CAPITAL

BUDGETING
OF BHEL
 BHEL – AN OVERVIEW

BHEL is the largest engineering and

manufacturing enterprise in India in the
energy-related/infrastructure sector,
today.
 The company has been earning profits
continuously since 1971-72 and paying
dividends since 1976-77. 
 BHEL has
 Installed equipment for over 90,000 MW of power generation --
for Utilities, Captive and Industrial users
 Supplied over 2,25,000 MVA transformer capacity and other
equipment operating in Transmission & Distribution network up
to 400 kV (AC & DC).
 Supplied over 25,000 Motors with Drive Control System to
Power projects, Petrochemicals, Refineries, Steel, Aluminum,
Fertilizer, Cement plants, etc.
 Supplied Traction electrics and AC/DC locos to power over
12,000 kms Railway network.
 Supplied over one million Valves to Power Plants and other
Industries.
 BHEL including Transmission, Transportation,
Telecommunication & Renewable Energy - and Overseas
business this enables BHEL to have a strong customer
orientation, to be sensitive to his needs and respond quickly to
the changes in the market.
 BHEL - HAS TWO
MANUFACTURING PLANTS: -
 Heavy Electrical Equipment Plant (HEEP) and
Central Foundry Forge Plant (CFFP).
 The Heavy Electrical Equipment Plant (HEEP)
located in Haridwar, is one of the major
manufacturing plants of BHEL. The core
business of HEEP includes design and
manufacture of large steam and gas turbines,
turbo generators, hydro turbines and
generators, large AC/DC motors and so on.
 Central Foundry Forge Plant (CFFP) is engaged
in manufacture of Steel Castings: Up to 50 Tons
per Piece Wt & Steel Forgings: Up to 55 Tons
Per Piece Wt.
 BHEL - CONTRIBUTION TO VARIOUS CORE
SECTOR
 Industry Sector

Since its inception in 1982, the industry sector business has grown
at an impressive rate and today, contributes significantly to BHEL’s
turnover.
BHEL, today, supplies all major equipment for the industries: AC/DC
machines, alternators, centrifugal compressors, special reactor
columns, heat exchangers, pressure vessels, gas turbine based
captive, co-generation and combined-cycle power plants, DG power
plants, steam turbine and turbo-generators, complete range of
steam generators for process industries, solar photovoltaic systems,
electrostatic precipitators, fabric filters, etc.
BHEL also provides solution for water management system, coal and
ash handling plants.
The industries that serve include steel, aluminum, fertilizers,
refinery, petrochemicals, chemicals, automobiles, cement, sugar,
paper, mining, textile, etc.
 Transportation Sector

In the transportation field, BHEL product range

covers: AC locomotives, AC/DC dual-voltage
locomotives, diesel-electric shunting
locomotives, traction motors and transformers,
traction electrics and controls for AC, DC and
dual voltage EMUs, diesel-electric multiple units,
diesel power car and diesel electric locomotives,
battery powered vehicles and solution for urban
transportation system including electric trolley
buses, LRT & MRTs.
A high percentage of the trains operated by
Indian railways is equipped with traction
equipment and controls manufactured and
supplied by BHEL.
 BHEL - OVERSEAS BUSINESS
 BHEL, Ranking among the
major power plant equipment
suppliers in the world, is one
of the largest exporters of
engineering products and
services from India. Over the
years, BHEL has established its
reference in around 60
countries of the world, ranging
from the united state in the
west to new Zealand In the far
east. BHEL’s exports range
cover individual product to
complete power stations.
 TRAINING OBJECTIVE

 To analyze financial position of BHEL & to

study about Budgeting and Capital
budgeting.
 INTRODUCTION

 BUDGETING
 CAPITAL BUDGETING
 BUDGET

 Budget is a financial and / or quantitative

statement, prepared and approved prior to a
defined period of time, of the policy to be
pursued during that period for the purpose of
attaining a given objective.

-CIMA official terminology

 BUDGETING

 Budgeting is the formulation of plans for

a given future period in numerical terms.
It is a method of looking ahead and
attempting to solve problems before they
arise.
 USES OF BUDGET

 Optimum utilization of resources

 Performance evaluation
 Coordination
 Assignment of responsibilities
 Compelled planning
 Communication
 BUDGETING PROCESS

The method by which the annual budget is

prepared will be differ from organization
to organization. In some organization
budgeting may be a well- organized, well
documented procedures, while, in others
the budget may be prepared in a rather
ad hoc and disorganized manner. The
budget process is shown below. The step
in budgeting process representative to all
organization is given below:
 THE STEPS IN BUDGETING
PROCESS
 Specification and communication of
organizational objectives
 Determination of key success factors
 Establishment of clear lines of authority
and responsibility
 Establishment of budget centers
 Determination of budget period
 Establishment of budget committee
 Appointment of budget controller
 Preparation of budget manual
 CAPITAL BUDGETING

 “capital budgeting is a long-term

planning for making and financing
proposed capital outlays.”
- Charles T. Horngren,
 SCOPE OF CAPITAL BUDGETIG
DECISION

 Expansion decision
 Replacement decision
 Choice of equipment
 Lease decision
 IMPORTANCE OF CAPITAL
BUDGETING

 Heavy investment
 Permanent commitment of funds
 Long-term impacts on profitability
 Worth maximization of shareholders
 THE CAPITAL BUDGETING
PROCESS
 Project generation
 Evaluation
 Project selection
 Project execution
FINANCIAL PERFORMANCE
16000
14000
12000
10000
8000 T.O
6000 PBIDT
4000 PBT
2000 PAT
0
2002-03 2003-04 2004-05 2005-06(F) GROWTH
(2005-
06)/2004-05
 PROFIT BEFORE TAX
2500

2000

1500

PBT
1000

500

0
2002-03 2003-04 2004-05 2005-06
 PROFIT AFTER TAX
1800
1600
1400
1200
1000
800 PAT
600
400
200
0
2002-03 2003-04 2004-05 2005-06
 ANALYSIS
 Turnover for the year has touched a new high for the fourth year in
succession thereby reaching the figure of Rs. 14410 Cr against Rs.
10336 Cr in 2004-05, an increase of 39.0 %.

 Value addition for the year 2005-06 stood at Rs. 4254 Cr against Rs.
5459 Cr for the year 2004-05, registering an increase of 28.3 %.

 Profit before tax for the year stood at Rs. 2484 Cr and is higher by
57.0 % as compared to the Rs. 1582 Cr in 2004-05.

 Profit after tax at Rs. 1621 Cr has increased by 70.0 % over the
previous years of Rs. 953 Cr.

 Net worth increased by Rs. 7278 Cr to Rs. 6027 Cr.

 Debt-Equity Ratio improved from 0.09 in 2004-05 to 0.08 in 2005-

06.
 CONCLUSION
 During the training period I had studied about
finance department of BHEL. With this study it
can be clearly concluded that the BHEL shown a
growth from last two years.
 Turnover is increased by 39.4 %, value addition
increased by 28.3 %, in the same way profit
after tax and profit before tax is increased by
70.0 % and 57.1 % respectively.