*100/666087.36 = 29.43% Interpretation:

It is gratifying to note that there has been increase in rate of return. For instance, the return on assets has slightly increment from 29.15% to 29.43%. This seems to be a potential for further improvement in its various rate of return by increasing its gross Profit and operating profit margin.

Net profit ratio

= net profit / net sales * 100

2008 = 276375.09 / 545520.71 * 100 = 50.66 % 2009 = 313101.09 / 655194.21*100 = 47.78 % Interpretation:

When I calculate Net Profit Ratio of NCL then I can say that the profit margin is gone down from 50.66% in 2008 to 47.78% in 2009.But it seems not worry about this ratio because after decreasing the ratio, Company has good Profit margin that is 47.78%.

CAPITAL STRUCTURE RATIO AND SOLVENCY RATIO Total debt to Total capital = (Current Liability + Long term Liability) /Total Liability

2008 = (280144.51 + 81503.87) /702929.12 = 0.51 Lovely Professional University, Phagwara Page 40

2009 = (382548.80 + 96380.45) /771023.59 = 0.62 Interpretation:

The ratio seems to be increased to .62 in 2009 from .51 in 2008 in respect of capital structure of a firm. The first of these indicates what proportion of the capital of a firm consists of debt. Although no hard and fast rules exist, conventionally a ratio of 1:2 is considered to be satisfactory. Debt Equity Ratio = Debt /Equity

2008 = 81503.87 /607645.91 = .13 2009 = 96380.45 /666087.36 = .14 Interpretation:

This ratio measures the degree of indebtedness of a business enterprise. So, it gives an idea to a long – term lender regarding the safety of the principal. If this ratio is high, then risk is more in extending a loan. Rule of thumb for this ratio is 2:1. It means debt could be twice the equity. However, this Ratio like other ratios varies from industry to industry. NCL’s debt-equity ratio is too low and it has remained same when compared with 2008. It means NCL has massive long – term debt raising capacity. If it ever plans to expand its operation in future. NCL management has a very conservative approach to financing as it finances. Proprietary Ratio = Equity / Total Assets

2008 = 607645.91/983070.63 = .61 or 61% 2009 = 666087.36/1153572.39 = .57 or 57% Lovely Professional University, Phagwara Page 41

Interpretation:

Total assets block of NCL is funded to the tune of 57% by Equity. This percentage stood at 61% in 2008 .It means during one year 17.34% growth in total assets has been funded by equity to tune of only 9.61%.Rest of the growth has been funded primary by current liability which have grown over period of By 36.55%. ACTIVITY RATIO OR TURNOVER RATIO

These ratios help in commenting on the efficiency of the firm in managing its assets. The speed with which assets are converted in to sales is captured in to sales by activity ratios. The activity of any business enterprise is reflected by the volume of sales it is able to generate. Working capital turnover ratio = net sales / working capital

2008=545520.71 / 478380.1 = 1.14 times 2009=655194.21/545193.08 =1.20 times

Interpretation:

When I calculate Working capital ratio I can say that this ratio is very low in nature. According to analysis higher the ratio better the position of the firm Inventory turnover ratio = Sales / Average inventory

2008 = 545520.71/29773.51= 18.32 times


Average Inventory= (29773.51+29773.51)/2=29773.51 Note: - I do not have balance sheet of 2007 .so I assume that 29773.51 is average stock 2009= 655194.21/32854.29=19.94 or 20 times Note: Average inventory= (29773.51+35935.07)/2=32854.29 Interpretation:

This ratio of 20 signifies that inventory of NCL is getting rotated over 20 times in 2009 and 18 signifies in 2008. However, going by the basic nature of the ratio, higher the ratio, better it is. NCL could increase the existing level of sales or by reducing the investment in inventory to a level which commensurate to change in the level of sales and this is good for the organization.

Debtor turnover ratio =Sales /Average debtor 2008= 545520.71/5182.79 = 105 times

Note: I am assuming average debtors is 5182.79 2009=655194.21/6277.82 = 104 times

Note: Average debtor = (5182.79+7372.85)/2=6277.82


Interpretation:

It means that debtor of NCL are getting turned over on an average 104 times in a year. Higher a turnover ratio, better it is. However, a too high debtor’s turnover ratio generally means tight credit policy and hence denial of opportunity to increase sales by offering liberal credit facility to customers. Conversely the nature of product and inducting customer may warrantee no credit, or very limited credit.

RESEARCH FINDING


While making a comparative study of ratios of different years we came to know the financial health of the company’s. On the other hand following were some of the findings:

•

While calculating the liquidity ratios we came to know that company hold the best financial position for payment of Short term liability

•

While calculating the turnover ratios we came to know that NCL has in a better position in the industry which means that the company has the capability of utilizing its assets to its maximum and that to optimally.

•

While calculating the solvency ratios hold the best position which means that it has an appropriate mix of debt and equity in financing the firm’s assets.

•

While calculating the Net Profit ratio we can say that company has doing very good financial performance in both the year.


RECOMMENDATIONS

After doing all data interpretation I have came to the recommendations part of my research objectives which is mention here:-

•

When I calculate liquidity ratio then I can say that company has better financial position but I want to suggest that NCL should reduce current ratio and liquid ratio because it can invest that money in different place.

•

I want to suggest second thing is that as we know that NCL is doing well financial performance, but in 2009 it is goes down approx 3% .So Company should know the main reason and work on it.

•

In 2009 Return on Asset is gown down by approx 1% .So Company should increase this ratio because this ratio shows the efficiency of the company to use its assets.


PROJECT OF NCL

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