Project Appraisal and Structured

Finance
Project

Submitted By
Aashima Mittal
15P002
Abhishek Bhatnagar
15P003
Gautum Bindlish
15P021
Development of the Hero MotoCorp Plant at
AP, Chittoor

Introduction
Current Capabilities for Hero MotoCorp
Existing capacity 7500000 units per year
Upcoming Plant at Halol with capacity of 1200000 units per
year
By 2018 demand expected to be close to 9000000 units per
year to fulfil the rapidly growing demand

Additional Capabilities setup for Hero MotoCorp

Company plans to commission 1800000 capacity plant in
Chittoor AP in 2018
The plant will be commissioned in 2 phases with 1.2 mn
vehicles in 1st phase and 0.6 mn in 2nd Phase

Financials
The company will invest 24000 cr in the project
The project will be funded internally and no Debt will be taken

Financial Analysis (Excel attached)

Assumptions

2W industry initially grow at 6% in 2016, 7 % in 2017 at 8% till

2020 and eventually the growth will slide as the industry
matures and stabilise at 4%

Market Share of HMCL is 39-40 % approximately

Plant operates at about 90% capacity

Realization/vehicle will grow at 3% equal to inflation

Life of the plant = 30 years

Conclusion

Project has the NPV of 13,421.75 million. Which is a good

investment proposition
IRR at 22% vs the WACC of 12 % makes the project
financially viable project
Payback period of 4 years is a good looking at the
investment