Assignment southern chemicals with project appraisal
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Assignment southern chemicals with project appraisal Document Transcript

  • 1. AssumptionsProject Cost (Rs. Lakhs) Land and Site Development 25.00 Building 85.00 Plant and Machinery 175.00 Miscellaneous Fixed Assets 125.00 Motor Vehicle 24.00 Pre-Operative Expenses 25.00 Public Issue Expenses 15.00 Contingency 20.00 Project Cost (excl. WCM) 494.00 Working Capital Margin 78.00 Project Cost (incl. WCM) 572.00Working Capital Raw Materials No. of Months 1.00 Utilities No. of Months 0.50 Work-in Progress No. of Months 0.50 Finished Goods No. of Months 0.98 Debtors No. of Months 1.00 Working Capital Financed by Syndicate Bank % 60% Working Capital Loan Margin % 40% Interest on Working Capital % 12.50%Financial Assumptions Financing Equity Promoters Equity 100.00 Equity Issue 250.00 Term Loan 222.00 572.00 Debt Proportion % 38.81% Equity Proportion % 61.19% Interest on Debt % 14.00% Repayment Period (Equal Installments at the end of 4th and 5th Year) Years 2.00 Weighted Average Cost of Capital Post-tax cost of Debt 9.10% Cost of Equity 20.00% Weight- Debt 38.81% Weight- Equity 61.19% WACC 15.77% Depreciation As per Companies Act (SLM) As per Companies Act (SLM) Buildings % 5.00% Plant and Machinery % 10.00% Miscellaneous Fixed Assets % 15.00% Motor Vehicle % 25.00% As per Income Tax Act (WDV) As per Income Tax Act (WDV) Buildings % 15.00% Plant and Machinery % 25.00% Miscellaneous Fixed Assets 20.00% Motor Vehicle 40.00% Depreciable Value for Book Depreciation % 100.00% Depreciable Value for Tax Depreciation % 100.00% Amortisation of Share Issue Expenses years 5.00 Income Tax Corporate Tax Rate % 35.00% For Simplicity, treatment of Share Issue Expenses is assumed to be same both under Companies Act and Income Tax Act Salvage Value for all assets except land % of NBV at 5th year 50.00% Salvage Value for land % of NBV at 5th year 100.00% Capacity and Operating Parameters Annual Production Capacity DCP - Feed Grade MTPA 4000.00 DCP - IP Grade MTPA 4000.00 No. of Months in a Year Nos 12.00 Capacity Utilisation for Both Feed and IP Grade Year 1 % 60.00% Year 2 % 70.00% Year 3 % 80.00%
  • 2. Operating Revenue and CostsSales Price DCP - Feed Grade Rs. per MT 8500.00 DCP - IP Grade Rs. per MT 28000.00Cost of Raw Material p.u. of DCP - Feed Grade Rate (Rs. p.u.) 4650.00Cost of Raw Material p.u. of DCP - IP Grade Rate (Rs. p.u.) 16500.00Consumable Stores % of Sales Revenue 2.00%Power % of Sales Revenue 4.00%Fuel % of Sales Revenue 2.50%Packaging Costs % of Sales Revenue 1.00%Administrative Expenses 1st Year of Operation Rs. Lakhs 5.50 2nd Year of Operation Onwards % Increase p.a. 5.00%Selling and Distribution Expenses % of Sales 3.00%Wages and Salaries 1st Year of Operation Fixed (80% of Rs.24 Lakhs) Rs. Lakhs 19.20 Variable (20% of Rs.24 Lakhs) Rs. Lakhs 4.80 2nd Year of Operation Onwards Fixed % Increase p.a. 5.00% Variable Increase in the same proportion of Production
  • 3. Statement of Working Capital (Rs. Lakhs)Particulars Units 0 1 2 3 4 5Working CapitalRaw Materials Rs. Crores 42.30 49.35 56.40 56.40 56.40Utilities Rs. Crores 3.47 4.05 4.62 4.62 4.62Work-in Progress Rs. Crores 25.23 29.38 33.52 33.55 33.58Finished Goods Rs. Crores 50.66 58.87 67.08 67.19 67.31Debtors Rs. Crores 73.00 85.17 97.33 97.33 97.33Working Capital Rs. Crores 194.66 226.81 258.96 259.10 259.25Increase/(Decrease) in WC Rs. Crores -194.66 -32.15 -32.15 -0.14 -0.15Working Capital FinancingWorking Capital Margin Rs. Crores 77.86 77.86 77.86 77.86 77.86 Debt 30.22 30.22 30.22 30.22 30.22 Equity 47.64 47.64 47.64 47.64 47.64Increase/(Decrease) in WCM -77.86 0.00 0.00 0.00 0.00Working Capital Loan Rs. Crores 116.80 136.08 155.38 155.46 155.55Interest on Working Capital Loan Crores Rs. 14.60 17.01 19.42 19.43 19.44Working Capital through Internal Accruals 0.00 12.86 25.72 25.78 25.84Increase/(Decrease) in WCM-Equity -47.64 0.00 0.00 0.00 0.00Increase/(Decrease) in WC through Internal Accruals 0.00 -12.86 -12.86 -0.06 -0.06 -47.64 -12.86 -12.86 -0.06 -0.06 0.00Recovery of WCM-Equity -73.48
  • 4. Statement of Profitability and Performance Parameters (Rs. Lakhs)Particulars Units 0 1 2 3 4 5ProductionOperational Months Months 12 12 12 12 12Capacity Utilisation % First 6 Months % 60% 70% 80% 80% 80% Second 6 Months % 60% 70% 80% 80% 80%Annual Production DCP - Feed Grade MTPA 2400 2800 3200 3200 3200 DCP - IP Grade MTPA 2400 2800 3200 3200 3200Profit/LossGross Revenue Rs. Lakhs 876.00 1022.00 1168.00 1168.00 1168.00Operating Expenditure Cost of Raw Material p.u. of DCP - Feed Grade 111.60 130.20 148.80 148.80 148.80 Cost of Raw Material p.u. of DCP - IP Grade 396.00 462.00 528.00 528.00 528.00 Consumable Stores 17.52 20.44 23.36 23.36 23.36 Power 35.04 40.88 46.72 46.72 46.72 Fuel 21.90 25.55 29.20 29.20 29.20 Packaging Costs 8.76 10.22 11.68 11.68 11.68 Administrative Expenses 5.50 5.78 6.06 6.37 6.69 Selling and Distribution Expenses 26.28 30.66 35.04 35.04 35.04 Wages and Salaries Fixed 19.20 20.16 21.17 22.23 23.34 Variable 4.80 5.60 6.40 6.40 6.40 Total Rs. Lakhs 646.60 751.49 856.43 857.79 859.22 Gross Margin Rs. Lakhs 229.40 270.52 311.57 310.21 308.78Less: Amortisation of Share Issue Expenses 3.00 3.00 3.00 3.00 3.00Less: Book Depreciation Rs. Lakhs 51.62 51.62 51.62 51.62 44.96 Profit before Interest and Tax Rs. Lakhs 174.78 215.90 256.95 255.59 260.82Less: Interest on Term Loans Rs. Lakhs 31.08 31.08 31.08 31.08 15.54Less: Interest on Working Capital Loan Rs. Lakhs 14.60 17.01 19.42 19.43 19.44 Profit before Tax Rs. Lakhs 129.10 167.81 206.45 205.08 225.84Corporate Tax Rs. Lakhs 27.86 49.83 69.62 73.85 82.35 Profit after Tax Rs. Lakhs 101.25 117.98 136.83 131.23 143.49
  • 5. Balance Sheet (Rs. Lakhs) Particulars Period 0 1 2 3 4 5LiabilitiesEquity 350.00 350.00 350.00 350.00 350.00 350.00Reserves and Surplus 0.00 101.25 219.22 356.05 487.27 630.76Long Term Loans 222.00 222.00 222.00 222.00 111.00 0.00Working Capital Borrowings 116.80 136.08 155.38 155.46 155.55 572.00 790.04 927.31 1083.42 1103.73 1136.31AssetsGross Block 479.00 479.00 479.00 479.00 479.00 479.00Accumulated Depreciation 51.62 103.23 154.85 206.46 251.42Net Block 479.00 427.38 375.77 324.15 272.54 227.58Deferred Revenue Expenditure 15.00 12.00 9.00 6.00 3.00 0.00Net Working Capital 194.66 226.81 258.96 259.10 259.25Cash and Bank Balances 78.00 156.00 315.73 494.31 569.10 649.48 572.00 790.04 927.31 1083.42 1103.73 1136.31Check 0.00 0.00 0.00 0.00 0.00 0.00
  • 6. Cash Flow Statement (Rs. Lakhs) Particulars 0 1 2 3 4 5Cash Flows from Operating ActivitiesNet Profit before Interest & Tax 174.78 215.90 256.95 255.59 260.82Adjustment for Book Dep & Amort. 54.62 54.62 54.62 54.62 47.96Change in Working Capital -194.66 -32.15 -32.15 -0.14 -0.15Tax Paid -27.86 -49.83 -69.62 -73.85 -82.35 Sub-Total (A) 6.88 188.54 209.79 236.22 226.28Cash Flows from Investing ActivitiesChange in Deferred Revenue Expd. -15.00Change in fixed assets -479.00 Sub-Total (B) -494.00 0.00 0.00 0.00 0.00 0.00Cash Flows from Financing ActivitiesChange in equity share capital 350.00 0.00 0.00 0.00 0.00 0.00Change in Loans 222.00 0.00 0.00 0.00 -111.00 -111.00Change in Working Capital Borrowings 0.00 116.80 19.29 19.29 0.08 0.09Interest on Long Term Loan -31.08 -31.08 -31.08 -31.08 -15.54Interest on Working Capital Loan -14.60 -17.01 -19.42 -19.43 -19.44 Sub-Total (C) 572.00 71.12 -28.80 -31.21 -161.43 -145.90Change in Cash Flows (A+B+C) 78.00 78.00 159.73 178.58 74.79 80.38Opening Balance 0.00 78.00 156.00 315.73 494.31 569.10Closing Balance 78.00 156.00 315.73 494.31 569.10 649.48Closing Balance as per BS 78.00 156.00 315.73 494.31 569.10 649.48Difference (Check) 0.00 0.00 0.00 0.00 0.00 0.00
  • 7. Tax and Depreciation Computation (Rs. Lakhs) Pre- Post- Allocated AllocationDepreciable Cost Cost Allocation CostBuilding 85.00 9.35 94.35Plant and Machinery 175.00 19.25 194.25Miscellaneous Fixed Assets 125.00 13.75 138.75Motor Vehicle 24.00 2.64 26.64Pre-Operative Expenses and Contingency (To be allocated to main asset items) 45.00Total Depreciable Cost 454.00 45.00 454.00Depreciation and Tax Calculation 0 1 2 3 4 5Operational Months 12 12 12 12 12Depreciation as per Companies Act Building 4.72 4.72 4.72 4.72 4.72 Plant and Machinery 19.43 19.43 19.43 19.43 19.43 Miscellaneous Fixed Assets 20.81 20.81 20.81 20.81 20.81 Motor Vehicle 6.66 6.66 6.66 6.66 0.00 Total 51.62 51.62 51.62 51.62 44.96Accmulated Depreciation Building 4.72 9.44 14.15 18.87 23.59 Plant and Machinery 19.43 38.85 58.28 77.70 97.13 Miscellaneous Fixed Assets 20.81 41.63 62.44 83.25 104.06 Motor Vehicle 6.66 13.32 19.98 26.64 26.64 Total 51.62 103.23 154.85 206.46 251.42Gross Block Building 94.35 94.35 94.35 94.35 94.35 Plant and Machinery 194.25 194.25 194.25 194.25 194.25 Miscellaneous Fixed Assets 138.75 138.75 138.75 138.75 138.75 Motor Vehicle 26.64 26.64 26.64 26.64 26.64 Total 454.00 454.00 454.00 454.00 454.00Net Block Building 89.63 84.92 80.20 75.48 70.76 Plant and Machinery 174.83 155.40 135.98 116.55 97.13 Miscellaneous Fixed Assets 117.94 97.13 76.31 55.50 34.69 Motor Vehicle 19.98 13.32 6.66 0.00 0.00 Total 402.38 350.77 299.15 247.54 202.58Depreciation as per Income Tax Act Building 14.15 12.03 10.23 8.69 7.39 Plant and Machinery 48.56 36.42 27.32 20.49 15.37 Miscellaneous Fixed Assets 27.75 22.20 17.76 14.21 11.37 Motor Vehicle 10.66 6.39 3.84 2.30 1.38 Total 101.12 77.05 59.14 45.69 35.50Accmulated Depreciation Building 14.15 26.18 36.41 45.10 52.49 Plant and Machinery 48.56 84.99 112.30 132.79 148.16 Miscellaneous Fixed Assets 27.75 49.95 67.71 81.92 93.29 Motor Vehicle 10.66 17.05 20.89 23.19 24.57 Total 101.12 178.17 237.31 283.00 318.50Gross Block Building 94.35 94.35 94.35 94.35 94.35 Plant and Machinery 194.25 194.25 194.25 194.25 194.25 Miscellaneous Fixed Assets 138.75 138.75 138.75 138.75 138.75 Motor Vehicle 26.64 26.64 26.64 26.64 26.64 Total 454.00 454.00 454.00 454.00 454.00Net Block Building 80.20 68.17 57.94 49.25 41.86 Plant and Machinery 145.69 109.27 81.95 61.46 46.10 Miscellaneous Fixed Assets 111.00 88.80 71.04 56.83 45.47 Motor Vehicle 15.98 9.59 5.75 3.45 2.07 Total 352.88 275.83 216.69 171.00 135.50Corporate Income TaxPBT (Book Profits) 129.10 167.81 206.45 205.08 225.84Add: Book Depreciation 51.62 51.62 51.62 51.62 44.96Less: Income Tax Depreciation 101.12 77.05 59.14 45.69 35.50Balance after Current Depreciation 79.60 142.38 198.93 211.00 235.29Unabsorbed Depreciation 0.00 0.00 0.00 0.00 0.00Carry Forward Unabsorb. Dep. 0.00 0.00 0.00 0.00 0.00Dedn of Unabsorb. Dep. 0.00 0.00 0.00 0.00 0.00Income Chargeable to Tax 79.60 142.38 198.93 211.00 235.29Corporate Income Tax 27.86 49.83 69.62 73.85 82.35Note: It is assumed that there is no Minimum Alternate Tax.
  • 8. Commercial Operation Date
  • 9. Repayment of Debt (Rs. in Lacs)Year Total 0 1 2 3 4 5Opening Bal. 222.00 222.00 222.00 222.00 111.00Loan Drawal 222.00 222.00Interest Payment 139.86 0.00 31.08 31.08 31.08 31.08 15.54Principal Payment 222.00 0.00 0.00 0.00 0.00 111.00 111.00Closing Bal. 222.00 222.00 222.00 222.00 111.00 0.00Total Payment 361.86 0.00 31.08 31.08 31.08 142.08 126.54
  • 10. Working Capital(Increase)/Decrease in Working Capital Rs. Lakhs -47.64 -12.86 -12.86 -0.06 -0.06 0.00Recovery of Working Capital Rs. Lakhs -73.48CapexCapital Expenditure Excl. WC Mgn Rs. Lakhs -572.00Salvage Value Rs. Lakhs 126.29Project IRR (Post Tax)Profit Before Tax Rs. Lakhs 129.10 167.81 206.45 205.08 225.84Add:Book Depreciation and Amortisation Rs. Lakhs 54.62 54.62 54.62 54.62 47.96Interest on Term Loans Rs. Lakhs 31.08 31.08 31.08 31.08 15.54Interest on Working Capital Loan Rs. Lakhs 14.60 17.01 19.42 19.43 19.44Cash Accruals Before Tax Rs. Lakhs 229.40 270.52 311.57 310.21 308.78Less: Corporate Tax Rs. Lakhs 27.86 49.83 69.62 73.85 82.35Cash Accruals to Project Rs. Lakhs 201.54 220.68 241.94 236.36 226.42Capital Expenditure Excl. WC Mgn, IDC and FC Rs. Lakhs -572.00 0.00 0.00 0.00 0.00 0.00Salvage Value Rs. Lakhs 126.29(Increase)/Decrease in Working Capital Rs. Lakhs -47.64 -12.86 -12.86 -0.06 -0.06 0.00Recovery of Working Capital Rs. Lakhs -73.48Net Cash Flows to Project Rs. Lakhs -619.64 188.68 207.82 241.89 236.30 279.24Project IRR % 23.25%Project NPVDiscount Factor % 10.00%NPV Rs. Lakhs 218.32Project NPVDiscount Factor % 15.77%NPV Rs. Lakhs 120.11Project Payback PeriodNet Cash Flows to Project Rs. Lakhs -619.64 188.68 207.82 241.89 236.30 279.24Cumulative Net Cash Flows to Project Rs. Lakhs -619.64 -430.96 -223.14 18.75 255.04 534.28Payback Period Years 0.00 0.00 0.00 2.92 0.00 0.00Payback Period Years 2.92Equity IRR (Post Tax)Profit after tax Rs. Lakhs 101.25 117.98 136.83 131.23 143.49Add: Book Depreciation Rs. Lakhs 51.62 51.62 51.62 51.62 44.96(Increase)/Decrease in Working Capital Rs. Lakhs -47.64 0.00 0.00 0.00 0.00Recovery of Working Capital Rs. Lakhs -73.48Salvage Value Rs. Lakhs 126.29Equity Infusion for Capex Rs. Lakhs #REF! #REF!Repayment of Debt Rs. Lakhs #REF! #REF! #REF! #REF!Net Cash Flows to Equity Rs. Lakhs #REF! #REF! #REF! #REF! #REF! 241.25Equity IRR % #VALUE!Discounted Project Payback PeriodDiscount Factor % 15.77%PV Factor 1.00 0.86 0.75 0.64 0.56 0.48PV of Net Cash Flows to Project Rs. Lakhs -619.64 162.98 155.06 155.89 131.55 134.28Cumulative Net Cash Flows to Project Rs. Lakhs -619.64 -456.66 -301.60 -145.71 -14.16 120.11Payback Period Years 0.00 0.00 0.00 0.00 0.00 4.11Discounted Payback Period Years 4.11Equity IRR (Post Tax)Profit after tax Rs. Lakhs 101.25 117.98 136.83 131.23 143.49Add: Book Depreciation and Amortisation Rs. Lakhs 54.62 54.62 54.62 54.62 47.96
  • 11. (Increase)/Decrease in Working Capital Rs. Lakhs -47.64 -12.86 -12.86 -0.06 -0.06 0.00Recovery of Working Capital Rs. Lakhs -73.48Salvage Value Rs. Lakhs 126.29Equity Infusion for Capex (Excl. WCM) Rs. Lakhs -302.36Repayment of Debt Rs. Lakhs 0.00 0.00 0.00 -111.00 -111.00Net Cash Flows to Equity Rs. Lakhs -350.00 143.00 159.73 191.39 74.78 133.25Equity IRR % 30.57%Equity NPVDiscount Factor % 20.00%NPV Rs. Lakhs 430.46Adjusted Net Present ValueAll Promoters Equity Financed NPV -12.78Issue Expenses for Public Issue 15.00PV of Tax Sheild 133.15Adjusted NPV 105.37Debt Service Coverage RatioProfit after tax Rs. Lakhs 101.25 117.98 136.83 131.23 143.49Add:Depreciation Rs. Lakhs 51.62 51.62 51.62 51.62 44.96Interest on Term Loans Rs. Lakhs 31.08 31.08 31.08 31.08 15.54 Total Inflow Rs. Lakhs 183.94 200.67 219.52 213.92 203.98Interest on Term Loans Rs. Lakhs 31.08 31.08 31.08 31.08 15.54Repayment of Principal Amount Rs. Lakhs 0.00 0.00 0.00 111.00 111.00 Total Outflow Rs. Lakhs 31.08 31.08 31.08 142.08 126.54Annual DSCR times 5.92 6.46 7.06 1.51 1.61Average DSCR times 2.82Maximum DSCR times 7.06Minimum DSCR times 1.51NPV of Debt Financing for Adjusted NPVDrawal 222.00Tax shield on Interest 10.88 10.88 10.88 10.88 5.44Repayment 0.00 0.00 0.00 -111.00 -111.00Financing Cash Flows 222.00 10.88 10.88 10.88 -100.12 -105.56NPV 133.15