BARDHMAN :

SHRACHI AND
WEST BENGAL
HOUSING
BOARD

Group IV
Kale Varun R (15pgp-023)
Konda Pavan (15pgp-021)
Saad Khan (15pgp-131)
Kartik Sharma (15pgp083)
C Madhav (15pgp-093)

Summary

Rahul Todi , leader of Shrachis

Housing Development decision is
considering for bidding for township
project
The project can be done as a part of
PPP model in collaboration with the
West Bengal housing Board (WBHB)
There is a PE firm Xander Funds
which is also willing to invest in the
project
So, Todi has to take a call whether to
bid for the project and how to go
about it.

Case Facts

Real estate and Construction Sector

Ranked 3rd among the 14 major sectors
Contributes almost 5% of Indias GDP
Indias second largest employer
Expected to grow at the rate of 30%
Worth of almost $14 billion in 08, and is expected to reach $90
billion by '15
Largely a fragmented industry with only few players like DLF and
Unitech having a national footprint

 Residential demand was which was expected to be 7.5 million

units was broadly divided into three main categories
Economically weaker Section (EWC)
Affordable Housing
Mid & Luxury segments

85%

With Rapid urbanization the population of Urban India expected

to reach 400 million.

Bardhman

A district in West Bengal with a

population of over 7 million
Almost 65% of the population was
rural and depended on agriculture
Two major subdivisions - Asansol &
Durgapur were the major Industrial
hub of the district
Came into spotlight from 2006-08 as
the
intended
venue
for
the
production of Tata Motors NANO

SHRACHI
Founded by S.K.Todi, the group was expanded by its sons Ravi Todi
heading Shrachi Securites ltd. and Rahul Todi heading Shrachi Housing
development company.
The company is diversified into various businesses such as:
Agro machinery
Engineering
Real estate
IT
Medical services
Annual turnover in excess of 1k crore in 2008
Has over 10 years of industry experience and proven track record of
delivering real estate solutions

Strategic
Decision

The proposed site will consist of 230-300 acres (depending on the

final deal)
Todi wants to create a Township Project ,a community by building
Bungalows and Group Housing , which would demand a hefty price
premium
The proposed project will start as a PPP model, between West
Bengal Housing Board (WBHB) and the real estate developers via
bidding process with both as 50/50 partner firms
The proposed project will have to devout acreage of 10% planned
for group housing to the Low Income Groups (LIG) Housing

Strategic
Decision

Todi has been approached by a PE

firm Xander Funds to invest in the
project
The Tentative Proposal:
65% of the cash will be brought by
the PE firm and the remaining 35%
by
the
Shrachi/WBHB
partnership(Bengal Shrachi)
In terms of the returns Xander will
first get all its capital back , then
Bengal Shrachi will get all its capital
back and further proceeds will be
divided equally between Xander and
Bengal Shrachi

Case
Question

Todi has to evaluate the economics of

the proposed project in concert with
weighing, timing, social ,political and
decision making considerations and try
to determine what should be the bid
price and capital structure of the
project

Case
Assumptions

He has taken various assumptions with

respect to :
Land allocation
Price and cost assumptions
Demand and model assumptions
Cash Flow assumptions
Ask price for the WBHB = 29cr

Case
Solution

Solution has been arrived by considering four

scenarios which depicts the IRR for Shrachi.
Through these scenarios we would be able to
determine whether Todi should bid for the
project or not and what would be the ideal
scenario If at all he bids and goes ahead with
the project. The various scenarios considered
are:
Scenario I- Calculation of IRR without
acreage and with bank loan
Scenario II- Calculation of IRR without
acreage and without bank loan
Scenario III- Calculation of IRR with acreage
and with bank loan
Scenario IV- Calculation of IRR with acreage

Scenario-I
In Scenario I, Shrachi is not funding the project as a part of the PPP
model with WBHB and the PE firm
It has decided to take out 350000 from its equity and the remaining
250000 is being funded through bank loan. The loan is assumed t
be taken at 10% and since there is no partnership hence the
acreage is assumed to be zero. The IRR for Shrachi comes out to be
45%

Scenario-II

In scenario II as well it has been

assumed that acreage is zero but in
this scenario Shrachi has gone ahead
with the project on its own completely
i.e - no bank loan has been taken. The
IRR for Shrachi comes out to be 41%

Scenario III

In scenario III its been assumed that

acreage of 10% has been taken but
again no partnership with WBHB or
pe firm is considered.
Bank loan has been taken at 10%.
The IRR for Shrachi comes out to be
44%

Scenario IV

In scenario IV its been assumed that

acreage of 10% has been taken but
again no partnership with WBHB or
pe firm is considered.
Bank loan is not taken. The IRR for
Shrachi comes out to be 42%

Conclusion
The table below summarizes that in none of the four scenarios
we are able to get IRR for Shrachi greater than 46%. Hence
Shrachi should pursue the project as PPP model in collaboration
with WBHB and PE firm.
Although its been mentioned that the IRR of the project without
acreage to the LIG is 50% but IRR for Shrachi is still below 46%.
The table below justifies that.

Thank You