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INTRODUCTION
Every business concern wants to know the various financial aspects for effective decision
making. To make the decisions regarding financial aspects of the firm, they have to prepare the
financial statements. The preparation of financial statement is required in order to achieve the
objectives of the firm as a whole. The term financial statement refers to an organized collection
of data on the basis of accounting principles and conventions to disclose its financial
information. Financial statements provide reliable information about the financial performance
and financial soundness of the firm. They give an exact envision of a company’s condition &
operating results in a condensed form. A complete set of financial statements include a
statement of financial position (i.e., a balance sheet), a statement of comprehensive income
(i.e., a single statement of comprehensive income or an income statement and a statement of
comprehensive income), a statement of changes in equity, and a statement of cash flows.

Significance of Financial Performance Measurement:

The interest of various related groups is affected by the financial performance of a firm. The
type of analysis varies according to the specific interest of the party Involved:

 Trade creditors: interested in the liquidity of the firm (appraisal of firm’s liquidity) 

 Bond holders: interested in the cash-flow ability of the firm (appraisal of firm’s capital

structure, the major sources and uses of funds, profitability over time, and projection of
future profitability)

 Investors: interested in present and expected future earnings as well as stability of these

earnings (appraisal of firm’s profitability and financial condition)

 Management: interested in internal control, better financial condition and better

performance (appraisal of firm’s present financial condition, evaluation of opportunities
in relation to this current position, return on investment provided by various assets of
the company etc.)

Analysis of Financial Statement

Financial statement analysis is the art of transforming data from financial statements into
information that is useful for informed decision making. From an investor’s standpoint,
predicting the future is what financial statement analysis is all about, while from management’s
standpoint, financial statement analysis is useful both to help anticipate future conditions and,
more important, as a starting point for planning actions that will improve the firm’s future
performance.

In general, financial analysts seek to examine the past and current performance and financial
position of a company in order to form expectations about its future performance and financial
position. Analysts are also concerned about factors that affect risks to a company’s future
performance and financial position. An examination of performance can include an assessment
of a company’s profitability (the ability to earn a profit from delivering goods and services) and
its ability to generate positive cash flows (cash receipts in excess of cash disbursements).
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Financial analysts often assess firm's production and productivity performance, profitability
performance, liquidity performance, working capital performance, fixed assets performance,
fund flow performance and social performance. The financial performance analysis identifies
the financial strengths and weaknesses of the firm by properly establishing relationships
between the items of the balance sheet and profit and loss account.

The first job of financial analyst is to select the information relevant to the decision under
consideration from the total information contained in the financial statement. The second job
involved in financial analysis is to arrange the information in a way to foreground significant
relationships. The final job is interpretation and drawing of inferences and conclusions. In brief,
financial analysis is the process of selection, relation, and evaluation.

Various types of financial analysis include:

1. Working capital Analysis

2. Financial structure Analysis
3. Activity Analysis
4. Profitability Analysis

In this context researcher has undertaken an analysis of financial performance of Power Grid
Corporation of India, which is India's principal electric power transmission company, to
understand how management of finance plays a crucial role in the growth.
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BACKGROUND
Every day, we are surrounded by one of the most important innovations of all time, electricity.
While it is a force of energy used all over the world, before discovering it, people have been
living for centuries without it, which you could imagine contributed to one dark world at night
with the exception of a candle here and there.

Electricity is one of the most important blessings that science has given to mankind. Life
without electricity is unimaginable for most part of the world population. One day of electricity
outage in an area can led to chaotic situation. It is used for lighting rooms, to use appliances, to
run machines, etc.

Electricity also provides mean of amusement, radio, television and cinema, which are the most
popular forms of entertainment are the result of electricity. Modern equipment like computers
and robots have also been developed because of electricity. Electricity plays a pivotal role in
the fields of medicines and surgery too — such as X-ray, ECG. The use of electricity is
increasing day by day.

India ranks third in the world in electricity production. The national electric grid, which is
owned by Power Grid Corporation of India, has an installed capacity of 388.134 GW as of 31
August, 2021. During the fiscal year (FY) 2019-20, the gross electricity generated by utilities in
India was 1,383.5 TWh and the total electricity generation (utilities and non-utilities) in the
country was 1,598 TWh. The gross electricity consumption in FY2019 was 1,208 kWh per
capita. In FY2015, electric energy consumption in agriculture was recorded as being the
highest (17.89%) worldwide.

Demand trend

During the fiscal year 2019-20, the utility energy availability was nearly 1300 billion KWh, a
short fall relative to requirements by 6.5 billion KWh (-0.5%). Peak load met was 182,533
MW, 1,229 MW (-0.6%) below requirements. According to Load Generation Balance report
2020, India's Central Electricity Authority anticipated energy surplus and peak surplus to be
2.7% and 9.1%, respectively, for the 2020–21 fiscal year.

Demand drivers

The International Energy Agency estimates India will add between 600 GW to 1,200 GW of
additional new power generation capacity before 2050. This added new capacity is similar in
scale to the 740 GW total power generation capacity of the European Union (EU-27) in 2005.
The technologies and fuel sources India adopt as it adds this electricity generation capacity may
have a significant impact on global resource usage and environmental issues

Hence this study analyzes the financial performance of the biggest electricity distribution and
transformation firm of India to get the idea of how it is performing in this high growth sector.
For the purpose of this analysis, we will use company’s balance sheet, income statement and
cash flow statement to calculate various ratios and to compare current year figures with the
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previous year’s figures to determine company’s financial position and provide

recommendations.

COMPANY PROFILE ]

Power Grid Corporation of India Limited, is a schedule ‘A’, ‘Maharatna’ Public Sector
Enterprise of Govt. of India which was incorporated on October 23, 1989 under the Companies
Act, 1956. Power Grid is a listed company, with 51.34% holding of the government and
balance is held by Institutional investors and Public. Headquarters of Power Grid is located in
Gurgaon, India. It mainly deals in supplying power in bulk across different states of India. 50%
of the total power of India’s transmission network is transmitted by Power Grid Corporation. It
is used to known as “National Power Transmission Corporation Power Limited” but on
November 8, 1990 after receiving the Certificate of Commencement of Business, its name
subsequently changed to Power Grid Corporation of India Limited on October 23, 1992.

Power Grid operates across India and covers 90% of country's interstate and inter-regional
electric power transmission system and its business segments include Transmission,
Consultancy, Telecom and ULDC/ RLDC. Its transmission network consists of roughly
168,140 circuit kilometers and 252 EHVAC and HVDC substations, with total transformation
capacity of 422,430 MVA as on 31 January 2021, and an availability of over 99%. Power
Grid's interregional capacity is 75,050 MW. Examples of Power Grid-owned stations include
the Vizag back-to-back HVDC converter station, the Chandrapur back-to-back HVDC
converter station, the India Sri Lanka HVDC Interconnection, and the Talcher–Kolar HVDC
system.

PGCIL also: -

 Provides in-house expertise in the Transmission, Distribution and Telecom sectors,

including Planning, Design, Engineering, Load Dispatch, OPGW on intra-state
Transmission network, Procurement Management, Operation & Maintenance,
Financing and Project Management.
 Providing consultancy for implementation of intra-state transmission network
 Undertakes Capacity Building Assignments.
 Providing consultancy for implementation of Smart Grid Pilot Projects, Energy
efficiency and Energy audit.

Power Grid Corporation of India provides telecom services too. Its telecom company is called
Powertel, which operates a network of 48,000 km and has presence in 688 locations across
India.

VISION
World Class, Integrated, Global Transmission Company with Dominant Leadership in
Emerging Power Markets Ensuring Reliability, Safety and Economy.

MISSION
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We will become a Global Transmission Company with Dominant Leadership in Emerging

Power Markets with World Class Capabilities by:

 World Class: Setting superior standards in capital project management and operations
for the industry and ourselves

 Global: Leveraging capabilities to consistently generate maximum value for all

stakeholders in India and in emerging and growing economies.

 Inspiring, nurturing and empowering the next generation of professionals.

 Achieving continuous improvements through innovation and state of the art technology.

 Committing to highest standards in health, safety, security and environment

VALUES
 Zeal to Excel and Zest for Change
 Integrity and Fairness in all matters
 Respect for dignity and potential of individuals
 Strict adherence to commitments
 Ensure speed of Response
 Foster learning, creativity and team-work
 Loyalty and pride in POWERGRID

SWOT Analysis of Power Grid Corporation of India Limited

Strengths: Weaknesses:

1. It controls India’s 90% interstate and 1. Slow decision-making process.

inter-regional electric power transmission 2. Centralized Authority.
system. 3. Inadequate skilled manpower in
2. Strong network coverage in remote areas. transmission line construction activities
3. Efficient system with minimal failures. and in the area of new technologies
4. Support from Central Government of
India.
5. Enjoys monopolistic characteristics.
6. High level of expertise and experience.
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Opportunities: Threats:

1. Smart grid and smart city projects. 1. Risk of failure of outdated grids.
2. Energy Audit and Energy Efficiency 2. Changning government policies and
sector. government intervention.
3. Solar power projects. 3. Difficulty in getting forest clearance for
4. Dedicated transmission system for expansion of the network.
railways and other bulk users.
5. Off-shore wind generation integration.
6. Wire distribution industry.

Competitors
Major Competitors of Power Grid Corporation of India are: -

1. Tata Power is an integrated power company. It engages in the generation, transmission,

distribution, and trading of electricity. The company deals with the generation of
electricity through coal, gas and oil, hydro, wind, solar, and waste heat sources.

2. India Power is a power generation and utility company. It operates in a diversified

portfolio of conventional and renewable modes of power generation, multi-location
distribution, operation and maintenance, and logistic outfits. The company serves
government utilities, hospitals, industrial, commercial, and residential consumers.

3. Adani Power Limited is an Indian power business subsidiary of Indian conglomerate

Adani Group with head office at Khodiyar in Ahmedabad, Gujarat. It is a private
thermal power producer, with capacity of 12,450 MW. It also operates a mega solar
plant of 40 MW at Naliya, Bitta, Kutch, Gujarat. It is India's first company that
synchronizes the supercritical technology.
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REVIEW OF LITERATURE
Khurana, Mani; Banerjee, Sudeshna Ghosh (2015) presents a diagnostic of the financial and
operational performance of segments in the power sector value chain between adoption of the
Electricity Act, 2003, and 2011, including analysis of the factors that contributed to the recent
crisis. The report focuses on efficiency and productivity, whether performance has improved
over time, and which states have emerged as performance leaders.

Nadar, Diwahar Sunder and Wadhwa, Bharti (2019) aims at providing the aforesaid
comprehensive knowledge by highlighting the areas in which ratios can be used, limitation of
ratios and methods to deal with the limitation. The study was able to identify and categorise
past studies into areas of financial evaluation, Insolvency Prediction, Valuation, Inter-linkage
studies, Benchmarking & Decision making, Technical Analysis.

Kennedy and Muller (2012) have explained that “The analysis and interpretation of financial
statements are an attempt to determine the significance and meaning of financial statements
data so that the forecast may be made of the prospects for future earnings, ability to pay interest
and debt matureness (both current and long term) and profitability and sound dividend policy.”

V. Vijayalakshmi and M. Srividya (2014) in their study stated that the financial health plays a
significant role in the successful management of a company. The analysis practically reveals
that gross profit ratio, operating ratio, return on equity capital, and earnings per share, have
significant effect on the net profit ratio of the selected pharmaceutical companies during the
study period. However, profitability of the selected pharmaceutical companies in India during
the study period is satisfactory. During the period of study there were a few ups and downs in
the profitability but it did not affect the operations of the company to a great extent. If the
Pharmaceutical Industry has to perform well, it has to invest more capital and has to do more
sales, only then it will improve its performance level.
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STATEMENT OF THE PROBLEM

Financial statement analysis is the process of analyzing and reviewing the financial statements
of a firm to gain insights about its financial position, so that management can take better
financial decisions for growth of the firm. Financial performance analysis includes analysis and
interpretation of financial statements in such a way that it undertakes full diagnosis of the
profitability and financial soundness of the business. It is proposed to conduct a review to study
the short-term prospects as well as long term trends and to arrive at the conclusion on the
performance of Power Grid Corporation of India Limited. Firm’s production and productivity
performance, liquidity performance, leverage performance, asset utilization performance and
growth performance will be analyzed to gain the insights about PGCIL’s financial strengths
and weaknesses by properly establishing the relationship between the items of balance sheet
and profit and loss account.

IMPORTANCE OF THE STUDY

The Financial Statements are mirror that reflects the financial position and strengths or
weakness of the concern. The electricity sector is witnessing high growth, change in
government policies and intense competition from private players. Every business needs to
view the financial performance analysis to know its position in the market.

The study on effectiveness of operational and financial performance of PGCIL is conducted to

measure the overall performance of the company. The financial analysis strengths the firms to
make their best use, and to be able to spot out financial weakness of the firm to state suitable
corrective actions.

This study aims at analysing the overall financial performance of Power Grid Corporation
Limited by using various financial ratios and method of comparative statements.

OBJECTIVES OF THE STUDY

The major objectives of the study are as follows:

1. To examine the financial performance of Power Grid Corporation for the period 2016-
17 to 2020-21.
2. To analyze, interpret and to suggest the operational efficiency of the Power Grid
Corporation by comparing the balance sheet and profit & loss A\c.
3. To critically analyses the financial performance of Power Grid Corporation with the
help of ratio analysis.
4. To offer appropriate suggestions for the better performance of the organization.
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RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind the
method used in the context of the research study, so that the result of this study can be
evaluated and reviewed by other researchers. This section includes the research design, nature
and source of data and the details of tools and techniques used in the analysis.
Research Design
Descriptive research design is used in this study because the purpose of this study is to cast
light on the current situation of the company by studying the facts and information recorded in
financial statements of the company over the years. It will ensure minimization of bias and
maximization of reliability of data collected. Hence by making the type of research conducted
to be both descriptive and analytical in nature. Furthermore, Descriptive research may identify
areas in need of additional research and relationships between variables that require future
study.

Nature and source of data

Secondary data is used for the study. The required data for the study is collected and compiled
from in.tradingview.com for the period from 2016-2017 to 2020-2021 which is a reliable and
empowered corporate database. In addition to this, supportive facts and information are
collected from books, journals, annual reports, and the internet.

Tools and techniques of analysis

The data collected were edited, classified and tabulated for analysis. The study employs the
following analytical tools:

1. Ratio analysis
2. Comparative statement

Ratio Analysis

There are many relationships between financial accounts and between expected relationships
from one point in time to another. Ratios are a useful way of expressing these relationships.
Ratios express one quantity in relation to another (usually as a quotient). In this proposed study,
the financial performance of Power Grid Corporation of India will be critically analyzed with
the help of various financial ratios namely:

1. Profitability Ratios:
 Gross Profit Margin
 Net Profit Margin
 Return on Assets
 Return on Equity
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2. Liquidity and Solvency Ratios:

 Current Ratio
 Quick Ratio
 Debt-Equity-Ratio
 Long Term Debt-Equity-Ratio

3. Coverage Ratios:
 Interest Coverage Ratio
 Cash Flow Coverage Ratio

4. Efficiency Ratios:
 Inventory Turnover Ratio
 Debtors Turnover Ratio
 Assets Turnover Ratio

5. Cash Flow Indicator Ratios:

 Dividend Pay-out Ratio
 Retention Ratio

Comparative Statements

Comparative statements are statements of financial position of a business at different periods.

These statements help in determining the profitability of the business by comparing financial
data from two or more accounting periods. Under this form of comparative financial statements
both the comparative Profit and Loss Account and comparative Balance sheet are covered.
Such comparative statements are prepared not only to the comparison of the various figures of
two or more periods but also the relationship between various elements embodied in profit and
loss account and balance sheet. It enables to measure operational efficiency and financial
soundness of the concern for analysis and interpretations. To prepare comparative statements of
Power Grid Corporation of India we will compare figures of the period 2020-21 with 2019-20.


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LIMITATIONS OF THE STUDY

Every project has its own limitations due to various reasons. This project work also has some
limitations which we want to highlight. These limitations are as follows: -

1. The study is limited to five years data only, i.e., from 2016-17 to 2020-21, therefore, a
complete analysis considering longer time period, which may give slightly different
results, has not been done.
2. For financial analysis of the firm, secondary data has been collected from
in.tradingview.com and company’s own website; therefore, the accuracy of analysis is
totally depending upon secondary data source.
3. Only quantitative aspects have been taken into consideration for analyzing financial
performance of the company, whereas many times financial performance can be
affected by qualitative factors too.
4. The study is limited to single firm only, i.e., Power Grid Corporation of India

EXPECTED CONTRIBUTION FROM THE STUDY

The study is expected to have importance to many parties. Since the study revolves around one
of the popular issues of current business scenario, the following are the expected significances:

1. It provides some insight about the evaluation process of electric industry.

2. To initiate the concerned organizations to reassess existing practices and put a renewed
emphasis on those undermined ones.
3. To serve as a reference material for both academicians and practitioners
4. To initiate other interested researchers to carry out more extensive studies in the area

REFERENCES
1. Periasamy, Dr. P. A Textbook of Financial Cost and Management Accounting. Mumbai:
Himalaya Publishing House, 2010.
2. Robinson, Thomas R., Henry, Elaine, Pirie, Wendy L. & Broihahn, Michael A.
International Financial Statement Analysis. New Jersey: Wiley & Sons, Inc., 2008.
3. Van Horne, James C. & Wachowicz, John M. Fundamentals of Financial Management.
New Jersey: Prentice Hall, 1971.
4. Schmidlin, Nicholas. The Art of Company Valuation and Financial Statement Analysis.
Sussex: Wiley & Sons, Inc., 2014.