Enayam Port

Tamil Research Institute
RAPID TECHNO-ECONOMIC FEASIBILITY REPORT FOR
DEVELOPMENT OF COLACHEL PORT AT TAMILNADU
FINAL REPORT
13.2. FINANCIAL RESULTS
This section presents the summary of results of the financial analysis after running the financial model using
projected traffic figures and industry benchmarks for port projects. The financial analysis identifies and estimates
various revenue streams, project costs, phasing or implementation schedule, cash flows and the financial viability
of the project. The financial analysis of the Enayam Port is based on set of assumptions and inputs based on the
industry benchmarks and from analysis & experience in the Port sector in India and globally. A detailed financial
model has been developed for a Concession period of 30 years; the financial viability of the project has been
assessed on the Discounted Cash Flow (DCF) and Internal Rate of Returns (IRR) method.
The key results of the discounted cash flow analysis based on the above mentioned assumptions are as follows:
NPV
INR 380 Crores
Project IRR 10.8%
Equity IRR 11.0%
Phase 1 Project IRR 9.2%
Phase 1 Equity IRR 8.6% 1 1
Table 54: Financial results
As can be seen in the results above, the project IRR is above WACC of 10.6%, but the equity IRR is lower than
the cost of equity of 16-18%. In order to make the project financially viable, viability gap funding (VGF) will be
required. It has been estimated that a VGF of 20-30% is required to achieve the target equity IRR of 16-18%.
Further, it can be seen that the difference between the project IRR and equity IRR value is low. This is because the
value of project IRR is very close to WACC. Despite the low difference in IRR values, it is advisable to take debt
because of the large amount of capital expenditure required across the three phases and the difference between
cost of debt and equity will be much large in terms of actual value, which the IRR value does not indicate.
On a standalone basis Phase 1 Project IRR (9.2%) is lower than overall IRR as benefits of the initial investments in
breakwater, connectivity, reclamation etc. are not completely realized within Phase 1 only. Hence, it is advised
that financial returns from the entire project are considered instead of returns from only Phase 1 in isolation.
The detailed P&L statement and cash flows (capital expenditure, interest payment and debt repayment), used in
arriving at the above results, have been provided in the Annexures.
13.3. SENSITIVITY ANALYSIS
1 EIRR is lower than Project IRR for Phase 1 as the Project IRR itself is lower than the Cost of Debt.
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