A

PROJECT REPORT

ON

“PROJECT FINANCING”

FOR

“GOEL GANGA GROUP”

Submitted to

“University of Pune”

IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE

MASTERS IN BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY

SABIL MOHAMMAD BALBATTI

(BATCH 2009-2011)

(SPECIALIZATION FINANCE)

Dr. D. Y. Patil Pratishtan’s

Padmashree Dr, D. Y. Patil Institute of Management & Research,

Pune-411018
 DECLARATION

I, undersigned honestly declare that, this project titled “PROJECT FINANCING” for GOEL GANGA

GROUP. is a genuine and bonafide project prepared by me and submitted to the Director, Padmashree

Dr.D.Y.Patil Institute of Management & Reasearch,Pimpri,Pune-411018 in partial fulfillment of MBA.

The project work is original and conclusions drawn herein are based on the data collected by

myself.

To the best of my knowledge, the matter presented in this project has not been submitted for

Award of any degree, diploma or membership either to this or any other Institute or University.

Date:

Place:

(SABIL MOHAMMAD BALBATTI)

 ACKNOWLEDEGMENT

I hereby offer my sincere and profound thanks to Mr. SHIVSAGAR GOYAL, who

gave me such a challenging project and guided me throughout the project. This project

would not have been completed successfully without their guidance.

I express my gratitude to our most respectful Mr. SANJAY DHARAMADHIKARI

(Director, DYPIMR. Pune) who has always been a guiding light for me and encouraging

me to take challenge all through my life.

I would like to thank my internal guide Prof. Mr. RATIKANT RAY and other Staff

Members for their valuable guidance and co-operation in completing my project report.

Finally, I feel it is my duty to thank all those who have directly and indirectly

helped me complete my project work.

INDEX
Sr. No. Particulars Page No.

1 Introduction

2 Objective of the Study

3 Theoretical Background

4 Company profile

5 Research Methodology

5.1 Meaning Of Research

5.2 Types Of Research

5.3 Methods and Tools used in Research

6 Analysis and Interpretation of data

7 Findings

8 Suggestion

9 Conclusions

10 Bibliography

11 ANNEXURE
 CHAPTER NO. 1

INTRODUCTION
Liberalization, privatization and globalization have brought unprecedented chance in the

economy, trade and industrial scenario. LPG has exposed various organizations including the

service sector to the challenge of competition; service quality, cost and the competitive

environment will help organization to modernize.

1.1 Object of the study

In today’s cutthroat competition world management has to perform variety of functions and

responsibilities. Theoretical knowledge of such function and responsibilities can be obtained

in the institute. But practically when this knowledge is applied in the corporate world, the

managers face many difficulties. One has to get an insight into this practical knowledge,

communication skills and develop the analytical aspects. Working for such objective will

definitely help to polish us and once accomplished it provides a great satisfaction.

It also helps us to understand the real organizational problems, perceptions and challenges.

Apart from these objectives, the other is to study certain fundamentals, commercials and

environmental aspects of the industry.

Definition of project finance

“The financing of the development or exploitation of a right, natural resource or other

asset where the bulk of the financing is to be provided by way of debt and is to be
repaid principally out of the assets being financed and their revenues.”

Definition of Project Finance borrowing

“Project Finance Borrowing” means any borrowing to finance a project:
(a) which is made by a single purpose company whose principal assets and business are
constituted by that project and whose liabilities in respect of the borrowing concerned
are not directly or indirectly the subject of a guarantee, indemnity or any other form of
assurance, undertaking or support from any member of the Group except as expressly
referred to in paragraph (b) (iii) below or

(b) in respect of which the person or persons making such borrowing available to the
relevant borrower have no recourse whatsoever to any member of the [Group] for the
repayment of or payment of any sum relating to such borrowing other than:

(i) recourse to the borrower for amounts limited to aggregate cash flow or net cash flow
from such project and/or

(ii) recourse to the borrower for the purpose only of enabling amounts to be claimed in
respect of that borrowing in an enforcement of any security interest given by the
borrower over the assets comprised in the project (or given by any shareholder in the
borrower over its shares in the borrower) to secure that borrowing or any recourse
referred to in (iii) below, provided that

(A) The extent of such recourse to the borrower is limited solely to the amount of any
recoveries made on any such enforcement, and

(B) such person or persons are not entitled, by virtue of any right or claim arising out of
or in connection with such borrowing, to commence proceedings for the winding up or
dissolution of the borrower or to appoint or procure the appointment of any receiver,
trustee or similar person or official in respect of the borrower or any of its assets (save
for the assets of the subject of such security interest) and/or
(iii) recourse to such borrower generally, or directly or indirectly to a member of the [Group]
under any form of completion guarantee, assurance or undertaking, which recourse is
limited to a claim for damages (other than liquidated damages and damages required to be
calculated in a specified way) for breach of any obligation (not being a payment obligation
or any obligation to procure payment by another or an obligation to comply or to procure
compliance by another with any financial ratios or other tests of financial condition) by the
person against whom such recourse is available or
(c) which the lender shall have agreed in writing to treat as a project finance borrowing.

One of the key differences, therefore, between project financing and corporate financing lies
in the
In the context of a project financing, however, a lender would only be entitled to this ultimate
sanction if the project vehicle is a special purpose vehicle set up especially for the project being
financed. In those cases where the project vehicle undertook other activities, then it would
look to ring fence the assets associated with these activities and in these cases the lender
would not ordinarily be entitled to petition to wind up the borrower for non-payment of the
project debt.
To allow otherwise would be to allow the lender to have recourse to non-project assets,
which would defeat the purpose of structuring the loan on limited or non-recourse terms in
the first place.
First Step in a Project Financing: The Feasibility Study.
 
A. Generally. As one of the first steps in a project financing the sponsor or a technical
consultant hired by the sponsor will prepare a feasibility study showing the financial
viability of the project. Frequently, a prospective lender will hire its own independent
consultants to prepare an independent feasibility study before the lender will commit to lend
funds for the project.
 
B. Contents. The feasibility study should analyze every technical, financial and other aspect of
the project, including the time-frame for completion of the various phases of the project
development, and should clearly set forth all of the financial and other assumptions upon
which the conclusions of the study are based, Among the more important items contained in
a feasibility study are:
 Description of project.
 Description of sponsor(s).
 Sponsors' Agreements.
 Project site.
 Governmental arrangements.
 Source of funds.
 Feedstock Agreements.
 Off take Agreements.
 Construction Contract.
 Management of project.
 Capital costs.
 Working capital.
 Equity sourcing.
 Debt sourcing.
 Financial projections.
 Market study.
 Assumptions.
Why choose project finance?
Before examining how projects are structured and financed, it is worth asking why sponsors
choose project finance to fund their projects. Project finance is invariably more expensive than
raising corporate funding.
Also, and importantly, it takes considerably more time to organize and involves a
considerable dedication of management time and expertise in implementing, monitoring and
administering the loan during the life of the project. There must, therefore, be compelling
reasons for sponsors to choose this route for financing a particular project.

Structuring the project vehicle

One of the first, and most important, issues that the project sponsors will face in
deciding how to finance a particular project will be how to invest in, and fund, the
project. There are a number of different structures available to sponsors for this purpose.
The most common structures used are:
• a joint venture or other similar unincorporated association
• a partnership
• a limited partnership
• an incorporated body, such as a limited company (probably the most common).
Of these structures the joint venture and limited company structure are the most universally
used. A joint venture is a purely contractual arrangement pursuant to which a number of
entities pursue a joint business activity. Each party will bring to the project not only its
particular expertise but will be responsible for funding its own share of project costs,
whether from its own revenues or an outside source. Practical difficulties may arise as
there is no single project entity to acquire or own assets or employ personnel, but this is
usually overcome by appointing one of the parties as operator or manager, with a
greater
degree of overall responsibility for the management and operation of the project. This
is the most common structure used in the financing of oil and gas projects in the United
Kingdom Continental Shelf.
Partnerships are, like joint ventures, relatively simple to create and operate but in many
Jurisdictions partnership legislation imposes additional duties on the partners, some of which
(such as the duty to act in the utmost good faith) cannot be excluded by agreement.
Liability is unlimited other than for the limited partners in a limited partnership, but these are
essentially “sleeping” partners who provide project capital and are excluded from
involvement in the project on behalf of the firm.
In many cases it will not be convenient (or may not be possible) for the project assets to
be held directly (whether by an operator or the individual sponsors) and in these cases it
may be appropriate to establish a company or other vehicle which will hold the project
assets and become the borrowing vehicle for the project. The sponsors will hold the
shares in this company or other vehicle in agreed proportions.
In most cases where this route is followed, the company or other vehicle would be a
Special purpose vehicle established exclusively for the purposes of the project and the
Use of the special purpose vehicle for any purposes unconnected with the project in
question will be published. In addition to the constitutional documents establishing the
vehicle, the terms on which it is to be owned and operated will be set out in a sponsors’
or shareholders’ agreement.
Whether sponsors follow the joint venture (direct investment) route or the special
purpose vehicle (indirect investment) route ultimately will depend on a number of legal,
tax, accounting and regulatory issues, both in the home country of each of the sponsors
and the host country of the project (and, perhaps, other relevant jurisdictions). Some of
the relevant influencing factors might include the following:
• a wish on the part of the project sponsors to isolate the project (and, therefore,
distance themselves from it) in a special purpose vehicle. If the project should
subsequently fail, the lenders will have no recourse to the sponsors, other than in
respect of any completion or other guarantees given by the sponsors (see section 6.5
for an explanation of such guarantees). The sponsors are effectively limiting their
exposure to the project to the value of the equity and/or subordinated debt that they
have contributed to the project
How can a project financing be identified? What details should we expect to find about
the transaction? Not every project financing transaction will have every characteristic,
but the following provides a preliminary list of common features of project finance
transactions.

Capital-intensive. Project financings tend to be large-scale projects that require a great

deal of debt and equity capital, from hundreds of millions to billions of dollars.
Infrastructure projects tend to fill this category. A World Bank study in late 1993 found
that the average size of project financed infrastructure projects in developing countries
was $440 million. However, projects that was in the planning stages at that time had
an average size $710 million.

Highly leveraged. These transactions tend to be highly leveraged with debt

accounting for usually 65% to 80% of capital in relatively normal cases.

Long term. The tenor for project financings can easily reach 15 to 20 years.

Independent entity with a finite life. Similar to the ancient voyage-to-voyage

financings, contemporary project financings frequently rely on a newly established
legal entity, known as the project company, which has the sole purpose of executing the
project and which has a finite life “so it cannot outlive its original purpose.” In many
cases the clearly defined conclusion of the project is the transfer of the project assets.
For example, in a build-operate-transfer (BOT) project, the project company ceases to
exist after the project assets are transferred to the local company.

Non-recourse or limited recourse financing. The project company is the borrower.

Since these newly formed entities do not have their own credit or operating histories, it
is necessary for lenders to focus on the specific project’s cash flows. That is, “the
financing is not primarily dependent on the credit support of the sponsors or the value
of the physical assets involved.” Thus, it takes an entirely different credit evaluation or
investment decision process to determine the potential risks and rewards of a project
financing as opposed to a corporate financing.
In the former, lenders “place a substantial degree of reliance on the performance of the
project itself. As a result, they will concern themselves closely with the feasibility of
the project and its sensitivity to the impact of potentially adverse factors.” Lenders
must work with engineers to determine the technical and economic feasibility of the
project. From the project sponsor’s perspective, the advantage of project finance is that
it represents a source of off-balance sheet financing.

Controlled dividend policy. To support a borrower without a credit history in a

highly-leveraged project with significant debt service obligations, lenders demand
receiving cash flows from the project as they are generated. This aspect of project
finance recalls the Devon silver mine example, where the merchant bank had complete
access to the mine’s output for one year. In more modern major corporate finance
parlance, the project has a strictly controlled dividend policy, though there are
exceptions because the dividends are subordinated to the loan payments. The project’s
income goes to servicing the debt, covering operating expenses and generating a return
on the investors’ equity. This arrangement is usually contractually binding. Thus, the
reinvestment decision is removed from management’s hands.
Many participants. These transactions frequently demand the participation of
numerous international participants. It is not rare to find over ten parties playing major
roles in implementing the project. The different roles played by participants is
described in the section below.
Allocated risk. Because many risks are present in such transactions, often the crucial
element required to make the project go forward is the proper allocation of risk. This
allocation is achieved and codified in the contractual arrangements between the project
company and the other participants. The goal of this process is to match risks and
corresponding returns to the parties most capable of successfully managing them. For
example, fixed-price, turnkey contracts for construction which typically include severe
penalties for delays put the construction risk on the contractor instead on the project
company or lenders. The risks inherent to a typical project financing and their
mitigants are discussed in more detail below.
Costly. Raising capital through project finance is generally more costly than through
typical corporate finance avenues. The greater need for information, monitoring and
contractual agreements increases the transaction costs. Furthermore, the highly-specific
nature of the financial structures also entails higher costs and can reduce the liquidity of
the project’s debt. Margins for project financings also often include premiums for
country and political risks since so many of the projects are in relatively high risk
countries. Or the cost of political risk insurance is factored into overall costs.
Another means of understanding project finance is to relate it to corporate finance.
Kensinger and Martin draw this comparison,
Generally when a corporation chooses to undertake an investment project, cash flows
from existing activities fund the newcomer; and management has the option to roll over
the project’s capital into still newer ventures within the company later on -- without
submitting them to the discipline of the capital market.
With project financing, by contrast, the assets and cash flows associated with each
project are accounted for separately. Funding for the new project is negotiated from
outside sources, and creditors have recourse only to the assets and cash flows of a
specific project. As the project runs its course, furthermore, the capital is returned to
the investors, and they decide how to reinvest it.
Most actual projects probably fall somewhere between the two theoretical definitions.
When evaluating a project, however, it is useful to think of it falling somewhere along a
Corporate Finance-Project Finance Continuum. The following chart summarizes the
key differences between the two types of financing.
 Project Financing Mechanisms

 Market-rate loans
 Below-market-rate loans
 Project-based loans
 Deferred payment loans
 Owner equity and equity syndication proceeds
 Lease purchase loans

Market - Rate Loans

Market-rate loans are offered by banks, thrift institutions and mortgage companies to
homebuyers and investors in rental property.
Insurance companies and public pension funds also make direct real estate loans, but
rarely with affordable housing projects, because the transactions are typically too small
to be profitable.
There is no set "market rate" of interest for housing loans - rather, a range of rates which
are found in the market.
These rates are primarily functions of three variables:
(1) the perceived risk of the investment,
(2) the costs of doing the transaction and
(3) supply/demand factors.

Below-Market-Rate Loans
A below-market-rate loan can be defined as any loan with an interest rate that is clearly
lower than prevailing market rates, taking into account the market factors
just described and the particular benefits and risks of the transaction in question.
Common sources:
 Direct low-interest loans from government agencies
 Lending using federal sources
 The proceeds of selling tax-exempt bonds
  Credit-enhanced investments
 Housing finance agency reserves
 Community Reinvestment Act (CRA) motivated
 An investment pool that mixes market-rate funds with
 Other innovative sources of capital

Project-Based Grants
 Project-based grants are used for the acquisition, construction or renovation of
affordable housing.
 These are distinguished from other types of grants that might, for example, be
used to pay rent subsidies, capitalize a loan pool or underwrite the operating
expenses of a nonprofit housing organization.

Deferred Payment Loans

 In the affordable housing industry," deferred payment second mortgage loan"
typically means that all payments of principal and interest are deferred until
resale of the property or conversion to another use.
 Such loans are also called "soft seconds". „ They typically generate no return on
investment, are not amortized (repaid monthly) and are made with non-
conventional sources of investment capital.

Owner Equity and Equity Syndication Proceeds

 Owner equity can be defined as cash or something else of value provided by the
owner to a real estate transaction that involves acquisition, construction or
refinancing.
 For example, a homebuyer's down payment is equity.
 An investor's cash paid into a deal is equity.
 The market value of land or buildings provided to a deal is equity.
 With rehabilitation of a property for an existing owner, the owner's equity is
usually valued as the difference between the market value of the property and
 debt on the property.
Lease-Purchase Loans

 In a typical program, a local government agency or nonprofit group arranges

financing for a group of homes - whether homes to be built, rehabbed or
simply bought in the open market.
 The program sponsor sells the homes to low-income families who do not
currently qualify for conventional financing - usually by failing to meet down
payment requirements.
 A slight surcharge on the monthly payment builds up a reserve account for the
down payment.
 The loan to the program sponsor is essentially a multifamily housing loan that
converts to a single-family home purchase loan in a year or two, when the lessee
buys the home.
Special Purpose Vehicle (SPV) Functioning
PROFILE OF THE ORGANISATION
 GOEL GANGA GROUP
The Goel Ganga takes pride in constructing dreams ... in building for life. Giving commercial

complexes the professional edge, adding fun to entertainment centers, providing education with

sound infrastructure and delivering homes with the advantages of both, comfort and

convenience.....
Every Goel Ganga construction stands tall on the ideals of quality, craftsmanship and good

value.

Focus on quality enhancement resulted in making it Pune's first DIN EN ISO 9001:2008 for
Quality and ISO 14001:2004 for Environment certified company way back in 1997 and BS
OHSAS 18001:2007 for Health & Safety in 2009.

BEYOND CONSTRUCTION
At Goel Ganga the completion of a project just marks the beginning of our responsibilities.

Construction is an art, and service is the essence of this art. Every project here is characterized

with service roads and sophisticated amenities. Every project is executed considering minute

details to instill our customers with the feeling of peace and security. Entertainment is a need to

relax and unwind. Keeping this in mind the Goel Ganga Group has planned recreation centers

and entertainment hubs.

Service to its customers and to the community as a whole, and the deepest respect for mankind

are the principles which govern every action at Goel Ganga.

 CORPORATE
This is a new beginning of a journey.
A journey of innovative and constructive thoughts.

A journey from splendid past towards glorious destiny,

A destiny of constructing those beautiful and huge structures,
Which shall reflect those dedicated minds and hardworking hands
Which shall make them alive.

We on the way should try to implement our creative ideas & sincere efforts
to make our Organization,
A sought destiny which can give
a great pleasure
Of adorning the shared dreams.

We will love to see your smile of Satisfaction.

Atul Goel
( Director )

Our Vision:

While Mankind Is Busy Exploring The Universe To Discover New Living Environments... We
At Goel Ganga Have Devoted Ourselves In Making The Earth A Better Place To Live On.

Our Mission:

Miles ahead. Yet a long way to go judging by the many milestones of success, the Goel Ganga
Group has crossed over two decades. Many would believe the Group to rest on past laurels. Yet
the Group is moving ahead, travelling further to give more value to its customers. The future will
see us build on our core values, while adapting, even anticipating changes in lifestyles,
environment, and needs; all with an eye on a single-minded goal; CUSTOMER DELIGHT
RESIDENTIAL

COMMERCIAL
MANAGEMENT TEAM

CITIES
 HOSPITALITY

INTERNATIONAL SCHOOL
 CHAIRMAN, S MESSAGE

Friends, we at Goel Ganga Group owe our success to strong support and goodwill of 5000 happy families who entrusted
their dreams of beautiful homes with us, and we believe that little progress can be made by merely attempting to repress
what is evil.

Our hope lies in developing what is good and pure. Developing good homes with good surroundings is a product of our
urge to enhance the human lifestyles. We are joined by thousands of people in this caravan mainly our valued customers,
colleagues, well -wishers and friends.

We have an array of many residential and commercial projects to suit your lifestyles. We invite you to take a tour of our
beautiful homes.
Jaiprakash Goel (Chairman)
 Management Team

Jaiprakash Goel ( Chairman )

Chairman of the Group, the doyen of construction industry in Pune city, is
supported in his endeavor by a team of qualified and experienced persons largely
belonging to the Goel clan. Although these members belong to the Goel family,
they bring with them all critical inputs, much necessary and indispensable for
success of any business venture.
Atul Goel ( Director )
Atul Goel, son of Shri Jaiprakash S. Goel is a dynamic personality who has
successfully introduced many of the latest technological innovations in the
construction activities of the company. Head of PBAP exhibition committee.
Chairman Magazine Committee - 2005-2006. Chairman of PBAP website &
Marketing Committee 2006-2007. An engineering graduate from University of
Pune, followed by a Master's degree in Business Administration, he too has
contributed significantly to the success of the Goel Ganga Group.
Amit Goel ( Director )
Amit Goel, youngest son of Shri Jaiprakash S. Goel, a young entrepreneur, with
progressive focus in the spheres of Purchase, Operations, and upgrading systems
and processes. His forte, besides Construction activities, is managing and
designing systems for Profit Centres, like Resort Operations, Health Management
Centres and Educational Institutes, wherein cost savings and revenue growth are
the objectives. His contribution to the Group ensures smooth operations and
target achievements
Research Methodology
Meaning of Research:-

The term ‘research’ is composed of two words ‘re’ and ‘search’ which means to search
again. Research is conducted to search for new facts or to modify the existing facts. The obvious
function of research is to add new knowledge to the existing store as well as to remove the
misconceptions and ignorance of mankind. Thus, research is a process and means to acquire
knowledge about any natural or human phenomena. It is the pursuit of the truth with the help of
study, observation, comparison and experiment.

Definition of Research:-
“Research is the process of systematically obtaining accurate answers to significant and
pertinent questions by the use of the scientific method of gathering and implementing
information.”
By:-Clover and Balsely

“Research is a method of studying, analyzing and conceptualizing social life in order to

extend, modify, correct and verify knowledge whether that knowledge aids in construction of
theory or in practice of an art”
By:- P.V. Young
 Type of Research

1. Descriptive Research:-
This kind of research merely describes and depicts the current state of affairs of different variables.
The research has no control over these variables. It only reports what has happened and what is
happening. E.g.:- Census in India.

2. Exploratory Research:-
This research attempts to gain better understanding of different dimensions of the problem. It
studies the subject about which either no information or a little information is available. In this
kind of research the assumption is that the researcher has little or no knowledge about the
problem or situation under the study. Exploratory studies are appropriate for some persistent
phenomena like sickness of an industry, deficiencies in education system, corruption prevailing
in government departments, rural poverty and so on.
3. Explanatory research:-This kind of research explains the causes of social and economic
phenomena. Describing or exploring the nature of a phenomenon is one thing but explaining the
cause for the same is its explanatory aspect.

Meaning of Research Design

Research design is a working plan prepared by the researcher before the actual start of research work.
It is the conceptual structure within which research activity is conducted.

It is a strategic plan of research. Research design includes an outline of what the researcher will do from
writing the hypothesis and its operation to collection, analysis and interpretation of data.

E.g.:- A house builder prepares a blueprint of the entire building before commencing the actual
construction.
 METHOD AND TOOLS USED IN RESEARCH

Primary Data

There is no field work in this project so there is no primary data in this project

Secondary Data:-
Secondary Data is collected through company website, periodicals, company sheets, meeting
with the management etc.

Type of Study

The research has been based on secondary data analysis. The study has been exploratory
as it aims at examining the secondary data for analyzing the previous researches that have
been done in the area of technical and fundamental analysis of stocks. The knowledge
thus gained from this preliminary study forms the basis for the further detailed
Descriptive research. In the exploratory study, the various technical indicators that are
important for analyzing stock were actually identified and important ones short list
 Findings & Recommendations

CHAPTER NO. 3

ANALYSIS AND INTERPRETATION OF DATA

CHAPTER NO. 2
CONCLUSION

BIBLIOGRAPHY