Evaluation of GMR Hyderabad International Airport Limited (GHIAL)

Presented By:Mihir Nisar Chintan Nagar Jinay Sheth Harshil Jasani Kiran Jadhav Mayank Saxsena

Hyderabad International Airport Limited

O GMR-Construction on Highways, Urban

Infrastructure, Agri-Business. O In 1999; GMR entered into the Airport Sector. O Won a competitive bidding process by the Govt. of Andhra Pradesh, it won the bid to construct GHIAL.

Hyderabad International Airport Limited

O Started as a Public-Private

Partnership
O 63% Hyderabad International Airport O 11% Malaysia Airports Holding

Berhad O 13% Government of Andhra Pradesh O 13% Airports Authority Of India

Hyderabad International Airport Limited

O Initial license period of 30 years with an

option to extend it for next 30 years. O GMR designed GHAIL to meet international standards. O Designed for 7 million passengers per annum. O Increased Capacity:O 12 million passenger per annum O 1 Lakh tones of cargo per annum

Hyderabad International Airport Limited

O Debt-Equity ratio:- 4:1 O Funded by :- Abu Dhabi commercial bank,

Andhra Bank and Vijaya Bank.

O Project Life:- 30 Years O Project Cost:- 24,780 million

PAY BACK PERIOD

Time required to recover original investment Simple & widely used method Formula:

original cost of investment Pay back period = annual cash inflows

PAY BACK PERIOD

Time required to recover original investment Simple & widely used method Formula:

Pay back period = 11 +

(24780;20759.15)

5112

= 11.7865

PAY BACK PERIOD

Merits:1. Best when project have shorter period & less cost. 2. Easy to operate & simple to understand. 3. Helps entrepreneur to evaluate in quick return funds.

PAY BACK PERIOD

Demerits:1. More on liquidity then profitability. 2. Not cover the earning beyond pay back period. 3. Suitable for small project. 4. Ignores cost of capital.

AVERAGE RATE OF RETURNS (ARR)

Better than pay back period method Considers earnings of full project during its economic time Also known as return on investment (ROI) Formula:average earning after tax Return on investment = average investment

AVERAGE RATE OF RETURNS (ARR)

Better than pay back period method Considers earnings of full project during its economic time Also known as return on investment (ROI) Formula:1 5 6 1 Return on investment = X 100 24780
= -6.303%

AVERAGE RATE OF RETURNS (ARR)

Merits:1. Simple to calculate & easy to understand 2. Consider earning of full life 3. Helps to comparing with other projects 4. Consider net earnings after depreciation & taxes

AVERAGE RATE OF RETURNS (ARR)

Demerits:1. Ignores time value of money 2. More focus on profit & loss 3. Not consider re-investment of profit over years 4. Not compare between size of investment

NET PRESENT VALUE

Consider time value of money It compare rupee value of today & after a year Calculate by present value Formula:1 (1:)

PRESENT VALUE =
Where, S= cash flow N= no. Of years R= interest rate

NET PRESENT VALUE

Consider time value of money It compare rupee value of today & after a year Calculate by present value Formula:1 (1:0.09)6

PRESENT VALUE = 24780 + 2863 +

1 1 3725 +5120 (1:0.09)30 (1:0.09)7

= 5222

NET PRESENT VALUE

Merits:1. Consider time value of money 2. Scientific method 3. Covers whole project 4. Future flow in todays value 5. Objective of maximum profitability

NET PRESENT VALUE

Demerits:1. Difficult to calculate 2. Biased towards short run projects 3. Not consider non-financial activity like marketability

PROFITABILITY INDEX

Ratio of present value of inflow & outflow Profitability ratio of project more than 1 is to be selected Formula:Profitability index =

PROFITABILITY INDEX

Ratio of present value of inflow & outflow Profitability ratio of project more than 1 is to be selected Formula:Profitability index =
30002 24780

=1.21

PROFITABILITY INDEX

Merits:1. Conceptually sound 2. Consider time value of money 3. Facilitates ranking of project

PROFITABILITY INDEX

Demerits:1. Computation process is complex 2. Different interpretation

INTERNAL RATE OF RETURNS (IRR)

Use time value of money NPV reduce to zero

IRR= 10.49% (with interpolation) (10% =1554, 11%= -1562)

INTERNAL RATE OF RETURNS (IRR)

Merits:1. Recognized time value of money 2. Consider cash flow for whole life 3. Takes into account true value of money 4. Objective of maximizing owners welfare

INTERNAL RATE OF RETURNS (IRR)

Demerits:1. Difficult to understand & use 2. Decision making is depends on the future financial projection

COMPARISION

Payback Period 11.78 Years Accept

Discounted Payback Period ARR 21.76 Years Accept

NPV 5222.20 -6.30% Millions

Accept

Profitability Index IRR 1.210743 Accept 10.49% Accept

Reject

conclusion
This is profit making project We Should Accept this project