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  1. 1. Sunrise Projects Ltd.SUNRISE PROJECTS LTD.HISTORYSunrise Projects is an existing profit making Company engaged in Construction Activities. The Company was originally incorporated onMarch 15, 2000 as Continental Constructions Private Limited and in the year 2000, it took over the running construction business of M/sSunrise Constructions, a partnership concern and executed projects on turnkey basis in different parts of the Country. From traditionalbusiness of building construction, the Company diversified into Coal Handling Plants, building of rail embankments, bridges, tunnels etc.PRESENT BUSINESSThe Company is in the business of Construction activities. It undertakes and is specialized in Construction Engineering and TurnkeyProjects viz.,Deep Excavation Industrial StructuresHeavy Rock Cuttings Development of townshipsHigh Railway Embankments Roads and concrete pavementsMajor Canals & Earthen Dams Water supply and sewage disposal worksDykes Ventilation and PressurizationCoal Handling Plants Fabrication and equipment erection works.Heavy WorkshopsAll the clients are Central or the State Governments, Public Sector Undertakings and other Government Companies.The Company has obtained the following registrations:a. Registered Contractor in Unlimited Class Category with Government of India Undertakings.b. Registered Contractor in Unlimited Class Category with State Government of Andhra Pradesh, Karnataka and Madhya Pradesh.c. Registered Contractor in ‘Special Class’ for the following undertakings. Konkan Railway Corporation Ltd. Narmada Valley Development Authority Ltd. Coal India Ltd. Jalagon Municipal Corporation Ltd. South Eastern Coal fields Ltd. South Central Railways Northern Coal Fields Ltd. National Airport Authority of India Madhya Pradesh Water Resource Department National Thermal Power Corporation Indian Road Construction Corporation Ltd. Sardar Sarovar Narmada Nigam Ltd. Engineers India Ltd.PROJECTThe Company has been undertaking projects across the country. Due to excellent opportunities available for expansion of business, theCountry proposes to augment its fixed assets viz., plant and machinery and other equipments to enable it execute large and turnkeyprojects; to increase the networth of the Company to enable it to qualify for higher bids and to compete with other large Companies andto augment its long term working capital requirements including margin money on Bank Guarantee.Pre-TenderingThe ‘Think Tank’ of the Company continuously scans the various new papers, magazines, journals and periodicals and shortlists theprospective projects for tendering and prequalification. The `Top Management’ of the Company from Projects, Finance and EngineeringDivisions then evaluate each project and finalises the projects in which the Company should participate. Sealed tenders are preparedand submitted to the Clients. The tenders are opened at Clients’ places in the presence of bidders and quotations of all the participantsare read out. The one with the lowest quotation and meeting all the pre-qualification criteria is awarded the Contract.Post-TenderingAfter receipt of the award, the Management designates an Executive Team to draw the detailed plan along with PERT Charts forexecution of the project. Targets are fixed, responsibilities are identified and authorities are defined for each project. 1
  2. 2. Sunrise Projects Ltd.ExecutionAs per the plans, The Project Manager designated will coordinate the mobilization of Machines, Materials and Manpower to the site. Aweekly fortnightly/monthly review will be conducted at different levels to continuously monitor the project implementation with theultimate object of delivering the project as per the time schedule and as per the required quality parameters.Raw MaterialsThe raw materials required for Civil Engineering works are bricks, sand, steel bars, wood, pipes, steel shuttering, Gravel etc. All thesematerials are easily available and the Company does not foresee any problem in procuring the same as they are available at any pointof time.UtilitiesPowerPower is required at the project site to run machines. Wherever possible power is sourced from the nearest substations and in theabsence of the same, diesel generators are used. The diesel generator sets are moved to the project sites wherever required. Most ofthe equipments are diesel operated.FuelDiesel is required for operating heavy machinery and construction equipments at the sites. At all major project sites, own-diesel bunksare arranged with licenses and purchases are directly made from the Oil Companies.WaterWater is sourced from the canals, river or borwells. In case of irrigation works, water will be sourced from the canals. For other works thewater will be sourced from nearby wells/reservoirs by water tankers or by digging tubewells.Pollution ControlThe Company’s operations do not generate any effluents. No permission is required from pollution control board for the operations of theCompany.Quality ControlA full fledged laboratory with testing apparatus for testing different materials, components/ingredients of concrete is maintained by theCompany at the Site of the Project. The concrete is tested for its strength, water resistance, tensile strength. Similarly tests are done forsoils like density test, OMC test, consolidation test, elementary grading test etc. The tests for bitumen/tar include penetration tests.Experienced team of technical staff look after the testing process to ensure proper quality. All the materials used in the work are testedin accordance with stipulated standards and any material that does not conform to these standards are not used. Aqualified and experienced Engineer is entrusted with controlling of the tests/activities of the lab.ManpowerThe success of any Construction Company depends on the quality of man-power it possesses. The Company has a team of wellqualified and experienced professionals on its rolls. The present strength of the Company is as follows:1. Engineers – 602. Diploma holders – 353. Graduates – 604. Skilled Employees – 4005. Unskilled Employees – 950Personnel for various contracts will be posted out of available strength depending on the requirements of the site.Schedule of ImplementationOrders for the plant and machinery and equipments have already been placed. Deliveries are expected to be completed by end April2001.Schedule of implementation of projects undertaken by the Company will be as per the client’s requirements in each case.FUTURE WORKS 2
  3. 3. Sunrise Projects Ltd.In its recent survey, National Highway Authority of India alongwith Asian Development Bank, shortlisted 42 Companies for constructionof Highway. Sunrise Projects Limited qualified for the same alongwith Binapuri Holdings BHD, Malaysia.The Company is bidding for several projects and confident of bagging some of them. Projects being bid by the Company include:a. Construction of Highway Roadsb. Guage Conversion Worksc. Krishna Water Projectsd. Coal Handling and Treatment.The Union Government has decided to go in a big way to private the development, maintenance and operation of the nationalhighway/express-ways with a view to strengthen the road network all over the country. According to conservative estimates, a colossalinvestment of nearly Rs.60,000 crores is expected in construction of national highways by the private sector in due course. By the year,2015, a length of nearly 10,000 kms of Expressways will be required to be constructed in a phased manner. Besides, there are alsoproposals to upgrade the existing level crossing on the national highways to be converted into over-bridges.The Company proposes to participate in the tenders to be floated by the Government for the construction of above projects and alsovarious others Government Undertakings under the following schemes.a. Build-Operate-Lease-Transfer (BOLT)b. Build-Own-Operate (BOO)c. Build-Own-Operate-Transfer (BOOT)d. Build-Operate-Transfer (BOT)The Company is exploring the possibilities of executing coal washeries, Express Highways, Rail over bridges, Rail under Bridges,Airports and Power Plants under ‘Build-Own-Lease-Transfer’ Concepts for Coal India Limited, State and Central Government, NationalAirports Authority of India and State Electricity Boards. With the growing emphasis on infra-structural development and maintenance, theprospects for the Construction industry in the country is bright.COST OF THE PROJECTThe cost of the project has been appraised by Canara Bank, Industrial Division, Bangalore vide their report dated November 01, 2000.The purpose and scope of appraisal was to ascertain the technical feasibility and financial viability of the project, sanction of term loanand for the purpose of raising funds from the Capital Market. (Rs. in lakhs)Plant & Machinery 287.00Equipments 146.00Miscellaneous Fixed Assets 11.00Vehicles 10.00Contingencies 22.00Pre-operative Expenses 10.00Issue Expenses 60.00Long term working capital 444.00*Total 990.00* Includes margin on Bank Guarantee of Rs.277 lakhs.MEANS OF FINANCE (Rs. in lakhs)Equity Capital– Promoters 40.00– Public 236.00Share Premium 3
  4. 4. Sunrise Projects Ltd.– Promoters 60.00– Public 354.00Term Loan 300.00*Total 990.00* Canara Bank has sanctioned a term loan of Rs.300 lakhs on the following terms and conditions:1. Primary : First Charge on the entire fixed assets of the Company. Personal guarantee of all the directors.2. Interest at the rate of 15% p.a.3. Repayment in 4 equal annual instalments of Rs.75 lakh each. Instalments begin from the end of second year.For financing the expansion project, the company has issued 27.6 lakhs shares of face value Rs.10 at a premium of Rs.15 per share.The issue was fully subscribed.The company has projected without the expansion project the following Gross revenue figures for years 2002 to 2006.Year 2002 2003 2004 2005 2006Gross revenue (Rs. in lakhs) 3500 3800 4000 4200 4500It is expected that due to the expansion project the work receipts will be increased by 25% over the above projected revenue figure forall five years. Due to increased investment in plant and machinery, and equipments the company will have other income from givingthose items on hire, estimated at 1% of the incremental revenue.Additional Information1. Assume project life of five years for appraising the project.2. Salvage value of fixed assets can be taken as 5% of Gross Block at the end of five years. Repairs and Maintenance can be assumed at 20% of Gross Block.3. Material consumption can be assumed at 50% of the gross revenue based on the past actuals. Labour charges can be assumed at 10% of the gross revenue based on the past actuals.4. Depreciation to be calculated as follows: Companies Act (SLM) IT Purposes (WDV) Plant and machinery 10% 25% Equipments 15% 25% Miscellaneous fixed assets 20% 15% Vehicles 25% 40%5. The company expects to declare a dividend of 20%. And the dividend is expected to grow by 5% each year.6. The tax rate applicable for the company is 35%.Answer the following questions:1. Prepare the incremental projected income statement from the expansion project for the first five years.2. Determine the incremental cash flows of the project assuming project life of five years.3. Appraise the project in terms of the following: • Benefit-cost ratio • Internal rate of return • Discounted pay-back period.4. Discuss the risk factors inherent in such projects.5. Company’s management is using PERT chart for execution of the project. There is another very popular and simpler technique – Gantt Chart. Discuss the use of Gantt Chart as a tool of control. 4