Vasavi Project

A Study on Capital Budgeting At
Amararaja Batteries Ltd, Tirupati, Chittoor

Project Report
Submitted to
VIKRAMA SIMHAPURI UNIVERSITY

NELLORE
In the partial fulfillment of the

Requirement for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
By
Ananthaneni vasavi
(Regd.No.200100001014)
Under the Guidance of
Dr.J.VijethaMBA,Ph.D.
Assistant Professor
VIKRAMA SIMHAPURI UNIVERSITY COLLEGE
KAKUTUR - NELLORE-524320 - A.P
2020-2022
DECLARATION
This is bearing Ananthaneni vasavi, Reg. No. 200100001014, a student of MBA in

vikramasimhapuri university nellore, hereby declare that this Project Report entitled “A
Study On Capital Budgeting ” , is a bonafied work done by me in partial fulfillment for the
award of Degree in Master of Business Administration.
I further declare that this project work is a result of my own effort and has not been
submitted to any other University or Institution for the award of any degree diploma/
certificate or published any time before.
Signature of the Student
(A. Vasavi)
Reg.No:200100001014
Date:
Signature of the Guide:

Date:
ACKNOWLEDGEMENT
A Project work at post graduate level is a golden opportunity for learning and self-
development. I consider myself very lucky and honored to have so many wonderful people
lead me through in completion of this project.
I wish to express my indebted gratitude and special thanks to Mr. G.SATISH (CFO),
Amararaja Batteries Ltd at Tirupati, Chittoor" for allowing me to carry out my Project
work at their esteemed organization and to my external guide Mr. Subramanyam (Finance
Manager) for his valuable suggestions and the support extended.
I feel it a great privilege to express my sincere gratitude to project guide Dr. J.

Vijetha, MBA Professor, for her valuable guidance, numerate suggestions, keen interestand
constant support throughout the project.
I offer my deep sense of gratitude to Prof.Suja. S. Nair, Principal, VSU, Nellore for
his moral support and permitting me to do the Project work.
My sincere thanks to Dr. J. vijethaHOD, Department of MBA, vikramasimhapuri

university Nellore, who has initiated and guided all the way for the successful completion of
the project report.
I gratefully acknowledge the management of VikramaSimhapuri University who has

provided excellent faculty, infrastructure to cherish the career advancement.
I would like to thank the Faculty members, parents and friends who are directly or
indirectly involved in the execution of my project.
(A.Vasavi)
Reg.No:200100001014
CHAPTER SCHEME
Chapter CONTENTS PAGE NO.

Scheme
CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT
INTRODUCTION
CHAPTER-1
INDUSTRY PROFILE 1-3
COMPANY PROFILE 4-10
PRODUCT PROFILE 11-15
16-21
CHAPTER-2 REVIEW OF LITERATURE 22-39
NEED FOR THE STUDY 40-41

SCOPE OF THE STUDY 42
CHAPTER-3 OBJECTIVES OF THE STUDY 43
METHODOLOGY 44
LIMITATIONS OF THE STUDY 45
DATA ANALYSIS AND 46-60

CHAPTER-4 INTERPRETATION
FINDINGS 61-62
CHAPTER-5
SUGGESTIONS 63
CONCLUSION 64
ANNEXURE 65-75
BIBILIOGRAPHY 76
A STUDY ON CAPITAL BUDGETING
CHAPTER -1
INTRODUCTION INDUSTRY
PROFILE
COMPANY PROFILE
PRODUCT PROFILE
Page 5
1.2 INDUSTRY PROFILE

Dr. Rama Chandra N. Galla is the Patriarch of an illustrious business family of
Andhra Pradesh, Gallas, who have established a name for themselves by successfully
setting up Amara Raja Batteries. Born in 1938, Dr. Ramachandra Galla is an
Electrical Engineer from S.V. University, Tirupati and has to his credit Masters
degrees in Applied Electronics, Roorkee, India and Systems Sciences, Michigan
StateUniversity,USA.
Dr. Galla started his career as an Electrical Engineer in US Steel orporation,

USA moved on to Sargent & Lundy, USA as a Consulting Engineer for the
Designing of Nuclear & Coal Fired Power Plant. He initiated various projects in
these corporations & mastered the ropes of this competitive business in a very short
time. However, he soon discovered that his natural inclination was serving his
country and as a logical sequel he gravitated towards Chittoor his native place in
India. Dr. Galla laid the foundation of Amara Raja batteries in 1985 in Chittoor.
With his intense zeal and highly focused approach, he propelled Amara Raja
Batteries in the top league of battery companies in India.
In his capacity as the Chairman, Dr. Ramachandra Galla has promoted and
established the following companies from the conceptual stage which are now well
established and profit making
AmaraRaja Batteries Ltd
AmaraRaja Power System Ltd Mangal Precisions Products Ltd AmaraRaja

Electronics Ltd Galla Foods Ltd AmarRaja Infra(P)Ltd Amaron
Batteries(P)Ltd Amara Raja Industrial Services (P) Ltd
Dr Galla's finest hour as a businessman came in 1998 when he was presented BEST
ENTERPRENEUR OF THE YEAR 1998 ” – by Hyderabad
Management Association, Hyderabad. He has been bestowed with honorary doctorate
degrees from Jawaharlal Nehru Technical University in 2008 at Hyderabad & Sri
Venkateswara University in 2007 at Tirupati. He has also been conferred with “THE
Page 6
SPIRIT OF EXCELLENCE” award by Academy of Fine Arts, Tirupati, and various

otherprestigiousawards.He is passionate about a corporate’s responsibility to society as
well as championing eco-friendly business practices.
Dr. Galla has established various charitable trusts like Krishna Devaraya
Educational & cultural association (KECA), Rajanna Trust, Mangamma & Gangul
Naidu Memorial Trust. He is dedicated to rural development and improving the
economic conditions of the farmers in Chittoor District, Andhra Pradesh, India. KECA
which was established in 1975 provides scholarship to the poor and needy students to
pursue their higher education.
While Rajanna Trust that was established in 1999 to construct check dams and
deepening the tanks to improve the ground water levels. MANGAL TRUST was
established in 2003 to provide drinking water facilities, constructing check dams &
providing infrastructure facilities to Petamitta and surroundingvillages.A committed
family man with wife, two children & grand children, he loves spending time with his
family and participating in society development project
Jayadev Galla (Jay) is the Managing Director of Amara Raja Batteries Limited
(ARBL), a leading manufacturer of Advanced Lead Acid batteries for Industrial and
Automotive applications. ARBL is a joint venture between Amara Raja group and
US based Johnson Controls Inc. (JCI). JCI is a USD 35 billion conglomerate and the
global leader in building efficiency, automotive interior experience and automotive
power solutions. The company owns the brand name “Amaron” which is the second
largest selling automotive battery brand in India today.
ARBL is a widely held public limited company listed on the National Stock
Exchange of India Limited and the Bombay Stock Exchange Limited. The gross
revenue for the year ending 31 March 2009 is more than USD 300 mn.
Page 7
Achievements
• Spearheading ARBL’s automotive batteries (Amaron) venture Striking a partnership
with JCI, U.S.A. for the automotive battery business
• Winning the prestigious Ford World Excellence Award in 2004 achieved by meeting
global delivery standards. ARBL is the 3rd supplier from India to be given this award.
Posts and Responsibilities

• Confederation of Indian Industry
o Young Indians National Branding Chair
o Young Indian’s National Immediate Past Chairman
o Young Indians Immediate Past Chairman - District Chapter
o Initiatives
• Amara Raja Group of Companies
o Managing Director, Galla Foods Limited. o Director, Amara Raja

Power Systems Ltd. o Director, Amara Raja Electronics Ltd. o
Director, Mangal Precision Products Ltd. o Director, Amara Infra
(P) Ltd. o Director, Amaron Batteries (P) Ltd.
o Director, Amara Raja Industrial Services (P) Ltd.
• Permanent Trustee of the Rajanna Trust
The Trust was established in 1999 and is dedicated to rural development and to
improve the economic conditions of the farmers in Chittoor District, Andhra Pradesh.
Among other things, Rajanna Trust has executed micro irrigation projects valued to a tune
of 1 million US dollars which has benefited over 2000 agricultural families
• Advisory Member
• wockhardt Foundation
AmaraRaja Electronics Ltd (AREL) is a rapidly growing company in the field of

electronics manufacturing services (EMS), engineering design services (EDS), custom
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magnetic solution (CMS) and consumer electronics.AREL has its manufacturing facility
in Chittor which is strategically located between Bangalore and Chennai. The 4500sq.m
facility is present amidst a lot of greenery with its workforce mostly comprising of
woman.
The current facility is being expanded to about 15,000sq.m to meet the ever increasing
demands of electronics manufacturing services. It has advanced production lines
comprising of FUJI make SMT line. The workforce is constantly trained to newer &
upcoming technologies to be in sync with global threshold levels.
Our Capabilities
We have the expertise of offering impeccable quality batteries, converters and
inverters to our clients. These are fabricated using quality raw material and tested on
different parameters to meet the ISO standards. Our additional capabilities include
the following:
• Printed circuit board assembly
• Custom wire harnessing
• Sheet metal fabrication, robotic welding & powder coating
• Yellow passivation & zinc plating
• Fasteners
• Plastic injection molding

• System integration, testing & product packaging
Benefits
The company is known for offering quality products and reliable solutions to our
clients across the country. The major factors responsible for making us the most
reckoned companies are the following:
• One-stop solution with wide range of services
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• Strategically located between Bangalore & Chennai

• Well connected to national highways &ports
• Practice of lean manufacturing concepts
Manufacturing Facilities
Our company is backed by a state-of-the-art manufacturing unit where our team uses
cutting edge technology to manufacture UPS batteries. The in-house facility enables us
to design the products as per the industry requirements. These are designed and
fabricated using superior quality fibre plastic, chemicals and electrodes, sealants,
glass. Our unit is installed with the latest machines and equipment that enable us to
produce these batteries. The machines installed at the unit include:
• Plastic molding machine
• Lathe machine
• Drilling machine
• Cutting machine
• Coiling machine
• Turning machine
• CNC machine
Our Team
We are backed by a proficient team of experts who leave no stone unturned to
manufacture the batteries. Our hardworking team encompasses engineers, technicians,
quality controllers, research experts. The engineers closely inspect the working of the
machines and the whole manufacturing process. Our quality controllers conduct
stringent tests to ensure that the range is flawless. Further, the research experts keep a
track of the latest developments and incorporate them in our manufacturing process.
Page 10
Keeping in mind the requirements of the clients, our technocrats and experts also offer
power back solutions and associated services to our esteemed clients.
Quality Assurance
Being an ISO 9001:2000 certified company, we have always strived on
offering quality products to our clients across the automobile industry. We focus on
clients and the products offered by us. Our quality controllers believe that an
electronic and electrical product is governed by the quality of the process used to
develop and manufacture it. The batteries, inverters and converters are tested on
various parameters such as:
• Power consumption
• Resistance to withstand high temperature & pressure
• Accurate readings
• Voltage
Research & Development

We aim to continuously upgrade the quality of our batteries, inverters and converters
and develop the range as per the current industry requirements.
Our modern research and development unit works towards developing an innovative
range. The everyday increasing demand of our products has enabled our research
experts to conduct thorough market study and keep track of the latest developments.
Our researchers along with the technocrats keep innovating manufacturing

techniques that are environment friendly. Further, they also maintain a record of the
researched projects for future references
Client Satisfaction
Our company follows corporate policies and follows a streamlined process to
carry forward all functions. The management and the team keep in line with the
Page 11
preferences of the clients and manufacture the products as per their requirements.
Our products are further quality tested on different parameters to ensure that the
products are in compliance with the ISO standards. Owing to the excellent
manufacturing process and quality products, we have been successful in establishing
a vast client base across the automobile industry across the country.
Our products such as SMPS battery charger, DC-DC converters are approved
by major organizations in India like BSNL, A.P. State Electricity Boards including
other private and public undertakings.
The product type is certified by TEC and has been approved for bulk
production clearance, for SMPS systems from BSNL (QE) to supply the systems for
BSNL. Our Auto Battery Chargers were supplied to Ford, Tata Motors, Hyundai,
Maruti, Mahindra & Mahindra and Ashok Leyland.
Page 12
1.4 PRODUCT PROFILE
Products of battery division are:

Amara Raja Batteries product line includes -
Industrial products
• Power Stack
• Quanta
• Brute
Automotive products
• Amaron Hi-life
• Amaron Hi - Way
• Amaron Harvest
• Amaron PRO
• Amaron GO
• Amaron Fresh
• Amaron Optima
• Amaron Shield
Page 13
Black Batteries
Amaron Black, brought to you by Amara Raja Batteries Limited (ARBL), the
largest manufacturers of Stand-by VRLA Industrial Batteries in the Indian Ocean Rim
and Johnson Controls Inc, USA; the global leader in Interior experience, building
efficiency and power solutions. Long life - Thanks to the reformulated Advantage paste
recipe. Maintenance Free - High heat technology, premium silver alloys
Optima Batteries
The Optima range of batteries comes in three kinds: yellow top, blue top and red
top. Each kind has a specific application it is ideal for. The key feature of the Optima
range is its endurance and ability to withstand the rigors of the most extreme of
applications. Optima Yellow Top: Deep cycle batteries for extreme applications Optima
Blue Top: For twice the life of traditional marine and RV
Hi-way Truck Batteries
Page 14
Amaron Hi-way truck batteries, brought to you by Amara Raja Batteries Limited
(ARBL), the largest manufacturers of Stand-by VRLA Industrial Batteries in the Indian
Ocean Rim and Johnson Controls Inc, USA; the global leader in Interior experience,
building efficiency and power solutions. Long life - A robust plate design and a ribbed
container make this the ideal long life battery for application
PRO Hi-life Batteries
Amaron PRO Hi-life batteries are made in a QS 9000, ISO 14001 & TS 16949 certified
plant using world class technology and stringent quality control parameters that make them
last long, really long. Some of the other features that add to making the Amaron PRO so
good: longest life, patented BIC vents for enhanced safety, the highest cranking power and a
completely unnecessary 60-month warranty.
SHIELD BATTERIES
The new Amaron Shield, with an unheard of 24 months warranty. A product of

Amara Raja Batteries Ltd. (ABRL), Amaron Shield is a result of a partnership between
the Amara Raja Group and Johnson Controls Inc, USA, the global leader in Interior
Page 15
experience, building efficiency and power solutions. Long life - The robust plate design
and a ribbed container provide extra strength and improved resista
Customers:
ARBL has prestigious Original Equipment Manufacture (OEM) clients like
Ford, General Motors, Daewoo Motors, Mercedes-Benz, Daimler Chrysler, Maruthi
Udyog Ltd, Premier Auto Ltd and recently acquired a referential supplier alliance with
Ashok Leyland, Hindustan Motors. The company entered the replacement battery
segment with the launch of Amaron Hi-life auto batteries.
Major Competitors:
Exide
Prestolite
Amco
Numeric
American power conversion and
PLANT PROFILE AND PHILOSOPHY
The factory is spread over an area of 150 acres with a current built - up area of
44,000 sq. mts. The present capacity is 5, 75,000 nos.
ARBL got ISO 9001 certificate in the year 1997 as ARBL assured quality
through out the whole cycle from design through production, installation and servicing.
It also depicts the efficiency with which the operation are being carried on as it could
obtain this certificate in such a short span of five years after commencing the operations
in 1992-93.
Conventional Chargers Application(s):
Power process Industries
Page 16
Power Generating Stations

Power Transmission
Oil & Natural gas plants
Sub-stations
Sea-shore platforms
Switch Mode Rectifiers (SMR)
Quality Policy:
Our aim is to achieve customer satisfaction through the collective commitment
of our employees in design, manufacture and marketing of reliable power systems,
batteries, allied products and services.
Culture & Environment:

Amara Raja is putting in place a number of HRD initiatives to foster a spirit of
togetherness and a culture of meritocracy. Involving employees at all levels in building
organizational support plans and in evolving vision for the organization.
Benchmark pollution control measures, energy conservation measures, waste

reduction schemes, massive greenbelt development programs, employee health
monitoring and industrial safety programs have already helped us take our environment
management program further.
Amara Raja has now secured the ISO-14001 certification in the year 2002
(evidence of our concern for the world around us and in which our children will
live).Organizations Network is spread all over the India:
Its Corporate Operations Office is situated at Chennai; other Marketing Offices

& Customer Support Centers are at
North: New Delhi, Chandigarh, Ghaziabad, Lucknow, Jaipur etc.,
West: Mumbai, Pune, Ahmedabad, Indore, Nagpur etc.,
South: Chennai, Bangalore, Hyderabad, Cochin, Coimbater, Vijayawada
Page 17
East: Kolkata, Bhubaneswar, Gauhati, Patna, Ranchi etc.,

Core Values
Work with integrity
Customer satisfaction
Effective employee selection, employee development, motivation &
recognition Improvement & innovation in every element of our business Awards:
"The Spirit of Excellence" - Award by Academy of Fine Arts, Tirupati.
"Best Entrepreneur of the year 1998" - Award by Hyderabad Management

Association, Hyderabad.
"All Round Performance in Industrial Activity including
Promotion/Expansion
Effort" in state for the year 1997-98 - Award by Federation of Andhra

Pradesh
"Industrial Economist Business Excellence Award" - 1999 - Award by the

Industrial Economist, Chennai.
"Excellence Award" - by "Institute of Economic Studies (IES)", New Delhi

on the 29th April 1999 at New Delhi.
"Udyog Rattan Award" - BY Institute of Economic Studies, New Delhi
Page 18
CHAPTER – 2
REVIEW OF LITERATURE
Page 19
REVIEW OF LITERATURE
MEANING OF CAPITAL BUDGETING:
Capital budgeting 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.
Capital budgeting is the process of identifying, analyzing and selecting investment
projects whose returns (cash flows) are expected to extend beyond one year.
From the above definition we may identify the basic features of capital budgeting
viz., potentially large anticipated benefits, relatively a high degree risk, and a relatively
long-time period between the initial outlay and anticipated return.
DEFINITION:
“ Capital budgeting is long term planning for making and financing
proposed capital outlays”
-T. Horn Green
“ A budget is an estimate of future needs arranged according to at an orderly basis

covering some or all the activities of an enterprise for a definite period of time”
-George R. TerryIMPORTANCE OF
THE PROPOSED STUDY:
Capital Budgeting used for long-term planning for proposed capital outlays and
their financing thus it includes both rising of long-term funds well as their utilization.
Capital budgeting is a many-sided activity; it includes searching for new kind more
profitable investment proposals, investment engineering and marketing considerations
predict the consequences of accepting the investment and malting economic analysis to
determine the profit potential of each investment proposal.
Capital budgeting decision is among the most crucial and critical business decisions.
Special care should be taken in making these decisions.
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CLASSIFICATION OF PROJECT:
Capital budgeting involves more time and cost. The cost incurred in this process
must be justifiable by the benefits from it. The capital budgeting process may be less or
more it depends on the type of the project. So firm normally classify the project in to
different categories.
The categorization may differ from one firm to another firm, but the following are
the most importance classification of projects.
• New Projects: New manufacturing concern requires investing in
fixed assets, without which there is no manufacturing process. For example,
establishing of paper manufacturing company requires machinery to produce
paper, which may require investing some cores of rupees. Purchase of long-term
assets requires efficient decision making.
• Expansion projects: Expansion projects generally involve an
increase of existing capacity or addition of new features to the existing product or
widen the distribution of network, these types of investments call for an explicit
forecast of growth. Project expansion generally requires more careful analysis
then the other type of projects. For example a paper manufacturing company
which currently is producing 20000 tons per year. A home appliance product
company that is producing semi automatic washing machine now it is planning to
produce fully automatic machines.
• Diversification Projects: Diversification is spread risk across a
number of assets investments. Here necessary to recollect a nice proverb, “don’t
all eggs in one basket” diversification may concentric or conglomerate. For
example, a company producing toilet soaps is planning to enter into detergent
soaps is known as concentric diversification.
• Conglomerate diversification is entering in to new business area. For
example Reliance marketer of textiles entering in to petroleum business. Often
diversification project entail substantial risks, involves large initial cash outflows,
and require considerable managerial effort and attention. They require more
analysis not only in the form of quantitative but also in qualitative
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• Replacement and modernization projects: In the competitive

world, companies have to improve their operating efficiency and reduce the costs,
for which they required to go for their modernization of existing machines of
replacement of obsolete and inefficient machinery, even though they may be good
condition.
• In other words, replacing or modernization is to reduce the costs,
increase yield and improve quality of the product. For example, cement
manufacturing concern is planning to go for modernization where it changing its
drying process forms semi- automatic drying equipment. Replacement of man
operated machinery by the fully automatic machine
• Research and Development (R&D) Projects: Now- a- day’s
majority of the large firms are setting up their own R&D departments.
Organizations require more funds to set up R&D departments. R&D projects are
characterized by numerous uncertain and typically involve sequential decision
making. For this type of projects discounted cash flow analysis is not applicable,
but these projects are decided on the basis of managerial judgment
• Miscellaneous projects: Apart from the above discussed types of
projects there are some other projects like interior decoration, recreational
facilities, executive aircrafts, landscaped gardens and so on, for evaluation of
these projects there is no standard approach and the decisions with regard to this
project are based on the top management preference and their judgment.
•
IMPORTANCE OF CAPITAL BUGETING DECISIONS:
Capital budgeting decisions are important due to following reasons:
Growth: Fixed assets are earning assets, since they have decisive
influence on the rate of return and direction of firm’s growth. A wrong decision
can affect the other projects, which ready running under profits. In other words
unwanted or unprofitable investments will result in heavy operating costs
More Risky: Investment in long-term assets increases average
profit but it may lead to actuations in its earnings, then firm will become more
risky. Hence, investment decision decides the future of the business concern.
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Huge Investments: Long-term assets involve more initial cash out

flows, which make the firm operative to plan its investment programs very
carefully and make an advance arrangement of funds either from internal source
or external source or from both sources.
Irreversibility: Long-term assets investment decisions are not
easily reversible without much financial loss to the firm; due to difficult to find
out market such used capital items. Hence firm will incur more loss in that type of
assets.
Effect on other Projects: Whenever long-term assets investment it expansion

program its cash flow effect of the projects under consideration, if it is not economically
independent. The effect may be increased in profits or decrease in profits. So, while
taking investment in long term assets decision maker has to check the impact of the
proposed project on other project, if the effect is in term of increases in profits then
financial manager has to accept the project and vice versa.
Difficult decisions: Capital budgeting is very difficult due to (a) The
decision involves based on expected future years cash inflows, (b)
The uncertainty of future and more risk.
KINDS OF CAPITAL BUDGETING:
Capital budgeting decision may (also) be classified in to following way:

Accept- Reject decision: It is a basic decision in capital expenditure decision. A project
is accepted when the return on the project is higher than a predetermined rate of return and
vice versa. This criterion is used for all independent projects.
Independent projects are projects that do not compete with one
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another in such a way that the acceptance one precludes the possibility of
acceptance of another. Under this decision all independent projects that satisfy
the criteria should be implemented
Mutually Exclusive Investments: Mutually exclusive investment
is those that compete with each other in such a way that acceptance of one,
will exclude the acceptance of the other. In other the projects do not depend
upon each other one can be accepted and other can be rejected. For example, a
company has an option of buying a component of outsider or manufacturing
within the firm. In the situation the company may accept the most profitable
decision, based on purchase price or manufacturing cost whichever is less.
Selection of one option leads to the rejection of another.
Capital Rationing Decision: This situation arises, when a firm has
limited funds several profitable investment projects. Capital rationing situation
arises when the various profitable investment proposals compete for limited
funds at time. Company selects a combination of profitable proposals that will
earn higher profits by ranking them in descending order of their profit earning
capacity.
Contingent Investment: Contingent projects are dependent
investment; acceptance of one option needs to undertake one or more other
projects. For example, location of a factory in backwards area, instead
industrial areas urban, it may need to construct roads, quarters to employees,
hospitals, schools without which it is very difficult to attract employees. In
other words, a project may be described here as the main project, that may be,
consider along with a bunch of other incidental projects. The total cost of
prime project and other bunch of projects is treated as single investment.
PROCESS OF CAPITAL BUDGETING:
The process of capital being may be divided into six brad phases/ steps. viz.,
planning or idea generation, evaluation or analysis, selection, financing, execution or
implementation and review.
Page 24
• Idea Generation: The search for promising project ideas is first step
in capital budgeting process. In other words the planning phase of a firm’s capital
budgeting process is concerned with an articulation of its broad investment
strategy and the generation search of project proposals. Identifying a new
worthwhile project is a complex problem. It involves careful study from many
different angles. Ideas can be generated from the sources like, performance
analysis of existing industries, review import and export data, study of the
suggestions of financial institutions and developmental agencies, plans outlays
and government guidelines availability, local materials and resources, new
technological developments, analysis economic and social trends, draw clues from
consumption abroad , explore the possibility of reviving sick units, identity
unfulfilled psychological needs, attending trade fairs, stimulate creativity for
generating new product ideas among employees.
• Evaluation or analysis: In the preliminary screening when a project
proposal suggests that the project prima facie worthwhile, then it is required to go
for evaluation. Analysis has take from the aspects like, marketing, technical,
financial, economic and ecological analysis. This phase focuses on gathering data,
preparing, summarizing relevant information about various alternatives projects
available, which are being considered for inclusion in the capital budgeting
process. Cost and benefits are determined based on the information gathered of all
alternative projects.
• Selection: Selection or rejection of projects follows analysis phases.
Projects are evaluated by using a wide range of evaluation techniques, which
divided in to traditional (non-discounted) and modern (discounted).
oSelection or rejections of a project depends on the technique used to evaluate
and its acceptance rule. The acceptance rules are different for each and
every method.
• A part form use the techniques of evaluation of there are few
techniques available for measurement (range, standard deviation, co-efficient of
variation) and incorporation of risk (risk adjusted discount rate, certainty
Page 25
equivalent, probability distribution approach and decision tree approach) in capital

budgeting.
• Financing the Selected Project: After the selection of the projects,
the next step is financing. Generally the amount required is known after selection
of project. Under this phase financing arrangement have to be made. There are
two broad sources available such as equity (shareholders’ funds – paid up share
capital, share premium and retained earnings) and debt (loan funds – term loans,
debentures, and working capital advances). While deciding the capital structure
the decision maker has to keep in mind some factors, which influence the capital
structure. The factors are flexibility, risk, income, control, and tax benefits
(referred to by the acronym FRICT). Capital should consist debt and equity.
• Execution Implementation: planning is paper work and
implementation is physically implementing the selected project. Implementation
of an industrial project involves the stages like, engineering designs, negotiations
and contracting, construction, training, and plant commissioning. Translating an
investment proposal from paper work to concert work is complex, time
consuming and risky task. Adequate formulation of projects, use of the principle
of responsibility accounting and use of network techniques (PERT and CPM) are
very much helpful for implementation of projects at reasonable cost.
• Review of the project: once the project is converted from paper
work in to concrete wok, and then there is need to review the project.
Performance review should be done periodically, in which phase actual
performance is compared with the predetermined performance.
PAY BACK PERIOD METHOD
It is also called pay out or pay off method, represents the period in which total
investment in permanent assets pay back it self.
Page 26
This method based on the every capital expenditure pays itself back with in a
certain period out of additional earnings generated from the capital assets.
It measures the period of time for t5he original cost of a project to be recovered
from the additional earnings of the project itself
It is also called pay out or pay off method, represents the period in which total
investment in permanent assets pay back it self.
This method based on the every capital expenditure pays itself back with in a
certain period out of additional earnings generated from the capital assets.
It measures the period of time for t5he original cost of a project to be recovered
from the additional earnings of the project itself.
Calculate annual net earnings (profits) before depreciation and after taxes, these are
called annual cash inflows.
Divide initial outlay cost of the project by the annual cash inflow, where the project
generates constant annual cash inflows
Pay back period= Annual cash Inflows

Cash outlay of the project
Where the annual cash inflows (profits before depreciation and after taxes) are unequal,
the pay back period can be found by adding up the cash inflows until the total is equal to
the initial cash outlay of project.
Page 27
In this time we want to find cumulative cash flows
Pay back period= actual year +different in cash flows

Next year cash flow
ADVANTAGES
The main advantage of this method it is too simple under standard easy to
calculate.
It saves in cost, it requires lesser time labor as compared to other methods
It shorter back period is preferred to the one having a longer pay-back period.
Due to short term approach, this method is particularly suited to a firm which has
shortage of cash.
DISAVANTAGES:
It does not account the cash inflows earned after the payback period and hence the
true profitability of the projects can not be correctly assessed.
This method ignores the time value of money and does not consider the size and
timing of cash flows. It treats all cash flows are equal through they occur in
different periods.
It does not take the consideration the cost of capital which is a very important factor
in making sound investment decisions
It may be difficult to determine the minimum acceptable pay back period; it is

usually a subjective decision.
It treats each asset individually in isolation with other assets which is not feasible in
real practice
Page 28
AVERAGE RATE OF RETURN METHOD
It averages the profit after tax and depreciation is calculated and then it is divided
by total capital.
In other words it establishes the relation ship between average annual profits to total
investments.
Average annual profits

Average rate of return = x100
Net investment in the project
ADVANTAGES & DISADVANTAGES:
• It is very simple to understand and easy to operate.
• It uses the entire earnings of a project in calculating rate of return and not only the
earnings up to pay back period.
• It is based upon accounting concept of profits it can be readily calculated from the
financial data.
• It does not take into the consideration the cash flows which are more important then
the accounting profits.
• This method cannot be applied to a situation where investment in a project is to be

made in parts.
Page 29
TIME ADJUSTED METHOD:
The traditional method just concentrates only on pay back period & earning rate.
But, discount cash flow method provides or discount cash flow methods are also called
Time adjusted method.
NET PRESENT VALUE METHOD
It is the classic economic method evaluating the investment proposal.
It recognizes the importance of time along with money value.
In this method financial manager compares the initial investments with present
value of future cash flows.
It demands the calculation of present values of future flows with the support from
present value table.
After comparing these two if any balance or value is there according to that project
will be accepted or rejected.
It must be done on tabulation form.
Net present value
Net present value = present value of cash flows after tax-present value of cash out flow.
Advantages of NPV:
Npv methods takes into the account the time value of money
oThe whole stream of cash flows is considered
o The Npv can be seen as the addition to the wealth of share holders. The
creation of Npv is thus in conformity with basic financial objectives.
Page 30
Disadvantages of NPV oIt involves the different calculationsoThis
methods necessity forecasting cash flows and the discount rate.
o The rankings of project depend upon discount rate.
INTERNAL RATE OF RETURN (IRR)
The internal rate of return (IRR) method is another discounted cash flow technique which
takes account of the magnitude and thing of cash flows, other terms used to describe the
IRR method are yield on an investment, marginal efficiency of capital, rate of return over
cost, time – adjusted rate of internal return and soon.
where as,
Cfi = Cash flows occurring at different point of time
k = the discount rate

n = life of the project in year
C0 = Cash out lay
SV & WC = Salvage value and working capital at the end of the n years.
Page 31
RP = L + (H − L)
(a − b)
Where as,
L = Lower discount rate at which NPV is positive
H = Higher discount rate at which NPV is negative
A = NPV at lower discount rate, L B
= NPV at higher discount rate, H
Merits:
1) This method considers the time value of money.
2) All cash flows are considered.
3) It has psychological appeal to the users.
4) The percentage figure calculated under this method is more meaningful and
acceptable, because it satisfies them in terms of rate of return on capital.
Limitations:
1) It may not give unique answer in all situations.
2) It is difficult to understand and use in practices.
3) It implies that the intermediate cash inflows generated by the project .

Profitability index (PI)
Yet another time – adjusted method of evaluating the investment proposals is the benefit
– cost (B/C.) ratio or profitability index (PI) Profitability Index is the ratio of the present
valued of cash inflows, at the required rate of return, to the initial cash out of the
investment.
Page 32
PV of Cash inflow
PI =
Intial Cash outlay
Where PV = Present Value Merits:
1) This method considers the time value of money.
2) All cash inflows are considered.
3)It is a better evaluation technique than NPV.
Limitations:
It fails as a guide in resolving capital rationing when projects are indivisible.
CAPITAL COMMITMENT PLAN:-
The progress of projects included in the capital budget, a capital commitment plan is
issued three times a year. The commitment plan lays out the anticipated implementation
schedule for there current fiscal and the next three years. The first commitment plan is
published within 90days of the adoption of the capital budget. Updated commitment plans
are issued in January & April along with the company’s budget proposals.
The commitment plan translates the appropriations approved under the adopted capital
budget into schedule for implementing individual projects. The fact that funds are
appropriated for a project in the capital budget does not 6necessarily mean that work will
start or be completed that fiscal year. He choice of priorities and timing of projects is
decided by office management & budget in consultation with the agencies along with
considerations of how much the managing director thinks the organization can afford to
append on capital projects overall.
The capital commitment plan lays out the anticipated implemented schedule for
capital projects and is one source of information on how far along projects are although
Page 33
not a consistent or always useful one. The adopted commitment plan is usually published
in September, & then updated in January & april.
In the capital budgeting for every two adjacent years there will be gap. The gap
between authorized commitments and the target is presented in capital commitment plan
as diminishing over the course of the year plan, in practice many of the “unattained
commitments” will be rolled over into the next year’s plan, so that the current year gap
will remain large. The gap has grown in recent year exceeding in last two executive
capital plans.
KINDS OF CAPITAL BUDGETING:-
Capital budgeting refers to the total process of generating, evaluating, selecting and
following up an capital expenditure alternatives. The firm allocates or budgets financial
recourses to new investment proposals. Basically, the firm may be confronted with three
types of capital budgeting decisions:-
The accept or reject decision,
The mutually exclusive choice decisions, and
The capital rationing decision
DIFFICULTIES OF CAPITAL BUDGETING:-
While capital expenditure decisions are extremely important, they also pose difficulties
which stem from three principal sources:
Identifying & measuring the costs & benefits of a capital expenditure proposal tends
to be difficult
There is great deal of uncertainty for capital expenditure decision which involves
cost & benefits that extend far into the future
It is impossible to product exactly what will happen in the future
The time period creates some problems in estimating discount rates &
establishing equivalences.
Page 34
COST EFFECTIVE ANALYSIS:-
In the cost effectiveness analysis the project selection or technological

choice, only costs of two or more alternatives choices are considering treating the benefits
as identical. This approach is used when the acquisition of how to minimize the costs for
undertaking an activity at a given discount rates in case the benefits and operating costs
are given, one can minimize the capital cost to obtain given discount.
PROJECT PLANNING:-
The planning of a project is a technically pre-determined set of inter related activities

involving the effective use of given material, human, technological and financial
resources over a given period of time. Which in association with other development
projects result in the achievement of certain predetermined objectives such as the
production of specified goods and services.
Project planning is spread over a period of time and is not a one shot activity. The
important stages in the life of a project are:
It’s identification
It’s initial formulation
It’s evaluation
It’s final formulation
It’s implementation
It’s completion and operation.

The time taken for the entire process is the gestation period of the project.
The process of identification of a project seriously trying to overcome
certain problems. They may be non-utilization to overcome available
funds. Plant capacity, expansion etc,.
CRITERIAN TABLE:-
In the evaluation process or capital budgeting techniques there will be a criteria to accept
or reject the project. The criteria will be expressed as:
Page 35
Table:
Accept Reject
Criterian/Method
Pay Back Period (PBP) < Target Period > Target Period
Accounting Rate of Return (ARR) > Target Rate < Target Rate
Net Present Value (NPV) >0 < 0
Internal Rate of Return (IRR) > Cost Of Capital < Cost Of Capital
Profitability index (PI) >1 <1
Page 36
CHAPTER – 3
RESEARCH METHODOLOGY
NEED FOR THE STUDY
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
LIMITATIONS OF THE STUDY
Page 37
3. RESEARCH METHODOLOGY
The research is based on the various systematic methods of data collection and
analysis. Both the primary and the secondary data were used for the present study.
Research Design:
The plan, structure and strategy of investigation conceived so as to reach the objectives of
research and to control variance used is descriptive research design.
At it necessary to know the satisfaction levels of employee’s survey method is adopted.
DATA COLLECTION:
The data relevant to problem identified is available in two forms. They are
1. Primary Data
2. secondary data
Primary Data:
The primary data was collected from the different departments of employees at Amara
raja through structured questionnaires followed by personal interest.
Secondary data:
The secondary data was collected manuals, journals and internet. Data about the
company profile and other details collected from company records, websites and through
personal discussion with various executives and other employees of the company.
Page 38
3.1 NEED FOR THE STUDY
In order to maintain flows of revenue from operations every firm need certain
amount of cash. So the cash is allocated firm properly. It means the proportion of
cash in terms of debt and equity.
3.2 SCOPE OF THE STUDY
The scope of the study is confined to the analysis of solvency & profitability
position of the company. The suggestions and conclusions given in the study are
limited to the financial data given by the company .This financial performance
analysis may help the company to take appropriate financial decision in the future.
Page 39
3.3 OBJECTIVES OF THE STUDY
• To analyze the capital budgeting of amararaja electronics limited.
• To determine the long-term profitability of the company
• To assess the change in proportion of the company.
Page 40
3.4 LIMITATIONS OF THE STUDY
Capital budgeting techniques suffer from the following limitations:
• All the techniques of capital budgeting presume that various investment proposals
under consideration are mutually exclusive which may not practically be true in
some particular circumstances.
• The techniques of capital budgeting require estimation of future cash inflows and
outflows. The future is always uncertain and the data collected for future may not
be exact. Obliviously the results based upon wrong data may not be good.
• There are certain factors like morale of the employees, goodwill of the firm, etc.,
which cannot be correctly quantified but which other wise substantially influence
the capital decision.
• Urgency is another limitation in the evaluation of capital investment decisions.
• Uncertainty and risk pose the biggest limitation to the techniques of capital
budgeting.
Page 41
CHAPTER - 4
DATA ANALYSIS
&
INTERPRETATIONS
Page 42
4. DATA ANALYSIS & INTERPRETATION

4.1 Commercial performance
TABLE NO - 4.1 (in lakh)
Year Sales Turnover Domestic Sales Exports
2016-17 17644.15 13391.73 4252.42
2017-18 14354.63 10502.38 3852.25
2018-19 15772.48 13511.77 2260.71
2019-20 17548.46 15604.02 1944.44
2020-22 19625.74 17406.85 2218.88
GRAPH - 4.1
Exports
4500 4252.42
4000 3852.25
3500
3000
2500 2260.71 2218.88
1944.44
2000
1500
1000
500
0
2016-17 2017-18 2018-19 2019-20 2020-21
Page 43
4.2 NON DCF CRITERIA:
TABLE NO – 4.2
(a) PAY BACK PERIOD(PBP):-

YEAR INCOME DEPRECIATION CASH IN CUMULATIVE
(PAT) (RS) FLOW CAST IN
(RS) (RS) FLOWS (RS)
2016-17 23.85 86.36 110.21 110.21
2017-18 47.04 100.95 147.99 258.20
2018-19 94.36 121.73 216.09 474.29
2019-20 80.48 145.77 226.25 700.54
2020-21 167.03 185.38 352.41 1052.95
Page 44
GRAPH NO- 4.2
PAY BACK PERIOD

1200
1000
Axi 800
s
Tit 600
le
400
200
0
2016-17 2017-18 2018 -19 2019-20 2020-21
Initial outlay = 491.11
Pay back period = 3+
= 3+0.074
= 3.074 Months
Page 45
Criteria for evaluation:-
The pay back period computed for a project is less than the pay back period set by
management of the company, it would be accepted. A project actual pay back period is
more than the determined period by the management, it will be rejected.
Decision:-
Hence we accept the project.
The standard payback period is set by Sri Dhanalakshmi cotton & rice mills pvt ltd for
considering the expansion project is six years, where as actual payback period is 3.074
months.
Page 46
TABLE NO – 4.3
(b) AVERAGE RATE OF RETURN (ARR):-

YEAR INCOME DEPRECIATION CASH IN FLOWS
2016-17 23.85 86.36 110.21
2017-18 47.04 100.95 147.99
2018-19 94.36 121.73 216.09
2019-20 80.48 145.77 226.25
2020-21 167.03 185.38 352.41
Page 47
GRAPH NO – 4.3
AVERAGE RATE OF RETURN

400
350
300
Axi
s 250
Tit 200
le 150
100
50
0
2016-17 2017-18 2018-19 2019-20 2020-21
Average profit
ARR = × 100
Average Investment
Average profit = = 82.552
Average investment = = 245.55
5,16,72,33 9
ARR = ×100
21,43,18,3 49
= 0.3362 × 100
= 33.62
Average profit
Page 48
ROI = ×100
Initial investment
= × 100
= 0.1680× 100
= 16.80
According to this method ARR is higher than minimum rate of return established by the
management are accepted. It reject the project have less ARR than the minimum rate set
by the management.
Decision:-
The standard ARR set by Sri Dhanlakshmi cotton & rice mills pvt ltd management is
21%. The actual ARR is 16.80% is higher than the standard ARR set by the management,
hence we accept the project.
4.4 DCF CRITERIA:
TABLE NO – 4. 4
(a) Net Present Value:-

YEAR CASH INFLOWS DCF (10%) PRESENT VALUE
2016-17 110.21 0.909 100.180
2017-18 147.99 0.826 122.239
Page 49
2018-19 216.09 0.751 162.283
2019-20 226.25 0.683 154.528
2020-21 352.41 0.621 218.85
TOTAL 758.079
GRAPH NO – 4.4
Page 50
Chart Title
2020-21
2019-20
2018-19
2017-18
2016-17
0 50 100 150 200 250 300 350 400
PRESENT VALUE DCF (10%) CASH INFLOWS
Net present value = present value of cash flows after tax-present value of cash out flow.
NPV = 758.079– 491.11
= 266.96
In case of calculated NPV is positive or zero, the project should be accepted. If the
calculated NPV is negative, the project is rejected.
Decision:-
The project is accepted due to calculate NPV is positive.
TABLE NO – 4.5
INTERNAL RATE OF RETURN:-

Page 51
2016-17 110.21 0.909 100.180
2017-18 147.99 0.826 122.239
2018-19 216.09 0.751 162.283
2019-20 226.25 0.683 154.528
2020-21 352.41 0.621 218.85
TOTAL 758.079
GRAPH NO – 4.5
400
350
300
250
200
150
100
50
0
2016-17 2017-18 2018-19 2019-20 2020-21
TABLE NO – 4.6
IRP
Page 52
2016-17 110.21 0.758 83.539
2017-18 147.99 0.574 84.946
2018-19 216.09 0.435 93.999
2019-20 226.25 0.329 74.436
2020-21 352.41 0.250 88.102
TOTAL 425.023
Page 53
GRAPH - 4.6
400
350
300
250
200
150
100
50
0
2016-17 2017-18 2018-19 2019-20 2020-21
A
IRP = L + (H − L)
(a − b)
IRR = 10+ ×(32 −10)
= 10 + × 22
= 10+0.80(22)
= 10+17.6
=27.6%
Page 54
Criteria for evaluation:

In this method the project is accepted when IRR is higher than its cost of capital or cut
out rate. If the project is not accepted when the IRR is less than cost of capital.
Decision:-
The project is accepted because of the calculation IRR is higher than its cost of capital.
The cost of capital fixed by management is 10%, the actual is more than its standard.
Hence, the project is accepted.
Page 55
TABLE NO – 4.7
(C) PROFITABILITY INDEX:-

YEAR CASH IN FLOW (RS)
2016-17 100.180
2017-18 122.239
2018-19 162.283
2019-20 154.528
2020-21 218.846
GRAPH NO – 4.7
CASH IN FLOW (RS)

250
218.846
200
Axi
162.283 154.528
s 150
Tit 122.239
le 100 100.18
50
0
2016-17 2017-18 2018-19 2019-20 2020-21
PI=PV of cash in flows

Initial cash outlay
= 758.079
491.11
= 1.54
Page 56
CHAPTER – 5
FINDINGS
SUGGESTIONS
&
CONCLUSION
Page 57
5.1 FINDINGS
Based on the objectives framed, findings are briefly summarized as follows.

• It is observed that the company’s Capital Budgeting and the company finances the
funds, proportionately.
• The long-term profitability loans and debentures it compare to other companies amara
raja electronics limited is turned to be declined.
• The company needs to change the proportion of debt and equity properly.
• The company has to improve the Capital Budgeting system to increase the net sales
and profitability of the company.
• The company has to analyze the proportion of finances between equity and debt
properly to increase the profitability. The firm has to allocate the funds properly to
increase the net sales and also to meet the requirements of the company.
Page 58
5.2 SUGGESTIONS
• To improve net profit, the company should have a strict control over
administrative expenses and management expenses.
• The management has to take necessary steps to handle the funds that are entrusted
with them effectively, in order to have a higher return on equity.
• The concern is required to develop an effective capital structure system.
• The systematic program for efficient operation of the plant should be involved.
Page 59
5.3 CONCLUSION
o The results of this study should be seen as a serious challenge to the

traditional capital structure literature.
o One of the dramatic changes created by the expanding global economy is

the increase in the rate of change within industries.
o We suspect that as more industries are experiencing greater levels of

change, we will find the use of debt-centered governance will prove less
effective in the near future.
o The first duty of managers is to ensure the long-term survival of the

organization within its competitive environment.
o In a world devoted to quick fixes, and short-term thinking edited by sound

bites, it is difficult to take time to think through serious challenges.
o As environments become more competitive, those who make the time to

reach appropriate decisions will be the ones left standing.
Page 60
ANNEXURE
BIBLIOGRAPHY
ANNEXTURE
Profit and Loss Account for the year ended March 31, 2016-17.
(Amount in Rupees)
Particulars Year Ended31-03- Year Ended31-03-
2017 2016
INCOME
Sales – Gross 26,057,500,000 19,443,140,000
Less: Excise duty Collected 2,383,940,000 1,832,610,000
Net Sales 23,673,560,000 17,610,530,000
Other Income 151,850,000 77,760,000
TOTAL 23,825,410,000 17,688,290,000
EXPENDITURE
Cost of material consumed 14,993,380,000 11,787,140,000
Purchase of stock in trade 840,020,000 74,140,000
Change in inventories of finished product, workin-
121,690,000 283,140,000
process and stock in trade
Employee benefits expenses 1,002,640,000 884,590,000
Finance cost 40,590,000 30,580,000
Depreciation and amortization 464,730,000 417,120,000
Other expenses 3,175,910,000 2,574,040,000
Page 61
TOTAL 20,638,960,000 15,484,470,000

Profit Before Taxation 3,186,450,000 2,203,820,000
Less Tax expenses
Current ax 1,030,210,000 731,390,000
Deferred tax(income)/expenses 14,670,000 11,420,000
Earlier years(excess)/short provision 9,060,000 2,890,000

Profit for the year 2,150,630,000 1,480,960,000
Basic Earnings Per Equity Share 25.18 17.34
BALANCE SHEET as at March 31, 2016-17

(Amount in Rupees)
Particulars As at 31-03-2017 As at 31-03-2016
SOURCES OF FUNDS
Shareholders' Funds
Share capital 170,810,000 170,810,000
Reserves and surplus 8,063,880,000 6,288,460,000
8,234,690,000 6,459,270,000
Noncurrent liabilities
Long term borrowings 784,720,000 701,020,000
Deferred tax liabilities 219,600,000 204,930,000

Long term provisions 146,180,000 104,170,000
1,150,500,000 1,010,120,000
Current liabilities
Short term borrowings 56,040,000 200,100,000
Page 62
Trade payables 888,500.000 1,053,790,000

Other current liabilities 1,124,560,000 967,930,000
Short term provisions 2,060,880,000 1,467,990,000
4,129,980,000 3,689,810,000
Total 13,515,170,000 11,159,200,000
Assets
Noncurrent assets
Fixed asset
Tangible asset 3,524,800,000 3,132,810,000
Intangible asset 20,920,000 18,060,000

Capital work in process 310,650,000 369,570,000
3,860,950,000 3,526,280,000
Noncurrent investment 160,760,000 160,760,000
Long term loans and 122,850,000 145,180,000
advances
Other noncurrent assets 1,110,000 2,370,000
4,145,670,000 3,834,590,000
Current assets
Inventories 2,666,170,000 2,846,970,000
Trade receivables 3,196,830,000 3,056,620,000
Cash and bank balance 2,292,200,000 451,180,000
Short term loans and 1,182,700,000 946,740,0000

advances
Other current assets 31,600,000 23,100,000
9,369,500,000 7,324,610,000
Total 13,515,170,000 11,159,200,000
Profit and Loss Account for the year ended March 31, 2017-18
(Amount in Rupees)
Particulars Year Ended 31-03- Year Ended 31-03-
2018 2017
INCOME
Sales of product 32,957,450,000 25,978,360,000
Net Sales 29,461,730,000 23,594,420,000
Sale of Services 137,020,000 38,960,000
Page 63
Other operating revenue 15,210,000 11,300,000

Net revenue from operations 29,613,960,000 23,644,680,000
Other income 465,510,000 279,710,000
TOTAL 30,079,470,000 23,924,390,000
EXPENDITURE
Purchase of stock in trade 2,632,540,000 840,020,000
Change in inventories of finished product, workin-
320,890,000 98,150,000
Employee benefits expenses 1,266,230,000 1,002,640,000
Finance cost 9,980,000 24,470,000
Depreciation and amortization 660,920,000 464,730,000
Other expenses 3,882,010,000 3,175,850,000
TOTAL 25,769,730,000 20,737,940,000
Profit Before Taxation 4,309,740,000 3,186,450,000
Less Exceptional items 91,570,000 -
Less Tax expenses
Current ax 1,377,970,000 1,030,210,000
Deferred tax(income)/expenses 24,510,000 14,670,000
Earlier years(excess)/short provision 2,340,000 9,060,000
Basic Earnings Per Equity Share 16.78 12.59
BALANCE SHEETas at March 31, 2017-18

(Amount in Rupees)
Page 64
SOURCES OF FUNDS
Shareholders' Funds
Share capital 170,810,000 170,810,000
10,598,140,000 8,234,690,000
Noncurrent liabilities
Long term borrowings 773,130,000 784,720,000
Deferred tax liabilities 195,090,000 219,600,000
1,334,630,000 1,150,500,000
Current liabilities
Short term borrowings 98,630,000 56,040,000
Trade payables 1,362,840,000 876,330,000
Other current liabilities 1,807,260,000 1,136,730,000
Short term provisions 2,493,200,000 2,060,880,000
1,888,508,475 1,568,304,581
5,761,930,000 4,129,980,000
Total 17,704,700,000 13,515,170,00
Assets
Noncurrent assets
Fixed asset
Tangible asset 3,554,970,000 3,524,800,000
Intangible asset 33,690,000 20,920,000

Capital work in process 1,024,970,000 310,650,000
Intangible asset under development 4,840,0000 4,580,000
4,618,470,000 3,860,950,000
Noncurrent investment 160,760,000 160,760,000
Long term loans and advances 353,520,000 96,410,000
Other noncurrent assets 3,430,000 1,110,000
5,136,180,000 4,119,230,000
Current assets
Inventories 2,928,580,000 2,666,170,000
Cash and bank balance 4,107,900,000 2,291,900,000
Page 65
Short term loans and advances 1,656,780,000 1,209,440,000

12,568,520,000 9,395,940,000
Total 17,704,700,000 13,515,170,00
(Amount in Rupees)
Particulars Year Ended31-03-2019 Year Ended31-03-
2018
INCOME
Sales of product 38,041,270,000 32,949,370,000

Net Sales 34,036,120,000 29,436,920,000
Sale of Services 309,320,000 137,020,000
Other income 455,140,000 465,510,000
TOTAL 34,821,730,000 30,054,660,000
EXPENDITURE
Purchase of stock in trade 2,113,690,000 2,632,540,000
Change in inventories of finished product, work-in-

( 292,100,000) (320,890,000)
Finance cost 7,180,000 2,690,000

Depreciation and amortization expenses[includes
impairment loss of Rs nil(pay Rs 75.52 million)] 645,710,000 660,920,000
Other expenses 4,346,600,000 3,904,240,000

TOTAL 29,416,190,000 25,744,920,000
Profit Before Exceptional Items And Tax 5,405,540,000 4,309,740,000
Less: Exceptional items(net) 38,840,000 91,570,000
Profit before tax 5,366,700,000 4,218,170,000

Less : Tax expense - -
Page 66
Current Tax
1,580,000,000 1,377,970,000
Deferred Tax(credit)/expense 106,230,000 (24,510,000)

Earlier years (excess)/short provision
6,110,000 (2,340,000)

Basic and diluted earnings per equity share of
Rs 1 each 21.51 16.78
(Amount in Rupees)
SOURCES OF FUNDS
Shareholders' Funds
Share capital 170,810,000 170,810,000
13,627,000,000 10,598,000,000
Non-Current Liabilities
Long-term borrowings 759,470,000 773,130,000
Long-term provisions 369,570,000 376,410,000
Deferred tax liability 301,330,000 195,090,000
1,430,370,000 1,344,630,000
Current Liabilities
Short-term borrowings 83,830,000 98,630,000
Trade payables 1,277,790,000 1,362,840,000
Short-term provisions 2,818,730,000 2,493,200,000
6,337,030,000 5,761,930,000
TOTAL 21,394,410,000 17,704,700,000
Assets
Fixed assets
Current Investments 7,678,640,000 4,618,470,000
Non- Current Investments 160,760,000 160,760,000
Long-term loans and 567,690,000 353,520,000

advances
8,408,310,000 5,136,180,000
Page 67
Current assets
Inventories 3,350,080,000 2,928,580,000

Trades receivables 4,527,890,000 3,806,770,000
Cash and bank balances 2,945,670,000 4,107,900,000
Short-term loans and 2,119,300,000 1,656,780,000
advances
12,986,100,000 12,568,520,000
TOTAL 21,394,410,000 17,704,700,000
(Amount in Rupees)
Particulars Year Ended31-03- Year Ended31-03-
2020 2019
INCOME
Sales of product 46,039,980,000 38,041,270,000

Net Sales 41,781,600,000 34,036,120,000
Sale of Services 314,840,000 309,320,000
Other income 422,990,000 455,140,000
TOTAL 42,536,280,000 34,821,730,000
EXPENDITURE
Cost of material consumed
25,494,490,000
21,011,950,000
Page 68
Purchase of stock in trade 2,746,490,000 2,113,690,000
Change in inventories of finished product, work-

( 479,950,000) (292,100,000)
inprocess and stock in trade
Finance cost 2,410,000 7,180,000
Depreciation and amortization expenses 1,339,920,000 645,710,000
Other expenses 5,310,400,000 4,346,600,000
TOTAL 36,364,870,000 29,416,190,000
Profit Before Exceptional Items And Tax 6,171,410,000 5,405,540,000
Less: Exceptional items(net) 72,790,000 38,840,000

Less : Tax expense - -
Current Tax
1,910,000 1,580,000
Deferred Tax(credit)/expense 67,160,000 (106,230,000)

Earlier years (excess)/short provision
12,840,000 (6,110,000)
Profit for the year

4,108,620,000 3,674,360,000
Basic and diluted earnings per equity share of Rs 1 each
24.05 21.51
(Amount in Rupees)
Particulars
As at 31-03-2020 As at 31-03-2019
SOURCES OF FUNDS
Shareholders’ funds
Share capital 170,810,000 170,810,000
Reserve and surplus 16,824,900,000 13,456,200,000
16,995,710,000 13,627,010,000
Non-current liabilities
Page 69

Deferred tax liabilities (net) 368,480,000 301,330,000
Long-term provisions 443,060,000 369,570,000
1,552,920,000 1,430,370,000
Current liabilities
Short-term borrowings - 83,830,000
Trade payables 1,520,800,000 1,277,790,000
Short-term provisions 1,195,720,000 1,259,780,000
5,332,210,000 4,778,080,000
Total 23,880,840,000 19,835,460,000
Assets
Non-current assets
Fixed assets
Tangible assets 9,398,930,000 6,198,940,000
Intangible assets 43,690,000 32,960,000
Capital work-in-progress 861,680,000 1,443,600,000
Intangible assets under development 1,520,000 3,140,000
10,305,820,000 7,678,640,000
Non-current investments 160,760,000 160,760,000
Long-term loans and advances 654,700,000 567,690,000
Other non-current assets 0,700,000 1,220,000
11,121,980,000 8,408,310,000
Current assets
Inventories 4,181,330,000 3,350,080,000
Cash and bank balances 2,221,710,000 2,945,670,000
Short-term loans and advances 740,820,000 560,350,000
12,758,860,000 11,427,150,000
Total 23,880,840,000 19,835,460,000
Profit and loss Account for the year ended March 31, 2020-21
(Amounts in Rupees)
Particulars Year Year
Page 70
Ended31- Ended31-
03-2021 03-2020
Revenue from operations 52,417,610,000 46,371,670,000
(gross)
Less: excise duty 5,510,930,000 4,258,380,000
Revenue from operations (Net) 46,906,680,000 42,113,290,000
Other income 456,850,000 422,990,000
Total Revenue 47,363,530,000 42,536,280,000
Expenses
Cost of materials consumed 27,421,380,000 25,494,670,000
Purchase of stock – in- trade 3,254,510,000 2,746,490,000
(Traded goods)
Changes in inventories of finished (1,031,200,000) (479,950,000)
goods, Work-in- progress and
stock-in-trade
Employee benefits expense 2,430,020,000 1,950,930,000
Finance costs(int) 4,850,000 2,410,000
Depreciation and amortization 1,398,670,000 1,339,920,000
expense
Other expenses 6,663,370,000 5,383,190,000
Total Expenses 40,141,600,000 36,437,660,000
Tax expense
Current tax expense 2,115,000,000 1,910,000,000
Taxation of earlier years (7,440,000) 12,840,000
Deferred tax 219,920,000 67,160,000
Net tax Expense 2,327,480,000 1,990,000,000
Earnings per share (of Rs,1/- each)
Basic and diluted( Rs.) 28.65 24.05
Page 71
BALANCE SHEET As at March 31, 2020-21
(Amount in Rupees)
Equity & Liabilities
Share holders funds
Share capital 170,810,000 170,810,000
21,016,420,000 16,995,710,000
Non-current liabilities
Deferred tax liabilities(Net) 588,400,000 368,480,000
1,773,270,000 1,552,920,000
Current liabilities
Trade payables
Total outstanding dues of Micro & 14,420,000 6,940,000
Small enterprises
Total outstanding Dues of creditors other 3,286,210,000 2,602,140,000
than Micro & Small Enterprises
Short-term provisions 522,410,000 1,195,720,000
6,293,590,000 5,314,230,000
TOTAL 29,083,280,000 23,862,860,000
ASSETS
Non currents assets
Fixed assets
Tangible assets 13,122,660,000 9,398,930,000
In-tangible assets 40,630,000 430,690,000
Capital work-in –Progress 1,197,420,000 861,680,000
In-tangible assets under developments 1,720,000 1,520,000
14,362,430,000 10,305,820,000
Non-current Investments 160,760,000 160,760,000
Long term loans & advances 479,280,000 701,700,000

15,002,470,000 11,168,280,000
Page 72
Current Assets
Inventories 6,016,480,000 4,181,330,000
Cash & cash equivalents 1,502,580,000 2,221,710,000
Short term loans & advances 527,750,000 660,810,000
14,080,810,000 12,694,580,000
TOTAL 29,083,280,000 23,862,860,000
Page 73
BIBLIOGRAPHY
BOOKS
Maheswari S.N.Financial management, Sultan Chant&Sons, New Delhi Edition

1996
KAPUR, Dr.Sudharsan Financial Management Theory & Practice, New Delhi,
Publishers Edition 1999
PANDEY, I.M.Financial Management, New Delhi.Vikas publishing house pvt. Ltd.,
Khan. M.Y and Jain. P.K, “Financial Management”, problems and cases Tata
McGraw Hill Publishing Company.
WEBSITES
www.google.comwww.mrf.ind
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A Study on Capital Budgeting At

Amararaja Batteries Ltd, Tirupati, Chittoor

VIKRAMA SIMHAPURI UNIVERSITY

In the partial fulfillment of the

MASTER OF BUSINESS ADMINISTRATION

Under the Guidance of

VIKRAMA SIMHAPURI UNIVERSITY COLLEGE

KAKUTUR - NELLORE-524320 - A.P

This is bearing Ananthaneni vasavi, Reg. No. 200100001014, a student of MBA in

Signature of the Student

Signature of the Guide:

I feel it a great privilege to express my sincere gratitude to project guide Dr. J.

My sincere thanks to Dr. J. vijethaHOD, Department of MBA, vikramasimhapuri

I gratefully acknowledge the management of VikramaSimhapuri University who has

Chapter CONTENTS PAGE NO.

NEED FOR THE STUDY 40-41

DATA ANALYSIS AND 46-60

1.2 INDUSTRY PROFILE

Dr. Galla started his career as an Electrical Engineer in US Steel orporation,

AmaraRaja Power System Ltd Mangal Precisions Products Ltd AmaraRaja

SPIRIT OF EXCELLENCE” award by Academy of Fine Arts, Tirupati, and various

Posts and Responsibilities

o Young Indians National Branding Chair

o Young Indian’s National Immediate Past Chairman

o Young Indians Immediate Past Chairman - District Chapter

• Amara Raja Group of Companies

o Managing Director, Galla Foods Limited. o Director, Amara Raja

AmaraRaja Electronics Ltd (AREL) is a rapidly growing company in the field of

• Custom wire harnessing

• Sheet metal fabrication, robotic welding & powder coating

• Yellow passivation & zinc plating

• Plastic injection molding

• Strategically located between Bangalore & Chennai

• Resistance to withstand high temperature & pressure

Research & Development

Our researchers along with the technocrats keep innovating manufacturing

1.4 PRODUCT PROFILE

Products of battery division are:

Hi-way Truck Batteries

PRO Hi-life Batteries

The new Amaron Shield, with an unheard of 24 months warranty. A product of

American power conversion and

PLANT PROFILE AND PHILOSOPHY

Power Generating Stations

Culture & Environment:

Benchmark pollution control measures, energy conservation measures, waste

Its Corporate Operations Office is situated at Chennai; other Marketing Offices

East: Kolkata, Bhubaneswar, Gauhati, Patna, Ranchi etc.,

"The Spirit of Excellence" - Award by Academy of Fine Arts, Tirupati.

"Best Entrepreneur of the year 1998" - Award by Hyderabad Management

"All Round Performance in Industrial Activity including

Effort" in state for the year 1997-98 - Award by Federation of Andhra

"Industrial Economist Business Excellence Award" - 1999 - Award by the

"Excellence Award" - by "Institute of Economic Studies (IES)", New Delhi

"Udyog Rattan Award" - BY Institute of Economic Studies, New Delhi

“ A budget is an estimate of future needs arranged according to at an orderly basis

• Replacement and modernization projects: In the competitive

Huge Investments: Long-term assets involve more initial cash out

Effect on other Projects: Whenever long-term assets investment it expansion

KINDS OF CAPITAL BUDGETING:

Capital budgeting decision may (also) be classified in to following way:

PROCESS OF CAPITAL BUDGETING:

equivalent, probability distribution approach and decision tree approach) in capital