INTRODUCTION TO PROJECT AT ECIL CAPITAL BUDETING

Introduction to project: The term Capital Budgeting refers to long term planning for proposed capital outlay and their Financing. It includes raising longterm funds and their utilization. It may be defined as a firms formal Process of acquisition and investment of capital. Capital budgeting decisions are one of the most important decisions, which affect both long and short run existence of a business. It has the major impact on the shareholders wealth in the long run. The project work has recognized the above two Phases and conducted this study. The study aims at identifying the extent to which capital budgeting Techniques and its related practices are used by the ECIL, and identifying reasonable justifications behind the use of such pattern. To evaluate the above, techniques such as PBP, ARR, NPV, PI, and IRR are used. The study also shows the practices related to capital budgeting techniques such as: cost of Capital estimation methods, risk analysis techniques, and cash flow forecasting techniques, which are not widely used by the ECIL within the domination of subjective judgment the term Capital Budgeting refers to long term planning for proposed capital outlay and their financing. It includes raising longterm funds and their utilization. It May be defined as a firms formal process of acquisition and investment of capital. Capital Budgeting may also be defined as The decision making process by which affirms evaluates the purchase of major fixed assets. It involves firms decision to invest its current funds for addition, disposition, modification and replacement of fixed assets. It deals exclusively with

investment proposals, which an essentially long term projects and is concerned with the allocation of firms scarce financial resources among the available market opportunities.

Some of the examples of Capital Expenditure are:-

Cost of acquisition of permanent assets like land and buildings. Cost of addition, expansion, improvement or alteration in the fixed assets. R&D project cost, etc.

ECIL was setup under the Department of Atomic Energy; with a view to generate strong indigenous capability in the field of professional grade electronics.

Many industries these days require concepts of electronics in their production process. Electronics is assuming increasing importance in the monitoring and control of production of many industries like Engineering, Chemical and Metallurgical industries. In India, the electronics industry has growth in many strides both in public and private sectors.

A part from this, in the field of industrial electronics , the government of India has taken initiations in 1960s ton set up an industrial units in public sectors in order to produce industrial electronics system with indigenous technology to meet the nations requirement in static areas. Electronics occupies a key position in modern science and technology. It has a vital role to play in the field of Atomic Energy, communication, defence education, Space technology and entertainment. Because of its dynamic character, its pervasive nature and its significant impact on science, industry and society, Electronics is today in the vanguard of the technology process. Technology process is both very rapid in this field.

An intensive promotional effort to both production and research and development is therefore essential to ensure a rapid growth in this field. In this direction, the government of India and its agencies with the aim of developing and promoting industrial Electronics system with indigenous know-how to attain Self-sufficiency in Atomic energy programmed started ELECTRONICS CORPORATION OF INDIALIMITED On 11th April 1967.

In any growing concern, capital budgeting is more or less continuous process and it is carried out by different functional areas of management such as production, marketing, engineering, financial management etc. All the relevant functional departments play a crucial role in the capital budgeting decision process of any organization, yet for the time being, only the financial aspects of capital budgeting decision are considered to discuss. The role of a finance manager in the capital budgeting basically lies in the process

of critically& in-depth analysis and evaluation of various alternative proposals, then to select one out of these alternatives. As already stated, the basic objectives of financial management is to maximize the wealth of the shareholders, therefore the objectives of capital budgeting is to select those long term investment projects that are expected to make maximum contribution to the wealth of the shareholders in the long run.

Objectives of project: To study the capital budgeting techniques and their related practices that used by ECIL. To study the reasons behind the selection of existing capital budgeting techniques by the ECIL rather than others. To evaluate the effect of the capital budgeting technique used on the ECILs performance. To measure the present value of rupee invested by ECIL. To understand an item wise study of the ECIL of financial performance of the company. To summarize and make suggestions if any, for improving the financial positions of ECIL. To study the financial aspects for future expansion of ECIL. To offer suggestion if required for the better investment proposal to ECIL.

Scope of project:

The scope of this project will not only be limited to understanding the financial capital budgeting practices employed in ECIL , but it will also analyse the financial decisions taken by these units using stranded capital techniques there by analysing the various projects undertaken by the ECIL.

1. To know the how money is acquired and from what sources. 2. In what way individual capital project alternatives are identified and evaluated by ECIL 3. How minimum requirements of acceptability are set. 4. How final project selections are made by ECIL.

Methodology:

To achieve a fore said objective the following methodology has been adopted. The information for this report has been collected through the primary and secondary sources.

PRIMARY SOURCES:

It is also called as first handed information the data is collected through the observation in the organization and interviews with

officials. Information is collected by circulating questionnaires to the officials of the finance department. Apart from these some information is collected through the personal interviews and suggestions collected from required personals.

SECONDARY SOURCES:

These secondary data is the existing data which is collected by others that is sources are financial journals, annual reports of the ECIL or ECIL website, and other concerned publications. Limitations of project: Lack of time is another limiting factor the schedule period 6 weeks are not sufficient to make the study independently regarding Capital budgeting in ECIL. The busy schedule of the officials in the ECIL is another Limiting factor. Due to the busy schedule of officials may restrict me in collecting the complete information about organization. Availability of confidential financial data is a constraint There is no scope of gathering current information, as the auditing has not been done by the time of the project work. The study is carried basing on the information and documents provided by the organization with the various employees and based on the interaction with the various employees of the respective departments.

COMPANY PROFILE
ABOUT ECIL

A. ECIL HISTORY

"Let us work up the embers of national pride latent in all of us and build up our morale so that we can confidently aim high and achieve greater goals" Dr. A.S.Rao,

Founder MD of ECIL Ayyagari Sambasiva Rao, the founder managing director of the Electronics Corporation of India Limited (ECIL), died on Friday at Nims Hospital, after a prolonged illness, family sources said. He was 89. He is survived by his wife, four sons and three daughters.

Dr. A.S.Rao was born in Mogallu of West Godavari district in the year 1914, obtained his engineering degree from Stanford University

in 1947 and joined the Department of Atomic Energy as a nuclear physicist to work with the likes of Homi J Bhabha. He was the director of radiation health protection and electronics groups at Bhabha Atomic Research Centre (Barc) and later played a key role in setting up ECIL in the city in 1967 when the DAE decided to go commercial in its electronics research.

ECIL was setup under the Department of Atomic Energy on 11th April, 1967 with a view to generate a strong indigenous capability in the field of professional grade electronics. The initial accent was on total self-reliance and ECIL was engaged in the Design, Development, Manufacture and Marketing of several products with emphasis on three technology lines viz. Computers, Control Systems and Communications. Over the years, ECIL pioneered the development of various complex electronics products without any external technological help and scored several 'firsts' in these fields prominent among them being country's First Digital Computer First Solid State TV First Control & Instrumentation of Nuclear Power Plants First Earth Station Antenna First Computerized Operator Information System First Radiation Monitoring & Detection Systems First Automatic Message Switching Systems First Operation & Maintenance Centred For E-108 Exchange

The company played a very significant role in the training and growth of high calibre technical and managerial manpower especially in the fields of Computers and Information Technology. Though the initial thrust was on meeting the Control & Instrumentation requirements of the Nuclear Power Program, the expanded scope of self-reliance pursued by ECIL enabled the company to develop various products to cater to the needs of Defence, Civil Aviation, Information &Broadcasting, Telecommunications, Insurance, Banking, Police, and Para-Military Forces, Oil & Gas, Power, Space Education, Health, Agriculture, Steel and Coal sectors and various user departments in the Government domain. ECIL thus evolved as a multi-product company serving multiple sectors of Indian economy with emphasis on import of country substitution and development of products & services that are of economic and strategic significance to the country A.VISION, MISSION & OBJECTIVES a. Vision To contribute to the country in achieving self-reliance in strategic electronics. b. Mission ECIL's mission is to consolidate its status as a valued national asset in the area of strategic electronics with specific focus on Atomic Energy, Defence, and Security and such Critical sectors of strategic national importance. c. Objectives To continue services to the country's needs for the peaceful uses Atomic Energy. Special and Strategic requirements of Defence and Space, Electronics Security Systems and Support for Civil Aviation sector.

 To establish newer technology products such as Container Scanning Systems and Explosive Detectors. To explore new avenues of business and work for growth in strategic sectors in addition to working for realizing technological solutions for the benefit of society in areas like Agriculture, Education, Health, Power, Transportation, Food, Disaster Management etc. To progressively improve shareholder value of the company. To strengthen the technology base, enhance skill base and ensure succession planning in the company. To re-engineer the company to become nationally and internationally competitive by paying particular attention to delivery, cost and quality in all its activities. To consciously work for finding export markets for the company's products.

A.BOARD OF DIRECTORS In terms of Sec 617 of the Companies Act, 1956, ECIL is a Government Company. Presently, the entire paid up capital of the Company is held by the President of India, including 3 shares held by his nominees. The Board, as on 31.03.2010 comprises of nine Directors - Chairman & Managing Director, three Whole-time Director and five Non-Executive Directors. The Board meets at regular intervals and is responsible for the proper direction and management of the Company. B.J OINT VENTURES Electronics Corporation of India Limited (ECIL) entered into collaboration with OSI Systems Inc. (www.osi-systems.com) and set up a Joint Venture "ECIL-RAPISCANLIMITED". This Joint Venture

manufactures the equipments manufactured by RAPISCAN, U.K and U.S.A with the same state of art Technology. Requisite Technology is supplied by RAPISCAN and the final product is manufactured at ECIL facility. ECIL-RAPISCAN have supplied many X-RAY BAGGAGE/CARGO INSPECTIONSYSTEMS (XBIS) of this Technology to high profile Indian Customers like Customs, Airports Authority, Parliament House, Defence, Air lines, State Police etc. ECIL-RAPISCAN exported XBIS to Tribhuvan International Airport, Kathmandu, Nepal, X-Ray generators to USA and Malaysia. ECIL-RAPISCAN continues to receive large number of orders from existing as well as new customers. This is basically due to our strength in Latest International Technology, Quality Assurance, The exhaustive spares inventory to meet the spares requirement. Strong Manufacturing and After Sales Service set up in 10 different canters located all over India.

VIRTICLES a. OVERVIEW

ECIL, established in 1967 under the Department of Atomic Energy had the primary objective of product ionising the products developed at BARC, Mumbai In order to support the Countrys Nuclear Power and other Atomic Energy Programmes. Concurrently, it has endeavoured to create a strong indigenous /production base in the Country for professional grade electronics spanning from small passive components to large and complex computer based systems. Though the initial thrust was on meeting the C&I requirements of NPP, the expanded scope of self-reliance pursued by

the Company enabled it to develop various special purpose products and systems to cater to the needs of Defence, Civil Aviation, Information & Broadcasting, Telecommunications, Space, Security, Oil & GA Power, Education and several other user departments in the Government domain s.

The Company has thus evolved over the years as a multiproduct Company serving multiple sectors of Indian economy with emphasis on Import Substitution and development of products and services that are of economic and strategic importance to the Country spanning the strategic sectors of Atomic Energy, Defence, Space, Security, IT & governance. b. AEROSPACE

ECIL Played a pioneering role in supporting the ambitious programs of ISRO. ECILs Antenna Products Division has its lineage that dates back to 1968, when ARVI Satellite Communication (ASCOM) group was constituted by drawing experts from various organizations to execute the design, develop, manufacture, install, test and commission the countrys 1st INTELSAT Class-A Earth Station Antenna at ARVI, Pune for providing the gateway for overseas communications for the traffic originating around Mumbai region. ASCOM Group has designed the 97ft Earth Station Antenna with a king post Elevation over Azimuth pedestal, servo system and antenna control unit. The station was installed and commissioned in 1968. The Feed was imported. The control and servo system was developed by BARC. After the completion of the above project, Microwave Antenna System Engineers Group {MASEG (ISRO)} was formed to further the R&D activities on Microwave and satellite earth station antennas for providing communication facilities in the country.

The MASEG group got merged with ECIL in 1972, and Antenna Products Division was formed in ECIL with the aim of taking up commercial production of Microwave and Earth station antennas. In 1975, ECIL delivered another 97ft Earth Station Antenna with king post pedestal (similar to ARVI Antenna) at Lachhiwala in Dehradun for providing the International gateway to the traffic originating from Delhi region. The expertise gained during the execution of above two projects has firmed up the knowledgebase at ECIL to take up design and production of various types of communication antennas. Communication antennas per se can broadly be classified into 3 types. 1. For Terrestrial Communicational. a. Tropos catter antennas. b. Line of Sight (L o S ) antennas 2. For Satellite Communication. c. Ground/Earth Station Antennas

Troposcatter Antennas :

Large Bill Board antennas focus a high power radio beam at the troposphere mid-way between the transmitter and receiver. A certain portion of the signal is refracted and received at a similar antenna at the receiving station.

Earth Station Antennas: On the earth station front, ECIL continued its progress and delivered and installed 3Nos. of 8m earth station antennas at Port Blair, Kavaretti and Aizwal with indigenous design to bring the far flung areas of Northeast into countrys telecom network.

When the INSAT programme was initiated, ECIL developed and delivered 2 Nos. of reflectors required for14m diameter Antennas for TTC application at MCF, Hassan with control system by jointly working with BARC. During the same period, ECIL also successfully absorbed the limited know-how from NEC, Japan in production is in medium sized Earth station antennas of diameter 11M,7.5M and 4.5M.Several of these antennas were delivered to various users like DOT, ONGC, NTPC and MCF.

In 1987, ECIL successfully designed, d e v e l o p e d , manufactured and installed the 11M diameter full motion an ten na fo r TTC app lication at MCF, Hassan . Th e 32 mdiameter Wheel & Track antenna was installed at ARVI, Pun e wh ich was ex ecuted jointly in collab o ration with NEC, Japan. During this period, ECIL acquired know-how f o r the ind ig enous realization of a 32 M Wheel & Track antenna employing the beam wave guide feed from NEC, Japan.

A full-fledged Design Center exists, where more than 30 engineers work in the Antenna design involving various disciplines of Structural, Mechanical, Microwave and Control systems aspects. The

center is well equipped with various software like NASTRAN, PATRAN, SIMULINK, Auto CAD, CATIA for Structural and Mechanical designs, WASPNET for RF design etc. to provide cost effective solutions, many pre and post processing support routines for verifying design compliance with regard to surface accuracy, pointing error, system performance predictions, both for structural and RF are available in the design center. C.DEFENCE ECIL has played a pioneering role in spurring the growth of Electronics Industry in the country. Spanning miniature components to mammoth systems and encompassing control, communication & computer technologies, today, ECIL is a multi-product, multidisciplinary and multi technology organization providing cutting-edge technology solutions in the strategic areas of Atomic Energy, Defence, Space and Electronic Security systems.

Multidisciplinary capability ECILs expertise harnesses electronics & communication technologies to meet Indias defence needs on land, sea and air. Some of the areas in which ECIL has contributed significantly to the Defence Sector are: 1. Secure and Jam- resistant communications 2. Electronic Warfare Systems & Simulators 3. COMINT & Intercep tio n Systems 4. Antenna, Satellite Communication Systems (SATCOM Systems), networks 5. Stabilized platforms for air-borne Radars

6. CI systems & Missile support Systems 7. En cryp tio n and Secrecy Systems 8. Electronic Fuzes for artillery and Navy 9. Precision Electro-Mechanical components, sensors & Inertial Navigation Systems

A.NUCLEAR Electronics Corporation of India was created essentially to meet the Control &Instrumentation requirements of the Nuclear Power Programme of India by product ionising the R&D efforts in the Bhabha Atomic Research Centre (BARC).Right from its inception in 1967, it has been totally supporting all the plans, programmes and endeavours of the Department of Atomic Energy in the chosen areas of Electronics, Instrumentation, IT and Security. ECIL significantly facilitated Indias Nuclear Energy Programme to reach greater heights. Today the company is proud to claim that all the operating Nuclear Power Plants in the country are supported by the Instrumentation and Control Systems engineered & manufactured by ECIL for the safe and reliable operation of the Reactors. These offerings cover diverse Reactor technologies with the I & C Foot prints in the entire Nuclear Fuel Cycle, starting from Ore extraction to the Spent-fuel management. It is a matter of pride that the company made the country self-sufficient in this vital area of electronics, which is significant in the context of technology denials clamped on the nation from time to time. ECIL thus contributed towards creating a strong and dependable indigenous Technology base in the Nuclear Power area.

B.I.T AND e GOV

The first age: Mainframe Computing A computer system consists of 3 basic functions presentation, which manages theway users interact with the system; application, which supports the logic of what todo with the data and data management, which supports the storage of information. The second age : Client Server Computing New applications with graphics and user interfaces required decentralized processing at the user end. Client Server computing distributed the work required to perform these functions among two or more computers. A server is akin to the mainframe, in that it coordinates activities of all clients and handles communications, but the processing is done largely at each clients end. The Third age: Network Centric Computing We are now moving to a environment where connectivity between computers and even other devices has pervaded computing. The network was born out of the C/S concept it is now possible to connect computers of different makes and yet enable them to work together. The popularity of the largest network of them all, the Internet has established Network Centric computing as the next wave in computing. With a totally different scenario in the country in Information Technology, at present ECIL is focusing on applications in the following technologies: 3-tier architecture Web technologies ERP Data Warehousing and Data Mining

 Network Security e-Governance ECIL apart from its own internal R&D efforts has also been acquiring know-how from various R&D establishments and outsourcing R&D work to some of the academic institutions.

CAREERS a. TECHNICAL EXPERTS Right from inception, ECIL has been a Technology-driven Company. Starting with supporting the Country's Atomic Energy Programme, the Company pioneered a number of technologies and introduced a number of products for the first time in the Country. In the formative years, ECIL was able to attract the best brain to facilitate the pursuit of its endeavours. The global village creators aftermath of liberalization, privatization and globalization attracted many well trained technologists and managers from the Company and as a result the reservoir of the competencies started depleting. Attrition has become global phenomena and the worst hit is the Electronics & IT field. Customer requirements are also changing dynamically and many of them, especially in the areas of Strategic Electronics, are expecting Total solutions. In a highly competitive market environment, with outsourcing as business inevitability, every operation needs to hire the services of Experts in select areas. Today, at least a multi-disciplinary organization like ECIL, it is very difficult, if not impossible to have the required expertise within the organization. The age of the organization and also the retirement profile also aggravates the situation. Therefore, top management of the Company decided to hire the services of experts in the areas of relevance to the Company, to supplement the efforts of the Project Teams in the Strategic Business

Units and other service functions. The required expertise is sought in those areas, which are depleted due to superannuation and some specialized areas which are non-existent to required levels within Company and also essential. As a Policy, ECIL appoints experts in the following levels: S e n i o r T e c h n i c a l E x p e r t s

T e c h n i c a l

E x p e r t s

b. HUM AN RESOURCE

ECIL was setup under the Department of Atomic Energy in the year 1967 with a view to generating a strong indigenous capability in the field of professional grade electronics. The present employee strength of the company is about 5100 (3000officers and 2100 workmen). The company, which started as a manufacturing company wedded to indigenization and self-reliance had a majority of human resources deployed in manufacturing operations. The post-liberalization era posed a number of challenges to the company especially in the area of HR, Due to the rightsizing and restructuring compelled by the market forces. With the help of Government of India, the company offered attractive Voluntary Retirement schemes to the employees which invited reasonable response. The company has also initiated number of programmes to retrain and redeploy the existing manpower so as to ensure gainful employment and achievement of targets. c. OUR CULTURE We Embrace diversity, Diversity is a cornerstone of our culture. Being an organization with a global foot print, you will notice our employees come from the most diverse of backgrounds: be it location, race, educational back ground, faith, all working towards one common goal. This diversity manifests to boundless energy, which percolates to all levels across the organization.

MANAGEMENT SYSTEM a.QUALITY MANAGEMENT SYSTEM Standards And Quality Assurance Group (SQAG) at ECIL is a Corporate Quality Assurance Service Facility. While the individual business groups have their own Quality Control / Quality Assurance sections, this corporate facility caters to the common requirements. Faculty for training personnel in Product divisions on ISO awareness and on Internal Quality Audits, Helping in developing their quality system documentation, planning, conducting and managing internal quality audits and reporting of audit results. A well-equipped and NABL accredited Calibration and Measurements Laboratory equipped with standards traceable to National Standards and catering to the calibration requirements of the Product divisions in the field of electro-technical measurements. An Environmental Test laboratory meant for component / unit / system evaluation. It has Dry / Damp heat chambers, Walk in chambers, Dust / Rain chambers, Vibration and bump test facilities. A Technical information Centre. Equipped with such facilities with service as its motto SQAG has adapted and declared its quality policy as "To render reliable and professional services in the fields of Quality Assurance, Testing and Calibration to the satisfaction of its CUSTOMERS." Standards and Quality Assurance Group (SQAG) is a Corporate Services Group catering to the needs of all Production divisions in the following areas. 1. Standards 2. Quality Assurance 3. Environmental and Calibration Services

4 . Indu strial Eng in eering a. ENVIRONMENT MANAGEMENT SYSTEM In recent times, environmental concern is increasing among Public as they are facing air pollution, traffic congestion, and land pollution due to dumping the waste (including electronic waste) in open lands without proper disposal. This feeling is predominantly high at national and international level. Al environmental Scientists are alerting the nations from time to time by bringing awareness and cautioning the ecological imbalances in the world. In this direction, all nations have responded in their own way. As usual, Internal Organization for Standardization (ISO) also showed their concern by constituting a Technical Committee and assigned the responsibility of formulating a standard with a view to certifying the organizations against that standard. This certification results in practical realization of prevention of pollution and conservation of energy. To this effect, ISO brought out a standard on Environmental Management System ISO 14001 in 1996. later on it was revised in the year 2004 which is in practice. Top Management felt that, even though pollution in electronic industry is at low level which will not affect anybody, the environmental management system should be implemented in ECIL to demonstrate to customers, suppliers, employees and Society that no pollution will be created by the very existence of the company through any act of theirs. It was therefore decided in August, 2004 to implement the EMS in the company. It was also concluded that one certificate should be obtained for the whole company covering all activities of all divisions.

PRODUCTS a. TELECOM DIVISION

PRODUCTS

MAJOR COUSTOM

rs
Surveillance Systems GSM, CDMA, Satellite & Wire line monitoring Systems Encryption systems - Wireless Encryption - Radios, CDMA, GSM Wire line Encryption- Voice / Data / fax / IP / STM / Bulk Design & Implementation of Access Control Systems & Integrated Security Systems Design & implementation of Network Solutions on turnkey basis DAE MOD NTRO NPCIL MHA LAW ENFORCING

AGENCIES PSUs

b. INSTRUMENTS AND SYSTEMS DIVISION

PRODUCT

SECTOR OF OPERATION/ MAJORCUSTOMERS Directorate of Logistics,

X ray baggage inspection system

Airports, Banks, Govt .Departments, Courier Services.

Steel, Coal Cement, industry, BARC/ DAE Transport sector Agricultural departments, BARC, Research institutes ELECTION COMMISION

Nuclear Industrial Instruments Electronic Toll Collection, Weigh in motion Spectrophotometers UPGARDED EVM

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