Presentation on Financial Feasibility

of an Expressway Project

For JAYPEE GROUP

04/09/23NDIM 1

Presented By:

Ankita SinghRoll No.-66Finance.

Company ProfileActivities involvedProject ConceptObjectives of the project Traffic EstimationEstimation of Toll revenueTolling StrategyToll revenue Financial modelPreparation of Financial statementsRisk AssessmentConclusion

Road Map

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Established in 1979, under the foray of Mr. Jaiprakash Gaur.

The group is a 7000 crore diverse industrial conglomerate.

Company’s Vision -As a group, the company is committed to strategic business development in infrastructure, as the key to nation building in the 21st century. It aims to achieve perfection in everything it undertakes with a commitment to excel

Company Profile

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Engineering and constructionPower generationCement productionReal estate developmentsHospitality servicesEducation

Activities involved

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Jaypee Infratech Limited, has undertaken the ribbon developments of the expressways and the townships developments.

Right to develop 6,175 acres of land with a 90-year lease.

The real estate is presently marketed under the “Jaypee Greens” brand.

The master planners of Jaypee Greens are Arcop Associates Private Limited.

Yamuna Expressway  is a 6-lane road link of 165 kms connecting Greater noida to Agra, with the basic aim to cut down the travel time to nearly 100 minutes.

Real Estate Developments

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The Yamuna Expressway Project is conceived with the idea to not only reduce the travel time between New Delhi and Agra but also to open up avenue for Industrial and Urban development of the region and provide the base for convergence to tourism and other allied industries.

Project Concept

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The objective of the project is to do a detailed financial feasibility study of the Yamuna expressway project undertaken by Jaypee Infratech Ltd. The project involved following sub-objectives:Analyze Capital structureMaking Cash Flows ProjectionsModel for Traffic Estimation & Toll revenueRisk assessment

Objective of the Project

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ICICI Bank will be providing approximately Rs. 32,000 Million ($745 Million)

Cash aggregating to Rs 2,500 million ($ 58 Million)

The Balance Rs 29,500 million ($ 686 Million) as rupee term loan in Jaypee Infratech Ltd.

Financial Features

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Crucial aspect of planning the facility.Based on the traffic and the travel

characteristics, gathered through primary surveys, as well as secondary data, the traffic that is likely to use the proposed expressway is composed of two elements:

Divertible Traffic Development traffic

Traffic Estimation

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An equitable and calculated process for financing transportation facilities.

Generate revenues to mitigate roadways and bridge construction, operation and maintenance costs.

Rates are often assessed according to the number of axles on a vehicle and the category of traffic.

There are two systems of toll collection:Open system Closed system

Estimation of Toll revenues

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The Close system of tolling is most suitable as this is as green filed project.

It must have the following objectives:Value addition to the traveller in form of savings

in time travel and travel cost.Easy entry to exit from the expressway.Various ways of collecting toll revenues:Manual toll collectionAutomatic toll collectionSemi-automatic toll collection

Tolling strategy

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Step for calculation are:-1)Growth rates for the type of vehicles are taken from the

consultant report.2)The road stretch of 165 km is divided in following 5

sections for projected no. of vehiclesSections Km 1 0 to 36.17 2 36.18 to 48.2 3 48.2 to 110 4 110 to 153.45 5 153.45 to 165.533)Traffic Distance is calculated using the formulaSummation of 1 to 5 (Distance of Section 1 X Traffic no

for Section 1)4)Toll rate structure is taken from the consultant report with

2010 as the base year5)Toll revenue= Toll rate X Traffic Distance

Toll Revenue Financial Model

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Principal amount borrowed –Rs.9000 crores.Rate of interest-12.5% per annum compounded

quarterly.Loan tenure-13 years 3 monthsConstruction period- 3 years.Loan being used as in construction period:1st year- 20% of the amount2nd year- 40% of the amount3rd year- 40% of the amountConstruction period is taken as the moratorium

period.Calculations have been taken for debt- equity of

following ratio’s:60:40 ratio50:50 ratio

Loan repayment schedule

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Cash flow statementProfit and loss accountBalance sheet

Preparation of financial statements

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Inflow of cash- annual revenuesOther incomes-from the petrol pumps,

restaurantsOutflow of cash-maintenance and operational

expensesCalculation for 36 years durationMajor findings:CAPEX is more than incomes, thus resulting in a

negative cash flow for initial years.Loan repayment outcasts the income being fetched

from the toll.But after 10 years, the company is able to get

decent inflows from the expressway project.

Cash Flow statement

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Incomes- toll revenuesExpenditure- maintenance and operational

expensesDepreciation, also to be charged on the cost for 36

years.Interest payment of loan also to be considered while

tabulation.After tabulating the gross profit/loss, providing for

provision for taxation.Also, the concept of MAT to be included.Inferences drawn:Negative cash flows result in losses, but gradually

with the increase in the toll rates and the traffic, the losses are being converted to profits.

Profit and Loss account

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Sources of fund: equity share capital, reserves and surplus, term loans, advances

Application of funds: land and site development, cost of construction, preliminary and preoperative expenses, IDC, contingencies, cash and bank balances

Deficit sponsored by the real estate projects of the company.

Findings:The company being a big brand in the construction

industry is able to carry off the burden of debt easily, with the help of its subsidiaries. The expressway will turn to be a major source of revenue for the company, although it has to incur losses for the initial stage.

Balance Sheet

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Graphical Representatio

n

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Risk Area Risk Descriptions Impact

Traffic Numbers Error in traffic counts Incorrect traffic numbers

High Roll Rates Higher toll rates than alternative routes may cause diversion away from project road

Lower Traffic

Traffic volumes rates Economic downturn, projection period

Difficult to assess and impact for the liquidity of the project

Political Risk Change of government, change in policies

Distraction of work and cash flow

Risk Assessment

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Initial financial troubleHeavy debt amount with loan repaymentsEventually when revenues increase, the burden of

debt gets loosen up.Backed by the big brand name of the company.Will prove to a major source of revenue generation

for the company.The expressway project is financially sound and

feasible, and will also prove beneficial for both the company as well as the masses.

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