18-01-2013, 11:49 AM
A Summer Training Project Report on WORKING CAPITAL MANAGAMENT
CAPITAL MANAGAMENT.docx (Size: 597.78 KB / Downloads: 80)
EXECUTIVE SUMMARY
Cash &Working Capital Management is usually concerned with the administration of all the current assets and current liabilities. Working capital management policies have a great impact on the firm's profitability, liquidity and its structural health of the organization. Managing working capital is having strategic importance in maintaining liquidity and improving financial position of any industry therefore we have to strike a balance between risk and profitability. Efficient management of working capital aims at solvency, profitability etc. Management of working capital is an essential task of the financial manager. He has to ensure that the amount of working capital available with his concern is neither too large nor too small for its requirement. Both excessive and inadequate working capital positions are undesirable and dangerous from the firm points of view. Excessive working capital means ideal funds which earns no profit for the firm. On the other hand paucity of working capital may lead to a situation where the firm may not able to meet its liabilities. Thus propermanagement and analysis of working capital is highly crucial for all kind of business whichis clearly highlighted in the present study. It is the job of the financial manager to estimatethe requirements of working capital carefully and determine the optimum level ofinvestment in working capital.
Further the present study related to National Hydroelectric Power Corporation Ltd. This came into existence in Nov.1975. The mission of National Hydroelectric Power Corporation Ltd. is to harness the vast hydro, tidal, wind, geo-thermal and gas potential of the country to produce cheap/pollution free and inexhaustible power. In its existence of over 25 years, ithas become the single largest organization for Hydro Power development in India. Theorganization has capabilities to carry out all activities from conceptualization to commissioning of hydroelectric projects. National Hydroelectric Power Corporation Ltd. isschedule ‘An’ Enterprise having an authorized capital of Rs. 7000 Cores and investment base of Rs. 10000 Cores at present.
INTRODUCTION:
Finance is one of the major elements that activate the overall growth of the economy. Finance is the life blood of economic activity. A well - knit financial system directly contributes to the growth of the economy. An efficient financial system calls for the efficient performance of institution, financial instruments and financial markets. Finance which acts as the lifeblood in the modern business types is one of the most important consideration for an entrepreneur-company. While Implementing, expanding, diversifying, modernizing or rehabilitating any project the meaning of finance is better to understood. In this section we have covered finance related information and the process of managing the same. Finance is a science of managing money and other assets. It is the process of channelization of funds in the form of invested capital, credits, or loans to those economic agents who are in need of funds for productive investments or otherwise. E.g. On one hand, the consumers, business firms, and governments need funds for making their expenditures, pay their debts, or complete other transactions. On the other hand, savers accumulate funds in the form of savings deposits, pensions, insurance claims, and savings or loan shares, etc which becomes a source of investment funds. Here, finance comes to the fore by channeling these savings into proper channels of investment. In general, finance is that business activity which is concerned with acquisition and Conservation of capital funds in meeting financial needs and over all objectives of a business entrepreneur.
The company:
NHPC AN OVERVIEW:
In India, electricity is produced in various sector hydro, tidal, winds, geothermal &gaspotential. NHPC is the power organization in the field of hydro sector. It was established in 7th November 1975.NHPC is a schedule ‘an’ enterprise of the government of India. With anauthorized share capital of Rs. 15,000 crore and an investment base of about Rs. 25,000crore. NHPC is ranked as a premier organization in the country for development ofhydropower.
NHPC is among the TOP TEN companies in the country in terms of investment. A credited with ISO-9001:2000 &ISO-14001:2004 certificates for its qualitysystem & environment concerns. NHPC Corporate office is in FARIDABAD. The saga of NHPC is replete with many challenges. To begin with NHPC took over three most difficult & almost abandoned projects in geologically weak Himalayan Ranges from the erstwhile central hydroelectric projects Control Board.
These projects were the 180MW Baira Siul in Himachal Pradesh, 105 MW Loktak in Manipur & the 345 MW Salal Stage-1 in J&K. The initial mandate given to the corporation to complete these three projects were fulfilled with the commissioning of Baira Siul in 1981, Loktak in 1983 & Salal Stage-1 in1987.The successful completion of these projects in most difficult areas & their operation is a testimony to NHPC’s success.
So far, NHPC has completed 12 projects with a total installed capacity of 5175 MW which includes 1000MW.Indira Sager project &520 MW Omkareshwar 2 Project through Narmada Hydroelectric Development Corporation Ltd. (NHDC)-a joint Venture of NHPC with government of Madhya Pradesh. Besides this; NHPC has commissioned the 14.1 MW Devi hat projects in Nepal, 60MW Kurichu project in Bhutan, 5.25 MW Kalpong project in Andaman & Nicobar Islands &4MW Sippi projects in Arunachal Pradesh as deposit work. At present 12 projects with a total installed capacity of 5132MW are under execution.
MANAGEMENT POLICIES
INDUSTRY INFRACTURE AND DEVELOPMNET:
Power is one of the most important factors for the growth of an economy, in particular, for a developing country like India where higher and improved standards of living depend upon the availability of adequate and reliable power at an affordable price. Unlike other commodities the dynamics of its supply and demand does not apply to power as it cannot be stored. Development of Power is basically with the Government in which the Central and State share 34% and 52% respectively. The Private Sector is also participating in the development of Power.
As on 31st March, 2008, The total installed capacity of power in India was 1,43,061 MW out of which share of Thermal, Hydro and Nuclear was 91,907 MW (64%) ,35909 MW (25%) and 4120 MW (3%) respectively and 11,125 MW (8%) from Renewable energy sources. Hydro power is considered as clean power. Over the years the share of hydro in the total installed capacity has gradually declined resulting in adverse HydroThermal Mix leading to many technical and operational abnormalities.
Besides shortage of power (especially peak power) and adverse hydro-thermal mix, Indian Power scenario historically has been plagued with variety of problems such as skewed Tariff, Poor and substandard distribution networks, high aggregate technical and commercial losses etc. Poor financial health of the SEBs has deterred private investors from making investments besides hindering the capacity of CPSUs to reinvest the profit earned out of sale of power generated.
OPPORTUNITIES:
The deteriorating hydro-thermal mix, increase in peaking shortages, erratic frequency variations, problems in water management etc., has resulted in the policy makers turning their attention towards development of hydro power. Hydro power not only generates clean energy but also provides drinkin water supply, irrigation, navigation, increased employment opportunities, industrial development, recreation facilities etc. to the region. The Government of India has made special emphasis for its development in the initiative for accelerated hydro power development. For North Eastern India, which is blessed with huge untapped hydro potential of 58,971 MW, development of hydro power is considered an excellent option to boost the economy for this underdeveloped part of the country.
UNEXPECTED COMPLEXITIES
The development of projects may be subject to unexpected complexities and dalays, which may cause the actual costs of developing projects to differ significantly from our estimates. Any change to CERC’s tariff regulations may adversely affect our cash flow and results of operations. Also the generation capacity may vary substantially because of variations in water flow due to climatic conditions, which may cause significant fluctuations in our revenue and profits.
CONCERNS
The reduction in the rate of return on equity for CPSUs from 16% to 14% post tax will have a bearing on the revenue realization and cash flow of the Company and is a cause of concern. As hydro power schemes are capital intensive and have long gestation period, availability of funds is always seen as one of the major constraint for exploitation of vast hydro power potential available in the Country.
SEGMENT WISE OR PRODUCT WISE PERFORMANCE:
The Corporation is a generating company with an installed capacity of 3655MW. It has also undertaken a number of consultancy assignments for various organizations in the Country. A sum of Rs. 30.11 Crore has been received on account of Consultancy services rendered.