APPENDIX 6A : VEGETRON LIMITED: A CASE STUDY ON FINANCIAL PROJECTIONS

Cost of Project and Means of Finance

Land and site development
Building
Plant and machinery
Miscellaneous fixed assets(Evacuation Cost up to Interconnection point (Cables and Transformer))
Preliminary expenses
Pre-operative expenses ( including interest during construction)
Contingency margin(5% of fixed cost)

Working capital margin

TOTAL
The proposed means of finance
Share capital
Term loans
State government's special incentive

No.of equal term loan instalments

Period of each instalment in years
First instalment falling due at the end of operating year
Interest rate on the outsanding term loan amount
Current asset/liability requirements

Raw materials(including consumables)

Stock-in- process
Finished goods
Book debt
Trade credit
No. of equal annual instalments in which preliminary expenses will be written off
Applicable income tax rate
Deduction allowed on Gross total income

Exhibit 6A.1 : Interest on Term Loans

Year
1
2
3
4
5
6
7
8
9
10
Year
Installed capacity units
Production in units
Capacity utilisation
Sales realisation(Rs.million)

Ex

Item
Raw materials(including consumables)
Stock-in-process
Finished goods
Book debts
Total current assets
Less: Margin for working capital from long-term sources(25% of total current
assets)
Less: Trade credit for raw materials and consumable stores
Bank finance for working capital

Year
Building
Plant & machinery & misc. fixed assets
Total

Year
A. Sales realisation
B.Cost of production
Raw materials
Power
Wages and salaries
Factory overheads
C. Administration & selling expenses
Administration expenses
Selling expenses
D. Gross profit before interest
E. Total financial expenses
Interest on term loans
Inerest on bank borrowing
F.Depreciation
G. Operating profit
H. Preliminary expenses written off
I. Profit/Loss before tax
J. Provision for tax
K. Profit after tax
L. Less: Dividend
M. Retained profit
N. Add: Depreciation
Preliminary expenses written off
O. Net cash accruals

Year
Profit/loss before tax
Add: depreciation for company law purposes
Less: depreciation for tax purposes
Less: unabsorbed depreciation of earlier years
Gross total income
Less deduction u/s 80 I at 30% from gross total income for 10 years
Total income
Income tax @ 33.99%

Year
Sources of Funds
Share issue
Profit before taxation with interest added back
Depreciation
Preliminary expenses written off
Increase in secured medium and long- term borrowings
Increase in bank borrowings for working capital

Increase in the State Govt's Special Incentive

Total ( A)
Disposition of Funds
Capital expenditure for the project
Increase in working capital
Preliminary expenses
Decrease in secured medium & long term borrowings
Interest on term loans
Interest on bank borrowings for working capital
Taxation
Dividend
Total (B)
Opening balance of cash in hand and at bank
Net surplus/deficit(A-B)
Closing balance of cash in hand and at bank

Liabilities
Share capital
Reserves and surplus
Secured loans
Term loans
Working capital advance
Unsecured loans
State Govt. subsidy
Current liabilities & Provisions
Total
Assets
Fixed assets
Gross block
Less: Accumulated depreciation
Net fixed assets
Investments
Current assets, loans and advances
Raw materials
Stock-in-process
Finished goods
Book debts
Cash & bank balances
Misc. expenditure & losses
Preliminary expenses
Total

References
http://efficientcarbon.com/services/energy/renewable-energy-advisory/frequently-asked-questions/comment-page-2#comment
http://www.cercind.gov.in/2013/orders/SO243.pdf = Income details
http://www.cercind.gov.in/2013/orders/SO242.pdf Total Cost

By,
V. SRIHARSHA
SRINIVAS PATNANA
CHINTALAPATI JANARDHAN VARMA
TULAYA SHRIVASTAVA

AL PROJECTIONS
(Rs. In millions)
11.13
16.5
23.71
10.5
2
2
3.092

11.5
80.432
(Rs. In million)
22.52096
33.78144
24.1296
80.432

20
0.5
2
13%
Months

0
0
0
0.0
0
10
34%

Loan o/s at the beginning

33.78144
33.78144
32.092368
28.714224
25.33608
21.957936
18.579792
15.201648
11.823504
8.44536

Exhibit 6A.4 : Sales realisa

1
2000
1500
75%
9.74

Exhibit 6A.2 : Working Capital Requirements (Rs.in million)

Norms in months
0
0
0
1.5

Depreciation schedule for income tax purposes ( Written dow

1
2.500
5.150
7.651

Exhibit 6A.5 Profitability Estimates (Estimates of W

1
9.74
0.00
0.00
2.00
0.50
0.30
0.78
6.16
4.39
0.00
2.36
-0.59
0.20
-0.79
0.00
-0.79
-0.79
2.36
0.2
1.76

Exhibit 6A.6 : Tax Calculation

1
-0.79
2.36
1.56
7.65
(6.09)
0.00
0.00
0.00

Exhibit 6A.7 : Projected Cash Flow Statements

Construction period
22.52096

33.78144

24.1296
80.43
66.93
2.00

68.93
11.50
11.50
Exhibit 6A.8 : Projected Balance Sheets
At the end of the construction period

22.52096

33.78144

19.68

75.98

66.93
66.93

11.50
2.00
80.43

equently-asked-questions/comment-page-2#comment-2649 General Data

2011A4PS325H
2011A4PS335H
2011A4PS186H
2011A4PS304H

Land Cost+ Civil and General Works

Power Conditioning Unit+Mounting Structures
PV Modules
Cables and Tranformers

After the government subsidy the net cost is split in 4:6 ratio between share capital and term loans
is 30% of Total Cost

Loan o/s at the end of the first half year

33.78144
33.78144
30.403296
27.025152
23.647008
20.268864
16.89072
13.512576
10.134432
6.756288
Exhibit 6A.4 : Sales realisation
2
2000
1600
80%
10.38

Exhibit 6A.2 : Working Capital Requirements (Rs.in million)

Years
1
0.00
0.00
0.00
0.00
0.00
0.00

0.00

Depreciation schedule for income tax purposes ( Written down value method)
2
2.150
4.434
6.584
Exhibit 6A.5 Profitability Estimates (Estimates of Working Results)

( Rs. In millions)

2
10.38
0.00
0.00
2.00
0.52
0.30
0.83
6.74
4.39
0.00
2.36
-0.01
0.20
-0.21
0.00
-0.21
1.126048
-1.33
2.36
0.2
1.22

Exhibit 6A.6 : Tax Calculation

2
-0.21
2.36
2.15
6.58
(4.44)

( Rs. In million)

0.00
0.00
0.00

Exhibit 6A.7 : Projected Cash Flow Statements

1

3.60
2.36
0.2
0.00

( Rs. In million)

ent-2649 General Data

6.16

0.00
4.39
0.00
0.00
0.00
4.39
11.50
1.76
13.26
Exhibit 6A.8 : Projected Balance Sheets
1
22.52096
-0.79
33.78
0.00
19.68

75.19

66.93
2.36
64.58

0.00
0.00
0.00
0.00
13.26
1.80
79.64

( Rs.in million)

Basic Assumptions
Installed capacity in kilo-units
Year
1
2
3
onwards
Avg cost per unit of electricity

2000
Capacity
utilisation
75%
80%
85%
6.49

Cost of raw materials and

consumables as a percentage of
sales

10%

Cost of power as a percentage of

sales

0%

Wages & salaries during

operating year
1
2
3
Increment per year from 4th year
Factory overhead expenses in
year

(Rs. in million)
2.0
2.0
2.2
0%

At the end of 10 years 90% efficiency

after 5yrs increases

This assumption is taken because we are calculating for current value o

(Rs. in million)
1
0.5
3%
Increment per year from 2nd year
Administrative expenses per year
in Rs.million
0.3
Selling expenses per year in Rs.as
a percentage of sales
8%
Interest rate on working finance

Depreciation rates for

Building
Plant and machinery
Miscellaneous fixed assets

Dividends
Planned to be paid from the year
Rate of dividend planned for the
second year
Increase proposed thereafter once
in years
Percentage of increase

Company law
purposesunder straight
line method
3.34%
4.75%
4.75%

6.5

For income tax

purposes
under WDV
method
14%
Companies Act 1956
13.91%
13.91%

2
5%
2
1%
( Rs.in million)

Loan o/s at the end of the

second half year
33.78144
32.092368
28.714224
25.33608
21.957936
18.579792
15.201648
11.823504
8.44536
6.756288

( Rs. In millions)

3
2000
1700
85%
11.03

Interest for the

first half year
2.20
2.20
2.09
1.87
1.65
1.43
1.21
0.99
0.77
0.55
4
2000
1700
85%
11.03

Total
Interest for the interest for
second half
the term
year
loan
2.20
4.39
2.20
4.39
1.98
4.06
1.76
3.62
1.54
3.18
1.32
2.74
1.10
2.31
0.88
1.87
0.66
1.43
0.44
0.99
5
2000
1700
85%
11.03

6
2000
1700
85%
11.05

7
2000
1700
85%
11.05

Exhibit 6A.3: Depreciation Schedules (Rs.in million

Asset valuation for depreciation purpos

2
0.00

3
0.00

0.00

0.00

0.00
0.00
0.00

0.00
0.00
0.00

0.00

0.00

0.00

0.00

3
1.849
3.817
5.666

4
1.590
3.286
4.877

Asset
expenses
Land
Building
Plant &
machinery
Misc.fixed
assets

Basic cost
11.13
16.5
23.71
10.5

Depreciation schedule for Company Law pur

5
1.368
2.829
4.197

Building
Plant &
machinery
Misc.fixed
assets
Annual
depreciation

3.34%

6
1.176
2.436
3.612

7
1.012
2.097
3.108

4.75%
4.75%

3
11.03

4
11.03

5
11.03

6
11.05

7
11.05

0.00
0.00
2.20
0.53

0.00
0.00
2.20
0.55

0.00
0.00
2.20
0.56

0.00
0.00
2.20
0.58

0.00
0.00
2.20
0.60

0.30
0.88
7.12

0.30
0.88
7.10

0.30
0.88
7.09

0.30
0.88
7.09

0.30
0.88
7.07

4.06
0.00
2.36
0.70
0.20
0.50
0.00
0.50
1.126048
-0.62
2.36
0.2
1.93

3.62
0.00
2.36
1.13
0.20
0.93
0.00
0.93
1.2386528
-0.31
2.36
0.2
2.24

3.18
0.00
2.36
1.55
0.20
1.35
0.00
1.35
1.2386528
0.11
2.36
0.2
2.67

2.74
0.00
2.36
1.99
0.20
1.79
0.18
1.61
1.3512576
0.26
2.36
0.2
2.81

2.31
0.00
2.36
2.41
0.20
2.21
0.49
1.71
1.3512576
0.36
2.36
0.2
2.92

3
0.50
2.36
2.86
5.67
(2.81)

4
0.93
2.36
3.28
4.88
(1.60)

5
1.35
2.36
3.70
4.20
(0.49)

6
1.79
2.36
4.14
3.61
0.53

7
2.21
2.36
4.56
3.11
1.46

0.00

0.00

0.00

0.53

1.46

0.00
0.00

0.00
0.00

0.00
0.00

0.53
0.18

1.46
0.49

4.18
2.36
0.2

4.56
2.36
0.2

4.55
2.36
0.2

4.53
2.36
0.2

4.53
2.36
0.2

0.00

0.00

million)

6.74

7.12

7.10

7.09

7.09

1.69
4.39
0.00
0.00
1.13
7.21
13.26
(0.47)
12.80

3.38
4.06
0.00
0.00
1.13
8.57
12.80
(1.45)
11.35

3.38
3.62
0.00
0.00
1.24
8.24
11.35
(1.14)
10.21

3.38
3.18
0.00
0.00
1.24
7.80
10.21
(0.71)
9.50

3.38
2.74
0.00
0.18
1.35
7.65
9.50
(0.57)
8.93

22.52096
-2.13

22.52096
-2.75

22.52096
-3.06

22.52096
-2.95

22.52096
-2.70

32.09
0.00

28.71
0.00

25.34
0.00

21.96
0.00

18.58
0.00

19.68

19.68

19.68

19.68

19.68

72.17

68.17

0.00
64.48

0.00
61.21

0.00
58.08

66.93
4.71
62.22

66.93
7.07
59.87

66.93
9.42
57.51

66.93
11.78
55.16

66.93
14.13
52.80

0.00
0.00
0.00
0.00
12.80

0.00
0.00
0.00
0.00
11.35

0.00
0.00
0.00
0.00
10.21

0.00
0.00
0.00
0.00
9.50

0.00
0.00
0.00
0.00
8.93

1.60
76.62

1.40
72.62

1.20
68.92

1.00
65.66

0.80
62.53

s.in million)
Years
2

are calculating for current value of the Rupee and as effect of inflation is shown both on salaries and profits the effect will be negated

8
2000
1700
85%
11.05

9
2000
1700
85%
11.05

10
2000
1700
85%
11.05

ation Schedules (Rs.in million)

uation for depreciation purposes
Share of
Share of continge
preoperat ncy
ive cost margin
Total
0.36
0.56
12.05
0.53
0.83
17.86
0.77

1.19

25.66

0.34

0.53

11.36

chedule for Company Law purposes

0.60

(Rs.in millions)

1.22
0.54

Companies Act 1956

2.36

8
0.870
1.805
2.675

(Rs.in millions)
9
10
0.748
0.643
1.554
1.338
2.302
1.981

8
11.05

9
11.05

10
11.05

0.00
0.00
2.20
0.61

0.00
0.00
2.20
0.63

0.00
0.00
2.20
0.65

0.30
0.88
7.05

0.30
0.88
7.03

0.30
0.88
7.01

1.87
1.43
0.99
0.00
0.00
0.00
2.36
2.36
2.36
2.83
3.25
3.67
0.20
0.20
0.20
2.63
3.05
3.47
0.79
1.05
1.31
1.84
2.00
2.16
1.463862 1.463862 1.576467
0.38
0.53
0.59
2.36
2.36
2.36
0.2
0.2
0.2
2.94
3.09
3.14

8
2.63
2.36
4.98
2.68
2.31

9
3.05
2.36
5.41
2.30
3.10

10
3.47
2.36
5.83
1.98
3.84

2.31

3.10

3.84

2.31
0.79

3.10
1.05

3.84
1.31

10

4.51
2.36
0.2

4.50
2.36
0.2

4.48
2.36
0.2

4.46
2.36
0.2

7.07

7.05

7.03

7.01

3.38
2.31
0.00
0.49
1.35
7.53
8.93
(0.46)
8.47

3.38
1.87
0.00
0.79
1.46
7.49
8.47
(0.44)
8.03

3.38
1.43
0.00
1.05
1.46
7.32
8.03
(0.29)
7.74

1.69
0.99
0.00
1.31
1.58
5.56
7.74
1.45
9.19

10

22.52096 22.52096 22.52096 22.52096

-2.33
-1.95
-1.42
-0.84
15.20
0.00

11.82
0.00

8.45
0.00

6.76
0.00

19.68

19.68

19.68

19.68

0.00
55.07

0.00
52.07

0.00
49.22

0.00
48.12

66.93
16.49
50.45

66.93
18.84
48.09

66.93
21.20
45.73

66.93
23.55
43.38

0.00
0.00
0.00
0.00
8.47

0.00
0.00
0.00
0.00
8.03

0.00
0.00
0.00
0.00
7.74

0.00
0.00
0.00
0.00
9.19

0.60
59.52

0.40
56.52

0.20
53.67

0.00
52.57

Profits fall as loans are being paid back but from the 10th year profits increase. A

ct of inflation is shown both on salaries and profits the effect will be negated

Profits fall as loans are being paid back but from the 10th year profits increase. A Solar Power Plant is a long term project always.

a long term project always.