CAPITAL BUDGETING

INTRODUCTION
An efficient allocation of capital is the most important finance function in modern
times. It involves decisions to commit firms funds to long-term assets. Such
decisions are tend to determine the value of company/firm by influencing its growth,
profitability & ris.
Investment decisions are generally nown as capital budgeting or capital e!penditure
decisions. It is clever decisions to invest current in long term assets e!pecting long-
term benefits firms investment decisions would generally include e!pansion,
ac"uisition, moderni#ation and replacement of long-term assets.
Such decisions can be investment decisions, financing decisions or operating
decisions. Investment decisions deal with investment of organi#ations resources in
$ong tern %fi!ed& Assets and / or Short term %'urrent& Assets. (ecisions pertaining to
investment in Short term Assets fall under )*oring 'apital +anagement,.
(ecisions pertaining to investment in $ong term Assets are classified as )'apital
-udgeting, decisions. 'apital budgeting decisions are related to allocation of
investible funds to different long-term assets. .hey have long-term implications and
affect the future growth and profitability of the firm.
In evaluating such investment proposals, it is important to carefully consider the
e!pected benefits of investment against the e!penses associated with it. /rgani#ations
are fre"uently faced with 'apital -udgeting decisions. Any decision that re"uires the
use of resources is a capital budgeting decisions. 'apital budgeting is more or less a
continuous process in any growing concern.
l
NEED FOR THE STUDY

.he 0ro1ect study is undertaen to analy#e and understand the 'apital
-udgeting process in edible oil manufacturing sector, which gives mean
e!posure to practical implication of theoretical nowledge.
.o now about the companys operation by using various 'apital -udgeting
techni"ues.
.o now how the company gets funds from various resources and effective
allocation of such funds %i.e. allocation between current and long term assets&
2
SCOPE OF THE STUDY
.he scope of the present study includes the following
2nderstanding the importance of capital -udgeting in 3ood, fats and
3ertili#ers 0vt $td, .adepaliigudem
4valuating of an Investment proposal of setting up 3acility at 333, for
manufacturing of 4dible /il.
3
OBJECTIVES OF THE STUDY
.o study the techni"ue of capital budgeting for decision- maing.
.o understand the practical usage of capital budgeting techni"ues
.o understand the nature of ris and uncertainty
.o mae suggestion if any for improving the financial position if the
company.
4
METHODOLOGY OF THE STUDY
.o achieve aforesaid ob1ective the following methodology has been adopted. .he
information for this report has been collected through the primary and secondary
sources.
Primary sourcs

It is also called as first handed information5 the data is collected through the
observation in the organi#ation and interview with officials. -y asing "uestions with
the accounts and other persons in the financial department
Sco!"ary sourcs
It is also collected by someone else and passed through some stastical techni"ues. .he
secondary data have been collected through the various boos, maga#ines, broachers
& websites.
3or this study collected information from company Annual 6eports.

5
LIMITATION OF THE STUDY
.hough the pro1ect is completed successfully a few limitations may be there.
Since the procedure and polices of the company will not allow to disclose
confidential financial information, the pro1ect has to be completed with the
available data given to us.
.he period of study that is 7 wees is not enough to conduct detailed study of
the pro1ect.
.he study is carried basing on the information and documents provided by the
organi#ation and based on the interaction with the various employees of the
respective departments.
$ac of nowledge. Some of the lac full-fledged nowledge of the concept
and its difficult to collect a specific opinion from them.
.ime limitation. .he duration of the pro1ect is short to collect the re"uired
information accurately
6
CHAPTERI#ATION PLAN
.he study is presented in five chapters as the following
C$a%&r'(
.his chapter deals with the introduction, need for the study, scope of the study
ob1ectives, and methodology, and limitations of the study.
C$a%&r')
.his chapter deals with the industry profile and the company profile.
C$a%&r'*
.his chapter deals with theoretical aspects of inventory management.
C$a%&r'+
.his chapter deals with data analysis and interpretation.
C$a%&r',
.his chapter deals with findings, suggestions, conclusions and bibliography

7

INDUSTRY PROFILE
In the Indian conte!t, the term 89egetable /ils is almost synonymous with
84dible /ils and land is not used as cooing media. :owever it is important to eep
this distinction in mind not all 9egetable /ils are 4dible ; Some including cater oil
are mostly non-edible and some of the edible oils lie <round =ut and 'oconut are
finding increasing industrial applications as in cosmetic, soap maing etc.
-y virtue if they are high nutritive content, 4dible oils from a ma1or source of
nutrition. .he fatty acids in 4dible /ils are re"uired by the body as a vehicle for
carrying vitamins5 provide oil caes, which are by-product of the oil e!traction
process, are important source of animal nutrition. .hese can be processed in to edible
flavors, which are rich in proteins.
/il seeds occupy an important position as the agriculture map pf and ran
second after food grains as a farm commodity crop. India accounts for a tenth of the
world out put of 9egetable /ils and fats. It is the largest produces of <round =ut,
rapeseed, mustard and sesame, second in respect of castor seeds, third in coconut,
fourth in cotton seed and fifth in line seed.
/ur country has a highly developed oil based industry. 0roviding gainful
employment to nearly >7 million persons besides another half a million engaged in
milling and processing units. It is essential a food-oil industry accounting for four
fifths of the total supply of 9egetable /ils. Soap paints and varnish industries from
the bul of non-food applications.
8
In spite of thief national importance, production of food grains has been
suffering a negative growth rate all these years. /nly during the first plan period, the
targets set for production were reali#ed after this no impressive achievement was
recorded. .he main contributory factors are two fold, first only marginal land, in rain
fed areas is being used for their cultivation resulting inevitable in low productivity,
second agriculture in India is still sub1ect to the vagaries of monsoon which maes for
erratic production. It is little wonder therefore that the annual rate5 of growth of oil-
seed production for the decade >?@7->?A@ was a mere >.B percent while that of oil
seed productivity, an e"ually dismal one percent.
9iewed in the global conte!t, India has the dubious distinction of having the
highest acreage under oil seeds and recording the highest output, and yet showing the
lowest yield, at AC@ g. Indias yield per hectare is lower than that of =igeria %>@>7.CD
Eg& 2.S.A. %?>FAF.7D Eg&, Argentina %>>7C.F? Eg& and 'hina %>>FD.77 Eg.& .he
following table would give picture of Indias placing in the world settings.
3or the year >?DG-D>, target for oil-seed production had been fi!ed at >>
million tones, actual production however lagged behind, with5 provisional estimates.
0laced at >G.B million tones. 0roduction of live ma1or oil seeds vi#./ groundnut, rare
seed mustard, sesame, line seed and castor seed and is estimated to be abound ?G
laes tones, which is about >C percent higher than the previous years production.
0roduction estimates of groundnut at 7A lae tones however show decline of AG,GGG
tones. At B lac tones castor seed production has also registered a decrease of CG,GGG
tones. 6apeseed, sesame and line seed have however, registered increased over the
previous years production levels.
.he central <overnment therefore too various measures to increase
production of oil seeds. A centrally sponsored scheme for an intensive oil seed
development programmed was operated in >F states with a coverage target FG.@ laes
hectors under a liberali#ed pattern of central, assistance.
9
:owever actual coverage was only C@ lae hectares and the short fall was
attributed to serve. (rought conditions in several states during the Eharrif season.
Short falls in production persisted in the oil year >?D>-DB as well as a result, domestic
industry could not meet the consumption needs respect of edible oils. .he total edible
and supplies from indigenous sources were estimated at about CG lae tones in >?D>-
DB %which however higher than the previous years levels of B7 laes tones&. .he gap
of >G lae tones had to be filled only though imports. 'onse"uently, the state-trading
corporation was ased to import a million tones of 4dible /ils during the oil year
>?D>-DB. .he allotment of imported 4dible /ils was also pruned in a bid to ensure
more supplies though fair price shops.
.he trend of imports in e!pected to continue in the year to come despite the best
efforts of the union agriculture ministry to raise oil seed output. .he genera-based
international trade center has pro1ected import of >C million tones of 9egetable /ils
in >?D7. As for e!ports, it is anticipated that India would e!port >7 $ae .ones of oil
e"uivalent of hand piced-selected groundnut, other nuts and castor oil by >?D7.
.he composition of our e!ports is e!pected to undergo a change palm oil and
products %palm oil and 3-( palm oil& will in further account for an increasing share
of Indian e!ports soybean oil and rapeseed oil will continue to be imported through
their combined share may fall to about one third of the total imports refined rapeseeds
oil could be the cheap oil for the li"uid maret while soybean oil is e!pected to the
supplied to the vanaspati industry. 6egarding production of oils, an increase in the
production of solvent e!tracted oils such as rice bran oil tree oils in lightly to occur
the I.' reports says that the country could mae significant investments in view of
its resource for this oil and the demand of 4dible /ils. .he report has also forecast a
rise in the de oiling of ground nuts cae and other sun caes the country could also
produce F.7 laes of tones seed oil per year.
l0
PROBLEMS-
An important feature to be taen note of in the case of seeds is that
their production facilities widely from year to due to seasonal conditions as only D
percent of the total area under oil seeds is irrigated further year substantial parts of the
verified areas under oil seeds consists of marginal lands plant population is mostly
sub-optional due to the user seed of pure "uality and wide spacing the triple alliance
of weeds, pests and pathogens cause great deals of losses both in the early state of
plant growth as also at crop maturity.

Absence of rains at critical stages also causes significant losses in yields
particularly in the case of groundnuts poor post, harvest technology including
deficiency in mareting support and storage and processing also have advice effect on
returns to grower and incentives for production.
ll
I!"ia! E"i./ Oi/ I!"us&ry
.he Indian vegetable oil economy is the worlds fourth largest after the 2S,
'hina and -ra#il, harvesting about B7 million tons of oilseeds against the world.
Since >??7, Indian share in world production of oilseeds has been around >G percent.
Although, India is a ma1or producer of oilseeds, per capita oil consumption in India is
only >G.@ g/annum which is low compared to >B.7 g/annum in 'hina, BG.D
g/annum in Hapan, B>.C g/annum in -ra#il and FD.G g/annum in 2SA.
9egetable oil consumption has increased following a rise in household
incomes and consumer demand. India imports half of its edible oil re"uirement,
maing it the worlds third-largest importer of edible oil. .he country buys soya oil
from Argentina & -ra#il and palm oil from +alaysia & Indonesia.
'urrently, India accounts for >>.B per cent of vegetable oil import and ?.C per cent of
edible oil consumption.
Ty%s o0 Oi/s commo!/y i! us i! I!"ia-
India has a wide range of oilseeds crops grown in its different agro climatic
#ones. <roundnut, mustard/rapeseed, sesame, safflower, linseed, nigerseed /
castorseed are the ma1or traditionally cultivated oilseeds. Soyabean and sunflower
have also assumed importance in recent years. <roundnut, soyabean and mustard
together contribute about D7 percent of the countrys oilseeds production. 'oconut is
most important amongst the plantation crops. 4fforts are being made to grow oil palm
in Andhra 0radesh, Earnataa, .amil =adu in addition to Eerala and Andaman &
=icobar Islands. Among the non-conventional oils, ricebran oil and cottonseed oil are
the most important. In addition, oilseeds of tree and forest origi2n, which grow
mostly in tribal inhabited areas, are also asignificant source of oils. ntil BGGB, the olive
oil sector in India was predominantly unorganised. than for cooing..
l2
INDIAN EDIBLE OILS INDUSTRY-
.he demand for edible oils in India has shown a steady growth at a 'A<6 of
F.FCI over the period from BGG> to BG>>. .he growth has been driven by
improvement in per capita consumption, which in turn is attributable to rising income
levels and living standards. :owever, the current per capita consumption levels of
India %at >C.C Eg/year for BGG?->G& are lower than global averages %BF g/year&.> .he
Indian edible oils maret continues to be underpenetrated and given the positive
macro and demographic fundamentals it has a favourable demand growth outloo
over the medium-to-long term. In terms of volumes, palm oil, soyabean oil and
mustard oil are the three largest consumed edible oils in India, with respective shares
of F@I, >@I and >FI in total oil consumption in BG>G. <iven the high price
consciousness and varied taste preferences of Indian consumers, I'6A e!pects
these three oils to continue to account for the bul of edible oil consumption in the
country.
.here has been a significant gap between demand and supply of edible oil
because of limited availability of oil seeds and shifting of acreage to other crops in the
domestic maret. .his gap has been met through imports, which account for almost
F7-7GI of the total oil consumption. In :>/JBG>G->>,B edible oil imports were
observed to be the lowest in the last three years in view of improvement in domestic
oilseed production.
=otwithstanding that, I'6A e!pects the high dependence on imported oils to
continue in the foreseeable future due to anticipated domestic supply constraints and
the high cost competitiveness of imported oils. 6efined and crude palm oil %'0/&
have accounted for the ma1or portion of edible oil imports in India %AFI in /JBGG?-
>G& mainly due to their relatively low prices and ample availability. I'6A e!pects the
dominance of palm oil in imports to continue in the near-to medium term.
> /il *orld BG>G
B /J ; /il Jear refers to the period
l3
ICRA Ra&i!1 Fa&ur I!"ia! E"i./ Oi/s I!"us&ry- 2y Tr!"s a!" Cr"i&
Im%/ica&io!s
:igh reliance on imports, domestic edible oil prices have largely been lined
to international edible oil prices. After the decline in 3JG?, international edible oil
prices remained at subdued levels during most part of 3J>G. .he prices of ma1or
edible oils rose in :B3J>> on account of anticipated higher demand for bio-fuels,
given the high crude oil prices as well as e!pected production shortfalls in palm oil
production. 0rices have, however, corrected and stabilised in recent months on
account of better-than-e!pected '0/ production from Indonesia/+alaysia during
3eb-+arch BG>>5 demand rationing due to high prices in developing countries
suffering from high levels of food inflation besides the geopolitical situation in the
+iddle 4ast and =orth Africa. .he improved pricing levels for /il Jear %/J& BG>> as
compared to /J BG>G have provided some comfort to small/medium scale domestic
solvent e!tractors and enabled relatively better capacity utilisation levels. /ver the
near term, edible oil prices are e!pected to remain firm, considering the strong
demand for alternative sources of energy lie bio-fuels in view of the continued rise in
crude oil prices.
.he Indian edible oil industry is highly fragmented, with the presence of a
large number of participants in the organised and unorganised sectors. .his has
resulted in severe competition and inherently thin profitability margins. 3urther, the
profitability of maret participants has also been vulnerable to riss emanating from
wea harvests5 commodity price volatility and fore! movements.
I'6A notes that while the share of branded oils segment has remained low
over the years, it is poised for growth in view of rising income levels5 uptrend in
urbanisation and increasing "uality consciousness of Indian consumers.
.he <overnment of India has cut down import duties on edible oil since April
BGGD. .he current duty differential between crude and refined oils stands at A.7I,
which provides protection to domestic refiners against competition from imported
refined oils. <oing forward, the industrys profitability is vulnerable to any reduction
in this duty differential.
l4
3rom a business ris perspective, I'6A considers the fle!ibility to modify
product portfolio as a ey strength in a maret characterised by commodity price
volatility. Accordingly, players with a diversified presence and e!posure to the three
ma1or categories of oil, namely, palm oil, Soya bean oil and mustard oil, would be
better positioned for growth as compared to players with single product concentration.
3urther, according to I'6A, the large-scale integrated players are better placed than
small and mid-si#ed manufacturers to withstand the challenges in the business
environment on the strength of benefits related to economies of scale such as
marginally lower cost of production and access to cheaper woring capital credit.
3rom the perspective of revenue growth and profitability, maret participants with a
high share of established branded products are better placed than participants
operating in the commoditised bul maret.
In the recent past, the Indian edible oil industry has witnessed organic and
inorganic e!pansion by some of its ma1or participants. *hile I'6A views the
increase in scale as a credit positive, the impact of these cape! activities on the capital
structure and the ability to scale up revenues and profitability to the envisaged e!tent
will be some of the variables to be closely observed from a credit perspective.
BAC2GROUND
:istorically, India has been a ma1or importer of edible oils with almost CG-
FGI of its re"uirements being imported till >?DGs. In >?D@, the <overnment of India
established the .echnology +ission on /ilseeds and 0ulses %.+/0& in order to
enhance the production of oilseeds in the country. .he .+/0 launched special
initiatives on several critical fronts such as improvement of oilseed production and
processing technology5 additional support to oilseed farmers and processors besides
enhanced customs duty on the import of edible oils. 'onse"uently, there was a
significant increase in oilseeds area, production and yields until the late->??Gs.
:owever, in order to fulfill its obligations towards various international trade
agreements and also meet the increasing demand supply deficits, India began to
reduce import restrictions on edible oils in the late >??Gs5 and it was gradually
brought under /pen <eneral $icense.
l5
.his led to a significant slump in the domestic oil seeds maret, as edible oil
prices fell sharply in line with the low international prices prevailing at that time.
Subse"uently, the duty structure was modified so as to maintain a duty differential
between crude and refined varieties in order to protect the domestic industry.
=evertheless, due to high import dependence, domestic edible oil prices remain
highly correlated to international edible oil price movement, and this has resulted in
volatility in the ey credit metrics of rated edible oil companies. At the same time,
I'6A notes that edible oil companies with benefits of large-scale integrated
operations, multi-product offerings and recogni#able branded presence in retail
marets have fared better as compared to small/medium-scale domestic oilseed
crushers.
2EY TRENDS 3 CREDIT IMPLICATIONS
Fa4ora./ "ma!" ou&/oo5 0or "i./ oi/s6 u!"r %!&ra&" mar5& o00rs
si1!i0ica!& 1ro7&$
Po&!&ia/-
.he demand for edible oils in India has shown a compounded growth of
F.7Iover the last >G years and is estimated at >@.B million tones for /il Jear%/J&
BG>G->>. India plays an important role in the global edible oil maret, accounting for
appro!. >G.BI share of consumption5 AI share of oilseed production5 7I share of
edible oil production and >C.@I share of world edible oil imports for /JBGG?->G. As
per 2S(A estimates, India is the third largest consumer of edible oils %after 'hina and
the 42-BA countries&5 and will account for >>I of global edible oil demand and >@I
of global imports in /J BG>G/>>3.
Indias annual per capita consumption has shown a steadily increasing trend
from F g in the >?AGs to>G.B g in the late >??Gs to current levels of K>C.7 - >F g.
:owever, it still rans well below the world average of around BF g %per capita
figures including consumption of bio-energy&, thereby signifying the high growth
potential of the industry. 6efer 'harts > and B for trend in domestic demand and
percapita consumption of edible oils in India.
l6
I!"us&ry rmai!s 4u/!ra./ &o &$ ris5 o0 !arro7i!1 im%or& "u&y "i00r!&ia/-
-eginning BGGA-GD, there has been a progressive reduction in import duties on
crude and refined edible oils. +ost of these policy changes have been made in order
to comply with foreign trade agreements entered by India with other countries and
associations such as AS4A= apart from meeting shortfalls in domestic supplies and
curtailing inflation. In the last round of changes in duty structure %April BGGD&, the
duty on crude palm oil was made 8nil while that on refined palm oil was made A.7I
%A.AI including education cess&, with the net duty differential being maintained at
A.7I to protect the domestic industryC. <oing forward, the reduction of import duty
differential remains a ey regulatory ris for the industry.
Bra!"" oi/ sa/s8 a/&$ou1$ curr!&/y /o7 i! I!"ia8 ar 9%c&" &o 1ro7 "u &o
r!7" &$rus& .y ma:or %/ayrs
.he share of branded product sales has remained low with most low-income
consumers opting for given the presence of a large number of unorganised
participants in the Indian edible oil maret, cheaper oils sold in loose form. As per
industry data, only about C>I of urban households and about ?I of rural households
consume branded edible oils, with the national average at >@I. <iven the low
penetration of branded oils5 increasing affluence levels and "uality consciousness of
the Indian consumers, there is a significant growth potential in the branded segment.
Amongst the ma1or edible oils consumed, palm oil is still largely traded as a
commodity and sold mostly in loose form, with pacaged sales accounting only for
>7I-BGI of total sales. Sunflower and soya oil, on the other hand, have a high
proportion of pacaged sales estimated at around AGI and 77I of total sales. .he
ma1or participants in the organised sector, namely, 6uchi Soya, Adani *ilmar
$imited %A*$& & 'argill India, have a strong presence in the branded segment, with
branded sales accounting for CDI, 7DI and @GI of total edible oil sales of these
companies respectively. +oreover, a few mid-si#ed, regional edible oil companies
such as +antora /il 0roducts $td, +odi =aturals and .ara :ealth 3oods $td have
also been striving to establish their brands.
l7
3rom a credit perspective, I'6A considers high share of branded sales as a
strength, given the favourable outloo for growth5 relatively high margins5 stability of
off tae and better pricing power as compared to the bul maret. =onetheless, since
branding activities entail high upfront outlay while sales volumes may tae time to
scale up, profitability margins of companies undertaing large-scale branding efforts
are liely to come under pressure during the interim gestation period.
Som &r!"s o0 co!so/i"a&io! 4isi./ i! &$ i!"us&ry6 /ar1'sca/ i!&1ra&"
%/ayrs /a"i!1 &$ ca%aci&y a""i&io! %rocss &$rou1$ 9%a!sio! as 7// as
ac;uisi&io!<co!so/i"a&io!
.he edible oil industry in India in the recent past has witnessed both organic as
well as inorganic e!pansion by some of the ma1or players. A*$ has added >G?G .0(
of installed capacity for refining and 7G7G .0( of installed capacity for seed
processing during 'J BG>G->> by ac"uiring five operational plants and undertaing
e!pansion at three out of its four e!isting plants. A*$ has also additionally taen
over the operations of other *ilmar associates in India %lie Acalmar /ils & 3oods
$imited& so as to consolidate its pan-India presence. Sanwaria Agro /ils $imited has
added >GGG .0( crushing capacity in BGG? through ac"uisition of two plants. ES /ils
has set up new facilities at Eota, 6atlam and <una, totaling CFGG-C@GG tpd, and
ac"uired a refining unit at :aldia. 3urther, some edible oil manufacturers have also
undertaen bacward integration to strengthen their overall business model. ES /ils
has ac"uired >,CD,GGG acres of palm plantations in Indonesia while 6uchi Soya has
access to >,A7,GGG hectares of agricultural land with palm plantations across different
Indian states.
*hile I'6A considers this consolidation and capacity e!pansion trend as a
favourable development due to the benefits associated with large scale of operations,
on the flip side, the adverse impact of such activities on the capital structure5
profitability and return metrics of the concerned companies, particularly during the
gestation period, presents a downside ris.
l8
PROJECTIONS-
India has becoming a si#able imported of 4dible /ils since the mid-seventies.
Annual reports are the order of the million tones costing around 6s.@GG cores in
foreign e!change.
It has been pro1ected that the demand edible oils will increase at the minimum
annual rates of C.7 percent. .he growth rate in oil seeds production has been then one
annual a half percent per annum in the last decade avoidably import o 4dible /ils will
be on the rise. At these assumed the levels, the annual import re"uirements will be
around >.@ millions tones by >??G. If demand grows at the higher rate, say at 7
percent, the volume of e!ports re"uired will be B.> million tones by the same year.
Imports in the range >.@ to B.> million tones will mean India rice bringing D.>G
percent of the pro1ected will e!port vegetable oil at the time. Such heavy dependence
on India to price bacs mail. .hat would be compounded in years of bad harvest. .he
foreign e!change drain on our e!change %according to *orld -an estimates& could
be us LC to F billion annually.
At the instance of the <overnment of India the =ational (airy (evelopment
-oard %=((-& has under taen the pro1ect for restructuring the pattern of production
and mareting of oil seeds and 4dible /ils. .he pro1ect has been designed to
integration production, procurement, processing and mareting of oil seeds and
vegetable oils through a two-tier co-operative structure oil seeds growers co-
operative societies at villages level and an oil seeds growers federation at the state
level.
A sum of 6s.>7G cores re"uired for pro1ect investment could come from
ploughing bac the sale proceeds of B.7 laes tones of 4dible /ils gifted to the =((-
by the co-operative league 2SA M'$2SAN =((- by co-operative union of 'anada
%'9$&. It is sought to involve @ states <u1arat, +aharashtra, .amilnadu, +adhya
0radesh, Andhra 0radesh, and /rissa in implementing the pro1ect.
l9
RICE BRAN OIL
NE= TECHNOLOGIES-
=ew technology in the 2S has proved that rice bran oil is effective in lowering
cholesterol. .his has encouraged many rice millers in the 2S to stabili#er rice bran oil
e!traction. 4dible grade rice brand oil is called 8:eart /il, in Hapan. As demand from
this oil is liely to broaden the world over and as India is the second largest producer
of rice after 'hina, the union government decision to encourage productions of this oil
is welcomed in oil "uarters. .here is great scope, to introduce modern technology in
this predominant agro-industry.
.he central <overnment has raised the e!port ceiling on de oiled rice brand
from B>@,GGG tones to CBF,GGG tones for the oil year >?D?-?G to encourage the
domestic production of brain oil and the e!port of de oiled brand. .his is a welcome
step at that time when the country is poised for it is highest level of edible imports.
It is now increasingly felt that there e!ists scope of arguments. .he and the
availability of 4dible /ils through the application of appropriate technology and the
other moderni#ation programs in the oil-milling sector of particular interest is the vast
scope of producing 4dible grade oil from rice brand.
According to study the 2nited =ations 3ood and Agricultural /rgani#ation %3A/& I=
>?D7, India is the largest producer of the rice brand oil in the world. -ut compared to
Hapan were DG percent of all rice brands are attracted for oil, only one-fourth of all
potential bran is used for oil attraction in this country.
.ill >?AA-AD, India produced about DG,GGG tones of rice brand oil, but only of
industrial grade, >?AD-A? only B,7GG tones of 4dible /ils, could be produced out of
>G>,GGG tones of rice bran oil. .he situation steadily improved since than, thans in
part to the efforts of the solvent e!tractors, Association of India %S4AI&.
20
/ut of B7G,GGG tones of the 4dible grade. 0roduction of 6I'4 -6A= /il is
liely to go up from B7G,GGG tones in >?D@-DA to C>G,GGG tones in >?DA-DD. In >?DD-
D?, the production is liely to go up CB7,GGG tones although the potential, identified
by the S4AI is of @A7,GGG tones per annum.
.he development of 6I'4 -6A= oil e!tracts illustrates how by-product
utili#ation can help argument 4dible /il supplies in the county and generate economic
activities as well.
.he thin brown layers between the hus and ernel in a grain of paddy are
called bran. .hese layers are baric barbarous in nature, indigestible, and refractory to
cooing. .hese bran layers are, therefore, indigestible, and refractory to cooing. .his
bran layers are, therefore removed by a process called polishing. About @-Egs -ran
in usually obtained from polishing one "uintal of rice.
.he bul of the oil of rice bran %7G-DG percent of the total oil& comes into bran
during its polishing. In row rice, on an average, bran contains >B->7 percent oil, while
in per ; per ; boiled rice when oil inside the grain gets deposited on the outer layer
the oil content of bran is >D-BG percent consider its fact that half of rice productive in
India is par boiled, the average oil content of rice bran could realistically be assumed
to an average of about 7G percent.
.he estimated production of paddy in the >?DD-D? was ?C million tones.
'alculated at the modest rate of 7 percent bran on each "uintal of paddy for seed
purpose, the potential output of oil comes to @>G,GGG tones out of bran of F million
tones.
-eginning in the >?AG under private suspires oil e!traction from 6I'4 -6A=
has been steadily on the increasing move ever the profession of 4dible grade 6I'4
-6A= oil to the total has gone up from more B,CGG tones during >?AA-AD to our
>GG,GGG tones in >?AA-AD. .he products of 4dible /il are closely related to the use of
this oil the 9anaspathi Industry.
2l
In spite of fluctuations in demand the use of 6I'4 -6A= oil is 9anaspathi
manufacturing has increased steadily over the year. *ith the recent decisions of the
<overnment to reduce the allocation of imported oils to the 9anaspathi Industry, it
has become more depend on indigenous oils and fats. A situation that is going to
further increase its demand for 6I'4 -6A= oil in the coming year. 9arious
<overnment policies lie e!port of de oiled bran e!ercise rebate on the use of 6I'4
-6A= oil in the 9anaspathi units, e!cise in he! an on hardened 6I'4 -6A= oil for
use so, and the levy on rice mills have contributed, towards the growth of the sector.
.he announcement of a cash compensatory support of >G percent on the 3/-
value of e!ported de oiled from cae for the C years >?D@-DA to >?DD-D? as further
boosted the processing of the rice bran.
Andhra 0radesh process the largest "uantum of rice bran, followed, 0un1ab
and 2ttar 0radesh. .his is also due to the growth in the no of solvent e!traction units.
In >?DA, out of F.D@ millions tones of solvent e!traction capacity, Andhra 0radesh had
>GCD million tones, followed by 0un1ab with D@ tones +adhya 0radesh with @ laes
and 2ttar 0radesh, with 7,DG,GGG tones. In >?D7-D@ Andhra 0radesh processed C?.7
percent of all rice bran produced accounting for 7G.C percent of total 4dible grade
6I'4 -6A= oil FG.B percent of total bran and produced AG percent of total 6I'4
-6A= oil. 7 states Andhra 0radesh, 0un1ab, 2ttar 0radesh, Earnataa and :aryana
produced D> percent of all rice bran under produced DG.F percent total 6I'4 -6A=
oil.
As a result of the encouragement given from the use of indigenous rice bran
oil particularly by the 9anaspathi Industry the processing capacity of rice bran in the
country went up from a more ?G laes tones to C.F million tones >??F and now stands
at DG million tones.
22
A number of suggestions have been put forward for augmenting the
production of 6I'4 -6A= oil. .hese includeO
>& 2niform systems of rice levy for huller and Sheller millers, so that huller
cant remain *edded their traditional technology with perpetuates wastage and would
be compelled to moderni#e. .his would also increase the availability of rice bran for
oil e!traction.
B& An increase in the e!cise rebate on using rice bran oil in 9anaspathi
manufacturing as well as fro soaps and other industries.
C& 3iscal incentives for production of refined solvent e!tracted 6I'4 -6A=
oil for direct use of cooing medium.
F& 0ermission for blending similar non-conventional oil with 6I'4 -6A= oils
for direct consumption and
7& +inimi#ing the import of 0lan oil so as to boost the price of indigenous oils
and provide an intensive to domestic producers.
(eposit all efforts to increase the production of 6I'4 -6A= oil to ma1or out
stacs, one in built in the very structure of rice milling in India and the other natural
of technology, stand in the way of the fuller development of 6I'4 -6A= oil
processing. .o tae the farmer first, largest production ; no less than half of fresh rice
bran accepts the e!traction process is together due to the problems of collection %and
stabili#ation of oil content&. .his is because no less than DG,GGG hullers scatters all
over the country, mostly in the rice producing and consuming states, produce these
brans.
.he technology constraints are closely related to the structural ones. *here as
has the hus content or rice bran in Hapan is only C percent, in India it is more than >B
percent. As a result, the oil content of 6I'4 -6A= in terms of value goes down.
3urther, when oil e!traction is done, the hus leaves a deep color in the oil, when
poses problems at the time of bleaching, another acute technological constraint arises
from the tendency of rice bran to get dehydrated as a result e!posure to the
atmosphere as a result, oil contest goes down to a great e!tent, maing it and
economical per oil e!traction.
23
.he colossal waste of paddy by production including rice bran is ingrained in
the structure of rice milling industry in India. .he number of rice mills in India
increased from F@,GGG in >??C to >GA,GGG in >?DC and >,>A,GGG in >?DA. .he number
of huller mills also increased from >?@C to DG,GGG in >?DC, before declaring to AD,CGG
in >?DA.
.he large number of huller units is a serious drawbac, not only because their
paddy out turns is low, but also because the bran obtained from huller mills is mi!ed
with hus and other foreign matter. -ecause of the low oil content, in the ran of rice
to nine percent, it becomes uneconomical to e!tract oil from this bran.
:oller mills are improved versions of hand panders mostly located in small
towns and in interior villages mostly located process BGG to 7GG tones of paddy in a
year. .hese small hullers generally involve themselves in custom milling of paddy
with fi!ed charges, in cash and in ing. .hey are e!cluded from paying the
compulsory levy imposed on larger mills, which under tae commercial milling of
paddy.
.he huller mills cater to the large number of landless laborers, sharecroppers
and poor peasants whose output is fre"uently at or below subsistence level. It has
been estimated that at treats a "uarter of the paddy produced in the country is other
land pounded or processed through huller unit custom milling. 6ice bran obtained out
of such paddy, estimate about a million tones, is neither pure enough not available in
large enough "uantities to be economically collected. .herefore, this "uantum of rice
bran is as good as not produced at all.
.here are a number of reasons why huller mills thrive in states producing rice
bran oiled vice. 3irst, huller mills are very cheap, and conveniently located in interior
areas. Second, the investment re"uirement being low, under utili#ation of huller mills
in the lean season doesnt put the owner out of business, because the can often
supplement it with other from and non from activities.
.hird, the out turn of rice is not really so low when it comes to par boiled rice.
And last but not the least, is the reason using a huller mill rather than a moderni#ed.
24
Sheller mill enables the miller to avoid mill point levy of rice and associated
problems.
Since about half of the paddy produced in India is rice bran oiled, the loss of
rice bran oil potential is colossal, particularly since the bran produced out of par
boiled rice contains three o five percent more oil that produced out of raw rice and the
oil the bran of par boiled relatively stable and doesnt degrade an account of free fatty
acid formation %33A&P
.ill such time as the huller mills are moderni#ed an intermediate short-run
solution could be applied. .his is to use a mini-rice mill or even a modified huller in
place of traditional huller, so as to improve the outturn of rice as well as to detain
purer bran.
In order to achieve the largest of moderni#ation, the 'entral <overnment runs
a huller subsidy scheme provides for 7G percent of the cost of install action to
improved rice milling e"uipment as subsidy.
3or instance, electricity heated rice bran stabili#er of various power rating and
capacities %between 7G and B7G g. 0er hour& as well as steam heated bran stabilities
have been successfully field-tested. :owever, the tests of chemical stabili#ers, which
are simple and convenient, are yet to yield sufficient results in the field.
.he <overnment of India has decided to install some of these stabilities in
research centers lie 006' to demonstrate its advantages to demonstrate its
advantages to the millers.
In American mills, rice is rubbed with leather straps instead of by emery, not
to get polished rice but also to get good e"uality. -ran in Hapan, rice mills have in
built stabili#ation units. In countries lie -elgium Hapan, *est <ermany and 2.E the
technology of continuous e!traction of oil from rice bran is used to achieve ma!imum
economic energy, labor and materials.
25
*hile most of these technologies are sophisticated, with a high degree of
efficiency of this country, because of the specific nature of the Indian rice milling
Industry, Indignation of these process, therefore is of the most importance. .here are
two ma1or stages in producing 4dible grade oil fro rice bran. .he first stage consists
of stabili#ation of bran to pressure the oil content. .he second stage involves the
processing and refining of rice bran oil.
A number of stabili#ation systems have been successfully developed in India
at the 'entral 3ood .echnological 6esearch Institute %'4.6I& +ysore, .he 0addy
0rocessing 6esearch 'enter %006'& .hiruvarur %..=&, .he 0ost harvest .echnology
'enter %0:.'& at the Indian Institute of .echnology, Eharagpur. .he stabili#ation
particularly the wet heat treatment and chemical stabili#ation particularly the wet heat
treatment and chemical stabili#ation using hydrochloric acid have opened up
enormous possibilities of producing low acid bran in the rice mills. .he rice mills can
now store and accumulated the stabili#ed bran for selling it in to the solvent
e!tractions. 4ven a trucload can be accumulated and stored for the sae of greater
economic in transport. -y the end of this century, paddy productions e!pected to
reach a level of >CG millions tones. Eeeping a side >B.7 percent of production towards
seed, the potential bran production would come to 7.A million tones, which in turn
would yield D,7G,GGG tones of 6I'4 -6A= oil. .he e!ploit this huge potential what
is needed is the right perspective and a commitment towards reali#ing the rich
possibilities in event in the agricultural by products they have conventionally been
wasted.
26
COMPANY PROFILE
PROFILE OF FOODS FATS AND FERTILI#ERS LIMITED
3oods fats and 3ertili#ers limited .adepalligudem is a family owned
organi#ation. It is well nown as 3oods & 3ats but the *est <odavari farmers call it
as a tawdu factory. .his organi#ation is professionally carrying the business activity
by )<oena, family. .he company was established in the year >?@B. It is having
branches in 'hennai, +umbai, Eainada, :yderabad, Eolata and -aroda.
:istorical bacground of foods 3ats and 3ertili#ers $imited were conceived in
>?7? born in >?@G and were on its beet by >?@B. .oday 3oods 3ats and 3ertili#ers
$.( has matured into a conglomerate of its industrial units spread over FG acres
contently bu##ing with activity and providing employment to over DGG persons.
.he wheel of fortune has turned a full circle for +r. -.E.<oena the architect
of 333 $.(, born and bred in -urma. .he <oena family established and respected
in Industry and .rade. .he rice bran from +r. <oenas mill sought as a mal feed and
wrapping papers used for sampling could this oil e!tracted.
.hese "uestions have to wait because in >?FB, the Hapanese invaded -urma
and +r. <oena has to abandon his business and return to India. -eing an optimist is
transformed the adversity into opportunity by his grit and after a brief spell in his
native land in 6a1asthan, his restless enterprising #eal brought +r. <oena to 'hennai
in >?FC. *here he is with his brother e!port of handloom fabrics in due course, he
established a te!tile business. In >?7?, +r. <oena read on article by (r. 6aghunath
0rasad of central food technological institution of +ysore that oil could be e!tracted
from bran using alcohol as a catalyst.
27
Simultaneously his brother in 6angoon informed him of plans being setup with
Hapanese and <erman technologists for e!tracting oil from rice bran +r. <oena held
deliberation with (r. 6aghunathprasad and visited -urma with him to study the
relevant technology better, he was in Hapan to study in 4urope to study the process of
:urgi of <ermany and (r. smith of -elgium.
LOCATION-
.he 'ompany is a conglomerate of various industrial units spread over FG
acres of land, with a built up area of ape!. F lac sft. $ocated in the vicinity of
.adepalligudem +andal & +unicipality in *est <odavari (istrict of Andhra
0radesh.
DEPARTMENTS IN FFFO-
0ersonnel department
0roduction department
+areting department
Accounts department
6esearch & development
MANAGEMENT-
.he manufacturing activities of the company are managed by Sri /.0.<oena
and Sri Sushil <oena at the helm of affairs as whole time (irectors at factory,
supported by team of highly educated and committed professional having wide range
of e!perience in the field of oil derivatives and allied fields.
>. =ames of (irectorsO
Sri -.E.<oena -+anaging (irector
Sri <.S.<oena -*hole .ime (irector
Sri S.-.<oena -*hole .ime (irector
Sri /.0.<oena -*hole .ime (irector
Sri -harat <oena - *hole .ime (irector
Sri Sitarama <oena -*hole .ime (irector
Sri Sushil <oena -*hole .ime (irector
Sri 9ianod umar saraogi -(irector
28
Sri Shiv Eumar 1atia -(irector
Sri Anand choradi -(irector
B. 0articulars of present collaboration if any, =o 'ollaboration %name and
address, nature of collaboration, period of collaboration etc.,&
C. =ame of chief 4!ecutive Sri -.E. <oena
CAPITAL STRUCTURE-'
3inance is very much needed to any business so finance is as heart to the
business the company was incorporated in the year >?@G, the original share capital
subscribed is 6s. 7 lahs. .he company is a closely held industrial houses with no
public investment in the form of e"uity share capital. 3ollowing is the capital structure
as on C>.GC.G@.
Share 'apitalO %Including 6eserves& F>.@F 'rs.
$oaned fundsO %Secured $oans& A>.F? 'rs.
%2nsecured $oans& >A.7> 'rs.
TOTAL (*>?@+ Crs
BAN2ERS-'
S.A.4 -A=E /3 I=(IA M':4==AIN
S.A.4 -A=E /3 :J(46A-A( M':4==AIN
A=(:6A -A=E M.A(40A$$I(2(4+N
'4=.64$ -A=E /3 I=(IA M':4==AIN
I=(2S.6IA$ (494$/0+4=. -A=E /3 I=(IA $.( M':4==AIN
EA626 9JSJA -A=E $.( M.A(40A$$I<2(4+N
29
BRANCHES-'
+2+-AI
:J(46A-A(
EAEI=A(A
=4* (4$:I
3ood fats & fertili#ers $.( is the flagship company of the 333 group. .oday
the 333 group has matured into a conglomerate of BG industrial units spread over F7
acres constantly bu##ing with activity and providing employment to over >GGG
people.
.oday the product range of 333 $.( includes oils of ricebran, soybean,
sunflower, groundnut, sesame, palm, salseed, mangoernel, acidoils, wa!, gums,
deoiled meals Qe!tractionsR, crude distilled and hydrogenated fat for industrial use,
vanaspati, baery, shortening5 margarine, baery fats, specialty fats for manufacturing
chocolate confectionery and cosmetics, canned fruits and vegetables natural colors for
use in food and feed industry, oleo resins and herbal e!tracts. .he company also under
taes fabrication and installation of turney pro1ects for processing of vagetabel oils
and their derivatives.
MULTIFARIOUS PROGRESS-'
Starting with a solvent e!traction plant in >?@B units was continuously added
year after year to form a wide spectrum of products. 'urrent manufacturing activities
comprise of-
Solvent 4!traction 0lant > Mlurgi, <ermanyN
Solvent 4!traction 0lant B Mdesmet, -elgium/IndiaN
Solvent 4!traction 0lant C Mfabricated and installed by engineering division of 333
groupN
30
So/4!& E9&rac&io! %/a!& + A0a.rica&" a!" i!s&a//" .y oi/9 I!"ia a!"
!1i!ri!1 "i4isio! o0 FFF 1rou%B
.he above four e!traction plants provide versatility of
operation in processing different oil seeds/oil caes at the same time and hence are
highly advantageous in mareting. .he plants have facilities to process a wide variety
of oil seeds/oil caes lie rice barn, soybean, sunflower, groundnut, rapeseed, sesame,
mango, sal, =iger, etc. continuous upgradation of manufacturing process through in
house and world wide research is our hallmar.
6efinerO - Msharpels 2SA and engineering division 333 groupN
:igh "uality refining of a variety of vegetabel oils.
Fa& S%/i&&i!1 P/a!&- ' C7urs&r 3 Sa!1r USA a!" !1i!ri!1 "i4isio! o0
FFF 1rou%D
:igh pressure splitting of oil into fatty acids and sweet water.
3atty Acid (istillation 0lantO - Mluwa, Swit#erlandN
:igh "uality distillation of crude fatty acids obtained from the splitting plant.
<lycerin plantO - Mwurster & Sanger 2SAN 0rocessing of sweet water obtained from
fat splitting plant into various grades of refined glycerin.
Stearic acid plantO- Mengineering of 333 groupN
:ydrogenation of fatty acids into stearic acid flaes.
:ydrogenation plantO- M-ernardino Italy and engineering division of 333 groupN
:ydrogenation of fats and fatty acids for industrial use.
0hysical refineryO- Myoshinoi technology and engineering division of 333 groupN
6efining of high free fatty acid oils by seam distillation.
'anning divisionO- Mfabrication and installation by engineering division of 333 groupN
0rocessing of fruits into pulp 1uice and bars.
9anaspati-shortening- margarine divisionO- Mfabrication and installed by engineering
division of 333 groupN
3l
0roduction of vanaspati shortening high "uality baery fats and margarine from
refined oils
Fractionation plant:- .his division produces high "uality oleins and stearines
from various edible fats for use in manufacture of chocolate confectionery and
cosmetics. $eading manufacturers in this field of activity all over the world are our
customers.
.urney engineering divisionO- In collaboration with yoshinoi Seisausho co
$.( Hapan who have done pioneering wor in developing process and technical
now-how for refining high 33A rice bran oil, our engineering division has installed
and commissioned five plants of a total pro1ect cost of 6S. >AG million in south India.
India is the second largest producer of rice with a large potential of crude rice bran oil
to be processed and turned into a fine cooing medium t satisfy the re"uirements o fan
immense Indian maret. 333 group engineering division is e"uipped t set up any
vegetable oil and derivative processing pro1ect.
Oi/ %a/m %ro:c&-' 0lantation of oil palm to progressively cover B7GGG hectares in
Andhra 0radesh and Earnataa the southern states of India is sponsored by us.
:igh yielding variety of sprouted seeds from India and abroad is grown in our
nursery and seedlings are regularly supplied for planting to the farmers to cover the
targeted area. 2nder comprehensive e!tension services provided by us the maturing of
plantation is e!pected to be ideal mean while the group has set u plant and machinery
along with suitable infrastructure t crush the palm fruits and ernels into oil and
process the same into refined oils oleins stearines and a host of other products. .otal
pro1ect outlay is estimated to be df> billion Indian rupees.
I!&r!a&io!a/ &ra"i!1-' -esides the e!port of the manufactured products
with large warehouse for dry cargo bul storage installation for li"uid cargo at the
ports, re"uired infrastructure at our command and international trading e!perience of
over FG years the 333 group has set u high standards and achieved substantial growth
in international trading of commodities lie rice, edible oils, Industrial fats, mai#e,
tapioca, hps groundnut ernels dyes and chemicals.
32
.he group has been a pioneer in introducing various Indian products
manufactured by us to new international marets and has won awards for our
performance. :owever, a research and development new product is being done on a
continuous basis for enriching the international trading in both "uality and volumes.
Sarc$ A!" Rsarc$-' 6esearch and development is the pivot of our
activities and has made us to stand in good steady continuous up gradation of
production process with the help of a well-e"uipped 6&( laboratory at :yderabad
and diversification in new research based pro1ects in our corporation. 'ulture leading
us to a steady upward movement.
Sr4 To Soci&yO- .he 333 group is involved in a large way in social service
activities the <oena family trust runs Arts and Science college for women in Andhra
0radesh and a :igher Secondary School in 6a1asthan. It has a established a boys
college in Andhra 0radesh, a :igher Secondary School in +yanmar and a multistory
building in .amilnadu, providing accommodation to .ourists and Social functions
with a library and reading room. In addition to the above pro1ects the group has also
being regularly contributing to several educational, medical and social service
institutions.
33
ETHICSO-
.he 333 group is proud of its inherent values, which are, persuade relentlessly to
drive it towards sustainable growth. .hese values are common language that binds all
its people.
.he 333 group stands forO-
An intrinsic commitment to its people.
A culture of trust, mutual respect, opens communication and transparency of
action.
'ommitment to welfare-driven initiatives that mae a "ualitative difference to
the lives of marginali#ed people.
An environment-conscious group through its eco-friendly units.
Indian values with a global mind set.
333 groups manufacture a variety of products including vanaspati granite
readymade garments computer software etc. we have listed a few of our products
here.
TANDUL-' R0i!" ric .ra! oi/
A multi purpose-cooing medium 1udged as the safest cooing oil in the world.
'ontains tocopherol and ory#anol that reduce cholesterol. It is e!pensively used in
Hapan an evidence for the Hapanese larger living.
0acing >7g/>litre fle! pouch.
34
SUN DELITEO- 6efined sunflower oil.
Imported from Argentina and refined in the most modern refinery contains
high puff. It lowers cholesterol.. A general purpose cooing oil.
0acing, >7Eg tin/>7litre tin/7litre 1ar/>lite fle! pouch.
SURABHIO- 9anaspati
An economical vegetable fat for small-scale baeries. +ulti utility fat widely used all
over the country.
0acing, >7Eg bag-in-bi!/>7Eg tin/>7Eg 1ar.
Ba5rEs P&O- -aery shortening.
+ultipurpose baery shortening creamy white and bland in taste. A blend of specially
formulated and te!tured hydrogenated fats to provide e!cellent plasticity. .he largest
selling brand in south India for manufacturing caes beads biscuits filling cream
cooies also used for shallow and deep-frying. 0acing5 >7Eg bag-in-bo!/>7Eg
tin/>7Eg 1ar.
FFF-'Va!as%a&i
>GGI granulated vegetabel fat. A favorite of south Indian housewives for cooing and
deep-frying. A must for all festival cooing and sweet preparations. 0acing, >7Eg
tin/>7 liter tin/>lite fle! pouch/7GG,BGG and >GG ml fle! pouch.
MELLO-' +argarine.
+argarine made from the choicest of refined oils for baery industries recommended
by the best baers in the country for cae cream pastry biscuits icing and cooies.
Ideal because it is not colored and not flavored.
0acing5 >7Eg bags-in-bo!.
BISCREMEO- Ara&" .a5ry s$or&!i!1?
2niform dispersion of nitrogen gas in the fat produces a superior baery shortening
Mcontains >GI v/wt nitrogenN specially used for filling cream and icing. -est for
premium biscuits and cooies.
35
PALM DELITE-' Im%or&" E3D %a/mo/i!?
A refined bleached and deodori#ed palm oleins imported from +alaysia, 4conomical
oil supplied allover the country directly from our ports on the east and west.
0acing, >7Eg tin/> liter fle! pouch/7GG ml fle! pouch.
BA2ERS DELITEO- 0uff pastry fat, An in house development to produce a smooth
fat designed of ruse in puff pastry products. A specialty fat, which gives a flay, puff
with a good life. 0acing5 >7Eg bag-in-bo!.
GOLDEN SPREAD-' Mar1ari! 0or %u00s
Specially formulated product for puffs. .here is already a great demand for these
margarine for its superior "uality.
0acing5 >7Eg bag-in-bo!.
-A:AA6O- +ango bar
A papad made from mango pulp favorite mouth tingler for the young and the old.
0acing5 BGgms sachet.
FFF GLYCERINEO- 6efined glycerin made from sweet water obtained in fat
splitting.
<rades available---industrial white-I*
'hemically pure-'0
Indian pharmacopeia-I0
0acing5 B7Gg plastic drums.
TRIFFA-' Fa&&y aci"s<s&aric aci"s?
Standard and hardened "uality distilled fatty acids made from rice bran palm
coconut sunflower rapeseed Soya and linseed oil. 'ustom made formulations
available on order. 6aw material for cosmetic premium soap lubricants chemical
industries rubber and 09' formulations.
0acing, >>GEg in plastic carboys for li"uids 7GEg woven hdpe lined bags for
hardened "uality in flae form.
36
/.:46SO- 'rude palm, oil-bul.
6efined palms oil-bul5 contract farming by farmers. *e provide imported seedlings
after acclimati#ing now how for growing is provided to the farmers. Specialty fats5
6efined oum fat MgarceniaN
Sal stearines Mshorea 6obustaN
0roduced from forest sources. An important nontimber forest produces.
+ango stearines Mmagnifier IndiaN
Shea stearine.
'osmetic ingredients --- mango oleins
Shea oleins.
6efined rice bran oil wa!O- 2sed in various industries lie paper coating
candles water proofing floor shoe and furniture polish cosmetics carbon paper
printing ins fruit and vegetable coatings and pharmaceuticals. 6ice barn oil wa!
may substitute wa! lie carnauba.
4!porters of O- Indian rice Mnon-basmatiN
(e oiled rice barn
(e oiled saled meal- pellets non-dusty.
Importers ofO-
0alm oil and its fractions.
'rude sunflower oil
'rude soybean oil
:ave sea-worthy barges for unloading from ships when anchored near shallow
water ports. 0resence in all minor ports in India. *est coast Eochi and +angalore
east coast gopalpur Eainaa and nagapattinam
.urney pro1ect ; Supplier for double solvent refining of high 33A oils up to BGI
such as 6ice bran oil solvent e!tracted high 33A oils. .he refined oil obtained is of
e!cellent "uality as per food standards.
37
<A6+4=. 4S0/6.46SO- *e e!port woven garments to 2nited States of America,
2nited ingdom 'anada <ermany Hapan 'hile 3rance and Australia.
/ur customer span ranges from chain stores mail order bouti"ues and wholesalers
order si#es vary from >GGG to >,GG,GGG units.
<6=I.4 4S0/6.46SO- *e initially started e!porting rough blocs and have
e!panded by e!porting cut-to-si#e slabs and random slabs. $ater we shifted towards
manufacturing of finished products lie monument artifact items and fireplaces.
SOFT=ARE DEVELOPMENT-' <oena Info.ech limited provides the full range
of I. solutions and services in the following segments.
>. 'onformance services.
B. *eb gardening.
C. Software maintenance and web enabling legacy applications.
F. I. applications in power sector.
7. Smart card based solutions.
.he 7GG s"uare meters of software development center at :yderabad has been
designed to provide the state of art infrastructure for software professionals.
NE= PROJECTS-
Apart from hori#ontal e!pansion, *e have also e!panded out operations
vertically. It may be noted that the company had implemented several pro1ects during
the last 7 years which includes @+* co-generation industrial waste based power
plant, -aery shortening 0lant at 'olombo, Srilana %Hoint 9enture&.
38
I!'$ous R 3 D a!" Tc$!o/o1y Bas
As a pioneer in 4dible industry. *e have over the years built up a strong in-
house 6 & ( and technology base. Sri /m 0raash <oena, who is a 'hemical
4ngineer, with FG years of e!perience in the line, is one of the leading oil
technologists of the company and he is the bac bone for the implementation of
various pro1ects in the company.
*e had a technical collaboration agreement with Joshino Scishausho
'o.$td., Hapan, who are the pioneers in developing the technology and process now
how for refining 6ice bran /il with high 33A %3ree 3atty Acid& and maing it
suitable for edible use. /ut 4ngineering division has designed, fabricated, installed
and commissioned successfully on turn-ey basis.7 4dible /il 6efinery 0lant at a
total pro1ect cost of 6s.>AG million, based on the above technology.
) .he potential of a seed is not recognised, until one fine day we see it standing
strong, ma1estic and gigantic as a treeP So true. Its the tree that captures our
attention and not the seed from which it sproutsT,
Jet, we will fail not to recall the modest start of the C3 group with 3oods 3ats &
3ertilisers $td. Its a saga of F7 years and the 9ision of +r. -.E <oena %'hairman
and +anaging (irector& that has made the C3 group a conglomerate of BG diversified
industrial units.
Starting with edible oil e!traction and refining at 3ood 3ats and 3ertilisers $td we
branched out into multifarious vistas vis-a- vis oil palm cultivation, manufacture of
edible oils and its by-products, baery shortenings and margarine, specialty fats,
commodity trading, garments, power, etc. =otably, we have emerged as one of the
largest )-aery fat & +argarine, manufacturers in India and )*orld leaders in
Specialty fats % '-S & .echnology.,
*ith the committed team enterprise of over >GGG employees, the C3 group steered
past the Indian landscape to e!pand overseas. /ur networ and goodwill has been
vibrantly growing in countries abroad eversince.
39
/ther products manufactured at the facility are baery shortenings, fatty acids and
tailor made solvent fractionated specialty fats. .hese products find use in te!tile, soap,
3oods 3ats & 3ertilisers $td was conceived in >?7?, born in >?@G and was on its feet
by >?@B.
.oday 3oods 3ats & 3ertilisers $td was matured into a conglomerate of BG industrial
units spread over FG acres constantly bussing with activity and providing employment
to over >GGG persons .
/ur product range today includes oils of rice bran, soyabean, sunflower, groundnut ,
sesame, palm, sal seed, mango emel, acid oils, wa!, gums, deoiled meals
%e!tractions&, crude distilled and hydrogenated fatty acids, oil tractions, stearic acids,
glycerine, hydrogenated fats for industrial use, vanaspati / shortening, margarine,
canned fruits, vegetables, baery fats, speciality fats for manufacturing chocolate,
confectionery and cosmetics, natural colours for use in food and feed industry, oleo
resins and herbal e!tracts, fabrication and installation of turney pro1ects for
processing of vegetable oils and their derivatives.
40
6esearch and development is the pivot of our activities and has made us to
stand in good stead. 'ontinuous upgradation processes and diversification in new
research based pro1ects is our 'orporate culture leading us to steady upward
movement.
333 has been a ma1or player in the C3 <roup of industries for almost half a
century. 'ontinued progress in the edible oil & fats field heralded the setting up of yet
another subsidiary -the Asia 0acific 'ommodities $imited %A0'$& in +arch BGGB.
Its facilities comprises5 a modern B7G .0( (esmet physical refinement plant,
>GG .0( interesterfication plant, fatty acid distillation plant, dry fractionation plant
and state-of-art solvent fractionation plant. .hese fac cosmetics, candle, baery,
confectionery, food and chemical industries.
.he A0'$ pro1ect was implemented under .arget BGGG Scheme of <overnment
of Andhra 0radesh and hence is eligible for sales ta! e!emption/deferment. A0'$ has
clients based all over India & overseas.
+odesty <arments is one of those rare organi#ations to which success has come
naturally, since its incorporation.
Success in this highly competitive field has been the result of a devotion to
"uality, commitment to delivery schedules and a desire to always perform better.
.oday these "ualities are recogni#ed and appreciated by importers of woven
garments. .he world sees +odesty as an indispensable partner in their business,
someone who understands their needs and is able to translate that understanding into
concreteterms.
4l
Since its inception in >?DD, +odesty has grown to a turnover of 2SL >B million,
producing F.7 million garments.
=ew (elhi , India Us capital is the hub of +odestyUs operation. In addition to
manufacturing facilities, most of our support departments , shipping "uality control,
designing, sampling are also here.
+odesty <arments has a team of >7GG dedicated employees who are all a part of
oursuccess.
*e ensure that our total fabric is checed before it goes into production. 4ach
and every fabric is tested to -uyerUs re"uirements for shrinage and colour fastness.
+odesty <arments e!ports woven garments to 2nited States of America ,
2nited Eingdom , 3rance and Australia . +odestyUs customer span range from chain
stores, mail order, bouti"ues and wholesalers. /rder si#es vary from >,GGG to >,GG,GGG
units. All receive the same care and attention
.he company was established in >??G. It initially started e!porting rough
blocs to countries lie Hapan and Australia. It then e!panded its business by
e!porting cut-to-si#e slabs and random slabs to various countries lie Indonesia,
(ubai, Singapore, Saudi Arabia & =ew#ealand. .he cut-to-si#e slabs which were
e!ported to (ubai were used in the construction of famous ban called the U-an of
/manU and the ones which were e!ported to Indonesia were used in the construction
of non-alignment building in Indonesia.
$ater the company shifted its way to manufacture of finished products lie
monuments, artifacts items and fire places to countries lie -elgium, <ermany,
3rance, :olland, Scotland, =etherland, 2nitedEingdom etc.
42
Mo!um!&s-
(utch model, Irish model, -elgian model, 3rench model, 4nglish model,
<erman model, $eaves, -oos with leaves, :eart, (oppel :eart, etc.
Artefact ItemsO
3lower vases, $anterns, 2rns, -owls, -irdbaths, 3ountains, Single 0illar,
.hree piece pillar, Ashtray, -alls% >Gcms to @Gcms& and all other round items.
3ire 0lacesO
.hese are made in all designs and colours.
All these products are e!ported in Indian materials lie 0aradisom, :imalayan
blue, 9i#ag blue, Eerala green, 6uby red, Eashmir white, *iscon white, Absolute
blac, Huprana and -lac gala!y.
6ecently the company has taen up a running factory where it is
manufacturing all monuments and airfacts items. Apart from Indian materials it
started processing foreign materials lie =ero Impala from South Africa and -lue perl
from =orway and re-e!porting the same to 4uropean countries.
.he company has also got a set of silled worers and designers in both
fields of monuments and round items, which facilitates it to manufacture any product
when provided with appropriate drawings or designs.
43
VIATON INFRASTRUCTURES PVT LTD
VIATON ENERGY LTD
.he above companies are promoted by the C3 group and 'reative group.
Po7r-
0ower is a critical driver of economic growth and industrial development. India
is facing a huge gap between demand and supply year on year. .he company aims to
set up power pro1ects based on an entire gamut of generation / transmission/
distribution of power. .he company has been alloted licenses for power pro1ects
based on bio mass in 'hattisgarh, +aharashtra and 0un1ab.
Mi!or Air%or&s<Por&s<Co!&rac&ua/ Jo.s-
.he 'ompany foresees increasing infrastructure re"uirement in India, eeping in view
of the huge development phase happening - aims to build in infrastructure facilities in
the above area, in more specifically, the tier B and tier C locations.
44
*F IN OVERSEAS
'4J$/= S04'IA$I/.J 3A.S
'eylon Specialty 3ats 0vt.$td %'S3& is a subsidiary of 3oods 3ats &
3ertilisers $td.
'S3 has been established to tae advantage of Sri $anas strategic
geographic location as an international business center between 'hina, the 3ar 4ast
and countries east of the Sue#. 2nder the Indo Sri $anan 3ree .rade Agreement,
'S3 will be able to e!port its manufactured products into India duty free.
.he factory is situated in the prestigious e!port-processing #one in
-iyagama, located about C7 ms from 'olombo. .he factory is modeled on the latest
technology and is largely fabricated from imported machinery.
'S3 is e"uipped to produce >GG .0( of baery shortenings and margarine
and CG .0( of Specialty 3ats. 2nlie hydrogenation, which produces high trans fatty
acids, which are detrimental to health, 'S3 produces trans-free hard fats using the
interesterification .echnology.
'eylon Specialty 3ats will focus on maing specialty fats for the baery
and confectionery industries. .hese specialty fats will be natural ingredients to
chocolates, ice cream, pastries, biscuits, breads, and many other applications. .he
modern factory will also be able to produce table and industrial margarine that has a
growing maret both in Sri $ana and abroad.
45
*F AFRICA
.he C3 group pushes on into the remote and less accessed countries of the world
because it sees a mutual opportunity for growth and development even in far removed
nations.
C3 Africa has operations in various *est African countries such as ; <hana, -urina
3aso, -enin, +ali, .ogo, =igeria and Ivorycoast. C3 Africa is a wholly owned
subsidiary of 3oods 3ats and 3ertilisers $td., India. .he company is involved in
procurement and trading of various commodities.
.he commercial and economic activities of the company have e!tended beyond the
boundaries with various procurement centres and warehouses spread all over which
are well netted with efficient transport conduit.
/ur in-house clearing and forwarding center at the port ensures swift and efficient
foreign trade. .he African e!perience has given C3 group, the 1oy of co-operation
among developing nation.
PAR2ER INTERNATIONAL
)S+A$$ -2. 0/*4632$,
.he C3 group has always believed in the above adage. .his prompted us to set up
0arer International at Singapore - one of the worlds most prosperous countries with
strong international trading lins.
0arer International caters to the groups trading activities of Agro commodities.
46
SPECIALITY FATS
'elebrations are never complete without confectioneries. And confectioneries
are incomplete without a iss of Speciality 3ats. .he C3 <roup has been a silent
partner in sweet moments. /bscure, hidden and yet adding flavor you have relished.
/ver CG years starting from >?A7 we have grown hand in hand with the
confectionery industry providing her with e!otic fats e!tracted from Shea nuts, Sal
seeds, Eoum ernel, +ango ernel and Illipe. .hese products have been tailor-made
to suit the needs of various confectioners. 333 $td is today one of the largest sources
of specialty fats in the world.
333 $td. pioneered in India, the process of both dry fractionation and solvent
fractionation through in-house development of the process technology. *e
manufacture world-class Sal, +ango & Shea stearine using modern solvent
fractionation techni"ues. *e also have the capability to produce Illipe & oum fats
and high "uality 0alm +id 3raction %I9-CC&. .hese products find e!tensive
application in the manufacture of cocoa butter e"uivalents %'-4&, which are used in
the chocolate industry. .ailor-made '-4s have functional properties similar to cocoa
butter and are far more economical. In combination with cocoa butter it standardi#es
product "uality and enhances product shelf life. .his is made possible by use of
special types of '-4Us nown as 'ocoa -utter Improvers %'-I& which raise the
melting point of chocolate for better storage stability in tropical climates. .he
Speciality 3ats (ivision has always observed stringent "uality assurance systems in
its processes.
333 is today, one of the largest sources of speciality fats in the world.
.estimony to mar our "uality is the continued patronage we en1oy from large
manufacturers of 'ocoa -utter 4"uivalents from Hapan, +alaysia, Italy, :olland, 2E
& the Scandinavian countries.
47
OIL PALMS
.he /il 0alm (ivision %/0(& has successfully set up a complete cycle of
operation%s& and moved from the 0/' %0roof of 'oncept& stage to 6amp up stage in a
short period of time.
I! A!"$ra Pra"s$
V /perations in ? +andals of *est <odavari (ist./F +andals of 9i#ianagaram
(istrict with a potential of FGB7G ha.
V =urseries in *est <odavari and 9i#ianagaram (istricts
V >B,7GG ha area under /il 0alm
V +ultiple collection centres
V >G-BG ./hr 0alm /il +ill % Including 0roduction of 0alm Eernel /il&
V 6efinery / 3ractionation 2nit for further processing of '0/&'0E/
V A.7 +w power plant based on 0alm waste as its fuel
I! 2ar!a&a5a
V /perations in C district of Eoppal,<adag and 6aichur with a potential of CG,GGG ha.
V /ne nursery in Eoppal (istrict
V B,7GG ha area under oil palm.
V +ultiple collection centres
V 7 ->G +. 33-/ :our 0alm /il +ill coming up in Eoppal (istrict.
I! MiForam
V /perations in C district of Ai#wal,Serchhip and Saiha with a potential of BG,GGG ha.
V /ne nursery in Serchhip (istrict
V In its first year of area e!pansion covered 7GG ha under oil palm
48
I! Gu:ara&
V /perations in B distrcts of Surat and .api with a potential of >D,FGG ha.
V /ne nursery in .api (istrict
V In its first year of area e!pansion covered 7GG ha under oil palm
I! Orissa
V /perations in C distrcts of (henanal and Ha1pur with a potential of >B,GGG ha.
V /ne nursery in (henanal (istrict
V In its first year of area e!pansion covered 7GG ha under oil palm
I! Tami/!a"u
V <overnment of .amilnadu has allotted ).oothuudi, district for /il 0alm
(evelopment during
BGGD. Arrangements are being made for establishing =ursery and start related
operations
Farmrs G our %ar&!rs &o Succss
= /oo5 a& 0armrs as our %ar&!rs &o succss a!" 7 %romis
V .o give them the best "uality sapling / best e!tension practices
V .o ensure "uality plantation / best yield at field level
V .o provide training to farmers
V .o loo at intercrop in aged plantation ; increased income to farmers
V .o be a support to the farmer in his other needs.
*hat the 3uture has in Store
V A ma1or ramp up in ac"uiring a very good area coverage in the subse"uent year%s&
49
Aras o0 O%ra&io!
/0( ; A0
V =ursery - (ubacherla 9illage, *est <odavari district.
V +ill//ffice - Jernagudem village, *est <odavari district
/0( ; EA6=A.AEA
V =ursery - Einnal 9illage, Eoppal (istrict.
V /ffice - Eoppal .own, Eoppal (istrict.
/0( ; +IW/6A+
V =ursery - +at 9alley, Serchiip (istrict
V /ffice - Serchhip .own, Serchhip district.
/0( ; <2HA6A.
V =ursery - -hatpur 9illage, Surat district.
V /ffice - 9yara talu, Surat district.
/0( ; /6ISSA
V =ursery - Erusnaumarpur Ehamar 9illage, (henanal district.
V /ffice - (henanal town, (henanal district
50
Oi/ Pa/m "i4isio! Ima1s


OILS AND FATS
.he food we eat is an e!pression of love. *e as the C3 group try to e!press this
love in different ways. *e are with you, right through the day, unnoticed and yet
eeping you in the finest of spirits, body and mind.
Jes, we are with you as edible oils and fats adding flavour to all that you
savour. -e it homemade edibles or baery products, we add taste to every thing you
smac into.
.andul, 0almdelite, 6oyaldelite, Soyadelite, C3 Sunflower oil and Surabhi are
few of the names dedicated to ensure a salubrious and healthy meal. :ygiene and
"uality are what we are pledged to and this has made our edible oils a household name
for over FG years.
5l
/ur range of -aery shortenings, +argarine and 9anaspati are the delight of
baers and confectioners.
-aerspet and -aers (elight for crisp, flay puffs and croissants. +ello
+argarine, +ello 'ream, <olden Spread for soft and fluffy pastries that melt in your
mouth. C3 9anaspati, .rim and Surabhi for the much relished Indian sweets. All
these, eeping at the fore front of our mind your health and nutrition balance.
For mor "&ai/s o! our
V 4dible oils
V -aery 3ats
OTHER PRODUCTS
).here is never a product with no use,. *e put this philosophy to use by
furthering on our residual products. *e call it the 8-y-products division where every
remnant of a processing or e!traction function finds an alternative application.
3atty Acids, <lycerine, Stearic Acid and 6- wa! are our principal by-products
from e!traction and refining of 6ice bran, 9egetable, 0alm and other oils.
4ach of these products is an essential ingredient of varied industries such as the
.e!tile, 0harma, 'osmetics, 0lastic, 6ubber, 'ement, 4!plosive, 0aints, 'oolants and
many others.
-eside we also manufacture these products based on customer specification to
suit their needs
52
CONSUMER PRODUCTS
Jet another division dedicated to mareting and trade of consumer goods is the
)'onsumer 0roduct (ivision., *e see to mae a foray into the retail segment by
capitali#ing on the groups e!istent mareting networ.
'0( had tied up with 'oca-'ola, the worlds largest brand in -everages
segment. It will be mareting the companys products, in the city of 'hennai
%.amil =adu, India& to start with and will gradually e!pand to other cities. .he
division has complete warehousing facilities and logistical set up to support
the venture.
*e have also established strategic distribution alliance with the <lobal ma1or
:yundai 4lectronics for consumer durable products such as Air conditioners,
6efrigerators and other electronic goods.
.he division is in the process of launching 0remium "uality branded
0istachios in the Indian maret. .hese pistachios are piced from the best
farms in Iran and sautXed with saffron and condiments. $ow cholesterol and
added health properties have made the pistachios an appetising treat amongst
royal Arab families
.he division plans to introduce a melange of brands and products into the maret in
the near future.
NATURAL PRODUCTS
*hen +other =ature smiles, she e!presses herself as UI=(IA.U-the country that is
blessed with natureUs bounty of flora and fauna. 3rom time immemorial e!plorers
have visited our country in search of herbs with healing properties. And India has
always shared with the world all that she has. *e as a group continue this tradition of
sharing, through our =atural 0roducts (ivision.
53
/ur focus has been medicinal plants and their therapeutic values. .hese herbs
are procured from some of the most far removed locales of the country, which serve
as their natural habitat. :erbal e!tracts and bio-nutrients are then obtained from these
plants. .his is done under stringent pharmaceutical "uality standards.
Our sys&ma&iF" %roc"ur i!4o/4s-
V 0rocuring medicinal herbs.
V 4!tracting active ingredients from these verdure.
V 0urifying and concentrating the active ingredients.
V Standardi#ing the ingredients.
V Analysing and certifying each production batch using modern
scientific e"uipment.
V 'linical study and documentation of the efficacy of these products.
V +aing available tested herbal e!tracts for healing and medical
purposes.
*e at 333 are privileged to be engaged in this highly speciali#ed activity, giving to
the world the benefit of IndiaUs bio-diversity in medicinal plants.
The ancient is forever young.....
Because it's always rediscovered in infinite ways...

RESEARCH AND DEVELOPMENT
6esearch & (evelopment is the pivot of our activities and has helped us stand in good
stead. It is due to the continuous development activities that we have been able to
introduce, products that have been well accepted both in domestic & international
marets. Some of these products such as e!otic fats, rice bran wa! & solansol have
gained global recognition. *e have recently started search & research on herbal
e!tracts.
*hilst being in the commodity business, it has been our tradition to charter our
course by continuous value addition. At 333, we have a penchant to create high value
products from waste or low value by products.
54
In the normal course also, through our research & development, we try to
improve the "uality of our e!isting products such as baery shortenings &
margarines.
ENGINEERING
/ur "uest for new products had led us to the formation of this division. A small
worshop set up to manufacture pilot plants for our product development, has
culminated into a well e"uipped, self-sufficient engineering division.
.his division besides having supplied five miscella refining pro1ects, caters to the
continuous internal re"uirement of the C3 <roup. -esides cost (ivision enables the
toideas into plant-scale reality. An embryo in the form of a laboratory trial is
converted into a mammoth manufacturing facility by the e!pertise of this division.
We start small, yet achieve big.... WE achieve the unthinkable!
55
CAPITAL BUDGETING
Ca%i&a/ .u"1&i!1 %or investment appraisal& is the planning process used to
determine whether an organi#ationUs long term investments such as new machinery,
replacement machinery, new plants, new products, and research development pro1ects
are worth pursuing. It is budget for ma1orcapital, or investment, e!penditures.
+any formal methods are used in capital budgeting, including the techni"ues such as
Accounting rate of return
0aybac period
=et present value
0rofitability inde!
Internal rate of return
+odified internal rate of return
4"uivalent annuity
6eal options valuation
.hese methods use the incremental cash flows from each potential investment,
or proect. .echni"ues based on accounting earnings and accounting rules are
sometimes used - though economists consider this to be improper - such as
the accounting rate of return, and Yreturn on investment.Y Simplified and hybrid
methods are used as well, such as payback period anddiscounted payback period.
56
NET PRESENT VALUE
In finance, the !& %rs!& 4a/u %NPV& or !& %rs!& 7or&$ %NP=& of
a time series of cash flows, both incoming and outgoing, is defined as the sum of
the present values %09s& of the individual cash flows of the same entity.
In the case when all future cash flows are incoming %such as coupons and
principal of a bond& and the only outflow of cash is the purchase price, the =09 is
simply the 09 of future cash flows minus the purchase price %which is its own 09&.
=09 is a central tool indiscounted cash flow %('3& analysis and is a standard method
for using the time value of money to appraise long-term pro1ects. 2sed for capital
budgeting and widely used throughout economics, finance, and accounting, it
measures the e!cess or shortfall of cash flows, in present value terms, once financing
charges are met.
=09 can be described as the )difference amount, between the sums of
discountedO cash inflows and cash outflows. It compares the present value of money
today to the present value of money in future, taing inflation and returns into account
.he =09 of a se"uence of cash flows taes as input the cash flows and a
discount rate or discount curve and outputs a price5 the converse process in ('3
analysis Z taing a se"uence of cash flows and a price as input and inferring as
output a discount rate %the discount rate which would yield the given price as =09&
Z is called the yield and is more widely used in bond trading.
57
USE IN DECISION MA2ING
=09 is an indicator of how much value an investment or pro1ect adds to the
firm. *ith a particular pro1ect, if is a positive value, the pro1ect is in the status of
positive cash inflow in the time of t. If is a negative value, the pro1ect is in the
status of discounted cash outflow in the time of t. Appropriately rised pro1ects with a
positive =09 could be accepted. .his does not necessarily mean that they should be
undertaen since =09 at the cost of capital may not account for opportunity
cost, i.e., comparison with other available investments. In financial theory, if there is a
choice between two mutually e!clusive alternatives, the one yielding the higher =09
should be selected.
I0??? I& ma!s??? T$!???
=09
[ G
the investment would
add value to the firm
the pro1ect may be accepted
=09
\ G
the investment would
subtract value from the
firm
the pro1ect should be re1ected
=09
] G
the investment would
neither gain nor lose
value for the firm
*e should be indifferent in the decision whether to accept or re1ect the
pro1ect. .his pro1ect adds no monetary value. (ecision should be based
on other criteria, e.g., strategic positioning or other factors not e!plicitly
included in the calculation.
58
CAPITAL BUDGETING DEFINITION
'apital budgeting is a long-term economics decision maing. 4ach potential
pro1ectUs value should be estimated using a discounted cash flow %('3& valuation, to
find its net present value %=09&. %3irst applied to 'orporate 3inance by Hoel (ean in
>?7>5 see also 3isher separation theorem, Hohn -urr *illiamsO .heory.& .his
valuation re"uires estimating the si#e and timing of all the incremental cash flows
from the pro1ect. %.hese future cash highest =09%<4&.& .he =09 is greatly affected
by the discount rate, so selecting the proper rateZsometimes called the hurdle rateZ
is critical to maing the right decision. .he hurdle rate is the +inimum acceptable
rate of return on an investment. .his should reflect the risiness of the investment,
typically measured by the volatility of cash flows, and must tae into account the
financing mi!. +anagers may use models such as the 'A0+ or the A0. to estimate a
discount rate appropriate for each particular pro1ect, and use the weighted average
cost of capital %W!""& to reflect the financing mi! selected. A common practice in
choosing a discount rate for a pro1ect is to apply a *A'' that applies to the entire
firm, but a higher discount rate may be more appropriate when a pro1ectUs ris is
higher than the ris of the firm as a whole.
INTERNAL RATE OF RETURN
.he i!&r!a/ ra& o0 r&ur! %I66& is defined as the discount rate that gives
a net present value %=09& of #ero. It is a commonly used measure of investment
efficiency.
.he I66 method will result in the same decision as the =09 method for %non-
mutually e!clusive& pro1ects in an unconstrained environment, in the usual cases
where a negative cash flow occurs at the start of the pro1ect, followed by all positive
cash flows. In most realistic cases, all independent pro1ects that have an I66 higher
than the hurdle rate should be accepted. =evertheless, for mutually e!clusive pro1ects,
the decision rule of taing the pro1ect with the highest I66 - which is often used -
may select a pro1ect with a lower =09.
59
In some cases, several #ero =09 discount rates may e!ist, so there is no
uni"ue I66. .he I66 e!ists and is uni"ue if one or more years of net investment
%negative cash flow& are followed by years of net revenues. -ut if the signs of the cash
flows change more than once, there may be several I66s. .he I66 e"uation generally
cannot be solved analytically but only via iterations.
/ne shortcoming of the I66 method is that it is commonly misunderstood to
convey the actual annual profitability of an investment. :owever, this is not the case
because intermediate cash flows are almost never reinvested at the pro1ectUs I665 and,
therefore, the actual rate of return is almost certainly going to be lower. Accordingly,
a measure called +odified Internal 6ate of 6eturn %+I66& is often used.
(espite a strong academic preference for =09, surveys indicate that
e!ecutives prefer I66 over =09
Mcitation neededN
, although they should be used in concert.
In a budget-constrained environment, efficiency measures should be used to
ma!imi#e the overall =09 of the firm. Some managers find it intuitively more
appealing to evaluate investments in terms of percentage rates of return than dollars of
=09.
EHUIVALENT ANNUITY METHOD
.he e#uivalent annuity method e!presses the =09 as an annuali#ed cash flow
by dividing it by the present value of the annuity factor. It is often used when
assessing only the costs of specific pro1ects that have the same cash inflows. In this
form it is nown as thee#uivalent annual cost %4A'& method and is the cost per year
of owning and operating an asset over its entire lifespan.
It is often used when comparing investment pro1ects of une"ual lifespans. 3or
e!ample if pro1ect A has an e!pected lifetime of A years, and pro1ect - has an
e!pected lifetime of >> years it would be improper to simply compare the net present
values %=09s& of the two pro1ects, unless the pro1ects could not be repeated.
60
.he use of the 4A' method implies that the pro1ect will be replaced by an
identical pro1ect.
Alternatively the chain method can be used with the =09 method under the
assumption that the pro1ects will be replaced with the same cash flows each time. .o
compare pro1ects of une"ual length, say C years and F years, the pro1ects are chained
together, i.e. four repetitions of the C year pro1ect are compare to three repetitions of
the F year pro1ect. .he chain method and the 4A' method give mathematically
e"uivalent answers.
.he assumption of the same cash flows for each lin in the chain is essentially
an assumption of #ero inflation, so a real interest raterather than a nominal interest
rate is commonly used in the calculations.
REAL OPTIONS
6eal options analysis has become important since the >?AGs as option pricing
models have gotten more sophisticated. .he discounted cash flow methods essentially
value pro1ects as if they were risy bonds, with the promised cash flows nown. -ut
managers will have many choices of how to increase future cash inflows, or to
decrease future cash outflows. In other words, managers get to manage the pro1ects -
not simply accept or re1ect them. 6eal options analysis try to value the choices - the
option value - that the managers will have in the future and adds these values to
the =09.
RAN2ED PROJECTS
.he real value of capital budgeting is to ran pro1ects. +ost organi#ations
have many pro1ects that could potentially be financially rewarding. /nce it has been
determined that a particular pro1ect has e!ceeded its hurdle, then it should be raned
against peer pro1ects %e.g. - highest 0rofitability inde! to lowest 0rofitability inde!&.
.he highest raning pro1ects should be implemented until the budgeted capital has
been e!pended.
6l
FUNDING SOURCES
*hen a corporation determines its capital budget, it must ac"uire said funds.
.hree methods are ge stoc have no financial ris butdividends, including all in
arrears, must be paid to the preferred stocholders before any cash disbursements can
be made to common stocholders5 they generally have interest rates higher than those
of corporate bonds. 3inally, common stocs entail no financial ris but are the most
e!pensive way to finance capital pro1ects..he Internal 6ate of 6eturn is very
important.
NEED FOR CAPITAL BUDGETING
l. As large sum of money is involved which influences the profitability of the
firm maing capital budgeting an important tas.
B. $ong term investment once made can not be reversed without significance loss
of invested capital. .he investment becomes sun and mistaes, rather than
being readily rectified,must often be borne until the firm can be withdrawn
through depreciation charges or li"uidation. It influences the whole conduct of
the business for the years to come.
C. Investment decision are the base on which the profit will be earned and
probably measured through the return on the capital. A proper mi! of capital
investment is "uite important to ensure ade"uate rate of return on investment,
calling for the need of capital budgeting.
F. .he implication of long term investment decisions are more e!tensive than
those of short run decisions because of time factor involved, capital budgeting
decisions are sub1ect to the higher degree of ris and uncertainty than short
run decision.
An efficient allocation of capital is the most important finance function in modern
times. It involves decisions to commit firms funds to long-term assets. Such
decisions are tend to determine the value of company/firm by influencing its growth,
profitability & ris.
62
Investment decisions are generally nown as capital budgeting or capital
e!penditure decisions. It is clever decisions to invest current in long term assets
e!pecting long-term benefits firms investment decisions would generally include
e!pansion, ac"uisition, moderni#ation and replacement of long-term assets.
Such decisions can be investment decisions, financing decisions or operating
decisions. Investment decisions deal with investment of organi#ations resources in
$ong tern %fi!ed& Assets and / or Short term %'urrent& Assets. (ecisions pertaining to
investment in Short term Assets fall under )*oring 'apital +anagement,.
(ecisions pertaining to investment in $ong term Assets are classified as )'apital
-udgeting, decisions.
'apital budgeting decisions are related to allocation of investible funds to different
long-term assets. .hey have long-term implications and affect the future growth and
profitability of the firm.
In evaluating such investment proposals, it is important to carefully consider the
e!pected benefits of investment against the e!penses associated with it./rgani#ations
are fre"uently faced with 'apital -udgeting decisions. Any decision that re"uires the
use of resources is a capital budgeting decisions. 'apital budgeting is more or less a
continuous process in any growing concern.
For E9am%/- 0urchase of $and is an e!ample of 'apital -udgeting decision.
Similarly replacement of outdated e"uipment with modern machines, purchase of a
brand or business, computeri#ation and networing the organi#ation, investment in
research and development of a product launch of a ma1or promotional campaign etc
are all e!ample of 'apital -udgeting decisions.
:owever, in all cases, the decisions have a long-term impact on the performance of
the organi#ation. 4ven a single wrong decision may in danger the e!istence of the
firm as a profitable entity.
63
IMPORTANCE OF CAPITAL BUDGETING-
.here are several factors that mae capital budgeting decisions among the critical
decisions to be taen by the management. .he importance of capital budgeting can be
understood from the following aspects of capital budgeting decisions.
>. Lo!1 Trm Im%/ica&io!s- 'apital -udgeting decisions have long term effects
on the ris and return composition of the firm. .hese decisions affect the
future position of the firm to a considerable e!tent. .he finance manger is also
committing to the future needs for funds of that pro1ect.
)? Su.s&a!&ia/ Commi&m!&s- .he capital budgeting decisions generally
involve large commitment of funds. As a result, substantial portion of capital
funds is bloced.
*? Irr4rsi./ Dcisio!s- +ost of the capital budgeting decisions are
irreversible decisions. /nce taen the firm may not be in a position to revert
bac unless it is ready to absorb heavy losses which may result due to
abandoning a pro1ect midway.
+? A0&r &$ Ca%aci&y a!" S&r!1&$ &o Com%&- 'apital budgeting decisions
affect the capacity and strength of a firm to face competition. A firm may
loose competitiveness if the decision to moderni#e is delayed.
64
PROBLEMS 3 DIFFICULTIES IN CAPITAL BUDGETING-
>. Fu&ur u!cr&ai!&y- 'apital -udgeting decisions involve long-term
commitments. .here is lot of uncertainty in the long term. .he uncertainty may be
with reference to cost of the pro1ect, future e!pected returns, future competition,
legal provisions, political situation etc.
B. Tim E/m!&- .he implications of a 'apital -udgeting decision are scattered
over a long period. .he cost and benefits of a decision may occur at different point
of time. .he cost of a pro1ect is incurred immediately. :owever, the investment is
recovered over a number of years. .he future benefits have to be ad1usted to mae
them comparable with the cost. $onger the time period involved, greater would be
the uncertainty.
C. Di00icu/&y i! Hua!&i0ica&io! o0 Im%ac&- .he finance manger may face difficulties
in measuring the cost and benefits of pro1ects in "uantitative terms.
E9am%/- .he new product proposed to be launched by a firm may result in
increase or decrease in sales of other products already being sold by the same
firm. It is very difficult to ascertain the e!tent of impact as the sales of other
products may also be influenced by factors other than the launch of the new
product.
ASSUMPTIONS IN CAPITAL BUDGETING-
.he 'apital -udgeting decision process is a multi-faceted and analytical process. A
number of assumptions are re"uired to be made.
(? Cr&ai!&y 7i&$ rs%c& &o cos& 3 B!0i&s- It is very difficult to estimate the
cost and benefits of a proposal beyond B-C years in future.
)? Pro0i& Mo&i4 - Another assumption is that the capital budgeting decisions are
taen with a primary motive of increasing the profit of the firm.
65
T$ ac&i4i&is ca! . /is&" as 0o//o7s-
(is-investments i.e., sale of division or business.
'hange in methods of sales distribution.
2ndertaings an advertisement campaign.
6esearch & (evelopment programs.
$aunching new pro1ects.
(iversification.
'ost reduction.
FEATURES OF INVESTMENT DECISIONS-
.he e!change of current funds for future benefits.
.he funds are invested in long-term assets.
.he future benefits will occur to the firm over a series of years.
IMPORTANT OF INVESTMENT DECISIONS-
.hey influence the firms growth in long run.
.hey effect the ris of the firm.
.hey involve commitment of large amount of funds.
.hey are irreversible, or reversible at substantial loss.
.hey are among the most difficult decisions to mae.
TYPE OF INVESTMENT DECISIONS-
4!pansion of e!isting business.
4!pansion of new business.
6eplacement & +oderni#ation.
66
INVESTMENT EVALUATION CRITERIA-
4stimation of cash flows.
4stimation of the re"uired rate of return.
Application of a decision rule for maing the choice.
'onsideration of cash flows is to determine true profitability of the pro1ect and it is
an unambiguous way of identifying good pro1ects from the pool. 6aning is
possible it should recogni#e the fact that bigger cash flows are preferable to smaller
ones & early cash flows are referable to later ones I should help to choose among
mutually e!clusive pro1ects that which ma!imi#es the shareholders wealth. It should
be a criterion which is applicable to any considerable investment pro1ect
independent of other..here are number of techni"ues that are in use in practice. .he
chart of techni"ues can be outlined as followsO
CAPITAL BUDGETING TECHNIHUES-
Tra"i&io!a/ A%%roac$ Mo"r! A%%roac$
AorB AorB
No!'Discou!&" Cas$ F/o7s Disco!!c&" Cas$ F/o7s
0ay -ac 0eriod %0-& =et 0resent 9alue %=09&
Accounting Rate of Return (ARR) Internal Rate of Return
0rofitability Inde! %0I&
67
NET PRESENT VALUE -
.he =et 0resent value method is a classic economic method of evaluating the
investment proposals. It is one of the methods of discounted cash flow. It recogni#es
the importance of time value of money,.
It correctly postulates that cash flows arising of different time period, differ
in value and are comparable only when their e"uivalent i.e., present values are found
out.
T$ 0o//o7i!1 s&%s ar i!4o/4" i! &$ ca/cu/a&io! o0 NPV-
'ash flows of the investment pro1ect should be forecasted based on realistic
assumptions.
An appropriate rate of interest should be selected to discount the cash flows,
generally this will be the ) 'ost of capital rate, of the company.
.he present value of inflows and out flows of an investment proposal, has to
be computed by discounting them with an appropriate cost of capital rate.
.he =et 0resent value is the difference between the )0resent 9alue of 'ash
inflows, and the present value of cash outflows.
=et present value should be found out by subtracting present value of cash
outflows from present value of cash inflows. .he pro1ect should be accepted if
=09 is positive.
NPV I Prs!& Va/u o0 Cas$ i!0/o7 G Prs!& 4a/u o0 &$ cas$ ou&0/o7
Acc%&a!c Ru/-
Accept if =09 [ G
6e1ect if =09 \ G
+ay accept if =09 ] G
/ne with higher =09 is selected.
68
69
INTERNAL RATE OF RETURN METHOD-
.he internal rate of return %I66& method is another discounted cash flow
techni"ue ..his method is based on the principle of present value. It taes into account
of the magnitude & timing of cash flows.
I66 nothing but the rate of interest that e"uates the present value of future
periodic net cash flows, with the present value of the capital investment e!penditure
re"uired to undertae a pro1ect.
.he concept of internal rate of return is "uite simple to understand in the case
of one-period pro1ect.
Acc%&a!c Ru/-
Accept if r [
6e1ect if r \
+ay accept if r ]
where r ] rate of return
] opportunity cost of capital
PROFITABILITY INDEJ AORB BENEFIT COST RATIO-
Jet another time-ad1usted method of evaluating the investment proposals is
the benefit-cost %-/'& ratio of profitability inde! 0I&. It is benefit cost ratio. It is ratio
of present value of future net cash inflows at the re"uired rate of return, to the initial
cash outflow of the investment.
Prs!& Va/u o0 Cas$ i!0/o7s
PI I '''''''''''''''''''''''''''''''''''''''''
Prs!& Va/u o0 Cas$ ou&0/o7s
70
Acc%&a!c Ru/ -
Accept if 0I [ >
6e1ect if 0I \ >
+ay accept if 0I ] >
0rofitability Inde! is a relative measure of pro1ects profitability.
PAY BAC2 PERIODE METHOD-
/ne of the top concerns of any person or organi#ation investing a large amount of
money would be the time by which the money will come bac. .he concern maing
the investment would want that at least the capital invested is recovered as early as
possible. .he pay bac period is defined as the period re"uired for the proposals
cumulative cash flows to be e"ual to its cash outflows. In other words, the paybac
period is the length of time re"uired to recover the initial cost of the pro1ect. .he
paybac period is usually stated in terms of number of years. It can also be stated as
the period re"uired for a proposal to 8brea even on its net investment.
.he paybac period is the number of years it taes the firm to recover its original
investment by net returns before depreciation, but after ta!es.
If pro1ect generates constant annual cash inflows, the pay bac period is completed
as followsO
I!i&ia/ I!4s&m!&
Pay Bac5 I ''''''''''''''''''''''''
A!!ua/ cas$ i!0/o7

In case of une"ual cash inflows, the paybac period can be found out by
adding up the cash inflows until the total is e"ual to initial cash outlay.
7l
Acc%&a!c Ru/ O
Accept if calculated value is less than standard fi!ed by management
otherwise re1ect it.
If the paybac period calculated for a pro1ect is less than the ma!imum
paybac period set up by the company it can be accepted.
As a raning method it gives highest ran to a pro1ect which has lowest pay
bac period, and lowest ran to a pro1ect with highest pay bac period.
DISCOUNTED PAY BAC2 PERIOD-
/ne of the serious ob1ections to pay bac method is that it does not discount the
cash flows. :ence discounted pay bac period has come into e!istence. .he number
of periods taen in recovering the investment outlay on the present value basis is
called the discounted pay bac period.
(iscounted 0ay -ac rule is better as it does discount the cash flows until the outlay
is recovered.

ACCOUNTING RATE OF RETURN AORB
AVERAGE RATE OF RETURN AARRB -
It is also nown as return on investment %6/I&. It is an accounting method, which
uses the accounting information revealed by the financial statements to measure the
profitability of an investment proposal. According to Solomon, A66 on an
investment can be calculated as ) the ratio of accounting net income to the initial
investment i.e., .
A4ra1 N& I!com
ARR I '''''''''''''''''''''''''''
A4ra1 I!4s&m!&
Average Income ] Average of after ta! profit
Average Investment ] :alf of /riginal Investment
72
Acc%&a!c Ru/-
Accept if calculated rate is higher than minimum rate established by the
management.
It can re1ect the pro1ects with an A66 lower than the e!pected rate of return.
.his method can also help, the management to ran the proposals on the basis
of A66.
A highest ran will be given to a pro1ect with highest A66, whereas a lowest
ran to a pro1ect with lowest A66.
73
CAPITAL BUDGETING METHODS IN PRACTICE
In a study of the capital budgeting practices of fourteen medium to large si#e
companies in India, it was found total almost all companies used by bac.
*ith pay bac and/or other techni"ues, about B/C
rd
of companies used I66 and
about B/7
th
=09. I66 s found to be second most popular method.
0ay bac gained significance because of is simplicity to use & understand, its
emphasis on the early recovery of investment & focus on ris.
It was found that >/C
rd
of companies always insisted on computation of pay
bac for all pro1ects, >/C
rd
for ma1ority of pro1ects & remaining for some of
the pro1ects.
6easons for secondary of ('3 techni"ues in India included difficulty in
understanding & using threes techni"ues, lac of "ualified professionals &
unwillingness of top management to use ('3 techni"ues.
/ne large manufacturing and mareting organi#ation mentioned that
conditions of its business were such that ('3 techni"ues were not needed.
Jet another company stated that replacement pro1ects were very fre"uent in
the company, and it was not considered necessary to use ('3 techni"ues for
evaluating such pro1ects. techni"ues in India included difficulty in
understanding & using threes techni"ues, lac of "ualified professionals &
unwillingness of top management to use ('3 techni"ues.
74
CAPITAL BUDGETING PROCESS-
Atleast five phases of capital e!penditure planning & control can be
identifiedO
Identification % or /rgani#ation & of investment opportunities.
(evelopment of forecasts of benefits and costs.
4valuation of the net benefits.
Authori#ation for progressing and spending capital e!penditure.
'ontrol of capital pro1ects.
INVESTMENT IDEAS-
Investment opportunities have to be identified or created investment proposals
arise at different levels within a firm. Investment proposals should be generated to
employ the firms funds fully well & efficiently.
FORECASTING -
'ash flow estimates should be development by operating managers with the
help of finance e!ecutives. 6is associated should be properly handled. 4stimation
of cash flows re"uires collection and analysis of all "ualitative and "uantitative data,
both financial and non-financial in nature. +IS provide such data.
Corrc& &ra&m!& s$ou/" . 1i4! &o -
Additional woring capital
Sale proceeds of e!isting assets.
(epreciation
3inancial flows %to be distinguished from operation flows&
75
EVALUATION -
<roup of e!perts who have no tae to grind should be taen in selecting the
methods of evaluation as =09, I66, 0I, 0ay -ac, A66 & (iscounted 0ay -ac.
0ay -ac period is used as )0rimary, method & I66/=09 as )Secondary,
method in India. .he following are to be given due importance.
3or evaluation, minimum rate of return or cut-off is necessary.
2sually if is computed by means of weighted Average cost of 'apital
%*A''&
/pportunity cost of capital should be based on risy ness of cash flow of
investment proposals.
Assessment of ris is an important aspect. Sensitivity Analysis &
'onservative for costs are two important methods used in India.
AUTHORI#ATION-
Screening and selecting may differ from one company to another. *hen large
sums are involved usually final approval rests with top management. (elegation of
approval authority may be effected sub1ect to the amount of outlay. -udgetary control
should be rigidly e!ercised.
CONTROL AND MONITORY-
A 'apital pro1ects reporting system is re"uired to review and monitor the
performance of investment pro1ects after completion and during their life. 3ollow up
comparison of the actual performance with original estimates to ensure better
forecasting besides sharpening the techni"ues for improving future forecasts. As a
result company may re-praise its pro1ects and tae necessary action.
Indian 'ompanies use regular pro1ect reports for controlling capital e!penditure
reports may be "uarterly, half-yearly, monthly, bi-monthly continuous reporting..
76
4!penditure to date
Stage and physical completion
Approved total cost
6evised total cost
DECISION MA2ING LEVEL-
3or planning and control purpose three levels of (ecision maing have been
identified O
/perating
Administrative
Strategic
OPERATING CAPITAL BUDGETING-
Includes routine minor e!penditure, as office e"uipment handled by lower
level management.
ADMINISTRATIVE CAPITAL BUDGETING-
3alls in between these two levels involves medium si#e investments such as
business handled by middle level management.
STRATEGIC CAPITAL BUDGETING-
Involves large investment as ac"uisition of new business or e!pansion in a
new time of business, handled by top management uni"ue nature.
77
DATA ANALYSIS AND INTERPRETATION
NET PRESENT VALUE-
78
Yar Cas$ I!0/o7s Dis? K()L Prs!& Va/u o0 Cas$0/o7s
> 6s. >.>B?.CDF.GGG G,D?B 6s. >.GGA.F>G.7BD
B 6s. >.C>G.D?7.GGG G,A?A 6s. >.GFC.?D@.C>7
C 6s. >.A@>.DA?.GGG G,A>> 6s. >.B7B.@?7.?@?
F 6s. >.ACB.GD@.GGG G,@C7 6s. >.>G?.DAF.@>G
7 6s. B.>?C.G@>.GGG G,7@A 6s. >.BFC.F@7.7DA
Prs!& Va/u o0 Cas$ F/o7s Rs? ,?@+M?+**?>(>
Lss- Cas$ Ou&/ay Rs? ,?+NO?)>>?>>>
N& Prs!& Va/u Rs? (,N?)**?>(>
GRAPH (-
I!&r%r&a&io! O .he =et 0resent 9alue is the difference between the ) 0resent value
of cash inflows, and )0resent value of cash outflows.
79
PROFITABILITY INDEJ A P?IB-
Yar I!4s&m!&s AI! La5$sB Cas$ i!0/o7sAP?V?B Cas$ Ou& F/o7s AI!i&ia/B
>???-GG B,?F7,GDC.CA >D>DG BGGGG
BGGB-GC C,GFG,B?C.>A BFADG CGGGG
BGGC-GF C,>?B,FFF.BD F7GAG @GGGG
BGGF-G7 C,GA>,>DC.>> 7F@FG DGGGG
BGG7-G@ C,7F7,B>G.DA >D@CG CGGGG
BGG@-GA ?,GB7,DAF.GG >@>B?G BBGGG
BGGA-GD C,??>,F7?.FG >?B>G CCGGG
BGGD-G? F,GCD,>>F.BG >>>CG AGGGG
BGG?->G C,@@A,FF>.>7 @7FBG FGGGG
BG>G->> A,CCD,GGG.GG >?BCC DGGGG
BG>>->B B,GD?,AA7.GG @>CBC @GGGG
.otalO +ONNO@ ,),>>>
0.9. of 'ash Inflows
0I ] ---------------------------
Initial 'ash outlays
F?DD?@
] ---------- ] G.?7
7B7GGG
GRAPH ) -
80
Investments (In Lakhs)
0.00
1,000,000.00
2,000,000.00
3,000,000.00
4,000,000.00
5,000,000.00
6,000,000.00
7,000,000.00
8,000,000.00
9,000,000.00
10,000,000.00
2
0
0
1
-
0
2
2
0
0
2
-
0
3
2
0
0
3
-
0
4
2
0
0
4
-
0
5
2
0
0
5
-
0
6
2
0
0
6
-
0
7
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1
2
0
1
1
-
1
2
Investments (In Lakhs)
INTERPRETATION-
.he profitability inde! of present value of cash inflows and cash out flows is
fluctuation from year to year in the year >???-GG the present value of cash inflows is
>D>DG were as in the year BGG?->G has been increased with @>CBC.
.he highest cash inflows has been recorded in BGGF-BGG7 as >@>B?G and
lowest has been recorded as >D>DG in the year >???-GG
8l
PAY BAC2 PERIOD-
Yar I!4s&m!&s AI! La5$sB Cas$ i!0/o7sAP?V?B Cas$ Ou& F/o7s AI!i&ia/B
>???-GG FG,GGG.GG DGGG BGGGG
BGG>-GB @G,GGG.GG >@GG CGGGG
BGGB-GC AG,GGG.GG BBGG @GGGG
BGGC-GF BG,GGG.GG F7GG DGGGG
BGGF-G7 >G,GGG.GG FGGG CGGGG
BGG@-GA @@,GGG.GG CGGG BBGGG
BGGA-GD B7,GGG.GG B?GG CCGGG
BGGD-G? >B,GGG.GG >>GG AGGGG
BGG?->G ?G,GGG.GG >@GG FGGGG
BG>G->> CG,GGG.GG >BGG DGGGG
BG>>->B 7G,GGG.GG >DGG @GGGG
.otalO +M*8>>>?>> *(O>> ,),>>>
Initial Investments
0ay -ac 0eriod ] ---------------------------
Annual 'ash inflows
FG,GGG
] --------- 7 Jears
DGGG
82
GRAPH *-
Investments (In Lakhs)
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
80,000.00
90,000.00
100,000.00
1
9
9
9
-
0
0
2
0
0
1
-
0
2
2
0
0
2
-
0
3
2
0
0
3
-
0
4
2
0
0
4
-
0
5
2
0
0
6
-
0
7
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1
2
0
1
1
-
1
2
Investments (In Lakhs)
I!&r%r&a&io!-
In the 0ay -ac method the Investment and the case inflows are fluctuating
from year to year where as in the year >???-GG it is FGGGG and in the year BGG?->G is
7GGGG.
'ash inflows are in the order of increasing to decreasing from >???-GG and
BGG?->G.
83
AVERAGE RATE OF RETURN-
Yar I!4s&m!&s ALa5$sB A4ra1 I!com
AT$ousa!"sB
Cas$ F/o7s a0&r Ta9s
BGGB-GC FGG,GGG.GG BGGGG >GGGGG
BGGC-GF FDG,GGG.GG >7GGG B@GGGG
BGGF-G7 BDG,GGG.GG BDGGG FFGGGG
BGG7-G@ BFG,GGG.GG D7GGG A7GGGG
BGG@-GA >7G,GGG.GG A7GGG >@GGGG
BGGA-GD B@G,GGG.GG @FGGG BGGGGG
BGGD-G? @GG,GGG.GG ADGGG CGGGGG
BGG?->G >GG,GGG.GG B7GGG @GGGGG
BG>G->> B7G,GGG.GG >DGGG DGGGGG
BG>>->B 7BG,GGG.GG BBGGG A7GGGG
.otal *8)N>8>>>?>> +*>>>> +*@>>>>
Average Income
Average 6ate of 6eturn ] ----------------------
Average Investments
BGGGG
] --------- ] G.G@I
FGGGGG
84
GRAPH +-
Investments (Lakhs)
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
3,000,000.00
3,500,000.00
2
0
0
2
-
0
3
2
0
0
3
-
0
4
2
0
0
4
-
0
5
2
0
0
5
-
0
6
2
0
0
6
-
0
7
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1
2
0
1
1
-
1
2
T
o
t
a
l
Investments (Lakhs)
INTERPRETATION-
Average rate of return is calculated based on Average income and Average
investment where as Average income in the year BGGC-GF is BGGGG and investments in
the year BGG?->G is FGGGGG.
.he value from BGGC-GF and BGG?->G are fluctuating from year to year
INTERNAL RATE OF RETURN:
85
The lNTERNEL RATE OF RETURN lS AS FOLLOWS


C
lRR = A + ------------- (B-A)
C D
Where:
C = Positive NPV
D = NPV value Negative
B = Rate of return at high price.
Calculation of lRR show the fig, 5.5
86

87
YEARS CASH lNFLOWS
(Rs in lakhs)
DCF(l2%) PRESENT VALUE
(Rs in lakhs)
2007-08 l,l29,384
0.892 l007.4l0.528
2008-09 l,3l0,895
0.797 l.043.986.3l5
2009-l0 l,76l,879
0.7ll l.252.695.969
20l0-ll l,732,086
0.635 l.l09.874.6l0
20ll-l2 2,l93,06l
0.567 l.243.465.587
TOTAL 5,757.433.0l0
88
YEARS CASH lNFLOWS
(Rs in lakhs)
DCF(l5%) PRESENT VALUE
(Rs in lakhs)
2007-08 ll29384 0.86
9
98l434.
69
2008-09 l3l0895 0.75
6
99l036.
62
2009-
l0
l76l879 0.65
7
ll57554.
3
20l0-
ll
l73208
6
0.57
l
98902l.l0
20ll-l2 2l9306
l
0.49
7
l08995l.3
l
TOTAL 5208998.0
6
Fig no:- 5.3

5757.433.0l0-5,489,200
lRR =l2 +--------------------------------------------X(3)
5757. 5,208,998.069
268,233.0l
= l2+ ---------------------- X (3)
548,434.94l
= l2 + 0.48
= l2.048s%
89
FINDINGS AND SUGESSTIONS
.he 'orporate mission of 333 is to mae available reliable and "uality in oil
increasingly large "uantities. .he company will spear head the process of
accelerated development of the /il sector by e!peditiously planning,
implementing pro1ects and operating economically and efficiently.
.he organi#ation needs the capable personalities as management to lead to
organi#ation successfully. .he management mae the plans and implement of
these plans. .hese plans are e!pressed in terms of long-term investment
decisions.
.he special budgets are rarely used in the organi#ation lie long-term budgets,
research & development, budget and budgetary control.
3rom the 6evenue budget for the year BGGG-BGGC, it is clear that the Actual
sales % 6s. >@D77B.7G lacs& are more than the budgeted or 4stimated sales
% 6s. >@FBGD.7F lacs&. It is a good sign and the overall earnings of the budget
indicate high volume over estimated.
=ew pro1ects acceptance consider on the basis of 6eturn -enefits. 6is is
evaluated while considering the new pro1ects.
90
CONCLUSIONS
4very organi#ation has pre-determined set of ob1ective and goals, but reaching
those ob1ectives and goals only by proper planning and e!ecuting of the plans
economically.
Investment decisions have its own importance in the organi#ational growth
and future.
<rowth of the organi#ation depends on its "ualitative decisions taen by the
financial department in the organi#ation.
.he overall all performance of the organi#ation is good.
9l
BIBLIOGRAPHY
S.N0 AUTHOR TITLE OF BOOK NAE OF
PUBLISHER
!
I?M?PANDEY FINANCIAL
MANAGEMENT
VI2AS
PUBLICATIONS
P4& L&"?8
"
PRASANNA
CHANDRA
FINANCIAL
MANAGEMENT
TATA MC GRA=
HILL
PUBLISHING
COMPANY
LIMITED NE=
DELHI
#
S?P JAIN FINANCIAL
MANAGEMENT
2ALYANI
PUBLICATIONS
$
Dr?S?N?MAHES=ARI FINANCIAL
MANAGEMENT
HIMALAYA
PUBLICATION
HOUSE
%EBSITES
www.fff.com
www.food fats.com
92
93
BIBLIOGRAPHY
3inancial +anagement -I. +. 0andey
3inancial +anagement -0rasanna'handra
3inancial +anagement -+. J. Ehan & Hai
n
333 profile & Annual 6eports
94