ABSTRACT

Capital Budgeting decision pertains to fixed/long-term assets which are in operation and yield a return over a period of time. They therefore involve current outlay in return for series of anticipated flow of future benefits.

Capital budgeting decisions are of paramount importance in financial decision making. In first place such decision affects the profitability at a firm. They also have a bearing on the competitive position of the enterprise mainly because of the fact that the may enable the firm. To generate finished goods that can ultimately be sold for profit.

During the project, I have gone through Capital Budgeting information. The proposed objectives of the company include Power Generation.

I found Increase in Investment Turnover Ratio, Fixed Assets Turnover Ratio and Fixed Assets to Net worth Ratio and decrease in Return on Investment and Fixed Assets Ratio.

I Suggest that the use of various project evaluation techniques, such as return on investment, payback period, discounted cash flow Evaluation and Review Technique, Critical path method and strengths weaknesses, opportunities and Threats Analysis.

INTRODUCTION TO CAPITAL BUDGETING

INTRODUCTION:
Among the various business decisions capital budgeting decisions are critical and crucial decisions. Therefore special care must be taken while taking these decisions.

CONCEPT AND MEANING:

The term capital budgeting refers to long term planning for proposal capital outlay and their financing. It includes rising long-term funds and their utilization. It may be defined as firms, formal process of acquisition and investment of capital. Capital Budgeting may also be defined as The decision making process which the firm evaluates the purchase of major fixed assets. It involves firms decision to invest its current funds for addition, disposition, modification and replacement of fixed assets. It deals exactly with major investment proposals, which are essentially long-term projects and incurred among the available market opportunities. Capital budgeting is the process of making investment decision in capital expenditure. A Capital expenditure may be defined as an expenditure, the benefits of which are expected to be received over a period of time exceeding one year. The main characteristic of a Capital expenditure is that the expenditure is incurred at the one point of time whereas benefits of the expenditure are related at different point of time in future. In simple language we may say that a capital expenditure is an expenditure incurred for acquiring or improving the fixed assets, the benefits of which are to be received over a number of years in future

NEED AND IMPORTANCE:

Capital Budgeting means planning for capital assets. Capital Budgeting decisions are vital to an organization as to include the decision as to:

Whether or not funds should be invested in long term projects such as settings of an industry, purchase of plant and machinery etc., Analyze the proposals for expansion or creating additions capacities. To decide the replacement of permanent assets such as building and equipments. To make financial analysis of various proposals regarding capital investment so as to choose the best out of many alternative proposals.

OBJECTIVES OF THE STUDY:

Capital Budgeting decisions are based on the objective of efficient utilization of resources by reducing costs. Therefore capital expenditure decision can be two types

(1) (2)

Expenditure which increases revenue Expenditure which reduces costs.

There is difference between capital expenditure increasing revenue and capital expenditure reducing costs. The former has more uncertainty when compared to the later. The overall objective of capital expenditure is to maximize the firms profits and thus optimizing the return on investment. This objective can be achieved either by increased revenue or by reducing costs

SCOPE OF THE STUDY:

The efficient allocation of capital is the most important financial function in the modern times. It involves decision to commit the firms, since they stand the long - term assets such decision are of considerable importance to the firm since they send to determine its value and size by influencing its growth, probability and growth.

The scope of the study is limited to collecting the financial data of ULTRATECH CEMENTS for four years and budgeted figures of each year.

METHODOLOGY:
At each point of time a business firm has a number of proposals regarding various projects in which, it can invest funds. But the funds available with the firm are always limited and are not possible to invest trend in the entire proposal at a time. Hence it is very essential to select from amongst the various competing proposals, those that gives the highest benefits. The crux of capital budgeting is the allocation of available resources to various proposals. There are many considerations, economic as well as non-economic, which influence the capital budgeting decision in the profitability of the prospective investment. Yet the right involved in the proposals cannot be ignored, profitability and risk are directly related, i.e. higher profitability the greater the risk and vice versa there are several methods for evaluating and ranking the capital investment proposals.

Data collection: Primary data:The primary data is the data which is collected, by interviewing directly with the organizations
concerned executives. This is the direct information gathered from the organization.

Secondary data:The secondary data is the data which is gathered from publications and websites.

LIMITATIONS:
(1) All the techniques of capital budgeting presume that various investment proposals under consideration that are mutually exclusive which may not practically be true in some particular circumstances. (2) The techniques of capital budgeting requires estimation of future cash inflows and out flows. The future is always uncertain and the data collected for future may not be exact. Obviously, the result based upon wrong data cannot be good. (3) There are certain factors like morale of employees, goodwill of the firm, etc., which cannot be correctly qualified but which otherwise substantially influence the capital decision. (4) Urgency is another limitation in evaluation of capital investment decision. (5) Uncertainty and risk pose the biggest limitation to the techniques of capital budgeting.

COMPANY PROFILE

ULTRATECH CEMENT:

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. It also manufactures ready mix concrete (RMC). UltraTech Cement Limited has five integrated plants, six grinding units and three terminals two in India and one in Sri Lanka. UltraTech Cement is the countrys largest exporter of cement clinker. The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East. UltraTechs subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited. The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading in cotton, laying the foundation for the House of Birlas. Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up industries in critical sectors such as textiles and fibre, aluminium, cement and chemicals. As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. He represented India at the first and second round-table conference in London, along with Gandhiji. It was at "Birla House" in Delhi that the luminaries of the Indian freedom struggle often met to plot the downfall of the British Raj. Ghanshyamdas Birla found no contradiction in pursuing business goals with the dedication of a saint, emerging as one of the foremost industrialists of pre-independence India. The principles by which he lived were soaked up by his grandson, Aditya Vikram Birla, our Group's legendary leader.

Aditya Vikram Birla: putting India on the world map A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was the first to put Indian business on the world map, as far back as 1969, long before globalisation became a buzzword in India. In the then vibrant and free market South East Asian countries, he ventured to set up world-class production bases. He had foreseen the winds of change and staked the future of his business on a competitive, free market driven economy order. He put Indian business on the globe, 22 years before economic liberalisation was formally introduced by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand, Malaysia, Indonesia, the Philippines and Egypt. Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach. He believed that a business could be global even whilst being based in India. Therefore, back in his home-territory, he drove single-mindedly to put together the building blocks to make our Indian business a global force. Under his stewardship, his companies rose to be the world's largest producer of viscose staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the sixth largest producer of carbon black. In India, they attained the status of the largest single producer of viscose filament yarn, apart from being a producer of cement, grey cement and rayon grade pulp. The Group is also the largest producer of aluminium in the private sector, the lowest first cost producers in the world and the only producer of linen in the textile industry in India.