Abstract
Capital budgeting decisions, being strategic in nature, are likely to have a marked bearing on profitability of corporate business enterprises. The analysis in respect of the sample companies has been carried out on the basis of the two broad parameters: (a) the investment and financing activities of the sample companies and (b) the capital budgeting practices followed by such enterprises.
Capital budgeting practices in India, at least amongst the sample companies, appear to have improved over the past two decades with an increasing number of companies using more sophisticated DCF techniques. A striking finding of the survey is that internal rate of return (IRR) is preferred over the net present value (NPV) method by most of the sample companies, in spite of the superiority of the NPV method. The theory–practice gap is a recurrent theme in the capital budgeting literature, in particular with regard to NPV. Despite the recommendations of the financial literature on using NPV as the primary technique, this research too found that respondent firms indicated a preference for IRR compared to NPV.
As far as the capital expenditure activity is concerned, the sample companies have made substantial investments in acquisition of new fixed assets. It is pertinent as well as satisfactory to note that paucity of funds is not an inhibiting factor in undertaking capital projects by the sample companies. While it is true that the postliberalisation period has witnessed a salubrious effect on their investment activity, the rate of investment in new fixed assets (measured on a year-to-year basis) has been impressive in that it has been at a rate of 18.06 % during the 11-year period (2001–2011) of the study. This is in contrast to the modest figure of less than 5 % recorded for the public sector enterprises (PSEs) over a 13-year period (1991–2003) in a separate study conducted by the authors (Jain and Yadav 2005). Above all, the global recession has not impacted, to a marked extent, the sample companies (representing vital segment of Indian economy).
As far as the financing pattern of long-term investment projects is concerned, it is satisfying to note that the sample companies are following sound policies in this regard – their fixed assets have been financed from long-term sources. Equally commendable is the aspect that their permanent working capital needs have also been financed through long-term sources of finance. This is in conformity with the sound principles of financial management.
Cost of capital constitutes an integral part of capital budgeting proposals. It is encouraging to note that the vast majority of the sample companies follow theoretically sound and conceptually correct basis of computing cost of capital, that is, weighted average cost of capital (WACC). More than two-thirds (67.85 %) of the firms have been following the appropriate WACC basis compared to other methods, suggesting a reduction in the theory–practice gap compared to the past studies. Also, consistent with finance theory, the survey reveals that the sample companies are risk-averse. Sensitivity analysis is the most popular approach used by these companies to incorporate risk in their capital budgeting decisions, followed by shorter payback period method and higher cut-off rate for more risky projects.
Another notable finding is the emergence of new techniques of real options and abandonment options as a part of practice by the sample companies, while evaluating capital budgeting proposals. This perhaps signals the adoption of emerging techniques by the sample companies, an encouraging indication of growing professionalism in their decision-making. Half of the respondent firms (50 %) used real options while evaluating their investment projects. The results are in sharp contrast with other international studies reporting low usages of the same.
Very high fixed-cost components of capital projects and the irregularities in prediction of future cash flows due to decrease in sales and increased competition seem to be the major factors leading to failures of capital budgeting decisions for the sample companies. This is perhaps a reflection of the growing challenges of a volatile global marketplace.
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Appendices
Appendices
Appendix 2.1: Impact of recent financial crisis on India
According to the remarks prepared for the International Monetary Fund (IMF)–Financial Stability Forum (FSF) high-level meeting, on the recent financial turmoil and policy responses for India, Reserve Bank of India (RBI, India’s central bank) in October 2008 stated that India had (at that time) not been seriously affected by the recent financial crisis. The reasons for the relative resilience shown by the Indian economy, the impact and likely implications have been summarised below (source: RBI website. http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/87784.pdf; Economic Surveys of India).
India has been following a rather calibrated approach to the opening up of the capital account and the financial sector. Evidence suggests that the greatest gains are obtained from the opening to foreign direct investment, followed by portfolio equity investment. The benefits emanating from external debt flows have been found to be more questionable until greater domestic financial market development has taken place.
Accordingly, while encouraging foreign investment flows (in particular, direct investment flows), a cautious approach has been adopted related to debt flows. Debt flows in the form of external commercial borrowings are subject to ceilings and some end-use restrictions, which are modulated from time to time, taking into account evolving macroeconomic and monetary conditions. Similarly, portfolio investment in government securities and corporate bonds are also subject to macro ceilings, which are also modulated from time to time.
These prudential policies have attempted to prevent excessive recourse to borrowings and dollarisation of the economy. As far as capital outflows are concerned, the policy framework has been progressively liberalised to enable the nonfinancial corporate sector to invest abroad and to acquire companies in the overseas market.
As a result of conservative/cautious policy of the Government related to financial capital inflows, investments have been predominantly financed by domestic savings in India – the current account deficit has averaged between 1 and 2% of GDP since the early 1990s. The Government’s fiscal deficit has been high by international standards but is also largely internally financed through a vibrant and well developed government securities market, and thus, despite large fiscal deficits, macroeconomic and financial stability has been maintained.
The financial sector, in particular banks, is subject to prudential regulations, both in regard to capital and liquidity (Mohan 2007). As the current global financial crisis has shown, liquidity risks could rise manifold during a crisis and can pose serious downside risks to macroeconomic and financial stability. The Reserve Bank of India has already put in place steps to mitigate liquidity risks at the very short end, risks at the systemic level as well as at the institutional level.
In addition to the exercise of normal prudential norms on the financial sector, RBI has also successively imposed additional prudential measures in respect of exposures to particular sectors, akin to a policy of dynamic provisioning. For example, in view of the accelerated exposure to the real estate sector, banks were advised to put in place a proper risk management system to contain the risks involved.
While the overall policy approach has been able to mitigate the potential impact of the turmoil on domestic financial markets and the economy, with the increasing integration of the Indian economy and its financial markets with the rest of the world, there is recognition that the country does face some downside risks from these international developments. The risks arise mainly from the potential reversal of capital flows on a sustained medium-term basis from the projected slowdown of the global economy, particularly in the advanced economies. As might be expected, the main impact of the global financial turmoil in India has emanated from the significant change experienced in the capital account. Total net capital flows fell from US$17.3 billion in April–June 2007 to US$13.2 billion in April–June 2008. Nonetheless, capital flows are expected to be more than sufficient to cover the current account deficit.
These characteristics of India’s external and financial sector management coupled with ample foreign exchange reserves (INR 15,790 billion as on 25 November 2011, up from INR 2,466.66 billion in December 2010) coverage and the growing underlying strength of the Indian economy reduce the susceptibility of the Indian economy to global turbulence (source: Reserve Bank of India website. http://www.rbi.org.in/scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=2. Accessed 4 December 2011).
However, the financial crisis in the advanced economies and the likely slowdown in these economies could have some impact on the IT sector. According to the latest assessment by the NASSCOM (the software trade association), the current developments with respect to the US financial markets are very eventful; these developments may have a direct impact on the IT industry and are likely to create a downstream impact on other sectors of the US economy and worldwide markets. About 15–18% of the business coming to Indian outsourcers includes projects from banking, insurance and the financial services sector which is now uncertain. (source: Reserve Bank of India website. http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/87784.pdf).
According to the Economic Survey of India of 2010–2011, the Indian economy has emerged with remarkable rapidity from the slowdown caused by the global financial crisis of 2007–2009. With the growth in 2009–2010 estimated at 8% by the Quick Estimates released on 31 January 2011 and 8.6% in 2010–2011 as per the Advance Estimates of the Central Statistics Office (CSO) released on 7 February 2011 the turnaround has been fast and strong. Much of the economic stress (if any) in the current year (2011) can be attributed to continued food inflation and a temporary slowdown in industrial growth (source: http://indiabudget.nic.in/. Accessed 17 November 2011).
Appendix 2.2: Mean, median and quartile values of percentage growth in gross fixed assets of constituent sectors of the sample companies over phase 1 (2001–2006) and phase 2 (2007–2011) (figures are in percentages)
Sector | Phase 1 (2001–2006) | Phase 2 (2007–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
Internet and communications technology (ICT) | 25.50 | 24.55 | 9.63 | 33.38 | 40.91 | 39.51 | 24.78 | 51.02 |
Healthcare | 23.22 | 20.14 | 12.29 | 30.38 | 29.51 | 29.63 | 21.52 | 36.74 |
Housing | 18.43 | 12.43 | 4.60 | 27.13 | 29.42 | 23.76 | 13.39 | 39.67 |
Miscellaneousa | 18.29 | 10.23 | 4.34 | 23.52 | 27.75 | 20.93 | 13.70 | 38.08 |
Metals | 17.40 | 10.89 | 4.64 | 24.42 | 26.11 | 24.01 | 15.97 | 31.61 |
Capital goods | 17.13 | 7.55 | 2.92 | 21.45 | 26.59 | 23.33 | 15.69 | 35.20 |
Transport | 15.12 | 10.83 | 5.08 | 19.83 | 26.60 | 23.91 | 15.26 | 33.87 |
Oil and gas | 14.14 | 8.18 | 4.41 | 12.63 | 23.88 | 21.10 | 12.32 | 28.90 |
Diversified | 12.78 | 3.53 | 1.71 | 12.40 | 24.92 | 23.29 | 19.54 | 27.61 |
Fast moving consumer goods (FMCG) | 12.50 | 7.61 | 3.49 | 17.32 | 21.94 | 21.87 | 13.22 | 29.07 |
Power | 10.97 | 7.33 | 3.99 | 15.42 | 18.00 | 13.17 | 8.57 | 21.79 |
Sector | Phase 1 and Phase 2 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
ICT | −2.144 | 16 | 0.048 |
Housing | −1.696 | 14 | 0.112 |
Capital goods | −1.700 | 12 | 0.115 |
Transport | −1.601 | 15 | 0.130 |
Power | −1.426 | 10 | 0.184 |
Oil and gas | −1.332 | 13 | 0.206 |
Miscellaneous | −1.302 | 14 | 0.214 |
Healthcare | −1.038 | 13 | 0.318 |
FMCG | −0.886 | 11 | 0.395 |
Diversified | −0.357 | 8 | 0.731 |
Metals | −0.141 | 17 | 0.890 |
Appendix 2.3: Mean, median and quartile values of percentage growth in gross fixed assets of constituent sectors of the sample companies over phase 3 (2007–2008) and phase 4 (2009–2011) (figures are in percentages)
Sector | Phase 3 (2007–2008) | Phase 4 (2009–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
ICT | 32.75 | 29.16 | 12.06 | 43.49 | 46.36 | 46.41 | 33.26 | 56.03 |
Housing | 28.41 | 22.11 | 13.49 | 32.76 | 30.09 | 24.87 | 13.32 | 44.27 |
Miscellaneous | 25.63 | 19.19 | 11.12 | 36.21 | 29.16 | 22.09 | 15.43 | 39.32 |
Capital goods | 25.23 | 21.21 | 10.82 | 36.37 | 27.50 | 24.74 | 18.93 | 34.43 |
Transport | 20.36 | 17.32 | 10.61 | 24.01 | 30.76 | 28.30 | 18.36 | 40.45 |
Healthcare | 20.19 | 19.08 | 11.30 | 27.76 | 35.71 | 36.67 | 28.34 | 42.72 |
FMCG | 16.09 | 11.44 | 6.26 | 16.59 | 25.84 | 28.82 | 17.86 | 37.40 |
Metals | 15.31 | 10.96 | 3.27 | 19.98 | 33.30 | 32.71 | 24.43 | 39.37 |
Oil and gas | 14.34 | 6.79 | 4.90 | 13.80 | 30.24 | 30.63 | 17.27 | 38.96 |
Power | 12.20 | 4.68 | 2.94 | 15.02 | 21.87 | 18.83 | 12.33 | 26.29 |
Diversified | 9.70 | 8.56 | 5.51 | 12.71 | 35.07 | 33.10 | 28.89 | 37.54 |
Sector | Phase 3 and Phase 4 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
Metals | −2.257 | 17 | 0.037 |
Diversified | −1.743 | 7 | 0.125 |
Healthcare | −1.324 | 13 | 0.208 |
Oil and gas | −1.28 | 13 | 0.223 |
Power | −1.272 | 10 | 0.232 |
Capital goods | 0.919 | 12 | 0.376 |
Transport | −0.806 | 16 | 0.432 |
Miscellaneous | 0.321 | 15 | 0.753 |
ICT | 0.259 | 16 | 0.799 |
Housing | 0.132 | 12 | 0.897 |
FMCG | −0.044 | 11 | 0.966 |
Appendix 2.4: ANOVA of the consolidated sample and the constituent sectors of the sample companies based on growth in gross fixed assets over phase 1 (2001–2006) and phase 2 (2007–2011) and phase 3 (2007–2008) and phase 4 (2009–2011)
Sector | Phase 1 and Phase 2 | Phase 3 and Phase 4 | ||
|---|---|---|---|---|
F | Significance | F | Significance | |
Consolidated | 3.364 | 0.000 | 3.684 | 0.000 |
Housing | 4.714 | 0.038 | 0.093 | 0.762 |
ICT | 3.137 | 0.086 | 0.077 | 0.783 |
Transport | 2.769 | 0.106 | 1.059 | 0.311 |
Capital goods | 1.281 | 0.269 | .363 | 0.553 |
Power | 1.135 | 0.298 | 0.000 | 0.998 |
Miscellaneous | 0.932 | 0.342 | 0.086 | 0.772 |
FMCG | 0.581 | 0.454 | 0.001 | 0.971 |
Oil and gas | 0.436 | 0.515 | 0.785 | 0.383 |
Healthcare | 0.391 | 0.537 | 1.518 | 0.229 |
Diversified | 0.175 | 0.681 | 4.068 | 0.062 |
Metals | 0.015 | 0.903 | 2.594 | 0.117 |
Appendix 2.5: Mean, median and quartile values of fixed assets (net) to permanent capital employed of constituent sectors of the sample companies over phase 1 (2001–2006) and phase 2 (2007–2011) (figures are in percentages)
Sector | Phase 1 (2001–2006) | Phase 2 (2007–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
Transport | 56.60 | 57.50 | 44.20 | 72.80 | 44.20 | 46.80 | 32.90 | 53.90 |
Miscellaneous | 50.90 | 49.60 | 35.90 | 70.40 | 44.00 | 44.60 | 32.60 | 55.20 |
Oil and gas | 49.20 | 49.90 | 37.20 | 69.70 | 38.50 | 29.80 | 12.70 | 65.00 |
Metals | 47.60 | 48.10 | 33.90 | 61.80 | 39.10 | 33.33 | 22.00 | 53.70 |
Housing | 46.50 | 45.60 | 27.50 | 65.00 | 35.90 | 36.30 | 7.80 | 59.60 |
Healthcare | 42.50 | 41.20 | 30.00 | 55.40 | 28.10 | 26.60 | 16.00 | 39.90 |
Power | 41.50 | 46.90 | 30.90 | 53.20 | 27.60 | 25.50 | 11.60 | 40.30 |
FMCG | 36.20 | 35.10 | 5.92 | 49.20 | 40.40 | 44.30 | 6.14 | 58.70 |
ICT | 35.30 | 32.80 | 20.60 | 45.70 | 35.30 | 31.50 | 17.40 | 46.70 |
Diversified | 35.00 | 43.50 | 31.00 | 61.50 | 23.90 | 21.10 | 4.20 | 35.60 |
Capital goods | 31.00 | 28.39 | 21.08 | 37.10 | 29.22 | 22.18 | 10.90 | 38.35 |
Sector | Phase 1 and Phase 2 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
Healthcare | 4.412 | 13 | 0.001 |
Transport | 3.500 | 16 | 0.003 |
Housing | 3.369 | 16 | 0.004 |
Diversified | 2.584 | 8 | 0.032 |
Oil and gas | 2.235 | 14 | 0.042 |
Miscellaneous | 1.850 | 15 | 0.084 |
Metals | 1.679 | 17 | 0.111 |
Power | 1.071 | 10 | 0.310 |
ICT | −0.281 | 17 | 0.782 |
Capital goods | 0.162 | 12 | 0.874 |
FMCG | −0.142 | 11 | 0.889 |
Appendix 2.6: Mean, median and quartile values of fixed assets (net) to permanent capital employed of constituent sectors of the sample companies over phase 3 (2007–2008) and phase 4 (2009–2011) (figures are in percentages)
Sector | Phase 3 (2007–2008) | Phase 4 (2009–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
Transport | 48.20 | 49.50 | 39.90 | 57.80 | 41.50 | 45.10 | 28.20 | 51.30 |
Miscellaneous | 44.90 | 46.30 | 36.10 | 54.30 | 43.40 | 43.50 | 30.30 | 55.80 |
Metals | 41.80 | 35.00 | 24.70 | 55.70 | 37.20 | 32.10 | 20.20 | 52.40 |
Oil and gas | 40.60 | 30.40 | 18.80 | 70.10 | 37.10 | 29.40 | 8.70 | 61.60 |
FMCG | 39.90 | 47.10 | 5.83 | 55.60 | 40.70 | 42.30 | 6.34 | 60.80 |
ICT | 36.50 | 32.70 | 19.90 | 43.20 | 34.50 | 30.70 | 15.80 | 49.10 |
Housing | 35.60 | 36.40 | 8.00 | 60.00 | 36.20 | 36.30 | 7.70 | 59.40 |
Capital goods | 31.20 | 23.90 | 12.30 | 43.20 | 27.90 | 21.00 | 10.00 | 35.10 |
Healthcare | 30.90 | 27.40 | 19.20 | 43.20 | 26.20 | 26.00 | 13.80 | 37.70 |
Power | 26.50 | 28.60 | 15.30 | 36.50 | 28.30 | 23.50 | 9.20 | 42.90 |
Diversified | 25.70 | 23.20 | 4.90 | 38.30 | 22.60 | 19.70 | 3.70 | 33.70 |
Sector | Phase 3 and Phase 4 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
Healthcare | 2.362 | 13 | 0.034 |
Diversified | 2.085 | 8 | 0.071 |
Transport | 1.732 | 15 | 0.104 |
Metals | 1.304 | 17 | 0.210 |
ICT | 0.937 | 17 | 0.362 |
Capital goods | 0.632 | 12 | 0.539 |
Oil and gas | 0.541 | 15 | 0.596 |
FMCG | 0.479 | 11 | 0.641 |
Power | −0.394 | 11 | 0.701 |
Housing | 0.315 | 17 | 0.756 |
Miscellaneous | 0.202 | 14 | 0.843 |
Appendix 2.7: ANOVA of the consolidated sample and the constituent sectors of the sample companies based on fixed assets to permanent capital employed over phase 1 (2001–2006) and phase 2 (2007–2011) and phase 3 (2007–2008) and phase 4 (2009–2011)
Sector | Phase 1 and Phase 2 | Phase 3 and Phase 4 | ||
|---|---|---|---|---|
F | Significance | F | Significance | |
Consolidated | 2.743 | 0.003 | 2.285 | 0.013 |
Healthcare | 6.343 | 0.018 | 0.567 | 0.458 |
Transport | 4.483 | 0.042 | 1.089 | 0.304 |
Metals | 1.621 | 0.212 | 0.129 | 0.721 |
Miscellaneous | 1.087 | 0.306 | 0.189 | 0.667 |
Housing | 1.065 | 0.310 | 0.014 | 0.908 |
Oil and gas | 1.036 | 0.317 | 0.082 | 0.777 |
Diversified | 0.675 | 0.423 | 0.070 | 0.794 |
Power | 0.206 | 0.654 | 0.532 | 0.473 |
ICT | 0.036 | 0.851 | 0.094 | 0.762 |
Capital goods | 0.022 | 0.885 | 0.102 | 0.752 |
FMCG | 0.011 | 0.919 | 0.066 | 0.800 |
Appendix 2.8: Mean, median and quartile values of fixed assets (net) + net working capital to permanent capital employed of constituent sectors of the sample companies over phase 1 (2001–2006) and phase 2 (2007–2011) (figures are in percentages)
Sector | Phase 1 (2001–2006) | Phase 2 (2007–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
Capital goods | 71.20 | 78.50 | 58.60 | 87.80 | 72.70 | 80.10 | 64.80 | 92.60 |
Housing | 70.80 | 77.90 | 54.60 | 87.10 | 68.40 | 70.30 | 59.10 | 84.40 |
Miscellaneous | 70.60 | 73.50 | 61.30 | 84.40 | 66.80 | 70.50 | 49.10 | 83.30 |
Transport | 67.30 | 67.80 | 51.50 | 85.90 | 62.50 | 63.20 | 50.90 | 81.20 |
Healthcare | 66.90 | 68.80 | 49.50 | 84.30 | 64.40 | 69.60 | 48.00 | 85.20 |
ICT | 66.60 | 66.60 | 35.30 | 78.30 | 58.80 | 62.30 | 45.40 | 75.90 |
Oil and gas | 62.40 | 67.80 | 42.30 | 84.20 | 62.70 | 72.90 | 46.80 | 85.70 |
Metals | 59.40 | 59.60 | 44.00 | 80.30 | 57.20 | 56.70 | 42.70 | 71.70 |
Diversified | 55.40 | 59.00 | 40.40 | 80.00 | 43.50 | 41.00 | 29.50 | 51.80 |
Power | 46.80 | 49.00 | 36.50 | 61.10 | 46.50 | 48.20 | 35.30 | 54.50 |
FMCG | 40.00 | 35.20 | 16.60 | 60.70 | 45.30 | 47.50 | 18.30 | 68.20 |
Sector | Phase 1 and Phase 2 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
Diversified | 2.153 | 8 | 0.063 |
Housing | −1.348 | 16 | 0.197 |
ICT | 0.916 | 15 | 0.374 |
Oil and gas | −0.751 | 13 | 0.466 |
Miscellaneous | 0.711 | 13 | 0.490 |
FMCG | −0.450 | 11 | 0.662 |
Capital goods | −0.349 | 12 | 0.733 |
Metals | −0.251 | 14 | 0.805 |
Transport | 0.215 | 15 | 0.833 |
Power | −0.201 | 10 | 0.845 |
Healthcare | −0.168 | 12 | 0.869 |
Appendix 2.9: Mean, median and quartile values of fixed assets (net) + net working capital to permanent capital employed of constituent sectors of the sample companies over phase 3 (2007–2008) and phase 4 (2009–2011) (figures are in percentages)
Sector | Phase 3 (2007–2008) | Phase 4 (2009–2011) | ||||||
|---|---|---|---|---|---|---|---|---|
Mean | Median | Quartile 1 | Quartile 3 | Mean | Median | Quartile 1 | Quartile 3 | |
Capital goods | 74.30 | 81.60 | 69.90 | 91.30 | 71.60 | 79.10 | 61.50 | 93.60 |
Miscellaneous | 69.30 | 68.50 | 54.30 | 82.00 | 65.20 | 71.90 | 45.60 | 84.10 |
Oil and gas | 67.70 | 80.90 | 53.80 | 93.00 | 59.40 | 67.60 | 42.10 | 80.90 |
Transport | 66.80 | 69.90 | 54.90 | 82.80 | 59.60 | 58.70 | 48.30 | 80.20 |
Housing | 65.00 | 67.30 | 55.10 | 80.20 | 70.80 | 72.40 | 61.80 | 87.20 |
Healthcare | 60.70 | 67.40 | 38.20 | 87.30 | 67.00 | 71.20 | 54.60 | 83.80 |
ICT | 59.90 | 63.60 | 40.20 | 81.80 | 58.10 | 61.40 | 48.90 | 72.00 |
Metals | 59.10 | 59.90 | 46.10 | 71.40 | 55.90 | 54.60 | 40.50 | 71.80 |
Power | 44.00 | 45.70 | 32.80 | 50.60 | 48.30 | 49.90 | 37.00 | 57.00 |
Diversified | 36.50 | 40.50 | 24.40 | 44.30 | 48.10 | 41.30 | 32.90 | 56.80 |
FMCG | 35.80 | 33.60 | 7.60 | 60.50 | 51.60 | 56.70 | 25.40 | 73.40 |
Sector | Phase 3 and Phase 4 | ||
|---|---|---|---|
t | df | Significance (2-tailed) | |
Transport | 2.177 | 13 | 0.049 |
FMCG | −1.796 | 9 | 0.106 |
Oil and gas | 1.687 | 11 | 0.12 |
Metals | 1.088 | 13 | 0.296 |
Miscellaneous | 0.863 | 12 | 0.405 |
Healthcare | −0.829 | 11 | 0.425 |
Diversified | −0.686 | 7 | 0.515 |
Capital goods | 0.672 | 10 | 0.517 |
Power | −0.598 | 7 | 0.568 |
ICT | 0.582 | 12 | 0.571 |
Housing | −0.567 | 14 | 0.579 |
Appendix 2.10: ANOVA of the consolidated sample and the constituent sectors of the sample companies based on fixed assets and net working capital to permanent capital employed over phase 1 (2001–2006) and phase 2 (2007–2011) and phase 3 (2007–2008) and phase 4 (2009–2011)
Sector | Phase 1 and Phase 2 | Phase 3 and Phase 4 | ||
|---|---|---|---|---|
F | Significance | F | Significance | |
Consolidated | 1.304 | 0.227 | 4.669 | 0.000 |
Diversified | 1.544 | 0.232 | 0.811 | 0.382 |
Capital goods | 0.899 | 0.353 | 2.691 | 0.115 |
ICT | 0.857 | 0.361 | 0.017 | 0.897 |
Housing | 0.657 | 0.423 | 0.391 | 0.536 |
Metals | 0.268 | 0.608 | 0.357 | 0.555 |
Oil and gas | 0.219 | 0.644 | 1.053 | 0.315 |
FMCG | 0.109 | 0.744 | 1.900 | 0.183 |
Miscellaneous | 0.067 | 0.797 | 0.001 | 0.982 |
Transport | 0.031 | 0.860 | 0.854 | 0.363 |
Power | 0.018 | 0.894 | 0.060 | 0.809 |
Healthcare | 0.011 | 0.916 | 0.564 | 0.460 |
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Jain, P.K., Singh, S., Yadav, S.S. (2013). Capital Budgeting Decisions. In: Financial Management Practices. India Studies in Business and Economics. Springer, India. https://doi.org/10.1007/978-81-322-0990-4_2
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