Professional Documents
Culture Documents
BY
P.Mahesh
(1409-10-672-050)
MBA
2010-2012
ACKNOWLEDGEMENT
P.MAHESH
(1409-10-672-050)
DECLARATION
P.MAHESH
(1409-10-672-050)
PLACE:
DATE:
CONTENTS
CHAPTER 1
INTRODUCTION
METHODOLOGY
CHAPTER 2
COMPANY PROFILE
CHAPTER 3
THEORETICAL FRAMEWORK OF
CHAPTER 4
CHAPTER 5
FINDINGS
BIBILOGRAPHY
INTRODUCTION
These are prepared at the end of a given period of time. They are
the indicators of profitability and financial soundness of the business concern.
The term financial analysis is also known as analysis and interpretation of
financial statements. It refers to the establishing meaningful relationship
between various items of the two financial statements i.e. Income statement and
Position statement. It determines financial strength and weakness of the firm.
Analysis of financial statements is an attempt to assess the efficiency and
performance of an enterprise. Thus, the analysis and interpretation of financial
statements is very essential to measure the efficiency, profitability , financial
soundness and future prospects of the business units. Financial analysis serves
the following purposes.
Source of data
The data is collected from the following sources.
METHODOLOGY
Primary data
Secondary data
PRIMARY DATA
3. From the people who are directly involved with the transaction of
the firm.
Secondary data
Study has been taken from secondary sources i.e. published annual
reports of the company editing, classifying and tabulation of the financial data.
For this purpose performance data of BHEL for the years 2007-2008 to 2009-
2010 has been used.
Scope of study
The scope and period of the study is being restricted to the following.
2. The information is obtained from the primary and secondary data was
limited to the BHEL.
3. The profit and loss, the balance sheet was on the last six years.
Limitations of study
2. As most of the data is from the secondary sources, hence the accuracy is
limited.
COMPANY PROFILE
This success story of BHEL however goes back to 1956 when its first
plant was set up in BHOPAL. Three more major plants followed in
HARIDWAR, HYDERABAD and THIRUCHIRAPALLI flowed this. These
plants have been the core of BHEL’S efforts to grow and diversify and become
one of the most integrated power and industrial equipment manufacturers in the
world. The company now has 14 manufacturing units,8 service centres and 4
power sector regional centres, besides project sites spread all over India and
abroad.
MISSION:
VALUES:
5. Team playing.
6. Zeal to excel.
OBJECTIVES
GROWTH:
To ensure a steady growth by enhancing the competitive edge of
BHEL in exiting business, new areas and international operation so as to fulfil
national expectations from BHEL.
PROFITABILITY:
TECHNOLOGY:
IMAGE:
STRENGTH’S
WEAKNESS
4. No financial package
OPPORTUNITIES
1. Growing power sector machinery
THREATS
4. Poor infrastructure.
PRODUCTS OF BHEL
BHEL manufactures a wide range of power plant equipments and also caters
to the industry sector.
1. Gas turbines
2. Steam turbines
3. Compressors
4. Turbo generators.
5. Pumps
6. Pulverizes
7. Switchgears
8. Oil rigs
10.Telecommunication.
THEORITICAL
FRAMEWORK OF
FINANCIAL STATEMENT
ANALYSIS
INTRODUCTION TO FINANCE:
Financial statement is that managerial activity which is
concerned with the planning and controlling of the firm financial resources.
Though it was a branch of economic till 1890 as a separate activity or discipline
it is of recent origin. Still, as no unique body knowledge of its own, and draws
heavily on economics for its theoretical concepts even today.
SCOPE:
PRODUCTION
MARKETING
FINANCE
FUNCTION:
The finance function form production, marketing and other
functions. Yet the function themselves can be readily identified. The function of
raising funds, inverting them in assets and distributing returns earned from
assets to shareholder respectively. The finance functions are:
2. To access the performance of the BHEL on the basis of earnings and also
to evaluate the solvency position of the company.
5. Informed decision.
2. The information obtained from the primary and secondary data was
limited to the BHEL
4. The profit and loss, the balance sheet was on the last 3 years.
LIMITATIONS OF STUDY:
METHODOLOGY:
1. PRIMARY DATA
2. SECONDARY DATA
Study has been taken from secondary sources i.e. published annual
report of the company. Editing. Classifying and tabulation of the
financial data for this purpose performance data of BHEL or the
yeary2007-2008 to 2009-2010 have been used.
(A)DEFINITIONS:
(C)CONVENTIONS:
The financial statements are mirrors which reflect the financial position and
operating strength’s or weaknesses of the concern. These statements are useful
to management, investors, creditors, bankers, workers, government and public
at large. George O May points of the following measure used of financial
statements:
3. Debenture holders
5. Employee customers who wish to make along standing contact with the
company.
7. Members.
1. A balance sheet
2. An income statement
BALANCE SHEET:
The term owners equity refers in the claims of the owners of the
business against the assets of the firm. It consist of two elements.
1. Paid up share capital i.e. the initial amount of funds invested by the
shareholders.
The basic financial statement i.e. the balance sheet and profit and loss
account and income statement of a business reveals the net effect of various
transactions on the operational position of the company. But there are many
transactions that do not operate through profit and loss account. Those for a
better understanding another statement of changes in financial position has to be
prepared to show the changes in assets and liabilities from the end of another
point of time. The statement of changes in financial position may take any of the
two forms. They are:
Funds statements
Absolute figures
1. Common size balance sheet: A statement in which balance sheet items are
expressed as the ration of each asset to total assets and the ratio of each
liability is expressed as a ratio of total liabilities is called common sized
balance sheet.
TREND ANALYSIS:
Trend percentages:
RATIO ANALYSIS:
Liquidity ratio
Profitability ratio
Activity ratio.
1. Current ratio
3. Cash ratio
1.Current ratio: Current ratio is the ratio of current assets to current liabilities.
Current assets are the assets that are expected to be realized in cash or sold or
consumed during the normal operating cycle of the business or with in one year,
which ever is longer, they include cash in hand and bank, bills receivable, net
sundry debtors, stock of raw materials, finished goods and working in progress,
prepaid expenses, outstanding incomes, assured incomes and short term or
temporary investments. Current liabilities are the liabilities that are to be repaid
within a period of one year. They include bills payable, sundry creditors, bank
overdrafts, outstanding expenses, income receivable in advance, proposed
dividend, provision for taxation, unclaimed dividends and short term loans and
advanced repayable within one year. Any instalment of long-term liability
payable within the next 12 months is also current liability.
2. ACID TEST/QUICK RATIO: the acid test ratio is the ratio between quick
current assets and current liabilities and calculated by dividing the quick assets
by current liabilities. Quick assets mean those which can be converted into cash
immediately by exclusion of inventory and prepaid expenses from current
assets.
3. CASH RATIO: The cash ratio is the ratio of cash and bank balance, it is
calculated dividing cash and bank balance by current liabilities.
2. Proprietary Ratio
1.Debt Equity Ratio : It reflects the relative claim of creditors and shareholders
against the assets of the business. Debt usually refers to long-term liability.
Equity includes equity and preference share capital and reserves.
2.Propreitary ratio: It expresses the relationship between the net worth and total
assets. A high proprietary ratio is indicative of strong financial position of
business.
Proprietary ratio = Net worth/ Total Assets
Capital Gearing Ratio = funds bearing fixed interest and fixed dividend/equity
. share holder’s funds
4.Fixed Assets Ratio: This ratio indicates the mode of financial the fixed assets.
It is calculated as
5.Interest Coverage Ratio: This ratio is called as “debt service ratio”. This ratio
indicates whether a business is earning sufficient profits to pay the interest
charges. It is calculated as
Interest coverage ratio=PBIT/Fixed interest charges
Generally greater the ratio, the better is the servicing ability of company.
1.Gross Profit Ratio: Gross profit is one of the most commonly used ratios. It
reveals the result of trading operations of the business. In other words, it
indicates to us the profitability of the business. It is calculated as
Generally the higher the ratio, the better will be the performance of the
company.
2.NET PROFIT RATIO: It indicates the results of overall operations of the firm.
While the gross profit ratio indicates the extent of profitability of core
operations. Net profit ratio tells us about overall profitability. It is called as
5.EXPENSES RATIO: Expenses ratios are the ratios that supplement the
information given by the operating ratio. Each of the expense rations highlights
the relationship given by the particular expense and net sales. For example,
factory expenses ratio is of factory expenses to net sales any expenditure can be
shown as a ratio to sales. All such ratios fall under the broad head of expenses
ratios.
ROA=PAT/TOTAL SALES
6.Dividends per share (DPS): It is the amount of dividend payable to the holder
of one equity share. It is calculated as
Generally from investors point of view, the higher the ratio, the happier the
investor.
7.DIVIDEND PAY OUT RATIO: It is the ratio of dividend per share to earning
per share. It is calculated as
10.BOK VALUE: It is the fraction of the net worth of the business as depicted
in the balance sheet, which is attributable to one equity share of the business . it
is calculated as
Generally higher the book value of the share, the more strong the business is
assumed to be.
Generally the ratio between 10-12 an ideal value for the company.
3.CREDITORS TURN OVER RATIO: Creditors turn over ratio expresses the
relationship between creditors and net credit purchases. It is calculated as
5.Fixed Assets Turn Over Ratio: It is Defined as ratio of Net Sales to the Fixed
Assets.
Generally higher the ratio, the greater is the ability of the firm to utilize the
investments in the business.
DATA ANALYSIS
AND
INTERPRETATION
Current Asset Liability Ratio
year current assets current liability Ratios
2001-02 155792 73129 2.13
2002-03 166669 74427 2.23
2003-04 155652 84990 1.83
2004-05 192697 116644 1.65
2005-06 235062 143200 1.64
2006-07 276062 208869 1.32
2007-08 310002 243220 1.27
2008-09 453597 376332 1.2
2009-10 580804 397574 1.46
2010-11 771519 502024 1.54
Interpretation –The ideal ratio for the concern is 2:1 i.e. current assets doubled
for the current liabilities considered to be satisfactory. The current ratio of
BHEL is less than ! .Thus it has to maintain its efficient current assets.
The ideal quick ratio is 1:1 which is considered satisfactory for the concern. The
company is maintaining the ratio above the standard norm , thus the
management of BHEL is label to meet its current obligations.
The debt equity ratio has been increasing over the years and it has been
maintained at a level of .62 for the financial year 2009-10
Generally financially well managed company will have its fixed assets financed
by long term funds. There fore , the fixed assets ratio should never be more than
!.A ratio of .67 is considered ideal. The results for BHEL is much less at 0.11
Interest coverage ration of BHEL is not constant , from 2008-09 the ratio is10
as in 2009 -10 the ratio is 12.17, There is a random fluctuation in the ratio
Gross profit
year Gross profit Net sales Ratios
2001-02 13500 153205 0.088
2002-03 13420 137838 0.097
2003-04 15821 174490 0.07
2004-05 33122 174668 0.189
2005-06 60867 267217 0.227
2006-07 63290 289241 0.218
2007-08 68916 310235 0.2224
2008-09 68478 414816 0.165
2009-10 86483 500342 0.172
2010-11 130330 665323 0.196
Gross Profit = Gross /net sales
Generally the higher gross profit ratio , the better for the performance of the concern .In BHEL , the
company has started to increase from the year on year which is a very good sign for the company.
Operating ratio
year Operating cost Net sales Ratios
2001-02 131006 153205 0.85
2002-03 116708 137838 0.84
2003-04 149823 174490 0.85
2004-05 136630 174668 0.78
2005-06 201962 267217 0.75
2006-07 221227 289491 0.76
2007-08 234677 310235 0.76
2008-09 338382 414816 0.81
2009-10 404647 500342 0.8
2010-11 524531 665323 0.79
Operating Ratio : Operating Cost / Net Sales
Generally the lower the Operating Cost , the better for the concern. The ratio
should be below1 which is satisfactory for the concern.
The higher the ROCE ratio , the better for the concern. The company has been
keeping up the good performance is increasing at the rapid phase which in turn
is a good sign for the company.
The BHEL`s debtor turnover ratio was below 2 .Its has bee increasing since
2008-09 from 1.44 to 1.53 in 2009-10, the increasing trend Implies the efficient
management of Debtor and credit sales.
Interpretation : The BHEL`s creditors Turn Over Ratio is at 0.68 , it has been on
the increasing trend since past two financial years. The management should try
to reduce this by adopting proper payment policies.
At high fixed assets turnover ratio indicates better utilization of the firms fixed
assets. A ratio around 5 is considered ideal for the concern .In BHEL it is more
than 22.This is a very good sigh for the company.
The Total Assets turnover ratio of the BHEL is below 1 . This shows greater
ability of the firm to utilize the investment in the business
DESCRIPTION
2009-10 2010-11 increase/decrease increase/decrease
DESCRIPTION
2008- 2009-
09 10 Increase/Decrease Increase/Decrease%
1. The net working capital was Rs 91021 lac’s in 2000-2001. This decreased
to Rs 82663 lac’s in the year 2001-2002. In the year 2006-2007 the net
working capital is Rs 67193 lac’s.
2. The current ratio of BHEL was 2.41 in the year 2000-2001. There was
decrease in the ratio up to the year 2007-2008. The ratio is decreasing
year by year. But the BHEL is maintaining current ratio more than the
standard norms of 2.
3. The organization is able to maintain both current ratio and quick ratio
above the standard norms. i.e. the ideal current ratio for the concern is 2:1
and the quick ratio is 1:1 but the cash ratio is fluctuating.
1. The current ratio of BHEL is decreasing year by year . In the year 2000-
2001 it was 2.41 and during the year 2008-2009 it has gone down to 1.2
later in the next financial year 2009-2010 it has gone up to 1.46, so the
company should concentrate effectively on the management of Current
Assets and Current Liabilities.
2. The Net Working Capital of BHEL is good for almost in range for each
and every year. It is always in the ideal ratio for every organization.
4. The debtors constitute nearly 50% of the Total Current Assets. For the
Company it is difficult to manage the accounts receivables. The company
should collect debts as quickly as possible.
6. The debtors turn over ratio in 2005-2006 is 1.97. the ratio has increased
than previous years except for 2003-2004, which had 2.10. the decreasing
ratio shows the inefficient management. They should concentrate more on
the collection of the debts.
BIBILOGRAPHY:
http://www.bhel.com/financial_information/index.php
http://www.studyfinance.com/lessons/workcap
www.bizsearchpapers.com
http://www.antiessays.com/free-essays/9076.html
http://www.bhelhyderabad.com/bhel_hyderabad_unit.htm
http://en.wikipedia.org/wiki/Bharat_Heavy_Electricals_Limited
In order to run the industry or company it requires machinery and other assets. To seek
machinery and other assets the company must spend or invest some money in order to buy
them. Before investing money on the machinery, the company need to evaluate the future
returns on the machinery, its depreciation value per year etc, then the company after going
through the above information, it will decide whether to invest on that particular machinery
or not. So, studying all this information comes under the title “CAPITAL BUDGETING” it
deals with evaluation of various projects using different capital budgeting techniques like net
present value, internal rate of return, profitability index, rate of return. From these
calculations the company will find out the feasibility of project that is whether to take up the
project or not. Then, finally the company will decide up on the project.
efficiently in the long-term assets in anticipation of an expected flow of benefits over a series
of years. Therefore it involves a current outlay or series of outlay of cash resources in return
for an anticipated flow of future benefits. The long-term assets are those, which affect the
firm’s operations beyond the one year period. The firm’s investment decisions would
assets.
To study the Capital Budgeting process in the company and to analyze the feasibility
of the various projects taken up by the BHEL company by using capital budget technique.
its existing production process by installing machine. The future cash inflows on this
investment are the savings resulting from the lowered erating costs. The firm would be
increase the scale of production and sale, the company may think of acquiring new
Machinery, addition of building, merger or takeover of another business etc. this all would
require additional investment which should be evaluated in terms of future expected earnings.
latest model. The use of new and latest model of machinery may possibly bring down
operating costs and increase the production. Such replacement decision will take with help of
capital budgeting.
choice can be made between semi- automatic or fully- automatic machine. Capital Budgeting
Product or process innovation The introduction of new product or a new process will
involve heavy expenditure and will earn profits also in the future. So, a study of capital
budgeting will be very useful and the ultimate decision will depend upon the profitability of
1. The procedures involved in Energy sector for the Capital Budgeting may vary
2. The study is based on the financial data provided by the finance personnel of
RESEARCH METHODOLOGY
Research is a processing which the researchers wish to find out the end result for a
given problem and thus the solution helps in future course of action. The research has been
defined as A careful Investigation or enquiry especially through search for new facts in
branch of knowledge. The present study involves the analysis of data by using various
NPV
PI
ROI
IRR
RESEARCH DESIGN
The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to
DATA COLLECTION
Primary Sources
1. Data are collected through personal interviews and discussion with
Finance executives.
2. Data are collected through personal interviews and discussion with
MEANING OF A BUDGET:
A budget is the monetary or/and quantitative expression of business plans and policies
to be pursued in the future period of time. The term budgeting is used for preparing budgets
and other procedures for planning, co-ordination and control of business enterprise.
statement prepared prior to a defined period of time, of the policy to be pursued during that
period for the purpose of attaining a given objective”. In the words of Crown and Howard, “A
The actual performances of the past, the present situation and likely trends in the
The budgets are usually classified according to their nature. The following are the
1. Long-Term budgets.
2. Short-Term budgets.
3. Current budgets.
1. Operating budgets.
2. Financial budgets.
3. Master budgets.
1. Fixed budget.
2. Flexible budget.
1. Long Term Budgets. The budgets are prepared to depict long term planning of
the business. The period of long term budgets varies between five to ten years.
The long term planning is done by the top level management. Long time
budgets are prepared for some sectors of the concern such as capital
expenditure, research and development, long term finance; etc .These budgets
2. Short-term budgets. These budgets are generally for one or two years and are
in the form of monetary terms. The consumers’ goods industries like sugar,
operations of a firm. The number of such budgets depends up on the size and
2. Financial budgets. Financial budgets are concerned with cash receipts and
3. Master Budget. In this type of budget various functional budgets are integrated
1. Fixed budget. The fixed budgets are prepared for a given level of activity; the
budget is prepared before the beginning of the financial year. If the financial year
starts in January then the budget will be prepared a month or two months earlier
either in Nov or Dec. The changes in expenditure arising out of the anticipated
changes will not be adjusted in the budget. Fixed budgets are suitable under static
conditions.
level of activity. It varies with the level of activity attained. A flexible budget is
the business.
1. Sales budget
2. Production budget
8. cost budget
All these situations involve a capital expenditure decision. Essentially each of them
represents a scheme for investing resources which can be analyzed and appraised reasonably
independently.
outlay of funds in the expectation of a stream of benefits extending far into future.
This definition of capital expenditure is not necessarily synonymous with how capital
expenditure is defined in accounting. A capital expenditure from the accounting point of view
is an expenditure that is shown as an asset on the balance sheet. This asset, except in the case
of a non-depreciable asset like land, is depreciated over its life. In accounting, the
Capital budgeting is a process of planning expenditures incurred on assets whose cash flow is
expected to range beyond one year. In other words, it is defined as a process that requires
planning for setting up budgets on projects expected to have long-term implications. It can be
used for processes such as the purchase of new equipment or launching of a new product in
the market. Businesses prefer to intricately study a project before taking it on, as it has a great
Some of the projects that use capital budgeting are investments in property, plants, and
The success of a business depends on the capital budgeting decisions taken by the
management. The management of a company should analyze various factors before taking on
a large project. Firstly, management should always keep in mind that capital expenditures
require large outlays of funds. Secondly, firms should find modes to ascertain the best way to
raise and repay the funds. The management should also keep in mind that capital budgeting
The requirement for relevant information and analysis of capital budgeting has paved the way
for a series of models to assist firms in amassing the best of the allocated resources. One of
the oldest methods used is the payback model; the process determines the length of time
required for a business to recover its cash outlay. Another model, known as return on
investment, evaluates the project based on standard historical cost accounting estimates.
Popular methods of capital budgeting include net present value (NPV), discounted cash flow
While working with capital budgeting, a firm is involved in valuation of its business. By
valuation, cash flow is identified and discounted at the present market value. In capital
budgeting, valuation techniques are undertaken to analyze the impact of assets instead of
financial assets.
The importance of capital budgeting is not the mechanics used, such as NPV and IRR, but is
the varying key involved in forecasting cash flow. The importance of capital budgeting is not
only its mechanics, but also the parameters of forecasting the incurrence of cash in the
business
Capital budgeting is vital in marketing decisions. Decisions on investment, which take time
to mature, have to be based on the returns which that investment will make. Unless the
project is for social reasons only, if the investment is unprofitable in the long run, it is unwise
to invest in it now.
Often, it would be good to know what the present value of the future investment is, or how
long it will take to mature (give returns). It could be much more profitable putting the
planned investment money in the bank and earning interest, or investing in an alternative
project.
Typical investment decisions include the decision to build another grain silo, cotton
gin or cold store or invest in a new distribution depot. At a lower level, marketers may wish
to evaluate whether to spend more on advertising or increase the sales force, although it is
The key function of the financial management is the selection of the most profitable
assortment of capital investment and it is the most important area of decision-making of the
financial manger because any action taken by the manger in this area affects the working and
the profitability of the firm for The need of capital budgeting can be emphasised taking into
consideration the very nature of the capital expenditure such as heavy investment in capital
projects, long-term implications for the firm, irreversible decisions and complicates of the
decision making. Its importance can be illustrated well on the following other grounds:-
(1) Indirect Forecast of Sales. The investment in fixed assets is related to future sales of the
firm during the life time of the assets purchased. It shows the possibility of expanding the
production facilities to cover additional sales shown in the sales budget. Any failure to make
the sales forecast accurately would result in over investment or under investment in fixed
assets and any erroneous forecast of asset needs may lead the firm to serious economic
results.
study of the alternative projects for the replacement of assets which are wearing out or are in
danger of becoming obsolete so as to make the best possible investment in the replacement of
(3) Timing of Assets-Acquisition. Proper capital budgeting leads to proper timing of assets-
and supply of capital goods. The demand of capital goods does not arise until sales impinge
on productive capacity and such situation occur only intermittently. On the other hand, supply
of capital goods with their availability is one of the functions of capital budgeting.
(4) Cash Forecast. Capital investment requires substantial funds which can only be arranged
by making determined efforts to ensure their availability at the right time. Thus it facilitates
cash forecast.
(5) Worth-Maximization of Shareholders. The impact of long-term capital investment
decisions is far reaching. It protects the interests of the shareholders and of the enterprise
because it avoids over-investment and under-investment in fixed assets. By selecting the most
profitable projects, the management facilitates the wealth maximization of equity share-
holders.
(6) Other Factors. The following other factors can also be considered for its significance:-
(b) It may be useful n considering methods of coast reduction. A reduction campaign may
(c) The feasibility of replacing manual work by machinery may be seen from the capital
(d) The capital cost of improving working conditions or safety can be obtained through
(e) It facilitates the management in making of the long-term plans an assists in the
(f) It studies the impact of capital investment on the revenue expenditure of the firm such as
Capital budgeting is very obviously a vital activity in business. Vast sums of money can be
easily wasted if the investment turns out to be wrong or uneconomic. The subject matter is
difficult to grasp by nature of the topic covered and also because of the mathematical content
involved. However, it seeks to build on the concept of the future value of money which may
be spent now. It does this by examining the techniques of net present value, internal rate of
return and annuities. The timing of cash flows are important in new investment decisions and
so the chapter looks at this "payback" concept. One problem which plagues developing
countries is "inflation rates" which can, in some cases, exceed 100% per annum. The chapter
A capital investment project can be distinguished from current expenditures by two features:
As a result, most medium-sized and large organizations have developed special procedures
and methods for dealing with these decisions. A systematic approach to capital budgeting
implies:
proposals
decision level
execution
g) a set of decision rules which can differentiate acceptable from unacceptable alternatives is
required.
a) By project size
Small projects may be approved by departmental managers. More careful analysis and Board
of Directors' approval is needed for large projects of, say, half a million dollars or more.
c) By degree of dependence
Positive dependence
Negative dependence
Statistical independence.
Conventional cash flow: only one change in the cash flow sign
Non-conventional cash flows: more than one change in the cash flow sign,
I) accepting or
II) rejecting
Recall that the interaction of lenders with borrowers sets an equilibrium rate of interest.
Borrowing is only worthwhile if the return on the loan exceeds the cost of the borrowed
funds. Lending is only worthwhile if the return is at least equal to that which can be obtained
can be used to earn more money. The earlier the money is received, the greater the potential
for increasing wealth. Thus, to forego the use of money, you must get some compensation.
ii) The risk of the capital sum not being repaid. This uncertainty requires a premium as a
hedge against the risk, hence the return must be commensurate with the risk being
undertaken.
iii) Inflation: money may lose its purchasing power over time. The lender must be
compensated for the declining spending/purchasing power of money. If the lender receives no
compensation, he/she will be worse off when the loan is repaid than at the time of lending the
money.
Future value (FV) is the value in dollars at some point in the future of one or more
investments.
FV consists of:
FVn = Vo (l + r)n
where
Vo is the initial sum invested
Thus we can compute the future value of what V o will accumulate to in n years when it is
Capital expenditures represent the growing edge of a business. Capital expenditures have
Capital budgeting is a most important issue in corporate finance. How a firm finances
its investments (the capital structure decision) and how it manages its short-term operations
are definitely issues of concern but how it allocates its capital (the capital budgeting decision)
really reflects its strategy and its business. That is why the process of capital budgeting is also
Most firms have numerous investment opportunities before them. Some are valuable
while others are not. The essence of financial management is to identify which are which.
DEFINITION OF CAPITAL BUDGETING:
Capital Budget may be defined as ”the firm’s decision to invest its current funds most
efficiently in the long-term assets in anticipation of an expected flow of benefits over a series
of years. Therefore it involves a current outlay or series of outlay of cash resources in return
for an anticipated flow of future benefits. The long-term assets are those, which affect the
firm’s operations beyond the one year period. The firm’s investment decisions would
assets.
IMPORTANCE
Capital budgeting decisions are most crucial and critical business decision and are
absolutely necessary that the firm should be carefully plan its investment program
so that it may get the finances at the right time and they are put to most profitable
use.
b. LONG-TERM IMPLICATION
The firm will feel the effect of capital budgeting decisions over a long period,
and therefore they have a decisive influence on the rate and direction of the
c. IRREVERSIBLE DECISION:
In most cases these decisions are irreversible this is because it is very difficult
to find a market for the capital assets. The only alternative will be to scrap the
capital assets so purchase and sell them at substantial loss in the event of the
d. FUTURE EVENTS:
are uncertain. It is really a difficult task to estimate the probable future event, the
e. IDENTIFY OPPORTUNITIES
as a company. The first step in the capital budgeting process is identifying which
opportunities are available to you at the time. Before you can make a decision he
f. ASSESS OPPORTUNITIES
Once you have identified the possible opportunities for your business, the
next step in the process is to assess each opportunity individually. You to compare
each opportunity against your vision for the company and the mission statement.
Look at the values of each opportunity and see if they match with your own
values. Many of the potential opportunities can be eliminated in the step before
you can get into the financial information. You want only pursue opportunities that
Another vital part of the capital budgeting process is cash flow assessment.
When looking at a new project, you to come up with a cash flow plan for it. You
need to estimate the amount of cash that will take to complete the project and how
much cash it will require going forward. This often requires the consultation of
several different experts. For example, if you are considering starting a new plant
for your business, you will need to consult with an architect and possibly a builder
to determine how much it would cost. If building is not your expertise, do not rely
The second part of the cash flow assessment process helps you determine
how much money are project could bring in. When calculating these numbers do
not ever use the best case scenario. Use numbers that are more realistic for your
assessment. This part of the process helps you determine whether the project is
viable or not.
h. MAKING DECISIONS
decisions that are smart for your business. Taking the necessary steps to evaluate
each opportunity can help you avoid disastrous consequences for your business. If
these steps are not taken, you can take on a project that does not bring any value to
your company. Ultimately, it could prove to be the last mistake your company
the very nature of the capital expenditure such as heavy investment in capital
complicates of the decision making. Its importance can be illustrated well on the
the life time of the assets purchased. It shows the possibility of expanding the
production facilities to cover additional sales shown in the sales budget. Any
failure to make the sales forecast accurately would result in over investment or
under investment in fixed assets and any erroneous forecast of asset needs may
the replacement of assets which are wearing out or are in danger of becoming
supply of capital goods. The demand of capital goods does not arise until sales
the other hand, supply of capital goods with their availability is one of the
by making determined efforts to ensure their availability at the right time. Thus it
protects the interests of the shareholders and of the enterprise because it avoids
The following other factors can also be considered for its significance:-
modern equipment.
(c) The feasibility of replacing manual work by machinery may be seen from the
capital forecast be comparing the manual cost and the capital cost.
(d) The capital cost of improving working conditions or safety can be obtained
(e) It facilitates the management in making of the long-term plans an assists in the
(f) It studies the impact of capital investment on the revenue expenditure of the
Capital rationing
Firms may have to choose among profitable investment opportunities because of the limited
financial resources. In this article we shall discuss the methods of solving the capital
budgeting problems under capital rationing. We shall show that the net present value is the
most valid section rule even under the capital rationing situations.
A firm should accept all investment projects with positive net present value in order to
maximize the wealth of shareholders. The net present value rule tells us to spend funds in the
projects until the net present value of the last project is zero.
Capital rationing refers to a situation where the firm is constrained for external, or self
imposed, reasons to obtain necessary funds to invest in all investment projects with positive
net present value. Under capital rationing, the management has not simply to determine the
profitable investment opportunities, but it has also to decide to obtain that combination of the
profitable projects which yields highest net present value within the available funds
Capital rationing may rise due to external factors or internal constraints imposed by the
External capital rationing mainly occurs on account of the imperfections in capital markets.
attitude that hamper the free flow of capital. The net present value (NPV) rule will not work
if shareholders do not have access to the capital markets. Imperfections in capital markets
alone do not invalidate use of the net present value (NPV) rule. In reality, we will have very
Internal capital rationing is caused by self imposed restrictions by the management. Various
types of constraints may be imposed. For example, it may be decide not to obtain additional
funds by incurring debt. This may be a part of the firm’s conservative financial policy.
Management may fix an arbitrary limit to the amount of funds to be invested by the divisional
rate of return higher than the cost of capital. Whatever, may be the type of restrictions, the
implication is that some of the profitable projects will have to be forgone because of the lack
of funds. However, the net present value (NPV) rule will work since shareholders can borrow
forcing them to carefully assess their investment opportunities and set priorities is
to put upper limits to their capital expenditures. Similarly, a company may put
investment limits if it finds itself incapable of coping with the strains and
because of the limited financial resources. In this article we shall discuss the
shall show that the net present value (NPV) is the most valid section rule even
A firm should accept all investment projects with positive net present value (NPV)
in order to maximize the wealth of shareholders. The net present value (NPV) rule
tells us to spend funds in the projects until the net present value (NPV) of the last
project is zero.
Capital rationing refers to a situation where the firm is constrained for external, or
self imposed, reasons to obtain necessary funds to invest in all investment projects
with positive net present value (NPV). Under capital rationing, the management
has not simply to determine the profitable investment opportunities, but it has also
to decide to obtain that combination of the profitable projects which yields highest
Capital Budgeting is a complex process, which may be divided into the following
phases
They are :
Decision making.
Implementation.
Performance review.
serves as the basis for setting production targets. This information in turn is helpful in
Generally most of the proposals before they reach capital budgeting committee or
somebody who assembles them are routed through several persons. The purpose of
routing proposal through several persons is primarily to ensure that the proposal is
viewed from different angles. It also helps in creating for bringing about co-ordination
of interrelated activities.
Decision Making :
making. Under this system the executives are vested with the power to act the
investment proposals up certain limits. Investment requiring higher outlays needs the
lower level, are often covered by a blanker appropriation for expeditions actions.
Project requiring larger outlays are included in the capital budget after necessary
The purpose of this check is mainly to ensure that the funds position of the firm is
Implementation :
consuming and risk task. Delay in implementation, which is common can lead to
substantial cost overruns. For expeditions implementations at a reasonable cost the
Performance review :
PROJECT CLASSIFICATION :
Project analysis entails time and effort. The costs incurred in this exercise must be
justified by the benefits from it. Certain projects, given their complexity and magnitude,
may warrant a detailed analysis; others may call for a relatively simple analysis. Hence
firms normally classify projects in to different categories. Each category is then analyzed
somewhat differently.
While the system of classification may vary from one firm to another, the following
MANDATORY INVESTMENTS :
equipment, crèche in factory premises, and so on. These are often non-revenue producing
investments. In analyzing such investments, the focus is mainly on finding the most cost-
REPLACEMENT PROJECTS :
equipments, even though they may be in a serviceable condition. The objective of such
investments is to reduce costs (of labor, raw material and power), increase yield, and
EXPANSION PROJECTS :
These investments are meant to increase capacity and/or widen the distribution
network. Such investments call for an explicit forecast of growth. Since this can be risky
and complex, expansion projects normally warrant more careful analysis than replacement
projects. Decisions relating to such projects are taken by the top management.
DIVERSIFICATION PROJECTS :
These investments are aimed at producing new producing new products or services
or entering into entirely new geographical areas. Often diversification projects entail
substantial risks, involve large outlays, and require considerable managerial effort and
attention. Given their strategic importance, such projects call for a very thorough
evaluation, both qualitative and quantitative. Further they involve board of directors.
most Indian companies. But now the companies are now allocating more funds to R&D
numerous uncertainties and typically involve sequential decision making. So, such projects
are decided on the basis of managerial judgment. Firm which rely more on quantitative
methods use decision tree analysis and option analysis to evaluate R&D projects.
MISCELLANEOUS PROJECTS :
This is a catch-all category that includes items like interior decoration, recreational
facilities, executive aircrafts, landscaped gardens, and so on. There is an standard approach
for evaluating these projects projects and decisions regarding them are based on personal
INVESTMENT CRITERIA :
1. Discounting criteria
2. Non-discounting criteria
1. Discounting criteria
2. Non-discounting criteria
a. Payback period
A wide range of criteria has been suggested to judge the worth whileness of
investment projects. The important investment criteria, classified into two broad categories
The distinctive feature of capital budgeting in public sector undertakings is that the
boards of these enterprises are empowered to sanction capital expenditures with in certain
limits which are reviewed time to time. Capital expenditures involving larger outlay have to
The Public Investment Board (PIB) set up in 1972 presently plays a pivotal role in
the appraisal and sanction of capital projects of public enterprises. The PIB is
headed by the secretary, Expenditure. Its other members are the secretaries to he
For almost 15 years since the commencement of the planned era, no guidelines
any feasibility report and detailed project report. In 1966,for the first time, the
this manual:
1. Suggested the use of various criteria like return on investment , payback period,
net present value, and internal rate of return for measuring profitability ;
2 . Laid stress on the use of net present value to be calculated at a discount rate of
12 percent, with a mention that different discount rates may have to be used for
different projects;
3. Emphasized the need for analysis of risk, though it did not suggest any
4. Underscored the need for assessing the ‘national economic benefits ‘from the
project.
feasibility reports for industrial projects was issued in 1975 by the Project
2. Preliminary analysis
3. Project description
4. Market analysis
7. Financial analysis
In the Guidelines emphasis has been placed on the internal rate of return method
as against the net present value method that was recommended by the Manual
issued in 1996.
practice.
c. Profitability index
a. Payback period
The Net present value method is the classic economic method of evaluating
recognizes the time value of money. It correctly postulates that cash flows arising at
different time periods differ in value and are comparable only when their equivalent
and the factors by which we have multiplied the cash flows are known as discount
PVF=1/(1+r)n
Where ‘r’ is the rate of interest per annum and ‘n’ is the number of years over which we are
discounting.
n
t=1 (1+r)t
r= discount rate
The net present value has certain properties that make it a very attractive decision
criterion.
Because present values are measured in today’s rupees they can be added. This means that if
you have two projects a and b, the net present value of the combined investment is
The net present value of a package of projects is simply the.sum of the net present values of
The value of a firm can be expressed as sum of the present value of the projects in
expected future cash flows, the value of the firm increases by that amount. Likewise,
when a firm undertakes a new project that has a negative NPV, the value of the firm
divested affects the value of the firm. If the price is greater/lesser than the present
value of the anticipated cash flows of the project the value of the firm will
firm depends on whether its NPV is in line with expectation. Example Hindustan
Lever Limited, is expected to take on high positive NPV projects and this expectation
is reflected in its value. Even if the new projects taken on by Hindustan Lever
Limited have positive NPV, the value of the firm may drop if the NPV is not in line
the expected cash flows from the acquisition it is like taking on a negative NPV
The NPV rule assumes that the intermediate cash flows of a project-that is, cash flows that
occur between the initiation and termination of the project- are reinvested at a rate of return
ACCEPTANCE RULE:
The acceptance rule under the NPV method is “accept the proposal if its NPV is positive and
reject the proposal if the NPV is negative “. The positive NPV of a proposal signifies that the
present worth of its in flows is more than the present worth of its outflows. Thus the NPV
represents the excess of benefits over the cost in real term. The NPV therefore, is the change
expected in the wealth of the shareholder because of the acceptance of a particular proposal
in the wealth of the shareholder because of the acceptance of a particular proposal in the case
of ranking of mutually exclusive proposals, the proposals with the highest positive NPV is
given the top priority and the proposals with the lowest priority. The proposals with the
MERITS:
The future discount rate normally varies due to long span. They can be applied in calculating
This method of project selecting is instrumental in achieving the financial objectives i.e; the
DEMERITS:
capital is the basis of determining the desired rate. The calculation of cost of capital is
itself complicated .Moreover, desired rate of return will vary from year to year.
This method is an absolutely measure .When two projects having different effective
lives are being compared. Normally, the project with shorter economic life is
preferred.
The internal rate of return (IRR) of a project is the discount rate which makes its NPV equal
to zero. Internal rate of return is a percentage discount rate used in capital investment appraisal, which
bring the cost of a project and its future cash inflows into equality. It is the rate of return which
equates the present value of anticipation net cash flows with the initial outlays. The IRR is defined as
the rate which the net present value is zero. The test of profitability of unity a project is relationship
Relationship between the internal rate of return of the project and the minimum
ACCEPTANCE RULE:
The accept-or-reject rule, using the IRR method, is to accept the project if its internal
rate of return is higher than the opportunity cost of capital (r>k). ‘k’ is also known as required
rate of return , or the cut-off, or hurdle rate. The project shall be rejected if its internal rate of
return is lower than the opportunity cost of capital (r>k). The decision maker may remain
indifferent if the internal rate of return is equal to the opportunity cost of capital.
MERITS:
can be
This method is particularly useful for the selection of mutually exclusive
projects.
The method of project selection is instrumental in achieving the financial
DEMERITS:
PROFITABILITY INDEX :
The profitability index is also called benefit cost ratio. The profitability index is the
present value of anticipated net future cash flows divided by the initial outlay. The only
difference between the net present value method and profitability index method is that when
using the NPV technique, the initial outlay is deducted form the present value of anticipated
cash flows, whereas with profitability index approach, the initial cash outlay is used as
divisor.
PAYBACK PERIOD :
The payback period is usually expressed in years it takes the cash inflow from a
capital investment project to equal to cash outflow. When deciding between two and more
competing projects the usual decision is to accept the one with the shortest payback. This
method recognizes the recovery of the original capital invested in a project. The basic
element of this method is a calculation of recovery time, by accumulation of the cash inflows
year by year until the cash inflows equal to the amount of the original investment. In simple
terms, it can be defined as the number of years required to recover the cost of the investment.
MERITS :
DEMERITS :
employed. This method employs the normal accounting technique to measure the increase in
profit expected to result from an investment by expressing the net accounting profit arising
ACCEPTANCE RULE :
As an accept – or – reject criterion, this method will accept all those projects which
have ARR less than the minimum rate. This method would rank a project as number one if it
has highest ARR and lowest rank would be assigned to the project with lowest ARR.
MERITS :
information.
2. It is not concerned with the cash flows but rather based upon profits, which are
The capital budgeting in BHEL is based on capital budget manual, which covers the
following aspects.
Feasibility report
3. Replacement guidelines
4. Government guidelines
Capital funds budget is what enables a program of action on all capital expenditure
items to be grouped in one consolidated document. This outlines the proposal for creation of
new assets addition for increase in production, diversification and reduction of coast ensures
how these ventures will be financed over a given period, it includes five years plan, annual
plan exercise and non-plan budget exercise, which are described below.
The government has been formulating five years plans for the economic growth.
Inline with this policy, BHEL also formulates the five years plans of the company and
submits to the government for inclusion in every five years plan of the county.
Five year plan exercise normally starts from the third year of the previous five years plan.
The schemes included in the plan approved by planning commission are prioritized for
implementation depending on the need resources etc., these schemes should be inline with
The capital funds budget annual plan is meant for making provisions for cash
expenditure of capital nature including the foreign exchange component where ever
necessary.
All expenditure on capital equipment like cranes, material heading equipment, special
tools and plant equipment, which are required at project sites for erection and commissioning
Feasibility Report :
feasibility report is required to be formulated for approval of the competent authority. The
Implementation plan.
Once the capital budget has been approved it has to be ensuring the targets laid down
regarding physical and financial progress adhered to. Any short fail in this regard is likely in
delay the completion of project and ultimately affects production program. Therefore each
project is continuously monitored at divisional level both physically and financially. For
major projects consisting more than five cores. Projects review committees are required to be
consisted having representatives from project unit and corporate office. Those committees
should met periodically to review the progress and recommenced, taking corrective action.
Replacement Guidelines :
Substantial investments have been made in the plant and machinery in all the BHEL
manufacturing divisions. Though modernization and expansion programs, new machine tools
have been added from time to time. New projects are underway increasing investments in
Replacement of plant and machinery are needed for the following reasons.
Technological obsolescence.
Accident.
Government Guidelines :
Reference has been made in various government manual containing guidelines / policies, which are
relevant for the capital budgeting exercise within BHEL and with other government.
The capital budgeting in BHEL has in four phase, which can be explained as
follows….
First Phase :
This phase involve the different aspects in approval of the proposals put forth but the
R&D department. This letter contains the specification of items in the case of
replacement the need for the replacement is to be clearly specified along with the cost
estimates.
2. This proposal is forward to finance department, industrial engineering and
proposal.
5. Maintenance and service department consent.
Second Phase :
1. The department which has sent the proposal gives the 100% specifications to the
purchase department.
2. The purchase department lists the supplies and quotations are invited.
3. After the quotations are received the proposal with the lowest cost is opted for, ask
Third Phase :
1. A representative of the supplier gives the demonstration with respect to the technical
Forth Phase :
1. If the machines worn out or obsolete, it is disposed off the replacement.
PROFILE OF ORGANIZATION
INDUSTRY PROFILE
BHARATH HEAVY ELECTRICAL LIMITED
The vital role played by the BHEL today in the country is the mark of its continuous
efforts to improve the service in the nation by consultancy, manufacturing and offering
This success story of BHEL however goes back to 1956 when its first plant was set up
TIRUCHINAPALLI follow. These plants have been the core of BHEL’s efforts to grow and
diversify and become one of the most integrated power and industrial equipment
manufacturers in the world. The company now has 14 manufacturing units, 8 service centers
and 4 power sector regional centers, besides project sites spread all over India and abroad.
BHEL manufactures over 180 products under 30 major product groups and meets the
needs of core sector like power, industry, transmission, defense, telecommunications, oil
business etc. Its products have established an enviable reputation for high quality and
reliability. This is due to the emphasis placed all along on design, engineering and
technologies developed in its own R&D centers. BHEL caters to the needs of different sectors
by designing and manufacturing according to the need of its clients in power sector.
INDUSTRIAL SECTOR :
BHEL contributes major capital equipment and systems like captive power plants
Capacitors
Compressors
Gas turbines
Steam generators
Steam turbines
TRANSMISSION SECTOR:
BHEL also produces high voltage transformer an SF6 switch gears up to 400KV.
India’s first indigenous 145KV gas insulated switch gear was developed and commercialized
Capacitors
Dry-type transformers
Energy meters
Insulators
Switch gears
OIL SECTOR:
BHEL has been supplying onshore drilling rigs, X-MAS tree valves and wellheads up
to a rating of 1000 PSI to ONGC and OIL India. It can also supply subsea wellheads, super
TRANSPORTATION SECTOR:
Most of the trains in the Indian railways are equipped with BHEL’s traction and
traction control equipment. India’s first underground metro at Calcutta runs on drives and
controls supplied by BHEL. The company also manufactures broad gauge 3900HP AC
locomotives, 5000/4600HP AC/DC locomotives. BHEL has acquired the technology for 3
Solar lanterns
Solar photovoltaic’s
TELECOMMUNICATION:
BHEL also manufactures MAX-XL systems based on C DOT technology and plans to make
BHEL has the capability to design, manufacture and commission steam turbines of up to 100
MW rating for steam parameters ranging from 30 bars to 300 bars pressure and initial &
reheat temperatures up to 600 0 C. Steam Germany covering the whole range of requirements
for Drive, Cogeneration, Captive Power, Utility and Combined Cycle applications BHEL
STEAM TURBINES
BHEL presently has manufactured Turbo-Generators of ratings upto 560 MW and is in the
process of going upto 660 MW. It has also the capability to take up the manufacture of ratings
up to 1000 MW suitable for thermal power generation, gas based and combined cycle power
generation as-well-as for diverse industrial applications like Paper, Sugar, Cement,
Petrochemical, Fertilizers, Rayon Industries, etc, Based on proven designs and know-how
backed by over three decades of experience and accreditation of ISO 9001, the Turbo-
checks at each stage has helped BHEL, to secure prestigious global orders in the recent past
from Malaysia, Malta, Cyprus, Oman Iraq, Bangladesh, Sri Lanka and Saudi Arabia.
The successful completion of the various export projects in a record time is a testimony of
BHEL’s performance.
PUMPS
BHEL started manufacture of Pumps during the mid-sixties under technical collaboration
with M/s Sigma Lutin, Czechoslovakia, to meet the requirements of 60 MW, 110 MW and
210 MW thermal power stations, the scope of which was widened to meet the requirements
of power plants up to 500 MW, with the help of another collaboration with M/s Weir Pumps,
U.K. BHEL has also made some in-house product development to gain spin off benefits from
the above collaboration as well as to develop new pumps to meet the requirements of
Combined Cycle Power plants.BHEL has undertaken a design up-gradation and retrofit of the
existing 200 KHI Boiler Feed pumps Inside Stators with energy efficient hydraulics and
cartridge design internals under technical tie-up with M/s Sulzer Pumps, Germany, and
recommended the upgraded 200 KHI-S Boiler Feed pump to all customers of 110 MW & 210
MW Power Stations operating with the earlier Czech design for increase of pump availability
PULVERIZERS
BHEL manufactures mills for pulverized coal fired Thermal and Industrial boilers, BHEL till
date has manufactured over 1200 bowl mills and over 100 tube mills, operating in different
BHEL has absorbed technology from world leader M/s. Combustion Engineering USA for
bowl mills. The specific range – 583 XRP/XRS to 1043 XRP covers the-state-of-the-art mills
required for the India market and are supplied as Industrial boilers as-well-as Utility boilers
OIL RIGS
BHEL started manufactures oil field equipment in collaboration with M/s UA Steel Engineers
and Consultants USA (National Oil Well), M/s Skytop Brewster USA, M/s Branham
Industries USA, M/s IRI International, USA. After successful absorption of technology,
BHEL now has the capability to manufacture conventional deep drilling rigs up to a depth of
9000 meters, mobile rigs to a depth of 3000 meters and well servicing rigs to a well depth of
6100 meters.
SWITCH GEARS :
switch gears catering to various applications like power station auxiliaries, power
distribution process industries, rural electrification, open cast mines, electric traction and
collaboration with ASIA, Sweden and to keep pace with the technological advancement
BHEL a pioneer in the field of design manufacturing and installation of solar water
heating systems in the country till date installed systems covering more than 74000m2 of
absorber area of capacity over 37lakh liters per day. The largest Solar water heating system is
In the BHEL make solar collector, stabilize efficiency values up to 65% is assured
potential areas.
VALUES:
* Team playing.
*Zeal to excel.
OBJECTIVES:
GROWTH:
To ensure a steady growth by enhancing the competitive edge of BHEL in existing business,
new areas and international operation so as to fulfill national expectations from BHEL
PROFITABILITY:
Confidence by providing increased value for this money through international standards of
TECHNOLOGY:
To achieve technology excellence in operations by development of indigenous technologies
to and efficient absorption and adaptation of imported technologies to suit business needs
IMAGE:
SWOT ANALYSIS:
STRENGTHS:
*Excess manpower.
OPPORTUNITIES:
THREATS:
*Poor infrastructure.
*Dumping of goods.
KEY FACTORS:
*More than 200 personal computers with data exchange facilities with mainframe
computer
WELFARE:
About 30km away from the city centre on the fringes of the historical city of the
qutub shah kings lies the hub of the Ramachandrapuram unit of Bharat heavy electrical
limited, Hyderabad made a beginning in 1965 with the idea of "Bringing power to the
people".
The success story of B.H.E.L, Ramachandrapuram has its roots in its Commitments
to the nation's economic growth, towards which it has set high standard for itself. Striving
hard to take part in the building of a Strong and self reliant India.
110MW capacity steam turbines, generators and auxiliaries for the power and the industry
other areas absorbing latest technologies from world leaders to meet Emerging challenges
and the needs of the country. Steam turbines , Gas Turbines Turbo generators Compressors,
Pumps, Switch Gears, Oil Field Equipment, pulverizing mills, Heat exchangers including a
INTERNATIONAL OPERATIONS:
BHEL has exported its equipment and services to over 50 countries. In Malaysia,
BHEL has supplied 80% of the Boilers besides several hydro sets and gas turbines. BHEL
equipments are in operation in Malta, Cyprus, Saudi Arabia, Oman, Egypt, Cyprus, Libya,
Greece, Bangladesh, Srilanka, Iraq, and Australia, etc. BHEL exports turnkey power projects
of thermal, hydro, abd gas based types , substation projects, rehabilitation projects, besides a
wide variety of products like insulators, transformers, valves motors, traction generators and
technology. BHEL R&D efforts have produced several new products. Some of the recent
successful R&D products are automated storage retrieval systems, automated guided vehicles
The greatest strength of BHEL is its highly skilled and committed people. Every
employee is given equal opportunity to develop himself and improve his position.
Continuous training and retaining, a positive work culture and participative style of
management have led to the development of a motivated work force and enhanced
ORGANISATION STRUCTURE
corporate functions, Business sectors and Operating units under the control of Chairman &
Directors individually deal with corporate functions with the help of Executives
The highly trained and motivated manpower of B.H.E.L is its biggest asset.
6358 out of this, Executive’s are 1587, supervision are 1200 and the Non-supervisors are
3471 this work force is an unending reservoir of talent, which alone can transform the
OBJECTIVES OF B.H.E.L:
Systems and services to serve the National & International Markets in the field of energy.
The areas of interest would be conversion, Transmission and Utilization & Market
leadership.
It is segregated into different sub groups reporting to Additional General Manager/ Finance.
Product Wing is divided into various products like TCGT, EM, HEF, PUMPS, SG,
PULV, F&S, WORKS & MISC, ED&ST, BUDGET & MONITORING ETC.
Each product groups deals with all types of finance and Accounting relating to that
product wise concurrence to proposals for Procurement and incurring expenditure, material
accounting, cost accounting sales accounting, budget preparation, and other miscellaneous
Centralized Wing deal with Establishment matters pertaining to all employees of the
unit, Cash management dealing with total cash management of the unit, Books section deal
with preparation of annual accounts and Taxation matters, Export incentive section deal
with all export incentive matters, stock verification and Productivity groups related to those
subjects.
In addition, there is an internal audit, which audits all the functions of the unit and
The flow of authority and responsibility has definite forms of hierarchy ranging from
BHEL today enjoys national and international presence and it is ranked among the top
The first plant of what is today known as BHEL was established nearly 40 years ago in
1956 at Bhopal and was the genesis of the Heavy electrical equipment industry in India.
Jhansi, Chennai, Varanasi and Gurgoan in addition to a number of service division all
B.H.E.L’s wide range of Products Caters to the need of Power generation for
Thermal, Hydro and Nuclear power station, Transmission, Transportation, Industry, Oil
B.H.E.L’s collaboration with world leader’s help in keeping it abreast of the Latest
technologies in the field, BHEL is well known for reaching power to the people.
But the cornerstone of its philosophy is anchored on its endeavor to offer quality
The BHEL has emerged as an industrial empire that has carved a niche as a major
The operation of BHEL is organized around business sectors to provide a strong Market
orientation.
The company has been chosen as one of the “NAVARATNA” public sector Enterprise,
To become future global players, a strong work force of 53,000 dedicated personnel