ABSTRACT

This project examines a capital budgeting in which a serious at limited annual budgets its located and a production of annual savings generated by a project may or any not be used on additional capital investment specially a plastic injection machine selection and part assignment problem is investigation under such a annual budgets constituent. The problem mathematically formulated and solved and determined a set of optimal recommendations that include the infection machine size to be purchased part items to be assigned to be them and timings of purchase ,so that the net present value of the total net savings is maximized this paper present a new analytical method of capital budgeting. That takes into account both customers wants and computations states (or relative position and strength !. The model which is loosely based on the "uality function deployment. (#$% in cooperation, market segments, customer wants design specifications, varies manufacture process! and capital budgeting! projects as rows and columns of inter connected #$% matrix. &n addition, we have used the analytical hierarchy process ('() to determine the intensity of the relationship between the variable involved in each matrix of model. *ltimately the goal of those matrixes is to prioritize projects.

INDEX
PAGE NO

Contents
List of table List of figures

Chapter1:-Introduction Chapter 2:- Literature revie Chapter 3:-co#pan$ pro%i&e Chapter !:-Data ana&$sis and interpretation Chapter ):-*indin+s and conc&usion Chapter ":- -i.&io+raph$ Appendices

1-3 !-2" 2'-3' 3(-!" !(-), )1 )2-)"

CHAPTER-1 INTRODUCTION

INTRODUCTION
INTRODUCTION OF THE STUDY: The term capital budgeting refers to long term planning for proposed capital outlay and their financing. Thus it includes both rising of long term funds as well as their utilization. &t may thus be defined as the firm+s formal process for the ac"uisition and investment of capital. &t is the decision making process by which the firms evaluate the purchase of major fixed assets. &t involves firm+s decision to invest its current funds for addition, disposition, modification and replacement of long,term on fixed assets. (owever, it should be noted that investment in current assets necessitated on account of investment in a fixed assets. &s as to be taken as a capital budgeting decision. -apital budgeting is a many,sided activity. &t includes searching for new and more profitable investment proposals, investigating, engineering and marketing considerations to predict the conse"uences of accepting the investment and making economic analysis to determine the profit potential of each investment proposal. &ts basic feature can be summarized as follows. .. &t has the potentiality of making large anticipated profits.

/. &t involves a high degree of risk. 0. &t involves relatively long,term period between the initiate outlay and the anticipated return. -apital budgeting is investment decision,making as to whether a project is worth undertaking. -apital budgeting is basically concerned with the justification of capital expenditures. -urrent expenditures are short,term and are completely written off in the same year that expenses occur.

NEED FOR THE STUDY: The term 1capital budgeting1 is used to describe how managers plan significant outlays on projects that have long,term implications such as the purchase of new e"uipment and the introduction of new products. 2ost companies have many more potential projects than can actually be funded. (ence, managers must carefully select those projects that promise the greatest future return. (ow well managers make these capital budgeting decisions is a critical factor in the long run profitability of the company. OBJECTIVES OF THE STUDY: To understand the various methods of determining the size of capital budgeting. To %etermine the payback period for an investment. To compute the simple rate of return for an investment. To determine the efficiency of the company. To measure the profitability of the projects by considering all cash flows. SCOPE OF THE STUDY: This study is significant for capital budgeting practices of a company by focusing on examining the processes, appraisal techni"ues, financing, estimating and accounting for risk when undertaking capital budgeting. &n practice, this study will assist management and decision makers of companies to improve performance and profitability of their businesses by undertaking capital budgeting efficiently and effectively.

METHOD OF DATA COLLECTION: Primary data: The primary data is collected from the personnel interview. S !"#dary data: The study has been made using secondary data, which are obtained from annual reports and statements of accounts. The study is period for the annual reports and statements of accounts extended form the year. LIMITATIONS OF THE STUDY: The lack of information sources for the analysis part. Time and money are critical factors limiting this study. The data provided by the prospects may not be .334 correct as they too have their limitations.

CHAPTER-$ REVIE% OF LITERATURE

REVIE% OF LITERATURE
&n our present day economy, finance is defined as the provision of money at the time when it is re"uired. 5very enterprise, whether big, medium of small, needs finance to carry its operations and to achieve its targets. &n fact, finance is so indispensable today that it is rightly said to be the lifeblood of an enterprise. 6ithout ade"uate finance, no enterprise can possibly accomplish its objectives. $inancial management is applicable to every type of organization, irrespective of its size kind of nature. &t is as useful to a small concern as to a big unit. ' trading concern gets the same utility from its application as a manufacturing unit may expect. This subject is important and useful for all types of ownership organizations. 6here there is a use of finance. $inancial management is helpful. 5very management aims to utilize its funds in a best possible and profitable way. 7o this subject is ac"uiring a universal applicability &t is indispensable in any organization as helps in8 $inancial planning and successful promotion of an enterprise9 'c"uisition of funds as and when re"uired at the minimum possible cost9 )roper use and allocation of funds9 Taking sound financial decisions9 &mproving the profitability through financial controls9 &ncreasing the wealth of the investors and the nation9 and )romoting and mobilizing individual and corporate savings

OBJECTIVES OF FINANCIAL MANA&EMENT $inancial management is concerned with procurement and use of funds. &ts main aim is to use business funds in such a way that the firm+s value:earnings are maximized. There are various alternatives available for using business funds. 5ach alternative course has to be evaluated in detail. The pros and cons of various decisions have to look into before making a final selection. The decisions will have take into consideration the commercial strategy of the business. $inancial management provides a framework for selecting a proper course of action and deciding a viable commercial strategy. The main objective of a business is to maximize the owner+s economic welfare. This objective can be achieved by8 .. )rofit 2aximization /. 6ealth maximization 1' Pr"(it ma)imi*ati"#: )rofit earning is the main aim of every economic activity. ' business being an economic institution must earn profit to cover its costs and provide funds for growth. ;o business can service without earning profit. )rofits are a measure of efficiency of a business enterprise. )rofits also serve as a protection against risks which cannot be ensured. The accumulated profits enable a business to face risks like fall in prices, competition from other units, adverse government policies etc. Thus, profit maximization is considered as the main objective of business8 (& when profit < earning is the aim of business then profit maximization should be the obvious objective. (ii )rofitability is a barometer for measuring efficiency and economic prosperity of a business enterprise, thus, profit maximization is justified on the grounds of rationality.

(iii 5conomic and business conditions do not remain same at all the times. There may be adverse business conditions like recession, depression, severe competition etc. ' business will be able to service under unfavorable situation only if it has some past earnings to rely upon. Therefore a business should try to earn more and more when situation is favorable. (iv )rofits are the main sources of finance for the growth of a business. 7o, a business should aim at maximization of profits for enabling its growth and development. (v )rofitability is essential for fulfilling social goals also. ' firm by pursuing the objective of profit maximization also maximizes socio, economic welfare. $' % a+t, ma)imi*ati"# 6ealth maximization is the appropriate objective of an enterprise financial theory asserts that wealth maximization is the single substitute for stockholder+s utility. 6hen the firm maximizes the stockholder+s wealth, the individual stockholder can use this wealth to maximize his individual utility. &t means that by maximizing stockholder+s wealth firm is operating consistently towards maximizing stockholder+s utility. Ca-ita+ ./d0 ti#0: I#tr"d/!ti"#: The term capital budgeting refers to long term planning for proposed capital outlay and their financing. &t includes raising long,term funds and their utilization. &t may define as a firm+s formal process of ac"uisitions and investment of capital. -apital budgeting may also be defined as The decision making process by which a $irm evaluates the purchase of major fixed assets . &t involves firm+s decision to invest its current funds for addition, disposition, modification and replacement of fixed assets. &t deals exclusively with investment proposals, which is essentially long term projects and is concerned with the allocation of firm+s scarce financial resources among the 'vailable market opportunities. 7ome of the examples of capital 5xpenditure are

'c"uisition cost of permanent assets as land and buildings. -ost of addition, expansion, improvement or alteration in the fixed assets. = >% project cost, etc.

-apital budgeting is a many,sided activity. &t includes searching for new and more profitable investment proposals, investigating, engineering and marketing -onsiderations to predict the conse"uences of accepting the investment and making 5conomic analysis to determine the profit potential of each investment proposal. &ts basic feature can be summarized as follows. .. &t has the potentiality of making large anticipated profits. /. &t involves a high degree of risk. 0. &t involves relatively long,term period between the initiate outlay and the anticipated return. ?n the basis of the above discussion it can be concluded that capital budgeting -onsisting )lanning the development of available capital for the purpose of maximizing the long,term profitability. -apital budgeting is investment decision,making as to whether a project is worth undertaking. -apital budgeting is basically concerned with the justification of capital expenditures. -urrent expenditures are short,term and are completely written off in the same year that expenses occur. D (i#iti"#1 "( !a-ita+ ./d0 ti#0 Jam 1 C' 2a# H"r# 8 -apital budgeting involves a current investment in which the benefits are expected to be received beyond one year in the feature.! &t 7uggests that the investment in any asset with a life of less than a year falls into realm of the working capital management, whereas any with a life of more than one year involves capital budgeting

% 1t"# a#d Bri0,am: -apital budgeting involves the entire process of planning expenditures whose returns are to extend beyond one year!. C,ar+ 1 T H"r#0r #8 -apital budgeting is the long,term planning for making and financing proposed capital outlays!. R". rt N A#t,"#y8 The capital budgeting is essentially a list of what, management believes to be worthwhile projects for the ac"uisition of new capital assets together with the estimated cost of each projects!. Thus, capital budgeting decision may be defined as he firms decision to invest its current funds most efficiently in @ong,term projects, in anticipation of an expected flow of feature funds over a series of years. &t involves the process of generation of investment proposals9 estimation of cash flows for the proposals, evaluation of cash flows, and selection of projects based an acceptance criterion and finally continuous revaluation of investment projects after their acceptance. Nat/r "( Ca-ita+ B/d0 ti#0 ;ature of capital budgeting can be explained in brief as under

-apital expenditure plans involve a huge investment in fixed assets. -apital expenditure once approved represents long,term investment that cannot be reserved or withdrawn without sustaining a loss.

)reparation of coital budget plans involve forecasting of several years profits in advance in order to judge the profitability of projects.

&t may be asserted here that decision regarding capital investment should be taken very carefully so that the future plans of the company are not affected adversely. Im-"rta#! "( Ca-ita+ B/d0 ti#0 D !i1i"#1 -apital budgeting is a process used to determine whether a firm+s proposed investments or projects are worth undertaking or not. The process of allocating budget for fixed investment opportunities is crucial because they are generally long lived and not easily

reversed once they are made. 7o we can say that this is a strategic asset allocation process and management needs to use capital budgeting techni"ues to determine which project will yield more return over a period of time. The "uestion arises why capital budgeting decisions are criticalA The foremost importance is that the capital is a limited resource which is true of any form of capital, whether it is raised through debt or e"uity. The firms always face the constraint of capital rationing. This may result in the selection of less profitable investment proposals if the budget allocation and utilization is the primary consideration. 7o the management should make a careful decision whether a particular project is economically acceptable and within the specified limits of the investments to be made during a specified period of time. &n the case of more than one project, management must identify the combination of investment projects that will contribute to the value of the firm and profitability. This, in essence, is the basis of capital budgeting. Pr"! d/r "( Ca-ita+ B/d0 ti#0 -apital investment decision of the firm have a pervasive influence on the entire spectrum of entrepreneurial activities so the careful consideration should be regarded to all aspects of financial management. &n capital budgeting process, main points to be borne in mind how much money will be needed of implementing immediate plans, how much money is available for its completion and how are the available funds going to be assigned tote various capital projects under consideration. The financial policy and risk policy of the management should be clear in mind before proceeding to the capital budgeting process. The following procedure may be adopted in preparing capital budget8, 314 Or0a#i*ati"# "( I#2 1tm #t Pr"-"1a+' The first step in capital budgeting process is the conception of a profit making idea. The proposals may come from rank and file worker of any department or from any line officer. The department head collects all the investment proposals and reviews them in the light of financial and risk policies of the

organization in order to send them to the capital expenditure planning committee for consideration. 3$4 S!r #i#0 t, Pr"-"1a+1' &n large organizations, a capital expenditure planning committee is established for the screening of various proposals received by it from the heads of various departments and the line officers of the company. The committee screens the various proposals within the long,range policy,frame work of the organization. &t is to be ascertained by the committee whether the proposals are within the selection criterion of the firm, or they do no lead to department imbalances or they are profitable. 354 E2a+/ati"# "( Pr"6 !t1' The next step in capital budgeting process is to evaluate the different proposals in term of the cost of capital, the expected returns from alternative investment opportunities and the life of the assets with any of the following evaluation techni"ues8,

%egree of *rgency 2ethod ('ccounting =ate of return 2ethod )ay,back 2ethod =eturn on investment 2ethod %iscounted -ash $low 2ethod.

374 E1ta.+i1,i#0 Pri"riti 1' 'fter proper screening of the proposals, uneconomic or unprofitable proposals are dropped. The profitable projects or in other words accepted projects are then put in priority. &t facilitates their ac"uisition or construction according to the sources available and avoids unnecessary and costly delays and serious cot,overruns. Benerally, priority is fixed in the following order.

-urrent and incomplete projects are given first priority. 7afety projects ad projects necessary to carry on the legislative re"uirements. )rojects of maintaining the present efficiency of the firm.

)rojects for supplementing the income )rojects for the expansion of new product.

384 Fi#a+ A--r"2a+' )roposals finally recommended by the committee are sent to the top management along with the detailed report, both o the capital expenditure and of sources of funds to meet them. The management affirms its final seal to proposals taking in view the urgency, profitability of the projects and the available financial resources. )rojects are then sent to the budget committee for incorporating them in the capital budget. 394 E2a+/ati"#' @ast but not the least important step in the capital budgeting process is an evaluation of the programmed after it has been fully implemented. Cudget proposals and the net investment in the projects are compared periodically and on the basis of such evaluation, the budget figures may be reviewer and presented in a more realistic way. Si0#i(i!a#! "( !a-ita+ ./d0 ti#0 The key function of the financial management is the selection of the most profitable assortment of capital investment and it is the most important area of decision,making of the financial manger because any action taken by the manger in this area affects the working and the profitability of the firm for many years to come. The need of capital budgeting can be emphasized taking into consideration the very nature of the capital expenditure such as heavy investment in capital projects, long,term implications for the firm, irreversible decisions and complicates of the decision making. &ts importance can be illustrated well on the following other grounds8, 314 I#dir !t F"r !a1t "( Sa+ 1' The investment in fixed assets is related to future sales of the firm during the life time of the assets purchased. &t shows the possibility of expanding the production facilities to cover additional sales shown in the sales budget. 'ny failure to make the sales forecast accurately would result in over investment or under investment in fixed assets and any erroneous forecast of asset needs may lead the firm to serious economic results.

3$4 C"m-arati2 St/dy "( A+t r#ati2 Pr"6 !t1 -apital budgeting makes a comparative study of the alternative projects for the replacement of assets which are wearing out or are in danger of becoming obsolete so as to make the best possible investment in the replacement of assets. $or this purpose, the profitability of each project is estimated. 354 Timi#0 "( A11 t1-A!:/i1iti"#' )roper capital budgeting leads to proper timing of assets,ac"uisition and improvement in "uality of assets purchased. &t is due to ht nature of demand and supply of capital goods. The demand of capital goods does not arise until sales impinge on productive capacity and such situation occurs only intermittently. ?n the other hand, supply of capital goods with their availability is one of the functions of capital budgeting. 374 Ca1, F"r !a1t' -apital investment re"uires substantial funds which can only be arranged by making determined efforts to ensure their availability at the right time. Thus it facilitates cash forecast. 384 %"rt,-Ma)imi*ati"# "( S,ar ,"+d r1' The impact of long,term capital investment decisions is far reaching. &t protects the interests of the shareholders and of the enterprise because it avoids over,investment and under,investment in fixed assets. Cy selecting the most profitable projects, the management facilitates the wealth maximization of e"uity share,holders. 394 Ot, r Fa!t"r1' The following other factors can also be considered for its significance8,

&t assists in formulating a sound depreciation and assets replacement policy. &t may be useful n considering methods of coast reduction. ' reduction campaign may necessitate the consideration of purchasing most up,toDdate and modern e"uipment.

The feasibility of replacing manual work by machinery may be seen from the capital forecast be comparing the manual cost and the capital cost.

The capital cost of improving working conditions or safety can be obtained through capital expenditure forecasting.

&t facilitates the management in making of the long,term plans an assists in the formulation of general policy.

&t studies the impact of capital investment on the revenue expenditure of the firm such as depreciation, insure and there fixed assets.

FEATURES OF CAPITAL BUD&ETIN&: The important features, which distinguish capital budgeting decisions in other day,today decisions, are capital budgeting decisions involve the exchange of current fun benefits to be achieved in future. The future benefits are expected and are to be realized over a series of years. The funds are invested in non,flexible long,term funds. They have a long term and significant effect on the profitability of the -oncern. They involve huge funds. They are irreversible decisions associated with high degree of IMPORTANCE OF CAPITAL BUD&ETIN&: -apital budgeting decisions are among the most crucial and business decisions. ' number of factors are responsible for capital decisions. -are must be taken while making capital budgeting decisions influence all the departments of a company such as production, marketing, personnel etc. The importance of capital budgeting can be *nderstood from the fact that an unsound investment decision may prove to be very 5xistence of the organization. The other reasons for keeping more attention include the following. risk. the

.. INVESTMENT OF HU&E FUNDS: capital budgeting decisions re"uired larger capital outlay hence, the company should carefully plan its investment programmed so that it may get the funds at the right time and they must be put to most profitable use. 'n opportune investment decision can give rise for spectacular result. ?n the other hand, an ill,advised and incorrect decision can jeopardize the profitable position and can also be the cause for closer of the company. /. &RO%TH8 The effects of investment decisions extend into future and have to be endured for a longer period than the conse"uences of the current operating expenditure. ' firm+s decision to invest in long,term assets has a decisive influence on the rate and direction of its growth. ' wrong decision can prove disastrous for the continued survival of the firm9 unwanted or unprofitable expansion of assets will result in heavy operating costs to the firm. ?n the other hand inade"uate investment in assets would make it difficult for the firm to compete successfully and maintain its market share. 0. RIS;: ' long,term commitment of funds may also change the risk complexity of the firm. &f the adoption of an investment increase average gain but causes fre"uent fluctuations in it earnings, the firm will become more risky. Thus, investment decision shapes the basic character of a firm. E. FUNDIN&: investment decisions generally involve large amount of funds, which make it imperative for the plan its investment programmers very carefully and make an advance arrangement for procuring finances internally or externally. F. IRREVERSIBILITY: 2ost investment decisions are irreversible. &t is difficult to find a market for such capital items once they have been ac"uired. G' COMPLE<ITY8 &nvestment decisions are among the firm+s most difficult decisions. They are an assessment of future events, which are difficult to predict. &t is really a complex 5stimation. problem to correctly estimate the future cash flows of an investment 5conomic, political social and technological forces the uncertainty in cash flow

H. LON&-TERM APPLICATION: The effect of a capital budgeting decision will be felt by the company over a long period and therefore they have decisive influence on the rate and direction of the growth of the company, for example, if accompany purchases a new machine by paying heavy amount and the project comes out to be unprofitable, the company decides to write off the burden of fixed cost up to stage, where the -ompany decides to write off the machine completely. 'part from this, if the results are extended for a long period of time, it may result in loosing the flexibility of the decision maker, because it involves lot of uncertainty about the future of the investment. $urther, it may be influenced by several future unforeseen events. I IRREVERSIBLE DECITIONS8 capital budgeting decisions are irreversible in majority of the cases. &t is due to the fact that, it is very difficult to find a market for the capital assets. The only alternative is to treat the entire value of the assets as a scrap. This will result in heavy loss. J CPITAL BUD&ETIN& DECISION IS MOST DIFFICULT TO TA;E 8 -apital budgeting decisions involve assessment of future events, which are most uncertain. &t will be Kery difficult to project sales revenues, costs and benefits accurately in "uantitative terms because of economic, political, social and technological factors. $uture, the 5rroneous forecast of asset needs can result in serious conse"uence for a company. .3 RAISIN& FUNDS: 'nother reason for the importance of capital budgeting is that always assets ac"uisition involves substantial amount of funds and the part of the -ompany. Cefore a firm spends large amount of funds, it must plan them to rise systematically because funds are not always available with the company. -ompany contemplating a major capital expenditure programmed may need to arrange its financing re"uirements several years in advance, to be sure of having the availability of funds for expansion. .. ABILITY COMPLETE8 finally, it has been said that many firms fail, not because they have too much capital e"uipment but because they have too little ability to complete. The conservative approach of having a small amount of capital e"uipment may be approach may also be fatal if the other competitors install modern and automated

e"uipment that permit them to produce a better product and sell it a lower price. (ence, the investment in capital assets help must the company to face and meet competition from the other companies in the same industry. LAR&E INVESTMENT: -apital expenditure decision, generally involves large investment of funds. Cut the funds available with firm are scarce and the demand for funds exceeds resources. (ence, it is very important for a firm to plan and control its capital expenditure. LON& TERM COMMITMENT OF FUNDS: -apital expenditure involves not only large amount of funds but also funds for long,term or a permanent basis. The long,term commitment of funds increases the financial risk involved in the investment decision. CAPITAL BUD&ETIN& PROCESS8 -apital budgeting is a complex process which may be divided into the following phases8 L &dentification of project investment opportunities L assembling of proposed investments L %ecision making L )reparation of capital budget and appropriations L &mplementation L )erformance review &mportance of &nvestment %ecisions8, &nvestment decisions re"uire special attention because of the following reasons. They influence the firm+s growth in the long term.

 They affect the risk of the firm. They involve commitment of large amount of funds. They are irreversible, or reversible at substantial loss. They are among the most difficult decisions to make. Ty- 1 "( i#2 1tm #t d !i1i"#1:There are many ways to classify investments one classification is as follows9 5xpansion of existing business. 5xpansion of new business. =eplacement and modernization. E)-a#1i"# a#d di2 r1i(i!ati"#1 ' company may add capacity to its existing product lines to expand existing operations. $or example, the Kisakhapatnam 7teel )lant (K7) may increase its plant capacity to manufactures more li"uid steel. &t is an example of related diversification. ' firm mat expand is activities in a new business expansion of a new business re"uires investment in new products and new kind of production activating within the firm. &f packing manufacturing company invests in a new plant and machinery to produce ball bearings, which the firm has not manufactured before, this represents expansion of new business or unrelated diversification. 7ometimes a company ac"uires existing firms to expand its business. R -+a! m #t a#d m"d r#i*ati"#' The main objective of modernization and replacement is to improve operating efficiency reduce costs. -ost savings will reflect in the increased profits, but the firm+s revenue may remain unchanged. 'ssets become outdated and absolute with technological changes. The

firm must decide to replace those assets with new assets that operate more economically. =eplacement decisions help to introduce more efficient and economical assets and therefore, are also called cost, reduction investments. (owever replacement decisions that involve substantial modernization and technological improvements expand revenues as well as reduce costs. Met another useful way to classify investments is as follows9 2utually exclusive investments &ndependent investments -ontingent investments M/t/a++y )!+/1i2 i#2 1tm #t1 2utually exclusive investments serve the same purpose and compete with each other. &f one investment understands others will have to be excluded. 'ccompany 2ay, for example, either use a more labor, intensive, semi, automatic machine, or employ a more capital intensive, highly automatic machine for production. I#d - #d #t i#2 1tm #t1 &ndependent investments serve different purposes and do not compete with each other. $or example, a heavy engineering company may have been considering expansion of its plant capacity to manufacture additional excavators and addition of new production facilities to manufacture a new product. C"#ti#0 #t I#2 1tm #t1 -ontingent investments are dependent projects9 the choice of one investment necessitates understanding one or more other investments for example, if a company decides to build a factory in a remote, backward area, it may have to invest in houses, roads, hospitals, schools, etc., and the total expenditure will be treated as one single investment.

I#2 1tm #t E2a+/ati"# Crit ria:Three steps are involved in the evaluation of investment. 5stimation of cash flows 5stimation of the re"uired rate of return (the opportunity cost of capital 'pplication of a decision rule for making the choice. IDENTIFICATION OF POTENTIAL INVESTMENT OPPERTUNITIES The capital budgeting process begins with the identification of potential investment opportunities. &dentification of investment ideas it is helpful to8, .. 2onitor external environment regularly to scout investment opportunities. /. formulate a well defined corporate strategy based upon a through analysis of strength, weakness, opportunities and threats 0. 7hare corporate strategy and perspectives with person who are involved in the process of capital budgeting. E. 2otivation employees to make suggestions. ASSEMBLIN& OF PROPOSED INVESTMENTS: &nvestment proposal are usually classified into various categories for facilitating decision making, budgeting and control. L =eplacement investments L 5xpansion investments

L new product investments L ?bligatory and welfare investments The purpose of routing a proposal through several persons is primarily to ensure that the proposal is viewed from different angles. &t is helps in creating a climate for bringing about co,ordination of interrelated activities. DECISION MA;IN& -hoosing the best alternatives projects which support the firm is an important aspect of investment decision. )roper decision by the investment by evaluating the returns on investments. PREPARATION OF CAPITAL BUD&ET AND APPROPRIATION )rojects involving smaller outlays and which can be decided by executives at lower levels. )rojects involving larger outlays are included in the capital budget after necessary approvals. Cefore undertaking such projects an appropriation order is usually re"uired. The purpose of this check is mainly to ensure that the funds position of the firm is satisfactory at the time of implementation. $urther, it provides an opportunity to review the project at the time of implementation. IMPLIMENTATION Translating an investment proposal into a concrete project is a complex, time, consuming. $or expeditious implementation at a reasonable cost, the following are needed8,

ADE=UATE FORMATION OF PROJECTS *se of the principle of responsibility accounting8,assign specific responsibilities to project managers within the defined time,frame and cost limits are helpful for expeditious execution and cost control.

*se of network techni"ues8 , for project planning and control, several network techni"ues are re"uired like )5=T (program evaluation review techni"ue -)2 (critical path method . P r("rma#! r 2i > )erformance review or post,completion audit is a feedback device. &t is a means for comparing actual performance with projected performance. &t may be conducted, most appropriately, when the operations of the project have stabilized. &t is useful in several ways8, L &t throws lights on how realistic were the assumptions underlying the projects. L &t provides a documented log of experience that is highly valuable for decision making. L &t helps in uncovering judgmental biases L &t includes a desired caution among project sponsors. PROJECT CLASSIFICATION:$irms normally classify projects into different categories. 5ach category is then analyzed somewhat differently. 6hile the system of classification may vary from one firm to another, the following categories are found in most classification. A4 2andatory investment8 , these are expenditures re"uired to comply with statutory re"uirements. 5xamples of such investments are L )ollution control e"uipment. L 2edical dispensary. L $irefighting e"uipment.

B4 =5)@'-525;T )=?N5-T78 , firm routinely invest in e"uipment meant to replace obsolete and inefficient, even though they may in a serviceable condition. The objective of such investments is to L reduce costs L &ncrease the return L improve the "uality. - E<PANSION PROJECTS8 , these investments are meant to increase capacity or widen the distribution network. 7uch investments call for an explicit forecast of growth. %ecisions relating to such projects are taken by the top management. % DIVERSIFICATION PROJECTS: - these investments are aimed at producing new products or services or entering into entirely new geographical areas. ?ften diversification projects entail substantial risks, involve large outlays, and re"uire considerable managerial effort and attention. 5 RESEARCH AND DEVELOPMENT8 , traditionally =>% projects absorbed very small proportions of capital budget =>% projects are characterized by numerous uncertainties and typically involved se"uential decision making. CAPITAL BUD&ETIN& TECHNI=UES The re"uirement for relevant information and analysis of capital budgeting decisions has lined a series of models to assist the organization in to use their resources best. )opular methods are8 The )ayback )eriod ;et )resent Kalue (;)K &nternal =ate of =eturn (&==

Pay.a!? P ri"d &t is defined as the time re"uired recovering the initial investment in a project from operations. This method is used to evaluate capital projects and to calculate the return per year from the start of the project until the accumulated returns are e"ual to the cost of the investment at which time the investment is said to have paid back and the time taken to achieve this payback is referred to as the payback period. )ayback is said to emphasize the management+s concern with li"uidity and the need to minimize risk through a rapid recovery of the initial investment. )ayback 2ethod in =elation to the Boals of the -ompany &n the payback method companies will go ahead with an investment if the return of the investment is higher or larger than the capital cost. Benerally, most companies go ahead with an investment decision if the following conditions hold true. . ;)K O 3

This means that for a good investment decision to be made, the net present value must be greater than zero. / &== O6'-- (i.e. cost of capital

This says that the internal rate of return is expected to be greater than weighted average cost of capital for executing the capital budget under consideration. 0 ;)KP ?ption value (7trategic ;)K O3

This explains the net present value in addition to the option value must be greater than zero to make a good investment decision. The above conditions are used because they increase the principal+s wealth (i.e. shareholder+s wealth and ultimately add value to the company as a whole. The goal function of the company is one of the major criteria in the investment decision of the

company. &nvestment that will add value to the company is always chosen, and majorly the investment that maximizes the present future value of cash flow. To find out, if the goal function of the company is supported by the payback method, we have assumed the goal function of the company in the =esearch. &n the research, the goal function of the company is focusing on maximizing the long run market value of the firm by maximizing the net benefits from activities such as investments with positive returns. (;umminen /33I The goal function of the company is said to maximize the present value of future cash flow which is easily supported by the net present value method and the internal rate of return method. &t is noted that the payback method is majorly used for appraising capital projects which have short term such as 0 years. The development of the relationship between the internal rate of return and the payback method has shown that the payback method do measure profitability of investment. The literature has shown that the payback period is an approximation of internal rate of returns of infinite life and uniform cash flow. ($rank @efely .JJG 'ccording to studies, the payback method has been employed because some practicing manager believe that it is the approximation of internal rate of return and that it also support the goal function of the company. This is also one of the reasons the payback method is still relevant in industries. Di1!"/#t d Pay.a!? P ri"d M t,"d The payback method have gone through various development stages over the years, eliminating some of its disadvantages and at the same time keeping it as simple as possible. The payback method based on discounted cash flow figures were proposed by, =appaport .JGF. This method attempted to overcome one of the drawbacks of the conventional payback calculation which failed to take into 'ccount -ompany+s cost of capital. @ong more .JIJ, proposed a generalized time,adjusted payback rule which states that &f the investment proposal+s payback, adjusted for the timing of the net cash flows, is less than or e"ual to the present value of annuity factor at the firm+s cost of capital for the life of the proposal, the investment should be accepted.! (e argues that by adjusting the discount rate, the discounted payback decision rule can be modified to handle risky

investments. &n practice it appears that the standard payback %-$ uses discounted figures in its calculation but allows managers to determine the payback hurdle rate, which in many cases is based on the subjective judgment. &t should however be noted that the payback period is determined from the present value annuity factors used and not predetermined by the managers. &t is computed as follows8

)ayback )eriod Q

?=

)ayback )eriod Q

&n payback method, the projects with shorter payback periods rank higher than those with longer paybacks. The reason is that projects with shorter period are more li"uid and thereby less risky i.e. they allow the organizations to recoup the investment sooner, so that the money can be invested elsewhere. 'lso in shorter period there is little or no chance that market conditions, interest rates, the economy, or other factors affecting the proposed project will drastically change. Ad2a#ta0 1 "( Pay.a!? P ri"d &t is widely used and easily understood &t favors capital projects that return large early cash flows &t allows a financial manager to cope up with risk by examining how long will it take to recoup initial investment

&t addresses capital rationing issues easily The ease of use and interpretation permit decentralization of capital budgeting decision which enhances the chance of only worthwhile items reaching the final budget

&t contains a built,in safeguard against risk and uncertainty in that the earlier the payback the lower the risk

&t remains a major supplementary tool in investment analysis

Di1ad2a#ta0 1 "( Pay.a!? P ri"d &t ignores any benefits that occur after the payback period i.e. it does not measure total income The time value of money is ignored &t is difficult to distinguish between projects of different size when initial amounts are vastly divergent &t over,emphasizes short run profitability

N t Pr 1 #t Va+/ The ;et present value is defined as the different between the present value of the cost of inflows and the present value of cash outflows. &n other words, a project+s net present value is computed as the present value of cash flows from operations and disinvestments less the amount of the initial investment. &n computation of ;)K, the cash flows that occur at different point of time are adjusted for the time value of money using a discount rate that is the minimum rate of return re"uired for the project to be acceptable. )roject with Pve ;)K are acceptable and <ve are unacceptable. ;)K is used in capital budgeting to analyze the profitability of an investment and it is sensitive to the reliability of future

cash flows that the investment will yield. $or example8 the ;)K compares the value of rupee today of that same rupee in the future taking inflation and returns into account. The ;)K is computed as follows8 ;)K Q )resent Kalue of -ash &nflows < &nitial &nvestment ;ote that higher ;)Ks are more desirable. The specific decision rule for ;)K is as follow8 ;)K R 3, reject project ;)K O3, accept project

Ad2a#ta0 1 "( NPV &t is considered to be conceptually superior to other methods &t does not ignore any period in the project life or any cash flows &t is mindful of the time value of money &t is easy to apply ;)K than &== &t prefers early cash flows compare to other models

Di1ad2a#ta0 1 "( NPV The ;)K calculations unlike &== method, expects the management to know the true cost of capital ;)K gives unclear comparisons between projects of une"ual size or une"ual economic life. &n other to overcome this limitation, ;)K is used with )rofitability index. I#t r#a+ Rat "( R t/r# 3IRR4

The internal rate of return is the discount rate often used in capital budgeting that makes the net present value of all cash flows e"ual to zero. This means that &== is the rate of return that makes the sum of present value of future cash flows and the final market value of project e"ual current market value. (7tefan Mard .JJJ The higher the project+s internal rate of return, the more desirable it is to undertake. &t is used to rank several prospective projects a firm is considering. The &== provides a simple hurdle, whereby any project should be avoided if the cost of capital exceeds this rate. &== is also referred as economic rate of return (5== . 7o simple criteria can be, accept a project if it+s &== exceeds the cost of capital and reject if &== is less than cost of capital. 'lthough the use of &== could result in a number of complexities such as a project with multiple &==s or no &==. &nternal rate of return is the flip side of ;)K, where ;)K is discounted value of a stream of cash flows, generated from investment.

Ad2a#ta0 1 "( IRR &t is straight forward and easy to understand &t recognizes the time value of money &t is uses cash flows

Di1ad2a#ta0 1 "( IRR &t often gives unrealistic rates of return and unless the calculated &== gives a reasonable rate of reinvestment of future cash flows, it should not be used as a base to accept or reject a project &t may give different rates of return

&t could be "uite misleading if there is no large initial cash flow

CHAPTER-5 INDUSTRY PROFILE

CHAPTER-7 DATA ANALYSIS AND

INTERPRETATION

DATAANALYSIS AND INTERPRETATION

PAYBAC; PERIOD: The payback is method to evaluate an investment project. The payback method focuses on the payback period. The payback period is the length of time that it takes for a project to recoup its initial cost out of the cash receipts that it generates. This period is sometimes referred to as1 the time that it takes for an investment to pay for itself.1 The basic premise of the payback method is that the more "uickly the cost of an investment can be recovered, the more desirable is the investment. The payback period is expressed in years, when the net annual cash inflow is the same every year. )ayback periodQ /3./ 0J.H/ F0.3H J/.HJ E30.0J

)ayback period Q Q E/.0:E30.0J Q3..3 Q /P3..3 Q /..3 The )ayback period for a given project is /..3 which means the invested capital will return back within a tenure of / years.

NET PRESENT VALUE *nder the net present value method, the present value of a projectSs cash inflows is compared to the present value of the projectSs cash outflows. The difference between the present values of these cash flows is called 1the net present value1. This net present value determines whether or not the project is an acceptable investment. ;)K Q )resent Kalue of -ash &nflows < &nitial &nvestment Mear /33H /33I /33J /3.3 /3.. /3./ Total -ash inflows 0E.3I G3.HJ 0F.J0 II.FF J../F J/.HJ E30.0J )resent value of cash flows 03.JI F3./0 /G.JJ FE.JI F..F F/.E/ /GH..

;)K

Q )resent Kalue of -ash &nflows < &nitial &nvestment Q /GH.. < E/.0 Q //E.I

(ere, the net present value of the investment is //E.I which is greater than initial investment. 7o, the net cash flows from the investment are increased.

PROFITABILITY INDE< =atio of the present value of a projectSs cash flows to the initial investment. ' profitability index number greater than . indicates an acceptable project, and is consistent with a net present value greater than 3. )rofitability &ndex Q )K of -ash $lows : &nvestment -ost Mear /33H /33I /33J /3.3 /3.. /3./ Total -ash inflows 0E.3I G3.HJ 0F.J0 II.FF J../F J/.HJ E30.JJ )resent value of cash flows 03.JI F3./0 /G.JJ FE.JI F..F F/.E/ /GH..

)rofitability &ndex Q )K of -ash $lows : &nvestment -ost Q /GH..:E/.0 Q G.0. (ere, the profitability index value is greater than., which is G.0.. (ence the investment gets more returns.

ACCOUNTIN& RATE OF RETURN:

The accounting rate of return using total investment or 7ometimes average rate of return is calculated by using the following formula8

'verage rate of returnQ Mear /33H /33I /33J /3.3 /3.. /3./ &ncome /..3F EI./0 .E.F/ FH..F EI.H0 0J.H/ %epreciation .0.30 ./.FG /..E. 0..E3 E/.F/ F0.3H -ash inflow 0E.3I G3.HJ 0F.J0 II.FF J../F J0.HJ

'verage rate of return Q 'verage profit Q Total cash inflows:;o. of years Q E30.0J:G Q GH./0 'verage investment Q &nvestment:/ Q E/.0/ Q /...F 'verage rate of return Q GH./0:/...F Q 0..I The average rate of return of the project is 0..I. That means the company needs to maintain the long term income. That is good for a company.

SALES TO NET %ORTH RATIO: 7ales to ;et 6orth: This volume ratio indicates how many sales dollars are generated with each dollar of investment (net worth . The formula is8 Mear 7ales to net worth ratio /33H 3.EJ /33I 3.HI /33J 3.F. /3.3 3.I/ /3.. 3.GG /3./ 3.F0

I#t r-r tati"#: (ere, the sales to net worth ratio is decreasing and increasing year on year starting from /33H to /3./. -urrently the value of sales to net worth ratio is 3.F0 which is a slightly decreased over the previous year. That means the company is not generating enough sales for their investment.

&r"11 -r"(it mar0i# The gross profit margin is a measurement of a companySs manufacturing and distribution efficiency during the production process. The gross profit tells an investor the percentage of revenue : sales left after subtracting the cost of goods sold. ' company that boasts a higher gross profit margin than its competitors and industry is more efficient. &nvestors tend to pay more for businesses that have higher efficiency ratings than their competitors, as these businesses should be able to make a decent profit as long as overhead costs are controlled (overhead refers to rent, utilities, etc. Bross profit marginQ Mear Bross profit margin /33H 0E.HE /33I E..EG /33J /..HH /3.3 0F./F /3.. 0/.F /3./ 03.JJ

I#t r-r tati"#: $rom the above fig9 it is understood that the company is not maintaining efficiency in their services. &t is proved from the value of gross profit margin value which is 03.JJ4 in /3./, lowest value ever from the past G years.

N t -r"(it mar0i# ;et profit margin is one of the profitability ratios and an important tool for financial analysis. &t is the final output9 any business is looking out for. ;et profit ratio is a ratio of net profits after taxes to the net sales of a firm. 'll the efforts and decision making in the business is to achieve a higher net profit margin with increase in net profits. ;et profit margin shows the margin left for the e"uity and preference shareholders i.e. the owners. *nlike the gross profit which measures the operating efficiency of the business, net profit margin measures the overall efficiency of the business. 'n ade"uate margin of net profits will be generated only when most of all the activities are being done efficiently. The activities may be production, administration, selling, financing, pricing or tax management. ;et )rofit 2argin or =atioQ Mear ;et profit margin /33H /3./J /33I /F.3H /33J .3./ /3.3 /..G /3.. /3.GF /3./ .J.FJ

I#t r-r tati"#: $rom the above fig9 it is understood that the margin available for owners is less compared to previous years. The value is reduced nearly .34 from the previous margin that available for owners. &t is also proved that the efficiency of the company is increasing and decreasing from /33H to /3./.

R t/r# "# Ca-ita+ Em-+"y d 3@4 =eturn on capital employed establishes the relationship between the profit and the capital employed. &t indicates the percentage of return on capital employed in the business and it can be used to show the overall profitability and efficiency of the business. -alculated as8

Mear =eturn ?n -apital 5mployed (4

/33H 03.GJ

/33I ./..3E

/33J .E.GF

/3.3 ./3.EJ

/3.. /..3F

/3./ ...I0

I#t r-r tati"#: $rom the above information the return on capital employed ratio was increasing and decreasing from /33H to /3./. &n /3./ the value of return on capital employed is ...I04, which indicates that the company is not generating enough profits for their capital invested.

R t/r# "# N t >"rt, 3@4 &t measures the profitability of the business in view of the shareholders. &t judges the earning capacity of the company and the ade"uacy of return on proprietor+s funds. 7hareholders and potential investors are interested in this ratio. &t is calculated as below8 =eturn on ;et 6orth Q Mear =eturn ?n ;et 6orth (4 /33H .3..HH /33I //J.IF /33J GE.E. /3.3 /F/.. /3.. /.0.0F /3./ .HE.3.

&nterpretation8 $rom the above graph it is understood that the value of return on net worth is .HE.3.4 which indicates the low earning capacity of the company. &n the view of share holders the company is not good to invest.

Ear#i#01 - r S,ar 5arnings per share ratio (5)7 =atio are a small variation of return on e"uity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of e"uity shares. The formula of earnings per share is8

Mear 5arnings )er 7hare

/33H ..3.

/33I /./J

/33J 3.GE

/3.3 /.F/

/3.. /..0

/3./ ..HE

I#t r-r tati"#: $rom the above fig9 it is understood that the value of earnings per share is s reduced in the year /33J. -urrently the value of earnings per share is ..HE which again decreased from /3.3.

CHAPTER-8 FINDIN&S A SU&&ESTIONS AND CONCLUSION

FINDIN&SB SU&&ESTIONSACONCLUSION
Fi#di#01: .. The )ayback period for a given project is /..3 which mean the invested capital will return back within tenure of / years. /. The net present value of the investment is //E.I which is greater than initial investment 0. The profitability index value is greater than., which is G.0.. E. The average rate of return of the investment is 0..I. That means the company needs to maintain the long term income. F. The sales to net worth ratio is decreasing and increasing year on year starting from /33H to /3./. -urrently the value of sales to net worth ratio is 3.GG which is a slightly reduced over the previous year. G. The value of gross profit margin value which is 03.JJ4 in /3./, lowest value ever from the past G years. H. The margin available for owners is less compared to previous years. The value is reduced nearly .34 from the previous margin that available for owners. I. &n /3./ the value of return on capital employed is ...I04, which indicates that the company is not generating enough profits for their capital invested. J. The value of return on net worth is .HE.3.4 which indicates the low earning capacity of the company. .3. The value of earnings per share is sharply reduced in the year /33J is 3.GE and it was increased in /3./.

S/00 1ti"#1: .. Beojit C;) )aribas $inancial 7ervices should improve the efficiency in maintaining their financial services. /. Beojit C;) )aribas $inancial 7ervices should improve margin available for owners which is very low compared to previous year. 0. Beojit C;) )aribas $inancial 7ervices should improve the profits for their capital invested. E. Beojit C;) )aribas $inancial 7ervices should improve the earning capacity of the company to maintain the trust in the share holders. F. Beojit C;) )aribas $inancial 7ervices should maintain the same efficiency in managing the capital.

C"#!+/1i"#:
The study on capital budgeting at Beojit C;) )aribas $inancial 7ervices was undertaken with an objective of getting an insight into the concept of capital budgeting. The term capital budgeting refers to long term planning for proposed capital outlay and their financing. Thus it includes both rising of long term funds as well as their utilization. The study was undertaken with a main objective of understanding the various methods to determining the size of capital budgeting and to determine the payback period for an investment. &t was also undertaken to compute the simple rate of return for an investment and to determining the efficiency of the company. $inally it was focused to measure the profitability of the company by considering all cash flows. The study was done using the Calance sheet, )rofit and @oss account and other financial information of Beojit C;) )aribas $inancial 7ervices. The entire study is based on the secondary data only. The analytical tools used for the study are payback period, net present value, return on net worth, return on e"uity and profitability indexes etc,. The study was done at Beojit C;) )aribas $inancial 7ervices, (yderabad for a period of EF days. The study had few limitations which were taken care of. The financial information obtained was analyzed using the appropriate techni"ues and it was found that that the )ayback period for a given project is /..3 which mean the invested capital will return back within tenure of / years. &t is also found that the net margin available for owners is less compared to previous years. The value is reduced nearly .34 from the previous margin that available for owners. &t is suggested to the company to improve the efficiency in maintaining their financial services and to improve the margin available for owners which is very low compared to previous year. &t is also suggested to improve earning capacity of the company to maintain the trust in the share holders.

CHAPTER-9 BIBLO&RAPHY

BIBLIO&RAPHY
.. )rasanna chandhra, $inancial 2anagement, Tata 2cBraw,(ill 5ducation, Hth edition, /33I. /. Than and jain, $inancial 2anagement, Tata 2cBraw,(ill 5ducation, Fth edition, /33H. 0. %r.=.T. 2ittal, 2anagement 'ccounting and $inancial 2anagement,K.T(india 5nterprises,/3.3.

%EBILIO&RAPHY:
1. www.wikipedia.org 2. mbatutorial.net/Casestudy/capitalbudgeting/9780521817820ws.pd !. www.bim.edu/pd /lead"article/pro kannad#asan.pd $. #ttp://www.capitalbudgetingtec#ni%ues.com/importance&o &capital& budgeting&decisions/

CHAPTER-C APPENDICES

APPENDICES
Ba+a#! S, t "( & "6it BNP Pari.a1 Fi#a#!ia+ S r2i! 1
Calance 7heet of Beojit C;) )aribas $inancial 7ervices 7ources ?f $unds Total 7hare -apital 5"uity 7hare -apital 7hare 'pplication 2oney )reference 7hare -apital =eserves =evaluation =eserves ;etworth 7ecured @oans *nsecured @oans Total %ebt Total @iabilities 'pplication ?f $unds Bross Clock @ess8 'ccum. %epreciation ;et Clock -apital 6ork in )rogress &nvestments &nventories 7undry %ebtors -ash and Cank Calance Total -urrent 'ssets @oans and 'dvances $ixed %eposits Total -', @oans > 'dvances %effered -redit -urrent @iabilities )rovisions Total -@ > )rovisions ;et -urrent 'ssets 2iscellaneous 5xpenses Total 'ssets -ontingent @iabilities Cook Kalue (=s ,,,,,,,,,,,,,,,,,,, in =s. -r. ,,,,,,,,,,,,,,,,,,, 2ar S./ //.IE //.IE 3 3 0FF.FG 3 0HI.E 3 3 3 0HI.E 2ar S./ II.F. F0.3H /J.H/ .G.JE .3J.GH 3 H/.IF G3.FE .00.0J .EH.3H IH.3J 0GH.FF 3 ./E.3/ /3.0H .EE.0J //0..G 3 0HI.0I E0./E .G.FH 2ar S.. //.IE //.IE ... 3 00/.FH 3 0FG.F. 3 3 3 0FG.F. 2ar S.. .G/.G I0./J E/.F/ 0F.3F J.GG ./3./ 3 .3F.0G GJ .HE.0G IH.0 ..I.II 0I3.FE 3 .GG.G0 //.0/ .II.JF .J..FJ 3 0FG.F 0E..H .F.FG 2ar S.3 //.F0 //.F0 ..II 3 /JE.G0 3 0.J.3E 3 3 3 0.J.3E 2ar S.3 IJ.3. H..F 0..E E3.. /.I0 .03.F/ 3 .3J..E ./H.H/ /0G.IG ./F./0 HF... E0H./ 3 /G0.J/ //.EF /IG.0H .F3.I0 3 0.J.3F 03.I .E.3I 2ar S3J //.0E //.0E ..EH 3 /F/./F 3 /HG.3G 3 3 3 /HG.3G 2ar S3J GG.GG /..E. EF./F 3.0G .FG.F/ 3 E..0H J/.H/ .0E.3J .E..FJ F..0J 0/H.3H 3 .J..FE FF.F/ /EH.3G I3.3. 3 /HG.3G E.// ././J 2ar S3I /3.J /3.J I.JF 3 /./.H 3 /E/.FF 3 3 3 /E/.FF 2ar S3I EF.GF ./.FG 00.3J ..H0 .EH./F 3 GE.HE II.F0 .F0./H ./H.HE 0H.EJ 0.I.F 3 .J3.H GH./I /FH.JI G3.F/ 3 /E/.F0 E..J ....I 2ar S3H /3.J /3.J I.FE 3 .I../J 3 /.3.H0 3 3 3 /.3.H0 2ar S3H ..3.HI 0F.FI .0.30 //.FF 3./E E/.0 3 0..FJ EE.F HG.3J HJ..F ./0.E0 /HI.GH 3 .3I.H /E.0F .00.3F .EF.G/ 3 /.3.H. /.IH J.GH

Pr"(it A L"11 a!!"/#t "( & "6it BNP Pari.a1 Fi#a#!ia+ S r2i! 1
)rofit > @oss account of Beojit C;) )aribas $inancial 7ervices &ncome 7ales Turnover 5xcise %uty ;et 7ales ?ther &ncome 7tock 'djustments Total &ncome 5xpenditure =aw 2aterials )ower > $uel -ost 5mployee -ost ?ther 2anufacturing 5xpenses 7elling and 'dmin 5xpenses 2iscellaneous 5xpenses )reoperative 5xp -apitalised Total 5xpenses ?perating )rofit )C%&T &nterest )C%T %epreciation ?ther 6ritten ?ff )rofit Cefore Tax 5xtra,ordinary items )CT ()ost 5xtra,ord &tems Tax =eported ;et )rofit Total Kalue 'ddition )reference %ividend 5"uity %ividend -orporate %ividend Tax )er share data (annualized 7hares in issue ( lakhs 5arnings )er 7hare (=s 5"uity %ividend (4 Cook Kalue (=s ,,,,,,,,,,,,,,,,,,, in =s. -r. ,,,,,,,,,,,,,,,,,,, 2ar S./ /3/.GH 3 /3/.GH 0/.H/ 3 /0F.0J 3 3 F3.J I3.HG /I./. ./.H. 3 .H/.FI 2ar S./ 03.3J G/.I. ..30 G..HI ...F/ 3 F3./G /.EH F/.H0 .3.J0 0J.H/ .H/.FJ 3 .H..0 /.HI /,/I0.G3 ..HE HF .G.FH 2ar S.. /0F.J 3 /0F.J 0F./G 3 /H...G 3 3 FE.F. JG.// /J.I0 .0.I0 3 .JE.0J 2ar S.. E..F. HG.HH 3..I HG.FJ ./.HJ 3 G0.I /.HG GG.FG .F.30 EI.H0 .JE.E 3 .H..F /.HI /,/I0.G3 /..0 HF .F.FG 2ar S.3 /G/.J. 3 /G/.J. /E./G 3 /IH..H 3 3 F..3J /I.EH .3../. ./.G/ 3 .J0.0J 2ar S.3 GJ.F/ J0.HI 3.FE J0./E ...F/ 3 I..H/ ..3J I/.I. /0.IE FH..F .J0.0J 3 .G.J0 /.I. /,/F/.FE /.FE HF .E.3I 2ar S3J .E3.JF 3 .E3.JF .H.J/ 3 .FI.IH 3 3 E0.3J /F.JG EH.G/ .3.I. 3 ./H.EI 2ar S3J .0.EH 0..0J . 03.0J .3..0 3 /3./G 3 /3./G F.HE .E.F/ ./H.EH 3 .../. ..I/ /,/0E../ 3.GF F3 ././J 2ar S3I .J..FJ 3 .J..FJ .E.FI 3 /3G..H 3 3 E..3G /H.0E EJ.HF J.G. 3 ./H.HG 2ar S3I G0.I0 HI.E. 3.EG HH.JF G./. 3 H..HE 3 H..HE /0.F. EI./0 ./H.HG 3 .E.G0 /.EJ /,3IJ.J. /.0. H3 ....I 2ar S3H .3E.HI 3 .3E.HI E.JF 3 .3J.H0 3 3 /../G /3.3G /0.EF I.0F 3 H0../ 2ar S3H 0..GG 0G.G. 3.0H 0G./E E.FH 3 0..GH ,3.// 0..EF .3.E /..3F H0../ 3 G.3J 3.IF /,3IJ.J. ..3. E3 J.GH

Ca1, F+"> "( & "6it BNP Pari.a1 Fi#a#!ia+ S r2i! 1

-ash $low of Beojit C;) )aribas $inancial 7ervices ;et )rofit Cefore Tax ;et -ash $rom ?perating 'ctivities ;et -ash (used in :from &nvesting 'ctivities ;et -ash (used in :from $inancing 'ctivities ;et (decrease :increase &n -ash and -ash 5"uivalents ?pening -ash > -ash 5"uivalents -losing -ash > -ash 5"uivalents ,,,,,,,,,,,,,,,,,,, in =s. -r. ,,,,,,,,,,,,,,,,,,, 2ar S./ F3./E ,03.J/ 0.F. ,.I.I/ ,EG.// .F3.F0 .3E.0 2ar S.. G0.I. ,.J.3I ,/I.0/ ,...0/ ,FI.H/ ./H.H/ GJ 2ar S.3 I..H/ 0E.EE I.FE ,H.JI 0F J/.H/ ./H.H/ 2ar S3J /3./G ...I0 ,//.3F .E.E E..J II.F0 J/.H/ 2ar S3I GH GJ.3H ,/F./F 3./ EE.30 EE.F II.F0 2ar S3H 0..GI .H.EF ,.F..EJ .E/.J I.IG 0F.GE EE.F