98480 12123

Financial Modeling Case Study

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

SLD
3.34%
6.33%
5.28%

WDV
10%
18.10%
15%

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

The Basic infrastructure construction cost is estimated at INR 21.60 Crores

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98480 12123

Financial Modeling Case Study

The expected Costs associated with Bus Terminal Area, Parking and Support facilities are
provided in the table below
Bus Terminal Area Assumptions
Ground Floor
Bus Bay Units (inter city)
Bus Bay Units (city buses)

# of Units
200
30

Area/Unit
450 sft
450 sft

1
3

100000 sft
1500 sft

1000

20 sft

100
500

250 sft
20 sft

food courts

5000 sft

Primary Health Centre

Administrative offices
Parking
Parking for 4 wheelers
Parking for 2 wheelers
Parking for Hired transport (Auto,Taxi)
Parking for Idle Buses

1
5

3000 sft
300 sft

Passenger lobby
Bank Extn Counters
First Floor
Driver amenities
Budget hotel
Dormitories

1
1
1
1

Support facilities
Petrol Pumps
Auto service centre
Auto spare part shops
Office space for travel oprs & cargo opr
Electrical Sub station & power
transmission lines
Fire Station

2
2
4
15

acre
acre
acre
acre

Cost/Area
300 per sft
300 per sft
1000 per
sft
800 per sft
1000 per
sft
1400 per
sft
800 per sft
1000 per
sft
1200 per
sft
800 per sft
250
250
250
250

per
per
per
per

sft
sft
sft
sft

3
10
10

2 acre
4 acre
400 sft

30

400 sft

800 per sft

1000 per
sft

1
1

1 acre
2000 sft

60000000
800 per sft

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

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98480 12123

Financial Modeling Case Study

Revenue Assumptions
You are making the following annual revenue assumptions as of the current prices and at 100%
utilization levels

Bus Platforms
Parking charges for buses
Main Lobby
Budget Hotel
Dormitories
Driver Amenities
Primary Health Care
Bank Extension Counters
Administrative offices
Office space for Travel & Cargo
Operators
Petrol Pumps
Auto Service Centres
Parking for 4 Wheelers
Parking for 2 Wheelers
Parking for Hired Transport
Revenue from Ads

Expected Revenue
50 per vehicle
1500 per bus per
month
480 per sft per
year
500 Per room per
day
50 per bed per day
25 per bed per day
480 per sft per
year
480 per sft per
year
480 per sft per
year
480 per sft per
year
1000000 acre/year
1000000 acre/year
20 per vehicle
10 per vehicle
30 per vehicle
30000000
acre/year

Number of
Units
230

Occupan
cy
85%

Repea
t
730

1230

80%

12

100000

85%

100
500
1000

75%
75%
75%

365
365
365

3000

100%

4500

100%

1500

100%

10000
2
4
200
2000
100

85%
90%
80%
100%
100%
100%

1
1
1
365
365
365

80%

Operating & Maintenance Cost Assumptions

Bus Terminal Area
Parking
Office Space, PHC, Banks & Support
Budget Hotel
AMC for Basic Infrastructure & Lighting
Security Guards
Water Bill
Power Bill

5% of the Head revenue

5% of head Revenue
5% of Head revenue
30% of Head revenue
2% of the total Revenue
INR 50 Lakh per year
INR 35 Lakh per year
INR 25 Lakh per year

Required
1. You are required to build a model that is scalable and extendible to change in
different assumptions.
a. Address the Delays in the project (Extending the construction and Operations
Periods)
b. Change in inflation assumptions
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Financial Modeling Case Study

c. Change in Revenue Assumptions

d. Changes in Debt repayment to EYI model
e. Changes in Depreciation/Tax assumptions
2. You should be able to project the cash flows and compute the IRR associated with
the project as well as IRR for the Equity Investors (Sponsors)

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