PREPARATION OF PROJECT

REPORT

PRESENTED BY:

SACHINDRA MISRA,
FCA
 GENERAL OVERVIEW
Suitability of the Project for the Client / Promoter
• Past line / Experience of the Promoters
• Risk Analysis based on Educational / Professional / Technical Qualification of
the
Client
Type of Proposed Project
• New Project
• Existing Project
• Expansion & Diversification
• Balancing / Modification
• Rehabilitation
Purpose
• Term Loan
•Working Capital
•Share / Bond / Debt Market
Chapter- I Highlights of the Project
1. Name of the Unit / Company / Concern
2. Promoter Group
3. Constitution (Public Ltd. / Pvt. Ltd. / Partnership / Proprietorship
4. Board of Directors / Partners
5. Date of Incorporation
6. Location
7. Registered & Adm. Office
8. Govt. Consents
9. Capacity
a) Installed
b) Capacity Utilization Envisaged
10. Cost of the Project & Means of Finance.
11. Schedule of commencement of Commercial Production
12. D .S. C. R.
13. Employment potential
14. Socio-Economic Advantage for the Area.
Chapter-II Background of the Promoters
1. Bio Data
2. Educational Qualification (Especially Technical / Professional)
3. Past Experience & its Relevance to the Project
4. Interrelationship of Promoters
5. Financial Resources
6. Creditworthiness
7. In case of Existing Company
• Past Working Results
• Past Dealings with Bank / F1
8. Details of Associate Concerns
• Introduction
• Activities
• Banking Dealing & Facilities
• Last 3 years working Results
Chapter-III Organisation & Management

1. Board of Directors / Partners

2. Profile of Directors / Partners

3. Organisation Chart

4. Profile of key Executives

Chapter-IV Location of the Project

Criteria / Reasons for Selection

• Close to Raw Material Sources / Market
• Transport
• Type of Land
• Soil Test Report
• Approach (Close to NHW / SHW / Major Roads / Rail Head)
Chapter-V Technical Aspects & Technology to
be used
1. Brief Introduction and Importance of the Project with Reasons
for Selection of Proposed Technology / Machines.
2. Machine Balancing
3. Product
• Specification, its standard and other Qualitative Information
• Application
• Distinctive Features & Edge Over Competitors
4. Detailed Design, Engineering & Execution
5. Capacity
• Basis of Assessing Installed Capacity with Detailed
Calculation Indicating Critical Machine on Basis of which
Capacity Ascertained no of Working Hours & No. of Days.
• Reasons for particular capacity utilisation
Chapter-V Technical Aspects & Technology to
be used Contd…

6. Technology Adopted and Its Comparison With Alternative

Technology and Reasons for Selection
7. Technical Consultant, if any
• Write up on Consultant indicating Organizational setup,
Experience and Scope of Work etc.
• Agreement With Consultant
8. In case of Foreign Collaboration:
• Write up on Collaborator indicating their Activity, Size and
Turnover.
• Past Experience
• Basis of Selection
• Collaboration Agreement
• Technical Brochure, Balance Sheet, Bank Reference Etc.
Chapter-V Technical Aspects & Technology to
be used Contd…

9. Power
• Requirement & its Availability
• Source
10. Water
• Requirement & its Availability
• Source
11. Compressed Air
• Requirement & its Availability
• Source
Chapter-V Technical Aspects & Technology to
be used Contd…

12. Effluent Treatment

• Type of Effluent
• Measures
13. Manpower
• Requirement, Availability, Sourcing & Recruitment
14. Raw Material
• Requirement of Various Raw Material
• Source and Availability Position Indicating National & Local
Scenario
• Basis of Cost Indicating Tax & Duty Structure.
• Government Regulations if Any
• Arrangement Made for Procurement
Chapter-VI Manufacturing Process

1. Description of Process Along with Plant & Machinery Lay Out

2. Process Flow Chart & Material Flow Chart

Chapter-VII Market & Demand
1. Detailed Note on Demand Supply Position
• Uses of the Product and End Users
• Capacity at National & Local Level
• Price Structure of Existing Manufacture
• Tax Structure
• Performance of Existing Co.’s
• Demand-supply Trend of Last 5 years & Future
Projection
• Export Potential
• Information regarding Substitutes
2. Govt. Regulation
3. Existing Trade Practices
4. Selling Arrangement
5. Market Survey Report, if any
 Chapter-IX Cost of Project
1. Land
• Area & Cost
• Status & Documents
• Proper Legal Documentation
• Contour Plan & Site Development Cost
2. Building
• Justification for Proposed Area
• Building Layout & Plants
• Specification of Construction & Justification of Cost
• Details of Architect indicating their Organisational Setup, Experience and Scope of Work
• Approval of Building Plan by the Competent Authority.
3. Plants & Machinery
• Detailed Quotation of Suppliers
• Comparative Statement & Reasons of Selection with Techno-economic Justification
• Performance Guarantee of Special Machines
Chapter-IX Cost of Project Contd…

4. Misc. Fixed Assets

• Detailed Breakup of Electrical, Workshop Equipments
• Detailed Quotation of Suppliers
• Comparative Statement & Reasons of Selection with Techno-
economic Justification
5. Preliminary & Pre-operative Expenses
• Basis of various Expenses
6. Margin for Working Capital
• Basis of Assessment
• Justification for holding period
• Justification for Margin
7. Contingency
• Basis of Contingency Provision
Chapter-X Means of Finance

1. Justification of Proposed Means of Finance

2. Proposed Shareholding Pattern

3. Steps Taken to Raise the Stipulated Means

4. Status of Regularity Clearances & Legal Compliances

5. Detail of Investible Resources of Prompters

Chapter-XI Profitability & Funds Flow

1. Assumption
• Capacity
• Recovery from Raw Material and Process Loss
• Basis of Consumables
• Basis of Repairs & Maintenance
• Basis of Wages & Salaries
• Basis of Power & Fuel Cost
• Basis of Administrative & Selling Expenses
• Basis of Depreciation Rates
• Basis of Interest on Working Capital and Term Loan
• Basis of Selling Price
• Basis of Income-Tax Rates
Chapter- XI Profitability & Funds Flow contd…
2. Summarised Position of Future Profitability Estimates &
Comments thereon
3. Comments on Fund Flow & Proposed Repayment Schedule
4. Comments on Balance Sheet
5. Comments on Financial Indicators
a) Commercial Viability Ratios
i. Debt Service Covering Ratio-
PAT + Dep.+ Int. TL/TL+Int. TL (Minimum 1.5)
ii. Security Margin (Net Fixed Assets – TL/Net Fixed
Assets)
iii. Fixed Assets Coverage Ratio – Net Fixed Assets / OSTL
iv. BEP Analysis – BEP (Fixed Cost / Sales – Variable
Cost)
Cash BEP (FC-Depr. / Sales –
Variable Cost)
Chapter- XI Profitability & Funds Flow contd…

v. Sensitivity Analysis
• Base DSCR
• DSCR with Reduction of Sales Prices
• DSCR with Increase in Raw Material Cost.
b) Efficiency Ratios
I. Net Sales/ Total Tangible Assets (Times)
ii. PBT/ Total Tangible Assets (%)
iii. Operating Cost/ Income (%)
iv. Bank Loan for WC/Current Assets (%)
v. Inventory + Receivables / Net Sales (Days)
Chapter- XI Profitability & Funds Flow contd…

c) Risk Related Ratios

i. Profitability
- PBT/ Sales (%)
- PAT/Net Sales (%)
ii. Interest Coverage = PBIT/Interest ( Times)
iii. Return on Capital Employed (ROCE) = PBIT/ Total Assets
iv. Current Ratio = CA/CL
v. Liability against Net worth ( Important for Working Capital)
= TOL/TNW (Times)
vi. Return on Assets = PBT/ Total Assets
vii. Debt Equity Ratio - Important for Term Loan
= Term Loan/ Promoter Contribution
Chapter- XII Implementation Schedule

1. Detailed Implementation Schedule Indicating each activity and its

estimated date of Completion

2. PERT Diagram
Chapter- XIII Security Coverage

1. Primary Security and Detailed Calculation of Security Margin

2. Personal Guarantee of Promoters With Their Net Worth

3. Collateral Security & Valuation thereof by empanelled Regd. Valuer

4. Other Securities
• Escrow Mechanism
• Guarantee by Collaborator
• Third Party Guarantee
• Step in rights
Chapter- XIV SWOT Analysis

1. Strengths
• Strengths of the Company & Project like Project Location,
Market Share, Dealers Network, Technology, Collaboration,
Government Certifications etc.

2. Weaknesses
• Weakness of the Company like Old Technology, Product
Obselence Power Shortages, Raw Material Problem, Labour
Problem, Competition, Statutory Clearances etc.
2. A Mitigating Factors to overcome / minimize each factor.
Chapter- XIV SWOT Analysis Contd…

3. Opportunities
• Opportunities Available to the Company like Industry
Growth, Future Expansion, Backwork or Forward
integration, Competitiveness, Technology Upgradtion etc.

4. Threats
• Threats to the company like chances of product Obsolesance,
due to Government Policies, due to Completion with Major
Players etc.

4. A Mitigating Factors to Minimize threats.

Annexures of Project Cost & Profitability

1. Details of cost of Project & Means of Finance

2. Details of Cost of Land & Site Development
3. Details of Building & Civil Construction
4. Details of of Plant & Machinery
5. Details of Misc. Fixed Assets
6. Details of Preliminary & Preoperative Expenses
7. Details of Working Capital and its Margin
8. Details of Capacity Calculation & Sales Realisation
9. Details of Salary & Wages
10. Details of of Power & Fuel
Annexures of Project Cost & Profitability Contd..

11. Projected Profitability Statement

12. Projected Cash Flow
13. Projected Balanced Sheet
14. Details of Repayment Schedule & Interest on Term Loan.
15. Deprecation Calculation : SLM & WDV Method
16. Calculation of Income Tax Payable
17. Calculation of DSCR & Sensitivity Analysis
18. Key Financial Indicators.
Thank You