A SYNOPSIS ON

“CAPITAL BUDGETING”

AT

“ULTRATECHCEMENT LTD”

BY

PENTAM SUDHA PRASHANTI

(HALL TICKET NO: 2129-18-672-019)

Synopsis for project to be submitted for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

OSMANIA UNIVERSITY

2018-2020

AURORA’PG COLLEGE, MUSARAMBAGH

Meaning:

Capital budgeting is the process that companies use for decision making on capital

project. The capital project lasts for longer time, usually more than one year. As the

project is usually large and has important impact on the long term success of the

business, it is crucial for the business to make the right decision.

Capital Budgeting Process

The specific capital budgeting procedures that the manager uses depend on the

manger's level in the organization and the complexities of the organization and the

size of the projects. The typical steps in the capital budgeting process are as follows:

 Brainstorming. Investment ideas can come from anywhere, from the top or the bottom

of the organization, from any department or functional area, or from outside the

company. Generating good investment ideas to consider is the most important step in

the process .

 Project analysis. This step involves gathering the information to forecast cash flows

for each project and then evaluating the project's profitability.

 Capital budget planning. The company must organize the profitable proposals into a

coordinated whole that fits within the company's overall strategies, and it also must

consider the projects' timing. Some projects that look good when considered in

isolation may be undesirable strategically. Because of financial and real resource

issues, the scheduling and prioritizing of projects is important.

predicted results, and any differences must be explained. For example, how do the

revenues, expenses, and cash flows realized from an investment compare to the

predictions? Post-auditing capital projects is important for several reasons. First, it

helps monitor the forecasts and analysis that underlie the capital budgeting process.

Systematic errors, such as overly optimistic forecasts, become apparent. Second, it

helps improve business operations. If sales or costs are out of line, it will focus

attention on bringing performance closer to expectations if at all possible. Finally,

monitoring and post-auditing recent capital investments will produce concrete ideas

for future investments. Managers can decide to invest more heavily in profitable areas

and scale down or cancel investments in areas that are disappointing.

Complexity Of Capital Budgeting Process

The budgeting process needs the involvement of different departments in the

business. Planning for capital investments can be very complex, often involving

many persons inside and outside of the company. Information about marketing,

science, engineering, regulation, taxation, finance, production, and behavioral issues

must be systematically gathered and evaluated.

The authority to make capital decisions depends on the size and complexity of the

project. Lower-level managers may have discretion to make decisions that involve

less than a given amount of money, or that do not exceed a given capital budget.

Larger and more complex decisions are reserved for top management, and some are so

significant that the company's board of directors ultimately has the decision-making

authority. Like everything else, capital budgeting is a cost-benefit exercise. At the

margin,
 1.2 NEED AND IMPORTANCE:

 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.

The efficient allocation of capital is the most important financial function in

the modern times. It involves decision to commit the firm’s, 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

CEMENT LIMITED for four years and budgeted figures of each year.
 1.4 OBJECTIVES OF THE STUDY

 To evaluate the capital budgeting practices relating to various projects of

ULTRATECHCEMENT LIMITED Hyderabad

 To Asses the long term requirements of funds and plan for application of internal

resources and debt servicing.

 To Assess the effectiveness of long term investment decisions of

ULTRATECHCEMENT LIMITED

 To offer conclusion derived from the study and give suitable suggestions for the

efficient utilization of capital expenditure decisions.

The study is both descriptive and analytical in nature. It is a blend of primary data and

secondary data.The primary data has been collected personally by approaching the

online share traders who are engaged in share market. Methodology refers to the by

which data is obtained. The information has been collected through various sources

 Websites

 Journals

 Text books

Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a

time consuming and expensive method and requires more administrative planning and

supervision. It is also subjective to interviewer bias or distortion.

Sample Size: 100 respondents

Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.

Capital budgeting is the process of determining whether a big expenditure is in a

company's best interest. Here are the basics of capital budgeting and how it works.

Capital Budgeting Basics

A company undertakes capital budgeting in order to make the best decisions about

utilizing its limited capital. For example, if you are considering opening a distribution

center or investing in the development of a new product, capital budgeting will be

A project may not be profitable as compared to another today but it may promise

better future earnings. In such cases it may be preferred to increase earnings.

2. Obsolescence.

There are certain projects, which have greater risk of obsolescence than others. In

case of projects with high rate of obsolescence, the project with a lesser payback

period may be preferred other than one this may have higher profitability but still

longer pay-back period.

3. Research and Development Projects.

It is necessary for the long-term survival of the business to invest in research and

development project though it may not look to be profitable investment.

4. Cost Consideration.

Cost of the capital project, cost of production, opportunity cost of capital, etc. Are

other considerations involved in the capital budgeting decisions?

1. The study is limited to ULTRATECHCEMENT LIMITED only.

2. The study is limited to certain projects of ULTRATECHCEMENT LIMITED only.

3. Period of the study is restricted to five years only.

4. The present study cannot be used for inter firm comparison.

5. Limited span of time is a major limitation for this project.

6. The act and figures of the study is limited to the period of FIVE years i.e. 2015-2019.

7. The data used in reports are taken from the annual reports, published at the end of the

years.

8. The result does not reflect the day-to-day transactions.

CHAPTER-1
INTRODUCTION
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
INDUSTRY PROFILE
COMPANY PROFILE
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
CHAPTER-5
SUGGESTION
FINDINGS & CONCLUSION
BIBLIOGRAPHY
 BIBLIOGRAPHY

Books:
-Financial Management - Prasanna Chandra
-Management Accounting - R.K.Sharma & Shashi K.Gupta
-Management Accounting -S.N.Maheshwary
-Financial Management -Khan and Jain
-Research Methodology -K.R.Kothari

Internet Sites:
http\\:www.google.com
http\\:www.bharaticement.co.in
http\\:www.googlefinance.com