ALL INDIA CPE Conference

“Art of preparation of Project Report for

Assured Bank Finance”

By : Vinay Mruthyunjaya
Senior Partner
VINAY & KESHAVA LLP.,
1
Vinay & Keshava
 STRUCTURE

!   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
2
Vinay & Keshava
 PROSPECTS & Efforts - CURRENT SCENERIO

!   Excellent Potential !   State Laws

!   Libralised financing ! Labour Laws
!   Economic Laws
!   Stable Government
!   Trade Laws
!   Interest Rates – downward trend
!   Industrial Policy
!   Foreign Currency Loans !   Credit Policy
!   Interest & Flair !   Current Affairs
!   Good Analytical Skills
!   Accounts !   Logical in Thinking
!   Costing !   Good at English
!   Direct Taxes / Indirect Taxes !   Exposure to Computer
3
Vinay & Keshava !   Ideal for CA’s
 Requirement of Project Reports

Internal Purpose External Purpose

Pre-Investment Study Own Funding Financial Assistance Statutory Clearances

New Unit Environment Clearances

Expansion Central Govt.
Modernisation State Govt
Diversification Local Authorities
Substitution Inspection of Labour
Subsidiary etc Dept. of Industries
& Commerce
Ø  Term Loan Licensing Authorities
Ø  Working Capital Registration Etc.,
Ø  Seed Capital
Ø  Venture Capital
Ø  Lease Finance
Ø  Hire Purchase
Ø  Share Capital 4
Vinay & Keshava Ø  Debentures
 WHO PREPARES THE PROJECT REPORT

LARGE PROJECTS MEDIUM SCALE SMALL SCALE

PROJECTS PROJECTS

Promoters Promoter Promoter

Technical Consultant Technical Consultant Chartered Accountant
Architects Chartered Accountant
Advocates
Engineers
Valuers
Surveyors (Market)
Experts
Chartered Accountant
5
Vinay & Keshava
 CONTENTS OF GOOD PROJECT REPORT

TECHNICAL FINANCIAL FINANCIAL

CONTENTS CONTENTS IMPLICATIONS

Theoritical Financial Co-Relating

Write up Projections Theory and
Financial Figures

6
Vinay & Keshava
 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
7
Vinay & Keshava
 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)

8
Vinay & Keshava
 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
9
Vinay & Keshava
 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
10
Vinay & Keshava
 APPRAISAL OF PROJECT REPORT

TECHNICAL FINANCIAL SOCIO-ECONOMIC

FEASIBILITY VIABILITY FEASIBILITY

P&M Analyse COP & MOF Impact on Society

Manufacturing Process Contingencies Employment Generation
Promoter'sTechnical Debt Equity Ratio Foreign Exchange Earnings
Strength Promoter's Margin Country /State/Local Implications
Promoter's Financical Subsidy Ancilliary Units
Strength Arithmetic Accuracy Contribution to the Ex-chequer
Availabilty of Manpower Analysis of all Projected Statement Non-monetary Benefits to the Society
Selling Competence DSCR
Technological Changes Profitability Ratio
Industrial Policy Liquidity Ratio
Return on Investment
Breakeven Analysis
IRR
Sensitivity Analysis
Projected Wkg. Capital Ratio
Current Ratio
DOCUMENTATION ANALYSIS 11
Vinay & Keshava
 Critical aspects of project Report:
!   Starting point !   F.A. Capitalisation
!   Capacity Particulars !   Depreciation modes
!   Assumptions !   Income tax Cal.
!   Net of taxes !   Inventories Value
!   Multi purpose !   Sensitivity Analysis
!   Productive Assets !   IRR
!   Contingencies !   BEP
!   P & M Cost !   DER
!   Land Cost !   DSCR
!   Margin money !   Profitability
!   Preliminary !   Liquidity
!   Pre-operative !   Current
!   Int –Implementation
12
Vinay & Keshava
 Documentation
!   MOA / AOA / Deeds !   Fire Force
!   ROC / ROF / ROS !   Collaborations
!   Approvals ; !   Drug Control
!   Central !   Land Conversion
!   State !   Bio-Data
!   Local !   Net worth
!   Ind & Comm !   I.T & WT returns
!   FEMA !   Investment certificate
!   RBI !   Last three yrs Audited
!   SEBI Statements
!   Forest !   MOU if any
!   Environment !   Shareholders list
!   Power !   Organisation Chart
13
Vinay & Keshava
 Documentation (Cont’d)

!   Credit Reports !   Working capital

!   Status Report arrangement
!   Sale/lease deeds
!   Soil test report
!   Location map
!   Plan Sanction
!   Agreements
!   Power sanction
!   Water Sanction
!   Quotations
!   Guarantors details
!   Legal Documents
14
Vinay & Keshava
 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
15
Vinay & Keshava
 CONCLUSION

SPECIALISING – Factors to be considered :

!   Not to share the Fees

!   Not to charge fees on percentage basis
!   Associating the Firm’s name

16
Vinay & Keshava

Vinay Mruthyunjaya
Senior Partner
Vinay & Keshava LLP.,
#8,VK Commerce
3rd Main Road, Rajajinagar
Industrial Estaate, Opp IT Park
Bangalore : 560 003
Vinay & Keshava
THANK YOU
E-mail : vinaym@blr.vsnl.net.in
Ph : (O) 080- 23167560 / 75
Fax : 080- 23167562
Mobile : +91 9972567575
Res : 080- 23371176
17