98480 12123Financial Modeling Case Study

The project is to build an Interstate Bus Terminus. The overall concession period is for 33 years where it may take 2 years for construction and the remaining 31 years for the operations of the project. You are also expecting that 40% of the construction work will be done in Year 1 and the remaining 60% in Year 2.You also expect the average inflation to be around 5% for the entire period. You also expect that all your revenues will grow at an annual rate of 7% while the operations expenses will grow at the rate of inflation.You expect the project to be financed with 60% of Debt and 40% equity. The Debt will have a drawdown period of 2 years and the amount be repaid in 12 years from then at a rate of 12% per year. The drawdown happens quarterly. The current arrangement with the bank is, reduction in principal in equal quarterly installments. You are also required to maintain a Debt Service Reserve account equivalent to 6 months of the interest and principal to be repaid in the next yearYou can assume that DSRA & Cash Surplus generated from annual operations can be invested at 6% p.a and interest on Cash overdraft (if required) is 14% throughout the entire period. Assume that the project costs contain 80% of Building and Civil Works, and 10% each in Furnitures and Fixtures as well as Plant and Machinery. Take the Depreciation as followsDepreciation AssumptionsSLDWDV

Building & Civil Works3.34%10%

Furniture & Fixtures6.33%18.10%

Plant & Machinery5.28%15%

You can assume 34% for Corporate Tax and 17% for MAT About the ProjectThe land allocated for the project is 55 Acres. The market value of the land is Rs. 1.50 Crore per acre and the company is expected to pay an annual lease rental of 1.2% of the value of the land. It is expected that the expected value of land increases at 8% every year. In addition to the lease rental, the company is expected to deposit 50% of the annual lease rental as the lease deposit.Construction AssumptionsYour team has done enough research and has come up with the following cost assumptions The Basic infrastructure construction cost is estimated at INR 21.60 Crores

The expected Costs associated with Bus Terminal Area, Parking and Support facilities are provided in the table belowBus Terminal Area Assumptions

Ground Floor# of UnitsArea/UnitCost/Area

Bus Bay Units (inter city)200450 sft300 per sft

Bus Bay Units (city buses)30450 sft300 per sft

Passenger lobby1100000 sft1000 per sft

Bank Extn Counters31500 sft800 per sft

First Floor

Driver amenities100020 sft1000 per sft

Budget hotel100250 sft1400 per sft

Dormitories50020 sft800 per sft

food courts15000 sft1000 per sft

Primary Health Centre13000 sft1200 per sft

Administrative offices5300 sft800 per sft

Parking

Parking for 4 wheelers12 acre250 per sft

Parking for 2 wheelers12 acre250 per sft

Parking for Hired transport (Auto,Taxi)14 acre250 per sft

Parking for Idle Buses115 acre250 per sft

Support facilities

Petrol Pumps32 acre

Auto service centre104 acre

Auto spare part shops10400 sft800 per sft

Office space for travel oprs & cargo opr30400 sft1000 per sft

Electrical Sub station & power transmission lines11 acre60000000

Fire Station12000 sft800 per sft

OthersThe Preoperative Cost is 10% of the total construction cost. Stamp Duty is charged at 0.8% of the total lease rentals or 5% of the land value whichever is higher. The project also requires an upfront premium of INR 30 crores to be paid which is non refundable. Registration charges are levied at 0.5% of the Average annual lease rentals. Insurance premium cost is expected at 1% of the construction cost of the year.

Revenue AssumptionsYou are making the following annual revenue assumptions as of the current prices and at 100% utilization levelsExpected RevenueNumber of UnitsOccupancyRepeat

Bus Platforms50 per vehicle23085%730

Parking charges for buses1500 per bus per month123080%12

Main Lobby480 per sft per year10000085%1

Budget Hotel500 Per room per day10075%365

Dormitories50 per bed per day50075%365

Driver Amenities25 per bed per day100075%365

Primary Health Care480 per sft per year3000100%1

Bank Extension Counters480 per sft per year4500100%1

Administrative offices480 per sft per year1500100%1

Office space for Travel & Cargo Operators480 per sft per year1000085%1

Petrol Pumps1000000 acre/year290%1

Auto Service Centres1000000 acre/year480%1

Parking for 4 Wheelers20 per vehicle200100%365

Parking for 2 Wheelers10 per vehicle2000100%365

Parking for Hired Transport30 per vehicle100100%365

Revenue from Ads30000000 acre/year180%1

Operating & Maintenance Cost AssumptionsBus Terminal Area5% of the Head revenue

Parking5% of head Revenue

Office Space, PHC, Banks & Support5% of Head revenue

Budget Hotel30% of Head revenue

AMC for Basic Infrastructure & Lighting2% of the total Revenue

Security GuardsINR 50 Lakh per year

Water BillINR 35 Lakh per year

Power BillINR 25 Lakh per year

Required1. You are required to build a model that is scalable and extendible to change in different assumptions. a. Address the Delays in the project (Extending the construction and Operations Periods)b. Change in inflation assumptionsc. Change in Revenue Assumptionsd. Changes in Debt repayment to EYI modele. Changes in Depreciation/Tax assumptions2. You should be able to project the cash flows and compute the IRR associated with the project as well as IRR for the Equity Investors (Sponsors)

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