PIF Assignment No.

Toms TC No. 36

Project appraisal
Senior Secondary School by Deepika Soni The project is opening a secondary school in urban region. It involves an initial investment of 10 cr. 6 crore is the term loan sought. The owners funds are 2 crore. Marketing appraisal India is yet to achieve 100% enrollment and retention of children with schooling facilities in all regions, urban or rural. Therefore there is a lot of opportunity for private players in this space. Given the considerations of return on investments only urban population can afford this education. The above said project is located in an urban region. The density of schools in the region is 1 in 2 sq km. The proposed project site is slightly on the outskirts which reduces initial investments considerably at the same time does not dent the demand for the services offered. The marketing strategy adopted by the promoter is sound and is focused more locally. The market study is comprehensive and takes into account all the aspects. Moreover the promotional campaigns are also intense and focused. Technical appraisal Training in extra-curriculars and 360 degree development is the key USP that the school is using for promotion. This brings in the desired differentiation in the services offered. The promoters are roping in professional help in designing the architecture of the school. The curriculum and range of services is also vetted by eminent academicians. In terms of teaching professionals they are being picked from among the best in the industry with considerable experience. The promoter are admitting students in all the classes from 1-12 std. each with a capacity of 30 students. They have plans of scaling up in the next two years, depending on the demand. They have already been given approval from the Education ministry and other procedural issues have been sorted out already. They are also looking at accredition by foreign educational institutions to give combined courses and increase international exposure right from the secondary level itself. Financial appraisal The overall outlay of capital expenditure is reasonable. Preoperative expenses including advertising and initial cash losses, licensing fees also are optimally stated. The project being in the service industry doesnt require much of variable costs and the fixed cost component initially might be in capital expenditure, but over the years salaries and overheads would contribute to the fixed costs, unless the company does not go into further expansion IRR of the project: 22% - this is higher than the cost of project taken to be 10% ROI: 41% (average of 5 years)

PIF Assignment No. 7

Toms TC No. 36

DSCR:

Year A. Total Cash Accruals PAT Depn Int on TL Total B. Debt Service Int on TL Repayment of TL Total

3.5 0.5 0.2 4.2

3.75 0.5 0.2 4.45

4.0 0.5 0.2 4.7

4.9 0.5 0.2 5.6

5.5 0.5 0.2 6.2

0.2 0.2

0.2 0.2

0.2 0.2

0.2 1 1.2

0.2 1 1.2

Total cash accrual = 25.15 Total debt service burden = 3. DSCR = 8.38 D/E ratio for the five year period

Year Equity Debt D/E ratio

1 2.0 6.0 3

2 2.0 9.5 4.75

3 2.0 12.0 6.0

4 2.0 12 6.0

5 2.0 11.5 5.75

Economic appraisal From the larger socio economic point of view the project is viable. Education is one of the thrust areas for the Government and they are implementing a host of initiatives in collaboration with the world bank. A recent report on education trends suggest that of the 200 mn children in the age group 6-14, 59

PIF Assignment No. 7

Toms TC No. 36

mn are not attending school. Inadequate school infrastructure, high teacher absenteeism, poor quality of education and inadequate funds are some other issues which India is grappling with. The project has immense socio economic benefit to the society

Managerial appraisal The promoter herself is a known figure in academic circles and brings to the board her 20 years of managerial experience in handling a secondary school. The persons on advisory board are among the whos who of cities academicia. The site on which the building is constructed is owned by the promoter. The capital infused by the owners from their own funds is substantial to show the commitment towards the project

The project has a viable business model to leverage the large and growing unfulfilled demand for quality educational infrastructure and learning services, and requires the requisite capital.