TOD 526 - Project Management

Monsoon 2021 Semester

Group Assignment I

Case study analysis: Multiplex Project

Discuss the importance of Feasibility Report and Project
Appraisal

GROUP MEMBERS:

Name Enrollment number

Anushka Deshpande AU 2016012

Kareena Lakhani AU1813072

Janki Solanki AU1813051

Raj Shah AU1813043

Purvesh Goswami AU2014053

Navneet Patel AU2014041

Khyati Srivastav AU1811419

Contents
BRIEF DESCRIPTION OF THE DARPAN MULTIPLEX PROJECT.............................................3
BACKGROUND STUDY..............................................................................................................4
What is the Feasibility study for the project?............................................................................4
Types of Feasibility Study........................................................................................................ 5
Importance of Project Feasibility Study....................................................................................8
Importance of Project Appraisal...............................................................................................8
KEY FACTORS RESPONSIBLE FOR VIABILITY OF DARPAN MULTIPLEX PROJECT.........10
ANALYSIS FOR DARPAN MULTIPLEX PROJECT...................................................................12
CONCLUSION........................................................................................................................... 15
BIBLIOGRAPHY........................................................................................................................ 16
 BRIEF DESCRIPTION OF THE DARPAN
MULTIPLEX PROJECT

The case study on the Multiplex Project enables the readers to understand the concept and need
for project appraisal. Shiv Telefilms, a newly formed company, planned to set up a multiplex
project in Mehsana, Gujarat. Prior to this, the members of the company had already completed
another multiplex project called ‘Darpan’ in the city of Ahmedabad In Gujarat. Project Darpan
was financed by a bank and the repayment record of this project was satisfactory.

Mr. Nanubhai Patel was the main promoter of the Darpan multiplex project; however, he was not
on the Board of Directors of Shiv Telefilms. He approached the same bank that had previously
financed the Darpan project, to finance this new multiplex project by Shiv Telefilms. Since the
Darpan multiplex project was a success and some of the directors of the Darpan multiplex
project were on this new project by Shiv Telefilms too, Mr. Nanubhai Patel was confident that
the bank would immediately accept and sanction the finance.

The bank was interested in financing the project, but it did not approve the finance immediately.
The bank required an independent appraisal of the new project. It suggested that Shiv Telefilms
get a Techno-Economic Viability (TEV) study from a consultant/organization recommended by
the bank. The bank recommended XEMCO, Ahmedabad, a reputed consultancy firm for the
same.

Mr. Nanubhai Patel along with his

consultant discussed with XEMCO and
explained his opinion that this consultancy
may be a mere formality and hence
requested that the report be made in a
week’s time at the most. XEMCO discussed
the project with the bank and explained to
Mr. Patel that it requires a comprehensive
assessment focusing on the key parameters
of the project as per the bank norms.
XEMCO was given the contract and it
completed the report in about 3 weeks’ time.
After analysing the report, the bank then
sanctioned the loan.
 Figure 1: Sample design
of cinema hall[ CITATION Unk87 \l 16393 ]

BACKGROUND STUDY
 This paper outlines the importance of feasibility report and the project appraisal through
the hypothetical case study of the Darpan Multiplex Project, wherein the setup is about
70 km away from north Gujarat, pertaining to the location and its demographic data,
which is to be financed by the bank, prima-facie, but prior to making agreements banks
demands an independent appraisal of the Multiplex Project, to which the banks suggests a
consultant firm, M/s XEMCO, Ahmedabad get a Techno-Economic Viability study.

 Bank desires to get a feasibility report from the company so that they can assess whether
the project would be viable according to their expectations before committing their time,
resources, and funds.
The development and
perception of project
management have
varied drastically over
the past few years, and
these modifications are
likely to persist and
grow. And with the
growth of project
management comes the
need for a feasibility
study and project
appraisal.

Figure 2: Cinema architecture and design

What is the Feasibility study for the project?
 As the name suggests, a feasibility study is applied to define the possibility of an idea, if
the Multiplex project is viable or not, and ensuring if the project is lawfully and
technologically achievable as well as economically acceptable. It shows whether the
project is worth the financing for the bank, as it could be possible that a plan might not be
attainable. There can be several reasons for this, with demanding too many funds and
supplies, which not only inhibits those resources from executing other tasks but also
might cost additional than the company as well as the bank, would gain back by holding
on a project that isn’t rewarding.

 A well-constructed analysis should advance a historical background of the company and

its Multiplex projects, such as a description of the service, accounting statements,
specifics of functions and administration, marketing study and strategies, financial data,
legal necessities, and tax obligations. Once the company gets its feasibility report done by
the consultancy firm and is approved by the bank, is when the technological and
infrastructure development and project execution can take place.

Types of Feasibility Study

 A feasibility study assesses the project’s possibility for success; hence, perceived
neutrality is a crucial component in the reliability of the study for likely stakeholders and
lending institutes. There are five kinds of feasibility study—distinct fields that a
feasibility study analyses, explained below.

1. Technical Feasibility

 This evaluation centers on the technical assets accessible to the company. It improves
businesses' decisions of whether the technological means meet up ability and whether the
technical staff is efficient at transforming the proposals into operating systems. Technical
feasibility additionally entails the appraisal of the hardware, computer software, and
further technical constraints of the planned system. As for the multiplex project, the
company needs to measure its capacity in hiring employees, placing of infrastructure,
equipment required, and raw material in accordance with the capital.

 Example of the project that is not technically feasible:

  Self-Driving Car with Top Speed up to 300 KMPH – The main cause for the idea not
being viable is technological limitations. Google’s Self-driving car i.e. Waymo has its
best speed near 56 KMPH (Liedtke, 2017). Additionally, they have numerous drawbacks.

 These are likely to eliminate jobs for drivers

 High price
 Mishaps owing to the non-predictive nature of traffic
 Trouble to determine who is responsible for the disaster
 Possibilities of car hacking which can cause security concerns
 Climate changes, frightening the driving experience of individuals
 Unable to adjust to changes in route or diversion
 Unlawful use by terrorists, etc. As a result, this project deals with Technical and
Legal Feasibility Issues.

2. Economic Feasibility

 This measurement usually includes a cost/ benefits study of the project, assisting
companies to verify the feasibility, expense, and profits associated with a project prior to
monetary resources being allotted. Likewise, it also operates as an autonomous project
evaluation and boosts project reliability and credibility, assisting decision-makers to
decide the optimistic economic benefits to the company that the planned project will
deliver.

3. Legal Feasibility

● Legal Feasibility is tested to make sure that the plan, which is to be carried out, satisfies
the constraints of the regulations at the national and global levels. The Consulting team
should examine thoroughly and regularly the laws related to the project to prevent any
breaches.

● Certain factors that have to be taken care of as dealing with Legal Feasibility. These are:

 Project Financial Attributes.

 Business Viability.
 Project Credibility.
 Land and Existing Property Usage.
 Alternate Ownership Rights on Land.
 Additional Client Rights.
 Matters Concerning Employment.
 Tax and Reporting Issues.
4. Operational Feasibility

 Operational Feasibility deals with several aspects like:

 How would customers perceive the new Multiplex Project?

 Would it be able to operate smoothly or not?
 What would be the role of Investors, Administrator, and End-Users
 How to Assess Management, Team, and Individual Challenge and cope with
them?
 What is the work environment like?
 Will it be able to overcome the resistance?
 In the case of the Multiplex Project, will the company be able to attract
customers? Is it maintainable? Will the mode of operation be cost-effective? What
can be the likely conflicts that can occur in organizational processes? Will there
be any objections from workers? Will there be increased profits or a decline in
costs?

5. Scheduling Feasibility

 This evaluation is extremely crucial for a plan to accomplish; in the end, a project will
fail if not finished
on time. In
scheduling
feasibility, a
company
approximates
how much time the
development
plan will take to
complete.
 Figure 3: Types of feasibility studies[ CITATION Kat19 \l 16393 ]

Importance of Project Feasibility Study

 The importance of a feasibility study stems from the yearning of an organization to get it
correct and precise prior to capitalizing on assets, time, or money. A feasibility study can
realize renewed designs that modify the opportunity of a project. It's better to form these
results early rather than hastening into a project merely to uncover that it won't function.
A feasibility study is typically beneficial to a project given that it postulates you and
other interested parties with a clear-cut representation of what is being proposed.
[ CITATION Sid20 \l 16393 ]
Importance of Project Appraisal
● Justifying spending money on a project- Talking about the Multiplex Project here the
project has a shopping complex (150 shops) as a part of the project. The total cost of the
project is estimated at Rs.10.00 crores. Being located in ‘Nanded’ village, the project
would have Lower Entertainment Tax. However, the project would not enjoy the special
100% Tax Exemption under the Tourism Policy of Gujarat State. So the objective of the
project appraisal is to justify the money which is spent on the project.
● Is an important decision-making tool- By considering every possibility of money
spending and also advantages and disadvantages of it, the assignment was given to
XEMCO on mutually agreed terms. The assignment has been completed in about 3
week’s time. The bank has sanctioned the finance. So, this decision was taken when
XEMCO discussed the background, spoke also to the bank and explained to the promoter
that it requires a comprehensive assessment focusing on the key parameters of the project
as per the bank norms.
 ● Ensure getting the system right- The promoters have projected capacity utilization of
40%, 50%, and 60% in the first three years. The ticket rates have been considered at
Rs.80/- and Rs.90/-. The promoters have claimed that about 40% of the shops have
already been booked. So, promoters decided the whole system with the help of project
appraisal by selecting the ticket’s price and capacity utilization.

So, by the above points Project Appraisal is a very important activity for bigger projects or any
important projects. [ CITATION Dav14 \l 16393 ]

Figure 4: Project management study

KEY FACTORS RESPONSIBLE FOR VIABILITY OF

DARPAN MULTIPLEX PROJECT

 The key factors mentioned are foremost considerations for a project like the multiplex
project as it includes theatre, small shopping mall, cafeteria, etc. Therefore, to feature a
successful project these key factors are important to keep in mind.
1. The project would not enjoy the special 100% Tax Exemption

 The endeavor would have a lower Entertainment Tax due to its location in 'Nanded' town.
Regardless, the endeavor would not be eligible for the unusual 100 percent tax exemption
under Gujarat State's Tourism Policy, which had previously been benefited by previous
multiplex tasks, including their own "Darpan." In the first three years, advertisers expect
to limit consumption to 40 percent, half, and 60 percent.

 The ticket rates have been considered at Rs.80/- and Rs.90/- as the new project consists
of 3 screens (1000 seats total), one cafeteria, and two popcorn counters and it also has a
shopping complex (150 shops) as a part of the project which have the total cost of the
project is estimated at Rs.10.00 crores and for that the construction has been started and
the project is scheduled to be completed before December 31, 2021.

2. Company approached a nationalized bank for term loan & working capital

 Around 40% of the stores have been effectively reserved, according to the advertising.
For term loans and working capital, the organization has moved toward a nationalized
bank. This group's previous multiplex project was also backed by a similar bank. This
project's reimbursement track record is satisfactory.

 The main promoter, Shri Nanubhai, was assured of the bank's sudden acceptance and
considering their past successful record so he went to the bank with a proposal and
project report (prepared by his consultant) looking at the term finance as also working
capital funds. The bank, by all appearances, is keen on financing the project and
simultaneously, considering the nature of the project, the bank wanted to have an
independent appraisal of the project.

3. Bank directed company to get a TEV

 By all accounts, the bank is eager to fund the project. Simultaneously, while considering
the venture's concept, the bank desired an independent review of the assignment. It aided
the organisation in obtaining a Techno Economic Viability (TEV) focus from a bank-
affiliated expert/association. M/s XEMCO, Ahmedabad - a reported consultancy firm -
was also presented in this way by the bank. As TEV is an important and better way for
the bank itself and when the bank is ready to invest in the fund of the project still
knowing the concept.

4. XEMCO discussed the background and informed it cannot be done in 5-7 days’ time
 Along with his counsellor, Shri Nanubhai made his way to XEMCO. He appeared to be
in a hurry. He told XEMCO that this could be a simple custom (which, in his opinion,
could be reasonable) and that the report will be ready in five to seven days. XEMCO
discussed the foundation, as well as the bank, and informed the advertiser that the project
required a thorough examination that focuses on the task's critical boundaries, as defined
by bank requirements. XEMCO also stated that while the task will be completed quickly,
it would be impossible to complete in five to seven days.

5. Assignment completed in 3 weeks’ time

 Shri Nanubhai was pleased with the situation. The task was assigned to XEMCO on
mutually agreed-upon terms. The project was completed in about a week's time. The
money has been authorised by the bank.

ANALYSIS FOR DARPAN MULTIPLEX PROJECT

 Regardless of the consequence, whenever a new project is being considered, the rigid
question that comes up is whether or not the multiplex project is feasible? What steps
should the project manager and other key stakeholders take when assessing a new project
to determine whether or not they can (or should) move ahead with it?

 It needs to be confirmed that the project turns in with development and sector strategies,
policy priorities, and infrastructure plans. At that point incorporates practicality studies to
guarantee that the task is actually possible, and the innovation is effectively accessible on
the lookout and might become out of date in the medium-term. The bank’s appraisal was
to check that the project is cost-benefit justified, and represents the least-cost approach to
bringing the expected benefits.
  A project like a multiplex project needs feasibility reports such as Real Estate feasibility
reports, Financial Economic Feasibility Reports, Marketing Feasibility Reports, etc.

Real Estate Feasibility

 Real estate feasibility reports contain such terms as the land survey, building permits,
traffic problems, impact on the nearby environment and natural conducts, and impression
on businesses in the area as well as the market opportunity. Multiplex projects such as
single screen, double screen, etc., or other related projects such as complexes, buildings
or parking areas, etc. frequently make land achievability examinations before land
acquisition and improvement.
 In this case, the land is on a highway, on the outskirts of the village Nanded. The
multiplex shall have 150 shops and would have three screens to house about a thousand
people.

Comprehensive Feasibility
 A comprehensive feasibility study is a complete report that takes into consideration some
of the most rational business processes one should execute before undertaking any
project. This report includes data on real estate issues, economic and cultural impact on
the greater nearby areas, and more. Whether it be adopting a process, implementing a
new Change Organization System, the sentiment of the company and its current culture
need to be taken into justification.
 For this project we know that it contains a multiplex and shops, so the shops and the
multiplex need to operate in harmony. The multiplex is located some kilometers away
from the center of the Mehsana town.

Financial Economic Feasibility

 An economic feasibility study is directed when Nanubhai wants to know if the projected
amount of capital and financing is sufficient to complete this multiplex project
successfully. While a project strategy might have a portion called the money-saving
advantage examination, in monetary financial attainability concentrate on it will be
bigger exhaustively and have more measurements and numbers in.
 The required budget for this project is 10 crores however doubt sets in due to the
location.

Marketing Feasibility
 The marketing feasibility covers the market effect and infiltration, item testing and
dispatching, target market, and so on prior to dispatching an item into the new market,
 regardless of whether in a neighborhood, public or worldwide climate, a market
possibility study on the objective market is basic.

Nature of the Business

 Whenever imagining something new, a key question to ponder is: does this project
correspond with the mission statement of the company? It’s a vital question to ponder
since attempting something new can sometimes lead to great success or failure. What is
imperative is that when evaluating the viability of a multiplex project, it is important to
ensure that it lines up well with the business initiatives.
 Whatever the situation, it is important to confirm that the project is in the best interests of
the company and that its implementation has concrete benefits.

Technology Assessment
 It is important for the project manager to determine the technical viability of the proposed
project. In many cases, the individuals thinking of a new idea may not have the necessary
technical know-how to be able to measure whether the resultant solution is possible,
given the technology of the time or the competencies of the company. So, when
scrutinizing the pre-planned project, the team and stakeholders need to certify that they
have several senior technical consultants provide input.
 There may be circumstances where the project can proceed but needs a partnership with
an external vendor. Certain contractors with precise skills may be needed and their
intrinsic cost needs to be considered.

Economic Viability
 It’s necessary to look at the full impact of the project from an economic stance. That
involves determining the projected costs of implementation, the expected return on
investment and the market being targeted. Cost and benefit analysis as well as SWOT and
market analysis completed by Product Managers can provide a good assessment of the
economic viability of this multiplex project and should be part of the feasibility study.

Legal Implications
 Whenever a project is under deliberation and has certain features scoped, it is important
to regulate if there are any legal problems with the current execution. Some of those areas
of concern might be patent infringement issues, government protocols, company
compliance procedures etc. Understanding what legal deliberations need to be addressed
is important to ensure that the project does not run into unanticipated roadblocks in its
execution.

Deadline and Resource Concerns

  One of the most important considerations for the feasibility homework, how the project
affects the timeline and how adequately it can be proved of vital importance. Whenever
evaluating a project, the number of resources and initial deadline estimates should be
referenced against past multiplex projects. All the deadline and resources-related
considerations to ponder whenever acting this portion of the feasibility evaluation.

Market Dynamics
 Every time looking to implement a new project that contains some type of market
deliverable, it is important to look at market trends to measure how worthwhile the
product will be. Does the current solution offer something new in relation to its
competitors? Is the current execution up to modern standards or is it based on concepts
that have become old? All of these need to be considered in the market dynamics study.

Finally, when looking at this kind of project, a deliberation is to also look at the company and its
overall culture. If the project is a process methodology variation or some fundamental change in
the internal way things are performed internally, that must be approached carefully. [ CITATION
Bha21 \l 16393 ]

CONCLUSION

This case has very subtly pointed out the need for checking the feasibility of the project in
multiple aspects along with the need for project appraisals. The promoter thought that since he
has been successful in the past he should get the loan as per his requirements sans the formality
however the bank did trust him they were not very convinced with him not being on the board of
directors. Apart from that it was mandatory to check the feasibility as the project is based in a
secluded area and setting a multiplex on a highway on the outskirts of the town doesn’t really
sound feasible.
From this case we can conclude that before starting and investing in a project one must check its
feasibility and the expected returns on investment.

The organization needs to put in a lot of work to bring in the customers to watch movies in this
multiplex hence they have an attraction of a shopping complex and lucrative rates for the tickets.
Financially the project sounds feasible as per the projected returns. The project however should
refrain from making use of a advanced technology such as 3d, 4d or extra advanced sound and
seating systems because the audience is not informed about it and wouldn’t receive it well. They
should work on making the food court sell products that shall attract the residents of the area and
enhance their experience of visiting the multiplex. The organisation should use a limited budget
due to the current state of pandemic and the disadvantage of location.

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