Analysis of the financing structure of infrastructure projects with special references to Highways...

ANALYZING THE FINANCING STRUCTURE OF

INFRASTRUCTURE PROJECTS WITH SPECIAL

REFERENCE TO HIGHWAYS IN THE SPHERE

OF PUBLIC PRIVATE PARTNERSHIPS

Submitted in partial fulfillment of the requirements for

Post Graduate Diploma in Management (PGDM)

By

Saurabh Sharma

Class of 2009

Bharatiya Vidya Bhavan’s

Usha & Lakshmi Mittal Institute of Management

Copernicus Lane, Kasturba Gandhi Marg

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New Delhi

July 2010

ACKNOWLEDGEMENT

I express my sincere gratitude to Mrs. Manju Kapoor (Vice President), IFIN, Delhi/NCR for

giving me the opportunity to undergo summer training in this esteemed organization.

I feel great pleasure to acknowledge deep regards to my esteemed Company Guide Mr. Ravi

Kyal (Senior Manager, Project Syndication Group, IFIN) for cooperating a lot in the projects and

for giving their advice to make my project more useful and impressive.

I am grateful to my faculty guide Prof. Ms. Priya Sharma for extending her help during my

Summer Internship and giving me the guidance. This report would not have been possible

without their help.

Last but not the least I also want to thank the entire Management Staff of the Company whom I

found friendly, courteous and candid while expressing their views.

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CERTIFICATE OF ORIGINALITY

I --------------------------------------------------- Roll No -------------- Class of 2008, a full time bonefide

student of first year of Post Graduate Diploma in Management (PGDM) Programme of Bharatiya Vidya

Bhavan’s Usha and Lakshmi Mittal Institute of Management, New Delhi hereby certify that this project

work carried out by me at

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---------------------- and the report submitted in partial fulfillment of the requirements of the programme is

an original work of mine under the guidance of the industry mentor

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----------------------------and faculty

mentor------------------------------------------------------------------------------, and is not based or reproduced

from any existing work of any other person or on any earlier work undertaken at any other time or for any

other purpose, and has not been submitted anywhere else at any time

Date: July 01, 2010

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Date: July 01, 2010

CERTIFICATE BY THE COMPANY

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4

CERTIFICATE BY THE INDUSTRY MENTOR

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EXECUTIVE SUMMARY

The National Highway network of the country spans about 66,590 Km. The NHDP (National Highway Development Project), covering a length of 55,000 Km. is India’s largest road development program in its history. This project began in the last decade and acknowledged the importance of private sector in India’s infrastructure development.

As a result of these types of initiatives by the government a new concept called as Public Private Partnership (PPP) emerged. Various new types of methods were adopted to finance, build and operate the infrastructure projects emerged.

In the due course of study of a Highway Project of IL&FS Financing Services Limited named as Dehradun Haridwar Project Limited the entire process of the project implementation in terms of :

Model Concession Agreement

Key Dates

Project Cost

Modes of Financing

Financial Model

was obtained.

In the entire two months of the training this project report was prepared and I believe that this would serve as a useful guide to students like me to understand the details of Project Financing especially in the Highway Sector.

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LIST OF CONTENTS

ACKNOWLEDGEMENT..........................................................................................................................1

CERTIFICATE OF ORIGINALITY..........................................................................................................2

CERTIFICATE BY THE COMPANY.......................................................................................................3

CERTIFICATE BY THE INDUSTRY MENTOR....................................................................................4

EXECUTIVE SUMMARY.........................................................................................................................5

LIST OF CONTENTS...............................................................................................................................6

ABBREVIATIONS....................................................................................................................................9

OBJECTIVE..............................................................................................................................................11

1. INTRODUCTION.............................................................................................................................12

1.1Project Finance..........................................................................................................................12

1.1.1Introduction...............................................................................................................................12

1.2 Forms of Project Financing (Especially in Highway sector)........................................14

1.2.1 Traditional Approach................................................................................................................14

1.2.2 Current Scenario.......................................................................................................................14

1.3 Public Private Partnerships..................................................................................................15

1.3.1 The key drivers for PPP are:.....................................................................................................15

1.3.2 Misconceptions about PPPs......................................................................................................16

1.3.3 Principles of PPP......................................................................................................................17

The following key principles will underpin all PPP actions in the highway sector:...........................17

1.4 Government Initiative............................................................................................................19

1.4.1 Current Scenario.......................................................................................................................20

1.5 Modes of Financing a PPP Project in Highway Sector.................................................23

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1.6 Company Profile.......................................................................................................................26

1.6.1 Infrastructure Leasing & Financial Services Limited (IL&FS).................................................26

1.6.2 Services....................................................................................................................................26

1.6.3 IL&FS Financial Services Limited...........................................................................................27

1.6.4 Key Strengths of IFIN are:........................................................................................................28

1.6.5 Sources of funds of IL&FS.......................................................................................................29

METHODOLOGY..................................................................................................................................31

2. DEHRADUN HARIDWAR PROJECT LIMITED..........................................................................32

2.1 Project Details............................................................................................................................32

2.2 Background................................................................................................................................33

2.3 Sponsors Profile.......................................................................................................................34

2.4 Concession Agreement..........................................................................................................36

2.5 Project Cost and Means of Financing................................................................................40

2.6 Project Implementation Framework............................................................................................45

3. FINANCIAL MODEL………………………………………………………………………………..46

3.1Output and Sensitivity…………………………………………………………………….............46

3.2 Assumptions……………………………………………………………………………………….49

3.3 Phasing.............................................................................................................................................59

3.4 Working Capital………………………………………………………………………………….72

3.5 Revenue and Expenditure………………………………………………………………………..73

3.6 Depreciation and Tax…………………………………………………………………………….78

3.7 Financial…………………………………………………………………………………………..88

3.8 Ratios……………………………………………………………………………………………...102

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REFERENCES …………………………………………………………………………………………103

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ABBREVIATIONS

BOT Build Operate & Transfer

COD Commercial Operation Date

CA Concession Agreement

DBFOT Design, Build, Finance, Operate & Transfer

DER Debt Equity Ratio

DSCR Debt Service Coverage Ratio

DSRA Debt Service Reserve Account

EBIDTA Earnings Before Interest Depreciation Taxation and Amortization

EA Escrow Account

FY Financial Year

DHPL Dehradun Highways Project Limited

EIEL ERA Infra Engineering Limited

OJSC-SIBMOST OJSC-SIBMOST (Technical Partner)

IE Independent Engineer

IFIN IL&FS Financial Services Limited

IL&FS Infrastructure Leasing & Financial Services Limited

IRR Internal Rate of Return

KM Kilo Meter

LOA Letter of Award

LoC Letter of Credit

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MAT Minimum Alternate Tax

Cr Crores

Bn Billion

MoEF Ministry of Environment and Forests

MOU Memorandum of Understanding

NH National Highway

NHAI National Highways Authority of India

NHDP National Highways Development Programme

O&M Operation and Maintenance

PAT Profit After Tax

PBT Profit Before Tax

PMC Project Management Consultant

RFP Request for Proposal

RFQ Request for Qualification

Rs Indian Rupees

SPV Special Purpose Vehicle

TL Term Loan

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OBJECTIVE

The objective of the project report is:

1. To understand the basics of Project Financing.

2. To understand the importance and emergence of Public Private Partnerships in the sector of

Infrastructure Development with special reference to Highways.

3. To prepare the Project Information Memorandum.

4. To understand the debt financing process.

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1. INTRODUCTION

1.1Project Finance

1.1.1Introduction

Project finance is a method of raising long term debt financing for major projects through “ Financial

Engineering” based on lending against the cash flow generated by the project alone; it depends on a

detailed evaluation of a project’s construction, operating and revenue risks, and their allocation between

investors, lenders and other parties through contractual and other arrangements.

Project finance is generally used to refer to a non-recourse or limited recourse financing structure in

which debt, equity and credit enhancement are combined for the construction and operation, or the

refinancing, of a particular facility in a capital-intensive industry.

Credit appraisals and debt terms are typically based on project cash flow forecasts as opposed to the

creditworthiness of the sponsors and the actual value of the project assets. Forecasting is therefore at the

heart of project financing techniques. Project financing, together with the equity from the project

sponsors, must be enough to cover all the costs related to the development of the project as well as

working capital needs.

Project finance risks are therefore highly specific and it is essential that participants such as commercial

bankers, investment bankers, general contractors, subcontractors, insurance companies, suppliers and

customers understand these risks since they will all be participating in an interlocking structure.

These various participants have differing contractual obligations, and the resultant risk and reward varies

with the function and performance of these various parties. Ideally, the debt servicing will be supported

by the project cash flow dynamics as opposed to the participants, who at best provide limited coverage.

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Some of the major sectors include:

Energy - Project finance is used to build energy infrastructure in industrialized countries as well

as in emerging markets.

Oil- Development of new pipelines and refineries are also successful uses of project finance.

Large natural gas pipelines and oil refineries have been financed with this model. Before the use

of project finance, such facilities were financed either by the internal cash generation of oil

companies, or by governments.

Mining- Project finance is used to develop the exploitation of natural resources such as copper,

iron ore, or gold mining operations in countries as diverse as Chile, Ghana and Australia.

Highways- New roads are often financed with project finance techniques since they lend

themselves to the cash flow based model of repayment.

Telecommunications- The burgeoning demand for telecommunications and data transfer via the

Internet in developed and developing countries necessitates the use of project finance techniques

to fund this infrastructure development.

Other- Other sectors targeted for a private takeover of public utilities and services via project

finance mechanisms include pulp and paper projects, chemical facilities, manufacturing,

hospitals, retirement care facilities, prisons, schools, airports and ocean-going vessels.

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1.2 Forms of Project Financing (Especially in Highway sector)

1.2.1 Traditional Approach

Traditionally, financing for development of National Highways in India was from the budgetary resources

of the Government of India. In order to augment the available resources, loans have also been raised from

multilateral agencies like World Bank, Asian Development Bank (ADB) and Japan Bank of International

Cooperation (JBIC). NHAI has earlier received loans directly from multilateral agencies (highway

project). These loans are expected to be repaid through the toll income from the project. The interest rate

for the project is determined according to ADB's pool based variable lending rate system for US dollar

loans. Around 80 per cent of the external assistance is provided to NHAI as a grant by the central

government. The balance is made available as long-term loans to NHAI, with the Centre bearing the

foreign exchange risk. Such loans are usually provided for 15-25 years with a moratorium of 5 years.

1.2.2 Current Scenario

Presently, the development and maintenance of National Highways is financed by following modes:

1. Government's general budgetary sources

2. Dedicated accruals under the Central Road Fund (by levy of cess on fuel)

3. Lending by international institutions:

• World Bank

• ADB (Asian Development Bank)

• JBIC (Japan Bank for International Cooperation)

4. Private financing under PPP frameworks

Build Operate and Transfer/Design Build

Finance Operate and Transfer (DBFOT) -

Investment by private firm and return through levy and retention of user fee

Build Operate and Transfer (Annuity)

BOT (Annuity ) - Investment by private firm and return through semi-annual

Payments from NHAI as per bid.

Special Purpose Vehicle – SPV (with equity participation by NHAI)

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Market Borrowings

1.3 Public Private Partnerships

A Public Private Partnership is an arrangement between a public (government) entity & a private (non-

government) entity by which services that are the responsibility of/ have traditionally been delivered by

the public entity are now to be provided by the private entity under a set of terms and conditions that are

defined at the outset.

PPP is more about creating a structure in which greater value for money is achieved for services

through private sector innovation, management skills and delivering significant improvement in service

efficiency levels.

1.3.1 The key drivers for PPP are:1. Increased public expectations and demand for public services

2. Need for capital investment

3. Innovation in service delivery and

4. Encouragement of on time and within budget competition

Apart from these, the other aspects to drive PPP are:

5. Fiscal reasons - Inadequacy of resources – leveraging on lower government funding

6. Optimal transfer of risks – to the entity best suited to manage the risks to deliver value for

money through synergies such as:

Design

Financing

Construction

Operations and Maintenance

Impact - time overrun, cost overruns, change of scope, defective designs, leakage

of revenues, high maintenance costs

7. Efficiency gain by transferring responsibilities

Appropriate technology

Innovative design solutions and spread of best practices

Project management

Establishing standards through the life cycle of a project

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8. Rigorous enhancement in the bankability of the project and

9. Enhancement of implementation capacity

1.3.2 Misconceptions about PPPs

PPPs are often not understood properly by the implementation bodies and the prejudices works

against the interests of the project. It is necessary to understand that a PPP is not:

Privatization or disinvestment- where the underlying asset is not an infrastructure asset that would

work for the benefit of the society, but rather a corporation or a venture of Government

established years ago where private sector was not developed and now with the maturing of

private sector capabilities are not needed to be owned by Government any longer.

About borrowing money from private sector or donations extended by private entity for public

good. - Because the partnering in the service delivery is not there, and in this case the utilization

of the resources is still by Government body.

Simple outsourcing where in substantial financial, technical and operational risk is retained by

public entity (Government). PPP without risk transfer would not help Government in expanding

coverage or enhancing quality. It is to be clearly understood here that the risk has to be allocated

to the party best able to manage it.

Commercialization of a public function by the creation of a state owned enterprise, ultimately the

management and the regulation are both with the Government and there can hardly any

improvement in the service quality and coverage.

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1.3.3 Principles of PPP

The following key principles will underpin all PPP actions in the highway sector:

Size of the Initiatives

With an extensive road network of 3.3 million kilometers, India is the second largest in the world. Indian

roads carry about 61% of the freight and 85% of the passenger traffic. All the highways and expressways

together constitute about 66,000 kilometers (only 2% of all roads), whereas they carry 40% of the road

traffic. To further the existing infrastructure, Indian Government annually spends about Rs.18000 crores

(USD 3.704 billion).

Target

Developing 1000 km of expressways

Developing 8,737 km of roads, including 3,846 km of national highways, in the North East

Four-laning 20, 000 km of national highways

Four-laning 6,736 km on North-South and East-West corridors

Six-laning 6,500 km of the Golden Quadrilateral and selected national highways

Widening 20,000 km of national highways to two lanes

Approach

National Highways Authority of India (NHAI) is the apex Government body for implementing

the NHDP. All contracts whether for construction or BOT are awarded through competitive

bidding

Private sector participation is increasing, and is through construction contracts and Build-

Operate-Transfer (BOT) for some stretches based on either the lowest annuity or the lowest lump

sum payment from the Government

BOT contracts permit tolling on those stretches of the NHDP

A large component of highways is to be developed through public-private partnerships and

several high traffic stretches already awarded to private companies on a BOT basis.

Policy

100% FDI under the automatic route is permitted for all road development projects

100% income tax exemption for a period of 10 years

Grants / Viability gap Funding for marginal projects by NHAI.

Formulation of Model Concession Agreement

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Opportunity

Road development is recognized as essential to sustain India’s economic growth. Road development is a

priority sector and the ongoing focus on the highway infrastructure development is targeted to projected

annual growth of 12-15% for passenger traffic and 15-18% for cargo traffic. The project has been

attracting huge Direct Foreign Investment (FDI).

Outlook

Annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic

Over $50- 60 billion investment is required over the next 5 years to improve road infrastructure

Potential

Road development is recognized as essential to sustain India’s economic growth

The Government is planning to increase spends on road development substantially with funding

already in place based on a cess on fuel

A large component of highways is to be developed through public-private partnerships

Several high traffic stretches already awarded to private companies on a BOT basis

Two successful BOT models are already in place - the annuity model and the upfront/lump sum

payment model

Investment opportunities exist in a range of projects being tendered by NHAI for implementing

the NHDP - contracts are for construction or BOT basis depending on the section being tendered.

At Rs.41, 200 crores (US $ 5 billion) project plans to lay 6 lane roads over 6,500 kms. of

National Highways on the Design Build Finance and Operate (DBFO) basis - in Golden

Quadrilateral and other high traffic stretches.

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1.4 Government Initiative

For a country of India's size, an efficient road network is necessary both for national integration as well as

for overall socio-economic development. The National Highways (NH), with a total length of 65,569 km,

serves as the arterial network across the country. The four-laning the 5,900 km long Golden Quadrilateral

(GQ) connecting Delhi, Mumbai, Chennai and Kolkata is on the verge of completion. The ongoing four-

laning of the 7,300 km North-South East-West (NSEW) corridor is scheduled to be completed by

December 2009. The Committee on Infrastructure adopted an Action Plan for development of the

National Highways network. An ambitious National Highway Development Programme (NHDP),

involving a total investment of Rs.2, 20,000 crores (USD 45.276 billion) up to 2012, has been established.

For the smooth implementation of the government initiatives Government of India formed an

autonomous body - The National Highways Authority of India (constituted by an Act of Parliament, the

National Highways Authority of India Act, 1988. The Authority was operationalised in Feb, 1995.

NHAI is the nodal agency responsible for the development, maintenance and management of National

Highways entrusted to it and for matters connected or incidental thereto. The USD 60 billion National

Highways Development Project (NHDP) has been entirely managed by the NHAI under the mandate of

the Ministry of Road Transport & Highways (MoRTH), Government of India.

The charter of NHAI is set out in the National Highways Act, 1956 and National Highways Authority of

India Act, 1988:

Delegation of powers and functions of the highway administration to NHAI

Enhanced powers for land acquisition

Right to collect tolls for road projects on its own or through third parties in accordance with

specified government guidelines

Authorization to borrow from capital market through bonds, debentures and other instruments

Situation where Central Government will have powers to override NHAI and its officials NHAI

Besides implementation of the NHDP, NHAI is also concerned with implementation of road safety

measures and environmental management and IT initiatives in construction, maintenance and operation of

National Highways.

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1.4.1 Current Scenario

India has an extensive road network of 3.3 million km – the second largest in the world. The National

Highways have a total length of 70,548 km and serve as the arterial road network of the country. It is

estimated that more than 70 per cent of freight and 85 per cent of passenger traffic in the country is being

handled by roads. While Highways/ Expressways constitute only about 2 per cent of the length of all

roads, they carry about 40 per cent of the road traffic leading to a strain on their capacity. The number of

vehicles on roads has been growing at compounded annual growth rate (CAGR) of over 8% in the last 5

years (2003-04 to 2008-09). The development of National Highways is the responsibility of the

government of India. The Government of India has launched major initiatives to upgrade and strengthen

National Highways through various phases of the NHDP. NHDP is one of the largest road development

programmes to be undertaken by a single authority in the world and involves widening, upgrading and

rehabilitation of about 55,000 km, entailing an estimated investment of INR 3,00,000 Crores (USD 60

billion).The National Highways Authority of India (NHAI) is mandated to implement the National

Highways Development Project (NHDP). Most of the projects have been developed or are under

development on Public Private Partnership (PPP) basis through Build Operate and Transfer (BOT)-

Annuity and BOT-Toll mode (these have been explained in detail in later section of the brochure).

Typically, in an annuity project, the project IRR is expected to be 12-14% and equity IRR would be 14 -

16%. For toll projects, where the concessionaire assumes the traffic risk, the project IRR is expected to be

around 14-16% and 3 equity IRR around 18-20% .The NHDP is being implemented under several phases:

4-laning of the Golden Quadrilateral (GQ) and North- South and East- West (NS-EW) Corridors-(NHDP

I & II) Phase I mainly involves widening (to 4 lanes) and upgrading of 7,498 km of the national highway

network and has four component packages:

Highway network linking the four metropolitan cities in India i.e. Delhi-Mumbai-Chennai-

Kolkata, covering a length of 5,846 km, popularly known as the Golden Quadrilateral (GQ)

project.

Highways along the North-South (NS) and East- West (EW) corridors, covering a length of 981

Km.

Port connectivity projects covering a length of 356 km; and

Other highway projects, covering a length of 315 km.

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Phase-II involves widening and improvement of the NS-EW corridors (not covered under Phase-I)

covering a distance of 6,647 km, besides providing connectivity to major ports on the east and west coasts

of India and some other projects. This includes 6,161 km of NS-EW corridors and 486 km of other

highways. The total length of the NS-EW network under Phases I & II is about 7,200 km. 4-laning of the

GQ has almost been completed. Phase II is expected to be largely completed by December 2010.

Upgradation of 12,109 km (NHDP-III)

NHDP-III involves upgradation of 12,109 km (mainly 4- laning) of high density national

highways, through the Build, Operate & Transfer (BOT) mode at a cost of INR 80,626 Crores (USD

billion). The project consists of stretches of National Highways carrying high volume of traffic,

connecting state capitals with the NHDP network under Phases I and II and providing connectivity to

places of economic, commercial and tourist importance.

2-laning of 20,000 km with paved shoulders (NHDP-IV)

With a view to providing balanced and equitable distribution of the improved/widened

highways network throughout the country, NHDP-IV envisages upgrading of 20,000 km of such

highways into 2-lane highways, at an indicative cost of INR 27,800 Crores (USD 5.6 billion). This

will ensure that their capacity, speed and safety match minimum benchmarks for national highways.

The government has already approved strengthening of 5,000 km to 2-lane paved shoulders on BOT

(Toll/ Annuity) under NHDP-IV A at a cost of INR 6,950 Crores (USD 1.4 billion).

6-laning of 6,500 km (NHDP-V)

Under NHDP-V, 6-laning of the 4-lane highways comprising the GQ and certain other high

density stretches, will be implemented on BOT basis at an estimated cost of INR 41,210 Crore (USD

8.2 billion).These corridors have been 4-laned as part of the GQ in Phase-I of NHDP. Implementation

of initial set of projects has already commenced and the entire package is expected to be completed

by 2012. Of the 6,500 km proposed under NHDP-V, about 5,700 km would be taken up in the GQ

and the balance 800 km would be selected on the basis of predefined eligibility criteria.

Development of 1,000 km of expressways (NHDP-VI)

With the growing importance of urban centers of India, particularly those located within a

few hundred kilometers of each other, expressways would be both viable and beneficial. The

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Government has approved 1,000 km of expressways to be developed on a BOT basis, at an indicative

cost of INR 16,680 Crores (USD 3.3 billion). These expressways would be constructed on new

alignments.

Other Highway Projects of 700 km (NHDP-VII)

The development of ring roads, bypasses, grade separators and service roads are considered

necessary for full utilization of highway capacity as well as for enhanced safety and efficiency. For

this, a programme for development of such features at an indicative cost of INR 16,680 Crores has

been approved by the Government. Apart from the high density corridors, a substantial part of the

National Highways network would also require development during the 11th Plan period. The

sections are characterized by low density of traffic. Some of these stretches fall in backward and

inaccessible areas and others are of strategic importance. The development of these categories of

National Highways would be carried out primarily through budgetary resources.

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1.5 Modes of Financing a PPP Project in Highway Sector

The first two phases i.e. NHDP-I and NHDP-II were mostly funded through Government where the share

of the BOT (Build – Operate –Transfer) Highways was only 10%. Now, from the NHDP-III onwards, the

funding mechanism is mostly Public– Private Participation except some stretches where it may not be

viable on BOT. Also high traffic corridors are being offered to the concessionaire there by making Public

Private Participation an attractive and profitable proposition.

Public Private Partnership is proving to be a successful mechanism for developing and maintaining the

National Highways. In 2005, 30 BOT contracts covering a length of 1600 Kms. Were awarded. Almost

all future projects are envisaged in the BOT mode.

Types of Public Private Partnerships:

i. Build Operate and Transfer/Design Build 5 Finance Operate and Transfer

(DBFOT) - Investment by private firm and return through levy and retention of

user fee.

ii. Build Operate and Transfer (Annuity) – BOT (Annuity ) - Investment by private

firm and

iii. Return through semi-annual payments from NHAI as per bid.

iv. Special Purpose Vehicle – SPV (with equity participation by NHAI)

v. Market Borrowings

BOT (Toll)

Private developers/ operators, who invest in toll able highway projects, are entitled to collect

and retain toll revenues for the tenure of the project concession period. The tolls are prescribed by

NHAI on a per vehicle per km basis for different types of vehicles. The Government in the year 1995

passed the necessary legislation on collection of toll. (Refer the National Highways Fee

[Determination of Rates and Collection] Rules 2008). A Model Concession Agreement (MCA) has

been developed to facilitate speedy award of contracts. This framework has been successfully used

for award of BOT concessions.

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BOT (Annuity)

The concessionaire bids for annuity payments from NHAI that would cover his cost

(construction, operations and maintenance) and an expected return on the investment. The bidder

quoting the lowest annuity is awarded the project. The annuities are paid semi-annually by NHAI to

the concessionaire and linked to performance covenants. The concessionaire does not bear the traffic/

tolling risk in these contracts.

Operate, Maintain and Transfer (OMT) Concession

NHAI has recently taken up award of select highway projects to private sector players under

an OMT Concession. Till recently, the tasks of toll collection and highway maintenance were

entrusted with tolling agents/ operators and subcontractors, respectively. These tasks have been

integrated under the OMT concession. Under the concession private operators would be eligible to

collect tolls on these stretches for maintaining highways and providing essential services (such as

emergency/ safety services).

Special Purpose Vehicle for Port Connectivity Projects

NHAI has also taken up development of port connectivity projects by setting up Special Purpose

Vehicles (SPVs) wherein NHAI contributes up to 30% of the project cost as equity. The SPVs also have

equity participation by port trusts, State Governments or their representative entities. The SPVs also raise

loans for financing the projects. SPVs are authorized to collect user fee on the developed stretches to

cover repayment of debts and for meeting the costs of operations and maintenance.

International Competitive Bidding Process

General procedure for selection of concessionaires adopted by NHAI is a two-stage bidding

process. Projects are awarded as per the model documents- Request for Qualification (RFQ), Request

for Proposal (RFP) and Concession Agreement - provided by the Ministry of Finance. NHAI amends

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the model documents based on project specific requirements. The processes involved in both stages

are set out as follows:

Stage 1: Pre-qualification on the basis of Technical and Financial expertise of the firm and its track

record in similar projects which meets the threshold technical and financial criteria set out in the RFQ

Document. Notice inviting tenders is posted on the web site and published in leading newspapers.

Stage 2: Commercial bids from pre-qualified bidders are invited through issue of RFP. Generally, the

duration between Stage 1 and 2 is about 30-45 days. Wide publicity is given to NHAI tenders so as to

attract attention of leading contractors/ developers/ consultants.

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1.6 Company Profile

1.6.1 Infrastructure Leasing & Financial Services Limited (IL&FS)

IL&FS was promoted by the Central Bank of India (CBI), Housing Development Finance Corporation Limited (HDFC) and Unit Trust of India (UTI). Over the years, IL&FS has broad-based its shareholding and inducted Institutional shareholders including State Bank of India, Life Insurance Corporation of India, ORIX Corporation - Japan and Abu Dhabi Investment Authority

IL&FS has a distinct mandate - catalyzing the development of infrastructure in the country. The organization has focused on the commercialization and development of infrastructure projects and creation of value added financial services.

1.6.2 Services The IL&FS Group has developed the requisite capabilities to take infrastructure projects from concept to commissioning. The organization has developed a pool of institutionalized resources and functional expertise in various areas. These areas include project management, project engineering, finance, risk management and environmental-social management, all of which are strategic to the infrastructure development activity:

IL & FS Group

Infrastructure Services Financial Services

Project Development & Implementation Project Finance

Cluster Management Private Equity

Environmental & Social Investment Banking

Education/ Technology Trust & Fiduciary

Logistic & Fleet Management Depository, Custodian and professional clearing service

Facility Management Auto Infrastructure

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http://www.ilfsindia.com/group_co.asp?gmchild=101










Table 1: List of various infrastructure and financial services of IL&FS

Group Companies

Infrastructure Services Financial Services

IL&FS Infrastructure Development Corporation Limited

IL&FS Investment Managers Limited -

IL&FS Transportation Networks Limited

IL&FS Trust Company Limited

IL&FS Ecosmart Limited ORIX Auto Infrastructure Services Limited

IL&FS Education and Technology Services Limited

IL&FS Securities Services Limited

New Tirupur Area Development Corporation Limited

IL&FS Financial Services Limited

Noida Toll Bridge Company Limited IL&FS Financial Services Limited

Table 2: List of various Group Companies of IL&FS

1.6.3 IL&FS Financial Services Limited

IL&FS Financial Services Ltd (IFIN) is a 100% subsidiary of IL&FS, with a combination of Investment Banking skill sets comprising of Debt Syndication, Corporate advisory and lending capabilities. The mandate to IFIN is to provide value added Investment banking services to a select group of customers.

The core businesses of IFIN are:

Asset and Structured Finance Project Debt Syndication Corporate Advisory International Business Project Finance

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1.6.3.1 Asset and Structured Finance The Asset and Structured Finance Group (ASF) of IFIN is the primary relationship originator with corporate clients. Thus it plays the role of being the principal interface between IL&FS Group/ IFIN and the corporate world.

1.6.3.2 Project Syndication GroupThe Project Syndication Group (PSG) has established itself as a bridge between Project Sponsors and Lenders by leveraging the knowledge, expertise and resources in the field of mobilising funds for projects. PSG focuses on the role of a Funds Arranger for Projects along with support for related Advisory initiatives. While fund mobilisation services provided across various sectors, the Infrastructure sector remains a key area of activity.

1.6.3.3 Corporate Advisory

The Corporate Advisory Services (CAS) team plays a key role in advising clients on their organic as well as inorganic growth objectives. The team has proven expertise in rendering the following advisory services to its clients:

Syndication of growth capital, i.e. private equity and mezzanine capital Advising on Mergers & Acquisitions Advising on Capital Restructuring

1.6.3.4 International BusinessIFIN over a period of time has a developed a strong platform for syndication of debt and equity in the domestic financial markets. Today IFIN is recognized as one of the major players in the project syndication market with a niche carved out in the Infrastructure segment

1.6.4 Key Strengths of IFIN are:

The ability of IFIN to provide strong sector insights, understanding of the trends and risks impacting Projects, enables it to impart the most optimal advice towards providing innovative financing structures, on a complete project-recourse basis. Similarly, a high acceptability of IL&FS appraisal amongst Lenders and the demonstrated capability of the Group to close complex transactions within tight deadlines have provided IFIN a distinctive edge in delivery and positioning with other Project Debt Arrangers & Advisors in the market.

Ability to offer customized / Tailor made solutions to clients financial needs. Healthy relationship with most of the large business group that generates recurring businesses. Capability of execute innovative /first of its kind structured deals to suit the clients requirement

29

Diverse sector expertise. Strong relationships with other corporate finance and investment institutions. Robust network of relationships with leading Global and Domestic investors. Ability to align Client needs with Investor requirements - ensures the right 'fit' of investors for the

Client. Strong Parentage - Potential to leverage IL&FS Group capabilities to deliver 'Best-in-Class'

solutions to the Client. Wide experience both in domestic and international transactions across sectors like Infrastructure,

Real Estate, Manufacturing and Services. Strong awareness of financial market trends and regulatory matters. Global reach with offices in London, Singapore and Middle East. Well qualified and multi faceted team with immense business understanding. Client focused and high impact solutions. Invaluable advice on transaction structuring and execution. Quick turnaround of mandates.

1.6.5 Sources of funds of IL&FS

Given the rapid pace of urbanization in India, the urban infrastructure sector which is one of the key drivers of the Indian economy, requires an enhanced focus. Traditionally, HUDCO and multilateral institutions such as the World Bank, the Asian Development Bank, Japan International Co-operation Agency, KfW etc., have been providing project finance assistance to government and local level authorities executing urban infrastructure projects. Such assistance is generally routed through the Government of India (GoI) and the respective state governments following the budgetary mechanism and generally sanction is based on guarantees provided by the respective state governments.

Attracting commercial debt to fund urban infrastructure has always been a challenge. Considering that GoI has announced various initiatives and programmes, to attract and promote sustainable investments in urban infrastructure projects, there is a significant opportunity for financing such urban infrastructure projects.

The Pooled Municipal Debt Obligation (PMDO) facility has been structured through a partnership of 15 Banks/FIs including IL&FS with a corpus of Rs 2750 cr to primarily finance urban local bodies and Special Purpose Vehicles (SPVs) promoted under PPP arrangements, to implement urban infrastructure projects for Water Supply and Sewerage, Solid Waste Management, Roads and Urban Transport, Environment Projects, Healthcare and Education etc.

30

The underlying strategy of the PMDO is to improve credit worthiness and bankability of urban infrastructure projects, and use efficient transaction structures built on robust risk management processes, that have been successfully replicated in other infrastructure sectors.

The local bodies are encouraged to conceive and implement projects in the Public Private Partnerships (PPP) framework based on long-term concession agreements, to make service delivery more efficient and to utilise private sector funding by tapping the commercial debt and equity market. This arrangement is expected to relieve the urban local bodies of substantial investment burden on their books and to make scarce public resources available for core civic services.

The list of various physical infrastructure projects:

Adityapur Industrial Water Supply Scheme International Convention Centre Complex at Thiruvananthapuram

Ahmedabad-Mehsana Toll Road International Convention Centre, Hyderabad

Ambur Vaniyambadi Effluent Program IT Corridor Project

Artisan Clusters Jal Mahal, Jaipur

Assam State Electricity Board Jawaharlal Nehru National Urban Renewal Mission

Bihar State Electricity Board Joint Venture with Coal India Limited

Container Transhipment Terminal Joint Venture with Power Grid

Delhi Cab – Radio Taxi Scheme Project Karimnagar Thermal Power Project

Delhi Cab Launches ‘Forshe’ – Radio Taxi Service Karnataka Toll Bridges

Delhi-Noida Toll Bridge Kotakatta-Kurnool Road Project

Dighi Port Project Krishnapatnam Thermal Power Project

East Coast Road Ludhiana Bus Terminal Project

East Godavari Power Plant Ludhiana Textile ClusterFor-She Mumbai Cab World Class Exclusive Ladies Taxi Service Maha Mumbai Integrated SEZ Project

Gangavaram Port Maharashtra State Electricity Board

Haldia Integrated Infrastructure Development Program National Games Village, Hyderabad

Howrah Foundry Cluster North Karnataka Expressway

Hydro Projects Nuclear Power Corporation of India Limited

Industrial Clusters ONGC Tripura Power Project

Info Nepal Transmission Lines Punjab Roads

Initiatives Under Industrial Infrastructure Upgradation Scheme Quila Nabha

Integrated Urban Infrastructure Development in Nanded DHPL

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METHODOLOGY

The methodology adopted in the course of the study is as follows:

1. A basic understanding of project finance was obtained.

2. The importance of the emergence of the Public Private Partnerships in the field of infrastructure especially in highways sector was established.

3. A project named as Dehradun Highways Project Limited was studied in detail.

The details of the project were studied in reference to:

Project Details

Project background in reference to the bidding process

Sponsor’s profile

Concession Agreement

Project cost and financing

Project approvals and clearances

4. The projects financial model was studied in detail.

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2. DEHRADUN HARIDWAR PROJECT LIMITED

2.1 Project Details

The project which ‘I am considering for my study is the 4 laning of Haridwar –Dehradun highway from Km 211.00 to Km 218.200 of NH 58 and from Km 165.000 to Km 196.825 of NH-72 (approx 39.03 ms) in the state of Uttarakhand on BOT Annuity basis on DBFOT pattern.

Dehradun Highways Project Limited (“DHPL”) is a Special Purpose Vehicle (SPV) company promoted

by Era Infra Engineering Limited (EIEL-74%) and OJSC-SIBMOST (26%). DHPL has been awarded the

bid, by the National Highways Authority of India (“NHAI"), for development of 4 laning of the Haridwar

– Dehradun section from km 211.000 to km 218.2000 of NH-58 and km 165.000 to km 196.825 of NH-

72 (approximately 39.03 Km) on Design, Build, Finance, Operate and Transfer (DBFOT) Annuity basis

under NHDP-III in state of Uttarakhand. The aggregate cost of the project is estimated at Rs.691.41 Cr,

which is proposed to be financed in a debt: equity ratio of 77:23 with Rs.528.45 Cr being raised as Senior

debt from Banks and Financial Institutions and the balance amount of Rs.162.96 Cr being infused as

Sponsors contribution.

The company has mandated IL&FS Financial Services Limited (“IFIN”) to mobilize the Senior debt

facility of Rs. 528.45 Cr to part finance the project cost.

The highlights of the project are:

1. Project sponsors: Era Infra Engineering Limited (EIEL)2. Technical Partner: OJSC – SIBMOST3. Concession Period: 20 years from the date of commencing from appointed date i.e. date of

Financial Closure (including 2 years of the construction period).4. Project Cost: 691.41 Crores

33

2.2 Background

The Government of India (GoI) has entrusted to the National Highways Authority of India (NHAI), the

development, maintenance and management of national highways. NHAI is currently augmenting the

Haridwar – Dehradun section from km 211.000 to km 218.2000 of NH-58 and km 165.000 to km 196.825

of NH-72 (approximately 39.03 Km) on Design, Build, Finance, Operate and Transfer (DBFOT) pattern

on BOT Annuity basis by 4 laning of the existing Road.

The bidding process:

The NHAI accordingly invited proposals by its Request for Qualification (RFQ) in August 2009

for short listing of bidders for the Project and subsequently short listed bidders, including the

consortium of Era Infra Engineering Limited (EIEL) and .its technical partner OJSC-SIBMOST

(Russian Company).

The NHAI then invited bids or Request for Proposals (RFP) from shortlisted bidders under

prescribed technical & commercial terms and conditions.

The list of other shortlisted bidders is:

Ramky Infrastructures Limited

Soma Enterprises Limited

NCC Infra Holdings Limited

Era Infra Engineering Limited & OJSC-SIBMOST

After an evaluation of bids, NHAI accepted the bid of the consortium of EIEL & OJSC-

SIBMOST and communicated its bid vide Letter of Award (LOA) No.

NHAI/BOT/11019/2/2009/45 dated December 29, 2009. The Concession Agreement has been

executed on 24th February, 2010.

34

2.3 Sponsors Profile Era Infra Engineering Limited (EIEL) – Lead Sponsor

Era Infra Engineering Limited (formerly Era Constructions (India) Ltd.) is the flagship company of

the ERA group, a reputed business house with primary business interests in Construction and a

growing Real Estate business. EIEL is an ISO 9001:2000 certified company and is engaged in

diversified construction activities of power projects, roads, railways, runway & integrated cargo

complex for airports, drainage, institutional & industrial complexes, multiplexes and residential

buildings. Since inception, EIEL has completed more than 60 projects for renowned clients like

NTPC, PGC, NHPC, RVNL, BHEL, NBCC, PWD, NALCO etc. EIEL has a robust current order

book of over Rs. 8000 Cr across all sectors. With the Government's thrust on infrastructure

development in the country, EIEL has started focusing on bidding for BOT projects to take advantage

of the opportunities that sector offers

Key Financial indicators of EIEL for the past three years are given below:

Financial Year 2007 2008 2009

(Audited) (Audited) (Audited)

Net Sales 763.02 1464.48 2376.90

EBITDA 140.59 293.10 413.61

Profit before tax 111.41 209.73 257.07

Profit after taxes 79.12 121.37 202.62

EBITDA Margin (%) 18.42% 20.01% 17.40%

Equity Share capital 18.61 23.10 28.71

Reserves & Surplus 272.07 443.11 850.18

Tangible Net Worth(TNW) 304.96 489.59 878.89

Total Loans 814.03 1447.09 1796.35

Net Fixed assets 369.98 710.15 1200.97

Investments 125.20 218.49 176.14

Current Assets 784.06 1411.18 1927.99

Current Liabilities 136.10 339.73 549.84

Total Outstanding Liabilities (TOL) 950.13 1791.68 2346.19

35

Financial Year 2007 2008 2009

(Audited) (Audited) (Audited)

TOL/TNW 3.12 3.66 2.67

Current Ratio 5.76 4.15 3.51

Balance Sheet Analysis:

Net Sales in FY 2009 stands at Rs. 2376.90 crore an increase of 62.30% over

previous financial year. Contract revenue forms a major portion of total turnover

contributing approximately 80 % in FY 09. Contract revenues have grown from Rs.

1244 crores in FY 08 to Rs. 1960 crores in FY 09 an increase of 57.5% over the

previous financial year

There has been an increase in order book from approximately Rs. 5122 crore in

FY 2008 to Rs. 7250 crore in FY 2009 an increase of 41.5%

Profit after tax as on 31.03.2009 stood at Rs. 202.62 crore an increase of 66.13%

over previous financial year

Major activities of the company are in construction division and they have

undertaken bigger projects in FY09. The cost of raw material including steel and

cement increased steeply during FY2009

OJSC-SIBMOST – Technical Partner

SIBMOST (Sibmost) is a leading Russian construction company with over six decades of

experience.Sibmost has built over 3,500 bridges and overbridges with a total length of over 200

kilometres in Ukraine, Siberia, Kazakhstan, the Russian Far East and the Polar North, including

scores of super-class bridges across the Siberian rivers of Yenisei, Ob, Tom, Irtysh, Angara, Abakan,

Biryusa, Chulym, Ob, Katyn. Out of the thirty projects raised in the former USSR, four bridges built

by the firm are included in the UNESCO hand book entitled “Bridge Building Worldwide”.

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2.4 Concession Agreement

1. Concession period

The Concession has been awarded to DHPL for a period of 20 years from the Appointed Date, which is 180 days from the date of execution of the Concession Agreement i.e. February 24, 2010. NHAI is the Concessioning Authority .

2. Annuity

The Concessionaire would be compensated through a fixed payment (Annuity) of Rs 53.22 cr to be paid semi-annually by NHAI during the operations period.

The first annuity payment date shall be 180 days from COD. The number of annuities shall not exceed 2 per year over the Concession Period.

The CA provides for availability of the entire carriageway assured by the Concessionaire for each Annuity Payment (Assured Availability) period, with a proportionate reduction in annuity payment if the actual availability is less than assured availability.

The CA also provides for adherence to Maintenance Requirements during each Annuity Period with proportionate reduction in annuity payment if the maintenance requirements are not adhered to.

The CA specifies that the Concessionaire shall either receive Bonus for early completion of the Project or incur Reduction in the Annuity for delayed completion of the Project. The Bonus shall be paid one month after COD, or reduction shall be effected on the first Annuity Payment date after COD.

3. Conditions Precedent

The following Conditions Precedent is to be satisfied by the Authority before Financial Closure:

a. Provide to the Concessionaire right of way in accordance with the provisions of the Concession Agreement

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b. Procured approval of the Railway authorities that would enable the Concessionaire to construct road over bridges / under bridges at level crossings on the Project Highway

c. Procure all applicable permits relating to environmental protection and conservation of the project site

The Conditions Precedent to be satisfied by the Concessionaire prior to the Appointed Date will be deemed to be fulfilled if the Concessionaire has:

a. provided Performance Security to the Authority

b. executed and procured execution of the Escrow and Substitution Agreement

c. procured all the Applicable Permits specified and executed the Financing Agreements

d. The Concessionaire shall have delivered to NHAI from the Consortium Members, their respective confirmation, in original, of the correctness of their representations and warranties set forth in the Concession Agreement

e. NHAI shall have received the legal opinion of legal counsel of the Concessionaire with respect to the authority of the Concessionaire to enter into the CA and the enforceability of the provisions thereof

4. Obligations of the Concessionaire

The Concessionaire shall:

a. procure finance for and undertake design, engineering, procurement, construction, operation and maintenance of Project Highway

b. comply with all applicable laws and Applicable Permits

c. procure and maintain appropriate proprietary rights, licenses, agreements and permissions

d. make reasonable efforts to facilitate acquisition of land required for the purpose of the Concession Agreement

e. perform and fulfill its obligations under the Financing Agreements

f. transfer the highway to NHAI upon Termination of the Concession Agreement

g. ensure that the Project Site remains free from all encroachments and take all steps necessary to prevent or remove encroachments

38

h. not to undertake or permit any Change in Ownership, except with the prior approval of NHAI

i. not, except with the previous written consent of NHAI, become engaged in any other business other than as envisaged herein

5. Obligations of NHAI

Specific Obligations

a. Handover peaceful physical possession of the Project Site to the Concessionaire, in accordance with the Project Site Delivery Schedule

b. Grant in a timely manner all such approvals, permissions and authorisations which the Concessionaire may require from the Government Agency / the Board in connection with implementation and operations of the Project

General Obligations

a. provide assistance to the Concessionaire in procuring Applicable Permits

b. assist the concessionaire in obtaining access to all necessary infrastructure facilities and utilities

c. ensure that no barriers are erected or placed on the Project Highway

d. make best endeavors to procure that no local tax, toll or charge is levied or imposed on the use of whole or any part of the Project Highway

e. assist the Concessionaire in procuring Police assistance for regulation of traffic, removal of trespassers and security on the Project Highway

f. Support, cooperate with and facilitate the Concessioner in the implementation and operation of the project in accordance with CA

g. Provide reasonable assistance to the Concessionaire or its contractors to obtain applicable visas and work permits for the purposes of discharge of their obligations by the Concessionaire or its Contractors

h. During the development period NHAI shall maintain the Project Highway, at its own cost and expense, so that its traffic worthiness and safety are at no time materially inferior as compared to its condition 7 days prior to the last date for submission of the Bid, and in the event of any material deterioration or damage other than normal wear and tear, undertake repair thereof, or pay to the Concessionaire the cost and expense, as

39

determined by the Independent Engineer, for undertaking such repair after the Appointed Date

40

2.5 Project Cost and Means of Financing

1. Project Cost

The project cost has been estimated at Rs. 691.41 Cr. The detailed break-up of Project Cost is presented in the table below:

Cost Head Rs Cr

EPC Cost 630.00

Preliminary & Pre-Operative Cost 9.29

Interest during construction(IDC) 52.12

Total 691.41

The detailed break-up of each element of project cost is as under:

Engineering, Procurement and Construction Cost (EPC)

The EPC cost has been taken on the basis of proposed EPC contract which shall be entered into with EIEL, the EPC Contractor. The EPC contract will be lumpsum contract with specific provisions to ensure timely completion of the project implementation. The break-up of EPC is as follows:

Particulars Rs. Crores

Construction Cost 583.53

Escalation 36.50

Consultancy & Maintenance Expenses during Construction 9.97

Total 630.00

41

Preliminary & Pre-Operative Expenses

Preliminary expenses include company incorporation expenses. Pre-operative expenses include financing cost, Project Insurance, Establishment expenses, BG Commission etc.

Interest during Construction

Interest on Senior Debt and Sponsor Sub-debt for the implementation period of 24 months has been computed based on the proposed phasing of capital expenditure & debt drawdown schedule. Accordingly, the total IDC component on Senior Debt is Rs.47.01 and on Sponsor Sub-debt is Rs. 5.11 Cr

Interest on Sponsor sub-debt shall be accrued throughout the tenor of the loan and shall be paid after the repayment of entire senior debt. The accrued IDC of Rs. 5.11 Cr on the Sponsor sub-debt has not been considered for the purpose of debt: equity ratio of 77:23

2. Means of Financing

The fund requirement for the Project shall be met through a mix of Shareholders’ equity, Senior Debt from Lenders at an aggregate Debt to Equity Ratio (DER) of 77:23

Particulars Rs. Cr

Equity share capital 5.00

Equity Like Instruments 102.75

Sponsors’ Sub- Debt including Accrued Interest 55.21

Total Sponsor Contributions (A) 162.96

Term Loan-Senior Debt 528.45

Total Debt(B) 528.45

Total 691.41

42

The details of the funding pattern is summarised below:

Sponsor Contributions

Sponsors contribution for this project is as follows:

i. Equity Share Capital

Equity share capital for the project shall be Rs. 5 Crores (50, 00,000 Equity Shares of Rs.10/- each) which would be contributed by both EIEL and OJSC SIBMOST in 74% and 26% respectively.

ii. Equity Like Instruments

The Equity Like instruments shall be in the nature of Preference Share capital for Rs.102.75 Cr. These Preference Shares shall be cumulative in nature and would carry 0.1% p.a. coupon rate. Such preference shares shall not be redeemed during the tenor of the Senior Term Loan.

iii. Sponsor Sub-debt

The financing plan includes Sponsor sub-debt Rs 50.10 Cr. Interest for the same would accrue throughout the loan tenor including construction period. The repayment of sub-debt including accrued interest would also be made subsequent to the repayment of entire senior debt from lenders.

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Senior Debt

The senior debt requirement is estimated at Rs. 528.45 cr, which is proposed to be raised from domestic Banks/ Financial Institutions

(i) Drawdown Schedule

The debt and equity drawdown schedule, over the implementation period of the Project will be as follows:

(Rs. Cr)

Qtr No.

Senior Debt Drawdown

Sub-Debt Drawdown

Equity & Equity Like Instruments

Total Capital Expenditure

1 56.52 - 26.94 83.46

2 63.26 8.84 11.03 83.13

3 66.47 8.82 - 75.29

4 67.77 6.42 13.81 88.00

5 69.08 6.55 14.08 89.71

6 80.21 7.60 16.35 104.16

7 81.77 7.75 16.67 106.19

8 43.37 4.12 8.87 56.36

Total 528.45 50.10 107.75 686.30

The total project cost is Rs.691.41 Cr. However since the interest on Sponsors Sub-debt for Rs.5.11 Cr shall be accrued during the construction as well as operations period, the same has not been considered as part of financing requirement.

44

Performance Guarantee

As per the CA, the Concessionaire is required to provide an irrevocable and unconditional Performance Bank Guarantee within 180 days from the date of the CA to NHAI (towards performance obligations) for a sum equivalent to Rs 23.90 cr for a period of one year.

45

2.6 Project Implementation Framework

The project implementation framework is illustrated in the figure below:

The Project would be implemented over 2.0 years from the appointed date (which is the date of financial

closure) as per the Concession Agreement. The COD of the project is envisaged as 23-Aug-2012.

The implementation timelines of the project are as under:

Description Period DateConcession Agreement 20 Years from Appointed Date 24-Feb-10

Financial ClosureWithin 180 Days from the Date of Signing the Concession Agreement 23-Aug-10

Commercial Operations Date (COD)2 Years (730 days) from the date of Financial Closure 23-Aug-12

Project Period20 Years from the Appointed Date including Construction 23-Aug-30

46

Concession Agreement

NHAI

Sponsors

EIEL & SIBMOST

Lenders

Banks/ FIs

Dehradun Highways Project Limited

(DHPL)

O&M CONTRACT

EIEL

DEVELOPMENT CONTRACT

EIEL

3. FINANCIAL MODEL

It is an abstract representation of a financial decision making solution. The financing is typically secured by all the project assets including the revenue producing contracts.

Project lenders are given a lien on all the assets and are able to assume control on a project.

3.1 Output and Sensitivity

Particulars Rs. CroresProject Cost EPC Cost

630.00

Preliminary and Pre-Operative Expenses

9.29

IDC-Senior Debt 47.01

IDC-Sponsor Debt 5.11

Total Project Cost 691.41

MOF Means of Finance Debt 77.0%Sub-Debt-Lenders 0.0%Equity 15.7%Sub Debt-Sponsors 7.3%Total 100.00%

Debt 528.45

Equity 107.75

Sponsor Sub-Debt 50.10

Accrued int. on Sponsor debt

5.11

Total 691.41

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FinancingRate of Interest 10.0%

Door To Door 15.00

Constn Period + Moratorium 2.50

Repayment Period 12.50

Repayment Starts on 23-Mar-13Repayment Ends on 23-Mar-25Balance Sheet Check OkProject Cost/MOF Check OkIDC Check Ok

Sensitivity Analysis

Particulars % Sensitivity Change

FactorMin. DSCR

Avg. DSCR

Base CaseBase case

1.27

1.31

ROI Increase by 1.00% 0% 0%

1.18

1.25

Project IRR (Pre Tax)

Project IRR (Post

Tax)EIRR

0.00% 0.00% 0.00%10.72% 10.36% 13.90%

Analysis of the data

This sheet gives the details about the:

1. Project costThe project cost is explained in terms of:

EPC Cost Preliminary and Pre Operative Expenses Interest During Construction Senior Debt Interest During Construction Sponsor Debt

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2. Means of FinanceThis section gives the details about the various means of finance in terms of percentages and figures with respect to:

Debt Sub Debt Lenders Equity Sub Debt Sponsors

3. Sensitivity AnalysisThe sensitivity analysis is also given in terms of various ratios for the base case and return on investment.

The ratios used for sensitivity analysis are taken from the ratios sheet.

4. This sheet also gives the details about financing of the project with respect to: Rate of Interest Construction Period Repayment Period Repayment date Checks of the balance sheet Checks of the project cost Interest during construction checks

49

3.2 Assumptions

Figures in Rs. Crores 10000000

Assumptions

Key Dates Particulars Days/Months Date FYDate of Concession 24-Feb-10 2010Time for Financial Closure (FC) 180 Days 23-Aug-10 2011Construction Starts from 24-Aug-10 2011COD 730 Days 23-Aug-12 2013Concession Period Ends from FC 240 months 23-Aug-30 2031First Annuity Period after COD 180 Days 19-Feb-13 2013Last Annuity period 210 months 19-Aug-30 2031First Financial Year Ending 31-Mar-11 2011Last Financial Year 31-Mar-31 2031

No.of Days/Year 365

Financing Senior Debt % 77.0%Sub-Debt-Lenders % 0.0%Equity % 15.7%Sub Debt-Sponsors % 7.3%Total Debt & Equity 100.0%Rate of Interest 10.00%

Refinancing% of Senior Debt reqd. 22.00%

Amount of Refinance 116.26

Rate of Interest 10%

Reapayment period 2 Years

Repayment Starts on 23-Sep-2530-Sep-

25

Repayment ends on 23-Sep-2730-Sep-

27

50

Tenor Door To Door Tenor Years 15.00

Construction Period Years 2

Moratorium after COD Years 0.50

Repayment Period Years 12.50

Repayment Starts Date 23-Mar-1331-Mar-

13

Repayment Ends on 23-Mar-2531-Mar-

25

Upfront Equity % 25%Financing Chages 0.80%Interest Rate on WC/STL 12.00%DSRA - BG Commission Rate 0%

Sub Debt-Lenders Rate of Interest 0.00%Repayment starts 23-Jun-25Repayment Ends on 23-Dec-25

Sub Debt-Sponsors Rate of Interest 12.00%

Repayment starts 23-Jun-25Repayment Ends on 23-Dec-25

51

Project Cost EPC Cost Including Escalation Crores 630.00

Preliminary Expenses Crores 9.29

IDC-Senior Debt Crores 47.01

Contingency Crores -

Total Project Cost Crores 686.30

IDC-Sub Debt Crores 5.11


Rs. Crores

MOF Senior Debt 528.45

Sub-Debt-Lenders -

Equity 107.75

Sub Debt-Sponsors 50.10

Interest on Sub Debt Sponsors 5.11

Total Means of Finance 691.41

Prelims & Pre-Ops

Finance Charges, BG Commn, Audit Fee, LLC & LE Fee, Project Insurance etc Crores

5.47

Preliminary Exp, Project Insurance, Establishment Exp etc. Crores

3.82

Total Crores 9.29

Performance BG Crores 23.90

52

Particulars Upfront Balance

Equity 27

81

Debt 21

508

Sub Debt-Sponsors 13

38

Sub Debt-Lenders -

-

Total 60

626

Accounting: Depreciation Method Useful Life 5.56%Tax Depreciation - WDV % 10%Tax rate % 33%Mat Rate % 20%Service Tax Rate % 11%

Capex Related Contingency % 0%

Operations: Annuity - Semi Annually 53.22

Routine Maintenance/Km p.a. Rs. Crores 0.24

Establishment Cost/p.a. Rs. Crores 0.5

MMR/km Rs. Crores 0.77

Escallation of O&M % 5.0%

Periodic Maintenance from Operations Years 5

Total Length Km 39.025Expenses Based on FY 2013

53

Repayment Schedule Repayment Schedule - Senior Lenders 23-Mar-13 23-Jun-1323-Sep-

13

Quarter End 31-Mar-13 30-Jun-1330-Sep-

13100.000% Semi Annually (15 Years) 0.75% 1.25%

Repayment Schedule - Sub Debt 23-Mar-13 23-Jun-1323-Sep-

13

31-Mar-13 30-Jun-1330-Sep-

13100.00% Sponsor Sub-debt Repayment% 0% 0% 0%

0.00% Lenders Sub-debt Repayment % 0% 0% 0%100.00% Refinancing Debt-Repayment% 0% 0% 0%

23-Dec-13 23-Mar-14 23-Jun-1423-Sep-

1423-Dec-

1423-Mar-

1523-Jun-

1523-Sep-

15

31-Dec-13 31-Mar-14 30-Jun-1430-Sep-

1431-Dec-

1431-Mar-

1530-Jun-

1530-Sep-

15 2.25% 2.00% 2.25% 2.25%

23-Dec-13 23-Mar-14 23-Jun-1423-Sep-

1423-Dec-

1423-Mar-

1523-Jun-

1523-Sep-

15

31-Dec-13 31-Mar-14 30-Jun-1430-Sep-

1431-Dec-

1431-Mar-

1530-Jun-

1530-Sep-

150% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0%

23-Dec-15

23-Mar-16

23-Jun-16

23-Sep-16

23-Dec-16

23-Mar-17

23-Jun-17

23-Sep-17

23-Dec-17

23-Mar-18

31-Dec-15

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Mar-18

2.25% 2.00% 3.00% 2.00% 3.50%

23-Dec-15

23-Mar-16

23-Jun-16

23-Sep-16

23-Dec-16

23-Mar-17

23-Jun-17

23-Sep-17

23-Dec-17

23-Mar-18

31-Dec-15

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Mar-18

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

54

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Jun-18

23-Sep-18

23-Dec-18

23-Mar-19

23-Jun-19

23-Sep-19

23-Dec-19

23-Mar-20

23-Jun-20

23-Sep-20

30-Jun-18

30-Sep-18

31-Dec-18

31-Mar-19

30-Jun-19

30-Sep-19

31-Dec-19

31-Mar-20

30-Jun-20

30-Sep-20

2.25% 4.00% 3.25% 3.50% 3.50%

23-Jun-18

23-Sep-18

23-Dec-18

23-Mar-19

23-Jun-19

23-Sep-19

23-Dec-19

23-Mar-20

23-Jun-20

23-Sep-20

30-Jun-18

30-Sep-18

31-Dec-18

31-Mar-19

30-Jun-19

30-Sep-19

31-Dec-19

31-Mar-20

30-Jun-20

30-Sep-20

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Dec-20

23-Mar-21

23-Jun-21

23-Sep-21

23-Dec-21

23-Mar-22

23-Jun-22

23-Sep-22

23-Dec-22

31-Dec-20

31-Mar-21

30-Jun-21

30-Sep-21

31-Dec-21

31-Mar-22

30-Jun-22

30-Sep-22

31-Dec-22

3.75% 4.00% 4.00% 4.00%

23-Dec-20

23-Mar-21

23-Jun-21

23-Sep-21

23-Dec-21

23-Mar-22

23-Jun-22

23-Sep-22

23-Dec-22

31-Dec-20

31-Mar-21

30-Jun-21

30-Sep-21

31-Dec-21

31-Mar-22

30-Jun-22

30-Sep-22

31-Dec-22

0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Mar-23

23-Jun-23

23-Sep-23

23-Dec-23

23-Mar-24

23-Jun-24

23-Sep-24

23-Dec-24

23-Mar-25

31-Mar-23

30-Jun-23

30-Sep-23

31-Dec-23

31-Mar-24

30-Jun-24

30-Sep-24

31-Dec-24

31-Mar-25

4.00% 4.25% 4.50% 4.50% 27.00% 23-Mar-

2323-Jun-

2323-Sep-

2323-Dec-

2323-Mar-

2423-Jun-

2423-Sep-

2423-Dec-

2423-Mar-

2531-Mar-

2330-Jun-

2330-Sep-

2331-Dec-

2331-Mar-

2430-Jun-

2430-Sep-

2431-Dec-

2431-Mar-

250% 0% 0% 0% 0% 0% 0% 0% 0%

55

0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Jun-25

23-Sep-25

23-Dec-25

23-Mar-26

23-Jun-26

23-Sep-26

23-Dec-26

23-Mar-27

23-Jun-27

30-Jun-25

30-Sep-25

31-Dec-25

31-Mar-26

30-Jun-26

30-Sep-26

31-Dec-26

31-Mar-27

30-Jun-27

0.00% 0.00% 0.00% 0.00%

23-Jun-25

23-Sep-25

23-Dec-25

23-Mar-26

23-Jun-26

23-Sep-26

23-Dec-26

23-Mar-27

23-Jun-27

30-Jun-25

30-Sep-25

31-Dec-25

31-Mar-26

30-Jun-26

30-Sep-26

31-Dec-26

31-Mar-27

30-Jun-27

0% 100% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%0% 24% 24% 23% 28%

23-Sep-27

23-Dec-27

23-Mar-28

23-Jun-28

23-Sep-28

23-Dec-28

23-Mar-29

23-Jun-29

23-Sep-29

30-Sep-27

31-Dec-27

31-Mar-28

30-Jun-28

30-Sep-28

31-Dec-28

31-Mar-29

30-Jun-29

30-Sep-29

0.00% 0.00% 0.00% 0.00% 0.00%

23-Sep-27

23-Dec-27

23-Mar-28

23-Jun-28

23-Sep-28

23-Dec-28

23-Mar-29

23-Jun-29

23-Sep-29

30-Sep-27

31-Dec-27

31-Mar-28

30-Jun-28

30-Sep-28

31-Dec-28

31-Mar-29

30-Jun-29

30-Sep-29

0% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Dec-29

23-Mar-30

23-Jun-30

23-Sep-30

23-Dec-30

23-Mar-31

23-Jun-31

23-Sep-31

23-Dec-31

31-Dec-29

31-Mar-30

30-Jun-30

30-Sep-30

31-Dec-30

31-Mar-31

30-Jun-31

30-Sep-31

31-Dec-31

0.00% 0.00% 0.0% 0.0%

23-Dec- 23-Mar- 23-Jun- 23-Sep- 23-Dec- 23-Mar- 23-Jun- 23-Sep- 23-Dec-

56

29 30 30 30 30 31 31 31 3131-Dec-

2931-Mar-

3030-Jun-

3030-Sep-

3031-Dec-

3031-Mar-

3130-Jun-

3130-Sep-

3131-Dec-

310% 0% 0% 0% 0% 0% 0% 0% 0%0% 0% 0% 0% 0% 0% 0% 0% 0%

23-Mar-32

23-Jun-32

31-Mar-32

30-Jun-32

0.0% 23-Mar-

3223-Jun-

3231-Mar-

3230-Jun-

320% 0%0% 0%

Analysis of the Data

The first sheet of the financial model is of the assumptions made during the preparation of the concessional agreement.

It contains the detail of the project in terms of the:

1. Key Dates2. Financing3. Refinancing4. Tenor5. Lenders6. Sponsors7. Project cost8. Means of Finance9. Preliminary and Operating Expenses10. Accounting11. Capital Expenditure12. Operations13. Repayment Schedule

57

Key Dates

The details of the key dates and timeline that needs to be adhered to are mentioned in this part of the assumptions. The main dates that need to be adhered to are:

i. Date of concessionii. Time of financial closure

iii. Date of commencement of constructioniv. Commercial operation Datev. First and last annuity Period etc.

Financing

The details of various types of financing used for the project are mentioned in this section. The various modes used are:

i. Senior Debt:ii. Sub Debt Lenders

iii. Equityiv. Sub Debt Sponsors

Tenor

The amount of time left for the repayment of the loan or the initial length of the loan is known as tenor. It can be expressed in years, months or days.

In this project tenor is expressed in years.The tenor is given in terms of :

Door to Door TenorThis means the tenor in terms of the completion of the project from Dehradun to Haridwar i.e the total completion of the project.

In this case the tenor is used interchangeably with the completion or maturity.

Construction Period Moratorium after COD Repayment Period

Project Cost

This sheet gives the detail about the project cost in terms of the: EPC cost Preliminary Expense

58

Interest during Construction of the Senior Debt Contingency

Means of FinanceThe sheet also gives the detail about the means of finance used for funding the project which includes:

Senior Debt: A debt that takes priority over other debt securities sold by the issuer. Sub Debt Lenders: It is the subordinate debt by the lenders which is a debt which ranks after

other debts should a company becomes bankrupt. Equity: It is a stock or any other security representing an ownership interest. Sub Debt Sponsors: It is the subordinate debt by the sponsors which is ranked after other debts

should a company becomes bankrupt.

Prelims and Pre Operation ExpenseThis sheet also gives information about the prelim and pre operative expenses . These include:

i. Finance chargesii. Audit Fee

iii. Limited Liability Company Feeiv. Limited Entity Feev. Project insurance

AccountingThis sheet also gives the information about the various accounting particulars and their breakup in terms of the upfront and balance components. These accounting particulars include:

i. Equityii. Debt

iii. Sub Debt Sponsorsiv. Sub Debt Lendersv. Depreciation Method

vi. Tax Ratevii. MAT Rate

viii. Service Tax Rate

Capital ExpenditureThis is the amount spend to acquire or upgrade productive assets such as buildings, machinery and equipment, vehicles to increase the capacity or efficiency of a firm for more than one accounting period.

Repayment ScheduleThis contains the detail about the repayment for:

i. Senior Lendersii. Sub Debt

59

The repayment starts in the year 2013 i.e. the year when the operations or the year when highway becomes operational.

The repayment is funded from the annuity which is paid by the NHAI on a semi annually basis.

3.3 PhasingConstruction PhasingMilestone date as per CA 19-Feb-11% of Completion as per CA 15%

29-Jun-11 25-Jan-

12 22-Aug-

12

35% 70% 100%

Quarter Begins Total 1-Jul-10 1-Oct-10

Quarter Ending 30-Sep-1031-Dec-

10FY 2010 2011 2011% Completion of EPC 1.25% 11.00%% Completion of Preliminary & Pre Operative exp 55.00% 5.00%% Completion of Contingency

EPC Costs 630.00

7.88

69.30

Preliminary Expenses 9.29

5.11

0.46

Interest During Construction 47.01

-

0.71

Contingency -


12.98

70.47

1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12

60

31-Mar-11 30-Jun-11

30-Sep-11

31-Dec-11

31-Mar-12 30-Jun-12

30-Sep-12

31-Dec-12

2011 2012 2012 2012 2012 2013 2013 2013

11.00% 13.00% 13.00% 13.00% 15.00% 15.00% 7.75% 0.00%

6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 2.50% 0.00%

69.30

81.90

81.90

81.90

94.50

94.50

48.82

-

0.58

0.58

0.58

0.58

0.58

0.58

0.23

-

2.20

3.82

5.50

7.21

9.08

11.10

7.38

-

72.08

86.31

87.98

89.69

104.16

106.18

56.44

-

Cum Funding Requirement 12.98

83.45

Cum % of Completion 12%Equity Drawdown

Upfront Equity 26.94

12.98

13.95

Balance Equity 80.81

-

-

Total Equity Infusion 107.75

-

12.98

13.95

155.54

241.84

329.83

419.52

523.68

629.86

686.30

686.30

23% 35% 48% 61% 76% 92% 100% -

-

-

-

-

-

-

-

-

11.03

13.81

14.08

16.35

16.67

8.86

-

-

11.03

13.81

14.08

16.35

16.67

8.86

-

Cumulative Equity

61

- 12.98 26.94 Debt

Senior Debt 528.45

-

56.52

26.94

37.97

51.78

65.86

82.22

98.89

107.75

107.75

63.25

66.46

67.75

69.06

80.20

81.76

43.46

-

Cumulative Senior debt -

-

56.52

119.76

186.22

253.97

323.03

403.23

484.99

528.45

528.45

Sub Debt-Sponsors 50.10

-

-

Cumulative sub debt-Sponsors -

-

-

8.84

8.82

6.42

6.55

7.60

7.75

4.12

-

8.84

17.65

24.08

30.62

38.23

45.98

50.10

50.10

Total Funds drawn 12.98

70.47

Check -

-

72.08

86.31

87.98

89.69

104.16

106.18

56.44

-

-

-

-

-

-

-

-

-

62

Debt Schedule- Senior Debt 2011 2011Period beginning 1-Jul-10 1-Oct-10

period Closing 30-Sep-1031-Dec-

10

Beg. Balance -

-

Debt d/d during the period 528.45

-

56.52

Repayment Schedule -

End Balance -

56.52

Interest -

0.71

IDC 47.01

-

0.71

Interest to P&L 461

-

-

2011 2012 2012 2012 2012 2013 2013 20131-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-1231-Mar-

11 30-Jun-1130-Sep-

1131-Dec-

1131-Mar-

12 30-Jun-1230-Sep-

1231-Dec-

12 56.52

119.76

186.22

253.97

323.03

403.23

484.99

528.45

63.25

66.46

67.75

69.06

80.20

81.76

43.46

-

119.76

186.22

253.97

323.03

403.23

484.99

528.45

528.45

2.20

3.82

5.50

7.21

9.08

11.10

12.67

13.21

2.20

3.82

5.50

7.21

9.08

11.10

7.38

-

-

-

-

-

-

-

5.29

13.21

2013 2014 2014 2014 2014 2015 2015 2015 20151-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-14 1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-1531-Mar-

1330-Jun-

1330-Sep-

1331-Dec-

1331-Mar-

1430-Jun-

1430-Sep-

1431-Dec-

1431-Mar-

15

63

528.45 524.48 524.48 517.88 517.88 505.99 505.99 495.42 495.42 -

-

-

-

-

-

-

-

-

3.96

-

6.61

-

11.89

-

10.57

-

11.89

524.48

524.48

517.88

517.88

505.99

505.99

495.42

495.42

483.53

13.16

13.11

13.03

12.95

12.80

12.65

12.52

12.39

12.24

-

-

-

-

-

-

-

-

-

13.16

13.11

13.03

12.95

12.80

12.65

12.52

12.39

12.24

Sub Debt-Sponsors 2011 2011 2011Period beginning 1-Jul-10 1-Oct-10 1-Jan-11

period Closing 30-Sep-1031-Dec-

1031-Mar-

11

Beg. Balance -

-

-


-

-

8.84

Repayment Schedule 50.10

Repayment of Interest

End Balance -

-

8.84

Interest -

-

0.13

IDC 5.11

-

-

0.13

Interest Accrued to P&L 78

-

-

-

Int on Sponsor debt macro 83

-

-

0.13

Cum Int on Sponsor debt -

-

0.13

64

IDC Macro - Senior Debt 47.01

-

1

2

IDC Macro-Sub Debt-Lenders -

-

-

-

IDC Macro-Sub Debt-Sponsors 5.11

-

-

0

2012 2012 2012 2012 2013 2013 20131-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12

30-Jun-1130-Sep-

1131-Dec-

1131-Mar-

12 30-Jun-1230-Sep-

1231-Dec-

12 8.84

17.65

24.08

30.62

38.23

45.98

50.10

8.82

6.42

6.55

7.60

7.75

4.12

-

17.65

24.08

30.62

38.23

45.98

50.10

50.10

0.40

0.63

0.82

1.03

1.26

1.44

1.50

0.40

0.63

0.82

1.03

1.26

0.84

-

-

-

-

-

-

0.60

1.50

0.40

0.63

0.82

1.03

1.26

1.44

1.50

0.53

1.16

1.98

3.01

4.27

5.71

7.22

4

6

7

9

11

7

-

-

-

-

-

-

-

-

0

1

1

1

1

1

-

65

Project Cost & MOF Financial Year wise 2010 2011 2012

EPC Cost 146.48

340.20

Preliminary & Preoperatives 6.15

2.32

IDC-Senior Debt 2.91

25.62

IDC-Sponsor Debt 0.13

2.88

Total Cost 691.41

-

155.67

371.02

2013 2014 2015 2016 2017 2018 143.33

-

-

-

-

-

0.81

-

-

-

-

-

18.48

-

-

-

-

-

2.10

-

-

-

-

-

164.72

-

-

-

-

-

Means of Finance

Senior Debt

Senior Debt OB -

-

119.76

Draw Down -

119.76

283.47

Repayment -

-

-

Senior Debt CB -

119.76

403.23

403.23

524.48

505.99

483.53

459.75

433.33

125.22

-

-

-

-

-

3.96

18.50

22.46

23.78

26.42

29.06

66

524.48 505.99 483.53 459.75 433.33 404.26

404.26

371.23

335.56

297.25

254.98

212.70

166.46

-

-

-

-

-

-

-

33.03

35.67

38.31

42.28

42.28

46.24

166.46

371.23

335.56

297.25

254.98

212.70

166.46

-

Sub debt-Sponsors

Sub Debt OB -

-

8.84

Draw Down 50.10

-

8.84

29.39

Repayment 50.10

-

-

-

Repayment on Interest -

-

-

Sub Debt CB -

8.84

38.23

38.23

50.10

50.10

50.10

50.10

50.10

50.10

50.10

11.87

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

-

-

-

-

-

-

-

-

-

-

-

50.10

-

-

-

-

-

83.12

67

50.10 50.10 50.10 50.10 50.10 -

Equity

Equity During the Year 26.94

55.28

25.53

Total Means of Finance 156

368

163

MOF Check -0.13

-2.88

-2.10

Refinancing Schedule

Sub Debt OB -

-

-

-

Draw Down 116.26

-

-

-

-

Repayment 116.26

-

-

-

-

Repayment on Interest -

-

-

-

Sub Debt CB -

-

-

-

Then again from 2015:

-

116.26

60.13

0.00

116.26

-

-

-

-

56.12

60.13

-

-

83.12

-

-

116.26

60.13

0.00

0.00

FY 2010 2011 2012 2013 2014

CWIP -

155.67

371.02

164.72

-

68

Cost of Additions -

-

-

-

691.41

FY 2010 2011 2012 2013 2014Interest to P&L

Senior Debt -

-

-

31.66

51.89

Refinancing Debt -

-

-

-

-

Sub Debt-Lenders -

-

-

-

-

Sub Debt-Sponsors -

-

-

3.61

6.01

Cum Sub Debt Interest-Sponsors

-

-

-

3.61

9.62

2015 2016 2017 2018 2019 2020 2021 2022

49.79

47.46

45.12

42.44

39.42

35.82

32.15

28.14

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

6.01

6.01

6.01

6.01

6.01

6.01

6.01

6.01

15.63

21.64

27.66

33.67

39.68

45.69

51.70

57.72

2023 2024 2025 2026 2027 2028 2029 2030 2031

23.91

19.57

13.38

-

-

-

-

-

-

69

- - 1.45 9.52 3.90 0.00 0.00 0.00 0.00 -

-

-

-

-

-

-

-

-

6.01

6.01

6.01

2.25

-

-

-

-

-

63.73

69.74

75.75

78.01

78.01

78.01

78.01

78.01

78.01

Termination Payment Check31-Mar-

1131-Mar-

1231-Mar-

13

Annuity Payments -

-

53.22

Termination Payment - IF Concessioner Defaults 14.75%

709.40

Termination Payment - IF Concessioner Defaults 8.75%

988.80

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

31-Mar-21

31-Mar-22

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

752.96

741.89

729.45

714.90

698.21

679.06

657.33

632.14

603.25

1,017.44

990.72

961.87

930.28

895.93

858.57

818.13

773.96

725.93

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

31-Mar-29

31-Mar-30

31-Mar-31

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

53.22

570.09

532.23

488.60

438.53

381.07

315.26

239.62

152.82

53.22

673.69

617.03

555.27

488.10

415.06

335.70

249.32

155.38

53.22

Refinancing Schedule

Debt Schedule- Refinancing 2011 2011

Period beginning 0 1-Jul-10 1-Oct-10

period Closing 30-Sep-

1031-Dec-

10

70

Beg. Balance -

-


Repayment Schedule 116.26

End Balance -

-

Interest -

-

IDC -

-

-

Interest to P&L 15

-

-

2025 2026 2026 2026 2026 2027 2027 2027 20271-Jan-25 1-Apr-25 1-Jul-25 1-Oct-25 1-Jan-26 1-Apr-26 1-Jul-26 1-Oct-26 1-Jan-2731-Mar-

2530-Jun-

2530-Sep-

2531-Dec-

2531-Mar-

2630-Jun-

2630-Sep-

2631-Dec-

2631-Mar-

27 -

116.26

116.26

88.20

88.20

60.13

60.13

32.87

32.87

116.26

-

-

-

-

-

-

-

-

-

-

28.06

-

28.06

-

27.26

-

32.87

116.26

116.26

88.20

88.20

60.13

60.13

32.87

32.87

0.00

1.45

2.91

2.56

2.20

1.85

1.50

1.16

0.82

0.41

-

-

-

-

-

-

-

-

-

1.45

2.91

2.56

2.20

1.85

1.50

1.16

0.82

0.41

Analysis of the Data

The sheet of the phasing gives the details about the various milestones and phases of construction as per the concession agreement.

It also gives the detail of various percentages of completions in terms of various expenses namely:

i. EPC (Engineering Procurement and construction) ii. Preliminary and operative Expense

iii. Completion of contingencyiv. EPC Costs

The EPC cost is calculated by multiplying the percentage of completion of EPC with the total EPC cost.Eg. (1.25 * 630) / 100 = 7.88

71

v. Preliminary ExpenseThe preliminary expenses are calculated by multiplying the percentage of Preliminary expense with the total preliminary expense.E.g. (55 * 9.29) / 100 = 5.11

vi. Interest during Construction

The interest during construction is calculated by adding the interest during construction of Senior Debt and interest during construction Sub Debt Lenders.

This sheet also gives the detail about the cumulative funding requirement and cumulative percentage of completion.

The cumulative funding requirement is a calculated as per the total project cost required during different phases of construction.

The cumulative percentage of completion is calculated by finding out the percentage of cumulative funding requirement with respect to the total project cost.

Equity Drawdown

The equity drawdown is noted down from the assumptions sheet.

Debt Equity Ratio

The debt equity ratio is a leverage ratio that compares a company’s total liabilities to its total shareholder’s equity. This is a measurement of how much suppliers, lenders, creditors have committed to the company versus what the shareholders have committed.

The formula for the debt equity ratio is :

Debt Equity Ratio = (Total Liabilities / Shareholder’s Equity)

In this project:

The debt equity ratio is calculated by dividing the Cumulative Senior debt by the sum of Cumulative Equity, Cumulative Sub Debt lenders, Cumulative Sub Debt Sponsors, Cumulative Senior Debt and Interest During Construction for Sub Debt Sponsors.

E.g. [56.52 / (56.52 + 26.94 + 0 + 0 + 0)] * 100 = 67.72

The sheet also explains about the debt schedule in terms of:

Senior Debt Sub Debt Sponsors

72

The sheet also explains the Interest during construction for:

Senior Debt Sub Debt Lenders Sub Debt Sponsors

The sheet also gives detail about the Project cost and means of finance required yearly.

3.4 Working Capital

WC in due course of Annuity ReceiptFY ending 2011 2012 2013 2014

Short Term Loan Requirement 31-Mar-

1131-Mar-

12 31-Mar-13 31-Mar-14

OB -

-

27.27

Additions -

38.96

-

Repayment -

11.69

27.27

CB -

27.27

-

Interest -

1.42

1.64

Required Amount Before Annuity 38.96

WC-Repayment Schedule - 30% 70%

This sheet gives the details about the working capital.

Working capital is the cash available for day to day operations of a firm.

It is calculated by deducting current liabilities from current assets. Sources of working capital are:

i. Net income

73

ii. Long Term Loans

iii. Sale of Capital

iv. Injection of funds by the owners

Amount of available working capital is a measure of a firm’s ability to meet its short term obligations.

3.5 Revenue and Expenditure

365.00

366.00

365.00

No.of Days FY wise 31-Mar-

1031-Mar-

1131-Mar-

1231-Mar-

13

2010 2011 2012 2013

Operation Starts23-Aug-

12

- - - 221

Operation Closes23-Aug-

30

Annuity -

-

-

53.22

O&M Expenses -

-

-

5.88

365.00

365.00

366.00

365.00

365.00

365.00

366.00

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

2014 2015 2016 2017 2018 2019 2020 36

5 36

5 36

6 36

5 36

5 36

5 36

6

74

106.44

106.44

106.44

106.44

106.44

106.44

106.44

10.20

10.71

11.24

11.80

12.39

13.01

13.66

365.00

365.00

365.00

366.00

365.00

365.00

365.00

366.00

365.00

31-Mar-21

31-Mar-22

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

31-Mar-29

2021 2022 2023 2024 2025 2026 2027 2028 2029 36

5 36

5 36

5 36

6 36

5 36

5 36

5 36

6 36

5 106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

14.35

15.06

15.82

16.61

17.44

18.31

19.22

20.19

21.20

365.00

365.00

366.00

-48,304.00

-

31-Mar-30

31-Mar-31

31-Mar-32 0-Jan-00 0-Jan-00

2030 2031 2032 1900 1900 36

5 14

5 - - -

106.44

53.22

-

-

-

22.26

9.28

-

-

-

Annuity Calculation 19-Feb-

1319-Aug-

1319-Feb-

1419-Aug-

14

FY ending 2013 2014 2014 2015

Annuity 53.22

53.22

53.22

53.22

19-Feb- 19-Aug- 19-Feb- 19-Aug- 19-Feb- 19-Aug- 19-Feb- 19-Aug- 19-Feb-

75

15 15 16 16 17 17 18 18 192015 2016 2016 2017 2017 2018 2018 2019 2019

53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

19-Aug-19

19-Feb-20

19-Aug-20

19-Feb-21

19-Aug-21

19-Feb-22

19-Aug-22

19-Feb-23

19-Aug-23

2020 2020 2021 2021 2022 2022 2023 2023 2024 53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

19-Feb-24

19-Aug-24

19-Feb-25

19-Aug-25

19-Feb-26

19-Aug-26

19-Feb-27

19-Aug-27

19-Feb-28

2024 2025 2025 2026 2026 2027 2027 2028 2028 53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

53.22

19-Aug-28

19-Feb-29

19-Aug-29

19-Feb-30

19-Aug-30

19-Feb-31

2029 2029 2030 2030 2031 2031 53.22

53.22

53.22

53.22

53.22

-

No.of Years Operation -

-

-

1

FY ending 31-Mar-

1031-Mar-

1131-Mar-

1231-Mar-

13FY ending 2010 2011 2012 2013

Operation Factor -

-

-

0.61

Routine Maintenance including insurance

-

-

-

5.58

Administration Expenses -

-

-

0.30

Total O & M Expenses -

-

-

5.88

2

3

4

5

6

7

8

9

10

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

31-Mar-21

31-Mar-22

76

2014 2015 2016 2017 2018 2019 2020 2021 2022 1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

9.67

10.15

10.66

11.19

11.75

12.34

12.96

13.61

14.29

0.53

0.55

0.58

0.61

0.64

0.67

0.70

0.74

0.78

10.20

10.71

11.24

11.80

12.39

13.01

13.66

14.35

15.06

11

12

13

14

15

16

17

18

19

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

31-Mar-29

31-Mar-30

31-Mar-31

2023 2024 2025 2026 2027 2028 2029 2030 2031 1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

0.40

15.00

15.75

16.54

17.37

18.23

19.15

20.10

21.11

8.81

0.81

0.86

0.90

0.94

0.99

1.04

1.09

1.15

0.48

15.82

16.61

17.44

18.31

19.22

20.19

21.20

22.26

9.28

-

-

-

31-Mar-32 0-Jan-00 0-Jan-00

2032 1900 1900 -

-

-

-

-

-

-

-

-

-

-

-

Major Maintenance Reserve Account

77

31-Mar-

1031-Mar-

1131-Mar-

1231-Mar-

13

Operation Factor -

-

-

0.61

Expected Major Maintenance at inflated Rate (100%)

-

-

-

18.16

Opening Balance -

-

-

-

Transfer from Cash -

-

-

4.31

MMR Spending -

-

-

-

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

31-Mar-21

31-Mar-22

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

31.50

33.08

34.73

36.47

38.29

40.20

42.21

44.32

46.54

4.31

11.44

18.57

25.69

-

9.31

18.62

27.92

37.23

7.13

7.13

7.13

7.13

9.31

9.31

9.31

9.31

9.31

-

-

-

32.82

-

-

-

-

46.54

11.44

18.57

25.69

-

9.31

18.62

27.92

37.23

-

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

31-Mar-29

31-Mar-30

31-Mar-31

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

-

48.87

51.31

53.88

56.57

59.40

62.37

65.49

68.76

28.68

-

11.88

23.76

35.64

47.52

-

13.75

27.50

41.26

11.88

11.88

11.88

11.88

11.88

13.75

13.75

13.75

-

-

-

-

-

59.40

-

-

-

-

11.88

23.76

35.64

47.52

-

13.75

27.50

41.26

41.26

31-Mar- 0-Jan-00 0-Jan-00

78

32 -

-

-

-

-

-

41.26

41.26

41.26

-

-

-

-

-

-

41.26

41.26

41.26

Analysis of Data

This sheet gives the detail about the revenue and expenditure related to the project.

It gives the details about the annuity and operation and maintenance expenses on a yearly basis.

The operation and maintenance expenses include:

i. Routine Maintenance including insurance

ii. Administration Expense

3.6 Depreciation and Tax

Books -

-

-

221.00

Book Depreciation 2010 2011 2012 2013

FY Ending 31-Mar-

10 31-Mar-11 31-Mar-12 31-Mar-13

Factor -

-

-

0.61

Opening Balance -

-

-

155.67

526.69

Additions -

-

155.67

371.02

164.72

Net Block -

-

155.67

526.69

668.15

79

Depreciation -

-

-

-

23.26

No.of Years 20 19 18 365.00

365.00

366.00

365.00

365.00

365.00

366.00

365.00

2014 2015 2016 2017 2018 2019 2020 202131-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

668.15

628.85

589.54

550.24

510.94

471.64

432.33

393.03

-

-

-

-

-

-

-

-

628.85

589.54

550.24

510.94

471.64

432.33

393.03

353.73

39.30

39.30

39.30

39.30

39.30

39.30

39.30

39.30

17 16 15 14 13 12 11 10 365.00

365.00

366.00

365.00

365.00

365.00

366.00

365.00

2022 2023 2024 2025 2026 2027 2028 202931-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

353.73

314.42

275.12

235.82

196.51

157.21

117.91

78.61

-

-

-

-

-

-

-

-

314.42

275.12

235.82

196.51

157.21

117.91

78.61

39.30

39.30

39.30

39.30

39.30

39.30

39.30

39.30

39.30

9 8 7 6 5 4 3 2

365.00

145.00

-

2030 2031 203231-Mar-30 31-Mar-31 31-Mar-32

1.00

0.40

-

39.30

-

-

80

- - - -

-

-

39.30

-

-

1 0 0

Tax Depreciation 2010 2011 2012 2013

FY Ending 31-Mar-

10 31-Mar-11 31-Mar-12 31-Mar-13

Factor -

-

-

1.00

Opening Balance -

-

155.67

526.69

additions -

155.67

371.02

164.72

Gross Block -

155.67

526.69

691.41

Tax Depreciation 10% -

-

-

69.14

No.of Years 20 19 182014 2015 2016 2017 2018 2019 2020 2021

31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

622.27

560.04

504.04

453.63

437.81

394.03

354.62

319.16

-

-

-

32.82

-

-

-

-

622.27

560.04

504.04

486.45

437.81

394.03

354.62

319.16

62.23

56.00

50.40

48.65

43.78

39.40

35.46

31.92

17 16 15 14 13 12 11 102022 2023 2024 2025 2026 2027 2028 2029

31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 1.

00 1.

00 1.

00 1.

00 1.

00 1.

00 1.

00 1.

00 287.

24 300.

41 270.

37 243.

33 219.

00 197.

10 230.

84 207.

76 46.

54 -

-

-

-

59.40

-

-

333. 300. 270. 243. 219. 256. 230. 207.

81

78 41 37 33 00 49 84 76 33.

38 30.

04 27.

04 24.

33 21.

90 25.

65 23.

08 20.

78 9 8 7 6 5 4 3 2

2030 2031 2032

31-Mar-30 31-Mar-31 31-Mar-32 1.00

1.00

-

186.98

168.29

151.46

-

-

-

186.98

168.29

151.46

18.70

16.83

-

1 0 0

Tax Computation 31-Mar-

10 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14

PBT -

-

-

-12.60

-2.59

Add: Book Depreciation -

-

-

23.26

39.30

Less: Tax Depreciation -

-

-

69.14

62.23

Gross Taxable Profit -

-

-

-58.49

-25.52

Loss Carryforward used -

-

-

-58.49

-25.52

Loss Brought forward -

-

-

-58.49

-84.00

Net Taxable Profit -

-

-

-

-


2.42

-2.36

-0.27

2.13

5.08

8.06

8.61

39.30

39.30

45.87

45.87

45.87

45.87

45.87

48.61

82

56.00

50.40

48.65

43.78

39.40

35.46

31.92

33.38

-16.07

-8.68

-5.14

1.81

8.59

15.48

22.01

23.85

-16.07

-8.68

-5.14

1.81

8.59

15.48

22.01

23.85

-100.07

-108.75

-113.89

-112.07

-103.48

-87.99

-65.98

-42.13

-

-

-

-

-

-

-

-


15.64

19.55

27.74

32.13

35.07

34.06

33.00

48.61

48.61

48.61

48.61

51.18

51.18

51.18

51.18

30.04

27.04

24.33

21.90

25.65

23.08

20.78

18.70

30.66

37.22

43.83

54.46

57.67

63.17

64.47

65.49

30.66

11.48

-

-

-

-

-

-

-11.48

-

-

-

-

-

-

-

-

25.74

43.83

54.46

57.67

63.17

64.47

65.49

31-Mar-31 31-Mar-32 32.06

-0.00

11.88

-

16.83

-

27.11

-0.00

-

-0.00

-

-0.00

27.11

-

Normal Tax Payable -

-

-

-

80IA Counter

83

- - - -

Operating Year -

-

-

1

MAT Calculation -

-

-

-

Tax Payable -

-

-

-

Less: MAT Credit -

-

-

-

Actual Tax Payable -

-

-

-

MAT Credit

Opening -

-

-

-

Addition -

-

-

-

Cum Credit available -

-

-

-

Cum Credit available for set off -

-

-

-

Utilised -

-

-

-

Closing -

-

-

-

Depreciation of MMR

No.of Years Operation -

-

-

1

OB -

-

-

-

Additions -

-

-

-

deletions -

-

-

-

Closing Balance -

-

-

-

Depreciation on Major Maintenance reserve

-

-

-

-

-

-

-

-

-

-

-

-

84

-

-

-

-

1

1

1

1

2

3

4

5

6

7

8

9

-

0.13

0.48

-

-

0.42

1.01

1.61

-

0.13

0.48

-

-

0.42

1.01

1.61

-

-

-

-

-

-

-

-

-

0.13

0.48

-

-

0.42

1.01

1.61

-

-

0.13

0.61

0.61

0.61

1.03

2.05

-

0.13

0.48

-

-

0.42

1.01

1.61

-

0.13

0.61

0.61

0.61

1.03

2.05

3.65

-

0.13

0.61

0.61

0.61

1.03

2.05

3.65

-

-

-

-

-

-

-

-

-

0.13

0.61

0.61

0.61

1.03

2.05

3.65

2

3

4

5

6

7

8

9

-

-

-

-

32.82

32.82

32.82

32.82

-

-

-

32.82

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

32.82

32.82

32.82

32.82

32.82

-

-

-

6.56

6.56

6.56

6.56

6.56

-

-

-

-

-

-

20.98

21.41

85

1

1

1

1

1

1

-

-

10

11

12

13

14

15

16

17

1.72

2.41

3.12

3.90

5.53

6.40

6.99

6.79

1.72

2.41

3.12

3.90

5.53

6.40

20.98

21.41

-

-

-

-

-

-

13.99

10.69

1.72

2.41

3.12

3.90

5.53

6.40

6.99

10.73

3.65

5.37

7.65

10.29

14.18

19.71

25.69

10.69

1.72

2.41

3.12

3.90

5.53

6.40

-

-

5.37

7.78

10.90

14.79

20.32

26.73

26.73

26.73

5.37

7.65

10.29

14.18

19.71

25.69

24.68

23.07

-

-

-

-

-

-

13.99

10.69

5.37

7.65

10.29

14.18

19.71

25.69

10.69

-

10

11

12

13

14

15

16

17

32.82

46.54

46.54

46.54

46.54

46.54

59.40

59.40

46.54

-

-

-

-

59.40

-

-

32.82

-

-

-

-

46.54

-

-

46.54

46.54

46.54

46.54

46.54

59.40

59.40

59.40

9.31

9.31

9.31

9.31

9.31

11.88

11.88

11.88

86

21.75 9.00 - -

-

-

18

19

-

6.58

6.39

-

21.75

9.00

-

-

-

-

21.75

9.00

-

-

-

-

-

-

-

26.73

26.73

26.73

21.36

18.95

15.83

-

-

-

-

-

-

18

19

-

59.40

59.40

59.40

-

-

-

-

-

59.40

59.40

59.40

-

11.88

11.88

-

87

Analysis of Data

Depreciation and Tax

This sheet gives the details about the depreciation and tax related to the project.

There are two types of depreciation used in this project:

i. Book Depreciationii. Tax Depreciation

Book Depreciation

It is defined as the amount of depreciation for one or more assets, as shown in the books of accounts rather than the real value of the depreciation.

This depreciation is used for financial purpose.

Book Depreciation for this project is calculated by the following formula:

[(Opening Balance + Construction Work in Progress) / No. of Years] * Factor

The factor is calculated dividing the no. days from the commencement of operations with the no. of days in the year.

Tax Depreciation

It is the depreciation computed on the tax return according to the income tax code and regulations.

This depreciation is used for the income tax purpose.

The tax depreciation for this project is calculated by the following formula:

{[(Opening Balance + Construction Work in Progress)] * Tax Depreciation Rate} * 100

The factor in this case is 1.0.

Tax Computation

It is calculated by calculating the Normal Tax payable.

Normal Tax Payable is calculated by Deducting the Loss Carry Forward used from Gross Taxable Profit.

Gross Taxable Profit is calculated by adding book depreciation to the PBT and deducting the tax depreciation from the sum.

88

Loss Carry Forward is the minimum of either Gross Taxable Profit or the negative of Loss Brought forward.

The other taxes calculated in this sheet are:

MAT (Minimum Alternative Tax)

It is the tax which has to be paid by the companies that are enjoying some kind of tax benefits.

And one more depreciation i.e. the depreciation on major maintenance reserve is also calculated in this sheet.

3.7 Financial

PROFIT AND LOSS ACCOUNT Figures in Rs. Crores

Year Ending March 31st 31-Mar-

1031-Mar-

1131-Mar-

1231-Mar-

1331-Mar-

14

Annuity -

-

-

53.22

106.44

Other Revenue

Total Revenue -

-

-

53.22

106.44

O&M -

-

-

5.88

10.20

Total Expenses -

-

-

5.88

10.20

EBITDA -

-

-

47.34

96.24

Interest - Senior Debt -

-

-

31.66

51.89

Interest-Refinancinng debt -

-

-

-

-

Interest -WC -

-

-

1.42

1.64

Interest Sub Debt- Lenders -

-

-

-

-

Interest Sub Debt - Sponsors -

-

-

3.61

6.01

EBTDA -

-

-

10.66

36.71

Depreciation

89

- - - 23.26 39.30 Amortization

Profit Before Tax -

-

-

-12.60

-2.59

Tax -

-

-

-

-

Profit After Tax -

-12.60

-2.59

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

31-Mar-21

31-Mar-22

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

10.71

11.24

11.80

12.39

13.01

13.66

14.35

15.06

10.71

11.24

11.80

12.39

13.01

13.66

14.35

15.06

95.73

95.20

94.64

94.05

93.43

92.78

92.09

91.38

49.79

47.46

45.12

42.44

39.42

35.82

32.15

28.14

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

6.01

6.01

6.01

6.01

6.01

6.01

6.01

6.01

39.93

41.73

43.51

45.59

48.00

50.95

53.93

57.22

39.30

39.30

45.87

45.87

45.87

45.87

45.87

48.61

90

0.63

2.42

-2.36

-0.27

2.13

5.08

8.06

8.61

0.13

0.48

-

-

0.42

1.01

1.61

1.72

0.50

1.94

-2.36

-0.27

1.71

4.07

6.46

6.90

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

31-Mar-29

31-Mar-30

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

106.44

15.82

16.61

17.44

18.31

19.22

20.19

21.20

22.26

15.82

16.61

17.44

18.31

19.22

20.19

21.20

22.26

90.62

89.83

89.00

88.13

87.22

86.25

85.24

84.18

23.91

19.57

13.38

-

-

-

-

-

-

-

1.45

9.52

3.90

0.00

0.00

0.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

6.01

6.01

6.01

2.25

-

-

-

-

60.70

64.25

68.16

76.35

83.32

86.25

85.24

84.18

91

48.61 48.61 48.61 48.61 51.18 51.18 51.18 51.18 12.09

15.64

19.55

27.74

32.13

35.07

34.06

33.00

2.41

3.12

3.90

5.53

6.40

6.99

10.73

21.75

9.68

12.52

15.65

22.21

25.73

28.08

23.33

11.25

31-Mar-31

31-Mar-32

53.22

-

53.22

-

9.28

-

9.28

-

43.94

-

-

-

0.00

0.00

-

-

-

-

-

-

-

92

43.94 0.00 11.88

-

32.06

-0.00

9.00

-

23.05

-0.00

BALANCE SHEET Figures in Rs. Crores

Year Ending March 31-Mar-1031-Mar-

1131-Mar-

12

Equity - 26.94

82.22

Reserves & Surplus - -

-

Networth - 26.94

82.22

Senior Debt - 119.76

403.23

Refinancing Debt - -

-

WC Loan/STL - -

-

Sub Debt-Lenders - -

-

Sub Debt-Sponsors - 8.84

38.23

Interest Accrued on sub debt from sponsors -

0.13

3.01

Loan Funds - 128.73

444.47

93

Total Sources of Funds - 155.67

526.69

Gross Fixed Assets/CWIP - 155.67

526.69

Depreciation - -

-

Net Fixed Assets - 155.67

526.69

Cash - -

-

Major Maintenance Reserve - -

-

Total Application of Funds - 155.67

526.69

31-Mar-13

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

107.75

107.75

107.75

107.75

107.75

107.75

107.75

107.75

-12.60

-15.20

-14.69

-12.75

-15.11

-15.38

-13.67

-9.61

95.15

92.55

93.06

95.00

92.64

92.37

94.07

98.14

524.48

505.99

483.53

459.75

433.33

404.26

371.23

335.56

-

-

-

-

-

-

-

-

27.27

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

50.10

50.10

50.10

50.10

50.10

50.10

50.10

50.10

8.72

14.73

20.74

26.76

32.77

38.78

44.79

50.80

94

610.57 570.82 554.37 536.60 516.19 493.14 466.13 436.47 705.72

663.37

647.43

631.60

608.83

585.51

560.20

534.61

691.41

691.41

691.41

691.41

724.23

724.23

724.23

724.23

23.26

62.56

101.86

141.17

187.03

232.90

278.77

324.63

668.15

628.85

589.54

550.24

537.19

491.33

445.46

399.59

33.25

23.08

39.32

55.67

71.64

84.88

96.12

107.09

4.31

11.44

18.57

25.69

-

9.31

18.62

27.92

705.72

663.37

647.43

631.60

608.83

585.51

560.20

534.61

31-Mar-21

31-Mar-22

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

107.75

107.75

107.75

107.75

107.75

107.75

107.75

107.75

-3.15

3.75

13.42

25.95

41.60

63.82

89.55

117.63

104.60

111.49

121.17

133.70

149.35

171.56

197.29

225.38

297.25

254.98

212.70

166.46

-

-

-

-

-

-

-

-

116.26

60.13

0.00

0.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

50.10

50.10

50.10

50.10

50.10

-

-

-

56.82

62.83

68.84

74.85

80.86

-

-

-

95

404.17

367.90

331.64

291.41

247.22

60.13

0.00

0.00

508.76

479.40

452.81

425.11

396.57

231.70

197.29

225.38

724.23

770.77

770.77

770.77

770.77

770.77

830.16

830.16

370.50

419.11

467.72

516.33

564.94

613.55

664.74

715.92

353.73

351.66

303.04

254.43

205.82

157.21

165.43

114.24

117.81

127.74

137.89

146.92

155.11

26.97

31.87

97.38

37.23

-

11.88

23.76

35.64

47.52

-

13.75

508.76

479.40

452.81

425.11

396.57

231.70

197.29

225.38

31-Mar-29

31-Mar-30

31-Mar-31

31-Mar-32

107.75

107.75

107.75

107.75

140.96

152.21

175.26

175.26

248.71

259.96

283.01

283.01

-

-

-

-

0.00

0.00

0.00

0.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

96

0.00

0.00

0.00

0.00

248.71

259.96

283.01

283.01

830.16

830.16

830.16

830.16

767.10

818.28

830.16

830.16

63.06

11.88

-

-

158.14

206.82

241.76

241.76

27.50

41.26

41.26

41.26

248.71

259.96

283.01

283.01

CASH FLOW STATEMENT Figures in Rs. Crores

Year Ending March 31-Mar-1031-Mar-

1131-Mar-

12

Profit After Tax - -

-

Depreciation & Amortization - -

-

Increase In Equity - 26.94

55.28

Increase in Senior Debt - 119.76

283.47

Increase in Short Term Loan - -

-

Increase in Sub Debt-Sponsors - 8.84

29.39

Increase in Sub Debt-Lenders - -

-

Increase in Refinancing - -

-

Interest on Sub debt to P&L (As accrued) - -

-

Total Inflows - 155.54

368.14

Capex including Preliminary Exp. -

97

155.54 368.14

Repayment - Senior Debt - -

-

Repayment of Refinancing debt - -

-

Repayment of WC - -

-

Repayment of Sub Debt-Lenders - -

-

Repayment of Sub Debt-Sponsors - -

-

Payment of accrued Interest on Sponsors Sub debt -

-

-

Total Outflows - 155.54

368.14

Net Cashflows before Periodic Maintenance Reserve -

-

-

Periodic Maintenance Reserve - -

-

Cash Balance :

Surplus/(Deficit ) for the year - -

-

Opening Balance - -

-

Closing Balance - -

-

31-Mar-13

31-Mar-14

31-Mar-15

31-Mar-16

31-Mar-17

31-Mar-18

31-Mar-19

31-Mar-20

-12.60

-2.59

0.50

1.94

-2.36

-0.27

1.71

4.07

23.26

39.30

39.30

39.30

45.87

45.87

45.87

45.87

25.53

-

-

-

-

-

-

-

125.22

-

-

-

-

-

-

-

38.96

-

-

-

-

-

-

-

11.87

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

98

- - - - - - - - 3.61

6.01

6.01

6.01

6.01

6.01

6.01

6.01

215.84

42.72

45.82

47.26

49.52

51.61

53.58

55.95

162.62

-

-

-

-

-

-

-

3.96

18.50

22.46

23.78

26.42

29.06

33.03

35.67

-

-

-

-

-

-

-

-

11.69

27.27

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

178.27

45.77

22.46

23.78

26.42

29.06

33.03

35.67

37.57

-3.04

23.36

23.48

23.10

22.54

20.56

20.28

4.31

7.13

7.13

7.13

7.13

9.31

9.31

9.31

33.25

-10.17

16.23

16.35

15.97

13.23

11.25

10.97

-

33.25

23.08

39.32

55.67

71.64

84.88

96.12

33.25

23.08

39.32

55.67

71.64

84.88

96.12

107.09

31-Mar-21

31-Mar-22

31-Mar-23

31-Mar-24

31-Mar-25

31-Mar-26

31-Mar-27

31-Mar-28

6.46

6.90

9.68

12.52

15.65

22.21

25.73

28.08

45.87

48.61

48.61

48.61

48.61

48.61

51.18

51.18

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

99

- - - - - - - - -

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

116.26

-

-

-

6.01

6.01

6.01

6.01

6.01

2.25

-

-

58.33

61.52

64.30

67.15

186.53

73.08

76.91

79.26

-

-

-

-

-

-

-

-

38.31

42.28

42.28

46.24

166.46

-

-

-

-

-

-

-

-

56.12

60.13

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

50.10

-

-

-

-

-

-

-

83.12

-

-

38.31

42.28

42.28

46.24

166.46

189.34

60.13

-

20.02

19.24

22.03

20.91

20.07

-116.26

16.78

79.26

9.31

9.31

11.88

11.88

11.88

11.88

11.88

13.75

10.71

9.94

10.15

9.03

8.19

-128.14

4.90

65.51

107.09

117.81

127.74

137.89

146.92

155.11

26.97

31.87

117.81

127.74

137.89

146.92

155.11

26.97

31.87

97.38

31-Mar-29

31-Mar-30

31-Mar-31

31-Mar-32

23.33

11.25

23.05

-0.00

100

51.18 51.18 11.88 - -

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

74.52

62.43

34.93

-0.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

74.52

62.43

34.93

-0.00

13.75

13.75

-

-

60.76

48.68

34.93

-0.00

97.38

158.14

206.82

241.76

158.14

206.82

241.76

241.76

101

Analysis of Data

Financials

This sheet contains the Balance Sheet, Profit and Loss Account and the Cash Flow statement.

Profit and Loss Account

i. It contains the detail about the annuity and revenue which together constitute the total revenue.ii. The cost of operations and maintenance.

iii. The EBITDA which is calculated by deducting the total expenses from the total revenue.iv. EBTDA which is calculated by deducting the various interest components such as:

Interest Senior Debt Interest Refinancing Debt Interest Working Capital Interest Sub Debt Lenders Interest Sub Debt Sponsors

from the EBITDA.v. Profit before tax which is further calculated by deducting the depreciation and amortization from

EBTDA.vi. And finally by deducting the tax from PBT we get Profit after tax.

Balance Sheet

It contains the details about the

i. Net worth which is calculated by adding the Equity and Reserves and Surplus .

ii. The Total Source of Funds which is calculated by adding the: Senior Debt Refinancing Debt Working Capital Loan Sub Debt Lenders Sub Debt Sponsors Interest accrued on sub debt by the sponsors Loan Funds

iii. The Total Application of Funds i.e. the areas where the funds are being used. These include: Gross Fixed Assets Depreciation Net Fixed Assets Cash Major Maintenance Reserve

102

Cash Flow Statement

It includes:

i. Total inflows which include the following components: Profit after Tax Increase in Equity Depreciation and Amortization Increase in senior debt Increase in Short term loan Increase in sub debt sponsors Increase in sub debt lenders Increase in refinancing Interest on sub debt to P&L

ii. Total outflows which include: Capital Expenditure Repayment of senior debt Repayment of refinancing debt Repayment of working capital Repayment o f Sub debt Lenders Repayment of sub debt sponsors Payment of accrued interest on sponsor’s sub debt

iii. The Cash balance is calculated by deducting the sum of Total Outflow and Periodic Reserve.

The same cash balance is used as the closing balance for the same year.

3.8 Ratios

Debt Service Coverage Ratio (DSCR)-Senior Debt -15 Years 2010 2011 2012 2013

PARTICULARS 31-Mar-

1031-Mar-

1131-Mar-

1231-Mar-

13

PAT -

-

-12.60

Depreciation & Amortization -

-

23.26

Interest on Senior Loan -

-

31.66

103

Interest on Sub Debt-Lenders -

-

-

Interest Accrual on Sub Debt -

-

3.61

Total Available for servicing -

-

45.93

Debt servicing

Interest on Senior Loan -

-

31.66

Senior Debt Servicing -

-

3.96

Total -

-

35.63

DSCR for Senior Debt 1.29

Minimum DSCR 1.27

-

Average DSCR 1.31

2014 2015 2016 2017 2018 2019 2020 2021 2022 202331-Mar-

1431-Mar-

1531-Mar-

1631-Mar-

1731-Mar-

1831-Mar-

1931-Mar-

2031-Mar-

2131-Mar-

2231-Mar-

23 -2.59

0.50

1.94

-2.36

-0.27

1.71

4.07

6.46

6.90

9.68

39.30

39.30

39.30

45.87

45.87

45.87

45.87

45.87

48.61

48.61

51.89

49.79

47.46

45.12

42.44

39.42

35.82

32.15

28.14

23.91

-

-

-

-

-

-

-

-

-

-

6.01

6.01

6.01

6.01

6.01

6.01

6.01

6.01

6.01

6.01

94.61

95.61

94.72

94.64

94.05

93.00

91.76

90.49

89.66

88.21

51.89

49.79

47.46

45.12

42.44

39.42

35.82

32.15

28.14

23.91

18.50

22.46

23.78

26.42

29.06

33.03

35.67

38.31

42.28

42.28

70.38

72.25

71.24

71.54

71.51

72.45

71.49

70.47

70.42

66.19

104

1.34 1.32 1.33 1.32 1.32 1.28 1.28 1.28 1.27 1.33

2024 202531-Mar-

2431-Mar-

25 12.52

15.65

48.61

48.61

19.57

13.38

-

-

6.01

6.01

86.72

83.65

19.57

13.38

46.24

50.20

65.81

63.58

1.32

1.32

Analysis of Data

DSCR (Debt Service Coverage Ratio)

It is the amount of cash flows available to meet annual interest and principle payment on debt.

In general it is calculated by the following formula:

Net Operating Income / Total Debt Service

In this project it is calculated by the following formula:

Total Amount Available For Servicing

( Debt Servicing Amount + Interest on Senior Loan + Amount for Senior Debt Servicing )

105

The total amount available for servicing is calculated by adding the following components:

i. PATii. Depreciation and Amortization

iii. Interest on Senior Loaniv. Interest on Sub Debt Lendersv. Interest accrual on Sub Debt

REFERENCES

1. Projects – Planning, Implementation and Review (Prassana Chandra, 2009)

2. Introduction to Accountancy (T.S. Grewal, 2009)

3. Guidelines for Investment in Road Sector ( Publication by the Ministry of Shipping, Road Transport and Highways)

4. Model Concession Agreement (Published by the Planning Commission)

5. Project Information Memorandum (Published by IL&FS)

106

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