Resort Project - Feasibility Final Report - 22082014

8/11/2019 Resort Project - Feasibility Final Report - 22082014

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Prepared by:

Kumar & Joseph

Chartered Accountants

www.kumarandjoseph.com

Feasibility study fora proposed Resortat Kovalam


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Contents

Executive Summary .............................................................................................................. 3

Feasibility .......................................................................................................................... 4

Introduction and Background ................................................................................................ 5

Introduction ....................................................................................................................... 5

Background for investment ................................................................................................ 5

Promoters .......................................................................................................................... 5

Demand Analysis .................................................................................................................. 6

Introduction ....................................................................................................................... 6

Kovalam and Tourism ........................................................................................................ 6

Geography ........................................................................................................................ 6

Climate .............................................................................................................................. 6

Food and Drinks ................................................................................................................ 6

Requirement and Demand Analysis for Resorts ................................................................ 6

Location Advantages ......................................................................................................... 8

Advantages of Resort Setup in Trivandrum ....................................................................... 8

Project Profile ....................................................................................................................... 9

Profile of the Proposed Resort ........................................................................................... 91. Process/Steps ............................................................................................................. 10

2. Infrastructure and Amenities ........................................................................................ 10

Financial Plan ..................................................................................................................... 11

Assumptions .................................................................................................................... 11

Feasibility Indicators............................................................................................................ 14

Annexure ............................................................................................................................ 20

Break Up Of Project Cost ................................................................................................ 20

Project Implementation Tracker .......................................................................................... 24


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Feasibility study for a proposed Resort at Kovalam 4

Feasibility

To assess the financial viability of the proposed Project, a feasibility model was created to account forthe revenue streams, expenses, and variables associated with the development and operation of theproject. It is important to keep in mind that the model and the resulting measures of financialperformance are based on general assumptions and enquiry. The results are as follows:

Internal Rate of Return & Net Present Value

Project IRR 30.41%

Project NPV 76.03 lakhs

Discounted Payback period 5 years

Normal Payback period 5 years

Cost of Capital Assumptions

Equity contribution 100%

Cost of Equity (assumed) 15%

The Project IRR is 30.14% which is more than the Cost of Equity which is assumed to be 15%. NPValso shows a positive value.

Moreover from the graphical representation above, we can see the total revenue trend is steeplyrising whereas total cost trend rise is moderate, resulting in increasing profit trend. Since project isdepicting increasing trend of revenue and profit, the project is viable and acceptable.

-8,19,913 -6,26,655

5,93,810

14,84,694 24,45,123 29,00,312

36,94,313 35,01,055

52,29,700

70,89,008

86,89,76796,59,498

28,74,400 28,74,400

60,78,000

92,10,000

1,21,82,800

1,38,02,800

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Profit/Loss Total Cost Total Revenue


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Introduction and Background

Introduction

The Kovalam resort project is promoted by NRI couple, Anuj Narayanan & Meera Anuj. Anuj andMeera have been living abroad for the last 15 years and it has been their dream to construct amedium sized resort aimed at providing a very traditional and malayalee experience for tourists. Thepromoters have 40 cents of land in Kovalam, a major tourist destination of Kerala and South India,which they plan to develop and construct 6 cottages with all modern facilities. Another 4 cottages areplanned and will be commissioned as part of Phase II of the project.

It has been proposed to start the development and construction of the resort by January 2015 andcommission the phase I of the project by April 2016.

This project report covers the market and financial feasibility of Phase I & II of the project.

Background for investment

Tourism is an ever rising industry in any country. The revenue it brings and the employmentopportunities it provide, both directly and indirectly, has gained it a lot of recognition in favourablegovernment policy making.

Also there is a lot of potential if there are vacant lands available in tourist hot spots. The promotersthemselves own ancestral land property in Kovalam, the prime tourist destination of Kerala.The present trend of tourist attraction is economy and cost effectiveness. This has a favorable impacton the project as it is a small scale business and the cost expectations of the tourist would match.

Promoters

Mr. Anuj Narayanan

He is currently working as Senior Project Engineer at Qatar Petroleum in Doha,Qatar. Anuj was born in New Delhi and completed schooling in Cochin/ Mumbai.He is a bachelors degree holder in Mechanical Engineering. He has 19 years ofexperience in Oil and Gas Industry.

Mrs. Meera Anuj

She is born and brought up in Trivandrum, is a holder of Masters degree inCommerce and has been working as a teacher in Delhi Public School, Doha,Qatar.


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Demand Analysis

Introduction

With the Arabian Sea in the west, the Western Ghats in the east and networked by 44 rivers, Keralaenjoys unique geographical features that have made it one of the most sought after touristdestinations in Asia. Also its climate is ideal for tourist visits around the year, making its tourismmarket active all throughout the year.

Kovalam and Tourism

Kovalam Beach is one if the finest beaches in India and the most attractive tourist centre of Kerala. Itis 13 kms south of Thiruvananthapuram, the capital city of Kerala, hailed as Gods Own Country. It islocated on the western coast of India near the extreme south of the mainland. It is close toKanyakumari, another important tourist destination, which also makes it a frequently visited spot.Napier Museum, Sri Chitra Art Gallery, Padmanabhaswamy Temple, Padmanabhapuram Palace,Kowdiar Palace, Ponmudi hill station are certain other places of tourist importance in

Thiruvananthapuram, and they are reasonably close by Kovalam. In 2010, as many as 1,08,639foreign tourists visited Kovalam and the number of domestic tourist is even higher.

Geography

Kerala is made up of fourteen districts. Each of them has a distinct character. Thiruvananthapuram(also known as Trivandrum) is the capital of Kerala, famous for its Kovalam beach (rated as one of thetop ten beaches of the world). Geography is destiny in Kerala with the monsoon winds bringing thegift of life annually. Its monsoons are likened to a battalion of wild elephants.

Climate

Being situated very close to the sea, Kovalam has a moderate climate. Heavy showers are

experienced during the months June, July and August due to the South-West Monsoon. The North-East Monsoon brings light rainfall during the months September, October, November and December.December to February is pretty cool. The annual rainfall is about 310 cm. In summer the temperaturerises to a maximum of 35 C while in winter it is around 25 C. The climate between October to Marchis around an average of 25 C, making it the ideal period for tourism.

Food and Drinks

Kerala has a variety of delicious food specialties. Rice is the staple food. It is accompanied withvarious curries, curd, pappad, pickles and other side dishes. The non-vegetarian dishes are made ofmutton, beef and chicken. Fish is also a favourite dish. A dessert called payasam usually follows themain course of food. The popular thirst aids are buttermilk and tender coconut water.

Kovalam being a tourist village of the state, there are a wide range of restaurants and parlourscatering to all kinds of international cuisines such as French, Chinese, Italian, Continental etc.

Requirement and Demand Analysis for Resorts

The survey conducted in 2013, by the department of tourism from the details collected fromaccommodation units all over Kerala reveals that the foreign tourist visit in Kerala was 8,58,143during 2013, with an increase of 8.12% from previous year figures. Also, domestic tourist visits hadan increase of 7.75% and statistics for the same was 1,08,57,811 visitors.


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Tourist visit in Kerala

Tourism is an ever developing sector. From the graph given above, it is clearly evident that tourist visitin Kerala is on the rise, especially domestic tourist visits. Hence, there is an increasing demand forimprovements in the tourism sector. This provides profitable opportunities for new entrants and theirsuccess lies in their ability to provide quality services to their clients at a reasonable cost.

Out of the 1,17,15,954 tourist visiting Kerala in the year 2013, 18,24,879 tourists (about 16%) arevisiting Trivandrum and wont be missing the beautiful Kovalam. So, on an average 18 lakh peopleare visiting the Kovalam beach every year and this number is rising each year.

The average tourist visits for each of the 14 districts is approximately around 7% whereas inTrivandrum it was 16%, more than double the average.

The revenue acquired directly and indirectly from tourism sector during the year 2013 wasRs.22,926.55 Crores and around 16% of this revenue can be apportioned to Trivandrum(i.e. Rs.3,668.2 Crores), making it evident that Trivandrum and Kovalam are indeed the bestoptions to attract tourists and to start new investments.

Although other tourist spots are somewhat in a 10 km distance, tourists often chooses to stay atKovalam because of the rush and traffic in the city. Hence, a higher occupancy rate is experienced in

Kovalam compared to that in the city.

6,59,265 7,32,985 7,93,696 8,58,143

85,95,075

93,81,4551,00,76,854

1,08,57,811

2010 2011 2012 2013

Foreign Tourist Domestic Tourist

0

20,00,000

40,00,00060,00,000

80,00,000

1,00,00,000

1,20,00,000

Foreign Tourist inkerala

Foreign Tourist inTrivandrum

Domestic Touristin kerala

Domestic Touristin Trivandrum

2012 2011


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Feasibility study for a proposed Res

Location Advantages

The shimmering water of the vever green coconut trees and cwithin a 20 minutes drive to theresort. Moreover Kovalam is als

It is also very easily acceDestination of Kerala and wiAirport run way of Trivandspiritual tourism, eco-touris

With a record arrival of moryear 2011-12, Trivandrum h

There are many tourist destiBeach, Napier museum andDam, Kuthira Malika palaceand beaches and many othe

Advantages of ResortThe Government of Kerala has

To facilitate the investors, apconversion and allotment of lanallotment of land for setting up o

ort at Kovalam

st expanse of the Arabian Sea, the never endoastal line, away from all the hush and traffic ocity, all makes Kovalam an ideal and suitable locconsidered a safe place in Kerala in terms of la

sible by Air, Train, Road and Water. It is alsll start getting International Chartered Flights inum Airport. Trivandrum is going to make hea, health tourism and rural tourism.

than 3 lakh foreign tourists and 25 lakh domes s been one of the most popular destinations for

nations in or near the city including Kovalam beZoo, Agasthyarkoodam peak, Neyyar Wildlife S

, Sree Padmanabha Swamy temple, Ponmudi,rs.

Setup in Trivandrumccorded a high priority to attract private investm

ropriate amendments have been made in thin rural and urban areas. This has facilitated itourism units in the state by private sector initiat

8

ing panorama of thef the city yet locatedation for putting up a

and order.

the leading touristview of the extendedway in the area of

ic tourists during theall.

ch, Sanghumukhamanctuary and Neyyaroovar, Varkala cliffs

nt in tourism sector.

e relevant rules forthe conversion and

ive.


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Project Profile

Profile of the Proposed Resort

The resort is located in 40 cents of land located in Kovalam, Thiruvananthapuram. The Project isproposed to be launched in 2 Phases. Phase I will have 6 cottages, a multi-cuisine restaurant and a24x7 coffee shop. 4 more cottages will be set up at a later stage as part of Phase II of the project.

The cost of Phase I of the project is estimated at 80 lakhs which will be funded entirely by thepromoters of the project. The estimated cost of the phase II of the project is 47 lakhs and will be partlyfunded by the promoters and partly by the funds generated from the operations of Phase I.

Project at a glance

Project period Phase I Phase II

Project Start Year 2015 2018

Construction period in months 15 6

Investment (in 000s) Phase I Phase II

Project Cost (in 000s) 7000 4700

Contingencies (in 000s) 1000 300

Total Investment (in 000s) 8000 5000

Debt Equity Ratio Phase I Phase II

Debt Nil Nil

Equity 100% 76%

Funds generated from operations of Phase I 0 24%

Built up Area Phase I Phase II

Nos. Sq ft Area Nos. Sqft Area

Cottages 6 800 4800 4 800 3200

Reception and Lobby 1 1000 1000 - - -

Restaurant and Kitchen 1 1200 1200 1 700 700

GymTotal Area 7000 3900


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1. Process/Steps

Following are the necessary steps required to construct the resort:

Feasibility Study

Market and financial analysis and projections

Finalization of the Layout

Completion of site survey, design of plant & buildings, auxiliary & ancillary buildings, mechanicalutilities, electrical services and system

Planning for enabling works, like construction of waterlines, power lines and sewerage, office,labour camp, communication facility etc.

Approach and Internal Roads

Employee Hiring Process

Marketing

2. Infrastructure and Amenities

Air conditioned cottages

Airport transfers

Audio visual equipped

Business centre

Cable TV

Car parking

Doctor on call

Fax service

Fire safeguards

Laundry facilities

Photocopy services

Power back-up

Restaurant

Safe deposit

Travel desk


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Financial Plan

The financial plan consists of a 6 year profit and loss projection, cash-flow projection, projectedbalance sheet, and calculation of financial feasibility indicators. Together they constitute a reasonable

estimate of projects financial feasibility.

Underlying Assumptions used in the financial projections are briefly described below for easyreference.

Assumptions

General assumptions used in the Financial Projections are given below:

Phase I Phase II

Project Start Year January 2015 October 2018

Total Investment (Rs in 000s) 8000 5000

Construction period 15 months 6 months

Funding

Debt Nil Nil

Equity 100% 76%

Income from Phase I operations 0 24%

Project Cost and Funding assumptions

in 000s

A. Building Phase I Phase IIBuilding Construction 3,344 2,723

Plant & Machinery 970 725

Furniture & Fixtures 2,033 1,252

Miscellaneous Fixed Assets 653

Total (A) 7,000 4,700

B. Others

Pre-Operative cost 500 -

Statutory compliance fees 300 150

Consultancy and technical fees 200 150

Total (B) 1,000 300

Project Cost (A+B) 8,000 5,000

The breakup of the cost of construction is annexed to at the end of the project report underAnnexure A.

Phase I of the project will be entirely funded by Anuj Narayanan & Meera Anuj, promoters of theproject. Phase II of the project will be 75% funded by the promoters and 25% from operations ofPhase I


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Income Assumptions

Rental rate in Rs Year 1 &2 Year 3 Year 4 Year 5 Year 6

Season 3,500 4,500 5,500 6,500 7,500

Off-Season 2,000 3,000 4,000 5,000 6,000

Average Occupancy %

Year 1 & Year 2 30%

Year 3 50%

Year 4 70%

Year 5 75%

Year 6 75%

No. of cottages

Phase I 6

Phase II 4

Rental Income in 000s Year 1 &2 Year 3 Year 4 Year 5 Year 6

Season 1,134 2,430 4,158 5,265 6,075

Off-Season 648 1,620 3,024 4,050 4,860

Total 1,782 4,050 7,182 9,315 10,935

Food & Beverages in000s Year 1 &2 Year 3 Year 4 Year 5 Year 6

Breakfast 194 432 756 972 1,134

Dinner 648 1,296 2,117 2,592 2,916

Snacks & Coffee shop 250 300 400 500 600

Total 1,092 2,028 3,273 4,064 4,650

Expense Allocation

Major components of the variable cost and its allocation are as follows:

Components As a % of

General & Administration charges 5% of revenue

Repairs & Maintenance 5% of rental income

Food & Beverages Cost 30% of F&B income

Insurance & Legal Charges 10% of rental income

Utilities 10% of rental income

Miscellaneous 7% of rental income


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Major components of the fixed costs are as follows:

Components Annually in Rs.

Salaries 648,000

Electricity 180,000

Office expenses 120,000

Repairs & Maintenance 200,000

The year on year increase on fixed expenses from 3rd year onwards is assumed at 5 %

Depreciation

Depreciation is calculated as per rates mentioned in the Income Tax Act 1961 and the detailedschedule is attached as part of the projected financial statements.


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Feasibility study for a proposed Resort at Kovalam

Feasibility Indicators

The cost of capital is assumed at 15%

Project IRR

Description Year 0 Year 1 Year 2 Year 3 Ye

Initial Investment (8,000)

Phase II investment (5,000)

Profit as per P&L A/c (1,029) (836) 928 5

Add: Depreciation 1,027 834 684 1

Provision for Tax - - 398 2

(8,000) (3) (3) (2,990) 9

Project IRR 30.41%

Normal payback period

Project IRR







(8,000) (3) (3) (2,990) 9

Project present value (8,000) (8,003) (8,005) (10,995) (1

Normal payback period 5 years


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Discounted Payback Period







(8,000) (3) (3) (2,990) 9

NPV (8,000) (2) (2) (1,966) 5

Discounted payback (8,000) (8,002) (8,004) (9,970) (4

Discounted payback period 5 years

Project NPV Description Year 0 Year 1 Year 2 Year 3 Ye



Add: Income before Depreciation,Amortisation and Interest

(3) (3) 2,010 9

Total (8,000) (3) (3) (2,990) 9

NPV (8,000) (2) (2) (1,966) 5

Project NPV 7,603


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Resort Project, Kovalam, Trivandrum

Projected Profitability Statement

Sch Year 12016-17

Year 22017-18

Year 32018-19 20

Income

Rental Income 1,782 1,782 4,050

Food & Beverages 1,092 1,092 2,028

Total 2,874 2,874 6,078

Expenditure

Employee Cost 1 648 648 680

Office Expenses 120 120 126

General & Administration charges 144 144 304

Repairs & Maintenance 200 200 210

Food & Beverages Cost 328 328 608

Advertisement 300 300 315

Insurance & Legal Charges 178 178 405

Utilities 358 358 594

Miscellaneous 201 201 425

Interest on Capital 400 400 400

Depreciation 2 1,027 834 684

Profit /(loss) before tax (1,029) (836) 1,325

Provision for Taxation @ 30% 398

Profit/(loss) after tax (1,029) (836) 928

Total 2,874 2,874 6,078


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Resort Project, Kovalam, Trivandrum

Projected Balance Sheet

Year 02015-16

Year 12016-17

Year 22017-18

Year 32018-19

Ye201

Liabilities

Fixed Capital 8,000 8,000 8,000 11,800 11

Retained earnings/(acc.deficit) (1,029) (1,865) (938) 4

Total shareholders' funds 8,000 6,971 6,135 10,862 16

Total liabilities and equity 8,000 6,971 6,135 10,862 16

Assets

Work in Progress 5,000

Cash in hand & at Bank (3) (5) 407 7

Total Current Assets (3) (5) 5,407 7

Fixed assets, net 8,000 6,973 6,140 5,455 9

Total Assets 8,000 6,971 6,134 10,862 16

Schedule 1

Employee Cost (in 000s)

Description No Salary Year 1 Year 2 Year 3

General Manager/Front office manager 1 144 144 144 151

Housekeeping 2 96 192 192 202

Cook 1 144 144 144 151

Helper 2 84 168 168 176

Total 6 468 648 648 680


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Rate Year 1

Description % OB Dep

Building 5 3,344 168

Plant& Machinery 25 970 243

Furniture & Fixtures 10 2,033 203

Miscellaneous Fixed Assets 25 1,653 413

Total 8,000 1,027

Schedule 2

Depreciation (in 000s)

Year 2 Year 3 Year 4

CB/OB Dep CB/OB Dep CB/OB Addition Dep CB

3,177 159 3,018 151 2,867 2,723 280 5

728 182 546 136 409 725 284

1,829 183 1,646 165 1,482 1,252 273 2

1,240 310 930 232 697 300 249

6,973 834 6,140 684 5,455 5,000 1,086 9


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Resort Project , Kovalam, Trivandrum

Projected Cash Flow Statement

Year 0 Year 1 Year 2 Year 3

2015-16 2016-17 2017-18 2018-19 20

Sources

Net Profit as per P&L A/c (1,029) (836) 928

Add:

Add: Depreciation 1,027 834 684

Provision for Tax - - 398

Own Funds 8,000 3,800

Total 8,000 (3) (3) 5,810

Applications

Provision for Tax - - 398

Investment in Fixed Assets 8,000 5,000

Total 8,000 - - 5,398

Net Cash flow for the year - (3) (3) 412

Cash and bank, beginning of year 8,000 - (3) (5)

Cashflow for the year 8,000 (3) (3) 412

Cash and bank, end of year - (3) (5) 407

Drawings 10%

Excess Cash / Surplus Funds 5%

Investments 85%

Opening Cash Balance - (3) (5)

Cash Balance & Cash at Bank (3) (5) 407


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Annexure

Break Up Of Project Cost

Phase I Phase II

A. Building: Sch 2015-16 2018-19

Building Construction A 3,344 2,723

Plant & Machinery B 970 725

Furniture & Fixtures C 2,033 1,252

Miscellaneous Fixed Assets 653

Building Total 7,000 4,700

B. Others

Pre-Operative cost 500

Statutory compliance fees 300 150

Consultancy and technical fees 200 150

Others Total 1,000 300

Project Cost 8,000 5,000

Schedule A

in 000s

Cost of Building Phase I Phase II

Total Built up Area 7 3.9

Rate per sq.ft 325 475

Cost 2,275 1,853

Electrical Work 15% 341 278

Plumbing & Drainage 12% 273 222

Consultant 20% 455 371

Total 3,344 2,723


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Schedule B

in 000s

Plant & Machinery Phase I Phase II

Air Conditioners 280 150

Generator 100 100

Bore well 60 40

EPBAX 40 40

Boiler 50 40

CCTV 50 185

Kitchen Equipments 100

Fire Fitting 60 40

Water Coolers 30 30

Printers, Fax, Telex 60 30

Computers 140 70

Total 970 725

Schedule C

in 000s

Furniture & Fixtures Phase I Phase II

Total 2,033 1,252

Schedule C1

Reception, Lobby & Administration in '000s

Counter 25

Stationery 25

Pigeon Hole 15

Cupboard 50

Safe deposit 40

Sofa set 50

Fixtures 20

Luggage Carriers 15

Miscellaneous 30

Total 270


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Schedule C2

Phase I Phase II

Guest Room Nos Rate in 000s Nos Rate in 000s

Cot

Queen size 6 15,000 90 4 20,000 80

Single 5 4,000 20 3 5,000 15

Mattress

Queen size 7 7,000 49 6 7,000 42

Single 5 4,000 20 3 4,000 12

Mattress Protector

Queen size 7 1,600 11 6 1,600 10

Single 5 900 5 3 900 3

Side table 8 1,500 12 5 1,500 8

Chair 12 1,000 12 8 1,000 8

Coffee Table 8 1,000 8 4 1,000 4

Cupboard/Luggage Rack 8 15,000 120 4 15,000 60

Dressing Table and Mirror 6 5,000 30 4 5,000 20

Television 9 20,000 180 4 20,000 80

Telephones 10 600 6 6 600 4

Bathroom Mirror 10 1,000 10 6 1,000 6

Wash Basin 10 1,500 15 4 1,500 6

WC 10 5,000 50 4 5,000 20

Bath Tub 6 10,000 60 4 10,000 40

Upholstery 200 200

Fixtures 200 200

Total 1,098 816

Schedule C3

Phase I Phase II

Restaurant Nos. Rate in '000s Nos. Rate in '000s

Tables 4 2,500 10 3 2,500 8

Trays 10 500 5 5 500 3

Chair 15 1,000 15 15 1,000 15

Side Stations 2 10,000 20 2 10,000 20

Upholstery 20 20

Fixtures 20

Total 90 65


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Schedule C4

Phase I Phase II

Guest Room Linen Nos. Rate in 000s Nos. Rate in 000s

Single Bed Sheet 15 600 9 6 600 4

Double Bed Sheet 20 1,000 20 10 1,000 10

Blankets 20 1,000 20 10 1,000 10

Blankets Cover 20 500 10 10 500 5

Bed Cover 20 800 16 10 800 8

Pillow Cover 40 200 20 20 200 4

Hand Towel 80 150 12 40 150 6

Bath Towel 80 400 32 40 400 16

Bath Mat 40 150 6 20 150 3

Total 145 66

Schedule C5

in 000s

Stores & Housekeeping Phase I Phase II

Racks, Cupboards & Shelves 100 75

Bins 10 10

Fixtures 20 20

Total 130 105

Schedule C6

in 000s

Kitchen & Kitchen Stewarding Phase I Phase II

Kitchen Interiors Hobs, Cabinet etc. 200 100

Glasses 50 50

Cutlery & Crockery 50 50

Total 300 200


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Project Implementation Tracker

in months

# Particulars Phase I Phase II

1 Project research

2 Preparation of feasibility report

3 Preparation of Building plan

4 Project approval

5 Application for electricity & water

6 Building construction

7 Purchase & installation of Plant & Machinery

8 Plumbing & electrification

9 Furnishing and interior decoration

10 Staff recruitment

11 Trail runs and commissioning

12 Land seeping

13 Inauguration and commercial roll out

Total Implementation Period 15 6


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Resort Project - Feasibility Final Report - 22082014

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