mr[1]. bijoy-construction project finance

7/31/2019 Mr[1]. Bijoy-Construction Project Finance

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-Kumar Bijoy

Financial Aspects of Site

Organization & Planning


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-Kumar Bijoy

What is Project?

Any undertaking that has definite, final objectives representing specific values

to be used in the satisfaction of some need or desire.

Time, Cost and Performance: hitting the bulls eye on all the three counts is

essential for the success of a project.

Cost

Performance

Time

i=3

S = Wi Ri

i=1

Where 1 to 3 = Time, Cost and Performance.Wi = weight assigned to each factor

Ri = degree of success in each factor

Once the Project is feasible on Commercial and Technical front FinancialProjections

are made for it.


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-Kumar Bijoy

DEVELOP

CONSTRUCTION PLAN

DEVELOP GENERAL AND

ADMINISTERATIVE PLAN

DEVELOP MANUFACTURING

PLAN

ESTIMATE TOTAL PROJECT COST

ESTIMATE FINANCING NEED

PREPARE PROFORMA INCOME STATEMENT

EVALUATE PROJECT FEASIBILITY

DOES PROJECT SATISFY INVESTMENT DECISIONCRITERIA?

TERMINATE

NO YES

ANALYZE PROJECTIONS OF

OPERATING CONDITIONS

The various steps in financial analysis are as follows:


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IS SENSITIVITY ANALYSIS NECESSARY?

ANALYZE PROJECTIONS OF OPERATING CONDITIONS

CONDUCT SENSITIVITY ANALYSIS

IS RISK ANALYSIS NECESSARY?

CONDUCT RISK ANALYSIS

IS PROJECT FEASIBLE?

TERMINATE PREPARE INVESTMENT

PROPOSAL

NO

NO

NO

YES

YES

YES


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-Kumar Bijoy

Three important components of financial appraisal

are:

Cost of the Project

Means of finance

Projected Working results


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-Kumar Bijoy

Generally the Cost of the Project includes:

Land

Site development

Buildings

Machinery

Miscellaneous Fixes AssetsPreliminary Expenses

Pre-operative Expenses

Provision for contingencies

Margin money for WC


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-Kumar Bijoy

Generally the Means of Finances are:

Equity Capital

Preference Capital

Debenture Capital

Term LoansDeferred Credit

Bill Rediscounting Scheme

Seed Capital Assistance

Unsecured LoansLeasing and Hire Purchase

Securitization

Overseas Funds: GDR/ ADR/ Foreign Bonds


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-Kumar Bijoy

Projected Working results depend upon

Product Mix

Installed capacity

Capacity Utilization


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-Kumar Bijoy

Estimating the income from the project in terms of

cash flows is based on the following principles:

All costs and benefitsin terms of cash flow i.e. non cashcharges are added back

Cash flows are post tax terms.

Cash flows measured in incremental terms.


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-Kumar Bijoy

Unsophisticated or Traditional or Non- Discounted Criteria

ARR

PBP

Urgency

Sophisticated or Time-Adjusted or Discounted Criteria

NPV

IRR

BCR/NBCR


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-Kumar Bijoy

Social Cost Benefit Analysis :

SCBA is required due to

Market imperfections

Externalities Taxes and Subsidies

Concern for Savings

Concern for Redistribution

Merit Wants


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-Kumar Bijoy

UNIDO approach for SCBA

Calculation of financial profitability at MP.

Shadow Pricing of resources to obtain net benefit at economic

prices.

Adjustment for the projects impact on savings and investment.

Adjustment for the projects impact on income distribution.

Adjustment for the projects production or use of goods whose

social values are less than or greater than their economic values.


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mr[1]. bijoy-construction project finance

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