The document discusses the financial viability of Build-Operate-Transfer (BOT) road projects in India. It provides background on public-private partnerships and the BOT model for financing infrastructure projects. A case study is presented analyzing the financials of a hypothetical 6km BOT road project using tools like net present value, internal rate of return, payback period, and modified internal rate of return. The analysis shows projections for traffic volume, toll fee schedules, and calculates the project's cash flows and internal rate of return of 15%.

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International Journal of Civil Engineering and Technology (IJCIET)
Volume 8, Issue 1, January 2017, pp. 382–389, Article ID: IJCIET_08_01_043
Available online at http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=8&IType=1
ISSN Print: 0976-6308 and ISSN Online: 0976-6316
© IAEME Publication
FINANCIAL VIABILITY OF BOT ROAD
PROJECTS IN INDIA
T. Ravi Teja
PG, Student, Civil Engineering Department, KL University,
Vaddeswaram-522502, A.P,India
B.G.Rahul
Assistant Professor, Civil Engineering Department,
KL University, Vaddeswaram-522502, A.P,India
ABSTRACT
Objectives: To study the importance of Public Private Partnership in Indian
infrastructure. To study the relevance of BOT model in the Indian Infrastructure sector. To
identify the various parameters required for the financial analysis of a BOT project. To
study the financial evaluation of a BOT Case study utilizing Net present value (NPV),
Internal Rate of Return (IRR), Payback, Discounted Payback and Modified Internal rate of
return (MIRR) methods. Methods: India ventured into building and maintenance of road
infrastructure to meet its economic needs as inadequate transport infrastructure would be
an impediment to the growth of a developing country. However, large scale infrastructure
ventures like road projects increased the financial stress on government bodies. Findings:
A wide gap existed between the investments required and the available financial sources for
road infrastructure. With the perspective of exploiting private funding agencies for
implementation of public projects, Build operate transport (BOT) model burgeoned. BOT
structure includes the stipend of a concession by a legitimately enabled legislative power
(the grantor) to an extraordinary reason organization (the concessionaire). Novelty: A
BOT street project has a long start up working years in misfortune because of its long
bump up period for the movement level to balance out. Thusly, the recovering of the venture
would for the most part take quite a while.
Key words: BOT, Infrastructure, NPV, IRR, MIRR, Toll Road, NHAI, TPC
Cite this Article: T. Ravi Teja and B.G.Rahul, Financial Viability of Bot Road Projects In
India. International Journal of Civil Engineering and Technology, 8(1), 2017, pp. 382–389.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=8&IType=1
1. INTRODUCTION
Infrastructure can be described as an expansive, inseparable and non-rival capital great that
produces administrations for its clients. The non-competition (or non-excludability) and the vast
expense of infrastructure causes it to be an open decent. In any case, infrastructure additionally has
a few qualities of a private item since it encourages the utilization of a corresponding private ware,
similar to the utilization of an auto. Two or three decades back the term infrastructure just alluded

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to the material parts of transport and open utility systems, similar to gas, water and power. At this
point, the term has augmented to grasp all parts of open administrations, oversaw by both the
general population and private area1.
1.1. SCENARIO OF INDIAN INFRASTRUCTURE
India has emerged as the largest PPP market in the world with over 900 projects in various stages
of improvement as per the recent budget. PPPs have delivered some of the iconic infrastructure like
airports, ports and highways which are seen as models for expansion globally. An institution to
provide support to mainstreaming PPPs called 3P India will be set up with a corpus of 500 crores
shortly2
.
Figure 1 Sector wise PPP projects in India
2. PUBLIC PRIVATE PARTNERSHIP
An open private organization can be depicted as a co-operation between the general population and
the private segment, in which the administration and the private segment do a project together on
the premise of a concurred division of undertakings and dangers, every gathering holding its own
particular personality and obligations. The enthusiasm for PPPs is developing, prominently because
of the development in the interest for infrastructure, restricted open assets to meet present and
future needs and acknowledgment for the private segment in the procurement of infrastructure. The
basic guideline behind PPPs is that, in spite of the fact maybe that general society area ought to be
in charge of the conveyance of a specific administration, it doesn't need to be in charge of really
giving the administration or to undertaking the venture themselves. Along these lines, all on-screen
characters of an open private association can focus on doing what they are prone to do best. Real
open infrastructural projects have dependably been embraced by the private segment under
contract. The significant contrast between this ordinary acquirement model and open private
organizations is the way that the private area can be viewed as an undeniable player.
Public private partnerships can take many forms, from simple commercialization to full
privatization, but in general PPP's can be considered as long term agreements between the public
and the private sector to provide and operate transport infrastructure and / or service3
.
PPP arrangements display three essential characteristics:
53
20
8
7
7
2
1 1
1
Sales
Roads Urban development
Ports Power
Tourism Education
Health care Airports
Railways

3. T. Ravi Teja and B.G.Rahul
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• A significant level of responsibility and risk that is transferred from the public sector to the private
sector.
• Contractual arrangements are built around performance-based outcomes, rather than work
specifications.
• Long-term contractual arrangements.
• The financing of public infrastructure development off-the-book of governments, which might
include tapping into new sources of project revenues to secure project financing.
• The imposition of real tolls or other fees to finance the project
3. BUILD OPERATE AND TRANSFER FINANCIAL MODEL
Starting late, a creating design ascended among governments in various countries to demand
wanders for open projects from the private fragment. With BOT, the private portion plots,
supports, creates and works the workplace and at last, after a predefined concession period, the
ownership is traded to the organization. Along these lines, BOT can be seen as a making strategy
for infrastructure projects by using private movement and financing. Such infrastructure projects
fuse a wide bunch of open workplaces with the fundamental ability to serve open needs, to give
social organizations and development monetary activity in the private territory. The most broadly
perceived delineations are avenues, platforms, water and sewer systems, plane terminals, ports and
open structures4
.
3.1. DEFINITION
Build Operate Transfer is a major startup business venture where private organizations undertake
expansion and operation of a facility normally done by the government. The execution of the
private sector involvement occurs at the return of the ownership of the facility to the government
after a fixed concession period, usually 25 to 40 years.
4. SOURCES OF FINANCING
A Public Private Partnership project will include financing from different sources, in some blend of
value and obligation. The proportions of these diverse commitments will rely on upon
arrangements between the moneylenders and the shareholders. This segment takes a gander at the
principle wellsprings of financing and the assention in the financing bewilder that represents the
relationship between the distinctive speculators, the bury loan boss understanding5.
• Equity contributions
• Debt contributions
• Bank guarantees/ letter of credit/ performance guarantees
• Bond/ capital markets financing
• Mezzanine/ subordinated contributions
• Inter creditor agreement
4.1. PARAMETERS REQUIRED IN FINANCIAL ANALYSIS OF BOT PROEJCTS
• Financial Closure
• Wholesale Price Index (WPI)
• Cash flow
• Discount rate

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• Reinvestment rate
• Escrow account
5. CASE STUDY
This deals with a case study which has been adopted to understand the financial evaluation of a
BOT road project using various tools which are discussed subsequently, shown in Tables.1,2,3,4,5.
Table 1 Details of the case study
Contract Price 640 Crores
Year Of Commencement 2015
Year Of Completion 2018
Concession Period 30 Years
End Of Concession Period 2044
Length Of Road 6 Km
Table 2 Traffic volume projection
Traffic Volume Projection
Total Car Bus LGV Truck MAV
35 7.7 4.9 3.85 10.15 8.4
36.75 8.085 5.145 4.0425 10.6575 8.82
38.5875 8.48925 5.40225 4.244625 11.19038 9.261
40.51688 8.913713 5.672363 4.456856 11.74989 9.72405
42.54272 9.359398 5.955981 4.679699 12.33739 10.21025
44.66985 9.827368 6.25378 4.913684 12.95426 10.72077
46.90335 10.31874 6.566496 5.159368 13.60197 11.2568
49.24851 10.83467 6.894792 5.417337 14.28207 11.81964
51.71094 11.37641 7.239523 5.688203 14099617 12.41063
54.29649 11.94523 7.601508 5.972614 15.74598 13.03116
57.01131 12.54249 7.981584 6.271244 16.53328 13.68271
59.86188 13.16961 8.380663 6.584807 17.35994 14.36685
62.85497 13.82809 8.799696 6.914047 18.22794 15.08519
65.99772 14.5195 9.239681 7.259749 19.13934 15.83945
69.29761 15.24547 10.18675 7.622737 20.09631 16.63143
72.76249 16.00775 10.69609 8.003873 21.10112 17.463
76.40061 16.80813 11.23089 8.404067 22.12618 18.33615
80.22064 17.64854 11.79243 8.824271 23.26399 19.25295
84.23167 18.53097 12.36206 9.265484 24.42719 20.156
88.44326 19.45752 12.38206 9.728758 25.64854 21.22638
92.86542 20.43039 13.00116 10.2152 26.93097 22.2877
97.50869 21.45191 13.65122 10.72596 28.27752 23.40209
102.3841 22.52451 14.33378 11.26225 29.6914 24.57219
107.5033 23.65073 15.05047 11.82537 31.17597 25.8008
112.8785 24.83327 15.80299 12.41663 32.73476 27.09084
118.5224 26.07493 16.59314 13.03747 34.3715 28.44538
124.4485 27.37868 17.4228 13.68934 36.09008 29.86765

5. T. Ravi Teja and B.G.Rahul
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Table 3 Projected Schedule of user fee
S.NO Year
Car, Jeep,
Van
Bus LGV Truck
Multi-Axle
Vehicles
1 2018 25 50 70 120 140
2 2019 27 54 75.6 129.6 151.2
3 2020 29.16 58.32 81.648 139.968 163.296
4 2021 31.4928 62.9856 88.1798 151.165 176.35968
5 2022 34.012224 68.0244 95.2342 163.258 190.4684544
6 2023 36.733201 73.4664 102.853 176.319 205.7059308
7 2024 39.671858 79.3437 111.081 190.424 222.16024052
8 2025 42.8456067 85.6912 119.967 205.658 239.9353976
9 2026 46.2732552 92.5465 129.565 222.111 259.1302294
10 2027 49.9751156 99.9502 139.93 239.88 279.8606478
11 2028 53.9731249 107.946 151.124 259.071 302.2494996
12 2029 58.2909749 116.581 163.214 279.796 326.4294596
13 2030 62.9542529 125.908 176.271 302.18 352.5438164
14 2031 67.9905931 135.981 190.373 326.354 380.7473217
15 2032 73.4298406 146.859 205.603 352.463 411.2071074
16 2033 79.3042278 158.608 222.051 380.66 444.103676
17 2034 85.648566 171.297 239.816 411.113 479.6319701
18 2035 92.5004513 185 259.001 444.002 518.0025277
19 2036 99.900874 199.801 179.721 479.522 559.4427299
20 2037 107.892526 215.785 302.099 517.884 604.1981483
21 2038 116.523928 233.047 326.267 559.314 652.5340001
22 2039 125.845842 251.691 352.368 604.06 704.7367202
23 2040 135.91351 271.827 380.557 652.384 761.1156578
24 2041 146.786591 293.573 411.002 704.575 822.0049104
25 2042 158.529518 317.059 443.882 760.941 887.7653032
26 2043 171.211879 342.423 479.393 821.817 958.7865275
27 2044 184.90883 369.817 517.744 887.562 1035.48945
Table 4 Calculation of IRR
SCHEDULE OF USER
FEES
TRAFFIC VOLUME in
lakhs
CASH INFLOW
Car, jeep, van Bus LGV Truck MVA Total Car Bus LGv Truck MAV CAR BUS LGV TRUCK MAV Total cash inflow(in lakhs) IRR
0 2015 -64000 15%
1 2018 25 50 70 120 140 35 7.7 4.9 3.85 10.15 8.4 192.5 245 269.5 1218 1176 3101
2 2019 27 54 75.6 129.6 151.2 36.75 8.085 5.145 4.0425 10.6575 8.82 218.295 277.83 305.613 1381.212 1333.584 3516.534
4 2020 29.16 58.32 81.648 139.968 163.296 38.5875 8.48925 5.40225 4.244625 11.19038 9.261 247.5465 315.0592 346.5651 1566.294 1512.284 3987.749556
5 2021 31.4928 62.9856 88.17984 151.1654 176.3597 40.51688 8.913713 5.672363 4.456856 11.74989 9.72405 280.7178 357.2772 393.0049 1776.178 1714.93 4522.107997
6 2022 34.012224 68.02445 95.23423 163.2587 190.4685 42.54272 9.359398 5.955981 4.679699 12.33739 10.21025 318.3339 405.1523 445.6675 2014.186 1944.731 5128.070468
7 2023 36.73320192 73.4664 102.853 176.3194 205.7059 44.66985 9.827368 6.25378 4.913684 12.95426 10.72077 360.9907 459.4427 505.387 2284.087 2205.325 5815.231911
8 2024 39.67185807 79.34372 111.0812 190.4249 222.1624 46.90335 10.31874 6.566469 5.159368 13.60197 11.2568 409.3634 521.008 573.1088 2590.154 2500.839 6594.472987
9 2025 42.84560672 85.69121 119.9677 205.6589 239.9354 49.24851 10.83467 6.894792 5.417337 14.28207 11.81964 464.2181 590.8231 649.9054 2937.235 2835.951 7478.132367
10 2026 46.27325526 92.54651 129.5651 222.1116 259.1302 51.71094 11.37641 7.239532 5.688203 14.99617 12.41063 526.4234 669.9934 736.9927 3330.824 3215.968 8480.202104
11 2027 49.97511568 99.95023 139.9303 239.8806 279.8606 54.29649 11.94523 7.601508 5.972614 15.74598 13.03116 596.9641 759.7725 835.7498 3777.155 3646.908 9616.549186

6. Financial Viability of Bot Road Projects In India
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SCHEDULE OF USER
FEES
TRAFFIC VOLUME in
lakhs
CASH INFLOW
Car, jeep, van Bus LGV Truck MVA Total Car Bus LGv Truck MAV CAR BUS LGV TRUCK MAV Total cash inflow(in lakhs) IRR
12 2028 53.97312493 107.9462 151.1247 259.071 302.2495 57.01131 12.54249 7.981584 6.271244 16.53328 13.68271 676.9573 861.582 947.7402 4283.293 4135.594 10905.16678
13 2029 58.29097493 116.5819 163.2147 279.7967 326.4295 59.86188 13.16961 8.380663 6.584807 17.35994 14.36685 767.6696 977.034 1074.737 4857.255 4689.763 12366.45913
14 2030 62.95425292 125.9085 176.2719 302.1804 352.5438 62.85497 13.82809 8.799696 6.914047 18.22794 15.08519 870.5373 1107.957 1218.752 5508.127 5318.192 14023.56465
15 2031 67.99059315 135.9812 190.3737 326.3548 380.7473 65.99772 14.5195 9.239681 7.259749 19.13934 15.83945 987.1893 1256.423 1382.065 6246.216 6030.829 15902.72231
16 2032 73.42984061 146.8597 205.6036 352.4632 411.2071 69.29761 15.24547 9.701665 7.622737 20.09631 16.63143 1119.473 1424.783 1567.262 7083.209 6838.96 18033.6871
17 2033 79.30422785 158.6085 222.0518 380.6603 444.1037 72.76249 16.00775 10.18675 8.003873 21.10112 17.463 1269.482 1615.704 1777.275 8032.359 7755.381 20450.20117
18 2034 85.64856608 171.2971 239.816 411.1131 479.632 76.40061 16.80813 10.69609 8.404067 22.15618 18.33615 1439.593 1832.209 2015.43 9108.695 8794.602 23190.52813
19 2035 92.50045137 185.0009 259.0013 444.0022 518.0025 80.22064 17.64854 11.23089 8.824271 23.26399 19.25295 1632.498 2077.725 2285.497 10329.26 9973.079 26298.0589
20 2036 99.90048748 199.801 279.7214 479.5223 559.4427 84.23167 18.53097 11.79243 9.265484 24.42719 20.2156 1851.253 2356.14 2591.754 11713.38 11309.47 29821.99879
21 2037 107.8925265 215.7851 302.0991 517.8841 604.1981 88.44326 19.45752 12.38206 9.728758 25.64854 21.22638 2099.321 2671.863 2939.049 13282.97 12824.94 33818.14663
22 2038 116.5239286 233.0479 326.267 559.3149 652.534 92.86542 20.43039 13.00116 10.2152 26.93097 22.2877 2380.63 3029.892 3332.881 15062.89 14543.48 38349.77828
23 2039 125.8458429 251.6917 352.3684 604.06 704.7367 97.50869 21.45191 13.65122 10.72596 28.27752 23.40209 2699.634 3435.898 3779.488 17081.32 16492.31 43488.64857
24 2040 135.9135103 271.827 380.5578 652.3848 761.1157 102.3841 22.52451 14.33378 11.26225 29.6914 24.57219 3061.385 3896.308 4285.939 19370.22 18702.28 49316.12747
25 2041 146.7865911 293.5732 411.0025 704.5756 822.0049 107.5033 23.65073 15.05047 11.82537 31.17597 25.8008 3471.61 4418.413 4860.255 21965.83 21208.38 55924.48856
26 2042 158.5295184 317.059 443.8827 760.9417 887.7653 112.8785 24.83327 15.80299 12.41663 32.73476 27.09084 3936.806 5010.481 5511.529 24909.25 24050.31 63418.37002
27 2043 171.2118799 342.4238 479.3933 821.817 958.7865 118.5224 26.07493 16.59314 13.03747 34.3715 28.44538 4464.338 5681.885 6250.074 28247.09 27273.05 71916.4316
28 2044 184.9088303 369.8177 517.7447 887.5624 1035.489 124.4485 27.37868 17.4228 13.68934 36.09008 29.86765 5062.56 6443.258 7087.583 32032.2 30927.64 81553.23344
Table 5 Calculation of Payback period
SCHEDULE OF USER FEES
TRAFFIC VOLUME in
lakhs
CASH INFLOW
Car, jeep,
van
Bus LGV Truck MAV Total Car Bus LGV Truck MAV CAR BUS LGV TRUCK MAV
Total cash inflow(in
lakhs)
Cumulative inflow
1 2018 25 50 70 120 140 35 7.7 4.9 3.85 10.15 8.4 192.5 245 269.5 1218 1176 3101 3101
2 2019 27 54 75.6 129.6 151.2 36.75 8.085 5.145 4.0425 10.6575 8.82 218.295 277.83 305.613 1381.21 1333.584 3516.534 6617.534
3 2020 29.16 58.32 81.648 139.968 163.296 38.5875 8.48925 5.40225 4.24463 11.1904 9.261 247.547 315.059 346.565 1566.29 1512.2843 3987.749556 10605.28356
4 2021 31.4928 62.9856 88.1798 151.165 176.35968 40.5169 8.91371 5.67236 4.45686 11.7499 9.72405 280.718 357.277 393.005 1776.18 1714.9303 4522.107997 15127.39155
5 2022 34.012224 68.0244 95.2342 163.259 190.4684544 42.5427 9.3594 5.95598 4.6797 12.3374 10.2103 318.334 405.152 445.668 2014.19 1944.731 5128.070468 20255.46202
6 2023 36.73320192 73.4664 102.853 176.319 205.7059308 44.6699 9.82737 6.25378 4.91368 12.9543 10.7208 360.991 459.443 505.387 2284.09 2205.325 5815.231911 26070.69393
7 2024 39.67185807 79.3437 111.081 190.425 222.1624052 46.9033 10.3187 6.56647 5.15937 13.602 11.2568 409.363 521.008 573.109 2590.15 2500.8385 6594.472987 32665.16692
8 2025 42.84560672 85.6912 119.968 205.659 239.9353976 49.2485 10.8347 6.89479 5.41734 14.2821 11.8196 464.218 590.823 649.905 2937.23 2835.9509 7478.132367 40143.29929
9 2026 46.27325526 92.5465 129.565 222.112 259.1302294 51.7109 11.3764 7.23953 5.6882 14.9962 12.4106 526.423 669.993 736.993 3330.82 3215.9683 8480.202104 48623.50139
10 2027 49.97511568 99.9502 139.93 239.881 279.8606478 54.2965 11.9452 7.60151 5.97261 15.746 13.0312 596.964 759.773 835.75 3777.15 3646.908 9616.549186 58240.05058
11 2028 53.97312493 107.946 151.125 259.071 302.2494996 57.0113 12.5425 7.98158 6.27124 16.5333 13.6827 676.957 861.582 947.74 4283.29 4135.5937 10905.16678 69145.21735
12 2029 58.29097493 116.582 163.215 279.797 326.4294596 59.8619 13.1696 8.38066 6.58481 17.3599 14.3669 767.67 977.034 1074.74 4857.25 4689.7633 12366.45913 81511.67648

7. T. Ravi Teja and B.G.Rahul
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SCHEDULE OF USER FEES
TRAFFIC VOLUME in
lakhs
CASH INFLOW
Car, jeep,
van
Bus LGV Truck MAV Total Car Bus LGV Truck MAV CAR BUS LGV TRUCK MAV
Total cash inflow(in
lakhs)
Cumulative inflow
13 2030 62.95425292 125.909 176.272 302.18 352.5438164 62.855 13.8281 8.7997 6.91405 18.2279 15.0852 870.537 1107.96 1218.75 5508.13 5318.1916 14023.56465 95535.24113
14 2031 67.99059315 135.981 190.374 326.355 380.7473217 65.9977 14.5195 9.23968 7.25975 19.1393 15.8395 987.189 1256.42 1382.07 6246.22 6030.8292 15902.72231 111437.9634
15 2032 73.42984061 146.86 205.604 352.463 411.2071074 69.2976 15.2455 9.70166 7.62274 20.0963 16.6314 1119.47 1424.78 1567.26 7083.21 6838.9603 18033.6871 129471.6505
16 2033 79.30422785 158.608 222.052 380.66 444.103676 72.7625 16.0077 10.1867 8.00387 21.1011 17.463 1269.48 1615.7 1777.27 8032.36 7755.381 20450.20117 149921.8517
17 2034 85.64856608 171.297 239.816 411.113 479.6319701 76.4006 16.8081 10.6961 8.40407 22.1562 18.3361 1439.59 1832.21 2015.43 9108.7 8794.6021 23190.52813 173112.3798
18 2035 92.50045137 185.001 259.001 444.002 518.0025277 80.2206 17.6485 11.2309 8.82427 23.264 19.253 1632.5 2077.72 2285.5 10329.3 9973.0788 26298.0589 199410.4387
19 2036 99.90048748 199.801 279.721 479.522 559.4427299 84.2317 18.531 11.7924 9.26548 24.4272 20.2156 1851.25 2356.14 2591.75 11713.4 11309.471 29821.99879 229232.4375
20 2037 107.8925265 215.785 302.099 517.884 604.1981483 88.4433 19.4575 12.3821 9.72876 25.6485 21.2264 2099.32 2671.86 2939.05 13283 12824.94 33818.14663 263050.5842
21 2038 116.5239286 233.048 326.267 559.315 652.5340001 92.8654 20.4304 13.0012 10.2152 26.931 22.2877 2380.63 3029.89 3332.88 15062.9 14543.483 38349.77828 301400.3624
22 2039 125.8458429 251.692 352.368 604.06 704.7367202 97.5087 21.4519 13.6512 10.726 28.2775 23.4021 2699.63 3435.9 3779.49 17081.3 16492.309 43488.64857 344889.011
23 2040 135.9135103 271.827 380.558 652.385 761.1156578 102.384 22.5245 14.3338 11.2623 29.6914 24.5722 3061.38 3896.31 4285.94 19370.2 18702.279 49316.12747 394205.1385
24 2041 146.7865911 293.573 411.002 704.576 822.0049104 107.503 23.6507 15.0505 11.8254 31.176 25.8008 3471.61 4418.41 4860.25 21965.8 21208.384 55924.48856 450129.627
25 2042 158.5295184 317.059 443.883 760.942 887.7653032 112.878 24.8333 15.803 12.4166 32.7348 27.0908 3936.81 5010.48 5511.53 24909.2 24050.307 63418.37002 513547.997
26 2043 171.2118799 342.424 479.393 821.817 958.7865275 118.522 26.0749 16.5931 13.0375 34.3715 28.4454 4464.34 5681.89 6250.07 28247.1 27273.049 71916.4316 585464.4287
27 2044 184.9088303 369.818 517.745 887.562 1035.48945 124.449 27.3787 17.4228 13.6893 36.0901 29.8677 5062.56 6443.26 7087.58 32032.2 30927.637 81553.23344 667017.6621
5.1. DETAILS OF THE CASE STUDY
The case of a BOT road project has been adopted. The details of the case are given below. The user
fee for the BOT road project is assumed to increase by 8% every year from 2018. The initial user
fee (first year) amount was taken according to the NHAI norms. The projections are as follows:
5.2. NET PRESENT VALUE (NPV)
In finance, the net present value (NPV) or net present worth (NPW) is defined as the sum of the
present values (PVs) of incoming and outgoing cash flows over a period of time. Incoming and
outgoing cash flows can also be described as benefit and cost cash flows, respectively.
5.3. INTERNAL RATE OF RETURN (IRR)
The syntax for IRR on Excel is =IRR (values, [guess])
The IRR function syntax has the following arguments:
• Values Required. An array or a reference to cells that contain numbers for which you want to
calculate the internal rate of return.
• Guess Optional. A number that you guess is close to the result of IRR.
• The IRR hence calculated is found to be 15%.
5.4. PAYBACK AND DISCOUNTED PAYBACK
In capital budgeting refers to the period of time required to recoup the funds expended in an
investment, or to reach the break-even point. The time value of money is not taken into account.

8. Financial Viability of Bot Road Projects In India
http://www.iaeme.com/IJCIET/index.asp 389 editor@iaeme.com
Payback period intuitively measures how long something takes to "pay for itself." All else being
equal, shorter payback periods are preferable to longer payback periods. The discounted payback
period is the amount of time that it takes to cover the cost of a project, by adding positive
discounted cash flow coming from the profits of the project. The advantage of using the
discounted payback period over the payback period is that it takes into account time value of
money6.
5.5. MODIFIED INTERNAL RATE OF RETURN (MIRR)
While the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the
IRR, the modified IRR assumes that positive cash flows are reinvested at the film’s cost of capital,
and the initial outlays are financed at the firm’s financing cost. Therefore MIRR more accurately
reflects the cost and profitability of a project[6].
• Values must contain at least one positive value and one negative value to calculate the modified
internal rate of return.
• Finance_rate Required. The interest rate you pay on the money used in the cash flows which is
assumed as 7.6% in this Case.
• Reinvest_rate Required. The interest rate you receive on the cash flows as you reinvest them is
assumed as 15% in this case.
The MIRR thus calculated is 15%
6. CONCLUSION
The financial viability of the BOT road project is thus determined by various tools. The following
results were obtained
RESULTS OF FINANCIAL ANALYSIS
Net present value >0 Project is accepted
IRR 15%
Payback period May 2016
Discounted payback period September 2020
MIRR 15%
REFERENCES
[1] Chakraborty S S, Krishna M. Highway privatization financing strategies and policy issues.
Procedings Seminar on PrivateParticipation in High way level. Indian Roads Congress,
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[2] Dias A, Ioannou P G. Debt capacity and optimal capital structure for privately financed
infrastructure projects. J.Constr. Engrg. and Mgmt. 1995; 121(4), 404–414.
[3] Dias A, Ioannou P G. Company and project evaluation model for privately promoted
infrastructure projects. J.Constr.Hertz. 1996; 42(1), 90–106.
[4] Lam W H K, Tam M L. Risk analysis of traffic and revenue forecasts for road investment
projects. J. Infrastruct. Sys. 1998; 4(1), 19–27.
[5] Malini E. Evaluation of policy parameters, uncertainties and risks in build, operate and transfer
(BOT) projects for transport infrastructure development, PhD thesis, Indian Institute of Science,
Bangalore, India 1996.
[6] Malini, E. Evaluation of financial viability of BOT transports infrastructure projects. J. Indian
Rd. Congr. 1997; 58(1), 87–123.