Following are my observations relating to the benchmark calculations:

1. why a weighted average beta is considered than a minimum beta which would had been conservative?

2. How come NTPC is being compared which is a government owned agency. Is it appropriate to compare a Govt agency beta value considering the PP being a private entity

3. Why the BSE 500 index is considered to be appropriate than other indices such as BSE Sensex, BSE 100, BSE 200 etc. Please justify the conservativeness of the index chosen.

1)	Why is the risk free rate based on the weighted average yield on market loans and not on the Central government’s 10 year securities? Since as per the prevalent trade practices, the government securities rate is taken as the interest free rate for determing the CAPM.
2)	The project owner has provided a detailed calculation of all the parameters in the equation for calculating the cost of equity, i.e. the Benchmark IRR, but has not indicated, the risk premium percentage, though the method for arriving at the same has been mentioned.
3)	Why was BSE 500 index taken for computing the risk premium, instead of BSE power sector indices
a.	Why has the PO (Project owner) not considered the other Indices like BSE 30, BSE 100? What is the effect of these indices on the risk premium?
b.	Why has the PO not considered the NSE (National Stock Exchange) Indices, as that would have given a more robust and efficient face of the market as it would represent a wider face of the market?
4)	What is the basis for computing the Asset beta and the market capital? 
a.	Share price of which index has been considered for determining the market capitalisation (NSE, BSE) and for which period/ date these share prices have been considered. Can this be substantiated with the calculations and the proof of the date on which the market cap was considered?
b.	On what basis the companies have been selected for determining the asset beta, since there are lot of top performing companies in the sector, other than mentioned in the PDD?
5)	The PO has not indicated the date of board/management approval for the project.
It is surprising to see that the chronology begins from the day of “Offer from technology supplier” and not from the date of Investment decision.
The PDD thus does not indicate if real actions were taken to achieve CDM status for the project post Investment decision.
6)	The PO has not indicated the power selling rate at which the PPA (Power purchase agreement) has been signed.
a.	Is the rate fixed for the entire period or are there any escalations or the PO is selling it through open access agreement
7)	Has the PO considered tax holiday benefits while computing the IRR ( 10 year tax holiday in a gap of 15 years for generation or generation/distribution of power)?
8)	Has the PO considered the incentives on account of Indirect tax like Concessional rates of Excide duty, Customs duty and lower VAT?
9)	“ As per MNRE, accelerated depreciation on WEG is permissible upto 80 % for Income tax calculation, subject to a minimum utilization for 6 mths in the year in which the reduction is claimed”
a.	The project owner needs to clarify why they have considered 40% depreciation in the first year, since MNRE clearly states as above.
b.	Since the wind mill is expected to be commissioned after September( i.e. will be used for less than six months, by March next year), will the PO be claiming 40% in the first year or  40% in the first year and remaining 40% in the subsequent year, or a lump sum 80% in the second year.
As per industry knowledge and common practice, generally 80% of the depreciation is claimed in the first year or second year in which the WGE’s are used for more than six months

1)       Why is the risk free rate based on the weighted average yield on market loans and not on the Central government’s 10 year securities? Since as per the prevalent trade practices, the government securities rate is taken as the interest free rate for determing the CAPM.

2)       The project owner has provided a detailed calculation of all the parameters in the equation for calculating the cost of equity, i.e. the Benchmark IRR, but has not indicated, the risk premium percentage, though the method for arriving at the same has been mentioned.

3)       Why was BSE 500 index taken for computing the risk premium, instead of BSE power sector indices
a.        Why has the PO (Project owner) not considered the other Indices like BSE 30, BSE 100? What is the effect of these indices on the risk premium?
b.       Why has the PO not considered the NSE (National Stock Exchange) Indices, as that would have given a more robust and efficient face of the market as it would represent a wider face of the market?

4)       What is the basis for computing the Asset beta and the market capital? 
a.        Share price of which index has been considered for determining the market capitalisation (NSE, BSE) and for which period/ date these share prices have been considered. Can this be substantiated with the calculations and the proof of the date on which the market cap was considered?
b.       On what basis the companies have been selected for determining the asset beta, since there are lot of top performing companies in the sector, other than mentioned in the PDD?

5)       The PO has not indicated the date of board/management approval for the project.
It is surprising to see that the chronology begins from the day of “Offer from technology supplier” and not from the date of Investment decision.
The PDD thus does not indicate if real actions were taken to achieve CDM status for the project post Investment decision.

6)       The PO has not indicated the power selling rate at which the PPA (Power purchase agreement) has been signed.
a.        Is the rate fixed for the entire period or are there any escalations or the PO is selling it through open access agreement?

7)       Has the PO considered tax holiday benefits while computing the IRR ( 10 year tax holiday in a gap of 15 years for generation or generation/distribution of power)?

8)       Has the PO considered the incentives on account of Indirect tax like Concessional rates of Excide duty, Customs duty and lower VAT?

9)       “ As per MNRE, accelerated depreciation on WEG is permissible upto 80 % for Income tax calculation, subject to a minimum utilization for 6 mths in the year in which the reduction is claimed”
a.        The project owner needs to clarify why they have considered 40% depreciation in the first year, since MNRE clearly states as above.
b.       Since the wind mill is expected to be commissioned after September( i.e. will be used for less than six months, by March next year), will the PO be claiming 40% in the first year or  40% in the first year and remaining 40% in the subsequent year, or a lump sum 80% in the second year.
As per industry knowledge and common practice, generally 80% of the depreciation is claimed in the first year or second year in which the WGEs are used for more than six months.