- J.B.

INSTITUTE OF ENGINEERING AND TECHNOLOGY

A STUDY ON CAPITAL BUDGETING

WITH REFERENCE TO
KESORAM CEMENTS LTD

Under the guidance of

MR.FASI UR REHMAN SIR
Associate Professor

DARA AARTHI
22671E0029
MASTER OF BUSINESS
ADMINISTRATION
(2022-2024)
INTRODUCTION
• Capital budgeting, also known as investment appraisal, is a critical process
that involves evaluating and selecting long-term investment projects or
expenditures.
• These investments typically involve substantial amounts of money and
have a significant impact on a company's financial position over an
extended period.
• Capital budgeting is a fundamental aspect of financial management,
guiding organizations in making informed decisions about where to
allocate their financial resources for optimal returns.
MEANING AND DEFINITION
• MEANING

A capital budget is a long-term plan that outlines the financial demands of an

investment, development, or major purchase. As opposed to an operational
budget that tracks revenue and expenses, a capital budget must be prepared to
analyze whether or not the long-term endeavor will be profitable.
• DEFINITION

According to KELLER and FERRARA, ‘Capital Budgeting represents the

plans for the appropriation and expenditure for fixed asset during the budget
period.’
Need of the study
• Capital budgeting decisions are the
investment decisions of the firm generally
known as the capital budgeting, or capital
expenditure decisions.

• The firm’s investment decision would

generally include expansion, acquisition,
modernization and replacement of the long-
term assets.

• Hence, the project aims at evaluating the

investment proposal for setting up different
facilities in Kesoram Cement Limited,
Hyderabad.
 Estimates
the future
project cost

Decides Scope Analysis of

of the
whether or
the
not to
alternative
commit
proposals
funds

study
Require
careful
planning
and control
Objectives of the study
• To study the relevance of capital budgeting in evaluating the
project for project finance.

• To study the technique of capital budgeting for decision- making.

• To measure the present value of rupee invested.

• To understand an item wise study of the company financial

performance.

• To make suggestion for improving the financial position of the

company.

• To understand the practical usage of capital budgeting

techniques.
REVIEW OF LITERATURE
Capital budgeting techniques are used in any
organization and play an important role in determining
the organization's resources, profitability, and financial
stability.

Binder John JandChaput Scott J (1996), A positive analysis of

capital budgeting practices, Review of quantitative finance &
accountancy, 6 (1996), pp. 245-257, in their article cost benefit
analysis suggested that Discounting cash flow methods will be
used more frequently for large projects.
INDUSTRY PROFILE
India is the fourth largest cement producer after China, Japan and U.S.A.

So far annual production and demand has been growing a pace at roughly 68 million tons
with an installed capacity of 82 millions tons.

In 1914 as the foundation of stable cement Industry was laid. It was Indian Cement
Company at Porbandar in Gujarat. In 1920, the cement marketing corporation was
formed to promote the sale and distribution of cement.

A significant development was made in 1930 when all manufacturers mergers together to
form the Associated Cement Company Limited.

Cement Industry is the major Industry it has taken rapid strides for a modest beginning
at
porbandar in 1914 to the 1980’s with over understanding out of the 60 units, 14 units are
in the public sectors remaining units are in private sector.
COMPANY PROFILE
• One among the industrial gains in the country today serving the
nation on the industrial front kesoram industries limited has a
tenured and extent full history dating hock to the twenties when
the industrial house of Birla’s enquired it.

• With only a Textile mill under its banner in 1924,It grew from
strength and spread its activities to newer fields refectory Tyres
oil mills and refinery Extraction.

• Looking to the wide gap between the demand and supply of vital
commodity cement which it plays on important role in Nation
Building, the government Private entrepreneurs to argumentthe
cement production Kesoram rose to the occasion and decided to
set up few cement plants in the country.

• Kesoram cement is one of the prestigious units in the renowned

Kesoram industries group that is one of India’s leaden industrial
conglomerates, under the leadership of MR B.K.Birla the famous
personality of Indian Industry, who owes branches all over India.
SOURCES OF DATA
The project report is based on the source of data that is collected. The collection of data is an important
step to be followed. The process of data collection follows in two ways. They are
• Primary data
• Secondary data
PRIMARY DATA
The popular ways to collect primary data consist of surveys, interviews and focus groups, which shows
that direct relationship between potential customers and the companies
• The primary data will be collected through the questionnaire from selected sample respondents.
SECONDARY DATA
Secondary data would be taken from the existing available sources
• Various books relating to capital budgeting and other related topics.
• Internet and official websites of the company.
RESEARCH METHODOLOGY

To achieve aforesaid objective the following methodology has been adopted. The information for this
report would be collected through the primary and secondary sources.
Primary sources
It is also called as first handed information; the data is collected through the observation in the
organization and interview with officials. A part from these some information would be collected
through the seminars, which were held by KESORAM.
Secondary sources
The secondary data would be collected through the various books, magazines.
FINANCIAL TOOLS
For the purpose of budgetary control, various tools and techniques might be used which are briefly
explained as follows
Traditional methods:
(I) Payback period method (P.B.P)
(II) Accounting rate of retursn (ARR)
Time adjusted or discounting techniques:
(III)Net Present value method (N.P.V)
(IV)Internal rate of return method (I.R.R)
(V)Profitability index method (P.I)
LIMITATIONS OF STUDY
 Financial data is confidential hence it would be difficult to obtain .

 The busy schedule of the officials in the KESORAM might be another limiting factor.

 Personal judgements might be avoided.

 Budgets might not always be according to the impact

of other resources.
THANK YOU