SCMHRD: MBA, Batch of 2019-21
Advanced Corporate Finance (Term 2) – Project submission
Students are required to undertake a project on any one of the topics listed below.
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Students can either work individually or in teams with a maximum of 4 students per team.
Each team will be required to make and submit a project report including the assumptions and
detailed workings.
Each team will be required to make a presentation on the project (not more than 45 mins).
Project submission deadline 26 January 2020. Presentations will occur in the last week of
January 2020 (tentative). Final dates will be communicated closer to date.
Project reports should be clearly worded, precise and include an analysis and discussion on the
relevant factors including any theory/theories referred to.
Use of charts and graphical ways to explain concepts, etc is encouraged, but should not be seen
as a substitute for explanations.
Report and any table/charts should include the sources for the information. Kindly use reputed
sources of information (e.g. Bloomberg, Reuters, government websites, information from
corporates, etc).
Topics for the projects
1.
2.
3.
4.
Project bid proposal
Portfolio risk/return analysis
To be announced in Jan
To be announced in Jan.
Details of the individual project is on the following pages.
Project Topic 1: Project bid proposal
You have been approached by Adani Green Energy Limited (AGEL) to be an advisor to it in the
upcoming Solar Energy Corporation of India’s Wind energy auctions. As a developer, AGEL intends to
bid for 200-250MW of capacity at the auction with power from the wind farms owned by AGEL to be
supplied to SECI via the ISTS mechanism.
Aside from the standard SECI & PPA terms, the following information is available:
1. AGEL has three land parcels which can be used: Bhuj (Gujarat), Aurangabad (Maharashtra) and
Tiruppur (Tamil Nadu). Unused land parcels can be leased out to competing firms @ Rs. 50
lakh/yr (Guj), Rs. 20lakh/yr (Aurangabad) and Rs. 70 lakh/yr (TN) or retained by AGEL for future
bids.
2. AGEL has decided to use either Suzlon’s S128-2.6MW turbine or Siemens Gamesa’s SG-2.6-114
wind turbine model. Suzlon’s turbine costs Rs. 6cr/MW with an availability factor of 95% and a
0.25% p.a. reduction in utilisation rates from year 17 onwards, while Gamesa’s turbine costs Rs.
7cr/MW with availability factor of 98.5% and 0.25% p.a. reduction in utilisation from year 21
onwards. This can be offset by product upgrades at 3% of the original cost indexed for inflation.
3. Freight costs will be Rs. 25/km. AGEL will also be required to incur costs for foundations and
installation of turbines (balance of plant) at the wind farm in line with industry standards.
4. AGEL’s wind farms will be connected to the electricity grid via interconnection points which are
at a distance of 80km from each site. The electricity infrastructure until the point of
interconnection is AGEL’s responsibility.
AGEL has also provided the following information:
1. The wind farms will need to be commissioned within 18 months from winning the bid with
potential for delays upto 6 months. A 25-yr fixed rate Power Purchase Agreement (PPA) with SECI
for electricity produced sta6rts at the end of 18 months. Collection period is 6-months.
2. Wind speeds in Gujarat and Tamil Nadu range from 7-9m/s and 6-8m/s in Aurangabad for 75 days
in a year and below 3m/s for the rest of the year. (tip: use ‘power curves’ of the turbines). AGEL
has committed to a min. of 20% utilisation factor. Shortfall will be made up by procuring
electricity from the spot market while surplus can be sold.
3. Other direct & indirect costs and investments will be in-line with the average for AGEL’s existing
project portfolio and will rise in-line with the general inflation.
4. AGEL will depreciate the wind farm in-line with the rates provided in the Income Tax Act. The
government has offered a 10-year tax holiday for project in Aurangabad after which AGEL will pay
taxes at 35%.
5. AGEL will be required to invest a min. of 20% equity in the project, but they can go upto 40%, if
cost of debt is >200bp above current borrowing rates. AGEL will do the project only if it creates
value for the shareholders after allocating Rs. 25cr in annual corporate overheads.
AGEL has tasked you with preparing a detailed project report with the feasibility to set up wind
farms and come up with a range of prices per unit of electricity (Rs/kwH) that it can bid for at the
auctions along with related sensitivities/scenarios. AGEL has agreed to pay a fixed fee of Rs. 25 lakh
and 0.2% of the 1st year revenue if it is successful in winning the bid.
Project Topic 2: Portfolio risk/return analysis
You are a well-regarded expert on portfolio analysis. Your friend, a leading financial advisor
approaches you, seeking your help to construct a bespoke portfolio for some of his high net worth
investors.
He has made the following information available to you.
a. As a starting point he intends to select the best option from the following three portfolio’s.
b. He then intends to refine this by combining the three portfolios in appropriate quantities so as to
produce the best possible risk/return trade-off for his clients.
c. His clients are quite sophisticated, so he expects that at the end of one-year, his clients would
like to diversify the portfolio to one or more of the following stocks listed in the USA: Amazon
Inc, Alphabet, Honeywell International, Kellogs and Exxon Mobil.
d. His clients would however not like to add to the number of stocks in the portfolio, so any
addition of US stocks would have to be compensated by fully selling down one of the original
investments. The total investment in US stocks should be between 5-20% of the portfolio at
inception.
e. His clients are also open to the idea of using Indian government bonds as part of the strategy, if
needed.
f. All returns are calculated in Indian rupee terms and on an after tax basis.
You are required to make a detailed report for the prospective portfolio(s) keeping the requirements
in mind. Your friend has requested you to support your recommendation with simulation analysing
the risk/return of the suggested portfolio(s) using the data for the past 10-years since his investors
have a long-term time horizon.
Portfolio A
Name of the Instrument
% to Net
Assets
Equity & Equity related
Name of the Instrument
Dabur India Limited
% to Net
Assets
2.52%
HDFC Bank Limited
7.76%
Voltas Limited
2.50%
ICICI Bank Limited
5.66%
Torrent Pharmaceuticals Limited
2.44%
Infosys Limited
5.08%
Eicher Motors Limited
2.32%
State Bank of India
4.31%
JK Cement Limited
2.14%
Larsen & Toubro Limited
4.20%
Balkrishna Industries Limited
1.97%
Reliance Industries Limited
3.46%
1.95%
Hindustan Petroleum Corporation Limited
3.13%
Cholamandalam Investment and
Finance Company Limited
Kansai Nerolac Paints Limited
Syngene International Limited
3.12%
Dr. Lal Path Labs Limited
1.88%
Britannia Industries Limited
2.94%
Whirlpool of India Limited
1.54%
HDFC Life Insurance Company Limited
2.92%
Bajaj Finance Limited
1.49%
Gujarat State Petronet Limited
2.89%
Page Industries Limited
1.46%
IndusInd Bank Limited
2.79%
Emami Limited
1.39%
SKF India Limited
2.78%
Indian Energy Exchange Limited
Larsen & Toubro Infotech Limited
2.69%
Sub Total
Max Financial Services Limited
2.65%
Cash & Others
14.28%
Maruti Suzuki India Limited
2.57%
GRAND TOTAL
100.00%
1.91%
1.25%
85.72%
Portfolio B
Portfolio C
Company/Issuer/Instrument
% to Nav
Name
Equity & Equity Related Instruments
72.63%
Bharti Airtel Ltd.
Company/Issuer/Instrument
% to
Name
Nav
Equity & Equity Related Instruments
94.66%
Bajaj Finance
8.48%
Bajaj Finserv
7.66%
8.62%
Reliance Industries
7.31%
7.28%
8.10%
Kotak Mahindra Bank
NTPC Ltd.
7.15%
HDFC Bank
6.79%
Infosys Ltd.
6.78%
TCS
5.85%
ITC Ltd.
6.46%
Avenue Supermarts
5.80%
Mahindra & Mahindra Ltd.
5.41%
HDFC Limited
5.12%
4.75%
Sun Pharmaceutical Industries Ltd.
5.39%
Asian Paints
HCL Technologies Ltd.
4.90%
Bandhan Bank
4.61%
Gujarat Pipavav Port Ltd.
4.24%
Pidilite Industries
4.48%
4.15%
Supreme Industries
4.33%
3.38%
Info Edge (India) Ltd
4.29%
3.33%
Maruti Suzuki India
3.51%
2.78%
ICICI Bank
3.14%
2.50%
Shree Cement
2.67%
1.66%
Indian Oil Corporation Ltd.
GAIL (India) Ltd.
Wipro Ltd.
State Bank Of India
Interglobe Aviation Ltd.
LIC Housing Finance Ltd.
2.15%
V-Guart Industries
Vedanta Ltd.
1.95%
WABCO India
1.46%
Amara Raja Batteries Ltd.
1.64%
Cummins India
1.44%
1.60%
Divi's Laboratories
1.42%
1.30%
Eicher motors
0.91%
1.28%
Tech Mahindra
0.86%
0.39%
Endurance Technologies
Motherson Sumi Systems Ltd.
Bharat Heavy Electricals Ltd.
Grasim Industries Ltd.
Sun TV Network Ltd.
Vodafone Idea Ltd.
Cash & GSEC's
Total Net Assets
16.50%
100.00%
Cash, etc
Total Assets
0.84%
5.34%
100.00%