Design a Model for Fund raising & Capital structuring of 300 MW power plant of Abhijeet GroupPRATIK LOKHANDE2010-2012G.H.R.S.B.M.Under GuidanceDr. R. M. Naik SIP DURATION: 50 days*

COMPANY PROFILE

Name of company: Abhijeet Group of Companies Address: Landmark building 6th floor Ramdaspeth NagpurPromoter: Mr. Manoj JayaswalArea of Sector: Power ProjectsName of Department: Corporate Finance

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Company DetailsAbhijeet Group is emerging as one of the fastest growing & leading Private Sector Organization of India.The Group is a well-diversified business entity with significant presence in the core sector areas of Power, Mining, Ferroalloys, Steel and Roads. The Group is aggressively working on its Vision of setting up the power plant of capacity 5000MW in 7 years in the states of Maharashtra, Jharkhand, Bihar & West Bengal. The MIHAN power project is being developed by Abhijeet MADC Nagpur Energy Private limited (AMNEPL) where Abhijeet group holds74% of shareholding & remaining 26% are hold by MADC.Abhijeet group sells its electricity to the Tata Power Ltd & Reliance Infrastructure Ltd.*

ObjectivesDetermine the funds raised for the companyStratify funds raised during project construction n project operating stageSignify investment decision based on long term & short term source of financing.Feasible Capital StructureProper mix of the debt & equityEffect of capital Structure on the profit of the company

*Limitations of Study During survey from FIs & other power plant its observe that they not share private data.Obtaining of data is time consuming process.The capital structure so suggested should not be taken as ideal it may vary depending upon the company's financial position.

HypothesisEstimated Cost of the project is taken as 1527 crores.The project will finance by keeping the debt equity ratio of 70:30.Deprecation of the project is based on Straight line method of depreciation.Financial Annexures of the company are made on the 10 years of Financial projections.The project life is assumed to be 25 years.

*Primary: data collected from survey of Mahagenco, various Financial InstitutionsSecondary: data collected from company Data Collection

Financing decision:

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Analysis & Interpretation Of Data*Fig: Estimated Income statement

Chart1

396.8390.84

793.65181.67

813.49187.28

833.33182.43

854.67188.05

876.04193.83

897.94199.74

920.39200.07

943.4211.05

966.98212.37

SALES (Rs. in Crores)

PROFIT (Rs. in crores)

Sheet1

SALES (Rs. in Crores)PROFIT (Rs. in crores)

2013396.8390.84

2014793.65181.67

2015813.49187.28

2016833.33182.43

2017854.67188.05

2018876.04193.83

2019897.94199.74

2020920.39200.07

2021943.4211.05

2022966.98212.37

Sensitivity Analysis*From the above financial projections, it is observed that the Project is financially viable. It may also be noted that the average DSCR (Debt Service Coverage Ratio) of the Project is 2.01 while minimum DSCR is 1.61. The mentioned DSCR levels of the Project are satisfactory.

ScenarioMinimum DSCRAverage DSCRBase case1.612.01Case 1: PLF at 75%1.211.50Case 2: Increase in Fuel Cost by 20%1.451.80Case 3: Increase in Project cost by 10%1.331.65

*FINDINGS The Debt equity ratio in power projects may vary in the range of 2.33:1 to 3:1.

The percentage of debt must be higher as compared to that of equity.

Dilution of equity is kept at lesser extent as compared to that of debts.

In general the debt service coverage ratio is taken as 1.44, but for the power projects it should not be as low as 1.2.

CONCLUSIONThe company should not increase the more amount of debts, since likelihood of defaults & risk may increase.If debts are more then, tenure of repayment of principal will be more. Hence less percentage of profit will be enjoyed.Less dilution of ownership will result into more dividend payouts to the shareholders of the company. Hence large amount of shareholders will tend to buy the shares of the company.DSCR of 2.01 of the project indicates the financial stability & feasibility, Hence company is able to pay the loans satisfactory.

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RECOMMENDATIONS/SUGGESTIONS* The recommended debt equity ratio for 300MW power plant should be in the ratio of 70:30.

Since by taking 70% debts the company can easily repay the principal amount of loans and its interest.

The mentioned percentage of debts will result into less burden on the company by shortening its gestation period, hence maximum profit will be enjoyed.

30% of equity will result into less dilution of ownership, hence more dividend payout.

Thank You*