WORKING CAPITAL MANAGEMENT

OF
ODISHA POWER TRANSMISSION
CORPORATION LTD. (OPTCL)

SUBMITTED
HARAPRIYA PARIDA(18MBA064)
UNDER THE GUIDANCE OF:
EXTERNAL GUIDE: INTERNAL GUIDE:
Mr. DAMODAR MISHRA Mrs. AHUTI MOHANTY
AGM FINANCE (OPTCL)

FOR THE PARTIAL FULLFILLMENT FOR THE DEGREE

OF MASTER IN BUSINESS ADMINISTRATION –
FINANCIAL HUMAN RESOURCES (MBA-FM),
SESSION 2018-2020

BHADRAK AUTONOMOUS COLLEGE, BHADRAK, ODISHA

 CERTIFICATE
This is to certify that HARAPRIYA PARIDA, ROLL NO-
18MBA064, student of BHADRAK AUTONOMOUS COLLEGE, BHADRAK,
has completed her project field work at Odisha Power Transmission
Corporation Limited (OPTCL) on the topic of ―WORKING CAPITAL
MANAGEMENT and has submitted the field work report in partial
fulfillment for the course of MASTER IN BUSINESS
ADMINISTRATION (MBA) for
the academic year 2018-2020.
She has worked under our guidance and direction. The said report is
based on bonfire information.

EXTERNAL GUIDE
Mr. Damodar Mishra
A.G.M. (Finance)
OPTCL
 CERTIFICATE
This is to certify that HARAPRIYA PARIDA, ROLL NO-
18MBA064, student of BHADRAK AUTONOMOUS COLLEGE, BHADRAK,
has completed her project field work at Odisha Power Transmission
Corporation Limited (OPTCL) on the topic of ―WORKING CAPITAL
MANAGEMENT and has submitted the field work report in partial
fulfillment for the course of MASTER IN BUSINESS
ADMINISTRATION (MBA) for
the academic year 2018-2020.
She has worked under our guidance and direction. The said report is
based on bonfire information.

INTERNAL GUIDE
Mrs. AHUTI MOHANTY
BHADRAK AUTO. COLLEGE
 DECLARATION
I hereby declare that the project titled ― ‘WORKING CAPITAL
MANAGEMENT’ is an original piece of research work carried out by me
under the guidance and supervision of Mr. Damodar Mishra and Mrs.
Ahuti Mohanty. The information has been collected from genuine &
authentic sources.

The work has been submitted in partial fulfillment of the

requirement of MASTER IN BUSINESS ADMINISTRATION (MBA).

HARAPRIYA PARIDA
ROLL NO: 18MBA064
 ACKNOWLEDGEMENT
“The satisfaction Euphoria that accompanies the successful
completion of any work would be incomplete unless we mention the name
of the person, who made it possible, whose constant guidance and
encouragement served as a beckon of light and crowned our efforts with
success.” I consider it a privilege to express through the pages of this
report, a few words of gratitude and respect to those who guided and
inspired in the completion of this project.

I am deeply indebted to Mr. Damodar Mishra, A.G.M (finance)

for giving me the opportunity to undergo my project in their esteemed
organization and their timely suggestions & valuable guidance.

My sincere thanks to Mrs. Ahuti Mohanty (Internal Guide,

Bhadrak Auto. College, Bhadrak) who constantly encouraged me and
showed the right path from day first till the completion of my project
and all the other faculty members for guiding me throughout the project.

However, I accept the sole responsibility for any possible errors of

omission and would be extremely grateful to the readers of this project
report if they bring such mistakes to my notice.

HARAPRIYA PARIDA
ROLL NO: 18MBA064
 CONTENTS
1. INTRODUCTION
1.1 Introduction
1.2 Importance of the study
1.3 Scope of the study
1.4 Objectives of the study
1.5 Research methodology
1.6 Method of the study
1.7 Collection of data
1.8 Selection of topic
1.9 Limitations of the study
2. ORGANISATION PROFILE
2.1 Company Profile
2.2 Vision of OPTCL
2.3 Mission of OPTCL
2.4 Board of directors
2.5 Senior executives
2.6 Objectives of OPTCL
2.7 Power sector reform in Odisha – OPTCL
2.8 SWOT analysis of OPTCL
2.9 Functional areas of OPTCL
2.10 Organisational structure of OPTCL
3. WORKING CAPITAL MANAGEMENT
3.1 Concept of working capital
3.2 Importance of working capital
3.3 How it is calculated
4. DATA ANALYSIS AND REPRESENTAION
4.1 Sources of data collection
4.2 Implementation of cash management at OPTCL
4.3 Funds management at OPTCL
4.4 Working capital management of OPTCL
4.5 Tools for data analysis
5. FINDING, SUGGESTION AND CONCLUSION
6. BIBLIOGRAPHY
 CHAPTER 1
INTRODUCTION

1.1INTRODUCTION
Working capital management is significant in financial management. It
plays a vital role in keeping the wheel of the business running. Every
business requires capital, without it can’t be promoted. Thousands of
companies fail each year due to poor working capital management
practices. Working capital plays a key role in a business enterprise just
as the role of heart in human body. It acts as grease to run the wheels of
fixed assets.
In simple term, working capital is an excess of current assets over the
current liabilities. Good working capital management reveals higher
returns of current assets than the current liabilities to maintain a steady
liquidity position of a company. Otherwise, working capital is a
requirement of funds to meet the day to day working expenses. So a
proper way of management of working capital is highly essential to ensure
a dynamic stability of the financial position of an organization.
Working capital refers to the funds invested in current assets, i.e.
investment in stocks, sundry debtors, cash and other current assets.
Current assets are essential to use fixed assets profitably. For example;
a machine cannot be used without raw material. The investment on the
purchase of raw material is identified as working capital.
Working capital management deals with maintaining the levels of working
capital to optimum, because if a concern has inadequate opportunities and
if the working capital is more than required then the concern will lose
money in the form of interest on the blocked funds. Therefore working
capital management plays a very important role in the profitability of a
company. And also due to heavy competitions among different
organization’s it is now compulsory to look after working capital.

1.2 IftPORTANCE OF THE STUDY

OPTCL is one of the largest power transmission organizations in the
country, which plays the role of transmission of electricity in the entire
state of Odisha seeing the good opportunity to study financial systems
and practices of OPTCL; it is relatively important take up internship
assignment on ”WORKING CAPITAL MANAGEMENT IN OPTCL”. During
the project work, it is being analysed the working capital position of this
organization. Decisions relating to working capital and short term
financing are referred to as working capital management. These involve
managing the relationship between a firm's short-term assets and its
short-term liabilities. The goal of Working capital management is to
ensure that the firm is able to continue its operations and that it has
sufficient money flow to satisfy both maturing short-term debt and
upcoming operational expenses.
At OPTCL a substantial part of the total assets are covered by current
assets. Current assets form around 30%- 40% of the total assets.
However this could be less profitable on the assumption that current
assets generate lesser returns as compared to fixed assets.
But in today’s competition it becomes mandatory to keep large current
assets in form of inventories so as to ensure smooth production and
excellent management of these inventories has to be maintained to strike
a balance between all the inventories required for the production.
So, in order to manage all these inventories and determine the
investments in each inventories, the system call for an excellent
management of current assets which is really a tough job as the amount
of inventories required are large in number.
Here comes the need of working capital management or managing the
investments in current assets. Thus in big companies like OPTCL it is not
easy at all to implement a good working capital management as it demands
individual attention on its different components.
The study of working capital management is very helpful for the
organization to know its liquidity position. The study is relevant to the
organization to know the day to day expenditure. This study is relevant
to give an idea to utilize the current assets.
This study is also relevant to the student as they can use it as a
reference. This report will help in conducting further research. Other
researcher can use this project as secondary data.
1.3 SCOPE OF THE STUDY
The present study deals with the working capital management
practice in OPTCL. The scope of working capital management is
very wide & broad based. For the theoretical understanding, the
first part of the study is confined to the review of literature
relating to working capital management & other related areas. For
analytical & technical study, the fourth part is relevant.

The study covers a period of 5 years commencing from the

financial year 201 4- 2015 to the financial year 201 7- 201 8.
The year 2012- 2013 was treated as a normal year for the major
economic activities. In order to treat the same year as the base
year for analysing the trends in the working capital of ODISHA
POWER TRANSMISSION CORPORATION LIMITED (OPTCL) the
year 2014- 2015 has been
selected as the beginning of the study period. The study is
confined up to 2017- 2018.

1.4 OBJECTIVES OF THE STUDY

Everything in life holds some kinds of objectives to be fulfilled. This
study is not an exception to it. The following are a few straight forward
goals which I have tried to fulfil in my project:
1) To study the various components of working capital.
2) To analyse the liquidity trend with the help of Ratios.
3) To analyse the working capital trend with the analysis of cash flow
analysis
4) To appraise the utilization of current asset and current liabilities and
find out short-comings if any.
5) To suggest measure for effective management of working capital.
1.5 RESEARCH ftETHODOLOGY
This chapter contains the methodology adopted in collection &
analysis of the data for the study of working capital management
of
WORKING CAPITAL MANAGEMENT IN OPTCL, BBSR”. The scope of
the study, sources of data & limitations of the study. The chapter
also discusses the techniques used for analysis & interpretation of
working capital management practices of WORKING CAPITAL
MANAGEMENT IN OPTCL, BBSR”.

Research methodology is a systematic approach in management

research to achieve pre-defined objectives. It helps a researcher to
guide during the course of research work. Rules and techniques
stated in research methodology save time and labor of the
researcher as researcher know how to proceed to conduct the study
as per the objective.

1.6 ftETHOD OF THE STUDY:

Information is collected during my four weeks of study program at
OPTCL from official document, various sections of the organization &
disquisition with the officers of various departments. Some information’s
are collected directly through meet some information available in official
document such as: Newspaper, Annual report, Newsletter and any other
references.

1.7 COLLECTION OF DATA:

The data for purpose of the study are collected only from the secondary
sources of information. The information, which is available on various
publications like books, journal’s annual general reports, financial
statement, records etc., is taken for the purpose of the study.
1.8 SELECTION OF TOPIC
The selection of topic is a crucial factor in any research study. There
should be newness and it should give maximum scope to explore the ideas
from different angles.
In present day due to increase in competition, working capital is becoming
necessary for the organization. It is that part of capital which is
necessary to undertake day to day expenditure of the business
organization. Whatever may be the organization, working capital plays an
important role, as the company needs capital for its day to day
expenditure. Thousands of companies fail each year due to poor working
capital management practices. Entrepreneurs often don't account for
short term disruptions to cash flow and are forced to close their
operations. Working capital is the fund invested by a firm in current
assets. Now in a cut throat competitive era where each firm competes
with each other to increase their production and sales, holding of
sufficient current assets have become mandatory as current assets
include inventories and raw materials which are required for smooth
production runs. Holding of sufficient current assets will ensure smooth
and uninterrupted production but at the same time, it will consume a lot
of working capital. Here creeps the importance and need of efficient
working capital management. After due to consultation with the external
guide /internal guide, the topic was finalized and titled as-“A STUDY
ON WORKING CAPITAL MANAGEMENT IN OPTCL, BBSR”
SELECTION OF LOCATION FOR THE STUDY: The location for study
was selected as the CORPORATE OFFICE OF OPTCL, Bhubaneswar.
 RESEARCH DESIGN:“A Research design is the arrangement of
conditions for collection and analysis of data in a manner that aims
to combine relevance to the research purpose with economy in
procedure” The research design followed to study the working
capital management in ORISSA POWER TRANSMISSION
CORPORATION LIMITED (OPTCL) is Descriptive and Analytical
Research Design.
1.9 LIftITATION OF THE STUDY
1) The topic working capital management is itself a very vast topic yet
very important also. Due to time restraints it was not possible to study in
depth in get knowledge what practices are followed at OPTCL.
2) Many facts and data are such that they are not to be disclosed
because of the confidential nature of the same.
3) Since the financial matters are sensitive in nature the same could not
acquire easily.
4) The study is restricted to only the Four Year data of OPTCL.
 CHAPTER 2
ORGANISATION
PROFILE
2.1 COftPANY PROFILE
ODISHA POWER TRANSMISSION CORPORATION LIMITED.
(OPTCL)
Registered Office: Jan path, Bhubaneswar - 751022Phone: (0674) -
2540051 / 2540243
ODISHA POWER TRANSMISSION CORPORATION LIMITED (OPTCL),
one of the largest Transmission Utility in the country was incorporated in
March 2004 under the Companies Act, 1956 as a company wholly owned
by the Government of Orissa to undertake the business of transmission
and wheeling of electricity in the State.
 Started commercial operation from 01.04.2005 only as a Transmission
Licensee. (a deemed Transmission Licensee under Section 14 of
Electricity Act, 2003)

 Notified as the State Transmission Utility (STU) by the State Govt.

and discharges the State Load Dispatch functions.

The registered office of the Company is situated at Bhubaneswar, the

capital of the State of Orissa. Its projects and field units are spread all
over the State. OPTCL became fully operational with effect from 9th
June 2005 consequent upon issue of Orissa Electricity with OPTCL. The
Company has been designated as the State Transmission Utility in terms
of Section 39 of the Electricity Act, 2003. Presently the Company is
carrying on intra state transmission and Reform (Transfer of
Transmission and Related Activities) Scheme, 2005 under the provisions
of Electricity Act, 2003 and the Orissa Reforms Act, 1995 by the State
Government for transfer and vesting of transmission related activities of
GRIDCO wheeling of electricity under a license issued by the Orissa
Electricity Regulatory Commission.
The Company is also discharging the functions of State Load Dispatch
Centre. The Company owns Extra High Voltage Transmission system and
operates about 9550.93ckt kemps of transmission lines at 400 kV, 220
kV, 132 kV levels and 81 nos. of substations with transformation capacity
of MVA. The day-to-day affairs of the Company are managed by the
Managing Director assisted by whole-time Functional Directors as per
the advice of the Board of Directors constituted. They are in turn
assisted by a team of dedicated and experienced professionals in the
various fields.

FORftATION OF GRIDCO
th
The GRIDCO limited was incorporated on 20 April 1995 under the
companies Act 1956 as a wholly owned Government of Odisha undertaking
the company obtained the certificate of commencement of business on
th
6 July 1995. GRIDCO carried on the business of transmission and bulk
supply of electricity and other related activities under an exclusive
license issued by Odisha Electricity Regulatory Commission.

RESTRUCTURING OF GRIDCO AND FORftATION

OF OPTCL
GRIDCO has three functioning:
 The transmission and bulk supply activities in the State of Odisha.
 Sale of energy outside the State of Odisha.
 The State load dispatch functions.
Keeping in view, the statutory requirement of the Electricity Act 2003
for separation of trading and transmission functions into two separate
entities. The State government on 27.03.2004 incorporated Odisha
power transmission corporation (OPTCL) as a wholly owned undertaking of
the State Government to take over the transmission, STU and SLDC
function of GRIDCO.

STRUCTURE OF ELECTRICITY SECTOR IN ODISHA

2.2 VISION OF OPTCL
OPTCL ranks as one among the leading Transmission Utilities in India,
transmitting quality, reliable and SECURED power with minimum
transmission loss at a competitive price.

2.3 ftISSION OF OPTCL

 Transmission of power in large quantity with affordable price as per
the expectation of customers, Government of Odisha and OERC.
 Increase transmission network need based, to meet the demand of
the state in 2025.
 Develop a portfolio of Intra-State and some Inter-State
transmission assets in national market including business expansion
for evacuation of power outside the state in collaboration with
PGCIL and others.
 Adoption of best Construction and OJM practices supported by
system driven processes enabled by cutting age IT solutions.
 Diversification of business by providing consultancy in the areas of
construction and maintenance services and also in
Telecommunication and other emerging areas so as to achieve
optimum utilization of assets for generation of additional revenue.
 Develop skilled and satisfied human resources, fostering a service-
oriented attitude to its customers/stake holders and becoming
empowered to meet customer need in the changing scenarios.
 Building Research and Development wing for adoption of new
technology.
 Discharging the social responsibility with commitment on
Environment Protection, Health, Safety, Energy Conservation and
Community Development.
 Achieve excellence in project implementation.
 Practice higher standard of corporate governance and be a
financially sound company.
2.4 BOARD OF DIRECTORS
Sri Hemant Sharma, IAS
Chairman-cum-Managing Director
Ph. No. Off: 2540098, 2541196, Fax No. 2541904
Sri P.K. Lenka, IAS Sri D. K. Roy
Addl. Secretary to Former Chairman, OERC,
Government Bhubaneswar
Department of P.E, Govt. of Plot No. N-2/63, IRC Village,
Odisha Nayapalli, Bhubaneswar-751015
Ph. No. Off: 2390303 Ph. No. Off: 2554462
Sri Satyapriya Rath, Sri Bijoy Kumar Misra
IAS Former Member, OERC,
Joint Secretary to Bhubaneswar
Government Plot No. RP-8, Road No-6
Finance Department, Govt. of Pandav Nagar, Bhubaneswar
Odisha Ph. No. Off: 2322289 Ph. No. Off: 2593700
Sri Debendra Kumar Jena, IAS Prof. (Dr.) Mukti K. Mishra
Addl. Secretary to Government President, Centurian University,
Finance Department, Govt. of Bhubaneswar 17, Forest Park,
Odisha Bhubaneswar-751009
Ph. No. Off: 2322271 Ph. No. : 2696227
Sri Bibhu Prasad Mahapatra CA. Sunil Kumar Das
Director (Finance) M/S. Sunil Das & Associates
Ph. No. Off: 254087 Chartered Accountants
Fax No. 2543031 75, Surya Vihar, Cuttack-753012
Ph. No. 0671-2312324
Sri Rajendra Kumar Senapati Dr. (Mrs.) Meera Viswavandya
Director (HRD) Reader in Electrical Engineering,
Ph. No. Off: 2542369 College of Engineering & Technology
Fax No. 2545664 (CET), Bhubaneswar
Ph. No. 0671-2503587
2.5 SENIOR EXECUTIVES
Sri Priyadarsan Patra Sri Ramesh Chandra Mishra
Senior General Manager (IT) Chief General Manager (F) CF
Ph. Off-2545476, EPABX-2076 Ph. Off-2542472, Fax-
Mob- 94389070240 2541354, EPABX-2333, Res-
E-mail: [email protected] 2371376, Mob-9438907007,
9437034451
E-mail: [email protected]
Sri B. K. Sahoo Sri Bimal Chandra Mishra
Chief General Manager (O&M) Chief General Manager (RT&C)
Ph. (Off)-2542479 Fax- Ph./Fax-2542120, EPABX-2201,
2542932, Mob-9438907919 Res-2541518, Mob-
E-mail:[email protected] 9438907019,
E-mail: [email protected]
Sri Radha Raman Panda Sri H. K. Samantaray
Chief General Manager CGM (Telecom)
(Construction) Telecom Corporate
Ph.Off-2543807, Fax-2541897, office, Bhubaneswar
EPABX-2085 Ph. Off-2542403, Res-
Mob-9438603353, 9438907377 2543716 Fax: 2540875,
E-mail: [email protected] EPABX- 2211 Mob-
9438907720
E-mail: [email protected]
Sri Manoranjan Choudhury Sri P. K. Das
Senior General Manager (O & M) Company Secretary
Zonal Office-I, Narendrapur Ph. Off-2542547, Fax-
Mob-9438907820, Res-0680- 2542981 EPABX-2006, Res-
2282850 2396145, Mob-9438907009
E-mail: [email protected] E-mail: [email protected]
Sri Purnendu Sekhar Sahu
CLD, SLDC
Ph. Off. 2748885, Res. 2341012
Mob-9438907778
E-mail: [email protected]
Sri Nimain Charan Swain Sri P. S. Patra
Senior General Manager Senior General Manager (CPC)
(Construction) Ph-2541801, Fax-2542964, EPABX-
Zonal Office-I, Bhubaneswar 2051
Ph Off-2546353, Fax- Mob-9438907959
2547261 Res-2579490, E-mail: [email protected]
EPABX-2205 Mob-
9438907901
E-mail: [email protected]
Sri Gangadhar Patel Sri Uttam Kumar Samal
Senior General Manager (O&M) Senior General Manager (Const)
Zonal Office-II, Meramundali Zonal Office-II, Sambalpur
Mob-9438907823 Ph. Off-0663-2540032,
E- Mob:9438907730
mail: [email protected] E-mail: [email protected]
Sri Nihar Ranjan Pradhan Sri Bikash Chandra Panda
Sr. General Manager (Elect.) Senior General Manager (Elect.)
E. A to CMD (OPTCL & EHT (Const.) Circle, Sambalpur
GRIDCO)& PROJECT MANAGER Ph. Off-0663-2540974
(SC RIPS PMU) E-mail: [email protected]
Ph. Off-2540098, 2541196,
EPABX-2012/2002
Res-2544402, Mob-9438907044
E-mail: [email protected]
Sri K. C. Behera Sri D. R. Singhbabu
Sr. General Manager (Mech.) Senior General Manager (Telecom)
Electrical Stores & Services Telecom Circle, Bhubaneswar,
Circle, Bhubaneswar Ph. Off-2475923, Mob-9438907520
Ph. Off-2547185, Fax-2541106 E-mail: [email protected]
EPABX-2334, Mob-9438907016
E-mail: [email protected]
Sri Srinibas Mohapatra Sri Sachindra Pattnaik
Senior General Manager (F), CA & General Manager (Elect.)
B&C EHT (O&M) Circle, Berhampur
Ph./Fax-2542994, EPABX-2341 Ph/Fax-0680-2291905, Mob-
Res-2741018, Mob-9438907015 9438907601
E- E-mail: [email protected]
mail: [email protected]
Sri Laxmikanta Mohanty Sri Umakanta Sahoo
General Manager (Elect.) General Manager (Elect.)
EHT (O&M) Circle, Bhubaneswar SLDC, Mancheswar, Bhubaneswar
Ph/Fax-0671-2300547, Mob- Ph. Off-2748827, Res-2743879
9438907065 Mob-9438907403, E-
E-mail: [email protected] mail: [email protected]
.in
Sri Kailash Kumar Agarwal Sri Amar Nath Mohanty
General Manager (Elect.) General Manager (Elect.)
EHT (O&M) Circle, Jeypore O/O CGM (Const.), HRQS Office,
Ph. Off-06854-240088, Fax- BBSR
06854-241470, Mob- EPABX-2091, Mob-9438907380
9438907122 E-mail: [email protected]
E-mail: [email protected]
Sri Prabodha Kumar Mishra Sri Lalatendu Nayak
General Manager (Elect.) General Manager (Elect.)
SLDC, Mancheswar, Bhubaneswar O/O CGM (O&M), HRQS Office,
Ph. Off-2748256, Res-2471812 BBSR
Mob-9438907402 Ph. Off-2540809, EPABX-2057, Mob-
E- 9438907801
mail: [email protected] E-mail: [email protected]
.in
Sri Pratap Chandra Mohapatra Sri Raj Kishore Pradhan
General Manager (Elect.) General Manager (Elect.)
EHT (O&M) Circle, Chainpal EHT (Const.) Circle, Jaipur Road
Mob:9438907320 Ph.Off-06726-222132, Mob-
E-mail: [email protected] 9438907390
E-mail: [email protected]
Ms. Sanjukta Behera Sri J. P. Mohanty
General Manager (HRD) General Manager (Mech)
Ph. Off-2540427, EPABX-2044 Ph. Off-2540632, EPABX-2223
Mob-9438907064 Mob-9438907405
E-mail: [email protected] E-mail: [email protected]
Sri Ajay Prasad Panda Sri Gobind Agarwalla
General Manager (HRD) General Manager (F) CA
Ph. Off-2541633, Fax-2540871 Ph. Off-2542837, EPABX-2331
EPABX-2119, Mob: 9438907036 Mob-9438907330
E-mail: [email protected] E-mail: [email protected]
Sri Niranjan Sahoo Sri Priyadarsan Patra
General Manager(Finance) Fund & General Manager (IT)
CIAC Ph. Off-2544153, EPABX-2081
Ph. Off- 2543493, EPABX-2318, Mob-9438908033
Mob-9438908166 E-mail: [email protected]
E-mail: [email protected]
Sri Sandeep Kumar Puri Sri Gouri Sankar Dash
General Manager (Elect.) General Manager, (Telecom)
O/O CGM(RT&C), HQRS Office, Telecom Circle, Meramundali
Bhubaneswar Mob-9438908033
Ph. Off-2541651, EPABX-2204 E-mail: [email protected]
Mob-9438907312
E-mail: [email protected]
Sri Pradipta Kumar Mohapatra Sri Bichitrananda Nayak
General Manager (Elect.) General Manager (Elect.)
EHT(Const.) Circle, Bhubaneswar EHT (C) Circle, Rayagada
Ph. Off-2546158, Res-2542430 Mob-9438907705
Mob-9438907181 E-mail: [email protected]
E-mail: [email protected]

2.6 OBJECTIVES OF OPTCL

To effectively operate Transmission lines and Sub-Stations in the State
for evacuation of power from the state generating stations feed power
to state distribution companies, wheeling of Power to other states,
maintenance of the existing lines and sub-stations for power transmission
and to undertake power system improvement by renovation, up-gradation
and modernization of the transmission network.
OPTCL being a State Transmission Utility Public Authority has set the
following objectives:
 Undertake transmission and wheeling of electricity through intra-
State Transmission system.
  Discharge all functions of planning and coordination relating to
intrastate, inter State transmission system with Central
Transmission Utility, State Govt. Generating Companies, Regional
Power Board, Authority, Licensees or other person notified by
State Govt. in this behalf.
 Ensure development of an efficient and economical system of intra
state and inter State transmission lines for smooth flow of
electricity from generating stations to the load centers.
 Provide non-discriminatory open access to its transmission system
for use by any licensee or generating company or any consumer as
and when such open access is provided by the State Commission on
payment of transmission charges/surcharge as may be specified by
the State Commission.
 Restore power at the earliest possible time through deployment of
emergency Restoration system in the event of any Natural
Disasters like super cyclone, flood etc.
 Exercise supervision and control over the intra-state transmission
system, efficient operation and maintenance of transmission lines
and substations and operate State Load Dispatch Centers to ensure
optimum scheduling and dispatch of electricity and to ensure
integrated operation of power systems in the State.

2.7 POWER SECTOR REFORf t IN

ODISHA
- OPTCL
The Power Sector Reforms in the State of Odisha was started during
November 1993 in an organized manner. The main objective of the
reform was to unbundle generation, transmission and distribution and to
establish an independent and transparent Regulatory Commission in order
to promote efficient and accountability in the Power Sector.
In order to implement the reform, in the first phase, two corporate
entities namely Grid Corporation of Odisha Limited (GRIDCO) and Odisha
Hydro Power Corporation Limited (OHPC) were established in April 1995.
GRIDCO was incorporated under the Companies Act, 1956 in April 1995
to own and operate the transmission and distribution systems in the
State. Similarly OHPC was incorporated to own and operate all the hydro
generating stations in the State.
The State Government enacted the Odisha Electricity Reform Act, 1995
which came into force with effect from 1.4.1996. In exercise of power
under Section 23 and 24 of the Odisha Electricity Reform Act, 1995, the
State Govt. notified the Odisha Electricity Reform (Transfer of
Undertakings, Assets, Liabilities, proceedings and Personnel) Scheme
Rules 1996. As per the scheme, the transmission, distribution activities
of the erstwhile OSEB along with the related assets, liabilities, personnel
and proceedings were vested on GRIDCO. Simultaneously the hydro
generation activities of OSEB along with related assets, liabilities,
personnel and proceedings were vested on OHPC.
In order to privatize the distribution functions of electricity in the
State, four Distribution Companies namely CESU utility, NESCO utility,
WESCO utility and SOUTHCO utility managed by GRIDCO ltd as a
separate utility. During November 1998 the State Govt. issued the
“Odisha Electricity Reform (Transfer of Assets, Liabilities, Proceedings
and Personnel of GRIDCO to distribution Companies) Rules 1998” wherein
the electricity distribution and retail supply activities along with the
related assets, liabilities, personnel and proceedings were transferred
from GRIDCO to the four Distribution Companies. Through a process of
international Competitive Bidding (ICB), the four Distribution Companies
were privatized during 1999.
The Government of India enacted the Electricity Act, 2003 which came
into effect from 10th June 2003. Under the provisions of the said Act,
trading in electricity has been recognized as a distinct licensed activity,
which can only be undertaken by a licensee to be granted by the
appropriate commission. The Act specifically prohibits the STU and
Transmission Company in the State from engaging in the business of
trading. GRIDCO being a State Transmission Utility was not permitted to
engage itself in the trading in electricity and was required to segregate
its activities in a manner within the transonic period allowed under the
Act that, the entity which will undertake transmission STU and SLDC
function will not undertake the activities of Trading and Bulk Supply of
Electricity.
2.8 SWOT ANALYSIS OF OPTCL
A. STRENGTH
 OPTCL is the only transmission utility in the state of Odisha, there
is no competition from any other transmission corporation limited.
 The strong transmission network is having 81 grid substations
spread throughout the state, is a great asset of OPTCL.
B. WEAKNESS
 In the absence of any competition there is a likelihood that the
performance of the employee may go down.
 As there is no recruitment has taken place since last 2-3 years, the
performance of the remote grid substation has gone down due to
lack of proper manpower.
C. OPPORTUNITY
 There is enough scope for creating network for both inter as well
as intra state in the absence of any competitors.
 Availability of technical persons [electrical engineers] within the
state in a large number is an opportunity in the organization for
fresh recruitment.
D. THREATS
 Continuous operation and maintenance of grid substation and extra
high voltage [EHV] transmission lines has become a challenge to the
organization: unless properly maintained it will break down of the
entire system.
 As per electricity act 2003 a new transmission company may come
up in the future which may pose a threat for the existing company.

2.9 FUNCTIONAL AREAS OF OPTCL

A. Finance
B. Human resource development
C. Telecom
D. Regulation and tariff wing
E. Corporate planning
 A.FINANCE
1. Corporate Account Section: It deals with Profit and Loss
Account, Trading Account and Balance Sheet i.e. preparation of
final statement of the organization.
2. Corporate Finance Section: It deals with funds management,
cash management, etc.
3. Funds Section: It deals with the retirement benefits such as
Pension, Gratuity, PPF, etc.
4. Budget Section: It deals with the preparation of budget to the
implementation of it. Budget is the estimation of expenditure of
the organization for the next financial year.
5. Audit Section: It deals with internal audit that takes place
within the same department by higher officials of that department
of the organization, higher audit that takes place externally by the
State Government through its appointed audit officer; special audit
is done for a special cause; resident audit that takes by different
department within the organization.
6. Loan Section: It deals with the amount of funds deficit of the
organization and procurement of funds from external source such
as banks and other financial institutions.
The loans have been termed as short term and long term. Long term
loan is generally for a period of 1 to 7 years with a rate of interest
varying between 7.75% and 8.25% whereas short term loan is for a
period of 5 months up to 1 year with a rate of interest between
7.75% and 8.25%.
7. Banking Section: The finance department of OPTCL is dealing with 2
to 3 nationalized banks. Also deals with some of the private bank such as
ICICI, UTI, etc. And Union bank is the main banker of OPTCL. OPTCL
has 5 types of account in these banks such as current a/c, flexi a/c etc.

B. HUftAN RESOURCE DEVELOPftENT

The function of HR Department starts from recruitment and end at
retirement, besides this, the main objective is to utilize the existing
manpower in the best possible manner by motivating them more effective
and efficient through several training and development program me to
achieve organizational goal and objective.
THE OBJECTIVE OF HR DEPARTMENT:
 Introduction of new schemes, incentives, etc.

 Decentralization of power

 Formulation of rules, regulation, guidelines and service conditions

 Formulation of recruitment, promotion, and transfer policies for its

employees

 Service benefit to employee.

C. TELECOft
UTILITY OF COMMUNICATION IN OPTCL - THE CHALLENGES
AHEAD
For ensuring effective and secured communication, all power utilities in
India and abroad have opted for their own telecom network due to the
reasons that public telephone network remains busy very often and goes
out of service during natural calamities.
For this purpose, power utilities do recruit their own telecom engineers
who are entrusted for planning, design, deployment and management of
dedicated telecom network. OPTCL like other Power Utilities in the
country also have its own telecom network which is operated and managed
by a Telecom Wing since 1973. Power Line Carrier Communication (PLCC)
is considered as the most economic, reliable and dependable for voice and
low speed data communication in electrical utilities.
In the year 1994, the SCADA, based on CMC design was implemented in
Odisha Grid as a pilot project, considering only 15 RTU stations located
at:
(1)Balimela (2) Bhanjanagar (3) Burla PH (4) Chip Lima PH (5) IB TPS (6)
Talcher TPS (7) Rengali PH (8) Rengali Switch Yard (9) Upper-Kolab PH
(10) Tarkera (11) Jeypore PG (12) Jayanagar (13) Budhipadar (14) Joda
and (15) Duburi.
 D. REGULATION AND TARIFF WING
OPTCL raises customer-bills on a monthly basis as follows:
 Network Intra-state transmission charge bills are raised upon GRIDCO
towards transmission of energy for four DISCOMS (CESU, NESCO,
SOUTHCO and WESCO) who are long-term open access customers.
 Bills on other long-term open access customers like NALCO and ICCL
are raised for wheeling of energy from their CGPS to their industries
located at damanjodi and therubali respectively.
 Inter-state wheeling charge bills are raised upon CSEB, MPSEB, MSEB,
DD and DNH for wheeling of central sector power to their territories
through OPTCL.

E. CORPORATE PLANNING
ACTIVITIES OF THE CORPORATE PLANNING:
The Directorate of Corporate Planning was created in GRIDCO during the
year 1995. The Corporate Planning was assigned with the following main
activities:
 Long term financial projection and overall prospective planning
 Co-ordination of reform-restructuring process
 Coordination with Project Management Unit
 Liaison with external agencies like G.O.O, CEA, World Bank etc. on
corporate policy and reform/restructuring.

2.10 ORGANISATIONAL STRUCTURE

OF OPTCL
 CHAPTER -3
WORKING CAPITAL
MANAGEMENT
3.1 CONCEPT OF WORKING CAPITAL
Finance is the life blood of any business. It is the starting for
making plans, before using any sophisticated forecasting and
planning procedures. Understanding the past is a prerequisite for
anticipating the future. So finance needs to be managed very
effectively. Various tools are used in analysing the financial
information contained in the financial, statement and the "working
capital" is one of them. Working capital is a technical tool to
measure the financial strength, weakness and progress.

DEFINITION
Working capital refers to that part of the firm’s capital which is
required for financing short term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested
in current assets keep revolving fast & are being constantly
converted into cash and these cash flows out again exchange for
other current assets. Hence it is also known as revolving or
circulating capital or short-term capital. Working capital, in general
practice refers to the excess of current assets over current
liabilities. Working capital management therefore, is concerned with
the problems that arise in attempting to manage the current assets,
the current liabilities and the inter-relationship that exists between
them.

Working capital= current assets- current liabilities

ftANAGEftENT OF WORKING CAPITAL:-

Management of Working
Capital

Cash Receivable Inventory

Management Management Management
1. CASH MANAGEMENT:
Cash is the important current asset for the operation of the business.
Cash is the basic input needed to keep the business running in the
continuous basis, it is also the ultimate output expected to be realized by
selling or product manufactured by the firm. The firm should keep
sufficient cash neither more nor less. Cash shortage will disrupt the
firm’s manufacturing operations while excessive cash will simply remain
ideal without contributing anything towards the firm’s profitability. Thus
a major function of the financial manager is to maintain a sound cash
position. The term cash includes coins, currency and cheques held by the
firm and balances in its bank account. Sometimes near cash items such as
marketing securities or bank term deposits are also included in cash.
Generally when a firm has excess cash, it invests it is marketable
securities. This kind of investment contributes some profit to firm.

1.1 Sources of Cash:

Sources of additional working capital include the following:
 Existing cash reserves
 Profits (when you secure it as cash!)
 Payables (credit from suppliers)
 New equity or loans from shareholders
 Bank overdrafts or lines of credit.
 Long-term loans
If you have insufficient working capital and try to increase sales, you can
easily over-stretch the financial resources of the business.

2. RECEIVABLE MANAGEMENT:-
Receivable represent amount owed to the firms a result of sale of goods
& services in the ordinary course of business. These claims of the firm
against customers and firms part of its current receivables, trade
receivables or book debts.
On the other hand receivable management is the process of making
decisions relation to investment in trade debtors.

2.2 Cost of maintaining Receivables:

1. Cost of financing receivables:
 When products are provided on credit then concerns capital allowed
to be use by the customers. The receivables are financer from the funds
supplied by shareholders for long term financing and through retained
earnings.
2. Cost of collection:
A proper collection of receivables is essential for receivables
management. The customers who delays in payment are sent reminders,
some persons may have to be sent for collecting these amounts.
Sometimes legal action also taken includes cost of the concern.
3. Bad-debts:
The amount, which the customers fail to pay, is known as debts.
Though a concern may be able to reduce bad debts through efficient
collection machinery but one cannot altogether rule out this cost.

Factors influencing the size of receivables:-

The various factors as follows-
 Size of credit sale

 Credit policy

 Terms of trade

 Expansion plans

3. INVENTORY MANAGEMENT:-
3.1 Inventories:
Inventories constitute the most important part of the current assets of
large majority of companies. On an average the inventories are
approximately 60% of the current assets in public limited companies in
India. Because of the large size of inventories maintained by the firms, a
considerable amount of funds is committed to them. It is therefore,
imperative to manage the inventories efficiently and effectively in order
to avoid unnecessary investment.
Nature of Inventories:
 Inventories are stock of the product of the company is
manufacturing for sale and components makeup of the product. The
various forms of the inventories in the manufacturing companies are:
 Raw Material: It is the basic input that is converted into the
finished product through the manufacturing process. Raw
materials are those units which have been purchased and stored
for future production.

 Work-in-progress: Inventories are semi-manufactured products.

They represent product that need more work they become
finished products for sale.

 Finished Goods: Inventories are those completely manufactured

products which are ready for sale. Stocks of raw materials and
work-in-progress facilitate production, while stock of finished
goods is required for smooth marketing operations. Thus,
inventories serve as a link between the production and
consumption of goods.

OPERATING CYCLE
It is the time duration required to convert sales, after the conversion of
resources into inventories into cash. The operating cycle refers to
different stages involved from the investment in raw material to
realization of cash from the sale of finished products.
The stages in the operating cycle of a manufacturing company as given
below.
1. Conversion of cash into raw material

2. Conversion of raw material into work-in-progress

(Raw Material Conversion Period)

3. Conversion of work-in-progress into finished goods

(Work-In-Progress Conversion Period)

4. Conversion of finished goods into debtors through sales

(Finished Goods Conversion Period)

5. Conversion of debtor into cash

 (Debtor Conversion Period)
6. Direct accumulation of cash through cash sales

Working-in- Progress Finished Goods Sales

Raw Material
Debtor
Cash

Cash
Cash
WORKING CAPITAL
CYCLE:
Working capital cycle is the amount of time it takes to turn the net
current liabilities into cash. The longer cycle liabilities are, the longer a
business is typing up capital without earning a return on it. Therefore,
companies strive to reduce their working capital cycle by collecting
receivables quicker or sometimes stretching accounts payable. The
capital measures the time between paying for goods supplied to you and
the final receipt of cash to you from the sale. It increases the
effectiveness of working capital. The working capital cycle is made up of
four core components:

i. Cash (funds available)

ii. Creditors (accounts payable)

iii. Inventory (stock in hand)

iv. Debtors (accounts receivable)

Classification or kinds of working capital:
Working capital may be classified in two ways:
1) On the basis of concept.
2) On the basis time.
1) On the basis of concept: On the basis of concept, working capital is
classified as a gross capital and net working capital. This classification is
important from the point of view of the financing manager.
i) Gross working capital: The term working capital
refers to the gross working capital and
represents the amount of funds invested in
current assets

ii) Net working capital: The term working capital

refers to the net working capital. Net working
capital is the excess of the current assets over
current liabilities.
2) On The basis of time: On the basis of the time, working capital may
be classified as permanent or fixed working capital, temporary or
variable working capital.
i) Permanent or Fixed working capital: Permanent or fixed working
capital is the minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of
current assets. The permanent working capital can further be classified
as regular working capital and reserve working capital required insuring
circulation of current assets from cash inventory, from inventories to
receivables and from receivable to cash and so on.
a) Regular working capital: This is the amount of working capital
required for the continuous operation of an enterprise. It refers to the
excess of current assets over current liabilities .Any organization has to
maintain a minimum stock of materials, finished goods and cash insure its
smooth working and to meet its immediate obligations.
b) Reserve working capital: Reserve working capital is the excess
amount over the requirement for regular working capital which may be
provided for contingencies that may arise at unstated period such as
strikes, rise in price, depression, etc.

ii) Temporary or variable working capital

Temporary or variable working capital is the amount of working capital

which is required to meet the seasonal demands and some special
exigencies. Variable working capital can further be classified as seasonal
working capital and special working capital.

(a)Seasonal working capital:-The capital required to meet the seasonal

need of the enterprise such as, a textile dealer would require large
amount of fund a few month before Diwali.

(b)Special working capital: - Special working capital is that part

of working capital which is required to meet special exigencies such
as launching of extensive marketing for conducting research, etc.

Most of the enterprises have to provide additional working capital to

meet the seasonal and special needs.

Temporary working capital differs from permanent working capital in the

sense that is required for short periods and cannot be permanently
employed gainfully in the business.

The following diagrams would show the different between

permanent and temporary working capital. Figure (a) presents
constant permanent capital and Figure (b) present an increasing
permanent capital .The first is the case of a static company and
that of a growing one

NEED FOR WORKING CAPITAL:-

Working capital is required starting from purchase of raw material to the
sale of finished goods. Hence working capital is required also for the
following purposes working capital is needed.

 For purchasing of raw material

 For payment of production expenses such as- wages & salaries

 For payment of other operating expenses

 For payment of selling & distribution expenses.

 For making credit sales of finished products

 For maintaining closing stock of raw material work-in-progress &

finished goods

3.2 IftPORTANCE OF
WORKING CAPITAL
Working capital is the life blood & nerve centre of a business. Just as a
circulation of blood is essential in the human body for maintaining life,
working capital is very essential to maintain the smooth running of a
business. No business can run successfully without an adequate amount of
working capital. The main advantages of maintaining adequate amount of
working capital are as follows.
 Solvency of the business- Adequate working capital helps in
maintaining solvency of the business by providing uninterrupted
flow of production.
 Goodwill- Sufficient working capital enables a business concern to
make prompt payments & hence helps in creating & maintaining good
will.
 Easy loans- A concern having adequate working capital, high
solvency & good credit standing can arrange loans from banks and
others on easy & favorable terms.
 Cash discounts- Adequate working capital also enables a concern
to avail cash discounts on the purchases & hence it reduces costs.
  Regular supply of raw materials- Sufficient working capital
ensures regular supply of raw materials and continuous production.
 Regular payments of salaries, wages & other day- to- day
commitments- A company which has ample working capital can
make regular payment of salaries, wages & other day-to-day
commitments which raises the morale of its employees, increases
their efficiency, reduces wastages & costs & enhances production &
costs.
 Exploitation of favorable market conditions- Only concerns with
adequate working capital can exploit favorable market conditions
such as purchasing its requirements in bulk when the prices are
lower & by holding its inventories for higher prices.
 Ability to face crisis- Adequate working capital enables a concern
to face business crisis in emergencies such as depression because
during such periods, generally, there is much pressure on working
capital.
 Quick & regular return on investments - Every investor wants a
quick & regular return on his investments sufficiency of working
capital enables a concern to pay a quick& regular dividends to its
investors as there may not be much pressure to plough back profits.
This gains the confidence of its investors & creates a favorable
market to raise additional funds in the future.
 High morale- Adequacy of working capital creates an environment
of security, confidence, and high morale & creates overall
efficiency in a business.

3.3 HOW IT IS CALCULATED

An analysis of working capital position of a firm means such a treatment
of the information contained in its financial statements so as to afford a
full diagnosis of its working capital management practices, the data
provided in the financial statements should be methodically classified in
tune with the objective of the analysis. Then only by using the techniques
of analysis, one can get answers to the following questions relating to
efficiency of working capital.
a. Will the firm be able to pay its obligations as and when they
fall due?
b. Is the working capital position improving or deteriorating day
by day?
c. Is the working capital being effectively utilized?
d. Is the amount of working capital sufficient, excessive
or inadequate?

There are at hand several techniques for analysis of working capital of a

firm. The following are some of them:
A.Comparative statement
B. Trend percentage analysis
C. Common size percentage analysis
D.Cash flow analysis
E. Ratio analysis

COftPARATIVE STATEftENT :
Comparative financial statements are an important tool of horizontal
financial analysis. A statement prepared in a form that reflects financial
data for two or more periods is known as comparative statement. The
figures for two or more periods are placed side by side. Comparative
statement of current assets, current liabilities and their components
over a period of two years enables one to study the increase and
decrease in them and their effect on the working capital position.

TREND PERCENTAGE ANALYSIS :

Trend percentages are index figures indicating the percentage
relationship that each statement item bears to the same item in the
base year. The information for a number of years is taken up and one
year, usually the first year, is taken as the base year. Each item of base
year is taken as 100 & trend ratios for other years are calculated on the
basis of the base year. By showing the relative changes, it discloses
unequal changes that significance has to be analysed & interpreted. It
will be possible to observe the trend of figures, whether upward or
downward.

COftftON-SIZE STATEftENTS :
Common-size financial statements are devices for studying financial
statements and the changes there in. These are prepared by expressing
the items of the balance sheet as a percentage of total assets & the
items of the income statement as a percentage of total revenue. These
statements are also known as `100 percent` statement because each
individual item is stated as a percentage of the total of 100. In order to
study the pattern of grass working capital, total current assets are
taken as 100 & different components are expressed as a percentage of
the total. Similarly, the pattern of current liabilities can also be studied.
These statements are more valuable in making comparisons between the
companies in the same industry.

CASH FLOW ANALYSIS :

Cash Flow Analysis is the evaluation of a company’s cash inflows and
outflows from operations, financing activities, and investing activities. In
other words, this is an examination of how the company is generating its
money, where it is coming from, and what it means about the value of the
overall company. Cash Flow Analysis is a technique used by investors and
businesses to determine the value of overall companies as well as the
individual branches of large companies by looking at how much excess
cash they produce.
RATIO ANALYSIS :
Among all the techniques used in financial statement analysis, ratio
analysis is the most powerful tool of financial analysis. A ratio is simply
one number expressed in terms of another. Liquidity & turnover ratios
are used by management in checking upon the efficiency with which
working capital is being used in the firm. To make ratios more powerful,
they have to be further interpreted & compared. Behaviour of ratios
over a period of time is to be studied to determine their trend. A ratio
may be interpreted in relation to certain rule of thumb or it may be
compared with the past ratios.

APPROACHES OF WORKING CAPITAL FINANCE:-

Approaches to
finance

Hedging/Matching Conservative Aggressive

Approach Approach Approach

(A) The Hedging/Matching Approach: The hedging refers to, selling

transactions of simultaneous but opposite nature which counter balance
the effect of each other. The term hedging refers to the process of
matching maturities of debt with the maturities of financial needs.
According to this approach the maturity of sources of funds should
match nature of Asset to be financed.
(B) The conservative approach: The approach suggests that entire
estimated investment in Current Asset should be financed from long
term sources and short term sources should be used only for emergency
requirement.
(C) The Aggressive Approach: This approach suggests that the entire
estimated requirement of current asset should be financed from short-
term sources. This approach makes finance mix more risky, less costly
and more profitable.

PRINCIPLES OF WORKING CAPITAL

ftANAGEftENT POLICY:-
The following are the general principles of a sound working capital
Management policy.

1) Principles of risk variation:-

Risk here refers to the inability of a firm to meet its
obligations as when they become due for payment. Larger investment in
current asset with less dependence on short term borrowings increases
liquidity, reduces dependence on short term borrowings increases
liquidity, reduces risk and there by decreases the opportunity for gain
or loss. On the Other hand, less investment in current assets with
greater dependence on Short term borrowing increases risk reduces
liquidity and increases profitability.

2) Principles of cost of capital: -

The various sources of raising working capital finance
have different cost of capital and the degree of risk involved.
Generally, higher the risk lower is the cost and lower the risk higher
the cost. A sound working capital
management should always try to achieve a proper Balance between
these two.
3) Principles of Equity position: -
This principle is concerned with planning the total
Investment In current assets. According to this principle, the amount
of Working capital invested in each component should be adequately
justified By a firm's equity position. Every rupee invested in the
current assets should contribute to the net worth of a firm.

4) Principle of maturity of payment:-

This principle is concerned with planning the sources
of Finance for working capital. According to this principle, a firm should
make every report to relate maturities of payment to its flow of
internally generated funds. Maturity pattern of various current
obligations is an important factor in risk assumptions and risk
assessments. To sum up, working capital management should be
considered as an Integral part of overall corporate management. To
achieve the above-mentioned objective of working capital funds, how to
use them and how to Measure, plan and control them.
 CHAPTER- 4
DATA ANALYSIS
AND
REPRESENTATION
 4.1 SOURCES OF DATA COLLECTION:
The secondary data are those which have already collected and stored.
Secondary data easily get those secondary data from records, journals,
annual reports of the company etc. It will save the time, money and
efforts to collect the data. Secondary data also made available through
trade magazines, annual reports, books etc.
This project is based secondary data collected through annual reports of
the organization. The data collection was aimed at study of working
capital management of the company.

BALANCE SHEET OF OPTCL (Rs in crore)

Particular As at As at As at As at As at
31.03.2014 31.03.2015 31.3.2016
31.3.2017 31.3.2018

EQUITY AND        
LIABILITIES

1.Shareholders’ fund        

(a)Share capital 303.07 353.07 410.07 460.07 510.07

(b)Reserves & surplus 840.15 1,107.50 1128.78 659.90 894.54

1143.22 1460.57 1538.85 1119.97 1404.61

2.Non-Current Liabilities    

(a)Long term borrowings 724.82 759.09 884.35 2005.7 2075.92

(b)Other Long term 879.43 968.65 2303.37 168.71 176.71

liabilities

(c)Long term provisions 378.34 419.32 423.14 429.18 451.96

1,982.59 2,147.06 3610.86 2603.59 2704.59

3. Current Liabilities

(a)Trade payables
48.15 50.23 67.59 206.93 333.40

(b)Other Current Liabilities 93.82 421.46 484.46 2290.83 2540.82

(c)Short term provisions 163.74 148.16 154.05 139.61 138.11

 305.71 619.85 706.10 2637.37 3012.33

TOTAL 3,431.52 4,227.48 5885.81 6360.93 7121.53

ASSETS    

1.Non-current Assets
(a)Fixed Assets 2,370.26 2,875.79 3993.58 3805.67

(i)Tangible assets 1,551.31 1,581.61 2211.56 2725.12 2978.40

(ii) Capital W.I.P 817.41 1,289.10 1775.54 1074.13 1481.73

(iii)intangible assets 0.31 0.25 0.19 0.13 0.18

(iv)Intangible assets 1.23 4.83 6.29 6.29 6.29

under Development

(b)Non-current Investments 35.41 91.86 90.96 144.5 147.55

(c)Long-term Loans and 121.06 154.19 401.06 11.46 11.39

Advances

(d)0Other Non-current 224.09 156.47 176.65 27.06 51.67

assets

2,750.82 3,278.31 4662.25 3988.69 4677.21

2.Current Assets
(a)Current Investments 7.31 8.41 102.58 138.67

(b)Inventories 140.39 123.71 179.37 178.56 157.86

(c)Trade Receivables 57.12 113.01 119.32 202.00 150.07

(d)Cash & Cash Equivalents 389.59 456.58 747.09 1545.35 1750.02

(e)Short Term Loans and 75.40 202.93 97.30 5.62 6.16

Advances

(f)Other Current Assets 10.89 52.94 42.07 338.15 241.91

680.70 949.17 1193.56 2372.26 2444.69

TOTAL 3,431.52 4,227.48 5855.81 6360.9 7121.9

5 0
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31st MARCH (Rs in Crore)

Particulars For the For the For the For the For the
year year year year year ended
ended ended ended ender 31.03.2018
31.3.2014 31.3.2015 31.3.2016 31.3.201
7

I. Revenue from Operations 598.89 634.34 661.58 665.31 692.30

II. Other Income 50.89 39.14 33.39 189.13 178.61

III. Total Revenue (I + II) 649.78 673.48 694.97 854.44 870.91

IV Expenses

Employee Expenses 194.73 320.63 285.95 380.39 385.44

Finance Cost 71.39 64.17 76.95 66.94 66.27

Depreciation and 115.10 118.81 141.00 176.39 201.21

amortization Exp.

Other Exp. 216.36 130.5 151.96 211.21 195.18

Net Prior Period (0.10) (0.42) (0.92)

Expenditure/Income

Total Expenses 597.48 634.53 656.78 834.93 848.10

V. Profit/Loss before Tax 52.30 38.95 38.19 19.51 22.81

& Extraordinary items
(III-IV)

VI. Exceptional items 18.94 3.01

V. Profit before Tax(III- 33.36 38.95 38.19 19.51 19.80

IV)
VI. Tax Expenses 6.68 7.79 8.15 1.54 22.60

VII. Profit(Loss) for the 26.68 31.16 30.04 17.97 42.40

period (V-VI)

VIII. Earning Per Equity

Share

(i)Basic 88.05 88.25 73.28 39.07 38.82

(ii)Diluted 53.04 56.34 49.25 27.23 27.89

CASH FLOW STATEMENT

PARTICULARS For the year For the For the For the For the
ended year year Year year
31.3.2014 (Rs. ended ended Ended ended
in crore) 31.3.201 31.3.2016 31.3.2017 31.3.2018
5 (Rs. in (Rs. in
crore) crore)
Profit/loss before 21.56 26.68 31.16 30.04
tax & extraordinary
items
Adjustment for:
Appropriation to 2.11 4.38 8.93 10.66
Reserve and
Surpluses
Depreciation 143.79 100.78 101.77 118.47
Provision for Wealth
Tax
Provision/Write off
against theft
materials
Operating Profit 152.21 131.84 141.86 159.17
before working
capital change (A)
Working Capital
change
Stores and Spares (10.54) 0.56 16.68 (55.67)
Sundry debtors 14.34 7.06 (55.89) (6.31)
Other Current 1.27 (8.93) (42.04) 10.87
Assets
Loans and Advances (0.04) (61.01) (127.54) 105.64
Current Liabilities 12.60 12.82 (116.91) 119.16
Provisions 23.51 (4.83) (15.58) 5.88
Net Working Capital 41.14 77.51 (199.41) 338.74
Change(B)
Increase/Decrease 12.58 446.09 164.71 (159.43)
in long term other
liability
Cash generated 205.93 523.60 (34.70) 179.31
from
Operations(A+B)
Cash Flow from
Investing activities:
Capital (191.63) (255.03) (530.52) (1,255.67)
Expenditure(Net of
Deposit work)
Redemption of (10.01) (17.00) (49.14) (7.50)
investment
Cash generated (201.63) (272.03) (579.66) (1,263.17)
from Investing
activities (C)
Cash Flow from
Financing activities:
Repayment of (38.01) 25.76 631.35 1317.39
Secured/ Unsecured
loan
Grant against
cyclone repair works
Increase in long
term other Liability
Proceeds from Share 50.00 50.00 50.00 57.00
Capital
Cash flow from 17.73 77.41 681.35 1374.39
Financing activities
(D)
NET CASH 22.03 328.98 67.00 290.52
GENERATED From
all Activities (A+B)
+C+D
Cash and Cash 38.58 60.61 389.59 456.58
Equivalent at the
beginning of the year
Cash and Cash 60.61 389.59 456.58 747.10
Equivalent at the end
of the year

4.2 IMPLEMENTATION OF CASH

MANAGEMENT AT OPTCL:
1. In order to effectively manage its cash so as to sustain liquidity
and profitability, OPTCL has chosen to go for a centralized cash
management.

2. The centralized cash management system means the cash of

OPTCL is basically managed from the head office situated at
Jan path, BBSR, Odisha.

3. For smooth management of cash, OPTCL takes the services of

UBI, SBI, ANDHRA bank, IDBI, bank and SYNDICATE bank.

4. It has got the main account with the UBI and with the other
banks; it has got the current account.

5. It has 62 branches all over Odisha. All the cash transaction of

these regional offices is controlled from the head office.

6. The branch offices around the state are given a budgeted

figure of money to be spent by the head office. If they have
any expenditure exceeding the limit then they have to justify it.

The decentralized cash collection system of OPTCL also helps to check

the idle cash, which would otherwise have blocked in other branches.
Though this system, the cash is not allowed to remain idle at various
branches and is used by the public giant to pay its short term liabilities.

4.3 FUNDS MANAGEMENT AT OPTCL:

OPTCL is basically a trading organization and therefore it requires
maintaining sufficient current assets to meet its working capital needs
because in order to pay its obligation at the time as and when they are
due. So in OPTCL the management of funds basically caters the needs of
working capital through its funds management policy. To ensure smooth
flow of funds, in order to carry out business smoothly.

For the better understanding of working capital management at

OPTCL, one has to thoroughly go through the sources & application of
funds. For the purpose of monitoring working capital requirement, daily
cash register is maintained. The receipt of funds at each of the centres
of OPTCL is transferred to corporate office, Bhubaneswar.

4.4 WORKING CAPITAL

MANAGEMENT OF OPTCL:
OPTCL being a public sector undertaking fully owned by Govt. of Odisha
and its power sector has got a very wide network not confident with in
state of Odisha but also it supplied power to other state such as Bihar,
Chhattisgarh, Madhya Pradesh, West Bengal and other states to fulfil
their power requirement. It has got 105 maintenance centres throughout
Odisha which are otherwise called as accounting centres.

The maintenance of centres has to report to the head office for

their weekly funds requirement on a weekly basis because the funds are
allocated from the head office. SBI also play a very vital role in
maintaining of fund position of OPTCL on daily basic.

4.5 TOOLS FOR DATA ANALYSIS

In order to assess the working capital of OPTCL, we will take the help of
following ratios-

 Current Ratio
  Liquid Ratio
 Working Capital Turnover Ratio
 Inventory Turnover Ratio

CURRENT RATIO:
The current ratio is a liquidity ratio that measures a company's ability to
pay short-term and long-term obligations. To gauge this ability, the
current ratio considers the current total assets of a company
(both liquid and illiquid) relative to that company’s current
total liabilities.

The formula for calculating a company’s current ratio, then, is:

Current Ratio = Current Assets / Current Liabilities

The current ratio is called “current” because, unlike some other liquidity
ratios, it incorporates all current assets and liabilities.

The current ratio is also known as the working capital ratio.

CURRENT ASSET(in Rs. crore) CURRENT LIABILITY(in Rs. crore)

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
(a)Current 7.31 8.41 102.58 138.67 (a)Trade
Investment payables 48.15 50.23 67.59 206.93 333.4
s 0
(b)Inventor 140.39 123.71 179.37 178.56 157.86 (b)Other 93.82 421.46 484.46 2290.8 2540.
ies Current 3 82
Liabilities
(c)Trade 57.12 113.01 119.32 202.00 150.07 (c)Short 163.7 148.16 154.05 139.61 138.1
Receivable term 4 1
s provisions
(d)Cash & 389.59 456.56 747.09 1545.3 1750.0
Cash 5 2
Equivalents
(e)Short 75.40 202.93 97.30 5.62 6.16
Term Loans
and
Advances
(f)Other 10.89 52.94 42.07 338.15 241.91
Current
Assets

TOTAL 680.7 949.15 1193.5 2372.2 2444.6 305.7 619.85 706.1 2637.3 3012.
6 6 9 1 7 33
YEAR 2014 2015 2016 2017 2018
Total CA 680.7 949.17 1193.56 2372.26 2444.69
Total CL 305.71 619.85 706.1 2637.37 3012.33
CURRENT 2.23 1.53 1.69 0.89 0.81
RATIO

CURRENT RATIO
2.5

1.5

0.5

0
2014 2015 2016 2017 2018

CURRENT RATIO

According to convention, current ratio should be 2:1, i.e., every current

liability of Re. 1 should be backed by current asset of Rs. 2. If the ratio
is more than this, it means the working capital position is sound. If
current ratio is less than this, i.e., 2:1, there is a need to investigate
whether the position is satisfactory or not. As a matter of fact, a ratio
higher than 2:1 may be unsatisfactory from the point of view of
profitability though it may be satisfactory from the viewpoint of
solvency.

Here, the year 2014 had satisfactory current ratio; in the years 2015,
2016 the company had an average current ratio; whereas, in the year
2017 and 2018, the company had an unsatisfactory current ratio.
QUICK RATIO:
The quick ratio is an indicator of a company’s short-term liquidity.
The quick ratio measures a company’s ability to meet its short-term
obligations with its most liquid assets.

For this reason, the ratio excludes inventories from current assets, and

is calculated as follows:

Quick ratio = Quick asset / current liabilities

Where,

Quick assets = (current assets – inventories) or (cash and equivalents

+ marketable securities + accounts receivable)

YEAR 2014 2015 2016 2017 2018

Total CA 680.7 949.15 1193.56 2372.26 2444.69

Inventories 140.39 123.71 179.37 178.56 157.86

Quick asset 540.31 825.46 1014.19 2193.70 2286.83
(Total CA -
Inventories)
Total CL 305.71 619.85 706.1 2637.37 3012.33

QUICK 1.767 11.332 1.436 0.831 0.759

RATIO
 QUICK RATIO
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2014 2015 2016 2017 2018

QUICK RATIO

As per the convention, normal quick ratio should be 1:1, i.e., every rupee
of quick liability should be backed by equivalent liquid assets. If the ratio
is less than this, it means that arrangement from outside will have to be
made for meeting immediate obligations. This is not a desirable situation
and it should be avoided.
Here, in the year 2017 and 2018, the company had an unsatisfactory
quick ratio; whereas in the years 2014, 2015 and 2016, the company had a
very satisfactory quick ratio.

WORKING CAPITAL TURNOVER RATIO:

Working capital turnover is a measurement comparing
the depletion of working capital used to fund operations and purchase
inventory, which is then converted into sales revenue for the company.
The working capital turnover ratio is used to analyze the relationship
between the money that funds operations and the sales generated from
these operations.

For example, a company with current assets of $10 million and current

liabilities of $9 million has $1 million in working capital, which may be
used in fundamental analysis.
YEAR 2014 2015 2016 2017 2018
Total CA 680.7 949.17 1193.56 2372.26 2444.69
Total CL 305.71 619.85 706.1 2637.37 3012.33
Working 374.99 329.32 487.46 (265.11) (567.64)
capital
Sales 598.89 634.34 661.58 665.31 692.30

Working 1.60 1.93 1.36 (2.50) (1.21)

Capital
Turnover
WORKING CAPITAL TURNOVER

This
3

ratio
2

0
2014 2015 2016 2017 2018

-1

-2

-3

WORKING CAPITAL TURNOVER

indicates extent of working capital, which should be always moderate.

The decline in working capital indicates that either working capital is in
excess of requirements or there is operational inefficiency.
Here, in the year 2015 the company had very high working capital and in
2017 and 2018, the company had a very bad working capital turnover
ratio resulting in a wide fluctuation; whereas in the years 2014 to 2016,
the company maintained a moderate working capital.

INVENTORY TURNOVER RATIO:

Inventory turnover is a ratio showing how many times a company's
inventory is sold and replaced over a period of time. The days in the
period can then be divided by the inventory turnover formula to calculate
the days it takes to sell the inventory on hand.
It is calculated as sales divided by average inventory.

Inventory Turnover Ratio= Cost of Goods Sold / Average

Inventory at Cost

YEAR 2014 2015 2016 2017 2018

Sales 598.89 634.34 661.58 665.31 692.30

Opening 140.95 140.39 123.71 179.37 178.56

inventory
Closing 140.39 123.71 179.37 178.56 157.86
Inventorie
s
Average 140.67 132.05 151.54 178.96 168.21
inventories
Inventory 4.26 4.80 4.36 3.72 4.11
Turnover
Ratio (in
times)
Inventory 85.68 76.04 83.72
Turnover
Ratio (in
days)
 INVENTORY TURNOVER RATIO
6

0
2014 2015 2016 2017 2018

INVENTORY TURNOVER RATIO

Normally, the higher ratio indicates better inventory management. Low

ratio means that sales require to be pushed up and action is called for. At
times even high ratio should convey a danger signal. It means customers’
demand cannot be met properly and thus it indicates that profitable
opportunities are not being fully utilised.

Here, in all the five years from 2012 to 2016, the company maintained a
satisfactory inventory turnover ratio.
 CHAPTER- 5
FINDING,
SUGGESTION AND
CONCLUSION

5.1 FINDINGS OF THE STUDY:

The following are the findings of the study for the year 2012 to 2016:
 Working capital of 2013 is in negative figure. The reason is that the
corporation’s current liabilities exceeds current assets in the year
2013. The short term provisions have increased during this period.
It is an alarming sign for the corporation. Besides these short term
provisions and other current liabilities also increased like deposits
and retention from suppliers, liability for wealth tax, electricity
duty payable.
 The rule of thumb for current ratio is 2:1. And for OPTCL it is not
satisfactory. The reason behind such result is that the current
liabilities exceed current assets. The standard current ratio for the
year 2014 was satisfactory; in the years 2012, 2015 and 2016 the
corporation had an average current ratio; whereas, in the year 2013,
the corporation had an unsatisfactory current ratio. The reason
behind this is the increase in current liabilities and provisions. It
was not a good sign for the corporation.
 The rule of thumb for quick ratio is 1:1 and for OPTCL it is not
satisfactory in the year 2012 and 2013. The reason behind this was
the current liabilities exceed the liquid assets. There is an increase
in current liabilities like sundry creditor, interest accrued but not
due on loans, liability for wealth tax and liabilities for fringe benefit
tax than of liquid assets. But in the years 2014, 2015 and 2016, the
corporation had a very satisfactory quick ratio.
 The current asset trend decreased from 2012 to 2013, but from
2014 it tends to increase upto 2016. The current assets like stores
and spare increased continuously.
 The current liabilities trend increased year after year from 2012 to
2016 which is alarming situation for the corporation.
 Working capital turnover ratio was negative in 2013. It shows
positive sign in the year 2014, 2015 and 2016. For the years 2012
and 2013 the corporation had a wide fluctuation in working capital;
whereas in the years 2014 to 2016, the corporation maintained a
moderate working capital structure.
  The higher the inventory turnover ratio indicates better inventory
management. Here in all the five years from 2012 to 2016, the
corporation maintained a satisfactory inventory turnover ratio..

5.2 SUGGESTION
OPTCL is the soul of Odisha’s power transmission network and is playing a
pivotal role in making surplus power after meet the demand of the state
through efficiently administering the system of transmission. For
improvement of organization’s profitability, much emphasis is needed to
improve the better working capital management by decreasing the
current liabilities through reducing of unplanned overhead expenses. In
such process, current assets position will be improved through collection
of revenue from power transmission as well as recovery of past dues
from DISCOMS, Govt. and other agencies etc. The company should give
more attention on increasing its collection of revenue from wheeling
charges under the head of account revenue from operation and should
give more emphasis to curtail unplanned expenses to increase the further
profit.

 The management should generate a systematic financial plan for

better working capital management. There should be a better
and proper guidelines for working capital management. It should
get detailed view of the operations; find out the financial
requirement on accounts of operation after taking into
consideration the different financial statements.
 The corporation should invest more in current assets instead of
gross block. If the corporation will give emphasis on investment
in current assets then it will increase the liquidity position of the
corporation.
 There must be a systematic plan to collect the outstanding
payments still due from the distribution companies.
 There should be more capital inclusion in this corporation by the
government of Odisha, Department of Energy, because it will
increase the working capital and also the capital in OPTCL. As in
 this stage it needs more capital for its day to day operation and
strengthening the transmission lines all over odisha.
 The management should more concentrate on management of
current assets & minimize current liabilities.

 The management should concentrate more on better utilization

of funds for working capital in current asset than fixed asset.

 The proportion of the current assets to total assets is very low,

so the corporation should have to take some adequate measures
to increase it.

 The management should plan to purchase its fixed assets from

long term sources instead of from the availability of working
capital.

 In order to increase the profitability of this concern if govt.

increases the tariff rate, then this corporation as well as other
power sector corporations will get more profit in the future. So
that they can meet with the demand side.

5.3 CONCLUSION
On the basis of data analysis on working capital management in OPTCL,
the following conclusions arrived.

The current liabilities are increasing from financial year 2011-2012 to

2015-2016, in comparison to current assets position. Hence, it is an
alarming sign for the smooth working capital management.
There is also satisfactory net cash flow from the operating, investing and
financing activities of the organization.
Currently the corporation has progressed in the quick ratio as it is quite
satisfactory in the recent years and in case of inventory turnover, the
corporation has managed it very well in all the years of our study.
By adapting proper short term investment pattern, utilization of
inventory by adopting guidelines for working capital management, the
corporation may attain a sound financial position in future and able to
manage its working capital efficiently.

BIBLIOGRAPHY
TEXTBOOKS:
1. Prasanna Chandra, “Financial Management”, Fourth Edition
1999, Tata McGraw Hill Publishing Company Ltd, New Delhi.
2. Maheswari Dr S. N “Financial Management”, Ninth Edition,
2006 Sultan Chand & Sons, New Delhi.
3. Gupta, Sashi, “Financial Management”, 4th Edition, 2007,
Kalyani Publisher, New Delhi.
4. Pandey I. M., “Financial Management”, Vikas Publishing House
Pvt. Ltd. 8th Edition 1999.

ARTICLES:
 Working Capital Management
 An overview of Working Capital Management and corporate
financing.
 Working Capital Management Manages Flows of Funds.

WEBSITES:
 www.optcl.co.in
 www.wikipedia.com
 www.slideshare.com
 www.google.com