Corporate Finance

RDB Rasayans Limited

Submitted by
Karan Talwar (2010103)
Mohit Kothari (2010122)
Neeraj Jain (2010130)
Nishith Agarwal (2010139)
Lokesh Sharma (2010262)
Garvit Bharadwaz (2010275)
 Types of Capital investment

1. Expansion and Diversification :

A business strategy in which growth is obtained by increasing the number of

stores or plants in which customers can buy a company's products and services or
company can manufacture more products. Unlike relocation, business expansion entails
opening up new stores in different physical locations while still maintaining the current
business locations.
Diversification is a business strategy by a company to enter into an altogether new
market .The aim of diversification is to acquire more market share when the company has
sufficient funds or it has the goodwill to raise those funds. A company Diversify its
business mainly due to the more competitors in the existing business and the industry
become stagnant.
Expansion and diversification go hand-in-hand as when company needs to
diversify it has to enhance its capacity or buy a new plant to produce the new product to
meet the market demand.

2. Mutually exclusive investment

Group of Capital Budget projects that compete with one another in such a way
that the acceptance of one automatically excludes all others from further consideration.
Analysis of competing projects using the Net Present Value (NPV) and Internal Rate of
Return (IRR) methods may give decision results contradictory to each other. From a
practical standpoint, the NPV method generally gives correct ranking to mutually
exclusive projects.

3. Independent Investment

Investments available to a firm that may be selected individually or in groups

because each investment is different in its nature and purpose. This type of investment
does not affect the other investment. For example, a heavy engineering company may be
considering expansion of its plant capacity to manufacture additional excavators and
addition of new production facilities to manufacture a new product light commercial
vehicles. Depending on their profitability and availability of funds, the company can
undertake both investments.
 Type of Investment by the Company

 To finance the capital expenditure to enhance the manufacturing capacity by 7450 MTPA
by establishing the Unit -II.

The type of investment by the company is Expansion .The main Object of

the Issue is to utilize the Net Proceeds of the Issue to finance the capital expenditure
to enhance the production facilities of the Company. Presently Company is
having a production capacity of 6050 MT and proposes to enhance its production
capacities by 7450 MTPA.

 To meet General Corporate Purpose

This investment is of type Expansion by merger and acquisition.

In accordance with the policies set up by the Board, the Company proposes to
retain flexibility in applying Issue Proceeds for general corporate purpose, including
strengthening of our marketing capabilities, upgradation of Infrastructure and
working capital .Our management will have the flexibility in utilizing these proceeds
under the overall guidance and policies laid down by our Board.

 To meet the Issue expenses

This is a kind of expansion related Investment .the expenses of the Issue

include, among others, underwriting and issue management fees, selling
commission, printing and distribution expenses, advertisement expenses and
listing fees.
 Initial Cost of the Project

(Rs in lacs)
Activity Total Fund Estimated schedule of deployment of
Fund already Balance fund during 2010-2011
requireme deployed* April- October-March
Civil Works nt
442.85 442.85 September
-- --
Plant & Machinery 2358.65 42.37 1877.01 439.27
Pre-operative Expenses 70.00 -- -- 70.00
Provision for Contingencies# 115.81 -- -- 115.81
Security for WBSEDCL** 200.00 -- 200.00 --
General Corporate Purpose N/A N/A N/A N/A
Issue Expenses N/A 5.00 N/A N/A
Total N/A 490.22 N/A N/A
* Certified as per Auditor’s Certificate dated January 29, 2010

** This is towards security deposit to West Bengal State Electricity Distribution

company Limited (WBSEDCL) for electricity connection at the proposed manufacturing unit.
This is as per the estimates of management.

# Contingency has been calculated at the rate of 5% of cost of plant & machinery for which
order has not yet been placed.

Initial cost of the project =3187.31 Lacs