INTRODUCTION INTRODUCTION OF CAPITAL BUDGETING: Capital budgeting is an essential part of every company’s financial management. Capital budgeting is a required managerial tool. One duty of a financial manager is to choose investment with satisfactory cash flows and rates of return. Therefore a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives. To do this, a sound procedure to evaluate, compare, and select Projects is needed. Capital budgeting is represents a long term investment decision, involves the planning of expenditures for project with life of many year, usually requires a large initial cash outflow with the expectation of future cash inflows, uses present value analysis, emphasizes cash flows rather than income Capital budgeting is the planning process used to determine a firm’s long-term investment such as new machinery, replacement machinery, new plants, new products and research and development projects. NEED FOR THE STUDY: Capital budgeting decisions are of paramount importance in financial decision-making. Special care should therefore be taken in making these decisions on account of following reasons. Heavy investments. Long term commitment on funds 1
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INTRODUCTION
INTRODUCTION OF CAPITAL BUDGETING:
Capital budgeting is an essential part of every company’s
financial management. Capital budgeting is a required managerial tool. One
duty of a financial manager is to choose investment with satisfactory cash
flows and rates of return. Therefore a financial manager must be able to
decide whether an investment is worth undertaking and be able to choose
intelligently between two or more alternatives. To do this, a sound
procedure to evaluate, compare, and select Projects is needed.
Capital budgeting is represents a long term investment decision,
involves the planning of expenditures for project with life of many year,
usually requires a large initial cash outflow with the expectation of future
cash inflows, uses present value analysis, emphasizes cash flows rather than
income
Capital budgeting is the planning process used to determine a
firm’s long-term investment such as new machinery, replacement
machinery, new plants, new products and research and development
projects.
NEED FOR THE STUDY:
Capital budgeting decisions are of paramount importance in
financial decision-making. Special care should therefore be taken in making
these decisions on account of following reasons.
Heavy investments.
Long term commitment on funds
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Irreversible decisions
Long term impact of profitability
Most difficult to make.
Wealth maximization of shareholders.
Cash forecast.OBJECTIVES OF THE STUDY
The objectives of the study are:
To understand the need of organizations to identify and invest in high
quality capital projects.
To prepare a list of the main financial variables required for a project
appraisal.
To evaluate capital projects using traditional methods of investment
appraisal and discounted cash flow methods.
To illustrate the important differences, which can arise in evaluating
projects when using net present value (NPV) and internal rate of
returns (IRR).
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SCOPE OF THE STUDY:
The scope of the study is that the following areas:
How money is acquired and from what sources?
How individual capital project alternatives are identified and evaluated?
How minimum requirements of acceptability are set?
How final project selections are made?
How post mortem are conducted?
METHODOLOGY OF THE STUDY
DATABASE:
This study will be based on both primary and secondary data. The
primary data will be collected interact with financial Manager of HAL
company and The secondary data will be collected from various books,
journals, newspapers, websites, reports and other published sources of
company.
PERIOD OF STUDY:
The present study is made during the IVth semester of the
MBA course. i.e., from 17th December 2007 to 10th may 2008.
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CAPITAL BUDGETING DECISIONS
Capital expenditure decisions are of considerable significance as
the future success and growth of the firm depends heavily on them. But they
are best with a number of difficulties.
The benefits from investment are received in some future period.
The future is uncertain. Therefore, an element of risk is involved. Future
revenue involves estimation of the size of his market for product and
expected share of the firm. These estimates depend on the variety of factors,
including price, advertising and promotion, sales effort and so on. The cost
incurred and benefits received from a capital budgeting decision occurred in
different periods. They are the time value of the money.
So a firm must replace worn and obsolete plant and machinery,
acquired fixed assets for current and new products and makes strategic
investment decisions. This will enable the firm to achieve its objectives of
maximizing profits either by the way of increased revenues or cost
reduction. The quality of these decisions is improved by capital budgeting.
Capital budgeting decisions can be of two types and are as follows:
(a) Expanding revenues
(b)Reduce costs
INVESTMENT DECISIONS AFFECTING REVENUES
Investment decisions are expected to bring in additional revenues
there by raising the size of the firms total revenue. That can be the result of
the either expansion of present operations or the development of new
product lion.
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INVESTMENT DECISIONS REDUSING COST
Cost reduction investment decisions are subject to less uncertainty
in comparison to the revenue affecting investment decisions. This is so
because the firm has a better feel for potential cost savings as it can examine
past production and cost data. So it is difficult to precisely estimate the
revenue and cost resolution from a new product line.
KINDS OF DECISIONS
• Accept / reject decision
• Mutually exclusive project decision
• Capital rationing decision
Accept / reject decision:
This is the fundamental decision in capital budgeting. If the project is
accepted the firm would invest it, if the proposal were rejected, the firm does
not invest in it. In general those entire proposal, which yield a rate of return
greater than a certain required rate of return or cost of capital, are accepted
and the rest are rejected. Under accept-reject decision, all independent
projects that satisfy the minimum investment criterion should be
implemented.
Mutually exclusive project decision:
Mutually exclusive project decisions are those, which compete with
other projects in such a way that the acceptance of one will exclude
acceptance of the other projects. The alternatives are mutually exclusive and
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only one may be chosen. Some technique has to be used to determine the
best one. The acceptance of the best alternative automatically eliminates the
other alternatives.
Capital rationing decision:
In a situation where the firm has unlimited funds, all independent
investments proposal-yielding returns greater than some predetermined level
are accepted. However, the situation does not prevail in most of the firms in
actual practice. They have fixed capital budget. A large number of
investment proposals compete for these limited funds. The firm must
therefore ration them. The firm allocates funds to projects in a manner that
maxims long term returns. Thus capital rationing refers to a situation in
which a firm has more acceptable investment that it can finance. It is
concern with the selection of the group of investment proposals out of many
investment proposals accepted under accept or reject decisions. The projects
are ranked in the descending order rate of return
TECHNIQUES OF CAPITAL BUDGETING
Capital budgeting is the process of making investment in capital
expenditures. A capital expenditure may be defined as expenditure and the
benefits of which are expected to be received over a period of time
exceeding one year. The main characteristics of capital expenditure incurred
at a point of time and benefits of expenditure incurred at one point of time in
future are realized. The following are some examples of capital expenditure.
(a) Cost of acquisition of permanent assets i.e. buildings, plant and
machineries etc.
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(b) Cost of replacement of old permanent asset.
Investment decisions required special attention because of the following
reasons:
(a) They influence the firm’s growth path.
(b) They affect the risk of the firm.
(c) They involve large amount of funds of the firm.
(d) They are unchangeable or reversed at high cost.
(e) They are most difficult decisions to make.
Capital expenditure involves non-flexible long-term commitment of funds.
Thus capital expenditure decisions are also called as long-term investment
decision-making, capital expenditure decisions, planning capital expenditure
and analysis of capital expenditure.
DEFINITIONS: -
“Capital budgeting is long term planning for making and
financing proposed capital outlays”.
--Charles T Hangmen.
According to GC Philppatos, “Capital budgeting concern
with allocation of firms scarce financial resources among the available
market opportunities. The considerations of investment opportunities
involve the comparison of the expected future of the streams of earning from
a project, with immediate end subsequent streams of expenditure for it”.
Capital budgeting decision from day to day is: -
Capital budgeting decision involves the exchange of the current
funds for the benefits future.
The future benefits are expected to be realized over a series of years.
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The funds are invested in non-flexible and long-term activities.
They have long-term and significant effect on the probability of the
concern.
They are invariable decisions.
INVESTMENT EVALUATION CRITERIA
Three steps are involved in the evaluation of an investment.
(a) Estimation of cash flows.
(b)Estimation of the required rate of return.
(c) Application of the decision rule for making the choice.
Characteristics:
It should consider all cash flows to determine true value of the project. It
should help in ranking the various projects according to their true benefits.
It should recognize the fact that the bigger cash are preferable than the
smaller ones and early cash flows are preferable than later ones.
It should help to choose among mutually exclusive projects that project
which maximizes the shareholders wealth.
It should be a criterion, which is applicable to many conceivable
investment projects independent of other.
The capital budgeting technique, which has all these characteristics, is
the method to be used for the project appraisal purpose. A number of capital
budgeting techniques are in use in practice. They may be grouped in two
categories that the following chart tries to show:
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EXHIBIT-II.1
INVESTMENT CRITERIA
TRADITIONAL OR NON-DISCOUNTING TECHNIQUES:
1) Payback period:
The payback period is one of the most popular and widely recognized
traditional methods of evaluating investment proposals. It is defined as the
number of years required to recover the original cash outlay invested in a
Investment criteria
Discounting criteria Non-discounting criteria
Net
present
value
Profitability
index
Internal
rate of
return
Payback
period
Accounting
rate of
return
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project. If the project generates constant annual cash flows, the payback
period can be computed by dividing cash outlay by the annual cash inflow.
Acceptance rule:
Payback method is the simplest and easy to understand and easy to
calculate. As a ranking method, it gives highest ranking to the project, which
has the shortest payback period and lowest among two mutually exclusive
projects, the project with shorter payback period.
2) Accounting rate of return (ARR):
The accounting rate of return (ARR) is known as average rate of return and
also returns on investment (ROI). It is found out by dividing the average
after tax profit by the average investment. The average investment would be
equal it half of the original investment if it is depreciated constantly.
Alternatively, it can be found out dividing the total of the investments boo
vales after depreciation by the life of the project.
Accounting rate of return = average income / Average investment.
Average investment = (Original investment – Scrap value)/2
Payback period = Average income / Annual cash flow
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Average income = Total income / Number of years.
Acceptance rule:
This method will accept all those projects whose ARR is higher than
the minimum rate established by the management and reject those projects
which have ARR less than the minimum rate. This method would rank a
project as number one if it has higher ARR and lowest rank would be
assigned to the project with lowest ARR.
DISCOUNTING TECHNIQUES:
1) Net present value (NPV):
The net present value (NPV) method is the classic economic method of
evaluating the investment proposals. It is a method in which we can convert
future cash profits to today’s cash profit based on the interest rate by which
we can equate today’s value of the future profit. The interest rate is nothing
but cost of capital or the inflation rate or the rate expected by the investor. If
the rate of interest is not given, in India maximum return expected is 10% so
find out the NPV at 10% only. If the NPV is positive(+) we will get profits
on projects. Accordingly accept / reject decision will be taken.
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Net present value = Summation of present value of cash inflows in each year
– The summation of present values of the net present value of two mutually
exclusive projects X and Y.
Acceptance of project:
NPV<0 reject
NPV>0 accept
NPV=0 May accept
2) Internal rate of return (IRR):
The second discounted cash flow or time-adjusted method for apprising
capital investment decisions is the internal rate of return (IRR) method. This
technique is also known as yield on investment, marginal efficiency of
capital, marginal productivity of capital. The internal rate of return is usually
the rate of return that a project earns. It is defined as the aggregate present
value of cash outflows of a project.
Acceptance of project:
Accept – if IRR > cost of capital
Reject - if IRR < cost of capital
3) Profitability Index (PI):
IRR = Lower rate of return + present value of Cash at lower rate – present
value of investment / Different between present values ∗ Different between
the discount rate chosen.
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Another time adjusted capital budgeting technique is profitability index
or benefit cost of ratio. It is similar to the NPV approach. The profitability
index approach means the present value of returns per rupee invested, while
the NPV is a base on the difference between the present value of future cash
in inflows and the present value of cash outlays. A major disadvantage of
NPV method is that being an absolute measure, it is not a reliable method to
evaluate projects requiring different initial investments. The PI method
provides a solution to this kind of problem. It may be defined as the ratio,
which is obtained dividing the present value of future cash in flows by
present value of cash outlays.
PI = Present value cash inflows / Present value of cash outflows
Acceptance of project:
If the present value sum of total of the compounded reinvested cash
inflows (PVTs) is greater than the present value of the outflows (PVO), the
project is accepted if:
PVTs > PVO accepted.
PVTs < PVO rejected
A variation terminal value method (TV) is net terminal value
method (NTV) it can be represented as NTV = PVTs – PVO.
If the NTV is positive, accept the project. If the NTV is negative,
reject the project. The NTV method is similar to NPV method. Initially the
values are compounded, and in the later they are discounted. Both the
methods will give the same results. The same interest rates are used for both
the discounting and compounding.
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EVALUATION OF PROJECT CASH FLOWS
The role of finance manager is to coordinate the different
departments and obtain information from departments, ensure that the
forecast are based on set of consistent economic assumptions, keep the
exercise focused on the relevant variables and minimize the problems in
cash flow fore casting.
(a) Times factors for the analysis.
(b) Physical life of the plant.
(c) Technological life of the plant.
Investment planning horizon of the firm. For the capital budgeting cash
flows have to be estimated. There are certain ingredients of cash flow
streams.
Tax effect:
It has been already observed that cash flows to be considered for the
purpose of capital budgeting are net of taxes. Special consideration needs to
be given to tax effects on cash flows if the firms is incurring losses and,
therefore paying no taxes. The tax laws permit carrying losses forward to set
off against future income. In such cases, therefore, the benefits of tax
savings would accrue in future years.
Effect on other projects:
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Cash flow effects of the projects under the consideration. For
instance if the company is considering the production of new product, which
competes with the existing products in the product line, it is likely that as a
result of new proposal, the cash flows related to the old product will be
affected.
Effect on indirect expenses:
The indirect expenses/overheads are allocated to the different products
on the basis of wages paid, materials used, floor space occupied or some
other similar common factor. The question that arises is should such
allocation of the overheads be taken into the account in the cash flows? If
yes, it should be taken into account. If however the overheads will not
change as a result of the investment decision, they are not relevant.
Effect of depreciation:
Depreciation, although a non-cash item of cost, is deductible
expenditure in determining taxable income. Depreciation provisions are
prescribed by the company’s act for accounting purpose and by the income
tax for taxation purposes. The act that prescribes that rate of depreciation for
various types of depreciable assets. On written down value (WDV) basis as
well as straight-line basis. It also permits companies to charge depreciation
on any other basis provided it has the effect of writing off 95% of the
original cost of the asset on the expiry of the specified period and has the
approval of the government.
Depreciation is the charged with a view to simplify computation, not
on individual assets. A block of assets defined as group of assets, being
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building, machinery, plant or furniture in respect of which the same rate of
depreciation is prescribed.
Depreciation is computed at the block-wise rates on the basis of
written down value (WDV) method only. Presently, the block-wise for plant
and machinery are 25%, 40% and 100%.
The depreciation allowance on office buildings, and furniture and
fitting is 10%. Where the actual cost of plan and machinery does not exceed
Rs.5000 the entire cost is allowed to be written off in the first year of its use.
If an asset acquired during a year has been used for a period less than
180days during the year, depreciation on such assets is allowed only a 50%
of the computed depreciation according to the relevant rate.
Working capital effect:
Working capital constitutes another capital ingredient of the cash flow
stream, which is directly related to an investment proposal. The term
working capital is used here in neatness, i.e. current assets – current
liabilities (Net Working Capital). If investment is expected to increase sales
it is likely that there will be an increase in current assets in the form of
account receivable, inventory and cash. But part of these increases in current
assets will be offset by an increase in current liabilities in the form of current
accounts and notes payable. The difference between these additional current
assets and current liabilities will be needed to carryout the investment
proposal. Sometimes, it may constitute a significant part of the total
investment in the project. The increased working capital forms part of an
initial cash outlay.
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The additional networking capital will however be returned to the
firm at the end of the projects file. Therefore, the recovery of the working
capital becomes the part of the cash in flows stream in the terminal year.
Determination of relevant cash flows:
The data requirements for capital budgeting are cash flows, outflows
and inflows. Their competition becomes on the nature of the proposal.
Capital proposals can be categorized into:
(a) Single proposal.
(b)Replacement situations.
(c) Mutually exclusive.
Single proposal:
The cash outflows, comprising cash outlays required to carryout the
proposal capital expenditure, while the computation of the inflows after
taxes (CFAT).
Format:
Cash outflows of the new project (beginning of the period at ZERO TIME)
Cost of new project xxx
+ Installation of plant and equipment xxx
+/- Working capital requirement xxx
Determination of cash inflows: Single investment proposal (t=n-1)
TABLE – II.1
Single investment proposal format
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Years
Particulars 1 2 3 N Cash sales revenues (-) Cash operating cost Cash inflows before taxes (CFBT) (-) Depreciation taxable income (-) Tax earnings after taxes (+) Depreciation Cash inflows after tax(CFAT) (+) Salvage value (in Nth year) (+) Recovery of the working capital
Replacement situations:
In case of replacement of an existing machine by a new one the
relevant cash outflows are after tax incremental cash flows. If anew machine
is about to replace an existing machine the proceeds so obtained from its
sales reduce cash out flows required to purchase the new machine and part
of relevant cash outflows.
Mutually exclusive:
In case of mutually exclusive proposals the selection of one proposal
preludes the choice of other. The calculation of the cash flows is on lines of
similar to the replacement situations.
Element of cash flows streams:
To evaluate a project, we must determine the relevant cash flows,
which are the incremental after the cash flows associated with the project.
The cash flow stream of the conventional project, a project which involves
cash outflows followed by cash inflows comprises three basic components:
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(a) Initial investment.
(b)Operating cash flows.
(c) Terminal cash flows.
The initial investment is after tax cash outlay on capital expenditure and
networking capital.
The operating cash inflows are the after tax cash inflows resulting
from the operating of the project during the economic life.
The terminal cash inflow is after tax cash flow resulting from the
liquidation of the project at the end of its economic life.
Time horizon for analysis:
This time horizon for cash flow analysis usually established
generally the minimum of the following:
Physical life of the plant:
This refers to the period during which the plant remains in a
physically usable condition. This is the number of years the plant would
perform the function for which it had been acquired. This depends upon the
wear and tear which plant is subjected to. Suppliers of plant may provide the
information of the physical life under normal operating conditions. While
the concept of the physical life may be useful for determining the
depreciation charge, it is not very useful for investment decision-making
process.
Technological life of the plant:
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New technological developments tend to render the existing plant
obsolete. The technological life of the plant refers to the period of the time
for which the present plant would not be rendered obsolete by a new plant. It
is very difficult to estimate the technological life because any law does not
govern the phase of the new development. While it is almost certain that a
new development would occur when it would occur is anybody’s guess. Yet
an estimate of the technological life has to be made.
Product market life of the plant:
A plant may be physically usable, its technology may not be
obsolete, but the market for its products may disappear or shrink and hence
its continuance may not be justified. The product life of the plant refers to
the period for which the product of the plant enjoys reasonable satisfactory
market.
Investment horizon of the firm:
The time period for which a firm wishes to look ahead for the
purposes of investment analysis may be referred to as its investment horizon
planning. It naturally tends to vary with the complexity and size of
investment. For small investments (installation of lathe) it may be five years.
For medium size investments (expansion of the plant capacity) it may be ten
years. For large size investment (setting up a new division) it may be fifteen
years.
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COMPANY PROFILE
Hindustan Aeronautics Limited (HAL) came into existence on
1st October 1964. The Company was formed by the merger of Hindustan
Aircraft Limited with Aeronautics India Limited and Aircraft Manufacturing
Depot, Kanpur.
The Company traces its roots to the pioneering efforts of an
industrialist with extraordinary vision, the late Seth Walchand Hirachand,
who set up Hindustan Aircraft Limited at Bangalore in association with the
erstwhile princely State of Mysore in December 1940. The Government of
India became a shareholder in March 1941 and took over the Management in
1942.
Today, HAL has 16 Production Units and 9 Research and Design
Centers in 7 locations in India. The Company has an impressive product
track record - 12 types of aircraft manufactured with in-house R & D and 14
types produced under license. HAL has manufactured 3550 aircraft (which
includes 11 types designed indigenously), 3600 engines and overhauled over
8150 aircraft and 27300 engines.
HAL has been successful in numerous R & D programs developed
for both Defense and Civil Aviation sectors. HAL has made substantial
progress in its current projects:
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• Dhruv, which is Advanced Light Helicopter (ALH)
• Tejas - Light Combat Aircraft (LCA)
• Intermediate Jet Trainer (IJT)
• Various military and civil upgrades.
Dhruv was delivered to the Indian Army, Navy, Air Force
and the Coast Guard in March 2002, in the very first year of its
production, a unique achievement.
HAL has played a significant role for India's space programs by
participating in the manufacture of structures for Satellite Launch Vehicles
like
• PSLV (Polar Satellite Launch Vehicle)
• GSLV (Geo Stationary Launch Vehicle)
• IRS (Indian Remote Satellite)
• INSAT (Indian National Satellite)
There are three joint venture companies with HAL:
• BAeHAL Software Limited
• Indo-Russian Aviation Limited (IRAL)
• Snecma HAL Aerospace Pvt Ltd
Apart from these three, other major diversification projects are Industrial
Marine Gas Turbine and Airport Services. Several Co-production and Joint
Ventures with international participation are under consideration.
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HAL's supplies / services are mainly to Indian Defense Services, Coast
Guards and Border Security Forces. Transport Aircraft and Helicopters have
also been supplied to Airlines as well as State Governments of India. The
Company has also achieved a foothold in export in more than 30 countries,
having demonstrated its quality and price competitiveness.
HAL has won several International & National Awards for achievements in
R&D, Technology, Managerial Performance, Exports, Energy Conservation,
Quality and Fulfillment of Social Responsibilities.
• HAL was awarded the “INTERNATIONAL GOLD MEDAL
AWARD” for Corporate Achievement in Quality and Efficiency at
the International Summit (Global Rating Leaders 2003), London, UK
by M/s Global Rating and UK in conjunction with the International
Information and Marketing Center (IIMC).
• HAL was presented the International - “ARCH OF EUROPE” Award
in Gold Category in recognition for its commitment to Quality,
Leadership, and Technology and innovation.
• At the National level, HAL won the "GOLD TROPHY" for
excellence in Public Sector Management, instituted by the Standing
Conference of Public Enterprises (SCOPE).
The Company scaled new heights in the financial year 2004-2005 with a
turnover of Rs. 4534 Crores and export over Rs. 150.05 Crores.
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EVOLUTION AND GROWTH OF THE COMPANY
The company’s steady organizational growth over the years with consolidation and enlargement of its operational base by creating sophisticated facilities for manufacture of aircraft / helicopters, aero engines, accessories and avionics is illustrated below.
EXHIBIT-III.1
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HAL MISSION
" To become a globally competitive aerospace industry while working as an
instrument for achieving self-reliance in design, manufacture and
maintenance of aerospace defense equipment and diversifying to related
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areas, managing the business on commercial lines in a climate of growing
professional competence”
HAL VALUES
CUSTOMER SATISFACTION
HAL is dedicated to building a relationship with its customers
where it becomes partners in fulfilling their mission. It strives to understand
our customer’s needs and to deliver products and services that fulfill and
exceed all their requirements.
COMMITMENT TO TOTAL QUALITY
It is committed to continuous improvement of all its activities. It
will supply products and services that conform to highest standards of
design, manufacture, reliability, maintainability and fitness for use as desired
by our customers
COST AND TIME CONSCIOUSNESS
It believes that our success depends on their ability to continually
reduce the cost and shorten the delivery period of its products and services.
It will achieve this by eliminating waste in all activities and continuously
improving all processes in every area of our work.
INNOVATION AND CREATIVITY
It believes that our success depends on our ability to continually
reduce the cost and shorten the delivery period of our products and services.
It will achieve this by eliminating waste in all activities and continuously
improving all processes in every area of our work.
TRUST AND TEAM SPIRIT
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It believes in achieving harmony in work life through mutual
trust, transparency, co-operation, and a sense of belonging. It will strive for
building empowered teams to work towards achieving organizational goals.
RESPECT FOR THE INDIVIDUAL
It values its people. it will treat each other with dignity and
respect and strive for individual growth and realization of everyone's full
potential.
INTEGRITY
It believes in a commitment to be honest, trustworthy, and fair
in all our dealings. It commits to be loyal and devoted to its organization. It
will practice self-discipline and own responsibility for its actions. It will
comply with all requirements so as to ensure that its organization is always
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EXHIBIT-III.2
BOARD OF DIRECTORS
29
CHAIRMAN
PART TIME OFFICIAL
DIRECTORS (2)WHOLE TIME
DIRECTORS (7)PART TIME NON-
OFFICIAL DIRECTORS (6)
MD (MIG COMPLEX)
DIRECTOR (PERSONNEL)
DIRECTOR (CORP PLG & MKG)
MD (ACCYS COMLLEX)
DIRECTOR (DESIGN & DEV)
DIRECTOR (FINANCE)
MD (BANGALOOR COMPLEX)
JOINT SECRETARY (HAL)ADDL.FA (AM) & JS
G P GUPTHA
RATAN NAVAL TATA
R N BHATTACHARYA
M.K.MOITRA
S.RAVI
VICE ADMIRAL
RAMAN PURI (Retd.)
EXHIBIT-III.3
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TABLE – III.1HAL CUSTOMERS
31
International Customers Domestic Customers
• Airbus Industries, France • APPH Bolton, UK • BAE Systems, UK • Chelton, UK • Coast Guard, Mauritius • Corporate Air,
Hydraulics, UK • EADS, France • ELTA, Israel • Gorkha Airlines, Nepal • Hampson, UK • Honeywell International,
USA • Island Aviation Services,
Maldives • Israel Aircraft Industries,
Israel • Messier Dowty Ltd., UK • Mistubishi Heavy
Industries, Japan • MOOG, USA • Namibian Air Force,
Namibia • Peruvian Air Force , Peru • Rolls Royce Plc, UK • Royal Air Force, Oman • Royal Malaysian Air
Force, Malaysia • Royal Nepal Army,
Nepal • Royal Thai Air Force,
Thailand
• Air India • Air Sahara • Airports Authority of India • Bharat Electronics • Border Security Force • Coal India • Defense Research & Development
Organization • Govt. of Andhra Pradesh • Govt. of Jammu & Kashmir • Govt. of Karnataka • Govt. of Maharashtra • Govt. of Rajasthan • Govt. of Uttar Pradesh • Govt. of West Bengal • Indian Air force • Indian Airlines • Indian Army • Indian Coast Guard • Indian Navy • Indian Space Research Organization • Jet Airways • Kudremukh Iron ore Company ltd. • NALCO • Oil & Natural Gas Corporation Ltd. • Ordnance Factories • Reliance Industries • United Breweries
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• Smiths Industries, UK • Snecma, France • Strong field
Technologies, UK • The Boeing Aircraft
Company, USA • Tran world Aviation,
UAE • Vietnam Air Force,
Vietnam
FINANCIAL HIGHLIGHTS:
Hindustan Aeronautics Limited (HAL) has cruised past the
Rs.7,500-crore mark for the first time with a sales turnover of Rs.7,783.61
crores ($1.82 billion) during the Financial Year 2006-07, The Value of
Production has also gone up by 55.54% to Rs. 9,201.88 crores, while the
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Profit of the Company (Profit Before Tax) soared to Rs.1,743.60 crores,
which is an increase of 54.88% over the previous year's performance.
The highlights are given below:
Rupees in Crores
Particulars 2005-06 2006-07 Growth over Previous Year
Sales 5342 7783 45.69%
VOP 5916 9202 55.54%
Profit before tax 1126 1744 54.88%
Profit after tax 771 1149 49.03%Gross Block 1694 2081 22.85%
Welcome to the Avionics Division, Hyderabad of Hindustan Aeronautic
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s Limited.
In early sixties, it was strongly felt that our defense services
should be more self reliant in defense related equipment, electronics in
particular. This resulted in HAL setting up a full - fledged unit to cater to the
aviation electronics (AVIONICS). Thus Avionics Division, Hyderabad was
born in the year 1965.
To begin with, the Division's dedicated design team took up the task of
indigenising, the following critical avionics.
• Identification of Friend or Foe
• UHF Communication set
• V/UHF Communication System
• Automatic Direction Finder (ADF)
• Radio Altimeter
These systems were developed, qualified, flight tested and inducted
into the various MiG aircraft manufactured under license in India. Later on,
the same equipments were fine tuned to meet the requirement of other
aircraft like Kiran, Jaguar, Dornier, AN-32 and Helicopters.
Today the Division has spread its wings further to meet the
Communication and Navigation requirements of our defiance customers and
the Division is fully geared to enter the international market too.
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Products in Current Manufacturing Range
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SI. NO.
EQUIPMENTFUNCTION HIGHLIGHTS SPECIFICATIONS
1. IFF 400Identification of Friend or Foe
More than 2000 in service
Power output: > 350W< (24.5 dbw) PEAK No. of codes available 4096
2. IFF 1410A
Automatic replies to appropriate ground or airborne interrogators
Modular Construction
Additional secure mode
3. ADFAutomatic Direction Finder
About 1000 flying in various aircraft
Accuracy: ± 2%
4. VUC-201 AA combined V /UHF main communication set