A Summer Internship Project Report

On

“Project Finance- Modeling and Analysis”

A Capstone project report is submitted in partial fulfilment of requirements for Masters of Business
Administration (Energy & Infrastructure) May, 2020

Under the Guidance of

Ashish S Kumar
(Founder CEO)
Vardhan Consulting Engineers

Submitted by:
Prabhu Agrawal
Roll no: 20191031
MBA (Energy & Infrastructure)
2019-21
School of Petroleum Management, PDPU
 Project Finance- Modeling and Analysis

CERTIFICATE

This is to certify that the “Vardhan Consulting Engineers" internship report is completed and
submitted by Prabhu Agrawal in fulfilling the requirements for the award of Master's Degree in
Business Management (Energy & Infrastructure), is a bonafide work practiced by him under my
guidance. To my knowledge and belief, this work is based on an investigation, collected and
analysed data from it, and this work is not carried out elsewhere, since no other university or
institution for granting degree.

Ashish S Kumar
(Founder CEO)
Vardhan Consulting Engineers

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 Project Finance- Modeling and Analysis

STUDENT DECLARATION

I declare that this assignment report is my own work and that to my knowledge it does not contain
material previously published or written by another person nor material that has bееn accepted for
awarding another degree or other institute for higher education, except in case where the necessary
recognition is given in the text.

Prabhu Agrawal
Roll Number: 20191031
MBA (Energy & Infrastructure)
2019-21
School of Petroleum Management, PDPU

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 Project Finance- Modeling and Analysis

ACKNOWLEDGEMENT

I would like to express my deepest gratitude to Ashish S Kumar for his trust and reluctance to teach
and inspire by his guidance. Without a guiding hand and stubborn support, this work of mine wills
not be possible.
I would like to thank Ms. Neha Kumari who provide me this internship opportunity with Vardhan
Consulting and Engineers. I would also like to sincerely thank my friends for their ideas and the
maintenance of a warm environment and support.

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 Project Finance- Modeling and Analysis

INDEX

CONTENT PAGE NO.

About Vardhan Consulting Engineers 7

Other Initiatives & Advisory Board 8

Module:1 9

Module:2 10

Module:3 11

Module:4 12-13

14
Real Estate Sector- India

References

FIGURES PAGE NO.

Growth Drivers 14

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 Project Finance- Modeling and Analysis

EXECUTIVE SUMMARY

Title of the Project: Project Finance- Modeling and Analysis.

Objective of the Project: To understand the constituents and complexities of a financial modelling
and various technical terms associated with it. Starting from the very basics of what exactly the
corporate finance is, to the development of the actual financial model of a Real Estate Development
project covers almost every concepts involved in Project Financing.
A detailed financial modelling of 50 flats housing project in Gurgaon, Haryana is done to check the
feasibility of the project which ultimately helps in mitigating the future risks.

Methodology: Actively participated in various discussions conducted by the mentor. Data from
secondary sources such as online print literatures. Various assumptions are made in building up
financial model.

Conclusions: Project Finance is a useful tool for companies that wish to avoid any unforeseen risk
associated with their investments. Often these investments involves huge amount of money that
raised from various financing sources having different costs. Analysis these projects in advance helps
the companies to check the feasibility of the project using various scientific and mathematical tools
and thus helps in mitigate the risks.

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 Project Finance- Modeling and Analysis

ABOUT VCE

VCE is a consulting company founded by group of engineers who have strong academic background
with decades of management experience while working in companies all across the globe. VCE is
providing solutions to the complex engineering, management and financial issues of clients.

The Company provide engineering and project management consultancy to energy projects.
Especially Solar PV power project (Utility Scale Large Sized Projects), Pyrolysis Projects (Plastic
to Oil).
Core services includes;

1. Feasibility Analysis, Detailed Project Report, Financial Analysis (IM).

2. Financial Closure through Debt or Private Equity for Project Finance.
3. On-site and Off-site Project Management and EPC-Management Services.
4. Documentation and Transaction Services for Sale of Project.
5. Project Development and Transfer of Rights at NTP.

Group lead consultant have 10+ years of experience in energy sector in India, Philippines, UK,
Cambodia and Thailand.

VCE have different business horizons and revenue sources such as:

1. Engineering and Management Consulting.

2. Importing and Branding Pearl Jewellery.
3. Stock Market and Cross-Currency Trading.
4. Insurance and Investment Advisory.

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 Project Finance- Modeling and Analysis

OTHER INITIATIVES

Vardhan Merit Scholarship:

In this initiative, company pay scholarship to poor under-privileged girls and pay their entire
educational expense till class 12th. So that, financial burden never be the reason for them to drop out
from schools. It also encourages the kids to study with more focus. Currently, the company
grants Rs. 50,000 (Fifty Thousand Rupees) per year for this.

VCE Internships and Training:

In this initiative, company select students from various engineering and management colleges and
provide them internship and training. Company’s internships and training are very unique in nature
and it’s especially for the students of Core Engineering Sector (Electrical, Mechanical, Civil and
Energy Engineering) and Finance Management for preparing them to corporate / industry ready.
Company provide them mentor from the industry. All this is done without taking any fee / favour
from the students. Currently, company grant Rs. 60,000 (Sixty Thousand Rupees) per year for this.
Majority of the amount will be paid as stipend to the best interns as encouragement. (Stipend paid so
far, Rs. 1.50 Lakhs+).

ADVISORY BOARD

 Ashish S Kumar, Consultant, Energy Sector, Bangkok, Thailand

 Neha Kumari, Consultant, HR & ERP, Bangkok, Thailand
 Manish S Kumar, Consultant, M&A and IPO, NewYork, USA
 Amit S Kumar, Consultant, IT & Software Sector, Pinang, Malaysia

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 Project Finance- Modeling and Analysis

MODULE: 1
Task Description: The primary objective of this module is to make familiar with the basic
terminologies of Project Finance.
Learning & Outcomes: In this module I got to learn the about the basic difference between
accounting and finance followed by the understanding of project finance terminologies and the
difference between project finance and corporate finance. Project finance deals with a specific
project or a portfolio of projects whereas corporate finance deals with increasing the value of the
firm by taking bold managerial decisions regarding sourcing of funds, the capital structure of
corporations and use of various financial tools to maximize the shareholders wealth.
Also in this module I got to learn about the various projects that involves use of project finance such
as large infrastructure projects which are large in investments as well as having greater amount of
risks associated with them. For that different sources of funding is required. Corporates usually go
for the combination of Debt and Equity funding that has their own benefits and challenges. I also
read about the example of oil and gas project financing wherein learnt about the complexities and the
risks factors that involves in the projects.

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 Project Finance- Modeling and Analysis

MODULE: 2

Task Description: It consists of a financial model of buying of a flat which need to be

conceptualized based upon the various formulas used in the model.

Learning & Outcomes: Financial Model involves various spreadsheets which an analysts uses to
depict the future performance of the business. It comprises of various assumptions which the
company need to make while developing a financial model those assumptions are as follows:
 Revenue Streams: It plays a very important role as it reflects the company ability to convert
goods into cash. Whiling considering this the company need to forecast the revenue stream
for the business based on the past sales. Since revenue is related with the economic activities
of the country so the company need to have the updated knowledge about the economic
conditions of the country so the correct prediction of revenues can be made.
 Expenses: It comprises of all the costs associated with the business. It can be classified into
two parts i.e. Operating Expenses and Non-Operating Expenses. The value of both the
expenses need to be identified so as to perform the accurate financial analysis. Operating
expenses includes expenses which are incurred to generate the sales like building and
maintenance, insurance, wages, electricity etc. Non-operating expenses includes expenses of
interest and tax amount which varies based upon the amount of debt and the prevailing
interest rates in the economy.
 Earnings per Share: Since the main objective of any business is to maximize the
shareholders wealth so for that the company need to focus upon increasing the EPS so that
the stock price of the company increases as the demand for the company’s share in the market
increases thus leads to increase in the share prices.
Apart from these the economic and political factors need to be taken into account as these factors
decides the success or failure of the business. Political factors includes: Attitude of the government
towards business.
This module also helps in understanding the various functions of revenue, cost and debt sheet of
financial model which further helps in knowing banks procedure related to mitigating the risks
associated with financing the project. At the time of granting loans the bank usually checks the
liquidity of the company by comparing the revenue streams with expenses. Also bank check the EPS,
NPV and IRR of the projects which helps the banks to determines the future scope of business of the
company. If NPV is positive than the project is acceptable. DCR is also another measure which the
banks take into considerations whiling granting, loan as it helps in determining the liquidity of the
business.

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MODULE: 3
Task Description: This module focuses on understanding the revenue model and process flow of
different types of business ventures.
Learning & Outcomes: It is very important to assess the financial viability of any project because
the investment is done to earn money from the business. So whiling doing this analysis the following
factors must be considered:

 Characteristics of the Business Partners: It involves identifying the background of the business
promoters to get idea about the company and the people behind it. It is often said that u must
have a best idea in this world but it will get off the ground if it is executed with the wrong people
in a team. So before financing the project it is essential to check the reliability, honestly, work
ethics and the potential of the promoters of the business.
 Innovative Idea: Project value proposition must be unique only than it will be consider because
ultimately it will create good returns on investments.
 Analysis of Project Cost: It is associated with determine the initial investment that has to be
made in any project. It is benchmarked to similar projects in the industry.
 Financial Outlook: It deals with determining the payback period of any investment. If the
payback period is long than the chance of project getting goof finance is less because every
investor wants the quick returns on their investments.
After determining various factors that impacts the financial viability of any project the next step is to
determine its revenues and cost models.
 Revenue model of Solar PV Project, Residential Building and Manufacturing Unit is analysed in
this module. Solar PV Project: Revenue streams includes PPE (Purchasing Power
Agreements) model where the energy supplier make a long term power purchase agreements
with various utilities companies, industrial customers and commercial customers with a fixed or
variable prices depending upon the contract. Another revenue stream for Solar PV project is to
manufacture the solar panels and directly install them to customer premises.

 Residential Building: 1. Rental Business

2. Apartment Sell
3. Commission & Brokerage

 Manufacturing Unit: 1. Export

2. Domestic Market Sales-
Wholesale & Retail

Apart from this various factors that affects the funding from international markets are identified and
analysed.

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MODULE: 4
Task Description: This module is divided into two parts first part is related to building up an actual
financial model of one amongst various case problems provided by the organisation and the other
part includes preparation of final project report comprises of the key learnings of this internship.
Learning & Outcomes: A Real Estate development project of 50 flats housing in Gurgaon, Haryana
is done to evaluate the investment return profile of the project. Various assumptions are made while
modelling the project. Key highlights of the model is attached with this report.

Cost Sheet

Revenue Sheet

Debt Sheet

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 Project Finance- Modeling and Analysis

Fin Flow Sheet

In the above analysis it is cleared from the model that the product is feasible as both NPV and IRR
are favourable when considered under equity option as NPV is positive and IRR also is quite
attractive in comparison of cost of equity.
But when we consider the project under both debt and equity than the project is not feasible due to
negative NPV value and also IRR is low in comparison of cost of capital.
Also the project has good DCR of 1.67 till 11th year and 2.95 in 12th year. This shows that the project
has good operating income to cover the debt obligations.

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 Project Finance- Modeling and Analysis

REAL ESTATE SECTOR- INDIA

This section of the report highlights that cumulative developments in the area of Real Estate
Development. In India Real Estate sector is the 4th largest sector in terms of FDI inflows, contributed
$24.66 billion from April 2000 to September 2017. The main contributor to this is the increase in the
rate of urbanisation. It is estimated that the number of people living in urban areas will increase from
434 million in 2015 to 600 million by 2030 and thus leads to 70% of the county’s population under
urban region. It is also expected that the country’s Real Estate sector by 2028 will grow by 7 times
and will stood at $853 billion market size. Mumbai and Bengaluru have been rated as the top real
Estate investment destination in Asia.
The key growth driver of the market includes robust demand along with the attractive opportunities,
good government policy supports and increase investments in the sector. Government of the country
is also showing great amount of interest in this sector and thus formulated various polices namely:
Real Estate Regulatory Act, Benami Transaction Act, and Boost to Affordable Housing
Construction, Interest Subsidy to Home Buyers, Service Tax Exemptions, Goods and Service Tax,
PR for Foreign Investors. Apart from this the government is also providing various relaxations to
foreign investors to investment in the country and thus increases the FDI inflows. Also government
is planning to build 100 smart cities to reduce the rate of migration of people to metro cities. In 2017
the State Bank of India and CREDAI signed an MOU to work towards the development of Real
Estate Sector of the country.

Growth in
Torism

Easier Urbanisation
Funding

Policy Growing
Support Economy

Fig: Growth Drivers

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REFERENCES

1. www.ibef.org/real-estate
2. www.techvardhan.com

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