CAPITAL BUDGETING

AT
DR REDDY’S LABORATORY

PADMA SUPRIYA
H.T.NO: 1415-20-672-014

MBA III SEMESTER

PENDEKANTI INSTITUTE OF MANAGEMENT
INTRODUCTION

 The term capital budgeting refers to long-term planning for proposed capital
outlays and their financing. Thus, it includes both rising of long-term funds as
well as their utilization. It may be defined as “The firm’s decision to invest its
current funds most efficiently in the long-term assets in anticipation of an
expected flow of benefits over a series of years”. The primary objective of
financial analysis is to assist in decision making.
  
 An efficient allocation of capital is the most important finance function in the
modern times. It involves decision to commit the firm’s funds to the long-term
assets. The investment decisions of a firm are generally known as the Capital
Budgeting or Capital Expenditure Decisions. A Capital Budgeting Decisions
maybe defined as the firm’s decision to invest its current funds most efficiently
in the long-term assets in anticipation of an expected flow of benefits over a
series of years.
 One of the basic questions faced by the financial manager is” How should the scarce
resources of the firm is allocated to get the maximum value for the firm? This refers to
investment decisions, which deal with investment of firm’s resources in long-term
(fixed) assets and short term (current) assets or Capital Budgeting Decisions and
Working Capital Management. Capital Budgeting is a decision making process for
investment in assets that have long term implication, affect the future growth and
profitably of the firm and basic composition and assets mix of the firm. Measuring the
benefits and costs associated with each alternative option in terms of incremental cash
flows. Evaluating different proposals in the light of return expected by the investors of
the firm and the return promised by the proposal Applying different techniques to
select an alternative with objective of maximization of value of the firm. Typically,
capital budgeting decision involves rather large cash outlays and commits the firm to
a particular course of action over a relatively long period and consequently, every care
should be taken care of. The future risks and uncertainties should be incorporated in
the evaluation procedure so the future cash flows occur as they are intended to be
NEED OF THE STUDY

 Capital budgeting decisions are the investment decisions of the firm generally
known as the capital budgeting, or capital expenditure decisions. A capital
budgeting decision may be defined as the firm’s decision to invest in current
funds most efficiently in the long term assets in anticipation of an expected flow
or benefits over a series of years. The long-term assets are those that effect the
firm’s operations beyond the one year period. The firm’s investment decision
would generally include expansion, acquisition, modernization and replacement
of the long-term assets. Sale of a division or business is also an investment
decision. Decisions like the change in the methods of sales distribution, or an
advertisement campaign or research and development programme have long-
term implications for the firm’s expenditures and benefits, and therefore they
should also be evaluated as investment decision. Hence, the project aims at
evaluating the investment proposal for setting up different facilities in Dr
Reddy’s Laboratory Limited, Hyderabad.
OBJECTIVES OF THE STUDY

 To study the investment decisions in the select

organization.
 To investigated on the various methods for
determining the size of the Capital Budget
evaluating the investment proposals of Dr Reddy’s
Laboratory Limited
 To give appropriate suggestions on capital
budgeting techniques for the development of the
select organization
SCOPE OF THE STUDY

 The scope is limited to the operations of the Dr Reddy’s

Laboratory Limited.
 The information obtained from the primary and secondary
data was limited to Dr Reddy’s Laboratory Limited.
 The Key information performances indicated were taken
from 2016-2021
 The P&L, The Balance sheet was on the last five years.
 Comparison analysis was done in comparison of sisters
units
RESEARCH METHODOLOGY
 The study has been collected through secondary sources. The secondary data has been collected
from the 5 years annual reports (2016-2021) of the Dr Reddy’s Laboratory Limited, Books,
Journals, Magazines, Periodicals and company websites.
 Primary Sources
  
 It is also called as first handed information. The data is collected through the observation in the
organization and interview with officials. By asking question with the accounts and other persons in
the financial department.
  
 Secondary Sources
 The secondary data have been collected through the various books, Magazines and websites.
  
 Data Analysis Techniques
 Payback period
 Accounting rate of return
 Profitability Index
 Net Present Value
 Internal Rate of Return
 LIMITATIONS OF THE STUDY
 The study is conducted with the data available and
analysis is made accordingly.
 Due to the confidential financial records, the data is not
exposed so the study may not be detailed and full-fledged.
 Since the study is based on financial data that are obtained
from the financial statements, the limitations of financial
statement shall be equally applicable.
 The analysis may not be accurate as the available data is
limited.