A

PROJECT REPORT
ON
“A STUDY ON PROJECT COSTING AND FUNDING IN
MMRC LINE 3”
AT

A Summer Internship Project (SIP) done in

“FINANCE”
Submitted in partial fulfillment of the requirement for the award of degree of Master
of Management Studies (MMS) under the University of Mumbai
Submitted by
PREETI YADAV
ROLL NO: 59
BATCH: 2018-2020

Under the guidance of

Dr. Uma Durgade

Bharati Vidyapeeth’s
Institute of Management Studies& Research, Navi Mumbai
 ACKNOWLEDGEMENT

My project on Study on project costing and funding of MMRC

has been a great learning experience. I was exposed to the different areas of research
in finance and gained valuable experience, which I will always recall with a sense of
satisfaction and pride.

This is to acknowledge Mrs. Dr.Uma Ghurgude under whose guidance I have been
able to successfully complete this project and effectively come to a very successful
conclusion.

A greater share of inputs and data from Mr. Umesh Gavande (DGM of Accounts)
made this project report possible to its rightful accuracy.

To all my colleagues who have helped me either directly or indirectly, I am grateful

for their valuable inputs. This project would not have been possible without their help.

Signature of the student

(PREETI YADAV)
PLEASE PASTE HERE THE CERTIFICATE FROM THE COMPANY
< PLEASE PASTE THE CERTIFICATE FROM THE INSTITUTE on letter head as follows >
 CERTIFICATE

This is to certify that the Summer Internship Project (SIP) titled A Study On Project Costing and
Funding of MMRC” is successfully done by Ms. Preeti Yadav, BATCH: 2018-2020, a student
of Bharati Vidyapeeth’s Institute of Management Studies and Research, submitted in partial
fulfillment of Master of Management Studies under the University of Mumbai from 13 May to
10 July 2019 at MMRCL .(BKC)

Date :___________

_____________________ _________________
Prof._DR Uma Gurgude Dr. Anjali Kalse
Project Guide I /c Director
BVIMSR BVIMSR
 EXECUTIVE SUMMARY

The main purpose of the project is to understand the whole concept of Project financing, and its
methods and needs of project financing in the form of different recommendation and methods. To
know the needs and methods of project financing for term loan and various guidelines issued by the
RBI for banking sector for Project finance. The project has been divided into two parts. In initial
chapters of the project was given to general concept and fundamental principles for project
financing, method of project financing, requirement of project financing in rapid transport systems,
the finance requirement to the borrowers and the various approaches adopted by the borrowers for
selecting the mode of financing. The later chapter covers various methods of project financing and its
sub methods. Funding the requirement of the loan by following suitable procedures. And finally
various committees’ recommendation and current scenario were elaborated in detail. And the project
includes the case study on Delhi Metro for which the procedure actually holds true and the details of
projection are highlighted.
 TABLE OF CONTENTS
PARTICULARS PAGE NO:
Acknowledgement (i)
Certificates (ii)
Executive Summary (iv)
Table of Contents (v)
Chapter 1: Introduction of the Project Page Number
1.2: Need of the Study 1
1.3: Objective of the Study 2
1.4: Scope of the study
1.5: limitation of the study
1.6 : Introduction to the topic
1.7: Literature Review

Chapter 2: Introduction to _civil construction Industry

2.1: Overview of construction_Industry
2.2:GDP Contribution to the industry
2.3: Major players in the industry,

Chapter3: Introduction to the Company

3.1:

3.2: (Description of the HR/Marketing /Finance /Operation processes: Should include block
diagrams, models for showing the processes, major operations,compositions, process
conditions & regulatory aspects etc. Mention assumptions, if any & management
technologies used for regulation purpose.)

3.3: (Products,Plants,Capacity,Turnover,Market share etc,SWOT Analysis)

Chapter 4: Research Methodology

4.1: Research Design
4.2: Sources of Data
4.3: Data Collection Tools and Techniques
4.4: Sample Design

Chapter 5: Data Analysis and Interpretation

(Tables, graphs, statistical techniques etc.)
Chapter 6 : Conclusion & Suggestions
6.1: Findings
6.2 : Suggestions
6.3 : Limitations
6.4 : Conclusion

Chapter 7 : Learning Experience from the project

Annexure
(Questionnaire, specimen copies of forms, other exhibits etc.)

Bibliography
(books, journal articles, internet etc. referred for the project work).
 Chapter no .1
Introduction of the project
 1.1 Introduction

 A metro line from Colaba to Bandra was announced in January 2014 as part of a master plan
unveiled by the Mumbai Metropolitan Region Development. The plan encompassed a total of
146 kilometer of track of which 32 kilometer was proposed to be underground. The MMRDA
unveiled plans for an extended Colaba-Bandra-SEEPZ metro line in 2011. According to its
earlier plans a 20 km metro line from Colaba to Bandra was to be constructed, running
underground for 10 kilometer ftom Colaba to Mahalaxmi, and then on an elevated track from
Mahalaxmi to Bandra.
 The MMRDA decided to extend the line to the Chatrapati Shivaji International Airport to
increase ridership. The 33.5 kilometer Colaba-Bandra-SEEPZ line was estimated to cost Rs
21000 crores, have 27stations, and would be the city first fully underground metro line at
Nariman Point,BKC, MIDC, SEEPZ and elsewhere.
 According to the MMRDA an underground metro will minimize land acquisition and
disturbance to traffic during construction compared to an elevated metro.
 The Mumbai Metro Rail Corporation Ltd (MMRC) registered under provision of company
act 1956 was constituted as a filly owned company of the MMRDA on 30 April 2008 as per
the state government directives.
 On 27 February 2012 the Central Government gave in principle approval to the plan for line
3. In April 2012 the MMRDA announced plans to grant the MMRC increased management
autonomy in an effort to enhance the project’s operational efficiency.
1.2 Need of the study
1.3 Objective of the study:
1. To provide a proper framework of funding details in the Mumbai metro.
2. To find out overall funds required for completion of package 5 and package 6 project in
Mumbai Metro.
3. Also find out the overall project costing which is incurred while doing the project.
4. To provide a detailed study on the project costing and from where the funding is done.
5. .To study the financial alternatives with the help of Project financing.
6. To understanding the project financing system and actualization in practical.

1.4 Scope of the study :

 Company has given various guidelines, advice and projection for obtaining the finance from the
banking institutions and other financial services. And developing of the company keeping in the view
economic of the country. It is necessary to under taken the impact of Delhi Metro & various services
provide to their clients.
 Since it will not be possible to conduct a micro level study on all the packages of MMRC
underground project, the study is restricted to package 5 and 6 only.

1.5 Limitation of the study:-

 The time limitation is the most important problem to collect the various information.
 Study is not related to the current market position
 It requires lot of time & is more expensive
1.6 Introduction to the topic
Project Cost is the total funds needed to complete the project or work that consists of a Direct
Cost and Indirect Cost. The Project Costs are any expenditures made or estimated to be made, or
monetary obligations incurred or estimated to be incurred to complete the project which are listed in
a project baseline.

Project Cost Management (PCM) is a method that uses technology to measure cost and
productivity through the full life-cycle of enterprise level projects.
PCM encompasses several specific functions of project management including estimating, job
controls, field data collection, scheduling, accounting and design. PCM's main goal is to complete a
project within an approved budget.
Beginning with estimating, a vital tool in PCM, actual historical data is used to accurately plan all
aspects of the project. As the project continues, job control uses data from the estimate with the
information reported from the field to measure the cost and production in the project. From project
initiation to completion, project cost management has an objective to simplify and cheapen the
project experience.[2]
This technological approach has been a big challenger to the mainstream estimating software and
project management industries.This method is crucial for engineering in the buyer market trend: the
market price is always fixed and to have competition.Early Purchasing Involvement philosophy may
be one of the solutions in future.

Types of project costing:

No project starts without a budget. Project success is decided by how well the project cost has been
handled in the project. Many times it happens that, the project may not be completed within the
project cost. It means that when compared the Project Cost Vs Project Profit, Project Cost might
have exceeded and it is of course considered as a project failure. Hence it’s very important to come
up with the correct cost estimation needed for the project.
To come up with accurate cost estimation, it’s requiring to understand the types of project costs
involved in the project.

Types of Project Costs.

There are 5 types of project costs incurred in any project. They are

1. Fixed cost
2. Variable cost
3. Direct cost
4. Indirect cost
5. Sunk cost

Fixed cost:
Any cost which is fixed throughout the project life cycle and would not change by quantity, time or
any other project factors called for a fixed cost.Fixed cost example: in a software project, rent for the
company space, systems cost, software license cost, salaries are considered as a fixed cost.Note that
fixed costs are not fixed permanently. They will change over a period of time. Here we are referring
to the project fixed cost which means that they are fixed in relation to the delivery of the project.  To
conclude “in short term, the costs are fixed, however, the costs are variable in the long term”.

variable cost:
On the contrary to fixed cost, the variable cost is a cost which varies or changes in proportion to
product or service that the project produces. Variable cost example 1: let’s understand it with a
simple example. Imagine you are running a pizza shop.  Once you make, boxed and delivered the
pizza to the customer, you have encountered several variable costs.  Which are (prices mentioned
below are just for the sake of illustration), 
Pizza base: 50cents
Pizza sauce: 10cents 
Pizza seasoning: 10cents
Pizza topping (any): $1
Box to deliver: 50cents
Based on the mentioned information, you are spending $2.20 on every pizza. All these costs are
variable. Selling pizza less than $2.20 means it’s a loss. And, also these costs are directly
proportionate to the numbers of pizzas are sold.

Direct costs:

Costs which are directly visible and accountable to produce the project output are called direct
costs.Direct cost example: materials which are used to produce a product can be considered as the
direct cost. Logistics, human resources, project development cost used specifically to the project can
also be considered as a direct cost.

Indirect costs:
Costs which do not directly contribute or specific to the output of the project are called indirect costs.
it may be either variable or fixed. Indirect cost example: overhead cost, electricity consumption, rent,
salary, administrative, security cost. These costs are not directly related to the production. a project
manager is considered as an overhead cost or indirect cost as he is not directly involved in the
production whereas developer of a project will be considered as a direct cost.

Sunk costs:
Sunk costs are costs which are already spent, but failed to incur any business value and cannot be
recovered and permanently lost.
Example for sunk cost:  let me take an example from our day to day life. Just imagine, you have
bought few vegetables and kept it in the fridge.  However, you forgot to use one of them and you
found it only when cleaning the fridge. By the time you see it, it has got totally spoiled and hence
you threw it away. The cost of the vegetable is called a sunk cost. This cost did not solve any
purpose and also cannot be recovered and permanently lost.

Total project cost:

Calculating total project cost (TPC) is a vital step for any project. TPC should include all the costs
(fixed and variable) of the project.  The calculation should include total estimated cost (TEC) and
other project costs (OPC). i.e., it includes but not limited to activities costs such as pre-planning,
feasibility, operating cost, commissioning, risk analysis, contingency, design, development,
maintenance etc. 
if total project cost is not estimated precisely, the project will have to face serious consequences. it
will have a direct impact on the project schedule, quality, and scope.  This will lead to cost overrun.
for an example, while calculating project cost, if few of the activities are not included,  then the
scope has to be updated, timeline (schedule) for the project might need to be extended and cost of
quality will also be increased. at the same time, compromising quality and scope to meet the project
schedule which would lead to customer dissatisfaction.  Due to these reasons, project managers are
forced to exceed their budget.

Definition of project costing

1. Project finance is the process of financing a specific economic unit that the sponsors create, in
which creditors share much of the venture’s business risk and funding is obtained strictly for
the project itself. Project finance, often used for capital-intensive facilities and utilities, is
commonly used to segregate the credit risk of the project from that of its sponsors so that
lenders, investors, and other parties will appraise the project strictly on its own merits. Project
finance creates value by reducing the costs of funding, maintaining the sponsors financial
flexibility, increasing the leverage ratios, avoiding contamination risk, reducing corporate
taxes, improving risk management, and reducing the costs associated with market
imperfections.

2. Project finance techniques have enabled projects to be built in markets using private capital.
These private finance techniques are a key element in scaling back government financing, a
central pillar of The current ideological agenda whose goals are well articulated by Grover
Norquist, a, a US Republican ideologue and lobbyist, who says ‘I don’t want to abolish
government. I simply want to reduce it to the size where I can drag it into the bathroom and
drown it in the bathtub.’ On the basis of such ideological agendas and lobbyists’
machinations are the macroeconomic policies, upon which project finance feeds, Made, thus
transferring the control of public services from the electorate to private, unaccountable And
uncoordinated interests. Such agendas make project financing a key method of using private
capital to achieve private ownership of public services such as energy, transportation and
other infrastructure Development initiatives. The goal ultimately is to make government
irrelevant and achieve a two-tier Society where government panders to the marginalized and
infrastructure development and exploitation Are handed over to private capital, free from the
encumbrances of electoral mandates.

-Andrew Fight

Definition of Project

Organizations perform work continuously. These works include operations or projects though
some works may overlap with each other. For the organizations, projects are important
elements of change. They are considered to be the leading edge of change in organizations. A
project consists of a combination of organizational resources pulled together to create
something that did not previously exist and that will provide a performance capability in the
design and execution of organizational strategies. Projects are conceptualized, designed,
engineered and produced (or constructed); something is created that did not previously exist.
An organizational strategy has been executed to facilitate the support of ongoing
organizational life. Projects therefore support the ongoing activities of a going concern.
What Is Project Finance

Project finance is the structured financing of a specific economic entity—the SPV,or special-
purpose vehicle, also known as the project company—created by sponsors using equity and
for which the lender considers cash cows as being the primary source of loan reimbursement,
whereas assets represent only collateral.

The following five points are, in essence, the distinctive features of a project Finance deal:

1. The debtor is a project company set up on an ad hoc basis that is financially and legally
independent from the sponsors.

2. Lenders have only limited recourse (or in some cases no recourse at all) to the sponsors after
the project is completed. The sponsors’ involvement in the deal is, in fact, limited in terms of
time (generally during the setup to start-up period), amount (they can be called on for equity
injections if certain economic-financial tests prove unsatisfactory), and quality (managing the
system efficiently and ensuring certain performance levels). This means that risks associated
with the deal must be assessed in a different way than risks concerning companies already in
operation.

3. Project risks are allocated equitably between all parties involved in the transaction, with the
objective of assigning risks to the contractual counterparties best able to control and manage
them.

4. Cash cows generated by the SPV must be sufficient to cover payments for operating costs and
to service the debt in terms of capital repayment and interest. Because the priority use of cash
cow is to fund operating costs and to service the debt, only residual funds after the latter are
covered can be used to pay dividends to sponsors.

5. Collateral is given by the sponsors to lenders as security for receipts and assets tied up in
managing the project.

Why is it important to understand project finance?

The people involved in a project are used to find financing deal for major construction projects
such as mining, transportation and public utility industries that may result such risks and
compensation for repayment of loan, insurance and assets in process. That’s why they need to
learn about project finance in order to manage project cash flow for ensuring profits so it can
be distributed among multiple parties, such as investors, lenders and other parties.

Project Finance

 Project finance is a method of financing very large capital intensive projects, with long
gestation period, where the lenders rely on the assets created for the project as security
and the cash flow generated by the project as source of funds for repaying their dues.
  Simply put, project finance is essentially financing on the security of the project itself,
with limited or no recourse against the sponsors of the project or other parties involved in
the development and implementation of the project. Due to such characteristics of project
finance, the loans sought by the borrowers are always approved by the lenders on the
basis of strong in-house appraisal of the cost and viability of the ventures as well as the
credit standing of project promoters.

 Project finance generally covers green-field industrial projects, capacity expansion at

existing manufacturing units, construction ventures or other infrastructure projects. The
term ‘infrastructure projects’ is used here in its general and wide meaning to describe
physical structures (such as roads, highways, ports, airports etc.) or systems (such as
electricity transmission system, pipeline distribution systems) that are designed, built,
operated and maintained to provide for certain physical facilities (such as roads, railways,
airports, urban mass rapid transit systems) or commodities (such as natural gas,
petroleum, electricity) or for the due utilization of natural resources (water, crude oil,
minerals) or provision of services.

 (Telecommunications, broadcasting, air transport services, waste handling and treatment)

through the general public within the specified geographical area. Capital intensive
business expansion and diversification as well as replacement of equipment may also be
covered under project finance.

 An understanding of the possible money streams into a particular project and the possible
expenditure streams out of the same is essential to structure the finance. Such
understanding would be based on an analysis of the legal framework governing the
project, all of the project’s documentation including all government approvals with regard
to the implementation and financing of the project and the finance documentations.

 Project finance is quite often channeled through a project company known as special
purpose vehicle or project development vehicle. Internationally, in addition to a private
limited company, a limited company, a partnership and an unincorporated entity structure
are all recognized as suitable project development vehicle. However, in India, a private
limited company is regarded to be an appropriate project development vehicle as it
ensures limited liability for the developers of the project, enables the shareholders to
incorporate the various terms and conditions agreed to between them in the articles of
association of the project company, thereby binding not only the shareholders themselves
but also the company to such agreed terms. Besides, a private limited company also has
greater avenues open for equity and loan financing.

Some Jargons:

1. Full Recourse Loan: A loan in which the lender can claim more than the collateral as
repayment in the event that the loan is enforced. Thus a full recourse loan places the
Sponsor’s assets at risk.

2. Non-Recourse Loan: A loan in which the lender cannot claim more than the collateral as
repayment in the event that the loan is enforced.
3. Limited Recourse Loan: A loan in which the lender can claim more than the collateral,
subject to some restrictions, as repayment in the event that the loan is enforced.

Who Are the Sponsors of a Project Finance Deal?

By participating in a project financing venture, each project sponsor pursues a clear objective,
which differs depending on the type of sponsor. In brief, four types of sponsors are very often
involved in such transactions:

1. Industrial sponsors, who see the initiative as upstream or downstream integrated or in

some way as linked to their core business .

2. Public sponsors (central or local government, municipalities, or municipalized

companies), whose aims center on social welfare.

3. Contractor/sponsors, who develop, build, or run plants and are interested in

participating in the initiative by providing equity and/or subordinated debt .

4. Purely Financial investors.

5. Industrial Sponsors in Project Finance Initiatives.

Let’s use an example to illustrate the involvement of sponsors who see project Finance as
an initiative linked to their core business. For instance, a major project involving IGCC
(integrated gasification combined cycle) cogeneration includes outputs (energy and
steam) generated by fuels derived from refinery by-products. The residue resulting from
refining crude oil consists of heavy substances such as tar; the disposal of this toxic
waste represents a cost for the producer. The sponsors of these project Finance deals are
often oil companies that own refineries. In fact, an IGCC plant allows them to convert
the tar residue into energy by means of eco-compatible technologies. The byproduct is
transformed into fuel for the plant (downstream integration). The sponsor, in turn, by
supplying feedstock for the power plant, converts a cost component into revenue, hence a
cash in inflow. Lenders in this kind of project carefully assess the position of the sponsor,
since the SPV should face a low supply risk. The sponsor/supplier has every interest in
selling the tar promptly to the SPV. If this does not happen, the supplier not only will
forfeit related revenue but will be subject to penalties as well.

6. Public Sponsors with Social Welfare Goals- Historically, project Finance was first used
in the oil extraction and power production sectors .These were the more appropriate
sectors for developing this structured Financing technique because they were marked by
low technological risks, a reasonably predictable market, and the possibility of selling
what was produced to a single buyer or a few large buyers based on multiyear
contracts .So project Finance initially was a technique that mainly involved parties in the
private sector.
Overview of the Features of Project Finance-

It is quite common to find contractors who also offer to run the plant once it is operational. Plant
managers have a clear interest in sponsoring a project Finance deal because they would
benefit both from cash Cows deriving from the operation and maintenance (O&M) contract
as well as from dividends paid out by the SPV during the operational phase.

The ‘‘Purely’’ Financial Investor

 The purely Financial investor plays the part of sponsor of a project Finance initiative with a single
goal in mind: to invest capital in high-profit deals.
 These players seek substantial returns on their investments and have a high propensity for risk; as
such they are similar in many ways to venture capitalists.
 Their involvement in a structured Finance deal is seen (from the perspective of the banks providing
Financial backing) as a private equity activity in which purely financial investors play a passive role.
 In other words, they have no say in the industrial policies of the SPV.
 In practice, cases in which purely financial investors are shareholders in the SPV are still few, but the
number is growing. In addition to traditional loans, almost all multilateral development banks
implement investment plans in the equity capital of the project companies.
 What is more, private banks are also developing private equity alternatives to granting loans for
project Finance deals. In the UK, for instance, with various project Finance ventures in the health
Weld, banks have opted to Finance projects with equity rather than loans, in particular in cases where
project Finance could not sustain sufficient debt-to-equity ratios.
Advantages:

1. Non-Recourse: The typical project financing involves a loan to enable the sponsor to construct
a project where the loan is completely ‘non-recourse’ to the sponsor, i.e., the sponsor has no
obligation to make payments on the project loan if revenues generated by the project is
insufficient to cover the principal and interest payments on the loan. In order to minimize the
risks associated with a non-recourse loan, a lender typically will require indirect credit
supports in the form of guarantees, warranties and other covenants from the sponsor, its
affiliates and third parties involved with the project.

2. Maximize Leverage: In a project financing, the sponsor typically seeks to finance the cost of
development and construction of the project on a highly leveraged basis. Frequently, such
costs are financed using 80 to 100 percent debt. High leverage in a non-recourse project
financing permits a sponsor to put less in funds at risk, permits a sponsor to finance the
project without diluting its equity investment in the project and, in certain circumstances, also
may permit reductions in the cost of capital by substituting lower-cost, tax-deductible interest
for highercost, taxable returns on equity.

3. Off-Balance-Sheet Treatment: Depending upon the structure of project financing, the project
sponsor may not be required to report any of the project debt on its balance sheet because
such debt is non-recourse to the sponsor. Off-balance-sheet treatment can have the added
practical benefit of helping the sponsor comply with covenants and restrictions relating to
borrowing funds contained in other indentures and credit agreements to which the sponsor is
a party.

4. Maximize tax benefit: Project financings should be structured to maximize tax benefits and to
assure that all possible tax benefits are used by the sponsor or transferred, to the extent
permissible, to another party through a partnership, lease or other vehicle.

DISADVANTAGES.

1. Project financings are extremely complex.

2. It may take a much longer period of time to structure, negotiate and document a project
financing than a traditional financing, and the legal fees and related costs associated with
a project financing can be very high.

3. Because the risks assumed by lenders may be greater in a non-recourse project financing
than in a more traditional financing, the cost of capital may be greater than with a
traditional financing.
TYPICAL CHARACTERISTICS OF PROJECT FINANCING:

Some of the typical characteristics are: -

1. Large capital costs

2. Long gestation periods

3. Assets are not easily transferable

4. Services provided are not tradable

5. Revenues only in local currency

6. Borrowing may be in foreign currency

7. Tariffs are politically sensitive

8. Social aspects involved

9. Vulnerable to regulatory policies

10. Limited recourse financing needed

Stages in Project Financing

1. Project identification Pre Financing Stage

2. Risk identification & minimizing

3. Technical and financial feasibility

4. Equity arrangement financing Stage

5. Negotiation and syndication

6. Commitments and documentation

7. Disbursement

8. Monitoring and review Post Financing Stage

 9. Financial Closure / Project Closure

10. Repayments & Subsequent monitoring

Methods of the Project Financing

There are three methods in Project Financing:
1. Cost Share Financing or Low interest loan financing.
2. Debts Financing.
3. Equity Financing.

Sources for Financing Fixed Assets :The type of funds required for acquiring fixed assets have
to be of longer duration and these would normally comprise of borrowed funds and own
funds. There are several types of longer term loans and credit facilities available which a
company may utilize to acquire the desired fixed assets. These are briefly explained as under.
1. Term Loan:-
(a) Rupee loan- Rupee loan is available from financial institutions and banks for setting up new
projects as, well as for expansion, modernization or rehabilitation of existing units. The rupee
term loan can be utilized for incurring expenditure in rupees for purchase of land, building,
plant and machinery, electric fittings, etc. The duration of such loan varies from 5 to 10 years
including a moratorium of up to a period of 3 years. Projects costing up to Rs. 500 lakhs are
eligible for refinance from all India financial institutions and are financed by the State level
financial institutions in participation with commercial banks. Projects with a cost of over Rs.
500 lakhs are considered for financing by all India financial institutions. They entertain
applications for foreign currency loan assistance for smaller amounts also irrespective of
whether the machinery to be financed is being procured by way of balancing equipment,
modernization or as a composite part of a new project.
For the convenience of entrepreneurs, the financial institutions have devised a standard
application form. All projects whether in the nature of new, expansion, diversification,
modernization or rehabilitation with a capital cost up to 5 crores can be financed by the
financial institution either on its own or in participation with State level financial institutions
and banks.

(b) Foreign Currency term loan- Assistance in the nature of foreign currency loan is available
 for incurring foreign currency expenditure towards import of plant and machinery, for
payment of remuneration and expenses in foreign currency to foreign technicians for
obtaining technical knowhow. Foreign currency loans are sanctioned by term lending
institutions and commercial banks under the various lines of credits already procured by them
from the international markets. The liability of the borrower under the foreign currency loan
remains in the foreign currency in which the borrowing has been made. The currency
allocation is made by the lending financial institution on the basis of the available lines of
credit and the time duration within which the entire line of credit has to be, fully utilized.
2. Deferred payment guarantee (DPG) - Assistance in the nature of Deferred Payment
Guarantee is available for purchase of indigenous as well as imported plant and, machinery.
Under this scheme guarantee is given by concerned bank/financial institutions about
repayment of the principal along with interest and deferred instalments. This is a very
important type of assistance particularly useful for existing profit making companies who can
acquire additional plant and machinery without much loss of time. Even the banks and
financial institutions grant assistance under Deferred Payment Guarantee more easily than
term loan as there is no immediate outflow of cash.

3. Soft loan - This is available under special scheme operated through all India financial institutions.
Under this scheme assistance is granted for modernization and rehabilitation of industrial units. The
loans are extended at a lower rate of interest and assistance is also provided in respect of promoters’
contribution, debt equity ratio, repayment period as well as initial moratorium.

4. Supplier's line of credit - Under this scheme revolving line of credit is extended to the seller
to be utilized within a stipulated period. Assistance is provided to manufacturers for
promoting sale of their industrial equipment on deferred payment basis. While on the other
hand this credit facility can be availed of by actual users for purchase of plant/equipment for
replacement or modernization schemes only.

5. Buyer’s credit - Under a buyer's credit arrangement, a specific long-term loan is granted by a
designated lending agency in the exporter's country to the buyer in the import, country against a
guarantee by an acceptable bank or financial institution. The supplier receives payment for the exports
on his delivering to the lending agency the requisite documents specified in the loan agreement and the
relative commercial contract. The lending agency realizes the payment from the buy (importer) in
instalments as and when they fall due. Ordinarily, the supplier of his obligation reckons the period
 credit as the duration from the date of completion.

6. Debentures - Long - term funds can also be raised through debenture with the objective of financing
new undertakings, expansion, and diversification and also for augmenting the longer term resources of
the company or working capital requirements. Debenture holders are long term creditors of the
company. As a secured instrument, it is a promise to pay interest and repay principal at stipulated
times. In the contrast to equity capital which is a variable income (dividend/ security, the debenture /
notes are fixed income (interest) security).

7. Leasing - Leasing is a general contract between the owner and user of the assets over a specified
period of time. The asset is purchased initially by the lessor (leasing company) and thereafter leased to
the user (Lessee Company) which pays a specified rent at periodical intervals. The ownership of the
asset lies with the lessor while the lessee only acquires possession and right to use the assets subject to
the agreement. Thus, leasing is an alternative to the purchase of an asset out of own or borrowed
funds. Moreover, lease finance can be arranged much faster as compared to term loans from financial
institutions.

8. Public deposits - Deposits from public is a valuable source of finance particularly for well-
established large companies with a huge capital base. As the amount of deposits that can he accepted
by a company is restricted to 25 per cent of the paid up share capital and free reserves, smaller
companies find this source less attractive. Moreover, the period of deposits is restricted to a
maximum of 3 years at a time. Consequently, this source can provide finance only for short to
medium term, which could be more useful for meeting working capital requirements. In other words,
public deposits as a source of finance cannot be utilized for project financing or for buying capital
goods unless the payback period is very short or the company uses it as a means of bridge finance to
be replaced by a regular term loan.
Before accepting deposits a company has to comply with the requirements of section 58A of the
Companies Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975 that lay down the
various conditions applicable in this regard.

9. Own Fund:
a. Equity: Promoters of a project have to involve themselves in the financing of the project by
providing adequate equity base. From the bankers/financial institutions' point of view the level of
equity proposed by the promoters is an important indicator about the seriousness and capacity of the
promoters.
Moreover, the amount of equity that ought to be subscribed by the promoters will also depend upon
the debt: equity norms, stock exchange regulations and the level of investment, which will be
adequate to ensure control of the company.
b. Preference share: Though preference shares constitute an independent source of finance,
unfortunately, over the years preference shares have lost the ground to equity and as a result today
preference shares enjoy limited patronage. Due to fixed dividend, no voting rights except under
certain circumstances and lack of participation in the profitability of the company, fewer
shareholders are interested to invest moneys in preference shares. However, section of the investors
who prefer low risks fixed income securities do invest in preference shares. Nevertheless, as a source
of finance it is of limited import and much reliance cannot be placed on it.
Compliance with Different Laws & Regulations
In this context it would be pertinent to note that while initiating the process for making a public issue
of equity /preference shares, the promoters will have to comply with the requirements of different
laws and regulations including Securities Contracts (Regulation) Act, 1956, Companies Act, 1956
and SEBI guide-lines etc., and various rules, administrative guidelines, circulars, notifications and
clarifications issued there under by the concerned authorities from time to time.
c. Retained earnings: lough back of profits or generated surplus constitutes one of the major sources
of finance. However, this P source is available only to existing successful companies with good
internal generation. The quantum and availability of retained earnings depends upon several factors
including the market conditions, dividend distribution policy of the company, profitability,
Government policy, etc. Hence, retained earnings as a source plays an important role in expansion,
diversification or modernization of an existing successful company. There are several companies
who believe in financing growth through internal generation as this enables them to further
consolidate their financial position. In fact, retained earnings play a much greater role in the
financing of working capital requirements.
d. Unsecured Loans: If there is some shortfall in the mean-of-finance, the promoters/ directors can
mobilize funds from their friends, relatives and well-wishers. Such loans are always unsecured i.e.,
the lenders cannot have any charge over the assets of the company. Banks and financial institutions
stipulate the following conditions if unsecured loan is to form part of the means-of-finance.
- The promoters shall not repay the unsecured loan till the term loan persists.
- Interest if any payable on unsecured loan shall be paid only after meeting the term loan repayment
committees.
-The rate of interest payable on unsecured loan shall not be higher than the rate of interest applicable
for term loans. Normally unsecured loan component is expected not to exceed 50% of the equity
capital.

10. Bridge Loans: This is a temporary loan meant for tying up the capital cost of the project. The
necessity for bridge finance arises in situations where finance from particular source is being
delayed. However, the availability of finance from that source is certain.

11. Seed Capital: In consonance with the Government policy which encourages a new class of
entrepreneurs and also intends wider dispersal of ownership and control of manufacturing units, a
special scheme to supplement the resource & of an entrepreneur has been introduced by the
Government. Assistance under this scheme is available in the nature of seed capital which is
normally given by way of long term interest free loan. Seed capital assistance is provided to small as
well as medium scale units promoted by eligible entrepreneurs.

12. Government subsidies: Subsidies extended by the Central as well as State Government form a
very important type of funds available to a company for implementing its project. Subsidies may be
available in the nature of outright cash grant or long - term interest free loan. In fact, while finalizing
the mean of finance, Government subsidy forms an important source having a vital bearing on the
implementation of many a project.
 1.7 Literature review
The growing demand for public transport in mega cities has serious effects on urban
ecosystems, especially due to the increased atmospheric pollution and changes in land use
patterns. An ecologically sustainable urban transport system could be obtained by an
appropriate mix of alternative modes of transport resulting in the use of environmentally
friendly fuels and land use patterns. The introduction of CNG in certain vehicles and
switching of some portion of the transport demand to the metro rail have resulted in a
significant reduction of atmospheric pollution in Mumbai. The Mumbai Metro provides
multiple benefits: reduction in air pollution, time saving to passengers, reduction in accidents,
reduction in traffic congestion and fuel savings. There are incremental benefits and costs to a
number of economic agents: government, private transporters, passengers, general public and
unskilled labor. The financial internal rate of return on investments in the Metro is estimated
as 17 percent while the economic rate of return is 24 percent. Accounting for benefits from
the reduction of urban air pollution due to the Metro has increased the economic rate of return
by 1.4 percent.
 Chapter no 2
Introduction to the industry
2.1 Introduction to the industry

 The construction industry is the second largest industry in India after agriculture. It accounts for
about 11% of India as GDP.

 It makes significant contribution to the national economy and provides employment to large
number of people.

 There are mainly three segments in the construction industry like real estate construction
which includes residential and commercial construction; infrastructure building which
includes roads, railways, power etc.; and industrial construction that consists of oil and gas
refineries, pipelines, textiles etc.

 Construction is the process of constructing a building or infrastructure. Construction differs

from manufacturing in that manufacturing typically involves mass production of similar
items without a designated purchaser, while construction typically takes place on location for
a known client. 

 Construction as an industry comprises six to nine per cent of the gross domestic

product of developed countries. Construction starts with planning, design, and financing; and
continues until the project is built and ready for use.
2.2 GDP contribution by the construction sector
 In India construction has accounted for around 40 per cent of the development investment in
during the last 50 years.

 Around 16 per cent of the of nations working population depends on construction for its
livelihood.

 The Indian construction industry employs over 30 million people and creates assets worth
over 200 billion.

 It contributes more than 5 per cent to the nations gdp and 78 per cent to the nation gross
capital formation.

 In the 21 century, there has been increase in the share of construction sector in GDP and
capital formation.

 The main reason these is increasing the emphasis of involving the private sector
infrastructural development through

 Public private partnership and mechanism like build – operate – transfer (BOT)

 Private sector investment has not reached the expected levels

2.3 Major players in the civil constructions sector:
1. DLF has nearly 70 years of track record of sustained growth, customer satisfaction, and
innovation. The company has 249 most of development potential with 19.1 most of projects under
construction. DLF's primary business is development of residential, commercial and retail properties.
The company has a unique business model with earnings arising from development and rentals. Its
exposure across businesses, segments and geographies, mitigates any down-cycles in the market.
From developing 22 major colonies in Delhi, DLF is now present across 15 states-24 cities in India.

2. Larsen & Toubro Limited

is commonly known as L&T,
is an Indian multi-
national conglomerate headqu
artered in Mumbai. It was
founded by two Danish
engineers taking refuge in
India. The company has
business interests in
engineering, construction, manufacturing goods, information technology, and financial services, and
has offices worldwide.

3. Tata Projects Ltd:

Tata Projects is one of the fastest growing and most admired infrastructure ... It has expertise in
executing large and complex industrial infrastructure projects.

4.Jaypee Group
The Jaypee Group is an conglomerate based in Noida, India. It
involved in well diversified infrastructure conglomerate with
business interests in Engineering & Construction, Power,
Cement, Real Estate, Hospitality, Expressways, IT, Sports &
Education (not-for-profit).
5. Oberoi Realty

Oberoi Realty is a real estate developer based in Mumbai,

Maharashtra. It is led by Mr Vikas Oberoi, CMD. The
company has developed over 39 projects at locations across
Mumbai. Its main interest is in Residential, Office Space,
Retail, Hospitality and Social Infrastructure properties in
Mumbai.

6. Unitec

Three Sixty West, the second tallest tower in India, is developed by Oberoi Realty.
Unitech Limited is India's second largest real estate investment company, and has recently claimed to
be the largest real estate builder in the country

7. GMR

It was in 1978, when Mr. G.M Rao started off with a small jute mill, and established, over 28 years
later, what is known today as the GMR Group. GMR is today a major player in the Infrastructure
Sector, with world class projects in India and abroad. The GMR group is headquartered in New
Delhi, and has been developing projects in high growth areas such as Airports, Energy,
Transportation and Urban Infrastructure.

8. Reliance Infrastructure

Reliance Infrastructure Limited (RInfra) is a

constituent of the Reliance Group, one of the
leading business houses in India. RInfra,
incorporated in 1929, is amongst the largest and
fastest growing companies in the infrastructure
sector with turnover of Rs 18,852 crore and
market capitalization of over Rs 11,300 crore as
on March 31, 2015.
9. Punj Lloyd

Punj Lloyd provides Engineering, procurement, integrated design, construction and project
management services in the energy and infrastructure sectors. With operations spread across Middle
East, Africa, The Caspian, Asia Pacific and South Asia, Punj Lloyd provides EPC services in Oil and
Gas, Process, Civil Infrastructure, and Thermal Power

10. Gammon India:

Gammon India Limited is one of the largest civil engineering construction companies in India.
Headquartered in Mumbai, it was founded in 1922 by John C. Gammon.
 Chapter no 3 :
Introduction to the company
3.1 INTRODUCTION

The Mumbai Metro is a rapid transit system serving the city of Mumbai,
Maharashtra, and the wider metropolitan region. The system is designed to
reduce traffic congestion in the city, and supplement the overcrowded Mumbai
Suburban Railway (colloquially called local trains) network. It is being built in
three phases over a 15-year period, with overall completion expected in 2025.
When completed, the core system will comprise eight high-capacity metro
railway lines, spanning a total of 235 kilometers (146 mi) (24% underground,
the rest elevated, with a minuscule portion built at-grade), and serviced by 200
stations.

As of August 2018, Mumbai metro consisted of 1 operational line (Line 1 -

elevated metro from Versova to Ghatkopar), and 4 lines under various stages of
construction.

Line 1 of the Mumbai Metro system is operated by Metro One Operation

Private Limited (MOOPL), a joint venture company formed between RATP
Dev Transdev Asia (a 50:50 RATP Development and Transdev joint venture)
(70%) and Reliance Infrastructure (30%). While lines 2, 4, 6, 7 (under
construction), 5 and their extensions (bidding in progress) will be built by
MMRDA, the completely underground line 3 (also under construction) will be
built by Mumbai Metro Railway Corporation Limited (MMRCL). The total
financial outlay for the expansion of the metro system beyond the currently
operational Line 1 is Rs. 821.72 billion (equivalent to US$12.46 billion or
€11.12 billion in 2018), to be funded through a mix of equity and bilateral,
multilateral as well as syndicated debt.

In June 2006, Prime Minister Man Mohan Singh laid the foundation stone for
the first phase of the Mumbai Metro project, although construction work began
in February 2008. A successful trial run was conducted in May 2013, and the
system's first line entered into operation on 8 June 2014. Many metro projects
were being delayed because of opposition by political parties, late
environmental clearances and land acquisition troubles. The proposed 15 km
line would link Kalyanand Shil Phata with
 13 stations,bringing metro connectivity to Kalyan East, Dombivli, Ambernath
and Diva.

Indian Experience
The Metro Rail projects implemented and those under implementation have huge
government funding either directly as equity and subordinate debt or through
government guaranteed Japanese Official Development Association loan from JICA.
The financial patterns of some of the Indian metros are as follows: -

1. Kolkata Metro
The initiative had to wait for 2 decades when in 1969 the Metropolitan
Transport Project was initiated. The master plan prepared by them in 1971
envisaged a network of 97.50 km consisting of three North-South corridors of
which three were selected for detailed planning. These three lines were
Dumdum – Tollygunge, Bidhannager – Ramrajatala and Dakshineswar –
Thakurpukur. Based on traffic studies, the Dumdum – Tollygunge corridor
was first selected for implementation and work started on 29th December,
1972. On 24th October 1984, the first stretch, a length of about 3.4 km
between Esplanade and Bhowanipur was completed, the first metro line in
India. Over the years, others stretches on the corridor were gradually
completed and some extensions were also made. This corridor was extended to
New Garia as late as 2010. The people of Kolkata, enjoyed benefits of a
modern metro system. In today carries about 5 lakh passengers a day.

2. Delhi Metro
rd
The Delhi Metro Rail Corporation Limited (DMRC) was registered on 3
May 1995 under the Companies Act, 1956 with equal equity participation of
the Government of the National Capital Territory of Delhi (GNCTD) and the
Central Government to implement the dream of construction and operation of
a world class Mass Rapid Transport System (MRTS). The DMRC opened
th
its first corridor between Shahdara and Tis Hazari on 25 December, 2002.
Subsequently, the first phase of construction worth 65 km of Metro lines was
finished two years and nine months ahead of schedule in 2005. Since then the
DMRC has also completed the construction of another 125 kilometers of
Metro corridors under the second phase in only four and a half years.
Presently, the Delhi Metro network consists of about 373 Km with 271
stations. The network has now crossed the boundaries of Delhi to reach
Noida and
 Ghaziabad in Uttar Pradesh, Gurgaon, Faridabad, Bahadurgarh and
Ballabhgarh in Haryana. With the opening of the Majlis Park to Shiv Vihar
and Janakpuri West - Botanical Garden Sections, new age trains equipped with
the Unattended Train Operation (UTO) technology have been introduced.
These trains operate with the Communication Based Train Control (CBTC)
signaling technology which facilitate movement of trains in very short
frequencies. This network also includes the Noida - Greater Noida Aqua Line.
The Aqua Line has been constructed by DMRC on behalf of the Noida Metro
Rail Corporation and is also being operated by DMRC currently. In addition,
the 11.7 kilometre long Rapid Metro also connects with the Delhi Metro
network at Sikanderpur station of Yellow Line. The Rapid Metro provides
connectivity within the satellite city of Gurugram.
The Delhi Metro has been instrumental in ushering in a new era in the sphere
of mass urban transportation in India. The swanky and modern Metro system
introduced comfortable, air conditioned and eco-friendly services for the first
time in India and completely revolutionized the mass transportation scenario
not only in the National Capital Region but the entire country.
Having constructed a massive network of about 373 Km with 271 stations in
record time in Delhi, NCR, the DMRC today stands out as a shining example
of how a mammoth technically complex infrastructure project can be
completed before time and within budgeted cost by a Government agency.

3. Bangalore Metro
Bangalore Metro Rail Corporation Limited (BMRCL), a joint venture of
Government of India and Government of Karnataka is a Special Purpose
Vehicle entrusted with the responsibility of implementation of Bangalore
Metro Rail Project. Bangalore Metro, christened as "Namma Metro", not only
adds to the beauty of Bangalore skyline, but immensely adds to the comfort
level of travel. Besides this, Namma Metro is a major environment friendly
addition to the Bangalore City as it significantly contribute to the reduction of
carbon emissions. The project has an East-West corridor - 18.10 km long,
starting from Baiyappanahalli in the East and terminating at Mysore Road
terminal in the West and a 24.20 km North-South corridor commencing at
Nagasandra in the
 North and terminating at Puttenahalli in the South. This is the First Metro rail
project in India commissioned with 750V DC Third Rail on Standard Guage.

4. Chennai Metro
The project envisages the creation of 2 initial corridors under the proposed
phase-1 of the Chennai Metro Rail Project.
The details of the two corridors are given below:

Corridor-1:
Washermenpet–Broadway (Prakasam Road)–Chennai Central Station–Rippon
Building–along Cooum River–Government Estate–Tarapore Towers–
Spencers–Gemini–Anna Salai–Saidapet–Guindy–Chennai Airport.

Corridor-2:
Chennai Central–along EVR Periyar Salai–Vepery–Kilpauk Medical College–
Aminjikarai–Shenoy Nagar–Annanagar East-Anna Nagar 2nd avenue–
Tirumangalam–Koyambedu-CMBT–along Inner Ring Road–Vadapalani–
Ashok Nagar–SIDCO–Alandur–St. Thomas Mount. The portions of Corridor-
1 with a length of 14.3 kms. from Washermanpet to Saidapet, and Corridor-2
with a length of 9.7 kms. from Chennai Central to Anna Nagar 2nd Avenue
will be underground and the remainder elevated. The alignment and stations
given above are tentative and subject to change during detailed design and
execution.

5. Kolkata Metro (East West Corridor)

The master plan had already identified the corridor way back in 1971. The
experience of Indian first metro and the success of the Delhi Metro Network
contributed to the sanction of the East-West corridor connection Howrah
th
Railway Station and Didhannagar through an order dated 30 July, 2008.
Thus began the fascinating journey of building the Eastern Western corridor,
the line which would connect Howrah and Sealdah Railway station, two of the
busiest railway station in the world and which would pass through using
Hooghly river, the first such river crossing in the country. A journey whose
end is in sight, a journey which will give Kolkata its second metro station, a
metro the resident would be proud off.
 6. Mumbai Metro Line 1 & 2
LINE 1
Line 1 of the Mumbai Metro, or the Versova-Andheri-Ghatkopar Line, is
part of the metro system for the city of Mumbai, India. The 11.40 km line is
fully elevated, and consists of 12 stations from Versova to Ghatkopar. The line
connects the eastern and western suburbs of Mumbai. It was built at an
estimated cost of Rs. 4,321 crore (US$630 million) and is operated by the
Metro One Operation Pvt Ltd (MOOPL) on a 5-year contract. The MOOPL is
a joint venture company owned by Reliance Infrastructure (30%) and RATP
Dev Transdev Asia (70%). Line 1 started operations on 8 June 2014. It has the
eighth highest passenger density of any metro line in the world. Line 1 has the
steepest curve of any metro line in India. There are a total of 64 curves on the
line, with the steepest curve being 107 meters.

LINE 2
Line 2 of the Mumbai Metro is an under construction metro line in the city
of Mumbai connecting Dahisar in the northwest with Mandale in Mankhurd in
the east.
Construction on the first section of the line, called Metro 2A (between Dahisar
and D.N. Road), began in November 2016, and is expected to be completed in
2020. This section shall be 18.589 km (11.551 mi) long, and comprise 17 of
the 39 stations that form part of this route.

Mumbai, the financial capital of India, has witnessed phenomenal growth in

population and employment. The trend is expected to continue in the future. The job
opportunities it offers have served as a major attraction for immigration from
hinterland of Maharashtra as well as from all parts of the Country. Mumbai
Metropolitan Region (MMR) is one of the fast growing metropolitan regions in India.
It comprises of 7 municipal corporations, 13 municipal councils and 996 villages and
extends over an area of 4,355 sq.km. MMR is projected to have population and
employment (both in terms of formal and informal) as 34 million and 15.3 million
respectively in the year 2031.
Four-fold growth of population since 1951 has been largely accommodated in the
suburbs while the highest concentration of jobs has remained in the Island City. The
physical characteristics of the City are such that the suburbs have been constrained to
spread northwards only, and all transport facilities are concentrated within three
narrow corridors. Today’s major challenge is to provide connectivity and promote
growth by providing additional infrastructure which would improve the quality of life
of the residents.

A Master Plan for Mumbai Metro was prepared in 2004 which proposed
implementation of metro corridors in three phases i.e. Phase 1: 2005‐2011, Phase II:
2011‐ 2016 and Phase III: 2016‐2021. MMRDA has carried out DPR studies for all
the three Phase I metro corridors during the period 2005‐2009 (Line 1: Versova ‐
Andheri
‐ Ghatkopar, Line 2: Mankhurd ‐ Bandra ‐ Charkop and Line III: Colaba ‐ Bandra -
Seepz). In 2010, MMRDA also carried out the DPRs of four lines of Phase II & III.
Among these, RITES carried out the DPR for BKC - Kanjur Marg (via Airport) with
extension from BKC to Mahim (Total Length - 23.5 km).
 3.2: Phasing of Mumbai Metro Master Plan Line 3

Capita Peak
Length Phas Propose
l Cost Hour
Sr. of the e d Period
Corridor @ Peak Phasing
No. Corrido wise of
2003 Directio
r (km) lengt Impleme
prices n Flow
h n tation
(Rs in (PHPDT)
(km)
Crores
)
1 Versova –Andheri
15.0 1500 3142
– Ghatkopar 1
2 Colaba (Backbay)
– Mahim – 36.0 5085 4335 I 63.8 2005-2011
Charkop 6
3 Mahim – 12.8 1595 2802
Mankhurd 2
4 Charkop –
Dahisar 7.5 750 1909
4 II 19.9 2011-2016
(East)
5 Ghatkopar –
12.4 1540 3269
Mulund 8
6 BKC to
Kanjurmarg via 19.5 3225 2144
1
Airport
7 Andheri (East) –
18.0 1800 2550
Dahisar (East) III 62.8 2016-2021
4
8 Hutatma Chowk –
21.8 3455 1835
Ghatkopar 4
9 Sewri – 3.5 875 4446
Prabhadevi

To provide multimodal access to the airport passengers at CSIA, (being developed as

a world class airport), it has long been considered necessary to provide metro
connectivity to / from major parts of the City. Initially this was contemplated via Line
I (Versova – Andheri – Ghatkopar), but the spur line connection was not found
feasible. The National Facilitation Committee (NFC), decided that the metro
connectivity to the CSIA be expedited and put in the phase 1, rather than in the phase
3 as per Metro Master Plan. This was decided to be achieved by merging Line 6 of
Phase 3, named BKC –
Kanjur Marg via Airport with the Line 3 of Phase I, i.e. Colaba – Mahim – Bandra
and run through services from Colaba till SEEPZ.
With this background, MMRDA through MMRC commissioned the services of
RITES to update both the studies; viz. the first conducted by DMRC for Colaba –
Mahim – Bandra Metro Line (2007) and the second by RITES for Mahim – BKC –
Kanjur Marg (2010).
Fig. 1.1: MUMBAI METRO LINE 3 ROUTE MAP
 Table3.3: List of Stations

Sr. No. Chainage Inter Station

Station Name
(M) Distance (M)
1 Cuffe Parade 0 -
2 Badhwar Park 1000 1000
3 Vidhan Bhavan 1600 600
4 Churchgate Metro 2285 685
5 Hutatma Chowk 3102 817
6 CST Metro 3956 854
7 Kalbadevi 4891 935
8 Girgaon 5616 725
9 Grant Road Metro 7156 1540
10 Mumbai Central Metro 8067 911
11 Mahalakshmi Metro 9216 1149
12 Science Museum 10316 1100
13 Acharya Atrey Chowk 11516 1200
14 Worli 12924 1408
15 Siddhi Vinayak 14479 1555
16 Dadar Metro 15756 1277
17 Shitla Devi Temple 17525 1769
18 Dharavi 19306 1781
19 Bandra Metro 21271 1965
20 Mumbai University, Kalina 22812 1541
21 Santacruz 24027 1215
22 CSIA (Domestic) 26299 2272
23 Sahar Road 27906 1607
24 CSIA (International) 28958 1052
25 Marol Naka 29829 871
26 MIDC 31225 1396
27 SEEPZ 32546 1321

3.4 Benefits of Mumbai metro line 3

 MML-3 would facilitate change over to the existing suburban trains at Churchgate, CSTM, Mumbai
Central and Mahalakshmi. The existing suburban train facility would go hand-in-hand with the
MML-3 to take the train services closer to the city areas that are not connected by suburban rail
network.
 Decongestion of the Roads Many a traffic jams would be avoided and significant waiting time
would be saved with Mumbai Metro Line-3. Once implemented, MML-3 would reduce traffic on
the corridor by about 35% or by 4.5 lakh vehicles leading to decongestion of roads.
 Reduction in Travel time The present travel time of 100 minutes from Cuffe Parade to Airport will
come down to only 50 minutes due to MML-3.
 Comfort and Security during travel On account of provision of escalators/elevators, secured
platforms, closed doors of train services, CCTV cover, there will be enhanced safety and comfort
level for Senior citizens, ladies, patients etc. There will be entry from either side of roads avoiding
FOBs/road crossing. Platform screen door will ensure safety of passengers and eliminate chances of
accidents while alighting/boarding.
 Minimal Cost Maximum Convenience MML-3 aims to provide the travelers convenient and
comfortable journey with minimal cost being incurred. Commuters would travel by the air
conditioned coaches of MML-3; spend no waiting time in the city traffic and would experience the
facilities offered by the modern mass transit rail system at an affordable cost.
 Environmental benefits There is expected to be reduction in air pollution, and improvement in air
quality. MML-3 is committed to preserve the environment. As commuters would start to prefer the
comforts of metro over other conventional transport options, there would be significant drop in air
and noise pollution which are outcomes of burgeoning population in cities such as Mumbai.
 Green & efficient transport Trains of MML-3 will have special feature of 40% regenerative energy
generated during braking for captive use. Likely emission’s reduction on implementation of project
is expected to be 1 lakh ton CO2 emissions per annum at the beginning.
 Saving in fossil fuel On account of reduction in approx. 4.5 lakhs vehicles on road per day, there
will be saving of approx. 2.5 lakhs liters of fuel per day i.e. about Rs. 550 cr. per year.

 Economic BenefitsMML-3 would be uniquely positioned to attract more business investments and
is also expected to result in employment generation during and after construction.
 Chapter no 4:
Research Methodology
4.1 Research methodology

Research methodology is a systematic approach in management research to achieve pre-defined

objectives. It helps a researcher to guide during the course of research work. Rules and techniques stated in
research methodology save time and labor of the researcher as researcher know how to proceed to conduct
the study as per the objective.
SELECTION OF TOPIC
The selection of topic is a crucial factor in any research study. There should be newness and it should give
maximum scope to explore the ideas from different angles.
Due to increase in competition, finding suitable and capable sources of Project finance is becoming vital
for the organization. Funding a project appropriately is necessary to undertake day by day expenditure of
the business organization. Whatever may be the organization, the mix of project finance sources play an
important role, as the company needs money for its day to day expenditure? Thousands of companies fail
each year due to poor finance management practices. Entrepreneurs often don't account for short term
disruptions and are forced to close their operations. Now in a cut throat competitive era where each firm
competes with each other to increase their production and sales, holding of sufficient funds for the smooth
operation of the project plays a crucial role for smooth operations of the firm. If the funds are not
appropriately allocated and tapped, then the firm may have to pay more interest and tax rather than what it
can if these funds sources are taken care of in a suitable mix. Here creeps the importance and need of
efficient project financing. After due to consultation with the external guide /internal guide, the topic was
finalized and titled as-“Project financing in Mumbai Metro”
RESEARCH DESIGN
“A Research design is the arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure” The research design
followed to study the project financing techniques in Mumbai Metro Rail Corporation Pvt Ltd is
Descriptive Research Design.
SOURCES OF DATA COLLECTION
 Primary Sources (which includes excerpts from the interviews of AGM’s and GM).
 Secondary data collection
The secondary data are those which have already collected and stored. Secondary data easily get those
secondary data from records, journals, annual reports of the company etc. It will save the time, money and
efforts to collect the data. Secondary data also made available through trade magazines, annual reports,
books etc.
This project is based on secondary data collected through annual reports of the organization. The data
collection was aimed at study of project financing techniques of the company.
Project is based on
  Annual report of Delhi Metro Rail Corporation
 Schedule of Powers
 Schedule of Rates
 General Conditions of contract
 Detailed Project Report (DPR) for different phases
 Interviews conducted of senior managers.
The overall sources of funds of DMRC is studied and analyzed
Suggestions are given on the basis of findings for better understanding of Project financing techniques.
4.2 LIMITATIONS OF THE STUDY
 The sources of funds keep on changing due to time variability of the commuters i.e. the exact amount may
not be provided accurately for each of the projects undertaken due to government policies that are updated
from time to time.
 Investment of funds are also made by corporate office, so it becomes difficult to know that how much
investment is made in different ways for continuous availability of funds.
 Chapter no 5:
Data analysis and interpretations
IMPLEMENTATION SCHEDULE

SPV may initiate action for appointment of General Consultants for project
management including preparation of tender documents. The proposed date of
commissioning of the section with suggested dates of important milestones is given in
Table 1.3.

Table 1.3: Project Implementation Schedule

Duration
Sr. Tasks Start Finish Date
No. (in weeks) Date
1 PREPARATION OF DPR 17.4 2.8.2011 30.11.2011
2 APPROVAL OF DPR & G.R. REVISION 15 1.12.2011 14.3.2012
3 LAND ACQUISITION AND CLEARANCES 52.4 15.9.2011 14.9.2012
4 PARALLEL ACTIVITIES 27 1.12.2011 6.6.2012
5 GOI Approval 52.4 15.9.2011 14.9.2012
6 APPOINTMENT OF G.C. 29 2.11.2011 22.5.2012
PACKAGING AND INVITATION OF BIDS
7 24 1.10.2012 15.3.2013
BY GENERAL CONSULTANT
CAPITAL COST ESTIMATES

The basic Project cost of the metro corridor at September 2011 prices is estimated at
Rs 149,701 Million. The cost of land is estimated at Rs.15,865 Million. Of the total
land cost, Rs 4,985 Million is cost of private land and the cost of government land is
estimated at Rs 10,880 Million. The total cost of project including land cost, is
estimated at Rs 165,566 Million. The Central and State taxes and duties (Customs,
Excise and VAT) amount to Rs 25,467 Million. Of the total taxes and duties, Rs
20,432 Million are central taxes (Customs and Excise duty) and Rs 5035 Million are
state taxes (Value Added Tax). The component towards Octroi and insurance works
out to be Rs. 2121 Million and Rs. 831 Million respectively. The details of the cost
components at September 2011 prices are given in Table 2.1

Table 2.1 Costs of Colaba – Bandra – Seepz Metro System (Sept. 2011 prices)

Cost Component Rs. in Million

Construction Cost 149701
Total Construction Cost 149701
Land Cost 15865
Govt. Land 10880
Private land 4985
Total Cost With Land 165566
Taxes 28419
Central Taxes 20432
State Taxes 5035
Octroi & Insurance 2952
Total Cost with Taxes w/o Land 178120
Total Cost With Taxes & Land 193984
 COMPLETION COST

The cost estimate has been prepared covering civil, electrical, signaling and
telecommunications works, rolling stock, traffic integration facilities, security at
stations, environmental protection, rehabilitation, etc. at September, 2011 price level.

The rates are taken as per DPRs of DMRC Phase – III Corridors, which was at Jan’
2011 price level. These rates have been enhanced by 10% to arrive at Sept’ 2011 price
level and also due to difficult working conditions and different subsoil conditions of
Mumbai.

With escalation factor of 5% p.a. the Completion Cost of the project including land
and taxes is estimated to be Rs. 223,386 Million. For the purpose of financial analysis,
only the cost of private land, (being a cash payout) has been added to the project cost
as the government land is expected to be available on transfer basis. Further, JICA is
expected to part fund the project through soft loan. As per the policy decision taken
by Department of Economic Affairs, JICA will not fund the IDC and the same has
been added to project cost. The private land cost is not escalated since land acquisition
would be completed in the initial two years. It is proposed to start land acquisition and
construction work prior to June 2012 and commission the system by Mar-2017. Thus,
the completion cost including IDC with interest rate 1.4% considered for financial
analysis, works out to Rs 216,663 Million. The details of completion cost under
different scenarios are as per Table 2.2

Table 2.2 Details of Completion Costs (Rs. in Million)

Particulars Cost at 2011 Completion cost including

Prices IDC
Cost without taxes 154,686 183,554
With Central taxes 175,118 207,359
With Central & State Taxes 183,104 216,663
OPERATION & MAINTENANCE COSTS

The Operation & Maintenance costs can be divided into three major parts:
i. Staff costs
ii. Maintenance cost which include expenditure towards upkeep and maintenance
of the system and
iii. Energy costs
The total O&M cost in the year 2016-17 is estimated at Rs.4,407 Million. The total
O&M cost in the year 2024-25 is estimated at Rs 12,390 Million. The year-wise
O&M costs and additional investment are as indicated in Table 2.3

Table 2.3 Operation and Maintenance Costs (Rs in Million)

Addition / Grand
Year Staff Cost Total
Maintenance Energy Replaceme Total
Expenses Charges nt Cost
2016-2017 1,505.75 1,333.45 1567.8 4,407 4,407
2017-2018 1,641.27 1,400.12 1567.8 4,609 4,609
2018-2019 1,788.99 1,470.13 1645.8 4,905 4,905
2019-2020 1,949.99 1,543.64 1645.8 5,139 5,139
2020-2021 2,125.49 1,620.82 1729 5,475 5,475
2021-2022 2,316.79 1,701.86 1729 5,748 5,748

2022-2023 2,525.30 1,786.95 1814.8 6,127 6,127

2023-2024 2,752.58 1,876.30 1814.8 6,444 6,444

2024-2025 3,000.31 1,970.11 1905.8 6,876 12390 19,266

2025-2026 3,270.34 2,316.42 2565.5 8,152 8,152

2026-2027 3,564.67 2,432.24 2695 8,692 8,692
2027-2028 3,885.49 2,553.85 2695 9,134 9,134
2028-2029 4,235.18 2,681.54 2828 9,745 9,745
2029-2030 4,616.35 2,815.62 2828 10,260 10,260

2030-2031 5,031.82 2,956.40 2971.5 10,960 8382 19,342

2031-2032 5,484.68 3,271.87 3650.7 12,407 12,407
2032-2033 5,978.30 3,435.46 3831.3 13,245 13,245
2033-2034 6,516.35 3,607.23 3831.3 13,955 13,955
Chapter no 6 :
Findings
PROPOSED FUNDING FOR THE PROJECT

The total completion cost of the project including IDC and excluding govt. land works
out to Rs 216,663 Million. The funding for the same shall be as under:

a. Government Contribution – GOI & GOM will contribute a total equity of Rs

64,343 Million which is 30% of the total completion cost. This means that
both GOI and GOM will share 15% of the total cost amounting to Rs 32,172
Million.

b. JICA Loan – JICA funding of 60 % of total completion cost excluding taxes,

duties and land cost, works out to 48% of the total completion cost including
land and taxes and amounts to Rs 104,647 million as loan.

c. Subordinate Debt: To pay back state and central taxes and duties amounting to
Rs 33,109 Million which is 15% of the total completion cost of the project,
interest free Subordinate Debt from GOI and GOM is considered. It includes
Rs 2471 Million Octroi which can be waived off by the City agencies as the
project is for the benefit of the City. The payment of this loan will be after the
payment of JICA loan.

d. Stake holder Contribution: The cost of stations falling in the areas belonging
to MIAL (Mumbai International Airport Authority & ASIDE (Assistance to
States for Infrastructure Development for Export Promotion) will be borne by
them. Total 5 stations fall in their area and cost of the stations amounting to Rs
14,653 Million (7% of the total project cost) is proposed to be contributed by
these agencies as stake holder contribution.

MMRC may also consider asking the stakeholders to pay for additional corridor length
for providing connectivity and additional rolling stock for carrying these passengers.
MMRC may however, consider making some design modifications to accommodate
the special requirements of the stakeholders.
Figure 4.1 gives the funding pattern of cost of Line III of Mumbai MRTS and the Table
4.1 gives the year wise funds requirement from different sources.
 Table 4.1 Financing of Project Completion Costs Including IDC

Rs. Million
Year JICA Debt Sub Equity Stake Holder Total
Debt Contribution
2012-2013 9431 2984 7467 1313 21195
2013-2014 19805 6266 13072 2756 41900
2014-2015 31194 9869 16864 4341 62268
2015-2016 32753 10363 18123 4558 65798
2016-2017 11464 3627 7352 1595 24038
2017-2018 1465 1465
TOTAL 104647 33109 64343 14563 216663
% Share 48 15 30 7 100
 JICA Debt EquitySub DebtStakeholder Conribution

7%

15%

48%

30%

Fig. 4.1: The Funding Pattern of Completion Cost of Line III of Mumbai MRTS
RIDERSHIP ESTIMATION

In the year 2017 the ridership on the proposed Colaba- Bandra- Seepz metro system
has been estimated at 10.38 lakh passenger trips per day. The ridership figures for key
horizon years are given in Table 5.1.

Table No: 5.1 Expected ridership on Colaba- Bandra – Seepz

Metro Corridor

Year Passenger Trips per day (lakh)

2017 10.38
2025 13.87
2031 17.00

Table 5.2: Total Revenue Collection (Rs in Millions)

2017-2018 2030-2031 2035-2035

Source of Revenue
MMRDA DMRC MMRDA DMRC MMRDA DMRC
Fare Box Revenue 6001 7029 15964 18512 20975 25347
Revenue from other Sources 600 703 1596 1851 2097 2535
Total Revenue 6601 7732 17560 20364 23072 27881
 Overall funding in the Mumbai Metro
Mumbai Metro Line 3(MML-3) project is estimated to cost INR 23,136 Crore. Japan
International Co-operation Agency (JICA) will provide loan assistance worth Rs.13, 235 Crore,
which accounts for 57.2% of the total cost. Balance funding will be made available by Govt. of
India, Govt. of Maharashtra/MMRDA in the form of equity and subordinate debt and the funds
from MIAL(Mumbai International Airport Pvt. Ltd.) as per break up below:

Source Amount (in Cr INR) % age

Equity by Centre 2,403 10.4

Equity by State 2,403 10.4

Sub Debt by Central Govt. 1,025 4.4

Sub Debt by State Govt. 1,615 7.0

Property Development + Impact Fee 1,000 4.3

Stakeholder Contribution (MIAL) 777 3.4

ASIDE Funding / MMRDA Grant 679 2.9

JICA loan 13,235 57.2

Total Project Completion Cost 23,136 100

 Equity by Centre

 Equity by State
 Sub Debt by Central Govt.

 Sub Debt by State Govt.

 Property development + Impact fee

 Stakeholder contribution (MIAL)

 ASIDE funding / MMRDA Grant

 JICA loan
 Temporary Land
Permanent Land Required
S Required
r.
Particulars 
N Govt. /
o. Govt. /
Pvt Pvt Semi
Semi Govt.
Govt.

Station and allied facilities (MCGM,

1 0.55 ha 8.70 ha 2.90 ha 12.00 ha
Home Dept, MHADA, PWD, etc.)

2 Traction Sub-Station (at 3 locations) - 0.60 ha - -

3 Construction Depot (12 pockets) 0.55 ha 8.70 ha 2.90 ha 12.00 ha

4 TBM worksites (12 pockets) - - - 7.00 ha

5 Casting yard (7 packages)* - - - 35.00* ha

6 Other allied & commercial uses - 3.72 ha - -

  Total 0.55 ha 13.02 ha 2.90 ha 62.20 ha

Total Land Required: 78.67 ha

Permanent: 13.57 ha
Temporary: 65.10 ha
Pvt: 3.45 ha
Govt: 75.22 ha
Private land acquisition is being done under sec126 of MRTP Act 1966 by negotiation to the
extent possible.
MMRCL has set up Preliminary Hearing Committee to hear the suggestions and objectives.

FINANCIAL FEASIBILITY STUDY OF MUMBAI METRO LINE 3

 The Financial appraisal of Colaba – Bandra – SEEPZ MRT Corridor in Mumbai has been
carried out within the broad framework of Social Cost –Benefit Analysis Technique. It is
based on the incremental costs and benefits and involves comparison of project costs and
benefits in economic terms under the “with” and “without” project scenario. In the
analysis, the cost and benefit streams arising under the above project scenarios have been
estimated in terms of market prices and economic values have been computed by
converting the former using appropriate shadow prices. This has been done to iron out
distortions due to externalizes and anomalies arising in real world pricing systems. The
 annual streams of project costs and benefit have been compared over the analysis period
of 34 years to estimate the net cost/ benefit and to calculate the economic and financial
viability of the project in terms of FIRR (Financial Internal Rate of Return).

 A financial feasibility study is an assessment of the financial aspects of the construction

Project. If thus case for starting and running a Project. It considers many things include
start-up capital, expenses, revenues generation, and investor income and Rate of return.

 Capital cost estimate (September 2011)

Cost Component Rs in Millions

Construction Cost 149701
Total Construction Cost 149701

Land Cost 15865

Government Land 10880
Private Land 4985
Total Cost with Land 165566
Taxes 28419
Central Taxes 20432
State Taxes 5035
Octoroi & Insurance 2952

Total Cost with Taxes w/o Land 178120

Total Cost with Taxes & Land 193984

Project Funding
The total completion cost of the project including IDC and excluding Government land works
out to Rs 216663 Million. The funding for the same shall be as under.
 MMRC

JICA LOAN
GOI & GOM
SUBORDINATE DEBT
SHAREHOLDERS CONTRIBUTION

1. Government of India & Government of Maharashtra (GOI &GOM) will contribute a

total equity of Rs 64343 Million which is 30% of the total completion cost.

2. JICA funding of 48% of the total completion cost including land and taxes and amounts
to Rs 104647 Million loan.

3. Pay back state and central taxes and duties amounting to Rs 33109 Million which is
15% of the total completion cost of the project, interest free Subordinate Debt from
Government of India and Government of Maharashtra is considered.

4. 5 stations fall in the area of Mumbai international Airport Authority & Assistance to
State for infrastructure Development for export promotion and cost of the stations
amounting to Rs 14665 Million (7% of the total project cost) is proposed to be
contributed by these agencies as stake holder contribution.

Completion Cost
  With Price escalation factor of 5% p.a the completion Cost of the project including land
and taxes is estimated to be Rs 223386 Million.
 For the Purpose of financial analysis only the cost of private land (being a cash pay-
out) has been added to the project cost as the government land is expected to be available
on transfer basis.
 It is proposed to start land acquisition and construction work prior to June 2012 and
commission the system by March 2017. Thus the considered cost including IDC with
interest rate 1.4% considered for the financial analysis, works out to Rs 216663 Million.

YEARS COMPLETION LAND COST IDC TOTAL

COST COMPLETION
COST
2012 – 13 18703 2493 0 21195

2013 – 14 39275 2493 132 41900

2014 – 15 61859 0 409 62268

2015 – 16 64952 0 846 65798

2016 – 17 22733 0 1305 24038

2017 – 18 0 0 1465 1465

TOTAL 207521 4985 4157 216663

The year wise requirement of funds under different scenarios has been given in the Table.

The cost of acquisition of private land is divided into two initial years during which it is expected
that the land acquisition work would be over and related payments would be released.

Additional Investments: The total additional investment cost of Rs 12390 Million will be
required in the years 2024 – 25 and Rs 13032 Million in 2031.

 The additional cost in the years 2031 includes the cost of providing stabling facilities.
 These costs have been brought to the current price level by using a factor of 5% pa.

Operation Maintenance Cost: The operation & Maintenance costs can be divided into three
major parts.

 Staff Cost
 Maintenance cost which includes maintenance towards upkeep and maintenance of the
system
  Energy cost

The total operation & maintenance cost in the years 2016 – 17 is estimated at Rs 4407 Million.
The total operation & maintenance cost in the years 2024 – 25 is estimated at Rs 12390 Million.
 Conclusion

The conclusion draw generally offers a view of current industry practice

and area that could be improved. In this case the conclusion are simply
observation of facts required on particular analysis.

However the funding play an important role in the project and it also states
about the company interested for investment and which improves the
infrastructure of Maharashtra and the recoverable revenue on the
investment.

With above funding pattern, the project will generate positive cash flows
during the analysis period of 44 years. But once the payment of loan starts
the project will have negative cash flows for 11 years and the project will
not able to meets its loan obligations.

However, after these 11 years, the project will have a positive cash flows
except two years when replacement of the equipment’s is required. During
the when negative cash flow period, the loan liability of the project can be
met by soft loans from MMRDA / MMRC which will be adjusted from
future surplus revenues. Thus, the project has potential to service its debt.
BIBLIOGRAPHY
https://www.mmrcl.com/en
https://www.mmrcl.com/sites/default/files/dp
r-metro-line-III.pdf
https://chennaimetrorail.org/cmrl-profile/
https://en.wikipedia.org/wiki/Line_1_(Mu
mbai_Metro)
https://en.wikipedia.org/wiki/Line_2_(Mu
mbai_Metro) http://english.bmrc.co.in/
http://www.kmrc.in/
http://www.delhimetrorail.com/