CCHAPTER NO CHAPTER NO.

OBJECTIVES

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

1. OBJECTIVES
SECTION A: Funds Flow Statements  To understand the importance of Funds Flow Statement, especially in a construction company.  To prepare Funds Flow Statement. SECTION B: Feasibility Analysis  To study cash inflow & outflow for new construction project and estimate cash outflows for the period 2007-15.  To access the viability of the project with the help of techniques like NPV, IRR, etc.  To estimates the profits for the new project.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

CCHAPTER NO CHAPTER NO.2

SCOPE

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

2. SCOPE
 The Funds Flow Statement is done on a daily basis in the company. In this report the data is clubbed on month basis.  Funds Flow Statement is prepared for three months starting from APRIL to JUNE.  Cash Flow for the business Modeling is forecasted for the period 2007-2015.  The primary source of the data was collected from the finance dept. of the company.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

CHAPTER NO.3 CCHAPTER NO

COMPANY OVERVIEW

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

3. COMPANY OVERVIEW
HCC (erstwhile Premier Construction Co. Ltd.) was incorporated by Seth Walchand Hirachand in 1926 and became a public limited company in 1939. Post the split of the Walchand Group in 1993, the company came under the control of Mr. Ajit Gulabchand, who is the current CMD.

 Hindustan Construction Company (HCC) is a construction major with significant presence in power, transportation, marine projects, water supply & irrigation etc. The company has undertaken construction for ~20% of Indias installed hydel power capacity and ~57% of installed nuclear power capacities.  HCC has been building large and complex structures for the last 80 years. Known for taking giant strides in technology and innovation, we are now recognized as a spearheading force in engineering construction, both in India and the rest of the world.  HCC is one of the largest private sector construction companies in India and specialize in pioneering large-scale civil constructions and developing new age construction technologies.  HCC has been entrusted with the construction of high value projects across segments like transportation, power, marine projects, oil and gas pipeline constructions, irrigation and water supply, utilities and urban infrastructure.

HCC is the first construction company in India to be certified for ISO 9001, ISO 14001 and OHSAS 18001 for its Quality, Environmental and Occupational Health & Safety Management System.

It has also forayed in real estate development and boasts of a land bank of ~14k acres. Around 12.5k acres is accounted for by Lavasa, its marquee real estate project, touted as Indias first private hill station. It has recently formed a subsidiary which will bid for BOT/BOOT projects in transportation, power and airports verticals.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

INTRODUCTION TO HCC Real Estate Ltd HCC is an integrated group spanning Construction, Real Estate and Infrastructure development. The HCC Group of companies comprises of HCC Construction, HCC Infrastructure, HCC Real Estate (HREL) and Lavasa Corporation. HCC Real Estate is a 100% subsidiary of Hindustan Constructions Company. The company was formed due to the booming infrastructure industry in the country. It came into existence in the year 2005 It is currently developing LEED certified, state-of-the-art, 1.8 million sq ft multi-tenanted IT Park located at Vikhroli, Mumbais emerging IT hub. HREL is also developing free Indias largest Hill Station, Lavasa, spread across a picturesque landscape of 12,500 acres, located 45 minutes away from Pune.

In these years the company has been into land acquisitions in various parts of Maharashtra for developing townships, malls, residential complex, slum rehabilitation programs, etc. The places where the company has taken possession of land are Pune, Thane, Nagpur, Nasik and Mumbai. The acquisitions are in its initial phase as the entire project would require huge areas of land. The company is in constant procedure of negotiation for these areas and was preparing its plan of action for the coming future. HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 7

The team of senior management comprises of Mr. Arun Batra as the Chief Executive Officer, Mr. Manoj Raichandani as the Chief Financial Officer and Mr. Mukund Rathi as the Vice President for Land Development.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

SECTION A FUNDS FLOW STATEMENTS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

CHAPTER NO.4 CCHAPTER NO

INTRODUCTION TO FUNDS FLOW

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

10

4. INTRODUCTION TO FUNDS FLOW

MEANING OF FUND The term fund has a variety of meaning such as cash fund, capital fund and working capital fund. 1. Cash fund In a narrow sense, fund means only cash. Cash flow statement portrays net effect of the various business transactions on cash into account receipts & disbursement of cash. This concept of preparing fund flow statement is not accepted, as there are many such transactions which do not affect cash but represent the flow of fund .for example purchase of furniture on credit does not affect cash but there is flow of fund. 2. Capital fund Here fund means all financial resources used in the business, whether in the form of men, money, material, machine & others. 3. Net working capital -Net working capital means difference between current asset and current liabilities. Funds generally refer to cash or cash equivalent or to working capital. MEANING OF FLOW The term flow refers to changes or transfer and therefore the flow of funds means transfer of economic values from one asset to another, from one liability to another, from one asset to liabilities or vice-versa or a combination of these. So flow of fund refers to increase or decrease in net working capital. The increase or decrease in net working capital will take place only when one account, out of two accounts to be affected in a transaction ,is a current account i.e. current asset or current liabilities and the other account is non current account i.e. fixed asset or long term liability or capital. When a change in non current account is followed by a change in another non current account, it does not amount to flow of fund. It is because, in such case, neither the working capital increase nor decrease.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

11

For example Machinery a/c Dr To share capital a/c (Machinery purchase in consideration of share) In the above transaction both accounts are non current accounts which do not at all affect current asset and current liability. Therefore working capital will remain unaffected i.e. there will be no flow of fund. When changes in one current account results in changes in other current account, it also does not affect working capital i.e. there is no flow of funds.

For example Cash a/c Dr To debtor a/c (Cash received from debtor) It represents an increase of cash a current asset account and decrease of debtor again a current asset account .thus there will be no net changes in the amount of working capital, although the composition of working capital will be affected.

In the above figure the dotted line displays there will be no flow of fund & the dark line displays the flow of fund. Meaning of fund flow statement: This statement reveals resources from which funds were obtain by the firm hand the specific uses to which such funds were applied. The effectiveness of financial management in procuring funds from various sources & using them effectively for generating income without sacrificing the financial position of the firm is reflected in fund flow statement.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

12

Definitions of fund flow statement: In the words of Foulke, R.A., a statement of source and application of fund is a technical device designs to analysis the changes in the financial condition of business enterprises between two dates. According to, Almond Coleman, The fund flow statement summarizing the significant financial changes which were occurred between the beginning & the end of a companys accounting periods. This fund flow statement has two parts: (1) Sources of fund. (2) Application of fund. The difference between these two parts that is sources & uses of funds represents net changes in working capital. The excess of sources of funds over uses of fund is the net increase in working capital & excess of uses over sources of fund is net decrease in working capital. The amount of net increase or decrease as shown in fund flow statement should be equal to the amount shown by schedule of working capital changes.

Sources of fund
Business transactions resulting in an increase in net working capital is source of funds. Following are the sources of funds: 1. Fund from operations: The profit made by a firm through normal operations is a major source of funds. The amount of sales as shown in the P&L A/c is a source of funds by way of increase in cash, debtor and B/R. 2. Increase in long term liabilities: It includes long term loans, public deposits and debentures issued for cash. These loan increases fixed liabilities as well as current assets without affecting current liabilities, and thus result in an increase in working capital. 3. Increase in share capital: Proceeds of fresh issue of equity or preference shares for cash is a source of funds. Because it increases the current assets without any corresponding increase in current liability and therefore working capital is increased. 4. Sale of fixed assets: When a fixed asset is sold, there is a decrease in the value of fixed assets and increase in current assets (Cash or debts). 5. Non trading receipts: During the course of business, there are certain non trading receipts such as income from investments, dividends received etc increase current asset without affecting current liabilities, thus resulting in an increase in net working capital which is a source of funds.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

13

Applications of Funds: Business transactions resulting in a decrease in net working capital is a use of fund. Following are the uses of funds: 1. Loss from operations: Where the cost of goods sold & other direct & indirect expenses exceeds the sales revenue that is trading loss, it results in outflow of funds. 2. Decrease in long term liabilities: Long term loans are to be repaid & redeemed on maturity when these loans are repaid or debentures redeemed current asset that is cash is reduced without affecting current liabilities. Thus repayment of fixed or long term liabilities will lead to application or use of fund & as such the working capital will be reduced. 3. Decrease in capital fund: Decrease in capital fund may occur in two ways. First, by the redemption of redeemable preference shares & by back of equity shares. Second, payment of dividend out of retained earnings. In both the cases cash i.e. current asset is reduced without affecting current liabilities that means working capital is reduced so it is an application of fund. 4. Purchase of fixed asset: Purchase of fixed asset like land, building, plant machinery etc is an application of funds. When these assets are purchased, there is an increase in fixed assets and decrease in current assets (Cash Purchase) or increase in current liabilities (credit purchase). This decrease in current asset & current liabilities reduces the working capital; therefore purchase of fixed assets is application of funds. 5. Non trading payments: Non trading payments in cash are use of funds. Such payments include embezzlement, compensation, donations etc. These payments reduce current asset without affecting current liabilities that means working capital is reduced. The changes which occurred in the current accounts as a result flow of fund are reflected in a statement known as schedule of changes in working capital. The similar changes in non current accounts are shown in Fund Flow Statement. Therefore, two statements under this technique are as follows. 1. Statement or Schedule of Changes in Working Capital. 2. Statement of Sources and Uses of Funds or Funds Flow Statement.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

14

Schedule of Changes in Working Capital It discloses the changes in individual item of current asset & current liabilities between two periods & there effect on working capital. Working capital will increase when there is an increase in current asset and decrease in current liabilities, whereas, working capital will decrease when there is a decrease in current asset & increase in current liabilities. Net increase in working capital is treated as use of funds & the net decrease in working capital is treated as source of funds. Format is given below: Statement or Schedule of Changes in Working Capital. Item Previous Current Year Year (A) Current Assets Rs. Rs. (1) Cash at bank . . (2) Cash in hand (3) Stock in trade (4) Debtors (5) Bills receivable (6) Advance payment (7) Short term investment (8) Prepaid expense (9) Accrued income Total (A) (B) Current Liabilities (1) Short term loans (2) Bank overdraft (3) Creditors (4) Bills payable (5)Outstanding expenses (6)Unclaimed dividend Total (B) Net Working Capital (A-B) Increase / Decrease in Working Capital Total

Effect on Working Capital Increase Decrease Rs. Rs.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

15

Format of Fund Flow Statement Sources Of Funds Amount Uses Of Funds Amount

(1) Fund from opera- Rs. tion (2) Issue of share (3) Issue of debenture (4) Raising long term loans (5) Sale of fixed assets / Investment (6) Non trading receipts (7) Decrease in working capital (if any)

(1) Loss from operation Rs. (2) Redemption of preference shares (3) Buy back of equity shares (4) Redemption of debentures (5) Repayment of long term loans (6) Purchase of fixed assets / Investments (7) Payment of dividend & taxes (8) Increase in working capital (if any)

Interpretation We can conclude that the sources of fund should be generated maximum by the fund from operation & the uses of fund should be utilized in purchasing fixed asset & investment as they will provide revenue later on in future.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

16

Funds Flow Cycle for the Organization:

Investment Operations Financing

Wages Cash Expenses

Expenses

Accounts Payable

Raw Materials Materials Inventory

Product Supplies
Transformation

Short-term Liabilities

Finished Goods Inventory

Salable Products

Other Current Liabilities

Fixed Assets

Write-off Depreciation

Long term Liabilities

Other Assets

Write-off Amortization

Shareholders Equity

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

17

Benefits of Funds Flow Analysis:

1) Analysis of Financial Position - The basic purpose of preparing the statement is to have a rich into the financial operations of the concern. It analyses how the funds were obtained and used in the past. In this sense, it is a valuable tool for the finance manager for analyzing the past and future plans of the firm and their impact on the liquidity. He can deduce the reasons for the imbalances in uses of funds in the past and take necessary corrective actions. In analyzing the financial position of the firm, the Funds Flow Statement answers to questions asa) Why were the net current assets of the firm down, though the net income was up or vice versa? b) How was it possible to distribute dividends in absence of or in excess of current income for the period? c) How was the sale proceeds of plant and machinery used? d) How was the sale proceeds of plant and machinery used? e) How were the debts retired? f) What became to the proceeds of share issue or debenture issue? g) How was the increase in working capital financed? h) Where did the profits go?

Though it is not an easy job to find the definite answerers to such questions because funds derived from a particular source re rarely used for a particular purpose. However, certain useful assumptions can often be made and reasonable conclusions are usually not difficult to arrive at. 2) Evaluation of the Firm's Financing - One important use of the statement is that it evaluates the firm' financing capacity. The analysis of sources of funds reveals how the firm's financed its development projects in the past i.e., from internal sources or from external sources. It also reveals the rate of growth of the firm. 3) An Instrument for Allocation of Resources - In modern large scale business, availability funds is always short for expansion programs and there is always a problem of allocation of resources. It is, therefore, a need of evolving an order of priorities for putting through their expansion programs which are phased accordingly, and funds have to be arranged as different phases of programs get into their stride. The amount of funds to be available for these projects shall be estimated by the finance with the help of Funds Flow Statement. This prevents the business from becoming a helpless victim of unplanned action.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

18

4) A Tool of Communication to Outside World - Funds Flow Statement helps in gathering the financial states of Business. It gives an insight into the evolution of the present financial position and gives answer to the problem 'where have our resources been moving'? In the present world of credit financing, it provides a useful information to bankers, creditors, financial, and government etc. regarding amount of loan required, its proposes, the terms of repayment an sources for repayment of loan etc. the financial manager gains a confidence born out of a study of Funds Flow Statement. In fact, it carries information regarding firm's financial policies to the outside world. 5) Future Guide - An analysis of Funds Flow Statements of several years reveals certain valuable information for the financial manager for planning the future financial requirements of the firm and their nature too i.e. Short term, long-term or midterm. The management can formulate its financial policies based on information gathered from the analysis of such statements. Financial manager can rearrange the firm's financing more effectively on the basis of such information along with the expected changes in trade p payables and the various accruals. In this way, it guides the management in arranging its financing more effectively. To determine financial consequence of operations Funds flow analysis helps the management to understand the movement of funds and in effective funds management. 6) To fill financial blind spots It translates the economic consequences of operations into financial information as a basis for action. 7) Working capital utilization. 8) To aid in securing new finances A statement of changes in financial position is useful for the creditor in considering the companys request for new term loan. 9) Helps in allocation of financial resources It helps the management in taking decisions regarding allocation of limited financial resources among different projects on priority basis. 10) Helps in deciding the urgency of a problem. 11) Helps in evaluation of operational issues.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

19

Drawbacks of Funds Flow Analysis:

1. The funds flow statement is historical in nature like any another financial statement. It does not estimate the sources and application of funds for the near future. 2. Structural changes are not disclosed. 3. New items are not disclosed - The funds flow statement does not disclose any new or original items which affect the financial position of the business. The funds flow statement simply rearranges the data given in conventional financial statements and schedules 4. A study of changes in ash is more relevant than a study of changes in funds for the purpose of managerial decision making. 5. The funds flow statement is prepared from data provided in the balance sheet and profit and loss account. Hence, the defects in financial statements will be carried over to funds flow statement also.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

20

CCHAPTER NO CHAPTER NO.8

ANALYSIS OF FFS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

21

5. ANALYSIS OF MONTHLY FUNDS FLOW STATEMENTS

Funds Flow Statement of HREL: April-08 Opening Balance (A) Receipt (B) Loan Transfers Others-Interest Total (A+B) Payments {C} Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers Total {C} 761.12 72.4 91.07 0 1236.09 100 936 3196.68 1928.39 752.49 94.11 23.13 5005.24 250.6 3402.88 1120.2 10648.65 1600.36 455.49 52.05 38.88 5007.65 31.88 833.77 5250.9 11670.62 1016.69 1000 2435.4 101 3536.4 9200 1060.6 60.02 10320.62 5835 5250.6 1.35 11086.95 1588.67 May-08 1928.39 June-08 1600.36

Closing Balance Bank (A+B-C)

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

22

Analysis of Funds Flow Statement: 1. Funds Flow for April08 Sources Loan Transfers Others-Interest Rs.Cr. 1000 2435.4 101

Sources of funds - Apr'08

101; 3%

1000; 28% Loan 2435.4; 69% Transfers Others-Interest

Application of funds Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers

Rs.Cr. 761.12 72.4 91.07 0 1236.09 100 936

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

23

Application of funds - April'08

936; 29% 761.12; 24% 72.4; 2% 91.07; 3% 0; 0% Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers

100; 3%

1236.09; 39%

2. Funds Flow for May08 Sources Loan Transfers Others-Interest Rs.Cr. 9200 1060.6 60.02

Sources of funds - May'08

60.02; 1% 1060.6; 10% Loan Transfers Others-Interest 9200; 89%

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

24

Application of funds Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers

Rs.Cr. 752.49 94.11 23.13 5005.24 250.6 3402.88 1120.2

Application of funds - May'08

94.11; 1% 752.49; 7% 1120.2; 11% 3402.88; 32% 5005.24; 47% 23.13; 0% Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers

250.6; 2%

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

25

3. Funds Flow for June08 Sources Loan Transfers Others-Interest Rs.Cr. 5835 5250.6 1.35

Sources of Funds - June'08

1.35; 0%

5250.6; 47% 5835; 53%

Loan Transfers Others-Interest

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

26

Application of funds Project Exp Statutory Expenses Repayment of Loan Finance Cost Investments Transfers

Rs.Cr. 455.49 52.05 38.88 5007.65 31.88 833.77 5250.9

Applications of Funds - June'08

455.49; 4% 52.05; 1% 38.88; 0% Project Exp Statutory Expe ses 5007.65; 43% Repayme t of Loa Fi a ce Cost I vestme ts Tra sfers 5250.9; 45%

31.88; 0% 833.77; 7%

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

27

CCHAPTER NO CHAPTER NO.6

OBSERVATIONS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

28

6. OBSERVATIONS
HREL calculates Funds Flow on day-to-day basis. This helps the company to have a track of funds and find out discrepancies if any, so that corrective action can be taken. Also financial position of the company can be known at any point of time. The company also finds out expected funds flow on a weekly basis so as to estimate the inflows and outflows of funds. This helps in proper management of the available funds in effective way. The expected funds flows are determined by obtaining budgeted requirements from the different departments on a weekly basis. The major sources of funds for the company are: 1. Loans: The Company makes available funds by procuring loans. For the same purpose company has a tie up consortium of banks and many financial institutions. 2. Transfers: Funds are obtained from the holding company HCC. These are returned back as and when there are surplus. 3. Others: It includes interests, dividends, etc. obtained from investments in stocks, mutual funds, bonds, etc. The major applications of funds are: 1. Project Expenses: These are expenses incurred in the construction of the project. The company has around 8 projects which are various stages of development. It generally

includes amount paid to contractors, consultants, legal charges, inventories, etc. Project expenses constitute major chunk of the applications of funds. 2. Administrative Expenses: These include salaries paid to employees, stationary, office expenses, etc. These are second largest application of the funds. 3. Repayment of Loan: The loans taken by the company are paid back as per the schedule. 4. Interests: These are the interests paid on the loans taken by the company. These are to be paid at regular intervals. 5. Transfers: company takes loan from the holding company as and when required. These are returned back when excess of funds are available.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

29

CCHAPTER NO CHAPTER NO.7

RECOMMENDATIONS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

30

7. RECOMMENDATIONS:
1. In the current scenario, the company is a lot dependant on its parent company for all sort of financing or has to take loans at high interest rates from the financial organizations. So it is suggested that the company should consider listing itself as a separate entity on the exchange. This would make it easier for the company to get funds for its company and projects. 2. The company can also tap other sources of funds such as Debentures, Preferential shares, bonds, etc. 3. The Finance Cost for the company has decreased considerably; this is good as it results in more profits for the company. The reasons for such a drastic decrease are the company had obtained loans from the banks during April, while in May & June funds were obtained from the holding company. 4. In the month of April there has been no repayment of loan, the reasons for the nonpayment is the company was in requirement of funds for development of existing projects.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

31

SECTION B FEASIBILITY ANALYSIS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

32

CHAPTER NO.8 CCHAPTER NO INTRODUCTION TO PROJECT

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

33

8.INTRODUCTION TO PROJECT
Under a business model we understand a simplified description and representation of a complex real world object. A model describes the original in a way that we understand its essence without having to deal with all its characteristics and complexities. In the same line of thought we could define a business model as a simplified description of how a company does business without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems. So we can say that the business model is a simplified representation of how we do business, we still have to decide which elements to describe. A synthesis of literature shows that there are mainly 9 building blocks to help us describe a business model: 1. The value proposition of what is offered to the market; 2. The target customer segments addressed by the value proposition; 3. The communication and distribution channels to reach customers and offer the value proposition; 4. The relationships established with customers; 5. The core capabilities needed to make the business model possible; 6. The configuration of activities to implement the business model; 7. The partners and their motivations of coming together to make a business model happen; 8. The revenue streams generated by the business model constituting the revenue model; 9. The cost structure resulting of the business model. There is a new business model in Construction Contracting. It has been the culmination of years of changes in the construction industry. However, there are conditions under which contractors work. Every contractor has a different expertise. Business practices vary. Building codes and customers seem to change their demands. Specialized trade skills define most contractors. (That skill is what contractors trade with clients to receive income.)

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

34

Each contracting firm is unique. The owner usually has grown the business from zero revenue to its present day volume. He or she along the way has made thousands of decisions of how the work will be built, how it will be estimated and how it will be tracked. These series of decisions gives the construction firm a unique way of conducting its business. The construction industry has a million moving parts. There are thousands of steps to build one project. They can be done in any sequence. The outcome will be a disaster but, steps are not ordered. It is only the project team that determines the order. For the contractor's part, he or she has hundreds of steps to execute on an individual project. Again, they can be done in any order, however the above average contractor insists on mapping the major steps in a good sequence and the execution of those steps. Discipline has to be part of the new business model in Construction Contracting.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

35

BASIC STRUCTURE:

The company had hired consultants from Deloitte Touche Tohmatsu India Pvt. Ltd. to prepare a business model to ascertain their fund requirements and the rate of returns of each of its real estate projects. This includes the preparation of Cash flow Statements, the profit and loss statement, the balance sheet and the debt and equity drawdown for the entire life of the project. The senior management has provided with a set of assumption which they have gathered for market surveys of other projects, current scenarios and years of experience from the industry. Apart from the assumptions the company has also disclosed its sources of funds and the rate at which those funds would be borrowed. The company has taken into consideration its current possession of land and the legal proceedings for acquiring more land. For its base calculations the company has considered several assumptions. The company has considered that each phase of construction will be made of 4 years and the as each phase of constructions is completed the company would start leasing out and selling the property built. The salable area of the projects are the super built up areas which takes into account every area of land ( including the lobby, lift and gallery) for the calculation of revenue. The model assumes that the company will get the funds for its projects through equity and debt. The debt will be raised at the rate of 12.5% p.a. The surplus cash generated would be used to pay the debts of the project it has been generated from as well as other projects. The rest of the surplus cash would get distributed among the investors or the equity holders. In some cases the surplus cash gets reinvested at the rate of 4% p.a. The company also assumes that within the stipulated time all the area developed by the company would either be leased or sold. The model also takes into account the inflation effect HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 36

of the cost as well as revenue from the sale and lease. Following is the basic structure for the calculation of cash flow generated for each year:Cash outflow Cost of Land Brokerage Other Consultancy fees Municipal Taxes & Duties Other Development Cost Architect Fees Insurance Marketing - In house Marketing - Brokerage Over Head Cost Contingency Cost of Construction Expense for O&M activity Income Tax Cash inflow Revenue received from Sale of Property Lease Income Residential Commercial Social Lease Deposit Income from O&M activity Net Cash From Operating activities Cash Inflow from investment activity Equity infusion Equity Withdrawal Capital Expenditure Pre-operative expenditure Net Cash from investing activities Cash Inflow from financing activities Increase In borrowing Repayment of Term Loan Interest on Deficit Finance Interest on Surplus Cash Net Cash From Financing activities Opening Balance Surplus Closing Balance

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

37

CHAPTER NO CCHAPTERNO.9

METHODOLOGY

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

38

9.METHODOLOGY
The company selects the locations on which it is planning its project. This selection is based on the discussion between the management and the chief designing officer. The basic parameter on which the land is selected is the companys policy, the availability, the government regulations, the market conditions and the companys feasibility to construct on that land.

Once the land is finalized, the management, based on its past experience and market research, it decides on the kind of project (it includes the commercial & residential complexes) it is going to prepare for the location. The mix is decided on the factors like demography, per capita income, lifestyle, etc. On the product mix the company decides as to what area would it lease out and what area would it keep for sale.

After the finalization of the product mix, the management decides on the number of phases in which the construction is going to get carried out. The phases are decided to anticipate the generation of revenues. Based on the product mix the company decides on the kind of funding it requires for the project. Once the entire cost of the project is decided the company finalizes the amount would be distributed phase wise. Under the phases the company decides as to what amount of sq. ft. it is going to build under each phase. As each phase end the company begins selling the built area and collecting deposits of its lease area.

Once the selling starts the company starts paying the installments of its debts which it has taken from its investors.

The company procures funds from two sources. The first source is the parent company which is HCC Ltd. The money invested by that company is considered as equity in the project. This equity is returned to the parent company by the HCC Real Estate once the project is completed. The equity is paid back in installments for a specified period which extends from the time the company generates more money than required to pay back it debt. The company goes ahead and pays back the debt and after the debt is paid back, it pays back all the equity to the parent company, i.e. HCC Ltd. and shares the profit accordingly.

The debt of the company is taken from a consortium of banks. The company contacts HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 39

one bank, which in turn talks to a number of banks for the funds. After through discussion the company decides on an interest rate and the tenure for which it would be borrowing those funds. The company doesnt borrow all the money at once but distributes them into installments based on the phases of construction. It usually keeps the borrowing monthly. The bank charges interest to the company for the amount borrowed only. So effectively the company would end up paying less interest than it would have paid had it borrowed all the money at once. Sometimes the company also tries to negotiate for a variable interest rate based on the LIBOR or MIBOR interest rates.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

40

CCHAPTER NO CHAPTER NO.10

CALCULATIONS

10.CALCULATIONS
HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 41

COST STRUCTURE:The model first takes in to consideration the cost that is going to be incurred for the project and the different time intervals the company would require funds. This is decided by the product mix, their cost of construction, the phases in which they would be made. Since the project takes years to complete, the company takes into account the inflation and its effect on the prices. The company takes a standard rate of inflation, and for the purpose of the model, the rate affects the prices every 3 years. For some projects the company takes into account all the expenses of construction and prepares the cost sheet, based on which it calculates the cost of building 1 sq. ft. of the premises. For different kinds of premises, i.e. offices, malls, residential flats, etc. the company takes different cost of constructions.

The construction cost comprises of expenses starting from the steel and cement used for the construction to the labor induced physically and mentally. The company calculates its working capital requirements taking into account all these factors.

One of the major cost components is land. The land is bought in acres and a lot of other charges like the brokerage involved, license fee, stamp duty, registration fee, fencing & security and development cost is also included. All the other cost including the first installment of the land is the first year payment. This makes the cash outflow of the first year very huge. The company cannot start construction on the land till is pays 50% of the total cost of land. Hence the company has to pay half the total cost of the land in the first phase of construction. In case the company goes ahead and induces its own land into a project, i.e. previously owned, then it is considered the companys equity in the project. Other costs include the infrastructure development cost, infrastructure sewage & sanitation cost, electricity cost and water supply cost.

The company has a contingency cash deposit of 10% of the yearly budget. The company goes ahead and gets short term finance at the rate of 12.5% from the banks it has been doing business with.

REVENUE STRUCTURE:Once the construction starts, the company goes ahead and invites bookings and deposits. HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 42

Based on the amount of area it is going to lease and the area it is going to sale, the company accepts deposits from its customers and uses them for development. For the sale of area, the company goes ahead and distributes the entire payment in installments. These installments are paid at equal intervals. In case a person goes ahead and books an area in the second phase, then the rate will get inflated as per the inflation rate applicable. For the purpose of the model, a standardized rate of inflation is considered for the revenue as well.

INPUT FOR THE MODEL:

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

43

Item Project Details Project Initiation Date Land area TDR Total area

Unit

Quantity

1-Apr-07 Acres Acres Acres 183 0 183

Cost Input Cost of Land (First Set) Basic Cost of Land Cost of TDR Brokerage for Land purchase Brokerage for TDR Cost of Land Stamp Duty & Registration for Land Stamp Duty & Registration for TDR Total Stamp Duty & Registration Conversion of Land use fees Licensee Fees Other Municipal charges Total Municipal Charges Rs Cr per acre Rs Cr per acre Rs Cr per acre Rs Cr per acre Rs Cr per acre % of basic cost % of basic cost Rs Cr per acre Rs Cr per acre Rs Cr per acre Rs Cr per acre Rs Cr per acre 0.65 0.00 0.00 0.00 0.65 12% 0% 0.08 0 0.22 0 0.296

Other Development Cost Infrastructure Development Cost Rs Cr per acre 0.22

Payment Milestones Date of signing Sale Deed (for first set of payment) Second set of payments towards cost of land Cost Inflation Rate Revenue Inflation Rate Product category wise FSI consumption HREL | % per annum % per annum

1-Apr-07 1-Jan-08 8% 8%

A Report on FFS & Feasibility Analysis for New Project at HREL

44

Phase I Social / Amenities Residential Product Construction Commercial Product Construction Phase II Social / Amenities Residential Product Construction Commercial Product Construction Phase III Social / Amenities Residential Product Construction Commercial Product Construction Phase IV Social / Amenities Residential Product Construction Commercial Product Construction % % % 0% 0% 100% % % % 0% 0% 100% % % % 5% 70% 25% % % % 5% 70% 25%

Product Distribution Phase I

HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 45

Residential Product RP Type 1 RP Type 2 RP Type 3 RP Type 4

Unit % % % %

Phase I 25% 25% 25% 25%

Phase II 25% 25% 25% 25%

Phase III 25% 25% 25% 25%

Phase IV 25% 25% 25% 25%

Commercial Product CP Type1 CP Type2 CP Type3 CP Type4 % % % % 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%

Social Facilities SF Type 1 SF Type 2 % % 50% 50% 50% 50% 0% 0% 0% 0%

Rates applicable for booking

Base Year for Sales / Lease Cost data
Sales Value Residential Product RP Type 1 RP Type 2 RP Type 3 RP Type 4 Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. Base Year Data 5,500 5,500 4,500 4,500 1-Apr-07

Commercial Product CP Type1 CP Type2 CP Type3 CP Type4 Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. 8,000 5,500 5,500 5,500

Lease rental
HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 46

Commercial Product CP Type1 CP Type2 CP Type3 CP Type4 Rs /sq. ft./Yr Rs /sq. ft./Yr Rs /sq. ft./Yr Rs /sq. ft./Yr 0 850 750 0

Social Facilities
SF Type 1 SF Type 2 Rs per sq. ft. Rs per sq. ft. 550 450

Lease inflation schedule

Applicable after every Residential Product RP Type 1 RP Type 2 RP Type 3 RP Type 4 Commercial Product CP Type1 CP Type2 CP Type3 CP Type4 Rs over previous year Rs over previous year Rs over previous year Rs over previous year 500 500 500 500 Rs. over previous year Rs over previous year Rs over previous year Rs over previous year 500 500 500 500 Years 1

Social Facilities SF Type 1 SF Type 2 Rs over previous year Rs over previous year 50 50

Construction cost HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 47

Residential Product RP Type 1 RP Type 2 RP Type 3 RP Type 4 Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. 2,100 2,000 2,000 2,000

Commercial Product CP Type1 CP Type2 CP Type3 CP Type4 Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. Rs per sq. ft. 2,600 2,200 2,200 2,200

Other Costs Architect fees Over head cost Contingency Insurance charges Other Consultancy fees Marketing cost - In house Marketing cost - (Brokerage) % of construction cost % of construction cost % of construction cost % of construction cost % of construction cost % of construction cost % of construction cost 3% 5% 5% 0% 0% 3% 2%

Schedule of Commencement of the project:

Commencement of Phase I Commencement of Phase II Commencement of Phase III Commencement of Phase IV Completion Period for Phase I Completion Period for Phase II Completion Period for Phase III Completion Period for Phase IV 1st April,2007 1st April,2007 1st April,2008 1st April,2009 31st March2010 31st March2010 31st March2012 31st March2013

Funding of project:
HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 48

Debt Equity Ratio Interest on Short Term Deficit Finance Interest on investments of Surplus Cash Discounting Rate % per annum % per annum %

50 : 50 12.5% 4% 9%

Assumptions for the Model:

1. Booking for Phase 1 starts from 2007. 2. Booking for Phase 2 starts from 2008. 3. Booking for Phase 3 starts from 2009. 4. Booking for Phase 4 starts from 201013. 5. Construction for phase 1 & 2 starts in 2007-2010. 6. Construction for phase 3 & 4 starts in 2010-2013. 7. Price/sq.ft. increases by Rs 500/yr. 8. Deposits for lease area are 1yr rental. 9. Rental increases by 50Rs/yr. 10. Booking Rate increases by Rs500/sq ft with each phase. 11. Payments are received in 4 instalments to be paid in 4 years. 12. Residential area constitutes of 30% of total area. 13. Commercial area constitutes of 60% of total area. 14. Social area constitutes of 10% of area. 15. Proportion of residential & commercial area constructed in each phase is same. 16. Social area is constructed in first two phases.

Results based on the assumptions provided above: 1. Construction Cost: HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 49

Area (sq ft) Residential I II III IV Commercial I II III IV Social TOTAL 25,000 25,000 50,000 50,000

Phase I ConstrucConstruction tion cost cost (Rs) (Rs / sq ft) 2,100 2,000 2,000 2,000 5,25,00,000 5,00,00,000 10,00,00,000 10,00,00,000

Area (sq ft) 25,000 25,000 50,000 50,000

Phase II ConstrucConstruction tion cost Cost (Rs/ sq ft) (Rs) 2,100 2,000 2,000 2,000 5,25,00,000 5,00,00,000 10,00,00,000 10,00,00,000

50,000 50,000 1,00,000 1,00,000 1,00,000

2,600 2,200 2,200 2,200 1,200

13,00,00,000 11,00,00,000 22,00,00,000 22,00,00,000 12,00,00,000 1,10,25,00,000

50,000 50,000 1,00,000 1,00,000 1,00,000

2,600 2,200 2,200 2,200 1,200

13,00,00,000 11,00,00,000 22,00,00,000 22,00,00,000 12,00,00,000 1,10,25,00,000

Area (sq ft) Residential I II III IV Commercial I II III IV Social TOTAL 25,000 25,000 50,000 50,000

Phase III Construction cost (Rs / sq ft) 2,200 2,100 2,100 2,100

Construction cost (Rs.) 5,50,00,000 5,25,00,000 10,50,00,000 10,50,00,000

Area (Sq ft) 25,000 25,000 50,000 50,000

Phase IV Construction cost (Rs/ sq ft) 2,200 2,100 2,100 2,100

Construction cost (Rs.) 5,50,00,000 5,25,00,000 10,50,00,000 10,50,00,000

50,000 50,000 1,00,00 0 1,00,00 0 0

2,700 2,300 2,300 2,300 1,200

13,50,00,000 11,50,00,000 23,00,00,000 23,00,00,000 0

1,02,75,00,000

50,000 50,000 1,00,00 0 1,00,00 0 0

2,700 2,300 2,300 2,300 1,200

13,50,00,000 11,50,00,000 23,00,00,000 23,00,00,000 0

1,02,75,00,000

Total Cost of Construction: Rs. 4, 26, 00, 00,000/HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 50

TOTAL COST OF THE PROJECT

Sr no 1 2 3 4 5 6 7 8 9 10 11 Particulars Cost of land Stamp duty and registration charges License fees Municipal charges Infrastructure development cost Construction cost Architect fees Over head cost Contingency Marketing Cost Total Interest on loan cost TOTAL COST of PROJECT Rate/unit 65,00,000 Rs/acre 12% of total land cost 22,00,000 Rs/acre 29,60,000 Rs/acre 22,00,000 Rs/acre 3% of const. cost 5% of const.cost 5% of const.cost 5% of const.cost 10% total cost Amount (Rs) 1,18,95,00,000 14,27,40,000 40,26,00,000 54,16,80,000 40,26,00,000 4,26,00,00,000 12,78,00,000 21,30,00,000 21,30,00,000 21,30,00,000 7,70,59,20,000 77,05,92,000 8,47,65,12,000

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

51

Ex ec e
e r 2 7 2 2 9

s i l
2 1

s r m 2 7 15
2 11

s.
2 12 2 13 2 14 2 15

esi e i l I P 1 I P 2 I P 3 I P 4 46,406,250 0 0 0 46,406,250 50,625,000 0 0 46,406,250 50,625,000 54,843,750 0 46,406,250 50,625,000 54,843,750 59,062,500 0 50,625,000 54,843,750 59,062,500 0 0 54,843,750 59,062,500 0 0 0 59,062,500 0 0 0 0 0 0 0 0

II P 1 II P 2 II P 3 II P 4

46,406,250 0 0 0

46,406,250 50,625,000 0 0

46,406,250 50,625,000 54,843,750 0

46,406,250 50,625,000 54,843,750 59,062,500

0 50,625,000 54,843,750 59,062,500

0 0 54,843,750 59,062,500

0 0 0 59,062,500

0 0 0 0

0 0 0 0

III P 1 III P 2 III P 3 III P 4

75,937,500 0 0 0

75,937,500 84,375,000 0 0

75,937,500 84,375,000 92,812,500 0

75,937,500 84,375,000 92,812,500 101,250,000

0 84,375,000 92,812,500 101,250,000

0 0 92,812,500 101,250,000

0 0 0 101,250,000

0 0 0 0

0 0 0 0

I I I

P 1 P 2 P 3

75,937,500 0 0

75,937,500 84,375,000 0

75,937,500 84,375,000 92,812,500

75,937,500 84,375,000 92,812,500

0 84,375,000 92,812,500

0 0 92,812,500

0 0 0

0 0 0

0 0 0

HREL |

A Re

t on FFS & Feasi ilit Anal sis for Ne Project at HREL

52

P 4

101,250,000

101,250,000

101,250,000

101,250,000

mmerci l le I P 1 I P 2 I P 3 I P 4 135,000,000 0 0 0 135,000,000 143,437,500 0 0 135,000,000 143,437,500 151,875,000 0 135,000,000 143,437,500 151,875,000 160,312,500 0 143,437,500 151,875,000 160,312,500 0 0 151,875,000 160,312,500 0 0 0 160,312,500 0 0 0 0 0 0 0 0

I I I I

P 1 P 2 P 3 P 4

185,625,000 0 0 0

185,625,000 202,500,000 0 0

185,625,000 202,500,000 219,375,000 0

185,625,000 202,500,000 219,375,000 236,250,000

0 202,500,000 219,375,000 236,250,000

0 0 219,375,000 236,250,000

0 0 0 236,250,000

0 0 0 0

0 0 0 0

Le se e si 0 0 0 0 0 0 0 0 0 0 0 0 57,375,000 57,375,000 0 0 0 0 64,125,000 64,125,000 0 0 0 0 0 0 0 0 0 0 0 0

II P 1 II P 2 II P 3 II P 4

HREL |

A Re ort on FFS & Feasi ilit Anal sis for Ne Project at HREL

53

III P 1 III P 2 III P 3 III P 4 e II P 1 II P 2 II P 3 II P 4

0 0 0 0

0 0 0 0

0 0 0 0

101,250,000 101,250,000

0 0 0 0

0 0 114,750,000 114,750,000

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

57,375,000 57,375,000 0 0

60,750,000 60,750,000 0 0

64,125,000 64,125,000 64,125,000 64,125,000

67,500,000 67,500,000 67,500,000 67,500,000

70875000 70875000 70875000 70875000

III P 1 III P 2 III P 3 III P 4

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

101,250,000 101,250,000 0 0

108,000,000 108,000,000 0 0

114,750,000 114,750,000 114,750,000 114,750,000

121,500,000 121,500,000 121,500,000 121,500,000

128250000 128250000 128250000 128250000

ci l F cili ies e I P 1 I P 2 0 0 0 0 0 0 si 13,500,000 14,175,000 14,850,000 15,525,000 e 16,200,000 16,875,000 17,550,000 18,225,000 37,800,000 19,575,000

13,500,000 14,175,000

II P 1

12,150,000

12,150,000

13,500,000

14,850,000

16,200,000

17,550,000

HREL |

A Re ort on FFS & Feasi ilit Anal sis for Ne Project at HREL

54

II P 2 TOT L

0 565 312 5

0 1 1 1 25

0 1 47 12 5

12,825,000 2 934 9

12,825,000 2 369 5 7 5

14,175,000 2 137 5

16,875,000 1 497 4 7 5

16,875,000 24 5

18,225,000 9 65

HREL |

A Re ort on FFS & Feasi ilit Anal sis for Ne Project at HREL

55

l Net Present Val e (NPV) of a project is t e sum of all values of all t e cash flows associated with it The cash flow can be positive or negative. The project is feasible or acceptable if the net present value is positive. The project is rejected if the net present value is negative. The advantages of the NPV method are: 1. It takes into account the time value of money with changing discounting rate. 2. It can be used to evaluate mutually exclusive projects 3. It takes into consideration the total benefits arising of the project over its lifetime. For the above business model NPV= Rs. 76 Cr.

Internal Rate of Return: Internal Rate of Return (IRR) is the discount rate which makes its net present value equal to zero. It is the discount rate which equates the present value of the future benefits with the initial outlay. In IRR calculation the NPV is set to zero to determine the discount rate that satisfies the condition. The calculation of IRR is a trial and error process. Different values are tried till the condition is satisfied. The advantages of IRR are: 1. It provides a rate of return which is indicative of profitability of the proposal. For the present Business model: IRR = 12%

HR

A R ort on FFS & Feasi ilit Anal sis for New Project at HR

56

R SULTS OF THE BUSINESS MODEL BASED ON THE ASSUMPTIONS PROVIDED ABOVE:

SR.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

PARTICULARS Revenue from Lease Revenue from Sale Revenue from operation (1 + 2 Other income Total Project Revenue (3 + 4 Land Cost Other Cost Construction Cost Total Project Cost (6 + 7 + 8) Project surplus (pre-tax) (5 - 9) Tax @ 40% Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr.

Amount 292 1145 1437 0 1437 118 303 426 847 590 236

Project surplus (post tax) IRR NPV

Rs Cr.

354 12%

Rs Cr

876

HR

A Report on FFS & Feasibility Analysis for New Project at HR

57

CHAPTER NO.11 CCHAPTER NO

CONCLUSION

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

58

16.CONCLUSION
Though the business model has been very robust in its calculations and outputs, it is still dependant on the inputs given by the company. During the tenure of my internship, I realized that the model would require even more changes since every time it wastested; a new problem arose from the calculations. For some projects the land cost was paid in kind and not monetarily. For those projects we had to consider the land cost as zero and showed that the amount out kind as a liability for the project. The comp any had various different for each project, so it was impossible to make a new model for each one of them. Hence we went ahead and manipulated the inputs of the project to get the best solution closer to reality.

The working of the model considers many possibilities such as defaults, hurdles, inflation, etc. Hence we can say that the model would give a very close picture of the real life situation in the business. However, it just a mathematical calculation which includes basic accounting principles. There are chances of change of various magnitudes. Like the inflation may not affect steel in the same way it affects the cement and labor. In these times the company would not be able to work according to the model. This would affect the return which the company anticipates from the project. Hence there are certain recommendations listed for the company while working with the model.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

59

CHAPTER NO.12 CCHAPTER NO

RECOMMENDATIONS

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

12.RECOMMENDATIONS
1. The company should consider listing itself as a separate entity on the exchange. This would make it easier for the company to get funds for its company and projects. In the current scenario, the company is a lot dependant on its parent company for all sort of financing.

2. The company should also consider and perform a risk analysis for its projects. In case there is a correction in the property market as it is going on now, then the company is going to face a loss. In case the correction happens after the company has purchasedthe land, then the company will have to revise all its calculation to ensure it doesnt go into losses due to the project. 3. In case the sale and lease doesnt go as per the schedule then the company might have to offer discounts to hasten its procedure of sale and lease. Then there are chances that the project might not provide the same amount of profit and might even have to bear losses for more years than anticipated. Then the whole working capital will have to be calculated in a different manner. 4. The company should take into consideration the seasonal changes, as the construction industry is always affected by the rainy season. In case of heavy rainfall, the company might have to bear losses which have not been anticipated for. In a city like MUMBAI, where the company is coming up with three projects, it is important that the company prepares for some contingencies and take into consideration a longer period for construction.

5. The company should consider the commodity cycle for its procurements since theprice cycles of each commodity differs. It can enter future contracts for these materials so that their normal assumption does not show wrong results.

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

61

CHAPTER NO.13 CCHAPTER NO

NOMENCLATURE

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

62

13. NOMENCLATURE:
y y y y y y
H : Hi t t lE t t t. ip i E ). p . (1 = 10 illi ). E i t lD i ( B il i ti ti i it . p . H E :H / :A EED: S : : t

Construction Terminologies:
The construction industry has some basic terminologies. They specify different area specifications and it is important to understand them before going ahead with the project. They are listed below:1. FSI This is a government specified multiple which ascertains the amount of area that

can be built from the land area available i.e. Floor Space Index. When a company buys some area of land, that area is multiplied with the FSI to give the total amount of area that can be built on that land. For e.g. Land Area 10 acres FSI 2.5 Square Foot Conversion Factor - 43560x Total area that can be built = 10 * 43560 * 2.5 = 1 89 Sq. Ft.

2. Built up Area (BUA)

This is the area which includes the total area built including

the walls and other basics of the infrastructure. For the convenience of the project we have considered it as a percentage of the FSI area. For e.g. FSI Area 1089000 Sq. Ft. Built up Area 120% Built up Area = 120% * 1089000 Sq. Ft. = 13 6800 Sq. Ft. HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 63

3. Super Built up Area (SBUA)

This is the area which includes the total area built

including the walls and other amenities of the building such as the elevator area, the lobby area, and the area built of passage of pipes and other connections, etc. For the convenience of the project we have considered it as a percentage of the FSI area. For e.g. FSI Area 1089000 Sq. Ft. Built up Area 135% Super Built up Area = 135% * 1089000 Sq. Ft. = 1470150 Sq. Ft. (The percentage of BUA and SBUA is known as the loading factor)

Construction Products
1. Mall Space for shopping centre and different recreational facilities. 2. Office Office spaces for commercial spaces. 3. Office IT Offices with IT enabled services. 4. Local Shopping Centre Shopping centre for the local residents for their daily usage. 5. Business Centre Office space for large business corporations 6. Hotel/Food Centre Space for restaurants and hotels 7. EWS - Residential Complex for the Economically Weaker Section 8. Villa Bungalows with individual facilities 9. Row House Similar houses built together with separate facilities. 10. Midrise building Lesser number of apartments however bigger in space than usual 11. Towers Normal residential Apartments 12. Educational Institute Space for educational institutes 13. Health Facilities Space for building hospitals and clinics. 14. Recreation Facilities/ Cinema Recreational Facilities. HREL | A Report on FFS & Feasibility Analysis for New Project at HREL 64

CHAPTER NO.14

BIBLIOGRAPHY

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

65

14. BIBLIOGRAPY
    

p I i i i t

t fi t i l i l i lA l i

B t t t l &

l B i Ki K i i K .

. .

&J i . Ei A. H lf t.

Websites:
    

. . . i

i . l t t . lt t t t . ti . p li ti .

.1000 . t

HREL |

A Report on FFS & Feasibility Analysis for New Project at HREL

66