JAYPEE GROUP

NDIM

12/6/2013

Company Profile
Established in 1979, under the foray of Mr. Jaiprakash Gaur. The group is a 7000 crore diverse industrial conglomerate. Companys 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
NDIM 2 12/6/2013

Activities involved
Engineering and construction Power generation Cement production Real estate developments Hospitality services Education

NDIM

12/6/2013

Real Estate Developments

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.
NDIM 4 12/6/2013

Project Concept
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.

NDIM

12/6/2013

Objective of the Project

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 structure Making Cash Flows Projections Model for Traffic Estimation & Toll revenue Risk assessment
NDIM 6 12/6/2013

Financial Features
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.

NDIM

12/6/2013

Traffic Estimation
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

NDIM

12/6/2013

Estimation of Toll revenues

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

NDIM

12/6/2013

Tolling strategy
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 collection Automatic toll collection Semi-automatic toll collection
NDIM 10 12/6/2013

 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 vehicles Sections 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 165.53 3)Traffic Distance is calculated using the formula Summation 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 year 5)Toll revenue= Toll rate X Traffic Distance NDIM 11 12/6/2013

Toll Revenue Financial Model

Loan repayment schedule

Principal amount borrowed Rs.9000 crores. Rate of interest-12.5% per annum compounded quarterly. Loan tenure-13 years 3 months Construction period- 3 years. Loan being used as in construction period: 1st year- 20% of the amount 2nd year- 40% of the amount 3rd year- 40% of the amount Construction period is taken as the moratorium period. Calculations have been taken for debt- equity of following ratios: 60:40 ratio 50:50 ratio NDIM 12

12/6/2013

Preparation of financial statements

Cash flow statement Profit and loss account Balance sheet

NDIM

13

12/6/2013

Cash Flow statement

Inflow of cash- annual revenues Other incomes-from the petrol pumps, restaurants Outflow of cash-maintenance and operational expenses Calculation for 36 years duration Major 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.
NDIM 14 12/6/2013

Profit and Loss account

Incomes- toll revenues Expenditure- maintenance and operational expenses Depreciation, 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. 15 12/6/2013

NDIM

Balance Sheet
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. NDIM 16 12/6/2013

Graphical Representation

NDIM

17

12/6/2013

Risk Assessment
Risk Area Traffic Numbers Risk Descriptions Error in traffic counts Impact Incorrect traffic numbers

High Roll Rates

Higher toll rates than alternative routes may Lower Traffic cause diversion away from project road

Traffic volumes rates

Economic downturn, projection period

Difficult to assess and impact for the liquidity of the project

Political Risk
NDIM

Change of government, change in policies

18

Distraction of work and cash flow

12/6/2013

Initial financial trouble Heavy debt amount with loan repayments Eventually 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.
NDIM 19 12/6/2013

NDIM

20

12/6/2013