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“Art of preparation of Project Report for Assured Bank Finance”
ALL INDIA CPE Conference
By : Vinay Mruthyunjaya Senior Partner
VINAY & KESHAVA LLP.,
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! WHEN & WHY Project Report is Required ! WHO Prepares the Project Report ! CONTENTS of a Good Project Report ! HOW A Project Report is Prepared
- Logical Order - Presentation Order
! APPRAISAL of a Project Report ! Documentation
STRUCTURE
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PROSPECTS & Efforts - CURRENT SCENERIO
! Excellent Potential
! Libralised financing
! Stable Government
! Interest Rates – downward trend
! Foreign Currency Loans
! Interest & Flair
! State Laws ! Labour Laws
! Economic Laws ! Trade Laws
! Industrial Policy
! Credit Policy ! Current Affairs
! Good Analytical Skills ! Logical in Thinking
! Good at English ! Exposure to Computer
! Ideal for CA’s
! Accounts
! Costing
! Direct Taxes / Indirect Taxes
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Pre-Investment Study Own Funding
Internal Purpose
New UnitExpansionModernisationDiversificationSubstitutionSubsidiary etc
Financial Assistance
Environment ClearancesCentral Govt.State GovtLocal AuthoritiesInspection of LabourDept. of Industries
& CommerceLicensing AuthoritiesRegistration Etc.,
Statutory Clearances
External Purpose
Requirement of Project Reports
Ø Term Loan Ø Working Capital Ø Seed Capital Ø Venture Capital Ø Lease Finance Ø Hire Purchase Ø Share Capital Ø Debentures
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PromotersTechnical ConsultantArchitectsAdvocatesEngineersValuersSurveyors (Market)ExpertsChartered Accountant
LARGE PROJECTS
PromoterTechnical ConsultantChartered Accountant
MEDIUM SCALEPROJECTS
PromoterChartered Accountant
SMALL SCALEPROJECTS
WHO PREPARES THE PROJECT REPORT
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TheoriticalWrite up
TECHNICALCONTENTS
FinancialProjections
FINANCIALCONTENTS
Co-RelatingTheory and
Financial Figures
FINANCIALIMPLICATIONS
CONTENTS OF GOOD PROJECT REPORT
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THEORETICAL WRITE- UP
! INTRODUCTION ! PROMOTER’S BACKGROUND ! PROJECT AT A GLANCE ! PROJECT CONCEPT ! PRODUCT/S / BY-PRODUCT ITS APPLICATION ! RAW MATERIAL ! PRODUCTION PROCESS ! INFRASTRUCTURE ! IMPLEMENTATION SCHEDULE ! CLEARANCES AND APPROVALS
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FINANCIAL PROJECTIONS
! COST OF THE PROJECT AND MEANS OF FINANCE ! PROJECTED BALANCE SHEET ! PROJECTED PROFIT & LOSS ACCOUNT ! PROJECTED CASH FLOW & FUND FLOW ! BREAK EVEN ANALYSIS ! DEBT SERVICE COVERAGE RATIO ! COMPUTATION OF WORKING CAPITAL ! CAPACITY PARTICULARS ! INTERNAL RATE OF RETURN (IRR)
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COORDINATING THEORY & FINANCIAL FIGURES
! CAPACITY PARTICULARS ! ASSUMPTIONS ! RATE OF INTEREST ! DEPRECIATION RATES / METHOD ! SELLING PRICE ! DRS/CRS/INVENTORY/EXPENSES PERIOD ! BASIS OF ESTIMATES ! INFORMATION RELIED ON ! MORATORIUM PERIOD IF ANY ! EMPLOYEES BENEFITS CONSIDERED
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Further Details of Financial Statements
! FIXED ASSETS ! ADVANCES & DEPOSITS ! PRELIMINARY & PRE-OPERATIVE EXPENSES ! PRODUCTION OVERHEADS ! PERSONNEL EXPENSES ! ADMINISTRATION EXPENSES ! SELLING EXPENSES ! FINANCIAL EXPENSES ! DEPRECIATION ! REPAYMENT OF TERM LOAN ! COMPUTATION OF INCOME TAX ! DETAILS OF INVENTORIES ! CONTINGENCIES
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P & MManufacturing ProcessPromoter'sTechnical
StrengthPromoter's Financical
StrengthAvailabilty of ManpowerSelling CompetenceTechnological ChangesIndustrial Policy
TECHNICALFEASIBILITY
Analyse COP & MOFContingenciesDebt Equity RatioPromoter's MarginSubsidyArithmetic AccuracyAnalysis of all Projected StatementDSCRProfitability RatioLiquidity RatioReturn on InvestmentBreakeven AnalysisIRRSensitivity AnalysisProjected Wkg. Capital RatioCurrent RatioDOCUMENTATION ANALYSIS
FINANCIALVIABILITY
Impact on SocietyEmployment GenerationForeign Exchange EarningsCountry /State/Local ImplicationsAncilliary UnitsContribution to the Ex-chequerNon-monetary Benefits to the Society
SOCIO-ECONOMICFEASIBILITY
APPRAISAL OF PROJECT REPORT
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Critical aspects of project Report:
! Starting point ! Capacity Particulars ! Assumptions ! Net of taxes ! Multi purpose ! Productive Assets ! Contingencies ! P & M Cost ! Land Cost ! Margin money ! Preliminary ! Pre-operative ! Int –Implementation
! F.A. Capitalisation ! Depreciation modes ! Income tax Cal. ! Inventories Value ! Sensitivity Analysis ! IRR ! BEP ! DER ! DSCR ! Profitability ! Liquidity ! Current
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Documentation
! MOA / AOA / Deeds ! ROC / ROF / ROS ! Approvals ; ! Central ! State ! Local ! Ind & Comm ! FEMA ! RBI ! SEBI ! Forest ! Environment ! Power
! Fire Force ! Collaborations ! Drug Control ! Land Conversion ! Bio-Data ! Net worth ! I.T & WT returns ! Investment certificate ! Last three yrs Audited
Statements ! MOU if any ! Shareholders list ! Organisation Chart
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Documentation (Cont’d)
! Credit Reports ! Status Report ! Sale/lease deeds ! Soil test report ! Location map ! Plan Sanction ! Agreements ! Power sanction ! Water Sanction ! Quotations ! Guarantors details ! Legal Documents
! Working capital arrangement
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Key Factors – Presenting the Project Report – Practical Tips
! Neatly Binded ! Indexing with page no’s ! Proper Order ! Present it with pictures ! Good quality print out ! Sufficient number of topics ! CMA Data – Verification ! Don’t compromise of Promoters Margin-JACK UP Costs ! Proper Documentation and Support Papers
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SPECIALISING – Factors to be considered :
CONCLUSION
! Not to share the Fees ! Not to charge fees on percentage basis ! Associating the Firm’s name
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THANK YOU
Vinay Mruthyunjaya Senior Partner
Vinay & Keshava LLP., #8,VK Commerce 3rd Main Road, Rajajinagar Industrial Estaate, Opp IT Park Bangalore : 560 003
E-mail : [email protected] Ph : (O) 080- 23167560 / 75
Fax : 080- 23167562 Mobile : +91 9972567575 Res : 080- 23371176
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