Project Appraisal

• It is a process of judging the viability of the

project from technology, finance, market,
managerial and economic point of view
– Technical Appraisal
– Financial Appraisal
– Market Appraisal
– Managerial Appraisal
– Economic Appraisal
 Technical Appraisal
• Technical review is done by qualified person
• In case of large and sophisticated project it is
done by outside expert
– Process of manufacturing
– Engineering know how
– Raw materials and consumable
– Location and site
– Building
– Plant and equipments
– Manpower requirements
– Break-even point
 Financial Appraisal
• Estimation of capital cost
– Whether proper quotations are obtained from
potential supplier?
– Whether contingencies are provided?
– Whether inflation factor is considered?
• Estimation of working results
– Whether price computation of input and output is
proper?
– Whether cost projections and distinction between
fixed and variable cost is proper?
 Financial Appraisal
• Adequacy of rate of return
– IRR and WACC
• Financing pattern
– Debt equity ratio
– Promoters contribution should be in the range
of 30 to 50 %
 Market Appraisal
• Whether demand projections made for the
output of the project is reasonable?
– Based on available survey
– Based on industry association projection
– Independent market survey
• Adequacy of marketing infrastructure
– Distribution network
– Transport facilities
– Warehousing and stock level
• Competency of marketing personnel
 Managerial Appraisal
• Sound understanding and commitment of
promoters towards the project
• Prior experience of the promoters
• Organization structure and staffing plan
• Remuneration structure of key technical
and managerial personnel
 Economic Appraisal
• Economic rate of return
• Social cost benefit analysis
• Employment generation
• Project’s contribution to the development
of sector / economy
• Industrial development of the region
• Improvement in the socio-economic status
of the people of the region