Project Background

Department of Sports and Youth Welfare (DSYW), Government of Madhya Pradesh (GoMP), Authority had decided to undertake the development of Sports City Project at Satgarhi Village in Bhopal, Madhya Pradesh comprising of 172 acres of land on Public-Private Partnership (PPP) basis. The Sports City shall comprise of Sports Infrastructure and Other Allied Infrastructure. As per the proposal, a Sports Infrastructure of international standards is to be developed on a land area of 50 acres and Other Allied Infrastructure on an area of 122 acres. Project was awarded to Essel Infraprojects Ltd (EIL) for a concession period of 99 years. The Sponsor Company is part of the Essel Group. In terms of the new Model Concession Agreement, the bid parameter was Bid Premium for the land; the concessionaire had quoted Rs. 18.9 crores as Bid Premium at the time of bid submission. The scope of project includes: Development of Sports Infrastructure on Built & Transfer (BT) basis to be handed over to the Sports Authority within a period of 3 years and Development of Other Allied Infrastructure which includes 9-hole golf course, 5 star hotel, residential and commercial facilities on Built Own Operate and Transfer (BOOT) basis. The Letter of Acceptance (LOA) was issued to EIL on 9th September, 2008 and the Concession Agreement (CA) was executed on 10th September, 2008 for implementing the project. As per the terms of Concession Agreement, the financial close is to be achieved by 9th March, 2009. Further, as per letter dated 21.12.2010 from Directorate of Sports & Youth Welfare, M.P, it was confirmed that the Concession Agreement is still in force and the company was advised to achieve financial closure at the earliest. The Total Project Area is 172 acres with Development of Sports Infrastructure over an area of 50 acres and Other Allied Infrastructure Development over an area of 122 acres. Development of Sports Infrastructure will include of following activities: Cricket Stadium-International level. Outdoor Sports Complex -International level (with Athletics Track, Hockey Turf, Volleyball, Football etc.) Indoor Sports Multipurpose Hall Aquatic Center - All weather Tennis Center Complex Internal and external electricity fittings, floodlights and electric substation (flood lights for Cricket, Hockey, Basket ball, Volleyball, Football courts/grounds etc.) Administrative Building Residential accommodation for players and coach Water supply and sanitary fittings Land Development & Horticulture

Sports Infrastructure shall be constructed by the concessionaire in Built & Transfer (BT) scheme and handed over to Department of Sports and Youth Welfare, Government of Madhya Pradesh after a period of 3 years. All revenue and expenditure including O&M cost shall accrue to the Govt. after handing over. However, the concessionaire has the first right of refusal for the O&M activity. Development of Other Allied Infrastructure will include of following activities: Golf Course (9-hole) Villas Residential Complex 5 Star Hotel Shopping Mall Conventional center Commercial Shops/Offices etc Multiplex / Entertainment Zone

Area of 122 acres will be entitled for Other Allied Infrastructure for which the concessionaire can undertake the development of above proposed activity. This development would be on BuildOwn-Operate-Transfer (BOOT) basis for a period of 99 years. All revenue and expenditure including O&M cost shall accrue to the private entrepreneur. Break-up of Maximum permissible Built-Up Area for Bhopal Sports City Project is as follow:Permissible BUA Residential Commercial Golf Course Club House Total BUA - Other Allied Infrastructure Sports Infrastructure Total Project BUA BUA in Sqft. 5,118,524.19 1,306,857.24 98,006.22 6,523,387.65 1,400,504.04 7,923,891.69

The total project cost has been estimated at Rs. 1,462.01 crore. The project cost includes Base Capital Expenditure consisting of site preparation works, construction cost, infrastructure development cost for both Sports Infrastructure and other real estate development undertaken during two phases. The other components of the project cost include preliminary & pre operative expenses, bid premium paid, financing costs, and interest during first year of construction considered to be funded. Summary of the cost components is shown below: Capital Investment Total Cost

(Rs. In Crore) Sports Infrastructure Development Cost 201.00

Real Estate Development Cost ( Golf Course, 5 star Hotel etc) 1037.67 Bid Premium IDC Pre-Operative Expenditure Contingencies Total Project Cost 18.90 42.51 100.00 61.93 1462.01

The project is divided into 2 phases. Phase I of the project would be the cost incurred till cash break even of the project (i.e till FY 13-14) which is Rs. 992.33 cr. The proposed term loan would be fully availed towards part financing the project cost of 1st phase i.e Rs. 992.33 cr (out of total project cost of Rs. 1462.01 cr) A detailed breakdown of the above costs is as per the table shown below. Rs. In crore Consolidated Capex Components Phase - 1 Phase - 2 Total Cost

Land Cost Cost of land in lieu of sports infra development 201.00 Real Estate Development Golf Course Club House Villas Residential Mall Outright 15.68 98.89 381.44 15.68 0.00 201.00

49.06 147.96 189.24 570.69 56.87 56.87

Commercial Office - Outright Mall Lease Commercial Office - Lease Hotel Convention Centre Multiplex Land Infrastructure Development Cost Golf Course Development Cost Public Amenities Total Real Estate Development Cost Total Project Construction Cost Other Cost Bid Premium IDC Pre-Operative Expenditure Contingencies Total Project Cost 992.33 590.35 791.35

23.68 17.22 9.60 30.50 12.00 1.33

89.43 89.43 24.37 24.37 38.33 38.33 447.32 447.32 23.68 17.22 9.60 30.50 12.00 1.33 1037.67 1238.67

18.90 42.51 100.00 39.57

18.90 42.51 100.00

22.37 61.93 469.68 1462.01

Total funds required till cash break even of the project (i.e Phase I till FY 13-14) is Rs. 992.33 crore. As such the proposed term loan would be fully availed by FY 13-14 towards part financing the project cost of Rs. 992.33 crore (out of total project cost of Rs. 1462.01 cr) to be incurred till cash break even of the project. Balance project cost of Rs. 469.68 cr (post break even i.e FY 14-15 onwards) would be funded entirely out of Advance from buyers/Internal accruals. 5.6. Project Components 5.6.1. Sports Infrastructure/ Mandatory Project Facilities: The company is warranted to undertake the Mandatory Project as per the terms of the Concession Agreement. The same includes the construction of sports infrastructure facilities of International Standards over a land area of 50 acres as listed below. Cricket Stadium Outdoor Sports Complex (with Athletics Track, Hockey Turf, Volleyball, Football etc.)

Indoor Sports Complex Aquatic Center Tennis Center Complex Sports Centre Accommodation for athletes and staff residential areas. Parking Sports Equipment Land Infrastructure Development including open spaces, utilities, electricity fittings, floodlights electric substation and roads In addition to the above mentioned facilities, the company is also mandated to compulsorily construct the following facilities as a part of the other Allied Infrastructure/real estate development A 9-hole Golf Course A 5-star Hotel

The total land area of 172 acres, comprising 50 acres of sports infrastructure development and 122 acres of other real estate development is proposed to be split up as per the following distribution. Developable Area Summary The total developable area for the sports infrastructure is approx 1.4 million square feet distributed as per the table below. The company is obligated to build the Sports Infrastructure as per the below guidelines. Activity - Wise Break - UP Proposed BUA Sq. m SPORTS CRICKET STADIUM AQAUTIC CENTRE INDOOR STADIUM TENNIS COMPLEX OUTDOOR SPORTS FIELD SPORTS CENTRE SPORTS PLAYERS HOSTELS HOUSING FOR STAFF PARKING BLDG 40,000.0 16,000.0 18,000.0 6,000.0 4,680.0 2,350.0 3,080.0 40,000.0 430,560.0 172,224.0 193,752.0 64,584.0 50,375.5 25,295.4 33,153.1 430,560.0 15.0 9% 4.0 2% 3.5 2% 2.5 1% 2.4 1% 1.5 1% 0.5 0% 0.7 0% 2.5 1% Sq.ft Plot Area Acres % Land Allocation

Open Space, Utilities, roads, open parking Total - Sports Infrastructure

130,110.0

1,400,504.0

17.5 10% 50.0 29%

5.6.2. Real Estate Infrastructure: Over the remaining acreage of 122 acres the company proposes to develop a mix of residential, commercial, retail and hospitality components as per the guidelines of the Authority regarding maximum acreage permissible for development of individual segments. Villas Residential Apartments Mall Convention center Commercial Developments Multiplex Developable Area Summary Real Estate Facility The real estate (other allied infrastructure) would have a total developable area of approx 6.63 million square feet distributed over several components as shown in the figure below. The area allocation for individual segments has been fixed by the Authority. The same is shown in the plot area details below. The maximum permissible FAR has also been fixed at 2.50. Within the above guidelines, the company proposes the following distribution. Proposed BUA Activity - Wise Break - UP Sq. m Real Estate Development Sq.ft Acres Plot Area % Land Allocation

Golf Course - Club House

9,105.0

98,006.2 45.0 26%

Villas

52,500.0

565,110.0

Hotel Convention Centre (FREE OF FAR - Capacity 2500 person)

11,000.0

118,404.0

10,000.0

107,640.0

12.0

7%

Mall

40,753.0

438,665.3

Multiplex

5,575.0

60,009.3

Commercial Office

64,082.5

689,784.0 27%

Residential

421,868.0

4,540,987.2

47.0

Public Amenities & Utilities

1,154.0

12,421.7

1.0

1%

Roads

17.0

10%

Total - Real Estate

606,037.5

6,523,387.7

122.0

0.7

Total Project Area

736,147.5

7,923,891.7

172.0

1.0

As shown in the table, the golf course and villas are to be situated on the same parcel of land aggregating to 45 Acres. Similarly, the commercial and retail spaces are proposed to be developed jointly on a parcel of land aggregating to 12 Acres. The land use for residential space development has been fixed at 47 Acres in which the company proposes to build apartments. The total developable area of the project is approximately 8.03 million square feet of which about 4.6 million square feet would be developed in Phase 1 and the remainder of 3.43 million square feet in Phase 2.

5.6.3. Engineering and Procurement Contract - MOU of Essel Infraprojects Ltd and Essel Sports Infrastructure Ltd with Pan India Infrastructure Ltd. Pan India Infrastructures Private Limited (PIIPL) is one of the Engineering, Procurement and Construction (EPC) companies of Essel Group. . Essel Group has, through Essel Infraprojects Limited (EIL) ventured into the Infrastructure space with contracts for roads, sports city, urban infrastructure, family recreation centre, SEZ etc already in its kitty. As one of the EPC companies of Essel Group, PIIPL receives EPC contracts from project specific special purpose vehicles incorporated by Essel Infraprojects Limited (the holding company) for completion of contracts awarded to EIL. Currently, PIIPL has entered into an agreement with EIL /SPVs for completion of 6 road projects, a sports city, a family recreation centre, an education complex etc and the order book stands at an impressive figure of Rs 12000 crore. The order book is set to grow further as more and more projects are awarded.

Out of the above projects, PIIPL had already commenced execution for one of the road projects last year and recorded total revenue of approx. Rs. 389 crore PAT Rs. 8.9 Crs Pan India Infrastructure Private Ltd (PIIPL)has been appointed as EPC contractor for doing the work relating to Engineering, Procurement and Construction of the project as per scope of the project elaborated in para 24.3.1 above in terms of MOU signed on 5th Feb 2011. The estimated EPC cost of the contract is Rs. 1238.67 cr. Essel Infraprojects Ltd (EIL) will be paying an advance of Rs. 20 crore to PIIPL as a payment for the execution of the scope of work. Also, the parties shall enter into a definitive EPC contract within a period of 3 months from the date of signing of the MOU. In case the parties fail to enter into a definitive EPC contract, then PIPL shall be entitled to receive all the costs incurred by it over and above the amount of advance of Rs. 20 crore received by it from (EIL). 5.6.4. Bid Premium: As per Concession Agreement, in consideration of the grant of concession, the Concessionaire shall pay to the Authority, a bid premium of Rs. 18.89 crore. Of which, Rs. 1.89 crore (10% of the total premium) shall be made at the time of signing of the agreement. Rs. 4.72 cr (25% of the total premium) shall be made at the time of complete handing over of the project site to the Concessionaire. 30% of the amount shall be made at the first anniversary of the signing of the agreement. Balance 35% shall be made at the second anniversary of the signing of the agreement. The company has reportedly paid 25% of premium amount paid till date. 5.6.5. Interest during Construction (IDC): IDC has been estimated by assuming an implementation period of 24 months from the zero date of April 2011 and assuming interest cost at 12% and based on average loan availment at Rs. 82.90 cr for FY 10-11 and Rs.271.34 cr for FY 11-12. 5.6.6. Pre-operative expenses Pre-operative expenses of Rs.100 Crore include expenses towards the start-up and commissioning of the Project. Further, we have stipulated a condition that preliminary and preoperative expenses shall be allowed as a part of project cost only to the extent they are found to be reasonable, as examined by LIE, and to the extent they are certified by the auditors of repute that they have been actually incurred by the Borrower and related to the project and have been accepted by the lenders. 5.6.7. Contingency The Project is in its implementation stage. However, to provide against any unforeseen expenditures and variations in the estimates of costs on account of contracts which are yet to be firmed up, a contingency of Rs. 61.93 crore which constitutes around 5% of the hard cost of the project cost.

1.7

Concession Agreement Major Highlights and Obligations

The company has entered into a Concession Agreement with the Department of Sports and Youth Welfare. The key highlights of the same are: 5.7.1. Scope of the Project: The company is obliged to build sports infrastructure and other facilities as required by the terms of the Concession Agreement over a parcel of land aggregating to 50 Acres with a built up area of approximately 1.4 million square feet. The Sports Infrastructure shall include Sports Facilities of International Standards, relevant utilities and accommodation for the athletes and sports staff. The total cost for development of the Sports Infrastructure is Rs. 201 crore. The company proposes to build real estate infrastructure including residential spaces, commercial and retail developments and hospitality projects over the remaining area of 122 acres. The Built up Area for the real estate project is estimated to be 6.63 million square feet. The total construction cost involved in the real estate development is projected to be Rs. 1037.67 crore.

5.7.2. Conditions Precedent: Prior to the Appointed Date (Financial Closure), the company is obligated to complete the following requirements. The company has to make a payment of the bid premium of Rs 18.9 crore to the Authority. Performance security by way of Bank Guarantee for Rs. 20 crore, which shall be used for the payment of damages due to delays and cancellation of the project. ( Bank Guarantee issued by Axis Bank) The company to enter into lease agreement for the real estate development for a period of 99 years. ( Lease Deed already executed on 4th Dec 2008) The company is required to submit the finalized development drawings, master plan, detailed design, construction methodology and any other relevant information to the Authority before the start of the project. Obtaining all relevant approvals, right of way and any other permits, regulatory or otherwise, as defined in the Concession Agreement which may be required for the commencement of construction The signing of a Project Account Agreement for all cash flows related to capital expenditure of the Sports Infrastructure part of the project. The signing of Project Agreements with regards to the Concession Agreement, EPC Contract, O&M Contracts, Real Estate development agreements and any other agreement or contract that may be entered into by the Borrower in matters relating to construction, development and sale of the project. The signing of Substitution Agreement between the Borrower and the Lenders for substitution of the borrower by any nominated party, as maybe agreed upon by the lenders, as a result of any default of the Concession Agreement. Finalization of detailed project implementation schedule, including but not limited to, the project milestones for the duration of construction of the Sports Infrastructure Project and the timelines for construction of Real Estate shall be furnished to the Lenders

Financial closure and execution of financing agreements.

5.7.3. Conditions post Commencement of Construction The mandatory construction of Sports Infrastructure and related facilities is to be completed within a period of 1095 days (~ 3 years) from the commencement. The company shall be liable to pay damages for any delay in completion of the same to the extent of 0.2% of the Performance Security Amount for every day of such delays. If the delay exceeds a period of 180 days the Authority has the power to terminate the Concession Agreement. For any delay in completing any Project Milestone exceeding 30 days from the date of the Project Milestone the company is liable to pay damages to the extent of 0.2% of the Performance Security for every day of such delays The company is liable for the operation and maintenance of the Sports Infrastructure Project till the completion of the project. Also, it has the right of first refusal on allocation of O&M contract post the same period. The company is responsible for operation and maintenance of real estate part of the project. For any default in construction of the project as defined in the Concession Agreement, the Authority has the right to suspend the rights of the company and act on behalf of the concessionaire for a period of upto 180 days, extendable to 90 more days on request of the Lenders. Post that period, the Authority can issue the termination notice at its discretion. The Authority can terminate the Concession Agreement if any default, as mentioned below, is not cured within a cure period specified under the Concession Agreement. Post Issue of the notice, the Authority can withhold termination for a period of 180 days, extendable by a further 90 days on Lenders Request.

5.7.4. Assignment and charges: The Concessionaire shall not create nor permit to subsist any encumbrance or otherwise transfer or dispose of all or any of its rights under this Agreement or any Project Agreement to which the concessionaire is a party except with the prior consent of the authority in writing.

6. 6.1

PROJECT STRATEGY Project Implementation Strategy

The entire project will be implemented in two phases with each phase comprising of three construction year starting from April 1, 2011. Phase - 1 (April 2011 March 2014) In phase 1 firstly the Sport Infrastructure Development would be undertaken followed by the Other Allied Infrastructure Development based on Master Planning and Project Viability Phase - 2 (April 2014 March 2017)

In phase 2 the balance construction work of Other Allied Infrastructure Development would be undertaken. BUA in lacs Sqft Construction Phasing Start Date Phase 1 1-Apr1-Apr-11 12 31-Mar13 Phase - 2 1-Apr15 31-Mar16

1-Apr13 31-Mar14

1-Apr14 31-Mar15

1-Apr16 31-Mar17

Tot al BU A 14. 01

End Date

31-Mar-12

Sports Infrastructure 4.20 Other Allied Infrastructure Golf Course & Villas

4.20

5.60

0.85

1.13

2.11

1.41

1.13

6.6 3 45. 41 11. 88 1.1 8 0.1 2 79. 24

Residential

6.81

6.81

9.08

11.35

11.35

Commercial

1.95

2.46

3.92

2.35

1.21

Hotel

0.36

0.41

0.41

Public Utilities Total BUA Project

0.04

0.04

0.05

14.20

15.06

21.18

15.11

13.69

6.2

Project Management Consultant / Contractors

In view of the size and nature of the project, ESSEL Group plans to take the services of different specialist agencies to provide their expertise on various aspects of the project for implementation and operations thereof, following is the list of consultant and agencies with which the company has already established their talk and is reviewing the proposal received from them. Consultant / Contractor Master Planning and Zoning for Sports Infrastructure Agency MOFA Studios Pvt. Ltd., Delhi

Master Planning and Zoning for Other Allied Infrastructure Development Master Planning local inputs & Utilities Planning EPC Contractor Legal Counsel

D.P. Architects of Singapore Mahindra Consulting Engineers PAN India Infrastructure (P.) Ltd. Link Legal

Architects for Sports Infrastructure MOFA, the architect firm on the panel of Madhya Pradesh Govt., is appointed for master planning the sports infrastructure. MOFA has designed various projects in Bhopal, Gwalior and various other cities of northern India In discussions with L & T and Shapoorji Pallonji for construction of stadiums Architects for other allied infrastructure DP Architects PTE Ltd., Singapore is appointed for designing the other infrastructure project (residential, commercial, villas and hotel). They have designed and executed various projects across the globe. They are credited for designing the sports city at Singapore. They have also worked with Emaar Group, GVK, Lanco Hills Technology Park Ltd., etc Other project consultants Structural consultants Suryaprakash / Sterling Engineering, Whitby Bird Engineers Mechanical & Electrical consultants Spectral Services Consultants Pvt. Ltd Site engineering consultants Mahindra Consulting Engineers Landscaping Belt Collins / ICN (Studio Steed) Signage consultants Square Peg Golf consultants Robert Trent Jones II LLC / Palmer Course Design Co. / Thompson & Perrett Lighting consultants Bo Steiber / Light Box Pte Ltd Traffic consultants PTV-Asia Pacific Local architect for municipal approvals Manoj Mishra

PROFITABILITY PROJECTIONS 8.1. The key assumptions underlying the profitability projections for the Project are presented as below: Outright Sale Villas Residential Apartments Rs/sq.ft 4200 1650

Mall Commercial Office Lease of Commercial/Retail Space Mall Commercial Office Multiplex Golf Club Life time membership fee Annual Membership fee in Year 1 No of life time members in 1st year of operation YOY increase in Life members Max no of members allowed Hotel Lease Rent Convention Centre

3000 2800 Monthly Rental Rs/sq.ft 45 45 45 Membership Fee Rs. 85,000 6,000 100 Nos 50 Nos 1,000 Nos Monthly Rent per sq.ft 30 200000

Assumptions: 1. The financial projections have assumed an interest rate of 12% p.a As we have proposed interest rate at 13% p.a interest is reckoned at 13% for the DSCR calculation. 2. Interest During Construction (IDC) of Rs.42.51 cr for FY 11-12 and FY 12-13 calculated at 12% has not been reckoned in the Projected Profitability statement as the same is capitalized and a part of project cost. However, Since the IDC is not being funded and would be met by the company out of equity/internal accruals; we have taken interest for FY 11-12 and FY 12-13 at 13% p.a for calculation of DSCR.