PROJECT SYNOPSIS

ON
CAPITAL BUDGETING
AT

COMPANY PROFILE:-

NMDC has made valuable and substantial contribution to the National efforts in the mineral
sector during the last five decades and has been accorded the status of schedule-A Public Sector
Company. In recognition to the Company's growing status and consistent excellent performance,
the Company has been categorized by the Department of Public Enterprises as "NAVRATNA"
Public Sector Enterprise in 2008.
The story of NMDC is woven around the dreamy hills and the deep jungle land of Bastar in
Chhattisgarh, known as Dandakaranya from the epic periods. The Bailadila iron ore range - "The
hump of an ox" - in the local dialect, was remote, inaccessible and replete with wild life. The
range contains 1200 million tonnes of high grade iron ore distributed in 14 deposits. The entire
area was brought to the mainstream of civilization by the spectacular effort of NMDC by
opening-up of mines. Today, Bailadila is a name to reckon with in the world iron ore market
because of its super high grade iron ore. Bailadila complex possesses the world's best grade of
hard lumpy ore having +66% iron content, with negligible deleterious material and the best
physical and metallurgical properties needed for steel making.
In the past, NMDC had developed many mines like Kiriburu, Meghataburu iron ore mines in
Bihar , Khetri Copper deposit in Rajasthan, Kudremukh Iron Ore Mine in Karnataka, Phosphate
deposit in Mussorie, some of which were later handed over to other companies in public sector
and others became independent companies.
NMDC is presently producing about 20 million tonnes of iron ore from its Bailadila sector mines
and 10 million tonnes from Donimalai sector mines.
Because of its excellent chemical and metallurgical properties, the calibrated ore from Bailadila
deposits has substituted the iron ore pellets in sponge iron making and hence became an
important raw material for three major gas-based sponge iron steel producers like Essar Steel,
Ispat industries and Vikram Ispat. In addition to these three, the entire requirement of the
Visakhapatnam Steel Plant is also being met from Bailadila.

The demand for steel will continue to grow in the years to come and this in turn would call for
increased demand for iron ore. NMDC is gearing itself to meet the expected increase in demand
by enhancing production capabilities of existing mines and opening up new mines - Deposit
-11B in Bailadila sector and Kumaraswamy in Donimalai sector. The production capability
would increase to around 50 million tonnes per year in coming years.
Besides, NMDC is also in the process of securing mining leases of following iron ore mines
(some as JV with State Governments):
Sasangada Iron Ore Deposit, Jharkhand
Ghatkuri Mine, Jharkhand
Ramandurg, Karnataka
Deposit 13, Bailadila, Chhattisgarh
Deposit-4, Bailadila, Chhattisgarh
NMDC is setting up a 3 MTPA Steel Plant at Nagarnar in Chhattisgarh, for which most of the
major packages have been finalized and awarded. Orders for major technological packages have
already been placed, other auxiliary packages are in advanced stages of finalization and
construction works of the major packages are being undertaken on war footing.
For Value addition NMDC is in the process of developing a 3 mtpa steel plant at Jagdalpur and 2
pellet plants at Donimalai (1.2 mtpa) and at Bacheli (2 mtpa). Besides, NMDC has acquired
Sponge Iron India Limited with plan for expansion to produce billets.
Besides iron ore, NMDC also plans to go for other minerals like Coal, Diamond, gold etc for
which NMDC is looking forward for leases / buy properties from foreign countries directly /
under Special Purpose Vehicle / Joint Ventures.
For continuing the exploration activities NMDC has set a Global Exploration Centre at Raipur ,
Chhattisgarh.

NMDC is taking up diversification activities through its intensive R&D efforts for production of
High-Tech and High Value added products from Blue Dust like Carbon free sponge iron powder,
Nano crystalline powder. Besides, study is also being conducted for setting up a demonstration
plant to beneficiate BHJ/BHQ material for upgradation to +64% Fe iron ore concentrate.
NMDC is also investing in development of renewable energy resources as an environment
friendly investment. A Wind mill project (10.5MW capacity) has been completed &
commissioned at Karnataka.
NMDC has always shown great concern for environment protection. At all its projects care is
taken in this regard by tree plantation, making tailing dams/check dams at different places.
Apart from iron ore NMDC is developing Magnesite mine in Jammu and Arki Lime Stone
Project in Himachal Pradesh.
NMDC, a socially responsible company, believes in engaging its stake holders through a
continuous and consultative process towards the fulfillment of its corporate mission and vision
which focus on sustainable growth and improvement in the quality of life of its employees and
the related communities. Corporate Social Responsibility (CSR) of NMDC is deeply ingrained in
its CSR philosophy right from its inception in 1958. The CSR Policy has a holistic triple bottom
line approach benefitting the company and the society at large, with particular emphasis on the
immediate surroundings of its Projects. It envisages the socio-economic advancement of the
community and also adheres to environment-friendly operations as well as socially relevant
interventions. Over the years, NMDC has made a huge impact on the socio-economic
emancipation of the people, especially in the remote villages of Bailadila, through a host of CSR
initiatives in the areas of medicare, education, skill training, infrastructure, drinking water, etc.,
through focused interventions and also integrated development of villages.

INTRODUCTION TO TOPIC
CAPITAL BUDGETING:
MEANING
Capital Budgeting is the process of making investment decisions in capital expenditure. A capital
expenditure may be defined as an expenditure the benefit of which are expected to be received
over a period of time exceeding one year.
The main characteristics of a capital expenditure are that the expenditure is incurred at one point
of time whereas benefits of the expenditure are realized at different points of time in future.
Capital expenditure involves non-flexible long term commitment of funds. Thus capital
expenditure decisions are also called Long-Term Investment Decision. Capital budgeting
involves the planning and control of capital expenditure.
DEFINITION:
R.M.LYNCH has defined capital Budgeting as Capital Budgeting consists of employment of
available capital for the purpose of maximizing the long term profitability of the firm.
Capital Budgeting is a many-sided activity. It includes searching for new and more profitable
investment proposals, investigating, engineering and marketing considerations to predict the
consequences of accepting the investment and making economic analysis to determine the profit
potential of each investment proposal.
Its basic features can be summarized as follows;
It has the potentiality of making large anticipated profits.
It involves a high degree of risk.
It involves a relatively long-time period between the initial
outlay and the anticipated return.
Capital Budgeting consists of planning and the development of available capital for the purpose
of maximizing the long-term profitability of the firm.

NEED AND IMPORTANCE OF CAPITAL BUDGETING

Capital Budgeting means planning for capital assets. Capital Budgeting decisions are vital to any
organization as they include the decision to;

Whether or not funds should be invested in long term projects such as setting of an

industry, purchase of plant and machinery etc.,

Analyze the proposal for expansion or creating additional capacity.
To decide the replacement of permanent assets such as building and equipments.
To make financial analysis of various proposal regarding capital investments so as to
choose the best out of many alternative proposals.

The importance of capital Budgeting can be well understood from the fact that an unsound
investment decision may prove to be fatal to the very existence of the concern. The need,
significance or importance of capital budgeting arises mainly due to the following.
1. Large Investments
2. Long-term commitment of Funds
3. Irreversible Nature
4. Long-term Effect of profitability
5. Difficulties of investment decisions
6. National Importance
7. Effect on cost structure
8. Impact on firms competitive strength
9. Cost control
10. Wealth Maximization

Objectives of the study:1. To study the organizational profile of National Mineral Development Corporation

2. To study the importance of the management of capital budgeting.

3. To know about the proposal and investments, inflows and out flows.
4. To study the investment proposal by using capital budgeting techniques.

5. To know about the better investment proposal.

RESEARCH METHODOLOGY:Research is common parlance refers to search for new knowledge.

Research is defined as human activity based on intellectual application in the investigation of
matter. The primary purpose for applied research is discovering, interpreting and the
development of methods and systems for the advancement of human knowledge on a wide
variety of scientific matters of our world and the universe. Research can use the scientific
method, but need not to do so. Scientific research relies on the application of the scientific
method, a hamessing of curiosity. The research provides scientific information and theories for
the explanation of the nature and the properties of the world around us. It makes practical
applications possible. Scientific research is funded by public authorities, by charitable
organizations and by private groups, including many companies. Scientific research can be
subdivided into different classifications according to their academic and application disciplines.

RESEARCH DESIGN
A research design is the arrangement of condition for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure

DATA COLLECTION
The information for the study is obtained from two sources namely.
1. Primary Sources
2. Secondary Sources
Primary Sources:

It is the information collected directly without any references. It is mainly through interactions
with concerned officers & staff, either individually or collectively; some of the information has
been verified or supplemented with personal observation. These sources will include.
1) Thorough interactions with the various department Managers of

National Mineral

Development Corporation
Eg. Experiments, surveys, e-mails, direct interview etc.
Secondary Sources:
This data is from the number of books and records of the company, the annual reports published
by the company and other magazines. The secondary data will be obtained from the following.
Collection of required data from annual records, monthly records, internal Published
book or profile of National Mineral Development Corporation.
Other books and Journals and magazines
Annual Reports of the company (2009 2013)

SCOPE OF THE STUDY:This study will highlights the review of capital budgeting and capital expenditure management of
the company. Capital expenditure decisions require careful planning and control. Such long term
planning and control of capital expenditure is called Capital Budgeting. The study also helps to
understand how the company estimates the future project cost. The study will also help to
understand the analysis of the alternative proposals and deciding whether or not to commit funds

to a particular investment proposal whose benefits are to be realized over a period of time longer
than one year. The capital budgeting is based on some tools namely Payback period, Average
Rate of Return, Net Present Value, Profitability Index, and Internal Rate of Return.

BIBLOGRAPHY:
Financial Management

I. M. Pandey

Financial Management

Prasanna Chandra

Financial Management

M. Y. Khan & Jain

Financial Management -

Shashi.K.Gupta, R.K.Sharma and Neeti gupta

National Mineral Development Corporation profile & Annual Reports( 2009- 2013)