Corporate Finance

Free Cash Flow Valuation 
 183

• Terminal navigational handling


• Parking


• Cargo handling


• Fueling


• Watch hour services

Non-traffic revenue comes from:

• Passenger service fee


• Visitors admission fee


• Car parks


• Advertisements


• Land lease


• Duty free shops


• Ground services


• Turnaround maintenance

The total number of passengers handled in the first year of operations was expected to be 1.55 million and

that domestic and international traffic would grow at 10 percent and 8.5 percent respectively.

The forecast of income and expenditure for the first 15 years (Exhibit 9.2) is based on the assumption that

domestic and international traffic will grow at 10.6 percent and 8.5 percent respectively. It also assumes that

66 percent of the cargo from the Thiruvananthapuram airport, 30 percent of the cargo from Chennai airport,

and 20 percent of traffic from other airports would be diverted to Kochi. Exhibit 9.3 presents the forecast of

free cash flows.

Exhibit 9.2 Forecast for 15 years

(Rs lac)

12 3 4 5 1 5

A. Income 5,551.02 7,402.97 9,138.18 10,394.78 11,751.57 24,265.31

B. Expenditure 3,643.52 3,684.61 3,741.87 3,794.71 3,750.14 4,511.94

Profit(A – B) 1,907.5 3,718.36 5,396.31 6,600.07 8,001.43 19,753.37

Preliminary expenses

Written off 125.6 125.6 125.6 125.6 125.6 0

PBT 1,781.9 3,592.76 5,270.71 5,474.47 7,875.83 19,753.37

Tax 0 0 0 0 0 7,873.39

PAT 1,781.9 3,592.76 5,270.71 5,474.47 7,875.83 11,879.93

Dividend 0 817.91 1,226.87 1,635.82 1,835.82 1,635.82

Exhibit 9.3 Forecast of free cash flow

(Rs crore)

Year 0 1 2 3 4 5 16

Investment 204.48

Free cash flow 1.65 3 –1.37 9.22 23.4 105.72

IRR = 26.2 percent.