SUMMER INTERSHIP

REPORT

SUBMITTED BY
NAME - PARAMJIT SINGH
CLASS & GROUP - MBF 1 “B”
UID - 20MBF5091

SUBMITTED TO
TEACHER NAME - Dr. Nikhil Kaushik Sir
Financial Modeling and Analysis
of 50 Flats Housing Project in
Gurgaon, Haryana IN
 DECLARATION

I, Paramjit Singh, Batch 2020-2022, hereby declare that this project report has been
submitted by me in partial fulfillment of the requirement of MBA AIT, Chandigarh
University, Mohali, Punjab. I also declare that this report is my own and has not been
previously submitted by anyone for the award of any degree or diploma to any other
institution.
 ACKNOWLEDGEMENT

It gives me immense pleasure to present this internship report on “Study of Project

Finance and building of Financial Models” carried out at VARDHAN
CONSULTING ENGINEERS, INDIA in partial fulfillment of the MBA BFE program
at AIT, Chandigarh University.

The success and final outcome of this project required a lot of guidance and assistance
from many people and I am extremely privileged to have got this all along the completion
of my internship. All I have done is only due to such supervision and assistance and I
would not forget to thank them.

I respect and thank my Industry Mentor, Mr. Ashish Kumar, Founder CEO, for
providing me an opportunity to do the internship in Vardhan Consulting Engineers and
giving us all support and guidance which made me complete my work duly. I am extremely
thanking him for providing such a nice support and guidance, although his busy schedule
managing the corporate affairs.

Then, I would like to thank my Internship Mentor, Dr. Nikhil Kaushik , who have helped
me with their valuable suggestions and guidance and has been helpful in various phases of
the completion of the project.

Lastly I would like to thank my parents, friends, fellow interns who encouraged me to do
this internship and all those who contributed directly or indirectly in completing the
project to whom I am obligated to even though anonymously.

Mr. Paramjit Singh

Week 1 Market Sector Analysis

Residential / Housing Sector

INDIAN MARKET SIZE

By 2040, real estate market will grow to Rs 65,000 crore (US$ 9.30 billion) from Rs
12,000 crore (US$ 1.72 billion) in 2019. Real estate sector in India is expected to reach a
market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13 per
cent to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also
growing significantly, providing the much-needed infrastructure for India's growing needs.
Indian real estate increased by 19.5 per cent CAGR from 2017 to 2028.
Housing sales reached 2.61 lakh units in 2019 across seven major cities.

INVESTMENTS/DEVELOPMENTS

Rapid urbanization in the country is pushing the growth of real estate. More than 70
per cent of India’s GDP will be contributed by urban areas by 2020. The Government of
India has been supportive towards the real estate sector. In August 2015, the Union
Cabinet approved 100 Smart City Projects in India. The Government has also raised FDI
(Foreign Direct Investment) limits for townships and settlements development projects to
100 per cent. Government of India’s Housing for All initiative is expected to bring US$ 1.3
trillion investment in the housing sector by 2025. As of December 2019, under Pradhan
Mantri Awas Yojana (Urban) [PMAY (U)], 1.12 crore houses were sanctioned in urban
areas, with a potential to create 1.20 crore jobs. The scheme is expected to push affordable
housing and construction in the country and give a boost to the real estate sector.

Some of the major investments and developments in this sector are as follows:

• On July 09, 2020, Union Cabinet approved the development of Affordable Rental
Housing Complexes (AHRCs) for urban migrants and poor as a sub-scheme under
PMAY–U.

• As of December 2019, under Pradhan Mantri Awas Yojana (Urban) [PMAY (U)], 1.12
crore houses were sanctioned in urban areas, with a potential to create 1.20 crore jobs

• Government has also released draft guidelines for investment by Real Estate
Investment Trusts (REITs) in non-residential segment
 • Housing sales reached 2.61 lakh units in 2019 across seven major cities

GOVERNMENT INITIATIVES FOR RESIDENTIAL AND HOUSING

Government of India along with the governments of respective States has taken several
initiatives to encourage development in the sector. The Smart City Project, with a plan to
build 100 smart cities, is a prime opportunity for real estate companies. Below are other
major Government initiatives:

• In order to revive around 1,600 stalled housing projects across top cities in the country,
the Union Cabinet has approved the setting up of Rs 25,000 crore (US$ 3.58 billion)
alternative investment fund (AIF).

• Under Pradhan Mantri Awas Yojana (Urban) (PMAY (U)), 1.12 crore houses have been
sanctioned in urban areas, creating 1.20 crore jobs.

• Government has created an Affordable Housing Fund (AHF) in the National Housing
Bank(NHB) with an initial corpus of Rs 10,000 crore (US$ 1.43 billion) using priority
sector lending short fall of banks/financial institution for micro financing of the HFCs.
Week 2 Company Profile / Analysis

Brief Introduction of the Organization’s Business Sector

Vardhan Consulting Engineers is a pioneer company which provides consultancy services to the
engineering companies and to the management companies. Vardhan Consulting Engineers (VCE) is a one
of the good and reputed consulting company. VCE provides consulting services for the business
organization. Also, VCE provides the consulting services for the small size businesses and for the
medium size businesses. Basically, VCE provides the solutions to the problems of the clients in the field
of engineering, management and financial issues. Also, they provide consulting to the engineers and the
project management for the energy project. Energy projects are like Solar PV power projects (they are the
Utility Scaled Large Size Project) or Pyrolysis Projects (these projects are mainly from Plastic to Oil).
They provide other services also like Financial Closure service with the help of Debt, Documentation and
Transaction consulting services, Consultation in Project Development Services, On-Site and Off-Site
Project Management Consultation Services and there are various other services which have been provided
by VCE. Vardhan Consulting Engineers is the organization which mainly provides the genuine solutions
for the Power Projects and also it provides consultancy to the engineering companies. It also provides the
consulting solutions to the new startup firms, construction project and the development projects also.

Overview of the Organization

Brief History
Vardhan Consulting Engineers (VCE) is a pioneer company which provides consultancy services to the
engineering companies and to the management companies. Vardhan Consulting Engineers (VCE) was
founded in the year 2018. The main office of Vardhan Consulting Engineers is located in Patna (Vardhan
House, Anand Bazar, Danapur Cantonment, Patna, Bihar 801503). The headquarters located in Danpur,
Bihar. Vardhan Consulting Engineer (VCE) is a consulting company which was founded by a group of
engineers and all have a strong academic background. Also, they have a good experience in management
and work in the companies across the world. The consultants working in the VCE have an experience of
more than 10 years. Since the company has been recently started therefore it doesn’t have much history.
Vardhan Consulting Engineers provide the internships and the training programs to the students who are
pursuing degree in Mechanical, Electrical, Civil and Energy Engineering or students who are pursuing
MBA, M Com, PGDM, M Eco and interested in working in next generation technological and
management solutions.

Business Size of the Organization

Since Vardhan Consulting Engineers is recently established that is in the year 2018 therefore it not listed
in the stock exchange market that is in National Stock Exchange (NSE) and not in Bombay Stock
Exchange (BSE). And this is the reason that its market share is still not known and it can be calculated
(the reason is that it is just a startup firm which has been started recently). If we talk about the number of
employees in the organization then there are 110 employees (as per the data available on the linked
profile and data available on the Google). The members of Advisory Board working in the Vardhan
Consulting Engineer are:-
• 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

Product Line of the organization

VCE provide the consulting services to the startups as well as to the small and medium business. It is a
private ltd. company. Vardhan Consulting Engineers Company provides the consulting services to the
engineering companies and provide project management consultancy for the Energy Projects companies.
VCE specially provide services for the Energy projects are like Solar PV power projects (they are the
Utility Scaled Large Size Project) or Pyrolysis Projects (these projects are mainly from Plastic to Oil).
They provide other services also like Financial Closure service with the help of Debt, Documentation and
Transaction consulting services, Consultation in Project Development Services, On-Site and Off-Site
Project Management Consultation Services and there are various other services which have been provided
by VCE. VCE have different business horizons and revenue sources such as:
• Engineering and Management Consulting.

• Importing and Branding Pearl Jewellery.

• Stock Market and Cross-Currency Trading.

 • Insurance and Investment Advisory.

Projects in which VCE provide consulting are:-

1) Solar PV Project:-In this project of Solar PV Project, consulting services are:
• Feasibility Analysis, Detailed report of the given Project and Financial Analysis of the
project.
• Provide the Financial Closure through Debt or with the help of Private Equity for the
Project Finance.

• On-Site and Off-Site Project Management and EPC-Management Services for the
project.

• Documentation and Transaction services for the Sale of the Project

2) Waste to Energy: -This project is for the developers of the Municipal Solid Wastes Management
Units for Municipal Corporation. This project include are:-
• Techno-Financial Feasibility Analysis of MSW Unit.
• Engineering designing of segregation, separation and sanitary landfill of waste
components.

• EPC-Management for compost and fertilizer making unit. Also, RDF and MSWM Unit
for the project.

• Commercial Analysis of Waste Management Contract and Tipping Fee with Municipal
Corporation.

• Setting up of Pyrolysis Units and Energy Generation Units.

3) Sustainable Development: - This project provides consulting for the companies and the
institutions who want to address their carbon foot prints and for the projects ready to adopt
sustainable development strategy. Consultation services provide by the company are:-
• Involvement in the Climate Changes and the Sustainable Development Educational Tour
and session.

• Projects related to Sustainability Reporting and Documentation.

• Projects related to Sustainable Development Practices, Ideas and Innovation

• Also, the projects which include reducing carbon foot prints strategy.
4) Merger & Acquisition and Private Equity (M&A and PE):-Company provides the
consultation to the company for Merger and Acquisition or Private Equity for your business growth.
Consultation provided by the company are:-
 • Complete process of M&A for the company

• Providing consultation, how to raise funds as debt or private equity or management assets

• Consultation for the Business Development and Management for the revenue.

• Valuation and Financial Analysis for different projects through different methods

All these consultation services are provided by Core Team Members and under the consultation of the
Advisory Board Members. Apart from this all employees are work to

provide the consultation for the various projects under the supervision and the guidance of the core team
member and the advisory members of the organizations. Basically, first a Google doc has to be filled and
as per the data filled by them the decision is taken that to which department the project is belonged too
and who will take the charge for the respective projects (Full disclosure of employee to employee has not
been provided).

Competitors
Since Vardhan Consulting Engineers Company has been recently established and is not listed in the stock
exchange market (that is in BSE and NSE) therefore it doesn’t have a big market share but yes, the
organization will become one of the good and popular consulting firms in the future. Main and large scale
competitors of the firm are:-
• McKinsey & Company
• The Boston Consulting Group

• Bain and Company

• A.T. Kearney

• Accenture Business Services

• FTI Consulting

• Monitor Deloitte

• PWC

• KPMG

• Tata Consultancy Services

• Indigo Consulting

• Deloitte Consulting
Week 3 Description of the Project

PROJECT DETAILS

Techvardhan Infra Pvt. Ltd (Any Company) “CLIENT” has acquired a piece of land near Gurugram
HR and wants to develop it as a residential building having 50 flats of 900 sq. ft each. They are
expecting to sell the flats at a rate of Rs. 4000 / sq.ft. The expected Capex is Rs. 8 Crore and
Opex is Rs. 50 Lacs / per annum for the whole project. They are seeking a non-recourse debt
(project financing) with 70:30 as D/E ratio from leading commercial banks in India as a 12 years
term loan.

PROJECT LOCATION

The Project going to be constructed in Gurgoan, officially gurugam, is a city located in the northern
Indian state of Haryana. It is situated near the Delhi-Haryana border, about 30 kilometers
southwest of the national capital New Delhi. Gurgoan has architecturally noteworthy buildings in
a wide rangeof styles and distinct time periods.

The city has been home to several tall buildings with the modern planning. Gurgoan had estimated
1100 residential rises. The average cost of a 93 square meter (1,000 sq ft) two bedroom at a decent
condominium in gurgoan is at least $160,130 (10,000,000).

The factor to be considered while selecting the building location is as follows:-

• Access to park & play ground.

• Availability of public utility services, especially water, electricity & sewage disposal.

• Contour of land in relation the building cost. Cost of land.

• Distance from places of work.

• Ease of drainage.

• Location with respect to school, collage & public buildings.

• Transport facilities.

• Other essential facilities.

PROJECT SIZE

The project is going to be developed in 5000 sq. ft. where each flat would be 900 sq. ft. and others
details related to the construction of project is a follows-

• It would have 50 Flats.

• It would have 10 floors and each floor would have 5 flats of 900 sq. ft. each.

• The building would have sufficient no. of lifts that will be 4-5.

• There would a parking area for the residential coverage.

• The building would have the best trending and best infrastructure facilities

The table below shows the necessary project details-

Table 1: Project Details-

PROJECT DETAILS
Size in sq. ft 5,000.00 80.00
Size Per Flat (Sq. ft.) 900.00
No. of Flats 50.00
Equity 30% 24.00
Debt 70% 56.00
Debt service reserve 0.10 yrs

PROJECT COMMENMENT & END DATE-

• The project is going to start 4-Oct-2020

• The end date of project will be 30-Nov-2032

PROJECT ASSUMPTIONS-
Table 2: Project Assumptions

ASSUMPTIONS
Inflation 7.66% Construction Time 0.10 yrs
Tax rate 12% MAT 15%
Debt Rate 10% Discount 10%
Moratorium 0.10 yrs USD/INR 73.16
Debt tenure 12.00 yrs DDT 0
 Depreciation 5.00% Flat Appreciation 10.00%

PROJECT REVENUE SOURCES-

Table 3: Project Revenue Sources-

Revenue Parameters
City GURUGAM, HARYANA
Size (Sq. ft) 5,000.00
Size Per flat (Sq. ft) 900.00
No of Floors 10.00
No. of Flats 50.00
Selling Price (Sq. ft) 4,000.00
Selling Price Per Flat 3,600,000.00
Flat Appreciation 10%
Sales commission 2%

PROJECT FINANCING

Table 4: Debt Schedule

Details
Debt Amount 56.00
Debt rate 10.00%
Moratorium 0.10 yrs
Term 12.0 yrs
Payment Periods 48
One period is one quarter
COD 6-Oct-2020
First Quarter End 4-Jan-2021

The project is being financed through a commercial bank through debt and equity in 70:30. The
schedule of debt repayment is for 12 years in 48 period(one period means one quarter) respectively.
Week 4 Financial Analysis of Project

COST ALLOCATION-

The total project cost (CAPEX) of the project Rs. 80,000,000 and the total of operating expenses
(OPEX) is Rs. 5,000,000 per annum. The expenses are expected to rise as per the inflation
ratethat is approx. 7.2%. The allocation of the total project cost is as follows-
REVENUE GROWTH

The revenue growth during the period of 10 years has been increasing constantly due to the
appreciation in the value of flat that are been projected as follows-

EBITDA GROWTH
The EBITDA has been constantly growing negatively during the period of 10 years. The
continuousEBITDA is shown as follows-
DEBT SERVICE COVERAGE RATIO-

DSCR is measure of thee cash flow to available to pay current debt obligation. The averageDSCR
of the company is 1.25.

FINAL PROJECT CASHFLOW-

The final project cash flow of the company during the construction and debt repayment scheduleis
as follows-
PROJECT FEASIBILITY ANALYSIS-

The best way to find out whether your project is feasible is to complete a Feasibility Study. This
process helps you gain confidence that the solution you need to build can be implemented on time
and under budget.

The importance of a feasibility study is to establish whether or not a company, team, or organization
will deliver on its promises in a satisfactory manner and a reasonable period of time.

These are the five questions most feasibility studies have to answer in order to justify a new project,
plan, or method:

• Is this plan technically feasible?

• Is this plan legal?

• Is this plan operationally

feasible?

• Is this plan economically

feasible?

• Is this plan feasible within a

reasonable period of time?

You can assess this area of feasibility based on several different factors, including:

• Projected profitability

• The total cost of completion

• Estimated investment by outside parties

No matter how incredible a project may seem, if the numbers don’t add up, then either you’ll have to
seek out larger budgets or the plan isn’t worth the risk.

Table 5: Results

RESULTS
Equity IRR 0.00%
Min DSCR -131.83
Avg. DSCR 12.46
Project IRR -23.32%

The following result shows the internal rate of return of the project which is -23.32% and equity internal
rate of return is 0.00%. The average DSCR from the project is 12.46. DSCR is an important measure to
consider the feasibility of the project. DSCR interpretation is important to the debt obligation and
repayment capacity of project.

DSCR is interpreted as:

• DSCR < 1

You have negative cash flow. You don’t have enough income to service all of the debt.

• DSCR > 1

You have positive cash flow. The higher you’re DSCR, the more income you have to pay offyour debt

• DSCR = 1

You have exactly enough cash coming in to service your debt, but you don’t have additionalcash
flow other than that.

So, from the following it could be clearly interpreted that the project is not feasible for being buildand
constructed and to fulfill its debt obligation and to earn income from it. The following time period is
also not suitable for scheduling the project
Week 5 Key Learnings

• The main learning, I adopted is that to deliver the work to corporate according to the
specified timelines given. This helped me to submit work on time and understood the
importance of punctuality in corporate world.
• As my project I worked is Financial Modelling, majority of work is to be done on excel.
This made my excel skills sharper.
• As the internship is work from home, learnt how to manage things both professional and
personal as this is first time experience for me.
• “Studying about the experiment is completely different from practically performing the
experiment”. In this internship I got a chance to work closely to a practical project which
enhanced my learning’s.
• While performing the project I had gone through and applied many concepts which I had
learned in previous semesters. This made my work much easy.
• As financial modelling is a complete new concept, took it as a challenge and firstly took
extra time to understand the roots of the concept which made my work swift while
performing various tasks in the project.

Lastly towards the end of the project, I understood the importance of financial modelling and
why it is necessary to perform in any organization.
 Conclusion
From the following report and analysis it can be conclude that there is difference between the
theoretical and practical work done. As the scope of understanding will be much more when
practical work is done. As, we get more knowledge in such a situation where we have great
experience doingthe practical work.
On the basis of financial model being provide in the module 2 of the project I am being able to
understanding the concept of financial modeling.
The overall internship sessions are divided into four modules that are as
-
Module1- It is basically about the Project Finance and the difference between project finance and
corporate finance. It helped to know the different terms related to project finance.

Module 2- It helps to know the assumptions that need to be kept in mind while preparing a financial
model and function of revenue, cost and debt sheet in financial model and the steps involved in
preparation of fin flow sheet.

Module 3- This task helped to know that how a venture is assessed to qualify as project finance and
how revenue models are prepared for different types of projects either they are residential, solar
PVor PPP projects.

Module 4- This is the last module of the internship and the main module. A project report and
financial model is being prepared in the project. The project report gives the brief explanation of
what the Project finance, what is the Indian scenario in residential and housing sector, how to
preparea financial model and how to know the feasibility of the project and analyzing the project.
From the analysis it has been cleared that the Project on Financial Modeling and Analysis of 50

Flats Housing project in Gurgoan, Haryana is not feasible and is not good to be considered as a
feasible. As, the debt obligations of the project are so high and the income generation is low at the
given pointof time. So, the project is not viable to be executed.

The Overall experience during the internship was very good and fruitful as it helped to learn many
new things, including financial modeling and analyzing a project.