Amrut Mody School of Management

Ahmedabad University
TOD326 Project Management
Padmin Buch

Project Feasibility
Cost of Project, Sources of Finance and
Financial Viability

PADMIN BUCH
B. Pharm; MBA; CMC; PG Diploma in Patents Law
August 30 , 2022

For academic discussions only

Data and information are indicative

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 Disclaimer . . .

 For academic discussions only

 Data and information are indicative
 Some items are reproduced from
copyrighted sources and the same
are herby duly acknowledged
 These also are used for academic
purpose only

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 Feasibility Report
Financial Aspects

Cost of Project

Means of Finance

 Financial Returns

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 Cost of Project :
Main components

i. Land & its development

ii. Building Capital
iii. Plant and Machineries Investment
iv. Technology
v. Other Assets

vi. P&P Expenses

vii. Contingencies
viii. Working Capital Margin

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Capital Investment :
Land & site development

 Rate
 Status of Land
(Contour Mapping)
 Cost of Site
Development
 Any Statutory
Requirements

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Capital Investment :
Building
 Production Block
 Raw Materials
 Finished Goods
 Quality Control
 Office Block
 Special Provisions
 Air conditioning
 Service Floor
 Packing Division
 Utilities
 Rate of Construction

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Capital Investment :
Plant & Machineries
 Main Equipments
 Supporting & Balance
Equipments
 Quality Control
 ETP
 Utilities

 Quoted Price

 Negotiated Price
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 Cost of Project

Preliminary & Pre-operative Expenses

 Legal, Financial & other

Consultancy Fees
 Traveling & Conveyance
 Salary drawn during construction
period
 Interest on Term Loan during
construction period
 Other Miscellaneous Expenses

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 Cost of Project
Working Capital Margin

 Working Capital includes :

 Raw material stock, Work in
Process, Finished Goods Storage,
Receivables, Some Admn.
Expenses..
 Bank Loan may be to the extent
of 70%
 The balance is to be brought by
promoters
 This is WC Margin

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Working Capital

Working Capital
provides Liquidity

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 P&P Expenses and
Working Capital Margin

 These two cost components

carry added importance
 Both are expenses and not
Capital expenditure
 Requires judicious approach

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 Sources of Finance

Debt
Equity

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 Modes of Finance

 Debt
Term loan on fixed assets
Loan on working capital
Unsecured loans
 Bridge Loan
 Equity
Promoters own fund
Subsidy / Incentives 15
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 Project Finance

 Term Loan available on Fixed Assets

 Quantum of Term Loan vary
 Loan on P& P as well as Contingency
also may be available
 Term loan on Miscellaneous Fixed
Assets not sure
 Ratio of Term Loan & Own Funds
important

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Sources of
Project Finance

 General
 Specific
 International
sources

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Sources of Finance General
 SIDBI
 Nationalised
Banks
 State level Finance
Corporations
 Private Sector
Banks
 Cooperative
Banks
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Sources of Finance

Specific

Specific  Venture Finance

Companies
 Angel finance
 PPP
 IPO

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 Sources of Finance (Contd…)
Specific Sources

 Venture Finance
 Angel funding

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 Specific Sources of Finance

 Increasing preference for such sources

particularly by technology oriented projects
/ start ups
 These essentially are equity based funding
sources
No interest burden in initial years
Such funding sources also have insight /
expertise in areas such as finance,
marketing, business modeling, etc.

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 Public Private Partnership (PPP)

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 PPP Project : GOI Definition

“Public Private Partnership (PPP) Project

means a project based on contract or
concession agreement between a
Government or entity on one side and a
Private Sector Company on the other side
for investing in construction and
maintenance of infrastructure asset and /
or delivering an infrastructure service”
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 Start up India & Stand Up India

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 Startup Cell, Gujarat

 http://www.startupgujarat.i
n/startup-cell-gujarat.htm
 Startup Gujarat
Helpdesk
3rd Floor, Industries
Commissionerate, Block
1, Udyog Bhawan,
Gandhinagar, Gujarat
 Email: icjcisalt@gujarat.
gov.in

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 New Industrial Policy,
Govt. of Gujarat

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 Other Sources of Project Finance
(Contd…)

 Subsidy / Grants / Interest subsidy

 Central Government Department/Agencies
 State Government Department/Agencies
 Development Financial Institutions
 Ministry of Food Processing
 Ministry of Alternate Energy
 Ministry of Environment and Forest
 Ministry of Industries
 MSME Development Institute, Government of
India

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Sources of Finance :
International

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 Project Finance : International

 International Finance Corporation

(World Bank Group)
 Asian Development Bank (ADB)
 International Venture Funds
 Private Sector Banks / Financial
Institutions
 Schemes by Government of respective
Countries
 International Project Finance
Association ( IPFA), UK

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 Financial Viability

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 Financial Returns Analysis

 Projected profitability statement

 Cash-cum-Fund Flow statement
 Projected Balance sheet

 Break-even point
 Ratios
 Sensitivity Analysis

 Relating to the kind of

industry/project
 Considering a few assumptions
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 1st Year 2nd Year 3rd Year 4th Year 5th Year

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 Financial Returns Analysis :
Ratios

 Debt-Equity Ratio
 Net Profit Ratio
 Return on Investment (RoI)
 Debt Service Coverage Ratio (DSCR)
 Fixed Assets Coverage Ratio
● Current Ratio

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Net Profit Margin Net profit / Sales
Current Ratio Current assets / current
liabilities
Debt Equity Ratio Total Debt / Equity
Return on Equity PAT / Equity capital
Capital
Return on PAT / Investment
Investment
Fixed Assets Fixed assets/ Debt (secured
Coverage Ratio loans)
(FACR)
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Net Contribution Net Sales – Variable expenses

BEP sales Fixed Cost / Contribution *

100
Debt Service Cash accruals after tax +
Coverage Ratio Interest / Interest + Installment
(DSCR) paid

EBDIT Margin PBDIT / Net Sales

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Final Chapters & Other components

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 The Final Chapter

SWOT Analysis

Key Elements

Conclusions &
Recommendations

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 Also to include...

 Project at a glance
 Annexure

 Support Documents

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 To Conclude . . .

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 Some Tips on
Report Writing and Presentation

Write less ! - i.e. write to the point

More tables, charts, projections, etc.
In the form of points, observations
Provide as much hard data as possible
Give/indicate sources of such statistics
Give basis for computations, projections

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Project Feasibility Report and
Project Finance

In a market driven economy

availability & presentation of
authentic and properly
documented data . . .

. . . makes it easier for the

lenders to appraise the true
value of proposals

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 Take care & Stay safe

THANK YOU….
….Padmin Buch

phbuch3@gmail.com

For academic discussions only

Data and information are indicative

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