A Study On

“CAPITAL BUDGETING’’
(With reference to SRI RAMADAS PAPER BOARDS PVT.LTD, )

A Project Report submitted to JNTU, Kakinada

In Partial fulfilment of the requirements for the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by
PICHIKA SAI VENKATA CHANDU
(Reg. No: 18P31E0021)

Under the Guidance of

Mr. B.GIRI BABU, MBA,(Phd.)
Assistant Professor

Department of Management Studies

ADITYA COLLEGE OF ENGINEERING &
TECHNOLOGY
(Approved by AICTE, GOVT.OF.A.P. & Affiliated to JNTU, Kakinada)
Aditya Nagar, ADB Road, SURAMPALEM-533437
2018-2020

1
 ADITYA COLLEGE OF ENGINEERING & TECHNOLOGY
(Approved by, AICTE, New Delhi & Affiliated to JNTU Kakinada)
ADB ROAD, SURAMPALEM -533333

CERTIFICATE

This is to certify that the project entitled “CAPITAL

BUDGETING” with reference to SRI RAMADAS PAPER BOARDS

PVT.LTD, submitted to JNTU, Kakinada in partial fulfilment of the requirement

for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION

carried out by , Reg. No. 18P31E0021 is a bonafied work done under my guidance.

Head of the Department Internal

Examiner

Dr. N. Visalakshi. B.GIRI BABU

EXTERNAL EXAMINER

2
3
 DECLARATION

I hereby declare that this project report entitled “CAPITAL

BUDGETING” with reference to SRI RAMADAS PAPER BOARDS

PVT.LTD, submitted by me towards the partial fulfilment for the requirement of

the MASTER OF BUSINESS ADMINISTRATION degree in ADITYA

ENGINEERING COLLEGE, SURAMPALEM affiliated to JAWAHARLAL

NEHRU TEHNOLOGICAL UNIVERSITY, KAKINADA is my own work and it

is not submitted to any other Universities/institutions or published anywhere for the

award of any degree or diploma.

Place : Surampalem
Date :
PICHIKA SAI VENKATA CHANDU

4
 ACKNOWLEDGEMENTS

I feel it is my duty and honor to acknowledge all those who have

extended their guidance and warm support in completing my project work

Firstly, it is my great honor to thank Sri N. Sesha Reddy Garu,

Chairman, Aditya Group of Educational Institutions for providing state-of-the-
art facilities, experienced and talented faculty members.
It is my great privilege to thank Smt. N. Suguna Reddy Director,
Aditya Global Business School for her continuous support and encouragement
in my endeavor.
It is my special thank to Dr.T.K.Ramakrishna Rao, Principal, Aditya
Engineering College for supporting & encouraging me to do my project.
I take this opportunity to express my profound gratitude and deep
regards to Dr.N.Visalakshi, Professor and Head of the Department for her
exemplary guidance, monitoring and constant encouragement throughout this
project.
I profoundly to thank B. Giri Babu, Associate Professor, Aditya
Engineering College under whose guidance made me a thorough and complete
of my Project Work.
I convey my proud gratitude to N.Venkata Reddy, Manager In SRI
RAMADAS PAPER BOARDS PVT.LTD , , and employees of their valuable
help during my project training. I thank them for their co-operation and
suggestions given to me.

Finally, I thank all the teaching and non-teaching staff members and my
parents who extended their cordial and valuables.
PICHIKA SAI VENKATA CHANDU
(Regd. NO:18P31E0021 )

5
 INDEX

CHAPTER PARTICULARS PAGE NO

Introduction
Need of the Study
Scope of the Study
I
Objectives of the Study
Methodology
Limitations
II Industry Profile
Company profile
III
IV Theoretical framework
V Data Analysis & Interpretation
VI Findings, suggestions & Conclusion
Annexure
Questionnaires
Bibliography

6
 CHAPTER-1

 INTRODUCTION

 OBJECTIVES OF THE STUDY

 SCOPE OF THE STUDY

 NEED OF THE STUDY

 RESEARCH METHODOLOGY

 LIMITATIONS OF THE STUDY

7
 Introduction

Finances may be defined as money supply in relation to the management of cash

flows through an organization, at the time when f ndin is re ired

states that finances ha e een defined as a The oney position at that ti e is

anted a inancial reso rces are to e proc red fro s pplied reso rces and

distribution of the resources on the basis of predictions of business monetary

requirements. Management refers to human activities and physical resources

preparation, management, alignment, monitoring for achieving business goals.

Financial Management:
Financial management is a management linked to the management of

all financial operations. Financial management is concerned, with some overarching goal,

with acquisition, funding and asset management. In other words, financial management deals

with revenue and expense planning and determines which will help you to survive

financially. Financial management is the general management specializing in procurement

and its efficient use for reaching the common aim of the organization. Financial management

is the executive activity that deals with the company's planning and control.. The process of

identification of measurements and the recoding of financial transactions in any organization

to provide different users with information for decision making is typically defined as

financial accounting.

Definition:

“Financial Management is an area of financial decision making harmonizing individual

oti es and enterprise oals ”

- Weston and Brigam.

8
 Financial Management is the application of the planning and control of functions to

the finance f nction ”

-Howard and Upton.

Financial Management is the operational activity of a business that is responsible

for obtaining and effectively, utilizing the funds necessary for efficient operations.

- Joseph and Massie.

Nature of Financial Management:

Financial management is a management practice dedicated to financial resources

preparation and control. Although it was an economy branch till 1980, it has not had a

specific knowledge of the discipline as a separate operation until today, and still

draws economic support for its theoretical definition.

Importance of Financial Management:

In today's corporate world, financial management became more relevant. It's a money

science that helps the authorities to go much further. Financial management 's value

can be summarized as:

• t s pports the assess ent of lar e or s all ind stries' financial needs and

identifies the resources to meet them both internally and externally.

• ssesses the effecti e o ilization of indi id al or corporate sa in s in the

financial initiation.

9
• ssists the ana e ent of profita le projects y analyzin the project ia ility

through the capital budget technology, while investing funds.

• Ena les ana e ent to protect a ainst shareholders ' interests thro h the

appropriate use of the supply of funds from various sources, and also to monitor and

track the funds in order to achieve full benefits.

Functions of Financial Management:

1. Estimation of capital requirements:

An estimation of the company's capital needs shall be made by a

finance manager. This will depend on the costs and benefits expected and on future

programs and policies. Estimates must be made in a way that increases the enterprise

's profitability.

2. Determination of capital composition:

The capital structure needs to be determined until the calculation is

made. This includes an examination of debt equity in the short and long term. This

depends on the share of equity and external funds that a corporation needs to raise

from outside parties.

3. Choice of sources of funds:

A organization has several options for additional funds to be collected

1. Issue of shares and borrowings

2. bank and financial institutions to take loans

3. Public deposits that are used as shares.

10
Factor choice depends on the relative merits and demerits of each funding source and

period.

4. Investment of funds:

In order to ensure that investment security and regular returns are possible, the

financial manager must decide to allocate funds to profitable companies.

5. Disposal of surplus:

The financial manager must decide on the net profit. This is necessary in two

respects:

DIVIDEND DECLARATION — The dividend rate and other incentives

including a bonus shall be calculated.

RETAINED PROFITS-Volume that will depend on the company's

development, innovation, diversification plans

6. Management of cash:

In cash management, the Finance Manager has to decide. For several items

such as salary and wage payments, power and water charges charged, investors, and

current liabilities payments, cash is needed. Cash .

11
 The most significant financial feature of modern times is an effective
allocation of resources. The decision to commit funds to long-term assets involves
decisions. The value of company / company is determined by these decisions by
affecting production , productivity and risk.

Capital budgeting or capital spending decision is commonly known as

investment decision-making. Current long-range investment decisions involve the
expansion, acquisition, modernization and replacement of long-term assets, and
expectations for long-term benefits for companies are clever decisions.

These may be decision-making, decision-making or operational decisions in

investment. The decision to invest in long term assets and/or short term (current)
assets is related to the commitment of organizations and their capital. Decisions
related to short-term capital investment are covered by TCM. Decisions on long-term
assets shall be known as decisions on capital expenditure. Decisions on long-term
assets.

Decision on the allocation of spending funds for various long-term assets

relating to capital budgeting. These have long-term effects, impacting the company's
potential growth and earnings.

It is important to consider the potential advantages of investments carefully

in evaluating these investment proposals against the associated expenditures.

Capital budgeting decisions are often taken by organizations. A capital

budgeting decision is a decision that requires the use of resources. The budgeting of
capital is in any growing concern more or less a continuous process.

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OBJECTIVES OF THE STUDY

 To understand the financial results of the company in an element wise

report.

 To determine that the Company will boost the financial position.

 Research the importance of capital budgeting in project finance evaluation

 Study of the technique of the decision-making capital budgeting.

 To offer suggestions to Rama das Paper Board Pvt Ltd.

NEED FOR THE STUDY

 The project study analyzes and understands the capital budgeting

process in the cement sector that gives the practical impact of the
theory knowledge a meaningful exposure.
 Know about the operation of companies using various methods of
Capital Budgeting.
 To know how the enterprise gets funds from different resources.

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METHODOLOGY

The following methodology has been adopted to achieve the above-

mentioned goal. The data were obtained from primary and secondary sources for
this study.

PRIMARY SOURCES

It is also referred to as first-hand information; the data is collected by

observing and interviewing officials. Ask the accounts and other people in the
finance department questions. Some of these information is gathered in the seminars
held by the SRPB.

SECONDARY SOURCES

The secondary knowledge was provided by books , journals, browsers and

websites.

LIMITATION OF THE STUDY :

 Furthermore, the time limit is another limiting factor, that is to say that the 8-
week schedule duration does not suffice to render the SRPB Capital Budgeting
Analysis independently.
 Another limiting factor is the busy schedule of the officials in the SRPB.
Because of the busy schedule, I was restricted by officials to gather the full
organizational information.
 Non-confidential financial data unavailability.
 A short analysis, which in all respects has not been studied, shall be
performed.
 All capital budgeting strategies in SRPB are not employed. Therefore, few
forms of capital budgeting could be explained.

14
 CHAPTER 2

PROFILE OF INDUSTRY

15
 INDUSTRY PROFILE

Paper is a commodity, which is important in everyday life. Paper has

grown immensely an importance in such a way that it has became an indicator for a
co ntry’s ci ilization, since it is ostly depend pon its paper cons ption first to
understand the establishment and growth of the paper industry. We had to know in
rief a o t the introd ction and the esta lish ent of paper in the orld and it’s
enhancing into the Indian soil.

The ord “paper” is deri ed fro the ater plant called “papyr s”
That ro s aro nd the “Nile Ri er”, E ypt The citizens of E ypt sed the ark of
“papyr s plant” after c ttin and dry it t as said that T Jaril r Chin” had
prepared paper with the bark of the mulberry tree in 105 A. D.

In 1336A the world's first paper mill was begun. D. Paper mills began
in 1586 in Switzerland and London, taking into account the enormous aspect of the
paper industry. It was later spread in no long time to all the other countries of the
world.

The technology used in paper making has made many modifications and was
entirely different from the technology used in the beginning. In the year 1927
chlorine as as sed for leachin of the p lp n 1979, “Ro ert Micholas” the
French scientist has designed first paper machine in the world. The paper machine
sed in the late 1960’s as desi ned y “Lo er did t and Bri al donklin” The
achines sed no a day’s are ite different and ery ell ad anced oth in capacity
to produce and the enormous speed with which they operated.

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HISTORY OF INDIAN PAPER INDUSTRY

Unlike Iron & steel, textile and sugar industry the paper making industry
didn’t exist in ancient ndia for ritin p rpose ancient ndian’s sed Bhoja patras
(bark of tree) and tal patras (bark of palm) were used some of the old man scripts and
many grand has preserve up to the present times were written on these materials
which are not prevalent now a days.

The modern art of paper making came to India quite late the
fo ndations of latest papers ind stry ained o ent fro late 1870’s prior to the
latest technology, people used different techniques.

Old Egyptians (paper mailing to India) used sheets of papyrus made of plant
papyrus stem tissue. The earliest written boards, now a day, was usable up to five
thousand years ago. The Aryans used the Bhoja patras for writing with derived and
processed palm leaves and thin bark leaves.

irst s ccessf l paper ill in ndia “the tata har” paper ills as esta lished
in the year 1891 in Bangalore, East India from this year onwards, the paper industry
in India has gained much movements and speed throughout the country and increased
in number

SIZE AND CAPACITY OF PAPER INDUSTRY

Availability of raw materials and market density depends on the availability of
power, transportation facilities, etc. At the start of the 1st V plan, only 19 paper and
paperboard mills with a total annual capacity of about 1.39 tons were produced, while
1.34 lakhs tons were produced. Currently , the total annual capacity of 106 mills is
1394 lakhs and production is approximately 11,12 tons, although several mills have
spread to large sizes. Some units are well organized and well-equipped, with over
50,000 tons of productive capacity and too small units of over 1,000 tons capacity.

The fact that of 17 major mills with a capacity of 1.37 tons per year is
a reflector of its production. At the end of the 7th 5-year plan in 1957, the industry
was increased to 319 mills with an annual output of 32,31 tons.

17
 And in 1994 the volume of paper and paperboards was 380 and the total
installed production capacity of 37,09 lakhs was approximately 22 lakhs tons, except
newsprints. The lack of large-scale investments by the Indian paper company in the
public sector to make it important for the growth of the industry to meet its demands
in the near future in the wake of many 1987 anticipations of a paper industry scheme
y the Ger an paper co pany −MODV T in recent years Efforts ere ade to
reduce the importance of the news point and forced some cultural varieties of papers
manufactured by Indian mills into use by new papers and magazines.

TYPES OF PAPER PRODUCT

Paper industry supplies various types of paper board, special paper to a no. of
uses which include Government education, companies packing, news paper &
magazines etc.

The Indian paper industry produces a number of varieties of papers & paper
boards. These include glassine paper, art paper, carbon papers, insulation papers,
draft papers, maplitho papers, quoted papers, quoted board, duplex boards, triplex
boards, straw boards, paper boards, lotterypaper, Xeroxpaper,

18
 INDIAN PAPER INDUSTRY

PAPER & PAPER BOARD

NEWS PRINT

STANDARD GLAZED

CULTURAL INDUSTRIAL BOARD SPECIALTY

Writing Printing Wrapping Packing Straw Bond

Creamwove Map litho Poster Craft Mill MLCR
Azure laid Offset Tea Yellow Media Grey Electrical
Cream bid Photocopier Manila Linear Brown Laminate Base
Bond Cover ARJR Sack raft Duplex Airmail

19
 CONSUMPTION OF PAPER IN INDIA

India is in poor condition per capital consumption of paper. It is currently around

3 kg at a very low level. The lowest in Asia is 18 kg, since in the case of India it is only 0166 that
Indian consumption of capital paper is expected to increase by 12 kg by 2010. D.

PER CAPITA PAPER CONSUMPTION

S.NO COUNTRY Per Capita paper consumption

1 USA 289
2 Canada 251
3 Sweden 213
4 Germany 205
5 Switzerland 168
6 Japan 153
7 England 135
8 Israel 79
9 Singapore 60
10 U.S.S.R 32
11 Brazil 26
12 Egypt 10
13 China 5
14 Indonesia 3.5
15 India 3

PRESENT STATUS

In 1974, the Indian Government adopted a paper inspections order controlling the
prices and quality of panels when paper inspections were removed. The industry has earned
some receipt and hope for greater productivity through the manufacture of these paper and paper
board blends, which are driven by appalling demand.

20
 A large number of units in the past two or three years have achieved a significant
term. However, many conflicting signals were given by the paper industry in 1992.

The following steps have been taken to encourage and improve paper and paper
board manufacturing in the country in which paper units have been exempt from industrial
permits subject to 10 cautionary angulars using at least 75% the pulp derived from luggage,
agricultural and residues and other non-contravention raw materials.

The manufacture of printing paper and exposed hand paper, which are made from a
mixture of rice and wheat, straws, jute and luggage, not less than 75% by weight, containing the
pulp of more pulp containing the above materials excluded from service.

Importation of water paper at low customs duty rates (20 percent) was freely allowed
without the need for an import license. In recent years the government has concessions to help
industries improve their capacity utilization and financial responsibility in other concessions.
These include free imports of raw materials, the sanding of different paper and paperboard
vacancies and the de-licensing of certain paper types.

PAPER INDUSTRY STATE-WISE DISTRIBUTION OF UNITS &

CAPACITY
(In lakhs tones)
NO. INSTALLE
S.No PRODUCT
STATE OF D
. ION
MILLS CAPACITY
1. Andhra Pradesh 18 4.106 2.173
2. Assam 4 2.208 1.084
3. Bihar 8 0.915 0.025
4. Gujarat 45 2.743 1.670
5. Haryana 17 1.496 1.110
6. Karnataka 15 1.933 1.770
7. Jammu & Kashmir 1 0.033 0.009
8. Himachal Pradesh 13 0.094 0.215
9. Kerala 3 0.393 -
10. Madhya Pradesh 15 1.813 0.991
11. Maharashtra 52 4.697 3.555
21
12. Nagaland 1 0.030 0.218
13. Orissa 7 2.136 1.207
14. Punjab 17 1.378 0.820
15. Rajasthan 9 0.433 0.064
16. Tamilnadu 21 2.051 1.616
17. Uttar Pradesh 58 3.120 2.092
18. West Bengal 21 2.386 0.858
19. Chandigarh 1 0.030 0.016
20. Pondicherry 1 0.096 0.032

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 CHAPTER 3

PROFILE OF
RAMADAS PAPER BOARD PVT LTD

23
RAMADAS GROUP – A PROFILE

Ramadas Group of Industries was established in the year 1974 with a modest workshop, by name
Sri Ramadas Engineering Works. Sri Ramadas Engineering Works earned good name in the
Paper Industry by virtue of quality of the equipment such as Stock pumps, Vacuum pumps,
Centrifugal Cleaners, Screens, Refiners, Head boxes etc. supplied to the industry all over the
country.

Soon, Sri Ramadas Engineering Works started manufacturing Egg Tray manufacturing
machines. The demand for egg and egg export created boom for Egg Trays and the machines (to
manufacture trays). Besides supplying several machines, the group has gone in for Egg Tray
manufacturing also. It is no wonder the Trays manufactured are selling product soon and till
day enjoying name for their quality.

The first Paper machine – Sri Ramadas Paper Boards Pvt. Ltd. was established in the year
1994 with a capacity of 10 Tons per day. MG Plain & Ribbed Kraft Papers from 40 to 150
GSM are the products manufactured. The mill is now producing 15 TPD after a rebuild. The mill
also manufactures special quality lower GSM Kraft Papers for export purpose.

Sri Vinayaka Paper Boards Pvt. Ltd. emerged in the 1998 with a capacity of 15 Tons per
day of Kraft Paper. The mill was producing 50 Tons per day after two rebuilds. MF Kraft Paper
from 90 to 180 GSM and Burst Factor 14 to 22 were the products made. The MF Kraft Paper
earned name for its quality and catered to several corrugators all over South India. Motivated by
the market response for Kraft Paper quality and the demand for White paper varieties, Sri
Vinayaka Paper Boards has changed its product mix to Newsprint, Writing & Printing Papers.
The mill is presently producing Creamwove and Deluxe Creamwove varieties with 72 to 76
percent brightness and Newsprint of 55 percent brightness. Inview of vigorous expansions in
Ramadas Groups, Sri Vinayaka has sold in March 2009.

24
 Sri Ramadas Paper Boards, expanded its production capacity (In addition to the existing
capacity of 15 Tons per day of Kraft paper), by installing a second machine in the year 2002 with
a capacity of 45 Tons per day. While Newsprint is the primary product, Creamwove, Super
Deluxe Creamwove, Map Litho and Map Litho (Special) papers are the other products. Ramadas
Newsprint Deluxe and Ramadas (Prime Quality) are two qualities manufactured with 55 and 60
percent brightness. Creamwove, Deluxe Creamwove, Map Litho and Map Litho (Special) papers
are manufactured with 75 to 80 percent brightness.

Power without any interruptions and voltage fluctuations is very essential for continuous
process like paper manufacture. Sri Ramadas Paper Boards has started a 4 MW Co-generation
Power Plant in the year 2005. This Power Plant supplies quality Power and Steam to the paper
units in Ramadas, which helps in making better quality paper cost effectively.

Ramadas group uses recycled fibre i.e. waste paper as raw material for paper
manufacture. Also, the group employs total Chlorine Free (TCF) Bleaching to protect ecology
and environment. All the Writing & Printing grades at Ramadas group are manufactured in
neutral/alkaline medium using special sizing chemicals. These papers are multi purpose papers,
good for Ink Jet, Bubble

Jet, Laser and Offset printing. Care is taken in the manufacture of paper to impart the
requisite characteristics to paper for high print quality. Paper manufactured in neutral/ alkaline
medium using functional additives in the paper furnish are surface toughened, stronger, brighter,
permanent in nature.

The management of Ramadas group never compromises with quality of product despite
higher input costs. The Ramadas group have well established laboratory to conduct stringent
Quality Control and carry out Research & Development work as well. Having understood the
importance of end use requirement of Newsprint, Writing & Printing papers and Kraft paper for
corrugators, Ramadas group carried R & D work to strike the right raw material mix and process
to get best out of recycled fiber.

The Market response for Newsprint, Writing & Printing papers at Ramadas is highly
satisfying and motivating. Enthused by the success and market patronization, Ramadas group has

25
expanded production by installing one more paper machine of 80 to 100 Tons per day capacity.
This new machine was commissioned and started production in March 2009.

As on date Ramadas group is producing about 150 Tons per day of Various grades of
paper in its paper division.

The philosophy at Ramadas Group is – “There is al ays a etter ay of doin a thin ”

That is how there is continual development at Ramadas Group.

MARKETING CENTERS IN ANDHRA PRADESH

1) Hyderabad

2) Vizag

3) Vijayawada

4) Gunlur

5) Tirupathi

6) Warangal

OUT OF ANDHRA PRADESH

1) Delhi

2) Kolkata

3) Mumbai

4) Pune

5) Nagpur

6) Chennai

7) Pond cherry

8) Bangalore

Proximity to Raw materials:

26
 The raw materials in the process for the production Indigenous waste paper is available in
local mostly in Andhra Pradesh and Imported waste paper will be dumped mainly from Europe
and to some extent from US and other countries.

Labour Facilities:

The production plant of SRPB in Rajahmundry requires skilled and semi skilled works
which draws from near by areas. The qualified persons who work in the organization are having
the best knowledge in both technical managerial skills. The labour facility in SRPB very
impressive.

Working hours & shifts:

It is implemented that the factory is working under 4 shifts viz A, B, C and General
shifts. The shifts are arranged in a way as to carry on the production continuously round the
clock. The following table exhibits the shifts and timings.

SHIFTS TIMINGS

A 6:00 AM to 2:00 PM

B 2:00 PM to 10:00 PM

C 10:00 PM to 6:00 AM

The general shift is from 8.30am to 6.00pm

ORGANISATION CHART:

27
28
CHAIRMAN & MANAGING DIRECTOR

DIRECTOR

GENERAL MANAGER

DEPUTY GENERAL MANAGER

Asst. GENERAL MANAGER

MANAGER

DEPUTY MANAGER

Asst. MANAGER

JUNIOR MANAGER

SUPERVISORS
29

SHOP FLOOR WORKERS

PROCESS OF MANUFACTURE :

The process is basically divided into three sections.

1. Waste Paper Pulping
2. Paper Making
3. Finishing

1. WASTE PAPER PULPING :

Fiber Furnish :
(A) 60-70% Indigenous waste paper like Old Newspapers; Old Text
Books, Office record and note books.

(B) 30-40% Imported waste paper like News & Pams ; Magazine
Trimmings; Printer off Cuts and Coated Book Stock.

 Indigenous waste paper is available in local mostly in Andhra Pradesh.

 Imported waste paper will be dumped mainly from Europe and to some extent from US and
other countries.

 The above said waste paper mix will be charged to high consistency pulper through belt
conveyor and 15-16% consistency will be maintained by adding water. The required
chemicals like

Caustic Soda Lye : 8kg/T for pH boosting

Sodium Silicate : 16kg/T for Ink detachment
De-inking agent : 70gm/T works as surfactant.
are added into pulper during pulping. Time for pulping is 30 minutes and will be transferred
to the pulp retention tower through POIR @ 4% consistency. In poir all the plastic materials
and foreign contraries will be removed spontaneously

30
 From pulp retention tower the pulp passes into No. I chest then goes to High density cleaner
(where the heavy particles like sand, grit pins etc. are separated) and then passed away to
separplast (light materials like plastics polystyrene etc. are eliminated in separplast). The
separplast accepts comes into No.2 chest and rejects in the sense remained plastics and other
light weight materials goes to Diabolo screening. Some portion fiber might be in separplast
rejects. This fiber also will be separated and recollected into No.2 chest during Diabolo
screening.

 From No.2 chest pulp passes to sand trap pump then forwarded to de-inking cell with proper
dilution. (the sand would settle in the bottom and can be removed periodically in sand trap
cleaner)

 In De-inking cell majority of the ink which was printed on waste paper will come out along
with the foam by flotation method. 0.8 to 1.1% consistency will be maintained in this
operation. The primary cell accepts (ink removed cleaned pulp) goes to three stage
centricleaning and slotted pressure screen where the rejects (ink along with fiber) goes to
secondary stage of de-inking cell.

Dust, shives and sand particles will be eliminated during centricleaning with centrifugal
action and the fiber length is uniform is slotted screening.

 After getting screened the low consistency (1%) pulp processed to a flow box then forwarded
to thickness. The constancy of pulp is around 6% after thickening and collected into a chest.

 From the thickener chest pulp is to be taken into Twin drum press and pulp is thickened upto
26-28% consistency. From this pulp is forwarded to Hot dispecer.

Addition of chemicals are as follows :

1. Caustic Soda Lye : 6kg/T

Dosage at twin drum out let
2. Sodium Silicate : 12kg/T

3. Hydrogen peroxide : 18kg/T dosage at heating screw outlet for pulp

bleaching purpose

31
 The pulp will be diluted to 21-22% consistency from 26-28%.before going to hot dispersion.
During the hot dispersion the temperature for the pulp is about 85-90oC will be maintained
where un dissolved hot melts and some unbleached shives / contaminants will be dissolved
completely with the temperature. From the hot disperser the pulp will be sent to retention
tower and retain atleast for one hour for better results.

 From retention tower again the pulp will be diluted into 4% consistency and forwarded to
mixing chest.
 In mixing chest all necessary dyes and chemicals like Talcum powder and other whitening
agents will be added.
 After getting thoroughly mixed in mixing chest pulp is forwarded to Receiving chest and
then Machine chest to proceed for paper making.

2. PAPER MAKING :

Without the need for an Import Licence, importation of water paper at a low tariff rate (20
percent). The government has concessions in recent years in support of industries in further
concessions to increase their utilization of capacity and their financial responsibility. These
include free imports of raw materials, the sanding and de-licensing of certain paper types of
different paper and carton vacancies.

3. FINISHING :
The cylinders wound on the paper machine are wound on a cylindrical rewinder to a
desired cylindrical size and loaded on to a sheet cutter for commercial papers, in which the
cylinders are packed and sent to market.

WATER RECIRCULATION AND EFFLUENT WATER TREATMENT :

Now a days fresh water is very much costly and valuable also. Our fresh water
consumption is very less compared to other industries where as we have full-fledged effluent
treatment plant system.
All the waste water from different sources in the plant will be collected into an
equalization tank (the suspended solids of water is 3000 PPM) and pumped to Primary clarifier.
The primary clarifier overflow passes into Aeration tank and then forwarded to secondary
clarifier. Secondary clarifier overflow water suspended solids 100 to 150 PPM) will be reused in
our process in place of fresh water.
Primary and secondary under flows are processed into sludge centrifuge. The generated
sludge from centrifuge will be sent for waste land filling.
32
 The pulp so obtained is bleached in a number of stages. Bleaching removes the coloring matter
and imparts brightness to the pulp. Unbleached pulp as such is utilized in the manufacture of
various packing and wrapping papers.
Bleached pulp is utilized for the manufacture of various writing, printing and base papers.
During the first stage of the bleaching process, the pulp is directly chlorinated with chlorine and
allowed retention time of one hour. This pulp is extracted with solution of caustic, washed and
again bleached in the subsequent stages with solution of either calcium hypochlorite or chlorine
dioxide with intermediate washing between the stages. The washed pulp is stored in stock chests.
The pulp at very low consistencies is formed into a sheet on an endless screen mesh made
of phosphor bronze / plastic wire. The sheet is calendared to impart smooth finish in the surface
on both sides. A calendar consists of a number of chilled iron rolls with good surface finish,
through which the sheet is passed between the nips formed by the rolls.

This paper is reeled or cut into sheets by the cutters depending on the requirement for the
customers.Steam is required for power generation and process requirement. Part of the
requirement is met with steam generated from the Recovery Boilers and the balance steam is
generated in Coal-Fired Boilers.
OPERATIONS DEPARTMENT:
The SRPB manufactures of writing & printing paper, poster paper, Kraft and
business papers like Copier, and multipart stationery. Using Waste Paper, Chemicals Dyes, oils,
coal etc., are main raw materials. The Company produces 120-150 tons per day.

SRPB PAPER PRODUCTIONS

Year Ended Production (MT)

2005-06 2,050

2006-07 6,030

2007-08 21,046

2008-09 22,977

2009-10 23,920

2010-11 26,286

33
 2011-12 33,697

2012-13 33,857

2013-14 35,156

2014-15 40,096

2015-16 55,416

2016-17 50,500

2017-18 61,500

2018-19 61,000

First installed capacity of SRPB is 10 tonnes at present installed capacity is 150.

Licensed capacity is 180 tons.

EFFLUENT TREATMENT PLANT

PRIMARY TREATMENT :-

Raw Effluent from Unit-I & II passed through stationary screens and joins Equalization
tank. The purpose of stationary screens is to eliminate floating bodies from Raw Effluent
entering Effluent Treatment Plant. Raw Effluent along with sludge thickener over flow and
Sludge De watering Machine filterate pumped from equalization tank to Primary Clarifier. The
Floating bodies like plastic pieces and polythine covers are to be avoided as they are non –
Biodegradable.

In the Primary Clarifier the suspended matter from Raw Effluent Settled at bottom and
from there the Primary Clarifier under flow (Consistency 1.5%) pumped to the sludge thickener.
The Primary Clarifier outer flow (Suspended solids less than 100ppm) sent to Aeration tank.
Removal of suspended matter from Effluent is an important and essential aspect as it helps not
only removal of suspended solids. But also reduces BOD (upto 40%) thereby contributing in
reducing load on biological treatment.

Impurities present in the Raw Effluent are floating bodies like plastic/polythine pieces,
pulp, starch, talcum powder, clay, sand, organic and inorganic waste materials.
34
 The Primary Clarifier under flow sludge with around 1.5% consistency pumped to sludge
thickener for further thickening the over flow of the sludge thickener with around 600 ppm sent
to equalization tank. The under flow of the sludge thickener with around 5.0% consistency,
pumped to sludge dewatering machine.

At sludge dewatering machine the sludge is pressed in between the wires for removing
the water and sludge coming out of the sludge dewatering machine as pressed cake with a
moisture of around 65%. The filterate with around 800 ppm suspend solids is being sent to
equalization tank. The pressed cake is disposed off to egg tray manufacturing units.

SECONDARY TREATMENT :-

The primary clarifier over flow with BOD of around 300 ppm is taken to aeration tank for
Biological Treatment (The Aerobic activated Biological Sludge Process). In the aeration tank
bacteria cultured the BOD (organic matter) present in the Effluent is food for bacteria. In the
process bacteria oxygen is given for strengthening the bacteria nutrients like urea and DAP are
added.

In the aeration tank MLSS (Mixed Liquor Suspended Solids) of around 3500 ppm is to be
maintained the high MLSS result in saturation deaths of bacteria. The dead bacteria floats and
causes problems in secondary clarifier.

The over flow with 3500 MLSS pumped to Secondary Clarifier from aeration tank. 90%
of the setteled sludge (Bio Mas) is to be re-circulated to aeration tank. This is required to
maintain MLSS in aeration tank for better biological treatment. 10% of the sludge is to be
diverted to sludge thickener. This is required to arrest the abnormal growth of MLSS in aeration
tank. The secondary clarifier over flow (Treated Effluent) pumped to the factory which
drastically reduces fresh water consumption.

Characteristics of Effluent in various stages of Effluent Treatment :-

Total
Condu
S.No. Particulars pH Suspended B.O.D Oxygen Ash
-ctivity
Solids T.S.S
1 Raw Effluent 7.0 /7.5 - 2300 ppm 500 ppm - -
2 P.C. over flow - - >100 ppm 300 ppm - -
3 P.C. under flow - - 1.5 % - - -
4 S.T. Over flow - - 600 ppm - - -
35
 5 S.T. Under flow - - 5.0 % - - -
S.D. M/c
6 - - 35% - - 40%
pressed cake

7 S.D. M/c filtrate - - 800 ppm - - -

MLSS 3500
8 Aeration tank - - - 3.0 ppm -
ppm
9 Treated Effluent - - >100 ppm >30 ppm - -

The values of different parameters of effluent samples in various stages of effluent

treatment are given only for guidance.

36
 CHAPTER 4

THEORETICAL FRAME-WORK

37
 CAPITAL BUDGEING

The most significant financial feature of modern times is an effective allocation of

resources. The decision to commit funds to long-term assets involves decisions. Such decisions
tend to influence growth , profitability and risk to determine the value of the company / business.

Capital budgeting or capital spending decision is commonly known as investment

decision-making. Current long-range investment decisions involve the expansion, acquisition,
modernisation and replacement of long-term assets, and expectations for long-term benefits for
companies are clever decisions.

These may be decision-making, decision-making or operational decisions in investment.

The decision to invest in long term assets and/or short term (current) assets is related to the
commitment of organizations and their capital. Investment decisions in short-term assets fall
within the scope of the Working Capital Management Decisions in the current report. Decisions
related to long-term assets management are known as decisions relating to capital-budgeting.

Decision on the allocation of spending funds for various long-term assets relating to
capital budgeting. These have long-term effects, impacting the company's potential growth and
earnings.

It is important to consider the expected advantages of investment carefully in the

evaluation of such investment proposals against the expenditures associated with the investment.
A capital budgeting decision is a decision that requires the use of resources. The budgeting of
capital is in any growing concern more or less a continuous process.

For instance: land purchase is an example of the decision on capital budgeting. Improved
investment in the research and product production of a new advertising campaign, etc. are both
examples of decisions on capital budgeting. Likewise replaced obsolete equipment with modern
machinery, branch or company recruitment, computerization and networking of the organisation.

38
 In all cases, however, decisions have a long-term impact on the organization 's
performance. The company's existence as a profitable entity may endanger even a single wrong
decision.

IMPORTANCE OF CAPITAL BUDGETING:

Among the important decisions to be made by the management there are many factors
that make capital expenditure decisions. From the following aspects of capital budgeting
decisions, the importance of capital budgeting can be understood.
1. Long Term Implications: Decisions on the capital budget have long-term
impacts on the company's cost and returns. These decisions have a significant
impact on the company's future position. The financial manager also
contributes to the potential funding needs for this project.
2. Substantial Commitments: The decisions on the capital budget are generally
mostly supported. Substantial capital funds are also blocked.
3. Irreversible Decisions: Most decision-making in the capital budget is
irreversible. Once taken, the company can not return unless it is prepared to
take away significant losses that could result due to a project abandonment at
mid-term.
4. After the Capacity and Strength to Compete: Decisions on capital
budgeting impact a company's competitiveness capacity and power. If the
decision to modernize is postponed, a organization will lose competitiveness.

PROBLEMS & DIFFICULTIES IN CAPITAL BUDGETING:

1. Future uncertainty: Decisions on capital budgeting include long-term commitments. Long-

term vulnerability is common. Uncertainty may be linked to project costs, future expected
returns, future competition, legal legislation, political situation etc.
2. Time Element: The consequences of a decision on capital budgets are spread over a long
period. At various times, the cost and benefits of a decision can arise. There are immediate
costs for a project. However, over several years the investment has been recovered. To order
to be equal to the cost the potential benefits need to be changed. The longer the time it takes,
the higher the risk.

39
3. Difficulty in Quantification of Impact: Financial analysts may be unable to quantitatively
calculate the costs and benefits of projects. Example: the proposed new product to be
introduced by the company will trigger sales of other goods to be increased or decreased
from the same brand already sold. The effect of sales of other goods can also have influences
other than the introduction of the new product, which make it very difficult to assess.

ASSUMPTIONS IN CAPITAL BUDGETING:

The decision-making process on capital budgeting is a multiple, analytical process. There must
be a variety of assumptions.
1. Certainty with respect to cost & Benefits: The cost and benefits of a
plan over two-three years are very difficult to estimate..

2. Profit Motive : Another hypothesis is that decisions on capital

budgeting are taken primarily to increase the profit of the company.

The activities can be listed as follows:

 To sell division or business. dis-investments i.e.

 Change in distribution methods.

 Undertakings a plan for ads.

 Towards programs for Research & Development.

 At the launch of new projects.

 To diversification. To diversification.

 Reduction in costs.

40
FEATURES OF INVESTMENT DECISIONS:

 Future exchange of the existing funds.

 Funds in long-term assets are invested.
 For a number of years, the potential benefits will come to the client.

IMPORTANT OF INVESTMENT DECISIONS:

 Taken they affect the company's long-term growth.

 Build on the Company's risk.

 Company requires huge sums of capital.

 They are, at a substantial loss, irreversible or reversible.

 They are one of the hardest choices to make.

TYPE OF INVESTMENT DECISIONS:

 Keep the company growing.

 THE NEW BUY SPECIAL.
 Replacement & Upgrading.

INVESTMENT EVALUATION CRITERIA:

 Five Cash Flow Estimation.

 Estimating the rate of return required.

 Os Implementation of the preference decision rule.

41
 Cash flows are taken into consideration in determining the real profitability of the project and
are a clear way of identifying good pool projects. Ranking is possible because larger cash
flows are better than smaller ones, early cash flows can be referred to later ones, which I
should help to make maximum use of the wealth of shareholders between mutually exclusive
projects. This should also be a criterion that applies independently to others to any significant
investment initiative. There are many approaches in use. The technical diagram can be
represented as follows:

Capital Budgeting Techniques:

Traditional Approach Modern Approach

(or) (or)
Non-Discounted Cash Flows Disconnected Cash Flows

Pay Back Period (PB) Net Present Value (NPV)

Accounting Rate of Return (ARR) Internal Rate of Return

Profitability Index (PI)
Discounted Payable Period

NET PRESENT VALUE :

A classic economic framework for assessing investment proposals is the Net Present
value test. This is one of the discounted cash flow forms. It acknowledges the value of money to
money.

It correctly postulates that cash flows from different times vary in value and are only
compared when current values are discovered.

42
The following steps are involved in the calculation of NPV:

• ct al ass ptions sho ld e sed to esti ate the in est ent project cash flo s
• reasona le rate of interest to disco nt cash flo s sho ld e selected, s ally the expense of
the co pany's o n capitalization .
• Capital cost discounting will be used to measure the present value for the inflows and the
outflows of a plan for investment.
• The Net resent al e is the difference et een the €/Cash Cash lo Val e and the Cash
Flow Value present.
• C rrent net al e sho ld e esta lished by removing the cash outflow present value from the
present cash inflow value. If the NPV is positive, the project should be approved.

NPV = Present Value of Cash inflow – Present value of the cash outflow
Acceptance Rule:
Accept if NPV > 0

Reject if NPV < 0

May accept if NPV = 0

One with higher NPV is selected.

INTERNAL RATE OF RETURN METHOD:

Another discounted cash flow strategy is the internal return rate (IRR) approach. The
approach is based on the present value theory. The size and pacing of cash flows are taken into
account.

IRR is nothing but the current value of the future net financial flows, equivalent to the
present value of the expenditure required to undertake a project for capital investment.

43
 In the case of a single project, the concept of the internal return rate is easy to understand.

Acceptance Rule:
Accept if r > k

Reject if r < k

May accept if r = k

where r = rate return

k = opportunity cost of capital

PROFITABILITY INDEX (OR) BENEFIT COST RATIO:

The profit-cost (B / C) ratio of the profitability index PI is yet another time-consuming tool for
assessing investment proposals. It's a value for money. The current value of future net cash
inflows is proportional to the required rate of return to the initial cash outflow.

Present Value of Cash inflows

PI = -----------------------------------------
Present Value of Cash outflows

Acceptance Rule :

Accept if PI > 1

Reject if PI < 1

May accept if PI = 1

Profitability Index is a relative measure of projects profitability.

44
PAY BACK PERIODE METHOD:

The period when money is returned is one of the major concerns of any individual or
organization which invests a great deal of money. The investment concern would like to see
the invested capital recovered at least as soon as possible. The period for reimbursement is
defined as the period required for the proposal to match the cumulative cash flow to its cash
outflows. In other words, the time taken to recover the initial project cost is the repayment
duration. The reimbursement period is usually given by the number of years. The period
required for the plan to pay off even on its net investments may also be specified. This is the
time limit.
The payback period is the number of years the firm takes before depreciation but after
taxation recovers its original investments by net returns.
The pay-back period is completed if the investment produces continuous annual cash inflows.
as follows:

Initial Investment
Pay Back = ------------------------
Annual cash inflow

In the event of unequal cash inflows, a payback period can be determined by adding the
cash inflows up to the initial cash expenditure total.

Acceptance Rule:
 Accept if the calculated value is less than the standard, otherwise rejected by
management.
 If the reimbursement period for a project is below a maximum company reimbursement
period it can be accepted.
 The project with the lowest pay-back period and the lowest classification level in a
project with the highest pay-back period ranks as a level form.

45
DISCOUNTED PAY BACK PERIOD:
One of the major drawbacks to the system of payment is that the cash flow is not
discounted. This has led to the existence of a reduced pay-back period. The time taken to recover
the investment costs on the basis of the present value is referred to as the discounted return
period.
Discounted payment returns are higher because cash balances are high before the cost is
recovered.

ACCOUNTING RATE OF RETURN (OR)

AVERAGE RATE OF RETURN (ARR) :
Return on investment ( ROI) is also known. This is an accounting method that uses the
financial statements to calculate the viability of an investment plan by means of the accounting
details. The investment ARR can be calculated in accordance with Solomon as a ratio of net
accounting income to initial investment i e ”

Average Net Income

ARR = ---------------------------
Average Investment

Average Income = Average of after tax profit

Average Investment = Half of Original Investment

Acceptance Rule:

• ccept if the eas red rate eets the ana e ent ini li it

• The RR projects can e discarded at a pace lo er than expected

• The ana e ent of proposals can also assist in rankin on the asis of the RR

• a project with the highest ARR will be rated the highest while a project with the lowest ARR
will be rated the smallest.

46
 CAPITAL BUDGETING METHODS IN PRACTICE

 Almost every backbone company has been found to be tat in a review of the budgeting of
capital activities of fourteen medium to large companies in India.
 Approximately 2/3 of companies used IRR and approximately 2/5 NPV with their payback
and/or other technology. The second most popular way of using IRRs was found.
 Their concentrate on early recovered investment and focus on risk gains importance as they
are easy to use and understand.It was found that 1/3rd of companies always insisted on
computation of pay back for all projects, 1/3rd for majority of projects & remaining for some
of the projects.
 Reasons for secondary DCF techniques were difficult to understand and use three-way
techniques, lack of qualified professionals, and lack of a willingness to employ the DCF
techniques by top management.
 A major production and marketing company said that its business conditions did not require
DCF techniques.
 Again, another company has confirmed that substitute projects in this business were very
popular and DCF techniques for assessing such projects were not deemed appropriate.
Techniques in India involved challenges in understanding and using three techniques, lack of
trained practitioners, and lack of ability to use DCF techniques in the top management

PROCESS
CAPITAL BUDGETING PROCESS:
At least five phases of capital expenditure planning & control can be identified:

• n est ent opport nities identification (or or anization)

• Benefit and cost projections de elop
• Net profit e al ation
• ro ress and expendit re a thorisation for capital
• n est ent project onitor

47
INVESTMENT IDEAS:
Investment opportunities have to be identified or created investment proposals arise at different
levels within a firm.

Nature of Idea Level

Cost reduction ------
Replacement Plant Level
Process/Product Development ( 50% in India cover this level)
Expansion Top management
Diversification In India, it is insignificant
New Product Marketing Dept., ( or) Plant Manager
Replacing an old
Machine ( or)
Improving the Factory Level.
Production techniques.

n est ent proposals sho ld e enerated to e ploy the fir ’s f nds f lly ell & efficiently

FORECASTING :

Cash flow forecasts by operating managers, with the assistance of financial managers,
should be growth. The related risk should be managed correctly. Cashflow evaluation calls for
the compilation and review, both in financial and non-financial terms, of both qualitative and
quantitative data. These data are given by MIS.

Correct treatment should be given to :

• rther orkin capital
• roceeds fro existin assets to e sold
• Dis antlin
• inancial flo s (to differentiate et een operatin flo s)

48
EVALUATION :
Experts should be grouped who are free from grinding when selecting assessment
methods such as NPV , IRR, PI, Pay Back, ARR & Discounted Pay Back.

Pay Back periods are used as the oscillation of the primary process and the IRR / NPV in India.
Pay Back duration is used as the same form. It is necessary to take the following into account.For
evaluation, minimum rate of return or cut-off is necessary.

• Us ally if the ei hted a era e capital costs ( CC) are calc lated
• Capital opport nity cost sho ld e ased on the risky cash flo ness of in est ent
propositions.
• si nificant factor is risk ana e ent T o essential approaches are used in India:
sensitivity analysis & cost conservative.

AUTHORIZATION:
Screening and selecting may differ from one company to another. When large sums are
involved usually final approval rests with top management. Delegation of approval authority
may be effected subject to the amount of outlay. Budgetary control should be rigidly exercised.

CONTROL AND MONITORY:

A monitoring system for Capital Projects is required to review and monitor the
performance after completion or lifetime of investment projects. Following the actual
performance comparison with original estimates to ensure better predictions and improve future
forecasting techniques. It will allow the company to praise its projects again and take the action
required.

In order to control capital spending reports, Indian companies regularly use reporting
projects that may be continuous quarterly, semi-annual, monthly or bi-monthly.

 Date costs

 physical phase and finishing

 Total cost accepted

49
 Total cost overhaul

DECISION MAKING LEVEL:

Three stages of decision-making were established for planning and control purposes:

• Jo

• d inistration

• trate ic trate ic

OPERATING CAPITAL BUDGETING:

Includes small routine costs, as lower-level management office equipment.

ADMINISTRATIVE CAPITAL BUDGETING:

Between these two levels medium-sized investments, such as middle-level management,

are involved.

STRATEGIC CAPITAL BUDGETING:

Requires big investments to acquire new company or to grow into a new century, treated

with a distinctive character of top management.

Long Term Capital Budgeting In SRI RAMADAS PAPER BOARDS PVT.

LTD.,

PRE – INVESTMNET STAGE:

In a planned economy, like in India, public sector projects must be identified within the
national sector planning framework as a whole. At the time of formulating the plan, all projects

50
of each sector must be scientifically identified. In practice, the alteration stage is the most
neglected phase of project planning. In practice, it is, however, observed.

The five-year plans demonstrate the specific economic development planning agenda and
other primary targets that are to be achieved during the plan era. Each sector 's role in meeting its
physical objectives and financial outlays, which could be made available for the development of
the sector during the planning period, is largely indicated by the macro planning work carried
forward at the start of every five years plan.

In the Five-Year Plan, naming a project is not the approval of the execution of the
project. It sends a preliminary audit to the FR of the project in the Ministery and subsequently
copies of the feasibility report to the evaluation agencies, i.e. the Planning Commission, the
Bures of Public Enterprises and Plan Finance of the Ministery, to the Department of Finance
(DFOE). It also provides only a "model signal" to prepare the feasibility report for assessment
and investment.

Therefore, in consultation with their public enterprises, the administrative ministry

concerned is responsible for the organizational identification of these projects.

Importing (i) replacements (ii) available and raw materials (iii) available technology and
skills (iv) inter-industry ties (v) current industrial (vi) growth plan (vii) old projects etc. are
considered the most critical steps in project identification and planning.

These measures can not be objectively tested in actual practice and are followed at the
point of recognition by the public sector administrative ministry business. The public sector
projects frequently randomly on the basis of Vorstellungen und Möglichkeiten zur Nachfrage
oder Verfügbarkeit of raw materials rather than an outcome of scientific study and the systematic
analysis of feasible projects.

PROJECT FORMULATION :
The second step of Phase Phase Cycle project viz. Project Formulation is an experiment in
advance to decide whether to invest, when to invest and how much to invest. Project formulation
In order to assess the technical , financial, commercial, organizational and economic viability of
the project planning process in Indian the project / feasibility reports are required mainly because

51
their importance is relatively delayed in realization. In addition, expenditure decisions for large
projects in the past have been more common than exceptions for half-baked projects and poorly-
conceived projects, and time periods and the cost-over runs of projects from the public sector.

In the early 1970s , the government set up a new project assessment division in the
Planning Commission along with the formation of the Public Investment Board (PIB). In the
1974 reporting of the Feasibility Reports of Industrial Projects the Division prepared and
circulated the guidelines.

This directive, unlike the previous manual, includes all the information and data to be
submitted and analyzed in the Feasibility Report in order to allow the assessment agency to carry
out I a technical analysis, in order to determine whether technical parameter requirements are
realistic

The guidelines outline the details required to be given and evaluated on following issues:
(a) general sectoral information;(b) the intent of the proposal; (c) alternative means where
appropriate to achieving the objectives and better suitability of the proposed project; (d) project
description

PROJECT APPRAISAL :

The project evaluation follows the stage of formulation. The aim of the evaluation
process is not only to decide whether or not to accept or reject a proposal for investment, but also
to recommend ways of redesigning or reformulating the project in order to provide better
technical , financial, commercial and economic viability.

The assessed projects are a multidisciplinary activity and are an important resource for
sound decision taking and selection of projects. Yet that is also viewed as skepticism and has
played a key role in leading to systematic approaches for forecasting the future and creating
methods for evaluating social costs and benefits, however the investment plan can not be
completely evaluated by them alone.

The need to analyze the projects and make decisions about investment based on social
viability emerges mainly because of the fundamental characteristics of developing countries,
52
which have limited development capital and numerous needs. The aim of planning is to achieve
social justice economic growth. The assessment of the proposal is a simple and thorough way to
achieve the economic development plan objectives. A certain minimum of reliable and up-to -
date data is available throughout the country and the availability of trainees to carry out the
assessment analysis. The evaluation work requires

As previously stated, the investment decision of the projects of the public sector must be
made under the approved plan framework work. Therefore, in the Planning Commission was
created the Project Evaluation Division (PAD), to prepare the detailed assessment report for the
Central Plan projects. For any investment proposals within the scope of the annual budget work,
the finance ministry issues expenditure sanction. The Finance Program Division and the Ministry
of Finance 's Bureau of Public Enterprises will also consider and report on the government's
investment proposals.

53
 CHAPTER -5
DATA ANALYSIS & INTREPRETATION

54
 DATA ANALYSIS & INTREPRETATION

An investment plan starts all financial operations, which includes a financial assessment
of a project. Capital Budgeting has a part to play here. Each project is evaluated on the basis of
the following
 Cost Estimates.
 Cost Generations.

COST ESTIMATES :-

Feasibility The project's report is prepared on the basis of the costs of similar units at the
time of the project report and the latest cost should be increased. The compilation of information
concerning expenditures of the various equipment should be focused on the basis of ongoing
planning, so that for the project, a fair estimation of the costs is made.

COST OF GENERATION :-

Public sector borrowing is essentially based on the equity of 3:1 debt, and the central
government 's general interest rate on loan components is 10.5% (now increased to 11%). The
plant life as provided for by the 1948 Electricity Supply Act is 25 years and a depreciation of
90% of the cost fixed assets must be calculated on a straight line basis. The expenses for
operation and maintenance normally amount to 2.5% on the basis of these assumptions of the
capital cost, the cost for the generation of cash flow could be calculated at a discounted rate of
IRR of 12%. Various organizations have typically acknowledged this pace
Feasibility Report based on above-noted methodology and site selection, coal
connections, power delivery examined in all instances where investment is Rs.1 Crore and
above. Feasibility report Report Feasibility Because SRPB is a public sector corporation, the
government shall officially approve all investment decisions after the approval of the Public
Investment Board.

55
SHARE CAPITAL :
It is a government of India which owns the entire share capital. No additions were made
throughout the year. However, from Rs. 80,000 toRs. 1,00,000 million, the approved capital was
increased and the favored value or share was divided to Rs.10/- each by Rs.1000 per-.

ROLE OF FINANCE MANAGEMENT IN INVESTMENT

DECISIONS IN SRPB:

The financial manager is the project team level. It plays an important role in
the study stage of the project by analyzing and choosing different alternatives. The
accuracy of the data and the quality of the data as a financial analyst needs to be
checked and fulfilled.

The energy projects are highly capital intensive and a thorough feasibility
report needs to be planned before substantial resources are allocated to a scheme.

• The project's need

• Esti ates for de and
• The e site alternati es
• Lar e plant and e ip ent para eters •
• Esti ates of costs
• The che e's ia ility

Cost Estimates :- Cost estimates, financial justification and project returns are the fields in
which financial management has a role to play. Cost forecasts by cost analysts are to be prepared
and the finance manager is to be reviewed. Cost engineering is a specialist registered company
and needs to be established at the energy projects contest due to inadequate cost data on project
components.

56
 The current methodology of preparing cost estimates without any price contingencies
provision raises an important question. Due to the time gap between cost estimate planning and
investment decisions, these figures are now out of date and will also require an update following
their analysis by evaluating agencies.

CAPITAL BUDGETING
EXAMPLE OF STAGE I & II

Sl. Schemes Outlay

1. Stage-I ( 3 x 20000 MT) 5,48,92,00,000

2. Stage- II( 3 x 50000 MT) 11,03,69,00,00

3. Stage-III( 1 x 50000MT) 1229.38(Millions)

Stage – I consisting outlay of 5,48,92,00,000 this is Recovered in 5 years of time.

RECOVERY OF PROJECTS (Stage-I):

Following calculations are under consider

Under Discounted Pay Back Period:
Stage – I ( 3 x 20000 )Outlay : 5,48,92,00,000
NET PRESENT VALUE:

Year Cash Inflows Dis. @12% Present Value of Cashflows

1 Rs. 1.129.384.000 0,892 Rs. 1.007.410.528

2 Rs. 1.310.895.000 0,797 Rs. 1.043.986.315

3 Rs. 1.761.879.000 0,711 Rs. 1.252.695.969

4 Rs. 1.732.086.000 0,635 Rs. 1.109.874.610

5 Rs. 2.193.061.000 0,567 Rs. 1.243.465.587

57
Present Value of Cash Flows Rs. 5.647.433.010

Less: Cash Outlay Rs. 5.489.200.000

Net Present Value Rs. 158.233.010

GRAPH 1:

Interpretation:
The Net Present Value is the difference between the “ resent al e of cash inflo s” and
“ resent al e of cash o tflo s

PROFITABILITY INDEX ( P.I):

Year Investments (In Lakhs) Cash inflows(P.V.) Cash Out Flows (Initial)
2008-09 2,945,083.37 18180 20000
2009-10 3,040,293.17 24780 30000

58
2010-11 3,192,444.28 45070 60000
2011-12 3,071,183.11 54640 80000
2012-13 3,545,210.87 18630 30000
2013-14 9,025,874.00 161290 22000
2014-15 3,991,459.40 19210 33000
2015-16 4,038,114.20 11130 70000
2016-17 3,667,441.15 65420 40000
2017-18 7,338,000.00 19233 80000
2018-19 2,089,775.00 61323 60000
Total: 498896 525000

P.V. of Cash Inflows

PI = ---------------------------
Initial Cash outlays

498896
= ---------- = 0.95
525000

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GRAPH 2 :

Investments (In Lakhs)

10,000,000.00
8,000,000.00
6,000,000.00
Investments (In Lakhs)
4,000,000.00
2,000,000.00
0.00
2010-11 2012-13 2014-15 2016-17 2018--19

Interpretation:
a) The profitability index of present value of cash inflows and cash out flows is
fluctuation from year to year in the year 2010-11 the present value of cash inflows
is 18180 were as in the year 2018-19 has been increased with 61323.
b) The highest cash inflows has been recorded in 2015-2016 as 161290 and lowest
has been recorded as 18180 in the year 1999-00.

PAY BACK PERIOD:

Year Investments (In Lakhs) Cash inflows(P.V.) Cash Out Flows (Initial)
2008-09 40,000.00 8000 20000
2009-10 60,000.00 1600 30000

60
2010-11 70,000.00 2200 60000
2011-12 20,000.00 4500 80000
2012-13 10,000.00 4000 30000
2013-14 66,000.00 3000 22000
2014-15 25,000.00 2900 33000
2015-16 12,000.00 1100 70000
2016-17 90,000.00 1600 40000
2017-18 30,000.00 1200 80000
2018-19 50,000.00 1800 60000
Total: 473,000.00 31900 525000

Initial Investments
Pay Back Period = ---------------------------
Annual Cash inflows

40,000
= --------- 5 Years
8000

GRAPH 3:

Investments (In Lakhs)

100,000.00
80,000.00
60,000.00
Investments (In Lakhs)
40,000.00
20,000.00
0.00

2008-09 2010-112012-13 2014-152016-17 2018-19

61
Interpretation:

a) In the Pay Back method the Investment and the case inflows are fluctuating from
year to year where as in the year 2013-14 it is 40000 and in the year 2018-19 is
50000.
b) Cash inflows are in the order of increasing to decreasing from 2013-14 and 2018-
18
AVERAGE RATE OF RETURN:
Year Investments (Lakhs) Average Income Cash Flows after Taxes
(Thousands)
2008-09 400,000.00 20000 100000
2009-10 480,000.00 15000 260000
2010-11 280,000.00 28000 440000
2011-12 240,000.00 85000 750000
2012-13 150,000.00 75000 160000
2013-14 260,000.00 64000 200000
2014-15 600,000.00 78000 300000
2015-16 100,000.00 25000 600000
2016-17 250,000.00 18000 800000
2017-18 520,000.00 22000 750000
2018-19 550,000.00 21000 810000
Total 3,280,000.00 430000 4360000

Average Income
Average Rate of Return = ----------------------
Average Investments

20000
= --------- = 0.06%
400000

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GRAPH 4:

Investments (Lakhs)

800,000.00
600,000.00
400,000.00 Investments (Lakhs)
200,000.00
0.00

Interpretation:

a) Average rate of return is calculated based on Average income and Average investment
where as Average income in the year 2013-14 is 20000 and investments in the year 2018-
19 is 400000.
b) The value from 2013-14 and 2018-19 are fluctuating from year to year.

DISTRIBUTION OF REVENUE 2020-2020

Fuel
Generation
Administration
& Other Reatined earnings
Interest &Expenses
Depreciation
8% 2%
Finance
Charges Dividends
14% Fuel
Tax 51%
3% 63 Tax

Dividends
5%
Interest & Finance
Reatined Charges
earnings
Interpretations:

a) In the year 2013-14 the revenue is distributed in the from of fuel retained earning,
dividends is latest finance change, depreciation and for employees.

b) Where as in the year 2013-14 it is been fluctuated the rates compare to the year 2018-
19.

TABLE 7:
FY YEAR NET BLOCK (IN LAKS)
2013-14 284738
2014-15 323083
2015-16 328916
2016-17 386106
2017-18 400381
2018-19 520861

NET BLOCK AND GROSS FIXED ASSETS

600000

520761
500000

400000 400281
366106
323073 328916
300000 284738 Series1

200000

100000

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

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Interpretations:

a) From 2013-2014 the net block and gross fixed assets is 328916.

b) Where as the Net Block and gross fixed asset is been increased in the
year 2018-19.

TABLE 8:

FY YEAR NET SALES(IN LAKS)

2013-14 229055
2014-15 258117
2015-16 286453
2016-17 315400
2017-18 355502
2018-19 440302

NET WORTH AND NET ASSETS

500000
450000 440201
400000
350000 355501
315040
300000 286453
250000 258117 Series1
229045
200000
150000
100000
50000
0
13-14 14-15 15-16 16-17 17-18 18-19

Interpretations:

65
 a) Net worth and net assets has been increasing from year to year from
2016-17 it is 229055 and compare to 2018-19 it has been increased to
440302.

b) By observing the chat we can say the net worth and net assets has been
increasing from 2017-18 to 2018-2019

TABLE 9 :
FY YEAR PROFIT AFTER TAX
2013-14 34245
2014-15 37338
2015-16 35396
2016-17 36085
2017-18 52609
2018-19 72032

PROFIT AFTER TAX

80000 72022
70000
60000 52608
50000
37338 35396 36075
40000 34245 Series1
30000
20000
10000
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

66
Interpretations:

a) The chart show the increase value after the deduction of tax in the year
2019-20.

b)The Profit is changing from year to year in the year 2016-17 it is 34245 where
as increasing value in the year 2016-2017 and decreased, in the year 2018-19
the value is increased.

b) TABLE 10 :

FY YEAR POWER GENERATION (M UNITS)

2013-14 7470
2014-15 7080
2015-16 7090
2016-17 10923
2017-18 19790
2018-19 19237

GENERATION AND SALES

25000

19790 19237
20000

15000
10823 Series1
10000
7470 7070 7080

5000

0 67
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
GENERATION IN MUS – SALES IN MILLIONS:

Interpretations:

a) On the X – airs year are been shown from 2013-14 to 2018-19 and the value
has been increasing from year to year.

b) In the year 2003-14 the generation and sale has been 7470 and the value has
been increasing year to year but 2018-2019 the value is decreasing.

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 CHAPTER -5

FINDINGS & SUGGESTIONS

CONCLUSIONS
BIBLIOGRAPHY

69
 FINDINGS AND SUGESSTIONS

 The SRPB Corporate challenge is to deliver increasingly large quantities of reliable and
quality electricity. The company will lead the process of rapidly developing the
electricity industry through the expeditious economic and efficient planning,
implementation and operation of power stations.

 As in project implementation, the station continued to excel in power generation with the
power station having reached its first goal of total capacity installation. Ramagundam is
generating power at consistently high plant load factor.

 The organization needs the capable personalities as management to lead to organization

successfully. The management make the plans and implement of these plans. These plans
are expressed in terms of long-term investment decisions.

 The special budgets are rarely used in the organization like long-term budgets, research &
development budget and budget and budget for constancy.

 From the 2000-2003 revenue budget, it becomes apparent that the current sales (ref.
168552.50 deficiencies) were more than those budgeted or estimated (ref. 164208.54
deficiencies). It is a positive indicator that the budget's net revenue is high over expected.

 Fuel utilization is perfectly carry out in RSTPS. And Cash from Ash effectively carry out
the job.

70
 New projects acceptance consider on the basis of Return Benefits. Risk is evaluated while
considering the new projects.

CONCLUSIONS

 Each organization has a set of objectives and goals, but it only has the
economic planning and execution of these goals and objectives to achieve
them.

 The company commissioned 19502 MW with an operating capacity of 19.9

percent as of March 31, 2000 in the short term of its life Currently, SRPB
generates 24.9% of electricity in the country. SRPB has been implementing
12 cement production projects with a total authorized capacity of 29.935 MT
and 6 gas-based cement projects as of 31 March 2004. As of 31 March 2004.

71
BIBLIOGRAPHY
References :

Accounting of finance

Accounting for costs and resources

Accounting of finance

Management Accounting

Websites :

www.google.com
www.ramadaspaper.com
www.yahoofinance,com

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