1. Project Formation and Implementation 1
1.1 Introduction
1.2 Role of Economic Development
1.3 Types of Projects
1.4 Implementation Stages of the Project Life Cycle
1.5 Summary
1.6 Keywords
1.7 Self-assessment Questions
2. Promoter's Role/Functions Data and Skills
Requirements - Part I 19
2.1 Common Objectives of the Project
2.2 Hie Promoter's Role and Responsibilities
2.3 Promoter's Role and Skills in Capital Investment
Evaluation
2 4 Ecological / Environmental Aspects of Projects
2.5 Summarising me Cost of the Project
2.6 Some issues about the Size and Location of the Unit
2.7 Summary
2.8 Key Words
2.9 Self-assessment Questions
3. Promoter's Role/Functions Data and Skills
Requirements - Part II 49
3.1 Presentation of Project to Investors
3.2 Addressing Investors' Needs
3.3 Summary
3.4 Key Words
3.5 Self-assessment Questions
4. Financial Statements and Tools 75
4.1 Introduction
4.2 Definition and Need of Financial Statements:
4.3 Balance Sheei: Definition, Contents. Formats. Use,
Limitations, etc.
4.4 Profit and I oss Statement (P&I,) Operating Statement
4.5 Fund Flow Analysis
4.6 Cash Flow Analysis and Cash Budget
4.7 Ratio Analysis
4.8 Summary
4.9 Key Words
4.10 Self assessment Questions
5. Lenders' General Appraisal 103
5.1 Introduction
5.2 Lenders' Mam Concerns and Scrutiny Points Examining
Prima Facie Acceptabi 1 ity of Project
5.3 Lender's Due Diligence Process and Use of Special
Consultants
5.4 Assessment of Applicant's Existing Company/Group
Companies
5.5 Assessment of Financial Health
5.6 Useol Balance Sheet
5.7 Useol Ratios
5.8 Anal\ sis of Funds Flow and Cash Flow Statements
5.9 Credit Rating
5.10 Security Margin
5.11 Difference in Calculation of IRR for the Promoter and
I .ender
5.12 Recourse Available to Lenders. Non-limited
Recourse and Full Recourse Financing
5.13 Lender's Specific Detailed Appraisal
5.14 Summary
5.15 Keywords
5.16 Self-assessment Questi ons
6. Commercial Viability 119
6.1 Markets, Market analysis and Demand Forecasting
6.2 Commercial Viability - Cost of Production and
Profitability
6.3 Commercial Viability -Debt Service Coverage and
Repayment Programme
6.4 Break-Even Analysis
6.5 Summary
6.6 Key Words
6.7 Self-assessment Questions
7. Sources of Finance 145
7.1 Introduction
7.2 Investment Decisions by Companies in a Wider Context
7.3 Sources of Project Finance- Classification
7.4. Long Term Sources of Finance
7.5 Owned Capital
7.6 Borrowed Capital
7.7 Financial Leverage
7.8 Other Sources of Finance
7.9 Venture Capital Financing
7.10 Hire Purchase and Leasing
7.11 Bonds
7.12 Securitisation
7.13 Global Depository Receipts (GDRs)
7.14 American Depository Receipts (ADRs)
7.15 Foreign Institutional Investors (FTIs)
7.16 External Commercial Borrowings (ECBs)
7.17 Summary
7.18 Keywords
7.19 Self-assessment Questions
8. Financial Feasibility Appraisal 179
8.1 Financial Feasibility Analysis
8.2 Capital Cost of Project
8.3 Cost of the Project-How to Examine Various Items?
8.4 Plant and Machinery
8.5 Technical Know-how, Engineering and Consultancy
Fees
8.6 Miscellaneous Fixed Assets
8.7 General Comments
8.8 Leverage Ratios
8.9 Concept of Cost of Capital & its Use in Capital
Structuring
8.10 Summary
8.11 Keywords
8.12 Self-assessment Questions
9. Technical Feasibility Appraisal 205
9.1 Introduction
9.2 Technical Feasibility
9.3 General Perspectives for Technical Feasibility
9.4 Basic Field Level Queries
9.5 Technical Feasibility Study
9.6 The Appraisal Points/Focus
9.7 Introduction and Overview of Organisational Processes
in a Project
9.8 Conventional View of Management Competency
Appraisal
9.9 Technical and Human Processes Related Management
Competencies
9.10 Types of Projects and The Promoter Manager
9.11 Project Management: Organisational Structure Context
9.12 Management Competencies: a Comprehensive View
9.13 Leadership in Non-conventional Projects
9.14 Organisational Ethics
9.15 Summary
9.16 Keywords
9.17 Self-assessment Questions
10. Project Risks, Risk Management and Credit Rating 239
10.1 Introduction
10.2 Why do Projects fail?
10.3 Project Risks
10.4 Risk Assessment Techniques with Dlustrations
10.5 Project Cost Risk Analysis Using Crystal Ball Software
10.6 Estimating Time & Cost Overrun Risks
10.7 Orgardsational/Procedural/Systemic Reasons for
Project Cost Overruns
10.8 Risk Management: An Organisational System
10.9 Lenders' Perspective
10.10 Credit Rating Systems
10.11 Summary
10.12 Keywords
10.13 Self-assessment Questions
11. Working Capital Arrangements and Terms and
Conditions of Project Finance 267
11.1 Introduction
11.2 Operating Cycle
11.3 Stocking Pattern and Financial Needs
11.4 Lending for Working Capital Requirements of a Unit
11.5 Various Methods Prescribed by Regulators 1 ike RBI
11.6 Systems of Credit Delivery by Commercial Banks
11.7 Optimal Levels for Working Capital Assets: Criteria
for Decision Making
11.8 Some More Methods/Products for Working Capital
Finance
11.9 Standard Covenants for Term Loans/Deferred
Payment Guarantees
11.10 Summary
11.11 Keywords
11.12 Self-assessment Questions
12. Project Scheduling, Implementation & Follow Up 295
12.1 Introduction
12.2 Project Evaluation, its Purpose and Benefits
12.3 PERT/CPM Technique for Monitoring Project
Schedule
12.4 Project Cost Management through the Implementation
Process
12.5 Project Audit
12.6 Follow Up of Project Implementation
12.7 Monitoring, Supervision and Follow Up: Lender's
Point of View
12.8 Summary
12.9 Key Words
12.10 Self-assessment Questions
13. Legal Aspects of Project Finance and Documentation 325
13 1 Intnxiuction
13.2 Security for Term 1 ending by Banks and Financial
Institutions
13.3 Mortgages
13.4 Other Security Interest-Creating Methods
13.5 D(xu mentation
13.6 Execution of D»x;uments by aCompany
13.7 Provisions of some Relevant Acts
13.8 Scope of Work of a Legal Counsel
13.9 Summary
13.10 Key Words
13.11 Self-assessment Questions
14. Infrastructure Projects (Private Sector) Financing 347
14.1 Introduction
14.2 Definition of Infrastructure Sectors
14.3 Economy and Policy Level Issues in Infrastructure
Development
14.4 Characteristics of Infrastiucture Project Financing
14.5 Risk Hedging through Project Contracts
14.6 LJocumentation Overview
14.7 Industry View
14.8 Summary
14.9 Key Words
14.10 Self-assessment Questions
15. Public Private Partnership Projects (PPP) 383
15.1 Introduction
15.2 Infrastructure 1 )e\ elopment & Public Private
Partnership
15.3 PPPs in Indian Infrastructure Projects
15.4 PPP Schemes &GOI Scheme
15.5 Concession Agreement: Obligations of Parties
Involved
15.6 PPP Projects Implemented: Some Examples
15.7 Summary
15.8 Key Words
15.9 Self-assessment Questions
Appendix A: Suggested Reference Books 401
Appendix B: Glossary 405