Project Finance

1. Management appraisal
2. Commercial Appraisal
3. Technical Appraisal
4. Financial Appraisal
 Management appraisal

1.Who are the promoters

2.Family background
3.Educational background
4.Experience
5.Whether promoters are in the caution list of RBI /
ECGC
6.CIBIL Reports
 Commercial Appraisal

1. Demand side :
Main consumers
2. Supply side :
Major competitors / Possibility of new entrants
3. Government policy
4. Price of the product
 Technical Appraisal
1. Licenses and permits required
2. Location of the project
- Whether basic infrastructure is available
3. Availability of technical know-how and management
personnel.
4. Pollution control issues / Treatment of effluents.
5. Possibility of time over run resulting in cost over run.
6. Availability of raw materials, electricity, water etc.
7. Availability of labour.
8. Techno-economic viability report
 Financial Appraisal
1. Cost of the project
Land cost including land development, fencing
Building cost – Factory, administration, godowns &
warehouses, canteen, other auxiliary buildings, wells,
drainage etc.
Cost of plant and machinery
Cost of technology
Misc fixed assets like vehicles, furniture, electric
installations etc.
Margin money for working capital
Contingencies
 Means of Finance

Capital
Term loan from banks / financial insititutions
Unsecured loans
Internal accruals
Capital subisdy
 Viability of the Project

1. Profitability Statement
2. Sensitivity Analysis
3. Scenario Analysis
4. Risk Mitigation
 Points to be examined
1. Promoter’s contribution
2. Debt- Equity ratio
3. Cost of finance
4. Capitalization – Pre-operative Expenses, Preliminary
Expenses
5. Profitability Statement – Capacity utilization /
Profitability
6. Repayment capacity – DSCR
7. Payback period.
8. Break Even Point - BEP
9. Internal Rate of Return - IRR
 Debt Service Cover Ratio
PAT + Depreciation + Other non cash items + Interest on term loan
Annual Principal Installments + Interest on TL

The ratio indicates the capability of an

enterprise for servicing both interest and
principal installments.
 Net Fixed Asset Coverage Ratio

Book Value of Fixed Assets

Balance in Term Loan Account