A STUDY ON CAPITAL BUDGETING AT BHARAT HEAVY ELECTRICAL LIMITED Project report submitted inPartial fulfillment for the award

of MASTER OF BUSINESS ADMINISTRATION Submitted by: JOYICE JOCAB Bearing Roll No. 08J41E0018 Submitted in partial fulfillment for the award of the Master of Business Administration

COMMERCE AND BUSINESS MANAGEMENT MAHATHMA GANDHI UNIVERSITY PANAGAL NALGONDA DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION

CERTIFICATE This is to certify that the project is on the CAPITAL BUDGETING by JOYICE JACOB bearing theR o l l N o : 0 8 J 4 1 E 0 0 4 2 O f t h e d e p a r t m e n t o f M B A i s a b o n a f i d e w o r k d o n e u n d e r t h e g u i d a n c e o f Mr.MOHAN RAO, Associate Professor and submitted to JNTU.Date:Place: Head of the Department Internal Guide External Examiner DECLARATION I hereby declare that the project entitled CAPITAL BUDGETING from BHEL, Hyderabad submitted to MAHATHMA GANDHI UNIVERSITY, Hyderabad in partial fulfillment of the requirements for the award of the degree MASTER OF BUSINESS ADMINISTRATION . The project is an original work done by me and to the best of my knowledge this work is not submitted to any other college or universityfor the award of any other degree, diploma or fellowship. D a t e : J O Y I C E

B Place: 08J41E00

ACKNOWLEDGEMENT The satisfaction that accompanies to the success of the task would be incomplete without mentioning thenames of the people, whose constant guidance and encouragement crown all effects with success. Iconsider it as my privilege to express my gratitude and respect to all those who guided, inspired andhelped me in the completion of my project work.I would like to thank BHEL, Hyderabad for giving me an opportunity to under go a project in their esteemed organization. I express my sincere gratitude to Mr. S.SATISH KUMAR, Relationship Manager and other personnel staff for guiding and encouraging me to the completion of project on time. I heartily thank Mr. B.Samuel Sushanth, Head of the Department and Internal Guide Mrs.G.V.Venela,Assistant Professor, Malla Reddy Engineering College, Dhulapally, Secunderabad for their continuousguidance, monitoring and Encouragement.Finally, I would like to thank my parents and friends for their moral support.D a t e : M . R A T N A K E R Place: 08J41E004
CONTENTS 1.COMAPNY PROFILE. 2. THEORITICAL ASPECTS OF CAPITAL BUDGETING 3. CAPITALS BUDGETING IN BHEL 4. DATA ANALYSIS AND CONCLUSION 5. FINDINGS AND CONCLUSION RECOMMENDATION AND SUGGESTIONS 6. DATA ANALYSIS AND INTERPRETATION 7. BIBLIOGRAPH

CHAPTER 1 COMPANY PROFILE BHEL AN OVERVIEW: BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector, today. BHEL was established more than 40 years ago, ushering in the indigenous Heavy Electrical Equipment industry in India - a dream that has been more than realized with a well-recognized track recordof performance. The company has been earning profits continuously since 1971-72 and paying dividendssince 1976-77.

BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry, Transportation, Renewable Energy,etc. The wide network of BHEL's 14 manufacturing divisions, four Power Sector regional centres, over 100 project sites, eight service centers, 18 regional offices and one subsidiary enables the Company topromptly serve its customers and provide them with suitable products, systems and services -- efficientlyand at competitive prices. The high level of quality & reliability of its products is due to the emphasis ondesign, engineering and manufacturing to international standards by acquiring and adapting some of the besttechnologies from leading companies in the world, together with technologies developed in its own R&D centers.

BHEL caters to core sectors of the Indian Economy:

\1. Power Generation and Transmission, 2. Industry, 3. Transportation, 4. Renewable Energy,

Power Generation and Transmission:

Power Generation Sector comprises thermal, gas, hydro and nuclear power plan business. The company manufactures 220/235/500/540 MW nuclear turbine-generator sets. Custommade hydrosets the power plant equipment manufactured by BHEL is based on contemporary technology comparablewith the best in the world, and is also internationally competitive. The company has proven expertise in plant performance improvement through renovation,modernization and up rating of a variety of power plant equipment, besides specialized know how of residual life assessment, health diagnostics and life extension of plants

Industries:
BHEL manufactures and supplies major capital equipment and systems like captive power plants, centrifugal compressors, drive turbines, industrial boilers and auxiliaries, waste heat recovery boilers, gas turbines, pumps, heat exchangers, electric machines, valves, heavy casting and forgings etc. to a number of industries other than power utilities like metallurgical, mining, cement, paper, fertilizers, refineries and petro-chemicals, etc. BHEL has also emerged as a major supplier of controls and instrumentation systems, especially distributed digital control systems for various power plants and industries.

Transportation: Most of the trains on Indian Railways, whether electric or diesel powered are equipped with BHELstraction propulsion system and controls. The systems supplied are both with conventional DC drives andstate of the art AC drives. Indias first underground metro at Kolkata runs on drives and controls supplied byBHEL. Renewable energy: BHEL has been manufacturing and supplying a range of renewable energy system and products. Itincludes solar energy system namely PV modules, PV power plants, solar lanterns, street lighting, solar pumps and solar water heating system. A large no of small hydro power stations have also been completed.New areas like wind power generation etc. are also being explore for entry. ABOUT BHEL RAMACHANDRAPURAM UNIT: The Ramachandrapuram unit of Bharat Heavy Electricals Limited (BHEL) has achieved its highest-ever turnover of Rs. 5,004 crore and a record profit of Rs. 930 crore during the year 2009-10.The company registered a 21 per cent increase in turnover as compared to Rs. 4,149 crore and 24 per cent increase in profit from Rs. 753 crore in the previous fiscal despite global instability, stiff competitionand critical input constraints. BHEL Ramachandrapuram has set a target of achieving a turnover of Rs.6,651 crore in the current fiscal, envisaging 33 per cent growth. Announcing the company's results here on Monday, BHEL Ramachandrapuram general manager (in-charge) R. Krishnan said the unit had a healthy order book of Rs. 15,264 crore and it was facing a major challenge in meeting the contractual requirements. It was, therefore, decided to accelerate manufacturingand project delivery for which initiatives such as outsourcing of finished assemblies, pre-order advancemanufacturing and process improvements were being taken. He said the unit was contemplating to significantly enhance capital investment for capacity expansion during the current fiscal and Rs. 205 crore, 60 per cent higher than the previous year's Rs. 128 crore, had been earmarked towards this end. Mr. Krishnan said the company was gearing up to meet super critical applications as adoption of super critical technology was essential for the low carbon growth strategy of the country. BHEL had also initiated steps to enter into technology tie-ups for higher capacity compressors to cater to the ever-increasing demand from fertilizer plants and refineries. In line with its commitment to expand manufacturing capacity to 20,000 MW by 2012, BHEL hadinvested more than Rs. 200 crore during the previous year while the company was fully on track to surpassthe strategic plan target of Rs. 7,000 crore by the end of 2011-12

Evolution and growth of BHEL Hyderabadunit : The Hyderabad Unit of BHEL is located at Ramachandrapuram which is around 30KM from thehistoric city of Charminar . Foundation Stone of the Plant was laid in 1959 and the production commencedin the year 1965. The Unit was set up mainly to manufacture 60MW and 110MW Steam Turbo Generator sets for State Electricity Boards and also 12 MW TG Sets. From this small beginning, theRamachandrapuram Unit has been growing steadily in different phases of development and today it caters toa wide spectrum of business in Power, Industry, Transmission, Oil and Gas. It now boasts the largestnumber of products under a single roof as compared to any of the other BHEL Units.

Phase. I - Project Implementation & Technology absorption (1959-70) Phase. II - Diversification (1971-78) Phase.III Phase.IV Phase.V Phase.VI - Technology upgradation (197985) - Market orientation (1985-91) - Adaptation to liberalization (1992-2002) - Modernization and Capacity enhancement (2003-2012)

ABOUT B.H.E.L RAMACHANDRAPURAM UNIT:

As a member of the prestigious BHEL family, BHEL Hyderabad has earned a reputation as oneof its most important manufacturing units, contributing its lions share in BHEL Corporationsoverall business operation The Hyderabad unit was setup in 1963 and started its operations with manufacture of turbogenerator sets and auxiliaries for 60 and 110 MW thermal utility sets. Over the years it has increased its capacity range and diversified its operations to many other areas.Today, a wide range of products are manufactured in this unit, catering to the needs of variety of industries like fertilizers & chemicals, petrochemicals & refineries, paper, sugar, steel, etc., BHEL Hyderabad unit has collaborations with world renowned MNCs like M/S General Electric,USA, and M/S Nuovo pig none, etc. HISTORY OF BHEL: BHARAT HEAVY ELETRICALS LIMITED (BHEL) is one of the pioneers in engineeringindustries in the world. The vital role played by the BHEL today in the country is the mark of itscontinuous effects to improve the service in the nation by consultancy, manufacturing and offeringservices in Power section. The success story of BHEL how ever goes back to 1956 when its first plant was set up in BHOPAL.Three major plants in Haridwar, Hyderabad and Tiruchirapalli followed this. These plants have beenthe core of BHELs effects to grow and diversify and become one of the most Integrated Power andIndustrial Equipment manufacturers in the world. The company now has 14 manufacturing units, 8service centers and 4 Power stations spread all over India and abroad. BHEL manufactures over 180 products under 30 major product groups and meet the needs of coresector like Power, Industry, Transmission, Defense, Telecommunications, Oil business etc. Itsproducts have established on enviable reputation for high quality and reliability. This is due to theemphasis placed all along on Design, Engineering and manufacturing to International Standards byacquiring and adapting some of the best technologies developed in its own centers. BHEL hasacquired ISO 9000 certification for quality management and ISO14001 certification for EnvironmentManagement. BHEL caters to the needs of different sectors by Designing and Manufacturingaccording to the needs of its Clients in Power sector. BHEL Ramachandrapuram unit to upgrade gas turbine facility THE BHEL Ramachandrapuram unit has decided to upgrade its gas turbine facility with an initialinvestment of Rs 34 cores during the current financial year. The investment is essentially directed towardsprocuring machinery to strengthen the existing infrastructure, according to Mr. A.N. Jagadeeswaran, Executive Director.

Buoyed by the good performance in the gas turbine sector, BHEL is also diversifying into advanced class turbines, low-cost steam turbine generators and export markets, Mr. Jagadeeswaran told Business Line .With orders from Kazakhstan, Iran, Oman in hand, the company was exploring markets in Algeria, Nigeria,Iran, Bosnia and other Latin American countries. Plans had also been firmed up for the manufacture of gasturbine-driven compressors for gas transportation/LNG projects, he said. The Ramachandrapuram unit is also focused on upgradation of gas turbines and retrofitting for lowemissions. The BHEL unit, achieved a turnover of Rs 1,533 cores during fiscal 2001-02. It is pinning itshopes of quick turnover growths in the power sector. The Union Power Ministry has set an ambitious targetof adding about one lakh MW of power during the Tenth and Eleventh Five-Year plans. BHEL had also equipped itself to provide expertise in life extension studies for the existing power plants inthe country, he said. In the power sector, BHEL units wants to diversify into setting up small, biomass-based power plants of thesize of 10-15 MW. "There is a definite demand for such compact alternate energy units and we propose tocapture this market with our advantages", he added. The Ramachandrapuram unit has emerged as an important contender for the 660 MW supercritical power plant of NTPC proposed in Madhya Pradesh. The company has identified a foreign consortium partner andthe bid for the project is to be executed on a turnkey basis, as for the NTPC's 500 MW Simhadri power plantin Andhra Pradesh, he said. In the area of pumps and heaters, BHEL units had signed up MoUs with Sulzer Pumps of Switzerland for the design, upgradation and retrofit of different pumps. INTERNATIONAL OPERATIONS BHEL has exported its equipment and services to over 50 countries. In Malaysia, BHEL has supplied 80%of the Boilers besides several Hydro sets and Gas Turbines. BHEL equipment are in operation in Matta, Cy,Saudi Arabia, Oman, Egypt, Libya, Greece, Bangladesh, Srilanka, Iraq, Australia etc. BHEL exportsturnkey power projects of Thermal, Hydro, Gas based types, Substation projects Rehabilitation projectbesides a wide variety of product like Insulators, Transformers, Valves, Motors, Traction Generators andservices for Renovation and Modernization and Operation Power station. RESEARCH AND DEVELOPMENT (R & D)

BHEL is one of the few companies world wide involved in Development of Integrated GasificationCombined Cycle (IGCC) Technology, which word uses in clean Coal Technology. BHEL R & D effortshave produced several new products. Some of the recent successful R & D products are Automated StorageRetrieval Systems, Automated Guided Vehicles for Material Transportation, Automatic Robotic WeldingSystems. HUMAN RESOURCE AND DEVELOPMENT (HRD) The greatest strength of BHEL is its highly skilled and committed people. Every employee is given equalopportunity to develop himself and improve his position. Continuous training and retraining a positive work culture and participation style of management have led to the Development of a motivated work force andenhanced Productivity and Quality. COMPANY VISION, MISSION AND VALUES: VISION A world Class, Innovation, Competitive and Profitable Engineering EnterpriseProviding total Business Solutions. MISSION To be the leading Engineering Enterprise providing Quality products System and services in the fieldof Energy, Transportation, Industry, Infrastructure and other potential areas. VALUES Meeting commitments made to External and Internal customers. Faster learning, Creativity and Speed of response. Respect for Dignity and potential of Individuals. Loyalty and Pride in the Company. Team playing. Zeal to Excel.Integrity and Fairness in all matters OBJECTIVESGROWTH To ensure a steady growth by enhancing the competitive edge of BHEL in existing Business, newareas and International operation so as to fulfill National expectations from BHEL.

PROFITABILITY To provide a reasonable and adequate return on Capital employed, Primarily through improvementsin Operational efficiency, Capacity Utilization and Productivity and generate adequate Internal