Lakshya 2011

SM

Orchestrating Corporate Excellence

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Lakshwiz
D-Street Finance Case Study Competition

Lakshya 2011

CASE STUDY BOT ROAD PROJECT

INTRODUCTION
State Government has identified improvement of the road network in the State as the key focus area for overall development of the State. It has identified 10 road stretches (constituting around 20% of the state road network, which carries approximately 80% of the traffic) for development as part of Phase 1 of the road development programme. The State Govt. has entrusted State Nirman Nigam Limited (SNNL) with the development of these road stretches on Build Operate and Transfer (BOT) basis. SNNL is a fully owned Company of State Government entrusted with the task of spearheading the development of road stretches in the State. To facilitate development of these stretches through private sector participation, SNNL envisages providing grant/subsidy to the developers. The subsidy is being funded by the State Infrastructure Investment Fund Board which has been constituted under a legislative act. SNNL has awarded a concession (of 14 years and 11 months) to Infrastructure Developers Private Limited (IDPL) for strengthening, upgradation, operation and maintenance of 134 kilometres (kms) of State Highway 25 (SH-25) between the towns of Umer and Jhunjhunu (Project) in the State. IDPL is a special purpose vehicle set up by M/s Priya Constructions, M/s Vedprakash Highways Ltd and M/s ABC Constructions for undertaking implementation of the Project. The Project forms a crucial link between two important towns in the state right upto the border of the state. It also provides a shorter alternate route between the two main state towns for long distance traffic plying between Mumbai and Delhi. The cost of the Project, estimated at Rs 80 crore is proposed to be financed by way of equity capital of Rs. 18.81 crore, rupee debt of Rs. 37.63 crore, capital grant from SNNL of Rs. 22.33 crore and internal accruals amounting to Rs. 1.23 crore. The Company has approached the Bank for rupee debt assistance to the extent of Rs. 37.63 crore.

SPONSOR BACKGROUND Priya Construction

M/s. Priya Construction is a partnership firm of Mr. Bansal and his mother. The firm has been operating in the area of construction of roads and bridges and other civil works for past eight years and has executed number of road projects in the State. The firm obtained an A-1 category registration with the State Government within a period of 4 years from commencement of operation. This license is granted by the State PWD based on past experience, track record and availability of construction machinery & equipment and entitles the contractor to undertake contracts of any value. The firm employs 60 professional employees including 50 technically qualified executives.

Lakshya 2011

Summary of the past financials of the firm are as follows: (Rs crore) 200 FY ending March 31, 2008 2010 9 Operating Income 2.41 3.22 4.41 Expenses 1.96 2.65 3.66 Gross Profit 0.45 0.56 0.76 Gross Margin 18.7% 17.5% 17.1% Profit Before Tax 0.09 0.09 0.13 (PBT) Profit After Tax (PAT) 0.06 0.06 0.09 Gross Cash accruals 0.29 0.26 0.31 Share Capital 0.23 3.58 2.31 Net worth 0.23 3.58 2.31 Total Debt 1.00 1.07 1.47 Debt Equity Ratio 4.32 0.30 0.64 The firm has working capital limits with United Bank. The bank has given a satisfactory report on the firm. Vedprakash Highways Ltd It is a closely held limited company promoted by Mr. Vedprakash and Mr. Piyush Agrawal. Both the promoters have experience over 15 years in civil construction and developing BOT projects in road sector. In the past, both promoters have undertaken several toll collection contracts at various places including Raipur, Goa, Indore, Ajmer etc. The Company was incorporated in 2001 with the objective of constructing and developing infrastructure projects in the roads sector on BOT basis. The company has successfully completed 4 BOT road projects till date and has also been awarded ISO 9002 certification. The firm employs 87 professional employees including 65 technically qualified executives. Summary of the past financials of the firm are as follows: (Rs. crore) FY ending March 31, 2008 2009 2010 2.91 4.33 8.01 Operating Income 0.47 0.57 1.41 Expenses 2.44 3.75 6.59 Gross Profit 83.75% 86.69% 82.36% Gross Margin 1.17 0.60 0.30 Profit Before Tax (PBT) 1.17 0.55 0.30 Profit After Tax(PAT) 1.41 2.97 4.49 Gross Cash accruals 3.60 6.21 8.11 Share Capital 4.05 7.21 9.41 Net worth 5.46 15.21 20.12 Total Debt 1.35 2.11 2.14 Debt Equity Ratio In FY 2010, income increased by 84% primarily on account of commencement of tolling at one of its road projects. The increase in debt equity ratio in FY 2010 was also due to additional loans taken for the above project which was assisted by IDBI Bank through term loans amounting to Rs. 12 crore. However, profit

declined during the year as a result of increased financing charges and higher depreciation. Currently the company is executing construction contracts of around Rs 10.5 crore including XYZ Road Project (Rs. 2.3 crore) and UPW Road Project (Rs. 8.2 crore). These projects are expected to be completed over the next 2 years. The company has been provided financial assistance by Allahabad Bank and IDBI Bank. We have received satisfactory reports from the banks. ABC Construction ABC Construction is a proprietorship firm of Maninder Verma who has around 23 years of experience in handling medium and large-scale civil construction projects in various industrial sectors. The firm was incorporated in 1999 and has completed construction projects in fields of fertilizers, chemicals, petrochemicals, raw water treatment, effluent treatment, sewage treatment, road and drain work and canal works. The client list of the firm includes refineries, fertiliser companies NTPC, Tata Fertilisers, Voltas, Petronet LNG etc. The registered office of the firm is at Jaipur. The firm employs 120 professional employees including 85 technically qualified executives. Summary of the past financials of the firm are as under: FY ending March 31 Operating Income Expenses Gross Profit Gross Margin Profit Before Tax (PBT) Profit After Tax(PAT) Gross Cash accruals Share Capital Net worth Total Debt 2008 29.35 23.82 5.53 18.84% 1.97 1.21 1.93 3.56 3.56 0.03 2009 36.81 30.98 5.83 15.83% 2.24 1.83 2.76 5.13 5.13 0.16 (Rs. crore) 2010 46.49 40.42 6.07 13.06% 4.41 3.36 3.74 5.01 5.01 0.02

The income of the firm increased by Rs. 9.68 crore in 2009-2010. However, gross margins reduced from 15.8% in FY2009 to 13.06 % in FY2010 on account of increasing competition in the construction industry. The company has a current order book position of around Rs 45 crore, which includes road construction work in a Road project in West Bengal (Rs. 10 crore) and civil works at an LNG terminal (Rs. 9.32 crore). These projects are expected to be completed over the next 18 months. The firm has working capital limits with Dena Bank. The bank has given a satisfactory report on the firm.

OWNERSHIP STRUCTURE AND MANAGEMENT

Shareholding The proposed shareholding is as under: Shareholders Priya Construction Vedprakash Highways ABC Construction

% of Total Equity 48% 26% 26%

As per the Memorandum of Understanding and draft Shareholders Agreement, Priya Construction is the lead member for the Project with full responsibility for overall control of the works, ABC Construction will be responsible for the deployment of equipment and machinery required for execution of earth work and Vedprakash shall be responsible for project planning, supervision, quality control and asphalting work. The authorised share capital of the Company is Rs. 1 crore which would need to be enhanced in line with the total equity contribution. The day-to-day affairs of the company are being looked after by Mr. Bansal who is assisted by a Project Manager and a team of 4 Project Engineers. The Company has also employed the services of K. Lal who is retired Engineer in Chief, PWD for advising the company on various matters relating to design and quality control. None of the sponsors are in the RBI defaulters list. TRANSACTION STRUCTURE

A snap shot of the transaction structure and the Project participants is as follows:

Concession Agreement As mentioned earlier, SNNL has granted a concession of 14 years, 10 months and 22 days to IDPL for the Project stretch. SNNL, the concessioning authority for the Project, is a public limited company fully owned by State Govt., established for spearheading development of road network in the State. Under the road development programme in the state, Govt. had identified 11 road projects with an overall length of 2062 kms. and costing approx. Rs 1100 crore, for first phase of development. Govt. has entrusted SNNL with development of these road corridors. SNNL has taken over development of 5 road corridors as first phase of the programme. This project stretch on State Highway 25 is one of these 5 road corridors. SNNL is providing grant/subsidy to the developers of these projects to attract private sector participation. The fund required for the subsidy has been raised under an Act . The highlights of the same are as follows: The Act was enacted to enable raising of Funds for infrastructure projects in the State; Under the Act, State Govt. has framed a scheme by the name of Infrastructure Development Fund Scheme 2009 for mobilisation of resources for investments in select infrastructure project in the state; State Govt. has constituted a Fund Board for the administration of the fund and supervision of the projects financed through the fund. The fund shall be utilised to finance investment in infrastructure projects in the State either directly or through any government body or corporation. The Chief Secretary of the state has been appointed Chairman of the Board. The Act empowers the Board to borrow any sum required for infrastructure project development through issue of bonds or debentures to banks or Institutions upto the extent approved by State Government; The Fund Board would receive allocation from the State Govt. out of the annual budget of Public Works Department (PWD) for meeting debt service obligations. Initially, an amount of Rs. 500 crore has been approved by the Fund Board for the road projects and an amount of Rs. 80 crore has already been disbursed to SNNL.

The CA for the Project is generally in line with the provisions of Model Concession Agreement (MCA) finalised by NHAI for toll road projects. EPC Contract IDPL proposes to sign a fixed time fixed price EPC contract with all the promoters who shall be jointly and severally liable for completing widening and strengthening works on the Project stretch. The EPC contractors shall be responsible for design, engineering, procurement, construction and commissioning of the facility within the stipulated time frame. Each contractor shall be responsible individually for a particular section of Project stretch which would be detailed in the contract. The salient features of proposed contract, which is under finalisation, are as follows:

Contractor(s)

Priya Construction, Vedprakash Highways and ABC Construction Design, engineering, procurement, construction, operations and maintenance (during the construction period) Rs. 70 crore 18 months Bank guarantee equivalent to 10% of the contract value Nil 2.5% of each invoice raised to be reimbursed after the Defects Liability Period. 12 months To cover all fixed costs; Overall cap of 10% of the contract value.

Scope of Work Contract Value Time Period Performance Guarantee Mobilisation Advance Retention Money Defects Liability period Liquidated Damages

Independent Consultant The CA requires appointment of a reputed engineering firm as an Independent Consultant (IC) for the Project. The major responsibilities of the IC include, monitoring on behalf of State Govt. the design, construction, operation and maintenance of the facility and compliance by the concessionaire under the CA. Upon testing and commissioning of the facility, the IC would issue the Completion Certificate. During the operations phase, IC would monitor the operation and maintenance of the facility to ensure that the performance standards are adhered to by the concessionaire. Lenders Engineer Bank has appointed Halcrow as Lenders Engineer for the Project. The current scope of work includes traffic study for the Project and undertaking a cost due diligence of the project prior to financial close. The terms of reference for the LE would be expanded to include , monitoring and supervision of the Project during construction and operations period on behalf of lenders. Halcrow has substantial experience in road projects and has been working on some NHAI projects. Insurance Consultant The Bank has appointed an Insurance Consultant for advising on insurance package during construction and operations period. The Consultant has considerable experience in designing insurance package for road sector projects in India. PROJECT DETAILS

Project Profile The Project involves strengthening, widening, upgradation, operation and maintenance of Umer Jhunjhunu road on BOT basis. The Project Road extends

over a distance of 134 Km. from Km. 58 to Km. 192 on SH-25 running North South through the State. The Project road passes through important settlements like Ghaisa, Timadia, Agha, Saaner and Siyat and traverses though predominantly agriculture districts of Sajjanpur and Umer. Scope of Work The scope of work includes: Strengthening and widening to intermediate lane of 5.5 m carriageway with 1.5 m wide hard shoulders and 1.0 m soft shoulders to meet 80 km per hour design speed standards; Strengthening of 40 minor bridges and 2 major bridges; Reconstructing of 34 culverts, widening of 9 culverts and minor repairs of other 27 culverts; Major and minor junction improvements as per relevant IRC codes; Providing roadside drains in cut, fill, high embankment portions, road junctions, etc. Construction of covered masonry drains in built up area; Around 10 km of bypass around a town which passes through forest area. Construction of 3 toll plazas (two plazas of 6 lanes each and one of 4 lane) for which additional land has to be obtained; Planting of trees and shrubs and landscaping within the ROW; and Providing markings, signage and road-side furniture.

In addition to the construction, IDPL is responsible for O&M of the stretch during the life of the concession period. Land State Government is responsible for handing over physical possession of the project site free from encumbrance together with the necessary rights of way for implementing the Project within 90 days of signing of CA. The CA was signed on November 16, 2010. Environmental due-diligence While the State government has applied for the Environmental Clearance from the MoEF and Forest department for the concerned 10 km stretch, all the other clearances and permits for the individual units are in the process of being acquired. Obtaining these other permits is the responsibility of the EPC contractor. EPC Arrangements Design The design of the road stretch is proposed to be followed as per the DPR prepared by LASA. The design of the bridges/culverts has been carried out by Mr. Lal and his team.

Schedule of implementation The Project stretch has been divided into two sections i.e. from km 58 to km 128 (Section I) and from km 128 to km 192 (Section II). Implementation would start with patchwork of existing road for both the sections. Simultaneously, the road strengthening work shall be taken up for section 1 of the Project stretch with completion targeted within 9 months from the start of the patch work. Road work for Section 2 shall be taken up after substantial portion of the road work of Section 1 has been completed and shall be completed within 18 months of the commencement of patch work. As per the current status, patch repair is nearing completion (93% completed). Shoulder work is in progress. Repair of 4 minor bridges, 1 major bridge and 8 culverts has been completed. Further, reconstruction of 7 culverts has also been completed. PROJECT COST

The summary of Project cost is as follows: Base Construction Cost (EPC Contract) Preliminary & Preoperative Expenses Interest During Construction Debt Service Reserve (DSR) Provision for Contingency Total Project Cost Rs.(Crores) 70.00 2.99 3.49 1.42 2.10 80.00 R s . c r o r e

The Base construction cost is based on the EPC contract value for the Project. This cost translates to Rs. 52.2 lakh/km of the Project stretch. The EPC cost is low as the construction activities involve only strengthening of existing road without any new road construction. Lenders Engineer has independently estimated the construction cost of the Project and has estimated the cost at Rs. 72 crore which is within 5% of EPC price. Preliminary and preoperative expenses include independent consultant fee, financing charges, lenders engineers fee etc. DSR to the extent of first quarters debt service obligation has been funded upfront as part of the project cost. To take care of unforeseen circumstances, a contingency provision equivalent to 3% of the construction cost has been made in the Project cost. MEANS OF FINANCE

The Company proposes to finance the Project at a debt-equity ratio of 2:1 (0.9:1 including Grant). The proposed means of financing is as under:

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Equity Capital Grant Term Debt Internal Accruals Total Funds

(Rs crore) 18.81 22.33 37.63 1.23 80.00

% of Total Funds 23.52% 27.91% 47.04% 1.53% 100%

The sponsors contribution for the project will be met by the 3 promoters in proportion to their respective shareholding. This understanding is proposed to be formalised through a Shareholders Agreement to be finalised to the satisfaction of the lenders. Priya Construction proposes to raise its share of equity contribution (around Rs 9 crore) from relatives out of which around Rs 4 crore has already been raised and invested in the Project. Vedprakash and ABC Construction would fund their equity contribution (Rs 4.9 crore each) through internal accruals. It may be mentioned that during FY 2009, Vedprakash had a gross cash accrual of Rs 4.49 crore and ABC Construction had a gross cash accrual of Rs 3.74 crore. SNNL has committed a grant amount of Rs. 22.33 crore to the Project, which will be disbursed in equal tranches of 10% each along with pro-rata contribution by sponsors and lenders. SNNL has agreed to deposit the prospective one quarter grant requirement into the Project escrow account. As per the CA, IDPL has the right to commence tolling on the Project road on completion of first stretch of 65 km (from Km 58 to Km 123) and after completing the patch work on the balance section. As per the current status of implementation, the Company expects to commence tolling by end December 2011. However, we have assumed commencement of tolling by February 2012 and consequent toll collection to the extent of Rs 1.23 crore till COD. This revenue (estimated for a period of about 7 months) is proposed to be invested into the Project as full COD assumed from September 2012. The bank has been mandated as Arranger for syndicating the debt requirement for the Project. The bank proposes to sanction the entire debt for the Project and down-sell a part of the debt subsequently to commercial banks. It may be mentioned that in-principle sanctions have been received from SBI and PNB for Rs. 15 crore and Rs. 10 crore respectively. As on February 2011, the Company had incurred an expenditure of Rs. 4.53 crore on the Project. The expenditure has been financed by sponsors in the form of paid up equity (Rs. 2.52 crore) and unsecured debt (Rs. 2.01 crore). TRAFFIC ANALYSIS The Project stretch constitutes a critical link of an important route within the State connecting an important commercial town in the state and Delhi. In addition to the above, there are 2 main alternatives to this route as given below: (i) National Highway 3 (NH3) between Umer and town E, NH21 between town E and Jaipur and NH8 between Jaipur and Delhi; and (ii) NH3 between Umer and town Q and NH2 between town Q and Delhi.

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While the Project road stretch is proposed to be developed by IDPL, various contiguous stretches are at various stages of implementation. On completion of the above stretches, the above route will provide an improved link between state town and Delhi (total distance 815 kms), and will emerge as a competitive alternative to the available other three alternative routes given below: Route 1: Route 2: Route 3:

Route 1 on NH3 & NH2 is generally economical when compared to the Project stretch. However, this is not a preferred route of truck operators due to daytime traffic restrictions on many cities enroute and an additional state border crossing and permit requirement of the adjoining State (total distance of 800 km). Route 2 is being used by part of freight traffic coming from Jaipur having destination upto the beginning of the project stretch at Jhunjhunu. The traffic then gets diverted towards town E as the present condition of the project road stretch is extremely poor. Therefore despite the extra distance of 80 km as compared with using the Project stretch, freight traffic prefers this alternative at present (total distance 894 km). The alternative Route no. 3 is being used by most of the freight traffic as road conditions are generally good. However, on completion of the Project stretch, Route 2 would provide a distance saving of at least 80 kms to this route (total distance 897 km). Past Traffic Data Analysis of past traffic data reveals that traffic has significantly declined over the last 4 years on account of poor conditions of the road. This is despite the Project stretch being the shortest route between Umer and Jhunjhunu. Further commercial traffic has declined from 2005 levels of 1000 trucks per day to 600 trucks per day currently. Traffic Surveys The following traffic surveys were carried out by the LE for the stretch : 7 day traffic volume count surveys at two locations on the project road to derive Average Daily Traffic (ADT). In addition 3 day traffic volume count surveys at two locations of the Project Road to understand the variation in traffic intensity along the Project road. Further, 1 day count was also taken on NH3 to determine the traffic on this corridor which forms part of alternative routes to the Project stretch; Origin-Destination (O-D) surveys for 24 hours at two locations on the Project road and on NH3 to assess travel pattern and likely diversion to/from the Project road;

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Average Daily Traffic (ADT)

The summary of ADT, in terms of vehicles and PCU at the five count locations is given below:
Figure : Traffic Survey Locations Link-wise Traffic on the Project Road (vehicles / day) Vehicle Type Car Bus LGV 2 & 3 -Axle Truck MAV Two-Wheeler (Link 1) (Link 2) (Link 3) 390 487 212 278 293 144 121 159 55 561 25 1233 680 4 582 420 0 1003 (Link4) 84 151 27 554 2 377 Through Traffic on the Project Road 13 52 9 334 2 0

Summary of the traffic counts is as follows: The average daily traffic volumes on the project road range between 1,605 vehicles per day (3,000 PCUs) on Link-4 to 2615 vehicles per day (6000 PCUs) on Link-2; The traffic indicates no significant traffic generators along the project road and the traffic, therefore, is predominantly through traffic except on Link-1 due to LPG bottling plant and Link-2 where the number of trucks is slightly higher. This is due to the presence of stone crusher plants, from where the material is being transported by the trucks to the nearby corridors, which are being constructed or improved; The bus traffic is higher on Link-1 and 2 due to interaction of P and Q towns with commercial capital town of state. Moreover, bus traffic on Link-2 is more than the Link-1 bus traffic due to the presence of major bus stand at P town.

Origin Destination (OD) Survey In order to assess the percentage of through traffic on the Project road and to understand the travel demand pattern in the region, OD surveys were carried out on the Project road and on NH3. The travel characteristics obtained by O-D surveys facilitate the identification of (i) local and through traffic on the Project road, (ii) potential divertible traffic from Project road to various alternative routes, (iii) potential divertible traffic from NH3 to Project road, and (iv) the tollable traffic at the proposed toll plazas. The travel pattern observed on NH3 was analyzed to determine the potential traffic that is likely to divert on to the Project road after the road is improved. For the purpose, the traffic originating/destining at or south of project stretch and destining/originating at northern states was only considered. The potential divertible traffic is given in following table:

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S. No. Vehicle Type 1 2 3 4 LGV 2 -Axle Truck 3 -Axle Truck MAV

Traffic bound from south of project stretch to northern states State 1 State 2 State 3 State 4 State5 9 11 57 9 4 299 107 516 85 87 5 3 22 5 2 2 4 14 0 2

Traffic Assignment In order to estimate the future travel demand of the Project stretch, the traffic was assigned using a Multinomial Logit Model based multi-path traffic assignment procedure. The technique assigns the traffic among a set of reasonable paths between each pair of zones. The existing carriageway width of the Project Road generally varies between 4.8 and 8m (7 to 8m in urban/built-up area; 4.6m in two small stretches; absent in few stretches). Currently the Project Road is in very poor condition. Due to very bad condition of shoulders (non-existent in many stretches), the Project Road at present is functioning effectively as a single lane road. With the upgradation of the Project Road to intermediate lane configuration with improved riding surface and shoulders and upon the imposition of tolls on the project road, traffic is likely to shift from/to NH3 to/from Project Road. In order to estimate this shift, the travel pattern presented under the combined O-D matrix (combination of O-D matrices estimated for project road and NH3) was assigned on to the road network using the proposed assignment technique. While some part of the current traffic on the stretch is expected to shift to NH3 due to incidence of tolls, a large part of the NH3 traffic is also expected to shift to the Project stretch after its completion primarily due to distance saving. Summary of the findings is given below: Tollable Traffic on the Project Road (daily traffic, year 2012)
Toll Section Section 1 Section 2 Section 3 Car 491 588 185 Tollable Traffic (in Vehicles/Day) 2-Axle LGV MAV Minibus Truck 125 731 25 27 163 850 4 37 31 724 2 49 Bus 304 319 177

It may be noted that the above traffic numbers do not assume any growth in traffic during the construction period. FINANCIAL ANALYSIS Base Case Assumptions Key Dates & Time Periods Commencement Date Construction Period (in months) CA signing date Construction Start Date COD Concession Period (years) End of Concession Period Revenue Assumptions Traffic Assumptions Toll Rate Escalation Traffic Growth Rate Based on Lenders Engineers report. 5% per annum 3% per annum March 16, 2011 18 November 16, 2010 March 16,2011 September 16, 2012 14.9 years January 16, 2026

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Project Cost Assumptions Base Construction Cost Physical Contingency on BCC Total Base Construction Cost Preliminary & Preoperative Expenses Establishment, Travel and Misc. Independent Consultant Fee Insurance Consultant Fee Legal Documentation Fee Financing Charges Engineering Consultant Fee Company Formation Expense Insurance Premium 1.20 % of BCC 1.19 % of BCC 0.03 % of BCC 0.15 % of TPC1 1.00 % of Debt 0.06 % of BCC 0.20 % of TPC 0.30 % of BCC As per agreement with SNNL Rs. 70.00 crore Rs. 2.10 crore Rs. 72.10 crore

Operating And Maintaining Expense Assumptions SNNL Fee Contribution to Maintenance Fund
1

1% of previous years toll revenue 3 % of Toll Revenue As per CA

TPC Total Project Cost

Maximum Maintenance Fund to be maintained Independent Consultant Fee Establishment and Tolling expenses Lenders Engineers Fee Insurance Regular Maintenance Expense For 1st year of operation For 2nd year of operation For 3rd year of operation For 4th year of operation Major Maintenance Expense For 1st Major Maintenance (during 5-6 year) For 2nd Major Maintenance (during 11-12 year) Financing Assumptions Debt Equity Ratio Grant from SNNL Debt Interest rate Tenor (years) Moratorium (years) Depreciation Rate Book Depreciation (SLM) Tax Depreciation (WDV) WPI
2

Rs. 60 lakh 1% of TB CC2 7.5% of Revenue 0.05 % of TBCC 0.2% of replacement Rs. 0.15 lakh /km Rs. 0.20 lakh /km Rs. 0.40 lakh /km Rs. 0.60 lakh /Km Rs. 7.04 crore Rs. 10.58 crore 2:1 Rs. 22.335 1 crore 14% payable quarterly 10 years from COD 2 years

As per CA for first 3 years For 1st year Value

As estimated by Company. As estimated by Company.

7.09% p.a.(95% of the cost depreciated over the concession life) 10% p.a. 3.5%
TBCC Total Base Construction Cost

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Base Case Projections A summary of financial projections is given below: (Rs crore)
Year ending Mar-13 Mar-14 Mar- 15 Mar-1 6 Mar-1 7 Mar-1 8 Mar-1 9 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26 Mar-27 Income 3.74 6.85 9.85 10.62 11.46 12.38 13.39 14.45 15.64 16.88 18.23 19.68 21.22 17.28 7.20 Expenses EBITDA GPM
3

0.69 3.05

1.04 5.81

1.39 8.46

1.77 8.84

0.92

0.97

1.26

1.41

1.83

2.27

1.24

1.30

1.67

1.77

1.72 5.48

10.54 11.41 12.12 13.04 13.82 14.60 16.99 18.38 19.55 15.51

81.6% 84.8% 85.9% 83.3% 91.9% 92.2% 90.6% 90.3% 88.3% 86.5% 93.2% 93.4% 92.1% 89.8% 76.1% 2.84 3.49 -3.28 0.00 -3.28 1.57 5.27 5.95 5.16 5.95 4.85 5.95 4.43 7.13 -1.02 0.00 -1.02 1.68 4.00 6.53 0.88 0.07 0.81 1.88 3.37 6.53 2.22 0.17 2.05 1.46 2.53 6.53 3.98 0.31 3.67 1.76 1.69 6.53 5.60 0.44 5.16 2.01 0.84 6.53 7.23 0.57 6.66 2.33 0.21 7.47 0.00 7.47 0.00 7.47 0.00 7.47 8.04 0.63 7.41 N/A 0.00 2.12 3.37 0.27 3.10 N/A

Interest NCE PBT Tax PAT DSCR

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-5.41 -2.66 -1.96 0.00 0.00 0.00 -5.41 -2.66 -1.96 1.37 1.47 1.34

9.31 10.91 12.08 0.73 0.86 0.95 8.58 10.05 11.13 5.58 N/A N/A

Note : 1. The estimates for year ending March 31,2013 are for a period of 197 days of operations as the Project is expected to be commissioned in September 2012. 2. The revenue estimates for year ending March 31 2014 are for 275 days of operation as during the year, no toll shall be levied during Grand Mela (as per the CA) for a duration of 90 days. 3. The estimates for year ending March 31,2027 are for a period of 106 days of operations.
Gross Profit Margin 4 Non-Cash Expenses
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Questions:
1. 2. 3. 4. Bring out the salient features of the case. Based on your theories and calculations, work out the best liable options. What conclusions you can draw from the case? Bring out the assumptions on which you have analyzed the case.

Make suitable assumptions wherever required and indicate the same

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