1. INDUSTRY PROFILE
POWER SECTOR REFORMS IN INDIA
Introduction:
The power sector has transited to an era or controlled competition giving a
meaningful role for the private sector and the market to play in the nation’s
infrastructure building. Reform in the power sector was officially kicked off in
September 1991 with the passing of the electricity laws (amendment) act, allowing
the private sector in power generation. This was followed by the center’s resolution in
October 1991 that opened up electricity generation, supply and distribution to the
private sector. These came soon after the assumption of office by the Narasimha Rao
Government.
REFORMS IN THE STATE ELECTRICITY BOARD
The reforms process turned active only in late 1996 with the adoption of the
“common minimum nation action plan for power” at the Chief Minister’s conference.
The action plan, which laid the foundation for reforms, is the state electricity boards
[SEB’s] have the following salient features.
• Formulation of national energy policy.
• Setting up of the central and state electricity regulatory commissions.
• Rationalization of retail tariffs.
• Private sector participation in private distribution.
• Streaming the role of central agencies concerned with project approvals.
• Autonomy and improvement in the management and physical parameters of
SEB’s.
It took another 18 months before the reforms process got into implementation
mode with the promulgation of the electricity regulatory commissions ordinance by
the precedence of India April 25, 1998. This ordinance primarily gave legal shape to
the two cardinal features of the common minimum action plan establishment of
regulatory commission and rationalization of retail tariff. This provision invited
considerable flak from the prefer power lobby and was unceremoniously shelved
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2. when the ordinance was passed in to, an I act of parliament of July 2, 1998, reducing
SERCs to toothless tigers as far as rationalization of retail tariff was concerned.
However, the clause requiring the State Government to compensate the person
affected by the grant of subsidy in the manner state commission may direct was
retained, there by giving some vestige of authority to the regulators.
Andhra Pradesh Power Generation Corporation Limited is one of the pivotal
organizations of Andhra Pradesh, engaged in the business of Power generation. Apart
from operation & Maintenance of the power plants it has undertaken the execution of
the ongoing & new power projects scheduled under capacity addition programmed
and is taking up renovation & modernization works of the old power stations.
When APSEB came into existence in 1959, APSEB started functioning with
the objectives of maintaining the power sector efficiently and economically
simultaneously ensuring demand meets the supply.
During the last decade inadequate capacity addition and low system frequency
operation of less than 48.5 Hz for more than half a decade considerably reduced the
power supply reliability.
The consumer have grown up from two and half lakhs to over one crore, the
energy handled per annum from 686 MV to over 40,000 MV. The annual revenue has
increased from mere Rs.65 crore to Rs.48000 crore. In the after reforms process is
taken up in a big way and APGENCO could complete 2X250MU KTPS V – stage
and Srisailam left bank Power House. International agencies have are now interested
in taking part in VTPS stage – IV.
HISTROY OF APGENCO
APGENCO came into existence on 28.12.1998 and commenced operations
from 01.02.1999. This was a sequel to Government’s reforms in Power Sector to
unbundle the activities relating to Generation, Transmission and Distribution of
Power. All the Generating Stations owned by erstwhile APSEB were transferred to
the control of APGENCO.
The installed capacity of APGENCO as on 31.03.2007 is 6760.9 MW
comprising 3172.50 MW Thermal, 3586.4 MW Hydro and 2 MW Wing power
stations, and contributes about half the total Energy Requirement of Andhra Pradesh.
APGENCO is third largest power generating utility in the Country next NTPC and
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3. Maharashtra. Its installed Hydro capacity of 3586.4 MW is the highest among the
Country.
APGENCO has an equity base of Rs.2107 crore with 10804 dedicated
employees as on 31.12.2006. The company has an asset base of approximately Rs.
12000 crores.
Power Sector Status in India:
• Generation during 2007-08 (April).
• Daily reservoir levels.
• Daily generation report.
• Generation during 2006-07 (April – March).
OUR POWER PLANTS
Our Power Plants meet half the total Energy Requirement of Andhra Pradesh. As on 31-
03-2005 APGENCO Owns, Operates and Maintains Five Thermal Plants with an installed capacity
of 3882.50 MW, 18 Hydel Plants (including 4 Mini Hydel Plants) with an installed capacity of
3703.4MW, among them, Tungabadhra HES is joint project (80:20) with Govt. of Karnataka and
Machkund Power Utility (70:30) with Orissa Government, and 2 MW Ramagiri Wind Power Plant.
APGENCO has also under taken Operation and Maintenance of Gas Power
Plant at Vijjeswaram owned by APGPCL.
1) Thermal Plants. 2) Hydel Plants. 3) Wind Plants
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4. ORGANISATION STRUCTURE
Sri.A.K.Goyal I.A.S
Sri.A.K.Goyal I.A.S
Chairman
Chairman
Sri Ajay Jain I.A.S
Sri Ajay Jain I.A.S
Managing Director
Managing Director
Sri C. Radhakrishna
Sri C. Radhakrishna Sri.G.Adishe
Sri.G.Adishe Sri.U.G.Krishna
Sri.U.G.Krishna Sri. C. Radha
Sri. C. Radha Sri.D.Prabhakar
Sri.D.Prabhakar G.Vaman
G.Vaman
Adl.Charge -- Director
Adl.Charge Director shu
shu Murthy
Murthy Krishna
Krishna Rao
Rao Rao
Rao
(Thermal)
(Thermal) Director
Director Director (Technical)
Director (Technical) Director
Director Director
Director Director
Director
(Hydel)
(Hydel) (Projects)
(Projects) (Finance)
(Finance) (HR)
(HR)
Sri A. Rama Rao
Sri A. Rama Rao Sri A.Sunder Kumar Das,IPS
Sri A.Sunder Kumar Das,IPS
E.D (Information Systems)
E.D (Information Systems) Chief of Vigilance & Security
Chief of Vigilance & Security
FA & CCA (Accounts)
FA & CCA (Accounts) FA & CCA (Resources)
FA & CCA (Resources)
C.E (Civil // Hydro)
C.E (Civil Hydro) Dy.CCA (Audit)
Dy.CCA (Audit)
Chief Engineer
Chief Engineer C.E (Civil // Environment)
C.E (Civil Environment)
(Commercial)
(Commercial)
G.M (Training)
G.M (Training)
C.E (Projects)
C.E (Projects) S.E (O & M // NSHES)
S.E (O & M NSHES)
C.E (O & M // Srisailam)
C.E (O & M Srisailam) C.E (O & M // Sileru
C.E (O & M Sileru
Complex)
Complex)
C.E
C.E C.E (Generation)
C.E (Generation)
Training Inst (VTPS)
Training Inst (VTPS)
C.E (TPC) C.E (O & M // RTPP)
C.E (O & M RTPP)
C.E (TPC)
C.E (O & M // KTPS)
C.E (O & M KTPS) C.E (R & M // KTPS)
C.E (R & M KTPS)
C.E (O & M // KTPS-V)
C.E (O & M KTPS-V) S.E (O & M // RTS-B)
S.E (O & M RTS-B)
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5. COMPANY PROFILE
HISTORICAL BACKGROUND OF RTPP, KADAPA (Dist), A.P
A BEGINNING
Almost a century after the invention of electricity it was introduced in India
for commercial use in a humble way. Fr the first time in the year 1889 a mini
hydroelectric power house with a capacity of 15KW was constructed on a small
rivulet in Darjeeling district and electric power was supplied n its vicinity. Within,
two decades, in 1909 a 10KW diesel set was installed in Hyderabad for supply of
electricity to the king’s palaces. This was the first step in the development of electric
power in Andhra Pradesh (HYDERABAD).
GENERAL
Rayalaseema Thermal Power Project is one of the major Powers generating
facilities in Andhra Pradesh to meet the growing demand for power in the Southern
part of the state. The Project envisaged the installation of 2X210 MW of Thermal
Generation units under Stage – 1.
LOCATION
The Project Is located at a distance of 8 KM from Muddanur Railway station
of South Central Railway on the Chennai – Mumbai Railway line. The site selected is
at an adequate distance from populous Town and land belonged to the government
and was not in use. It is quiet near to the existing Railway line and Transmission lines
of AP TRANSCO.
The water requirement for the Project from Mylavaram Reservoir, which is at
20 KM from the Project through two dedicated pipelines.
COAL LINKAGE
The main Coal Linkage to RTPP is M/s SCCL and is transported through
rail. Occasionally RTPP gets the coal requirements from M/s MCL, Orissa and this is
transported through ‘Rail-Sea-Rail’ Method.
OBJECTIVE OF THE PROJECT
The Rayalaseema region is in the Southern part of the state and most of the
generation facilities are in the Northern part of the state, except for two major Hydel
stations in the Central part of the state. The Rayalaseema region thus used to get
power through long EHT line and frequently it is used to face the low voltage
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6. problem particularly during the summer when the Hydel stations generations goes
down. The region is a drought prone area and has to depend on Industrial growth for
its economic development power bring basic need, RTPP has ensured the proper and
quality supply the objective also improved the base load Thermal generating capacity
of the AP Grid.
PROJECT COST
The original cost of the Project as approved by the Planning
Commissioner is Rs. 503.71 crores and the revised cost of the Project based on actual
expenditure is Rs. 860.30 crores and the increase over general cost is 70%.
About APGENCO
LANDMARKS $ Achievements
• Unit 3 (210 MW) of Vijayawada Thermal Power Station
has established a National Record of continuous service for
441 days from 14.12.2004 to 28.02.2006
• APGENCO is the third Largest Power utility in the country
in terms of Installed Capacity - 7587.9 MW
• Our Hydro Installed Capacity 3703.4 MW is highest in the
country.
• Thermal plants are consistently winning the Gold and
silver medals for Meritorious Productivity Award
• Availability of thermal plants has been (over a decade) well
above the national average
• Recently Srisailam Left Bank Power House, a unique
complete under ground powerhouse is successfully
commissioned and being operated. This is the first such
one in southern region.
• Thermal generation during 2004-05 - 23360 MU - is
highest ever achieved by APGENCO
• AMRP LIFT IRRIGATION Scheme is taken up and
completed well below the stipulated time & budget .In that,
the pumping station commissioned (18 MW) is first such
one in India where water is lifted to an height of 100Mts.
• Srisailam complex is the largest hydro power station with
installed capacity 1670 MW in the country.
• Nagarjuna Sagar Left canal Power House is the first hydro
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7. station in the country to use SCDCA for operation of the
units from control room besides enhancing the Excitation
and Governor systems with microprocessor controls.
• Pochampad Hydro electric Scheme is the first hydro power
station to use microprocessor controls in the powerhouse
• Thermal generation during 2004-05 - 23360 MU - is
highest ever achieved by APGENCO
APGENCO – RTPP ITS VISION, MISSION AND CORE VALUES
OUR VISION:
♥ To be the best power utility in the country and one of the best in the world.
OUR MISSION:
 To generate adequate and reliable power most economically, efficiently and
eco-friendly.
 To spearhead accelerated power development by planning and implementing
new power projects.
 To implement Renovation and Modernization of all existing units and enhance
their performance.
CORE VALUES:
 To proactively manage change to the liberalized environment and global
trends.
 To build leadership through professional excellence and quality.
 To build a team based organization by sharing knowledge and empowering
employees.
 To treat everyone with personal attention, openness, honesty and respect they
deserve.
 To break down all departmental barriers for working together.
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8.  To have concern for ecology and environment.
CORPORATE OBJECTIVES:
1. To operate and maintain Power Stations availability ensuring minimum cost of
generation.
2. To add generating capacity with in prescribed time and cost.
3. To maintain the financial soundness of the Company by managing financial
operations.
4. In accordance with good commercial utility practices.
5. To adopt appropriate Human Resources development policy leading to
creation of team of motivated and competent power professional.
Quotations Regarding Power
 “Save Energy Today Avoid Crisis Tomorrow”.
 “A Thing Which Burns Never Returns”.
 “Save One Unit A Day Keep Power WT A Way”.
 “When it is Bright Switch of the Light”.
ESSENTIAL INPUTS TO PROJECTS
LAND: An extent of 2621.587 acres of government land has been acquired for the
main plant, colony, and ash pond and marshalling yard areas. In addition to that 52.59
acres of patta land was also acquired.
WATER SUPPLY:
The water required for running of the power station is being drawn from the
Mylavaram reservoir through a 21Mm long steel pipeline. The water flows from
Myalavaram to RTPP through gravity. Government of A.P irrigation department has
allocated 20 cusecs of water per day and 1.3 TMC per year from the reservoir for the
project.
COAL SUPPLY:
The power station requires about 2.5 million tones of coal every year, which is
being supplied from SINGARENI COLLIRIES under long-term coal linkage
arrangements. The coal is being transported to powerhouse site by rail over a distance
of about 800Km by one of the routes, Vijayawada-Guntur-Reniguntla. An approach
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9. railway line is formed from Muddanur Railway Station to the project site as a part of
the project.
EVACUATION OF POWER:
The power generated at the project is evacuated through six number 220KV
transmission lines to Yerraguntla, Kadapa, and Anantapur.
STATE OF CLEARENCE:
All the clearances required for the construction of the project like “NO
OBJECTION” from Airports Authority, “NO OBJECTION” from state Pollution
control Board and clearance of India wide letter dated 09-03-1998 accorded
investment approval for the project at an estimated cost of Rs.503.71 crores for the
power station based on 1987 prices.
ELECTRICITY PROGRESS IN A.P (1911-1922)
The electricity department was established in 1911 under the Government
Mint. Later Hussain Sugar Bund was electrified on Saturday 25th October, 1913 A.D
and street electrification work was started within and outside the Municipal limits of
Hyderabad and electricity was provided on the residency roads. In Hederabad 10
substations were erected for the distribution of power in the city. The tariff was 6
annas (Osmania sikka) per unit with a minimum of Rs.5/- O.S. per month.
Programmes of expansion to cover other town if the Nizams State was take up. Under
this programme steps were taken to generate electric power at Aurangabad, Raichur,
Warangal and Gulbarga etc.
The Government of India Framed Electricity rules in 1910 so as to ensure fair
distribution and supply of power as well as take all necessary precaution for the use of
power by the consumers and concerned departments.
POWER DEVELOPMENT IN A.P AN OPPORTUNITY KNOWKING
We are standing at the entrance of 21st century and opportunity is knocking at
its door. The end of the century offers us the opportunity to assure India’s and in
particular out state’s electricity needs for decades to come.
Electricity demand in A.P is estimated to grow at an annual compound growth
rate of around 10% as against the National growth rage of 6.8%. The installed
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10. capacity of A.P state Electricity Board has grown from 213 MW in 1960-61 to 6124
MW at present (Excluding central share).
The available capacity in A.P is 6135.5 MW, which includes 897 MW from
central generating stations. As the capacity addition could not keep pace with the
growth in demand, a shortage of 2000MW in the installed capacity exists now. The
growth in demand has been mainly due to extensive Rural Electrification Programme
and energisation of agricultural pump sets at one – lakhs pump sets per year since
1985-86 besides increase in domestic loads.
A.P.S.E.B has long been a trendsetter in breaking new paths and adopting the
STATE-OF-THEATRE technology in its power plants. The technology adopted in the
power station has been continuously upgraded both in the Hydro and Thermal station
and also in transmission distribution and general management to enhance the
productivity and improve the operations.
RAYALASEEMA THERMAL POWER PROJECT STAGE – I
Rayalaseema comprises of four districts Kadapa, Kurnool, Anantapur and
Chittoor which are considered to be in backward region and the area lags behind in all
respects such as Agriculture, Industry and education prior to the Industrial
development, Agriculture is purely dependent on rainfall. People used to live on
Agriculture sector owing to the advancement of Science and Technology some of
barites and Mine Industries were started subsequently and more industries were
established in this region. Added to this, the region is considered to be hottest region
and temperature often goes up to 50 degrees centigrade in summer. Therefore the
need for Electricity to meet the necessity of the inhabitants and the Industrial belt of
this region was felt, as the supply that was generated by the Agencies was found
insufficient. Hence the Government established Rayalaseema Thermal Power Project
in 1994. Rayalaseema Thermal Power Project is one of the major power generation
facilities began developed in Andhra Pradesh to meet the growing demand for power.
The project envisages the installation of 210 MW power generation units under Stages
- I.
The first 210 MW under commissioned on 31-3-1994 and second unit on 25-
2-1995. Rayalaseema region is in the Southern part of the state and most of generating
facilities are in the Northern part of the state except two major Hydel stations in the
Central part. The Rayalaseema region therefore gets in power, therefore gets power
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11. during summer when the Hydo stations generations goes down. Priority is therefore
given for Industrial development and power being the basic infrastructure; it is
necessary to ensure proper power supplies. In this context the RTPP is taken up not
only to improve the base load capacity of the Grid but also to ensure proper voltage
profile in the area under all conditions.
RAYALASEEMA THERMAL POWER PROJECT STAGE – II
Salient Features:
Installed Capacity 420 MW (2 X 210 MW)
Estimated Cost Rs. 1640 Cr
Location V V Reddy Nagar-516 312, Kadapa (Dt)
Coal Source Singareni Coal Collieries Limited
Water Source Mailavaram Dam
Units Commissioning Unit-III : January, 2007
Schedule Unit-IV : July, 2007
Financial Assistance Power Finance Corporation, Rural Electrification
Corporation, Central Bank & Indian Overseas Bank.
STATUS AS ON 04.06.2007
♣ All Statutory Clearances/Approvals obtained.
♣ Total Project cost including IDC is about Rs. 1640 Crores (Rs. 3.90 Cr per
MW).
♣ Contract of Main Plant and balance of plant except coal & ash plants and civil
works was awarded to BHEL on 27.12.2003 at Rs. 1125 Cr.
♣ Contract for major civil works like Foundations, Structures, Cooling Towers,
Chimney,
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12. ♣ C.W. Pump House and Railway siding were also awarded and civil works are
under brisk progress.
♣ Financial Closure achieved through PFC, REC, Central Bank and Indian
Overseas Bank
SALIENT FEATURES OF THE PROJECT
Single tower type boilers on concrete pylons with a capacity of 690 T/HR at a
pressure of 155Kg/cm2 and at 540oc for each unit are installed.
MILLING PLANT:
Three horizontal tube mills each having capacity of 105 T/HR are provided for
each of the boilers.
ELECTROSTATIC PRECIPITATORS:
In order to achieve total pollution control 6 field electrostatic precipitators
having capacity of 13, 82,000 M/s and 99.89% efficiency are installed.
CHIMNEY:
A 220mts tall chimney with two flues conforming to the latest requirement of
“Emission Regulators” is installed.
TURBO GENERATORS:
German designed steam turbines with lowest heat rate with 3 cylinders
reaction type were commissioned. Microprocessors based automatic Turbine runs up
systems are installed.
PERFORMANCE SINCE INSPECTION
ACHIEVED AWARDS
YEAR PLANT LOAD WON RANK
FACTOR (%)
1995-1996 70.9 --- ---
1996-1997 66.2 --- ---
1997-1998 81.1 Silver Medal
1998-1999 91.5 Gold Medal First in Country
1999-2000 94.9 Gold Medal Second in Country
2001-2002 92.4 Gold Medal Second in Country
2002-2003 94.8 Gold Medal First in Country
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13. 2003-2004 92.2 Second in APGENCO
2004-2005 91.16 Bronze Medal Third in Country
2005-2006 64.44 --- ---
2006-2007 89.52 --- ---
2007-08 85.62 --- ---
2008-09 91.99 Energy conservation ---
2009-2010 84.44 --- Fourth in Country
WORKING CAPITAL
If a firm wants to increase its profitability, it must also increase its risk. If it is
to decrease risk, it must decrease its profitability. The trade off between these
variables is that regardless of how the firm increases its profitability through the
manipulation of working capital. The consequence is a corresponding increase in risk
as measured by the level of working capital.
Working capital in simple terms is the amount of funds which business
concerns have to finance its day-to-day operations. It can also be regarded as that
proportion of company’s total capital which is employed in short-term operations.
Concepts of working capital:
Working capital can be defined through its two concepts, namely:
(a) Gross working capital (b) Net working capital.
Gross working capital:
Gross working capital refers to the firm’s investment in current assets. Current
assets are the assets which can be converted into cash within an accounting year and
13

14. include cash, short term securities, debtors, (accounts receivable or book debts) bills
receivable and stock (inventory).
Net working capital:
Net working capital refers to the difference between current assets and current
liabilities are those claims of outsiders which are expected to mature for payment within an
accounting year and include creditors (accounts payable), bills payable, and outstanding
expenses. Net working capital can be positive or negative. A positive net working capital
will arise when current assets exceed current liabilities.
A negative net working capital occurs when current liabilities are in excess of
current assets.
Importance of Working Capital:
Investment is fixed assets only is not sufficient to run the business. Therefore
working capital or investment in current assets is a must for the purchase of raw
materials and for meeting the day-to-day expenditure on salaries, wages, rents etc.
The main advantages of adequate working capital are as follows:
 If proper cash balance is maintained a Company can avail the advantage of
cash discounts by paying cash for the purchase of raw materials in the
discount period, which results in reducing the cost of production.
 Adequate working capital creates a sense of security, confidence and loyalty
not only through out the business itself but also its customers, creditors and
business associates.
 A firm can raise funds from the market, purchase of goods on credit and
borrow short-term funds from banks etc. If investors and borrowers are
confident that they will get their due interest and payment of principle in time.
 Certain contingencies like financial crises due to heavy losses; business
oscillation etc. can be easily overcome, if the company maintains adequate
working capital.
 A continuous supply of raw material, research programs, innovation and
technical developments and expansion programs can successfully be carried
out if working capital is maintained in the business. It will increase the
production efficiency, which in turn increase the efficiency and morale of the
employees, lower the cost and create image in the community.
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15. Determinants of Working Capital:
A large number of factors, each having a different importance, influence
working capital needs of firms. Also, the importance of factors changes for a firm
over time. Therefore, an analysis of relevant factors should be made in order to
determine total investment in working capital. The following are the factors which
generally influence the working capital requirements of the firm.
• Nature of the Business
• Sales and Demand Conditions
• Technology and Manufacturing Policy
• Credit Policy
• Availability of Credit
• Operating Efficiency
• Price Level Changes
Operating cycle
Operating cycle is the time duration required to convert sales, after the
conversion of resources into inventories, into cash. The operating cycle of a
manufacturing company involves three phases.
 Acquisition of resources such as raw material, labour, power and fuel etc.
 Manufacture of the product which includes conversion of raw material into
work-in-progress into finished goods
 Sale of the product either for cash or on credit. Credit sales create account
receivable for collection.
The firm is required to invest in current assets for smooth, uninterrupted
functioning. It needs to maintain liquidity to purchase raw materials and pay expenses
such as wages, salaries and other manufacturing, administrating and selling expenses
as there is hardly a matching between cash inflows and outflows.
Stocks of raw material and work-in-process are kept to ensure smooth
production and to guard against non-availability of raw material and other
15

16. components. The firm holds stock of finished goods to meet the demands of
customers on continuous basis and sudden demand from some customers. Debtors are
crated because goods are sold on credit for marketing and competitive reasons.
The operating cycle can be measured as follows:
 RMCP – Raw material Conversion Period
 WIPCP – Work-in-progress Conversion Period
 FGP – Finished Goods Conversion Period
 SDCP= Sundry Debtors Conversion Period
 SCCP= Sundry Creditors Conversion Period
Operating Cycle=RMCP+WIPCP+FGCP+SDCP-SCPP
Purchases Payment Credit Sale Collection
RMCP+WIPCP+FGCP
Inventory Conversion Period Receivable Conversion Period
Payables Net Operating Cycle
Gross Operation Cycle
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17. Permanent and Variable Working Capital:
The minimum level of current assets which is continuously required by the
firm to carry on its business operations is referred to as permanent or fixed working
capital. Depending upon the changes in production and sales, the need for working
capital over and above permanent working capital will fluctuate.
The extra working capital needed to support the changing production and sales
activities is called fluctuating, or variable working capital. Both are necessary to
facilitate production and sale through operating cycle, but temporary working capital
is created by the firm to meet liquidity requirements that will last only temporarily.
Amount of
Working
Capital Temporary
Fixed
Time
Amount of
Working
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18. Capital Temporary
Fixed
Time
From the above two graphs it is shown that permanent working capital is
stable over time, while temporary working capital is fluctuating. The permanent
working capital is increasing over a period if the firm’s requirement for working
capital is increasing.
Operating cycle:
Operating cycle=RMCP+WIPCP+FGCP+SDCP-SCPP
RMCP=Raw Material Conversion Period
WIPCP=Work-in-progress Conversion Period
FGCP=Finished Goods Conversion Period
SDCP=Sundry Debtors Conversion Period
SCCP=Sundry Creditors Conversion Period
Working capital cycle/operating cycle
Raw Material Working progress
Cash
Finished
Goods
Accounts receivables Sales
Debtors Management
Receivables occupy the second place among the various components of
working capital in any manufacturing concern. Effective management of the
18

19. receivable investments is a required characteristic of successful and growing
enterprise.
The main purpose of maintaining receivables is to push up the sales and also
profit by giving credit to the customers who find it difficult to purchase on cash. This
process involves so much risk, which is called credit risk. While giving credit to any
customer, credit manager has to consider the five Cs of credit: Character, Capacity,
Capital, Collateral and Conditions, otherwise loss of bad debts will increase. The
receivable improve the liquidity position of an enterprise as it is a near cash item, and
the receivables should be at the satisfactory level.
The receivable in the strict accounting sense, arise out delivery of goods or
rendering of services on credit. According to this, receivables mean only a trade
debtor. But in the present context, the term receivable has been in its broader sense,
i.e., to include trade debts, loans and advances in this preview.
The sale of the products against cash would be an ideal situation to eliminate a
stage in the working capital cycle thus achieving the objective of drastic reduction in
its length and the requirement of Working Capital. The existence of numerous
competitors in the era of globalization and liberalized economy, such sales on cash
could only be next to impossibility if growth of the organization is any aspiration. In
the present complex market scenario one leads the other, in offering more value for
money to their customers and extending credit has been one such major step. This
encounters the organization with substantial blockage of Working capital.
Indiscriminant extension of credits in the name of growth could erase the entire
profitability and as stated above non-extending of credit would keep the organization
out of business. A great deal of planning and efficiency is warranted to keep the
receivables at optimum level. A little elaboration is needed in this level. There are two
measures in this regard.
a. Collection period:
The collection period would be in terms of number of days average credit sale. Such a
calculation area wise, marketing personnel wise at frequent intervals would provide
information’s for selective credit control. An application of incentive for faster
collection in certain selective areas also would render possible, the collection faster.
b. Aging of book debts:
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20. The collection efforts could be intensified on greater analysis of receivables
from the point of view of the number of days it is outstanding. Higher the number of
days the debt is outstanding, the probability of it becoming doubtful of recovery is
higher. Earlier detection of such outstanding from customers would facilitate taking
hard decisions of stoppage of further sales, in order to minimize bad debts. Collection
of book debts just as per credit policy would enable the organization to achieve
planned profitability.It would be an art and efficiency of marketing personnel in an
organization, which enables overall monitoring of receivables effective and to keep at
an optimum level.
Cash Management:
One of the main tasks of financial management is to hold and maintain an
adequate but not excessive cash balance. Cash is just another commodity required in
the process of production. A company should work hard to keep its inventory of cash
down to the minimum as it does to hold down the lock up in merchandise, inventory
and receivables. Cash is also the major and much awaited output or result of the
company’s operations and there is the need for the effective plan to deploy the liquid
resource to utmost productive use. Cash is also the idlest of all current assets. The
objective of any firm cash management is therefore to improve the cash turnover by
reducing the operating cycle period. Therefore its efficient management is crucial to
the solvency of the business.Cash is the starting point and the ending point of the
Working Capital cycle. The management necessarily means, ways and means of
maintaining as low level in each stage possible, without hampering the laid down
objectives of the organization of growth and profitability. While explaining these, the
efforts were only to reduce the conversion period at each stage and to reach to the
cash stage as early as possible, process Management, and Receivables Management
etc.
Cash Management as such, of course, depends on the nature of the
Organization, market conditions for the products dealt with by the organization
policies pursued, other external factors affecting etc.
The Management of cash mainly should serve the following objectives:
 The cost of capital being a major component in the determinants of
profitability, the optimum level of its maintenance is so essential that any
shortage even temporarily would disrupt the whole activity of the
20

21. Organization. It would fail to meet its commitments to employees statutory
authorities etc. the suppliers would loose confidence in the Organization and
there could be lack of competitiveness in supplying the materials.
 Ultimately leading to substantial higher in-out costs. On the other hand of
indiscriminate holding of cash, higher than necessary, would result in the loss
of interest apart from stagnation in growth and profitability. It would be the
endeavor of the Organization to rotate cash as fast as possibility maintaining
cash in its form at the minimum.
 The inflow and the outflow of cash could be nearly matched in order to enable
the company meeting of all its commitments on time at minimum cost.
 The cash should available even at the time of an unexpected deviation in the
plan of production and sales.
Efficient Debt Collection System:
While dealing with monitoring receivables it have touched upon the need for
reducing book debts and also control of book debts through Aging analysis. In
addition, the system could build in the following for accelerating debt collection even
within the overall credit policy of the Organization.
 Extending cash discounts for early payments by the customers. As long as
margin on the products sold is higher than the cost of borrowed capital, faster
collection by this system resulting in quicker rotation of cash could result in
higher profitability.
 Collection through demand drafts in the place of cheques, particularly that
from outstations.
Temporary Investment in Marketable Securities:
There cannot be a perfect match between inflow and outflow of cash. In view
of necessity to provide for contingencies, temporary surplus cash situation might
exist.
21

22. It would be desirable to invest such funds in readily marketable securities
like treasury bills, certificates of deposits etc., so as to earn an income even in the
short run and convert those securities just when the cash is required.
SCOPE OF THE STUDY:
The basis scope of the study is to understand & determine working
Capital management adopted by the department. The study also includes an
observation of different year’s working capital of APGENCO & its financial position.
NEED FOR THE STUDY:
Working capital is referred to be the lifeblood and nerve center of a business the
need for working capital is to run day to day activities can’t be over emphasized.
Firms aim at maximizing the wealth and should earn sufficient return from its
operations. The working capital is having the great influence on the development and
progress of any organization. The efficient management of working capital is as
essential to maintain the smooth functioning of day to day operations .Hence there is a
need to study the importance of working capital management in “RAYALASEMA
THARMAL POWER PROJECT
SIGNIFICANCE OF THE STUDY:
The working capital reflects the financial position and operation strengths and
weakness of the concern. These statements are useful to management investors,
creditors, bankers, Government and public at large. It served as a basis to decide the
wise dividend declaration by company.
OBJECTIVES OF THE STUDY:
• To know the efficiency of the company in investing the funds in the current
assets to perform the day –to- day operations smoothly.
• To study the changes in Net working capital position..
• To evaluate the working capital position and its management in the company
through computing and analyzing the financial ratios.
LIMITATIONS OF THE STUDY:
 Time is one of the limiting factor of the study the duration of training was two
months which was too short period to study the whole organization.
22

23.  Second limiting factor is the busy schedule of the executives. As a result of this
it is very difficult to get minute information about the organization.
 Some aspects of financial information were not available because of the
confidentiality of APGENCO.
METHODOLOGY OF THE STUDY:
The data that was obtained for the study can be classified into the following types.
 PRIMARY DATA
 SECONDARY DATA
Primary data comprises of information obtained during discussions with the officers
and staff in the finance department.
Secondary data comprises of information obtained from ratio analysis and ratio
analysis estimates of other financial statements files and some other important documents
maintained by the organization are also the helpful. The administration report published by
APGENCO is another source of data.
RESEARCH METHODOLOGY
• Research Design : Analytical
• Analytical Tools : Ratio analysis, statement Showing
Changes in working capital.
• Data Sources : The secondary data has been
Collected from Company records, Annual reports.
• Period of the Study : 5 years i.e. from 2006 to 2010.
For analyzing data simple mathematical ratios, percentages etc., have been used.
The ratios relating to working capital have been selected and computed for the
study are as follows:
RESEARCH TOOLS
• Current Ratio
• Quick Ratio
• Net Working Capital Ratio
23

24. • Debtors Turn Over Ratio
• Inventory Stock Turnover Ratio
• Gross Profit Ratio
• Net Profit Ratio
• Working Capital Turnover Ratio
• Average collection period
• Working Capital Ratio
LIQUID RATIOS
1. Current ratio:
The current ratio compares the total current asset with the total current
liabilities. A relative high ratio is an indication that the company is having high
liquidity position and has the ability to pay its current obligation in time as and when
they became due.The current assets include cash, stock, work in progress, marketable
securities and accounts receivable. On other hand current liabilities includes account
payable, sundry creditors, accrued income taxes, proposed dividends and borrowings
from financial institutions.
Current assets
Current ratio =
Current liabilities
Current ratio Table: V.1.1 (Rs. In Lakhs)
Year Current assets Current liabilities Current Ratio
2006 272451.78 115710.51 2.35
2007 260668.92 150181.58 1.73
24

25. 2008 289357.15 202529.67 1.42
2009 347341.01 274725.41 1.23
2010 413088.46 302356.99 1.36
2011 409947.10 404399.46 1.01
CURRENT RATIO
2.5
2
1.5
1
0.5
0
2006 2007 2008 2009 2010 2011
INTERPRETATION:
Generally 2:1 is considered ideal for the concern ratio. Current assets should
be two times the current liabilities. But this was not ideal for port trust because A.P
GENCO is a service oriented organization. From the above table and Chart, it can be
known that the current ratio is constantly decreasing from 2006-09. The current ratio
increased in the year 2010 and then decreased in 2011.
2 QUICK RATIOS:
The quick ratio is calculated by deducting inventories from current
assets and dividing the remainder by current liabilities. Inventories are typically the
least liquid of a firm’s current assets and assets on which losses are most likely to
occur in the event of liquidation. Therefore, this measure of the firm’s ability to
payoff short-term obligations without relying on the scale of inventories is important.
The term quick assets refer to current assets, which can be converted into cash
immediately or at a short notice without diminution in value. Included in this category
of current assets are
Current Assets - Inventories
Quick Ratio =
Current Liabilities
Quick ratio Table: V.1.2 (Rs. In Lakhs.)
Year Quick Assets Current Liabilities Quick Ratio
2006 241139.56 115710.51 2.101
25

26. 2007 233892.88 150181.58 1.56
2008 249039.63 202529.67 1.236
2009 304246.66 274725.41 1.07
2010 355371.21 302356.99 1.17
2011 353628.27 404399.46 0.87
QUICK RATIO
2.5
2
1.5
1
0.5
0
2006 2007 2008 2009 2010 2011
INTERPRETATION:
The exclusion of inventory is based on the reasoning that it is not Eastland
readily convertible into cash. Prepaid expenses by their very nature are not available
to pay off current debts. From the above table and Chart, it can be known that the
current ratio is increased in the year 2010 compared to year 2009 and then decreased
in 2011..
3. ABSOLUTE LIQUID RATIO:
The absolute liquid ratio explains about the firm’s liquidity position
now. A relative high ratio is an indication that the company is having high liquidity
position and has the ability to pay its current obligation in time as and when they
became due.
Cash+ Marketable securities
Absolute liquid ratio =
Current liabilities.
Absolute liquid ratio Table: V.1.3 (Rs. In Lakhs]
Year Current assets Current liabilities Current Ratio
2006 7072.47 115710.51 0.06
2007 3708.39 150181.58 0.02
26

27. 2008 3982.41 202529.67 0.01
2009 6974.45 274725.41 0.02
2010 11932.49 302356.99 0.039
2011 15248.69 404399.46 0.037
CHART: V.1.1.A
ABSOLUTE LIQUID RATIO
0.06
0.05
0.04
0.03
0.02
0.01
0
2006 2007 2008 2009 2010 2011
INTERPRETATION:
From the above table and Chart, it can be known that from 2006 Absolute
liquid ratio started falling up to 2008 due to increase in current liabilities.In 2009 the
ratio increased as in increase in cash and bank balances is more than the increase in
the current liabilities. The Absolute liquid ratio in the year 2011 is 0.037 which is
decreased compared to the last year.
4 NET WORKING CAPITAL RATIOS:
The difference between current assets and current liabilities is called
networking capital. The net working capital ratio is calculated by dividing net
working capital with net assets or capital employed. Current asserts include cash and
bank balances, investment, raw materials, advance payments, consumable stores and
spares, finished goods, stock in process semi finished goods,
Working Capital
Net Working Capital Ratio =
Net sales
Net working Capital ratio Table: 4.1.4 (Rs .in lakhs)
27

28. years Working sales Net working capital
capital Ratio
2006 157726.36 388868.06 0.405
2007 117872.81 419999.51 0.280
2008 89046.17 461370.22 0.193
2009 75282.09 622998.96 0.120
2010 124148.16 643421.85 0.192
2011
NET WORKING CAPITAL RATIO
0.5
0.4
0.3
0.2
0.1
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
The ratio is used as a measure of firm’s liquidity. The ratio measures the firm’s
potential reservoir of funds. From the above table and Chart, it can be known that the
current ratio is decreased from the year 2005-06 to 2008-09. But there after the
current ratio is increased up to the year 2009-10.
2. ACTIVITY RATIO
1. DEBTORS TURN OVER RATIO:
The major activity ratio receivables of debtor’s turnover ratio. Allied and
closely related to this is the average collection period. The debtor’s turnover ratio is
test of the liquidity of the debtors of a firm. The liquidity of a firm’s receivable can be
examined in two types of debtor’s turnover ratio. Debtors/receivables turnover ratio.
Average collection period.
Sales = operating income.
Sales
Debtors turn over ratio =
Avg debtor
28

29. Average debtors = opening debtors + closing debtors
2
Debtors turn over ratio (Rs.in lakhs)
DEBTORS TURN OVER RATIO
4
3
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
Years Sales/operating Avg debtors Debtors turn over
income Ratio
2005-06 388868.06 200553.01 1.938
2006-07 419999.51 181800.14 2.310
2007-08 461730.22 157286.83 2.935
2008-09 622998.96 159372.48 3.909
2009-10 643421.85 213843.71 3.008
The debtor’s turnover shows the relationship between sales and debtors of
firm. Debtor’s turnover indicated the number of times on the average the debtor’s
turnover each year. From the above table and Chart, it can be known that the current
ratio is 3.009 in the year 2009-10. The current ratio is 3.008 in the year 2008-09. The
ratio was decreased compared with last year.
2. AVERAGE COLLECTION PERIOD:
The second type of ratio of measuring the liquidity of a firm’s debtors is the
average collection period. This ratio is fact interrelated with the dependent upon, the
receivables turnover ratio.
No. of days in a year
Avg. Collection period =
Avg. Debtors ratio
Avg. Collection period Table: V.2.2
(Rs. In Lakhs.)
Years No. of days in a Avg. debtors Avg. Collection
year ratio period
29

30. 2005-06 365 1.938 188
2006-07 365 2.310 158
2007-08 366 2.935 125
2008-09 365 3.909 93
2009-10 365 3.008 121
CHART: V.2.2.A
AVG COLLECTION PERIOD
200
150
100
50
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
The shorter the average collection period, the better the quality debtors, as a
short collection period implies the prompt payment by debtors. From the above table
and Chart, it can be known that the current ratio is 188 highest days in the year 2005-
06. The average collection period ratio is 93 days in the year 2008-09.The average
collection period ratio is 121 days in 2009-10. The ratio was increased compared with
last year.
3. INVENTORY STOCK TURNOVER RATIO:
It indicates the number of times the average stock has turned over during period.
It indicates the efficiency of the firm’s inventory management. The cost of goods is an
expenditure including operating, administration, project establishment, interest on
loans, and depreciation on fixed assets, provision, for bad debts. The average
inventory used in the determination, in the average of opening and closing
inventories. It is calculated by dividing the cost of goods sold by average inventory.
Cost of goods sold
Inventory stock turnover ratio =
Average Inventory
30

31. Inventory Stock Turnover Ratio Table: V.2.3 (Rs. in Lakhs)
Year Average Inventory Cost of goods sold Inventory turnover
2005-06 25858.585 205641.06 Ratio
7.952 Times
2006-07 27562.465 220216.54 7.989 Times
2007-08 32813.97 249104.81 7.591 Times
2008-09 41241.42 373091.07 9.046 Times
2009-10 50405.8 372079.99 7.381 Times
INVENTORY STOCK TURN OVER RATIO
10
8
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
Generally a high inventory turnovers indicative of good inventory
management and a low inventory turnover suggests an inefficient inventory
management. Therefore a balance should be maintained between too high and too low
inventory turnovers. From the above table and Chart, it can be known that the
Inventory stock turnover ratio is 9.046 in the year 2008-09. The average collection
period ratio is 7.381 in the year 2009-10. The ratio was decreased compared with last
year.
PROFIT ABILITY RATIOS:
1. GROSS PROFIT RATIO:
Gross profit is sales minus cost of sales. The cost of production means cost of
raw materials consumed, direct labour, power, and fuel, repairs and maintenance,
other manufacturing etc. Gross profit is the contribution available to meet other
expenses such as selling, general, and administrative and interest expenses.
(Sales – Cost of Goods sold)*100
Gross Profit Ratio =
Sales
31

32. Sales = Operating Income; cost of goods sold = Operating expenditure
Gross Profit ratio Table: V.4.1 (Rs. In Lakhs.)
Years Gross Profit Sales Gross profit Ratio
2005-06 183227 388868.06 47.10
2006-07 199782.97 419999.51 47.50
2007-08 212625.41 461730.22 46.00
2008-09 249907.89 622998.96 40.11
2009-10 271341.86 643421.85 42.17
GROSS PROFIT RATIO
48
46
44
42
40
38
36
20005-06 20006-07 2007-08 2008-09 2009-10
INTERPRETATION:
. The gross profit ratio is generally low, if the value added in the production is
low. From the above table and Chart, it can be known that the gross profit Ratio is
40.11.0 in the year 2008-09. The gross profit Ratio is 42.17 in the year 2009-10. The
ratio was Increased compared with last year.
2. NET PROFIT RATIOS:
This ratio indicated the earnings out of every 100 rupees of sales and the unit
make a direct measure of the annual profit. Here, the net profit is taken as net profit
after tax.
(Profit after Tax)*100
Net Profit Ratio = Sales
Net Profit ratio table: V.4.2 (Rs. In Lakhs.)
Years Profit after Tax Sales Net profit Ratio
2005-06 6303.94 388868.06 1.621
2006-07 15100.62 419999.51 3.595
32

33. 2007-08 19763.59 461730.22 4.280
2008-09 24645.87 622998.96 3.956
2009-10 28866.02 643421.85 4.486
CHART : V.4.2.A
NET PROFIT RATIO
5
4
3
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
From the above table and Chart, it can be known that the Net profit Ratio is
3.956 in the year 2008-09. The Net profit Ratio is 4.486 in the year 2009-10. The ratio
was increased compared with last year.
3.WORKING CAPITAL TURNS OVER RATIO:
The difference between current assets and current liabilities is called net
working capital. The net working capital ratio is calculated by dividing net working
capital with net assets or capital employed. Current assets include cash and bank
balances, investment, raw materials, advance payments, consumable stores and
spares, finished goods, stock in process/ semi finished goods
Sales /operating income
Working Capital Turns Over Ratio =
Net Current Assets
Working Capital Turn Over Ratio (Rs in Lakhs)
years Sales Net Current assets Working capital
turn over ratio
33

34. 2005-06 388868.06 157726.36 2.465
2006-07 419999.51 117872.81 3.563
2007-08 461730.22 89046.17 5.185
2008-09 622998.96 72615.60 8.579
2009-10 643421.85 110731.47 5.810
WORKING CAPITAL TURN OVER RATIO
10
8
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
The ratio is used as a measure of firm’s liquidity. The ratio measures the firm’s
potential reservoir of funds. From the above table and Chart, it can be known that the
Working capital turn over ratio is 8.579 in the year 2008-09. The Working capital turn
over ratio is 5.810 in the year 2009-10. The ratio was decreased compared with last
year.
SCHEDULE OF CHANGES IN WORKING CAPITAL
AS ON 31ST MARCH 2006
(Rs. In lakhs)
Particulars Amount Amount Changes in Changes in
2005 2006 working working
capital capital
decrease
Increase
Current assets:
Inventories 22831.69 28885.48 6053.79 --
Sundry debtors 203161.62 197944.41 -- 5217.21
Sundry receivables 10242.06 29846.01 19603.95 --
Cash and bank balance 1681.45 7072.47 5391.02 --
Loans and advances 9722.43 8703.41 -- 1019.02
Total Current
Assets(A) 247639.25 272451.78
Current liabilities:
34

35. Sundry creditors 49046.67 39994.47 9052.20 --
Deposits and retentions 17691.49 19860.08 -- 2168.59
Provision for taxation 650.56 1311.16 -- 660.60
Interest accrued but not 8289.46 8724.02 -- 434.56
due
Other current liabilities 43097.76 45820.78 -- 2722.82
Total Current
Liabilities(B) 118776.14 115710.51
Working capital (A-B) 128863.11 156741.27
27878.16
Net increase in W.C 27878.16
Total net W.C 156741.27 156741.27 40100.96 40100.96
INTERPRETATION:
Current Assets like Inventories, Cash& Bank balance, Other Current asset has
increased in 2006 than in 2005. Current Liabilities has decreased in 2006 than in
2005. So, it is the Asset to the Company. The overall Performance of the company is
progressive than in 2003. The working capital of 2006 has also increased to the extent
of Rs.27878.16 than in 2006.
SCHEDULE OF CHANGES IN WORKING CAPITAL
AS ON 31ST MARCH 2007
(Rs. In lakhs)
Particulars Amount Amount Changes Changes
2006 2007 in in
working working
capital capital
decrease
Increase
Current assets:
Inventories 28885.48 26239.45 2646.03
Sundry debtors 197944.41 165665.88
32278.53
Sundry receivables 29846.01 49400.06
19554.05
Cash and bank balance 7072.47 3708.39 3364.08
Loans and advances 8703.41 15655.14
6951.73
35

36. Total Current 272451.78 260668.92
Assets(A)
Current liabilities:
Sundry creditors 39994.47 62687.38 22692.91
Deposits and retentions 19860.08 25563.52 5703.44
Provision for taxation 1311.16 7385.47 6074.31
Interest accrued but not 8724.02 9853.22 1129.20
due
Other current liabilities 45820.78 44691.99
1128.79
Total Current
Liabilities(B) 115710.51 150181.58
Working capital (A-B) 156741.27 110487.34 46253.93
Net decrease in W.C 46253.93
Total net W.C 156741.27 156741.27 73888.50 73888.50
INTERPRETATION:
Current Assets like Inventories, Debtors, Cash& Bank balance has increased in
2007 than in 2006. Current Liabilities has decreased in 2007 than in 2006.So, it is the
Asset to the Company. The overall Performance of the company is progressive than
in 2006. The working capital of 2007 has also Decreased to the extent of Rs.46,253.96
than in 2006.
SCHEDULE OF CHANGES IN WORKING CAPITAL
AS ON 31ST MARCH 2008
(Rs. In lakhs)
Particulars Amount Amount Changes in Changes in
2007 2008 working working
capital capital
decrease
Increase
Current assets:
Inventories 26239.45 39388.49 13149.04
Sundry debtors 165665.88 148917.78 16748.10
Sundry receivables 49400.06 93617.55 44217.49
Cash and bank balance 3708.39 3982.41 274.02
Loans and advances 15655.14 3450.92 12204.22
Total Current 260668.92 289357.15
Assets(A)
Current liabilities:
36

37. Sundry creditors 62687.38 61718.05 969.33
Deposits and retentions 25563.52 44903.20 19339.68
Provision for taxation 7385.47 13381.69 5996.22
Interest accrued but not 9853.22 7107.69 2745.53
due
Other current liabilities 44691.99 75419.04 30727.05
Total Current
Liabilities(B) 150181.58 202529.67
Working capital (A-B) 110487.34 86827.46 23659.86
Net decrease in W.C 23659.86
Total net W.C 110487.34 110487.34 85015.27 85015.27
INTERPRETATION:
Current Assets like Inventories, Debtors, Cash& Bank balance has increased in
2008 than in 2007. Current Liabilities has decreased in 2008 than in 2007.So, it is the
Asset to the Company. The overall Performance of the company is progressive than in
2007. The working capital of 2008 has also decreased to the extent of Rs 23,659.86
than in 2007.
SCHEDULE OF CHANGES IN WORKING CAPITAL
AS ON 31ST MARCH 2009
(Rs. In lakhs)
Particulars Amount Amount Changes in Changes in
2008 2009 working working
capital capital
decrease
Increase
Current assets:
Inventories 39388.49 43094.35 3705.86
Sundry debtors 148917.78 169827.19 20909.41
Sundry receivables 93617.55 123851.19 30233.95
Cash and bank 3982.41 6974.45 2992.04
balance
Loans and advances 3450.92 3593.52 142.58
Total Current 289357.15 347341.01
Assets(A)
37

38. Current liabilities:
Sundry creditors 61718.05 96573.95 34855.9
Deposits and 44903.20 64820.37 19917.17
retentions
Provision for 13381.69 12666.49 715.2
taxation
Interest accrued but 7107.69 8399.07 1291.38
not due
Other current 75419.04 92265.53 16846.49
liabilities
Total Current 274725.41
Liabilities(B) 202529.67
Working capital (A- 86827.46 72615.60 14211.86
B)
Net increase in W.C 14211.86
Total net W.C 86827.46 86827.46 72910.9 72910.9
INTERPRETATION:
Current Assets like Inventories, Debtors, Cash& Bank balance has increased in
2010 than in 2009. Current Liabilities has decreased in 2010 than in 2009.So, it is the
Asset to the Company. The overall Performance of the company is progressive than in
2009. The working capital of 2010 has also decreased to the extent of Rs 14211.86
than in 2009.
SCHEDULE OF CHANGES IN WORKING CAPITAL
AS ON 31ST MARCH 2010
(Rs. In lakhs)
Amount Amount Changes in Changes in
Particulars 2009 2010 working working
capital capital
Increase Decrease
Current assets:
Inventories 43094.35 57717.25 14622.9
Sundry debtors 169827.19 257860.24 88033.05
Sundry receivables 123851.5 82677.91 41173.59
Cash and bank 6974.45 11932.49 4958.04
balance
Loans and advances 3593.52 2900.57 692.95
38

39. Total Current 347341.01 413088.46
Assets(A)
Current liabilities:
Sundry creditors 96573.95 84198.85 12375.1
Deposits and 64820.37 80815.43 15995.06
retentions
Provision for taxation 12666.49 13416.69 750.2
Interest accrued but 8399.07 10056.04 1656.97
not due
Other current 92265.53 113869.98 21604.45
liabilities
Total Current 274725.41 302356.99
Liabilities(B)
Working capital (A- 72615.60 110731.47 38115.87
B)
Net decrease in 38115.87
working capital
Total net W.C 110731.47 110731.47 119989.09 119989.09
INTERPRETATION:
Current Assets like Inventories, Cash& Bank balance, Loans and Advances has
Increased in 2009 than 2010. Current Liabilities has Decreased in 2010 than in 2009.
So, it is the Asset to the Company. Debtors have increased in20010 than in 2009.The
overall Performance of the company is progressive in 2010. The working capital of
2010 has also decreased to the extent of Rs.38115.87 than in 2009.
FINDINGS
 Net working capital ratio has decreased from 0.405 to 0.120 from the year
2006 to 2009 respectively and later in 2009 and 2010 the ratio has increased
to 0.120 and 0.192. All the years of Net Working Capital show in the
following table.
YEARS 2006 2007 2008 2009 2010
RATIO 0.405 0.280 0.193 0.120 0.192
39

40.  Current ratio has increased from 2.37 to 1.28 .From 2006 to 2007, 2008 and
2009 the current ratio has been decreased. The ideal ratio of current ratio 2 :1
All the years of Current ratio show in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 2.37 1.82 1.44 1.28 1.43
 The quick ratio has decreased from 2.10 to 1.12, from 2006 to 2009. From
2009 and 2010 the quick ratio has been increased. All the years of Quick ratio
show in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 2.10 1.64 1.24 1.12 1.23
 The debtor’s turnover ratio has increased from 2006 to 2009. It increased.
All the years of debtor s turnover ratio show in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 1.91 2.31 2.94 3.91 3.01
 Inventory stock turnover ratio has increased from 7.95 to 9.05 in the year
2006 to 2009. next year 2009 to 2010 it is decreased. All the years of
inventory stock turnover ratio show in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 7.95 7.99 7.59 9.05 7.38
 Average collection period from 2006 to 2009, decreased. All the years of
Average collection period show in the following table.
YEARS 200 200 200 200 2010
RATIO 188 158 125 93 121
6 7 8 9
 The Net profit Ratio is 3.959 in the year 2009. The nest year 4.486 in the year
2010. All the years of Nest profit ratio show in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 1.621 3.595 4.280 3.959 4.486
 The gross profit ratio has decreased from 2006 to 2009. All the years of
gross profit ratio show in the following table.
40

41. YEARS 2006 2007 2008 2009 2010
RATIO 47.1 47.5 46.0 40.1 42.2
0 0 0 0
 Working capital turnover ratio has increased from 2.465 to 8.579 from the
year 2006 to 2009, the working capital turnover ratio has been decreased2009
to 2010. All the years of Working capital turnover ratio show in the
following table.
YEARS 2006 2007 2008 2009 2010
RATIO 2.465 3.563 5.185 8.579 5.810
 There is a fluctuation in cash ratio of RTPP from 2006 to 2010 continuously.
All the years of cash ratio shown in the following table.
YEARS 2006 2007 2008 2009 2010
RATIO 0.0559 0.0059 0.0025 0.0021 0.0019
SUGGESTIONS
 it is suggested to the company to maintain stable working capital. Because the
profitability of the organization is on sound working capital.
 It is suggested to company to proper utilization of funds in current assets.
 It is suggested to company to maintain required in hand and bank. Otherwise it
difficult to meet short term obligations.
CONCLUSION
41

42. The working capital management system followed by *RTPP* shows
“adequate working capital” in last three financial years, the study also under
takes to establish a cause and effect, relationship between variables to aid the
management in making effective forecasts, various crucial areas that need
attention were identified and practical suggestions were given to improve
performance.
BIBLIOGRAPHY
• I.M.PANDAY, Financial management,7th edition, Vikas publishing house
Pvt ltd, New Delhi.1995.
• S. N.MAHESWARY, Financial management, 4th edition, sultan chand & sons,
New Delhi,1997.
• PRASANNA CHANDRA, Financial management, 3rd edition, Tata mc.
GrawHill publishing co.ltd, New Delhi.1984.
42

43. • M.Y.KHAN & P.K.JAIN, Financial management, 2nd edition, Tata mc.
GrawHill publishing co.ltd, New Delhi.
• WEBSITE: www. Apgenco. gov. in.
• MAGZINES:
Charted financial analysis: ICFAI.
ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006
( Rupees in lakhs)
PARTICULARS Schedule Current Year Previous Year
INCOME
Revenue 16 388868.06 417255.56
Other Income 17 12076.07 400944.13 12046.38 429301.94
EXPENDITURE
Cost of Generation and
Purchase of Power 18 205641.06 215658.24
43

44. Operation ,Maintenance,
Adm, and General Expenses 19 38335.65 48844.80
Sub-total 243976.71 264503.04
Interest and Finance
Charges 20 72194.07 316170.78 81947.83 346450.87
Depreciation 71414.34 74291.78
TOTAL 387585.12 420742.65
Profit before prior period
items 13359.01 8559.29
Prior Period Items 21 (74.98) (380.20)
Extar Ordinary Items 37.83
Profit before tax 13396.16 8939.49
Current tax 1237.85 700.97
Deferred Tax 5659.55 3074.72
Fringe Benefit Tax 72.39
Tax for previous years 122.43
Net Profit after Tax 6303.94 5163.80
(20385.71
Add: Brought forward loss ) (25549.51)
Balance Carried to (14081.77
Balance Sheet ) (20385.71)
Earnings per Share (Basic
& Diluted) 2.99 2.45
(Face value of Rs.100 per
Share)
ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED
BALANCE SHEET AS AT 31st March 2006
( Rupees in lakhs)
As at 31-3-2006 As at 31-3-2005
Particulars Schedule
Current Year Previous Year
I. SOURCES OF FUNDS
Shareholders funds
Share Capital 1 210680.01 210680.01
Reserves and Surplus 2 0.00 210680.01 0.00 210680.01
Loan Funds
Secured Loans 3 240454.95 203552.90
Unsecured Loans 4 321062.57 343062.93
44

45. 1010201.3
Employee Related funds 5 448683.79 1 448670.85 995286.68
1220881.3
Total 2 1205966.69
II. APPLICATION OF
FUNDS
Fixed Assets 6
1407623.3 1403970.7
Gross Block 8 8
Less: Depreciation 587979.89 516851.96
819643.49 887118.82
Capital work in progress 7 149300.13 968943.62 63108.33 950227.15
Investments 8 76634.41 96231.91
Current Assets, Loans &
Advances
Inventories 9 28885.48 22831.69
Sundry Debtors 10 197944.41 203161.62
Cash and Bank balances 11 7072.47 1681.45
Other Current Assets 12 29846.01 10242.06
Loans and Advances 13 8703.41 9722.43
272451.78 247639.25
Less: Current Liabilities and
Provisions 14 115710.51 118776.14
Net Current Assets 156741.27 128863.11
Deferred Tax Asset 163186.36 188963.86
Less: Deffered Tax Liability 158944.17 4242.19 179062.13 9901.73
Miscellaneous Expenditure 15
to the extent not written off Or
Adjusted 238.06 357.08
Profit and loss account 14081.77 20385.71
1220881.3
Total 2 1205966.69
45

46. ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2007
(Rupees in lakhs)
PARTICULARS Schedule Current Year Previous Year
INCOME
Revenue 16 419999.51 388868.06
Other Income 17 12475.91 432475.42 12076.07 400944.13
EXPENDITURE
Cost of Generation and Purchase of
Power 18 220216.54 205641.06
Operation, Maintenance, Adm, and
General Expenses 19 54548.07 38335.65
Sub-total 274764.61 243976.71
Interest and Finance Charges 20 58071.49 72194.07
Depreciation 70838.52 403674.62 71414.34 387585.12
Profit before prior period items 28800.80 13359.01
Prior Period Items 21 114.44 (74.98)
Extar Ordinary Items 0.00 37.83
Profit before tax 28686.36 13396.16
Current tax 3291.78 1237.85
Deferred Tax 10214.91 5659.55
Fringe Benefit Tax 74.07 72.39
Tax for previous years 4.98 122.43
Net Profit 15100.62 6303.94
(14081.77
Add: Brought forward Profit (loss) ) (20385.71)
Balance Carried to Balance Sheet 1018.85 (14081.77)
Earnings per Share (Basic &
Diluted) 7.17 2.99
(Face value of Rs.100 per Share)
ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED
46

47. BALANCE SHEET AS AT 31st March 2007
(Rupees in lakhs)
As at 31-3-2007 As at 31-3-2006
Particulars Schedule
Current Year Previous Year
I. SOURCES OF
FUNDS
Shareholders funds
Share Capital 1 210680.01 210680.01
Reserves and Surplus 2 1018.85 211698.86 0.00 210680.01
Loan Funds
Secured Loans 3 294957.82 240454.95
Unsecured Loans 4 304790.92 321062.57
1030178.3
Employee Related funds 5 430429.63 7 448683.79 1010201.31
Deffered Tax Liability 151369.62
Less: Deffered Tax Asset 145396.90 5972.72
1247849.9
Total 5 1220881.32
II. APPLICATION
OF FUNDS
Fixed Assets 6
1416821.0 1407623.3
Gross Block 9 8
Less: Depreciation 656555.42 587979.89
760265.67 819643.49
1077841.0
Capital work in progress 7 317575.41 8 149300.13 968943.62
Investments 8 59402.50 76634.41
Current Assets, Loans &
Advances
Inventories 9 26239.45 28885.48
Sundry Debtors 10 165665.88 197944.41
Cash and Bank balances 11 3708.39 7072.47
Other Current Assets 12 49400.06 29846.01
Loans and Advances 13 15655.14 8703.41
260668.92 272451.78
Less: Current Liabilities
and Provisions 14 150181.58 115710.51
Net Current Assets 110487.34 156741.27
Deferred Tax Asset 163186.36
Less: Deffered Tax
Liability 158944.17 4242.19
Miscellaneous
Expenditure 15
to the extent not written
off or Adjusted 119.03 238.06
Profit and loss account 14081.77
47

48. 1247849.9
Total 5 1220881.32
48

49. ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2008
(Ru
pees in lakhs)
PARTICULARS Schedule Current Year Previous Year
INCOME
461730.2
Revenue 16 2 419999.51
519554.8
Other Income 17 57824.67 9 12475.91 432475.42
EXPENDITURE
Cost of Generation and 249104.8
Purchase of Power 18 1 220216.54
Operation, Maintenance,
Adm, and General 102452.0
Expenses 19 6 54548.07
351556.8
Sub-total 7 274764.61
Interest and Finance
Charges 20 65751.92 58071.49
486404.5
Depreciation 69095.73 2 70838.52 403674.62
Profit before prior period
items 33150.37 28800.80
Prior Period Items 21 (1373.85) 114.44
Extar Ordinary Items 27.99 0.00
Profit before tax 34496.23 28686.36
Current tax 3908.42 3291.78
Deferred Tax 10739.43 10214.91
Fringe Benefit Tax 84.79 74.07
Tax for previous years 4.98
Net Profit 19763.59 15100.62
Add: Brought forward
Profit (loss) 1018.5 (14081.77)
Balance Carried to
Balance Sheet 5191.15 1018.85
Earnings per Share
(Basic & Diluted) 9.38 7.17
(Face value of Rs.100 per
Share)
49

50. 50