A

PROJECT REPORT

ON

“A STUDY ON CAPITAL BUDGETING AT TVS MOTOR COMPANY”

SUBMITTED TO

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 SAVITRIBAI PHULE PUNE UNIVERSITY, PUNE
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
DEGREE OF

BACHELOR OF BUSINESS ADMINISTRATION

Under the guidance of

PROF. SHILPA VISHWAS

SUBMITTED BY

SAGAR JALINDAR GAVANDE

BBA III (FINANCE) (BATCH 2023-2024)

SIDDHANT COLLEGE OF MANAGEMENT STUDIES

PUNE – 412109

2024

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ACKNOWLEDGMENT

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 The completion of my project is always due to efforts from numerous people. I take this opportunity to
express my gratitude to all those who have helped me in undertaking and completing this project
successfully.

Sincere thanks to Prof. SHILPA VISHVAS

I express my deep gratitude to all faculty of BBA department, for helping me from time to time in the
Project.

I owe my profound thankfulness to Prof. SHILPA VISHVAS Who guided me to furnish my work &
showed me the direction towards success of this Project.

MR. SAGAR JALINDAR GAVANDE

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 DECLARATION

I undersigned here by state that the report, entitled "A STUDY ON CAPITAL
BUDGETING OF TVS MOTOR COMPANY is a genuine and benefited work presented by me under the
guidance of Prof.SHILPA VISHVAS

The empirical findings in this project report are based on the data collected by myself.

The matter presented in this report is not copied from any source.

The work has not been submitted for the award of any degree or diploma carlier to Pune University, Pune or
any other Universities.

The Project Report is submitted to Pune University, in the Partial fulfillment of the degree of Master in
Business Administration In year 2023 – 2024

Date :- / /2024 signature

Place :- SUDUMBARE Mr. SAGAR GAVANDE

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 INDEX
Chapter No. Chapter Name Page No.

1. Introduction 7-10

2. Objectives of the study 11-12

3. Scope of the study 13-14

4. Company profile 15-18

5. Research Methodology 19-21

6. Data Analysis & Interpretation 22-34

7. Findings 35-36

8. Suggestion 37-38

9. Conclusion 39-40

10. Bibliography 41-42

11. Questionnaire 43-46

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CHAPTER NO.1
INTRODUCTION

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 INTRODUCTION

INTRIDUCTION TO PROJECT :-
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 The project report at TVS motor company, Hosur on the topic capital budgeting has been done for
a period of six weeks. The report is first to have the theoretical insight about the techniques of capital
budgeting and how practically these techniques can be applied to the manufacturing sector like TVS Motor
company before making the investment in any proposals. Capital budgeting is a tool for maximizing a
company's future profits since most companies are able to manage only a limited number of large projects
at any one time
Capital Budgeting
Capital budgeting, which is also called "investment appraisal," is the planning process used to determine
which of an organization's long term investments such as new machinery, replacement machinery, new
plants, new products, and research development projects are worth pursuing. It is to budget for major
capital investments or expenditures.

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 Major Methods
Many formal methods are used in capital budgeting, including the techniques as followed

• Net present value

• Payback period
• Profitability index

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NET PRESENT VALUE

Net present value (NPV) is used to estimate each potential project's value by using a discounted cash flow
(DCF) valuation. This valuation requires estimating the size and timing of all the incremental cash flows
from the project. The NPV is greatly affected by the discount rate, so selecting the proper rate–sometimes
called the hurdle rate–is critical to making the right decision.
This should reflect the riskiness of the investment, typically measured by the volatility of cash flows, and
must take into account the financing mix. Managers may use models, such as the CAPM or the APT, to
estimate a discount rate appropriate for each particular project, and use the weighted average cost of
capital (WACC) to reflect the financing mix selected. A common practice in choosing a discount rate for a
project is to apply a WACC that applies to the entire firm, but a higher discount rate may be more
appropriate when a project's risk is higher than the risk of the firm as a whole.

PAYBACK PERIOD
Payback period in capital budgeting refers to the period of time required for the return on an investment
to "repay" the sum of the original investment. Payback period intuitively measures how long something
takes to "pay for itself." All else being equal, shorter payback periods are preferable to longer payback
periods. The payback period is considered a method of analysis with serious limitations and
qualifications for its use, because it does not account for the time value of money, risk, financing, or
other important considerations, such as the opportunity cost.

PROFITABILITY INDEX
Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), is
the ratio of payoff to investment of a proposed project. It is a useful tool for ranking projects, because it
allows you to quantify the amount of value created per unit of investment.

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 Features of Capital Budgeting:
Characteristics & features of capital budgeting are:

1. Potentially large anticipated benefits.

2. A relatively high degree of risk.
3. A relatively long period between the initial outlay and the anticipated return.

Advantages of Capital Budgeting:

1. Capital budgeting helps a company understand the various risks involved in an investment
opportunity.

2. It helps the company to estimate which investment option would yield the best possible return.
3. It helps the company to make long-term strategic investments.
4. It helps to make an informed decision about an investment considering all possible options.
5. It helps to make an informed decision about an investment considering all possible
6. It offers adequate control over expenditure for projects.

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Disadvantages of Capital Budgeting: 1. Capital budgeting decisions are for the long term and are

majorly irreversible in nature.

2. These techniques are mostly based on estimations and assumptions as the future will always remain
uncertain.
3. Capital budgeting still remains introspective as the risk factor, and the discounting factor remains
subjective to the manager’s perception.
4. A wrong capital budgeting decision can affect the company’s long-term durability. And hence it needs to
be done judiciously by professionals who understand the project well.

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 CHAPTER NO.2
Objective of the study

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 OBJECTIVES OF STUDY :-
Capital planning is a well ordered proceduring that business used to decide the benefits of a
speculation venture the choice of wheather to acknowledgment our everyday and ventures extends
as a major aspects of an organization speculation side of the arrival that such a is regarded
satisfactory are worthy is explicit to the organization just as te undertaking.

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Objectives

• The objective of the study is to analyze the customer buying behavior of the respondentsin motorbikes
of different brands .

• To study the future prospects of TVS motorbikes.

• To provide a fair picture of technology used by TVS motors.

• To study the sales trends of tvs motors.

• To analyze the quality of after sales services being provided by tvs motors.

• To evaluate the cash inflows and out flows of the company

• To determine the average rate of return

• To analyze the company’s investment decisions by Applying capital budgeting techniques

• To determine the net cash available for the investment purpose.

• To analyze the elimination of wastages and increase in profitability.

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 CHAPTER NO.3
Scope of the study

SCOPE OF THE STUDY :-

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• The scope of a project will be your guide to completing a project
• The study entitled “A Study on Financial Performance analysis of TVS Motor Company” is to analyse
the financial performance of tvs motor company for last 5 years.
• The study is based on financial position of the firm by using ratio analysis.
• This study will help the management to understand more possibilities.
• Capital budgeting is used by companies to evaluate major projects and investments, such as new plants
or equipment.
• The process involves analyzing a project's cash inflows and outflows to determine whether the
expected return meets a set benchmark.
• By implementing a project scope management strategy, you can work to eliminate distractions and
hurdles that may impede your timeline and overall success.

Important of Scope

• Having a project scope is important because it serves as a reference for project managers, stakeholders,
and project team members.
• Understanding the project scope helps project managers track project progress, assess project risks,
allocate resources effectively, and ensure that the project stays within budget.
• Writing a project scope allows project managers to present and share a project with managers and task
owners in a simple and effective way. Without a project scope statement, project managers would find
it difficult to keep the project on track and complete it
• A project scope should include project objectives, project deliverables, project timeline, project budget,
and any constraints or limitations.
• These items will help project managers set realistic expectations for the project and ensure that all tasks
are completed within the project timeline and budget. It is typically included on the statement of work
or contract for the client.
• Also, make a note of anything that’s explicitly out of scope. For example, if you’re conducting a
marketing campaign that involves Google Ads or pay-per-click ads, but you are not responsible for a
landing page for those ads, make sure this exclusion is noted in your scope statement.

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 CHAPTER NO 4
COMPANY PROFILE

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 COMPANY PROFILE :-
TVS MOTOR COMPANY ( Commonly known as TVS )is an
Indian multinational motorcycle manufacturer headquartered in Chennai. It is the third-largest
motorcycle company in India in terms of revenue. The company has annual sales of three million
units and an annual production capacity of over four million vehicles. TVS Motor Company is also
the second largest two-wheeler exporter in India with exports to over 60 countries.
TVS Motor Company is the flagship company of the TVS Group, being the largest company of the
group in terms of valuation and turnover. The logo for TVS Motor Company features a red horse.

The TVS Group was first presented in 1911 by Mr. Television. Sundaram Iyengar established. The TVS
assemble has a solid nearness in the production of bicycles, auto parts, and PC peripherals. In 2016-17, the
TVS Motor Company was the third biggest car maker in India, with more than 13,000 ($ 2 billion) income.
The main organization of TVS Group is the yearly limit of 3 million units every year and 4 million
vehicles every year. TVS Motor Company is the 2th biggest exporter in India with fares to 60 nations
The main dispatch of the TVS Motor Company was in August 2006 with 50 cc. The sulked TVS was 50.
It's 100 cc. The principal Indian organization to present IndoJapanese. Business creation of cruisers began
in 1984. It was additionally the principal Indian organization to dispatch nearby

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participation in India in 1994. It's developing quickly since it began to end up one of India's
driving bike makers.
TVS Motor Company Limited (TVS Motor), an individual from the TVS Group, is the biggest
gathering based on size and exchange, with more than 3 crore (30 million) clients riding a TVS
bicycle

Vision :

TVS Motor Driven by the customer :

TVS motor will be responsive to customer requirements consonant with its core competence
and profitability. TVS motor will provide total customer satisfaction by giving the customer the
right product, at the right price , at the right time

Mission:
We are committed to being a highly profitable, socially responsible, and leading
manufacturer of high value for money, environmentally friendly, life time personal transportation
products under the TVS brand , for customers predominantly in Asian markets and to provide
fulfilment and prosperity for employees, dealers and suppliers.

History
T. V. Sundram Iyengar began with Madurai's first bus service in 1911 and founded TVS, a
company in the transportation business with a large fleet of trucks and buses under the name
of Southern Roadways. Early history
undaram Clayton was founded in 1962 in collaboration with Clayton Dewandre Holdings,
United Kingdom. It manufactured brakes, exhausts, compressors and various other automotive
parts. The company set up a plant at Hosur in 1976, to manufacture mopeds as part of their new
division. In 1980, TVS 50, India's first two-seater moped rolled out of the factory at Hosur in
Tamil Nadu, India. A technical collaboration with the Japanese auto giant Suzuki Ltd. resulted in
the joint-venture between Sundaram Clayton Ltd and Suzuki Motor Corporation, in 1987.
Commercial production of motorcycles began in 1989

Recent

Recent launches include the flagship model TVS Apache RR 310, the TVS Apache RTR 200,
TVS Victor and TVS XL 100. TVS has recently won 4 top awards at J.D. Power Asia
Pacific Awards 2016, 3 top awards at J.D. Power Asia Pacific Awards 2015 and Two-
Wheeler Manufacturer of the Year at NDTV Car & Bike Awards (2014–15).
In early 2015, TVS Racing became the first Indian factory team to take part in the Dakar Rally,
the world's longest and most dangerous rally. TVS Racing partnered with French motorcycle

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manufacturer Sherco, and named the team Sherco TVS Rally Factory Team. TVS Racing also won
the Raid de Himalaya and the FOX Hill Super Cross held at Sri Lanka. In three decades of its
racing history, TVS Racing has won over 90% of the races it participates in.
In 2016, TVS started manufacturing the BMW G310R, a model co-developed with BMW Motorrad
after their strategic partnership in April 2013. In December 2018, the Hosur plant where the
motorcycle is manufactured rolled out its 50,000th G310R series unit.[5]
On 6 December 2017, TVS launched their most-awaited motorcycle, the Apache RR 310 in an
event at Chennai. The 310 cc motorcycle with an engine which was co-developed with BMW
features the first ever full fairing on a TVS bike, dual-channel ABS, EFI, KYB suspension kits, etc.
It is expected to rival bikes like KTM RC 390, Kawasaki Ninja 250SL, Bajaj Pulsar and Dominar
and Honda CBR 250R after hitting the market. The Apache RR 310 is designed and realised
entirely in India.[6]
On 17 April 2020, it has been reported that TVS Motor Company acquired Norton Motorcycle
Company in an all cash deal. In the short term, they will continue the production of motorcycles at
Donington Park using the same staff

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 CHAPTER NO 5
RESEARCH METHODOLOGY:-

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Research Methodology

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Research design is a basic framework, which provides guidelines for the whole research process. The
research design specifies the methods for data collection and data analysis. As the research uses Secondary
data for the study, it relates to analytical research study. Analytical research is which involves critical
thinking skills and evaluation of facts and information relative to the research being conducted.

The method I used for research methodology was

 Primary Data
 Secondary data

PRIMARY DATA:
The primary data is the data which is collected fresh and first hand and for the first time which is originals
nature. Primary data can collect through personal interview questionnaire etc. To support the secondary
data

SECONDARY DATA:
The secondary data for the project regarding investment and various investment analysis were
collected from websites, textbooks and magazines.
Sources of data collection: Company yearly
Reports.

Company audited financial statements.

Tools used
Following techniques are used to make decision regarding capital budgeting .
• Payback period.
• Net present value.

• Internal rate of return

Limitations

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• • A strong unwillingness on the part of the company officials, to participate and aid the research.
The study was limited to the geographical region of Bangalore
• The study is limited only to one company TVS Motors.

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 CHAPTER NO.6
DATA ANALYSIS AND INTERPRETATION

Table 4.1 showing current ratio

year current asset current liability ratio

2015-2016 2183.22 2596.48 0.84:1

2016-2017 2434.27 3208.62 0.75:1

2017-2018 6372.89 7853.08 0.81:1

2018-2019 8331.67 8184.79 1.01:1

2019-2020 9746.84 10042.28 0.97:1

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DATA ANALYSIS AND INTERPRETATION
This chapter deals with data analysis and interpretation. In this study analysis had been done using
ratio analysis. Ratio analysis is important technique of analysis of financial statement.

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1.2

0.8

0.6

0.4

0.2

0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2022

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 From the above table 4.1 it is understood that the company fails to attain the standard ratio.
Current ratio of 2:1 is considered as ideal ratio.2018-19 shows the highest ratio. Current ratio
from 2015-16 to 2019-20 is fluctuating year by year

Table 4.2 showing quick ratio

year quick asset current liability ratio

2015-16 1157.88 2596.48 0.44:1

2016-17 1255.67 3208.62 0.39:1

201-2018 5290.84 7853.08 0.67:1

2018-2019 7017.96 8184.79 0.85:1

2019-2022 8555.1 10042.28 0.85:1

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 0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2022

understood that quick ratio is less than 1 which means financial position of company is unsound. Quick
ratio of 1:1 is considered ideal. Quick ratio from 2015-16 to 2019-20 is fluctuating so company needs to
increase the liquid asset to attain standard ratio.

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Table 4.3 showing proprietary ratio

Year shareholders fund Total assest Ratio

2015-2016 1817.97 5146.05 0.35:1

2016-2017 2224.82 6127.96 0.36:1

2017-2018 2858.28 13190.30 0.21:1

2018-2019 3415.94 16696.49 0.20:1

2019-2020 3603.04 19280.01 0.81:1

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From the above table 4.3 shows the ratio's is not up to standard. Proprietary ratio of 0.5:1 or above (or
50% or more) is considered as ideal. This means risk to creditors of company. Proprietary ratio is
fluctuating from year 2015-16 to 2019-20.

0.4

0.35

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0.3

0.25
From the solvency ratio of the company is more than 1. leverage ratio of 1:1 is considered as ideal. This
means higher degree of solvency. That indicate the company is solvent because the assets are sufficiently
more than the liabilities of company. Leverage ratio from 2015-16 to 2019-20 is fluctuating.

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CHAPTER NO 7
FINDINGS

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 Findings

1. Current ratio is below standard and fluctuating year by year.

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2. Quick ratio is also below standard hence the firm will face difficulties in pay off its liabilities in
correct time.

3. Debt equity ratio is below standard except last year so the company is not financially sound.

4. Proprietary ratio is below standard so high risk to creditors.

5. Leverage ratio shows this company is strong because assets are sufficiently than liabilities.

6. Net profit ratio is fluctuating year by year so is shows profitability is fluctuating.

7. Gross profit ratio is above standard so it shows greater efficiency in production.

8. Return on shareholders' fund is above ideal ratio and fluctuating year by year.

9. Total asset turnover ratio is not up to standard. The company is not using asset efficiently.

10. Fixed asset turnover is below standard for last three years and shows a decreasing trend.

11. Stock turnover ratio shows a decreasing trend. 12. Earnings per share shows an increasing trend.

13. Dividend per share is almost constant throughout five years.

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CHAPTER NO 8
SUGGESTION

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 Suggestion

1. It will be better if company decreases its current liability to improve the liquidity
ratio and liquidity position.
2. It will be better if company improves quick ratio otherwise the company will struggle
in paying debt.
3. The company can use effective cost control methods for future growth .
4. Activity ratios are below standard is should be improved for better efficiency of
company.
5. Proprietary ratio could be improved to reduce risk of creditors.
6. Debt equity ratio should be improved so that the company will get more of its finance by
borrowing money

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CHAPTER NO.9
Bibliography

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 Bibliography

Reference:

1. Klammer, Thomas P. ”Empirical Evidence of the Adoption of Sophisticated Capital

Budgeting Techniques,” The Journal of Business, July 1972, 387-397.
2. Klammer, Thomas P. and Michael C. Walker, “The Continuing Increase in the Use of
Sophisticated Capital Budgeting Techniques, “California Management Review, fall
1984, 137-148
3. Fremgen, James, “Capital Budgeting Practices: A Survey,” Management Accounting ,
May 1973, 19-25
4. Petty, J. William Petty, David P. Scott, and Monroe M. Bird, “The Capital Expenditure
Decision-Making Process of Large Corporations,”The Engineering Economist, Spring
1975, 159-171
5. Gitman, Lawrence G. and Forrester, John R. Jr.,”A Survey of Capital Budgeting
Techniques
Used by Major U.S. Firms”, Financial Management, Fall 1977, pg 66-71

Web Sites:

• WWW.investopedia.com
• www.principlesofaccounting.com
• www.enterpenure.com
• www.encyclopedia.com

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CHAPTER NO.10
QUESTIONNAIRE

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 Questionnaire

Respected Sir/ Madam

I am students of “SIDDHANT COLLEGE OF MANAGEMENT STUDIES” Conducting a

survey on “A STUDY ON CAPITAL BUDGETING OF TVS MOTOR COMPANY ” The
following statements relate to your feeling about the capital budgeting on TVS motor company.
Please shows the extent to which you believe capital budgeting has the feature described in the
statement. I request you to

Please indicate with ( )How frequently you company employee the following.

Method Name Always Often Sometime Rarely Never

Net Present Value

(NPV)

Internal Rate of
Return (IRR)

Payback Period (PP)

Discounted Payback
Period (DPP)

Profitability Index (PI)

Accounting rate of
Return (ARR)

Other

Questions regarding on Data Analysis & Interpretation.

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1. Size of the company ( BDT)
a. Less than 500 crore.
b. 500 – 1000 crore.
c. 1000 – 15000 crore.
d. More than 15000 crore.

2. Age of the company in the respective industry

a. Less than 10 yrs.
b. 10 – 20 yrs.
c. 20 – 30 yrs.
d. More than 30 yrs.

3. In which Year payback Period is highly increase

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a. 2009
b. 2010
c. 2011
d. 2012

4. Which of the following is not true about Capital Budgeting?

a. Capital Budgeting decisions have an influence on the future stability of an organisation
b. Capital Budgeting decisions include investments to expand the business
c. Capital Budgeting decisions are of an irreversible nature
d. Sunk cost is a part of Capital Budgeting

5. Which of the following is true for a project with a shorter payback period?
a. The project will have more Net Present Value
b. The project will have less Net Present Value
c. The project carries a greater amount of risk
d. The project carries a lesser amount of risk

6. Which of the following can be a criterion for the acceptance of a project?

a. The Profitability Index should be greater than unity
b. The Internal Rate of Return should be greater than the cost of capital
c. The Net Present Value should be greater than zero
d. All of the above

7. Which of the following is true for a project with a shorter payback period?
a. The project will have a lesser risk
b. The project will have less Net Present Value
c. The project will have more Net Present Value
d. The project will have a greater risk

8. Capital Budgeting decisions are evaluated using the _________ and _______ is used for this
purpose.
a. Weighted average, cost of capital
b. Weighted average, component cost

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 c. Unweighted average, cost of capital
d. None of the above

9. Which of the following is a disadvantage of using the payback period?

a. It does not take into account the cost of capital and timing of return
b. When compared to the accounting rate of return method, it is more difficult
to calculate and understand
c. It does not take the initial investment into account
d. All of the above

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