Submitted By: Anmol Jain (13BSP0110) Submitted To: Prof. Jyoti Ahluwalia ALSTOM India Ltd.
2 ALSTOM India Ltd.
Significance of Indirect Taxes
In
Hydroelectric Construction Contracts (Chamera and Uri Hydroelectric Projects). ALSTOM India Ltd.
3 ALSTOM India Ltd.
Table of Contents
Executive Summary ....................................................................................................................................... 4 Part 1 : Company ........................................................................................................................................... 5 A) ALSTOM India Ltd. ................................................................................................................................ 6 About Alstom ........................................................................................................................................ 8 Major Projects ....................................................................................................................................... 9 Products & Services ............................................................................................................................ 11 Clients .................................................................................................................................................. 13 Competitors ........................................................................................................................................ 15 B) Financial Analysis ................................................................................................................................ 17 Ratio Analysis ...................................................................................................................................... 18 Cash Flow Analysis .............................................................................................................................. 46 Competitor Analysis ............................................................................................................................ 48 Part 2 : Taxation in Hydroelectric Projects ................................................................................................. 51 Chamera Hydroelectric Project ............................................................................................................... 52 Key Facts ............................................................................................................................................. 53 Uri Hydroelectric Project ........................................................................................................................ 54 Key Facts ............................................................................................................................................. 55 Future Plan of Action .................................................................................................................................. 56 Annexure(s) ................................................................................................................................................. 57
4 ALSTOM India Ltd.
Executive Summary
This project deals with understanding the business of Hydroelectric power generation in India and understanding the significance of indirect taxes in the hydroelectric construction contracts.
In pursuit of this objective I have also tried to understand Alstom India Limited as a company in terms of the businesses, products and services provided, clients, competitors etc. I have also analyzed company's financials through ratio analysis, cash flow analysis & comparing the ratios with competitors post which I moved on to the Hydroelectric construction contracts.
I have gone through the contracts of Chamera & Uri hydroelectric project. Both the contracts are divided into three parts which are as follows:
1. Supply of Offshore 1 Plant & Equipment 2. Supply of Onshore 2 Ex- works 3 Plant & Equipment (Indian Origin) 3. Transportation & Installation Services.
These contracts helped me gain all the information such as the contract price, time of completion, the conditions related to the taxes, also the types of taxes charged under these contracts. All this information will help me understand the significance of taxation in the hydroelectric construction contracts.
1 Away from the shore i.e. inside the water. 2 On the shore i.e. on the land. 3 Includes only the cost of manufacturing. 5 ALSTOM India Ltd.
Part 1 : Company
6 ALSTOM India Ltd.
A) ALSTOM India Ltd.
7 ALSTOM India Ltd.
Alstom Group France Fra Alstom India Limited Formerly Known As Alstom projects India Limited. Alstom T&D India Limited Formerly Known As Areva T&D. Power Transport Gas Coal & Oil Nuclear Renewable Hydro Wind Geothermal Biomass Solar Ocean 8 ALSTOM India Ltd.
About Alstom
Alstom is a global leader in the world of power generation, power transmission and rail infrastructure and sets the benchmark for innovative and environmentally friendly technologies. Alstom builds the fastest train and the highest capacity automated metro in the world, provides turnkey integrated power plant solutions and associated services for a wide variety of energy sources, including hydro, nuclear, gas, coal and wind, And it offers a wide range of solutions for power transmission, with a focus on smart grids.
The Group employs 92,000 people in around 100 countries. It had sales of 20 billion and booked close to 22 billion in orders in 2011/12.
About Alstom in India Present in India since 1911, Alstom has strong capabilities in engineering, manufacturing, project management and supply of products and solutions for infrastructure.
On 06 June 2012 the name ALSTOM Projects India Limited (APIL) was changed to ALSTOM India Limited (AIL), this change was to show that , the Companys operations have now gone beyond being a Projects Company. Alstom in India has full capabilities in engineering, manufacturing, project management and supply of power generation and transport sector requirements. This change was made to make solid progress in positioning the Company for progression and concurrently capturing new markets of growth. The name change reinforces AIL as an integrated enterprise, with a long-term strategy to advance its presence and more closely aligns and strengthens the identity of each of its core areas in which it operates. Alstom is widely recognized by customers, stakeholders, and other industry participants and has become synonymous with excellence in the market in which it operates. 9 ALSTOM India Ltd.
Major Projects
10 ALSTOM India Ltd.
Power Projects
Projects Completed: Utran project- Gujrat Gautami Project- Andhra Pradesh. Ongoing Projects: Subansiri largest hydro project of India - Assam and Arunachal Pradesh. Lower Jurala Hydro Electric Project - Andhra Pradesh. Uri II Hydro Electric Project - Jammu& Kashmir. Chamera III Hydro Electric Project - Himachal Pradesh.
Transport Projects Projects Completed: SIGNALING SYSTEM for DELHI METRO RAIL Corp. (DMRC) Ongoing Projects: METRO ROLLING STOCK CONTRACT for CHENNAI METRO (CMRL)
RAIL INFRASTRUCTURE CONTRACT for CHENNAI METRO (CMRL)
SIGNALING SYSTEM for BANGALORE METRO RAIL Corp. (BMRC)
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Products & Services
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POWER
Turbomachines Portfolio Electrical & Control Systems Steam Cycle add-ons Repowering and Rehabilitaion Hydro Environmental Control Systems Heat Recovery Steam Generators Energy Recovery Systems Pulverizers Power Automation and Controls
TRANSPORT
Rail Transport In India
13 ALSTOM India Ltd.
Clients
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National Hydro Power Corporation (NHPC):2000 MW Subansiri Hydro Power Project
Andhra Pradesh Power Generation Corporation Limited (APGENCO):Lower Jurala Hydro Electric Project
BANGALORE METRO RAIL Corp. : SIGNALING SYSTEM
Mumbai Railway Vikas Corporation Ltd (MRVC) :Design, Supply, Installation, Testing & Commissioning of Audio Frequency Track Circuits (AFTC)
Chennai Metro Rail Limited (CMRL) : METRO ROLLING STOCK CONTRACT
Nuclear Power Corporation of India Limited (NPCIL) :Rajasthan Atomic Power Project (RAPP)
National Thermal Power Corporation (NTPC) :Barh II Supercritical Boilers 2 x 660 MW
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Competitors
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Major competitors of Alstom India are:
ABB Limited
GE Energy
Siemens
All of these are involved in the business of power generation and infrastructure development in India. By power generation I mean all types of power generation such as hydro, wind, gas etc.
These companies operate in all over India similar to Alstom India Limited hence these can be called the true competitors of Alstom as their region of operation and the nature of business is same.
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B) Financial Analysis
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Ratio Analysis
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Overall Performance
The performance of company in terms of profitability is not good as the expenses are rising and the profits are declining though the figures of profits in Income Statement (Annexure 2) have increased in 2013 in comparison with 2012 but they are not able to keep up with the rise in sales.
In terms of investment the dividend per share has been constant whereas earnings per share has increased in 2013 after a dip in 2012. The earnings and dividend yield are rising however the reason behind this rise is the declining market price per share (Annexure 2) which is due to the declining price earnings ratio indicating higher risk.
In terms of liquidity the company is striving towards the ideal ratios which is good.
In terms of turnover the company's overall performance is good the only concern is with the stock turnover ratio which is declining indicating that the stock is not selling fast.
In terms of coverage ratio the debt equity ratio is rising showing increase in debt and the interest coverage ratio is rising indicating that the operating profit is not able to match the rising interest.
20 ALSTOM India Ltd.
Profitability Ratios
Figure 1
1. Gross Profit Ratio
GPR= Gross Profit x 100 Sales
This ratio is calculated to find the profitability of business. A high ratio of gross profit to sales is a sign of good management.
However, as per the financial statements of Alstom India Limited the gross profit margin is declining which is clearly shown in figure 1 above.
The reason behind this decline is the rising Cost of Goods Sold ratio which is also evident from figure 1 above. Though the sales have also increased however the rate of increase in cogs is more than the rate of increase in sales.
It is clearly shown from the table above that sales in 2012 increased 53.62% from 2011 where as the COGS increased 66.41%, similarly in 2013 sales increased 15.20% from 2012 whereas cogs increased 18.12%.
2. Cost of Goods Sold Ratio
COGS ratio = COGS x 100 Sales
This ratio indicates the proportion that the cost of goods sold bears to sales. Lower the ratio, the better it is. Higher the ratio, the less favourable it is because it would have a smaller margin of gross profit.
It is clearly seen in figure 1 that the cogs ratio is rising which is not favourable. The main reason behind this rise is the rising material cost.
Statement showing calculation of COGS (Rupees Million) Particulars 2011 2012 2013 increase/ decrease in stock -3.5 -15.1 22.9 material 8,142.40 13508.1 16003.9 power 149.5 210 242.4 repairs 84.5 109.1 108.3 tools and spares 48 200.8 174.9 Cost of Goods Sold 8420.9 14012.9 16552.4 22 ALSTOM India Ltd.
Figure 2
3.Operating Profit Ratio
Operating Profit Ratio = Operating Profit/EBIT x100 Net Sales
This ratio indicates the portion remaining out of every rupee worth of sales after all operating costs and expenses have been met. Higher the ratio the better it is.
The operating profit ratio of the company is declining as shown in figure 2 above the reason behind this decline is the rising operating cost. Due to the rise in operating cost the operating profit margin is declining in spite of the rising revenue
4. Operating Cost Ratio
Operating Cost Ratio = Operating Cost x 100 Net Sales
The operating cost ratio establishes a relationship between the operating cost and net sales. Operating cost includes cogs as well as other operating expenses i.e. administration, selling and distribution & depreciation which have a matching relation with the sales.
Lower the ratio, the better it is. A higher ratio is unfavourable as it will leave a small amount of operating income to meet interest, dividends etc.
As shown in Figure 2 above the operating cost ratio is rising resulting in the decline of operating profit ratio. The reason behind this rise in the operating cost ratio is the existence of cogs (which is rising, as explained above) and the rising trend of selling expense ratio(explained further), due to these two factors the operating cost has risen over the last 3 years. Though the administrative expenses have also risen but their rise in comparison with the sales has shown a decline in 2013 which is clearly evident from the administrative expense ratio( explained further).
Figure 3
5. Operating Expense Ratio
Operating Expense Ratio = Operating Expense x 100 Net Sales 29.00 30.00 31.00 32.00 33.00 34.00 35.00 2011 2012 2013 Percentage 2011 2012 2013 Operating Exp. 30.99 34.67 33.90 Operating Exp. 24 ALSTOM India Ltd.
This ratio shows the relation between the operating expense i.e. selling and distribution, administration & depreciation expenses with the net sales. Here we do not include the cogs. A lower ratio is favourable.
Unlike the rising Operating cost ratio the Operating expense ratio has shown a decline in 2013 from its rise in 2012 which is a good sign. The reason behind this decline is fall in the administrative expense ratio (explained further). Though the administrative expenses have also increased like selling and distribution expenses but when taken as a percentage of sales admin. expenses have declined.
Figure 4
6. Administrative Expense Ratio
Administrative Expense Ratio = Administrative Expense x 100 Net Sales
This ratio shows the relation of the Administrative expenses with the net sales. Lower the ratio the better it is.
As shown in Figure 4 above the ratio increased in 2012 however the company managed to lower it down in 2013. The ratio did not lower down because the expenses reduced instead it lowered down as the rate of increase in sales was more than the increase in admin. expenses. 22.00 24.00 26.00 28.00 30.00 2011 2012 2013 Percentage 2011 2012 2013 Admn. Exp. 24.19 28.04 26.63 Admn. Exp. 25 ALSTOM India Ltd.
It is clearly visible that in 2012 the increase in sales was 53.62% whereas increase in admin. expense was 78.06% & in 2013 the sales have increased by 15.2% whereas admin. expenses by only 9.42% hence the ratio declined.
Figure 5
7. Selling Expenses
Selling Expenses = Selling Expenses x 100 Net Sales
This ratio shows the relation between the selling expenses and the net sales. A lower ratio is favourable.
The selling expense ratio of Alstom India Ltd. has shown a rising trend in last three years.
It can be seen from the table above that out of all the rising components included in calculation of selling expenses Provision for bad debts and Bad debts have shown a significant increase, and can be called as the primary reason of the rise in the selling expenses and the ratio.
Figure 6
8. Net Profit Ratio
Net Profit Ratio = Net Profit x 100 Net Sales
This ratio is very useful to the proprietors and prospective investors because it reveals the overall profitability of the concern. This ratio measures the relationship between net profit and sales of the firm. 2011 2012 2013 0.00 2.00 4.00 6.00 8.00 10.00 12.00 Percentage 2011 2012 2013 Net Profit 10.73 6.94 6.60 Net Profit 27 ALSTOM India Ltd.
Higher the ratio, the better it is because it gives an idea of improved efficiency of the concern.
In figure 6 above we can clearly see that the net profit ratio has shown a declining trend which is not favourable.
As shown in the table above the reason behind this decline is that the rate of increase in sales is more than the rate of increase in net profit. Also in 2012 the profit decreased by 11.5% however in 2013 the company managed to increase the profit by 9.53%. This is a good sign.
Figure 7
9. Return on Capital Employed
Return on Capital Employed= Profit Before Interest & Tax X 100 Capital Employed 0.00 10.00 20.00 30.00 40.00 2011 2012 2013 Percentage 2011 2012 2013 ROCE 39.61 24.28 21.72 ROCE 28 ALSTOM India Ltd.
This ratio measures the relationship between Profit Before Interest &Tax and the average Capital Employed. This ratio is an indicator of the earning capacity on the capital employed in the business.
The objective of this ratio is to determine how efficiently the long term funds supplied by the creditors and shareholders have been used. Hence a higher ratio is favourable.
The capital employed ratio of Alstom India Ltd. has been declining since 2011 which shows that the company has not been able to efficiently utilise the funds of the shareholders which is not favourable. The reason behind this decline is the increasing capital employed.
Statement Showing % Change in EBI T & Capital Employed
We can see from the table above that in 2012 the EBIT has decreased by 26.89% however it has increased by 4.34% in 2013 which is a good sign, whereas the capital employed has only increased since 2011. Also it is important to note that the rate of increase in capital employed has declined from 19.28% in 2012 to 16.56% in 2013 which is appreciated.
29 ALSTOM India Ltd.
Figure 8
10. Return on Equity
Return on Equity = Earnings to Equity x 100 Equity Shareholders Fund
This ratio measures the profitability from the equity shareholder's viewpoint. This ratio is calculated to find out how efficiently the funds supplied by the equity shareholders have been used.
Higher the ratio the more efficient the management and utilization of equity shareholder's funds.
11. Return on Shareholder's Fund
Return on Shareholder's Fund = Profit After Tax x 100 Shareholder's Fund 0.00 10.00 20.00 30.00 40.00 2011 2012 2013 Percentage 2011 2012 2013 ROE 35.04 24.18 22.91 ROSF 35.04 24.18 22.91 30 ALSTOM India Ltd.
This ratio is a measure of percentage of net profit to average shareholder's fund. Average shareholder's funds include Equity Shareholder's funds as well as Preference Shareholder's funds.
The main difference in above two ratios is the existence of Preference Share Capital and Preference Dividend, since there is no Preference Share Capital or Preference Dividend the results of both the ratios are same.
Both the ratios have declined since 2011 and the main reason behind this decline is the rising shareholder's fund which can be seen in the table below.
Statement showing calculation of Shareholders Funds
The rise in the shareholder's fund is the result of rising Reserves & Surplus i.e. the company is holding the profits as reserves and investing back in the business as a result the shareholders are getting lesser returns.
31 ALSTOM India Ltd.
Liquidity Ratios
Figure 9 1. Current Ratio
Current Ratio = Current Assets Current Liabilities
The current ratio is a widely used measure for evaluating a company's liquidity and short term debt paying ability. This ratio reveals the relationship between current assets and current liabilities.
A current ratio of 2:1 is considered ideal, i.e. if current ratio is 2 or more it means that the concern has the ability to meet its current obligations but if the ratio is less than 2 it indicates that the concern has difficulty in meeting its current obligations.
The current ratio of the company is not 2:1 but have been rising since 2011 which is good. It is clearly seen in figure 9 that it has reached to 1.16 times in 2013 from 1.07 in 2011.
2011, 1.07 2012, 1.09 2013, 1.16 2011 2012 2013 1.02 1.04 1.06 1.08 1.10 1.12 1.14 1.16 1.18 TImes Current Assets Current 32 ALSTOM India Ltd.
Figure 10
2. Liquid Ratio Liquid Ratio = Liquid Assets Current Liabilities
This ratio is a measure of a company's immediate short term liquidity. The liquid assets exclude inventory and prepaid expenses. The inventory may not be readily saleable, and prepaid expenses may not be transferable to others.
The usual guideline for the liquid ratio is 1:1, however some industries may find that a ratio less than 1:1 is adequate.
The ratio has been above 1:1 since 2011 which is a good sign. This shows that the company is has more than enough liquid assets to cover it current liabilities.
Earnings Per Share = Earnings to Equity Shareholders No. of Equity Shares
Earnings per share is the measure of the net income earned on each share of common stock. The objective of determining this ratio is to measure the profitability of the firm on the equity shares.
Higher the earnings per share, better is the performance and prospects of the company.
There was a negligible decline in the EPS of the company in 2012 as shown in figure 11 above however the company has been able increase it in 2013 which is appreciated. 23.00 24.00 25.00 26.00 27.00 28.00 2011 2012 2013 R u p e e s
Dividend Per Share = Dividend Paid to Equity Shareholders No. of Equity Shares
This ratio is calculated to see how much dividend is paid for each share held by the equity shareholders.
Higher the ratio, the more favourable it is, because this ratio shows that how much income as profit will be received by the investors.
Alstom has maintained the dividend per share at Rs. 10 since 2011 which is a good sign.
2011 2012 2013 DPS (Rs.) 10 10 10 0 2 4 6 8 10 12 R u p e e s
DPS (Rs.) 35 ALSTOM India Ltd.
Figure 13
3. Dividend Payout Ratio
Dividend Payout Ratio = Dividend Per Share x 100 Earnings Per Share
The payout ratio measures the percentage of earnings distributed in the form of cash dividends. Companies wanting to have a high growth rate try to maintain a low payout ratio because they reinvest most of their net income into the business.
Alstom's payout ratio increased in 2012 however there was a significant decrease in 2013. The reason behind this fluctuation was that the company maintains a constant DPS of Rs. 10 but the EPS declined in 2012 resulting in increase of payout ratio and hiked up in 2013 resulting in a decrease in payout ratio and such decrease is favourable as this means that the company is holding the earnings for the purpose of reinvestment in the business.
34.00 36.00 38.00 40.00 42.00 2011 2012 2013 P e r c e n t a g e
4. Price Earnings Ratio Price Earnings Ratio = Market price Per Share Earnings Per Share
This ratio is helpful in determining whether the share of a particular firm should be purchased or not. High Growth shares have high P/E ratios as investors are willing to pay a greater multiple of current earnings to achieve a higher future growth.
If high risk is found in a share, it reduces its market price and hence automatically reduces its P/E ratio.
We can see from figure 14 that the P/E ratio is declining which indicates that there is high risk involved due to which the yield will be high (explained further) however the MPS will decline as shown below.
Statement Showing the Market Price per Share (In Rupees) Particulars 2011 2012 2013 MPS(closing rates) 586.75 355.60 318.25
0.00 5.00 10.00 15.00 20.00 25.00 2011 2012 2013 P e r c e n t a g e
Earning Yield Ratio = Earnings Per Share x 100 Market price Per Share
This ratio is also known as Earnings - Price ratio. This ratio shows the relationship between the EPS & MPS. Higher the ratio the better it is as each investor in equity shares expects a certain amount of earnings, whether distributed or not from the company in whose shares he invests.
6. Dividend Yield Ratio
Dividend Yield Ratio = Dividend Per Share x 100 Market price Per Share
This ratio is also known as Dividend - Price ratio. This ratio is important for the investors who are interested in the dividend income. This ratio shows that how much dividend can be received by an investor if he buys the shares from open market.
From figure 14 above we can see that the Earning Yield as well as the Dividend Yield has been rising since 2011. The reason behind this rising trend is the decline in the Market price Per Share which is due to the high risk involved as explained in point 4 above.
38 ALSTOM India Ltd.
Coverage Ratios
Figure 15 1. Interest Coverage Ratio Interest Coverage Ratio = Earnings Before Interest & Tax Interest on Long Term Debt
This ratio indicates the relation between net profits before interest and tax and interest on long term debts. This ratio shows the number of times the interest charges are covered by the income out of which they will be paid.
Higher the ratio the more beneficial it is for lenders, because this ratio measures the margin of safety for the lenders.
In case of Alstom this ratio has been declining since 2011 and there has been a drastic decline in 2013 to 74.83 times from 274.74 times. This shows that the lenders margin of safety has declines and the lenders will be reluctant to lend money to alstom. Interest Coverage Ratio 0.00 100.00 200.00 300.00 400.00 2011 2012 2013 T i m e s
2011 2012 2013 Interest Coverage Ratio 359.19 274.74 74.83 Interest Coverage Ratio 39 ALSTOM India Ltd.
Figure 15
2. Proprietary Ratio
Proprietary Ratio = Shareholder's Funds Total Assets
This ratio shows the relationship between shareholder's funds and total assets. This ratio shows that how much capital is introduced by the owner in business.
Higher the ratio means a sound position of business , because it shows that the organisation is not run by the outside funds which mean less interference and pressure of outsiders. It is clearly seen in the figure 15 above that the ratio has been rising since last three years which is a good sign. 2011 2012 2013 Proprietary 0.21 0.25 0.29 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 T i m e s
Proprietary 40 ALSTOM India Ltd.
Figure 16
3. Capital Gearing Ratio
Capital Gearing Ratio = Long Term Loan + Preference Share Capital Equity Share Capital
This ratio establishes the relationship between the fixed cost bearing capital (the capital upon which the rate of return is fixed) e.g. long term loans or preference share capital & variable cost capital ( the capital upon which rate of return is not fixed) e.g. equity share capital.
The higher ratio the more beneficial for the firm because at the time of prosperity the owners will enjoy the benefits of trading on equity, while at the time of depression they will have to suffer a lot because they will have to pay the interest whether they are in loss or profit.
Since the ratio has shown a rising trend in last three years it is a good sign. 2011 2012 2013 Capital Gearing 0.05 0.06 0.07 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 T i m e s
Capital Gearing 41 ALSTOM India Ltd.
Figure 17 4. Debt Equity Ratio
Debt Equity Ratio = Debt Equity
This ratio indicates the relationship between long term debts and shareholder's fund. A low ratio is generally favourable as it shows a greater claim of owners than creditors. From the creditors point of view it represents a larger margin of safety since owners equity is treated as a margin of safety by creditors also the owners try to maintain a low ratio so as to avoid the interference of outsiders in the operations of the business.
Alstom's debt equity ratio has been rising in last three years. The desirable norm for this ratio is 2:1, hence this rise is favourable.
2011 2012 2013 Debt-Equity 0.05 0.06 0.07 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 T i m e s
Debt-Equity 42 ALSTOM India Ltd.
Turnover Ratios
Figure 18
1. Stock Turnover Ratio
Stock Turnover Ratio = Cost Of Goods Sold Stock
This ratio measures the number of times on an average the stock is sold during the period. The purpose is to measure the liquidity of Stock. A faster turnover is favourable as less cash is tied up in stock and less the chance of stock obsolescence. Over the last three years the ratio has declined from 20.28 in 2011 to 18.86 in 2013 this means that the stock does not sell fast and stays on the shelf for a long time compared to earlier years, this needs to be improved.
Stock 18.00 19.00 20.00 21.00 2011 2012 2013 T i m e s
This ratio measures the number of times, on average , the debtors are collected during the period i.e. how faster the debts are being collected.
Debtors turnover has been on a rise since 2011 which is evident from figure 19 above. This is good as the company is able to promptly collect the debts as the years are passing by.
Note: It is assumed that total sales are credit sales.
2011 2012 2013 Debtors 2.31 2.35 2.54 2.15 2.20 2.25 2.30 2.35 2.40 2.45 2.50 2.55 2.60 T i m e s
Debtors 44 ALSTOM India Ltd.
Figure 20
3. Creditors Turnover Ratio Creditors Turnover Ratio = Credit Purchases Creditors
This ratio is used to establish a relation between credit purchases and average trade creditors. The objective of calculating this ratio is to determine the efficiency with which the creditors are managed.
A low turnover ratio reflect liberal credit terms granted by suppliers, while a high ratio shows that accounts are to be settled rapidly. There has been an increase in the turnover ratio in last three years which means that the accounts are to be settled faster than the earlier years, however we can see from figure 20 that the company has managed to lower the ratio to 4.78 in 2013 from 5.03 in 2012. This shows that the creditors are providing liberal credit terms to the company. Note: It is assumed that total purchases are the credit purchases. 2011 2012 2013 Creditors 3.62 5.03 4.78 0.00 1.00 2.00 3.00 4.00 5.00 6.00 T i m e s
Creditors 45 ALSTOM India Ltd.
Figure 22
4. Capital Employed Turnover Ratio Capital Employed Turnover Ratio = Net Sales Capital Employed
Capital Turnover Ratio indicates the efficiency of the organization with which the capital employed is being utilized. A high capital turnover ratio indicates the capability of the organization to achieve maximum sales with minimum amount of capital employed.
Alstom has been able to increase this ratio since 2011 and has maintained it over 3 from 2012 onwards. This means that the company is able to generate sales 3 times more than the capital employed in the company which is a sign of good performance.
Capital Employed 0.00 1.00 2.00 3.00 4.00 2011 2012 2013 T i m e s
2011 2012 2013 Capital Employed 2.55 3.29 3.25 Capital Employed 46 ALSTOM India Ltd.
Cash Flow Analysis
47 ALSTOM India Ltd.
Cash Flow Statement (Rupees in Millions) Particulars 2011 2012 2013 Operating Activities 2754.1 -1277.4 330.6 Investment Activities Inter corporate deposits given -14 -3273 -12943 Inter corporate deposits received back 814 12856 Purchase of equity shares of Subsidiary Company -0.5 Interest received 373.7 364.9 253.1 Purchase of investments -315.3 Purchase of fixed assets -933.7 -955.2 -837.1 Sale proceeds of fixed assets 8.7 9.5 4.5 Net cash used in Investing -565.3 -3355.6 -666.5 Financing Activities Dividend and corporate dividend tax paid -781.5 -773.6 -781.4 Movement in unclaimed dividend account -1.3 -1.2 Interest paid -27.1 -6.5 -19.1 Net cash used in Financing -808.6 -781.4 -801.7
We analyse from the figures above that the company was not able to generate cash through its operations in 2012 however it managed to turn it around in 2013 which is good.
The company is earning from the investments in form of interest. However they are investing more in fixed assets as a result there is a loss of cash from investing activities. We can also see that the company is investing in fixed assets in order to facilitate its operating activities.
The main financing expense is that of the interest payments though the major portion of the financing expense is covered by the payment of dividend it is more or less constant.
48 ALSTOM India Ltd.
Competitor Analysis
49 ALSTOM India Ltd.
Figure 23
Alstom stands at third position if compare it with the competitors in terms of revenue. However this does not mean that the company is not performing well.
Figure 24 13% 35% 1% 51% Revenue Alstom Abb Ltd GE Energy Siemens Net Profit ratio ROE ROCE Alstom 6.6 22.91 21.72 Abb Ltd 2.3 6.69 11.32 GE Energy 2.47 8.67 14.85 Siemens 1.7 4.81 5.08 0.0 5.0 10.0 15.0 20.0 25.0 P e r c e n t a g e
Particulars Alstom Abb Ltd GE Energy Siemens Revenue 27,858.4 77,219.9 1863 1,13,526 50 ALSTOM India Ltd.
In spite of not having the highest sales Alstom fares well when compared in terms of profitability. Alstom has the highest net profit ratio, return on equity & return on capital employed. This shows that the company is able to generate good returns in the current sales.
Figure 25 From the figure above we can see that Alstom also has the highest Dividend per Share as well as Earning per Share.
Figure 26 We can see that though the company has the highest DPS & EPS but the payout ratio is not the highest. This is still good because the company is utilising the retained money in an efficient way and this is evident from the returns.
0 5 10 15 20 25 30 DPS EPS DPS EPS Siemens 5 5.45 GE Energy 0.3 1.96 Abb Ltd 3 8.46 Alstom 10 27.33 Alstom Abb Ltd GE Energy Siemens 0 50 100 Divident Payout Ratio Alstom, 36.59 Abb Ltd, 35.45 GE Energy, 17.75 Siemens , 91.8 P e r c e n t a g e
51 ALSTOM India Ltd.
Part 2 Taxation in Hydroelectric Projects
52 ALSTOM India Ltd.
Chamera Hydroelectric Project Himachal Pradesh
As explained above Alstom India Ltd. is a company that provides solution for power generation. It entered into a contract with to NHPC ( National Hydro Power Corporation) to supply the Offshore and Onshore plant and equipment, for Chamera III Hydroelectric Project. Chamera III Hydroelectric Project is a 231 MW project and is situated on Ravi River, District Chamba, Himachal Pradesh. The contract includes turnkey Electro-Mechanical package of 3 x 77 MW Francis Units size along with associated Balance of Plants with a schedule of 48 months. There are three contracts for this project 1. Supply of Offshore Plant & Equipment. 2. Supply of Onshore Plant & Equipment. 3. Onshore Transportation & Installation Services.
53 ALSTOM India Ltd.
Key Facts Chamera Hydroelectric Project Himachal Pradesh Contract(Electrical & Mechanical Works) Basis 1 2 3 A B For
Offshore Plant & Equipment (Power Hydraulique) Onshore Ex- works Plant & Equipment (Indian Origin) (Power Hydraulique) Onshore Ex- works Plant & Equipment (Indian Origin) (Projects India) Onshore Services Client NHPC(National Hydroelectric Power Corporation) Ltd. Date 02-03-2007 Time of Completion Shall be determined from the date of Notification of Award Time Schedule 23-01-2007 - 22-12-2010 Contract Price JPY 1,150,003,216 INR 363,000,000 EURO 3,216,547 + INR 1,102,108,474 INR 271,968,000 (Transportation : INR 53,630,000 & Installation: INR 218,338,000) Taxes Custom Duty @ 22.58% (Calculated on CIF + 1% Landing Charges) Excise Duty(Reimbursed DEP) & CST @ 4% (C Form) (Calculated on main equipment value + ED @ 16.32%) Excise Duty(Reimbursed DEP) & CST @ 4% (C Form) (Calculated on main equipment value + ED @ 16.32%) Contract price inclusive of Service Tax @ 10.2% Tax Value INR 100.553.333.98 (JPY 1,150,003,216 @ 0.3834 INR) INR 55,232,648.23 INR 55,232,648.23 INR 251,73,081.67 54 ALSTOM India Ltd.
Uri Hydroelectric Project Jammu & Kashmir
Alstom in India was awarded Uri II contract by NHPC (National Hydro Power Corporation). Uri II Hydroelectric Project is a 240 MW project and is situated on Jhelum River, District Baramula, Jammu & Kashmir. The contract includes turnkey Electro-Mechanical package of 4 x 60 MW Francis Units size along with associated Balance of Plants. There are three contracts for this project 4. Supply of Offshore Plant & Equipment. 5. Supply of Onshore Plant & Equipment. 6. Onshore Transportation & Installation Services.
55 ALSTOM India Ltd.
Key Facts Uri Hydroelectric Project Jammu & Kashmir
Contract(Electrical & Mechanical Works)
Basis 1 2 3 For Offshore Equipment (Power Hydraulique) Onshore Ex- works Equipment (Indian Origin) Onshore Services Client NHPC(National Hydroelectric Power Corporation) Ltd. Date 25-01-2007 Time of Completion Shall be determined from the date of Notification of Award Time Schedule 29-12-06 - 28-04-10 Contract Price JPY 1,814,229,275 + CHF 14,256,086 INR 1,867,339,795 + EURO 3,531,935 INR 388,169,847 (Transportation : INR 80,356,129 & Installation : INR 307,813,718) Taxes Custom Duty @ 22.58% (Calculated on CIF + 1% Landing Charges) Excise Duty(Reimbursed DEP) & CST @ 4% (C Form) (Calculated on main equipment value + ED @ 16.32%) Service Tax not applicable on J& K as per Section 64 of chapter v of Finance Act 1994 Tax Value INR 287,030,225 INR 69,553,078.20 56 ALSTOM India Ltd.
Future Plan of Action
Understanding the indirect taxes in India.
Extracting information about current progress of these projects.
Understanding the revenue recognition system in these projects.
SWOT analysis.
Understanding the marketing mix.
Understanding the employee selection process and appraisal system.
57 ALSTOM India Ltd.
Annexure 4 (s)
4 All the figures are taken from the balance sheet of Alstom India Limited available on the company's website. http://www.alstom.com/india/our-companies/alstom-projects-india-limited/reports-and-financials/ 58 ALSTOM India Ltd.
Annexure 1 BALANCE SHEET Rupees in Million
EQUITY AND LIABILITIES 2011 2012 2013
(1) Shareholders' Funds
(a) Share Capital 670.20 672.30 672.30
(b) Reserves and Surplus 5,202.80 6,264.70 7,348.80 A Shareholders' Funds 5,873.00 6,937.00 8,021.10
2) Non-Current Liabilities
(a) Other long term liabilities 102.40 112.30 144.40
(b) Long term provisions 183.10 305.50 414.20
(c) Deferred tax liabilities (Net) 7.70 B Long Term Loans 293.20 417.80 558.60 (A+B)=C Capital Employed 6,166.20 7,354.80 8,579.70
3) Current Liabilities
(a) Construction contracts in progress, liabilities 17,584.10 14,587.70 12,556.00
(b) Trade payables 2,249.30 2,686.60 3,346.30
(c) Other current liabilities 1,534.60 1,544.50 1,695.00