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Coverage and Related Ratios - Completed

The document provides an example of coverage and leverage ratios for a project with a cost of ₹450 crores and initial debt-equity ratio of 2. Over the 5 year period, the interest coverage ratio increases from 1.5 to over 18, debt-equity ratio decreases from 1.52 to under 0.18, and debt is paid down from ₹300 crores to ₹72 crores as profits accumulate and are retained each year.

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51 views8 pages

Coverage and Related Ratios - Completed

The document provides an example of coverage and leverage ratios for a project with a cost of ₹450 crores and initial debt-equity ratio of 2. Over the 5 year period, the interest coverage ratio increases from 1.5 to over 18, debt-equity ratio decreases from 1.52 to under 0.18, and debt is paid down from ₹300 crores to ₹72 crores as profits accumulate and are retained each year.

Uploaded by

PRITEE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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COVERAGE AND LEVERAGE RATIOS - EXAMPLE

Project Cost ₹ 450 crores


Initial Debt-Equity Ratio 2
Interest rate on loan 10%
Loan repayable in 5 equal annual instalments of principal
Life of assets 10 years
Tax rate 0%

Projected P&L Statement (₹ crores)


Year 0 Year 1 Year 2 Year 3
EBITDA 90 120 140
Depreciation 45 45 45
EBIT 45 75 95
Interest 30 24 18
PBT 15 51 77
Tax 0 0 0
PAT 15 51 77
Dividends 0 0 0

Ratios
Interest Coverage Ratio 1.50 3.13 5.28
Debt Service Coverage Ratio 1.00 1.43 1.79
Debt-EBITDA Ratio 2.67 1.50 0.86
Debt-Equity Ratio 1.45 0.83 0.41
Fixed Asset Coverage Ratio 1.69 2.00 2.63

Debt Workings (₹ crores)


Loan - OB 300 240 180
Loan - Repayment 60 60 60
Loan - CB 300 240 180 120
Interest 30 24 18

Fixed Assets Workings (₹ crores)


Written Down Value - OB 450 405 360
Depreciation for the year 45 45 45
Written Down Value - CB 450 405 360 315

Net Worth Workings (₹ crores)


Paid-Up Capital 150 150 150 150
Retained Earnings - OB 0 15 66
Profits for the year 15 51 77
Dividends for the year 0 0 0
Retained Earnings - CB 15 66 143
Net Worth - CB 150 165 216 293

Projected Balance Sheet (₹ crores)


Net Fixed Assets 450 405 360 315
Cash 0 0 36 98
Total Assets 450 405 396 413
Paid Up Capital 150 150 150 150
Reserves & Surplus 0 15 66 143
Debt 300 240 180 120
Total Liabilities 450 405 396 413
Check 0 0 0 0
Year 4 Year 5 Year 1-5
160 180 690
45 45 225
115 135 465
12 6 90
103 129 375
0 0 0
103 129 375
0 0 0

9.58 22.50
2.22 2.73 1.77
0.38 -
0.15 -
4.50 #DIV/0!

120 60
60 60 300
60 0
12 6

315 270
45 45
270 225

150 150
143 246
103 129
0 0
246 375
396 525

270 225
186 300
456 525
150 150
246 375
60 0
456 525
0 0
COVERAGE AND LEVERAGE RATIOS - EXAMPLE

Project Cost ₹ 450 crores


Initial Debt-Equity Ratio 2
Interest rate on loan 10%
Loan repayable in 5 equated annual instalments
Life of assets 10 years
Tax rate 0%

Projected P&L Statement (₹ crores)


Year 0 Year 1 Year 2 Year 3
EBITDA 90 120 140
Depreciation 45 45 45
EBIT 45 75 95
Interest 30 25 20
PBT 15 50 75
Tax 0 0 0
PAT 15 50 75
Dividends 0 0 0

Ratios
Interest Coverage Ratio 1.50 2.99 4.83
Debt Service Coverage Ratio 1.14 1.52 1.77
Debt-EBITDA Ratio 2.79 1.64 0.98
Debt-Equity Ratio 1.52 0.92 0.47
Fixed Asset Coverage Ratio 1.61 1.83 2.29

Debt Workings (₹ crores)


Loan - OB 300 251 197
Loan - Repayment 49 54 59
Loan - CB 300 251 197 137
Interest 30 25 20

Fixed Assets Workings (₹ crores)


Written Down Value - OB 450 405 360
Depreciation for the year 45 45 45
Written Down Value - CB 450 405 360 315

Net Worth Workings (₹ crores)


Paid-Up Capital 150 150 150 150
Retained Earnings - OB 0 15 65
Profits for the year 15 50 75
Dividends for the year 0 0 0
Retained Earnings - CB 15 65 140
Net Worth - CB 150 165 215 290

Projected Balance Sheet (₹ crores)


Net Fixed Assets 450 405 360 315
Cash 0 11 52 113
Total Assets 450 416 412 428
Paid Up Capital 150 150 150 150
Reserves & Surplus 0 15 65 140
Debt 300 251 197 137
Total Liabilities 450 416 412 428
Check 0 0 0 0
Year 4 Year 5 Year 1-5
160 180 690
45 45 225
115 135 465
14 7 96
101 128 369
0 0 0
101 128 369
0 0 0

8.37 18.76
2.02 2.27 1.74
0.45 -
0.18 -
3.75 #DIV/0!

137 72
65 72 300
72 0
14 7

315 270
45 45
270 225

150 150
140 241
101 128
0 0
241 369
391 519
270 225
193 294
463 519
150 150
241 369
72 0
463 519
0 0

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