“A STUDY ON CAPITAL BUDGETING IN

HERITAGE FOODS INIDA LTD., KASIPENTLA”

Project Synopsis submitted in partial fulfillment of the requirement for the

Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Of
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY,
ANANTHAPUR

By
Name: L. JAGAPATHI

Reg. No. 17AK1E0029

Under the guidance of

Dr. N. CHANDRIKA, M.B.A., Ph.D.,

Department of MBA

DEPARTMENT OF MANAGEMENT STUDIES

ANNAMACHARYA INSTITUTE OF TECHNOLOGY & SCIENCES
TIRUPATI-517520
MBA 2017-2019

STUDENT SIGNATURE: GUDIE SIGNATURE:

DATE:

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 1.INTRODUCTION:
The term capital budgeting includes two different words
 1. Capital
 2. Budgeting Capital
 Capital means amount brought into the business to do the business.
Budget:
 Budget is a financial plan prepared for specific period in future.
Budgeting:
 All steps involved in preparing budgets is named as budgeting or simple words
building budgets is named as budgets.
CAPITAL BUDGETING :

It is a process of investing funds. Current funds which are long term activities
with view to earn more profits .Over a series of years.
budgeting means planning for capital assets. The investment decision means a decision as to
whether (or) not money should be invested in long term projects. Such projects may include:
 Setting up a factory
 Installing a new machinery

2. INDUSTRY PROFILE
 India with. 185 million cows and 154 million buffaloes, has the largest population of
cattle in the world. Total cattle population in the country as on October 2009 stood at
339 million .more than 50% of buffaloes and 20% of cattle in the world are found in
India and most of these are milk cows and milk buffaloes . 

 INDIA: WORLDS LARGEST MILK PRODUCER

 India has become the world's no.1 milk producing country. United States where the
milk production is anticipated to grow only marginally at 71 million tones, occupied the top
slot till 1997. In the year 1997, India's milk production was on par with the U.S at" 71 million
tones.
 MARKET SIZE AND GROWTH:
 Market size for milk (sold in loss/packaged from)is estimated to be 36 million metric
tones valued at Rs.470 billion; the market is currently growing at round 4% per annum in

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volume terms. The milk surplus states n fndia are Uttar Pradesh, Punjab, Haryana, Rajas than,
Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The manufacturing of
milk products in concentrated in these milk surplus states. The top 6 states viz.,

3. COMPANY PROFILE
The Heritage Groups, founded in the year 1992 by Mr. Nara Chandrababu Naidu, is one of
the fastest growing public Companies in India, with five-business division viz.,Dairy, Retail,
Agri, Bakery and Renewable Energy Under its flagship Company Heritage Foods Limited
(Formerly Known as Heritage Food (India) Limited)
The annual turnover of Heritage Foods crossed Rs.2380.58 crores in financial year 2015-16.
one infrastructure subsidiary – Heritage Infra Developers Limited and other
associate companies viz., Heritage Finlease Limited, Heritage International Limited and
Heritage Agro Merine Private Limited. The annual turnover of Heritage Foods crossed Rs
347 crore in 2015–16.

Presently, Heritage’s milk products have market presence in Andhra Pradesh,

Karnataka, Kerala, Tamil Nadu and Maharastra and its retail stores across Bangalore,Chennai
and Hyderabad. Integrated agri operations are in Chittoor and Medak Districts and these are
backbone to retail operations.

In the year 1994, HFIL floated a public issue to raise resources, which was
oversubscribed 54 times and its shares are listed under B1 Category on BSE and NSE.
Heritage Foods has its headquarters in Hyderabad, Andhra Pradesh, India.
4. REVIEW OF LITERATURE:

MEANING OF CAPITALBUDGETING

'The capital budget is essentially a list of what management believes to be worthwhile

projects for the acquisition of new assets together with the estimated cost of each project."
“Capital Budgeting is a long term planning for making and financing proposed capital
outlays.”
IMPORTANCE OF CAPITAL BUDGETING:
The importance of Capital Budgeting can be understood from the fact that
an unsound investment decision may prove to be fatal to the very existence of the

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organization.
The importance of Capital budgeting arises mainly due to the following:
1 .Large Investment:
Capital Budgeting decision, generally involves large investment of fund. But the
funds available with the firm are the demand for fund for exceeds resources. Hence, it is very
important for a firm to plan and control capital expenditure.
CAPITAL BUDGETING PROCESS

The Capital budgeting process involves generation of investment proposals,

Estimation of cash flows for the proposals, evaluation of cash flows, selection of
projects based on acceptance criterion, and finally the continual revaluation of
investment after their acceptance. The steps involved in capital budgeting process are
as follows.
1. Project generation
2. Project evaluation
3. Project selection
4. Project execution
SIGNIFICANE AND PRESENTATION

Capital budget decisions are among the most crucial business^ decision. A
number of factors are responsible for capital budget decisions. Care must be taken
while making capital budget decisions influence all the departments of the company
such as production,

5. Need For the Study

It is a significant to emphasize that expenditures and its benefits of an

investment should be measured in cash. In the investment analysis it is cash flow
which is important not the accounting profit. It may also be pointed out that
investment decisions affect the firm's value. The firms value will increase it
investments are profitable and to the shareholders wealth. That investment should be
evaluated on the basis of criterion which is compatible with the objective of the

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 shareholders wealth maximization. An investment will add to the shareholders wealth.
If it yields benefits in a excess of the minimum benefits as for the opportunity part of
capital.

6. Scope of the Study

 1. The scope of the present study includes the following. 
 Understanding the procedure of Heritage Milk Dairy Pvt., Ltd., Hyderabad
 Evaluating an investment proposal of setting up facility of Heritage Milk Dairy Pvt.,
Ltd.,
 Highlighting the necessity of current of assets and current liabilities.
 Explain the principles of the current assets, investment and financing.
 Suggest the need of establishing a sound credit policy.
7. Objectives of study:
The study of the capital budgeting in Heritage DAIRY is being attempted with the help
of the following objectives. .
 The main objective of the project is to evaluating the proposed projects undertaken by
Heritage DAIRY by applying the capital budgeting.
 To promote understanding across diverse communities of the communal value of
heritage
 To develop, maintain and support a wide network of contacts and volunteers
dedicated to the preservation of cultural heritage through effective practices.
 To provide instructive material to develop basic skills in computers use, management,
bookkeeping and English.
 To assist in the preparation for the Post-conflict situation.
8. Research methodology:
SOURCES OF DATA COLLECTION:
PRIMARY DATA:

Primary data comprises of information obtained during discussions with the officers
and staff in the financial department.

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 SECONDARY DATA:
Secondary data comprises of information obtained from ratio analysis and ratio
analysis estimates of other financial statements files and other important documents
maintained by the organization are also the helpful.

9.Limitations of study:

The following are the limitations of the study;

 The study was conducted with the data available and analysis was made accordingly.

 Detailed analysis could not be carried for the project work because of the limited time
span.

 Since the study is based on the financial data that are obtained from the company's
financial statements, the limitations of financial statements shall be equally
applicable.
10 a. Findings, suggestions, conclusion:

 The project is accepted when pay back is less than 5 years which is standard pay back
set by the management. The project gives less payback is accepted.

 As per the management the minimum rate of return expected is 10%. The project
ARR greater than 40% greater than 40% is accepted.

 The net income of the project is discounted at the minimum required rate return which
is grater then – 8% and NPV is positive so the project is accepted.

 The capital invested is getting more return which is greater than 10%

 The project showing Profitability Index is more than one. So the project is accepted.

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 b. suggestions:

 It is concluded that the project is viable and profitable as the ARR is getting more
than 40%
 The pay back indicates that the investment is fully recovered in short period.
 NPV of the project is considered as better because of its higher net present value.
 The IRR of the project is giving higher rate of return.
 The profitability index is more than the giving value and where projects shows
NPV as positive.
 To offer suggestions to Heritage foods limited to improve its financial
performance

C. Conclusion:

 The budgeting exercise in HERITAGE FOODS Ltd., also covers the long term capital
budgets, including annual planning and provides long term plan for application of internal
resources and debt servicing translated in to the corporate plan.
 The manual recommends the computation of NPV at a cost of capital / discount rate
specified from time to time.
 A single discount rate should not be used for all the capacity budgeting projects.
 The analysis of relevant facts and quantifications of anticipated results and benefits,
risk factors if any, must be clearly brought out.
 Feasibility report of the project is prepared on the cost estimates and generation.

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10. Bibliography:

 Anunual reports from 2013-2018 of Heritage foods dairy pvt .ltd.

 M.Y Khan and P.K. Jain “Finance Management”.3rd Edition Tata McGraw Hill
publishing company Ltd, New Delhi .

 I.M. Pandey “Finance Management”. 9th Edition Vikas publishing House PVT, Ltd.
New Delhi

 Prasana Chandra 2002 “Finance Management” 5thEdition , Tata Mc Graw Hill

publishing company Ltd, New Delhi.

Websites:

www.heritagefoods.com

www.google.com

www.wikipedia.com

WWW.FINANCE.COM

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