300 Corporate Finance
Dredging is one of the primary infrastructure facilities in the development and operation of ports. Capital
dredging is to create the requisite water depths; regular maintenance dredging ensures the availability of
depths so created—at all times and for the smooth and safe navigation of vessels. With the vast need and
scope for expansion of port facilities, India envisages a spurt in dredging requirements, both capital
and maintenance.
COMMENTS ON THE FINANCIAL POSITION
Given here is an analysis of the financial performance of the company.
Profitability
Particulars 1999–2000 2000–2001 2001–02
Gross profit 6.58 8.18 7.47
Percentage of GP to sales 18.58 21.6 29
Operating profit 101.16 149.74 87
Percentage of OP to sales 2.85 3.95 3.38
PBT 137.24 169.85 109.58
Percentage of PBT to sales 3.87 4.48 4.26
PAT 100.72 158.44 101.58
Percentage of PAT to TNW 4.92% 7.15 4.37
Cash accruals 3.69 4.90 4.34
Percentage of cash accruals to sales 10.41 12.96 16.88
The percentage of gross profit to sales was 29 percent for financial year 2001–02, and 21.6 percent for the
previous year. Though this is the case, the year 2001–02 was not as the promoters had forecast. BDCL’s sales
were estimated at Rs 38.69 crore but, in reality, the figure stood at Rs 25.69 crore only. The percentage of
operating profit to sales remained at the same level, but there was a decrease in the percentage of PAT to
tangible net worth—4.37 percent in 2001, and 7.15 percent in the previous year.
As on April 5, 2002, BDCL received a contract from Paradip Port for hydraulic dredging of an oil jetty at
the port. The value of this work stood at Rs 13.85 crore. The work, to be completed in four months’ time, was
to commence on April 20, 2002. There was need for an increase in working capital, which can be seen thus:
The operating expenditure for 4 months, starting April, was estimated at Rs 7.04 crore; and that for spares
and capital was estimated, in June, at Rs 0.5 crore and Rs 1 crore respectively. Margin money from the LC
and bank guarantee (BG) for April were Rs 0.3 crore and Rs 0.16 crore respectively. The estimated total
expenditure for the contract for 4 months was Rs 9 crore; receipts in the form of mobilisation charges,
dredging charges, demob charges totalled Rs 13.85 crore. The surplus from this cash flow statement stood at
Rs 4.85 crore.
In April, BDCL incurs expenditure to the tune of Rs 0.93 crore with no receipts. And, in May, it incurs
expenditure amounting to Rs 1.5 crore with receipts totalling Rs 0.63 crore, leading to an imbalance in the
cash flow. To tide over this gap, additional working capital needs to be provided.
Long-term Solvency The tangible net worth (TNW) this year when compared to the previous year has
increased by Rs 1.07 crore. This increase in TNW can be attributed to the profits that have been ploughed
back into the business, as no dividends were declared. BDCL planned on giving dividends to its shareholders,
but has postponed the same to next year due to the company’s performance this year. BDCL wants an