Financial Planning made by Apoorva Gupta(apoorva.gupta9028@gmail.com)

1. Hindustan Aeronautics Limited
A
1
A
Summer Internship Project Report
On
Financial Planning
Undertaken
In
Hindustan Aeronautics Limited
Submitted
by
APOORVA GUPTA
University Of Lucknow
Department Of Business Administration
2014-15
2014-15

2. 2
CERTIFICATE
This is to certify that this project report entitled “Financial Planning” is
submitted to University of Luckow in connection with the institute internship
program is a bonafide record of work done by “Ms. APOORVA GUPTA” has
completed successfully completed the summer internship under my
supervision at the Hindustan Aeronautics Limited, Accessories Division,
Luckonw from “June 2, 2014 to June 30, 2014.” Her performance was found
satisfactory. We wish her success in life.
S.P. Singh
Sr. Manager (Training)

3. 3
Declaration
I, Apoorva Gupta, hereby declare that I have carried out Summer
Training Project entitled “Financial Planning” is my own effort and
work and no part of this project has been published or submitted to
any other University for award of any other Degree, Diploma and
Fellowship. All information included from other sources have been
duly acknowledged.
I affirm that if any part of the report is found to be copied, I shall take
full responsibility for it.
Date:July 15, 2014 Apoorva Gupta
Place:Lucknow

4. 4
Acknowledgement
I, Apoorva Gupta, the student of University Of Lucknow, owe my special
thanks to Hindustan Aeronautics Limited for the confidence bestowed in me
and entrusting my project report entitled
I consider myself very lucky and privileged to have so many erudite people who
lead me through in completion of this project. I sincerely appreciate the support
and guidance of all those people who have been instrumental in making this
project a success.
I wish to express my indebted gratitude to Mr. S.P. SINGH, Sr. Manager
Training, “Hindustan Aeronautics Limited,” Lucknow for giving me this
opportunity to conduct Project research in HAL, Accessories Division,
Lucknow.
I am grateful to Mr. Irfan Ahmed, Manager (Finance) who in spite of being
extraordinarily busy with his duties, took time out to hear, guide and keep me
on the correct path and allowing me to carry out my project work at their
esteemed organization during the training.
I would also like to express my deepest thanks to my internal Project Mentor
Dr. Sanjay Medhavi, University of Lucknow, for their valuable suggestions
and guidance without which this project would not have been possible.
Any omission in this brief acknowledgement doesn’t mean a lack of gratitude.
Thanking You.
Apoorva Gupta

5. 5
EExxeeccuuttiivvee ssuummmmaarryy
The purpose of this study is to study the process of capital budgeting with
main emphasis on the technique which is used in Accessories Division,
Lucknow of HAL .
It has been a great experience to work with such an esteemed organization.
I am greatful to my mentor S.P Singh for providing me right direction and
sparing his valuable time to discuss on procedures involve in Budgeting.
The project report has been divided into different chapters.
This report provides overview, an analysis and evaluation of the project
of five years i.e. from 2008-13 by using capital budgeting techniques like
ARR, NPV and IRR, which helps business in accepting or rejecting a
particular project. Result of data analysed show that project is not
acceptable by using IRR method but it is acceptable by applying the
method of NPV. Exploratory research is used in this project.
The report finds the prospects of the company in its current position is
positive. The major areas of weakness require further investigation and
remedial action by management.
The project work has been great experience for me in learning the process
of budgeting and techniques of capital budgeting.

6. 6
Content
II.. IInndduussttrryy PPrrooffiillee
 OOvveerrvviieeww ooff HHiinndduussttaann AAeerroonnaauuttiiccss LLiimmiitteedd --- Page8
 HHiissttoorryy ----Page9
 Vision ---- Page11
 Mission ---- Page11
 Values ---- Page12
 OOrrggaanniizzaattiioonnaall SSttrruuccttuurree -------- PPaaggee 1133
 Products ofHAL ---- Page15
 HAL’s Services ---- Page18
 Evolution of HAL ---- Page21
 DDiivviissiioonnss ooff HHAALL -------- PPaaggee 2222
IIII.. HAL’s AccessoriesDivision ---- Page23
 IInnttrroodduuccttiioonn -------- PPaaggee 2233
 PPrroodduuccttss ooff AAcccceessssoorriieess DDiivviissiioonn -------- PPaaggee 2255
 OOrrggaanniissaattiioonnaall HHiieerraarrcchhyy ooff AAcccceessssoorriieess DDiivviissiioonn -------- PPaaggee 2266
 CCuussttoommeerrss ooff AAcccceessssoorriieess DDiivviissiioonn -------- PPaaggee 2277
 SSeerrvviicceess ooff AAcccceessssoorriieess DDiivviissiioonn -------- PPaaggee 2288
 OOuuttssoouurrcciinngg -------- PPaaggee 3300
 FFiinnaannccee && AAccccoouunnttss DDeeppaarrttmmeenntt -------- PPaaggee 3311
 IInnttrroodduuccttiioonn -------- PPaaggee 3322
 SSeeccttiioonnss ooff FFiinnaannccee DDeeppaarrttmmeenntt -------- PPaaggee 3322
IIIIII.. FFiinnaanncciiaall PPllaannnniinngg -------- PPaaggee 3344
 Budgeting -------- PPaaggee 3355
 EEsssseennttiiaallss ooff aa BBuuddggeett -------- PPaaggee 3366
 OObbjjeeccttiivveess ooff BBuuddggeett -------- PPaaggee 3366
 BBuuddggeett PPrroocceessss -------- PPaaggee 3377
 TTyyppeess ooff BBuuddggeett -------- PPaaggee 3388
 CCaappiittaall BBuuddggeettiinngg -------- PPaaggee 3399
 EEvvaalluuaattiioonn TTeecchhnniiqquueess ooff CCaappiittaall BBuuddggeettiinngg -------- PPaaggee 4433

7. 7
 Traditional methods -------- PPaaggee 4444
 Average Rate of Return -------- PPaaggee 4444
 PPaayy BBaacckk MMeetthhoodd -------- PPaaggee 4455
 PPeerrffoorrmmaannccee BBuuddggeettiinngg -------- PPaaggee 4488
 FFiinnaanncciiaall HHiigghhlliigghhttss OOff HHaall,, LLuucckknnooww -------- PPaaggee 5500
 Balance Sheet of HAL, Lucknow -------- PPaaggee 5522
 CCaasshh FFllooww -------- PPaaggee 5533
 Data Analysis -------- PPaaggee 5544
 RReesseeaarrcchh MMeetthhooddoollooggyy -------- PPaaggee 5555
 SSWWOOTT AAnnaallyyssiiss -------- PPaaggee 5577
 Suggestions ---- Page60
 Conclusions ---- Page62
 RReeffeerreenncceess -------- PPaaggee 6644

8. 8
IINNDDUUSSTTRRYY PPRROOFFIILLEE
OOvveerrvviieeww ooff HHiinndduussttaann AAeerroonnaauuttiiccss LLiimmiitteedd
Hindustan Aeronautics Limited (HAL) came into existence on 1st October
1964. It was formed by the merger of Hindustan Aircraft Limited with
Aeronautics India Limited and Aircraft Manufacturing Depot, Kanpur.
Late Seth Walchand Hirachand, had set up Hindustan Aircraft Limited
at Bangalore in association with the erstwhile princely State of Mysore in
December 1940. It is one of Asia’s largest aerospace company. The
Government of India became a shareholder in March 1941 and took over the
Management in 1942. Under the management of the Indian Ministry of
Defence, this state-owned company is mainly involved in aerospace industry,
which includes manufacturing and assembling aircraft, navigation and related
communication equipment, as well as operating airports.
HAL built the first military aircraft in South Asia and is currently involved in
the design, fabrication and assembly of aircraft, jet engines, and helicopters, as
well as their components and spares. The first fighter aircraft made in India was
HF-24 Marut fighter-bomber designed by German Engineer. Today, HAL has
19 Production Units and 10 Research & Design Centres in 8 locations in India.

9. 9
HHiissttoorryy
 HAL was established as Hindustan Aircraft in Bangalore in 1940 by Seth
Walchand Hirachand to produce military aircraft for the Royal Indian Air Force.
The initiative was actively encouraged by the Kingdom of Mysore and it also
had financial help from the Indian Government.
 Mysore was favoured because of the availability of cheap electricity. The
organisation and equipment for the factory at Bangalore was set up by William
D. Pawley of the Inter-continental Aircraft Corporation of New York, an
exporter of American aircraft to the region. Pawley managed to obtain a large
number of machine-tools and equipment from the United States.
 The Indian Government bought a one-third stake in the company and by April
1941 as it believed this to be a strategic imperative.
 The decision by the government was primarily motivated to boost British
military hardware supplies in Asia to counter the increasing threat posed
by Imperial Japan during Second World War. The Kingdom of Mysore supplied
two directors, Air Marshal and John Higgins was resident director.
 The first aircraft built was a Harlow PC-5 on 2 April 1942, after that company
had been nationalised when it had bought out the stakes of Seth Walchand
Hirachand and other promoters so that it could act freely.
 The Mysore Kingdom refused to sell its stake in the company but yielded the
management control over to the Indian Government.
 In 1943 the Bangalore factory was handed over to the United States Army Air
Forces but still using Hindustan Aircraft management.
 The factory expanded rapidly and became the centre for major overhaul and
repair of American aircraft and was known as the 84th Air Depot.
 The first aircraft to be overhauled was a Consolidated PBY Catalina followed

10. 10
by every type of aircraft operated in India and Burma.
 When returned to Indian control two years later the factory had become one of
the largest overhaul and repair organisations in the East. In the post war
reorganization the company built railway carriages as an interim activity.
 After India gainedindependencein 1947, the management of the company was
passed over to the Government of India.
 During the 1980s, HAL's operations saw a rapid increase which resulted in the
development of new indigenous aircraft such as the HAL Tejas and HAL
Dhruv.
 HAL also developed an advanced version of the MiG-21, known as MiG-
21 Bison, which increased its life-span by more than 20 years.
 HAL has also obtained several multi-million dollar contracts from leading
international aerospace firms such as Airbus, Boeing and Honeywell to
manufacture aircraft spare parts and engines.

11. 11
VViissiioonn
" To become a significant global player in the aerospace industry. ".
Mission
“To achieve self reliancein design, development, manufacture, upgrade and
maintenance of aerospace equipment diversifying into related areas and
managing the business in a climate of growing professional competence to
achieve world class performance standards for global competitiveness and
growth in exports. ".

12. 12
VVaalluueess
 CUSTOMER SATISFACTION:
They believe in building a relationship with their customers where they
become partners in fulfilling their mission. They strive to understand
their customers' needs and to deliver products and services that fulfill
and exceed all their requirements.
 COMMITMENTTO TOTALQUALITY:
They believe in continuous improvement of all activities. They supply
products and services of highest standards of design, manufacture,
reliability, maintainability and fitness for use as desired by our
customers.
 COST AND TIME CONSCIOUSNESS:
Their success depends onthe ability to continually reduce the costand
shorten the delivery period of their products and services. They achieve
this by eliminating waste in all activities and continuously improving all
processes in every area of our work.
 INNOVATION AND CREATIVITY:
They believe in striving for improvement in every activity involved in
the business by pursuing and encouraging risk-taking, experimentation
and learning at all levels within the company with a view to achieving
excellence and competitiveness.
 TRUST AND TEAM SPIRIT:
They believe in achieving harmony in work life through mutual trust,
transparency, co-operation and a sense of belonging. They strive for
building empowered teams to work towards achieving organisational
goals.

13. 13
 RESPECTFOR THE INDIVIDUAL:
HAL values people. They treat each other with dignity and respect and
strive for individual growth and realisation of everyone's full potential.
 INTEGRITY:
They believe in a commitment to be honest, trustworthy and fair in all
their dealings.

14. 14
OOrrggaanniizzaattiioonnaall SSttrruuccttuurree
Chairman
Business Head
Managing Director
(Bangalore Complex)
Managing Director
(MiG Complex)
Managing Director
(Accessories
Complex)
Managing Director
(Helicopter Complex)
Director
(Design
&Development)
Functional Head
Director
(Corp.Plg.&
Marketing)
Director
(Finance)
Director
(Human Resouce)

15. 15
PPrroodduuccttss OOff HHAALL
1.Aircrafts of Russian origin:
i. Su 30 mki
ii. Mig-21 variants
iii. Metallic drop tanks
iv. Undercarriage
v. Ejection seat
vi. Canopy
vii. Flexible rubber fuel tanks
viii. Aerospace fasteners
2.Aircraft of Western origin:
i. Hawk-advanced jet trainer
3.Helicopters:
i. Dhruv (advanced light helicopter)
ii. Dhruv (advanced utility helicopter)
iii. Chetak
iv. Cheetah
v. Lancer
vi. Cheetal

16. 16
4.Communication / Navigation Equipment:
i. IFF 400
ii. IFF 1410 A etc.
5.Advanced Communication equipment:
i. Jaguar avionics
ii. Mig-27m avionics
6.Accessories for Aircraft Helicopters and
Aero Engines:
 Environmental control system
 Engine fuel control system
 Instruments
 Electrical power generation and control system
 Undercarriage, wheels and brakes
 Test rigs
 Hydraulic system and power control
7.Aerospace Equipment:
i. PSLV: (polar satellite launch vehicle)
ii. GSLV: (geo-synchronous satellite vehicle)
iii. Indian remote sensing satellite

17. 17
8. Aero engines of Russian origin
9.Aero Engines of Western origin:
i. Adour mk 811
ii. Garrett 331 – 5
iii. Artouste iii b
iv. Dart 533 - 2 and 536 - 2t
v. Orpheus 70105
vi. Avon
vii. Adour mk 804 e
viii. Gnome 1400 - it
FFuuttuurree PPrroodduuccttss OOff HHAALL
o Light combat aircraft (LCA-Tejas)
o Intermediate jet trainer (IJT)
o Light combat helicopter (LCH)
o Light utility helicopter (LUH)
o Jaguar darin-iii upgrade
o Mirage upgrade
o Fifth generation fighter aircraft (FGFA)
o Multi-role transport aircraft (MTA)
o Htt-40
o Indian Multi Role Helicopter(IMRH)

18. 18
HAL’s Services
Accessories
Avionics
Engine
Maintenance,Repair
Foundry and Forge
Helicopter
Overhaul
Transport Aircraft
IMGT

19. 19
MMaajjoorr CCuussttoommeerrss OOff HHAALL
DOMESTIC
DEFENCE& SPACE:
 Indian Air Force
 Indian Army
 Indian Navy
 Indian CoastGuard
 Indian SpaceResearch Organisation
 Defence Research & Development Organisation
 OrdanceFactory Board
CIVIL
 Border Security Force
 Oil & Natural Gas Cooperation of India
 Govt. of Karnataka
 Govt. of Jharkhand
 Govt. of Maharshtra
 Geological Survey of India
 Bharat Heavy Electricals Ltd.

20. 20
EXPORTS:
 Airbus Industrie, France
 Boeing, USA
 CoastGuard, Mauritius
 Ecuadorian Air Force, Ecuador
 ELTA, Israel
 GE Aviation, USA
 Hamilton Sundstrand, USA
 Honeywell International, USA
 Israel Aircraft Industries, Israel
 Mauritius Police Force, Mauritius
 Moog Inc. USA
 Namibian Air Force, Namibia
 Nepal Army, Nepal
 RAC MIG, Russia
 Rolls RoycePlc, UK
 Royal Air Force, Oman
 Royal Malaysian Air Force, Malaysia
 Royal Thai Air Force, Thailand
 Ruag, Germany
 Rosoboronexport, Russia
 Suriname Air Force

21. 21
Evolution of HAL
1940 • Hindustan Aircraft Limited at Bangalore
1956 • Establishment of Engine Division at Bangalore
1960 • Establishment of Aircraft Manufacturing Division Depot at Kanpur for HS-748
1962
•Establishment of Aeronautics India Limited at Nasik, Koraput and Hyderabad for MiG Airframe,Engines
and Avionics
1964
•Formation of Hindustan Aeronautics Limited by Merger of 3 Companies
1970
•Establishment of Helicopter Division at Bangalore and Lucknow Division for Accessories and Instruments
1974
•Establishment of Foundry and Forge Division at Bangalore
1982
•Establishment of Korwa Division for Advanced Avionics
1988
•Establishment of Aerospace Division for structure of Aerospace Launch Vehicle
1998
•Establishment of Industrial and Marine Gas Turbine Division for Aero Derivative gas Turbines and
Industrial Engines
2000
•Establishment of Airport Service Centre for co-ordinating the operations at HAL Airprt
2002
•Expansion of Nasik Division as Aircraft Manufacturing Division and Aircraft Overhaul Division
•Establishment of Sukhol Engine Division at Koraput
2006
•Establishment of ALH-MRO Division at Bangalore to carry out ALH Overhaul activities
•Establishment of Barrackpore Division with dedicated facilitiesfor Cheetah and Chetak helicopters
2007
•Establishment Composite Manufacturing Division at Bangalore
•NAVRATHNA status granted by GOI

22. 22
DDiivviissiioonnss ooff HHAALL
BANGALORE
COMPLEX
Aircraft Division
Engine Division
Overhaul Division
Foundry & Forge
Division
AerospaceDivision
IMGT Division
Airport Services
CentreFacilities
Management
Division
MiG
COMPLEX
Aircraft Division
Nasik
Aircraft Overhaul
Division Nasik
Engine Division
Koraput
Sukhoi Engine
Division Koraput
ACCESSORIES
COMPLEX
TAD-Kanpur
Division
Accessories
Division Lucknow
Avionics Division
Hyderabad
Avionics Division
Korwa
HELICOPTER
COMPLEX
Helicopter
Division
Bangalore
Helicopter MRO
Division
Bangalore
Barrackpore
Division
CMD Division
Bangalore

23. 23
IInnttrroodduuccttiioonn
HAL’s Accessories Division
Objective: “Manufacturing systems and accessories for various aircraft and
engines to attain self sufficiency in particular area."
AccessoriesDivisionof HAL was established in 1970. Its facilities are spread
over 116,000 sqm of built area set in sylvan surroundings. At present it is
turning out over 1300 different types of accessories. The Division started with
manufacturing various Systems and Accessories viz, Hydraulics, Engine Fuel
System, Air-conditioning and Pressurization, Flight Control, Wheel and
Brake, Gyro & Barometric Instruments, Electrical and Power Generation &
Control System, Undercarriages, Oxygen System and Electronic System all
under one roof to meet the requirements of the aircraft, helicopters and
engines being produced by HAL.
The Division undertakes:
 manufacturing and servicing of accessories under Transfer of
Technology (ToT) from more than 40 licensor from different countries,
and
 developing indigenous capability for Design and Development of
various systems and accessories.

24. 24
This capability has culminated in indigenous design and development of over
350 types of accessories for the Light Combat Aircraft (LCA) (Air force and
Navy version), and so on. It has also developed and has made successful step
into the area of Microprocessor based control systems for the LCA Engine as
well as other systems.
The Division has been also involved in the supply not only to Indian Force
but to Army, Navy, Coast Guard and various Defence Laboratories as well as
for Space applications.
It is networked with all sister Divisions and R& D Centers by LAN/WAN. Lean
manufacturing and ERP have been implemented to create an efficient
manufacturing system. It has a prime name in the Aviation market and various
international companies. It has also made steady progress in the area of Export.

25. 25
PPrroodduuccttss ooff AAcccceessssoorriieess DDiivviissiioonn
DDoommeessttiicc PPrroodduuccttss::
 Hydraulic system and power control
 Environmental control system
 Engine fuel control system
 Instruments
 Electrical power generation and control system
 Undercarriage, wheels and brake
 Test Rigs
EExxppoorrtt PPrroodduuccttss::
Supply of New along with Repair and Overhaul of Rotables and Spares of
aircraft accessories of MiG series, Jaguar International, Light Combat Aircraft
(LCA), Su-30 MKI, Mirage-2000, Sea Harrier, Dornier DO-228, Avro HS-748
(Specific Version), Cheetah (Lama) / Chetak (Alouette III), MI - 17, Advanced
Light Helicopter (ALH) Helicopters to Royal Air Force Oman, Air Mauritius,
Israel Aircraft Industries, ELTA Israel, Hamilton Susstrand U.S.A., Govt of
Namibia, Aerostar Romania, Ecuadorian Air Force etc.

26. 26
OOrrggaanniissaattiioonnaall HHiieerraarrcchhyy ooff
AAcccceessssoorriieess DDiivviissiioonn
Managing Director
Executive Director
General Manager
Chief Manager
AGM
Senior Manager
Manager
Deputy Manager
Engineer
Assistant Engineer
Technician

27. 27
CCuussttoommeerrss ooff AAcccceessssoorriieess DDiivviissiioonn
 Indian Air Force / Army / Navy / Coast Guard
 Defence R&D Laboratories / Department of Space
 State Govt. Civil Aviation / Ordnance Factories / Corporate Sectors
 Flying Academics & Educational Institutions
 Airlines / Air Taxi / Air Cargo
 Defence Forces of countries from South East Asia, Middle East and
Africa
 Collaborators / Licensors

28. 28
SSeerrvviicceess ooff AAcccceessssoorriieess DDiivviissiioonn
REPAIRS, MAJOR SERVICING AND SUPPLY OF SPARES
The Division carries out Repairand Overhaul of Accessories, with
minimum turn-around-time. Site Repairfacilities are offered by the
Division by deputing team of expert Engineers / Technicians.
Services provided for:
1. Military Aircraft:
 MiG Series
 Jaguar
 Mirage-2000
 Sea - Harrier
 AN-32
 Kiran MK- I / MK- II
 HPT - 32
 SU-30 MKI
2. Civil Aircraft:
 Dornier-22B
 AVRO HS-748

29. 29
3. Helicopters
 Chetak (Alouette)
 Cheetah (Lama)
 ALH (IAF / NAVY / COAST GUARD / CIVIL)
Sub-contractCapabilities
 The Division has comprehensive manufacturing capabilities for
various Hi-tech components, Equipment and Systems to customer's
specifications and ensures high quality, reliability and cost
effectiveness.
 The Division has over 40 years of experience in producing
aeronautical accessories making it an ideal partner for the
International Aero Engineering Industry.
The Division also manufactures and supplies complete range of components
of Cheetah (Lama) & Chetak (Alouette) Helicopters, Jaguar and MiG series
Aircraft to Domestic and International Customers to supporttheir fleet

30. 30
OOuuttssoouurrcciinngg
The outsourcing activity started in the Division way back in 2003.
Since then Division has embarked upon selecting and creating base of
sub-contractors for outsourcing precision components, tooling and test
equipment. This is required to handle higher loads of existing and new
projects being undertaken in the division.
The outsourcing is done in the following areas:
1. Machining of components involving turning turning, milling,
drilling, jig boring, grinding, centre-less grinding, lapping etc.
2. Machining / Fabrication of tools, jigs and fixtures.
3. Specialized processes like Ion - Nitriding, Tungsten Carbide
Coating, Laser Beam Welding, Electron Beam Welding, Moulding
etc.
Apart from the above production work packages, Design work
packages are also outsourced.The components are classified in various
families like A, B & C depending upon the criticality of the operations.
Depending on the capabilities of sub-contractors, tenders are being
issued to respective registered vendors.
Organizations with established facilities & capabilities, willingness to
learn and excel in producing aeronautical quality product are
encouraged for outsourcing of components required for various
projects.

31. 31
FFiinnaannccee && AAccccoouunnttss
DDeeppaarrttmmeenntt
IInnttrroodduuccttiioonn::
TThhee ffiinnaannccee aanndd aaccccoouunnttss ddeeppaarrttmmeenntt ooccccuuppiieess aa vveerryy iimmppoorrttaanntt ppoossiittiioonn iinn aannyy
ddeeppaarrttmmeenntt ooff tthhee AAcccceessssoorriieess DDiivviissiioonn ooff HHAALL aass iitt ddeessccrriibbeess aanndd aannaallyysseess
llaarrggee aammoouunntt ooff ddaattaa ooff aann oorrggaanniizzaattiioonn tthhrroouugghh mmeeaassuurreemmeenntt,, ccllaassssiiffiiccaattiioonn aanndd
ssuummmmaarriissaattiioonn,, aanndd rreedduucceess tthhoossee ddaattaa iinnttoo rreeppoorrttss aanndd ssttaatteemmeennttss,, wwhhiicchh sshhooww
tthhee ffiinnaanncciiaall ccoonnddiittiioonn aanndd rreessuullttss ooff ooppeerraattiioonn ooff tthhee DDiivviissiioonn.. HHeennccee iitt iiss
rreeggaarrddeedd aass aa llaanngguuaaggee ooff bbuussiinneessss.. IItt aallssoo ppeerrffoorrmmss tthhee sseerrvviiccee aaccttiivviittyy bbyy
pprroovviiddiinngg qquuaannttiittaattiivvee ffiinnaanncciiaall iinnffoorrmmaattiioonn tthhaatt hheellppss tthhee uusseerrss iinn vvaarriioouuss wwaayyss..
IItt ppllaayyss aa rroollee iinn aallmmoosstt aallll tthhee aaccttiivviittiieess rriigghhtt ffrroomm ccoonncceeppttuuaalliissaattiioonn ooff pprroojjeecctt
ttoo iimmpplleemmeennttaattiioonn ffoorr ssmmooootthh ffuunnccttiioonniinngg ooff bbuussiinneessss..
SSeeccttiioonnss ooff FFiinnaannccee DDeeppaarrttmmeenntt::
AAcccceessssoorriieess DDiivviissiioonn ooff HHiinndduussttaann AAeerroonnaauuttiiccss LLiimmiitteedd wwhhiicchh iiss ppllaacceedd iinn
LLuucckknnooww hhaavvee 1122 sseeccttiioonnss uunnddeerr FFiinnaannccee DDeeppaarrmmeenntt iinn ttoottaalliittyy.. FFoolllloowwiinngg aarree
tthhee sseeccttiioonnss::
11.. BBiillllss PPaayyaabbllee
aa.. IInnllaanndd BBiillllss
bb.. FFoorreeiiggnn BBiillllss

32. 32
cc.. SSeerrvviicceess aanndd CCiivviill WWoorrkkss
22.. PPaayyrroollllss
33.. BBiillssss RReecceeiivvaabblleess
44.. CCaasshh OOffffiiccee
55.. MMaatteerriiaall AAccccoouunnttss
66.. BBooookk KKeeeeppiinngg
77.. CCoonnccuurrrreennccee DDeeppaarrttmmeenntt
88.. PPrroovviiddeenntt FFuunndd
99.. TTiimmee OOffffiiccee
1100.. BBuuddggeett aanndd MMIISS
1111.. BBuuddggeettaarryy CCoonnttrrooll
1122.. CCoosstt AAccccoouunntt

33. 33
FFiinnaanncciiaall PPllaannnniinngg
Financialplan isa series of steps or goals used by an individual or business,
the progressiveand cumulativeattainmentof whichis designed to accomplish
a financial goal or set of circumstances.
For instance, elimination of debt, retirement preparedness, etc.
This often includes a budget which organizes an individual's finances and
sometimes includes a series of steps or specific goals for spending
and saving future. This plan allocates future income to various types
of expenses, such as rent or utilities, and also reserves some income for short-
term and long-term savings. A financial plan is sometimes referred to as
an investment plan, but in personal finance a financial plan can focus on other
specific areas such as risk management, estates, college, or retirement.
In business, a financial planning involves the following, created within a
business plan:
I. Three primary financial statements i.e., balance sheet, income
statement and cash flow statement
II. Budgeting, and
Financial forecast or financial plan can also refer to an annual projection of
income and expenses for a company, division or department. A financial plan
can also be an estimation of cash needs and a decision on how to raise the cash,
such as through borrowing or issuing additional shares in a company.

34. 34
I. Budgeting:
“Budgeting is the preparation of comprehensive operating and financial
plans for specific intervals of time.”
Budgeting is a part of management process which includes preparation of
budget, budget control, budget co-ordination and all activities related with
budget. It is a tool of planning which involves the specification of the basic
objectives that the organization will pursue and the fundamental policies.
Budgeting is an important component for financial success of Accessories
Division, HAL. In operational terms, it involves four stages:
i. OObbjjeeccttiivveess: It is a broad and long-range desired state or position in future.
ii. GGooaallss: These are quantitative targets to be achieved in a specified period.
iii. SSttrraatteeggiieess: They represents specific course of action to achieve goals.
iv. PPllaannss//BBuuddggeett: It is the monetary or quantitative presentation of business
plan and policies to be pursued in future period of time.

35. 35
BBUUDDGGEETT
“It is a financial statement of a plans laid down prior to its period of its
implementationduringwhich hasto be follow based on management’spolicy
prepared for specific objectives.”
EEsssseennttiiaallss ooff aa BBuuddggeett:
 It is prepared for a definite future period.
 It is a special form of statement expressed in quantitative terms which
may be in the form of monetary value or physical units.
 It is prepared to attain a definite objective.
 It expresses the plans and policies of the management to be prepared
in future.
 It provides base for measuring the success of actual results.
OObbjjeeccttiivveess ooff BBuuddggeett:
 To layout a comprehensive plan of action expressed in
financial and physical terms and to achieve the targets of the
company against the available resources.
 It is a tool in a hands of management to establish goals, objectives and
targets of the company and measure the performance.
 To ensure that overall control over all expenditures (except that of
contingent nature) is authorized through the budget approval.

36. 36
BBuuddggeett PPrroocceessss::
A budget process refers to the process by which governments create and
approve a budget, which is as follows:
 The Financial Service Department prepares worksheets to assist the
department head in preparation of department budget estimates
 The Administrator calls a meeting of managers and they present and discuss
plans for the following year’s projected level of activity.
 The managers work with the Financial Services to prepare an estimate for
the coming year.
 The completed budget is presented by the managers to their Executive
Officers for review and approval.
 Justification of the budget request may be required in writing. In most cases,
the manager talks with their administrative officers about budget requirements.
Adjustments to the budget submission may be required as a result of this phase
in the process.
Justification
Approval
Preparation of Estimates
Review of Palns
Preparation of WorkSheet

37. 37
TTyyppeess ooff BBuuddggeett::
BBuuddggeettiinngg SSeeccttiioonn ooff FFiinnaannccee aanndd AAccccoouunnttss DDeeppaarrttmmeenntt pprreeppaarreess mmaaiinnllyy
ttwwoo ttyyppeess ooff bbuuddggeett nnaammeellyy,, CCaappiittaall BBuuddggeett aanndd PPeerrffoorrmmaannccee BBuuddggeett..
Capital Budget Performance Budget
BUDGET

38. 38
11.. CCaappiittaall BBuuddggeettiinngg::
““CCaappiittaall bbuuddggeettiinngg iiss tthhee pprroocceessss ooff eevvaalluuaattiinngg aanndd sseelleeccttiinngg lloonngg--tteerrmm
iinnvveessttmmeennttss tthhaatt aarree ccoonnssiisstteenntt wwiitthh tthhee ggooaall ooff sshhaarreehhoollddeerrss wweeaalltthh
mmaaxxiimmiissaattiioonn..””
Capital budgeting (or investment appraisal) is the planning process used to
determine whether an organization's long- term investments such as new
machinery, replacement machinery, new plants, new products, and research
development projects are worth the funding of cash through the firm's
capitalization structure (debt, equity or retained earnings). It is the process of
allocating resources for major capital, or investment, expenditures. One of the
primary goals of capital budgeting investments is to increase the value of the
firm to the shareholders. Capital expenditure management involves an outlay
of funds that is expected to produce benefits over a period of time exceeding
one year. The effectiveness of the decision rule depends on how these three
factors have been properly assessed. Estimation of cash flows require
immense understanding of the project before it is implemented; particularly
macro and micro view of the economy, polity and the company. Project life is
very important, otherwise it will change the entire perspective of the project.
So great care is required to be observed for estimating the project life. Costof
capital is being considered as discounting factor which has undergone a
change over the years. Cost of capital has different connotations in different
economic philosophies. Particularly, India has undergone a change in its
economic ideology from a closed economy to open-economy. Hence
determination of cost of capital would carry greatest impact on the
investment evaluation.

39. 39
`IImmppoorrttaannccee ooff CCaappiittaall BBuuddggeettiinngg::
 CCaappiittaall BBuuddggeettiinngg DDeecciissiioonn::
IItt iiss nneecceessssaarryy ffoorr ddeecciissiioonn mmaakkiinngg aass iitt aaffffeeccttss pprrooffiittaabbiilliittyy ooff HHAALL’’ss
AAcccceessssoorriieess DDiivviissiioonn.. TThheeyy hhaavvee bbeeaarriinngg ooff tthhee ccoommppeettiittiivvee ppoossiittiioonn ooff tthhee
eenntteerrpprriissee bbeeccaauussee ooff ffiixxeedd aasssseettss.. TThhee ffiixxeedd aasssseettss rreepprreesseennttss tthhee ttrruuee
eeaarrnniinngg aasssseettss ooff tthhee ccoommppaannyy.. TThheeyy eennaabbllee ccoommppaannyy ttoo ggeenneerraattee ffiinniisshheedd
ggooooddss tthhaatt ccaann uullttiimmaatteellyy bbee ssoolldd ffoorr pprrooffiittss.. TThhuuss,, ccaappiittaall bbuuddggeettiinngg ddeecciissiioonn
ddeetteerrmmiinneess tthhee ffuuttuurree ddeessttiinnyy ooff aa ccoommppaannyy..
 CCaappiittaall EExxppeennddiittuurree DDeecciissiioonn::
IItt hhaass iittss eeffffeecctt oovveerr aa lloonngg ttiimmee ssppaann aanndd iinneevviittaabbllyy aaffffeeccttss tthhee ccoommppaannyy’’ss
ffuuttuurree ccoosstt ssttrruuccttuurree..
FFoorr eexxaammppllee:: IIff aa ppaarrttiiccuullaarr ppllaanntt hhaass bbeeeenn ppuurrcchhaasseedd bbyy aa ccoommppaannyy ttoo ssttaarrtt aa
nneeww pprroodduucctt tthhee ccoommppaannyy ccoommmmiittss iittsseellff ttoo ssiizzeeaabbllee aammoouunntt ooff ffiixxeedd ccoossttss,, iinn
tteerrmmss ooff llaabboouurr,, ssuuppeerrvviissoorr’’ss ssaallaarryy,, iinnssuurraannccee eettcc.. iiff tthhee iinnvveessttmmeenntt yyiieellddss
lleessss pprrooffiitt iinn ffuuttuurree tthhaann aannttiicciippaatteedd tthhee ccoommppaannyy wwiillll hhaavvee ttoo bbeeaarr aa bbuurrddeenn
ooff ffiixxeedd ccoossttss uunnlleessss iitt wwrriitteess ooffff tthhee iinnvveessttmmeennttss ccoommpplleetteellyy..
 CCaappiittaall IInnvveessttmmeenntt DDeecciissiioonn::
TThhiiss ttyyppee ooff ddeecciissiioonn iinnvvoollvveess ccoossttss aanndd iitt mmaayy hhaappppeenn tthhaatt AAcccceessssoorriieess
DDiivviissiioonn llaacckkss ccaappiittaall rreessoouurrcceess,, ssoo iitt iiss nneecceessssaarryy tthhaatt tthhee mmaannaaggeemmeenntt mmuusstt
ttaakkee tthhoouugghhttffuull,, wwiissee aanndd ccoorrrreecctt iinnvveessttmmeenntt ddeecciissiioonnss.. TThhee iinnccoorrrreecctt
iinnvveessttmmeenntt ddeecciissiioonn wwoouulldd nnoott oonnllyy rreessuulltt iinn lloosssseess bbuutt aallssoo pprreevveenntt tthhee ffiirrmm
eeaarrnniinngg pprrooffiittss ffrroomm ootthheerr iinnvveessttmmeennttss wwhhiicchh ccoouullddnn’’tt bbee uunnddeerrttaakkeenn ffoorr wwaanntt
ooff ffuunnddss..

40. 40
SShhoorrttccoommiinnggss OOff CCaappiittaall BBuuddggeettiinngg::
 Uncertainity:
The benefits from investments are received in some future period
The future is uncertain. Therefore, an element of risk is involved.
 Time period:
Costs incurred and benefits received from the capital budgeting decisions
occur in different time periods. They are not logically comparable because of
the time value of money.
 Quantitative terms:
It is not often possible to calculate in strict quantitative terms all the benefits
or the costs relating to a particular investment decision.
Rationale
The rationale underlying capital budgeting decision is efficiency. Thus, a firm
must replace worn and obsolete plants and machinery to acquire fixed assets
for current and new products and make strategic investment decision. This will
help the firm to achieve its objective of maximising profits either by following
way:
 IInnvveessttmmeenntt DDeecciissiioonn AAffffeeccttiinngg RReevveennuueess::
This decision is for binging in up for additional revenue, thereby raising the
size of firm’s total revenue which would either result in the expansion of
present operations or the development of new product lines.
 IInnvveessttmmeenntt DDeecciissiioonn RReedduucciinngg CCoossttss::
Such decisions add to the total earnings of the firm by reducing costs. This
decision is less uncertain.

41. 41
KKiinnddss::
CCaappiittaall BBuuddggeettiinngg PPrroocceessss:
It includes four distinct but interrelated steps used to evaluate and select long-
term proposals, which are as follows:
 AAcccceepptt--RReejjeecctt DDeecciissiioonn::
This is a fundamental decision in capital budgeting. If the project is accepted,
the firm would invest in it; if the proposal is rejected, the firm doesn’t invest
in it. In general, all those proposals which yield a rate of return greater than a
certain required rate of return. By applying this criterion, all independent
projects are accepted.
 MMuuttuuaallllyy EExxcclluussiivvee PPrroojjeecctt DDeecciissiioonnss::
These are projects that compare with one another; the acceptance of one
eliminates the others from further consideration. The alternatives are
mutually exclusive and one may be chosen.
 CCaappiittaall RRaattiioonniinngg DDeecciissiioonn::
This is refers to a situation in which a firm has more acceptable investment
than it can finance. It is concerned with the selection of group of investments
proposals out of many investment proposals accepted under the accept-reject
decision. It employs ranking of the acceptable investment projects on the
basis of predetermined criterion such as rate of return.

42. 42
EEvvaalluuaattiioonn TTeecchhnniiqquueess ooff CCaappiittaall BBuuddggeettiinngg::
A variety of measures have evolved over time to analyse capital budgeting
requests. The better methods use time value of money concepts. Traditional
Methods, like the payback period, have the deficiency of not using time value
techniques and will eventually fall by the wayside and be replaced in companies
by the newer, superior methods of evaluation. Evaluation techniques are
classified into two categories:
Very Important: A capital budgeting analysis conducts a test to see if the
benefits (i.e., cash inflows) are large enough to repay the company for three
things:
 cost of the asset,
 cost of financing the asset (e.g., interest, etc.), and
 a rate of return (called a risk premium) that compensates the company
for potential errors made when estimating cash flows that will occur in
the distant future.
Evaluation
Techniques
Traditional
Method
Time – Adjusted
Method

43. 43
TRADITIONAL METHODS:
i. Average Rate of Return
ii. Pay Back Period
i. Average Rate of Return:
This method is used for evaluating proposed capital expenditure. It is based
upon the accounting information rather than cash flows.
ARR=
Average Profit After Tax
Average Investment Over The Life Of The Project
×100
AAcccceepptt--rreejjeecctt rruullee::
PPRROOJJEECCTT RREEAASSOONN
AAcccceepptt
If actual ARR is higher than the
minimum desired rate.
Reject If the actual ARR is lower than
the minimum desired rate.

44. 44
iiii.. PPaayy BBaacckk MMeetthhoodd::
TThhiiss mmeetthhoodd mmeeaassuurreess tthhee nnuummbbeerr ooff yyeeaarrss rreeqquuiirreedd ffoorr tthhee CCFFAATT ttoo ppaayy
bbaacckk tthhee oorriiggiinnaall oouuttllaayy ((ccaasshh oouuttffllooww ffoorr aa PPrrooppoosseedd pprroojjeecctt aatt tthhee ttiimmee
zzeerroo)) rreeqquuiirreedd iinn aann iinnvveessttmmeenntt pprrooppoossaall..
TTwwoo wwaayyss ooff ccaallccuullaattiinngg PPBB mmeetthhoodd::
PPRROOJJEECCTT RREEAASSOONN
AAcccceepptt
If the actual payback is less than
the predetermined payback.
Reject If the actual payback is more
than the predetermined payback.
Annuity Mixed Stream
Pay Back
Method

45. 45
TTIIMMEE –– AADDJJUUSSTTEEDD TTEECCHHNNIIQQUUEESS
ii.. NNeett PPrreesseenntt VVaalluuee MMeetthhoodd::
NNPPVV iiss ffoouunndd bbyy ssuubbttrraaccttiinngg aa pprroojjeecctt’’ss iinniittiiaall iinnvveessttmmeenntt ffrroomm tthhee pprreesseenntt
vvaalluuee ooff iittss ccaasshh iinnfflloowwss ddiissccoouunntteedd aatt tthhee ffiirrmm’’ss ccoosstt ooff ccaappiittaall..
NNPPVV == TToottaall ooff PPrreesseenntt VVaalluueess ooff aallll CCaasshh IInnfflloowwss –– PPrreesseenntt IInnvveessttmmeenntt
AAcccceepptt -- RReejjeecctt RRuullee
PPRROOJJEECCTT NNPPVV
AAcccceepptt WWhheenn NNPPVV iiss ggrreeaatteerr tthhaann zzeerroo..
RReejjeecctt When NPV is less than zero.
IInnddiiffffeerreenntt iinn AAcccceeppttiinngg oorr RReejjeeccttiinngg When NPV is equal to the zero
Net Present
Value
Internal Rate of
Return
Time-Adjusted
Technique

46. 46
iiii.. IInntteerrnnaall RRaattee ooff RReettuurrnn MMeetthhoodd::
IItt iiss tthhee ddiissccoouunntt rraattee tthhaatt eeqquuaatteess tthhee pprreesseenntt vvaalluueess ooff ccaasshh iinnfflloowwss wwiitthh
tthhee iinniittiiaall iinnvveessttmmeenntt aassssoocciiaatteedd wwiitthh aa pprroojjeecctt,, tthheerreebbyy ccaauussiinngg NNPPVV==00..
𝐈𝐑𝐑 = 𝐑 𝟏 +
𝐍𝐏𝐕𝟏
𝐍𝐏𝐕𝟏 − 𝐍𝐏𝐕𝟐
× (𝐑 𝟐 − 𝐑 𝟏)
Where,
𝐍𝐏𝐕𝟏 = 𝐍𝐏𝐕𝟐 𝐚𝐭 𝐑 𝟏
𝐍𝐏𝐕𝟐 = 𝐍𝐏𝐕𝟏 𝐚𝐭 𝐑 𝟐
𝐑 𝟏 = 𝐋𝐨𝐰𝐞𝐫 𝐃𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐑𝐚𝐭𝐞
𝐑 𝟐 = 𝐇𝐢𝐠𝐡𝐞𝐫 𝐃𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐑𝐚𝐭𝐞
AAcccceepptt –– RReejjeecctt RRuullee
PPRROOJJEECCTT IIRRRR
AAcccceepptt
If the IRR exceeds the Rate of
Return
IInnddiiffffeerreenntt iinn AAcccceeppttiinngg oorr
RReejjeeccttiinngg
When IRR =Rate of Return

47. 47
22.. PPeerrffoorrmmaannccee BBuuddggeettiinngg::
“A budget that reflects the input of resources and the output of services for
each unit of an organization. This type of budget is commonly used by the
Government of India to show the link between the funds provided to the
public and the outcome of these services.”
OObbjjeeccttiivveess ooff ppeerrffoorrmmaannccee bbuuddggeett::
ii.. TToo eessttaabblliisshh ccoorrrreellaattiioonn aanndd ccoo--oorrddiinnaattiioonn bbeettwweeeenn ffiinnaanncciiaall aanndd pphhyyssiiccaall
aassppeeccttss ooff vvaarriioouuss pprrooggrraammmmeess ooff eeaacchh ddeeppaarrttmmeenntt..
iiii.. TToo iimmpprroovvee bbuuddggeett ffoorrmmuullaattiioonn oonn tthhee bbaassiiss ooff rreevviieeww aanndd ddeecciissiioonn
mmaakkiinngg aatt aallll lleevveellss ooff mmaannaaggeemmeenntt..
iiiiii.. TToo ffaacciilliittaattee bbeetttteerr aapppprreecciiaattiioonn aanndd rreevviieeww ooff ppeerrffoorrmmaannccee bbyy ccoonnttrroolllliinngg
aauutthhoorriittiieess..
iivv.. TToo mmeeaassuurree tthhee pprrooggrreessss aaggaaiinnsstt bbootthh tthhee sshhoorrtt--tteerrmm aanndd lloonngg--tteerrmm
oobbjjeeccttiivvee..
SStteeppss iinn PPeerrffoorrmmaannccee BBuuddggeettiinngg
i. DDeetteerrmmiinnaattiioonn ooff RReessppoonnssiibbiilliittyy CCeennttrreess:
Establishment of such responsibility centres where operations are
performed and financial transactions take place in terms of money.
iiii.. NNoorrmmss aanndd SSttaannddaarrddss::
Physical targets are set for expected performance responsibility centres or
for each action point.
For example: These performances may in the form of units of goods sold
for a sales department, units of product for production

48. 48
department and quantum of work likely o be done for capital works.
iiiiii.. FFoorreeccaassttiinngg ooff EExxppeennddiittuurree::
The amount of expenditure is forecasted under the various classification
heads in order to the physical expected performance for each head.
iivv.. PPeerrffoorrmmaannccee EEvvaalluuaattiioonn::
It is done under two stages:
a. Estimated expenditure in budget and actual expenditure.
b. Estimated performance target in budget and actual performance.
vv.. PPeerrffoorrmmaannccee RReeppoorrttiinngg::
It is submitted to various levels of management and contains variance
analysis, detecting the causes, isolating key factors and indicating the
controllable elements. It also suggests remedial measures.
Performance Reporting
Performance Evaluation
Forecasting ofExpenditures
Norms and Standards
Determination of Responsibility Centres

49. 49
FFiinnaanncciiaall HHiigghhlliigghhttss OOff HHaall,, LLuucckknnooww
s.no Particulars Unit
s
08-09 09-10 10-11 11-12 12-13
A Earnings
Sale-inland
Export sales
Total sales
Changes in WIP&
SIT
Cr.
Cr.
Cr.
Cr.
9936.8
436.58
10373
1437.4
11252.03
204.67
11456.0
2032.89
12878.12
237.38
13115.50
3335.34
13855.88
348.33
14204
-1510.91
13940.81
382.82
14323.63
-121.80
Total sales Cr. 11810 13489.5 16450.8 12693.3 14201.83
B Our Outgoings
Cost of Materials
Manpower Cost
Operating Cost
Net Financing Cost
Depreciation
Cr.
Cr.
Cr.
Cr.
Cr.
7635.9
2542.7
886.86
-1732.1
142.55
9221.80
1954.05
984.87
-1525.57
166.00
11772.43
2246.28
764.68
-1340.86
168.79
5761.39
2720.66
2812.63
-2107.00
177.10
8008.44
2446.33
2382.87
-2316.27
183.48
Total Cr. 9475.9 10801.1 13611.3 9364.78 10704.86
C Our Savings
Profit Before Tax
Provision For Tax
Cr.
Cr.
2334.8
595.00
2688.4
721.02
2839.52
725.26
3328.52
789.09
3496.97
500.06
Profit After Tax
For Appropriation
Cr. 1739.8 1967.41 2114.26 2539.43 2996.91
D HAL Owns
Net Block
Other Assets (Net)
Cr.
Cr.
1327.5
6816.1
1465.50
8163.49
1509.18
9721.76
1555.83
11259.90
1548.07
13396.60
Total Cr. 8143.7 9628.9 11230.94 12815.73 14944.67

50. 50
E HAL Owe
Equity
Reserves and
Surplus
Cr.
Cr.
120.50
6495.9
120.50
8003.02
120.50
9624.72
120.50
11218.10
120.50
13257.69
Shareholders'
Funds
Cr. 6616.4 8123.52 9745.2 11338.60 13378.19
Deferred Tax Cash
Credit Loan
Cr.
Cr.
1525.2
1.98
-
1505.29
0.18
-
1485.55
0.17
1476.97
0.16
1566.32
0.16
-
Total Borrowings Cr. 1.98 0.18 123094 12815.72 0.16
Total Cr. 8143.7 9628.99 14944.67
F Financial
Statistics
Value of
Production
Value Added
Dividend Paid
(including Tax)
R & D Expenditure
Gross margin
Gross Block
Inventory
Sundry Debtors
Net Worth
No. Of Employee
Cr.
Cr.
Cr.
Cr.
Cr.
Cr.
Cr.
Cr.
Cr.
No.
11810
4174.9
407.12
674.78
2905.3
2638.0
10431.
1848.2
4635.7
34822
13489.59
4267.78
460.35
832.12
3382.75
2933.53
13660.03
1858.03
6157.30
33990
16450.84
4678.42
492.56
986.96
3654.32
3142.73
17427.18
2318.22
9745.22
33681
12693.30
6931.91
946.06
965.51
4050.83
3362.97
16152.99
3916.73
11338.60
32659
14201.83
6193.39
957.32
1948.95
4098.30
3524.81
17980.42
5530.17
13378.19
32644
G
Financial Ratios
Sales Per employee
Value Added Per
employee
PBT to Sales
PAT to Net Worth
Debt Equity Ratio
Earnings Per Share
Dividend as %age
of Equity
(including Dividend
Tax)
Rs.
Rs..
%.
%.
times
Rs.
%
2978973
1198926
22.51
37.53
0.00030
144.39
337.86
3370609
1255600
23.47
31.95
0.00002
163.27
82.04
3894036
1389038
21.65
21.70
0.00002
175.46
408.76
4349250
212513
23.43
22.40
0.00001
210.74
785.11
4387830
1897252
24.41
22.40
0.00001
248.7177
94.46

51. 51
BalanceSheet of HAL, Lucknow
Particulars 08-09 09-10 10-11 11-12 12-13
LIABILITIES
Sources offunds 120.50 120.50 120.50 120.50 120.50
Owner’s fund - - - - -
Equity Share Capital - - - - -
Share Application
Money
- - - - -
Preference Share
Capital
- - - - -
Reserves andSurplus 3050.58 3913.92 5163.22 6495.97 8003.02
Loan Funds 361.02 - - - -
SecuredLoans 3.88 4.02 - - -
Unsecured Loans - - - - -
Total 3535.98 4038.44 5283.72 6616.47 8123.52
ASSETS
Uses of Funds - - - - -
Fixed Assets - - - - -
Gross Block 3690.73 4634.45 5209.08 5650.24 2933.53
Less:Revaluation
Reserve
- - - - -
Less:Accumulated
Depreciation
(964.25) (1059.91) (1174.90) (1310.53) (1468.03)
Net block 2726.48 3574.54 4034.18 4339.71 1465.5
Capital Work-in-
Progress
331.17 210.27 242.70 217.86 212.37
Investments 8.44 15.28 19.2 44.03 230.66
Net Current Assets - - - - -
Current Assets, Loans
and Advances
21610.36 29258.55 33960.48 37880.14 42227.34
Less:Current
Liabilities and
Provisions
22870.7 30969.62 34930.02 37845.98 37978.58
Totalnet current assets (1260.34) (1711.07) (969.54) 34.16 4248.76
Miscellaneous Expenses
not written
1730.23 1949.42 1957.19 1980.71 1966.23
Total 3535.98 4038.44 5283.72 6616.47 8123.52

52. 52
CCaasshh FFllooww
Particulars 08-09 09-10 10-11 11-12 12-13
Profit before tax 2,688.43 2,334.86 2,164.23 373.40 265.15
Net cashflow from
operating activity -1,720.86 -809.50 2,077.84 530.90 -297.58
Net cashused in
investing activity 1,042.90 1,304.69 1,229.18 217.89 220.99
Net cashused in fin.
activity -408.96 -396.96 -366.22 348.27 20.37
Net inc/dec in cash and
equivalent -1,086.92 98.24 2,940.80 1,105.14 -56.22
Cash and equivalent
begin of year 19,744.56 19,646.32 16,705.52 3,757.84 3,814.06
Cash and equivalent
end of year 18,657.64 19,744.56 19,646.32 4,862.98 3,757.84

53. 53
Data Analysis
I. Computationof ARR:
Year 1 2 3 4 5 TOTAL
PAT(Rs.) 1739.86 1967.41 2114.26 2539.43 2996.91 11357.81
ARR=
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐏𝐫𝐨𝐟𝐢𝐭 𝐀𝐟𝐭𝐞𝐫 𝐓𝐚𝐱
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐎𝐯𝐞𝐫 𝐓𝐡𝐞 𝐋𝐢𝐟𝐞 𝐎𝐟 𝐓𝐡𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭
×100
=
11357.81÷5
230.66÷2
× 100
∴ ARR = 19.69%

54. 54
II. ComputationOf NPV:
Where, Discounting Factoris
𝟏
(𝟏+𝒌) 𝒏
NPV = Total Of Present Values Of All Cash Inflows − Present Investment
= 9012.54-230.66
∴ NPV= Rs. 8781.88
Interpretation:
As the project has positive NPV, i.e. present value of cashinflows is greater
than the cashoutlays, it shows that the project is accepted. It has profitability
equalto the Discounting Factor.
Year Cash Inflows Discounting factor@
10%
PV of Cash
Inflow
1 1882.35 .909 1711.05
2 2133.41 .826 1762.19
3 2283.05 .751 1714.57
4 2708.22 .683 1849.71
5 3180.39 .621 1975.02
Total 9012.54

55. 55
III. Computationof IRR:
𝐈𝐑𝐑 = 𝐑 𝟏 +
𝐍𝐏𝐕𝟏
𝐍𝐏𝐕𝟏 − 𝐍𝐏𝐕𝟐
× (𝐑 𝟐 − 𝐑 𝟏)
𝐍𝐏𝐕𝟏 = 𝟖𝟕𝟖𝟏. 𝟖𝟖
𝐍𝐏𝐕𝟐 = 𝟗𝟖𝟐𝟏. 𝟏𝟔
𝐑 𝟏 = 𝟕
𝐑 𝟐 = 𝟏𝟎
= 7 +
8781.88
8781.88−9821.16
× (3)
= 7 + {(- 8.449)× 3}
∴ IRR = - 18.349
Interpretation:
Project is not suitable for the HAL, Lucknow because IRR is less than the given
Discount Rate/ Factor. This project is not profitable.
Year Cash Inflows Discounting factor@
7%
PV of Cash
Inflow
1 1882.35 .934 1758.11
2 2133.41 .873 1862.46
3 2283.05 .816 1862.96
4 2708.22 .762 2063.66
5 3180.39 .715 2273.97
Total 9821.16

56. 56
RReesseeaarrcchh MMeetthhooddoollooggyy
“Research Methodology comprises of defining & redefining problems,
collecting, organizing and evaluating data, making deductions and doing
research to reach conclusions.” - Clifford Woody
This project work is based on Exploratory Research, which is a way to provide
insights and understanding to systematically solve the problem or attain its
objectives. It is a very important guideline and lead to completion of my project
work through observation, data collection and data analysis.
Accordingly, the methodology used in the project is as follows: -
 Defining the problem of the study
 Defining the objective of the study
 Feedback from the employees
 Analysis of feedback
 Conclusion, Findings and Suggestions.
Research Design:
I. Research problem:
In every step of life, resources are always scarce. In the same way,
business organizations are also facing such type of problems. In this
respect every organization wishes to use available resources in an
optimum manner. Capital budgeting is a technique which helps in solving
the same aspects of such phenomenon. This study is basically emphasizing
on capital budgeting of HAL, Lucknow and tries to find out ways of
optimum utilization of financial resources with the help of Capital

57. 57
Budgeting Techniques.
II. Research objective:
To study the process of capital budgeting with main emphasis on the
technique which is used in HAL.
IV. Research Plan:
 Researchdesign: Exploratory Research is used to have insights and
understanding of Financial Planning in HAL, Lucknow.
 Type of research: Problem Identification Research.
 Data collection source : Primary as it IS collected directly from
the employees of HAL, Lucknow interviewing the officer related to
the concerned department i.e. chief manager of finance department,
manager of budgeting section, Examination of records. Manual
related to capital budgeting.

58. 58
SSWWOOTT AAnnaallyyssiiss
STRENGTHS
i. HAL is headed by an excellent and extraordinary chairman, who is most
capable of managing the organization by getting the work load from
Indian Air Force, Navy, Army and Coast Guard for its financial growth and
management.
ii. The technological know how are very confidential and have the
best – suited for making and overhauling the Defence Aircraft that
is incomparable with any technologies.
iii. HAL is a very good pay-master to its employees as it is very much financially
healthy due to its existence under Ministry of Defence.
WEAKNESS
i. IAF is fully satisfied with the performance of HAL so far as
the following of licences Technical know how are concerned, but
due to recent Air crashes of MIG Aircraft and few other Aircrafts there
are few problems which are minor.
ii. S o metimes the fo reign vend o rs o n who m HAL d ep end s
fo r p ro c uring raw materials for projects are not in a position to
deliver the same in time this causes financial loses to H.A.L. by paying
liquidated damages to IAF / Customers.

59. 59
iii. Sometimes HAL use to make payment to suppliers as advance for
procurement o f raw material b ec aus e there are s o me
p arties who c an no t s up p ly witho ut advance payment due to
their financial problems.
iv. S o m e t im e s H . A . L . d o e s n o t g e t t h e a p p r o v a l f r o m I
A F a g a in s t t h e it e m s appeared in FPQ (Fixed Price Quotation)
at the rate prevalent in the International market with then approved
suppliers. Escalation percentage in respect of the items where it is
much more than permissible limit can put to loss to the
extent it is more.
v. Machineries required from Foreign vendor take abnormal
time leading to-delay in the normal manufacturing function, hence now
H.A.L. wants get similar type of machineries if approved by the customers.
OPPORTUNITIES
i. HAL is the o nly manufac turer o f the Defenc e Airc raft
s ;henc e the jo b opportunities as well as profit earning
opportunities are more to day and in the forthcoming years.
ii. Promotion oppurtunities are in vogue to all professionals including technical
and non-technical areas Departments.
iii. As H.A.L. has monopoly in the manufacturing and overhauling of
aircraft, so it can explore all the advantages related to this field.
iv. As H.A.L. has developed its own R & D centers so now it
would not have to depend on Russia for Technical know how.

60. 60
THREATS
i. HAL has fear to terrorist as it is a Defence Organization producing fighter
Aircrafts.
ii. Though H.A.L. is manufacturing fighter Aircrafts in confidence
and getting the same inspected by the authorized officials of
Airforce. There is a fear that during testing there should not be any
unwanted happening / rejections of Aircrafts which may cause the losses.
iii. During war, H.A.L. has its fear of attack by enemy – countries
as H.A.L. is very famous for a very good supporting organisation with
arms / fighter aircraft.
iv. T hreatening is given b y many agenc ies / us ers
that the materials mo d ules / parts / equipment are not be
touched by any country’s ship or otherwise. In case any project is
given by false that the above, materials / modules / part have been
touched by any ship during importing then the user suspect on unnecessarily.

61. 61
SUGGESTIONS
i. Before preparation of capital Budget, the records documents
available in the locations of Capital Assets physically present
should be checked to compare with that of items physically available.
ii. Year wise records showing the value of the capital items
with the gross value and written down value should be maintained.
iii. The source of supply with the details of Purchase Orders
and dealers. If any available in India alternatively should be
computerized and maintained.
iv. No. of years which the total value of the capital items to be
depreciated, should be indicated against each item on the basic of type
of the capital items.
v. If the existing machineries/plants are in need of frequent repairs, then
history book should be maintained with the details of breakdown, repair/
maintenance cost.
vi. Two registers i.e. one for purchase of plant/machineries from foreign
vendors and other for indigenous source should be maintained to know
the feasibility of procuring similar type of capital items within or
below the procuring time with economical condition.
vii. A team consisting of concerned user department for this
department there is need of the capital items. Finance,
commercial should be proposed for incorporating the capital
item in the Budget.
viii. Budgeting should include every pie of amount so that there is no
embarrassing situation during procurement; so far the funds are
concerned to pay.

62. 62
ix. The exchange rate applied in case of anticipated foreign sources for
procurement should have the authentic record for cross- check.
x. Lead time for receiving raw materials from suppliers
is more, it should be reduced.
xi. Many employees are very qualified and well endorsed
with valuable ideas; their ideas should be taken into consideration.
xii. Intranet facility should be frequently used so as to save money
and time.
xiii. The system of company should be elastic and capable of adopting
changes
xiv. While preparing capital budget Present Value of money should be
taken
xv. Similar kind of working conditions should be provided to
employees of same level.
xvi. Promotion criteria should not only
be based on seniority basis. It should be based on criteria
performance standards.
xvii. T he c o mpany s ho uld try to s et o rd ers fro m o ther c us to
mers o ther than permanent customers so that company could
get economy of scale and reduce costof production to maximize its
profit.

63. 63
CONCLUSION
As H. A. L. has numb er o f p ro jec ts , whic h need huge
inves tment s o it als o us ed appraisal method like pay-back period
method for evaluating the capital expenditure proposals. But as pay-
back period method does not consider the time value of money so it
must adopt discounted cash flow techniques which consider the
time value of money. Pay – back period method does not able to
tell post pay-back profitability. These factors can only be judged by net-
present value method or internal rate of return method. The topic undertaken
for study was too wide to be studied in detail & in all aspects. Duration
of the summer training was limited and the sample size was
restricted to accessories division Lucknow only. The data so collected
to write this report is the result of direct personal accounts department.
This study not only makes me familiar with big organization like HAL,
but also provided me the practical view that how the financial functions
and theories are applicable in an organization.HAL is listed among top ten
public sector units which are running in profit. Its main customer is
IAF; its other customers are ADA and other civil customers, Navy,
Air Force and Coast Guard etc. Budget and budgetary control system is a wide
area to cover. The method of budgeting is differs from industry to industry
on the basis of requirements. In HAL budgeting system, the period
considered for budgeting is the financial year from April to March. It
lays a comprehensive plan of action expressed plan of action expressed in
financial and physical terms. It acts as a tool in the hands of
management to establish goals, objects and target of the company.
It ensures the overall control over the expenditure as all

64. 64
the expenditures are sanctioned in the budget. The budget is classified into 2
categories for convenience Capital and Performance. Itis ensured that
capital facility is made available in time to suit production requirement.
Estimates and expenditures are presented physical and financial
aspects. Approval of board to break the budget into monthly budget
of Bo ard is req uired to b reak the b ud get into mo nthly b ud get
to ens ure unifo rm production from month to month.
All s ec tions o f F inanc e & Ac c o unts d ep artment func tio ning
s ep arately b ut in acoordinated manner. Their functioning depends
on each other. One section provides data as an input to other section, the
section processes it and gets output in this manner these sections are
interdependent.

65. 65
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