FINANCING OF PROJECTS IN WEST BENGAL 10.1 TYPES OF FINANCING S, CF rancial institutions and Banks offer a wide spectrum of financing options comprising of both fund and non fund based activities. Some of the key types of financing available include: 10.2 How To APPLY FOR TERM LOAN Most of the Public Financial Institutions in the country as well as the State Financial Corporations have standardized forms for application for term loans, These solct elaborate information, inter alia, on the promoters, the company profile and history, full project details including costs, profitability and cash flows, economic justifications, government consents etc. A typical activity list from the viewpoint of the financial insttutions vis a vis the project cycle is shown here. 10.2.1 ACTIVITY CHART FOR TERM LENDING Te promoter has to go through the following stages while making application for term loan from Financial Institutions or Banks: © Promoters decide about the project and other parameters lke location, raw material etc. © Preliminary discussions with Fls regarding feasibly © Appointment of consultants 149ooo ooo eoeoeoe ° Preparation of Project Report and application for term loan. In-principle decision by Fls to go for detailed appraisal Appraisal by Fs ‘Amendment of projectreport if required by Fis ater discussions Issue of sanction letter for term loan Borrower conveys acceptance to the proposal ‘Application for bridge loan against the term loan Promoters bring their contribution and Fl makes disbursement against bridge loan Verfcation of ile deeds by borrower to establish clear tte to satisfaction of Fis Documentation for term loan including creation of security by way of mortgage and adjustment of disbursements for bridge loan against term loan. Disbursement of further loan and implementation of project Commencement of commercial production Repayment of term loan as per schedule. 10.2.2 DOCUMENTATION FOR TERM LOAN APPLICATION An overview of the typical documentation involved in a Term Loan Applicaton is given below: . . . . . . . . . Detailed Project Report ‘Application form of bank duly filed in Industrial licence/SIA registration, NOC from State Pollution Control Board, Sanction for Power Balance Sheet, Profit & Loss Account and Directors Report for minimum 3 years Memorandum and Articles of Association Cash Budget, in case of working capital borrowing Statement of Net wealth of Promoters Statement of colateral securities with their market valuation by approved valuer and copies of tite deeds Copies of board resolutions authorizing execution of loan agreement and signing various documents to be submitted Quotations, purchase orders, invoices 15010.3 PRINCIPAL FINANCING INSTITUTIONS Sn West Bengal the principal domestic Financing Institutions include the following: B. Term Lending Institutions 1 © Industrial Finance Corporation of India (IFCI) ‘| @ West Bengal Financial Corporation (BFC) © Infrastructure Development Finance Company Ltd. (IDFC) | @ Industrial Investment Bank of India (IBI) C. Other Fi ‘© Export Import Bank (EXIM Bank) Indian Renewable Energy Development ‘Agency Ltd. (IREDA) © Power Finance Corporation Institutions National Housing Bank (NHB) National Bank for Agriculture and Rural Development (NABARD) Small Industries Development Bank (SIDBI) © National Small Industries Corporation Ltd. (sic) © Rural Electrification Corporation © Infrastructure Leasing & Financial Services Limited (ILSF5) © SREI Infrastructure Finance Ltd. (SIFL) © Tourism Finance Corporation of India Ltd. © West Bengal Industrial Development Corporation Ltd. (WBIDC) © India Infrastructure Finance Company (IFC) Housing and Urban Development Corporation Ltd. (HUDCO) 15110.4 SNAPSHOT OF KEY INSTITUTIONS AND FINANCING PROFILES Institution | Brief Profile “Types of Financing /Assistance Commercial [ Commercial Banks can be | Term Loan, Working Capital Finance, Banks broadly categorized into Export Credit, Project Finance, Lease nationalized (government _| Finance, Factoring, Bill Discounting, owned) and private banks. | Loan Syndication, Bridge Loan, RBIis the centralized Channel Financing authority regulating and monitoring the banking system in India Tndia Provides financial Project finance: providing credit to Infrastructure | assistance to industries in | green-field as well as brown-field Finance different sectors like projects, Equipment Finance, Short Company Consumer goods industry, | Term Loan, Bill Discounting, (FCI) service industries, Advisory Services ete Infrastructure, heavy industries ete. Tafrastructure — | Provides specialized ‘Sectors financed: Energy, Development _| finance for projects in Transportation, Telecommunication, and Finance | infrastructure sector IT, SEZs, Tourism, Industrial Parks, Company Ltd. Urban & Rural Infrastructure (DEC) West Bengal _ | Established under the State | Term Loans, Equipment Finance Financial Financial Corporation Act, | Loan, Working Capital Loan, Corporation | 1951 to finance small and | Subscription to shares & debentures, (WBEC) medium scale industries. _| Bill Discounting ete Industrial Fully owned by Govt. of _ | Terms loans, Equipment Finance, Investment —_| India and assists industries | Asset Credit, Project Finance, Bank of India _ | mainly in medium and Working Capital Loan, Underwriting, BD large sector Loan Syndication, Project Consultane EXIM Bank | Finances corporates! Exports Credits- Supplier's credit, Pre- exporters, refinances shipment credit, Buyer's credit, Indian commercial Finance for export oriented units, Banks and extends term credit to overseas financing institutions Consultancy services, Guarantees, Forfaiting (discounting of export receivables) ete Indian To promote, develop and _ | Sectors financed: Hydro energy, Wind Renewable | extend financial assistance | energy, Bio energy, and Solar energy Energy for Renewable Energy and_| Types of finance Project Finance & Development _ | Energy Efficiency Equipment finanes Agency Ltd. | /Conservation Projects (IREDA) 152Institution Brief Profile ‘Types of Financing /Assistance Power Finance For providing financial Rupee and Foreign Currency Term Corporation | assistance to units in power | Loan, Short Term Loan, Bill sector Discounting, Equipment Finance, Lease Finance, Debt Refinancing, Bridge Loan ete Tourism ‘Sponsored by IFCI to Rupee Loan, Subscription to Finance finance tourism projects _ | shares/debentures, Equipment Corporation Finance, Equipment Leasing, Merchant Banking & Advisory Services West Bengal Industrial Development Corporation, Ltd. (WBIDC) Provides financing for setting up and expansion of ‘medium and large-scale industries, “Types of financing: Long Term Loan: Amount — No limit, Rate of Interest- 9.5%, ‘Moratorium - upto 18 months, Repayment period —upto 7 years Equipment Finance Scheme (EFS): Amount — No limit, Rate of Interest- 9% quaterly, Moratorium — upto 9 months, Repayment period —upto 5 years Short Term Loan (to assisted units) ‘Max. amount -Rs 4000 thousands Rate of Interest- 9.25%, Maximum duration ~ 9 months Bridge Loan : Amount upto 50% of admitted claim of State Government Incentives, Repayment period — 15 months Interest rate —12% quarterly Equity Participation: Contribution depends upon the merit of individual projects Special Short Term Loan Scheme: ‘Amount — No limit, based on valuation Eligibility ~ No outstanding term loan Security — Exclusive first charge on fixed assets Rate of interest 9.25% p.a. Repayment Period — 12 months Rebate for timely payments: Ranging from 0.25% to 1,00% in respect of Term Loan and EFS and also for other units making timely repayments 153Institution Brief Profile ‘Types of Financing /Assistance Tndia Wholly owned Govt Direct lending to eligible projects, Infrastructure | subsidiary formed to Refinance to banks and (Fis), debt Finance accelerate and increase __| funding. Currently involved in Company PPPs in infrastructure power, ports, airports, urban (IFC) sector infrastructure, water and tourism, Housing and | Fully owned Gol enterprise | Financing housing & infrastructure Urban with focus on housing and_ | projects such as water, power, Development | utility infrastructure transportation, commercial, Corporation Lid, (HUDCO) provision educational institutions, hospitals, industrial infrastructure, telecommunications National Principal agency to Refinance to housing finance Housing Bank | promote Housing Finance | companies, banks ete., Project (NHB) Institutions and to provide | Finance. financial and other support to such institutions National Bank | Established for promotion | Refinance to commercial for Agriculture | and development of banks, Regional Rural and Rural agriculture, SSI, cottage | Banks. Cooperative Development | and village industries, Bunks, Production (NABARD) _| handicrafts and other rural crafts as well as allied activities in rural areas ‘Small Principal financial ‘Term Loan, Working Capital Term Industries institution for promotion, — | Loan, Bill Discounting ete Development | financing and development Bank (SIDBI)_| of SSIs National Small | Formed to promote, uid | Provides Term Loan, Plant & Industries and foster the growth of | Machinery on hire purchase and lease, Corporation | small industries in the | Working Capital Loan, Technical Ltd. (NSIC) | country Support, Export Finance Rural Financing and promoting Financial assistance for electrification, -ctrification Corporation projects covering power generation, conservation, transmission and distribution pump sets, transmission, sub transmission and distribution system, transformers and capacitors Infrastructure | Co-promoted by the Provides Project Finance, Asset Leasing & | Central Bank of India Finance, Loan Syndication, Financial (CBD, Housing Investment Banking, Advisory Services Development Finance _| Services, Debt Placement, Institutional Limited Corporation Limited Broking and Merchant Banking (L&Fs) (ADFC) and Unit Trust of India (UTD). One of India's leading infrastructure development and finance companies SRET ‘One of India's Targest “Areas covered: Infrastructure Infrastructure | private sector Non- Equipment Financing, Infrastructure Finance Ltd. | Banking Financial Project Financing, Renewable Energy (SIFL) Institutions financing Equipment Financing infrastructure sector 154