Capital Structure Dilemma at SRM Infrastructure Ltd.

Code : FCF0022

Year :

Industry : Infrastructure

Region : India

Teaching Note: Available

Structured Assignment :Not Available

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MR. P.M.SAXENA: Mr. Saxena went through industry research reports for his analysis which highlighted the growth potential of this sector taking into consideration the report of NHAI quoted as under: “Union Finance Minister Pranab Mukherjee in the Union budget 2012-13 proposed allocation of Rs. 50 lakh crore toward infrastructure investment during the Twelfth Plan period from 2012-17. About half of this is likely to come from the private sector. Moreover it was found that Investment in infrastructure will go up by 700 billion rupees in 2015-16, over the last year. National Investment and Infrastructure Fund (NIIF), to be established with an annual flow of 20,000 crore rupees to it. Allocation of 25,000 crore rupees for rural infrastructure. Tax free bonds for financing infrastructure projects were also raised to Rs 100 bn. In order to augment low cost funds from outside India, total exemption of 100% for next 5 years and an exemption of 30% for 20 years thereafter has been doled out to institutions providing debt to key infrastructure projects such as aviation, power, toll road, bridge, port etc.”

FINWIZ ASSOCIATES: Finwiz Associates worked upon the debt equity mix as suggested by Mr. P.M.Saxena. But they believed that with market sources of capital available, the company should rely on them along with internal equity. They quoted a survey done by McKinsey which stated that:...

RMPG Consultancy: “Infrastructure sector which acts as a catalyst in development of all the other sectors of the economy has been the focus area of Government. Government has recognized the need to fill the gaps in financing infrastructure projects and has set up an infrastructure debt fund to serve the same purpose. In order to augment low cost funds, a 100% tax exemption for initial 5 years and 30% for next 20 years has been doled out to investors providing debt to key infrastructure projects such as aviation, power, toll road, bridge, port etc. This will definitely help in filling the gap of the huge investment the country needs in infrastructure.”..

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  • Exhibit I: Balance Sheet of SRM Infrastructure Ltd as on 31st March 2015
  • Exhibit II: Profit and Loss Account of SRM Infrastructure Ltd for the Year 2014-2015
  • Exhibit III: Profit & Loss Account


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