Escolar Documentos
Profissional Documentos
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Report
Acumen Education, Sonari
Group 4
Jay Amin | B13028
Sandeep Mishra | B13111
Anik Roy | B13010
Ayush Goenka | B13141
Ishu Mahajan | B13151
Acumen Education
Acumen Education
The Assistant. General Manager,
Central Bank of India
Jamshedpur
Dear Sir,
Subject: Request for term loan of INR 464 Million
We take this opportunity to collaborate with you for building educational infrastructure in
Jamshedpur, Jharkhand. The state of Jharkhand has been focal point of Indias industrial development
and growth story. Over the years, the state has developed various other industries in addition to the
pioneering enterprise of the steel behemoth; Tata Steel Ltd. Tata Motors is another example of groups
presence in the state. State due to its rich mineral resources has also become metals and mining
centre of the country. The government is also focussing on promoting the state as a major industrial
centre in the east zone of India. Many industrial hubs in Jharkhand are slated to witness considerable
growth in business and allied activities. The state is filled with burgeoning educated and middle class
and upper middle class working in these huge enterprises. They are particularly conscious about
education and skill development.
Jharkhand already has world class management institutes such as Xavier Labour Relations Institute
(XLRI) and IIM Ranchi which offer premium post graduate programmes in management. At the
undergraduate level Jharkand has the National Institute of Technology (NIT) Jamshedpur, BIT Sindri
and BIT Mesra which offer engineering degree across multiple disciplines. Jharkhand also has good
medical colleges such as RIMS in Ranchi.
However, Jharkhand lacks presence of a reputed undergraduate commerce college where students
can pursue commerce. At present they have no choice but to move to other educational hubs such as
Delhi, Mumbai or Kolkata. Kolhan University established in 2009 is not up to the mark for the local
gentry.
It is in this context that our group, Acumen Education, has undertaken the onus of constructing and
operating a full-fledged commerce college in Jamshedpur. In view of the existing demand for quality
commerce education we see great potential in the business of establishing and providing higher
educational services to the state. The financial case for the same has been built henceforth.
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Acumen Education
Business Model
We are starting an undergraduate college which offers degree programs in commerce stream and
computer applications. The degrees offered under the commerce stream will be
1.
2.
3.
4.
We will offer the degree of Bachelors in computer application (BCA) under the computer application
stream.
All of the above courses are three year programs with semester system in place. Since many of our
students will be from out of city of Jamshedpur we are also offering a hostel and lodging facility for a
reasonable rate for 50% of the maximum student intake. Each of these courses will have annual
intake of batch of 60 students. Hence each academic year will have 300 students across all the degrees
in total and the total student base of college would be 900 students.
Construction of college is expected to begin in September 2014 and should be completed by March
2016. The college will be operational by June 2016.
Total Cost
Head
Building
Land & Site Development
Furniture& Fixtures
Kitchen & Washing Equipment
Electronic & Other Misc. Equipments
Preoperative Expenses
Preliminary Expenses
Sub Total Capex
Working Capital Margin
Contingency Costs
Total Capex
3|Page
Cost
463.97
39.27
20.77
1.00
7.34
8.14
2.82
543.31
5.58
29.87
578.76
Acumen Education
Acumen Education
30-09-2013
Private Limited Company
Registrar of Companies, Jamshedpur
Ram Kumar Agarwal, Sajjan Bansal,
NareshModi, Pushkar Gupta
Proposed registered office
Jamshedpur
Proposed Project
Establishing
an
under-graduate
university in Jamshedpur
Expected date of commencement of 01-06-2016
operations
Financing
Long -term debt will be the major source of funding of the fixed assets of our business. The share
capital of the company will be Rs 116 million. The debt-equity ratio (pre-capitalization of interest) will
be 4:1. Therefore, the long term debt that the company seeks is Rs 464 million. This amount will be
utilized towards construction of fixed assets. This is in compliance with the regulation pertaining to
such loans.
The long- term borrowing shall be secured against buildings. The Gross Block value of these buildings
in the opening year is Rs 586 million, which clearly covers the principal amount of the loan that is
sought. The Written down value of these buildings in subsequent years will also be more than the
unpaid principal amount of long-term loan outstanding.
The asset specificity of the assets under consideration is not very general, so these assets in a highly
unlikely case of default can also be disposed off at or below market value.
As per the rules of the bank, despite ours being a company form of organization, the promoters shall
be personally liable for the long-term loan taken.
The Base rate of CBI is currently at 10.25%. The spread on the loan depends on the credit worthiness
and past experience of the promoter. The experience of our promoters in the field of education, the
positive results in the pro-forma estimates despite conservative estimates of our project and past
track-record of timely repayment of borrowings by promoters is what will let us get the loan at an
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Acumen Education
interest rate of 11.25% i.e. spread of 1% over the base rate of CBI. We believe that this would be a
conservative estimate of interest rate.
As per the credit rating model of a leading bank, our Credit Score is 1 on 10, which gives a poor credit
risk quality in the first year. However, this is for the first year of the project when we are not at full
capacity, over and after year 3 projects credit capacity improves highly.
As per our discussions, the interest on the loan amount is considered to be charged on simple interest
basis during the construction period of one and half year (1.5 years). The interest accrued during the
first one and a half year is capitalized and paid in the subsequent years.
The total loan repayment period comes out to be 9.5 years with a moratorium being enjoyed on both
principal and interest payment during the construction period of 1.5 years.
Particulars
Opening
Loan
Amount
Finance
Cost
Incurred
Finance Cost Paid
Principal
Repayment
Ending
Loan
Amount
FY2015
FY2016
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
463.18
479.34
511.65
468.90
421.34
368.43
309.56
244.07
171.22
90.17
16.16
32.31
57.56
52.75
47.40
41.45
34.83
27.46
19.26
10.14
57.56
52.75
47.40
41.45
34.83
27.46
19.26
10.14
42.75
47.56
52.91
58.86
65.49
72.85
81.05
90.17
479.34
511.65
468.90
421.34
368.43
309.56
244.07
171.22
90.17
The loan is effectively repaid in 8 annual instalments commencing from the end of the first year of
operations on an Equated Yearly Instalment basis.
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81.98
2018E
141.58
2019E
153.81
2020E
150.05
2021E
131.73
2022E
104.79
2023E
74.76
2024E
58.90
2025E
-
Acumen Education
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
40.95
95.21
164.47
193.01
213.32
223.99
235.19
246.95
259.29
17.66
54.45
103.01
125.32
140.72
148.60
156.27
164.33
172.79
43%
57%
63%
65%
66%
66%
66%
67%
67%
(21.38)
19.83
71.80
96.82
114.45
124.20
133.49
142.97
152.70
-52%
(78.94)
-193%
(78.94)
-193%
21%
(45.22)
-47%
(45.22)
-47%
44%
7.63
5%
7.63
5%
50%
33.22
17%
33.22
17%
54%
56.83
27%
56.83
27%
55%
75.61
34%
75.61
34%
57%
96.49
41%
88.52
38%
58%
119.36
48%
84.91
34%
59%
142.67
55%
100.51
39%
36.86
(8.36)
(0.73)
32.49
89.32
164.93
253.46
338.37
438.88
0.18
4.76
0.43
4.86
0.87
4.51
1.03
3.97
1.18
3.25
1.27
2.38
1.30
1.42
1.16
0.51
NA
-
468.90
421.34
368.43
309.56
90.17
244.07
171.22
25.77%
43.13%
A detailed project report has been enclosed herewith along with other supporting documents to
corroborate the merit of the credit limit sought by Acumen Education. We hope to seek your
participation in the said venture. In the event of the need for any further clarification or information,
we shall be glad to provide the same.
Managing Director,
Acumen Education
August 20, 2014
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Acumen Education
Contents
Business Model ................................................................................................................................................................. 3
Total Cost .......................................................................................................................................................................... 3
Management and Promoter Group .................................................................................................................................. 4
Financing ........................................................................................................................................................................... 4
Debt Repayment Schedule................................................................................................................................................ 5
Short Term Loan ................................................................................................................................................................ 5
Forecast of Financial Performance ................................................................................................................................... 6
Contents ............................................................................................................................................................................ 7
Acknowledgement ............................................................................................................................................................ 9
Management and Promoter Group ................................................................................................................................ 10
Credit Worthiness Analysis ............................................................................................................................................. 11
Project Proposal (Undergraduate Private Commerce College) ...................................................................................... 12
Porters Five Forces ......................................................................................................................................................... 15
Rationale ......................................................................................................................................................................... 16
Project Implementation Schedule .................................................................................................................................. 17
Project consultant ........................................................................................................................................................... 17
Operations Plan............................................................................................................................................................... 17
Infrastructure .................................................................................................................................................................. 18
Regulatory Compliance ................................................................................................................................................... 19
Forecast Assumptions ..................................................................................................................................................... 20
Fundamental Analysis ..................................................................................................................................................... 21
Liquidity and Coverage Analysis .................................................................................................................................. 21
Profitability Analysis .................................................................................................................................................... 22
Du Pont Analysis.......................................................................................................................................................... 22
Altman Z-Scores .......................................................................................................................................................... 23
NPV Analysis .................................................................................................................................................................... 23
Analysis of NPV, IRR and MIRR of the Project ............................................................................................................. 23
Project IRR ................................................................................................................................................................... 26
Equity IRR .................................................................................................................................................................... 26
Project MIRR ............................................................................................................................................................... 26
Equity MIRR ................................................................................................................................................................. 27
Pay-Back Period .......................................................................................................................................................... 27
Breakeven Analysis ..................................................................................................................................................... 27
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Acumen Education
Sensitivity Analysis .......................................................................................................................................................... 28
Risk Mitigation ................................................................................................................................................................ 31
Real Options .................................................................................................................................................................... 32
Balance Sheet (Rs mn) as on financial year ending 31st March ..................................................................................... 33
Statement for Profit and Loss for Years Ended (Rs mn).................................................................................................. 34
Cash Flow Statement (Rs Mn)For Year Ended: ............................................................................................................... 35
Annexure ......................................................................................................................................................................... 36
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Acumen Education
Acknowledgement
We would like to take this opportunity to thank the following individuals for their contribution to our
project. Without their valuable guidance and support, this project would not have been feasible.
Mr. Lawrence Francis, Founder, Lawrence-Kunj and associates.
Mr. Bino Jose, Librarian, XLRI Jamshedpur.
Mrs. Anshu Jha, Central Bank of India, Jamshedpur Branch.
Mr. Kamlesh, Accounts Department, XLRI Jamshedpur.
Mr. Ravi and Mr. Vinay, IT Support, XLRI Jamshedpur.
We would also like to express our sincere gratitude to Prof. S.S., Finance Area, XLRI Jamshedpur. He
has been a constant source of inspiration and the guiding light behind this project.
August 20, 2014
Jamshedpur
9|Page
Acumen Education
Ram Kumar Agarwal was a senior consultant in a global Consulting Firm. Prior to that he was a
partner with a leading wealth management firm and before that he served as a senior manager in
the Credit Risk Management Group of leading bank. He is an alumnus in Business Management
from XLRI Jamshedpur and an economics graduate from St. Stephens College.
His work experience includes
Senior Consultant, Delloite Consulting LLP (2007-2013)
Partner, Burt Wealth Advisors (2005-2007)
Senior Manager, Credit risk management group, CITI Bank (2003-2005)
Sajjan Bansal served on the board of SEBI. He was also a global business consultant for a
prestigious consulting firm for several years. Prior to that he washead of Statutory Audit and
Compliances department for one of the big four Audit firms. He is a commerce graduate in
accounting and finance from St. Xaviers College Kolkata and is also a Qualified Chartered
Accountant and Cost Accountant. His comfort with numbers and shrewd business strategies and
analytical acumen ensures a smooth development of finances and business strategies.
His work experience includes:
Senior Mgr. , Statutory Audit and Compliances, Price Waterhouse Coopers (2001-2005)
Naresh Modiwas a board member of the West Bengal Higher Secondary Board. He served as
senior manager in a global Private Equity firm after starting his career in an equity research
company. He is a qualified CFA charter holder and an alumnus in Mechanical Engineering from IIT
KGP and Business Management from XLRI Jamshedpur. He has worked across sectors in key roles
in finance with bulk of experience coming in the banking and oil and gas sector.
His work experience includes
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Pushkar Gupta has worked with the Government of India in the Human Resource Development
Ministry. His most recent stint has been as the Joint Secretary in the Ministry. He is an IAS officer
of batch of 1990. He has worked with MHRD on several initiatives and projects undertaken by
different elected governments to increase private sector participation in education sector. He has
an engineering degree from IIT Guwahati and is an MBA from XLRI Jamshedpur.
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Acumen Education
Parameter
Total D/E
Net
Debt/EBITDA
Current
Ratio
ROE
Weights
0.5
0.25
0.25
EBIT
Interest
Coverage
2
Value(FY2017)
4.76
30.84
3.89
(2.14)
Score
Value(FY2018)
4.86
10.16
Score
Value(FY2019)
4.51
Score
DSCR
NPM
EBITDA
trend
margin
0.32
0.18
(1.92)
5.41
0.81
0.43
(0.48)
Favourable
10
10
4.97
2.1
(10.5)
1.83
0.87
0.046
Favourable
10
Value(2020)
3.97
3.58
1.89
1.02
2.5
1.03
0.172
Favourable
Score
10
Value(2021)
3.25
2.59
1.79
0.64
3.4
1.18
0.27
Favourable
Score
10
Value(2022)
2.38
1.78
1.78
0.46
4.64
1.27
0.34
Stable
Score
10
Value(2023)
1.42
0.98
1.77
0.35
6.78
1.3
0.38
Stable
Score
10
Value(2024)
0.51
0.28
1.76
0.25
11.48
1.16
0.34
Stable
Score
10
10
Total
10
1.0
3.2
3.6
4.6
5.3
5.3
5.8
6.1
Acumen Education
student fraternity. We forsee a shortage of faculty in this state but we intend to attract them from
neighbouring states where higher educational faculty are plenty for example Kolkata (West Bengal)
and Bhubaneswar (Orissa).
Theme
To develop a UG commerce collegecampus in Jamshedpur within an area of 28,338 sqm. The main
idea is to capture UG commerce education demand in Jharkhanddue to absence of such an institute.
We propose a business plan which is essentially exploiting a market gap in Jharkhands Education
Industry. We hope that this institute will cater to the growing demands of the city and the adjoining
districts in the state.Education Industry outlook
A Macro-Economic Perspective
Education in India
The Indian education sector is said to be one of the largest sun rise sectors of the Indian economy.
According to the India Ratings1 report on Education sector in India, the market size of Indian
education sector is set to increase to Rs. 602,410 crore ($109.84 billion) by FY15 from Rs 341,180
crore in FY12. This increase is majorly due to the increased emphasis on quality education by the
Indian middle class. The compounded annual growth rate (CAGR) of the education sector over the
period FY05-FY12 was 16.5%.
At present there are about 7002 universities and around 35,000 colleges. 85% of these students are
pursuing bachelors degree and about 16% of this student population is pursuing engineering and
technology programmes. But recently a huge spurt has been seen in the number of students opting for
commerce and arts courses. The government intends to increase the number of students going in for
higher education to 30% by 2020 and to fulfill this goal India needs around 35,0003 colleges.
Although the Governments expenditure spend on education is 3.35% of the GDP (FY12 Budget
estimates) the quality of education in the government run institutes as well as the infrastructure of
these institutes is abysmally poor. Therefore, there is a need of private institutes in the country.
Why Jamshedpur?
Jamshedpur, which is predominantly an industrial city, is the largest urban conglomeration4 of
Jharkhand. It houses factories of Tata steel, Tata Motors, Tinplate, etc. All the middle level and senior
level managers of these companies reside in Jamshedpur. There are also many small scale industries
located in Adityapur Industrial Estate. Adityapur has also been a major industrial hotspot for many
years. Thus, there is no doubt as to the buying power of people residing in Jamshedpur.
Jamshedpur is very well connected to other major cities in the country and there are frequent bus
services available from Jamshedpur to other neighboring major cities such as Ranch and Kolkata.
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Acumen Education
Jamshedpur has a high literacy rate of 85.94%4 much higher than national average of 74%. It also has
good quality schools such Sacred Heart Convent, Loyola school which will help our institute get the
required number of students per year. Thus, because Jamshedpur performs exceptionally well on the
parameters of demographics, connectivity and buying power we chose Jamshedpur as the location of
our institute.
A bottom up approach with the help of primary data gathered from schools in and around
Jamshedpur.
A top-down analysis by gathering secondary data from the data provided through NCERT.
From both the above approaches the estimated demand per year is c.3000 from top-down approach
and around 30% of the students enrolling for higher education as per bottom-up approach.
SWOT Analysis
Strengths
Weakness
Experienced
promoters
Unique Location
Professional Management
and
qualified
Opportunity
14 | P a g e
Threats
Migration of students to
other states (e.g. Kolkata)
Excellent infrastructure in
Jamshedpur (good connectivity)
Lack of availability of
lecturers and professors
Acumen Education
Threat of
New
Entrant (L)
Supplier
Power (H)
Competitive
Rivalry (L)
Buyer
Power (L)
Threat of
Substitution
(L)
3. Supplier Power: The supplier power in our case is high because it is very difficult to retain
professors in a state like Jharkhand where the culture of such degree courses is not very prevalent
and many employers of the talent do not exist.
4. Substitutes Power: Although there are many other courses which are remote substitutes for the
target market, the courses offered cover majority of the commerce undergraduate courses and so
students will definitely find the degree mix of the college exhaustive for their undergraduate
degree consideration set.
5. Competitive Rivalry: Due to growing nature of the market and absence of a university offering
such courses with a strong brandname the college will rarely face any rivalry.
6. Overall the project is very attractive due to combination of the above mentioned market dynamics in
the industry.
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7. The profitability of such projects will be very high because of high bargaining power of the college
which will translate into premium fees and full capacity this can be observe from high EBITDA margins
that are projected in our report as well as looking at Industry EBITDA which is about 45-55%.
Rationale
Increasing Demand of Higher education in Jharkhand
The Indian middle class has woken up to the need of quality education. The aspiring middle class of
our country sees higher education an essential requirement for a smooth career of their children.
Jharkhand is no exception to this trend. It has a population of around 3.3 croresand a literacy rate
which has seen major correction from 53.56% in 2001 to 66.41% in 2011. The trend of past data
suggests that more and more students of the state are going for higher education. Therefore, the
demand for higher education in this state is bound to witness a huge spike. But to cater to this
increased demand there are hardly a few good institutes and even lesser to satiate the demand of
students aspiring for commerce education.
Why a Commerce College?
During our preliminary analysis we found out that Jharkhand has premiere institutes in the field of
engineering (NIT Jmashedpur, BIT Mesra). Jharkhand also houses the world-renown XLRI which runs
postgraduate programmes in management. Even medical aspirants have been catered to by the
opening of Rajendra Institute of Medical Sciences (RIMS, Ranchi). But what it lacks is a good quality
commerce college which offers courses for undergraduate students.
The feedback that we got from the academic fraternity regarding quality of education being offered in
Kolhan University with which our college experiences some overlap regarding the courses being
offered wasnt positive. Therefore, we feel that Jharkhand has huge unmet demand for a good quality
commerce college. In fact, as of now students willing to pursue commerce at undergraduate level are
being forced to shift base to either New Delhi or Mumbai, just because of lack of a good quality
Commerce college in the state.
Why a not a Medical or an Engineering College?
Jharkhand already has a well-established engineering college and a medical college, NIT-Jamshedpur
and RIMS respectively. Existing presence of such big names in the state would make it tough for a
private medical or engineering college to carve a niche for itself within a few years.
Another factor influencing our decision is that the investment required to establish an engineering
college is much higher than that to set-up a commerce college because engineering colleges have
multiple streams and each of these streams require independent labs. Building these labs is extremely
expensive. The same is true for medical colleges. The equipment in these labs is also a huge expense.
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Acumen Education
Attracting and recruiting faculty for medical and engineering colleges away from government colleges
in Jharkhand or getting faculty from other states to our college would also be extremely tough.
Therefore, we didnt consider opening a Medical or Engineering college in Jharkhand.
Start Date
Completion Date
Month Ending
Land Acquistion
Sept2013
Sept2014
Jan 2014
Sept 2014
Construction
Sept 2014
Mar2016
External Development
Sept2014
Mar2016
Hostel Construction
Mar2015
Mar2016
Academic Block
Mar2015
Jan, 2016
Libarary construction
Sept 2014
Mar2016
Project consultant
We have hired reputed Consultants to conduct and provide a preliminary feasibility of the proposed project.
The key financial inputs are based on the discussions between us and various specialists:
Project Consultants
Architect
Structural Designer
Contractor
Legal Counsel
Education Sector Consultant
&
Operations Plan
Items
Details
Degrees conferred
60
300
180
180
180
180
900
Shifts
Total hrs of classes per week
Semester 1
July to October
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180
Acumen Education
Semester 2
Total Amount of Faculty
December to March
22
Infrastructure
Land
We propose to lease a land area of 7 acre to house:
1. Academic block
2. Library
3. Hostel
Along with the same we propose to develop the remaining 80% of the land for roads, sewage systems,
street lamps, playing fields and parking. We are keeping so much land for two reasons a) In order to
have an option to expand in the future if the demand is higher than we expected b) To avoid
competition by blocking the available land in Jamshedpur (we might also sublease / rent the same for
family functions, school events and other events requiring land for the functions).
Academic Block
We propose to build a 3 floor academic building with area of 1500sqm with 8 Lecture halls, 1 Staff
room, 2 computer labs with 60 computers each and internet available in the academic area with Wifi.
First two floors will house the lecture halls and the third floor will house faculty offices. The whole
block will have AC through independent units. The academic block will also have Projectors & audio
visual instruments as well as other IT equipment such as printers and Xerox. Academic block will have
adequate furniture and fixtures for students as well as faculty for conducting classes.
Library
Library will be housed in an air-conditioned single floor building with area of 650sqm. It will include
adequate sitting furniture such as Tables and chairs as well as book wracks of steel on the lines
similar to the library at XLRI. We estimate that the total book requirement and hence total books in
the library will be 7200 books. This is after taking into account 3 books requirement per enrolled
student and 100 books requirement per faculty.
Hostel
We plan to build a hostel with capacity of 450 residents in the area of 1860sqm. There will be two
building each of 930 sqm one with 4 floors and other with 5 floors because it is difficult to construct a
high-rise building in Jamshedpur due to geological reasons. Hostel will also have mess facility housed
in one of the buildings. The student rooms will have spartan furniture for e.g. cots, table and chair and
mess will have cooking equipment for catering and cooking for residents.
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Acumen Education
The major Components of cost are given below:
Head
Building
Land & Site Development
Furniture& Fixtures
Kitchen & Washing Equipment
Electronic & Other Misc. Equipments
Preoperative Expenses
Preliminary Expenses
Sub Total Capex
Working Capital Margin
Contingency Costs
Total Capex
Regulatory Compliance
19 | P a g e
Cost
463.97
39.27
20.77
1.00
7.34
8.14
2.82
543.31
5.58
29.87
578.76
Acumen Education
Forecast Assumptions
Revenue from student fees
The student demand forecast is done by both a top-down approach and a bottom-up approach.
In the bottom-up approach we gathered primary data from schools in and around Jamshedpur.
Other places we considered include Bokaro, Ranchi and Dhanbad
We have assumed that we would provide for five degree courses with a maximum capacity of 60
students in each course per year i.e. a total intake of 300 students.
In the bottom up approach we found that 30.62% of the total students in the schools take up nonscience courses mainly commerce.
In the top down analysis we calculated the demand in Jharkhand by taking the data of number of
students enrolled in major districts in Jharkhand in class 12 and found that at least 3370 students
would want to take up the courses offered by us. We expect that about 10% (a conservative
estimate) i.e. 300 students to take admission in our college.
We have assumed that in the first year of commencement i.e. FY2017, only 70% of the student
capacity is utilized thus assuming that 210 students take admission in the first year. We have also
assumed that the increase in capacity utilization increases to 85% in the second year and then
reach our maximum capacity henceforth.
We have assumed the fees to be INR 1.5 lakhs per year and have grown the fees at the rate of 5%
YoY which is also equal to the inflation rate in education industry. Thus our revenues from student
fees have increased from INR 31.5 Mn in FY2017 to INR 199.46 Mn in FY2025, a CAGR of 25.94%.
The Operating Expenses are all estimated line-by-line using a top-down analysis, where this team
has gone into great detail as to estimate minute details of the expenses, The detailed calculations
are provided in the Annexure.
300
250
In Rs Mn
200
150
100
50
FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025
Fees Revenue
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Hostel Revenue
Acumen Education
Revenue from Hostel fees
The hostel demand forecast for students is done by estimating the expected no of students per
annum.
The maximum capacity for hostel accommodation is capped at 450 students. We have also
assumed that only 50% of the incoming batch is given hostel accommodation.
In the first year of commencement i.e. FY2017, we have provided hostel accommodation to 105
students and have reached our peak hostel capacity of 450 students in FY2019.
We have charged an annual hostel fee of INR 90K and have grown the same at the rate of 5% i.e. at
the inflation rate in the education industry.
We have also assumed a hostel outsourcing margin of 60% in FY2017 which has grown to 70% in
FY2019 after which it is kept constant at the same level in our explicit forecasting period. We pay
high outsourcing costs initially because our hostel facilities are not fully operational and thus we
pay higher. When we reach our maximum capacity in FY2019, we keep a higher amount of hostel
revenues with us and is constant in line with maximum hostel capacity henceforth.
Net revenues (Inclusive of hostel outsourcing margin) has increased from INR 5.67 Mn in FY2017
to INR 41.89 Mn in FY2025, a CAGR of 28.4%.
The operating expenses are estimated line-by-line with a detailed estimation of each minute
component, the details of these are present in the annexure
Fundamental Analysis
Liquidity and Coverage Analysis
DSCR
Current Ratio
Quick Ratio
Interest Coverage
2017
0.18
3.89
3.28
0.32
2018
0.43
3.00
2.55
0.81
2019
0.87
2.10
1.77
1.83
2020
1.03
1.89
1.58
2.50
2021
1.18
1.79
1.50
3.40
2022
1.27
1.78
1.50
4.64
2023
1.30
1.77
1.49
6.78
2024
1.16
1.76
1.49
11.48
We can see that the DSCR of our company is low in the first few years this is because it takes time
before the admissions in the college pick-up. The DSCR of the company is greater than one 2020
onwards
The current ratio of the company is high in the 2017 but then it starts declining. This is because of
the working capital loan that the company takes to meet its operational cost and also its long-term
loan repayment
Interest coverage ratio for our company is increasing significantly over the years this is because
the long-term loan gets repaid over the years and also the operating income of the college
increases with time
21 | P a g e
Acumen Education
Profitability Analysis
2017
Operating Margin
-52.2%
Net Profit Margin
-192.8%
Operating Leverage (1.17)
Financial Leverage 0.27
Total Leverage
(0.32)
2018
20.8%
-47.5%
3.25
(0.44)
(1.42)
2019
43.7%
4.6%
1.62
9.41
15.26
2020
50.2%
17.2%
1.45
2.91
4.22
2021
53.7%
26.6%
1.37
2.01
2.75
2022
55.4%
33.8%
1.32
1.64
2.17
2023
56.8%
37.6%
1.29
1.38
1.79
2024
57.9%
34.4%
1.27
1.20
1.52
2025
58.9%
38.8%
1.25
1.07
1.33
In the initial years the Net profit margin is negative. This is because of the burden of interest costs.
These interest costs reduce as and when the repayment of loan takes place. The Net profit Margin
for our company shall stabilize at around 38% in the long run
The operating margin for our company is initially negative this is because of lower number of
admissions in the first year but as we have more number of students the fixed costs get
apportioned over larger number of students and leads to an increase in margins
Financial leverage of our company is initially high as we have both long-term loan and Working
capital loan but with repayment of loan it starts getting reduced
Du Pont Analysis
ROE
PAT/Net Sales
Net Sales/TA
TA/Total Equity
2017
(2.14)
-192.8%
6.9%
16.0
2018
5.41
-47.5%
17.1%
(66.8)
2019
(10.48)
4.6%
31.2%
(723.7)
2020
1.02
17.2%
38.7%
15.3
2021
0.64
26.6%
45.2%
5.3
2022
0.46
33.8%
49.9%
2.7
2023
0.35
37.6%
55.2%
1.7
2024
0.25
34.4%
60.9%
1.2
2025
0.23
38.8%
57.9%
1.0
ROE is negative in 2017 is because our Net profit margin is negative in the initial years this is
because of the interest cost of the loan that is taken and also because demand shall take time to
pick up
From the asset turnover ratio we can see that it is only with time i.e. as and when the demand
increases the assets starts to get utilized efficiently. Our major assets are the buildings that we
have constructed
22 | P a g e
Acumen Education
Altman Z-Scores
For Pvt. Firms
2017
2018
2019
2020
2021
2022
WC/TA
0.718
(0.13) (0.24)
(0.28)
(0.29)
(0.27)
RE/TA
0.847
(0.13) (0.22)
(0.22)
(0.17)
(0.06)
0.11
0.32
0.55
0.72
EBIT/TA
3.1
(0.04) 0.04
0.14
0.19
0.24
0.28
0.31
0.35
0.34
BE/TL
0.42
0.06
(0.01)
(0.00)
0.07
0.19
0.37
0.59
0.83
0.98
Sales/TA 0.998
0.07
0.17
0.31
0.39
0.45
0.50
0.55
0.61
0.58
Z Score
(0.22) (0.09)
0.34
0.67
1.04
1.45
1.93
2.42
2.77
Distress
Distress
Distress
Grey
Grey
Grey
Grey
Zone
Distress
Distress
2023
2024
2025
The Altman Z-score for our company is very low for the first 5 years. In fact the company lies in
the distress zone. The Z-score improves after that but still the company is in the grey zone w.r.t
bankruptcy
There has been huge investment in buildings and therefore the book value of the these buildings
is high. The rating is inversely related to the book value of the assets and this is the reason that
our company gets a low Altman Z-score
The main reason for low Altman Z-score is the negative working capital that our company has but
this is because the tuition fee is collected in advance from students
NPV Analysis
Analysis of NPV, IRR and MIRR of the Project
To evaluate the feasibility of the project we will be using the SCF techniques as we have already learnt
that they are superior to any other techniques.
Actual tax paid is Zero till FY 2022 as the business losses of the previous years were set off. Post
which, we have taxed the taxable income at 30% plus the applicable cess.
Denominator:
Unlevered Cost of Equity ()
We have calculated the NPV of the project using the Adjusted Present Value Method
We acquired the asset betas or the unlevered betas of comparable firms in the education
business from yahoo finance.
The overall unlevered beta or asset beta of Acumen Education is calculated by taking the mean
of the asset betas of firms in the education business.
23 | P a g e
Acumen Education
Now the WACC can be calculated by using both Kd, Ke and estimated market values of equity and
book value of debt each year.
Item
Asset Beta
Value
0.68
30.9%
8.50%
7.12%
13.34%
Remarks:
Risk free rate of return is taken as the yield on 10-year government bonds
24 | P a g e
Acumen Education
Numerator:
APV Method
FY2017
0.88
FY2018
0.78
FY2019
0.69
FY2020
0.61
FY2021
0.53
FY2022
0.47
FY2023
0.42
FY2024
0.37
FY2025
0.32
17.55
56.45
101.06
100.11
109.54
114.06
118.26
122.83
127.77
2863.29
1365.16
15.48
1,529.75
43.94
1,677.40
69.41
1,800.13
60.66
1,940.19
58.56
2,089.51
53.80
2,254.22
49.21
2,436.71
45.10
2,638.98
968.99
2,863.29
54.30
61.54
69.75
79.06
89.60
101.56
115.11
121.62
8.85
7.30
2.73
3.10
0.00
1419.46
1,591.29
1,747.15
1,879.19
2,029.80
2,191.06
2,369.32
2,445.56
2,641.71
2,863.29
511.65
907.81
0.56
14.52%
11.25%
12.09%
550.88
1,040.41
0.53
14.15%
11.81%
12.08%
562.91
1,184.23
0.48
13.89%
12.19%
12.13%
522.24
1,356.95
0.38
13.72%
12.35%
12.28%
459.61
1,570.19
0.29
13.60%
12.47%
12.47%
375.81
1,815.26
0.21
13.50%
12.56%
12.68%
276.01
2,093.31
0.13
13.43%
12.67%
12.89%
164.93
2,280.63
0.07
13.37%
12.95%
13.07%
58.90
2,582.81
0.02
13.30%
15.00%
13.24%
2,863.29
13.34%
0.00%
13.34%
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
FY2025
EBIT
(21.38)
19.83
71.80
96.82
114.45
124.20
133.49
142.97
152.70
Taxable EBIT
(48.13)
(2.43)
52.75
80.46
100.50
112.46
123.77
135.09
146.47
2.18
80.46
100.50
112.46
123.77
135.09
146.47
Taxable
EBIT
(Carry Forward)
Tax Paid If no
Loan
Add: Dep.
(0.67)
(24.86)
(31.05)
(34.75)
(38.24)
(41.74)
(45.26)
39.04
34.62
31.21
28.50
26.27
24.40
22.78
21.36
20.09
Capex
Change in WC
(0.11)
2.00
(1.28)
(0.35)
(0.13)
0.21
0.23
0.24
0.24
FCFF
17.55
56.45
101.06
100.11
109.54
114.06
118.26
122.83
127.77
Terminal Growth Rate has been assumed to be 8.50 % (current risk free rate)
Terminal Value = 2863.29
25 | P a g e
Acumen Education
Project IRR
FCF
Terminal Value
2863.29
Initial
Investment
Project IRR
-627.45
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
FY2025
17.55
56.45
101.06
100.11
109.54
114.06
118.26
122.83
127.77
25.77%
Equity IRR
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
FY2025
EBIT
(21.38)
19.83
71.80
96.82
114.45
124.20
133.49
142.97
152.70
Tax Paid
(7.96)
(34.45)
(42.16)
Capex
Change in WC
(0.11)
2.00
(1.28)
(0.35)
(0.13)
0.21
0.23
0.24
0.24
Add: Dep
39.04
34.62
31.21
28.50
26.27
24.40
22.78
21.36
20.09
LT Debt Repaid
(42.75)
(47.56)
(52.91)
(58.86)
(65.49)
(72.85)
(81.05)
(90.17)
ST Debt Repaid
81.98
59.60
12.23
(3.76)
(18.31)
(26.94)
(30.03)
(15.87)
(58.90)
Interest Paid
(57.56)
(65.05)
(64.17)
(63.60)
(57.61)
(48.59)
(37.00)
(23.61)
(10.02)
(0.79)
3.44
(3.11)
(1.26)
(0.83)
0.43
0.45
0.48
61.94
FCFE
-115.80
Terminal Value
2863.29
-115.80
Equity IRR
-0.79
3.44
-3.11
-1.26
-0.83
0.43
0.45
0.48
2,925.23
43.13%
Project MIRR
FCFF
WACC
Re-investment Factor
Value at the end of 9 years
Project MIRR
(627.45)
23.52%
FY2017
17.55
12.08%
2.61
0
FY2018
56.45
12.13%
2.33
0
FY2019
101.06
12.28%
2.08
0
FY2020
100.11
12.47%
1.85
0
FY2021
109.54
12.68%
1.64
0
FY2022
114.06
12.89%
1.45
0
FY2023
118.26
13.07%
1.28
0
FY2024
122.83
13.24%
1.13
0
FY2025
2,991.06
13.34%
1.00
4,199.06
Project MIRR
As we see that the MIRR of the project is well above the WACC. Hence it is a feasible project and will add wealth.
26 | P a g e
Acumen Education
Equity MIRR
FCFE
Cost of Equity
Re-investment
Rate
Value after 9
years
Equity MIRR
115.80
FY2017
(0.79)
14.15%
2.76
FY2018
3.44
13.89%
2.42
FY2019
(3.11)
13.72%
2.13
FY2020
(1.26)
13.60%
1.87
FY2021
(0.83)
13.50%
1.65
FY2022
0.43
13.43%
1.46
FY2023
0.45
13.37%
1.28
FY2024
0.48
13.30%
1.13
FY2025
2,925.23
13.34%
1.00
2,922.8
43.15%
Equity MIRR
As the Cost of Equity is less than the equity MIRR it will add value to the shareholders wealth
Pay-Back Period
We have calculated the payback period, which is the time that their capital would be invested in the
company. It comes out to be 7 years and 3 months from the gestation period.
FCFF
Cash Flow
Initial
FY2017
17.55
17.55
FY2018
56.45
74.00
FY2019
101.06
175.05
FY2020
100.11
275.16
FY2021
109.54
384.70
FY2022
114.06
498.76
FY2023
118.26
617.02
FY2024
122.83
739.85
FY2025
127.77
867.61
FY2026
138.63
1,006.24
627.45
Breakeven Analysis
For Year 2017
For our project to break-even in the FY 2017 (on a profit before tax basis in the first year of
operation), the tuition fee to be charged per annum per student comes out to be Rs 2.65 lakhs.
For Year 2018
For our institute to break-even by FY 2018 (on a profit before tax basis in the second year of
operation), the tuition fee to be charged per annum per student comes out to be Rs. 2.48 lakhs.
If we charge the same fees i.e. 1.5 lakhs per student per annum then we find that even if we operate at
full capacity we are unable to break even on PBT basis in the first year of operation.
27 | P a g e
Acumen Education
Sensitivity Analysis
Rho vs Groth rate
Rho
Growth
1,419
12.5%
12.8%
13.0%
13.3%
13.5%
13.8%
14.0%
14.3%
7.0%
1,373
1,313
1,258
1,208
1,161
1,118
1,077
1,040
7.5%
1,464
1,394
1,331
1,274
1,221
1,172
1,127
1,085
8.0%
1,574
1,492
1,419
1,352
1,291
1,235
1,184
1,137
8.5%
1,713
1,614
1,525
1,446
1,375
1,311
1,252
1,198
9.0%
1,890
1,767
1,659
1,563
1,478
1,402
1,333
1,271
9.5%
2,128
1,968
1,831
1,711
1,607
1,515
1,433
1,359
10.0%
2,460
2,241
2,059
1,905
1,773
1,658
1,557
1,468
The Sensitivity analysis above suggests that NPV is highly sensitive to rho and growth rate
The Beta unlevered used is 0.68, the risk free rate is 8.5% and the equity risk premium is 7.12%5.
The rho for our business comes out to be 13.34% and the growth assumed id 8.5%
As we can see that despite conservative assumptions the NPV of the project is strong and
therefore, this project has tremendous potential
NPV (Rs
mn)
1,446
1,437
1,428
1,419
1,410
1,402
1,393
Staff salary forms a major portion of our costs and therefore we thought of studying the sensitivity of
NPV with respect to staff salary. At present we have assumed that each professor on an average
charges Rs 8 lakhs per annum even if there was a 15% increase in this salary we would have a good
NPV for this project.
28 | P a g e
Acumen Education
PV vs Change in Student FEE
Change in NPV
(Rs
Student
mn)
Fee
-15%
1,236.84
-10%
1,297.57
-5%
1,358.45
0%
1,419.46
5%
1,480.60
10%
1,798.50
15%
1,954.71
Since, student fee is our only source of revenue it is important to study the impact of change in student fee per
academic year on NPV. A fall of 15% in student fee from the current Rs 1.5 lakh per annum would result in a fall in
NPV but only to 1,236 mn. Thus, this project has huge potential
in %Change
in
Project MIRR
1.3%
0.8%
0.4%
0.0%
-0.4%
-0.9%
-1.3%
It is important to study the impact of staff salary on project MIRR. In the worst case a 15% increase in staff salary will
lead to reduction in project MIRR by 1.3%
29 | P a g e
Acumen Education
Project MIRR vs Change in Student Fee
% Change
student Fee
-15%
-10%
-5%
0%
5%
10%
15%
in % Change in
Project MIRR
-8.9%
-5.8%
-2.8%
0.0%
2.7%
14.8%
20.0%
The impact of change in student fee is observed over project MIRR. A 15% reduction in student fee leads to an
approximate 9% reduction in project MIRR.
% change in
NPV
-0.63%
-0.42%
-0.21%
0.00%
0.21%
0.43%
0.66%
0.89%
% change in
Equity MIRR
-13%
-9%
-4%
0%
4%
9%
13%
18%
0.62%
0.42%
0.21%
0.00%
-0.21%
-0.43%
-0.66%
-0.79%
30 | P a g e
Acumen Education
Risk Mitigation
Construction Period Risk
Risk Factor
Regulatory Risks
Risk Nature
Proposed Mitigation Mechanism
- Approvals needed from various - Thorough screening of consultants to be
Governing Authorities
hired
- Risks involved in leasing land of - All regulations to be obtained before
required amount
starting construction
- MOU for land leasing to be signed
beforehand
- Land leasing to be done before any
project execution
Construction Defect
- Stringent qualification criteria for EPC
and Cost Overrun
Contractor to be followed including past
Risk
experience
- Quality Requirements to be strictly
mentioned in EPC Contract
- Timelines and project milestones to be
clearly communicated
- Regular Supervision onsite report
collection to be done
- Contingency Provision made for current
cost overrun
- Insurance to cover damages
- Performance security clause to be added
in
Operating Period Risk
Student/Sales Risk
Availability
of
Professors/Lecturers
Other Cost
Security Risk
Items
Interest
Risk
mitigation
Property destruction
Risk
31 | P a g e
Acumen Education
Real Options
Option to expand intake capacity in Jamshedpur
The institute has repaid all its debt, both long term and short term by the end of year 9. It will start
generating excess cash from the year after. Hence the company will be in a position to take a decision
regarding expanding its current capacity of student intake of 300 per year and total capacity of 900
per year. It can also think of expanding its hostel facility if it is in demand. Hence effectively and in a
simple format it has 2 options:
Option1: To expand the per year student intake capacity of 300 per year
Option2: To expand the hostel facility for students
Option3: Increase the variety of courses being offered
In case of these available options, institute holds the right of whether to invest in such expansion
plans or not. Further the constructed land is ~20% of leased land currently and hence there are no
bound restrictions for imposing of these constructions except for demand criteria. Hence the institute
can be said to have a call option in making the investment decisions.
In terms of expiry period of such option, we think that for capacity expansion, it is 5 years, i.e. FY2021,
where we will be able to gauge the demand increase in our institute. For the expansion of hostel, 3
years is perfect time where we will be able to gauge the demand where the number of students
enrolled is well above the capacity of the hostel, thus giving us an idea of the popularity for such
services. For increased course variety offer, investment needs to go into faculty training and into
capacity development. In order to gauge the demand we feel the perfect timing would be after we
have achieved the current plan, i.e. after 6 years i.e. FY2022.
A common framework for all the three investment options is shown below:
Invest
Yes
P
Decision to invest
High Demand
1-P
P
Dont Invest
No
P
The value of such options cannot be computed precisely as the future projected numbers with
probabilities are not available.
32 | P a g e
Acumen Education
FY18E
FY19E
FY20E
FY21E
FY22E
FY23E
FY24E
FY25E
Share Capital
115.8
115.8
115.8
115.8
115.8
115.8
115.8
115.8
115.8
Retained Earnings
(78.9)
(124.2)
(116.5)
(83.3)
(26.5)
49.1
137.7
222.6
323.1
Term Loan
468.9
421.3
368.4
309.6
244.1
171.2
90.2
0.0
0.0
Working Capital
Revolver
Trade Payables
82.0
141.6
153.8
150.0
131.7
104.8
74.8
58.9
0.0
1.9
3.7
5.6
6.6
7.3
7.6
8.0
8.4
8.8
Total
589.6
558.3
527.1
498.7
472.4
448.6
426.4
405.7
447.7
580.0
545.4
514.2
485.7
459.4
435.0
412.2
390.9
370.8
Stock
0.7
1.3
1.5
1.6
1.7
1.8
1.9
2.0
2.1
0.4
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.0
6.2
9.5
10.0
10.4
10.9
11.4
12.0
12.5
74.8
2.3
1.7
1.1
0.6
0.0
0.0
0.0
0.0
0.0
Total
589.6
558.3
527.1
498.7
472.4
448.6
426.4
405.7
447.7
Liabilities
Assets
33 | P a g e
Acumen Education
Statement for Profit and Loss for Years Ended (Rs mn)
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
31.50
73.24
126.51
148.47
164.09
172.30
180.91
189.96
199.46
9.45
40.95
2.20
8.32
3.78
0.53
4.28
2.05
21.97
95.21
2.20
16.38
7.69
0.55
4.95
4.76
37.95
164.47
2.20
26.37
11.39
0.58
5.81
8.22
44.54
193.01
2.20
27.69
13.36
0.61
6.19
9.65
49.23
213.32
2.20
29.07
14.77
0.64
6.48
10.67
51.69
223.99
2.20
30.53
15.51
0.67
6.67
11.20
54.27
235.19
2.20
32.06
16.28
0.71
6.86
11.76
56.99
246.95
2.20
33.66
17.10
0.74
7.07
12.35
59.84
259.29
2.20
35.34
17.95
0.78
7.29
12.96
0.56
0.56
0.56
0.56
0.56
1.58
23.29
3.66
40.76
6.33
61.46
7.42
67.69
8.20
72.60
8.61
75.39
9.05
78.91
9.50
82.62
9.97
86.50
56.9%
42.8%
37.4%
35.1%
34.0%
33.7%
33.6%
33.5%
33.4%
EBITDA
17.66
54.45
103.01
125.32
140.72
148.60
156.27
164.33
172.79
EBITDA Margin
43.1%
57.2%
62.6%
64.9%
66.0%
66.3%
66.4%
66.5%
66.6%
39.04
(21.38)
34.62
19.83
31.21
71.80
28.50
96.82
26.27
114.45
24.40
124.20
22.78
133.49
21.36
142.97
20.09
152.70
EBIT Margin
-52.2%
20.8%
43.7%
50.2%
53.7%
55.4%
56.8%
57.9%
58.9%
Interest Expenses
PBT
57.56
(78.94)
65.05
(45.22)
64.17
7.63
63.60
33.22
57.61
56.83
48.59
75.61
37.00
96.49
23.61
119.36
10.02
142.67
PBT Margin
192.8%
-47.5%
4.6%
17.2%
26.6%
33.8%
41.0%
48.3%
55.0%
Taxes Due
PAT
(78.94)
(45.22)
7.63
33.22
56.83
75.61
7.96
88.52
34.45
84.91
42.16
100.51
PAT Margin
192.8%
-47.5%
4.6%
17.2%
26.6%
33.8%
37.6%
34.4%
38.8%
34 | P a g e
Acumen Education
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
(78.9)
(45.2)
7.6
33.2
56.8
75.6
96.5
119.4
142.7
Depreciation
39.0
34.6
31.2
28.5
26.3
24.4
22.8
21.4
20.1
Preliminary Expenses
Written Off
Interest on Term Loan
0.6
0.6
0.6
0.6
0.6
0.0
0.0
0.0
0.0
57.6
52.8
47.4
41.4
34.8
27.5
19.3
10.1
0.0
0.0
12.3
16.8
22.2
22.8
21.1
17.7
13.5
10.0
18.2
55.0
103.6
125.9
141.3
148.6
156.3
164.3
172.8
0.7
1.3
1.7
0.8
0.6
0.3
0.3
0.3
0.6
18.9
56.3
105.3
126.7
141.9
148.9
156.6
164.7
173.4
18.9
56.3
105.3
126.7
141.9
148.9
148.6
130.2
131.2
82.0
59.6
12.2
(3.8)
(18.3)
(26.9)
(30.0)
(15.9)
(58.9)
(57.6)
(52.8)
(47.4)
(41.4)
(34.8)
(27.5)
(19.3)
(10.1)
0.0
0.0
(12.3)
(16.8)
(22.2)
(22.8)
(21.1)
(17.7)
(13.5)
(10.0)
Loan Repayment
(42.8)
(47.6)
(52.9)
(58.9)
(65.5)
(72.9)
(81.1)
(90.2)
0.0
(18.3)
(53.0)
(104.8)
(126.2)
(141.4)
(148.4)
(148.1)
(129.6)
(68.9)
0.6
3.3
0.4
0.5
0.5
0.5
0.5
0.6
62.3
6.2
9.5
10.0
10.4
10.9
11.4
12.0
12.5
74.8
5.6
6.2
9.5
10.0
10.4
10.9
11.4
12.0
12.5
6.2
9.5
10.0
10.4
10.9
11.4
12.0
12.5
12.5
(81.4)
(56.3)
(11.8)
4.2
18.8
27.4
30.6
16.4
121.2
35 | P a g e
Acumen Education
Annexure
A1. Building Construction Cost
1. Academic block includes 3 floors with areas of 1500 Sq. metre each.
2. Hostel will include 2 blocks one with 4 floors and the other with 5 floors. The cumulative capacity of the
9 floors would be 450 students.
Building
Parameters
Academic Block
48,420
3,500
169.4
Library
Hostel
7,000
90,000
3,500
3,000
24.5
270.0
Total
1,45,420
Rooms Design,
Specification
Number
&
463.9
39.27
36 | P a g e
Particulars
2.5% of construction Cost
900 students capacity @ Rs5,000 per student
17 rack and chair units @ Rs10,000 per unit
450 rooms @10,000 per room
Acumen Education
A4. SG&A Expenses (in Rs. Mn)
1. We have assumed that the electricity charges are Rs. 5/unit and have appreciated at the rate of
5% YoY. The rate is in line to current commercial rate.
2. Electricity usage is based on the average electricity usage in each room and by each computer.
3. Library running costs involved the magazines, newspapers and online gateway subscriptions.
4. We have provided for 0.5% of fees collected for various student related activities. Cost of
stationery and teaching material costs have been approximated to be 1% of total fees collected
each year.
5. Insurance costs are approximated to be 0.080% of the net assets. Hence it will decrease with
time due to depreciation.
Items
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
Electricity Costs
0.73
0.77
0.82
0.86
0.90
0.95
1.00
1.05
1.10
2.01
2.01
2.02
2.02
2.02
2.02
2.02
2.02
2.02
Internet Connection
Expenses
0.60
0.63
0.66
0.69
0.73
0.77
0.80
0.84
0.89
Student Activities
0.16
0.37
0.63
0.74
0.82
0.86
0.90
0.95
1.00
0.32
0.73
1.27
1.48
1.64
1.72
1.81
1.90
1.99
0.46
0.44
0.41
0.39
0.37
0.35
0.33
0.31
0.30
Total
4.28
4.95
5.81
6.19
6.48
6.67
6.86
7.07
7.29
37 | P a g e
Acumen Education
Particulars
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
8.32
16.3
26.3
27.6
29.0
30.5
32.0
33.6
35.3
Marketing Expenses
0.53
0.55
0.58
0.61
0.64
0.67
0.71
0.74
0.78
Electricity Costs
0.73
0.77
0.82
0.86
0.90
0.95
1.00
1.05
1.10
Internet Expense
0.60
0.63
0.66
0.69
0.73
0.77
0.80
0.84
0.89
Student Activities
0.16
0.37
0.63
0.74
0.82
0.86
0.90
0.95
1.00
3.78
7.69
11.3
13.3
14.7
15.5
16.2
17.1
17.9
0.32
0.73
1.27
1.48
1.64
1.72
1.81
1.90
1.99
Other Expenses
1.58
3.66
6.33
7.42
8.20
8.61
9.05
9.50
9.97
2.20
2.20
2.20
2.20
2.20
2.20
2.20
2.20
2.20
2.01
2.01
2.02
2.02
2.02
2.02
2.02
2.02
2.02
Maintenance Cost
2.05
4.76
8.22
9.65
10.6
11.2
11.7
12.3
12.9
Insurance Cost
0.46
0.44
0.41
0.39
0.37
0.35
0.33
0.31
0.30
0.56
0.56
0.56
0.56
0.56
Total Opex
23.2
40.7
61.4
67.6
72.6
75.3
78.9
82.6
86.5
16.0
30.7
48.0
52.8
56.7
59.6
62.6
65.7
69.0
7.29
9.98
13.4
14.8
15.8
15.7
16.3
16.8
17.4
68%
75%
78%
78%
78%
79%
79%
79%
79%
Variable Components
Fixed Components
FY2015E
16.16
FY2016E
32.31
0.25
0.75
0.62
0.10
0.58
1.10
18.81
0.18
1.87
0.10
0.58
2.20
38.00
56.81
Acumen Education
A7. Balance Sheet of FY 2016E
This is the balance sheet at the end of Y0 or FY2016E. This includes the capitalized interest in both
assets and term loan.
Liabilities
Share Capital
( Rs Mn)
115.75
Term Loan
Total
511.47
627.23
Assets
Net Fixed Assets
Cash & Bank Balances
Preliminary Expenses
Total
(Rs Mn)
618.82
5.58
2.82
627.23
Initial
503.24
6.69
20.77
1.00
0.67
532.3
39 | P a g e
Share of
Preoperative
53.70
0.71
2.22
0.11
0.07
56.81
Share of
Contingency
28.24
0.38
1.17
0.06
0.04
29.88
Total
585.1
7.77
24.15
1.16
0.78
619.0
Acumen Education
A9. Revenue Analysis
Particulars
FY2017E
Per Student Fees (Rs Mn)
0.15
Per Student Hostel Fees (Rs Mn)
0.09
2017E
300
210
23%
70%
2018E
300
465
52%
85%
Hostel Capacity
Hostel Utilization
450
23%
450
52%
450
85%
450
95%
450
100%
450
100%
450
100%
450
100%
450
100%
31.5
9.5
41.0
73.2
22.0
95.2
126.5
38.0
164.5
148.5
44.5
193.0
164.1
49.2
213.3
172.3
51.7
224.0
180.9
54.3
235.2
190.0
57.0
246.9
199.5
59.8
259.3
PBT as per
P&L
(+) Dep. As per
P&L
(-) Dep. As per
IT Act
Taxable
Income
EBDT Tax
EBDT Post
Absorption of
EBDT Loss
Dep.
Taxable
Income Post
Absorption of
Unabsorbed
Dep.
Tax Payable
40 | P a g e
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
(78.9)
(45.2)
7.6
33.2
56.8
75.6
96.5
119.4
142.7
39.0
34.6
31.2
28.5
26.3
24.4
22.8
21.4
20.1
65.8
56.9
50.3
44.9
40.2
36.1
32.5
29.2
26.3
(105.7)
(67.5)
(11.4)
16.9
42.9
63.9
86.8
111.5
136.4
(39.9)
(10.6)
38.8
61.7
83.1
100.0
119.3
140.7
162.8
50.1
83.1
100.0
119.3
140.7
162.8
(65.8)
(56.9)
(50.3)
(44.9)
(40.2)
(36.1)
(32.5)
(29.2)
(26.3)
25.8
111.5
136.4
8.0
34.4
42.2
Acumen Education
A11. Personnel Expenses
Particulars
Students enrolled
Teacher : student
Professors / Lecturers
required
Avg. Salary/year (Rs
Mn)
Total Costs for
Professor (Rs Mn)
Ratio of Professors to
Supp. Staff
Support staff
(Administration)
Average Salary per
year (Rs Mn)
Total Admin Staff Cost
(Rs Mn)
Ratio of Profs. to
cleaning staff
Other Staff
Average Salary per
year (Rs Mn)
Total Support Staff
Costs (Rs Mn)
Total Personnel Costs
41 | P a g e
2017E
210
40
8
2018E
465
40
15
2019E
765
40
23
2020E
855
40
23
2021E
900
40
23
2022E
900
40
23
2023E
900
40
23
2024E
900
40
23
2025E
900
40
23
0.80
0.84
0.88
0.93
0.97
1.02
1.07
1.13
1.18
6.4
12.6
20.3
21.3
22.4
23.5
24.7
25.9
27.2
4.00
7.50
11.50
11.50
11.50
11.50
11.50
11.50
11.50
0.36
0.38
0.40
0.42
0.44
0.46
0.48
0.51
0.53
1.44
2.84
4.56
4.79
5.03
5.28
5.55
5.83
6.12
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
4.00
0.12
7.50
0.13
11.50
0.13
11.50
0.14
11.50
0.15
11.50
0.15
11.50
0.16
11.50
0.17
11.50
0.18
0.48
0.95
1.52
1.60
1.68
1.76
1.85
1.94
2.04
8.3
16.4
26.4
27.7
29.1
30.5
32.1
33.7
35.3