PART II TECHINCAL ASSESSMENT

Technical Arrangements
Brain Nurture Academy will set up a Private Primary school with the objective of providing premium education and nurturing the young minds of semi urban India. The school is set up along the Missionary School Model in terms of tutoring, subject / syllabus, governance etc. with minor changes and will be affiliated to CBSE board. The school will work towards nurturing minds at a young age and making India a rich literate country with young talented minds even in the remotest of areas. The school will be set up as a private limited venture .The school will be located in a campus of 6000 sqft area in small town Etawah in U.P. The school will be non residential Day School and will be co-ed. In addition to state of the art academic teachings and programs, the school will offer training in sports and other cultural activities such as singing, dancing, debating, etc. to equip the upcoming generation with requisite knowledge and skills for their future. For the academic program, the school will adopt the curriculum of Central Board of Education (CBSE). For the first few years of operations, the school will be operating at 50% capacity as the students up to standard V only will be enrolled. There will be proportionate capacity addition with the increase in number of students and popularity

Services Provided
y y

y y

At the initiation stage it will have classes from standard I to standard V but with time and popularity school will be upgraded up to standard X. Classes from standard I to standard V will have two sections for each standard in the initiation stage. Each section will have a maximum of 20 students. The maximum seats in the school will be 400. The school will be non residential Day School and will be co-ed All expenses for the state level and the national level participation will be borne by the school only. In addition to state of the art academic teachings and programs, the school will offer training in sports and other cultural activities such as singing, dancing, debating, etc. to equip the upcoming generation with requisite knowledge and skills for their future. For the academic program, the school will adopt the curriculum of Central Board of Education (CBSE).

L nd.
The B i Nurture Academy i i the process of acquiri land in the vicinity of state hi hway 29,Etawah,UP.Though it is near agricultural land but the land itself is not for any agricultural purpose and there is no dispute regarding the ownership of theland.The land cost is 52 lacs. Below is the map of the proposed site

Const u tion.
Getting a firm construction bid is the next step in the process after securing the initial investors. The architect plans and an actual bid will be the last elements necessary to secure bank financing. The estimates included are from previous projects andare considered generous (on the high-side). The estimated INR 30 lacs includes total construction costs of school building its foundation and finishing ,site development ,Architects fees.

Equipment.
The Brain Nurture Academy has provided all the details of the equipments and procedures needed for the running of the school.
y y y y y

Furnitures and fixtures Computers Lab and Library Generator Set Approval and Affiliation

Schedule of Project
S.No 1 2 Activity Acquisitionof Land Building and Civil Works Plant and Machinery and Equipment Orders Supply Installation Commencement Completion Procedures ongoing September,2012 September,2012 December,2014

3 3.1 3.2 3.3

4 Trial Runs Start of 5 Operation

September,2012

December,2018

Man Power Planning

(K

Personnel Plan
The following table summarizes personnel expenditures for the first six years, with Salary per month is estimated to be growing @8% annually.

Employee Profile
Designations Salary Per Month* Head Count

2013E

2018E

Principal

25000

01

01

Teachers

9000

10

40

Administration Dept.

6000

03

08

Library & Lab Assistants

7000

02

06

House Keeping

3000

04

12

Fi a cial (Vikas Agarwal)

Fi a cial (Surbhi Sharma)

Strategy Head (A kur Garg)

(Neerja Bhardwaj)

(A chal Gupta)

Marketi g Head

Chair a

ar Diga t Si gh athore)

Public Relatio s Head

PART III MAR ET ASSESSMENT

Market Analysis
Demand Projection
India has the largest student population in the world with over 13.5crore pupils in primary education. In the last five years, the government has been focusing on the Education Sector through increased fund allocations. In the current year also, the government has increased the allocation by 24% to Rs. 52,057 crores. The allocation is expected to continue to increase in the foreseeable future as well. The government has imposed an Education cess on income tax to fund its various programs, which target to improve the quality and reach of education in India. Student enrolments have grown at a good rate of 3.2% CAGR over 1999-2000 to 200405 for primary enrolments, and 3.9% for upper primary enrolments. With increase in per-capita income there is a greater propensity to educate children at premier institutions. The parents whose children are studying at these schools expect a higher standard of education and have comparatively higher expectations from these schools in terms of infrastructure, facilities and courseware. For example, 50% of parents spending close to Rs. 3 4 lakh per year to educate their children at Doon School, Dehra Dun own medium sized business and come from small towns like Moradabad, Panipat, Yamuna Nagar etc. Formal schooling, globally known as K12 (Kindergarten to 12th grade) is Indias core education market and occupies the largest space in the education system, growing at 14% CAGR. As for Indias middle class households, it can be expected this segment of society would continue to spend a large part of its income to fund the education (with an eye on quality) of its children. Overall, we believe Budget allocations and high spending by the Indian middle class on education are expected to fuel growth of private schools in India.

Competitor Analysis:
The major competition will be from existing two schools: S.N.R Public school and St. Thomas public school. Brain Nurture Academy will stood apart from these two schools because of the below reasons:   Both the schools are located in the outer skirts of the city whereas Brain Nurture Academy will be in the centre of the city. S.N.R Public School is fairly expensive school with fees in the range of around 10000/ quarter where as Brain Nurture Academy will have its fees between 4500 5500/ quarter. Although facilities and infrastructure provided in Brain Nurture Academy will be better than S.N.R Public school. On the other hand fees of St. Thomas public school is fairly less than the proposed fees of Brain Nurture Academy but facilities provided to the students in latter will be much better than those of St. Thomas public school S.N.R is a residential school while Brain Nurture Academy will not be a residential school so no competition in these criteria.

Marketing Mix
Product: In this project we are basically selling the concept of premium education leading to overall development of children. In India, education is basically considered as a step by step process of gaining knowledge i.e. emphasis was put on knowledge and not on skills. We plan to sell the concept of overall development. The highlight would be state-of-the-art, mentoring students for quality academic knowledge and coaching them for sporting activities along with other cultural activities. Price: Proposed School Fees- Rs 18,000 per annum per student for the initial two years, which will be hiked to Rs 20,000 per annum per student from the third year. Place: We are targeting students from Etawah and from other nearby villages and town. Promotion: For the promotion of the school following strategies will be adoptedy The communication about the school will be made through pamphlet distribution, advertisement on TV, in magazines, newspapers and hoardings in a particular niche area. y The advertisement campaign will run all over the local tele Media. y We plan to rope in local students who topped their school or area, students who got through IITs, etc as brand ambassadors for helping us in the promotion of the school.

PART IV. SWOT ANALYSIS

Strengths
y y y y

World class facilities. Well educated teachers. Retention of school base adjacent to town. Less competition in the segment .

Weaknesses
y y

No past experience No residential and boarding facility

Opportunities
y y y

Significant population in high income group. Awareness of people towards education has increased over time. Major population of city is still illiterate.

Threats
y y

Parents reluctance towards education. Finding qualified staff in that region.

Confidence gained by existing players hence the expected public response towards

this new venture can be termed as iffy at the very least considering the general Indian mentality to stick to age old traditions or to trivially cheaper help available.

PART V FINANCIALS

Costing
Particulars Land (17325 sq. ft * 300 ) Building (academic & office) Furniture & Fixtures Computers (@15000 per system) Library Lab Equipments Generator Set pproval & ffliation Cost Total 2012 5200000 1200000 0 0 0 0 0 150000 6550000 ST RT UP COST 2013 0 1200000 400000 300000 50000 50000 150000 0 2150000

Revenues:

Particulars No. of existing students Ne Intake Total Students Tution Fees/Quarter Tution Fees nnual dmission Fees/Student Total Revenues

2013E 0 100 100 4500 18000 3000 2100000

2014E 100 150 250 4500 18000 3000 4950000

Tution Fees dmission Fees

1800000 300000

4500000 450000

2014 0 600000 400000 150000 75000 75000 0 0 1300000

2015 0 0 200000 300000 75000 75000 0 0 650000

Total 5200000 3000000 1000000 750000 200000 200000 150000 150000 10650000

2015E 250 200 450 4500 18000 3000 8700000

2016E 450 150 600 5000 20000 5000 12750000

2017E 600 125 725 5000 20000 5000 15125000

2018E 725 75 800 5000 20000 5000 16375000

8100000 600000

12000000 750000

14500000 625000

16000000 375000

Operating Expenses:

Costs Projections 2012E Employee Cost Facility Maintainance (Electricity Etc) dministration & other Operating Costs Marketing Cost Total Costs 0 0 0 200000 2013E 200000 100000 300000 2014E 300000 150000 200000 2015E 4940870 500000 150000 100000 2016E 6016385 500000 200000 100000 2017E 7754787 550000 250000 100000 2018E 8375170 550000 250000 0 1764000 3071520

Employee Cost Number Salary Per Month Principal Number Salary Per Month Teachers Number Salary Per Month Library & Lab ssisstants Number Salary Per Month dministration Staff Number Salary Per Month Guards & Misc Staff 8% 8% 8% 8%

200000 2364000 3721520 5690870.4 6816384.5 8654787.07 9175170.038

2012E

2013E 1 25000 300000 10 9000 2 7000 168000

2014E 1 27000 324000 20 9720 2 7560 181440 3 6480 233280 6 3240 233280

2015E 1 29160 349920 30 10498 4 8165 391910 5 6998 419904 6 3499 251942

2016E 1 31493 377914 35 11337 4 8818 423263 5 7558 453496 8 3779 362797

2017E 1 34012 408147 40 12244 6 9523 685686 8 8163 783642 12 4081 587731

2018E 1 36733 440798 40 13224 6 10285 740541 8 8816 846333 12 4408 634750

1080000 2332800 3779136 4761711 5877312 6347497

8%

3 6000 216000 4 3000 144000

Total Employee Costs

1764000 3071520 4940870 6016385 7754787 8375170

Projected P&L
2013E Revenues Tution Fees dmission Fees 1,800,000 4,500,000 8,100,000 12,000,000 14,500,000 16,000,000 300,000 450,000 600,000 750,000 625,000 375,000 2,100,000 4,950,000 8,700,000 12,750,000 15,125,000 16,375,000 2014E 2015E 2016E 2017E 2018E

Costs Employee Cost 1,764,000 3,071,520 4,940,870 Facility Maintainance (Electricity Etc) 200,000 300,000 500,000 dministration & other Operating Costs 100,000 150,000 150,000 Marketing Cost 500,000 200,000 100,000 Total Costs EBITD EBITDA% Depreciation Interest 2,564,000 3,721,520 5,690,870 122.10% 75.18% 65.41% -464,000 1,228,480 3,009,130 -22.10 24.82 34.59 412,500 1,108,800 1,985,300 0 1,985,300 -94.54% 585,125 973,056 799,656 1,089,823 6,016,385 500,000 200,000 100,000 6,816,385 53.46% 5,933,615 46.54 546,478 920,601 7,754,787 550,000 250,000 100,000 8,654,787 57.22% 6,470,213 42.78 417,179 491,074 8,375,170 550,000 250,000 0 9,175,170 56.03% 7,199,830 43.97 342,790 0

PBT Tax Paid (@30%)

P T pat%

 

Total Revenues

-329,701 0

1,119,651 335,895

4,466,536 1,339,961

5,561,960 1,668,588

6,857,040 2,057,112

-329,701 -6.66%

783,755 9.01%

3,126,575 24.52%

3,893,372 25.74%

4,799,928 29.31%

Depreciation:

Additions:-

2013E Land Building Furnitures & Fixtures 5200000 1200000 400000

2014E 0 1200000 400000

2015E 0 1200000 200000

2016E 0 0 0

2017E 0 0 0

2018E 0 0 0

Computers Library Lab Equipments Generator Set

300000 50,000 50000 100000

150000 75,000 75000 100000

3,00,000 75000 75000 0

0 0 0 0

0 0 0 0

0 0 0 0

Closing Gross Block:2012E 2013E 2014E 2015E 2016E 2017E

Land Building Furnitures & Fixtures Computers Library Lab Equipments Generator Set

5200000 1200000 400000 300000 50,000 50,000 1,00,000

5200000 2400000 800000 450000 1,25,000 1,25,000 2,00,000

5200000 3000000 1000000 750000 2,00,000 2,00,000 2,00,000

5200000 3000000 1000000 750000 2,00,000 2,00,000 2,00,000

5200000 3000000 1000000 750000 2,00,000 2,00,000 2,00,000

5200000 3000000 1000000 750000 2,00,000 2,00,000 2,00,000

Depreciation:Depreciation Rates (As Per Company's Act)

2012E -

2013E -

2014E -

2015E -

2016E -

2017E -

Land

Building Furnitures & Fixtures

10.00%

1,20,000

2,28,000

3,25,200

2,92,680

2,63,412

2,37,071

10.00%

40,000

76,000

88,400

79,560

71,604

64,444

Computers Library Lab Equipments Generator Set Total

60.00% 50.00% 50.00% 15.00%

1,80,000 25,000 25,000 15000 4,05,000

1,62,000 50,000 50,000 27750 5,93,750

2,44,800 62,500 62,500 23587 806988

97,920 31,250 31,250 20050 5,52,709

39,168 15,625 15,625 17042 4,22,476

15,668 7,813 7,813 14485 3,47,292

Calculation of WDV of fixed Asset:

Particulars Land 2012E 5200000 2013E 5200000 2014E 5200000 2015E 5200000 2016E 5200000 2017E 5200000

Building

10,80,000

20,52,000

29,26,800

26,34,120

23,70,708

21,33,637

Furnitures & Fixtures

3,60,000

6,84,000

7,95,600

7,16,040

6,44,436

5,79,992

Computers

1,20,000

1,08,000

1,63,200

65,280

26,112

10,445

Library

25,000

50,000

62,500

31,250

15,625

7,813

Lab Equipments

25,000

50,000

62,500

31,250

15,625

7,813

Generator Set

85000

157250

133662.5 113613.125 96571.1563 82085.4828

Total

6895000

8301250

9344262.5 8791553.13 8369077.16 8021784.88

Loan Repayment Schedule:

Loan Repayment:2012E 2013E 2014E 2015E 2016E 2017E

Opening Balance Addition Repayment Interest(@12.0%) Closing Balance

0 4000000 0 240000 4240000

4240000 3000000 0 868800 8108800

8108800 0 0 973056 9081856

9081856 0 2500000 1089823 7671679

7671679 0 4500000 920601 4092280

4092280 0 4583354 491074 0

DSCR Calculation:

Particulars Profit after Tax(PAT) A

2013E -329,701 973,056 585,125 1,228,480 0 973,056 973,056 1.26 1.43 1.26

2014E 783,755 1,089,823 799,656 2,673,234 0 1,089,823 1,089,823 2.45

2015E 3,126,575 920,601 546,478 4,593,655 2500000 920,601 3,420,601 1.34

2016E 3,893,372 491,074 417,179 4,801,625 4500000 491,074 4,991,074 0.96

2017E 4,799,928 0 342,790 5,142,718 4583354 0 4,583,354 1.12

A) PBI A Repayment of ebt B) EBT + Interest C) SCR (A/B) Average SCR (A SCR) Mininmum SCR (M SCR)

Cost Of Capital:
To arrive at the cost of capital, we used WACC methodology. It includes cost of debt and cost of equity. To get the cost of debt, we considered a term loan charging an interest rate of 12.5% p.a. In this we take into consideration the tax effect. The effective cost of debt comes out to be 12.5(1-0.3); =8.75% To get the cost of equity, we used the CAPM approach, according to which,

ke =Rf + (Rm-Rf)
where: ke=cost of equity Rf= Risk free rate ; considered 7% as per average Treasury-bonds discount rate. = Coefficient of systematic risk

  

: Interest Expenses

    

: Interest Expenses : epreciation

Rm= Market returns of NSE. Note: The Beta value of the industry as per the historical data is0 .69, although it is adjusted to 0.80 for more realistic value. Risk free rate = 8.31% Market Premium= 13.74% Ke= 12.65% The weights of debt and equity are taken as: Debt: Rs. 7000000 Equity: Rs. 3000000 ko = kd(D/D+E) +ke(E/D+E) WACC= .0875(7000000/10000000) + .1265(3000000/10000000) WACC = 9.92%

Break Even Analysis:

Key assumptions made for the break-even analysis are :
y y

We have used Free Cash Flows to the Firm(FCFF) for arriving at a break-even. FCFF is calculated as: FCFF= PAT + Interest(1-tax)+ Depreciation. PAT is taken as at the end of 3rd year as it is the 1st positive one we are getting. We are assuming a growth rate of 10% which is on the lower side of the expected growth rate of 14-15%.

y y

CALCULATION METHODOLOGY: Initial CAPEX = FCFF [1+(1+g)/(1+k) + ((1+g)/(1+k)) 2 ++((1+g)/(1+k))n] where n is the number of years for break-even. Initial CAPEX= 6400000 FCFF= 820624+ 1089823(1 -30%)+ 786987 = 2370487 Solving the above equation, the value of n is coming out to be close to 2 years.

PART VI TERMS OF SANCTION

Brain Nurtures Academy Term Sheet For Term Loan Of Term Loan Of Rs. 70 lakhs 1. 2. 3. 4. 5. 6. mount Purpose Margin Tenor alidity Rate of Interest RTL: Rs 70 Lakhs only Project Finance Rs 30 Lakhs to be brought by the borro er 6 years(including the moratorium period) 3 months from the date of sanction 12.5% hich is subject to change from time to time. The interest shall be payable on quarterly basis on the last day of the quarter. a 10% construction contingency that ill convert to operating capital if the construction costs are consistent ith the estimate Interest Reset fter Expiry of 1 year from the date of first Option disbursement of loan, and thereafter every year by giving forty five (45) days prior notice to the company. Up-front fee 1.25% of the financial assistance(plus applicable service tax and educational cess thereon) shall be payable by the company. The up front fee shall be non- refundable. Repayment 36 Monthly Installments Starting from Jan 2015. Put/Call Option N.

7.

8.

9. 10.

Term Sheet Common for Term Loan 1. Further Interest In the event of default in payment of interest on the financial assistance and all other monies on respective due dates, such defaulted amount shall carry interest/ further interest at the rate of interest as mentioned at Rate of Interest para above. dditional interest Disbursements made pending creation of final security as stipulated belo , shall carry additional interest @ 1,25% per annum(plus tax, if applicable) from the date of first disbursement, till creation of security. Liquidated Damages In case of default of payment of any instalment of principal amount, interest thereon or other monies becoming due on their respective due dates, you shall pay on such defaulted amounts at the rate of 2.25% per annum for the period of default Legal Fees & Other Legal fee plus other charges (net of taxes, other Charges levies/duties if any) on actual basis shall be paid/ reimbursed. Primary Security Exclusive first charge on all the current assets ,fixed assets of the company, movable and immovable both present and future having value of personal assets of promoter having Rs. 3000000 as per the project cost given. Collateral Security 1st mortgage on commercial land situated at Plot No. 7 survey no. 62, sector 11, d arka having value Rs. 80 lakhs (as indicated by the Directors) Personal Guarantee 1.Mr Kumar Digant Sing Rathore has a net orth of Rs.20 lakhs as on 31 st March 2011. 2.Ms. Neerja Bhardwaj has a net orth of Rs.15 lakhs as on 31 st March 2011 3.Mr. Ankur Garg has a net orth of Rs.20 lakhs as on 31st March 2011. 4.Mr. Vikas Agarwal has a net orth of Rs.15 lakhs as on 31 st March 2011. 5.Ms Aanchal Gupta has a net orth of

3.

4.

5.

6.

7.

2.

Rs.15lakhs as on 31st March 2011 6. Ms Surbhi Sharma has a net orth of Rs.15 lakhs as on 31 st March 2011 8. Pre Payment In case of interest levied on reset is not applicable to the company, the financial assistance may be prepaid, ithout payment of any prepayment premium on the reset dates. The company shall accept Bank s standard financial covenants. s per Bank s Norm/Guidelines s mentioned belo . Risk to be covered Comprehensive Insurance Standard risks including fire, natural calamities, civil commotion, burglary etc. With suitable bank clause.

9. 10. 11. 12.

Financial Covenants Documents Other Conditions Insurance sset to be insured ll movable and Immovable assets of the company