1. INSTITUTE OF PROFESSIONAL EDUCATION AND
RESEARCH (IPER), BHOPAL
ASSIGNMENT OF FINANCIAL MANAGEMENT ON
JP ASSOCIATE MBA SEC-II GROUP-12
Submitted to-
Prof. Priya Dwivedi
Submitted by-
Sandeep Patel
Sandeep Rai
Sanjeev Malviya
3. INTRODUCTION
Civil Engineering
Initially, the Jaypee Group started as civil engineering contractors. Jaiprakash Associates Ltd.,
the flagship company of the Group, is a leader in Construction of river valley and hydropower
projects on turnkey basis for more than 4 decades. The company is currently executing various
projects in hydropower / irrigation / other infrastructure fields and has had the distinction of
executing simultaneously 13 hydropower projects spread over 6 states and the neighboring
country Bhutan for generating 10,290 MW of power. Jaypee Group undertakes projects
involving:-
Large quantities of rock excavation (both surface and underground)
Controlled earth/rock fill
Concrete manufacture and placement (including chilling)
Fabrication and erection of penstock liners
Hydro-mechanical equipment procurement and erection
Steel Structures
Expressway Construction
Real Estate Development
The projects that have been commissioned or in the advance stages of completion have been
undertaken by it either as a successful EPC contractor or as a Non EPC contractor. The group
also has secured three BOT contracts in the private hydropower generation sector after the
opening up of the doors by the Government of India in 1991 for private sector power generation
companies.
It is not an embellishment to state that over the past three decades the company has not only
successfully executed large and prestigious projects, but in this process has acquired a pool of
knowledge, skills and experience in their field of technological excellence.
The company has been assigned "CR 1" grade by ICRA Ltd indicating Very Strong Contract
Execution Capacity with best prospects of timely completion of projects without cost overruns,
etc. for hydropower EPC contracts of value greater than Rs.2500 Crores.
Civil Engineering
4. CASH FLOW STATEMENT ANALYSIS
The cash flow statement explains the change during the period in cash and cash
equivalents.
Cash includes currency on hand and demand deposits. Cash equivalents are short-term,
highly
Liquid investments those are readily convertible to cash.
The cash flow statement will summarize the cash flows so that net cash provided or used
by each of the three types of activities is reported. Beginning and ending cash must be
reconciled based on the net effect of these activities.
Components of a cash flow statement
Operating Activities
The statement provides information about the cash generated from a company’s
daily operating activities. Operating activities are those which produce either
revenue or are the direct cost of producing a product or service.
Operating activities which generate cash inflows include customer collections from
sales of their primary products or services, receipts of interest and dividends, and
other operating cash receipts.
Operating activities which create cash outflows include payments to suppliers,
payments to employees, interest payments, payment of income taxes and other
operating cash payments.
Investing Activities
Investing activities include buying and selling noncurrent assets which will be used
to generate revenues over a long period of time; or buying and selling securities not
classified as cash equivalents.
Cash inflows generated by investing activities include sales of noncurrent assets
such as property, plant, and equipment. Investing activities can also include the
purchase or sale of stock and securities.
Lending money and receiving loan payments would also be considered investing
activities.
Financing Activities
Financing activities include borrowing and repaying money, issuing stock (equity)
and paying dividends.
For example, if you borrow funds to purchase equipment or pay off a loan, the cash
flow statement will enable you to determine how much cash was either generated or
used as a result of those transactions.
5. INTERPRETATION
Jaiprakash Associates
Cash Flow ------------------- in Rs. Cr. -------------------
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit Before Tax 1314.34 1754.51 2381.67 1250.98 843.35
Net Cash From Operating Activities 704.77 1207.58 185.32 523.12 1007.69
Net Cash (used in)/from
Investing Activities
-2948.10 -4919.20 -2949.12 -3712.66 -4225.27
Net Cash (used in)/from Financing
Activities
842.28 2294.97 3734.39 4259.04 3603.21
Net (decrease)/increase In Cash and
Cash Equivalents
-1401.05 -1416.65 970.59 1069.50 385.63
Opening Cash & Cash Equivalents 2423.28 3879.18 2908.59 1839.09 1429.81
Closing Cash & Cash Equivalents 1022.23 2462.53 3879.18 2908.59 1815.44
CASH FLOW ANALYSIS OF JP ASSOCIATE
Operating Activities
While analyzing cash flow, We found that Cash from operating Activity have been Declining
over the years. When compare from 2008 to 2009 almost Decrease in half the value of previous
years.
It tells us the firm needs a cash infusion.
Investing Activities
The cash flow statement puts investing activities into perspective. At one glance, we can see
wheather or not a surplus in operations is being used to grow the company.
A lack of investing activities, which is few purchases of new equipment or other assets, may
indicate stagnant growth or a diversion of funds away from the company.
It tells us the JP Associate Investment Activities provides Negative Returns
Financing Activities
While we made comparison between past periods shows a negative idea of the trend of JP
Associate’s business. Negative trends from (2008-12) in cash flow will discourage them to
consider long-term financing and also affects the ability to generate cash for repayment.
Decreasing cash flow will also make it difficult to acquire financing and to negotiate with
lenders.
6. Jaiprakash Associates
Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 13,408.07 13,539.72 10,497.25 6,100.82 4,326.87
Excise Duty 604.96 663.25 430.68 332.06 348.50
Net Sales 12,803.11 12,876.47 10,066.57 5,768.76 3,978.37
Other Income 264.49 865.04 1,595.17 389.12 271.60
Stock Adjustments -97.00 162.56 -83.10 66.16 23.78
Total Income 12,970.60 13,904.07 11,578.64 6,224.04 4,273.75
Expenditure
Raw Materials 1,826.75 1,636.98 1,709.89 1,068.36 816.41
Power & Fuel Cost 1,583.52 1,490.64 474.95 264.69 201.19
Employee Cost 661.32 595.72 453.35 330.79 255.27
Other Manufacturing Expenses 3,488.07 5,022.23 3,690.53 1,711.84 935.51
Selling and Admin Expenses 0.00 1,431.59 956.31 620.90 537.40
Miscellaneous Expenses 1,706.80 157.23 493.50 73.95 97.31
Preoperative Exp Capitalised 0.00 -307.63 -217.27 0.00 0.00
Total Expenses 9,266.46 10,026.76 7,561.26 4,070.53 2,843.09
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Operating Profit 3,439.65 3,012.27 2,422.21 1,764.39 1,159.06
PBDIT 3,704.14 3,877.31 4,017.38 2,153.51 1,430.66
Interest 1,781.74 1,515.41 1,158.28 584.75 383.70
PBDT 1,922.40 2,361.90 2,859.10 1,568.76 1,046.96
Depreciation 614.15 607.81 456.06 308.97 203.30
Other Written Off 0.00 0.42 4.40 0.33 0.31
Profit Before Tax 1,308.25 1,753.67 2,398.64 1,259.46 843.35
Extra-ordinary items 23.17 32.61 3.25 12.23 -0.06
PBT (Post Extra-ord Items) 1,331.42 1,786.28 2,401.89 1,271.69 843.29
Tax 288.10 600.82 673.31 353.97 233.68
Reported Net Profit 1,026.38 1,167.78 1,708.36 897.01 609.67
Total Value Addition 7,439.71 8,389.78 5,851.37 3,002.17 2,026.68
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 106.32 170.12 190.44 127.09 114.60
Corporate Dividend Tax 17.25 13.80 31.93 15.57 19.47
Per share data (annualised)
Shares in issue (lakhs) 21,264.33 21,264.33 21,246.35 11,838.01 11,715.22
Earning Per Share (Rs) 4.83 5.49 8.04 7.58 5.20
Equity Dividend (%) 25.00 40.00 54.00 50.00 50.00
Book Value (Rs) 57.86 43.24 38.58 52.27 33.22
8. INTERPRETATIONS
DU PONT ANALYSIS
The DuPont Analysis is an approach that breaks down ROE (Return on Equity) into a function
of 3 or 5 ratios that helps to see the impact of each ratio on ROE.
Return on assets (ROA)
It is a financial ratio that shows the percentage of profit that a company earns in relation to its
overall resources (total assets). Return on assets is a key profitability ratio which measures the
amount of profit made by a company per dollar of its assets.
It is decreasing over the period of time. The company is unable to utilise its resources.
Calculation (formula)
Return on assets is calculated by dividing a company's net income (usually annual income) by
its total assets, and is displayed as a percentage. There are two acceptable ways to calculate
return on assets: using total assets on the exact date or average total assets:
ROA = Net Income after tax / Total assets (or Average Total assets)
Return on equity (ROE)
is the amount of net income returned as a percentage of shareholders equity. It reveals how much
profit a company earned in comparison to the total amount of shareholder equity found on the
balance sheet.
It shows positive trend as it is increasing. The shareholders are receiving fare enough
through the investment in the JP Associate Company.
Calculation (formula)
Return on equity is calculated by taking a year’s worth of earnings and dividing them by the
average shareholder equity for that year, and is expressed as a percentage:
ROE = Net income after tax / Shareholder's equity
9. Definition of 'Retention Ratio'
The per cent of earnings credited to retained earnings. In other words, the proportion of net
income that is not paid out as dividends.
Calculated as:
Retention Ratio is increasing over the years. This might be due to the fact that company is
diversifying itself.
Definition of 'Internal Growth Rate'(IGR)
The highest level of growth achievable for a business without obtaining outside financing. A
firm's maximum internal growth rate is the level at which growth from general business
operations can continue to fund and grow the company. For start-up firms and small business the
internal growth rate is an important ratio to follow, since it measures a firm's profitable increase
in top-line revenues.
IGR is declining over the period of time because of the ROA is also decreasing company is
struggling to make optimum uses of its internal Resources.
Definition of 'Sustainable Growth Rate –( SGR ):
The maximum growth rate that a firm can sustain without having to increase financial leverage.
SGR = ROE *b/ 1 – (ROE*b)
Where b is Retention Ratio
SGR is also negative over the years. It also affects the overall efficiency of the business.
With the Help of Du Pont Analysis, we have calculated ROI, ROE,ROA, RETENTION RATIO,
IGR, SGR.
