inventory management

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A SUMMER INTERNSHIP & MINI PROJECT REPORT ON “INVENTORY MANAGEMENT” AT

AREVA T&D INDIA LTD SUBMITTED BY: SAUMIL SHAH ENROLMENT NO: 097710592015

SUBMITTED TO: SHRI M.H. KADAKIA INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES (MBA PROGRAMME) AFFILIATED TO: GUJARAT TECHNOLOGICAL UNIVERSITY, A’BAD GUIDED BY: MRS.VIKAS PANDYA, ASSISSTANT PROFESSOR, KIMCOS. IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION BATCH: 2009-2011

STUDENT DECLARATION
I, Mr.SAUMIL B SHAH student of SHRI M.H.KADAKIA INSTITUTE OF MANAGEMENT STUDIES AND COMPUTER STUDIES, ANKLESHWAR, affiliated to Gujarat Technological University, Hereby declare that this project report is a result of culmination of my sincere efforts. I declare that this submitted work done solely by me and to the best of my knowledge, no such work has been submitted by any other person for the award of post graduation Degree or Master of business administration. We also declare that all the information from various secondary sources has been duly acknowledge in this Project Report.

DATE: ______________________ [SAUMIL B SHAH]

ACKNOWLEDGEMENT
“The satisfaction Euphoria that accompanies the successful completion of any work would be incomplete unless we mention the name of the person, who made it possible, whose constant guidance and encouragement served as a beckon of light and crowned our efforts with success.” I consider it a privilege to express through the pages of this report, a few words of gratitude and respect to those who guided and inspired in the completion of this project I am deeply indebted to Mrs. Sonali Mungale (HR) for giving me the opportunity to undergo my project in their esteemed organization and their timely suggestions and valuable guidance. I also want to give thanks to Mr. Abhik Biswas, Mr. Kailassh Moyal, and Ms. Vaishali Patil. They constantly guided me and made me to learn from the first day till the completion of project. In the last but not the least, my grateful appreciation is also extended to Dr. Anil Sarougi (Director of the college), Mrs. Rashmi Ghamawala (Placement Coordinator), and Mr. Vikas Pandya (Mentor) as well as parents and friends. However, I accept the sole responsibility for any possible error of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice.

SAUMIL SHAH

EXECUTIVE SUMMARY
This project report is about the departmental as well as the Mini Project as per the Gujarat Technological University norms regarding the Summer Internship Programme. The Project report is provides the data of AREVA T&D India Ltd INTRODUCTION OF THE COMPANY AREVA T&D (India) Ltd., is a subsidiary of AREVA (France), and a leading player in T&D business, globally.

AREVA T&D India Ltd is among the top three transmissions & distribution (T&D) players in India. The company is engaged in providing products and systems to transmit and distribute electricity, manage smooth energy flows and operate efficient networks through information management. Its product offerings include power & distribution transformers, switchgear and circuit breakers and products in the area of energy automation. DEPARTMENTAL STUDIES PRODUCTION DEPARTMENT There are mainly three units of manufacturing units in India. Which are located at Tamilnadu, Uttarpradesh, Gujarat. In Gujarat, there are mainly three units : i) ii) TBI MVI

iii)

LTI

HUMAN RESOURCE DEPARTMENT The employee strength of the company as on 31st December 2009 is 5200. The T&D India Human Resource function is committed to helping AREVA T&D India become the “Industry Benchmark” by: Shaping the Company’s Management culture, ensuring support, develop managers and employees in executing their business objectives by identification and the development of their leadership and technical skills. MARKETING DEPARTMENT There are mainly two markets of the company: i) ii) Transmission Distribution

Brief

History

of

the

Company

including

name

change,

amalgamations etc
•

The General Electric Company of India Limited (“GECI”) was incorporated on November 4, 1911 and was engaged in the manufacture of various electrical, electronic, mechanical engineering goods, such as motors, pumps, switchgear, furnaces, transformers, electronic variable speed drives, etc. This Company was a subsidiary of The General Electric Company plc, UK (“GEC UK”). The English Electric Company of India Limited (“EEI”) was incorporated on March 13, 1957 as a Private Limited Company and was converted into a Public limited Company on February 25, 1963 and was engaged in the manufacture of various electrical/electronic equipment such as fuse-gear and switchgear products, relays, control panels, circuit breakers, 1

contactors and electronic testing and measuring instruments. This Company was a subsidiary of The English Electric Company Limited, UK, (“EEC UK”) a wholly owned subsidiary of GEC UK.
•

During 1991-92, the entire shareholding of EEC UK in EEI and GEC UK in GECI, constituting 66.66% of the paid-up share capital of the two companies, was transferred to GEC ALSTHOM NV, The Netherlands.

•

By a Scheme of Amalgamation, duly approved by the shareholders of EEI and GECI and the Order dated March 26, 1993 passed by the Hon’ble High Court at Calcutta, GECI was amalgamated with EEI (Transferee Company) and the name of the merged entity was changed from The English Electric Company of India Limited to GEC ALSTHOM India Limited by a fresh certificate of Incorporation dated 20th April 2003 issued by the Registrar of Companies, Kolkata. The effective date of the amalgamation was April 1, 1992.

•

By another Scheme of Amalgamation, duly approved by the shareholders of GEC ALSTHOM India Limited and GEC Power Engineering Services of India Limited (GEC PESIL) and the Orders passed by the Calcutta High Court on February 7, 1994 and by Delhi High Court on March 16, 1994, GEC PESIL was amalgamated with GEC ALSTHOM India Limited. The effective date of the amalgamation was April 1, 1993. GEC PESIL was in the business of erection and commissioning of Power Plants.

•

During 1997-98, the entire shareholding of GEC ALSTHOM NV was transferred to ALSTOM France SA whose name later on changed to ALSTOM Holdings, France.

•

The name of the said GEC ALSTHOM India Limited was changed to ALSTOM Limited, effective 1st September 1998 by a fresh certificate of Incorporation issued by the Registrar of Companies, Kolkata.

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•

By another Scheme of Amalgamation, duly approved by the shareholders of ALSTOM T&D Distribution Transformers Limited (DTL), a subsidiary of the Company and the Orders passed by the Calcutta High Court on 6th March 2000 and by the Kerala High Court at Ernakulam on 29th March 2000, DTL was amalgamated with the Company. The effective date of the amalgamation was April 1, 1999. DTL was in the business of manufacturing Distribution Transformers.

•

In the year 2004, AREVA Group of Companies (`AREVA Group’), acquired the Transmission & Distribution (T&D) business of ALSTOM Group of Companies (`ALSTOM Group’) outside of India to strengthen its strategic position in the Energy Sector and its range of services. Consequently, in India, AREVA T&D SA, France acquired the entire 66.35% shareholding (2, 64, 64,400 equity shares) in the Company of ALSTOM Holdings S.A. Further, pursuant to the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, and in terms of the open offer made to the shareholders of the Company, AREVA T&D SA, acquired further 1, 19,445 shares in the Company. Thus the holding of AREVA T&D SA shares were 2, 65, 83,845 equity shares representing 66.65% of the total paid up Share Capital of the Company. AREVA T&D Holding SA of France is the parent and/or ultimate holding Company of the AREVA T&D Group.

•

Consequent to the acquisition of ALSTOM’s stake (66.35%) by AREVA T&D SA in August 2005, the name of the Company was changed to AREVA T&D India Limited with effect from 23rd September 2005 after completing all necessary statutory formalities.

•

The Company is engaged primarily in Transmission and Distribution (T&D) business, which is the core business including manufacturing various equipment and providing services required by the said Sector. In addition, the Company was also engaged in certain non-T&D business activities

3

such as manufacturing industrial Motors, Pumps, Fans and Energy Meters.
•

ALSTOM the non-T&D

Industrial business

Products carried on

Limited by the

(AIPL) Company,

a new including

Company was incorporated with the main object, inter-alia, of carrying on manufacturing of industrial Motors, Pumps, Fans, Energy Meters and various other products. The Company along with its associates held 100% of the paid up share capital of AIPL.
•

The Company had two major divisions viz. Transmission and Distribution division (the ‘T&D division’) and the ‘Non T&D Division’ involved in manufacturing Motors (Low Voltage and Medium Voltage Motors) and Energy Meters. By a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 duly sanctioned by the Hon’ble High Court at Calcutta vide Order dated 14th August 2006 the Non T&D business was transferred to ALSTOM Industrial Products Limited (AIPL). Thereafter the entire shareholding in AIPL was transferred to ALSTOM Group.

•

In the Year 2007 by a scheme of Amalgamation sanctioned by the Hon’ble High Court of Calcutta vide Order dated the 5th Day of July 2007, Hon’ble High Court at New Delhi vide Order dated the 14th Day of August 2007, Hon’ble High Court at Chennai vide Order dated the 31st Day of August 2007 the three transferor Companies Viz, AREVA T&D Instrument Transformers India Private Limited (AITPL) AREVA T&D Systems India Limited (ATDSL) AREVA T&D Lightning Arresters Private Limited (ALAPL) amalgamated with the Transferee Company i.e. AREVA T&D India limited. Consequent to the sanctioning of the Scheme of Amalgamation the Company had issued and allotted 7933335 equity shares of Rs.10/- each, to the shareholders of the three transferor Companies. The paid up share capital of the Company has now become 47820807 equity shares of Rs 10 /- each.

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•

With a view to improving the liquidity of the Company’s shares in the stock market and to make it affordable to the small investors, the nominal value of equity shares was sub-divided. The shareholders, through a Postal Ballot on 19th September, 2008, had accorded their approval for the Subdivision of every Equity Share of Rs. 10/-each to 5 Equity Shares of Rs. 2/- each (Record Date October 31, 2008). Hence, the paid up share capital of the Company has now become 239104035 equity shares of Rs 2 /- each amounting to Rs. 478208070/-.

•

The Company has shifted its Registered Office from Kolkata to E-48/7, Okhla Industrial Area, Phase II, New Delhi 110020 w.e.f September 01, 2009 upon receipt of the relevant approvals from the shareholders and the Company Law Board.

5

AREVA GROUP PROFILE
All over the world, AREVA provides its customers with solutions for carbon-free power generation and electricity transmission. With its knowledge and expertise in these fields, the group has a leading role to play in meeting the world’s energy needs. Ranked first in the global nuclear power industry, AREVA’s unique integrated offering covers every stage of fuel cycle, reactor design and construction, and related services. In addition, the group is developing a portfolio of operations in renewable energies. AREVA is also a world leader in electricity transmission and distribution and offers its customers a complete range of solutions for greater grid stability and energy efficiency. Sustainable development is a core component of the group’s industrial strategy. Its 75,000 employees work everyday to make AREVA a responsible player that is helping to supply ever cleaner, safer and more economical energy to a large number of people.

6

AREVA T&D
AREVA’s Transmission and Distribution Division- AREVA T&D is a world leader in the transmission and distribution of energy, offering its customers a complete range of solutions to improve network stability and energy efficiency. AREVA T&D provides global solutions to industrial partners in their need for flawless energy and to utilities in their mission to supply energy to people around the world. These include:

Substation equipment,

such as high and medium voltage transformers, circuit

breakers, disconnectors and instrument transformers.

Turnkey substations,

bringing together the right mix of products, expert engineering

and complete project management.

Network management,

protection and control solutions. 7

Network consulting,

asset management, refurbishment and spare-part solutions to

manage electrical installations in a secure and efficient way throughout their lifecycle. AREVA T&D is committed to the AREVA WAY and endeavors to provide the safest working conditions and ensure the highest quality products and services while developing solutions and operating the business with respect for the environment and local communities. It has an individual footprint of 31,000 employees and 72 industrial sites spread across more than 100 countries, those together service 30,000 customers in 160 countries.

8

MORE ABOUT AREVA T&D
AREVA is a French public multinational industrial conglomerate that is mainly known for nuclear power; it also has interests in other energy projects. It was created on 3 September 2001, by the merger of Framatome (now AREVA NP), Cogema (now AREVA NC) and Technicatome (now AREVA TA). Its main shareholder is the French public-sector company, the CEA, which owns 78.9%. The CEA's brief is similar to that of the US Department of Energy. But the German company Siemens also retains 34% of the shares of AREVA's subsidiary, AREVA NP, in charge of building the EPR Reactor, an advanced Generation III+ nuclear reactor. All over the world, AREVA provides its customers with solutions for carbon-free power generation and electricity transmission. With its knowledge and expertise in these fields, the group has a leading role to play in meeting the world’s energy needs. Ranked first in the global nuclear power industry, AREVA's unique integrated offering covers every stage of the fuel cycle, reactor design and construction, and related services. In addition, the group is developing a portfolio of operations in renewable energies. AREVA is also a world leader in electricity transmission and distribution and offers its customers a complete range of solutions for greater grid stability and energy efficiency. Sustainable development is a core component of the group’s industrial strategy. Its 75,000 employees work every day to make AREVA a responsible industrial player that is helping to supply ever cleaner, safer and more economical energy to the greatest number of people. AREVA is a world-leading company in nuclear energy. It is the only company with a presence in each industrial activity linked to nuclear energy: mining, chemistry, enrichment, combustibles, services, engineering, nuclear propulsion

9

and reactors, treatment, recycling, stabilization, and dismantling. AREVA also claims to offer technological solutions for eco-free energy; and produces earth leakage circuit breaker technologies. Four main subsidiaries form the core of AREVA: AREVA NP (formerly Framatome ANP) — Nuclear Power: develops and builds nuclear reactors; Siemens has a 34% stake in AREVA NP AREVA NC (formerly Cogema) — Nuclear Cycle: covers the whole nuclear fuel cycle, from mining to waste disposal. Owns Eurodif AREVA TA (formerly Technicatone): develops and builds research reactors and reactors for the naval propulsion AREVA T&D — Transmission and Distribution: power transmission and distribution. It was bought from Alstom on 9 January 2004. Currently, AREVA has entered into exclusive negotiations with ALSTOM and Schneider Electric for selling of T&D Division The major partners of AREVA include: Euriware, STMicroelectronics, Eramet, and SAFRAN. Worldwide, the AREVA group has an industrial presence in 40 countries and its commercial network reaches more than 100 countries. It employs 58,000 people and has consolidated sales revenue of €10.863 billion. It is a member of the World Nuclear Association.

AREVA’S role in Energy sector can be understood in a better way by the following figure:

10

Organization of the AREVA group

Energy
Front End Division
> Mining > Chemistry > Enrichment > Fuel

Reactors & Services Division
> Reactors > Equipment > Nuclear Services > Nuclear

Back End Division
> Treatment > Recycling > Logistics > Engineering > Cleanup

Transmission & Distribution Division
> Products > Systems > Automation &

Measurement
> Consulting and

Information Systems
> Service

Information Systems
> Technicatome

3

DTR Convention

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AREVAT&D:
Global Product Line - Transformer
Worldwide manufacturing facilities
Stafford United-Kingdom Mönchengladbach Germany Shanghai China

Le Petit-Quevilly France Saint-Ouen France Canoas Brazil

Jakarta Indonesia

Gebze Turkey

Vadodara & Naini India

Brisbane Australia

4

DTR Convention

March 2002- 4

AREVA T & D deals with:
• • • • • • Instrument transformers Special Power Supply (SPS) Aluminums HVDC Gas Insulated Substations Energy Management Systems Disconnectors

12

VISION
Meeting growing electricity demands, fighting climate change and managing increasingly large, complex, and sometimes deregulated grids are among the major challenges facing our customer today. Our teams tailored and competitive solutions.

MISSION
“Innovate to contribute to CO2 – free power generation and electricity transport that are cleaner, safer and more economic.”

13

AREVA VALUES
Customer Satisfaction Profitability Responsibility Integrity Excellence Sincerity Partnership

14

TOMORROW’S ENERGY CHALLENGES

The global electricity transmission and distribution market is growing at a fast pace and this is forecast to continue over the coming years. New challenges such as network interconnections, power generation diversity, including increased renewable energy providers, as well as a heightened focus on efficiency, reliability and environment-friendliness, will offer significant growth potential.

With over 125 years of experience, we are well-positioned to meet the energy challenges of today and tomorrow. Growing Energy Needs Worldwide According to the International Energy Agency, the demand for energy is projected to increase by 53% between 2004 and 2030, particularly in fastdeveloping countries, such as China and India, which represent over 70% of this increase. Oil-producing countries, such as the Gulf States, are also massively investing in their transmission and distribution infrastructures

15

To help our customers meet these growing energy demands, fight climate change and manage increasingly complex grids, our market-oriented R&D teams develop tailored and competitive solutions focused on improving:
•

Reliability, through state-of-the-art products, such as FACTS (Flexible AC Transmission Systems) and HVDC (High Voltage Direct Current) technology, ensuring secure, high-quality energy supply;

•

Stability, through FACTS devices that help integrate renewable generation onto the grid and stabilize AC networks, and on-line stability solutions that contribute to blackout prevention via phasor measurement units, advanced modeling and visualization techniques;

•

Efficiency, through power electronics applications that improve active power flow and reduce congestion; market management systems that allow the efficient operation of and trading between energy markets; and low-loss transformers that increase network performance;

•

Environmental-friendliness, by connecting CO2-free generation and renewable energy sources and providing eco-designed and low visual impact products such as concrete substations in environmentallycoordinating colors.

In addition, we offer proven solutions and platforms, such as the e-terra suite, that are available to support the new design and application requirements of smart grids in all network operation and business domains – thus making smarter grids a reality.

16

AREVA T&D (INDIA) LIMITED
AREVA T&D (India) Ltd., is a subsidiary of AREVA (France), and a leading player in T&D business, globally.

AREVA T&D India Ltd is among the top three transmissions & distribution (T&D) players in India. The company is engaged in providing products and systems to transmit and distribute electricity, manage smooth energy flows and operate efficient networks through information management. Its product offerings include power & distribution transformers, switchgear and circuit breakers and products in the area of energy automation.

The company offers high-end T&D solutions such as 765 KV and HVDC transmission projects and Gas Insulated Substations. Company caters to both, private and the public sector clients. AREVA T&D currently employs over 4200 people in India. AREVA T&D India Ltd. has 8 manufacturing units & 22 sales offices and has been a trend - setter in the field of High-Voltage Switchgear. AREVA T&D India was the first to build the 765 kV Sub-station in India with National Thermal Power Limited (NTPC) at SIPAT, Chhattisgarh. Around 70% of load flow in India is managed by AREVA T&D's Automation solutions. Your Company has to its credit a complete range of T&D Products, Systems, Services & Automation solutions. Formerly Alstom Ltd., the company was taken over by AREVA T&D in 2005 as AREVA took control of Alstom’s world-wide T&D business. AREVA group, apart from T&D, has strong presence in Nuclear Power and is the global leader in this area.

17

AREVA T&D India Ltd. - Business AREVA T&D India divides its business in verticals like, Systems, Products, Automation, and Services.
•

Products

Company’s Products segment comprises of Power Transformers, Instrument Transformers, Circuit breakers and Medium Voltage Switch Gears. The company is present in products of up to 765 KV. AREVA T&D mainly focuses on Medium Voltage (MV) EHV Products: HV MV Products: Products: to 132 66 33 Extra High Voltage KV KV KV and and and above Above Below (EHV) products.

LV Products: 11 KV and Below (Not present)
•

Systems

Under this segment the company undertakes turnkey projects like building substations and switchyards. The company is also present in high-end areas like 765 KV substations, HVDC Substations and Gas Insulated Substations.
•

Automation

Automation segment comprises of hardware and software for managing energy flows from Load Dispatch Centers. It includes Supervisory Control and Data Acquisition (SCADA) used for managing smooth energy flows from a centralized location. Services This segment comprises services for network planning and after sales services for products and systems business.

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SUCCESS STORIES
FEBRUARY 2009: AREVA T&D awarded order for Gas Insulated
Switchgear for Mettur Thermal Power Project Stage II of TNEB.

MARCH 2009: AREVA T&D awarded contract for Hybrid Gas- Insulated
Substation by RRVPNL.

APRIL 2009: AREVA T&D India bags first of its kind 500 MVA Power
Transformer order from Powergrid.

MAY 2009: AREVA T&D bags 400 KV Substation order from
WBSETCL.

JUNE 2009: AREVA wins 1,200 MINR order for Substations and
Transmission from Jindal Steel & Power Limited.

JUNE 2009: AREVA T&D India has been awarded order from Hindalco
for 2 * 220 KV Conversion Substations.

SEPTEMBER 2009: AREVA T&D receives prestigious order from
Haryana Vidyut Prasaran Nigam Ltd. (HVPNL).

OCTOBER 2009: AREVA T&D awarded Power supply system package
Contract for Kamraj Domestic Terminal & Anna International Terminal at Chennai Airport.

OCTOBER 2009: AREVA T&D India signs 9000 MINR alliance
agreement for 36 Substations with Maharashtra State Electricity Transmission Co. Ltd.

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REGIONAL PRESENCE
As per AREVA T&D India region scope.

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AREVA T&D INDIA LTD. – VADODARA
AREVA T&D India, the transmission and distribution division of French engineering group AREVA SA inaugurated its largest manufacturing site in the country at VADODARA. The project promises generation of 1,000 direct jobs at a time lakes are losing slump. employment in the wake of economic

The four new factories at the Greenfield site near Kotambi village on VadodaraHalol highway are among the eight manufacturing facilities that AREVA has opened in India, with two other units at Hosur in Karnataka and Padappai in Tamil Nadu. AREVA has invested Rs 600 crore to set up the four factories at Vadodara that will produce power and distribution transformers and other power equipment. The company is looking to cash on the rising demand of electricity in India. Across India, AREVA T&D has invested Rs 950 crore for the new facilities.

"These are exciting times for us as energy demand in Asia is growing," Philippe Guillemot, chairman and CEO of AREVA T&D told media persons here. He added that additional 161 giga watt (GW) of power generation capacity is expected to be added in India by 2020, with significant investments expected to be made in electrical grid. Currently, country's total installed generation capacity is around 147 GW. Speaking on this, Philippe Guillemot (Chairman & CEO, AREVA T&D) said, “We have India’s largest transformer testing facility in Vadodara: a plant capable of locally delivering highly advanced ultra high voltage AC and DC transformers as well as critical medium voltage equipment. With this investment, we expect over 1,000 direct and some 3,000 indirect jobs over the next four years.”

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India contributes 10 per cent to AREVA T&D's order book, which the company expects to rise to 14 per cent by 2010. The company's sales stood at Rs 2,600 crore last year when its intake order grew by 27 per cent while its backlog orders went up by 50 per cent.

Guillemot said the company is making investments in all geographies with 22 ongoing capacity expansion projects. "We are finishing the projects that will help double our sales in the next few years," he said, adding that the company is also building two new plants in China that contributes 25 per cent of world market. AREVA had spent Rs 2,000 crore on its global expansion plans last year AREVA’s activities cover the full nuclear cycle, from uranium mining and enrichment to nuclear reactors and spent nuclear fuel recycling. The company is looking to cash on the rising demand of electricity in India. At present, the company employs over 4,600 workers at 16 factories in India. The entire plant has got three major units. They are: • • • LTI: LTI deals with manufacturing of Power Transformers above 150MVA to about 820 MVA of 1200 KV class. India’s first 765 kV Transformer manufactured by this unit for Lanco Infratech Ltd. LTI (Large Transformer India) MVI (Medium Voltage India) TBI (Transformer Baroda India)

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MVI: It deals with manufacturing of switch gear and circuit breakers of medium voltage range, varying from 3.3KV to 33KV. This plant manufactures SDS (secondary distribution system) and PDS (primary distribution system) switch gears. This unit manufactures both indoor switchgear panels and outdoor switchgear panels. The main parts of a switch gear are: • • • Structure assembly Mechanism Current Carrying Path

AREVA T & D in Baroda unit manufactures switchgear having vacuum circuit breakers. Few products of this unit are HVX-O, HVX and HWX breaker. TBI: It deals with manufacturing of distribution transformers of below 50MVA, 132KV Class. This unit has great Holt over the local markets as wells as across the country. This unit is also known as DTI unit.

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CORPORATE INFORMATION
BOARD OF DIRECTORS Dr. Ajay Dua, Chairman (non-executive) S.K.Poddar, Former Chairman (non-executive) Rathindra Nath Basu, Managing Director Michel Augonnet Pierre Laporte Arthur de Montalembert C.M.A. Nayar Subir Raha Karim Vissandjee REGISTRARS & SHARE TRANSFER AGENT CB Management Services (P) Ltd. P-22, Bondel Road, Kolkata 700019 COMPANY SECRETARY C.S. Ashok Kumar AUDIT COMMITTEE Dr. Ajay Dua, Chairman S.K. Poddar, Former Chairman

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C.M.A. Nayar Subir Raha Karim Vissandjee REGISTERED OFFICE E-48/7, Okhla Industrial Area Phase ll, New Delhi 110 020. AUDITORS Deloitte Haskins & Sells Chartered Accountants 7th Floor, ASVN Ramana Tower No. 52, Venkatnarayana Road T.Nagar, Chennai 600 017

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ENVIRONMNT HEALTH & SAFETY
By deploying safety procedure, training programme, EHS Policy and communication systems, AREVA T&D India are deeply committed to improve the EHS performance. EHS statistics for AREVA T&D India: Frequency Rate- 1

6 5 4 3 2 1 0 0

5.42

2.32 2.36 2.21 1.58 0.66 Year 2004 2005 2006 2007 2008 2009

The EHS focus on safeguarding employees by mitigating accidents in work operations and to attain zero Loss Time Injury Frequency Rate (FR-1). In 2009, Loss Time Injury Frequency Rate came down to 0.66. KEY HIGHLIGHTS OF THE YEAR Seven manufacturing units recorded more than 1 million man hours of operation without lost time injury. Seven manufacturing units received ISO 9000, ISO 14000, and OSHAS 18000 certifications.

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Several manufacturing units received prestigious Awards for good EHS practices. These include: (i) Safety Innovation Award 2009 for Naini Unit given by Chairman, Railway Board. (ii) “GREENTECH Safety Award-2009” to Naini Unit- for ‘outstanding achievement in Safety management in the manufacturing sector, from Greentech Foundation of USA. (iii) Several customers such as Steel Authority of India Ltd. (SAIL), LANCO, Banaras Hindu University and TATA Motors, gave appreciation letters to company’s teams for following and practicing good EHS systems at the project sites. AREVA T&D has a strong global policy on Environment management. Some of the key achievements are: 7 manufacturing units certified for ISO 14001 Environment Management System. Significant reduction in Water and Energy consumption. Air emission, Greenhouse gas emission, Liquid effluent, Conventional waste generation were also reduced at all the locations. Safety Marshals deployed at unites and major sites.

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CORPORATE SOCIAL RESPONSIBILITY
Key CSR initiative undertaken by the units: Medinipur is a district on the South Western side of West Bengal, bordering Orissa. The AREVA Foundation is supporting a programme targeting orphans and vulnerable children (OVCs) in the village, in collaboration with FXB Suraksha- a leading NGO. The AREVA – FXB Suraksha programme is currently covering four villages of Chaipat gram panchayat. Around 70 HIV affected families in these villages have been identified on the basis of a need gap survey for a basic package of health, education, psychosocial support and income-generating services. The objective of the programme is to help target recipients become self sufficient after 3 years and replicate the programme in other parts. In a short span of less than a year since inception, the programme has yielded visible results in terms of regular school attendance among children and mainstreaming the HIV affected children and adults in the village community.

Naini Unit, Uttar Pradesh
Supported local Administration in organizing District level Vegetable and Flower show, supported “EKTA” (An all India Social, Literary and Cultural Organization) in organizing their special programme dedicated to the poor, handicapped students and widows. Supported Allahabad Consumer protection society in organizing drive for poor patients, free education for poor children. Supported Kasam 20-20 Yatra for Child Right Protection.

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Hosur Unit, Tamilnadu
Major Greening initiative undertaken at the new site. Rain water harvesting has been implemented at the factory.

Padappai Unit, Tamilnadu
Donation of Chairs to Salamangalam village school and sponsorship of its Children’s Day celebration. Disposal PCB. of 1.5 MT of e-waste through authorized recycler

(ECORECO, Mumbai) in line with-waste notification issued by Central

Vadodara Unit, Gujarat
In line with the company’s CSR philosophy of engaging with communities at a local level, the Vadodara Unit has adopted village Alamgarh located near the factory, Vadodara-Halol Road. The Company has worked with the local village Gram Panchayat and District Authority to build basic amenities like roads, school, temple, milk collection centre etc., in the village.

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INFORMATION TECHNOLOGY

SYSTEMS

AND

The company continued to invest in Information System and Technology to support its business activities. The overall IT infrastructure was further strengthened to support manufacturing units and the new sites. The Country WAN (Wide Area Network) was upgraded to meet business needs. The company strengthened collaborative tools like IP telephony and Video conference facilities in all major sites and also provided its employees enhanced mobility tools (wireless devices) to access data remotely and be able to meet new challenges of business. AREVA T&D India continued to reinforce the IT security aspect and enforced an IT security policy in the country. All systems and antivirus software were upgraded to keep the IT systems secure. A significant step was taken to upgrade the ERP systems for several businesses such as Systems, Services, Automation and Country Shared Services at Noida and Chennai, including the unit at Pallavaram. The existing SAP software has been upgraded to the latest ECC 6.0 version, and the system has been align to the AREVA T&D Global ERP model. These changes will enable the Company to follow the Global best practices and facilitate world wide information sharing and consolidation. It is planned to upgrade the ERP for remaining units in the next two years.

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RESEARCH AND DEVELOPMENT
Research and Development is an important element of company’s leadership strategy and it continues to invest in R&D program including redesign to reduce cost across all product categories. Important technical developments and new products during the year in the Products business were: Successful localization of Dead Tank Circuit Breakers from 66 KV achieved in the High Voltage Switchgear business. The HV business also took a lead in developing a 72.5 kV Live Tank Circuit Breaker. The new instrument Transformer factory at Hosur successfully developed 765 kV Current and Capacity Voltage transformers and 550 kV Current transformers. The unit is developing a new range of Top Core Current Transformers in the 145 kV and 245 kV ratings. Significant R&D actions in the Secondary Distribution business at Vadodara led to development of Ring Main Unit with integrated metering, outdoor RMU, Auto changeover systems for RMUs with multiple incomers and SCADA ready RMU with motorization and viewing window for protective relay. In the Primary Distribution business, a completely new series of indoor and outdoor Circuit Breakers were launched to customers, the new PCOB-15 and PCOB-36 (outdoor circuit breakers), HVX- (Indoor circuit breakers), PIX MV (panels for Indoor), HWX- Circuit Breakers and panels (Indoor circuit breakers) will significantly meet customer expectations at different price levels.

Power Transformers made significant breakthroughs with the development and launch of 250 MVA Single Phase 400 kV GT

31

Transformer. The first 220 kV 160 MVA and the first 400 kV 250 MVA transformers were successfully completed and dispatched. Manufacturing activity for 765 kV Transformer also was commenced during the year. The Distribution Transformer business developed a 14 MVA Buck boost furnace transformer for the Railwheel project and 75 * 950 KVA compact corrugated energy efficient GSP transformers for the ENERCON Windmill green energy projects.

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SWOT ANALYSIS
STRENGTH • HUMAN RESOURCE Human Resource with rich experience in

managerial, technical as well as commercial fields. • TECHNOLOGICALLY STRONG AREVA is fully equipped to face the technological challenges of the T&D market and has various solutions in its portfolio to address most of the segment. • BRAND VALUE The brand value of AREVA T&D is well recognized in the market. • STRONG COMMUNICATION NETWORK One- on-one meeting with the investor community and web based interactive sessions to discuss the progress and performance of the company OPPORTUNITY • The increasing requirement of High Voltage Substations provides a good opportunity for the growth of Turnkey Systems, Products, Automation and Service businesses. • AREVA T&D India has already built up additional manufacturing capacities for meeting the future demand for Transmission and Distribution

33

equipments. This will help the company to serve the market requirements more efficiently. • AREVA is the first to have launched the construction of a local manufacturing facility for High Voltage Gas Insulated Switchgears. • Power Grid is also planning to scale up the voltage level of the Transmission Network in the country to 800 KV DC by 2010 and to 1200 KV AC by 2012. This will provide a significant opportunity for companies engaged in the manufacture of high technology equipment WEAKNESS • Even after adapting new IT enabled process there are number of paper work carried out in AREVA which is a bottle neck in its functioning. • The production process has to wait for a number of different approvals.

THREAT • A rise in raw material costs, especially metals may put a strain on margins. The price of copper, the main raw material required by the company has increased substantially during the last year. • During 2009, the Chinese and Koreans have been very aggressive in their T&D pricing strategy. A similar trend, if continued in 2010, would be a threat for the T&D industry. • Future IPOs of private sector power projects, if not completed on time, may affect the growth of the T&D business. • Any unforeseen slowdowns affecting the growth of the Indian Economy, may adversely affect investments in the Power sector.

34

TBI (TRANSFORMER BARODA INDIA)
TBI unit has three bays: • • • ODT: The Oil Distribution Transformer section, deals with production of low rating distribution transformers. The rating is below 5MVA, 33KV class at maximum. MPT: The Medium Power Transformer section, deals with production of distribution transformers above 5MVA up to 50MVA of 132 KV class at maximum. Winding: The winding section provides HV coils and LV coils to both the departments i.e. ODT & MPT. This department manufactures coils ranging from 0.75 MVA to 50 MVA. Along with this there is a high speed Auto stacking and step lap core cutting machine which supplies CRGO sheets for core building to both ODT as well as MPT department. This machine is one of its kinds. ODT SECTION WINDING SECTION MPT SECTION

35

RAW MATERIAL TRANSFORMERS

USED IN

Core Steel Cold- Rolled Grain Oriented Silicon Steel (CRGO) Winding Conductors Copper Winding Wires Insulation Transformer Oil

36

MVI (Medium Voltage Switchgear India)
In MVI, there are two sub departments: PDS (Primary Distribution System) SDS (Secondary Distribution System) Whole unit of MVI manufactures the switchgears and panels for the switchgear. There are two sections in the PDS, i) Indoor: In this section company manufactures switchgear which are the one part of the company’s main product TRANSFORMER ii) Outdoor: In this section company produces switchgears which are to be supplied to the outsider. In SDS, the company produces the secondary panel switchgears, which are to be supplied to the outsiders. The main product of SDS is called as RMU.

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PROCESS FLOW
Tank Assembly ? Mechanism ? Welding ? Gas Filling ? Leak Testing ? Support Structure ? Wiring ? Testing ? Finishing ? Testing

38

MARKET

Transmission

Products, turnkey systems and integrated services for network management and high-voltage substation operation.

Industries & Buildings Advanced, medium-voltage solutions for electrical distribution of major industrial, commercial and public infrastructures.

Oil & Gas A range of intelligent, integrated solutions and project management for electrical distribution and control.

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Power Generation A complete portfolio of solutions to ensure grid connections and the inelectrical distribution of all types of power. house

Distribution Equipment and services for the development and enhancement of distribution networks.

Railways High-quality products, systems and dedicated services for electrical railway infrastructures.

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MARKET SEGMENTATION
The T&D market consists of two segments: TRANSMISSION Transmission involves equipments and systems from 66 KV to 1200 KV. The demand for transmission is almost entirely from integrated power generating companies and power transmission utilities. Some industries which use large quantities of electricity, such as aluminum and steel producers, may be connected directly to the transmission grid. In general, the demand for Transmission Segment has been positive in 2009 and its expected to maintain the same trend in 2010. DISTRIBUTION: Distribution involves equipments and systems from 11 KV to 33 KV. Small and Medium Industries mostly use distribution level of voltages. 2009 was a difficult year for this segment of the market which reported a negative growth. An upturn of this segment is expected sometime in the second half of 2010.

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PRICING POLICY
AREVA’s Transmission and Distribution Division (T&D), one of the world’s leading suppliers of products, systems and services for the electricity market, just announced its new pricing policy for power transformers. AREVA T&D will systematically propose to its customers to index the price of its transformers on an escalation formula, reflecting the variations in raw material costs (magnetic steel, mild steel, copper and oil). This will help avoid speculating on future raw material costs and ensure a true correlation between the prices proposed by AREVA T&D for its transformers and their actual cost. The new pricing proposal follows an unprecedented rise in raw material costs over the last 18 months, resulting in an increase in prices for all types of transformers and reactors manufactured by AREVA T&D.

PROMOTIONAL TOOLS
AREVA T&D is in the electricity transmission and distribution business. To market these products AREVA searched for an innovative promotional tool to differentiate itself from the competition, while simulating the benefits of having physical hardware present on a booth at events, conferences and exhibitions across the world. In consultation with AREVA T&D, Virtalis’ Development Team designed and built a virtual showroom showing the Company’s entire product range. Drawing on effects from Star Trek’s teleportation system, the Team designed the showroom so the various pieces of equipment can be beamed in and interrogated at their actual scale. Literature mounted on the walls of the showroom can be read, giving a background to each product. Virtalis then moved on to create a series of virtual AREVA installations for potential customers to explore.

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CUSTOMER’S PROFILE
AREVA T&D is a world energy expert offering its customers technological solutions for highly reliable nuclear power generation and electricity transmission and distribution. Its T&D Division is one of the world's leading transmission and distribution companies, employing over 25,000 people in more than 30 countries, with a dedicated sales force serving customers in over 100 countries. Major Customers in India: All State Electricity Board Power grid Corporation Of India National Hydro Power Electric Corporation Tata Iron & Steel Company (TISCO) Bharat Heavy Electricals Limited (BHEL) KRIBHCO National Fertilizer Limited ACC L & T HINDALCO Indian Railways ABB Ashok Leyland Reliance Textiles

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MARKET COMPETITION
Major Competitors in India: ABB BHEL CGL EMCO BBL Siemens Crompton Greaves TELCo L&T Schneider ECE T&R

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HUMAN RESOURCES
The employee strength of the company as on 31st December 2009 is 5200. The T&D India Human Resource function is committed to helping AREVA T&D India become the “Industry Benchmark” by: Shaping the Company’s Management culture, ensuring support, develop managers and employees in executing their business objectives by identification and the development of their leadership and technical skills. During the under review, several initiatives were undertaken, which have significantly contributed to improvements in recruitment, retention and development of talent. The Company has successfully completed long term wage settlements in its manufacturing site at Pallavaram. It has also concluded a highly successful Graduate Engineer Training (GET) Program, with almost 200 Engineers (Graduate + Diploma) placed through Campus recruitment.

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CULTURE
INTEGRITY: Integrity is central feature of AREVA culture and hence AREVA T&D Ltd. is no exception and the same is expected of the dealings, behavior and work conduct. TRUST: Based on principal of trusteeship and AREVA Ltd. recognizes the immense trust placed in it by its shareholders, employees and customers base and strives to live by the standards it has set for itself, the standards that have made it what it is today. INFORMAL WORKPLACE RELATIONSHIP: Informality in relationships at the workplace is the core of AREVA Ltd. culture. Here at AREVA Ltd. is believed that Human resource is not the domain of the Human Resource Department alone but also superior and hence of every superior – juniors share both a professional and personal relationship. The superior is not only the person the junior reports into but is also a guide, advisor and mentor. COMMITTED, DILLEGENT AND ENTHUSIASTIC: AREVA SMC workplace environment is various and infused with enthusiasm and ambition.

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TRAINING AND DEVELOPMENT
In the year under review, the focus of training was on Competency building across various levels. Some of the key programmes for 2009 were Strategic Leadership for Senior Management Team, Fast Track Business Management with IIM Bangalore for High Potential Managers, Finance for Non-Finance with Faculty from IIM Bangalore. A unique program called Celemi Division Base was also undertaken for building overall business perspectives into the Managers. During the year, AREVA University conducted Cycle 3 program in India. Another new initiative undertaken was towards building the leadership pipeline. With the help of Unit Managers, people with leadership potential were identified and have also completed succession planning. For senior managers, A 360 degree feedback program was also launched. An average of 4 man days of training for all employees was maintained. In May 2009, training of the second batch for AREVA T&D Finance Institute Module 1 was conducted at The Indian School of Business (ISB, Hyderabad) India’s leading business school, as training ground for its global finance executives. This training program has been conceptualized by AREVA T&D finance department, implemented with the support of AREVA University, and supported by ISB, Hyderabad and its professors in collaboration with AREVA T&D managers and CEOs of lading Indian companies. The second batch of AREVA Continuing Education Program for Diploma Engineers was initiated in November, 2009 through a tie up with IIT, Chennai at their campus. 29 Engineers were enrolled for this program.

47

RECRUITMENT TALENT

AND

RETENTION

OF

AREVA T&D India has a policy of brining young talent into the organization and nurturing them for its future growth. 167 Graduates Engineers and 33 Diploma Engineers joined the organization in 2009. They have been put through intensive training prior to placement at various units. Over the last four years, the company has achieved high retention percentage of Graduates Engineers and Managers. The attrition rate among Managers and Professionals was around 4%. Relocation program for employees in all three Greenfield sites ensured its successful start up and smooth talent transition. The company’s current employees continue to support the efforts to attract talent through the Employee Referral Scheme, which contributes nearly 29% to the lateral recruitments.

INTEGRATION PROGRAM
The Integration Program enables newcomers to smoothly integrate into AREVA T&D and their new role. It will help newcomers understand AREVA and become part of its culture during their first year through the following three phases:

The program is based on the following five key principles:

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Integration starts before Day 1 and ends much later. In other words, Integration is not only a warm welcome and a few induction slides (although this is part of it). Active involvement of all stakeholders is required. Successful integration is based on this; your direct management is the process owner. Our business goals and values are demonstrated. The successful integration and retention of newcomers support and illustrate these. Integration and induction needs differ from one individual or country to another while the overall framework should be common to all.

The Role of the Program is use:
Provide a basic understanding of AREVA - both at group and division level Promote sense of belonging through the business strengths, the AREVA values and AREVA WAY Help create an environment in which different experiences, cultures and perspectives are valued Make everyone comfortable with their personal role and objectives thanks to clear support of their management Help improve the retention of newcomers Lead everyone to become rapidly efficient in their new role.

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The Levy
Excise duty is the single largest source of revenue for central government in India. Authority to impose excise duty by government has been given by article 246 of constitution and at entry no- 84 of list no i( union list) and entry no 51 of list no ii(state list).under this authority constitution bifurcates alcoholic liquors opium and narcotics from other goods and duty is levied on these products by state government called as state excise duty. Central excise is a tax on act of manufacture or production while sales taxis a tax on act of sale of goods. For manufacture of all the goods duty is levied by central government called central excise. At present the rate of excise duty for most of the product is @10% + educational Cess @ 2% of ED + secondary & higher educational Cess @ 1% of ED except some items such as petroleum products where the rate of ED is still 14%.

Registration
Every manufacture / First and second stage dealer of dutiable excisable goods desiring to issue Cenvetable invoices is required to take a central excise registration. However if a manufacturer is SSI and his yearly clearance is less than Rs. 90 lacs then he is not require to get himself registered with central excise (Rule 9 of Central Excise Rules 2002). Procedure for Registration Before starting production or dealership to issue cenvatable invoice, an application in prescribed format (annexure -1) with PAN no., detail of goods to be manufactured and retail of premises has got to be submitted to Asstt. / Dy. Commissioner of Central Excise. A registration certificate allocating PAN based 15 digit registration no shall be issued within 7 days.

50

Even if there is some change in information furnished or change in constitution of the firm, the registration will not change. However the change has got to be intimated to issuing authority within 30 days of the change. If the factory is required to be closed down or business is not carried, registration certificate should be surrendered to the Superintendent of Central Excise. Application form for Central Excise registration Central Excise registration certificate (NW) Annexure-2 -Annexure-1 -

Valuation
The Excise duty is payable on ³transaction value´ which means the price actually paid or payable for the goods, when sold , and includes in addition to the amount charged as a price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.

InvoiceUnder rule 11 of Central Excise Rules2002, The excisable goods will generally be removed from a factory under cover of an INVOICE. The invoice shall be serially numbered in triplicate and shall contain the registration number, address of the concerned Central Excise Division, name of the consignee, description, classification, time and date of removal, mode of transport and vehicle

51

registration number, rate of duty, quantity and value, of goods and the duty payable thereon. Before making use of the invoice series, in each financial year the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction. Excise ProcedureRemoval of Goods, Payment of Duty & Assessment As per rule 6, assessee shall himself assess the duty payable on the excisable goods and under rule 12 submits following returns1) ER-1- Monthly return to be submitted by tenth of every month for production , clearance, duty payable and duty paid for previous month( annexure-3). (2) ER-4- Annual financial information statement to be submitted by 20th November of every year (Annexure-4). (3) RR-5- Annual information regarding principle inputs to be submitted by 30th April of every year (Annexure-5) (4) ER-6- Monthly return to be submitted by 10th of every month for receipt and Consumption of principle inputs for previous month. (Annexure-6)

52

FINANCE
As a leader in the field of electrical energy delivery, AREVA T&D India has adopted a World Class Finance organization for the success of the Company and to become the benchmark of the industry. With the establishment of Finance Shared Services Centre (FSSC), the segregation of duty was established for all finance processes. Business unit Finance focuses on Controlling, which enables Financial Controllers to concentrate on unit’s growth and improve competitiveness of the product, in joint effort with respective UMDs. FSSC focuses on accuracy, speed and efficient processing of transaction through processes and tools such as intelligent scanning, expense claim workflows and messenger communication. Monthly performance reviews through dashboards help to identify areas for improvement. Service Level Agreements are established with units in the Company to ensure that the FSSC performance is as defined and agreed with the units. Migration from the localized SAP to a global T&D accounting system (T@IS) has been carried out in all Systems units and a few manufacturing units during the year. In the next couple of years, the remaining manufacturing units will migrate to T@IS, bringing standardization across all the units and to prepare the groundwork for convergence with IFRS. Mandatory Training was undertaken for employees in all the phases of change in order to acquire working knowledge. Key employees were sent for training with reputed International Business Schools and AREVA University. Action plans charted for improving various levers of internal controls were closely monitored by the management. In a phased manner, the actions are expected to be completed over a period of three years.

53

All these actions are carried out under four pillars namely: create a World Class Finance Function.

Manage

Talent,

Create Value, Optimize Governance and Increase efficiency with a mission to

With a 30% CAGR in revenues over the past 3 years, a need for strong monitoring compliance across all functions and all units is required. A new electronic tool, “The Compliance Manager” is in the final stage of implementation across all locations.

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SHAREHOLDING DECEMBER, 2009
SL. No Category 1.

PATTERN

AS

ON

No. of Equity Percentage Shares held (%)

2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Foreign Principal - AREVA T&D SAS, France – 132,919,225 - AREVA T&D Holding SA – 27,893,950 - Long & Crawford Limited – 11,772,725 General Public Insurance Companies Corporate Bodies UTI and other Mutual Funds Foreign Institutional Investors Non-resident Indians, Overseas Corporate Bodies, and Foreign Nationals Clearing Member Financial Institutions and Banks Trust State Government TOTAL

172, 585,900 29,401,850 21,648,841 6,984,673 4,636,082 1,798,397 1,014,463 834,689 173,195 25,340 605 239,104,035

72.18 12.30 9.05 2.92 1.94 0.75 0.43 0.35 0.07 0.01 0.00 100.00

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CAPITAL STRUCTURE
PARICULARS DEC. 2009 DEC. 2008 1,255,000 Authorized 627,500,000 equity shares of Rs 2/- each (December 2008- 627,500,000 equity shares of Rs 2/- 1,255,000 each Issued 239,106,635 equity shares of Rs 2/- each (December 2008- 239,106,635 equity shares of Rs 2/- 478,213 each Subscribed and paid up 239,104,035 equity shares of Rs 2/- each fully paid (December 2008- 239,104,035 equity shares of Rs 2/- 478,208 each

478,213

478,208

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CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2009 (RS IN THOUSANDS)
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax Adjustment For: Restructuring and relocation costs Profit on sale of Property Provision for contract losses (net) Provision for warranties Provision for doubtful debts Bad debts / advances written off (net) Exchange fluctuation unrealized (net) Depreciation Interest Income Interest paid Profit on sale of fixed asset (net) Operating profit before working capital changes Adjustments: Increase in trade and other receivables Decrease / (Increase) in Inventories Increase in trade payables, liabilities and provisions Cash generated from operations Employee voluntary separation scheme and related payments Income Tax / Fringe benefits tax paid, net of refunds Net cash generated from operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditure (including capital advances) Proceeds from sale of fixed assets Proceeds from sale of property / investments Interest received Net cash used in investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from short term loans, net Proceeds from ECB Interest paid Dividend and unclaimed div paid/ remitted, incl. div.tax Net cash generated from financing activities Net increase in cash and cash equivalents (A+B+C) Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents** DEC. 2009 2,930,254 83,286 (15,500) 76,646 (5,421) (15,069) 184,781 342,572 611,289 (655) 579,253 (4,662) 4,766,774 DEC. 2008 3,470,262 216,014 (115,021) 26,394 12,059 75,831 178,583 147,976 340,269 (3,724) 301,778 (848) 4,649,573

(6,376,991) (5,814,614) 71,651 (1,132,996) 5,110,819 5,362,092 3,572,253 (12,054) 3,064,055 (12,859)

(1,281,500) (1,508,500) 2,278,699 1,542,696 (3,224,163) 21,936 15,500 655 (3,186,072) 2,624,011 247,603 (595,167) (499,084) 1,777,363 869,990 440,733 1,310,723 (4,223,634) 6,389 117,520 3,268 (4,096,457) 3,153,964 388,951 (271,799) (500,106) 2,771,010 217,249 223,484 440,733

57

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER
(RS IN THOUSANDS) INCOME Sales and services (Gross) Less: Excise duty Sales and services (Net) Other Income EXPENDITURE Materials and Project related costs (Net) Employee costs Other mfg., admin., & selling expenses Interest (Net) Depreciation / Amortization Operating profit before Restructuring, relocation and sale of property Restructuring and relocation costs Profit on sale of property Profit Before Tax Provision for Taxation- Current Provision for Taxation- Deferred Fringe benefit tax Profit After Tax Balance brought forward from previous year Profit available for Appropriations Appropriations Proposed dividend Corporate dividend tax General Reserve Balance carried over to the balance sheet Basic and Diluted earning per share of Rs 2/- each

31,
DEC. 2009 37,241,211

2009
DEC. 2008 28,266,265 (1,854,122)

(1,582,445) 35,658,766 26,412,143 173,112 138,686 35,831,878 26,550,829 24,925,936 2,924,400 3,793,615 578,598 611,289 32,833,838 2,998,040 (83,286) 15,500 2,930,254 (710,087) (287,141) (13,000) 1,920,026 4,293,913 6,213,939 430,387 73,144 192,003 5,518,405 6,213,939 8.03 17,257,732 2,091,407 2,811,959 298,054 340,269 22,799,421 3,751,408 (396,167) 115,021 3,470,262 (1,266,197) 104,666 (45,500) 2,263,231 2,760,536 5,023,767 430,387 73,144 226,323 4,293,913 5,023,767 9.47

58

BALANCE SHEET AS AT DECEMBER 31, 2009
(RS THOUSANDS) SOURCES OF FUNDS Shareholder’s funds Share Capital Reserves and surplus Loan Funds Unsecured Loans APPLICATION OF FUNDS Fixed Assets Gross block Less: Accumulated depreciation Net block Capital Work-in-process (incl. capital advance) Investments Deferred tax asset (Net) Current Assets, Loans and Advances Inventories Sundry debtors Cash and bank balances Other Current assets Loans and advances Less: Current Liabilities and Provisions Liabilities Provisions Net Current Assets 7,676,119 4,692,170 7,676,119 4,692,170 16,342,032 11,942,301 10,838,634 2,454,718 8,383,916 518,875 8,902,791 34 100,089 3,790,460 15,994,357 1,325,302 4,474,711 3,173,978 28,758,808 20,320,820 1,098,870 21,419,690 7,339,118 16,342,032 4,075,221 2,104,413 1,970,808 4,499,645 6,470,453 34 387,230 3,862,111 11,889,443 450,865 2,582,505 2,815,946 21,600,870 15,404,941 1,111,345 16,516,286 5,084,584 11,942,301 DEC. 2009 478,208 8,187,705 8,665,913 IN DEC.2008 478,208 6,771,923 7,250,131

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Introduction to Inventory Management
INTRODUCTION
The word inventory was first recorded in 1601.The French term inventaire, or “detailed list of goods,” dates back to 1415. Inventory management is primarily about specifying the size and placement of stocked goods. Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60% of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately. It is possible for a company to reduce its level of inventories to a considerable degree, e.g., 10 to 20%, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in ‘excessive’ inventories carries a favorable impact on a company’s profitability.

NATURE OF INVENTORIES
Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories exist in a manufacturing company are: Raw materials, Work-in-process and finished goods. Raw Materials are those basic inputs that are converted into finished product through the manufacturing process. Raw material inventories are those units which have been purchased and stored for future productions.

60

Work-In-Process inventories are semi-manufactured products. They represent products that need more work before they become finished products for sale. Finished Goods inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production, while stock of finished good is required for smooth marketing operation. Thus, inventories serve as a link between the production and consumption of goods. The levels of three kinds of inventories for a form depend on the nature of its business. A manufacturing firm will have substantially high levels of all three kinds of inventories, while a retail or wholesale firm will have a very high level of finished goods inventories and no raw material and work-in-process inventories. Within manufacturing firms, there will be differences. Large heavy engineering companies produce long production cycle products; therefore, they carry large inventories. On the other hand, inventories of a consumer product company will not be large because of short production cycle and fast turnover. Firms also maintain a fourth kind of inventory, Supplies or stores and spares. Supplies include office and plant cleaning materials like soap, brooms, oil, fuel, light bulbs etc. These materials do not directly enter production, but are necessary for production process. Usually, these supplies are small part of the total inventory and do not involve significant investment. Therefore, a sophisticated system of inventory control may not be maintained for them.

NEED TO HOLD INVENTORIES
The question of managing inventories arises only when the company holds inventories. Maintaining inventories involves tying up of the company’s funds and incurrence of storage and handling costs. If it is expensive to maintain inventories, why do companies hold inventories? There are three general motives for holding inventories.

61

Transaction Motive emphasizes the need to maintain inventories to facilitate smooth production and sales operation. Precautionary Motive necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative Motive influences the decision to increase or reduce inventory levels to take advantage of price fluctuations. A company should maintain adequate stock of materials for a continuous supply to the factory for an interrupted production. It is not possible for a company to procure raw material whenever it is needed. A time lag exists between demand foe materials and its supply. Also, there exists uncertainty in procuring raw materials in time on many occasions. The procurement of raw materials may be delayed because of such factors as strike, transport disruption or short supply. Therefore, the firm should maintain sufficient stock of raw material at a given time to streamline production. Work-in-process inventory builds up because of the production cycle. Production cycle is the time span between introduction of raw material into production and emergence of finished product at the completion of production cycle. Till production cycle completes, stock of work-in-process has to be maintained. Stock of finished goods has to be held because production and sales are not instantaneous. A firm cannot produce immediately when customer demand goods. Therefore, to supply finished goods on regular basis, their stock has to be maintained. Stock of finished goods has also to be maintained for sudden demands from customers. The level of finished goods inventories would depend upon the coordination between sales and production as well as on production line.

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OBJECTIVES OF INVENTORY MANAGEMENT
In the context of inventory management, the firm is faced with the problem of meeting two conflicting needs: To maintain a large size of inventories of raw material and work-inprocess for efficient and smooth production and of finished goods for uninterrupted sales operations. To maintain a minimum investment in inventories to maximize of profitability.

CLASSIFICATION OF INVENTORY
Inventory can be classified into different types: Raw Material Work In Process Finished Goods Scrap Spares Tools Consumables

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COSTS ORIENTED WITH INVENTORY MANAGEMENT
In an Industry, Inventory costs almost 60% to 70% of its total cost; here AREVA T&D India Limited’s about 60% to 65% of total cost is on inventory. So due care is to be taken for Inventory Management so that profitability can be increased. Following are the types of cost for inventory management. Ordering Cost: The term ordering cost is used in case of raw materials(or supplies) and includes the entire costs of acquiring raw materials. They include costs incurred in the following activities: requisitioning, purchase ordering, transporting, receiving, inspecting and storing. Ordering costs increase in proportion to number of orders placed. Inventory Carrying Cost: Costs incurred for maintaining a given level of inventory are called carrying costs. Inventory carrying cost is always proportional to the investment in inventory and it is, therefore expressed as a percentage of average investment in inventory. Various costs are as follows: Capital Cost: This is the largest component of the carrying cost and it represents the cost of capital invested which includes the cost of borrowing capital which is the borrowing rate or the bank lending rate. Storage Cost:

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The chief elements of storage cost are the cost of space, maintenance and repairs, lighting, wages of personnel, handling charges and other. Obsolescence Cost: The value of an item gets progressively reduced, as the life of inventory goes on. Obsolescence is done due to life span of inventory, technology changes, and loss due to handling. Insurance: Insurance cost is incurred against loss due to some unforeseen circumstances like fire, pilferage and others. Stock out cost: This is the cost of not carrying the inventory, this is one type of opportunity cost, as when demand occurs but system is out of stock. Costs consists of loss of production resulting in idle machine hour and idle operator over cost, extra cost expediting and exiting purchase order, extra cost of transportation if faster means of transport are to be substitute, profit lost due to loss of production. Overstocking Cost: This is also an opportunity cost incurred as a result of investment in inventory larger than normal requirement. Usually, the items in stock are ultimately used. But they remain in inventory for an appreciable length of time incurring additional carrying coat. Where the items are not used, they become surplus and have to be ultimately scrapped and sold at a loss.

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INVENTORY CONTROL TECHNIQUES
Inventory is being maintained as a cushion in supply of materials for continuous production without causing stock out situation. This cushion should not be suicidal to any organization. The following scientific techniques and methods are being used in control of inventory. 1. Inventory Management Techniques 2. Standardization 3. Selective Inventory Control 4. Just In Time 5. Perpetual Inventory System 6. Inventory Turnover Ratio

Inventory Management Techniques
Economic Order Quantity If the firm is buying raw materials, it has to decide lots in which it has to be purchased on replenishment. If the firm is planning to production run, the issue is how much production to schedule. These problems are called order quantity problems, and the task of the firm is to determine the optimum or economic order quantity.

a) Ordering Cost: The term ordering cost is used in case of raw materials and includes the entire cost of acquiring raw materials. b) Carrying Cost: 66

Cost incurred for maintaining a given level of inventory is called carrying cost. Economic Order Quantity is given by the formula:

____ EOQ= ?2AO C The total cost of inventory is given by the formula: Total cost of Inventory = (A×P) + (A×O) + (EOQ×C) EOQ 2 Where A = Annual Consumption (In Units) O = Ordering Cost per order (In Rs.) C = Carrying Cost per unit (In Rs.) P = Price per unit (In Rs.) Reorder Point The reorder point is that inventory level at which an order should be placed to replenish the inventory. To determine reorder point: a) Lead time is the normally taken in replenishing inventory after the order has been placed. b) Average usage c) Economic order Quantity

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Safety Stock The demand for material may fluctuate from day to day. The actual delivery time may be different from the normal lead time. If the actual usages increases or the delivery of inventory is delayed the firm can face problem of stock out, which can be costly. So, in order to guard against the stock out the firm may maintain a safety stock.

Standardization
Standardization is very essential to control the inventory, as by standardization reduction in variety of material is possible. And because of the reduction in variety the advantages are low order cost, low inventory, less storage stocks, conservation of materials, variety reduction, less paper work, easy follow up with suppliers, less number of orders. The importance of this field has been recognized since the days of F.W.Taylor, who first drew attention to this fundamental need in any organization. Just as work study is necessary preliminary no work simplification, and a basic technique for production control, quality control, materials handling, estimated cost control, etc., “Standardization” are preliminary necessity to design a basic technique on build control and standardization procedure.

Selective Inventory Control Management
Any manufacturing organization consumes few thousand items of stores. A high degree of control on inventories of each item would, therefore neither be practical considering the work involved, nor worthwhile since all items are not of equal importance. Hence, it is desirable to classify or group item to control, commensurate with importance. This is the principle of selective control as applied to inventories and the technique of grouping is termed as selective technique.

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Selective inventory means variation in the methods of inventory control from item to item and this differentiation should be on selective basis by classification. A company has to stock thousands of items of raw materials, standard parts, stores and squares, sub contract items, tools, stationery etc. To have better control over the inventory stock on hand, selective inventory control technique should be used in isolation/ or in conjunction. Thus selective control means selecting the area of control so that required objective is achieved as early as possible without any lost of time due to taking care of full area• • Minimum loss of energy and efforts. At minimum cost without loss of time.

There are following selective control techniques: ABC Analysis FSN Analysis XYZ Analysis VED Analysis HML Analysis a) ABC ANALYSIS ABC analysis is a selective control technique which is required to be applied when we want to control value of consumption of the item in rupees obviously when we want to control value of the consumption of the material we must select those materials where consumption is very high.

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In any manufacturing company, there are number of items which are consumed or traded it may run into thousands. It is found after number of studies for different companies that – Value of Consumption of items (value in Rs.) No. of Items 70% of consumption 10% of no. of items 20% of consumption 15% of no. of items 10% of consumption 75% of no. of items A items these are those items which are found hardly 5% or Grade A B C 10% but their

consumption may amount 70% or 75% of the total money spend on materials. B items these are those items which are generally 10% or 15% of the total items and their consumption amounts to 10% or 15% of the money spend on the materials. C items these are large number of items which are cheap and inexpensive and hence insignificant. They are large in numbers running into hardly 5% or 10% of the total money spend on materials. ‘C’ Class Items (Low consumption value) 1. Loose control 2. Highly safety stock

‘A’ Class Items ‘B’ Class Items (High consumption (Moderate consumption value value) 1. Very strict control 1. Moderate control 2. No safety stocks or 2. Low safety stock very low safety stocks. 1. Maximum follow up 3. Periodic follow and Expediting up

3. Follow up and expediting in exceptional cases 2. Rigorous value 4. Moderate value 4. Minimum value analysis analysis analysis 3. Must be handled by 5. Can be 5. Can be fully senior officers handled by delegated management

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b) FSN ANALYSIS This type of analysis is more concerned from the point of view of movement of the item or issue of the item under this type of analysis. ‘F’ items are those items, which are fast moving i.e. in a given period of time, say a month or a year they have been issued up till number of items. Although fast moving does not necessarily mean that these items are consumed in large quantities ‘S’ items are those items which are slow moving in the sense that I the given period of time they have been issued in a very limited number of time. ‘N’ non moving items are those, which are not at all issued for a considerable period of time.

Thus, stores department whose concerned with the moving of items would like to know and classify that the items are storing in the categories FSN. So that they can manage operate and plan stores activity accordingly. For example, for efficient operations it would be necessary that fast moving items as far as possible should be stored as near as possible to the point of issue. So that it can be issued with minimum of handling. Also such items must be stored at the floor level avoiding storing them at high heights. Similarly, if the items are slow moving or issued once in a while in a given period of time they can be stored in the interior of the stores and even at the higher heights because handling of these items becomes very rare.

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Further it is necessary for stores in charge to know about non moving items for various reasons: 1. They mean unnecessary blockage of money and affecting the rate of return of the company. 2. Further they also occupy valuable space in the stores without any usefulness and therefore it becomes necessary to identify these items and go into details and find reasons for their non moving and if justified to recommend to top management for their speedy disposal so that company operations are performed efficiently. Also inventory control to some extent cam also be exercised on the basis FSN analysis c) XYZ ANALYSIS This type of analysis is carried out from the view point of value of balance stocks lying in the stores from time to time and classifies all the items as given below. ‘X’ items are those items whose value of balance stocks lying in the stock is very high. ‘Y’ items are those items whose value of balance stock is moderate. ‘Z’ items are those items whose value of balance stock is very low. After knowing this type of classifications and their items can be taken to control the situation as shown below: 1. From security point of view high value items must be stored and kept under lock and key or if not possible they should be kept in such a way

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that they are always under supervision. Similarly arrangement can be made for Y and Z items accordingly. 2. From inventory control point of view we must know why there is high inventory for ‘X’ items. We should review inventory control procedure for each and every high item because stock should be maintained to take care of lead time consumption and also to provide safety stocks. For high value items lying in stores we should review the reasons for long lead time as well as demand variations and see whether lead time consumption and safety stock can be reduced. Thus proper inventory control procedures can be developed on the basis of XYZ analysis. Thus proper selective control methods should be selected to control the materials and prevent from facing loss, taking advantage and knowing what exactly is to be done. d) VED ANALYSIS VED analysis is carried out to control situation, which are critical, when applied to material in VED analysis, we try to identify material according to their criticality to the production, which means the material, without which the production will come to stop and so on from this point of view material classified into three categories. V vital E essential D desirable Vital categories of the items are those items for the want of which the production will come to stop. For e.g. Power in the factory. Essential group of items are those items because of non availability of which the stock out cost is very high.

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Desirable group of items are those items because of non availability of which there is no immediate loss of production and stock cost is very less and it may cause minor disruption in the production for a short time. e) HML ANALYSIS This analysis, analysis the material according to their price and then classifies them as H items or M items or L items. H stands for high price, M stands for medium price, L stands for low price Since price is more concerned of purchase department, mostly purchase department people analysis the material according to HML analysis. HML analysis must be carried out from any one of the following objectives or some of the objective as the case may be: • When it is desire that purchasing responsibility should be delegated to right level of people. • When it is desire to evolve purchasing policies than also HML analysis is carried out i.e. whether to purchase in exact quantities as required or to purchase in EOQ or purchase only when absolutely necessary. • When the objective is to keep control over consumption at the department level then authorization to draw materials from the stores will be given to high level H item, low level for L item and medium level for M item. • When it is desired to decide frequency of stock taking then very frequently H category, very rarely L category and averagely M category.

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•

When it is desired to arrange security arrangements supervision for M items.

for the items, then

H item under lock and key, L items keep open on the shop floor and under

Perpetual Inventory System
The Chartered Institute of Management Accountants, London, defines the perpetual inventory as “a system of records maintained by the controlling department, which reflects the physical movement of stock and their current balance.” Bind cards and the stores ledger help the movements of the stock on the receipts and in maintaining this system as they make a record of to physical movement of the stock on the receipts and issue of the materials and also reflect the balance in the stores. Thus, it is a system of ascertaining balance after every receipt and issue of materials through stock record to facilitate regular checking and to avoid closing down the firm for stocktaking. To ensure the accuracy of perpetual inventory records (i.e. Bin card and stores ledger), physical verification of the stores is made by Bin cards or stores ledger may differ from the actual balance of stock as ascertained by physical verification

Just-In-Time (JIT)
Japanese firms popularized the Just-In-Time (JIT) systems in the world. In a JIT system material or the manufactured components and parts arrive to the manufacturing sites or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus, saves carrying and other related costs to the manufacturer. The system requires perfect understanding and coordination between the manufacturer and suppliers in terms of timing of delivery and quality of the material. Poor quality material or components could halt the production. The JIT inventory system complements the Total Quality Management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous

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pressure on suppliers. They will have to develop adequate systems and procedures to satisfactory meet the needs of manufacturers. Besides these techniques, there are two newly techniques of inventory control is to be implemented in most of the companies now-a-days.

Out-Sourcing
A few years ago there was a tendency on the parts of many companies to manufacture all components in-house. Now more and more companies are adopting the practice out-sourcing. Out-Sourcing is a system of buying parts and components from outside rather than manufacturing them internally. Many companies develop a single source of supply, and many others help developing small and middle size suppliers of components that they require.

Computerized Inventory Control
More and more companies, small or large size, are adopting the computerized system of controlling inventories A Computerized Inventory Control System enables a company to easily track large items of inventories. It is an automatic system of counting inventories, recording withdrawals and revising the balance. There is an in-built system of placing order as the computer notices that the reorder point has been reached. The computerized inventory system is inevitable for large retail stores, which carry thousands of items. The computer information systems of the buyers and suppliers are linked to each other. As soon as the supplier’s computer receives an order from the buyer’s system, the supply process is activated.

Material Requirement Planning (MRP)
Material Requirement Planning (MRP) is time-phased priority planning system. This is the tool that helps the management to forecast the proper amount of production and on that basis purchase planning of inventory is made.

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It takes into account the valid master production planning. Materials required for the production process Accurate and timely inventory status. Order policy Lead time for purchasing and production process. Benefits of MRP Reduction Inventory Quick response in demand and supply

MRP – II
MRP – II stands for Manufacturing Resource Planning, it provides the necessary tools for effective planning, controlling and managing the resources of manufacturing organization. It helps in various stages like resources, planning, business plan, and production plan. It also helps in providing information to plan priorities and respond the production changes, meet delivery schedule and material costs under control. Benefits of MRP - II Optimizes the inventory investment Improves productivity Improves product quality Reduce purchase cost Reduce obsolescence

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PROBLEM STATEMENT,RESEARCH OBJECTIVES AND METHODOLOGY
Research methodology is the full proof plan of the research plan. It covers the following points. Problem Statement I had joined the AREVA T&D India Ltd. For the purpose of the Summer Internship Training Program on the requirement of the GTU. I want to take the finance as my electives in the final year of the MBA so I am interested to do the project in the finance. So for that purpose I asked for the mini project topic in the company in which they can give the full information support. I talk with the Mr. Abhik Biswas for the purpose. He suggest me the topic of SAP Costing, Inventory Reconciliation and Asset Valuation. Among them I chose the “Inventory Management” as the topic of the mini project and He is ready to give me the greater detail regarding the Inventory Management. Research Questions Every research project starts with the research questions. And every research question to be fact oriented, information gathering question. In the word of definition the research question is the hypothesis of choice that best states the objective of the research study. It is more specific management question that must be answered. Following is the research question of my mini project research. How the company manage its Inventory?

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Objectives of the Study Objectives of the study must fulfill the requirements and solution about the research question. To formulate them, a general research question break into specific questions about which to gather data. On the basis of the above mentioned objectives of the study formulation process, in this project objective might be: To find out the technique of the Inventory management How the company keeps its Inventory? What is the ratio of inventory in the context of current assets? So above are the objectives of the study which have to be fulfilled. RESEARCH METHODOLOGY Research design Research design is the plan and structure of investigation so convinced as to obtain answer to research questions. The plan is the overall scheme of program of the research. It includes an outline of what to do from writing hypothesis and their operational implications to the final analysis of data. Research design expresses both the structure of the research problem – the framework, organization, or configuration of the relationships among variables of a study – and the plan of investigation used to obtain empirical evidence on those relationships. Here I am doing the research on the topic - Inventory Management of AREVA T&D India Ltd. So it can be said that the research design might be the

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descriptive where I have to find out the answer of the questions like who, what, where, when, how much regarding the Inventory Management. Data collection This part of the report described the specifics of the gathering the data. It include that the secondary data source from where the data is collected. I had used the two technique for the collecting the data these are. Mentoring the annual report of the company which is prepared by the company at the end of the year, and I had used the literature called I.M. Pandey’s financial Management book as reference book for the research. Company website- www.arevat-d.com & www.moneycontrol.com. Communicating with the financial officer (face to face as well as with the help of mail) for the purpose of the getting the policies regarding the Inventory Management.

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INVENTORY AT AREVA T &D

Inventory Structure
(Rupees Thousands) Inventories Stores and Spare parts Raw materials and components Work-In-Progress Finished Goods Total Dec. 2009 503 1,926,220 1,672,849 190,888 3,790,460 Dec. 2008 2,933 1,603,416 2,097,884 157,878 3,862,111

The above structure of inventory of AREVA T&D India Ltd. Shows the various components of inventory for last two years. It clear indicates that in 2008 company had more stores and spare parts comparing to latest data. Except that, AREVA has a more raw materials and components, Work-in-Progress and Finished Goods. In 2009, the company had a large raw material comparing to work in progress. In fact, the amount of Raw Material and Components is higher than any Inventories whether it is finished goods, Work-in-progress and spare parts. This Inventory Structure is higher than any other competitor company of AREVA. The main thing which should be considerable that Company succeeds to make a growth in its finished product comparing to its previous year’s performance of the finished product. In Vadodara, the company incorporated its business in 2009. So, Vadodara unit had contributed in the year 2009 not in 2008.

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PROCESS FLOW
The process flow for the inventory is as follows in AREVA T&D INDIA LTD

Purchase Order ? Material Purchase ? GRN ? IR ? Issue the material for Production ? Excise ? FSSC

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In above process of Inventory Management, the company firstly make a purchase order which includes, in what quantity the company needs the raw material and then after the company get the Quatation from the supplier. Then after the raw material is purchased, the raw material is mainly purchased of two types: Bought Out The raw material is needed to be bought from the suppliers means the material is to be purchased with the criteria of price and quality. Components Components is to be made from the raw material which is purchased from the suppliers. The GRN means Goods Receipt Number, In GRN the raw material is to be recorded at the average price The semi finished goods is to be recorded at the standard price The finished goods is to be recorded at the standard price In Inventory Process all the data and related information is to be recorded with the help of SAP. By the ending of last step of Invoice Capturing the data and the Invoice and related documents is to be transferred to the FSSC Department. This is official department of Finance. Means Finance Shared Service Center. AREVA T&D India Ltd. Maintains the WIP Report, SFG Report, and FG Report .

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Format of WIP Report:

Orde r

Materia l No

Material Descriptio n

WIP(Cum )

Curr .

Total Quantit y

Conf. Quantit y

Customer s

Raw material

Product Name Other Raw Materials and Components Components (fusegear & switchgear) Stampings and Laminations Copper Components (Relay and Control Panel) Vacuum Interrupter Components Porcelain Steel Oil, Paints & Varnish Aluminum Transformers and Accessories Radiators On Load Tap Changers Castings Cables Total

Dec. 2008 854.62 203.81 153.25 140.11 120.16 84 60.84 51.20 47.24 46.39 18 17.02 12.53 4.23 2.62 1816.02

Dec. 2009 1342.96 302.04 158.66 156.51 137.69 72.62 63.64 54 49.54 42.54 30.84 18 17.50 4.32 2.52 2453.38

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Finished goods
Product Name Project Items Transformers & Reactors Switchgears of all types Spares & Others Control Panel Transformer (Current) Bushing Line Traps Scrap Vacuum Interrupter Erection of Equipment Total Dec. 2008 Sales Value 1190.27 0.00 704.20 74.88 58.67 63.71 41.21 23.51 10.12 9.60 0.00 2176.17 Dec. 2009 Sales Value 1870.60 803.11 781.64 91.76 66.20 54.77 25.02 21.40 13.02 9.63 0.00 3737.15

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DATA ANALYSIS & INTERPRETATION Inventory structure in Areva T &D
Inventories Raw materials and components Work-In-Progress Finished Goods Total Dec. 2009 1,926,220 1,672,849 190,888 3,790,460 Dec. 2008 1,603,416 2,097,884 157,878 3,862,111

2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Dec. 2009 Dec. 2008 Raw materials and components Work-In-Progress Finished Goods

Interpretation You can see that the company keep the inventory in the format of the raw material, work in progress and finished goods and keep most of the raw material and work in progress.

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INVENTORY RELATED RATIO
INVENTORY TURNOVER RATIO Sales Inventory Turnover Ratio= Inventory Dec. 2008 28,266,265 = 3,862,111 = 7.32

Dec. 2009

= =

37,241,211 3,790,460 9.82

The inventory turnover ratio shows how much the inventory with compare to sales. From the following chart, we can say that the company has increase its inventory compared to past year.

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MATERIAL COST COMPONENT Particulars Material Cost Earning Material Cost (% of Earning) Dec. 2008 17,257,732 26,550,829 65% Dec. 2009 24,925,936 35,831,878 69.57%

The material cost component shows the Material cost with respect to earning. From these chart, we can say that the cost of material is higher than the past means the company has made a high material cost comparing to the earnings of the company. In 2008, the Material cost is 65% but in 2009 the company had made a high rate of material coat comparing to the earning which around 70% means 5% increase in the material cost is comparing to the earning.

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Inventory to Current Assets Ratio Inventory to current assets ratio is concerned with the inventory and current assets. Inventory to current assets ratio is defined as how much of inventory is available in current assets. Inventory to Current Assets Ratio = Total Inventory * 100 Current Assets Particular 2008 2009

Inventories 3862111 3790460 Current Assets 21600870 28758808 Inventory to Current Assets Ratio 18% 13%

18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

Inventory to Current Assets Ratio

2008

2009

From above graphical presentation the company decreases its inventory in the total current assets so the company implement the JIT technique well so the investment in inventory is less in the total current assets.

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JIT- FOR AREVA T&D
JIT means Just In Time, means as per this technique the company uses its raw material and finished components very synchronically. In AREVA T&D, The whole shop floor is set as per the JIT as well as Kanban approach. To view this technique, the shop floor is divided with its processing activity. Like that, the raw material inward starts the process and its ends with the outward product. Between that whole processing activity is to be made. The raw material is to be brought as per the requirement. Means the inventory carrying cost is to be less as per the competitors. By that way the company can save the time as well as cost and the quality of the product is also improved. By the uses of JIT, the company can make the coordination with the supplier and the manufacturing unit.

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ABC ANALYSIS OF AREVA T&d
ABC means Always Better Control, ABC is comes under the name of selective inventory control. ABC is generally used for the raw material which values more and its consumption is very high. The company has to control this inventory because it values more than the other material. The category is set for ABC is as follows: A – High Consumption Value B – Moderate Consumption Value C – Low Consumption Value Value of Consumption of items (value in Rs.) 70% of consumption 20% of consumption 10% of consumption No. of Items 10% of no. of items 15% of no. of items 75% of no. of items Grade A B C

Category A B C Total

% of Material 75% 15% 10% 100%

Dec. 2009 1960.17 327.95 165.26 2453.38

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ABC ANALYSIS OF RAW MATERIAL (RS IN THOUSANDS)

A Category B Category C Category

Product Name Other Raw Materials and Components Components (fusegear & switchgear) Stampings and Laminations Copper Components (Relay and Control Panel) Vacuum Interrupter Components Porcelain Steel Oil, Paints & Varnish Aluminum Transformers and Accessories Radiators On Load Tap Changers Castings Cables Total

Dec. 2009 1342.96 302.04 158.66 156.51 137.69 72.62 63.64 54 49.54 42.54 30.84 18 17.50 4.32 2.52 2453.38

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ABC ANALYSIS WITH GRAPHICAL PRESENTATION

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70
Item A Item B

Item C

15

35

100

The above graph represent that abc analysis of the company’s raw material with abc classification which help in the implement the control over the diffren raw material.

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FINDINGS
From the above project report, I found the following conclusion regarding my topic of Inventory Management. In the Inventory Management referring to the manufacturing department, Company uses the latest JIT approach, which is save the carrying cost of inventory and improve the quality. JIT also to be helped for the coordination between suppliers and manufacturer. Inventory keeps in the company by the help of ABC classification for the purpose of proper controlled. Because AREVA keep the variety of the inventory. The inventory is 13% in the current year and 18% in previous year in the regards of current year which shows that the less blockage of inventory. AREVA is depends upon the SAP System for the purpose of the all inventory management i.e. inventory purchase , store and put it in use

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SUGGESTIONS
These suggestions are provided from my side to the company on the basis of findings of the project report. The company should follow perpetual inventory system for the controlling of Inventory which help in the getting day to day update of the inventory in the store. The company should use the EOQ Inventory Technique for the less value items of material for the purpose of cutting the cost.

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BIBLIOGRAPHY
http://arevat-dmain.htm Annual Report of 2009 of AREVA T&D India Limited I.M.Pandey, financial Management(9th edition), inventory management http://moneycontrolhome.htm

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