IRB Ahmedabad

Vadodara Super
Express Tollway
Private Limited
Section B Group 7
Amber Dubey 13P062
Aravind Ramakrishnan 13P067
Govind Paliath 13P077
Milan Sachdeva 13P085
Niharika Chaube 13P090
Samudra Sarkar 13P108
INTRODUCTION TO PROJECT
Six laning of Ahmedabad to Vadodara Section of NH 8 (102.3 km)
Improvement of existing Ahmedabad Vadodara Expressway or NE-1 (93.3 km)
Project is on a Build Operate Transfer (BOT) basis, with concession period of 25 years
Construction Period of 3 years on NH8, while tolling to start from start of 2013 on NE1
48% of construction complete in the 1
st
year (based on IRB Board conference call)
NHAI project awarded to IRB
Infrastructure Developers Ltd
IRB Infra created a SPV for
this purpose - IRB
Ahmedabad Vadodara Super
Express Tollway Private
Limited

PROJECT COST BREAKUP
Cost component (INR crore) Total (%)
EPC cost 3,528 72.3
Premium payable during construction 615 12.6
LIE fees 22 0.5
Interest during construction 511 10.5
Preliminary & pre-operative exp. 49 1
Contingency 45 0.9
DSRA 110 2.2
Total project cost 4,880 100
Year 0 Year 1 Year 2
EPC cost 1693.44 917.28 917.28
LIE fees 10.56 5.72 5.72
Preliminary & pre-operative exp. 49 0 0
Contingency 15 15 15
Total 1768 938 938

Premium payable 309 324.45 340.6725
WACC ESTIMATION
Average Market Return (rm) 10.542%
Covariance 2.43E-04
Variance 0.000284846
Beta, levered 0.854830617
Beta, unlevered 0.522193413
Beta 1.285653403

Risk-free rate (rf) 7.96000%
Cost of Equity 11.279%
Equity 1.5800E+10
Blended Interest rate 10.50000%
Average Interest paid during FY 2008-13
Average debt 0
Tax rate 34.00%
Cost of debt 6.93%
Long-term Debt as on 31st Mar 2013 33000000000

Weight of Equity 0.324
Weight of Debt 0.676

WACC 8.338%
Average D/E of IRB Infra 0.91
Blended interest rate on debt of
10.5%
Risk Free Rate 7.96%
Tax Rate taken as 34% -
30% + surcharge of 10% of tax if the
taxable income is greater than Rs. 1
crore + education cess of 3% of tax
if surcharge is applicable


REVENUE ESTIMATION
Existing PCU's 79,500
Ahmedabad-Vadodara Expressway 47,000
NH-8 32,000
Design Capacity PCU's
Ahmedabad-Vadodara Expressway 80,000
NH-8 1,20,000
Year
Annual Traffic
Growth Rate (%)
FY 2013-13 to FY 2019-20 7
FY 2020-21 to FY 2028-29 6
FY 2029-30 onwards 5
Present Daily Toll Collection (In Rs
lakhs)
35
Estimated Yearly Toll Collection
including Tariff Revision(In Rs Crores)
135-145
Passenger Car Units Details
Annual Traffic Growth Estimates Toll Collection in 1
st
year of operation
OTHER ASSUMPTIONS
Operating Expenditure of 1.5% of total project costs in during
the years of operation, which increases by an amount equal to
WPI increase
Units of Consumption Method to calculate depreciation, which
is a common method used in toll projects
Annual Depreciation in Year x = (No. of PCUs in year x)/ (Total
no. of PCUs over all years)*(Total Capital Expenditure)
NPV AND IRR RESULTS
WACC 8.338 %
IRR 13%
NPV Rs. 2953 crores
Since IRR > WACC and NPV > 0, the project is feasible
PROFIT AND LOSS
Since IRR > WACC and NPV > 0, the project is feasible
DIVIDEND PAYOUT RATIO RESULTS
Dividend Payout 50%
Amount Cost Weightage Tax Rate WACC
Old Debt 1100 11% 31.18% 34.00% 9.02949%
New Debt 709.016141 11% 20.10% 34.00%
Equity 1718.51043 11.24% 48.72% N/A
Dividend Payout 40%
Amount Cost Weightage Tax Rate WACC
Old Debt 1100 11% 31.18% 32.66% 9.13439%
New Debt 681.314055 11% 19.31% 32.66%
Equity 1746.21 11.24% 49.50% N/A
If cost of new debt is kept the same as the cost of old debt, then with decrease in
dividend payout ratio, the WACC keeps on increasing
This is because more debt is needed for forthcoming investments and cost of debt is
lesser than cost of equity
However, there will be a change if we consider cost of new debt more than cost of old
debt due to higher risk