REPORT ON PROJECT FINANCING & RELATED ISSUES

By Abhishek Gupta

(A report submitted in partial fulfillment of the requirement of PGDBA program of SCDL, Pune)

Table of Contents 1. INTRODUCTION 1.1 The Essar Group 1.2 Essars Steel Business 1.3 The Project 1.4 Significance & objective of the project and process followed to pursue the objectives 2. 2.1 2.2 2.3 DETAILED REVIEW OF THE PROJECT TEFR & related matters Financial projections, Ratios etc. Main sources of debt and typical terms & conditions of sanction of financial assistance CONCLUSION

3.

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1.

INTRODUCTION
1.1. The Essar group

Essar Group is a high performance multinational organization, providing world class services and products. The business span over a wide variety of industries right at the heart of the economy like steel, energy, power, communications, shipping and logistics and construction etc. The Group is one of the Indias largest corporate houses with an asset of value of Rs. 410 billion (US $ 10 billion.) Essar Steel Ltd. (ESTL) is the flagship company of Essar Group in steel business. It is the largest producer of flat steel products in private sector in India having 23% of total installed flat steel capacity.
1.2. Essar steel business:

a) Bailiadilla ore beneficiation plant : b) Vishakhapatnam Pelletization plant : c) Hazira Steel complex d) Cold Rolling Complex, Hazira Fully integrated production facilities of ESTL have the following capacitiesFacility Pellets Hot Briquette Iron Hot Rolled Coils Cold Rolled Coils Galvanized Capacity 8.0 mtpa 5.5 mtpa 3.6 mtpa 1.4 mtpa 0.5 mtpa:

ESTL has operations at Hazira in Gujarat and Visakhapatanam in Andhra Pradesh in India and in Indonesia.
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Global steel industry has long term promising outlook and steel demand is expected to increase over next 10 years. Essar Group has decided to increase production capacities in India and outside to leverage the advantages of growth in demand and its experience in steel manufacturing. Following new projects are already under constructionProject/ Location Capacity Essar Steel Hazira SEZ 4.0 mtpa Hazira Plate SEZ 1.5 mtpa Rolling Mills, Vietnam 2.0 mtpa ISP, Caribbean 2.5 mtpa Production bases are being expanded at strategic global locations. While a 2.5 mt steel plant is being set up at Trinidad & Tobago, a 2.5 mt integrated steel facility is being planned at the recently acquired company, Minnesota Steel. Company is also implementing a 1 mtpa Rebar Mill at Karachi in Pakistan. In India, group has inked 3 Memorandum of Understandings (MOU) for setting up steel plant of 4 mtpa each at Jharkhand and Orissa and 3 mtpa at Chhattisgarh. Out of these, project in Orissa is in the most advanced stage. Company has planned to start with 8 mtpa pellet project which at a later date will be expanded to fully integrated steel plant. 1.3. The project During training period, it was decided to provide me on the job training on the following project

8 mtpa Pellet Plant, Paradeep, Orissa, India

Essar group proposes to install an integrated steel plant of 6 mtpa capacity at Paradeep which will be implemented in phases. Initially the company will implement 8 MTPA pellet plant and then ISP will be implemented in the second phase. The product from pellet project will be partially exported (4 mtpa) and balance will be consumed captively by Essar.

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The pellet project would comprises of

2 x 4 Mt pellet plant modules at paradeep Matching capacity iron ore grinding beneficiation plant at Kashia. Barbil. &

Matching capacity slurry transport pipeline of 298 Km from Barbil to Paradeep.

The project is in advanced stage of financial closure and all related workings had been done.
1.4. Significance and Objective of the Project and

process followed to pursue the objectives: The above-mentioned projects have been come out of conceptualization stage and are now in the early stages of implementation. Initial project development activities have been started and financial tie-ups are being arranged. It was felt that this is an ideal stage to understand different aspects of project financing. Objective of the assignment was primarily to provide basic understanding of different aspects of project financing and related matters. The main objective of training was that at the end of the training I should be able to develop the understanding of being able to borrow funds from the bank for a given project. To be able to develop the above said skills, I followed the following steps: Read TEFR and understand what is project report, what are the various issues that are addressed and why? Study the financial model, understand its construction/ structure, the rational behind that structure, the various computation, the rational behind these computations and the impact it has on the decision of the potential lenders to participate in the debt financing of the project as also the impact the financial results of the financial models would have on the decision of the promoter of the project regarding the taking up of the project.
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It was understood that though financial models reflects the profitability and return of the project but there are various extremely important issues which cannot be factored in the financial model but have a major impact on the success/failure of a given project. e. g. availability of raw material, power, water, environment approvals, choice of right technology etc. It was therefore understood that even if the financial model exhibits attractive profitability the project would not see the light of the day until and unless all the resources comprising men, material, technology and statutory applicable approvals etc. are not expected to be available.

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2.

DETAILED REVIEW OF PROJECT

Essar Group had signed a MOU with Government of Orissa on 21st April 2005 to implement 4mtpa integrated steel plant (ISP) in the state. In this process, initially the company is implementing an 8 mtpa pellet project which would be at a later date expanded to ISP. The study of the project was divided into three broad areas2.1 TEFR & Related Matters

Financial Projections, Ratios etc. Main Sources of Debt & Typical Terms & Conditions of Sanction of Financial Assistance
2.1 TEFR & Related Matters 2.1.1

General aspects of TEFR:

Each TEFR is structured to cover all important aspects of a given project(a) Introduction (b) Executive Summary which shows whole of the project summed up in few pages. (c)Market Demand (d) Technology & Process (e) Raw Material & Other Inputs (f) Financials covering project cost, profit & loss account, cash flow, balance sheet, ratio analysis and sensitivity analysis Normally TEFR is either prepared by the company or a Consultant appointed by the company. The banks on many occasions obtain an independent vetting of the TEFR from an independent consultant who is appointed by the request of the banker. This gives comfort to the banker that project is conceived on sound business principle and is based on reasonable financial assumptions. 2.1.2 Project Configuration
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The project should be optimally configured so as to optimize the capital cost and operating cost and thereby maximize the return on the capital. For the beneficiation of the pellet plant there was various available theoretical permutation and combination of configuration ranging from 1 x 8 mtpa up to 8 x 1 mtpa but keeping in mind standard plant & machinery, modules available, operating cost of various configurations, to have a redundancy in a system etc., it was decided by the company to go for 2 x 4 mtpa modules. Similarly, it was important for the company to have its plant near iron ore mines as also it was equally important to be on the port because 100% of the production will be evacuated through sea transport. There was no way that company could achieve both these objectives. The only optimal solution available was that the beneficiation plant should be at the mine head, the beneficiated ore be covert into slurry and a pipeline be used to transport the same to the pellet plant which was situated at the port so that the finished goods should be easily evacuated behind the sea port. 2.1.3 Location

Each factor has a cost implication and based on the relative cost benefit analysis of various options, the location is decided. In the case of the studied project, the location was decided in the state of Orissa after strategically considering the following aspect

Availability of required quality of iron ore fines in desired quantity Sound infrastructure Proximity to Port Availability of required manpower Desired support from State Govt. Availability of utilities (water, power etc.) Market Demand
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2.1.4

Until and unless the final product has a demand and can be sold in the market at the assumed selling price there is no project because the debt and equity will be serviced out of the profit of the project . It is in this context that demand of the project is of prime importance. In context of demand, the other important aspects are:i.
ii. iii.

Product mix and product specification. Other manufacturer and the demand supply gap. Target Market share. (incremental & overall)
iv.

The project unique selling proposition of the subject project. e. g. brand, understanding of market, technological excellence, relative cost competitiveness, quality of product, reliability of supply, location advantage etc. Technology & Process

2.1.5

It is important to understand the technology to be adopted for each stage of the project. Choice of technology to be used depends on various parameters. The technology should be tested, easily available and cost effective. In TEFR, technology to be used including plant configuration & capacities, process route and design criteria is explained and analyzed in detail. For the subject project, following tested technologies are proposed to be used

Wet grinding, Spirals and HGMS route for beneficiation. Single stage pumping through pipeline for slurry transportation. Straight Grate Technology for pelletization.

The technology of converting the ore into slurry and transporting it through pipeline is cost effective in comparison of transporting beneficiated ore through road/ rail/ sea.

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It was understood that company has already implemented and operating a pellet plant of similar configuration and based on same technology at Visakhapatanam in Andhra Pradesh.
2.1.6

Raw Material & Utilities

Successful implementation and operation of any project is dependant on many parameters and assured availability of raw material and various utilities like water, power, manpower etc. is one of them. Any project which prima facie looks very lucrative in terms of earnings may not be able to run at stipulated level of capacity utilization because of unavailability of operating power. Therefore it is of utmost importance to identify the linkage of all raw materials, utilities and manpower etc. For the subject project, no problem was foreseen in linkage of raw material, utilities and manpower.

Raw Material- Main raw material i.e. low grade iron ore fines are available with the local mines in abundance and company has obtained in-principle offer letters from them for supply of required quantity. Power- Company has obtained sanctions from State Electricity Board for construction power both at beneficiation plant and pellet plant site. For operating power, applications are in advanced stage and no major problems are foreseen in the sanction. Water- Company has obtained sanctions from local bodies for withdrawal of water from local rivers. Manpower- Total section wise manpower requirement at construction and operating phase is estimated and no problem is foreseen in that.

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2.2 Financial Projections, Ratios etc.

Financial output for any project is reflected in the financial model of the project. Financial model is made using certain assumptions about capital cost, operating cost and financing & taxation. Financial outcome of the project is estimated in the financial model by suitable use of these assumptions in various calculations like project cost, production cost, profitability etc. Normally, a financial model has the following contents(a) Key Assumptions
(b) Project Cost & Working (IDC & Margin Money etc.)

(c)Cost of Production
(d) Depreciation Schedules (as per Companies Act and

Income Tax Act) (e) Loan Schedules (f) Calculation of Tax Liability (g) Profitability Statement (h) Cash Flow Statement (i) Balance Sheet (j) Ratio Analysis While making the financial model for the subject project, various aspects associated in the workings were understood as under:(a) Key Assumptions Financial working of any project will always be dependant on certain assumptions about various aspects of the project. These assumptions are summarized in first sheet under three broad categories-

Capital Cost Related AssumptionsPage 11 of 28

For estimating project cost, suitable assumptions are required for various elements of cost like land, civil work, plant etc. Typical example of capital cost related assumptions can be cost of per acre land and consumption of man hours/ construction material during construction. Operating Cost Related AssumptionsFor projecting financial results of the project, revenue to be generated through the project and various operating costs are required to be estimated. This will again depend on certain assumptions like selling rate of the final product, cost of raw material etc. Financial AssumptionsAssumed debt equity ratio, interest rate, moratorium period, repayment period etc. for the long term loan are covered under this head. (b) Project Cost & Working (IDC & Margin Money etc.) Various elements of the project cost and their estimation were understood. Normally, cost of the project is estimated under the following heads

Land & Land Development- It includes the cost paid for the acquisition of land where the project will be undertaken along with further expenditure made for the development of the land e.g. fencing, rehabilitation cost, dredging etc. As an accounting principle, cost debited under this head is not depreciated over the life of the project. Civil & Structural Cost- Cost of construction all civil work and buildings (factory/ office) is capitalized under this head. This also includes cost of industrial constructions like pillars etc constructed for support of plants and equipments. Plant & Machinery- Under this all cost related to acquisition of plant & machinery including technical consultancy and engineering & supervision is
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included. The cost is depreciated over useful life of the plant.

Contingencies- There is a need to understand that while making financial models for new projects every working is based on estimates and always there will be scope of upward/ downward variation upon actual implementation of the project. Therefore it is always considered prudent to include contingent future increase in project cost. Normally contingencies are calculated at 5%. Interest during Construction- Interest which is accrued on the loan during the construction period is capitalized along with project cost. It is calculated as per estimated drawdown schedule and interest rates envisaged. Margin Money- Upon actual operation of the project, there will be some amount of working capital involved which will be employed in the project on perpetual basis. Practically, banks do not finance the complete amount of working capital and remaining amount after bank finance is known as Margin Money. This is also financed in debt equity ratio and becomes a part of the project cost in the first year of operation.

(c) Cost of Manufacturing

Cost of manufacturing consist the following elements

Raw Materials- Cost of main raw materials is assumed identifying main raw materials to be required and taking a practical level of consumption and prevalent market price. Consumables- Various types of consumables like oil & grease etc. are required in any production activity. These can be identified with the help of technical people and a suitable rate of consumption can be assumed.

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Spares- A suitable provision of consumption of spares should be made based on the technical inputs. Labor Charges- Labor cost can be assumed based on the labor hours required for the production and prevalent labor rates accordingly. Overheads- Proper assumptions about various elements of overheads like repairs & maintenance, rent, office salaries, office maintenance and other overheads should be made and cost should be included in the cost of production.

Format used for calculation of cost of production in the studied model is given belowCOST OF MANUFACTURING S. No . A Items Production Capacity Utilization (%) Production (mtpa) Pellets Fines Total Raw Material & Consumables Raw Material Consumable Total Utilities Electrical Energy Fuel Oil Makeup Water Total Others Labour Repairs & Maintenance Rent, Rates & Taxes Administrative Expenses Selling Expenses Total COST OF MANUFACTURING Year 1 Year 2 Year 3 Year 4 Year 5

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(d) Depreciation Schedules (as per Companies Act and Income Tax Act) Depreciation is provided towards annual wear and tear of capital assets so that a suitable part of project cost is charged to the profit & loss account every year. Normally depreciation is calculated as per Companies Act and as per taxation laws. Depreciation as per companies act is used for the calculation of book profit and tax depreciation is required for computation of tax liability. Different rates are mentioned in both acts for different group of assets. While making a financial model we need to identify the rates applicable and calculated depreciation accordingly. Preliminary and Pre-operative expenses included in the project cost are amortized over a reasonable period say 3-5 years.
Calculation of Depreciation

PARTICULARS CIVIL & STRUCTURAL WORK Opening Gross Block Additions during the year Closing Gross Block Depreciation for the year Cumulative Depreciation PLANT & EQUIPMENT Opening Gross Block Additions during the year Closing Gross Block Depreciation for the year Cumulative Depreciation PRELIMINARY EXPENSES Opening balance Written off during the year Closing balance

Year 1

Year 2

Year 3

Year 4

Year 5

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(e) Loan Schedules Schedule of long term loans is required to be prepared in the following format to estimate the interest payment every yearSchedule of Loang Term Loans (INR) Rs. Million % p.a. Construction Period 1 2

Total loan Rate of Interest

Particulars Opening Balance Additions during the year Repayment during the year Closing Balance Interest for the year

Operation Period 3 4

(f) Calculation of Tax Liability A suitable projection of tax payments over projection period is required to be made as per applicable tax laws. Here it is important that for tax purposes tax depreciation should be considered. In case of companies, provision for minimum alternate tax (MAT) is also required. (g) Profitability Statement For making the Profitability statement we need to calculate the revenue to be generated through the project and incorporate various costs calculated as above. Revenue- For projecting the revenue of any project, following ingredients will be involved-

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Capacity Utilization- It will start at a lower level and will keep increasing year by year. Production in terms of units- It can be calculated based on reasonable assumptions for output of the plant. Selling rate- Rates can be assumed analyzing past data for the output product and adjusting it for future changes.

Typically profitability is calculated at different levels as underEarning before Interest Depreciation Tax and Amortization (EBITDA) EBITDA is an important measure of profitability of any year. This reflects the profit earned by operating activities subject to deduction of depreciation which is a non cash expenses. Operating Profit- Operating profit can be determined by deducting depreciation and amortization from EBITDA. This reflects the profit generated from operating activities. Interest- Finance cost is calculated in loan schedule based on various assumptions decided. Profit before Tax (PBT) Profit before tax is Operating profit minus finance cost as calculated. Profit after Tax (PAT)- Profit after tax is the net profit after taxes. This reflects the ultimate amount of profit to be generated by project over projection period. Format of a typical profitability statement is given belowProfit & Loss Account Particulars Production Capacity Utilization Quantitities Produced Unit % Operation Period Year 1 Year 2

Year 3

Year 4

Year 5

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Pellets Fines Total Net Sales Realization Pellets Fines Total Revenue Cost of Production Depreciation & Preliminary Expenses Operating Cost Operating Profit Interest EBT Tax Profit after Tax

MTPA MTPA

Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million

(h) Cash Flow Statement Cash flow statement is prepared to show the movement of cash in and out of the project on a year to year basis. Format of a typical cash flow statement is given belowCash Flow Statement S. No. A 1 2 3 4 5 6 Particulars SOURCES OF FUNDS Equity Local Long Term Loan- Fixed Capital Foreign Currency Loan Increase in Working Capital Loan Profit before Interest, Dep. After Tax CENVAT Reversal Total Cash In flow APPLICATIONS OF FUNDS Capital Expenditure Decrease in Local Long Term Loan Decrease in Local/FE Long Term Loan Increase in Working Capital Interest on Loans Dividend
Construction Period Year 1 Year 2

Operation Period Year 1 Year 2 Year 3 Year 4 Year 5

B 1 2 3 4 5 6

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Total Cash Out flow Net Cash Accruals Cumulative Cash Accruals

(i)Balance Sheet Balance sheet is compiled from various figures calculated as above. Format is given belowBalance Sheet Construction Period Year 1 Year 2 Operation Period Year 1 Year 2 Year 3 Year 4 Year 5

Particulars Liabilities Share Capital Profit & Loss Long Term Loan Working Capital Loan

Assets Fixed Assets Gross Block Depreciation Fund Net Block Capital WIP Working Capital Cash Balance Preliminary Expenses

(j)Ratio Analysis Now after compilation of all financial statements and working, next important step will be to calculate various ratios and parameters to measure the feasibility of the project. It was understood that following ratios are considered important for evaluating any new project-

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Debt Service Coverage Ratio (DSCR) - DSCR reflects the availability of sufficient funds for the repayments of loan and interest amount. Any lender would like to check the cushion available for its payments. DSCR is calculated by dividing the cash available for servicing of debt (EBITDA less tax normally) by total debt service obligation (repayment as well as interest). Normally an average DSCR of more than 1.5 over repayment period is considered safe and comfortable. Break-Even Point (BEP) - BEP denotes the level of activity required at 100%/ maximum capacity utilization to cover the fixed costs including depreciation etc. As per more modern approach to calculate BEP, depreciation and other non cash items are not considered as fixed cost. Normally, conventional BEP of 30-40% and cash BEP of 20-25% is considered healthy. Project Internal Rate of Return (IRR) - IRR is the rate of return to be generated by series of cash flows involved with the project. IRR is the basic parameter to judge the feasibility of the project. Feasibility of the project can be checked by comparing the IRR with cost of capital. If IRR is higher then cost of capital then only project execution makes any sense and vice versa. Net Present Value (NPV) - NPV is the present value of cash flows generated by projects using a suitable discount rate. If IRR is higher than cost of capital then only project will have a positive NPV and vice versa.

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2.3 Main Sources of Debt & Typical Terms & Conditions

of Sanction of Financial Assistance After having understood the various project report aspects and the impact they have on the financiability of the project. The last portion of the training was to provide a basic understanding of the terms and conditions on which the project are provided financial assistance by the lenders in the form of long term loan. The schedule of training was divided into two parts. 1. Sources of debt and equity 2. Typical terms and conditions of financial assistance in the form of term loan. i. Sources of debt and equty To finance any project one need a combination of debt and equity. Sources of debt
1. Term

loan institutions

from

bank

and

financial

2. Bond issue 3. Non convertible debentures

Sources of equity
1. 2. 3. 4. 5.

Promoter equity Public issues in capital market Private equity from fund G.D.R/ A.D.R/ FCCB other more

Convertible and complex instruments 1) 2) Promoter equity and public issues. Term loan from bank and financial institutions

Despite so many options, new project typically rely on:

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ii.

Typical terms assistance

and

conditions

of

financial

In any term loan transaction, the typical terms and conditions are as follows: 1. Interest rate The interest rate could be either fixed or floating. The fixed interest rate is single interest rate which is applicable through out the term of the loan. This interest rate is applicable on reducing balance of the principle amount. Normally the interest rate is paid on monthly or quarterly basis. The floating interest rate is variable rate of interest. In such case , the interest rate could either go up or come down during the term of the loan. Each bank has a prime lending rate (PLR). This PLR varies with inflation, statutory liquidity ratio (SLR), cash reserve ratio (CRR), etc. Generally in period of rising inflation, the PLR increase. When PLR increases the floating rate increases because the floating rate is expressed in the form of spread sheet over the PLR. The spread sheet is in the form of a % and may as low as below 1% and as high as 5% or more. 2. Security The term loans are secured by way of a first parri-passu charge on fixed assets of the company. The banks also take second parri-passu charge on the current asset of the company. The first parri-passu charge on the current assets in with the working capital providing banks. At times the charge on the asset of the company is not found adequate security by the banks.In such cases banks also ask for either the personal guarantee of the promoter or if the promoter is already having another existing profit making company. The banks can ask for corporate guarantee and personal guarantee. It is also possible that banks also ask for both personnel & corporate guarantees. In some cases apart from the guarantee, banks also ask for pledge of shares held by the promoter in the project being finance.
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Basically the security package which is asked by the bank is substantially influenced by three factors:a) Risk related to the project b) Track record of the promoter c) Financial strength of the promoter
3.

Repayment schedule a) period of the project b) to be generated from the project Implementation Cash flow expected

The term of loan is dependent upon two factors:

During the implementation period of the project, the project does not have any cash flows. Therefore, no principle amount of loan is to be expected to be paid back to the bank. After the implementation period of the project is complete, then depending on the cash flows the bank fixes the repayment period. The annual amount of principle to be repaid could be either fixed amount per year or the amount could have some ballooning, i.e. smaller installments in early years and then the annual repayment installment would increase. If during the initial years of cash flows are weak then the bank also provides some grace period which is also called moratorium period. The project implementation period and the grace period and the repayment period together denote the total term of the loan which is also referred to as the door-to-door period of the loan. 4. Funded interest The interest payable on the loans during the construction period is included n the project cost itself because banks are extremely reluctant to sanction a loan on which the interest is not payable for a certain period.

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However in extremely exceptional cases, due to the typical nature of a given project the banks could also provide a moratorium of the payment of interest. In such cases, the accrued interest on the loans is added in the installment of the principle payable in the future year but this is very rare. 5. Upfront fees The banks have a practice of charging an upfront fee at the time of the sanction of the loan. This is a common practice because it adds to the non fund based income of the bank and at the same time it locks the potential borrower to the sanctioned facility. This upfront fee varies between 0.25% to 1.00% of the sanction loan. 6. Appraisal fees The bank normally spends 2-3 man-months for appraisal of a project. Consequent to the appraisal, if the appraisal is found satisfactory, banks sanction the loan to the project. It is common practice among the banks to charge a fee for the appraisal. This fee is normally a lump-sum amount which is payable at the times of the sanction. This amount generally varies between 0.1% to 0.25% of the loan sanction depending upon the size of the sanction. 7. Commitment fees When the bank sanctions the loan, it assumes that this loan will be availed by the company during the project implementation period. The bank lines up the availability of funds for lending accordingly. If for any reason, the borrower does not take the loan from the bank, the bank losses on its potential interest income and therefore in such cases the bank charges a commitment fee. Such a fee is normally equal to 1% of the draw down in variance of the proposed loan draw down schedule. 8. Additional interest The bank sanctions the loan on the basis of a security package. The basic security is the first charge on fixed asset. This first charge is created in two forms:a) Hypothecation of movable fixed assets. Page 25 of 28

b) Mortgage of immovable fixed assets-which is generally

the land. This is mortgage of land has to be done within a specified period. If the mortgages is not done in that period, then bank charge 1% additional interest on the outstanding loan. 9. Penal interest

If any of the interest installments is not paid on time, then during the delayed period the bank charges a penal interest of 2-3% on such interest dues. 10. Liquated damages If there is a delay in repayment of any of the principle amount then the bank charges liquidated damages @ 2 % p.a. over and above the interest rate on delayed repayments of the principle amounts. 11. Prepayment period Normally, the banks go with the assumptions that borrower will avail of the loan facility for the term of the loan and raise their resources accordingly but if borrower prepays the loan then the banks normally stipulate a notice period of 3 months and a prepayment penalty of 1% or so.
12.

Other covenants

To maintain the discipline in the borrower, the banks stipulate a lot of covenants. These covenants could be classified in three categories:a) Pre commitment condition b) Pre disbursement condition c) Other a. Some of the typical pre commitment conditions are: i. Tie up entirely debt and equity

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ii.

Satisfactory due diligence by the lenders independent engineer and lenders independent legal council. Necessary approvals of the government Undertaking by the promoters to maintain majority share holding Induction of agreed upfront equity, tied up of all inputs, obtaining of environmental clearance, adequate of insurance cover, broad basing of the Board of Directors and strengthening of the management, if needed, etc.

b. Some of the typical pre disbursement conditions are :i. ii. iii.

c. Some other conditions can also be stipulated. These are loan specific and need based.

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3. CONCLUSION

Thus during the course of training, I understood basics of all aspects related to preparation of TEFR and the financial model as also its evaluation and importance in the eyes of the potential lenders. The training also provided a brief prospective of the various sources of debt and the terms at which such debt financing is granted to a project by banks/ financial institution. This was my first experience of undergoing training at a corporate house. It has helped me a lot not only on account of training matter/ subject but also in terms of understanding the working and related aspects in an office. I express my deep thanks to the contributions of the followingi.
ii.

Mr. R. K. Mandirutta- Training/ Project Leader Mr. Gaurav Agrawal- Training/ Project Associate

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