PUNJAB TURF CLUB

BY: 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)

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

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

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

Turf Clubs In India

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

Mahalaxmi Race Course

November to April

Arjun Marg Race Course

July to October

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

Races are held on Saturdays and Sundays

1400 horses in training at Mumbai housed in permanent stables

Some of the horses are housed in temporary structures

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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

Breeding
Selling horses for money

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

A necessity for a stud farm to prevent overcrowding

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

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 o o o o Lifting of export ban of indigenous horses EU disease free zone Disease survey reports National equine development board 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 CenterTrotting Rings, Bund schools

Grand stand Minimum capacity 3000 spectators, Standing -Seating

Stable1200 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
Betting Off and on course Mobile Usage Entry Fee

Royalties REVENUE STREAMS

Gate Money

Sponsorship

Facility Usage

Boarding & Lodging

Sales at restaurants
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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
Chief minister -> Chairman State finance Minister -> Vice- Chairman

It provides for
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)

1% fee on all agricultural products

Augmentation of existing infrastructure through direct fund

PIDF ~ Rs. 190 Cr p.a. Punjab infrastructure initiative fund Punjab Gov.s contribution to grant/viability gap funding in priority infrastructure projects

Rs. 1/ litre on petrol

Bonds or other debts

Debt Servicing

Sources of funds for infrastructure development

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Department of Animal Husbandry

Objectives:
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.

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PROJECT DEVELOPMENT ADVISORIL&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
Services offered:
Project Development

Project/ Programme Management Consultancy

Project Appraisal

Training & Capacity Building

Project Finance
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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 luckbased, 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
Main characteristics:
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 PPPs 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.

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

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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, sponsors credit rating isnt affected and therefore future borrowing

Leverage
Highly leveraged in order to increase the equity return

isnt affected

Credit Ratings
Borrowing for profitable project not restrained by project sponsors 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

COST BENEFIT ANALYSIS

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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 TRACK
WINTER TRACK

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Turf Design
Monsoon turf Kikuyu sprigs Winter track -tan bark layer of 3 inches thickness 150mm thick soil layer

TURF SURFACE

ROOT ZONE

DRAINAGE LAYER

INTERMEDIATE LAYER

Around 200 mm deep gravel layer containing the collector drainage pipe

Around 113 mm deep sand layer

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Cross Sectional View of Track

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PROJECT EVALUATION

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Deal Diagram
Government Authorities
Department of Husbandry Government of Punjab

Raw Materials

Suppliers

PIDB

Money Experts Consultation/ Fees

TURF CLUB (SPV) Development Advisor IL & FS

Financers

State Support Agreement

Debt Finances Banks

Debt

Master plan /Fees

Consultant
Insurers

Insurance Services /Premium Debt Service Payments

Escrow Agents

Dividends

Equity Partners (Private Companies)

Revenue
Customers

Engineers (Design)

Operators (Operate)

Contractors (Build)

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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 Debt Equity Total 70.00% 30.00% 100.00% Amount(In Rs. Crores) 77 33 110

Risk-free Rate

8.15%

Market Risk Premium

Equity Beta Interest Rate

9.00%
1.85 13.00%

Ke (Cost of Equity) Kd (Cost of Debt) Tax Rate

24.77% 9.10% 30.00%

WACC

13.80%
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Term Sheet
BASIS Borrower Purpose of Loan Credit Facility CRITERIA Punjab Turf Club Ltd. (SPV) Development of Punjab Race Course 12 years Secured Term Loan including 2 years Interest accrual period , 10 equated annual installments Rs. 330 Million prior to any loan disbursement ( i.e. 30% of total project cost) Rs. 770 Million (i.e. 70% of total project cost) All the assets of the SPV including land, assignment of the borrowers rights under all project contract Personal guarantee of Promoters
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Equity Contribution

Amount Collateral

Guarantor

BASIS Interest Rate Conditions precedent to Funding

CRITERIA @ 3% above base rate per annum presently 13.00% Including but not limited to, 1. All the required equity contributions have been made 2. Project Advisor confirmation that costs are incurred confirmed to approved constructions plans 3. Projected ICR and DSCR should not be materially different from estimation Revenues generated to be applied as follows 1. Operating and Maintenance expenses 2. Interest payment on annual basis 3. Principal reduction on this credit facility 4. Annual Dividend payout

Priority of Cash Flows

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
The borrower should not dilute his equity stake until the 46 entire debt repayment

Borrowers Covenants

Project Cost
Particulars Value (Rs)

Track Preparation Cost

Track Equipments

18,65,08,841
1,21,31,900

Building
Equine Hospital & Lab Equipments

57,18,20,000
7,80,00,000

Televisions
Plant & Machinery

9,80,000
3,75,00,000

Electrical Installation
Electrical Lifts

1,50,00,000
50,00,000

Electrical Installation
Furniture

1,50,00,000
99,25,000
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Financial Statements

Cash Flow
Balance Sheet

Profit & Loss

Financial Statements

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Profitability Analysis
60.00 50.00 40.00 30.00 20.00 10.00 0.00 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

NPV IRR

8.00 6.00 4.00 2.00 0.00

Avg. ICR Avg. DSCR

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Sensitivity Analysis

Occupancy (in Percentage) NPV (Rs Crores) IRR (in Percentage)

20 12.19 15.12

25 18.79 16.26

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24.94 17.34 1.67 6.86

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30.58 18.34 1.74 7.06

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35.63 19.27 1.80 7.21

Average DSCR
Average ICR

1.49
6.27

1.59
6.60

Bid Amount (crores)

5.30 @ 30% occupancy rate

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RISK ANALYSIS

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Sources Of Risk
GOVERNMENT

LEGAL & REGULATORY FRAMEWORK

DEVELOPERS

CONTRACTS CONSTRUCTION O&M DEMAND TARGET MARKET

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RISKS IN A TYPICAL PPP PROJECT

Land Acquisition Risk & Mitigation

Risk
Challenging predevelopment 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 checkup of imported horses Proper administration of vaccines to the horses

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Construction Risk & Mitigation

Risk
Factors which cause noncompletion, 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 & VIABLE
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

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THANK YOU

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