INDUSTRY PROFILE

Indian Turbine Industry is growing rapidly wind energy is the growing source of
renewable energy in the country. According to the analysis in India more than 90% of
wind energy potential could be exploited by 2030. There are huge local production
facilities in India due to the vast demand for equipment by the wind power industry in
the country. Incentives are provided by the central and state governments to the
companies manufacturing wind energy equipment which contribute to the growth in
India’s turbine industry. India has huge demand for wind turbines and windmill blades.

India today has one of the world’s largest programmes for development of wind energy
products and U.S companies to offer their expertise and equipment for wind energy in
Indian market. Indian imports wind turbines, Windmills blades, wind battery charger,
wind energy converters, etc which are used in energy generation. Wind power is the
greatest renewable energy generating potential in India. U.S financial services
providers today safety invest in this field with potential for a good profit margin.
 Company Profile:-

Listing Date- Thursday, February 25, 2016

BSE Script Code- 539686

Listing in- M Group of Securities

Issue price- Rs 70.00 per Equity share

Face Value- Rs10 each

K.P Energy ltd is a very fast growing company of the group. It concentrates both solar
and wind. Energy projects and previously worked at Saurastra and Kutch in Northern
regions of Gujarat with leading corporate companies in power sector such as LANCO,
WIPRO, INDU projects. K.P Energy is also developing wind farm of 25 MW in
Bhavnagar and 150 MW in Porbandar.

The gross wind energy potential of India is 48,561 MW and a total of about 11,807
MW of commercial projects have been established until March 31,2010. Gujarat have
Gross wind potential of 10,656 MW, installed capacity till March31, 2010 is 1864 MW
only, leaving very good scope of development. K.P Energy has stepped into
Renewable Power Generation through Wind Energy Production.
 Our Strengths

Unique Model and Value proposition

In India currently, the trend within the Wind Energy sector is that Wind Turbine
manufacturers play a dual role and also act as a developer or purely land owning
companies act as a developer. Hence, their primary focus is on either selling turbines or
land or partially developed Infrastructure. The same is better explained from the
difference in value chain an of its player

 Manufacturer Value Chain > Manufacturing > Erecting And Commissioning >
Guarantees And Maintenance.
 Developer Chain > Site Identification > Contracts And Clearance > Operation

As a part of our Business model, we are providing complete turnkey solutions including
on BOT (Build- Operate- Transfer) basis on Wind energy Clients which includes on
Client cost reduction and timely as well as high performance delivery of the project and
not just a Turbine or Land. We believe that this model could be able to create a niche
for our company in the market and help in creating a more vibrant and wind energy
sector in India. We have the early mover advantage of offering a tailor made wind farm
development solution, which help us to create development tie-ups and visible grow
broader and deeper in wind energy sector and play a significant role in India’s
Renewable Energy success story.

Our Vision

The Vision of KP Group is to spread worldwide and offer quality infrastructural

development services.KP Group will continue its evolutionary path, attempt to identify
opportunities ahead of the market and position itself accordingly.
 Our Mission

The Mission of KP Group is to continuously provide all type of “Infrastructural

Development” solutions under roof to the Corporate sectors world-wide. Customer’s
driven approach and quality conscious products and services shall be presented with
Purity and Protective solutions. Rational commitment and smart working shall provide
effective solution to clients in such a manner that it adds a value to the brand.

Company Promoters

The promoters of the company are :-

1. Mr. Farukbhai Patel (Managing Director)

2. Mr.Ashish A Mithani (Whole-time Director & Chief Executive Officer)
Organizational Structure:-

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 INTRODUCTION OF

FINANCIAL DEPARTMENT

We are aware that in Economics, the four factors of production considered are Land,
Labour, Capital, Organisation. The term “Capital can also be referred to as Finance.” It
represent the money that is required to be brought into finance or fund an activity.

“Finance is regarded as the Life line of Business organization because in the absence of
finance all the business will be paralyzed. It is the finance that keeps the wheels of
business running.”

A part of the total capital invested in the current assets like stock, Debtors, Bills
Receivables and Cash or Bank Balance is known as Working Capital.

FUNCTIONS OF FINANCE

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RAISING OF LONG TERM FUND:

K.P. Energy raises the fund in the company as per the requirements in the company for
the set up the wind farms according to the customers demand for setup of megawatt
power they require. Funds are raised from different sources in company. A source such
as Equity shares, Term loan or promoters of the company brings the fund.

DISBURSEMENT OF LONG TERM FUND:-

Long term fund raised in the company is used by company for the purchase of raw
material required for the wind farm set up as per the demand.

WORKING CAPITAL MANAGEMENT:-

Working capital is the short term fund required to the company for the day to day
functioning in the company. Company raises the working capital from the two sources
that is Cash Credit (CC) and the other is Bank Overdraft. Company bring working
capital of 5crore per year from CC and almost 2.5 to 3crore capital are utilized by
company.

DIVIDEND DECISION:-

Company has issued the equity shares for raising fund in the company but it has not yet
taken any dividend decision.
 SOURCES OF LONG-TERM FINANCE

In a broad sense, sources of long-term funds are generally divided into two types one is
Internal Sources and the other is External Sources.

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Internal Sources:-

Profit is retained in the business in different forms like General Reserve, Bonus share,
Capital Reserve, Depreciation Reserve, etc..K.P. Energy uses only one Internal Source
for raising the fund that is Reserve & Surplus
Bonus Share

The company has allotted 1,500,000 (fifteen lacs) fully paid-up equity shares of face
value of Rs. 10/- each dated April 10,2015 to shareholders of company in proportion of
3-2 and consequently the paid up share capital increased to Rs 25,000,000 (two crores
fifty lacs) divided into 2,500,000 equity shares of Rs 10/- each

Reserve & Surplus

It is the part of premium which was 20 Rs out of 60 to 70 Rs issue price.

Share premium part was 9.20 lakhs to 6.44crore. This was the capital raised
during the initial public offering.

External Sources

Venues for obtaining funds that come from outside an organization. External sources of
finance might include taking on new business partners or issuing equity or bonds to
create long term obligation, or commercial paper to take on shorter term debt.

Equity Shares

It is the most important security used for raising long term capital from the external
sources is equity shares. Equity share holders are the owners of the company with the
voting rights.

As K.P Energy is a listed company in the SME platform of BSEraises its long term
fund through equity shares as per the the requirements of the company by presenting
the objectives of issue to the shareholders. BSE SME listed companies can raise the
long term fund of rupee 1 crore to 25 crore. Company initially raised the fund for 25
MW wind power project at Porbandar, Gujarat. Initial public offering size was 9,20,000
Equity shares of rupees 10 as on February 23, 2016
Term Loan

K.P Energy raises its long term fund through term loan from the banks. Currently,
company started the project of wind farm at site in Porbandar, which cost rupees 13
crore from which 8.25 crore of term loan was been taken from SBI (State Bank of
India).

Further the required capitals were also raised by the promoters by bringing the capital
in the company. Fund raised in the company is of 60:40 ratio that is of equity:debt. And
any other source of raising the long term fund is not use by the company

WORKING CAPITAL MANAGEMENT

A managerial accounting strategy focusing on maintaining efficient level of both

components of working capital, Current Assets and Current Liabilities, in respect to
each other. Working Capital Management ensures the company has sufficient cash flow
in order to meet its short-term debt obligations and operating expenses.

One of the most important areas in day to day management of the firm is the
management of working capital. Working Capital Management is the functional area of
finance that covers all the current accounts of the firm. It is considered with working
capital. Working Capital refers to the fund invested in the current assets. Current Assets
are essential to use Fixed Assets profitability.

If a Company’s Current assets does not exceed its current liabilities, then it may run
into trouble pay back to the creditors in the short term. The worst- case scenario is
bankruptcy. A declining working capital ratio over a longer time period would also be a
red flag that warrants further analysis. For Example, it would be that the company’s
sales volume are decreasing and, as a result, its accounts receivables number
continuous to get.

Working Capital also gives investors an idea of the company’s underlying operational
efficiency. Money that is tried up in Inventory or money that customer still owe to the
company cannot be used to pay off any of the company’s obligations. So, is a company
not operating in the most efficient manner (Slow Collection) it will show up as an
increase in the Working Capital. This can be seen by comparing working capital from
one period to another; slow collection may signal and underlying problem in the
company’s operation.

Since this time, there have been reports of ‘Green shoot’. Equally there have been
double dip recession in many parts of the world and even an unprecedented triple dip
recession for some. This factors affecting the availability of dept finance and
businesses, ability to secure it. If they have to survive and grow, they need to be more
innovative in their approach to there working capital is likely to be the cheapest and
easiest release cash. In this uncertain economy, one thing is clear that the current
economic conditions are likely to remain for sometimes and with the limited
availability of debt finance, the need to maintain low level of working capital is
becoming even more important.

Over the last few years we have seen on growing growth in the far East and other
emerging market. This phenomenon has started to drive a chain take a more global
supply chain model as more and more products are manufactured in the territories. The
result is buffer stock is due to long and long variable delivery lead times and shorter
payment terms as specially when buying from china. Consequently, there is increased
pressure on working capital in the West and working capital is rising fast up the
corporate agenda. During this period we have seen some business try to ride out of the
storm, relying on the goodwill of suppliers and lenders, other have taken the
opportunity to take decisive action to reduce working capital.

COMPONENTS OF WORKING CAPITAL

Working capital is the capital required to the company for its daily functioning.
Analysis of debtors and creditors is done by the company to know that whether
company require to raise the working capital. If company have more debtors then
creditors, so company may require less working capital to be raised from external
source.

K.P Energy analyse the working capital needed for daily functioning in the company
and raise it through two sources. They are as follows:
Cash Credit (CC)

Cash Credit is a type of short term loan provided to companies to fulfil their working
capital requirements.

Overdraft (OD)

Overdraft is a facility given by the bank to the companies, to withdraw money “more”
then the balance available in their respective accounts.

Earlier in CC, company was allowed to raise the working capital of 2.5crore per year
but it is not raise to 5crores per year from which atmost 3crores is been utilised by the
company.

Formula to calculate working capital

Working Capital = Current Assets – Current Liabilities

 RATIO ANALYSIS

CURRENT RATIO

Years Current Current ratio Change in

Assets Liablities % of ratio
2011-12 12237845 18756920 0.652:1 -
2012-13 75410908 62505843 1.206:1 84.96
2013-14 96453806 59916343 1.609:1 33.4
2014-15 91865435 93804095 0.979:1 -39.15
2015-16 16713038 140928333 1.18:1 22.57
9

Current Ratio of the year 2015-16= Current Assets / Current Liabilities

= 167130389/140928333

1.18:1

INTERPRETATION

Current Ratio was high in the inital period was decreasing with the passing years. It
was highest in the year 2012.

NET PROFIT RATIO

 Year Net Profit Sales Ratio Change in
% of ratio
2011-12 1182831 32435558 3.65% -
2012-13 678244 10422400 6.51% 78.35
2013-14 2985768 94429203 3.16% -51.45
2014-15 29425113 26925238 10.93% 245.88
0
2015-16 52023278 41452500 12.55% 14.82
0

Net Profit Ratio for the year 2015-16 = Net Profit / Sales *100

= 52023278 / 414525000 * 100

12.55%

INTERPRETATION

This ratio is used to measure the overall profitability, it is called index of profitability
an efficiency it is really fluctuating in the factory every year and manager need to pay
attention to make it stable or increase

PROPRIETARY RATIO
 Years Shareholder Total Ratio % of
Fund Assets change in
ratio
2011-12 288120 23913968 1.20% -
2012-13 10034962 104421345 9.61% 700.83
2013-14 7049195 88622542 7.95% -17.27
2014-15 49460075 190384146 25.98% 226.79
2015-16 165883353 429891166 38.58% 48.50%

Proprietary Ratio for the year 2015-16 = Shareholder Fund / Total Assets * 100

= 165883353 / 429891166

38.58%

INTERPRETATION

The ratio below 50% alarming for the creditors since they may have to lose heavily in
the event of factory liquidation on account of heavy losses.

RETURN ON SHAREHOLDER FUND

Years Net Shareholder Ratio % of

 Profit(PAT Fund change
) in ratio
2011-12 1182831 1470951 80.41% -
2012-13 678244 7049195 9.62% -88.03
2013-14 2985768 10034962 29.75% 209.25
2014-15 29425113 49460075 59.49% 99.96
2015-16 165883353 429891166 38.58% -35.15%

Return on Shareholder Fund for the year 2015-16= Net Profit(PAT) / Shareholder
Fund * 100

= 165883353 / 429891166 * 100

38.58%

INTERPRETATION

It is the income that is available for distribution as dividend to share holders. Share
holders fund include Equity Share Capital and all the surplus belonging to share holders

EXPENSE RATIO

Years Total Sales Ratio % of

 Expense change in
ratio
2011-12 30975083 32435558 95.49% -
2012-13 9928523 10422400 95.26% -0.24
2013-14 90372798 94429203 95.70% 0.46
2014-15 221227788 26925238 82.16% -14.14
0
2015-16 319326913 41452500 77.03% -6.24
0

Expense Ratio for the year 2015-16= Total Expenses / Sales * 100

= 319326913 / 41425000 * 100

77.03%

INTERPRETATION

This ratio reveals the relation of different expenses to sales. In this, lower the ratio
higher the profit. So of company wants to increase the profit, company need to lower
the ratio

RETURN ON ASSET

Years Net Avg Total Ratio % of

Income Asset change in
ratio
 2011-12 1182831 33851495.5 3.5% -
2012-13 678244 66205782.5 1.02% -70.85%
2013-14 2985768 96521943.5 3.09% 202.95%
2014-15 29725113 147402745.5 19.96% 545.95%
2015-16 52023278 310307656 16.76% -16.03%

Return on Asset for the year 2015-16 = Net Income/ Average Total Asset *100

= 52023278 / 310307656 * 100

16.76%

INTERPRETATION

The Return on Asset Ratio illustrates how well management is employing the
company’s total Asset to make profit. The higher the return the more efficient
management is in utilizing its Asset base.

QUICK RATIO

Year Liquid Current Ratio %Change

Assets Liabilitie in Ratio
s
2011-12 13224028 43789023 0.3:1 -
2012-13 19807083 88622542 0.2:1 -33.34%
2013-14 17684675 104421345 0.17:1 -15%
2014-15 38662487 93804095 0.4:1 135.29%
 2015-16 113590201 141121333 0.8:1 100%

Quick Ratio for the year 2015-16 = Liquid Assets / Current Liabilities

= 113590201 / 141121333

0.8:1

INTERPRETATION

Quick Ratio shows the extent of the cash and other current assets that are readily
convertible into cash in comparison to the short term obligation of a firm. A Quick
Ratio of 0.5 would suggest that a company is able to settle half of its current liabilities
instantaneously.

RETURN ON CAPITAL EMPLOYED

Year EBIT Capital Ratio %Change

Employe in Ratio
d
2011-12 1713984 25032103 6.8% -
2012-13 948546 26116699 3.63% - 46.62%
 2013-14 4332941 45339432 9.57% 163.64%
2014-15 43648715 96580051 45.19% 372.2%
2015-16 78823734 289109833 27.26% - 39.68%

Return on Capital Employed for year 2015-16 = EBIT / Capital Employed * 100

= 78823734 / 289109833 *100

27.26%

INTERPRETATION

In the initial years Return on Capital Employed was decreasing and suddenly it started
increasing in 2013-14 and 2014-15 and again it decreases in recent year 2015-16.

ASSET TURNOVER RATIO

Year Sales Average Ratio % Change

Total Assets in Ratio
2011-12 32435558 33851495.5 9.5 Times -
2012-13 10422400 66205782.5 0.15 -98.4%
Times
2013-14 94429203 96521943.5 0.97 546.67%
Times
2014-15 26925238 147402745.5 1.8 Times 85.57%
0
2015-16 41452500 310307656 1.3 Times -27.78%
 0

Asset Turnover Ratio for year 2015-16 = Sales / Average Total Assets

= 414525000 / 310307656

1.3 Times

INTERPRETATION

The Asset Turnover Ratio is an efficiency ratio that measures a firm’s ability to
generate sales from its Assets by comparing net sales with average total Assets. In
Initial level it was decreasing but shows increases in 2014 and 2015 and again it
decreases in recent year.

RETURN ON EQUITY

Year Net Shareholder’s Ratio %

Income Equity Change
in Ratio
2011-12 1713984 6920951 24.77% -
2012-13 948546 7049195 13.46% - 45.67%
2013-14 4332941 10034962 43.18% 220.8%
2014-15 43648715 49460075 88.25% 104.38%
2015-16 78823734 165223353 47.52% - 46.15%
Return on Equity for year 2015-16 = Net Income / Shareholder’s Equity *100

= 78823734 / 16523353 *100

47.52%

INTERPRETATION

Return on Equity is a measure of profitability that calculate how much amount of profit
a company generates with each amount of shareholder’s Equity.

ANNEXURE (A)

PROFIT & LOSS ACCOUNT

Particulars 2011-12 2012-13 2013-14 2014-15 2015-16

Revenue from 3245558 10422400 94429203 269252380 414525000
operations

Other Income 253509 226933 276536 1083090 500971

Total 32689067 10649333 94705739 270335470 415025971

Revenue
Expenses

Cost of material 20750730 553215 83597913 204278124 295490427

consumed

Employee
benefit expenses 5602138 3396414 3016895 10674325 13448394

Financial cost 2882894 2882143 2537856 3794409 9346206

Depreciation
expenses 174465 306581 177578 1664558 7529118

Other expenses
1564856 2790171 1042555 6275339 10388092

Total Expenses 30975083 9928524 90372797 226686755 336202237

Profit before 1713984 720810 4332941 43648715 78823734

Exception item
and Tax
Exceptional - 227736 - - -
items
Profit before 1713984 948546 4332941 43648715 78823734
tax
Tax Expenses

Net Current
Tax 444858 313950 1310208 12042984 7585210

Deferred tax
86295 43648 36966 2180618 19215246
Profit for the 1182831 678244 2985768 29425113 52023278
period
 ANNEXURE (B)

BALANCE SHEET

Particulars 2011-12 2012-13 2013-14 2014-15 2015-16

Equity and Liabilities

1.
2.
3. 1. Shareholder’s Fund

A. A. Share Capital
100000 5000000 5000000 10000000 34200000

B. B. Reserve and Surplus 1370951 2049195 5034962 39460075 131683353

2. Share Application 5450000 - - - -

Money Pending
 Allotment

4. 3. Non Current
Liabilities

A. A. Long Term
18000000 19000000 35200000 1976363 76920621
Borrowings

B. B. Deferred Tax 11152 67504 104470 2285088 21500334

C. C. Other Long Term - - - 42858525 24658525

Liabilities

5. Currents Liabilities

15583627 18238613 14183286 21808607 11633231

A. Short Term Borrowings

2009140 17168381 21459054 43740353 105813361

B. Trade Payables

C. Other Current Liabilities 1164153 27098849 23439473 2825535 23481741

Total 43789023 88622542 104421345 190384146 429891166

Assets

1. Non Current Assets

A. Fixed Assets 4550846 4223584 8791969 98508711 254110828

B. Investment 10000 10000 10000 10000 163000

- - - - 8486949
C. Long Term Loan and
Advances

2. Current Assets

A. Inventories 26014149 64582875 77974701 53212947 47368198

B. Trade Receivables 294595 11231713 - 18941641 77248893

C. Cash and Cash

3580332 8978050 1275174 9070887 14973943
Equipments

D. Short term Loans and

9339101 9704860 16369501 10446759 20434571
Advances

E. Other Current Assets - - - 193200 7104784

Total 43789023 88622542 104421345 190384146 429891166