Case Study – Financial Modelling

 You are a financial analyst in a Steel Company and your Company wants to implement a 0.6
MTPA carbon steel plant in Orissa. Please prepare a detailed financial model with P&L
statement, cash flow statement, P&L statement and advise the management whether they
should implement the project by calculating various ratios/analysis as below:

 NPV of the Project

 Project IRR
 Equity IRR
 DSCR
 Sensitivity Analysis
 Free Cash Flow to Firm
 Free Cash Flow to Equity
 Fixed Asset Coverage Ratio
 Interest Coverage Ratio

 Various Assumptions to be considered for the considered for preparation of the financial
model are as below:

 Project Cost Assumptions

Particulars Amount (Rs cr)

Land & Site Development Cost 5.00
Buildings & Civil Works 39.00
Plant & Machinery 86.50
Miscellaneous Fixed Assets 2.00
Total Hard cost 132.50

Pre Operative Expenses 3.50

IDC ?
Contingency (@5%) 6.63
Margin Money for WC ?
DSRA ?
Total Soft Cost ?
Total Project Cost ?

 Funding Assumptions

D:E 3:1
Interest Rate 11%
Upfront Equity 100%
 Project Phasing Assumptions

Particulars Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Land & Site Development Cost 20% 35% 45%
Buildings & Civil Works 20% 35% 45%
Plant & Machinery 15% 20% 30% 25% 10%
Miscellaneous Fixed Assets 0% 15% 20% 25% 40%

Pre-Operative Expenses 15% 20% 30% 25% 10%

IDC
Contingency 15% 20% 30% 25% 10%
Margin Money for WC 100%
DSRA 100%

 Operations Assumptions
o Material Balance Operations

Input Materials
Iron Ore 1.6 Mt
Coal - "D" Grade 2 Mt
Dolomite (Lime stone) 0.04 Mt
Fuel Oil 1.5 LT
Power 100 KWh

Plant Capacity 600000 MTPA

o Cost Assumptions

Product / Raw material Price Unit

Steel 14000 Rs/ton

Iron Ore 4100 Rs/ton

Coal - D Grade 2320 Rs/ton
Dolomite (Lime stone) 800 Rs/ton
Fuel Oil 40 Rs / lt
Power 3.5 Rs / unit

Repair & Maintenance 2.00% of Gross Block

Factory Overheads 0.20% of Net Revenue
Admin Exp 2.00% of Net Revenue
Other Exp 90.00 Rs / ton of finished goods
Personnel Expenses 3.5 Rs crores / year
 o Plant Utilization factor
Date FY FY FY FY FY FY FY
2016 2017 2018 2019 2020 2021 2022 onwards
Utilization 0% 20% 60% 65% 70% 75% 80%
factor

 Depreciation Assumptions

Particulars SLM WDV

Land 0.00% 0.00%
Buildings & Civil Works 5.36% 10.00%
Plant & Machinery 7.28% 15.00%
Miscellaneous Fixed Assets 8.00% 15.00%

 Loan Repayment Assumptions

Equal Repayment for 12 years

 Working Capital Assumptions

Particulars Months
Raw Material Inventory 1
Consumables, Stores & Spares 1.5
Debtors 1

Creditors 1.5

 Present MAT and Corporate Tax assumptions