PUNJAB TURF CLUBBY:Prachi Bhandari (A012)Mayank Bhatia (A013)Nitin Gupta (A024)Parnika Jain (A027)

Neha Mittal (A038)Pranab Parida (A041)Niral Shah (A053)Monisha Sharma (A055)Neha Singh (A056)

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Agenda

• About Turf Club• Punjab Turf Club Specifications• Punjab Government Entities• Project Development Advisor• Laws• Public-Private Partnership• Project Evaluation• Risk Analysis

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Turf Club• Sports club primarily involved into

horse racing• Modern racing is a major venue for

legalized gambling• Three major types of racing:

Flat racing Steeple chasing Harness racing

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Horse Racing in India

• Racing is conducted on one or two centers on one day

• Centers in Mumbai, Pune, Bangalore, Hyderabad, Mysore, Kolkata, Chennai, etc.

• Betting is conducted at all centers for all other centers in India

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• Royal Western India Turf Club Limited – 7566 members ,600 Owners, 46 licensed

trainers and 80 jockeys as on 15th July 2010

– Has residential facility along with gym, lounge, restaurants, etc

– Two race courses:the Mahalaxmi Race Course, Mumbai 6, Arjun Marg, Pune

Turf Clubs In India

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November to April

Thursdays and Sundays are race days from November to March and Saturdays and Sundays in April

1400 horses in training at Mumbai housed in permanent stables

Mahalaxmi Race Course

July to October

Races are held on Saturdays and Sundays

Some of the horses are housed in temporary structures

Arjun Marg Race Course

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Stud Farms• Any land and building used for the

breeding and rearing of horses• Provides a secure and quiet

environment for horses and ensure that they are isolated from diseases

• Punjab has around a dozen of the 60 stud farms existing in the country and offers at least 200 racehorses out of the 1300 produced in the country every year

• Muktsar district is one of the biggest stud farms in India

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Stud Services

• Provides an outside source of revenue to a stud farm via the stud fees paidBreeding

• A necessity for a stud farm to prevent overcrowding

Selling horses for money

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National Horse Breeding Society India (NHBSI)

• Established in 1920 & meant to promote equestrian activities

• Represents interests of Indian thoroughbred breeders

• Ensured Horse breeding operations came under the agricultural ministry

• Society was able to get relief from governmental threat of closing down racing activity in 1953

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Indigenous Horse stud Book Authority of India (IHSBA)

• Recognized by the Ministry of Agriculture, Government of India

• Each Society continues to register its respective breeds in their jurisdictions

• Maintains separate stud books for each Indigenous breeds

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Indigenous Horse Society of India (IHSI)

• Founded on 19th March 1999• To document indigenous breeds like

Marwari (from Rajasthan), Kathiyawari (Kutch), Spiti (Kashmir), Jhanskari and Manipuri

• Worked on:o Lifting of export ban of indigenous horseso EU disease free zoneo Disease survey reportso National equine development boardo Grants for indegenous horses

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PUNJAB TURF SPECIFICATIONS

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Project• Initiated by Department of Animal

Husbandry, Punjab Infrastructure Development Board and Government of Punjab

• IL&FS IDC appointed as project development advisor

• Area: 150 acres (outskirts of Ludhiana)

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Turf Club Components

Monsoon Track

Winter Track

Equine Training Center-Trotting Rings, Bund

schools

Grand stand – Minimum capacity 3000 spectators, Standing -Seating

Stable- 1200

horses

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Components Contd..Betting Halls / system : Place where people will place bets• Information and communication system • Tote terminals• Bookies Ring

Veterinary Center : Maintains health and provides immediate medical care

Club House/Restaurants : Indoor sports facilities along with restaurant and cafeteria

Staff Residence : facilities for the syces and the other servicemen

Others : Water treatment plant, Lighting for night racing, Waste disposal etc

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Turf Club Layout

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Sources of Revenue

REVENUE STREAMS

Betting – Off and on course

Entry Fee

Gate Money

Facility Usage

Sales at restaurants

Boarding & Lodging

Sponsorship

Royalties

Mobile Usage

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PUNJAB GOVERNMENT ENTITIES

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Punjab Infrastructure Development Board(PIDB)

• Set up in 1998 under ‘The Punjab Infrastructure Development Bill, 1998’

• A High-powered committee

• It provides for

Chief minister -> Chairman

State finance Minister -> Vice- Chairman

Clear operating guidelines pertaining to projects and concessionaires

Legal basis for grant of concessions

Structures of public-private participation

Safeguarding interests of stakeholders

Dispute-resolution mechanisms

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Punjab Infrastructure Development Fund (PIDF)

PIDF

~ Rs. 190 Cr p.a.

Augmentation of existing infrastructure through direct

fund

Punjab infrastructure initiative fund

Punjab Gov.’s contribution to grant/viability gap funding in

priority infrastructure projects

Debt Servicing

Bonds or other debts

Rs. 1/ litre on petrol

1% fee on all agricultural products

Sources of funds for infrastructure development

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Department of Animal Husbandry

To improve genetic potential of livestock through scientific breeding

To provide efficient and effective health cover to the livestock wealth of the state

To provide improved feeding and management practices

To provide effective extension services in the field of Animal Husbandry.

Objectives:

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PROJECT DEVELOPMENT ADVISOR-IL&FS IDC

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IL&FS IDC

Wholly owned subsidiary of the Infrastructure Leasing & Financial Services Limited (IL&FS)

Intensive knowledge & experience in all the aspects of Infrastructure development

Provides assistance as Project Developer/Advisor to develop 'bankable' infrastructure projects through Public Private Partnerships (PPPs)

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IL&FS IDC

Project Development

Project Appraisal

Project Finance Training & Capacity Building

Project/ Programme

Management Consultancy

Services offered:

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LAWS

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Bye Law• Law of local or limited application passed

under the authority of a higher law specifying things may be regulated by the Bye Law. 

• Also refers to the internal rules of a company or organization

Responsibilities of PIDB:Identification of projects

Arrangement of technical and financial consultancy services in the preparation of techno-feasibility studies, detailed project reports

Execution and implementation of infrastructure projects

Execution and supervision of work

Release of project related expenses

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Indian Horse Racing Legality

Indian horse racing industry is strictly regulated

Supreme Court of India ruled in 1996 that horse betting is not just luck-based, but also skill-based

Not illegal gambling according to the 1888 Police Act or the Gaming Act of 1930

According to 7th Schedule, Entry No. 34 of the Indian Constitution individual States have the full right and legitimate authority to make laws with respect to gambling and betting

Authority to the States to tax gambling and betting events or activities

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Horse Betting in India

• Offshore online betting sites offer many markets for Indian horse betting enthusiasts.– Ex- www.titanbet.com & www.bet365.com

• Punters are not allowed to bet online for Indian horse races

• Indian bettors can place bets on Tote or with trackside and off-course bookmakers

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CASE: Differentiating Horse Racing and Gambling

• In 1949, Tamil Nadu Legislative enacted law by which horse racing was brought within the definition of “gambling”

• Challenged by the club filing writ petition before the Madras High Court which was dismissed

• Supreme Court stated Horse racing is neither ‘gaming’ not “gambling” 

• Horse-racing is a sport which primarily depends on the special ability acquired by training & is a game of skill

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PPP

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PPP

OBJECTIVE •Transfer Risks and Responsibilities to private sector in order to gain efficiency, cost reliability and financial security

Efficiency gains through appropriate sharing of risks and responsibilities; the public sector retains mainly sovereign tasks and the private bears those for implementation

Lifecycle and private investment as crucial elements of PPP’s incentive structures

Long term contractual relationship

Innovation, in particular through output specification, service levels and payment mechanisms, as a new way of describing the services to be supplied.

Main characteristics:

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Advantages of PPP

Risk Diversification• Through creation of SPV

Risk Mitigation• SPV keeps specific risks of project

separate from existing business of private sponsors

Project financing• Since SPV is borrowing funds, sponsor’s credit rating isn’t affected

and therefore future borrowing isn’t affected

Leverage• Highly leveraged in order to increase

the equity return

Credit Ratings• Borrowing for profitable project not

restrained by project sponsor’s borrowing limitations

Tax Benefits • Tax benefits sometime exist for new

enterprises

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TECHNICAL EVALUATION

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Proposed Site Details

Proposed site at Mattewara village(20kms from Ludhiana)

150 acres of Govt. land

20% stud farms & 15% race horses of India are in Punjab

Incentives by state: tax incentives, single window clearance facility and provision of loans for Tourism related projects

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Location Analysis

• Factors to be considered while deciding the location:

CLOSENESS TO TOWNS AND CITIES

INFRASTRUCTURE IMPACT ON THE ENVIRONMENT

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Location Analysis

Ludhiana: Manchester of India

Ranks among the top 5 cities of North India in terms of economic index

Regarded as the best place for doing business in India as per World Bank Study 2009

Plain topography (average attitude over sea level being just 244mtrs)

Tropical climate, Adequate rainfall

Well drained soil and well developed water supply

High Income group people residing in city

Centrally located in Punjab and Closeness to Chandigarh (100 Kms)

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Track Preparation

MONSOON TRACKWINTER TRACK

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Turf Design

• Monsoon turf -Kikuyu sprigs

• Winter track -tan bark layer of 3 inches thickness

• 150mm thick soil layer

• Around 113 mm deep sand layer

• Around 200 mm deep gravel layer containing the collector drainage pipe

TURF SURFACE ROOT ZONE

INTERMEDIATE LAYERDRAINAGE LAYER

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Cross Sectional View of Track

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PROJECT EVALUATION

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Deal DiagramGovernment Authorities

PIDB Department of Husbandry

Government of Punjab

Experts

Development Advisor

Consultant

Insurers

Suppliers

TURF CLUB (SPV)

Financers

Banks

Debt FinancesIL & FS

Partners (Private Companies)

Engineers (Design)

Operators (Operate)

Contractors (Build)

Customers

Escrow Agents

Raw Materials

State Support Agreement

Money

Consultation/ Fees

Master plan /Fees

Insurance Services /Premium

Dividends EquityDebt Service

Payments

Revenue

Debt

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Current status

The bidding process for consultant has already started and application due date for Technical Stage was on July 9, 2012

Three multi-national companies, Populace , S Powers and JAA Consultants, have made bids for offering consultancy services for the horse racing tracks.

The bidding process for developer had started last year and application due date was May 3, 2011, but till now nothing has been disclosed by the government

Litigation is going on over 100 acres of land out of proposed 1000 acres of eight villages of Ludhiana Districts for various proposed projects

Various projects nearby site include amusement parks, Las-Vegas strip like casino, Golf Course & Forest retreat

US-based game park company Six Flags is likely to construct the amusement part

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Sources Of Funding

WACC Calculation Amount(In Rs. Crores)

Debt 70.00% 77

Equity 30.00% 33

Total 100.00% 110

Risk-free Rate 8.15%

Market Risk Premium 9.00%

Equity Beta 1.85

Interest Rate 13.00%

Ke (Cost of Equity) 24.77%

Kd (Cost of Debt) 9.10%

Tax Rate 30.00%

WACC 13.80%

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Term SheetBASIS CRITERIA

Borrower Punjab Turf Club Ltd. (SPV)

Purpose of Loan Development of Punjab Race Course

Credit Facility 12 years Secured Term Loan including 2 years Interest accrual period , 10 equated annual installments

Equity Contribution Rs. 330 Million prior to any loan disbursement ( i.e. 30% of total project cost)

Amount Rs. 770 Million (i.e. 70% of total project cost)

Collateral All the assets of the SPV including land, assignment of the borrowers rights under all project contract

Guarantor Personal guarantee of Promoters

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BASIS CRITERIA

Interest Rate @ 3% above base rate per annum presently 13.00%

Conditions precedent to Funding Including but not limited to,1. All the required equity contributions have been made2. Project Advisor confirmation that costs are incurred

confirmed to approved constructions plans3. Projected ICR and DSCR should not be materially

different from estimation

Priority of Cash Flows Revenues generated to be applied as follows 1. Operating and Maintenance expenses2. Interest payment on annual basis3. Principal reduction on this credit facility4. Annual Dividend payout

Non- Recourse All obligations shall be obligations solely of the borrower and the bank shall have recourse only to the borrower and collateral with respect thereto

Borrowers Covenants The borrower should not dilute his equity stake until the entire debt repayment

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Project Cost

Particulars Value (Rs)

Track Preparation Cost 18,65,08,841

Track Equipments 1,21,31,900

Building 57,18,20,000

Equine Hospital & Lab Equipments 7,80,00,000

Televisions 9,80,000

Plant & Machinery 3,75,00,000

Electrical Installation 1,50,00,000

Electrical Lifts 50,00,000

Electrical Installation 1,50,00,000

Furniture 99,25,000

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Financial Statements

Financial Statements

Profit & Loss

Cash FlowBalance Sheet

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Profitability Analysis

25%

50%

75%

100%

0.0010.0020.0030.0040.0050.0060.00

0.00%5.00%10.00%15.00%20.00%25.00%

NPVIRR

25%50%

75%100%

0.00

2.00

4.00

6.00

8.00

Avg. ICRAvg. DSCR

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Sensitivity Analysis

Occupancy (in Percentage) 20 25 30 35 40

NPV (Rs Crores) 12.19 18.79 24.94 30.58 35.63

IRR (in Percentage) 15.12 16.26 17.34 18.34 19.27

Average DSCR 1.49 1.59 1.67 1.74 1.80

Average ICR 6.27 6.60 6.86 7.06 7.21

Bid Amount (crores) 5.30 @ 30% occupancy rate

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RISK ANALYSIS

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Sources Of Risk

GOVERNMENT

DEV

ELO

PERS

TARGET MARKET

RISKS IN A TYPICAL PPP PROJECT

LEGAL & REGULATORY FRAMEWORK

CONTRACTS

CONSTRUCTION

O&M

DEMAND

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Land Acquisition Risk & Mitigation

Risk

• Challenging pre-development activity

• Litigation going on over 100 acres of land

Mitigation

• Land acquiring process should be completed before project allocation to developer

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Demand Risk & Mitigation

Risk

• Occupancy rate is low

• Betting value assumed may not be realized

Mitigation

• Suitable site selection with good connectivity

• Race dates should not clash with major turf clubs

• Invest in marketing & advertisements

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Force Majeure Risk & Mitigation

Risk• FLOOD• Ludhiana district is

prone to floods• Dhussi dam washed

away by a major flood in the year 2010

• EQUINE INFLUENZA• Influenza hit

Bangalore and Pune Turf clubs in the year 2008

Mitigation• Dhussi dam repair

should be finished efficiently

• Proper medical check-up of imported horses

• Proper administration of vaccines to the horses

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Construction Risk & Mitigation

Risk

• Factors which cause non-completion, late completion, and cost over-runs

• Impact on the net cash flow & profitability

Mitigation

• Contracts should be awarded to an experienced and reputed firm

• Obtain completion guarantees to pay liquidated damages

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Financial Risk & Mitigation

Risk

• Sufficient finance will not be available at reasonable cost

• Inappropriate financial structure

• Interest rate risk• Currency risk in case

of foreign developers

Mitigation

• Financing structure which can be availed at minimum cost

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Operation & Maintenance Risk & Mitigation

Risk

• Impacted by the level of experience and resources of the operator

• Inefficiencies in operations

• Shortages in the supply of skilled labour

Mitigation

• Operated by a reputable and financially sound operator

• Selection on the understanding of Turf Club business day to day operations

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Political Risk & Mitigation

Risk

• Uncertain Laws• Lack of clarity in

govt policies • Unstable

government• Change in taxation

rules

Mitigation

• Stable government

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Environmental Risk & Mitigation

Risk• Environmental

liabilities since site is near to Forest Area

Mitigation• All planning,

environmental and other consents and approvals should be taken prior to development

• Water recycling plant

• Waste Disposal System

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Conclusion

•Profitable even at low occupancy levels•The taxation rates would be maintained as a step to promote tourism.•The state already has various stud farms which supply horses to various locations domestic & abroad for racing purpose•In the absence of major turf clubs in the north, the location seems to be fit enough considering the fact that Ludhiana is the city of riches

PROFITABLE & VIABLE

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THANK YOU