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How much to bid for a toll road concession in India
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
An infrastructure fund is bidding for a 20-year toll, operate and transfer concession on a highway in India, paying the government a lump sum up front. The road carries 40,000 vehicles a day at an average toll of INR 150. Operations and maintenance cost INR 55 crore a year and barely change with traffic. The fund wants its money back within 8 years. Is a bid of INR 1,200 crore safe, and what if traffic is 25 percent below forecast?
2. Answers to clarifying questions
This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.
3. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Is the bid paid back in time = yearly cash from tolls minus costs, against the price paid
- Toll revenue = vehicles per day x average toll x 365
- Cash after operations and maintenance, which are mostly fixed
- Payback = bid divided by yearly cash
- Traffic risk: the low case
4. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Yearly toll revenue
What a strong candidate does: 40,000 vehicles x INR 150 x 365 days, in crore (1 crore is 10 million).
Toll revenue (INR crore): 40,000 × 150 × 365 ÷ 10,000,000 = 219
Step 2: Cash after operations
What a strong candidate does: Take off INR 55 crore of operations and maintenance.
Yearly cash before tax and financing (INR crore): 219 - 55 = 164
Step 3: Payback at forecast traffic
What a strong candidate does: INR 1,200 crore divided by INR 164 crore a year.
Payback, forecast traffic (years): 1,200 ÷ 164 = 7.32
Step 4: Revenue if traffic is 25 percent lower
What a strong candidate does: 30,000 vehicles a day at the same toll.
Toll revenue, low case (INR crore): 30,000 × 150 × 365 ÷ 10,000,000 = 164
Step 5: Payback in the low case
What a strong candidate does: Costs stay at INR 55 crore, so yearly cash falls to INR 109.25 crore.
Payback, low traffic (years): 1,200 ÷ (164.25 - 55) = 10.98
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
The fund should bid no more than about INR 1,200 crore, and only if it is comfortable with the low case, because the bid pays back in about 7.3 years at forecast traffic but in about 11 years if traffic is 25 percent lower, past its 8-year target. First, costs are mostly fixed, so a 25 percent fall in traffic cuts yearly cash by a third, from INR 164 crore to about INR 109 crore. Second, the fund carries all the traffic risk under this model, unlike a hybrid annuity road where the government pays. The risk is that a new parallel road or a change in toll rules cuts traffic for years. As a next step, check traffic counts at the toll plazas, planned roads nearby and the toll increase formula before setting the final bid.
Risks a strong answer names: A new free road or rail line can take traffic; Toll increases follow a formula linked to inflation, which may lag costs.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.
Next: another case in Partner mode
Swap roles and run the next case, so you both practise answering and scoring.