KEY Y FACTO CTOTRS TRS IN IN PRE REPARATION PARATION OF OF PRO ROJECT JECT RE REPO PORT RT & CM & CMA DATA TA Sita itarama raman n I Iyer yer , , FCA Nagpur, 30 October 2015
Steps ps IN N fina nancing ncing Assessmen essment t of requiremen quirement Do Docu cumen enting ting the above ove assess essmen ment t ( I IM) Analy lysing sing the Da Data ( ( TEV ) De Deciding iding fin inancing cing pattern tern : De Debt , E Equity ity/ / Other ers Fin inalise lise / Sh / Short rtli list st options tions availabl ilable Su Submit it prop roposal sal Sa Sanction tion and Avai ailme lment
Project ject report port Compi mpiling ling, , recording ording and Analy lysing sing Data ta I will call it an Information Memorandum Any document/Report/writing or Financials for Obtaining/reviewing/monitoring Assessment of requirement of funds Deciding means of finance mix out of available options Arriving at a decision for which it is made Financial projections to justify ability to service All l above ve put together ether cons nstitute titutes a te techno chno-economic economic viability bility study dy
OB OBJE JECTS CTS OF OF ANY NY VENTURE NTURE The proposed venture should be doable, which means : It should be technically feasible Economically viable i.e. ability to pay off outside liabilities and service equity
FUND ND RE REQUI QUIREMENT REMENT LONG TERM SHORT TERM FOR NEW NON FUND BASED FUND BASED FOR EXPANSION BUSINESS
FIN INANCING ANCING LONG NG TERM RM REQUI RE QUIREMENT REMENT Most of us practice in this sphere This can be in the form of a. Term Loan b. Equity c. Internal Accrual d. Other sources In case of Term Loan, financial statement will be in line with Institutional norms In case of Equity, if it is a Private Equity ,then requirement of due diligence In case of IPO, SEBI & ROC norms. In case of Equity and internal accruals, to assess justification for the proposed investments We conf nfine ine our disc scussion ussion to the followi owing ng battery tery limits: s: SME Sect ctor or New man anufa factur cturin ing g activity ivity
BA BASIC IC REQUI UIRE REME MENT NT FOR OR RAIS ISING ING fin inanc nce Project’s Capital Cost assessment Assessment of Working Capital Projections of profitability Projections of cash flows Ratios & their interpretation A report/write up deducing that the proposal is viable
BA BASEWORK WORK Detailed assessment of Promoters and associate concerns Gain knowledge of the industry Check for appetite of funding agencies for the industry Checklist to Promoters for requisite information
ASSESSME SESSMENT NT OF OF PRO PROJECT CT COS OST Project Cost is aggregate of the following : Land Site development Building & Civil works Plant & Machinery Foundation & Installation Utilities & Misc. Fixed assets Preliminary and preoperative expenses Working Capital Margin
SOU OURCES CES OF OF FU FUNDI DING NG Equity from promoters Internal Accruals Deferred Payments Unsecured Loan Term Loans Above are indicative, not exhaustive
IMPORTANT POINTS …….. Resources of the promoters Based on proposed capacity of the unit envisaged Minimum economic size Scope for future expansion, forward/ backward integration
STATE ATEME MENT NT OF CO COST T OF PR PROJECT CT Land: It would include the cost of land and stamp duty and registration expenses and brokerage. Adequacy for future. Site development: It would include cost of Leveling & Filling Fencing ( Barbed Wire/Wall ) Internal Roads Gates
Buil ildin ing Sr. No. Particulars Type of Dimension Area sq. Rate per Estimate constructio s L*B*H in Mts. sq. mts d Cost n Mts. (Rs. In lacs) 1 Factory Building 2 Administrative/Office Building/ Canteen etc 3 Warehouses for 4 Meter Room/Transformer Yard 5 Security Cabin 6 Residential / Staff quarters 7 Water Reservoirs 8 Borewells 9 Sewerage & Drainage 10 Architect’s Fees TOTAL
Plant nt and ma machin inery ery IMPORTE TED Sr. Name of The New/ Name of the CIF Duty & Clearing Total Delivery Status* Conne No Machinery Second Manufacturer/Fa Value* & Forwarding Cost Schedule * cted with Hand @ bricator ( Place & Q/E/N/ Load in Specification Country of origin O/A Kw INDEGENEOUS Sr. Name of The New/ Name of the Basic Taxes & Duties Total Delivery Status* Conne No Machinery Second Manufacturer/Fa Price & cost Schedule * cted with Hand @ bricator Transportation Q/E/N/ Load in Specification O/A Kw
Prelim iminar inary y and Preoperat rative ive expens nses es Cost already Proposed to Total incurred be incurred Preli limin inary ry & c capital ital issu sue expense nses: s: a) Brokerage and commission on capital b) Other capital issue expenses (legal, advertisement, printing. stationery, etc.) c) Other preliminary expenses (company floatation and other initial expenses). Pre-operat erative ive expen enses ses a) Establishment inclusive salaries etc b) Rent, rates and taxes c) Traveling expenses d) Misc. expenses e) Processing and Upfront Fees on borrowings f) Interest during Construction period g) Insurance during construction including erection insurance. h) Mortgage expenses i) Interest on deferred payments, if any. j) Deposit including Line Laying Charges to be paid for obtaining power k) Other Deposits l) Trial Run Expenses m) Product Launching expenses TOTAL
OT OTHER R FIX IXED D ASSE SSETS TS Electrical Equipment & Installations Technical know-how fees etc. Utilities except power Effluent Treatment Facilities Training of technicians
WORKI KING NG CAPIT PITAL AL MA MARGIN IN This will be discussed separately
Provision ision for con ontingenc ingencies ies ITEM OF COST Con onsidere idered Reason ons for r consid iderin ring the cost as F Firm Firm Non Firm (Rs in Lacs) (Rs in Lacs) Land Site Development Buildings Plant & Machinery Electrical Equipment & Installations Technical know-how fees etc. Utilities except power Effluent Treatment Facilities Expenses on foreign technicians’ and training of Indian technicians abroad. Miscellaneous fixed assets. Preliminary & Preoperative Expenses TOTA TAL
SENSIT NSITIVITY IVITY ANALY ALYSIS SIS DSCR IIR BEP Normal 2.22 27.72 13429.37 Capacity decreased by 5% 2.07 26.44 13028.41 Raw Material increased by 2% 1.27 17.88 60227.18 Selling Price decreased by 2% 1.19 16.66 76599.95
WHAT AT ARE ACCEPTABL PTABLE E NOR ORMS MS Debt Equity Ratio 1.50 : 1 Debt Service Coverage Ratio > 1.50 IRR BEP Current Ratio 1.33 TNW to Outside Liabilities
ASSES SESSME SMENT NT OF OF WO WORKING ING CAIT ITAL AL REQUI UIREM REMENT NT What are current assets and current liabilities Working capital cycle Holding levels Modes of funding : FB and NFB CMA Data
WHAT AT IS IS WOR ORKING ING CAPIT PITAL AL ? Funds required for financing the operating / production cycle Aggregate of non fixed assets that is required to complete one operating cycle All the components of an operating or production cycle can collectively be called as Working Capital
THE WOR ORKING ING CAPI PITAL TAL CYCLE LE CASH RAW MATERIAL RECEIVABLES GOODS IN PROGRESS FINISHED GOODS
FUN UND BA D BASED ED LI LIMI MITS TS FOR OR WOR ORKING ING CAPIT PITAL AL 25% Fund Based Requirements to be funded through Long Term Sources Cash Credit - most widely accepted form RBI stipulates that in case of limits over 10 Crs., 80% should be in the form of demand loan and balance 20% as CC Peak Season and Non Peak Season Limit Seasonal Fund Based Credits
NON ON FUN UND BA D BASED D LI LIMI MITS TS Non Fund Based limits are : Letters of Credits (LC) Bank Guarantee (BG)
LETTE LE TER R OF OF CR CREDIT DIT i) For Raw Material Inland Foreign Letter of Credit is a formal commitment given by the Bank 1. Estimated to a person, generally a Purchases against LC (For accepted supplier, that the buyer’s bill will level of Turnover) be paid on presentation or after expiry of a stipulated period 2. Lead / Transit Time (No. of days) Letter of Credit is subject to the 3. Usance Period terms and conditions narrated (No. of Days) in the Letter of Credit 4. Total No. of Days Letter of Credit is document (2+3) based and normally does not 5. No. of cycles in a concern itself to the goods year (365/Total No. of Days as per Sr. No.-4) 6. LC Requirement (Sr. 1/Sr. 5)
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