Submitted by: Submitted by amittrip01
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Category: Business and Industry
Date Submitted: 12/29/2012 10:00 PM
Infrastructure and Project Finance
CASE: NGHE AN TATE AND LYLE SUGAR COMPANY
12/30/2012
1
Is the mill an attractive investment?
Yes, the mill is an attractive investment, because all 5 porters’ forces are week. We will understand this by analysis of porters 5 forces.
• Bargaining power of customer : since Vietnam is sugar deficient country, it relies on imports hence bargaining power of customer is less
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Bargaining power of supplier: there are no major larger scale sugar mills in north Vietnam hence bargaining power of supplier is less.
Threat of new entrant: it’s a large capital intensive industry hence threat of new entrants is moderate.
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Threat of substitute products: normally there are few substitutes for sugar like Jaggery which also has same raw material.
Intensity of competition: Intensity of competition is less.
12/30/2012
2
What are the returns?
The project has 2 types of return:
Financial/commercial returns to financiers or financial rate of return, FRR
o As per the workings in exhibit 8, the project has NPV of 284,904 USD(in thousands) o Project has become profitable from 3rd year onwards i.e. year 2001 o Project becoming debt free from year 2008 onwards o Project is giving positive real free cash flow from second year onwards i.e. 2000
Social returns or economic rate of return, ERR
o o o o Benefits to employees and other labor Benefits to Customers Benefits to Suppliers i.e. to cane farmers, truck haulers Benefits to Government by way of taxes and larger social benefits
12/30/2012
3
What are the major risks?
The project has following major risks:
• Agriculture risk: Risk of farmers not supplying cane to the sugar factory • Infrastructure risk: Whether government would build new roads and bridges in the region needed for the transportation • Transportation risk: Whether there would be enough truckers available for the transportation • Risk of falling Sugar prices • Asian crisis in late...