INTRODUCTION

CAPITAL BUDGETING:

An efficient allocation of capital is the most important finance function in

modern times. It involves decisions to commit firm’s funds to long-term assets. Such
decisions are tend to determine the value of company/firm by influencing its growth,
profitability & risk.

Investment decisions are generally known as Capital Budgeting or capital

expenditure decisions. It is clever decisions to invest current in long term assets
expecting long-term benefits firm’s investment decisions would generally include
expansion, acquisition, modernization and replacement of long-term assets.

Such decisions can be investment decisions, financing decisions or operating

decisions. Investment decisions deal with investment of organization’s resources in
Long tern (fixed) Assets and / or Short term (Current) Assets. Decisions pertaining to
investment in Short term Assets fall under “Working Capital Management”. Decisions
pertaining to investment in Long term Assets are classified as “Capital Budgeting”
decisions.

Capital Budgeting decisions are related to allocation of investible funds to different

long-term assets. They 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

expected benefits of investment against the expenses associated with it.
Organizations are frequently faced with Capital Budgeting decisions. Any decision that
requires the use of resources is a Capital Budgeting decisions. Capital Budgeting is
more or less a continuous process in any growing concern.

NEED FOR THE STUDY

 The Project study is undertaken to analyze and understand the Capital

Budgeting process in Steel manufacturing sector, which gives mean
exposure to practical implication of theory knowledge.
 To know about the company’s operation of using various Capital
Budgeting techniques.
 To know how the company gets funds from various resources.

OBJECTIVES OF THE STUDY

 To study the relevance of Capital Budgeting in evaluating the project for

project finance

 To study the technique of Capital Budgeting for decision- making.

 To measure the present value of rupee invested.

 To understand an item wise study of the company financial performance of

the company.

 To make suggestion if any for improving the financial position if the

company.
 To understand the practical usage of Capital Budgeting techniques

 To understand the nature of risk and uncertainty

METHODOLOGY

To achieve aforesaid objective the following methodology has been adopted.

The information for this report has been collected through the primary and
secondary sources.

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. A part from these some
information is collected through the seminars, which were held by HETERO DRUGS
LTD.

Secondary sources

The secondary data have been collected through the various books,
magazines, brouchers & websites
LIMITATION OF THE STUDY :

 Lack of time is another limiting factor, ie., the schedule period of 8 weeks are
not sufficient to make the study independently regarding Capital Budgeting in
HETERO DRUGS LTD..
 The busy schedule of the officials in the HETERO DRUGS LTD. is another
limiting factor. Due to the busy schedule officials restricted me to collect the
complete information about organization.
 Non-availability of confidential financial data.
 The study is conducted in a short period, which was not detailed in all aspects.
 All the techniques of Capital Budgeting are not used in HETERO DRUGS LTD..
Therefore it was possible to explain only few methods of Capital Budgeting.
INDUSTRY PROFILE
 Pharmaceutical Industry

“The Indian pharmaceutical industry is a success story providing employment for millions and
ensuring that essential drugs at affordable prices are available to the vast population of this sub-
continent.”
Richard Gerster

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based
industries with wide ranging capabilities in the complex field of drug manufacture and
technology. It ranks very high in the third world, in terms of technology, quality and range of
medicines manufactured. From simple headache pills to sophisticated antibiotics and complex
cardiac compounds, almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field of
medicines,Indian Pharma Industry boasts of quality producers and many units approved by
regulatory authorities in USA and UK. International companies associated with this sector have
stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped
to put India on the pharmaceutical map of the world.

Growth Scenario in 2010

India's pharmaceutical industry is now the third largest in the world in terms of volume. Its rank
is 14th in terms of value. Between September 2008 and September 2009, the total turnover of
India's pharmaceuticals industry was US$ 21.04 billion. The domestic market was worth US$
12.26 billion. This was reported by the Department of Pharmaceuticals, Ministry of Chemicals
and Pharmacys. As per a report by IMS Health India, the Indian pharmaceutical market reached
US$ 10.04 billion in size in July 2010. A highly organized sector, the Indian Pharma Industry is
estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. Know more out this
in our article on Indian Pharmaceutical Industry- Future Trends Also check outPharmaceutical
Market Trends 2010

Leading Pharmaceutical Companies

In the domestic market, Cipla retained its leadership position with 5.27 per cent share. Ranbaxy
followed next. The highest growth was for Mankind Pharma (37.2%). Other leading companies
in the Indian pharma market in 2010 are:
 Sun Pharma (25.7%)
 Abbott (25%)
 Zydus Cadila (24.1%)
 Alkem Laboratories (23.3%)
 Pfizer (23.6 %)
 GSK India (19%)
 Piramal Healthcare (18.6 %)
 Lupin (18.8 %)
For details check out List of Top 10 Pharmaceutical Companies in India
Future Prospects
The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6
billion in 2009. This was stated in a report title "India Pharma 2020: Propelling access and
acceptance, realising true potential" by McKinsey & Company. In the same report, it was also
mentioned that in an aggressive growth scenario, the pharma market has the further potential to
reach US$ 70 billion by 2020

Due to increase in the population of high income group, there is every likelihood that they will
open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015.
This was estimated in a report by Ernst & Young. The domestic pharma market is estimated to
touch US$ 20 billion by 2015. The healthcare market in India to reach US$ 31.59 billion by
2020. The sale of all types of pharmaceutical drugs and medicines in the country stands at US$
9.61 billion, which is expected to reach around US$ 19.22 billion by 2012. Thus India would
really become a lucrative destination for clinical trials for global giants.

There was another report by RNCOS titled "Booming Pharma Sector in India" in which it was
projectedt that the pharmaceutical formulations industry is expected to prosper in the same
manner as the pharmaceutical industry. The domestic formulations market will grow at an annual
rate of around 17% in 2010-11, owing to increasing middle class population and rapid
urbanisation. Read More in Future Prospects of Indian Pharma Industry.

Characteristics of Indian Pharmaceutical Industry

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It
has expanded drastically in the last two decades. The leading 250 pharmaceutical companies
control 70% of the market with market leader holding nearly 7% of the market share. It is an
extremely fragmented market with severe price competition and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs,
drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and
injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the
core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These
units produce the complete range of pharmaceutical formulations, i.e., medicines ready for
consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and
used for production of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the
drugs and pharmaceutical products has been done away with. Manufacturers are free to produce
any drug duly approved by the Drug Control Authority. Technologically strong and totally self-
reliant, the pharmaceutical industry in India has low costs of production, low R&D costs,
innovative scientific manpower, strength of national laboratories and an increasing balance of
trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities,
supported by Intellectual Property Protection regime is well set to take on the international
market.
Why India?
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is commonly
used. Professional services are easily available.
Cost-effective chemical synthesis: Its track record of development, particularly in the area of
improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides
a wide variety of bulk drugs and exports sophisticated bulk drugs.
Legal & Financial Framework: India has a 53 year old democracyand hence has a solid legal
framework and strong financial markets. There is already an established international industry
and business community.
Information & Technology: It has a good network of world-class educational institutions and
established strengths in Information Technology.
Globalisation: The country is committed to a free market economy and globalization. Above all,
it has a 70 million middle class market, which is continuously growing.
Consolidation: For the first time in many years, the international pharmaceutical industry is
finding great opportunities in India. The process of consolidation, which has become a
generalized phenomenon in the world pharmaceutical industry, has started taking place in India.
Steps to strengthen the Industry
Indian companies need to attain the right product-mix for sustained future growth. Core
competencies will play an important role in determining the future of many Indian
pharmaceutical companies in the post product-patent regime after 2005. Indian companies, in an
effort to consolidate their position, will have to increasingly look at merger and acquisition
options of either companies or products. This would help them to offset loss of new product
options, improve their R&D efforts and improve distribution to penetrate markets.
Research and development has always taken the back seat amongst Indian pharmaceutical
companies. In order to stay competitive in the future, Indian companies will have to refocus and
invest heavily in R&D.
The Indian pharmaceutical industry also needs to take advantage of the recent advances in
biotechnology and information technology. The future of the industry will be determined by how
well it markets its products to several regions and distributes risks, its forward and backward
integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-
marketing and licensing agreements.

The Indian pharmaceutical industry is the world's second-largest by volume and is likely to
lead the manufacturing sector of India.1India's bio-tech industry clocked a 17 percent growth
with revenues of Rs.137 billion ($3 billion) in the 2009-10 financial year over the previous
fiscal. Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at
Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.2 The
first pharmaceutical company are Bengal Chemicals and Pharmaceutical Works, which still
exists today as one of 5 government-owned drug manufacturers, appeared in Calcutta in 1930.
For the next 60 years, most of the drugs in India were imported by multinationals either in fully
formulated or bulk form. The government started to encourage the growth of drug manufacturing
by Indian companies in the early 1960s, and with the Patents Act in 1970, enabled the industry to
become what it is today. This patent act removed composition patents from food and drugs, and
though it kept process patents, these were shortened to a period of five to seven years. The lack
of patent protection made the Indian market undesirable to the multinational companies that had
dominated the market, and while they streamed out, Indian companies started to take their
places. They carved a niche in both the Indian and world markets with their expertise in reverse-
engineering new processes for manufacturing drugs at low costs. Although some of the larger
companies have taken baby steps towards drug innovation, the industry as a whole has been
following this business model until the present.
Statistics

Top 10 Pharmaceuticals in India, as of 2010

Revenue Revenue
Rank Company
2010(Rs crore) 2010(Rs billion)

1 Ranbaxy Laboratories 4,198.96 41.989

2 Dr. Reddy's Laboratories 4,162.25 41.622

3 Cipla 3,763.72 37.637

4 Sun Pharmaceutical 2,463.59 24.635

5 Lupin Ltd 2,215.52 22.155

6 Aurobindo Pharma 2,081.19 20.801

7 GlaxoSmithKline 1,773.41 17.734

8 Cadila Healthcare 1,613 16.13

9 Aventis Pharma 983.80 9.838

10 Ipca Laboratories 980.44 9.8044

In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations
and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs
were exported, mostly to the United States and Russia25. Most of the players in the market are
small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market 1.
Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70%
thirty years ago20.

Most pharma companies operating in India, even the multinationals, employ Indians almost
exclusively from the lowest ranks to high level management. Mirroring the social structure, firms
are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are
often a mix of public and private enterprise. Although many of these companies are publicly
owned, leadership passes from father to son and the founding family holds a majority share.

In terms of the global market, India currently holds a modest 1-2% share, but it has been growing
at approximately 10% per year27. India gained its foothold on the global scene with its
innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now
seeking to become a major player in outsourced clinical research as well as contract
manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India,
more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New
Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies21,27.
Growth in other fields notwithstanding, generics are still a large part of the picture. London
research company Global Insight estimates that India’s share of the global generics market will
have risen from 4% to 33% by 2007.
Product development
Indian companies are also starting to adapt their product development processes to the new
environment. For years, firms have made their ways into the global market by researching
generic competitors to patented drugs and following up with litigation to challenge the patent.
This approach remains untouched by the new patent regime and looks to increase in the future.
However, those that can afford it have set their sights on an even higher goal: new molecule
discovery. Although the initial investment is huge, companies are lured by the promise of hefty
profit margins and the recognition as a legitimate competitor in the global industry. Local firms
have slowly been investing more money into their R&D programs or have formed alliances to
tap into these opportunities.
Small and medium enterprises
As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is
not as bright. The excise structure changed so that companies now have to pay a 16% tax on the
maximum retail price (MRP) of their products, as opposed to on the ex-factory price.
Consequently, larger companies are cutting back on outsourcing and what business is left is
shifting to companies with facilities in the four tax-free states - Himachal Pradesh, Jammu &
Kashmir, Uttaranchal and Jharkhand.12Consequently a large number of pharmaceutical
manufacturers shifted their plant to these states, as it became almost impossible to continue
operating in non tax free zones. But in a matter of a couple of years the excise duty was revised
on two occasions, first it was reduced to 8% and then to 4%. As a result the benefits of shifting to
a tax free zone was negated. This resulted in, factories in the tax free zones, to start up third party
manufacturing. Under this these factories produced goods under the brand names of other parties
on job work basis.

As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline
for compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this
should be beneficial to consumers and the industry at large, SMEs have been finding it difficult
to find the funds to upgrade their manufacturing plants, resulting in the closure of many
facilities. Others invested the money to bring their facilities to compliance, but these operations
were located in non-tax-free states, making it difficult to compete in the wake of the new excise
tax.

Challenges
All of these changes are ultimately good for the Indian pharmaceutical industry, which suffered
in the past from inadequate regulation and large quantities of spurious drugs. They force the
industry to reach a level necessary for global competitiveness. However, they have also exposed
some of the inadequacies in the industry today. Its main weakness is an underdeveloped new
molecule discovery program. Even after the increased investment, market leaders such as
Ranbaxy and Dr. Reddy’s Laboratories spent only 5-10% of their revenues on R&D, lagging
behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the
combined revenues of the entire Indian pharmaceutical industry13, 37. This disparity is too great
to be explained by cost differentials, and it comes when advances in genomics have made
research equipment more expensive than ever. The drug discovery process is further hindered by
a dearth of qualified molecular biologists. Due to the disconnect between curriculum and
industry, pharmas in India also lack the academic collaboration that is crucial to drug
development in the West.
R&D
Both the Indian central and state governments have recognized R&D as an important driver in
the growth of their pharma businesses and conferred tax deductions for expenses related to
research and development. They have granted other concessions as well, such as reduced interest
rates for export financing and a cut in the number of drugs under price control. Government
support is not the only thing in Indian pharma’s favor, though; companies also have access to a
highly developed IT industry that can partner with them in new molecule discovery
Labor force
India’s greatest strengths lie in its people. India also boasts of well-educated, English-speaking
labor force that is the base of its competitive advantage. Although molecular biologists are in
short supply, there are a number of talented chemists who are equally as important in the
discovery process. In addition, there has been a reverse brain drain effect in which scientists are
returning from abroad to accept positions at lower salaries at Indian companies. Once there, these
foreign-trained scientists can transfer the benefits of their knowledge and experience to all of
those who work with them13,25. India’s wealth of people extends benefits to another part of the
drug commercialization process as well. With one of the largest and most genetically diverse
populations in any single country, India can recruit for clinical trials more quickly and perform
them more cheaply than countries in the West47. Indian firms have just recently started to
leverage.
Biotechnology
Relationship between pharmaceuticals and biotechnology
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains
fairly defined in India. Bio-tech there still plays the role of pharma’s little sister, but many
outsiders have high expectations for the future. India accounted for 2% of the $41 billion global
biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in
number of biotechs.45 In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1
billion.2,9 The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5
revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from
biopharmaceuticals, vaccines led the way, comprising 47% of sales46. Biologics and large-
molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep
the market in biogenerics and contract manufacturing as drugs go off patent and Indian
companies upgrade their manufacturing capabilities.
 Top 10 Pharmaceuticals in India, as of 2010

Revenue Revenue
Rank Company
2010(Rs crore) 2010(Rs billion)

1 Ranbaxy Laboratories 4,198.96 41.989

2 Dr. Reddy's Laboratories 4,162.25 41.622

3 Cipla 3,763.72 37.637

4 Sun Pharmaceutical 2,463.59 24.635

5 Lupin Ltd 2,215.52 22.155

6 Aurobindo Pharma 2,081.19 20.801

7 GlaxoSmithKline 1,773.41 17.734

8 Cadila Healthcare 1,613 16.13

9 Aventis Pharma 983.80 9.838

10 Ipca Laboratories 980.44 9.804

Patents
As it expands its core business, the industry is being forced to adapt its business model to recent
changes in the operating environment. The first and most significant change was the January 1,
2005 enactment of an amendment to India’s patent law that reinstated product patents for the first
time since 1972. The legislation took effect on the deadline set by the WTO’s Trade-Related
Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on
both products and processes for a period of 20 years. Under this new law, India will be forced to
recognize not only new patents but also any patents filed after January 1, 1995.3 Indian
companies achieved their status in the domestic market by breaking these product patents, and it
is estimated that within the next few years, they will lose $650 million of the local generics
market to patent-holders42.

In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The
multinationals narrowed their focus onto high-end patients who make up only 12% of the
market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms
have chosen to take their existing product portfolios and target semi-urban and rural populations
 Top 20 Biotechnology Companies in India, 2010

Revenue Revenue
Rank Company
2010(Rs crore) 2010(USD millions)

1 Biocon 646 148.6

2 Serum Institute of India 565 129.9

3 Panacea Biotec 217 50.0

4 Venky's (India) Limited 188 43.2

5 Mahyco Monsanto 166 38.3

6 Novo Nordisk 135 31.0

7 Rasi Seeds 87 20.0

8 Aventis Pharma 84 19.4

9 Bharat Serums 81 18.6

10 Chiron Behring Vaccines 78 17.9

11 GlaxoSmithKline 78 17.9

12 Indian Immunologicals 72 16.6

 13 Shantha Biotechnics 70 16.1

14 Novozymes 69 15.9

15 Eli Lilly and Company 68 15.7

16 Wockhardt 67 15.4

17 Bharat Immunological & Biological Corp. 53 12.3

18 Bharat Biological International 41 9.4

19 Advanced Biochemicals 40 9.1

20 Biological E 36 8.3

USD 1 = Rs 43.5
Source: BioSpectrum Top 20: A threshold crossed
Most companies in the biotech sector are extremely small, with only two firms breaking 100
million dollars in revenues. At last count there were 265 firms registered in India, over 75% of
which were incorporated in the last five years.2,47 The newness of the companies explains the
industry’s high consolidation in both physical and financial terms. Almost 50% of all biotechs
are in or around Bangalore, and the top ten companies capture 47% of the market. The top five
companies were homegrown; Indian firms account for 62% of the biopharma sector and 52% of
the industry as a whole.4,46 The Association of Biotechnology-Led Enterprises (ABLE) is
aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009,
and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible.7,47
Comparison with the U.S.
The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-
ups while the majority of the market is controlled by a few powerful companies. Both are
dependent upon government grants and venture capitalists for funding because neither will be
commercially viable for years. Pharmaceutical companies in both countries have recognized the
potential effect that biotechnology could have on their pipelines and have responded by either
investing in existing start-ups or venturing into the field themselves.36 In both India and the
U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential.
Relationship with IT
Many analysts have observed that the hype around the biotech sector mirrors that of the IT
sector. Biotech colleges have been popping up around the country eager to service the pools of
students that want to take advantage of a growing industry.7 The International Finance
Commission, the private investment arm of the World Bank, called India the “centerpiece of
IFC’s global biotech strategy.” Of the $110 million invested in 14 biotech projects investment
globally, the IFC has given $43 million to 4 projects in India.29 According to Dr. Manju Sharma,
former director of the Department of Biotechnology, the biotech industry could become the
“single largest sector for employment of skilled human resource in the years to come.”5 British
Prime Minister Tony Blair was similarly impressed, citing the success of India’s biotech industry
as the reason for his own country’s own biotech opportunities.22 Malaysia is also looking to
India as an example for growing its own biotech industry.41
Government support
The Indian government has been very supportive. It established the Department of
Biotechnology in 1986 under the Ministry of Science and Technology.47 Since then, there have
been a number of dispensations offered by both the central government and various states to
encourage the growth of the industry. India’s science minister launched a program that provides
tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the
Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to
rodents, animal testing was expanded to include large animals as part of the minister’s
initiative.10 States have started to vie with one another for biotech business, and they are
offering such goodies as exemption from VAT and other fees, financial assistance with patents
and subsidies on everything ranging from investment to land to utilities19.
Foreign investment
The government has also taken steps to encourage foreign investment in its biotech sector. An
initiative passed earlier this year allowed 100% foreign direct investment without compulsory
licensing from the government1.6 In April, a delegation headed by the Kapil Sibal, the minister
of science and technology and ocean development, visited five cities in the U.S. to encourage
investment in India, with special emphasis on biotech.32 Just two months later, Sibal returned to
the U.S. to unveil India’s biotech growth strategy at the BIO2005 conference in Philadelphia.9
Challenges
The biotech sector faces some major challenges in its quest for growth. Chief among them is a
lack of funding, particularly for firms that are just starting out. The most likely sources of funds
are government grants and venture capital, which is a relatively young industry in India.
Government grants are difficult to secure, and due to the expensive and uncertain nature of
biotech research, venture capitalists are reluctant to invest in firms that have not yet developed a
commercially viable product.26 As previously mentioned, India hopes to solve its funding
problem by attracting overseas investors and partners. Before these potential saviors will invest
significant sums in the industry, however, there needs to be better scientific and financial
accountability. India is slowly working towards these goals, but it will be a while before they are
up to the standards of Western investors.

India’s biotech firms share another problem with their pharmaceutical cousins: a lack of qualified
employees. Biotech has the additional disadvantage of competing against IT for ambitious,
science-minded students but not being able to guarantee the same compensation. An aspiring
researcher in India needs 7–10 years of education covering a range of specialties in order to
qualify to work in biotech. Even if a student does choose to go on the biotech path, the
ineffectual curriculum at many universities makes it doubtful as to whether he will be qualified
to work in the field once finished. One estimate shows that 10% of upper-echelon biotech
recruits have come from foreign countries. While this is not a problem, per se, it drives up cost in
a country whose competitive advantage is based on cheap, high-quality labor. Far from ending
with scientists, there is also a shortage of people with a knowledge of biotechnology in related
fields: doctors, lawyers, programmers, marketing personnel and others.7,15,17

While little has been done about the latter half of the employee crunch, the government has
addressed the problem of educated but unqualified candidates in its Draft National Biotech
Development Strategy. This plan included a proposal to create a National Task Force that would
work with the biotech industry to revise the curriculum for undergraduate and graduate study in
life sciences and biotechnology. The government’s strategy also stated intentions to increase the
number of PhD Fellowships awarded by the Department of Biotechnology to 200 per year. These
human resources will be further leveraged with a “Bio-Edu-Grid” that will knit together the
resources of the academic and scientific industrial communities, much as they are in the U.S.5
Major players
Glenmark
Glenmark is a emerging leader of Indian Pharmaceutical market in sales as well in Research.
Soon new chemical entities will hit the market.
Ranbaxy Laboratories
Ranbaxy is the leader in the Indian pharmaceutical market, taking in $1.174 billion in revenues
for a net profit of $160 million in 2004. It was the first Indian pharmaceutical to have a
proprietary drug (extended-release ciprofloxacin, marketed by Bayer) approved by the U.S.
FDA, and the U.S. market accounts for 36% of its sales. 78% of Ranbaxy’s sales are from
overseas markets; its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100.

IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in the world and that
it is the 15th fastest growing company. By 2012, Ranbaxy hopes to be one of the top 5 generics
producers in the world, and it consolidated its position with the purchase of French firm RGP
Aventis in 2003. Ranbaxy also has higher aspirations, however, “to build a proprietary
prescription business in the advanced markets.” To this end, it keeps a dedicated research facility
in Gurgaon staffed with over 1100 scientists. They currently have two molecules in Phase II
trials and 3-5 in pre-clinical testing. It spent $75 million in R&D in 2004, a 43% increase over its
2003 expenditure.

Arun Puri is the chairman and CEO Brian Tempest is the only non-Indian on the senior
management team.38,39
Dr. Reddy's Laboratories
Founded in 1984 with $160,000, Dr. Reddy’s was the first Asia-Pacific pharmaceutical outside of
Japan and the sixth Indian company to be listed on the New York Stock Exchange. It earned
$446 million in fiscal year 2005, deriving 66% of this income from the foreign market. In order
to strengthen its global position, Dr. Reddy acquired UK-based BMS Laboratories and subsidiary
Meridian Healthcare. Anji Reddy is the chairman of Dr.Reddy's.

Although 58% of Dr. Reddy’s revenues come from generic drugs, the company was committed
to WTO-compliance long before the 2005 bill took effect, and most of these products were
already off patent. Dr. Reddy has long been a research-oriented firm, preceding many of its peers
in setting up a New Drug Development Research (NDDR) in 1993 and out-licensing its first
compound just four years later. Dr. Reddy’s has since outlicensed two more molecules and
currently has three others in clinical trials.

Although Dr. Reddy’s is publicly traded, the Reddy family (including founder/chairman K. Anji
Reddy, son-in-law/CEO GV Prasad and son/COO Satish Reddy) holds a hefty 26% share in the
company.11,44
Nicholas Piramal
The company led by Asish Mishra grossing $350 million per year, Nicholas Piramal started its
existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of
mergers, acquisitions and alliances. The company has formed a name for itself in the field of
custom manufacturing. It cites its 1700-person global sales force as another core strength; with
its acquisition of Rhodia’s inhalation anaesthetics business, Nicholas Piramal gained a sales and
marketing network spanning 90 countries34.

Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent
protection. The company has respected intellectual property rights since its inception and refused
to "support generic companies seeking first-to-file or early-to-market strategies." Instead, it
decided to make its own intellectual property and opened a research facility last November in
Mumbai with hopes of launching its first drug in 2010 at a cost of $100,000.24,33
Cipla
Cipla is one of the oldest drug manufacturers in India. It is led by Dr. Yusuf K. Hamied,
Chairman and Managing Director. Cipla burst into the international consciousness in 2000 with
Triomune, an AIDS treatment costing between $300 and $800 per year that infringed upon
patents held by several companies who were selling the cocktail for $12,000 per year. Long
before this news, Cipla had been building a strong global presence, and it now distributes its 800-
odd products in over 140 countries. Privately held Cipla holds a prominent spot in its home
country as well; it is the leader in domestic sales, having just unseated GlaxoSmithKline for the
first time in 28 years. Revenue in 2004 totaled $552 million (using Rs 43.472 = $1) about 75%
of which was derived in India. Cipla did not report having a research program.8,18

|Dr. Kiran Mazumdar-Shaw is the Chairman and Managing Director of BiocoIrish chemicals
company seeking to break into the Indian market, Biocon is now the leading biotech in India,
bringing in Rs 646.36 crore (almost $150 million) in revenue for fiscal year 2004. It initially
made its money by producing enzymes, but Biocon recently decided to become a research-
oriented company with the goal of bringing a proprietary new drug to market.

The company went public in March 2004, and "its shares were oversubscribed by 33 times on
opening day." Eight months later it launched Insugen, a bio-insulin that is its first branded
product. Biocon also has two wholly owned subsidiaries, Syngene and Clinigene, that perform
custom research and clinical trials.3,14,31
Serum Institute of India
Main article: Serum Institute of India
The Serum Institute of India can make the enviable claim that 2 out of every 3 children in the
world are immunized with one of their vaccines. It is the world’s largest producer of measles and
DTP vaccines, and its portfolio includes other vaccines, antisera, plasma products and anticancer
compounds. The Serum Institute earned Rs 565 crore ($130 million) in revenue in fiscal year
2005, selling mainly to UN agencies and to the Indian government. The Serum Institute is part of
the Poonawalla Group, whose holdings include a horse stud farm and manufacturers of industrial
equipment and components. Dr. Cyrus Poonawalla is the Chairman of the company.4
 CHAPTER 3

COMPANY PROFILE
Hetero Company Profile

Hetero is a research based global pharmaceutical company focused on

development, manufacturing and marketing of Active Pharmaceutical Ingredients

(APIs), Intermediate Chemicals & Finished Dosages. Ever since its establishment

in 1993, Hetero showed a tradition of excellence and deep sense of commitment in

developing cost effective processes to offer wide range of affordable drugs.

Hetero is building on the strengths of vertical integration in discovery research,

process chemistry, API manufacturing, formulation development and

commercialization. Hetero is a leading international supplier with a rich portfolio

of over 200 products from wide range of therapeutic categories both in active

pharmaceutical ingredients and finished dosages.

Hetero’s manufacturing facilities are cGMP compliant meeting global standards in

terms of infrastructure and systems. Majority of them are approved by the various

regulatory authorities of USFDA, WHO-Geneva, Australian TGA, Spanish agency

of medicines & health care products, ANVISA-Brazil, IDA-Netherlands etc.,

With full-fledged marketing capabilities, the company has been able to market its

products in over 138 countries across the globe.

Hetero Drugs, the parent company established in 1993 is one of the largest Indian

pharmaceutical companies with over 2000 crores in revenues and employs more

than 5000 employees. Hetero is a vertically integrated pharmaceutical company

and is a leading player in API’s and finished dosages. Hetero supply’s API’s and

finished dosages to major domestic and international generic companies.

Hetero operates in more than 100 countries and its manufacturing facilities meet

various national and international standards including USFDA. Hetero has a

portfolio of more than 200 products and is a leading company in bringing new

generic molecules to the market.

About Founder.

A Visionary Scientist

"Where the future started yesterday........ works a day ahead of future...."

Dr. Bandi Parthasaradhi Reddy, Chairman & Managing Director of Hetero group is

academically endowed with a Post Graduate and Doctoral degrees with distinction

in the field of synthetic chemistry. Prior to founding of Hetero Drugs Limited, Dr.

B.P.S Reddy had a stint in leading pharmaceutical companies as the head of the

Research & Development division. His sharp analysis and ability to synthesize
various chemical compounds lead to the discovery of new processes, cost effective

schemes for manufacturing of various pharmaceutical products. During the said

period Dr.B.P.S Reddy has the credit of introducing many new molecules for the

first time in Indian pharmaceutical market.

A visionary the world knows as Dr. B.P.S.Reddy, is the driving force behind this

growing pharmaceutical phenomenon called “HETERO”. Dr.B.P.S.Reddy’s dream

child, Hetero was born in the year 1993 as a small API unit. Today, 17 years later,

the name is synonymous with leadership in pharmaceuticals with more than 18

manufacturing units and 8000 employees. An entity that is grown in stature by

virtue of its combined strength in research, manufacturing and marketing.

Dr. B.P.S.Reddy steered Hetero towards the forefront of global pharmaceutical

industry with his vision to be recognised as an aggressive company that combines

its strength of R&D and manufacturing with definite advantages in terms of cost

and chemistry with a strong emphasis on quality of the products.

Dr. B.P.S.Reddy is now focusing on giving new dimensions to Hetero in terms of

research and innovation programs in discovery research to take the company to

greater heights.
Awards & Accolades

Hetero has been scaling new heights on a continual basis. These achievements

have been the result of concerted efforts on the part of different functions within

the organisation to achieve the organisational goal of being a leader.

In its path to success, Hetero has seen many a milestone being crossed and

achieved many awards on various fronts. Awards for exemplary work in R&D and

marketing are just a few to name.

A track of few events that saw Hetero reaching its Zenith of glory are :

2009

• Top Pharmexcil Gold Patent award.

• Top Pharmexcil Outstanding Export Performance award in Drugs and

Pharmaceuticals.

2006

• Chemexil Trishul export award for outstanding export performance 2001

Excellence & National Integration award in recognition of the efforts for

excellence with affairs connected with educational specialties and creating

teaching skills besides promoting harmony at all levels in the college.

1999

• Highest exporter award against stiff competition from internationally

recognized domestic competitors.

1998

• Top Chemexil award for Exports.

1996

• National award for "Best Efforts in Research and Development" from the

Department of Scientific and Industrial Research, Ministry of Science and

Technology, Government of India, in the year 1996.

Corporate Social Responsibility is our commitment

Hetero Group always believes in the concept of giving back to the society to uplift

the living standards in the surrounding society as one of the prime responsibilities

and always took the lead. The Group is committed for implementation of various

CSR initiatives and contributes substantially to the cause.

Hetero Group received appreciation from the Government of Andhra Pradesh, for

its outstanding contribution in the implementation of Corporate Social

Responsibility. .
Environment Protection:

Completed One Million Plantation Programme.

Taking up Plantation in the surrounding Schools.

Completed Plantation in newly acquired 15 acres land and a total of 25000 Nos. of

saplings made.

Provided substantial amount to the industrial association for the development of

infrastructure and environment in Kazipally IDA.

Provision of Biomass Pellets for cooking purpose in place of LPG gas.

Research & Development

Research & Development is the foundation of Hetero’s philosophy of developing

cost-effective, high quality and safe medicines to society. Hetero Research

Foundation is one of the most innovative, productive, and respected scientific

research organizations which is recognized by the Department of Science &

Technology, Government of India.

Hetero Research Foundation (HRF) has a team of over 400 dedicated scientists

working in the areas of Process, Analytical and Discovery Research. R & D centre
conforms to international standards and has advanced equipment for both basic and

applied research.

Process R&D

HRF has developed process for 150 plus molecules for various markets. The R&D

team actively involved in process development, scaling-up technology transfer and

associates with manufacturing team through out life cycle of product.

HRF has always been emphasizing to ensure that the processes being adopted for

the products are cost effective, safe to handle and with optimum advantage in terms

of yield and quality.

Analytical R&D

Analytical research at HRF is equipped to conduct complete physical and chemical

characterisation of API’s/ NCE’s. Further, the team is well versed with regulatory

filings and has vast experience in documentation. The infrastructure includes

advanced instruments like LC-MS-MS, GC-MS, NMR, Powder XRD apart from

several HPLC systems.

 Having a strong commitment and experience in bringing

quality medicines to all, Hetero entered into the pharmacy

services as part of its integration strategy. Having a strong knowledge in this space

we believe we can provide high quality services to our customers.

Less than year after the launch of Hetero Pharmacy in Hyderabad, we scaled up to

more than 100+ pharmacies across AP. We are still growing aggressively to serve

our customers better.

Hetero also has its outlets at the prestigious Nizam’s Institute of Medical Sciences

(NIMS) Punjagutta, Hyderabad and GMR international airport, Hyderabad.

At our pharmacy outlets we provide:

Qualified & trained Pharmacists

Helps you comply with prescription instructions. No scope for spurious drugs,

expired medicines and substitution

Availability of wide range of medicines

Pharmacy, surgical, disposables, ARV, anti-cancer, life saving and general

Healthcare products by Indian and International companies

Storage as specified

Stocking drugs as per prescribed temperature standards, thereby retaining their

quality and effectiveness

Computerized billing system

Proper display of batch numbers, price & expiry with no waiting time

Low Prices

Special discount on printed M.R.P

Patient education leaf-lets

Health tips & dietary suggestion

INDUSTRIALISATION AND ECONOMIC DEVELOPMENT

We have emphasised in the previous chapters the need for a substantial and rapid improvement in
agriculture in order to increase the supply of foodgrains and raw materials needed in the country.
The fact that at the present juncture it is necessary to give the highest priority to agricultural
development including the building up of the necessary basic services like irrigation and power
does not, however, mean that industrial development is in any sense less important. In the
development of an underdeveloped economy there is really no conflict between agricultural and
industrial development. Improvement in agriculture cannot proceed beyond a point unless the
surplus working force on the land is progressively diverted to industries and services. Similarly,
industrial development itself cannot advance sufficiently without a large increase in the supply of
food necessary to maintain the population thus diverted and of the raw materials needed to
enable industries to expand production. The fact that the productivity of labour in industry is
much higher than in agriculture also points to the need for rapid industrial development.
Moreover, in an underdeveloped country the surpluses created in the industrial sector are likely
to be available for investment relatively more easily than surpluses in the agricultural sector. The
pattern of industrialisation to be adopted, that is, the relative emphasis on capital goods industries
and consumer goods industries and the degree of capital intensiveness in different lines of
industry, has, of course, to be decided in the light of several technical, economic and social
factors. But there is no doubt that over a period the desired rate of economic progress will
necessitate a rapid diversification of the occupational structure through development of industry,
together with trade and transport.

INDIAN INDUSTRIAL STRUCTURE

2. The relative backwardness of industiral development in India may be judged from the fact that
in 1948-49 factory establishments accounted for only 6.6 percent of total national income. The
total labour force engaged in such establishments is about 2.4 million or 1.8 percent of the
working population in the country. While in the aggregate India's industrial output may look
massive, per head of population it is very much lower than the industrial output in advanced
countries.
3. Prior to the first world war the only major industries which had developed substantiaflly were
cotton' and jute textiles, for which the country had exceptional natural advantages. The industrial
development since the twenties is associated with the adoption of a more progressive industrial
and fiscal policy. Between 1922, when the policy of discriminating 420

the contribution of the Industrial Sector in India GDP

The industrial sector is one of the main sectors that contribute to the Indian GDP. The country
ranks fourteenth in the factory output in the world. The industrial sector is made up of
manufacturing, mining and quarrying, and electricity, water supply, and gas sectors. The
industrial sector accounts for around 27.6% of the India GDP and it employs over 17% of the
total workforce in the country. The Growth Rate of the Industrial Sector in India GDP came to
around 5.2% in 2002- 2003. In this year, within the India GDP, the mining and quarrying sector
contributed 4.4%, the electricity, water supply, and gas sector contributed 2.8%, and the
manufacturing sector contributed around 5.7%.

The Growth Rate of the Industry Sector in India GDP came to around 6.6% in 2003- 2004 and in
this year, the electricity, water supply, and gas sector contributed 4.8%, the mining and quarrying
sector contributed 5.3%, and the manufacturing sector contributed 7.1% in India GDP. Industry
Growth Rate in India GDP came to 7.4% in 2004- 2005, with the manufacturing sector
contributing 8.1%, the mining and quarrying sector contributing 5.8%, and the water supply,
electricity, and gas sector contributing 4.3% in India GDP.

Industry Growth Rate in India GDP came to 7.6% in 2005- 2006. In this year, the mining and
quarrying sector contributed 0.9%, the manufacturing sector contributed 9.0%, and the water
supply, gas, and electricity sector contributed 4.3%. The Growth Rate of the Industrial Sector
finally came to 9.8% in 2006- 2007. This shows that Industry Growth Rate in India GDP has
been on the rise over the last few years.

The reasons for the rise of Industry Growth Rate in India GDP
The reasons for the increase of Industry Growth Rate in India GDP are that huge amounts of
investments are being made in this sector and this has helped the industries to grow. Further the
reasons for the rise of the Growth Rate of the Industrial Sector in India are that the consumption
of the industrial goods has increased a great deal in the country, which in its turn has boosted the
industrial sector. Also the reasons for the increase of Industry Growth Rate in India GDP are that
the industrial goods are being exported in huge quantities from the country.

The Indian government must boost the Industrial Sector

Industry Growth Rate in India GDP thus has been registering steady growth over the past few
years. This has given a major boost to the Indian economy. The government of India thus must
continue to make efforts to boost the industrial sector in the country. For this will in turn help to
grow the country's economy.

Industrial Revolution

The Industrial Revolution was a period from the 18th to the 19th century where major changes in
agriculture, manufacturing, mining, transportation, and technology had a profound effect on the
social, economic and cultural conditions of the times. It began in Britain, then subsequently
spread throughout Western Europe, North America, Japan, and eventually the world.

The Industrial Revolution marks a major turning point in human history; almost every aspect of
daily life was influenced in some way. Most notably, average income and population began to
exhibit unprecedented sustained growth. In the two centuries following 1800, the world's average
per capita income increased over tenfold, while the world's population increased over sixfold.[2]
In the words of Nobel Prize winner Robert E. Lucas, Jr., "For the first time in history, the living
standards of the masses of ordinary people have begun to undergo sustained growth ... Nothing
remotely like this economic behavior has happened before".[3]

Starting in the later part of the 18th century, there began a transition in parts of Great Britain's
previously manual labour and draft-animal–based economy towards machine-based
manufacturing. It started with the mechanisation of the textile industries, the development of
iron-making techniques and the increased use of refined coal.[4] Trade expansion was enabled by
the introduction of canals, improved roads and railways.[5]

The introduction of steam power fuelled primarily by coal, wider utilisation of water wheels and
powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in
production capacity.[5] The development of all-metal machine tools in the first two decades of
the 19th century facilitated the manufacture of more production machines for manufacturing in
other industries. The effects spread throughout Western Europe and North America during the
19th century, eventually affecting most of the world, a process that continues as industrialisation.
The impact of this change on society was enormous.[6]

The First Industrial Revolution, which began in the 18th century, merged into the Second
Industrial Revolution around 1850, when technological and economic progress gained
momentum with the development of steam-powered ships, railways, and later in the 19th century
with the internal combustion engine and electrical power generation. The period of time covered
by the Industrial Revolution varies with different historians. Eric Hobsbawm held that it 'broke
out' in Britain in the 1780s and was not fully felt until the 1830s or 1840s,[7] while T. S. Ashton
held that it occurred roughly between 1760 and 1830.[8]

Some 20th century historians such as John Clapham and Nicholas Crafts have argued that the
process of economic and social change took place gradually and the term revolution is a
misnomer. This is still a subject of debate among historians.[9][10] GDP per capita was broadly
stable before the Industrial Revolution and the emergence of the modern capitalist economy.[11]
The Industrial Revolution began an era of per-capita economic growth in capitalist economies.
[12] Economic historians are in agreement that the onset of the Industrial Revolution is the most
important event in the history of humanity since the domestication of animals and plants.

The earliest use of the term "Industrial Revolution" seems to be a letter of 6 July 1799 by French
envoy Louis-Guillaume Otto, announcing that France had entered the race to industrialize. In his
1976 book Keywords: A Vocabulary of Culture and Society, Raymond Williams states in the
entry for "Industry": "The idea of a new social order based on major industrial change was clear
in Southey and Owen, between 1811 and 1818, and was implicit as early as Blake in the early
1790s and Wordsworth at the turn of the century." The term Industrial Revolution applied to
technological change was becoming more common by the late 1830s, as in Louis-Auguste
Blanqui description in 1837 of la révolution industrielle. Friedrich Engels in The Condition of
the Working Class in England in 1844 spoke of "an industrial revolution, a revolution which at
the same time changed the whole of civil society". Credit for popularising the term may be given
to Arnold Toynbee, whose lectures given in 1881 gave a detailed account of it.

Innovations

The only surviving example of a Spinning mule built by the inventor Samuel Crompton

The commencement of the Industrial Revolution is closely linked to a small number of

innovations,[16] made in the second half of the 18th century:

 Textiles – Cotton spinning using Richard Arkwright's water frame, James

Hargreaves'sSpinning Jenny, and Samuel Crompton's Spinning Mule (a combination of the
Spinning Jenny and the Water Frame). This was patented in 1769 and so came out of patent
in 1783. The end of the patent was rapidly followed by the erection of many cotton mills.
Similar technology was subsequently applied to spinning worsted yarn for various textiles
and flax for linen. The cotton revolution began in Derby, which has been known since this
period as the "Powerhouse of the North".
 Steam power – The improved steam engine invented by James Watt and patented in
1775 was initially mainly used to power pumps for pumping water out of mines, but from the
1780s was applied to power other types of machines. This enabled rapid development of
efficient semi-automated factories on a previously unimaginable scale in places
where waterpower was not available. For the first time in history people did not have to rely
on human or animal muscle, wind or water for power. The steam engine was used to pump
water from coal mines; to lift trucks of coal to the surface; to blow air into the furnaces for
the making of iron; to grind clay for pottery; and to power new factories of all kinds. For
over a hundred years the steam engine was the king of the industries.
 Iron making – In the Iron industry, coke was finally applied to all stages of
iron smelting, replacing charcoal. This had been achieved much earlier for lead and copper as
 well as for producing pig iron in a blast furnace, but the second stage in the production of bar
irondepended on the use of potting and stamping (for which a patent expired in 1786)
or puddling (patented by Henry Cort in 1783 and 1784).

These represent three 'leading sectors', in which there were key innovations, which allowed the
economic take off by which the Industrial Revolution is usually defined. This is not to belittle
many other inventions, particularly in the textile industry. Without some earlier ones, such as
the spinning jenny and flying shuttle in the textile industry and the smelting of pig iron with
coke, these achievements might have been impossible. Later inventions such as the power
loom and Richard Trevithick's high pressure steam engine were also important in the growing
industrialisation of Britain. The application of steam engines to powering cotton
mills and ironworks enabled these to be built in places that were most convenient because other
resources were available, rather than where there was water to power a watermill.

In the textile sector, such mills became the model for the organisation of human labour in
factories, epitomised by Cottonopolis, the name given to the vast collection of cotton
mills, factories and administration offices based in Manchester. The assembly line system greatly
improved efficiency, both in this and other industries. With a series of men trained to do a single
task on a product, then having it moved along to the next worker, the number of finished goods
also rose significantly.

Also important was the 1756 rediscovery of concrete (based on hydraulic lime mortar) by the
British engineer John Smeaton, which had been lost for 1300 years.[17]

Technological developments in Britain

In the early 18th century, British textile manufacture was based on wool which was processed by
individual artisans, doing the spinning and weaving on their own premises. This system is called
a cottage industry. Flax and cotton were also used for fine materials, but the processing was
difficult because of the pre-processing needed, and thus goods in these materials made only a
small proportion of the output.

Use of the spinning wheel and hand loom restricted the production capacity of the industry, but
incremental advances increased productivity to the extent that manufactured cotton goods
became the dominant British export by the early decades of the 19th century. India was displaced
as the premier supplier of cotton goods.

Lewis Paul patented the Roller Spinning machine and the flyer-and-bobbin system for drawing
wool to a more even thickness, developed with the help of John Wyatt in Birmingham. Paul and
Wyatt opened a mill in Birmingham which used their new rolling machine powered by a donkey.
In 1743, a factory was opened in Northampton with fifty spindles on each of five of Paul and
Wyatt's machines. This operated until about 1764. A similar mill was built by Daniel Bourn in
Leominster, but this burnt down. Both Lewis Paul and Daniel Bourn patented carding machines
in 1748. Using two sets of rollers that travelled at different speeds, it was later used in the first
cotton spinning mill. Lewis's invention was later developed and improved by Richard Arkwright
in his water frame and Samuel Crompton in his spinning mule.

Other inventors increased the efficiency of the individual steps of spinning (carding, twisting and
spinning, and rolling) so that the supply of yarn increased greatly, which fed a weaving industry
that was advancing with improvements to shuttles and the loom or 'frame'. The output of an
individual labourer increased dramatically, with the effect that the new machines were seen as a
threat to employment, and early innovators were attacked and their inventions destroyed.

To capitalise upon these advances, it took a class of entrepreneurs, of which the most famous is
Richard Arkwright. He is credited with a list of inventions, but these were actually developed by
people such as Thomas Highs and John Kay; Arkwright nurtured the inventors, patented the
ideas, financed the initiatives, and protected the machines. He created the cotton mill which
brought the production processes together in a factory, and he developed the use of power—first
horse power and then water power—which made cotton manufacture a mechanised industry.
Before long steam power was applied to drive textile machinery.

Metallurgy

The major change in the metal industries during the era of the Industrial Revolution was the
replacement of organic fuels based on wood with fossil fuel based on coal. Much of this
happened somewhat before the Industrial Revolution, based on innovations by SirClement
Clerke and others from 1678, using coalreverberatory furnaces known as cupolas. These were
operated by the flames, which contained carbon monoxide, playing on
the ore and reducing the oxide to metal. This has the advantage that impurities (such as sulphur)
in the coal do not migrate into the metal. This technology was applied to lead from 1678 and
tocopper from 1687. It was also applied to iron foundry work in the 1690s, but in this case the
reverberatory furnace was known as an air furnace. The foundry cupola is a different (and later)
innovation.

This was followed by Abraham Darby, who made great strides using coke to fuel his blast
furnaces at Coalbrookdale in 1709. However, the coke pig iron he made was used mostly for the
production of cast iron goods such as pots and kettles. He had the advantage over his rivals in
that his pots, cast by his patented process, were thinner and cheaper than theirs. Coke pig iron
was hardly used to produce bar iron in forges until the mid 1750s, when his son Abraham Darby
II built Horsehay and Ketley furnaces (not far from Coalbrookdale). By then, coke pig iron was
cheaper than charcoal pig iron.

Matthew Boulton helped James Watt to get his business off the ground. he set up a massive
factory called the Soho Factory, in the midlands.

Bar iron for smiths to forge into consumer goods was still made in finery forges, as it long had
been. However, new processes were adopted in the ensuing years. The first is referred to today
as potting and stamping, but this was superseded by Henry Cort's puddling process. From 1785,
perhaps because the improved version of potting and stamping was about to come out of patent,
a great expansion in the output of the British iron industry began. The new processes did not
depend on the use of charcoal at all and were therefore not limited by charcoal sources.

Up to that time, British iron manufacturers had used considerable amounts of imported iron to
supplement native supplies. This came principally from Sweden from the mid-17th century and
later also from Russia from the end of the 1720s. However, from 1785, imports decreased
because of the new iron making technology, and Britain became an exporter of bar iron as well
as manufactured wrought ironconsumer goods.

Since wrought iron was becoming cheaper and more plentiful, it also became a major structural
material following the building of the innovative The Iron Bridge in 1778 by Abraham Darby III.
The Iron Bridge, Shropshire, England

An improvement was made in the production of steel, which was an expensive commodity and
used only where iron would not do, such as for the cutting edge of tools and for
springs. Benjamin Huntsman developed his crucible steel technique in the 1740s. The raw
material for this was blister steel, made by the cementation process.

The supply of cheaper iron and steel aided the development of boilers and steam engines, and
eventually railways. Improvements in machine tools allowed better working of iron and steel and
further boosted the industrial growth of Britain.

Mining

Coal mining in Britain, particularly in South Wales started early. Before the steam engine, pits
were often shallow bell pits following a seam of coal along the surface, which were abandoned
as the coal was extracted. In other cases, if the geology was favourable, the coal was mined by
means of an adit or drift mine driven into the side of a hill. Shaft mining was done in some areas,
but the limiting factor was the problem of removing water. It could be done by hauling buckets
of water up the shaft or to a sough (a tunnel driven into a hill to drain a mine). In either case, the
water had to be discharged into a stream or ditch at a level where it could flow away by gravity.
The introduction of the steam engine greatly facilitated the removal of water and enabled shafts
to be made deeper, enabling more coal to be extracted. These were developments that had begun
before the Industrial Revolution, but the adoption of James Watt's more efficient steam engine
from the 1770s reduced the fuel costs of engines, making mines more profitable. Coal mining
was very dangerous owing to the presence of firedamp in many coal seams. Some degree of
safety was provided by the safety lamp which was invented in 1816 by Sir Humphry Davy and
independently by George Stephenson. However, the lamps proved a false dawn because they
became unsafe very quickly and provided a weak light. Firedamp explosions continued, often
setting off coal dust explosions, so casualties grew during the entire 19th century. Conditions of
work were very poor, with a high casualty rate from rock falls.
Steam power

The development of the stationary steam engine was an essential early element of the Industrial
Revolution; however, for most of the period of the Industrial Revolution, the majority of
industries still relied on wind and water power as well as horse- and man-power for driving small
machines.

The first real attempt at industrial use of steam power was due to Thomas Savery in 1698. He
constructed and patented in London a low-lift combined vacuum and pressure water pump, that
generated about one horsepower (hp) and was used in numerous water works and tried in a few
mines (hence its "brand name", The Miner's Friend), but it was not a success since it was limited
in pumping height and prone to boiler explosions.

Newcomen's steam powered atmospheric engine was the first practical engine. Subsequent steam
engines were to power the Industrial Revolution

The first safe and successful steam power plant was introduced by Thomas Newcomen before
1712. Newcomen apparently conceived the Newcomen steam engine quite independently of
Savery, but as the latter had taken out a very wide-ranging patent, Newcomen and his associates
were obliged to come to an arrangement with him, marketing the engine until 1733 under a joint
patent.[19][20] Newcomen's engine appears to have been based on Papin's experiments carried
out 30 years earlier, and employed a piston and cylinder, one end of which was open to the
atmosphere above the piston. Steam just above atmospheric pressure (all that the boiler could
stand) was introduced into the lower half of the cylinder beneath the piston during the gravity-
induced upstroke; the steam was then condensed by a jet of cold water injected into the steam
space to produce a partial vacuum; the pressure differential between the atmosphere and the
vacuum on either side of the piston displaced it downwards into the cylinder, raising the opposite
end of a rocking beam to which was attached a gang of gravity-actuated reciprocating force
pumps housed in the mineshaft. The engine's downward power stroke raised the pump, priming it
and preparing the pumping stroke. At first the phases were controlled by hand, but within ten
years an escapement mechanism had been devised worked by a vertical plug tree suspended from
the rocking beam which rendered the engine self-acting.
A number of Newcomen engines were successfully put to use in Britain for draining hitherto
unworkable deep mines, with the engine on the surface; these were large machines, requiring a
lot of capital to build, and produced about 5 hp (3.7 kW). They were extremely inefficient by
modern standards, but when located where coal was cheap at pit heads, opened up a great
expansion in coal mining by allowing mines to go deeper. Despite their disadvantages,
Newcomen engines were reliable and easy to maintain and continued to be used in the coalfields
until the early decades of the 19th century. By 1729, when Newcomen died, his engines had
spread (first) to Hungary in 1722, Germany, Austria, and Sweden. A total of 110 are known to
have been built by 1733 when the joint patent expired, of which 14 were abroad. In the 1770s,
the engineer John Smeaton built some very large examples and introduced a number of
improvements. A total of 1,454 engines had been built by 1800.[21]

Chemicals

The large scale production of chemicals was an important development during the Industrial
Revolution. The first of these was the production of sulphuric acid by the lead chamber
processinvented by the Englishman John Roebuck (James Watt's first partner) in 1746. He was
able to greatly increase the scale of the manufacture by replacing the relatively expensive glass
vessels formerly used with larger, less expensive chambers made of riveted sheets of lead.
Instead of making a small amount each time, he was able to make around 100 pounds (50 kg) in
each of the chambers, at least a tenfold increase.

The production of an alkali on a large scale became an important goal as well, and Nicolas
Leblanc succeeded in 1791 in introducing a method for the production of sodium carbonate.
TheLeblanc process was a reaction of sulphuric acid with sodium chloride to give sodium
sulphate andhydrochloric acid. The sodium sulphate was heated with limestone (calcium
carbonate) and coal to give a mixture of sodium carbonate and calcium sulphide. Adding water
separated the soluble sodium carbonate from the calcium sulphide. The process produced a large
amount of pollution (the hydrochloric acid was initially vented to the air, and calcium sulphide
was a useless waste product). Nonetheless, this synthetic soda ash proved economical compared
to that from burning specific plants (barilla) or from kelp, which were the previously dominant
sources of soda ash,[22] and also to potash (potassium carbonate) derived from hardwood ashes.
These two chemicals were very important because they enabled the introduction of a host of
other inventions, replacing many small-scale operations with more cost-effective and
controllable processes. Sodium carbonate had many uses in the glass, textile, soap, and paper
industries. Early uses for sulphuric acid included pickling (removing rust) iron and steel, and
for bleaching cloth.

The development of bleaching powder (calcium hypochlorite) by Scottish chemist Charles

Tennant in about 1800, based on the discoveries of French chemist Claude Louis Berthollet,
revolutionised the bleaching processes in the textile industry by dramatically reducing the time
required (from months to days) for the traditional process then in use, which required repeated
exposure to the sun in bleach fields after soaking the textiles with alkali or sour milk. Tennant's
factory at St Rollox, North Glasgow, became the largest chemical plant in the world.

In 1824 Joseph Aspdin, a British bricklayer turned builder, patented a chemical process for
making portland cement which was an important advance in the building trades. This process
involves sintering a mixture of clay and limestone to about 1,400 °C (2,552 °F), then grinding it
into a fine powder which is then mixed with water, sand and gravel to produce concrete. Portland
cement was used by the famous English engineer Marc Isambard Brunel several years later when
constructing the Thames Tunnel.[23] Cement was used on a large scale in the construction of
the London sewerage system a generation later.

After 1860 the focus on chemical innovation was in dyestuffs, and Germany took world
leadership, building a strong chemical industry.[24]Aspring chemists flocked to German
universities in the 1860-1914 era to learn the latest techniques. British scientists by contrast,
lacked research universities and did not train advanced students; instead the practice was to hire
German-trained chemists.[25]

Gas lighting

Another major industry of the later Industrial Revolution was gas lighting. Though others
made a similar innovation elsewhere, the large scale introduction of this was the work of William
Murdoch, an employee of Boulton and Watt, the Birmingham steam engine pioneers. The
process consisted of the large scale gasification of coal in furnaces, the purification of the gas
(removal of sulphur, ammonia, and heavy hydrocarbons), and its storage and distribution. The
first gas lighting utilities were established in London between 1812-20. They soon became one
of the major consumers of coal in the UK. Gas lighting had an impact on social and industrial
organisation because it allowed factories and stores to remain open longer than with tallow
candles or oil. Its introduction allowed night life to flourish in cities and towns as interiors and
streets could be lighted on a larger scale than before.

Industrial Growth in India

The latest data for Index of Industrial Production (IIP) has been released for the month of
October 2008. It shows that industrial growth in India has turned negative for the first time since
1993. According to figures of IIP, the overall growth rate of industrial production as measured by
the IIP has been -0.4% in the month of October 2008 as compared with that of October 2007.

The detailed data for the IIP is given in the following table:

Growth Rate of Industrial Production over the corresponding period of the

previous year

Month Mining Manufacturing Electricity General

2007- 2008- 2007- 2008- 2007- 2008- 2007- 2008-

08 09 08 09 08 09 08 09

Octobe
r 5.1 2.8 13.8 -1.2 4.2 4.4 12.2 -0.4

Apr-Oct 4.9 3.7 10.6 4.2 7.2 2.8 9.9 4.1

Source: Press Note -: Quick Estimates of Index of Industrial Production and

Use-based Index (Base 1993-94=100) for the month of October, 2008.
Available at: http://pib.nic.in/release/release.asp?relid=45554

From the above table it is seen that the growth rate of the overall index
declined from a high value of 12.2% in October 2007 to a negative -0.4% in
October 2008. If we compare the growth rates of April-October 2007 and
that of 2008 we see that the growth rate declined from 9.9% in 2007 to
4.1% in 2008. In September 2008, this growth rate was 4.8%.
(Source: http://mospi.nic.in/mospi_iip.htm). This massive decline in the
growth rate of the overall industrial index is driven mainly by a drastic fall in
the growth rate of the manufacturing sector.

It is seen from the above table that the growth rate of Manufacturing
registered the maximum fall, whereby it declined from 13.8% in October
2007 to a negative -1.2% in October 2008. On the other hand, the growth
rate of manufacturing declined to 4.1% in April-October 2008 as compared
to 9.9% in the same period in the previous year. The growth rate of
manufacturing in September 2008 was 4.8%.
(Source:http://mospi.nic.in/mospi_iip.htm). Manufacturing sector’s weight in
the overall industrial index is close to 80%. Therefore, it is obvious that such
large fall in the growth rate of the manufacturing sector has resulted in a
negative growth rate for the overall IIP.

As far as mining is concerned, it is seen that the growth rate declined from
5.1% to 2.8%, while there has been a minor increase in the growth rate of
electricity production from 4.2% to 4.4%.

Let us also look into the growth rate of the 6 core infrastructure companies, whose
figures have also been released. This is shown in the following table:

Index of six core sector industries - October 2008

Sector Weight Oct ’07 Oct ’08 Apr- Apr-

(%) % % Oct Oct
in IIP growth growth ’07-’08 ’08-’09
% %
growth growth

Crude 4.17 -0.1 -0.3 0.6 -0.7

Petroleum

Refinery 2.00 2.7 5 8.8 4.5

Products

Coal 3.22 8.9 10.9 3.7 8.4

Electricity 10.17 4.2 4.4 7.1 2.8

Cement 1.99 7.5 6.2 8.5 6.0

Finished 5.13 5.2 -0.5 7.3 4.2

Steel
(carbon)

Overall 26.7 4.6 3.4 6.6 3.9

Source: Infra Growth Dips to 3.4% in October, Business

Standard, 12 December 2008

From the above figure it is clear that the overall growth rate of the
infrastructure industries declined from 4.6% in October 2007 to 3.4% in
October 2008. There was a massive decline in the growth rate of steel
production from 5.2% to a negative growth of -0.5%. It is seen that the
growth rate of cement production also declined from 7.5% to 6.2% in the
same period.

The above two tables show that there has been very significant slowdown in
the industrial sector growth rate in India, which is almost spread across the
board. In order to understand the nature of this decline in the growth rate of
industrial production, let us first look at the Use-Based categorization of the
IIP figures. This is shown in the following table:
Source: Press Note -: Quick Estimates of Index of Industrial Production and
Use-based Index (Base 1993-94=100) for the month of October, 2008.

From above table it is seen that all categories of industries witnessed decline
in their growth rates in October 2008 as compared to October 2007. The
most noteworthy aspect is the fact that there has been a drastic decline in
the growth rate of capital goods industries, which declined from a very high
figure of 20.9% in October 2007 to a low figure of 3.1% in October
2008. if we consider the intermediate industries, then also a similar picture
emerges, where the growth rate declined from 13.9% ion October 2007 to a
negative growth rate of -3.7% in October 2008. Similar is the story of the
consumer goods industries, where the growth rate declined from 13.7% in
October 2007 to -2.3% in October 2008. Within the consumer goods sector,
the growth rates of both consumer durables as well as non-durables turned
negative in October 2008, while both these growth rates were quite high in
October 2007.

The question is what explains this overall slow down in the growth rate of
industrial production in India. Firstly, it must be remembered that the Indian
economy has been adversely affected by the global financial crisis. It has
been the case that as a result of the global economic crisis, there has been a
crisis of credit even in the Indian economy. As a result, banks have become
more stringent in giving loans to individuals or companies to meet their
consumption or investment needs. This has adversely affected the
investment decisions of firms and companies. As a result we are witnessing
that the growth rate of production of capital goods industry has declined
sharply in the country. Capital goods production essentially depends on the
investment decisions of firms. In a situation where the overall economic
scene is positive,firms increase their investments which get reflected in an
increase in the production of capital goods. By the same logic, a sharp
decline in the production of capital goods essentially shows that firms are
less than forthcoming in taking up new investments.

Why have firms become reluctant in taking investment decisions? One

reason for firms’ reluctance to make investments has been already
mentioned in the previous paragraph which is in terms of higher interest
rates on loans. There is however an additional reason for this reluctance,
which is the following. Investment decisions of firms are based upon
expectations of the future which in turn is formed on the basis of the
demand performance at the present. If at present, there is a drop in demand, then for the
firms this will manifest itself as an increase in their unutilized capacity and/or a build up of
their inventories.In this case, the firms perceive that their earlier investment decisions were
overestimates, since there exist unutilized capacities and therefore they cut back on investment
decisions. To some extent this is currently happening in the Indian economy. We have seen how
big firms like TATA Motors or Ashok Leyland closed down their units for some days or JSW
steel cutting production and so on and so forth. This is nothing but a manifestation of a demand
problem, which is reflected in the fact that the growth rate of the consumer goods sector has
turned negative in October 2008 from a very high level in October 2007 as has been shown in the
above table.

Now, the question is what accounts for the fall in the demand in the Indianeconomy,which is
reflected in the drastic fall in the growth rate of consumer goods. It must first be noted that the
demand in the Indian economy which has led the good growth performance of the last few years
is very narrowly based. It stems mainly from the demand of the rich and the middle class based
upon easy loans made available to them by banks. Now, with the global financial crisis
hitting India, the banks stopped giving easy loans which has resulted in the decline in demand for
consumer goods, particularly consumer durables in India. At the same time, with massive
poverty existing, particularly in the Indian countryside, there is very little demand that this
segment of the population generates. Therefore, what is needed is a plan of action which tries to
put more purchasing power in the hands of the poor, whose demand can then increase the overall
demand base in the economy and lead India towards a sustained demand led growth.

On the other hand it has also been the case that in the fact of global recession, particularly in
the USA, India’s exports have also been badly hit. In fact the export growth in October 2008 has
been negative, the lowest in many years. So, the external demand for Indian industrial output has
also not been strong enough.

It can however be argued that since the demand in India was largely based on the consumption of
the rich and middle class on the basis of soft loans, what is essential is interest cuts, which will
then automatically increase the demand in the economy. This however is not necessarily the case.
The present crisis is a crisis of confidence, where even with low interest rates, banks might just
refuse to lend to any borrowers other than the truly credit worthy one. On the other hand, given
the uncertainties in the market, the borrowers are also less than willing to take such loans. In
other words, only an injection of liquidity in the market may not solve the problem, since people
may just hold on to the excess liquidity without creating any demand, a case which Keynes
called the liquidity trap. The current world as well as the Indian economic situation is akin to this
phenomenon. (See, ‘In Search of a real Stimulus’, Jayati Ghosh, Another argument can be made
at this point which is the following. Even if it is granted that by a mere reduction of interest rates
will not solve the problem,the current stimulus package announced by the Government will take
care of the problem which talks about an additional fiscal stimulus and also tax cuts in the form
of a cut in excise duties. Firstly, it needs to be pointed out that the fiscal expenditure
of Rs 20,000crores planned by the Government is only 0.5% of the IndianGDP and is grossly
inadequate to quell the crisis. Secondly, the tax cuts in terms of cuts in excise duties will increase
demand only if they are passed on to the consumers through a price cut. More importantly,
however such cuts in the excise duties is aimed at only a short term solution of giving rise to a
demand bubble based on lower prices. But it completely ignores the aspect of increasing the
purchasing power of the poor by direct intervention of the state in funding the Public
Distribution System, expenditure in rural areas etc. In short the current stimulus package is
inadequate to meet the serious problem that the economy is in right now.
CONCEPTUAL FRAME-WORK
 CAPITAL BUDGEING:
An efficient allocation of capital is the most important finance function in
modern times. It involves decisions to commit firm’s funds to long-term assets. Such
decisions are tend to determine the value of company/firm by influencing its growth,
profitability & risk.

Investment decisions are generally known as Capital Budgeting or capital

expenditure decisions. It is clever decisions to invest current in long term assets
expecting long-term benefits firm’s investment decisions would generally include
expansion, acquisition, modernization and replacement of long-term assets.

Such decisions can be investment decisions, financing decisions or operating

decisions. Investment decisions deal with investment of organization’s resources in
Long tern (fixed) Assets and / or Short term (Current) Assets. Decisions pertaining to
investment in Short term Assets fall under “Working Capital Management”. Decisions
pertaining to investment in Long term Assets are classified as “Capital Budgeting”
decisions.

Capital Budgeting decisions are related to allocation of investible funds to different

long-term assets. They 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

expected benefits of investment against the expenses associated with it.Organizations
are frequently faced with Capital Budgeting decisions. Any decision that requires the
use of resources is a Capital Budgeting decisions. Capital Budgeting is more or less a
continuous process in any growing concern.
For Example: Purchase of Land is an example of Capital Budgeting decision. Similarly
replacement of outdated equipment with modern machines, purchase of a brand or
business, computerization and networking the organization, investment in research and
development of a product launch of a major promotional campaign etc are all example
of Capital Budgeting decisions.

However, in all cases, the decisions have a long-term impact on the performance of the
organization. Even a single wrong decision may in danger the existence of the firm as a
profitable entity.

IMPORTANCE OF CAPITAL BUDGETING:

There are several factors that make Capital Budgeting decisions among the critical
decisions to be taken by the management. The importance of Capital Budgeting can be
understood from the following aspects of Capital Budgeting decisions.

1. Long Term Implications: Capital Budgeting decisions have long term effects on
the risk and return composition of the firm. These decisions affect the future
position of the firm to a considerable extent. The finance manger is also
committing to the future needs for funds of that project.
2. Substantial Commitments: The Capital Budgeting decisions generally involve
large commitment of funds. As a result, substantial portion of capital funds is
blocked.
3. Irreversible Decisions: Most of the Capital Budgeting decisions are irreversible
decisions. Once taken the firm may not be in a position to revert back unless it is
ready to absorb heavy losses which may result due to abandoning a project
midway.
4. After the Capacity and Strength to Compete: Capital Budgeting decisions affect
the capacity and strength of a firm to face competition. A firm may loose
competitiveness if the decision to modernize is delayed.

PROBLEMS & DIFFICULTIES IN CAPITAL BUDGETING:

1. Future uncertainty: Capital Budgeting decisions involve long-term

commitments. There is lot of uncertainty in the long term. The uncertainty may
be with reference to cost of the project, future expected returns, future
competition, legal provisions, political situation etc.
1. Time Element: The implications of a Capital Budgeting decision are scattered over a
long period. The cost and benefits of a decision may occur at different point of time.
The cost of a project is incurred immediately. However, the investment is recovered
over a number of years. The future benefits have to be adjusted to make them
comparable with the cost. Longer the time period involved, greater would be the
uncertainty.
3. Difficulty in Quantification of Impact: The finance manger may face difficulties
in measuring the cost and benefits of projects in quantitative terms.
Example: The 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 extent 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:

The Capital Budgeting decision process is a multi-faceted and analytical process. A

number of assumptions are required to be made.

1. Certainty with respect to cost & Benefits: It is very difficult to estimate the cost
and benefits of a proposal beyond 2-3 years in future.
2. Profit Motive : Another assumption is that the Capital Budgeting decisions are
taken with a primary motive of increasing the profit of the firm.

The activities can be listed as follows:

 Dis-investments i.e., sale of division or business.
 Change in methods of sales distribution.
 Undertakings an advertisement campaign.
 Research & Development programs.
 Launching new projects.
 Diversification.
 Cost reduction.

FEATURES OF INVESTMENT DECISIONS:

 The exchange of current funds for future benefits.

 The funds are invested in long-term assets.
 The future benefits will occur to the firm over a series of years.
IMPORTANT OF INVESTMENT DECISIONS:

 They influence the firm’s growth in long run.

 They effect the risk of the firm.
 They involve commitment of large amount of funds.
 They are irreversible, or reversible at substantial loss.
 They are among the most difficult decisions to make.

TYPE OF INVESTMENT DECISIONS:

 Expansion of existing business.
 Expansion of new business.
 Replacement & Modernization.

INVESTMENT EVALUATION CRITERIA:

 Estimation of cash flows.

 Estimation of the required rate of return.
 Application of a decision rule for making the choice.

Consideration of cash flows is to determine true profitability of the project and it is an

unambiguous way of identifying good projects from the pool. Ranking is possible it
should recognize 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
exclusive projects that which maximizes the shareholders wealth. It should be a
criterion which is applicable to any considerable investment project independent of
other.There are number of techniques that are in use in practice. The chart of
techniques can be outlined as follows:

Capital Budgeting Techniques:

 Traditional Approach Modern Approach
(or) (or)
Non-Discounted Cash Flows Disconnected Cash Flows

Pay Back Period (PB) Net Present Value (NPV)

Accounting Rate of Return (ARR) Internal Rate of Return

Profitability Index (PI)
Discounted Payable Period

NET PRESENT VALUE :

The Net Present value method is a classic economic method of evaluating the
investment proposals. It is one of the methods of discounted cash flow. It recognizes 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 equivalent i.e., present values are found out.
The following steps are involved in the calculation of NPV:
 Cash flows of the investment project 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 “ Cost of capital rate” of the company.
 The 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.
 The Net Present value is the difference between the “Present Value of Cash
inflows” and the present value of cash outflows.
 Net present value should be found out by subtracting present value of cash
outflows from present value of cash inflows. The project should be accepted if
NPV is positive.

NPV = Present Value of Cash inflow – Present value of the cash outflow

Acceptance Rule:
Accept if NPV > 0
Reject if NPV < 0
May accept if NPV = 0
One with higher NPV is selected.

INTERNAL RATE OF RETURN METHOD:

 The internal rate of return (IRR) method is another discounted cash flow
technique .This method is based on the principle of present value. It takes into account
of the magnitude & timing of cash flows.

IRR nothing but the rate of interest that equates the present value of future
periodic net cash flows, with the present value of the capital investment expenditure
required to undertake a project.

The concept of internal rate of return is quite simple to understand in the case of
one-period project.

Acceptance Rule:

Accept if r > k
Reject if r < k
May accept if r = k

where r = rate return

k = opportunity cost of capital

PROFITABILITY INDEX (OR) BENEFIT COST RATIO:

 Yet another time-adjusted method of evaluating the investment proposals is the
benefit-cost (B/C) ratio of profitability index PI). It is benefit cost ratio. It is ratio of
present value of future net cash inflows at the required rate of return, to the initial cash
outflow of the investment.

Present Value of Cash inflows

PI = -----------------------------------------
Present Value of Cash outflows

Acceptance Rule :

Accept if PI > 1
Reject if PI < 1
May accept if PI = 1

Profitability Index is a relative measure of projects profitability.

PAY BACK PERIODE METHOD:

 One of the top concerns of any person or organization investing a large amount of
money would be the time by which the money will come back. The concern making
the investment would want that at least the capital invested is recovered as early as
possible. The pay back period is defined as the period required for the proposal’s
cumulative cash flows to be equal to its cash outflows. In other words, the payback
period is the length of time required to recover the initial cost of the project. The
payback period is usually stated in terms of number of years. It can also be stated as
the period required for a proposal to ‘break even’ on its net investment.
The payback period is the number of years it takes the firm to recover its original
investment by net returns before depreciation, but after taxes.
If project generates constant annual cash inflows, the pay back period is completed as
follows:

Initial Investment
Pay Back = ------------------------
Annual cash inflow
In case of unequal cash inflows, the payback period can be found out by adding
up the cash inflows until the total is equal to initial cash outlay.

Acceptance Rule:
 Accept if calculated value is less than standard fixed by management otherwise
reject it.
 If the payback period calculated for a project is less than the maximum payback
period set up by the company it can be accepted.
 As a ranking method it gives highest rank to a project which has lowest pay back
period, and lowest rank to a project with highest pay back period.

DISCOUNTED PAY BACK PERIOD:

 One of the serious objections to pay back method is that it does not discount the cash
flows. Hence discounted pay back period has come into existence. The number of
periods taken in recovering the investment outlay on the present value basis is called
the discounted pay back period.
Discounted Pay Back rule is better as it does discount the cash flows until the outlay is
recovered.

ACCOUNTING RATE OF RETURN (OR)

AVERAGE RATE OF RETURN (ARR) :

It is also known as return on investment (ROI). 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, ARR on an investment
can be calculated as “ the ratio of accounting net income to the initial investment i.e.” .

Average Net Income

ARR = ---------------------------
Average Investment

Average Income = Average of after tax profit

Average Investment = Half of Original Investment
Acceptance Rule:

 Accept if calculated rate is higher than minimum rate established by the

management.
 It can reject the projects with an ARR lower than the expected rate of return.
 This method can also help, the management to rank the proposals on the basis of
ARR.
 A highest rank will be given to a project with highest ARR, whereas a lowest
rank to a project with lowest ARR.
 CAPITAL BUDGETING METHODS IN PRACTICE
 In a study of the Capital Budgeting practices of fourteen medium to large size
companies in India, it was found tat almost all companies used by back.

 With pay back and/or other techniques, about 2/3 rd of companies used IRR and
about 2/5th NPV. IRR s found to be second most popular method.

 Pay back gained significance because of is simplicity to use & understand, its
emphasis on the early recovery of investment & focus on risk.

 It was found that 1/3rd of companies always insisted on computation of pay back
for all projects, 1/3rd for majority of projects & remaining for some of the
projects.

 Reasons for secondary of DCF techniques in India included difficulty in

understanding & using threes techniques, lack of qualified professionals &
unwillingness of top management to use DCF techniques.

 One large manufacturing and marketing organization mentioned that conditions

of its business were such that DCF techniques were not needed.

 Yet another company stated that replacement projects were very frequent in the
company, and it was not considered necessary to use DCF techniques for
evaluating such projects. techniques in India included difficulty in
understanding & using threes techniques, lack of qualified professionals &
unwillingness of top management to use DCF techniques.
PROCESS

CAPITAL BUDGETING PROCESS:

Atleast five phases of capital expenditure planning & control can be identified:

 Identification ( or Organization ) of investment opportunities.

 Development of forecasts of benefits and costs.
 Evaluation of the net benefits.
 Authorization for progressing and spending capital expenditure.
 Control of capital projects.

INVESTMENT IDEAS:
Investment opportunities have to be identified or created investment proposals
arise at different levels within a firm.

Nature of Idea Level

Cost reduction ------
Replacement Plant Level
Process/Product Development ( 50% in India cover this level)
Expansion Top management
Diversification In India, it is insignificant
New Product Marketing Dept., ( or) Plant Manager

Replacing an old
Machine ( or)
Improving the Factory Level.
Production techniques.

Investment proposals should be generated to employ the firm’s funds fully well &
efficiently.
FORECASTING :

Cash flow estimates should be development by operating managers with the

help of finance executives. Risk associated should be properly handled. Estimation of
cash flows requires collection and analysis of all qualitative and quantitative data, both
financial and non-financial in nature. MIS provide such data.

Correct treatment should be given to :

 Additional working capital

 Sale proceeds of existing assets.
 Depreciation
 Financial flows (to be distinguished from operation flows)

EVALUATION :
Group of experts who have no ake to grind should be taken in selecting the
methods of evaluation as NPV, IRR, PI, Pay Back, ARR & Discounted Pay Back.

Pay Back period is used as “Primary” method & IRR/NPV as “Secondary”

method in India. The following are to be given due importance.

 For evaluation, minimum rate of return or cut-off is necessary.

 Usually if is computed by means of weighted Average cost of Capital
(WACC)
 Opportunity cost of capital should be based on risky ness of cash flow of
investment proposals.
 Assessment of risk is an important aspect. Sensitivity Analysis &
Conservative for costs are two important methods used in India.
AUTHORIZATION:

Screening and selecting may differ from one company to another. When large
sums are involved usually final approval rests with top management. Delegation of
approval authority may be effected subject to the amount of outlay. Budgetary control
should be rigidly exercised.

CONTROL AND MONITORY:

A Capital projects reporting system is required to review and monitor the
performance of investment projects after completion and during their life. Follow up
comparison of the actual performance with original estimates to ensure better
forecasting besides sharpening the techniques for improving future forecasts. As a
result company may re-praise its projects and take necessary action.

Indian Companies use regular project reports for controlling capital expenditure reports
may be quarterly, half-yearly, monthly, bi-monthly continuous reporting..

 Expenditure to date
 Stage and physical completion
 Approved total cost
 Revised total cost

DECISION MAKING LEVEL:

For planning and control purpose three levels of Decision making have been identified :

 Operating
 Administrative
 Strategic
OPERATING CAPITAL BUDGETING:

Includes routine minor expenditure, as office equipment handled by lower level

management.

ADMINISTRATIVE CAPITAL BUDGETING:

Falls in between these two levels involves medium size investments such as
business handled by middle level management.

STRATEGIC CAPITAL BUDGETING:

Involves large investment as acquisition of new business or expansion in a new

time of business, handled by top management unique nature.

Long Term Capital Budgeting In HETERO DRUGS LTD.

PRE – INVESTMNET STAGE:

In a planned economy, as in India, the identification of public sector projects

needs to be done within the overall framework of national the sectoral planning. All
projects of every sector need to be identified scientifically at the time of plan
formulation. In actual practice, however, it is observed that ‘identification’ stage is the
most neglected stage of the project planning.

The five year plans indicate the broad strategy of planning economic growth rate
and other basic objectives to be achieved during the plan period. The macro level
planning exercise undertaken at the beginning of every five year plan indicates broadly
the role of each sector’s physical targets to be achieved and financial outlays, which
could be made available for the development of the sector during the plan period.

The identification of a project in the Five Year Plan is not the sanction of the
project for implementation. It provides only the ‘green signal’ for the preparation of
feasibility report (FR0 for appraisal and investment decision. A preliminary scrutiny of
the FR of the project is done in the Ministry and thereafter copies of the feasibility
report are submitted to the appraising agencies, viz., Planning Commission, Bureau of
Public Enterprises and the Plan Finance Division of the Ministry of Finance.
 Thus the organizational responsibility for identifying these projects rests with the
concerned administrative ministry, in consultation with its public enterprises.

The essential steps for project identification and preparation relates to studying (i)
imports (ii) substitutes (iii) available and raw material (iv) available technology and
skills (v) inter-industry relationship (vi) existing industry (vii) development plans
(viii) old projects etc.

It may be mentioned that in actual practice, these steps are hardly scientifically
studied and followed by the administrative ministry public sector undertaking at the
time of project identification. The public sector projects many a time come
spontaneously on the basis of ideas and possibilities of demand or availability of some
raw materials and not an outcome of scientific investigation and systematic search for
feasible projects.

PROJECT FORMULATION :

The second stage of “Project Cycle” viz. Project Formulation, is a pre-investment

exercise to determine whether to invest, where to invest, when to invest and how much
to invest. The project/feasibility reports are meant to provide required information for
assessing technical, financial, commercial, organization and economic viability of the
project planning in India, mainly because of relatively late realization of its importance.
As a result, the investment decisions for large projects in the past were taken on half-
baked and ill-conceived projects and time-over runs and cost-over runs of public sector
projects have become a regular feature rather than exception.
In early seventies along with the setting up of the Public Investment Board (PIB) the
Government created a new project Appraisal Division in the Planning Commission.
This Division prepared and circulated “Guidelines for preparing Feasibility Reports of
Industrial Projects” in 1974.
This guidelines, unlike earlier manual, indicates all the information and data required
to be presented and analysed in the feasibility report, so as to enable the appraisal
agency to carry out (i) technical analysis – to determine whether the specification of
technical parameters are realistic, (ii) financial anaylsis – to determine whether the
proposal is financially viable, (iii) commercial analysis – to determine soundness of the
product specifications, marketing plans and organization structure and (iv) economic
analysis, to determine whether a project is worthwhile from the point of view of nation
and economy as a whole.

The guidelines describes in details, the information required to be given and

analysed on the following issues : (a) general information of the sector, (b) objective of
the proposal, (c) alternative ways, if any of attaining the objectives and better suitability
of the proposed project, (d) project description – gestation period, costs, technology
proposed, anticipated life of the project etc., (e) demand analysis, total demand /
requirements of the country, including anticipated imports and exports and share of the
proposed project, (f) capital costs and norms assumed, activity wise and year wise, (g)
operating costs and norms, (h) revenue and benefits estimation etc.
PROJECT APPRAISAL :
The appraisal of the project follows the formulation stage. The objective of the
appraisal process is not only to decide whether to accept or reject the investment
proposal, but also to recommend the ways in which the project can be redesigned or
reformulated so as to ensure better technical, financial, commercial and economic
viabilities.

The project appraised which is an essential tool for judicious investment

decisions and project selection is a multi-disciplinary task. But many a times this is
considered doubt, have played an important role in contributing systematic methods
for forecasting the future and evolving appraisal methods to quantify socials costs and
benefits, but they alone can not carry out complete appraisal of an investment proposal.

The need for project appraisal and investment decisions based on social
profitability arises mainly because of the basic characteristics of developing countries
limited resources for development and multiple needs – objective of planning being
‘Economic Growth with Social Justice’. The project appraisal is a convenient and
comprehensive fashion to achieve, the laid down objectives of the economic
development plan. The appraisal work presupposes availability of a certain minimum
among of reliable and up to date data in the country, as well as the availability of
trained persons to carry out the appraisal analysis.

As stated earlier the investment decision of public sector projects are required to be
taken within the approved plan frame work. The Project Appraisal Division (PAD) that
prepares the comprehensive appraisal note of projects of Central Plans was therefore set
up in Planning Commission. The Finance Ministry issues expenditure sanction for all
investment proposals within the frame work of annual budget. The plan Finance
Division and the Bureau of Public Enterprises of the Finance Ministry are also required
to examine and give comments on the investment proposals of public.
DATA ANALYSIS
All finance activity commences with an investment proposal, which calls for a financial
appraisal of a project. Here, Capital Budgeting has its role. Each one of the projects is
appraised on following basis”

 Cost Estimates.
 Cost Generations.

Cost Estimates :-

Feasibility Report of the project is prepared based on the cost of similar units
prevailing at the time of preparation of projects report of the latest costs are not
available, the same should be escalated. Collection of data with regard to the cost of
the various equipment should from part of a continuous planning so tat a realistic cost
estimate is made for the project Reports for civil works are generally based on HETERO
DRUGS LTD. schedule of rates with reasonable premium there on.

Cost of Generation :-
The financing of public sector company is generally based on Debt Equity of 3:1
the general rate of interest chargeable by the central Government on loan components is
10.5% ( Now enhanced to 11%) . The plant life as provided under the Electricity
Supply Act, 1948 is 25 years and depreciation based on this period has to be calculated
on straight line method, on 90% of the cost fixed assets. The operation & maintenance
expenses are generally of the order 2.5% of the capital cost based on the above
assumptions, the cost of generation could be worked out discounted cash flow basis
taking 12% IRR (Internal Rate of Return). This rate has been generally accepted by
various appraising agencies of the power projects.
 Feasibility Report based on above methodology and indicating site selection, coal
linkage, power distribution examined by Central Electricity Authority in all cases
where investment is Rs.1 Crore and above. Since HETERO DRUGS LTD. is public
sector undertaking, all the investment decisions have to be formally sanctioned by
Government after PIB’s (Public Investment Board’s) clearance.

SHARE CAPITAL :
The entire share capital is owned by Government of India. During the Year no
addition has been made. However the authorized capital has been increased from Rs.
80,000 million to Rs.1,00,000 million and the face value or share has been split to Rs.10/-
each from Rs.1000/- each.

ROLE OF FINANCE MANAGEMENT IN INVESTMENT

DECISIONS IN HETERO DRUGS LTD.:

Finance Manager is the number of a project team. He plays an important role in

investigation stage of the project, when various alternatives are analysed & the most
optimum solution is decided upon. The soundness upon the accuracy of the data & as a
finance manager has to questing and satisfy himself on the validity of the data.

The power projects are extremely capital intensive and before large resources are
committed to a scheme a detailed feasibility study need to be prepared covering-

 The need of the project

  The demand projections
 The alternatives of the site locations
 The broad parameters of the plant and equipment
 The cost estimates
 The viability of the scheme.

Cost Estimates :- Cost estimates and financial justification and returns of the projects
are the areas where financial management has to play its role. Cost estimates should be
prepared by the cost engineers and vetted by the finance manager. Cost engineering is
a specialized filed & need to be developed in the contest of power projects because of
insufficient cost data on the components of the projects.

This raises an important question of the present methodology of preparing the

cost estimates without any provision for price contingencies. Because of time lag
between preparation of cost estimates and investment decisions, after its scrutiny by
the appraising agencies, these estimates are already out of data and hence would need
updating.

CAPITAL BUDGETING
EXAMPLE OF STAGE I & II
Sl. Schemes Outlay

1. Stage-I ( 3 x 20000 MT) 5,48,92,00,000

2. Stage- II( 3 x 50000 MT) 11,03,69,00,00

3. Stage-III( 1 x 50000MT) 1229.38(Millions)

Stage – I consisting outlay of 5,48,92,00,000 this is Recovered in 5 years of time.

RECOVERY OF PROJECTS (Stage-I):

Following calculations are under consider

Under Discounted Pay Back Period:
Stage – I ( 3 x 20000 ) Outlay : 5,48,92,00,000

Year Cash Inflows Dis. @12% Present Value of Cashflows

1 Rs. 1.129.384.000 0,892 Rs. 1.007.410.528

2 Rs. 1.310.895.000 0,797 Rs. 1.043.986.315

3 Rs. 1.761.879.000 0,711 Rs. 1.252.695.969

NET PRESENT VALUE:
4 Rs. 1.732.086.000 0,635 Rs. 1.109.874.610

5 Rs. 2.193.061.000 0,567 Rs. 1.243.465.587

Present Value of Cash Flows Rs. 5.647.433.010

Less: Cash Outlay Rs. 5.489.200.000

Net Present Value Rs. 158.233.010

GRAPH 1:

Interpretation:
The Net Present Value is the difference between the “ Present value of cash inflows”
and “Present value of cash outflows.

PROFITABILITY INDEX ( P.I):

Year Investments (In Lakhs) Cash inflows(P.V.) Cash Out Flows (Initial)
2003-04 2,945,083.37 18180 20000
2004-05 3,040,293.17 24780 30000
2005-06 3,192,444.28 45070 60000
2006-07 3,071,183.11 54640 80000
2007-08 3,545,210.87 18630 30000
2008-09 9,025,874.00 161290 22000
2009-10 3,991,459.40 19210 33000
2010-11 4,038,114.20 11130 70000
2011-12 3,667,441.15 65420 40000
2012-13 7,338,000.00 19233 80000
2013-14 2,089,775.00 61323 60000
Total: 498896 525000

P.V. of Cash Inflows

PI = ---------------------------
Initial Cash outlays

498896
= ---------- = 0.95
525000
GRAPH 2 :

Interpretation:
a) The profitability index of present value of cash inflows and cash out flows
is fluctuation from year to year in the year 2003-04 the present value of
cash inflows is 18180 were as in the year 2013-14 has been increased with
61323.
b) The highest cash inflows has been recorded in 2008-2009 as 161290 and
lowest has been recorded as 18180 in the year 2003-04.
PAY BACK PERIOD:

Year Investments (In Lakhs) Cash inflows(P.V.) Cash Out Flows (Initial)
2003-04 40,000.00 8000 20000
2004-05 60,000.00 1600 30000
2005-06 70,000.00 2200 60000
2006-07 20,000.00 4500 80000
2007-08 10,000.00 4000 30000
2008-09 66,000.00 3000 22000
2009-10 25,000.00 2900 33000
2010-11 12,000.00 1100 70000
2011-12 90,000.00 1600 40000
2012-13 30,000.00 1200 80000
2013-14 50,000.00 1800 60000
Total: 473,000.00 31900 525000

Initial Investments
Pay Back Period = ---------------------------
Annual Cash inflows

40,000
= --------- 5 Years
8000

GRAPH 3:
Interpretation:

a) In the Pay Back method the Investment and the case inflows are
fluctuating from year to year where as in the year 2006-07 it is 40000 and
in the year 2013-14 is 50000.
b) Cash inflows are in the order of increasing to decreasing from 2006-07and
2013-14.

AVERAGE RATE OF RETURN:

Year Investments (Lakhs) Average Income Cash Flows after Taxes
(Thousands)
2004-05 400,000.00 20000 100000
2005-06 480,000.00 15000 260000
2006-07 280,000.00 28000 440000
2007-08 240,000.00 85000 750000
2008-09 150,000.00 75000 160000
2009-10 260,000.00 64000 200000
2010-11 600,000.00 78000 300000
2011-12 100,000.00 25000 600000
2012-13 250,000.00 18000 800000
2013-14 520,000.00 22000 750000
Total 3,280,000.00 430000 4360000

Average Income
Average Rate of Return = ----------------------
Average Investments

20000
= --------- = 0.06%
400000

GRAPH 4:
Interpretation:

a) Average rate of return is calculated based on Average income and Average

investment where as Average income in the year 2007-08 is 20000 and
investments in the year 2013-14 is 400000.
b) The value from 2007-08 and 2013-14 are fluctuating from year to year.

DISTRIBUTION OF REVENUE 2020-2020

Interpretations:

a) In the year 2013-14 the revenue is distributed in the from of fuel retained
earning, dividends is latest finance change, depreciation and for employees.

b) Where as in the year 2013-14 it is been fluctuated the rates compare to the
year 2013-14.

TABLE 7:
FY YEAR NET BLOCK (IN LAKS)
2008-09 284738
2009-10 323083
2010-11 328916
2011-12 386106
2012-13 400381
2013-14 520861

NET BLOCK AND GROSS FIXED ASSETS

Interpretations:

a) From 2013-2014 the net block and gross fixed assets is 328916.

b) Where as the Net Block and gross fixed asset is been increased in the year
2009-10.

TABLE 8:
FY YEAR NET SALES(IN LAKS)
2008-09 229055
2009-10 258117
2010-11 286453
2011-12 315400
2012-13 355502
2013-14 440302

NET WORTH AND NET ASSETS

Interpretations:

a) Net worth and net assets has been increasing from year to year from 2008-09it
is 229055 and compare to 2013-14 it has been increased to 440302.

b) By observing the chat we can say the net worth and net assets has been
increasing from 2008-09 to 2013-2014.
TABLE 9 :
FY YEAR PROFIT AFTER TAX
2008-09 34245
2009-10 37338
2010-11 35396
2011-12 36085
2012-13 52609
2013-14 72032

PROFIT AFTER TAX

Interpretations:

a) The chart show the increase value after the deduction of tax in the year 2013-14

The Profit is changing from year to year in the year 2011-12 it is 34245 where as
increasing value in the year 2007-2008 and decreased, in the year 2013-14
the value is increased.
TABLE 10 :
FY YEAR POWER GENERATION (M UNITS)
2008-09 7470
2009-10 7080
2010-11 7090
2011-12 10923
2012-13 19790
2013-14 19237

GENERATION AND SALES

GENERATION IN MUS – SALES IN MILLIONS:

Interpretations:

a) On the X – airs year are been shown from 2008-09 to 2013-14 and the value has
been increasing from year to year.

b) In the year 2008-09 the generation and sale has been 7470 and the value has been
increasing year to year but 2013-2014 the value is decreasing.
FINDINGS AND SUGGESTIONS

FINDINGS ANDSUGESSTIONS
 The Corporate mission of HETERO DRUGS LTD. is to make available reliable
and quality steel in increasingly large quantities. The company will spear head
 the process of accelerated development of the power sector by expeditiously
planning, implementing power project and operating power stations
economically and efficiently.

 As in project implementation, the station continued to excel in power generation

with the power station having reached its first goal of total capacity installation.
Hyderabad is generating power at consistently high plant load factor.

 The organization needs the capable personalities as management to lead to

organization successfully. The management make the plans and implement of
these plans. These plans are expressed in terms of long-term investment
decisions.

 The special budgets are rarely used in the organization like long-term budgets,
research & development budget and budget and budget for constancy.

 From the Revenue budget for the year 2008-2009, it is clear that the Actual sales
( Rs. 168552.50 lacks) are more then the budgeted or Estimated sales ( Rs.
164208.54 lacks). It is a good sign and the overall earnings of the budget indicate
high volume over estimated.

 Fuel utilization is perfectly carry out in RSTPS. And Cash from Ash effectively
carry out the job.

 New projects acceptance consider on the basis of Return Benefits. Risk is

evaluated while considering the new projects.

CONCLUSIONS
 Every organization has pre-determined set of objective and goals, but reaching
those objectives and goals only by proper planning and executing of the plans
economically.

 With in a Short span of its existence, the corporation has commissioned 19502
MW as on 31st March, 2008 with an operating capacity of 19.9%. HETERO
DRUGS LTD. today generate 24.9% of nation’s electricity. HETERO DRUGS
LTD. is presently executing 12 Cement manufacturing Projects and 6 Gas based
cement manufacturing projects with a total approved capacity of 29,935 MT as on
31st March 2014.
BIBLIOGRAPHY
 References :

Financial accounting

Cost and management accounting

Financial accounting

Accounting for management

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