Interim Report

1
ALSTOM India Ltd.


Interim Report








Submitted By: Anmol Jain (13BSP0110)
Submitted To: Prof. Jyoti Ahluwalia
ALSTOM India Ltd.

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ALSTOM India Ltd.




“Significance of Indirect Taxes

In

Hydroelectric Construction Contracts”
(Chamera and Uri Hydroelectric Projects).
ALSTOM India Ltd.






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ALSTOM India Ltd.


Table of Contents


Executive Summary ....................................................................................................................................... 4
Part 1 : Company ........................................................................................................................................... 5
A) ALSTOM India Ltd. ................................................................................................................................ 6
About Alstom ........................................................................................................................................ 8
Major Projects ....................................................................................................................................... 9
Products & Services ............................................................................................................................ 11
Clients .................................................................................................................................................. 13
Competitors ........................................................................................................................................ 15
B) Financial Analysis ................................................................................................................................ 17
Ratio Analysis ...................................................................................................................................... 18
Cash Flow Analysis .............................................................................................................................. 46
Competitor Analysis ............................................................................................................................ 48
Part 2 : Taxation in Hydroelectric Projects ................................................................................................. 51
Chamera Hydroelectric Project ............................................................................................................... 52
Key Facts ............................................................................................................................................. 53
Uri Hydroelectric Project ........................................................................................................................ 54
Key Facts ............................................................................................................................................. 55
Future Plan of Action .................................................................................................................................. 56
Annexure(s) ................................................................................................................................................. 57







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ALSTOM India Ltd.



Executive Summary


This project deals with understanding the business of Hydroelectric power generation in
India and understanding the significance of indirect taxes in the hydroelectric
construction contracts.

In pursuit of this objective I have also tried to understand Alstom India Limited as a
company in terms of the businesses, products and services provided, clients, competitors
etc. I have also analyzed company's financials through ratio analysis, cash flow analysis
& comparing the ratios with competitors post which I moved on to the Hydroelectric
construction contracts.

I have gone through the contracts of Chamera & Uri hydroelectric project. Both the
contracts are divided into three parts which are as follows:

1. Supply of Offshore
1
Plant & Equipment
2. Supply of Onshore
2
Ex- works
3
Plant & Equipment (Indian Origin)
3. Transportation & Installation Services.

These contracts helped me gain all the information such as the contract price, time of
completion, the conditions related to the taxes, also the types of taxes charged under
these contracts. All this information will help me understand the significance of taxation
in the hydroelectric construction contracts.







1
Away from the shore i.e. inside the water.
2
On the shore i.e. on the land.
3
Includes only the cost of manufacturing.
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ALSTOM India Ltd.






Part 1 : Company






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ALSTOM India Ltd.






A) ALSTOM India Ltd.



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ALSTOM India Ltd.






















Alstom Group
France
Fra
Alstom India Limited
Formerly Known As
Alstom projects India Limited.
Alstom T&D India Limited
Formerly Known As
Areva T&D.
Power Transport
Gas Coal & Oil Nuclear Renewable
Hydro Wind Geothermal Biomass Solar Ocean
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ALSTOM India Ltd.


About Alstom

Alstom is a global leader in the world of power generation, power transmission and rail
infrastructure and sets the benchmark for innovative and environmentally friendly technologies.
 Alstom builds the fastest train and the highest capacity automated metro in the world,
 provides turnkey integrated power plant solutions and associated services for a wide
variety of energy sources, including hydro, nuclear, gas, coal and wind,
 And it offers a wide range of solutions for power transmission, with a focus on smart
grids.

The Group employs 92,000 people in around 100 countries. It had sales of €20 billion
and booked close to €22 billion in orders in 2011/12.


About Alstom in India
Present in India since 1911, Alstom has strong capabilities in
 engineering,
 manufacturing,
 project management
 and supply of products and solutions for infrastructure.

On 06 June 2012 the name ALSTOM Projects India Limited (APIL) was changed to
ALSTOM India Limited (AIL), this change was to show that , the Company’s operations have
now gone beyond being a “Projects” Company. Alstom in India has full capabilities in
engineering, manufacturing, project management and supply of power generation and transport
sector requirements.
This change was made to make solid progress in positioning the Company for progression and
concurrently capturing new markets of growth. The name change reinforces AIL as an integrated
enterprise, with a long-term strategy to advance its presence and more closely aligns and
strengthens the identity of each of its core areas in which it operates.
Alstom is widely recognized by customers, stakeholders, and other industry participants and has
become synonymous with excellence in the market in which it operates.
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ALSTOM India Ltd.



Major Projects



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ALSTOM India Ltd.



Power Projects

Projects Completed:
 Utran project- Gujrat
 Gautami Project- Andhra Pradesh.
Ongoing Projects:
 Subansiri – largest hydro project of India - Assam and Arunachal Pradesh.
 Lower Jurala Hydro Electric Project - Andhra Pradesh.
 Uri II Hydro Electric Project - Jammu& Kashmir.
 Chamera III Hydro Electric Project - Himachal Pradesh.


Transport Projects
Projects Completed:
 SIGNALING SYSTEM for DELHI METRO RAIL Corp. (DMRC)
Ongoing Projects:
 METRO ROLLING STOCK CONTRACT for CHENNAI METRO (CMRL)

 RAIL INFRASTRUCTURE CONTRACT for CHENNAI METRO (CMRL)

 SIGNALING SYSTEM for BANGALORE METRO RAIL Corp. (BMRC)

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ALSTOM India Ltd.




Products & Services


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ALSTOM India Ltd.



POWER


 Turbomachines Portfolio
 Electrical & Control Systems
 Steam Cycle add-ons
 Repowering and Rehabilitaion
 Hydro
 Environmental Control Systems
 Heat Recovery Steam Generators
 Energy Recovery Systems
 Pulverizers
 Power Automation and Controls

TRANSPORT

 Rail Transport In India





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ALSTOM India Ltd.







Clients



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ALSTOM India Ltd.




 National Hydro Power Corporation (NHPC):2000 MW Subansiri Hydro Power
Project

 Andhra Pradesh Power Generation Corporation Limited (APGENCO):Lower Jurala
Hydro Electric Project


 BANGALORE METRO RAIL Corp. : SIGNALING SYSTEM

 Mumbai Railway Vikas Corporation Ltd (MRVC) :Design, Supply, Installation,
Testing & Commissioning of Audio Frequency Track Circuits (AFTC)


 Chennai Metro Rail Limited (CMRL) : METRO ROLLING STOCK CONTRACT

 Nuclear Power Corporation of India Limited (NPCIL) :Rajasthan Atomic Power
Project (RAPP)


 National Thermal Power Corporation (NTPC) :Barh II – Supercritical
Boilers – 2 x 660 MW





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ALSTOM India Ltd.






Competitors





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ALSTOM India Ltd.



Major competitors of Alstom India are:

 ABB Limited

 GE Energy

 Siemens

All of these are involved in the business of power
generation and infrastructure development in India.
By power generation I mean all types of power generation
such as hydro, wind, gas etc.

These companies operate in all over India similar to
Alstom India Limited hence these can be called the true
competitors of Alstom as their region of operation and the
nature of business is same.







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ALSTOM India Ltd.




B) Financial Analysis


















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ALSTOM India Ltd.








Ratio Analysis









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ALSTOM India Ltd.


Overall Performance


 The performance of company in terms of profitability is not good as the
expenses are rising and the profits are declining though the figures of profits
in Income Statement (Annexure 2) have increased in 2013 in comparison
with 2012 but they are not able to keep up with the rise in sales.

 In terms of investment the dividend per share has been constant whereas
earnings per share has increased in 2013 after a dip in 2012. The earnings
and dividend yield are rising however the reason behind this rise is the
declining market price per share (Annexure 2) which is due to the declining
price earnings ratio indicating higher risk.

 In terms of liquidity the company is striving towards the ideal ratios which is
good.

 In terms of turnover the company's overall performance is good the only
concern is with the stock turnover ratio which is declining indicating that the
stock is not selling fast.

 In terms of coverage ratio the debt equity ratio is rising showing increase in
debt and the interest coverage ratio is rising indicating that the operating
profit is not able to match the rising interest.





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ALSTOM India Ltd.


Profitability Ratios


Figure 1


1. Gross Profit Ratio

GPR= Gross Profit x 100
Sales

This ratio is calculated to find the profitability of business. A high ratio of gross
profit to sales is a sign of good management.

However, as per the financial statements of Alstom India Limited the gross profit
margin is declining which is clearly shown in figure 1 above.

The reason behind this decline is the rising Cost of Goods Sold ratio which is also
evident from figure 1 above. Though the sales have also increased however the
rate of increase in cogs is more than the rate of increase in sales.






0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00
2011
2012
2013
Percentage
2011 2012 2013
COGS 53.49 57.95 59.42
Gross Profit 46.51 42.05 40.58
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ALSTOM India Ltd.


Statement Showing % Change in Sales & COGS
(Rupees Million)
Particulars 2011 2012 Increase % 2013 Increase %
Revenue 15742 24183 8441 53.62 27858.4 3675.4 15.20
COGS 8420.9 14012.9 5592 66.41 16552.4 2539.5 18.12


It is clearly shown from the table above that sales in 2012 increased 53.62% from
2011 where as the COGS increased 66.41%, similarly in 2013 sales increased
15.20% from 2012 whereas cogs increased 18.12%.

2. Cost of Goods Sold Ratio

COGS ratio = COGS x 100
Sales

This ratio indicates the proportion that the cost of goods sold bears to sales. Lower
the ratio, the better it is. Higher the ratio, the less
favourable it is because it would have a smaller margin of gross profit.

It is clearly seen in figure 1 that the cogs ratio is rising which is not favourable.
The main reason behind this rise is the rising material cost.

Statement showing calculation of COGS
(Rupees Million)
Particulars 2011 2012 2013
increase/ decrease in stock -3.5 -15.1 22.9
material 8,142.40 13508.1 16003.9
power 149.5 210 242.4
repairs 84.5 109.1 108.3
tools and spares 48 200.8 174.9
Cost of Goods Sold 8420.9 14012.9 16552.4
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ALSTOM India Ltd.



Figure 2



3.Operating Profit Ratio


Operating Profit Ratio = Operating Profit/EBIT x100
Net Sales


This ratio indicates the portion remaining out of every rupee worth of sales after all
operating costs and expenses have been met. Higher the ratio the better it is.

The operating profit ratio of the company is declining as shown in figure 2 above
the reason behind this decline is the rising operating cost. Due to the rise in
operating cost the operating profit margin is declining in spite of the rising
revenue



4. Operating Cost Ratio

Operating Cost Ratio = Operating Cost x 100
Net Sales

0.00 20.00 40.00 60.00 80.00 100.00
2011
2012
2013
Percentage 2011 2012 2013
Operating Cost 84.48 92.62 93.31
Operating Profit 15.52 7.38 6.69
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ALSTOM India Ltd.


The operating cost ratio establishes a relationship between the operating cost and net
sales. Operating cost includes cogs as well as other operating expenses i.e.
administration, selling and distribution & depreciation which have a matching
relation with the sales.

Lower the ratio, the better it is. A higher ratio is unfavourable as it will leave a small
amount of operating income to meet interest, dividends etc.

As shown in Figure 2 above the operating cost ratio is rising resulting in the decline
of operating profit ratio. The reason behind this rise in the operating cost ratio is the
existence of cogs (which is rising, as explained above) and the rising trend of selling
expense ratio(explained further), due to these two factors the operating cost has risen
over the last 3 years. Though the administrative expenses have also risen but their
rise in comparison with the sales has shown a decline in 2013 which is clearly
evident from the administrative expense ratio( explained further).





Figure 3


5. Operating Expense Ratio

Operating Expense Ratio = Operating Expense x 100
Net Sales
29.00 30.00 31.00 32.00 33.00 34.00 35.00
2011
2012
2013
Percentage
2011 2012 2013
Operating Exp. 30.99 34.67 33.90
Operating Exp.
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ALSTOM India Ltd.


This ratio shows the relation between the operating expense i.e. selling and
distribution, administration & depreciation expenses with the net sales. Here we do
not include the cogs. A lower ratio is favourable.

Unlike the rising Operating cost ratio the Operating expense ratio has shown a
decline in 2013 from its rise in 2012 which is a good sign. The reason behind this
decline is fall in the administrative expense ratio (explained further). Though the
administrative expenses have also increased like selling and distribution expenses but
when taken as a percentage of sales admin. expenses have declined.


Figure 4

6. Administrative Expense Ratio


Administrative Expense Ratio = Administrative Expense x 100
Net Sales


This ratio shows the relation of the Administrative expenses with the net sales.
Lower the ratio the better it is.

As shown in Figure 4 above the ratio increased in 2012 however the company
managed to lower it down in 2013. The ratio did not lower down because the
expenses reduced instead it lowered down as the rate of increase in sales was more
than the increase in admin. expenses.
22.00
24.00
26.00
28.00
30.00
2011
2012
2013
Percentage
2011 2012 2013
Admn. Exp. 24.19 28.04 26.63
Admn. Exp.
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ALSTOM India Ltd.


Statement Showing % Change in Sales & Admin. Expenses
(Rupees Million)
Particulars 2011 2012 Increase % 2013 Increase %
Revenue 15742 24183 8441 53.62 27858.4 3675.4 15.2
Admin.
Expenses 3807.9 6780.4 2972.5 78.06 7419.1 638.7 9.42


It is clearly visible that in 2012 the increase in sales was 53.62% whereas increase in
admin. expense was 78.06% & in 2013 the sales have increased by 15.2% whereas
admin. expenses by only 9.42% hence the ratio declined.



Figure 5


7. Selling Expenses

Selling Expenses = Selling Expenses x 100
Net Sales

This ratio shows the relation between the selling expenses and the net sales. A lower
ratio is favourable.

The selling expense ratio of Alstom India Ltd. has shown a rising trend in last three
years.

0.00
2.00
4.00
6.00
2011
2012
2013
Percentage
2011 2012 2013
Selling Exp. 4.21 4.52 5.29
Selling Exp.
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ALSTOM India Ltd.


Statement showing calculation of Selling Expenses

(Rupees Million)
Particulars 2011 2012 2013
royalty 217.1 417.3 515.8
travelling 432.5 598.3 612.3
provision for bad debts 3.9 76.7 213.4
bad debts 8.5 1.1 131.3
selling exp. 662 1093.4 1472.8

It can be seen from the table above that out of all the rising components included in
calculation of selling expenses Provision for bad debts and Bad debts have shown a
significant increase, and can be called as the primary reason of the rise in the selling
expenses and the ratio.



Figure 6

8. Net Profit Ratio

Net Profit Ratio = Net Profit x 100
Net Sales

This ratio is very useful to the proprietors and prospective investors because it
reveals the overall profitability of the concern. This ratio measures the relationship
between net profit and sales of the firm.
2011
2012
2013
0.00 2.00 4.00 6.00 8.00 10.00 12.00 Percentage
2011 2012 2013
Net Profit 10.73 6.94 6.60
Net Profit
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ALSTOM India Ltd.



Higher the ratio, the better it is because it gives an idea of improved efficiency of the
concern.

In figure 6 above we can clearly see that the net profit ratio has shown a declining
trend which is not favourable.

Statement Showing % Change in Sales & Net Profit
(Rupees Million)
Particulars 2011 2012
Increase/
Decrease % 2013
Increase
/Decrease %
Revenue 15742 24183 8441 53.62 27858.4 3675.4 15.2
Net Profit 1689 1677.5 -11.5 -0.68 1837.3 159.8 9.53

As shown in the table above the reason behind this decline is that the rate of increase
in sales is more than the rate of increase in net profit. Also in 2012 the profit
decreased by 11.5% however in 2013 the company managed to increase the profit by
9.53%. This is a good sign.


Figure 7


9. Return on Capital Employed

Return on Capital Employed= Profit Before Interest & Tax X 100
Capital Employed
0.00 10.00 20.00 30.00 40.00
2011
2012
2013
Percentage
2011 2012 2013
ROCE 39.61 24.28 21.72
ROCE
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ALSTOM India Ltd.




This ratio measures the relationship between Profit Before Interest
&Tax and the average Capital Employed. This ratio is an indicator of the earning
capacity on the capital employed in the business.

The objective of this ratio is to determine how efficiently the long term funds
supplied by the creditors and shareholders have been used. Hence a higher ratio is
favourable.

The capital employed ratio of Alstom India Ltd. has been declining since 2011 which
shows that the company has not been able to efficiently utilise the funds of the
shareholders which is not favourable. The reason behind this decline is the increasing
capital employed.


Statement Showing % Change in EBI T & Capital Employed

(Rupees Million)
Particulars 2011 2012 Increase % 2013 Increase %
EBIT 2442.5 1785.8 -656.7 -26.89 1863.3 77.5 4.34
Capital Employed 6166.2 7354.8 1188.6 19.28 8579.7 1224.9 16.65


We can see from the table above that in 2012 the EBIT has decreased by 26.89%
however it has increased by 4.34% in 2013 which is a good sign, whereas the capital
employed has only increased since 2011. Also it is important to note that the rate of
increase in capital employed has declined from 19.28% in 2012 to 16.56% in 2013
which is appreciated.










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ALSTOM India Ltd.



Figure 8


10. Return on Equity


Return on Equity = Earnings to Equity x 100
Equity Shareholders Fund


This ratio measures the profitability from the equity shareholder's viewpoint. This
ratio is calculated to find out how efficiently the funds supplied by the equity
shareholders have been used.

Higher the ratio the more efficient the management and utilization of equity
shareholder's funds.


11. Return on Shareholder's Fund


Return on Shareholder's Fund = Profit After Tax x 100
Shareholder's Fund
0.00
10.00
20.00
30.00
40.00
2011
2012
2013
Percentage
2011 2012 2013
ROE 35.04 24.18 22.91
ROSF 35.04 24.18 22.91
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ALSTOM India Ltd.


This ratio is a measure of percentage of net profit to average shareholder's fund.
Average shareholder's funds include Equity Shareholder's funds as well as Preference
Shareholder's funds.

The main difference in above two ratios is the existence of Preference Share Capital
and Preference Dividend, since there is no Preference Share Capital or Preference
Dividend the results of both the ratios are same.

Both the ratios have declined since 2011 and the main reason behind this decline is
the rising shareholder's fund which can be seen in the table below.

Statement showing calculation of Shareholder’s Funds

(Rupees Million)
Particulars 2011 2012 2013
(a) Share Capital 670.20 672.30 672.30
(b) Reserves and Surplus 5,202.80 6,264.70 7,348.80
Shareholders' Funds 5,873.00 6,937.00 8,021.10

The rise in the shareholder's fund is the result of rising Reserves & Surplus i.e. the
company is holding the profits as reserves and investing back in the business as a
result the shareholders are getting lesser returns.







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ALSTOM India Ltd.


Liquidity Ratios


Figure 9
1. Current Ratio

Current Ratio = Current Assets
Current Liabilities


The current ratio is a widely used measure for evaluating a company's
liquidity and short term debt paying ability. This ratio reveals the relationship
between current assets and current liabilities.

A current ratio of 2:1 is considered ideal, i.e. if current ratio is 2 or more it means
that the concern has the ability to meet its current obligations but if the ratio is less
than 2 it indicates that the concern has difficulty in meeting its current obligations.

The current ratio of the company is not 2:1 but have been rising since 2011 which is
good. It is clearly seen in figure 9 that it has reached to 1.16 times in 2013 from 1.07
in 2011.



2011, 1.07
2012, 1.09
2013, 1.16
2011
2012
2013
1.02 1.04 1.06 1.08 1.10 1.12 1.14 1.16 1.18
TImes
Current Assets
Current
32
ALSTOM India Ltd.





Figure 10

2. Liquid Ratio
Liquid Ratio = Liquid Assets
Current Liabilities


This ratio is a measure of a company's immediate short term liquidity. The liquid
assets exclude inventory and prepaid expenses. The inventory may not be readily
saleable, and prepaid expenses may not be transferable to others.

The usual guideline for the liquid ratio is 1:1, however some industries may find that
a ratio less than 1:1 is adequate.

The ratio has been above 1:1 since 2011 which is a good sign. This shows that the
company is has more than enough liquid assets to cover it current liabilities.





2011
2012
2013
1.02
1.04
1.06
1.08
1.10
1.12
2011, 1.05
2012, 1.05
2013, 1.11
TImes
Liquid Assets
Liquid
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ALSTOM India Ltd.



Investment ratios


Figure 11
1. Earnings Per Share

Earnings Per Share = Earnings to Equity Shareholders
No. of Equity Shares

Earnings per share is the measure of the net income earned on each share of common
stock. The objective of determining this ratio is to measure the profitability of the
firm on the equity shares.

Higher the earnings per share, better is the performance and prospects of the
company.

There was a negligible decline in the EPS of the company in 2012 as shown in
figure 11 above however the company has been able increase it in 2013 which is
appreciated.
23.00
24.00
25.00
26.00
27.00
28.00
2011
2012
2013
R
u
p
e
e
s

2011 2012 2013
EPS (Rs.) 25.12 24.95 27.33
EPS (Rs.)
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ALSTOM India Ltd.



Figure 12


2. Dividend Per Share

Dividend Per Share = Dividend Paid to Equity Shareholders
No. of Equity Shares


This ratio is calculated to see how much dividend is paid for each share held by the
equity shareholders.

Higher the ratio, the more favourable it is, because this ratio shows that how much
income as profit will be received by the investors.

Alstom has maintained the dividend per share at Rs. 10 since 2011 which is a good
sign.




2011 2012 2013
DPS (Rs.) 10 10 10
0
2
4
6
8
10
12
R
u
p
e
e
s

DPS (Rs.)
35
ALSTOM India Ltd.



Figure 13

3. Dividend Payout Ratio

Dividend Payout Ratio = Dividend Per Share x 100
Earnings Per Share


The payout ratio measures the percentage of earnings distributed in the
form of cash dividends. Companies wanting to have a high growth rate try to
maintain a low payout ratio because they reinvest most of their net income into the
business.

Alstom's payout ratio increased in 2012 however there was a significant decrease in
2013. The reason behind this fluctuation was that the company maintains a constant
DPS of Rs. 10 but the EPS declined in 2012 resulting in increase of payout ratio and
hiked up in 2013 resulting in a decrease in payout ratio and such decrease is
favourable as this means that the company is holding the earnings for the purpose of
reinvestment in the business.

34.00
36.00
38.00
40.00
42.00
2011
2012
2013
P
e
r
c
e
n
t
a
g
e

2011 2012 2013
Divident Payout 39.80 40.08 36.59
Divident Payout
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ALSTOM India Ltd.



Figure 14


4. Price Earnings Ratio
Price Earnings Ratio = Market price Per Share
Earnings Per Share

This ratio is helpful in determining whether the share of a particular firm should be
purchased or not. High Growth shares have high P/E ratios as investors are willing to
pay a greater multiple of current earnings to achieve a higher future growth.

If high risk is found in a share, it reduces its market price and hence automatically
reduces its P/E ratio.

We can see from figure 14 that the P/E ratio is declining which indicates that there is
high risk involved due to which the yield will be high (explained further) however
the MPS will decline as shown below.

Statement Showing the Market Price per Share
(In Rupees)
Particulars 2011 2012 2013
MPS(closing rates) 586.75 355.60 318.25

0.00
5.00
10.00
15.00
20.00
25.00
2011
2012
2013
P
e
r
c
e
n
t
a
g
e

2011 2012 2013
Price Earning(in times) 23.36 14.25 11.65
Earning Yield 4.28 7.02 8.59
Divident Yield 1.70 2.81 3.14
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ALSTOM India Ltd.



5. Earning Yield Ratio

Earning Yield Ratio = Earnings Per Share x 100
Market price Per Share

This ratio is also known as Earnings - Price ratio. This ratio shows the relationship
between the EPS & MPS. Higher the ratio the better it is as each investor in equity
shares expects a certain amount of earnings, whether distributed or not from the
company in whose shares he invests.



6. Dividend Yield Ratio

Dividend Yield Ratio = Dividend Per Share x 100
Market price Per Share

This ratio is also known as Dividend - Price ratio. This ratio is important for the
investors who are interested in the dividend income. This ratio shows that how much
dividend can be received by an investor if he buys the shares from open market.

From figure 14 above we can see that the Earning Yield as well as the Dividend
Yield has been rising since 2011. The reason behind this rising trend is the decline in
the Market price Per Share which is due to the high risk involved as explained in
point 4 above.









38
ALSTOM India Ltd.


Coverage Ratios


Figure 15
1. Interest Coverage Ratio
Interest Coverage Ratio = Earnings Before Interest & Tax
Interest on Long Term Debt

This ratio indicates the relation between net profits before interest and tax and
interest on long term debts. This ratio shows the number of times the interest charges
are covered by the income out of which they will be paid.

Higher the ratio the more beneficial it is for lenders, because this ratio measures the
margin of safety for the lenders.

In case of Alstom this ratio has been declining since 2011 and there has been a
drastic decline in 2013 to 74.83 times from 274.74 times. This shows that the lenders
margin of safety has declines and the lenders will be reluctant to lend money to
alstom.
Interest Coverage Ratio
0.00
100.00
200.00
300.00
400.00
2011
2012
2013
T
i
m
e
s

2011 2012 2013
Interest Coverage Ratio 359.19 274.74 74.83
Interest Coverage Ratio
39
ALSTOM India Ltd.



Figure 15


2. Proprietary Ratio

Proprietary Ratio = Shareholder's Funds
Total Assets


This ratio shows the relationship between shareholder's funds and total assets. This
ratio shows that how much capital is introduced by the owner in business.

Higher the ratio means a sound position of business , because it shows that the
organisation is not run by the outside funds which mean less interference and
pressure of outsiders.
It is clearly seen in the figure 15 above that the ratio has been rising since last three
years which is a good sign.
2011 2012 2013
Proprietary 0.21 0.25 0.29
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
T
i
m
e
s

Proprietary
40
ALSTOM India Ltd.



Figure 16

3. Capital Gearing Ratio

Capital Gearing Ratio = Long Term Loan + Preference Share Capital
Equity Share Capital


This ratio establishes the relationship between the fixed cost bearing capital (the
capital upon which the rate of return is fixed) e.g. long term loans or preference share
capital & variable cost capital ( the capital upon which rate of return is not fixed) e.g.
equity share capital.

The higher ratio the more beneficial for the firm because at the time of prosperity the
owners will enjoy the benefits of trading on equity, while at the time of depression
they will have to suffer a lot because they will have to pay the interest whether they
are in loss or profit.

Since the ratio has shown a rising trend in last three years it is a good sign.
2011 2012 2013
Capital Gearing 0.05 0.06 0.07
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
T
i
m
e
s

Capital Gearing
41
ALSTOM India Ltd.



Figure 17
4. Debt Equity Ratio

Debt Equity Ratio = Debt
Equity


This ratio indicates the relationship between long term debts and shareholder's fund.
A low ratio is generally favourable as it shows a greater claim of owners than
creditors. From the creditors point of view it represents a larger margin of safety
since owners equity is treated as a margin of safety by creditors also the owners try to
maintain a low ratio so as to avoid the interference of outsiders in the operations of
the business.

Alstom's debt equity ratio has been rising in last three years. The desirable norm for
this ratio is 2:1, hence this rise is favourable.





2011 2012 2013
Debt-Equity 0.05 0.06 0.07
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
T
i
m
e
s

Debt-Equity
42
ALSTOM India Ltd.


Turnover Ratios


Figure 18

1. Stock Turnover Ratio

Stock Turnover Ratio = Cost Of Goods Sold
Stock

This ratio measures the number of times on an average the stock is sold during the
period. The purpose is to measure the liquidity of Stock.
A faster turnover is favourable as less cash is tied up in stock and less the chance of
stock obsolescence.
Over the last three years the ratio has declined from 20.28 in 2011 to 18.86 in 2013
this means that the stock does not sell fast and stays on the shelf for a long time
compared to earlier years, this needs to be improved.

Stock
18.00
19.00
20.00
21.00
2011
2012
2013
T
i
m
e
s

2011 2012 2013
Stock 20.28 18.94 18.86
Stock
43
ALSTOM India Ltd.



Figure 19
2. Debtors Turnover Ratio

Debtors Turnover Ratio = Net Sales
Debtors

This ratio measures the number of times, on average , the debtors are collected
during the period i.e. how faster the debts are being collected.

Debtors turnover has been on a rise since 2011 which is evident from figure 19
above. This is good as the company is able to promptly collect the debts as the years
are passing by.

Note: It is assumed that total sales are credit sales.

2011 2012 2013
Debtors 2.31 2.35 2.54
2.15
2.20
2.25
2.30
2.35
2.40
2.45
2.50
2.55
2.60
T
i
m
e
s

Debtors
44
ALSTOM India Ltd.



Figure 20

3. Creditors Turnover Ratio
Creditors Turnover Ratio = Credit Purchases
Creditors

This ratio is used to establish a relation between credit purchases and average trade
creditors. The objective of calculating this ratio is to determine the efficiency with
which the creditors are managed.

A low turnover ratio reflect liberal credit terms granted by suppliers, while a high
ratio shows that accounts are to be settled rapidly.
There has been an increase in the turnover ratio in last three years which means that
the accounts are to be settled faster than the earlier years, however we can see from
figure 20 that the company has managed to lower the ratio to 4.78 in 2013 from 5.03
in 2012. This shows that the creditors are providing liberal credit terms to the
company.
Note: It is assumed that total purchases are the credit purchases.
2011 2012 2013
Creditors 3.62 5.03 4.78
0.00
1.00
2.00
3.00
4.00
5.00
6.00
T
i
m
e
s

Creditors
45
ALSTOM India Ltd.



Figure 22

4. Capital Employed Turnover Ratio
Capital Employed Turnover Ratio = Net Sales
Capital Employed

Capital Turnover Ratio indicates the efficiency of the organization with which the
capital employed is being utilized. A high capital turnover ratio indicates the
capability of the organization to achieve maximum sales with minimum amount of
capital employed.

Alstom has been able to increase this ratio since 2011 and has maintained it over 3
from 2012 onwards. This means that the company is able to generate sales 3 times
more than the capital employed in the company which is a sign of good performance.







Capital Employed
0.00
1.00
2.00
3.00
4.00
2011
2012
2013
T
i
m
e
s

2011 2012 2013
Capital Employed 2.55 3.29 3.25
Capital Employed
46
ALSTOM India Ltd.










Cash Flow Analysis




















47
ALSTOM India Ltd.



Cash Flow Statement (Rupees in Millions)
Particulars 2011 2012 2013
Operating Activities 2754.1 -1277.4 330.6
Investment Activities
Inter corporate deposits given -14 -3273 -12943
Inter corporate deposits received back 814 12856
Purchase of equity shares of Subsidiary Company -0.5
Interest received 373.7 364.9 253.1
Purchase of investments -315.3
Purchase of fixed assets -933.7 -955.2 -837.1
Sale proceeds of fixed assets 8.7 9.5 4.5
Net cash used in Investing -565.3 -3355.6 -666.5
Financing Activities
Dividend and corporate dividend tax paid -781.5 -773.6 -781.4
Movement in unclaimed dividend account -1.3 -1.2
Interest paid -27.1 -6.5 -19.1
Net cash used in Financing -808.6 -781.4 -801.7



 We analyse from the figures above that the company was not able to generate
cash through its operations in 2012 however it managed to turn it around in
2013 which is good.

 The company is earning from the investments in form of interest. However
they are investing more in fixed assets as a result there is a loss of cash from
investing activities. We can also see that the company is investing in fixed
assets in order to facilitate its operating activities.

 The main financing expense is that of the interest payments though the major
portion of the financing expense is covered by the payment of dividend it is
more or less constant.





48
ALSTOM India Ltd.










Competitor Analysis




















49
ALSTOM India Ltd.




Figure 23




Alstom stands at third position if compare it with the competitors in terms of revenue.
However this does not mean that the company is not performing well.


Figure 24
13%
35%
1%
51%
Revenue
Alstom Abb Ltd GE Energy Siemens
Net Profit ratio ROE ROCE
Alstom 6.6 22.91 21.72
Abb Ltd 2.3 6.69 11.32
GE Energy 2.47 8.67 14.85
Siemens 1.7 4.81 5.08
0.0
5.0
10.0
15.0
20.0
25.0
P
e
r
c
e
n
t
a
g
e

Particulars Alstom Abb Ltd GE Energy Siemens
Revenue 27,858.4 77,219.9 1863 1,13,526
50
ALSTOM India Ltd.


In spite of not having the highest sales Alstom fares well when compared in terms of
profitability. Alstom has the highest net profit ratio, return on equity & return on capital
employed. This shows that the company is able to generate good returns in the current sales.


Figure 25
From the figure above we can see that Alstom also has the highest Dividend per Share as
well as Earning per Share.


Figure 26
We can see that though the company has the highest DPS & EPS but the payout ratio
is not the highest. This is still good because the company is utilising the retained
money in an efficient way and this is evident from the returns.


0 5 10 15 20 25 30
DPS
EPS
DPS EPS
Siemens 5 5.45
GE Energy 0.3 1.96
Abb Ltd 3 8.46
Alstom 10 27.33
Alstom
Abb Ltd
GE Energy
Siemens
0
50
100
Divident
Payout Ratio
Alstom, 36.59
Abb Ltd, 35.45
GE Energy, 17.75
Siemens , 91.8
P
e
r
c
e
n
t
a
g
e

51
ALSTOM India Ltd.













Part 2
Taxation in Hydroelectric Projects






52
ALSTOM India Ltd.


Chamera Hydroelectric Project
Himachal Pradesh


 As explained above Alstom India Ltd. is a company that provides solution
for power generation.
 It entered into a contract with to NHPC ( National Hydro Power
Corporation) to supply the Offshore and Onshore plant and equipment, for
Chamera III Hydroelectric Project.
 Chamera III Hydroelectric Project is a 231 MW project and is situated on
Ravi River, District Chamba, Himachal Pradesh.
 The contract includes turnkey Electro-Mechanical package of 3 x 77 MW
Francis Units size along with associated Balance of Plants with a schedule of
48 months.
 There are three contracts for this project
1. Supply of Offshore Plant & Equipment.
2. Supply of Onshore Plant & Equipment.
3. Onshore Transportation & Installation Services.



53
ALSTOM India Ltd.


Key Facts
Chamera Hydroelectric Project
Himachal Pradesh
Contract(Electrical & Mechanical Works)
Basis 1 2 3
A B
For

Offshore
Plant & Equipment
(Power Hydraulique)
Onshore
Ex- works Plant &
Equipment
(Indian Origin)
(Power Hydraulique)
Onshore
Ex- works Plant &
Equipment
(Indian Origin)
(Projects India)
Onshore
Services
Client NHPC(National Hydroelectric Power Corporation) Ltd.
Date 02-03-2007
Time of
Completion
Shall be determined from the date of Notification of Award
Time Schedule 23-01-2007 - 22-12-2010
Contract Price JPY 1,150,003,216 INR 363,000,000
EURO 3,216,547
+ INR 1,102,108,474
INR 271,968,000
(Transportation : INR
53,630,000 & Installation:
INR 218,338,000)
Taxes
Custom Duty @
22.58%
(Calculated on CIF
+ 1% Landing
Charges)
Excise Duty(Reimbursed
DEP) & CST @ 4%
(C Form)
(Calculated on main
equipment value + ED @
16.32%)
Excise Duty(Reimbursed
DEP) & CST @ 4%
(C Form)
(Calculated on main
equipment value + ED @
16.32%)
Contract price inclusive of
Service Tax @ 10.2%
Tax Value
INR
100.553.333.98
(JPY
1,150,003,216
@ 0.3834 INR)
INR 55,232,648.23 INR 55,232,648.23
INR
251,73,081.67
54
ALSTOM India Ltd.


Uri Hydroelectric Project
Jammu & Kashmir

 Alstom in India was awarded Uri II contract by NHPC (National Hydro
Power Corporation).
 Uri II Hydroelectric Project is a 240 MW project and is situated on Jhelum
River, District Baramula, Jammu & Kashmir.
 The contract includes turnkey Electro-Mechanical package of 4 x 60 MW
Francis Units size along with associated Balance of Plants.
 There are three contracts for this project
4. Supply of Offshore Plant & Equipment.
5. Supply of Onshore Plant & Equipment.
6. Onshore Transportation & Installation Services.





55
ALSTOM India Ltd.


Key Facts
Uri Hydroelectric Project
Jammu & Kashmir

Contract(Electrical & Mechanical Works)

Basis 1 2 3
For
Offshore
Equipment (Power
Hydraulique)
Onshore
Ex- works Equipment
(Indian Origin)
Onshore
Services
Client NHPC(National Hydroelectric Power Corporation) Ltd.
Date 25-01-2007
Time of
Completion
Shall be determined from the date of Notification of Award
Time Schedule 29-12-06 - 28-04-10
Contract Price
JPY 1,814,229,275
+
CHF 14,256,086
INR 1,867,339,795 + EURO
3,531,935
INR 388,169,847
(Transportation : INR
80,356,129 &
Installation : INR 307,813,718)
Taxes
Custom Duty @ 22.58%
(Calculated on CIF + 1%
Landing Charges)
Excise Duty(Reimbursed DEP) &
CST @ 4% (C Form)
(Calculated on main equipment
value + ED @ 16.32%)
Service Tax not applicable on J&
K as per Section 64 of chapter v
of Finance Act 1994
Tax Value INR 287,030,225 INR 69,553,078.20
56
ALSTOM India Ltd.


Future Plan of Action

 Understanding the indirect taxes in India.

 Extracting information about current progress of these
projects.

 Understanding the revenue recognition system in these
projects.

 SWOT analysis.

 Understanding the marketing mix.

 Understanding the employee selection process and appraisal
system.





57
ALSTOM India Ltd.







Annexure
4
(s)








4
All the figures are taken from the balance sheet of Alstom India Limited available on the company's website.
http://www.alstom.com/india/our-companies/alstom-projects-india-limited/reports-and-financials/
58
ALSTOM India Ltd.


Annexure 1
BALANCE SHEET Rupees in Million

EQUITY AND LIABILITIES 2011 2012 2013

(1) Shareholders' Funds

(a) Share Capital 670.20 672.30 672.30

(b) Reserves and Surplus 5,202.80 6,264.70 7,348.80
A
Shareholders' Funds 5,873.00 6,937.00 8,021.10



2) Non-Current Liabilities

(a) Other long term liabilities 102.40 112.30 144.40

(b) Long term provisions 183.10 305.50 414.20

(c) Deferred tax liabilities (Net) 7.70
B
Long Term Loans 293.20 417.80 558.60
(A+B)=C
Capital Employed 6,166.20 7,354.80 8,579.70



3) Current Liabilities

(a) Construction contracts in progress, liabilities 17,584.10 14,587.70 12,556.00

(b) Trade payables 2,249.30 2,686.60 3,346.30

(c) Other current liabilities 1,534.60 1,544.50 1,695.00

(d) Short-term provisions 1,090.90 1,278.20 1,025.70

22,458.90 20,097.00 18,623.00
TOTAL 28,625.10 27,451.80 27,202.70



ASSETS 2011 2012 2013

(1) Non-Current Assets

(a) Fixed assets 3,980.50 4,686.20 4,820.70

(i) Tangible assets 3,486.70 3,687.70 4,414.00

(ii) Intangible assets 46.40 43.60 33.20

(iii) Capital work-in-progress 447.40 954.90 373.50

(b) Non-current investments 0.50 0.50
59
ALSTOM India Ltd.



(c) Deferred tax assets (Net) 124.50 108.20

(d) Long term loans and advances 648.90 693.50 675.50

(e) Other non-current assets 40.20 77.70

4,629.40 5,544.90 5,682.60



(2) Current Assets

(a) Inventories 415.20 739.70 877.80

(b) Construction contracts in progress, assets 6,108.10 2,384.80 2,091.20

(c) Trade receivables 6,811.40 10,290.60 10,977.00

(d) Cash and bank balances 7,360.60 2,232.00 1,097.60

(e) Short-term loans and advances 3,226.60 5,889.70 6,018.50

(f) Other current assets 73.80 370.10 458.00

23,995.70 21,906.90 21,520.10
TOTAL 28,625.10 27,451.80 27,202.70








60
ALSTOM India Ltd.


Annexure 2
INCOME STATEMENT Rupees in Million

Particulars 2011 2012 2013
A
Revenue 15,742.00 24,183.00 27,858.40
B
COGS 8,420.90 14,012.90 16,552.40
(A-B)=C
Gross Profit 7,321.10 10,170.10 11,306.00
D
Selling exp 662.00 1,093.40 1,472.80
E
Admin exp 3,807.90 6,780.40 7,419.10
F
Depreciation 408.70 510.50 550.80
(D+E+F)=G
Operating Exp. 4,878.60 8,384.30 9,442.70



(C-G)=H
Profit/PBIT 2,442.50 1,785.80 1,863.30
I
Other Income 471.80 718.00 980.60
J
Finance Cost(interest) 6.80 6.50 24.90



(H+I-J)=K
PBT 2,907.50 2,497.30 2,819.00
L
Current -775.90 -928.90 -884.40
M
Earlier tax

-58.30 -54.90
N
Deferred Tax -73.50 167.40 -42.40
(L+M+N)=O
Total Tax -849.40 -819.80 -981.70
(K+O)=P
Profit 2,058.10 1,677.50 1,837.30
Q
Profit/Loss from
Discontinued Operation -369.10

(P+Q)=R
PAT/EE/Net Profit 1,689.00 1,677.50 1,837.30
S
No. of Eq. Shares 67.23 67.23 67.23
(R/S)=T
Earnings Per Share(EPS) 25.12 24.95 27.33
U
Dividend Per Share(DPS) 10.00 10.00 10.00
V MPS(closing rates) 586.75 355.60 318.25


61
ALSTOM India Ltd.


Annexure 3
Notes
Particulars 2011 2012 2013
Net Sales Revenue
Revenue 16,086.10 24603.1 28678.2
excise duty 344.1 420.1 819.8
Net Sales Revenue 15742 24183 27858.4

2011 2012 2013
COGS
increase decrease -3.5 -15.1 22.9
material 8,142.40 13508.1 16003.9
power 149.5 210 242.4
repairs 84.5 109.1 108.3
tools and spares 48 200.8 174.9
variable exp 8420.9 14012.9 16552.4

total(other exp.) 2025 3967.8 4319.4

Selling
&
Admin.
Exp
operating
exp.
other exp (fixed) 1743 3447.9 3793.8
employee benefit 2,726.90 4425.9 5098.1
depreciation 410.2 514.7 554.9
transfer from revaluation
reserve -1.5 -4.2 -4.1
fixed exp. 4878.6 8384.3 9442.7

Selling
royalty 217.1 417.3 515.8
travelling 432.5 598.3 612.3
provision for bad debts 3.9 76.7 213.4
bad debts 8.5 1.1 131.3
selling exp. 662 1093.4 1472.8

Admin. Exp. Admin. Exp. 3807.9 6780.4 7419.1

Financing Exp. Financing Exp. 6.8 6.5 24.9