CHAPTER – 1

INTRODUCTION

1
 INTRODUCTION

There are many different definitions of what ‘investment’ and ‘investing’ actually
means. One of the simplest ways of describing it is using your money to try and make
more money. This can happen in many different ways.

All investors are different. The common factor is that you would like to invest money
to aim to make it grow or to receive a regular income from it. We would like to show
you that choosing the most suitable investment for you does not need to be difficult.
All you need is the right help along the way.

The act committing money or capital to an endeavor with the expectation of obtaining
an additional income or profit is known as investment. Investing means putting your
money to work for you.

Investment has different meanings in finance and economics. Finance investment is

putting money into something with the expectation of gain, that upon thorough
analysis, has a high degree of security for the principal amount, as well as security of
return, within an expected period of time. In contrast putting money into something
with an expectation of gain without thorough analysis, without security of principal,
and without security of return is speculation or gambling. As such, those shareholders
who fail to thoroughly analyze their stock purchases, such as owners of mutual funds,
could well be called speculators. Indeed, given the efficient market hypothesis, which
implies that a thorough analysis of stock data is irrational, all rational shareholders
are, by definition, not investors, but speculators.
Investment is related to saving or deferring consumption. Investment is involved in
many areas of the economy, such as business management and finance whether for
households, firms, or governments.
To avoid speculation an investment must be either directly backed by the pledge of
sufficient collateral or insured by sufficient assets pledged by a third party. A
thoroughly analyzed loan of money backed by collateral with greater immediate value
than the loan amount may be considered an investment. A financial instrument that is
insured by the pledge of assets from a third party, such as a deposit in a financial

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institution insured by a government agency may be considered an investment.
Examples of these agencies include, in the United States, the Securities Investor
Protection Corporation, Federal Deposit Insurance Corporation, or National Credit
Union Administration, or in Canada, the Canada Deposit Insurance Corporation.
Promoters of and news sources that report on speculative financial transactions such
as stocks, mutual funds, oil and gas leases, commodities, and futures often
inaccurately or misleadingly describe speculative schemes as investment.

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NEED AND IMPORTANCE OF STUDY
Essentially, Investment Planning involves identifying your financial goals throughout
your life, and prioritizing them. For example, if you want to invest for funding your
vacation next year, don't choose an investment vehicle that has a three-year lock-in.
Similarly, if you want to invest for your daughter's marriage after 10 years, don't
invest in 1yr bonds for the next 10 years. Instead, choose an option that matches your
investment horizon.
Investment Planning is important because it helps you to derive the maximum benefit
from your investments. Your success as an investor depends upon your ability to
choose the right investment options. This, in turn, depends on your requirements,
needs and goals. The choice of the best investment options for you will depend on
your personal circumstances as well as general market conditions. For example, a
good investment for a long-term retirement plan may not be a good investment for
higher education expenses.

4
NEED AND IMPORTANCE OF STUDY
 Essentially, Investment Planning involves identifying your financial goals
throughout your life, and prioritizing them. For example, if you want to invest
for funding your vacation next year, don't choose an investment vehicle that
has a three-year lock-in. Similarly, if you want to invest for your daughter's
marriage after 10 years, don't invest in 1yr bonds for the next 10 years.
Instead, choose an option that matches your investment horizon.
 Investment Planning is important because it helps you to derive the maximum
benefit from your investments. Your success as an investor depends upon your
ability to choose the right investment options. This, in turn, depends on your
requirements, needs and goals. The choice of the best investment options for
you will depend on your personal circumstances as well as general market
conditions. For example, a good investment for a long-term retirement plan
may not be a good investment for higher education expenses.

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OBJECTIVE OF THE STUDY

 The primary objective of the project is to make an analysis of various

investment decisions.
 The aim is to compare the returns given by various investment decisions.
 To cater the different needs of investor, these options are also compared on the
basis of various parameters like safety, liquidity, risk, entry/exit barriers, etc.
 The project work was undertaken in order to have a reasonable understanding
about the investments industry.
 The project work include knowing about the investment Decisions like equity,
bond, gold and mutual fund. All investments Decisions are discussed with
their types, working and returns.

6
SCOPE OF THE STUDY
 You can take investment decision only after analyzing entire process of
investment that starts with funds contribution and ends with getting
expectations fulfilled.
 The investment decision rules allow you to formalize the process and specify
what condition or conditions need to be met to accept the project.
 You will take decision only after ensuring that the required expectations in
terms of returns are ensured at any cost.
 The study is conducted to understand the functioning of Equities in India
Equity market.
 The choice of location for the study is based on the responses given by the
investors of who are operating the stock market in twin cities

 This study will helpful in understanding the behavior and risk preferences of
investors.

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RESEARCH METHODOLOGY

Equities, Bonds, Gold, Mutual Funds and Life Insurance were identified as major
types of investment decision.

The primary data for the project regarding investment and various investment
DECISIONS were collected through interactions had with the employees in the
organization i.e. HETERO.

The secondary data for the project regarding investment and various investments
Decision were collected from websites, textbooks and magazines

Primary method: This method includes the data collected from the personal
interaction with authorized members of HETERO Ltd.

Secondary method: The secondary data collection method includes:

 The lecturers delivered by the superintendents of respective departments.
 The brochures and material provided by HETERO Ltd.
 The data collected from the magazines of the NSE, economic times, etc.
 Various books relating to the investments, capital market and other related
topics.

Then the averages of returns over a period of 5 years are considered for the purpose of
comparison of investment options. Then, critical analysis is made on certain
parameters like returns, safety, liquidity, etc. Giving weight age to the different type
of needs of the investors and then multiplying the same with the values assigned does
this.

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LIMITATIONS OF THE STUDY

 The study was limited to only 5 investment options.

 Most of the information collected is secondary data.
 The data is compared and analyzed on the basis of performance of the
investment options over the past 5 years.
 While considering the returns from mutual funds only top performing schemes
were analyzed.
 It was very difficult to obtain the date regarding the returns yielded by others
and hence averages were taken.

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 CHAPTER – 2
REVIEW OF LITERATURE

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 REVIEW OF LITERATURE
INVESTMENT DECISIONS

Introduction
These days almost everyone is investing in something… even if it’s a savings account
at the local bank or a checking account the earns interest or the home they bought to
live in.

However, many people are overwhelmed when they being to consider the concept of
investing, let alone the laundry list of choices for investment vehicles. Even though it
may seem the everyone and their brothers knows exactly who, what and when to
invest in so they can make killing, please don’t be fooled. Majorities of investor
typically jump on the latest investment bandwagon and probably don’t know as much
about what’s out there as you think.

Before you can confidently choose an investment path that will help you achieve your
personal goals and objectives, it’s vitally important that you understand the basics
about the types of investments available. Knowledge is your strongest ally when it
comes to weeding out bad investment advice and is crucial to successful investing
whether you go at it alone or use a professional.

The investment options before you are many. Pick the right investment tool based on
the risk profile, circumstance, time available etc. if you feel the market volatility is
something, which you can live with then buy stocks. If you do not want risk, the
volatility and simply desire some income, then you should consider fixed income
securities. However, remember that risk and returns are directly proportional to each
other. Higher the risk, higher the returns.

TYPES OF INVESTMENT OPTIONS

A Brief preview of different investment options is given below
Equities: Investment in shares of companies is investing in equities.

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Stocks can be brought/sold from the exchanges (secondary market) or via IPO’s –
Initial Public Offerings (primary market). Stocks are the best long-term investment
options wherein the market volatility and the resultant risk of losses, if given enough
time, are mitigated by the general upward momentum of the economy. There are two
streams of revenue generation from this from of investment.
1. Dividend: Periodic payments made out of the company’s profits are termed as
dividends.
2. Growth: The price of the stock appreciates commensurate to the growth posted by
the company resulting in capital appreciation.
On an average an investment in equities in India has a return of 25%. Good portfolio
management, precise timing may ensure a return of 40% or more. Picking the right
stock at the right time would guarantee that your capital gains i.e. growth in market
value of stock possessions, will rise.

Bonds: It is a fixed income (debt) instrument issued for a period of more than one
year with the purpose of raising capital. The central or state government, corporations
and similar institutions sell bonds. A bond is generally a promise to repay the
principal along with fixed rate of interest on a specified date, called as the maturity
date. Other fixed income instruments include bank deposits, debentures, preference
shares etc.
The average rate of return on bond and securities in India has been around 10-13%
p.a.

Mutual Fund: These are open and close-ended funds operated by an investment
company, which raises money from the public and invests in a group of assets, in
accordance with a stated set of objectives. It is a substitute for those who are unable to
invest directly in equities or debt because of resource, time or knowledge constraints.
Benefits include diversification and professional money management. Shares are
issued and redeemed on demand, based on the funs net asset value, which is
determined at the end of each trading session. The average rate of return as a
combination of all mutual funds put together is not fixed but is generally more than
what earn is fixed deposits. However, each mutual fund will have its own average rate

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of return based on several schemes that they have floated. In the recent past, Mutual
Funs have given a return of 18 – 35%.

Precious Projects: Precious objects are items that are generally small in size but
highly valuable in monetary terms. Some important precious objects are like the gold,
silver, precious stones and also the unique art objects.

Life insurance: In broad sense, life insurance may be reviewed as an investment.

Insurance premiums represent the sacrifice and the assured the sum the benefits. The
important types of insurance policies in India are:

 Endowment assurance policy.

 Money back policy.
 Whole life policy.
 Term assurance policy.
 Unit-linked insurance plan.

ALL ABOUT EQUITY INVESTMENT

Stocks are investments that represent ownership --- or equity --- in a corporation.
When you buy stocks, you have an ownership share --- however small --- in that
corporation and are entitled to part of that corporation’s earnings and assets. Stock
investors --- called shareholders or stockholders --- make money when the stock
increases in value or when the company the issued the stock pays dividends, or a
portion of its profits, to its shareholders.
Some companies are privately held, which means the shares are available to a limited
number of people, such as the company’s founders, its employees, and investors who
fund its development. Other companies are publicly traded, which means their shares
are available to any investor who wants to buy them.

Growth & Income

Some stocks are considered growth investments, while others are considered value
investments. From an investing perspective, the best evidence of growth is an
increasing price over time. Stocks of companies that reinvest their earnings rather

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than paying them out as dividends are often considered potential growth investments.
So are stocks of young, quickly expanding companies. Value stocks, in contrast, are
the stocks of companies that problems, have been under performing their potential, or
are out of favor with investors. As result, their prices tend to be lower than seems
justified, though they may still be paying dividends. Investors who seek out value
stocks expect them to stage a comeback.

Market Capitalization
One of the main ways to categorize stocks is by their market capitalization, sometimes
known as market value. Market capitalization (market cap) is calculated by
multiplying a company’s current stock price by the number of its existing shares. For
example, a stock with a current market value of $30 a share and a hundred million
shares of existing stock would have a market cap of $3 billion.

P/E ratio
A popular indicator of a stock’s growth potential is its price-to-earnings ratio, or P/E –
or multiple – can help you gauge the price of a stock in relation to its earnings. For
instance, a stock with a P/E of 20 is trading at a price 20 times higher than its
earnings.
A low P/E may be a sign that a company is a poor investment risk and that its
earnings are down. But it may also indicate that the market undervalues a company
because its stock price doesn’t reflect its earnings potential. Similarly, a stock with a
high P/E may live up to investor expectations of continuing growth, or it may be
overvalued.

Investor demand
People buy a stock when they believe it’s a good investment, driving the stock price
up. But if people think a company’s outlook is poor and either don’t invest or sell
shares they already own, the stock price will fall. In effect, investor expectations
determine the price of a stock.
For example, if lots of investors buy stock A, its price will be driven up. The stock
becomes more valuable because there is demand for it. But the reverse is also true. If

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a lot of investors sell stock Z, its price will plummet. The further the stock price falls,
the more investors sell it off, driving the price down even more.

The Dividends
The rising stock price and regular dividends that reward investors and give them
confidence are tied directly to the financial health of the company.
Dividends, like earnings, often have a direct influence on stock prices. When
dividends are increased, the message is that the company is prospering. This in turn
stimulates greater enthusiasm for the stock, encouraging more investors to buy, and
riving the stock’s price upward. When dividends are cut, investors receive the
opposite message and conclude that the company’s future prospects have dimmed.
One typical consequence is an immediate drop in the stock’s price.
Companies known as leaders in their industries with significant market share and
name recognition tend to maintain more stable values than newer, younger, smaller,
or regional competitors.

Earnings and Performance

Investor enthusiasm for a stock can sometimes take on a momentum of its own,
driving prices up independent of a company’s actual financial outlook. Similarly,
disinterest can drive prices down. But to a large extent, investors base their
expectations on a company’s sales and earnings as evidence of its current strength and
future potential.
When a company’s earnings are up, investor confidence increases and the price of the
stock usually rises. If the company is li9sin g money—or not making as much as
anticipated -- the stock price usually falls, sometimes rapidly.

Intrinsic Value
A company’s intrinsic value, or underlying value, is closely tied to its prospects for
future success and increased earnings. For that reason, a company’s future as well as
its current assets contributes to the value of its stock.
You can calculate intrinsic value by figuring the assets a company expects to receive
in the future and subtracting its long-term debt. These assets may include profits, the
potential for increased efficiency, and the proceeds from the sale of new company
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stock. The potential for new shares affects a company’s intrinsic value because
offering new shares allows the company to raise more money.
Analysts looking at intrinsic value divide a company’s estimated future earnings by
the number of it s existing shares to determine whether a stock’s current price is a
bargain. This measure allows investors to make decisions based on a company’s
future potential independent of short-term enthusiasm or market hype.

Stock Splits
If a stock’s price increases dramatically the issuing company may split the stock to
bring the price per share down to a level that stimulates more trading. For example, a
stock selling at $100 a share may be split 2 for 1 doubling the number of existing
shares and cutting the price in half.
The split doesn’t change the value of your investment, at least initially. If you had
100 shares when the price was $100 a share, you’ll have 200 shares worth $50 a share
after the split. Either way, that’s $10000. But if the price per share moves back toward
the pre-split price, as it may do your investment will increase in value. For example if
the price goes up to $75 a share your stock will be worth $15000, a 50% increase.
Investors who hold a stock over many years, through a number of splits, may end up
with a substantial investment even if the price per share drops for a time.
A stock may be split 2 for 1, 3 for 1, or even 10 for 1 if the company wishes, though 2
for 1 is the most common.

Stock Research and Evaluation

Before investing in a stock, its important to research the issuing company and
understand how the investment is likely to perform, for example, you’ll want to know
ahead of time whether you should anticipate a high degree of volatility, or more stable
slower growth.
A good place to start is the company’s 10 k report, which it must file with the
Securities and Exchange Commission (SEC) each year. Its extremely detailed and
quite dry, but it is through. You’ll want to pay attention to the footnotes as well as the
main text, since they often provide hints of potential problems.

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Company News and Reports
Companies are required by law to keep shareholders up to date on how the business is
doing. Some of that information is provided in the firm’s annual report, which
summarizes the company’s operations for individual investors. A summary of current
performance is also provided in the company’s quarterly reports.

Buying and Selling Stock

To buy or sell a stock you usually have to go through a broker. Generally the more
guidance you want from your broker the higher the broker’s fee. Some brokers
usually called full-service brokers provide a range of service beyond filling buy and
sell orders for clients such as researching investments and helping you develop long
and short-term investment goals.
Discount brokers carry out transactions for clients at lower fees than full-service
brokers but typically offer more limited services. And for experienced investors who
trade often and in large blocks of stock there are deep-discount brokers whose
commissions are even lower.
Online Trading is the cheapest way to trade stocks. Online brokerage firms offer
substantial discounts while giving you fast access to your accounts through their Web
Sites. You can research stocks track investments and you to trade before and after
normal market hours. Most of today’s leading full-service and discount brokerage
firm make online trading available to their customers. Online trading is an extremely
cost-effective option for independent investors with a solid strategy who are willing to
undertake their own research. However the ease of making trades and the absence of
advice may tempt some investors to trade in and out of stocks too quickly and
magnify the possibility of locking in short-term losses.
Volatility
One of the risks you’ll need to plan for as a stock investor is volatility. Volatility is
the speed with which an investment gains or loses value. The more volatile an
investment is the more you can potentially make or lose in the short term.

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Managing Risk
One thing for certain: Your stock investment will drop in value at some point. That’s
what risk is all about. Knowing how to tolerate risk and avoid selling your stocks off
in a panic is all part of a smart investment strategy.
Setting realistic goals allocating and diversifying your assets appropriately and taking
a long-term view can help offset many of the risks of investing in stocks. Even the
most speculative stock investment with its potential for large gains may play an
important role in a well-diversified portfolio.

All ABOUT BONDS INVESTMENT

Have you ever-borrowed money? Of course you have whether we hit our parents up
for a few bucks to buy candy as children or asked the bank for a mortgage most of us
have borrowed money at some point in our lives.

Just as people need money so do companies and governments. A company needs

funds to expand into new markets, while governments need money for everything
from infrastructure to social programs. The problem large organizations run into is
that they typically need far more money than the average bank can provide. The
solution is to raise money by issuing bonds (or other debt instruments) to a public
market. Thousands of investors then each lend a portion of the capital needed. Really
a bond is nothing more than a loan for which you are the lender. The organization that
sells a bond is known as the issuer. Your can think of a bond as an IOU given by a
borrower (the issuer) to a lender (the investor).

Of course, nobody would loan his or her hard-earned money for nothing. The issuer of
a bond must pay the investor something extra for the privilege of using his or her
money. This ‘extra’ comes in the form of interest payments, which are made at a
predetermined rate and schedule. The interest rate is often referred to as the coupon.
The date on which the issuer has to repay the amount borrowed (known as face value)
is called the maturity date. Bonds are known as fixed-income securities because you
know the exact amount of cash you’ll get back if you hold the security until maturity.
For example, say you buy a bond with a face value of $1000 a coupon of 8% and a
maturity of 10 years. This means you’ll receive a total of $80 ($1000*8%) of interest

18
per year for the next 10 years. Actually because most bonds pay interest semi-
annually you’ll receive two payments of $40 a year for 10 years. When the bond
matures after a decade, you’ll get your $1000 back.

Face Value / Par Value

The face value (also known as the par value or principal) is the amount of money a
holder will get back once a bond matures. Newly issued bond usually sells at the par
value. Corporate bonds normally have a par value of $1000 but this amount can be
much greater for government bonds. What confuses many people is that the par value
is not the price of the bond. A bond’s price fluctuates throughout its life in response to
a number of variables (more on this later). When a bond trades at a price above the
face value, it is said to be selling a premium. When a bond sells below face value it is
said to be selling at a discount.

Coupon (The Interest Rate)

The coupon is the amount the bondholder will receive as interest payments. It’s called
a ‘coupon’ because sometimes there are physical coupons on the bond that you tear
off and redeem for interest. However this was more common in the past. Nowadays
records are more likely to kept electronically.
As previously mentioned most bonds pay interest every six months but it’s possible
for them to pay monthly, quarterly or annually. The coupon is expressed as a
percentage of the par value. If a bond pays a coupon of 10% and its par value is $1000
then it’ll pay %100 of interest a year. A rate that stays as a fixed percentage of the par
value like this is a fixed-rate bond. Another possibility is an adjustable interest
payment known as a floating-rate bond. In this case the interest rate is tied to market
rates through an index such as the rate on Treasury bills.
You might think investors will pay more for a high coupon than for a low coupon. All
things being equal a lower coupon means that the price of the bond will fluctuate
more.

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Maturity
The maturity date is the date in the future on which the investor’s principal will be
repaid. Maturities can range from as little as one day to as long as 20 years (though
terms of 100 years have been issued).
A bond that matures in one year is much more predictable and thus less risky than a
bond that matures in 20 years. Therefore in general the longer the time to maturity the
higher the interest rate. Also all things being equal a longer-term bond will fluctuate
more than a shorter-term bond.

Issuer
The issuer of a bond is a crucial factor to consider, as the issuers stability is your main
assurance of getting paid back. For example, the U.S government is far more secure
than any corporation. Its default risk (the chance of the debt not being paid back) is
extremely small – so small that U.S government securities are known as risk-free
assets. The reason behind this is that a government will always be bale to bring in
future revenue through taxation. A company on the other hand must continue to make
profits, which is far from guaranteed. This added risk means corporate bond must
offer a higher yield in order to entire investors – this is the risk / return tradeoff in
action.

The bond rating system helps investors determine a company’s credit risk. Think of a
bond rating as the report card for a company’s credit rating. Blue-chip firms, which
are safer investments, have a high rating, while risky companies have to low rating.
The chart below illustrates the different bond rating scales from the major rating
agencies in the U.S.

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Moody’s Standard and Poors and Fitch Ratings.

Bond Rating
Grade Risk
Moody’s S&P / Fitch
Aaa AAA Investment Highest Quality

Aa AA Investment High Quality

A A Investment Strong
Baa BBB Investment Medium Grade
Ba, B BB, B Junk Speculative
Caa/Ca/C CCC/CC/C Junk Highly Speculative
C D Junk In Default

Notice that if the company falls below a certain credit rating, its grade changes from
investment quality to junk status. Junk bonds are aptly named: they are the debt of
companies in some sort of financial difficulty. Because they are so risky, they have to
offer much higher yields than any other debt. This brings up an important point: not
all bonds are inherently safer than stocks. Certain types of bonds can be just risky, if
not riskier, than stocks.

Yield to Maturity
Of course, these matters are always more complicated in real life. When bond
investor refers to yield, maturity (YMT). YTM is more advanced yield calculation
that show the interest payment you will receive (and assumes that you will reinvest
the interest payment at the same rate as the current yield on the bond) plus any gain (if
you purchased at discount) or loss (if you purchased at a premium).
Knowing how to calculate YTM isn’t important right now. In fact, the calculation is
rather sophisticated and beyond the scope of this tutorial. The key point here is that
YTM is more accurate and enables you to compare bond with different maturities
coupons.

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The link between Price and yield
The relationship of yield to price can be summarized as follows: when price goes up,
goes down and vice versa. Technically, you’d say the bonds and its yield are
inversely related.
Here’s a commonly asked question: How can high yield and high prices both be good
when they can’t happen at the same time? The answer depends on your point of view.
If you are a bond buyer, you want high yields. A buyer wants to pay $800 for the
$1,000 bond, which gives the bond, a high yield of 12.5%. On the other hand, if you
already own a bond, you’ve locked in your interest rate, so you hope the price of the
bond goes up. This can cash out by selling your bond in the future.

Price in the Market

So far we’ve discussed the factors of face value, coupon, maturity, issuers and yield.
All if these characteristics of a bond play a role in its price, However, the factor that
influences a bond more than any other is the level of prevailing interest rates in the
economy. When interest rates rise, the prices of bonds in the market fall, thereby
raising the yield of older bonds and bringing them into line with newer bonds being
issued with higher coupons. When interest rates fall the prices of bonds in the market
rise, thereby lowering the yield of the older bonds and bringing them into line with
newer bonds being issued with lower coupons.
Different Types of Bonds

Government Bonds
In general, fixed-income securities are classified according to the length of time
before maturity. These are the three main categories:
Bill – debt securities maturing in less than one year,
Notes – debt securities maturing in one to 10 years.
Bonds - debt securities maturing in more than 10 years.

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Municipal Bonds
Municipal bonds, known as “munis”, are the next progression in terms of risk. Cities
don’t go bankrupt that often, but it can happen. The major advantage to munis is that
the returns are free from federal tax. Furthermore, local governments will sometimes
make their debt non-taxable for residents, thus making some municipal bonds
completely tax-free. Because of these tax savings, the yield on a muni a usually lower
than that of a taxable bond. Depending on your personal situation, a muni can be
great investment on an investment on an after-tax basis.

Corporate Bonds
A company can issued bonds just as it can issue stock. Large corporations have a lot
of flexibility as to how much debt they can issue: the limit is whatever the market will
bear. Generally, a short-term corporate bond is less than five years; intermediate is
five to 12 years, and long term is over 12 years.
Corporate bonds are characterized by higher yi8eld because there is a higher risk of a
company defaulting than a government. The upside is that they can also be the most
rewarding fixed-income investments because of the risk the investor must take on.
The company’s credit quality is very important: the higher the quality, the lower the
interest rate the investor receives.
Other variations on corporate bonds include convertible bonds, which the holder can
convert into stock, and callable bonds, which allow the company to redeem an issue
prior to maturity.
Risks
As with any investment, there are risks inherent in buying even the most highly
related bonds. For example, your bond investment may be called, or redeemed by the
issuer, before the maturity date. Economic downturns and poor management on the
part of the bond issuer can also negatively affect your bond investment. These risks
can be difficult to anticipate, but learning how to better recognize the warning signs
and knowing how to respond will help you succeed as a bond investor.

The industrial sector accounts for almost 40 per cent of the final energy use in
Sweden (SEA 2012) and one-third globally (IEA 2014a). Energy is an important input
for every firm to ensure basic necessities such as heating and lighting. For an

23
industrial firm, it is also an important input in production (SEA 2015). In order to
meet future needs in energy demand, there is an increasing need to improve energy
efficiency, as implied by the above quote. According to the International Energy
Agency, the global cumulative investment need in energy efficiency until 2035
amounts up to 48 trillion US dollars (IEA 2014b). One way to reduce energy use is by
undertaking efforts in energy efficiency, of which one such effort is investments.
Investments improving energy efficiency are investments that enable the same level
of output to a lower level of energy input (e.g. IEA 2012). Despite the rising need for
increasing energy efficiency, there is an untapped potential of energy efficiency, i.e. a
gap between the actual and optimal level of energy efficiency, even though cost
effective energy-efficient technologies are available. This gap is referred to as the
energy efficiency gap (e.g. Hirst and Brown 1990). The energy-efficiency gap is a
well-known paradox within the energy community with several attempts to explain
and propose ways to overcome this gap (e.g. DeCanio 1998, 1993; Jaffe and Stavins
1994a). Proposed explanations have been for instance market and non-market failures
as well as firm and investment characteristics. The energy-efficiency gap was recently
quantified in Sweden and approximately 60 per cent of the potential was estimated to
be accountable from energy-efficient technologies, i.e. investments, corresponding to
577 GWh/year (Paramonova et al. 2015). To overcome the market failures
Hindering energy-efficiency improvements, a number of policies and programmes
have been implemented, of which one Swedish example is the Programme for Energy
Efficiency (PFE1) (SEA 2014a). However, overcoming market failures may not be
sufficient to close the energy efficiency gap. Barriers within firms to energy
efficiency have been addressed since “the firm is shaped by internal informational and
incentive factors having little to do with the neoclassical paradigm” (DeCanio 1993,
p. 912). Previous research on investment decision making for investments improving
energy efficiency has studied the barriers and driving forces to adoption (e.g. Brunke
et al. 2014; Rohdin et al. 2007; Trianni et al. 2013). A study on the Swedish pulp and
paper industry concluded that both behavioral and organizational related barriers and
driving forces are ranked high, including barriers such as lack of budget funding,
other priorities for capital investments and long decision chains, and driving forces
such as people with real ambition and having a long-term energy strategy (Thollander
and Ottosson 2008). Barriers identified in other studies are for instance a low priority
level, more important investment opportunities, lack of management time, lack of
24
access to capital, slow rate of return and a focus on daily production activities, among
others (De Groot et al. 2001; Sardianou 2008; Venmans 2014). Not being linked to
core business is another suggested reason for why investments in energy efficiency
may lack priority against other investments (Cooremans 2012, 2011). In light of the
identified organizational and behavioral barriers and the presence of an energy-
efficiency gap, there is a need to go within the firm to study how and on what basis
firms make investment decisions for investments improving energy efficiency.
Therefore, this thesis will address investment decision making for capital investments
and specifically capital investments improving industrial energy efficiency. Returning
to the decision-making model suggested by Mintzberg et al. (1976), the selection
phase in addition to authorization includes evaluation, which for instance takes place
by applying capital budgeting tools. The evaluation criteria applied for energy-
efficiency investments have also been studied in an energy efficiency context,
indicating a frequent use of net present value (NPV) and especially the payback
method (PB) for energy-efficiency investments (e.g. Cooremans 2012; Harris et al.
2000). Requirements of a PB period of three years or less have been indicated for
Swedish industry (Thollander and Ottosson 2010). However, even though it could
contribute to an improved NPV or a shorter PB time, not all benefits related to a
capital investment are acknowledged in the investment process (Ashford et al. 1988).
The issue of not considering all benefits has been acknowledged in the context of
energy-efficiency improving investments as well (e.g. Pye and McKane 2000).
Considering energy efficiency as part of overall efficiency is in line with the view
taken in this thesis. Investments improving energy efficiency are in the literature
addressed as energy efficiency investments. However, in industry it may be difficult
to separate an investment in energy efficiency from an investment in production or
support processes since these often are connected (Thollander and Ottosson 2010).
Even if the main aim of the investment is for instance production related, it may still
improve energy efficiency and thus be an energy efficiency investment, as argued by
Fleiter et al. (2012). Energy-efficiency investments should therefore be considered as
any other capital investment with the additional value that it improves energy
efficiency. This perspective places further emphasis on acknowledging other benefits
in addition to energy cost savings when investments related to improved energy
efficiency are concerned. Quantifying the additional benefits by translating them into
monetary values have been suggested as a means to show the financial possibilities of
25
energy-efficiency investments and increase the probability of adopting them (Pye and
McKane 2000). As expressed by UNIDO, energy-efficiency investments “entail
estimating the size and the timing of a project’s income and outlays and choosing
among investment options” (2011, p. 68). On the other hand, there are findings
suggesting that financial evaluation only is one part of the process (King 1975) and
that other factors are of higher importance for achieving investment approval,
especially factors of a strategic character (Cooremans 2012, 2011). Arguments for
promoting an investment may in

turn be economic, non-economic, strategic or related to production technology

(Lumijärvi 1991). Despite the nature of the benefits, they should be accounted for in
the investment process (Ashford et al. 1988). Therefore, it should be of utmost
importance to also acknowledge the additional benefits during the investment process.
Dean and Sharfman (1993a) differ between the process-oriented approach to decision
making and the choice-based approach, of which the latter is focused on why choices
are made. The energy-efficiency literature has to a large extent had a choice-based
approach through the emphasis on barriers and driving forces (e.g. Brunke et al. 2014;
Rohdin et al. 2007; Trianni et al. 2013) or mostly been limited to one phase of the
process: selection and the applied evaluation criteria, such as PB thresholds (e.g.
Harris et al. 2000; Thollander and Ottosson 2008). Cooremans (2012) is to the
author’s best knowledge the only study in which a comprehensive perspective is taken
on the decision-making process. Cooremans (2012) provides an important
contribution, yet the study was based on a small sample of firms supervising buildings
and industrial sites in the secondary and tertiary sectors. The studied firms ranged
from being active in for example the chemical industry to chain stores and shopping
malls, and therefore differed in a number of characteristics. Thus, additional research
on this subject is needed. In light of the advocated process perspective (e.g. Cyert and
March 1963; King 1975; Mintzberg et al. 1976) and the persisting energy-efficiency
gap (Paramanova et al. 2015), there is therefore a need for further research on energy-
efficiency improving investments with a comprehensive take on the investment
process. The thesis holds the view that making energy-efficiency investment goes
beyond the scope of solely improving energy efficiency. Since the motives behind
energy-efficiency investments may vary, so may also the information taken into
account during the process, including both energy related information, such as energy
26
cost savings, and non-energy related information, i.e. additional benefits. To explore
how and the extent to which additional benefits are acknowledged when firms make
investment decisions on energy-efficiency investments, what information and the
extent to which it is acknowledged should be addressed. Moreover, the thesis
considers decision making as a process, which in turn is not restricted to a sequence of
steps but affected by different factors as well, such as the actors involved, information
addressed or how investments are authorized. For industrial energy-efficiency
improving investments, such a process perspective on the investment process can add
new insights on how these investments decisions are made and how additional
benefits are acknowledged. Consequently, it could also contribute to closing the
energy-efficiency gap.

In this thesis, capital investments improving energy efficiency are specifically studied.
For these investments, the return may stem from energy cost savings or cost savings
and revenues from other effects, as indicated in previous frameworks (Fleiter et al.
2012; Trianni et al. 2014). These additional benefits can include for example reduced
maintenance costs or improved productivity and are addressed in section 2.3.
However, the ‘return’ will in most cases arise from avoided or decreased costs (Bunse
et al. 2009). The energy using units at an industrial firm can be divided into
production processes or support processes (Söderström 1996). Capital investments
improving energy-efficiency can thus be related to either category and Fleiter et al.
(2012) have proposed a framework for characterizing energy-efficiency improving
investments2. Through the framework, the investments can be classified according to
three classes of characteristics. The first class is relative advantage, which includes
expenditure, internal rate of return (IRR), payback period (PB) and non-energy
benefits. The second class technical context includes core process, modification type,
scope of impact and lifetime, and the third class information context includes
transaction costs, knowledge for planning and implementation, diffusion progress and
sectoral applicability (Fleiter et al. 2012).

Based on these frameworks, it is evident that energy-efficiency improving

investments constitute more than saving energy. Additional aspects are therefore
necessary to address for a comprehensive understanding of these investments and the
decision-making process for them. The definition of energy efficiency as an
27
output/input ratio (e.g. IEA 2012) implies that even if the main aim of the investment
is not to improve energy efficiency, it can still be an energyefficiency investment if it
improves the energy-efficiency ratio (Fleiter et al. 2012). A similar definition for the
industrial sector is the ratio between useful output and energy input of a process
(Patterson 1996). The difficulty lies in how to define useful output as well as energy
input and what indicators to use. Patterson (1996) identifies four main types of
indicators to measure the level of energy efficiency: thermodynamic, physical-
thermodynamic, and economic thermodynamic and economic. These different
definitions are acknowledged; yet, for the scope of this thesis, it is sufficient to follow
the simple definition of energy efficiency as an output/input ratio which can increase
either by increasing output to a given level of input or to sustain a given level of
output while reducing the input level of energy. Whether an energy-efficiency
investment is related to production or support processes may have further implications
as well. Energy-efficiency investments related to support processes, e.g., ventilation
or lighting, have lower initial costs and may be adopted on an operational level,
whereas energy-efficiency investments related to production processes are capital-
intensive and therefore more often subject to strategic decision making (Thollander
and Ottosson 2010). That energy-efficiency investments often are related to
something other than saving energy, such as an improvement of the production
process, implies that most energy-efficiency investments may in fact be combinatorial
investments. The presence of additional benefits also indicates that an energy-
efficiency investment is more than an investment in energy efficiency. Another use of
terms will therefore be applied in the following pages: for investments aimed solely at
reducing energy efficiency, the term pure energy-efficiency investments will be
applied. When this distinction is not made, the investments that are concerned are of a
so-called combinatorial nature.
As stated in the introduction, this thesis takes a process perspective on investment
decision making. It takes its point of departure in the behavioral theory of the firm in
which the path towards making a decision is process oriented and takes place through
organizational decision

making4 (Cyert and March 1963). Their decision-making model is comprised by four
concepts: (1) quasi-resolution of conflict, which builds on the notion that there are
different goals represented within the organization and there is a latent conflict
28
between these goals; (2) uncertainty avoidance, which means that the organizations
“achieve a reasonably manageable decision situation by avoiding planning where
plans depend on predictions of uncertain future events and by emphasizing planning
where the plans can be made self-confirming through some control device” (p. 119);
(3) problemistic search, simply meaning that search stems from an identified problem;
and (4) organizational learning, meaning that organizations’ behavior is adaptive over
time (Cyert and March 1963). The model is illustrated as a step-by-step process, yet in
the form of a flow chart in which the start is arbitrary and the four concepts recur
during the process. The general decision-making model by Mintzberg et al. (1976) is
comprised by three phases: identification, development and selection. These phases
are described in terms of different routines. The first phase, identification, is described
in terms of decision recognition and diagnosis. The second phase, development, is
further described in terms of search and design. This is also the phase to which most
resources are allocated. Finally, the phase of selection is described in terms of
screening, evaluation-choice and authorization. These phases do not need to occur
sequentially but can be affected by so-called dynamic factors; for instance, the
selection phase is itself described as a multistage and iterative process (Mintzberg et
al. 1976). The view of the decision-making process not being simply sequential is
consistent with the view of Cyert and March (1976) and the different stages of the
decision-making process have been described in a similar manner in other studies as
well (e.g. King 1975; Maritan 2001; Nutt 1993). The models suggested by Mintzberg
et al. (1976) and Cyert and March (1963) have been classified as decision-making
models belonging to the rational or bounded rational stream of decision-making
literature (Eisenhardt and Zbaracki 1992). A different classification of the decision-
making literature has been provided elsewhere: Langley et al. (1995) review the
literature on organizational decision making and depict two extremes: on the one
hand, the rational and sequential process, as in the work by Herbert Simon, and on the
other hand, the anarchical process where there is a lack of structure and sequence. The
decision-making model according to Cyert and March (1963) is described as an
anarchy model, yet with a remaining connection to rationality and sequential elements
(Langley et al. 1995, p. 262). The model as described by Mintzberg et al. (1976) is on
the other hand classified as an iterative sequence model, caught in between the two
extremes (Langley et al. 1995). Langley et al. (1995) described the decision-making
process as driven by the decision maker dealing with streams of issues rather than
29
decisions. Previously, Cooremans (2012) has defined a model for investment decision
making5 which is based on the three phases and the dynamic factors according to
Mintzberg et al. (1976) and further addresses the view of issue streams in accordance
with Langley et al. (1995). This thesis takes a process perspective on investment
decision making and maintains the view of the decision-making process as a model
“in between” with rational and sequential elements yet affected by other factors too
(e.g. Cyert and March 1963; Mintzberg et al. 1976). In accordance with Langley et al.
(1995), the decision makers involved in the decision-making process are
acknowledged in this thesis. However, the thesis seeks to address how firms make
decisions on capital investments improving energy efficiency and is therefore not
committing to the view of issue streams.

One element of rationality is the degree of procedural rationality, defined as “the

extent to which the decision process involves the collection of information relevant to
the decision, and the reliance upon analysis of this information in making the choice”
(Dean and Sharfman 1993b, p. 589). A lower level of procedural rationality for
investments characterized by a higher level of uncertainty, often strategic decisions,
has been stressed in the literature (Dean and Sharfman 1993b; Maritan 2001) as well
as the opposite (Bourgeois and Eisenhardt 1988; Eisenhardt 1989a). In line with the
latter, Van Cauwenbergh et al. (1996) found that formal investment analysis was an
important instrument during the investment process for strategic investments and that
formal analysis worked both as a communication instrument and a decision-making
instrument. The communication aspect comes into play when other involved actors
must be convinced of the investment project (Lumijärvi 1991; Van Cauwenbergh et
al. 1996). For investments improving energy efficiency there are different types of
information, such as the attributes presented in previous frameworks (Fleiter et al.
2012; Trianni et al. 2014). For instance, Fleiter et al. (2012) address financial
information such as expenditure, IRR and PB, information related to the technical
context as well as the non-energy benefits (see section 2.3). Lumijärvi (1991) presents
four types of arguments by which information can be framed in an investment
proposal. These arguments can be economic, non-economic, strategic or related to
technology. Despite their popularity, economic arguments such as PB are not always
sufficient and strategic arguments are valued higher by senior management
(Cooremans 2012), especially for larger investments (Lumijärvi 1991).
30
Investment decisions are made by managers on different levels at a firm, especially in
large firms (Bower 1986). The extent to which management at different levels are
involved in the investment process have been stressed to differ depending on the
degree of uncertainty6 of the investment (Maritan 2001) as well as investment
categorization (Cooremans 2012). The leading actors in the decision process may also
differ during the different steps of the investment process (Xue et al. 2008). Senior
management, both on divisional and corporate level, have been suggested to be more
involved concerning investments characterised by a high level of uncertainty, due to
their strategic perspective (Maritan 2001). Cooremans (2012) concludes that if the
investment is considered as non-strategic, senior management is not interested.
According to a previous study on corporate control of investments in Swedish
multinational groups, senior managers are focused on strategic issues and
coordinating investments (Segelod 1996). Profitability assessment of investments and
investment proposals are performed on business unit level, which indicates a
decentralized investment process. For these decentralised investment processes, the
investment manual has been suggested to function as an important means of control,
standardization and creation of unitary principles (Segelod 1997). It has further been
suggested that large corporations with a decentralized form of evaluation and with
many investment proposals for investments related to production apply a manual for
how capital budgeting should be practiced (Segelod 1997). There may in turn be
different investment committees for different investments, which serve to rank
investment proposals (Segelod 1996). Senior management will then consider several
investment proposals and prioritise between them (Butler et al. 1991). Prioritizing
between investments is one step towards deciding which investments that should
finally be authorized.
And approved. The process of seeking approval on a higher hierarchical level is
referred to as the authorisation routine (Mintzberg et al. 1976). When authorization is
required, information, or arguments, for an investment is prepared and presented to
senior management (Mintzberg et al. 1976), such as investment committees (Segelod
1996). The stage at which approval takes place may also differ depending on the
investment (Maritan 2001). For uncertain investments, senior managers are involved
in initiating and preparing the proposals, which implies a faster approval: ”as senior
managers initiate and participate in the development of proposals for new7
31
investments, the stages of the investment process become blurred” (Maritan 2001, p.
523). Decision making can also be discussed in terms of which levels that it occurs;
the strategic, tactical or operative level (Bunse et al. 2009). Bunse et al. (2009)
describe these levels as varying in descending hierarchical order. The strategic level is
the top level in which decisions are more long-term and broad in character, evolving
around for instance business areas. Investment benefits on this level are in turn
intangible and non-financial in nature (Irani and Love 2002). The tactical level is
focused on aspects such as the production process and capacity planning. At this
level, decision making is thus a function to implement the goals established on
strategic level. The third and final level, the operational, serves to transform the
previously established goals into activities, such as amount of produced output (Bunse
et al. 2009). Investment benefits on tactical and operational levels are therefore to a
larger extent tangible (Irani and Love 2002). Related to the different levels of decision
making is that large firms are comprised by different departments and units, for
instance different functional departments. A pulp and paper firm can for example
have one department responsible for paper production and another for pulp
production, and most firms have a separate financial department or a department for
R&D; the decision making process may then be influenced by department power
(Provan 1989). The different needs and perspectives of different departments place a
political dimension to decision making in organisations (Dean and Sharfman 1993a;
Provan 1989) for instance in terms of bargaining between investments (Butler et al.
1991). This in turn adds conflict to decision making (Eisenhardt and Zbaracki 1992)
as a result of various actors being involved in the process (Butler et al. 1991). In
addition to internal actors, such as senior managers and different departments,
external actors should be addressed. When industries are characterised by a high level
of technical complexity, for instance the pulp and paper industry, the suppliers play an
important role in developing and providing technology (Del Río González 2005). The
supplier then has a strong bargaining power (Porter 1980). On the other end of the
value chain is the customer. Improved public image has been identified as an
important driver for energy-efficiency investments (e.g. Del Río González 2005;
Venmans 2014) as well as a non-energy benefit (e.g. Worrell et al. 2003). Hence, the
role of the customer should also be taken into account.

32
A systematic review of benefit concepts is provided in Paper I appended to the thesis.
This section therefore aims to only briefly describe the additional benefits and
illustrate how the thesis aims to contribute. First, the literature lacks clear definitions
of the available benefit concepts. These include for instance multiple benefits (e.g.
IEA 2012), co-benefits (e.g. Ürge-Vorsatz et al. 2007) and nonenergy benefits (e.g.
Pye and McKane 2000). This thesis therefore aims to provide a definition of the
benefit concept to use in an industrial context (Paper I). Regardless of which concept
that is used, these benefits can be described as additional benefits besides energy cost
savings, stemming from energy-efficiency investments. For instance, Worrell et al.
(2003) mentions reduced waste, improved productivity, reduced emissions, reduced
maintenance, improved work environment or improved public image as examples of
non-energy benefits. These benefits can be found amongst the driving forces
identified for energy-efficiency investments, such as a green public image (e.g.
Venmans 2014). Pye and McKane (2000) argue that it might be these additional
benefits that will stimulate the investments, in particular the benefits related to
productivity. Moreover, Eccels et al. (2014) mention a more engaged workforce and a
more secure license to operate, both of which are examples of additional benefits, as
possible factors that may contribute to the higher long-term performance indicated for
so-called high sustainability firms8.

Several studies have shown the potential of the additional benefits and indicated that
these can exceed the energy cost savings (Hall and Roth 2003; Lilly and Pearson
1999; Lung et al. 2005; Pye and McKane 2000; Worrell et al. 2003). However, the
robustness of these measures has been deemed uncertain since they stem from a
limited number of observations, often through case studies (Worrell et al. 2003). Also,
these studies are focused on an ex-post analysis, i.e. on reported benefits. Two
previous frameworks for energy-efficiency investments include additional benefits as
attributes that should be taken into account (Fleiter et al. 2012; Trianni et al. 2014).
The extent to which additional benefits are acknowledged before the investment
project is undertaken is however not considered in the literature even though their
potential has been established repeatedly. It has been advocated that investment
benefits of both a quantifiable and less quantifiable, i.e. intangible, nature should be
taken into account in the investment process (Ashford et al. 1988). Since intangible
benefits may be tangible in the long run (Grundy and Johnson 1993), acknowledging
33
intangible benefits in the investment process can show long-term potentials of
investments (Ashford et al. 1988). If additional benefits could be acknowledged
already during the investment process, it could thus contribute to an increased
adoption level of energy-efficiency investments.

The energy-efficiency gap, i.e., the gap between the optimal and actual level of
energy efficiency, is a proven paradox (e.g. Hirst and Brown 1990). Jaffe and Stavins
(1994a) explained the presence of the gap by market failures, related to imperfect
information and split incentives, and non-market failures, including high adoption
costs and high discount rates, for instance caused by uncertainty about future energy
prices and irreversible investments. Uncertainty and irreversibility as an explanation
for the energy-efficiency gap has also been addressed elsewhere (Van Soest and Bulte
2001). Inertia in adoption behavior and the fact that energy-efficiency technologies
are cost effective on average but may not be for some firms are also mentioned as
potential non-market failures (Jaffe and Stavins 1994a). It is suggested that if the
market failures are eliminated, the so-called economist’s potential and a narrow social
optimum will be reached, and the so-called technologist’s potential and a true social
optimum will be achieved if the non-market failures also are removed (Jaffe and
Stavins 1994a). The presence of both market and non-market failures as an
explanation for the energy-efficiency gap is further established in a study of the
gradual diffusion of cost effective energy-efficient technologies (Jaffe and Stavins
1994b). An additional explanation for the energy-efficiency gap is internal factors
within the firms (DeCanio 1998, 1993) and firm characteristics (DeCanio and
Watkins 1998). Even when cost effective energy-efficiency investments are
concerned, it may not be enough for adoption since the firm’s investment behavior
besides profit maximization also is influenced by factors related to its organization,
structure and governance (DeCanio 1993). Previously, the energy-efficiency gap has
been extended to also include the potential from energy management practices
(Backlund et al. 2012). On the contrary to investments in energyefficient technologies
that often are capital intensive, energy management is not; instead, it is focused on
aspects such as knowledge and awareness. The extended energy-efficiency potential
is however suggested to be somewhat larger for non-energy intensive sectors in which
the energy use is concentrated to support processes (Backlund et al. 2012).

34
 CHAPTER – 3
INDUSTRY & COMPANY PROFILE

35
 INDUSTRY PROFILE
PHARMACEUTICAL INDUSTRY
From ancient times, two systems of medicine will in vague in India firstly, there was
Ayurvedic medicine, which dates back to the Vedic period. Ayurvedic medicine depends
largely on the combination of various herbs, minerals and metals like gold, copper etc.
Secondly, there was the Arabian system of medicine. An innumerable invasion has brought
the Arabian system into India. In contrast to, two others systems of medicine, namely
Allopathic and Homeopathy, were in vague in the western part of the world. Despite of
being very advanced indigenous systems of medicine, Ayurvedic medicine has not really
become popular enough, probably because of very long British Rule and the consequent
development of an educational system including medical educational based some efforts to
promote ayurvedic medicine, its development seems to be a long way off.

It is still popular in rural areas, may be because modern medicine cannot reach there. In
urban areas it has yet to gain importance in so far as the prescription drug market is
concerned.

The indication of allopathic doctors towards prescribing an ayurvedic medicine is very low
indeed. Of late, however, the attitude of customers towards ayurvedic medicine seems to be
increasingly favorable. Some of the pharmaceutical companies are planning to diversify into
ayurvedic drugs mainly to improve their profitability ayurvedic drugs are exempted from
price control.

ORIGIN OF THE INDIAN PHARMACEUTICAL INDUSTRY

The exact date on which the allopathic systems of medicine make its entry into the country
is not available but it is generally estimated that it happened some time during the early part
of the 19th century. The British for their personal use imported the medicines when they
come to do business. This was the beginning of the pharmaceutical industry in India. Later,
when they ultimately took over the country, the imports became a regular feature. These
pharmaceutical products, which were introduced in India to provide relief to Britishers,
soon gained popularity among the people in urban areas. For the first few decades after their
introduction, pharmaceutical products were being imported into the country, mostly from
Germany and the United Kingdom.

36
 The Bengal chemical and pharmaceutical works started production of tetanus
antitoxin, a basic drug in 1930. Indigenous production in 1939 was sufficient to meet only
about 13 percent of medical requirements. Thus a large part of domestic demand for drugs
was still met by imports. The second world was another landmark in the history of the
Indian pharmaceutical industry it provided a propitious atmosphere for further expansion of
production.

Post-war developments in the west resulted in a high degree of product

obsolescence, replacing many older drugs with antibiotics and new chemotherapeutic
agents. This put the fledging Indian pharmaceutical industry at a great disadvantage. As a
result, Indian companies had to stop production of many items that were manufactured
during the war years. Instead, they started manufacture of formulations based on imported
bulk drugs and extraction of therapeutic agents from plant sources. Medicines, the industry
could not make much headway, in the absence of consistent govern-medal support to a
nascent industry. The estimated value of production of pharmaceuticals in 1947 are Rs.10
crores.

DRUG INDUSTRY: GROWTH INDICATORS

Particulars 1947-48 1991-92

(Rupees in crores) (Rupees in crores)
Capital Investment 24(1952-53) 950

Production 10 4200

Formulations 18(1956-66) 790

Bulk Drugs
Imports 100 1000
Exports 1.27(1963-64) 1281

R & D Expenditure 6(1972-73) 70

37
INDUSTRY STRUCTURE
The pharmaceutical industry is very aptly described as a “life-line” industry. It
plays a vital role in alleviating the suffering of millions of people and controlling various
ailments that afflict human beings. Recognizing this, the planners of Indian economic
development after independence have rightly included this industry in the core sector.

 The present day Indian pharmaceutical industry has three main sectors:
 The public sector
 The Indian private sector (including the organized sector) and
 The foreign sector:
 It is estimated that there are presently 16000 firms engaged in the production of
drugs and pharmaceuticals. About 300 units out of these are on the list of the
Directorate
 General of Technical Development.

PHARMACEUTICAL PRODUCTION IN INDIA:

1986-87 458 2140

1987-88 480 2350
1988-89 550 3150
1989-90 640 3420
1990-91 730 3840
1991-92 720 4200
EXPORTS:
At the time of independence there were no exports of pharmaceuticals from India.
The total value of exports of pharmaceuticals was a mere by Rs.3 crores in 1965-66. During
the last seven years, the Indian pharmaceutical industry has achieved commendable
progress on the export front. The industry total exports were valued at Rs.1281 crores in
1991-92. The progress of the industry in terms of exports can be seen in the tab.

38
Research & Development:

Pharmaceuticals industry is driven by a global need to conquer disease.

Medicines are developed to treat new diseases or improve upon the existing treatment. An
in-depth understanding of human physiology and disease mechanism is a pre-requisite to
pharmacy R & D to facilitate research.

39
 COMPANY PROFILE

HETERO DRUGS LTD

Established in the year 1993, with the motto to be the best in the API manufacture,
Hetero today embodies the vision of a top-notch player in developing and
commercializing products catering to a variety of therapeutic categories, integrating
into a leading finished dosage manufacturer.

True to the statement, “WHERE THE FUTURE STARTED YESTERDAY”, with

a foresight on the current trends in the pharmaceutical market, HETERO has grown
from strength to strength, combining its research strengths, manufacturing
capabilities, Human Resources and well established quality management system.
With full-fledged marketing capabilities the company has been able to market its
products in over 80 countries in Asia, Middle – east, Eastern, Europe and Latin
America.

With its compliance to the most stringent regulatory requirements, Hetero has today
gained foothold to market. Several of its APIs in the United States, Canada and
Europe. With all six manufacturing facilities being supported by excellent
infrastructure and compliance to the GMP requirements, Hetero has crossed numerous
milestones in a comparatively small period since its inception

HETERO GROUPS

 HETERO DRUGS LTD

 HETERO LABS
 HETERO RESEARCH FOUNDATION
 CIREX PHARMACEUTICALS
 SYMED LABS
 GENX PHARMA
 LYKA HETERO
 EXPICOR

40
FOUNDER & MILESTONES
 The spirit and brain behind the success story of HETERO is its founder
Dr.B.Parthasarathi Reddy, a scientist who started the company drawing
immense strength from the vast and rich experience he gained during his
earlier.
 Stint at the laboratory where he was instrumental in developing and
commercializing processes for several APIs.
 The company was started by him with a vision to be recognized 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.
 The untiring efforts of the Chairman saw HETERO develop processes for
several products at relatively low cost, thus making it possible for several life
saving drugs to be available at affordable prices, meeting all the regulatory
and quality norms.
 With the organization having reached a point where it is identified among the
widely recognized companies, the Chairman is now

VISION AND VALUES

 Hetero visualizes itself as an aggressive player in the global pharmaceutical
scenario, supplying generics developed, combining intellectual property,
research strengths and strong human resource inputs.
 The company values the concepts of having social responsibilities in the
course of its assent to greater heights. It strongly believes in focusing on
customer requirements and delivering the products at the right pace.
 Hetero considers its human resources as the core of all its capabilities and
believes in tapping and honing the talents of its members to reach the zenith of
success.
 It believes in continuous evaluation and improvement in all the factors that
contribute in transforming the organization into a global force to reckon with.
 Hetero takes due cognizance to the fact that the processes that it develops
should be all Eco- friendly and should not result in any consequence that
harms the ecological harmony.

41
MISSION

HETERO’s mission is to be a globally acclaimed pharmaceutical company, meeting

the requirements of healthcare imbibing the philosophy of both commercial and social
concerns, driven by research and manufacturing capabilities.

HETERO STRENGTH

 Strong emphasis on Research and Development.

 Ability to develop processes for a large range of therapeutic categories.
 Ability to orient and adapt to the changing facets of industry, particularly in
terms of regulations, intellectual property and manufacturing capabilities.
 Cohesive team of skilled professionals in all wings related to research,
manufacture and marketing.
 Strong customer base and market presence.
 A strong commitment towards the society to provide timely support by
providing life saving drugs at relatively low costs, short span of time

CAPABILITIES:

 Type of Reactors – Glass, Glass-Lined and Stainless Steel

 Reactors Sizes –250-10,000 LTR Commercial Plant
 5-250 LTR – Pilot Plant
 Total Reactor Volume -- 1000 Kilo Ltr
 Temperature Range -- 80degrees C to 300degrees C
 Pressure Range -- Unto 50 KG/cm square

ANALYTICAL STRENGTH OF HETERO GROUP

 HPLCs (with PDA facility)
 GCs (with Head space facility)
 Infra Red Spectrophotometers

42
  Ultra violet Spectrophotometers
 Practical size analyzer
 Digital polar meters
 Differential Scanning Calorimeters
 P-XRD
 NMR
 GCMS
 LCMSM

QUALITY SYSTEMS
All the activities at HETERO right from receipt of raw materials to dispatch of
the finished product are carried out in accordance to a well-oiled quality management
system. The importance of having a strong quality based system has been recognized
by organization due to which every individual in each department understands his/her
responsibilities and carries out them with utmost care avoiding any confusion, thus
delivering the best results.

In addition, talking about quality of the product itself, the company has
evolved the systems to implement GMP’s in the manufacture of the product to protect
the safety, quality and integrity. The approval of Hetero’s API Facility by USFDA
and Finished Dosage Facility by WHO bear a testimony to this fact.

R & D OVERVIEW

 HETERO’s emphasis has always been on Research and Development. The

emphasis was 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.
 Having laid solid foundation towards the end HETERO’s R&D approach has
also taken cognizance of the present scenario where stringent patent regime is
under implementation. HETERO’s teams of scientists have been and are
involved in developing non-infringing processes for its products. With its

43
 ability to explore high and achieve the best, HETERO has been able to file
patents for several of its processes.

 From an organization, which was concentrating on developing processes for

API’s HETERO, has now a full-fledged R&D facility for formulation
department.
 HETERO research capabilities have been proven with its ability to carry out a
wide range of reactions, which are difficult to carry
 Given its research capabilities HETERO has today has initiated contract
research. Towards the end, the company has already evolved its strategies and
is into discussions with renowned companies for carrying out the contract
research. Custom synthesis is one area where the company has been
concentrating on and has initiating work on several projects.
 In addition to the above, the company is now on the threshold of commencing
basic research activities to develop and screening new chemical entities for
different therapeutic categories.

STANDARD OPERATING PROCEDURES

LIST OF STANDARD OPERATING PROCEDURES:

 Receipt, Storage, Handling&Distribution of Raw Material.

 Handling &Disposal of Raw Material.
 Writing Pharma Distribution.
 Cleaning of Dispensing equipment.
 Sanitation.
 Raw Material distribution from Warehouse to Production
 Handling of Hosepipes& their periodical change
 Handling of Desiccant bags

44
PROCEDURE:
Receipt, Storage, Handling and Distribution of Raw Material
Receipt of Raw Material:

Upon receipt of rawmaterial the following checks can be taken up:

 Whether the rawmaterial is recorded as per the purchase order.
 Whether the consignment is supplied along with the certificate of analysis by
the vendor.
 Whether the vehicle carrying the consignment is clean
 In case of tankers carrying liquid raw material, check whether the valves and
manholes are free from dust, grease or any other lubricant
Above the all conditions are not fulfill the consignment is rejected.

Storage of Raw Material:

 After de-dusting bring the decoding list and deface the original name of the
material on each container or bags and write in-house code of the material.
Before defacing check the label on each container for vendor batch number
and weight.
 Transfer the material to quarantine area. Enter the details into the inward
register. Allot the in-house batch numbers to the consignment.
 If the number of containers shall be less than 25 then the under test label shall
be pasted on all containers. If it is more than 25 then the under test labels shall
be passed along four corners of the consignment.
Sampling and Testing:
 The warehouse personnel shall then raise a” raw material alert to Quality
Control” for sampling and analysis of the consignment
 The Quality Control personnel shall paste the sampled labels on the containers
from which the samples were taken.
 The Quality Control personnel shall paste Approved/Rejected labels on the
yellow of the under test labels of the consignment.

45
Storage and Handling:

 Raw Material shall be stored in such a manner that proper spacing between
different lots of the same material and also different material to avoid cross-
contamination between the materials.
 Inventory cards along with the raw material alert and pre-inspection report
shall also be placed along with the status boards.
 Special storage conditions are essential for the raw material say low
temperature and low humidity

Distribution of Raw Materials:

 On receipt of the raw material request from the production department the
warehouse personnel shall issue the requisite quantity of raw material to the
concerned production department.
 The warehouse personnel shall then enter the details of issue of the material in
the inventory card.
 While issuing the material to the production department, the warehouse
personnel shall follow the “First In First Out system”.

Re-testing of Raw Material:

 Raw materials being stored for longer periods of time shall be re-tested from
time to time i.e., within 5 days of re-test date.

Handling and Disposal of Rejected Raw Materials

 In case of rejection of any consignment subsequent to the analysis, the quality

control personnel shall paste “Rejected” labels on the containers/packages.
 The warehouse personnel should inform to the materials department regarding
the rejection of consignment and ask the material department to dispose the
material within 30 days in case domestic vendor, while incase of overseas
vendor material shall be disposed within 90 days.

46
Writing Pharma Distributioin

After receiving the goods transfer note from the production department it is
the responsibility of the warehouse personnel

 Check the batch number, quantity

 Ensure all the details mentioned in Goods Transfer Note are correct and check
all the required labels are pasted on the drums.
 After confirming all the above details enter the details in the Pharma
Distribution
Cleaning of Dispensing Equipment
 All the dispensing equipment like scoop, measuring jars, funnels and buckets
barrels pumps etc should be cleaned after their use.
 After completion of dispensing operations transfer the dispensing equipments
to wash area and rinse the dispensing equipment with water after wearing
goggles, nose masks and hand gloves.
 Cover the hosepipe ends, scoops, funnels, buckets etc and pump end with
clean polythene bag/rexine cover and keep the dispensing equipment in their
dedicated area.

Sanitation
 De-dust the entire area using nylon soft broom.
 Mop the floor with clean cloth if not satisfied repeat it again.
 Frequency-Everyday in the first shift

Sampling Room:
 Clean the room before arranging for sampling to Quality Control.
 Follow the cleaning activity in between two different materials sampling.
 Clean the walls, doors and floor with dry cloth, collect the dust and dispose it
into a dustbin, if not satisfied repeat it again.
 Details shall be entered in the sampling and sanitation record.
 Frequency-Every after sampling operation

47
Dispensing Room:
 Clean the room before starting dispensing activity and after completion of
every dispensing operation.
 Use vacuum cleaner to suck all dust.
 Mop the floor with water and allow to dry if not satisfied repeat it again.
 Details shall be entered in the sampling and sanitation record.
 Frequency-Every after dispensing operation

Raw Material Distribution from Warehouse to Production

Solids:
 After receiving raw material requesting check whether all details are entered
or not.
 Raw Material shall be taken into the dispensing room. Material shall be taken
using a clean scoop and tie the bags tightly after dispensing.
 A tag shall be assigned there remaining quantity of the material and the details
shall be entered in the inventory card.
Liquids from Drums:

 Drums shall be cleaned with a clean cloth and open the lid with drum opener.
 Transfer the required quantity of solvent by using PVC siphon pipe/barrel
pump and drums shall be closed tightly.

Liquids from Tanks:

 Check the day tanks/measuring tanks for the volume.
 Ensure that the solvent valves in the alter production blocks are closed.
 Measure the required volume of liquid raw material in measuring tank then
open the valves from measuring tank.
 Close all the valves of measuring tank and enter the details in the inventory
card.

48
Handling of Hose pipes and their Periodical Change

 All the hosepipes shall be colored as mentioned in the Annexure.

 Before starting of operation the hosepipe shall be cleared with 5 to 10 liters of
the same solvent and discard it.
 Upon completion of operation, when not in use, the ends of the pipe shall be
covered with rexine covers/polythene bags and store at the designated place
keeping both the ends of the pipe facing down.
 Hosepipe shall be checked monthly once and if any damages the pipe shall be
discarded and new pipe shall be used.
 Enter the details of checking and replacement of pipe in the record.
Handling of desiccant bags:
 Place the Desiccant bags in secador desiccator’s cabinet.
 If the humidity is>40% activate the desiccant bags by drying in a oven for 1- 2
hrs at90degrees to –105degrees centigrade
 Always maintain humidity below 40%
 At the time of issuing desiccant bags check the humidity if it is >40% activate
the bags as mentioned above& then use only
 Record the receipt& issuing details in the inventory card.

CAREERS
 HETERO considers its Human Resources as its core strength. The company
believes in the fact that its present position as an aggressive player can be
attributed to the efforts on part of all its employees working in different
departments in realizing its goal of being a Top Notch Company.
 The Company offers the best of the opportunities to work, where the potential
and capabilities of personnel are tapped to the maximum advantage of both the
organization and the personnel. The latent talents are honed to meet the
challenges faced by the organization and achieve the best.
 HETERO believes in recognizing and rewarding contributions of its
employees to meet its staff requirements, HETERO has several openings in
different departments for those who are ready to take up the challenge and
deliver the goods.

49
 OFFICES

Corporate Office
HETERO DRUGS LIMITED
“Hetero House”
H.no.8-3-166/7/1,Erragadda,
Hyderabad-500018,
(A.P)INDIA
Tel: +91-40-23704923/24/25
Fax: +91 – 40 – 23704926, 23714250
E- mail:
Contact@heterodrugs.com

BRANCH OFFICES
HETERO SINGAPORE PTE LTD. HETERO DRUGS LIMITED
19 Loyang way 607/608,6th floor, Matharu Arcade
#02 – 03, C.I.L.C Building Subash road, vile parle (E)
Singapore – 508724 Mumbai - 400057
Tel: (65)65458442/65467901 India
Fax: (65)65458443 Tel: +91 – 22 –
56910809/10/11/12/13
E – Mail: ramakrishna@hetero.com.sg

50
 CHAPTER – 4
DATA ANALYSES AND
INTERPRETATION

51
 DATA ANALYSES AND INTERPRETATION
PERFORMANCE ANALYSIS OF RETURNS
Equity returns at a glance
If we have a look at equity returns of the past 9 years it is like this:
SENSEX
YEAR INDEX* ABSOLUTE PERCENTAGE
CHANGE CHANGE (%)
2009 3972 0 0
2010 3262 -710 -17.88
2011 3377 115 3.52
2012 5838 2461 72.88
2013 6602 764 13.08
2014 9397 2795 42.34
2015 13786 4389 46.70
2016 13908 122 0.88
2017 20323 6415 31.57
2018 19426.71 -896.29 -33.01

52
 25000

20000

15000

INDEX*
10000 ABSOLUTE CHANGE
PERCENTAGE CHANGE (%)

5000

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

-5000

BSE100

YEAR INDEX ABSOLUTE PERCENTAGE

CHANGE CHANGE (%)
2009 2032 0 0
2010 1559 -477 -23.38
2011 1664 107 6.88
2012 3076 1412 84.74
2013 3580 506 16.46
2014 4953 1373 38.32
2015 6982 2029 40.96
2016 7026 44 0.65
2017 9132 2106 23.06
2018 9547.25 415.25 4.34

53
 12000

10000

8000

6000 INDEX
ABSOLUTE CHANGE
4000 PERCENTAGE CHANGE (%)

2000

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-2000

BSE200

YEAR INDEX* ABSOLUTE PERCENTAGE

CHANGE CHANGE (%)
2009 437 0 0
2010 340 -95 -21.96
2011 394 53 15.54
2012 766 372 94.41
2013 884 118 15.66
2014 1186 300 33.86
2015 1655 469 39.54
2016 1662 7 0.42
2017 2160 498 23.05
2018 2424.38 264.28 10.90

54
 12000

10000

8000

6000 INDEX*
ABSOLUTE CHANGE
4000 PERCENTAGE CHANGE (%)

2000

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-2000

BSE500
YEAR INDEX* ABSOLUTE PERCENTAGE
CHANGE CHANGE (%)
2009 1304 0 0
2010 1005 -299 -22.93
2011 1176 171 17.01
2012 2368 1192 101.20
2013 2779 413 17.46
2014 3795 1016 36.56
2015 5268 1473 38.86
2016 5295 25 0.47
2017 6883 1588 23.07
2018 7581.57 698.57 9.21

55
 9000

8000

7000

6000

5000
INDEX*
4000 ABSOLUTE CHANGE
PERCENTAGE CHANGE (%)
3000

2000

1000

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-1000

Bonds returns at a glance

If we have a look at the average return, which the central government securities have
given over a period of one year, it is 9.24%. Now if we look at the average return,
which the state government securities have given over a period of one year, it is
9.54%.

HETERO returns at a glance

“HETERO shines when everything else falls apart” goes an old adage. True, the
glitter is back. During the 50s gold appreciated marginally. The next decade, 1960-
1970, it moved from $35 to $40 and between 1970-1980 came the massive rise from
$40 to $614, a whopping 1407%. The trend of gold prices in India in the last few
years is given in the following table.

YEAR PRICE ($)* ABSOLUTE PERCENTAGE

CHANGE CHANGE (%)
2009 272 - -
2010 278 6 2.20
2011 346 68 24.46
2012 414 68 19.65

56
2013 438 24 5.79
2014 517 79 18.03
2015 517 79 18.03
2016 636 119 23.01
2017 995 359 36.08
2018 1207.50 212.50 17.59

1400

1200

1000

800
INDEX*
ABSOLUTE CHANGE
600 PERCENTAGE CHANGE (%)

400

200

0
2009 2010 2011 2015 2013 2014 2015 2016 2017 2018

57
58
*Price indicates December end prices of that particular year
Mutual Funds return at a glance
EQUITY TAX SAVING NAV 1 YR 2 YR 3 YR

Magnum Tax Gain 47.7 107.70 93.40 112.30

Principal Tax Savings 74.60 91.20 59.30 73.70

HETERO Tax Saver 138.50 104.60 83.60 91.60

140
120
100
80
60
40
20
0
NAV 1 YR 2 YR 3 YR

MAGNUM TAX GAIN PRINCIPAL TAX GAIN

Hetero

59
EQUITY BALANCED
NAV 1 YR 2 YR 2 YR

Magnum Balanced
32.40 74.60 53.40 63.70

Kotak Balanced
23.80 71.10 49.10 52.80

HETERO Prudential
96.30 61.80 42.90 55.90

100
80
60
40
20
0
NAV 1 YR 2 YR 3 YR

MAGNUM BALANCED KOTAK BALANCED

Hetero Drugs

60
Real Estate Returns
Real Estate industry in India has come of age and competes with other investment
options in the structured markets. Commercial real estate continues to be a desirable
investment option in India. On an average the returns from rental income on an
investment in commercial property in metros is around 10.5%, which is the highest in
the world. In case of other investment opportunities like bank deposits and bonds, the
returns are in the range of 5.5% - 6.5%. Rejuvenated demanded since early 2004 has
led to the firming up of real estate markets across the three sectors – commercial,
residential and retail. The supply just about matches demand in almost all metros
around the country. There has been an upward pressure on the real estate values. From
a technical perspective, robust demand and upward prices are helping revive
investment and speculative interest in real estate and this is being further aided by
excess money supply, stock market gains and policy changes in favor of the real
estate sector.

Investment Yield
Increasing demand from the IT/ITES and BPO sector has led to approximately 20% -
40% increase in capital values for office space in the last 12-18 months across major
metros in India. Grade-A office property net yields have come down from 12% -15%
in 2003 and currently average around 10.5% - 11% p.a. The fall in yields has resulted
from decreasing interest rates and increasing appetite from investors. This has in turn
resulted from abundant liquidity options available coupled with the acceptability of
real estate as a conventional class of asset. Lower interest rates, easy availability of
housing finance, escalating salaries and job prospects have been lending buoyancy to
the residential sector. The net yields (after accounting for all outgoings) on residential
property are currently at 4% - 6% p.a. However, these investments have benefited
from the improving residential capital values. As such, investor can count on potential
capital gains to improve their overall returns. Capital values in the residential sector
have risen by about 25% - 40% p.a. in the last 15 – 18 months. The retail market in
India has been growing due to increasing demand from retailers, higher disposable
incomes and dearth of quality space as on date. Though the net yields on retail
property have registered a fall from 10% - 13% p.a. reported earlier to 9% - 10.5%
p.a. currently, the capital appreciation in this sector is close to 20% 40% p.a.

61
However, the risks associated with this sector are higher as retailers are prone to
cyclical changes typical of a business cycle. Changing consumer psychographics
combined with increasing disposable incomes will ensure further growth of the retail
sector in India.

Life Insurance returns at a glance

Life Insurance as “Investment”
Insurance is an attractive option for investment. While most people recognize the risk
hedging and tax saving potential of insurance, many are not a aware of its advantages
as an investment option as well. Insurance products yield more compared to regular
investment options and this is besides the added incentives (bonuses) offered by
insurers.
You cannot compare an insurance product with other investment schemes for the
simple reason that it offers financial protection from risks something that is missing in
non-insurance products.
In fact, the premium you pay for an insurance policy is an investment against risk.
Thus, before comparing with other schemes, you must accept that a part of the total
amount invested in life insurance goes towards providing for the risk cover, while the
rest is used for savings.
In life insurance except for term insurance, unlike non-life products you get maturity
benefits on survival at the end of the term. In other words, if you take a life insurance
policy for 20 years and survive and survive the term, the amount invested as premium
in the policy will come back to you with added returns. In the unfortunate event of
death within the tenure of the policy the family of the deceased will receive the sum
assured.
Now let us compare insurance as an investment options. If you invest INR 10000 in
PPF, your money grows to Rs.10950 at 9.5% interest over a year. But in this case, the
access to your funds will be limited. One can withdraw 50% of the initial deposit only
after 4 years.
The same amount of Rs.10000 can give you an insurance cover of up to
approximately Rs.5 – 11 lakh (depending upon the plan, age and medical condition
of the life insured etc) and this amount can become immediately available to the

62
nominee of the policyholder on death. Thus insurance is a unique investment avenue
that delivers sou8nd returns in addition to protection.

Life Insurance as “Tax Planning”

Insurance serves as an excellent tax saving mechanism too. The Government of India
has offered tax incentives to life insurance products in order to facilitate the flow of
funds into productive assets. Under section 88 of income tax act 1961, an individual is
entitled to a rebate of 20% on the annual premium payable on his/her and life of
his/her children or adult children.

63
 CHAPTER – 5
FINDINGS, SUGGESTIONS AND
CONCLUSION

64
 FINDINGS

 Evaluating an investment option is never an attempt to run down the

credentials of other instruments in the block. Rather the aim is to uncover
ways to make the scene more persuasive and more rational. Mutual funds are
an ideal investment in more ways than one. After a number of investigation
and back seat squabbling over the latest budget, investors have finally started
asking for the right investment instrument that truly fits his needs. At the
backdrop of this uncertainty I am trying to size up the depts.
 And breadth of benefits of six investment instruments in this section of
triggering thoughts. Abandoning the marketing tricks, I stretched out my
analysis with a ranking scale of 10 as a fundamental figure crunching exercise.
Gradually, I have identified and categorized all the investment requirements
into three broad heads to seize the flaws into procedure.
 And in a remarkable finding, mutual funds appears to act as a treat to all
embodies investment at its best and widely addresses the savings component
of safety to suite your income tolerance.
 The basic requirements an investor looks for in an investment are safety,
returns and liquidity. After the US-64 fiasco, many people are confused
whether to invest in any government backed financial institutions. Most of
them are now transferring their money to bank FD's, which according to them
is one of the safest investment options. Many state that ‘ I don’t mind getting
low returns, but I should be sure to receive them.
 .Ancillary requirements for an investment are absence of entry barrier, tax
efficiently and cash flow effectiveness. In an attempt to encourage real estate
or the housing business in the country a lot of tax soaps have been given to
this sector. A taxpayer can claim the deduction of up to Rs.1.5 lakh per year
on the interest payable on the funds borrowed for the purchase of the house or
for construction. Coming to mutual funds, though the dividends are being
taxed i9n the hands of the investor this year, there is another route to save to
tax – the growth option or the systematic withdrawal plans. In the case of lone
term capital gain tax, one has the option of either paying 20% tax with
indexation benefits or a flat rate of 10%.

65
 SUGGESTIONS
 The stock market is one of the options for investing your money. Stocks are
unmatched to any other investment tool.
 They are the best way to make money and stay ahead of inflation over time.
This is ideal if you have long-term investment goals.
 When you buy stock in a company and if they go bankrupt then the stock will
not be the worth the price you paid for it.
 These thing do happen, gut if invest with proper strategies you will usually
come out a winner. For e.g. If someone had invested Rs.1 lakh in the equity
market 22 years back, the thing would have appreciated to Rs.25 lakhs today.
Another classic example is the Infosys stock where in if one had invested
Rs.10000 in June 1993, when it came out with its maiden IPO, your holding
would be worth more than Rs.85 lakhs. Over the same period debt has
generated an annual return of 12% whereas gold 3.4% and real estate, though
it gave 10% during this period it continued to be bogged with problems
relating valuation, liquidity, sale proceeds etc. another good option is the
systematic investment plan (SIP) in the mutual funds.
 This is feature in most of the mutual funds specifically designed for those who
are interested in building wealth over long-term and plans a better future for
themselves and their family.
 There are three major benefits of SIP. They are benefit of compounding rupee
cost averaging and convince. With cost averaging one need not worry about
the price of the unit, instead just invest regularly over a long-term period. This
approach turns the odds in your favor over the long-term period.
 Indeed the last couple of years were bad for the mutual fund industry.
However as the

66
 CONCLUSION

There are several investments to choose from these include equities, debt, real estate
and gold. Each class of assets has its peculiarities. At any instant, some of those
assets will offer good returns, while others will be losers. Most investors in search of
extraordinary investments try hard to find a single asset. Some look for the next
infosys, other buys real estate or gold. Many of them deposit their savings in the
Public Provident Fund (PPF) or post office deposits, others plump for debt mutual
funds. Very few buy across all asset classes or diversify within an asset class.
Therefore it has been widely said that “Don’t put all your eggs in one basket”. The
idea is to create a portfolio that includes multiple investments in order to reduce risk.

Things changed in early may 2015 since then the stock market moved up more than
72%, while many stocks have moved more. Real estate prices are also swinging up,
although it is difficult to map in this fragmented market. Gold and Silver prices have
spurted.

Bonds continue to give reasonable returns but it is no longer leads in the comparative
rankings. Right now equity looks the best bet, with real state coming in second. The
question is how long will this last? If it is a short-term phenomenon, going through
the hassle of switching over from debt may not be worth it. If it’s a long-term
situation, assets should be moved into equity and real estate. This may be long-term
situation. The returns from the market will be good as long as profitability increases.
Since the economy is just getting into recovery mode, that could hold true for several
years. Real estate values, especially in suburban areas or small towns could improve
further. The improvement in road networks will push up the value of far-flung
development. There is also some attempt to amend tenancy laws and lift urban
ceilings, which have stunted the real estate market.

67
BIBLIOGRAPHY

68
 BIBLIOGRAPHY

Text Books

Investment Analysis and Portfolio Management - Prasanna Chandra

Investments - Sharpe & Alexander
Security Analysis and Portfolio Management - Fischer & Jordan

Magazines
Business world
Business Today

Websites

www.bseindia.com
www.mutualfundsindia.com
www.crisil.com
www.gold.org.com
www.moneycontrol.com
www.investopedia.com
www.licofindia.com
www.hetero .com
www.heterodrugs.com

69