Analysis of Adani Power Operation, Research Paper Example

Adani Power has recently become interested in renewable energy projects (Panchabuta, 2012). In this situation, the capital investment costs will likely include pre-project study research and analysis, equipment, equipment installation and construction, employee benefits, labor, and land as fixed costs. The operation costs will include a marketing team, administrative and management staff, office space and utilities, the cost of personnel to run the equipment, equipment maintenance, insurance, accounting and legal fees, taxes, supplies and office expenses, and depreciation. This scenario assumes that a ₹ 1,000,000 loan was taken out at the beginning of year 1 with an interest rate of 7.5%.

Projected Income Statement Year 1 Year 2 Year 3 Year 4 Year 5
Sales ₹ 600,000 ₹ 2,200,000 ₹4,300,000 ₹4,600,000 ₹ 5,000,000
Government Incentives ₹ 50,000 ₹75,000 ₹60,000 ₹65,000 ₹ 60,000
Total Income ₹ 650,000 ₹2,275,000 ₹ 4,360,000 ₹ 4,665,000 ₹ 5,060,000
Cost of Goods          
Research ₹ 1,100,000 ₹ 60,000 ₹ 50,000 ₹ 20,000 ₹ 15,000
Equipment R & M ₹ 0 ₹ 170,000 ₹ 180,000 ₹ 220,000 ₹ 175,000
Labor Benefit ₹ 20,000 ₹ 100,000 ₹ 124,000 ₹138,000 ₹142,000
Processing Labor ₹ 30,000 ₹ 240,000 ₹ 245,000 ₹ 250,000 ₹ 255,000
Total Cost of Goods ₹ 1,150,000 ₹ 570,000 ₹ 554,000 ₹ 628,000 ₹ 429,500
Gross Margin -₹ 500,000 ₹ 1,705,000 ₹ 3,806,000 ₹ 4,037,000 ₹ 4,630,000
           
General and Administrative Expenses          
Administration/Management ₹ 80,000 ₹ 240,000 ₹ 255,000 ₹ 270,000 ₹ 285,000
Marketing ₹ 320,000 ₹ 300,000 ₹ 315,000 ₹ 330,000 ₹ 345,000
Office Space/Utilities ₹ 17,500 ₹ 31,000 ₹ 33,000 ₹ 33,500 ₹ 35,000
Insurance and Bond ₹ 48,000 ₹ 120,000 ₹ 150,000 ₹ 180,000 ₹ 110,000
Accounting and Legal ₹ 8,000 ₹ 40,500 ₹ 41,500 ₹ 43,000 ₹ 44,500
Taxes ₹ 0 ₹ 60,000 ₹ 60,000 ₹ 60,000 ₹ 60,000
Supplies and Office Expense ₹ 20,000 ₹ 30,000 ₹ 30,000 ₹ 30,000 ₹ 30,000
Depreciation ₹ 0 ₹ 550,000 ₹ 600,000 ₹ 650,000 ₹ 700,000
Total G&A Expenses ₹ 493,500 ₹ 1,371,500 ₹ 1,171,000 ₹ 1,254,500 ₹ 943,500
Operating Income -₹ 6,500 ₹ 334,000 ₹ 2,335,000 ₹ 2,782,500 ₹ 3,686,500
Interest Expense ₹ 75,000 ₹ 75,000 ₹ 75,000 ₹ 75,000 ₹ 75,000
Income Before Taxes -₹ 506,500 ₹ 2,039,000 ₹ 6,141,000 ₹ 6, 819,500 ₹ 8,316,500
Income Tax Expense ₹ 0 ₹ 0 ₹ 2,047,000 ₹ 2,273,167 ₹ 2,772,167
Income from Continuing Operations -₹ 506,500 ₹ 2,039,000 ₹ 4,094,000 ₹ 4,546,333 ₹ 5,544,333
Cash Flows -₹ 506,500 ₹ 2,039,000 ₹ 4,094,000 ₹ 4,546,333 ₹ 5,544,333

References

Panchabuta. (2012). Adani Power CEO may join US-based PE fund that is likely to invest $1 bn   in Renewable Energy projects. Retrieved from http://panchabuta.com/2012/06/24/adani-   power-ceo-may-join-us-based-pe-fund-that-is-likely-to-invest-1-bn-in-renewable-energy- projects/