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Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06

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Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06 Dr Rajesh Khajuria, Director TEAMPro Ltd, London TEAM Projects & Consultants, Vadodara – PowerPoint PPT presentation

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Title: Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06


1
Key Aspects of Project Appraisal for SME
Financing CII FINcon 02.09.06
  • Dr Rajesh Khajuria, Director
  • TEAMPro Ltd, London
  • TEAM Projects Consultants, Vadodara

2
A Warm Welcome to all of You!
  • CII Organisers and Members
  • SME Owners and Managers
  • Chief Guests
  • Speakers

3
Presentation Plan
  1. Indian SME Overview.
  2. Project Appraisal Methods.
  3. Project Appraisal Key Aspects.
  4. Case Study _at_ Asahi Songwon Colors Ltd with Korean
    Technology for TL, WCL and Public Issue.
  5. Questions?

Rs
4
Indian SME Overview
Rs
  • Part I

5
Welcome to Indian SMEs!
  • 95 of Industrial Units are SMEs
  • 40 of Value Added in Manufacturing Sector
  • 35 of National Exports
  • 7,500 Products Manufactured
  • Employs 20 million people
  • But, contribute only 7 of GDP ?
  • 40 of Bank Finances to Priority Sector
  • SMEs and Agriculture

Rs
6
Welcome to 3.5m Indian SMEs!
Rs
7
SMEs achieve Rs 8000 billion Sales
Rs
8
SMEs have Rs 1000 billion Investment
Rs
9
SMEs Export Rs 800 billion G S
Rs
10
SMEs provide 20 million Employment
Rs
11
The World depends on SMEs
  • UK 98 of all Businesses are SMEs
  • Japan 99 are SMEs
  • USA 96 are SMEs
  • Africas 29 nations 99.5 are SMEs
  • The world depends on SMEs
  • India depends on SMEs for economic success of its
    1 billion people

Rs
12
Project Appraisal Methods
Rs
  • Part II

13
Project Appraisal Methods
  • Today we discuss
  • Bank Appraisal for Loans.
  • Appraisal for Public Issue of Equity.
  • Other Methods
  • FI Appraisal for Loans
  • World Bank Project Appraisal
  • UNIDO, Social Project Appraisal

Rs
14
Project Appraisal Key Aspects
Rs
  • Part III

15
Project Appraisal Key Aspects
  • The Objectives
  • The Project
  • Methodology of Appraisal
  • Corporate Analysis
  • The Promoters Team
  • Marketability Assessment
  • Technical Feasibility
  • Economic Viability Financial Structuring
  • Environmental Impact Assessment
  • Conclusion Recommendation

Rs
16
Case Study _at_ Asahi Songwon Colors Ltd
Rs
  • Part IV

17
The Objectives _at_ Case Study
  • Asahi Songwon Colors Ltd, Ahmedabad (Padra Plant)
  • Phase I 2005 Operating.
  • Phase II III Expansion proposed with Term
    Loan, Working Capital Loan and Public Issue.
  • Total Investment Rs 71 Crore.
  • State Bank of India referred the Project
    Appraisal assignment to TEAM.

Rs
18
Methodology of Appraisal
  • Project Report of the company as a base.
  • Site visit to the Factory.
  • Market Competition Analysis.
  • Discussions with the Bankers and Co.s top
    executives on all aspects.
  • Raising 35 Queries.
  • Balance Sheet Analysis.
  • Independent unbiased Appraisal Judgement
  • Confidential Report with Specific Conclusions and
    Recommendations.

Rs
19
The Project _at_ Colors
  • Asahi Songwon Colors Ltd has already invested Rs
    25 Crore in a new Medium Scale Plant at Padra
    (Baroda) to manufacture basic Colors for export
    and domestic markets.
  • Collaboration with Songwon Colors Ltd, Korea
    (taken over by Clariant of Europe).
  • Colors are used in all walks of life Textiles to
    everything we see, touch and feel.

Rs
20
Vision
  • Songwon, Korea
  • Better Colour for A More Beautiful Life.
  • Asahi, India
  • To be a global leader in its field of Pigments
    by supplying quality and environment friendly
    products
    to MNCs worldwide.
  • Can you analyse both Visions?

Rs
21
Corporate Analysis
  • Past Performance
  • Corporate Emergence
  • Promoters Team Most Important
  • SWOT Analysis

Rs
22
The Promoters Team
  • Highly qualified and experienced with up to 15
    years experience in the same line.
  • MBA (USA), Technologists, CA.
  • Exporting, Profit-making existing business.
  • Demonstrated Performance in Manufacturing,
    Management and Export.
  • Politically well-known, but not spared by State
    Bank of India from Project Appraisal!

Rs
23
Marketability Assessment
  • Product Applications
  • Demand assessment based on end-user method
  • Global Consumption estimates
  • Competition and Supply Assessment
  • Export Import Data analysis
  • International and domestic prices
  • Demand-Supply Gap and Customers
  • Scope for the Company to tap the Gap

Rs
24
Technical Feasibility
  • Capacity Assessment Projected Utilisation
  • Manufacturing Process
  • Land Building Requirements
  • Plant Machinery Layout proposed
  • Inputs Raw Materials, Power, Fuel, Water,
    sources, quantities, prices, suppliers

Rs
25
Technical Feasibility
  • Technology source and cost
  • Manpower Requirements Costs
  • Pollution Control Measures
  • ISO Certification 9000 / 14000

Rs
26
Economic Viability
  • Project Cost
  • Appraisal resulted in Addition of Rs 6 Crore to
    original estimate of Project Cost Rs 71.5 Crore
    to Rs 77.55 Crore
  • Rise in Equipment costs and increased Working
    Capital, detected from TEAMs Appraisal process
  • Hell lot of efforts to convince the Company about
    raising Sources of Finance by Rs 6 Crore!

Rs
27
Sources Financial Re-structuring
  • Rs Crore
  • Term Loan SBI (FCNR/Rs) 13.82
  • Equity Share Capital 43.84
  • Unsecured Loan 07.98
  • Reserves Surplus 11.25
  • Deferred Tax Liability 00.66
  • TOTAL Sources of Finance 77.55
  • Add Working Capital Loan 24.00

Rs
28
Environmental Impact Assessment
  • Water pollution quantity
  • Treatment methods and equipments
  • Disposal to ETP Channel as per GPCB Rules
  • Membership of ETP Channel
  • Sources of Fresh Water
  • Ministry of Environment Forests clearance
    needed for large Projects

Rs
29
Conclusion Recommendation
  • The project is assessed by TEAM at the behest of
    State Bank of India.
  • The Project is Technically Feasible and
    Economically Viable.
  • SBI may grant Term Loan and Working Capital Loan
    recommended.
  • The Appraisal may be quoted in Prospectus for
    SEBI permission for Public Issue.

Rs
30
Learning Today
  • Proven Appraisal Process. Reliability.
  • Based on PhD Research of Dr Rajesh Khajuria
  • Independent Unbiased Appraisal.
  • Appointment by a Bank or Financial Institute.
  • Consultants Track Record. Credibility.
  • TEAM has 95 Success rate and 99 Recovery of
    Loans recommended for 200 Projects in 23 years
    (1983-2006).
  • Quick Turnaround.
  • Ethics for Long Term Success.

Rs
31
Questions?
Dr Rajesh Khajuria, Director TEAMPro Limited
www.TeamPro.org dr.khajuria_at_gmail.com M
94260 75402 Data and Image Courtesy SSI Annual
Report 2003, Ministry of Small Scale Industries,
Government of India
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