Professional Documents
Culture Documents
Business Environment
1
Social Environment
Political Environment
Which is reflected by:
- Attitude of Government towards liberalisation
- Political stability
- Security
period)
Increased dependence
2
In order to meet objectives in a situation of violet
and rapid changes in the socio-economic-political
environment, an organisation needs to build up
strengths and capability to convert threats into
opportunities. It needs to be vigilant, analytical in
approach, and initiative- taking to meet challenges
posed by dynamic environment. An analysis of external
environment would throw light on:
3
LINKAGE BETWEEN GOVERNMENTS PLANS
AND CORPORATE PLANS
Industrial Growth
Government Plans Agricultural Growth
Social Welfare
Best Technology
Competitive Quality
Higher Productivity
Social Consciousness
(FIGURE II)
5
Project Appraisal- 2
Capital Project - Definition, Characteristics, Benefits
I. Capital Investment/Expenditure
The sum total of all measurable costs is termed as
Project Outlay or simply defined as Capital
Investment/Expenditure.
6
Examples of schemes involving capital expenditure are:
Installation of a major new project such as
Thermal Power Station, Steel Plant, Cement Plant,
etc.
7
2. Important characteristics of a capital project
8
The broad distinction between capital and revenue
expenditure is shown in the Figure III below.
EXPENDITURE
CAPITAL REVENUE
(FIGURE III)
Synopsis
1. Search for investment opportunities by an 6
entrepreneur
2. Classification of projects in an existing concern 7
3. Expansion Project 8
4. Modernisation Project 8
5. Balancing Facilities Project 8
6. Diversification Project 8
(1) Diversification may be undertaken through 9
VERTICAL INTEGRATION
7. Cost Reduction Project 9
8. Research & Development Project 9
9. Quality Improvement Project 9
10. Employees' Welfare Project 9
11. Statutory Requirement Project 9
12. Pollution Control Project 9
13. Benefits of a capital Project 10
By an existing concern
Make or buy
Import substitution
Product modification with the existing technology
Modification in layout of specific facilities
Technological improvement
11
4. Scope for enlargement of domestic market, and an
entry into the foreign market in respect of different
products.
5. The opportunities of take-over, merger,
acquisition, joint venture, etc.
6. Government plans and policies, which may lead to
industrial development, change economic
environment and change consumption behaviour.
2. Trade exhibitions.
Capacity Expansion/Augmentation
Modernisation (Including replacement)
Balancing Facilities
Diversification
Cost Reduction
Research & Development
Employees' Welfare
Statutory Requirement
14
The major benefits are:
Increase productivity
6. Diversification Project
15
(1) Diversification may be undertaken through
VERTICAL INTEGRATION
This maybe:
16
PROJECT APPRAISAL
Detailed Project Report Formulation
Project Cost
18
Application for financial assistance under Project
Financing Participation Certificates Scheme
Note :
1. GENERAL
Date of application
1.01 Name of the industrial concern
(in block letters)
1.05 Sector
Public sector/Joint sector/private sector/Co-
operative sector
19
1.06 Name of the business house/group
to which the concern belongs
and the list of other companies in
the same group
1.07 Is the MRPT Act applicable to the company?
If so, have you obtained the necessary
clearance from the government?
1.08 Location
(Indicate Village, Tehsil, District and State)
(a) Registered Office
(b) Controlling (Head) office
(c) Project for which assistance is sought
(d) Is it a backward area eligible
for concessional finance from
institutions/central subsidy?
(c) Underwriting .
(i) Equity capital
(ii) Preference capital
(iii) Debentures
20
(e) Guarantee of foreign currency/deferred
credit
(i) Principal
(ii) Interest
(iii) Total
(iv) Guarantee to be Issued in
favour of
2. PROMOTERS
21
2.02 In case the promoter is a limited company, furnish
a brief writ4e-up on the activities and past
performance of the company and any other
expansion programme(s) contemplated.
Enclose:
22
PARTICULARS OF THE INDUSTRIAL
CONCERN
(Many of the questions in this section are applicable to
existing concerns only)
23
3.04 Give names, age and addresses of directors,
including wholetime directors, their qualifications,
past experience and business and industrial
background and existing and proposed
shareholdings in the company.
24
Furnish number of supervisory, skilled, semi-
skilled and unskilled personnel employed in each
of the existing plants.
26
3.16 Give destination, physical volume and proceeds of
export sales by main product lines in each of the
last five years. Also detail the export incentives
available to the concern.
27
4. PARTICULARS OF THE PROJECT
4.01 Describe in details of the project for which
financial assistance is required, indicating whether
it relates to expansion, modernization or setting up
of a new plant.
Enclose : Copy of the project report / feasibility
report, if any.
A. Capacity
4.02 Furnish details of installed capacity and
production as below : (Capacity is arrived at on
the basis of ...... day's working on ...... shift basis)
Product Present Proposed Maximum
installed installed Production
capacity capacity envisaged
(i)
(ii)
(iii)
(iv)
4.03 Indicate the section-wise capacities for the major
sections of the plant, along with detailed
calculations. Explain the reasons for
excess/inadequate capacity, if any, in any of the
sections.
28
4.04 Give specifications of major products and by-
products, including size and weight and, where
appropriate, chemical and physical properties as
also their industrial uses.
B. Process
4.05 Explain briefly, the technical process proposed to
be employed. Indicate reasons for
adopting/choosing the particular process.
Enclose: Copy of process.
4.06 Has the proposed process ever been tried in the
country? If so, with what results.
C. Technical arrangements
4.07 Explain the technical arrangements made/proposed
for the implementation of the project.
4.08 In case any collaboration is involved, furnish a
brief write-up on the collaborator company
indicating its activities, size and turnover,
particulars of existing plants, other projects in
India and abroad set up with same collaboration,
etc.
29
Enclose:
(i) Copies of published brochures highlighting the
activities of the collaborator and balance sheets for
last three years;
(ii) Copy of collaboration agreement;
(iii) Copy of Government approval for the
collaboration;
(iv) Copy of Government approval for availing of the
services of foreign technicians.
4.09 Furnish the particulars of consultants, as below:
(a) name of the consultants (indicate whether Indian
or foreign.)
(b) scope of work assigned to them;
(c) fees payable and the manner in which payable;
(d) brief particulars of the consultants including the
organisational set up, bio-data of senior personnel,
names of directors/partners, particulars of work
done in the past and work on hand.
30
Enclose:
(i) Copies of published material on consultants;
(ii) Copy of agreement with consultants;
(iii) Copy of government approval in case of foreign
consultants.
D. Management
4.10 Describe proposed arrangement for executive
management of the concern both during the
construction period and for regular operations
thereafter.
4.11 Give particulars of proposed key technical,
administrative and accounting personnel.
Enclose : Proposed organisation chart indicating
the lines of authority.
E. Location and Land
4.12 Indicate location of plant, requirements of land for
the project and the arrangements made therefor.
Enumerate the locational advantages.
31
4.13 Give the following particulars in respect of the
land acquired/proposed to be acquired for the
project:
(a) Area and cost
(b) Basis of valuation
(c) Mode of payment
(d) When purchased/take on lease
(e) Previous owners and their relationship, if any,
to the promoters/directors
(f) Is it industrial land? If not, has it been
converted for industrial use?
(g) Type of soil and load bearing capacity
(h) Water table
Enclose:
(i) copy of sale/lease deed;
(j) copy of soil test report;
(k) copy of Government order converting the
land into industrial land, if applicable;
(1) location map;
(m) site plan showing the contour lines, the
internal roads, power receiving station, railway
siding, tube wells, etc.
32
F. Buildings
4.14 Explain the arrangements made/proposed for
construction the buildings. Furnish particulars of
buildings as per Form V.
4.15 Give the following particulars of architects:
(a) Name of architect/firm;
(b) Scope of work;
(c) Fees payable and manner in which payable;
(d) Past experience of the architects;
(e) Bio-data of senior personnel in architects' firm.
Enclose:
(i) Copy of agreement with architects;
(ii) Copy of published write-up/brochure on
the architect.
G. Plant & Machinery
4.16 Explain the basis of selection of equipment for the
project. Furnish list of imported and indigenous
plant and machinery acquired/to be acquired for
the project, along with detailed specifications, etc.
as per Forms VI and VII. Enclose : Layout of the
pant and machinery indicating the flow of
material.
33
H. Raw materials
4.17 Provide information as per Form VIII indicating
the requirement of the raw materials, components,
chemicals, etc.
4.18 Axe there any price or distribution controls on any
of the items listed above? If so, give details.
4.19 Indicate the arrangements made/proposed for
obtaining the raw materials/chemicals which are in
short supply or to be imported.
4.20 In case of mining lease, provide:
(a) location and area of the mineral bearing lands;
(b) particulars of minerals;
(c) principal terms of the mining lease;
(d) estimated future reserves and quality of
reserves for each of the minerals and basis thereof;
(e) means of transport from the mines to the
factory.
Enclose :
(i) Copy of the agreement for mining lease;
(ii) Expert's report regarding the reserves.
34
I. Utilities
4.21 Power: Furnish the following details:
(a) Source of power and supply voltage
- purchased
- own generation
- stand-by arrangements
(b) Maximum demand
(c) Connected load
(d) Peak hour requirements
(e) Contracted load
(f) Power tariff
(g) Cost of power per annum at maximum
capacity utilisation (give calculations)
Enclose:
(i) Copy of letter of sanction for power;
(ii) Copy of agreement with Electricity Board;
(iii) Copy of electrical la)'out of the plant.
4.21 A Conservation of Energy (for Hotel Projects only)
(a) Indicate the efforts proposed for utilising
alternate sources of energy particularly the
following:
35
(i) For improving power factor
(ii) For improving heating efficiency in kitchens,
toilets, etc.
(iii) Use of solar energy for low temperature heating
requirements and whether siding/orientation of the
hotel buildings has been made to optimise the use
of solar energy.
(iv) For bringing down air-conditioning loads.
(v) For optimizing illumination from lighting
fixtures.
(vi) For better power-load management, including for
evening-out peak demand requirements and
cutting down non-essential loads,
(vii) For generally cutting down losses in the use of
various utility services namely, power, water and
steam and maximum and efficient utilization of
waste heat.
(b) Indicate any other measures considered necessary
or proposed to be taken in the context of energy
conservation.
36
(c) Give particulars of the monitoring system to
acquire the desired economy in use of energy.
37
6. Solar crop dryers and systems;
7. Solar refrigeration, cold storages and
air-conditioning systems;
8. Solar stills and desalination systems;
9. Solar pumps based on solar thermal and solar
photovoltaic conversion;
10. Solar power generating systems;
11. Solar photovoltaic modules and panels for water,
pumping and other applications;
12. Wind mills and any specially designed devices
which run on wind mills;
13. Any special devices including Electric Generators
and pumps running on wind energy;
14. Bio-gas plants and bio-gas engines;
15. Agricultural and municipal waste conversion
devices producing energy;
16. Geo ocean thermal energy.
4.22 Water : Give details on :
(a) Requirement of water, separately for - calculating,
make-up, process, boiler feed, drinking, cooling.
38
(b) Sources of water arrangements proposed and
water charges payable
(c) Capacities of the tanks, reservoirs
(d) Describe water treatment arrangements proposed.
Enclose :
(i) Layout for the water system:
(ii) Copy of letter of sanction of water by
municipal/local authorities, where applicable;
(iii) Copy of water analysis report,
Enclose:
(i) Layout for compressed air, fuel etc.
(ii) Copies of letter of allotment of coal furnace oil
from the concerned authorities.
40
4.25 Transport: Furnish information on:
J. Effluent
M. Schedule of implementation
Commencement Completion
(Month & year) (Month & year)
(i) Acquisition of land
(viii) Commissioning
Total
44
6. MEANS OF FINANCING
(In thousands of rupees)
Rupee loans
Foreign currency loans
Debentures
Internal cash accruals
Others (specify) __________
__________
45
6.04 Indicate sources of foreign exchange and
arrangements, if any, made for obtaining foreign
exchange.
46
7. MARKET AND SELLING ARRANGEMENTS
47
7.05 If there are any export commitments assumed by
the company as part of the Government
requirements, indicate the arrangements proposed
for meeting the same and the export incentives
available.
48
7.10 In case the company proposes to have any sole-
selling agency for any of its products, furnish the
following particulars:
(a) Name of the selling agent
(b) Remuneration
(c) Special advantages/reasons for the
appointment of sole selling agents
(d) Relationship of the directors of the company
with the directors/partners of the sole-selling
agents.
(e) Past experience in handling the
same/similar products and financial position
of the sole-selling agents.
(f) Storage facilities available with the sole-
selling agents and the adequacy of the
facilities.
49
8. PROFITABILITY AND CASH FLOW
50
9. ECONOMIC CONSIDERATIONS
51
Give brief write-up on the economic benefits to the
country in general and the region in particular, on
account of the proposed project.
Enclose : Copies of
licences/consents, etc. received
11. DECLARATION
Signature
Station Name & Designation
Date: Name of the concern
53
FORM I
Date :...........
The Manager
.......................
.......................
(Name and address of the bankers to be inserted here)
Dear Sir,
Yours faithfully,
55
FORM- II
PARTICULARS OF EXISTING DEBENTURES AND LONG-TERM SECURED
LOANS AS ON………………………..
A. DEBENTURES
Date of Purpos Securit Trustee Origina Amoun Rate of Amortis Conver Main Restrict
Debent e for y s for l t Interest ation sion or holders ive
ure which Charge debent amount outstan schedul other of covena
Trust debent d and ure of issue d-ing e special debent nts in
Deed ures nature holders provisi ures regard
were of ons to
raised charge dividen
d,
raising
of
loans,
creatio
n of
further
charge
s, etc.
1 2 3 4 5 6 7 8 9 10 11
56
Contd...2.
B. LONG-TERM SECURED LOANS:
Name of Purpose Original Amount Rate of Amortiz Security Date of Defaults Restricti
the of the Amount Outstan Interest ation Charges creation , if any, ve
Instituti Loan ding Schedul and of in the covenan
on from e nature charge paymen ts in the
whom of t of security
loan charge interest docume
raised and/or nts in
principal regard
to
dividend
, raising
of loan,
creation
of
further
charges
1 2 3 4 5 6 7 8 9 10
57
FORM- III
PARTICULARS OF EXISTING CASH CREDIT/OVERDRAFT ARRANGEMENTS
AS ON............................
Name Nature Maxim How Particul Stipulat Particul Rate of Value Amoun Whethe
of the of um and ars of ed ars of Interest of t r the
Bank Facility Limit when Securit Margin guaran Securit outstan bank
repaya y Percent tee, if y and ding on has
ble age any drawin the negativ
g date of e
power applica charge
tion on
fixed
assets
58
1 2 3 4 5 6 7 8 9 10 11
59
FORM IV
DISTRIBUTION OF SHAREHOLDINGS
(for existing companies only)
(In thousands of rupees)
Equity Preference Total
1. Indian promoters
(Name of major groups
(i)
(ii)
(iii)
(iv)
2. Foreign, collaborators
3. State Government
4. Central Government
5. State Industrial Development
Corporation (Specify)
6. Financial institution
(i) IDBI
(ii) IFCI
(iii) ICICI
(iv) LIC
(v) UTI
(vi) Others (Banks etc.) ______
Total ______
In respect of shares issued for consideration other than
for cash, furnish the following particulars:
Name of No. and value Date of Consideration for
the party of shares issued issue which issued
60
FORM-V
PARTICULARS OF FACTORY AND NON-FACTORY BUILDING
(Details of all buildings / civil constructions included under item ‘2-Buildings’ in Form
IX may be included here
Built-up Area In case contract is awarded
61
Description of the Building
Type of Construction
No. of Floors
Length
Breadth
Estimated Cost
Nature of contractor
Date of contract
Amount of contract
63
Sr.No.
1
Description with board specification
2
Name of manufacturer
3
Country of Origin
4
A. ALREADY IMPORTED
Whether order placed or not
5
Date of placement of order (actual / expected)
6
Expected date of delivery at Indian port
7
FORM VI
Port of Lading
8
FOB Value
9
64
(i) Main plant and equipment
(ii) Miscellaneous fixed assets
B. PROPOSED TO BE IMPORTED
(i) Main Plant and equipment
(ii) Miscellaneous fixed assets
FORM-VII
PARTICULARS OF MACHINERY ALREADY ACQUIRED / PROPOSED TO BE
ACQUIRED FROM INDIGENOUS SOURCES UNDER THE PROJECT
Sr.No. Description Name of Whether Date of Expected Ex- Basis of valuation Remarks
including Manufacture order placement date of works (quotation (give
broad / Supplier placed of order delivery F.O.R. date), order placed,
Specification or not (actual/exp price agreements entered
ected) into, etc.)
1 2 3 4 5 6 7 8 9
A. ALREADY ACQUIRED
(i) Main plant and equipment
(ii) Miscellaneous fixed assets
B. PROPOSED TO BE ACQUIRED
65
(i) Main plant and equipment
(ii) Miscellaneous fixed assets
66
FORM –VIII
REQUIREMENT OF RAW MATERIALS, CHEMICALS AND COMPONENTS
(at maximum capacity utilization)
Sr. Name Speci Whethe Requir Total Unit Tota Basis Sources of Unit
No of fi- r e- annual cost l of supply consump
. materia catio importe ment requir of Cos cost (indicate tion
l / n d / per em- Mater t estim names and guarante
chemic indigen tone ent ial ate addresses of ed by the
al ous of principal trade collabora
compon final suppliers who tor /
ent produ have been technical
ct contracted / consulta
agreed to nt
supply
1 2 3 4 5 6 7 8 9 10 11
Enclose:
(i) Copies of letters from suppliers agreeing to supply the company’s requirements
67
(ii) Copies of import licence for items to be imported.
68
FORM-IX
ESTIMATED COST OF THE PROJECT
(In thousand of rupees)
(6) + (3)
Rupee Cost
Rupee Cost
Total
costRupee equivalent of foreign exchange
1 2 3 4 5 6 7
1. Land and site development:
(a) Cost including conveyance
charges of .... Hectares of
freehold land acquired/proposed
to be acquired at the rate of Rs......
per hectare.
70
1 2 3 4 5 6 7
(d) Cost of laying roads:
(i) approach road connecting
the factory site to main road ...
rm of .... (type of construction)
at Rs. ... per rm.
(ii) Internal roads for the factory ....
Rm of ... (type of construction) at
Rs.....per rm.
(e) cost of fencing/compound wall
... rm of ...... (type of
construct! on) at Rs.....per rm.
(f) Cost of gates (No, of gates ....)
2. Buildings;
(a) Factory building for the main
plant and equipment
71
1 2 3 4 5 6 7
(f) Quarters for essential staff
72
1 2 3 4 5 6 7
73
1 2 3 4 5 6 7
(g) Equipment and piping for
supply and treatment of water
(including cost of installation).
(h) Equipment and piping for
distribution of steam, air, etc.
(which do not form part of
the main plant and machinery).
(i) Laboratory equipment
(j) Workshop equipment
(k) Fire fighting equipment
(1) Effluent collection, treatment
and disposal arrangement
(m) Miscellaneous fixed assets
74
1 2 3 4 5 6 7
8. Pre-operative expenses:
(from ..... (date) to date of
commencement of commercial
production)
(a) Establishment
(b) Rent, rates and taxes
(c) Travelling expenses
(d) Miscellaneous expenses
(e) Interest and commitment
charges on borrowings (give
details of calculations).
(f) Insurance during construction
including erection insurance
(g) Mortgage expenses (stamp
duty, registration charges and
other legal expenses) (... per
cent of loan of Rs......lakhs)
(h) Interest on deferred payments,
if any
75
FORM IX A
ESTIMATES OF CONTINGENCY ESCALATION
PROVISION
Item of Cost Considered Reasons
Firm Non(-) for
(Rs. In firm consider
Lakhs) (Rs. In ing the
lakhs) cost of
firm
1 2 3 4
1. Land
2. Buildings
3. Plant & Machinery
- Imported
- Indigenous
- Stores & Spares
- Foundation &
Installation
4. Technical know-how
fees etc.
5. Expenses on
foreign technicians
and training of
Indian technicians
abroad
6. Miscellaneous fixed
assets
7. Preliminary and
capital issue
expenses
76
8. Pre-operative
expenses
Total
77
Form IX-B
MARGIN MONEY FOR WORKING CAPITAL
1st year 2nd year 3rd year 4th year
Amount
Amount
Amount
Amount
79
reaches maximum capacity utilisation.
(2) The amounts given here shall
agree with the figures in the
profitability statement as well as
the cash flow statements
80
FORM X
MEANS OF FINANCING
(in thousands of rupees)
In In rupees Total
rupees equivalent
of foreign
exchange
(1) (2) (3)
81
6. Deferred payments (including
interest) to machinery suppliers
(less amounts due upto start
of production)
82
FORM X-A
PROPOSALS FOR RAISING SHARE CAPITAL,
LOANS AND DEBENTURES
Subs R F De Re
cripti upe ore be ma
on / es ign ntu rks
Unde Loa Cur res
rwriti ns ren
ng of cy
shar Loa
e ns
capit
al
Equit Pref
y .
(1) (2) (3) (4) (5) (6)
Subscription
(a) Indian Promoters
(i) In cash
(ii) For consideration other
than cash specify)
(b) Foreign collaboration
(i) In Cash
(ii) For consideration other
than cash (specify)
(c) State Government
(d) State Industrial
Development Corporation
(SIDC)
83
84
Underwriting/Loans:
(i) IDBI
(ii) IFCI
(iii) ICICI
(iv) LIC
(v) UTI
(vi) SFC (specify)
(vii) SIDC (specify)
(viii) Commercial banks
(ix) (specify)
(x) Insurance Brokers
________
Total ________
85
FORM X-B
SOURCES OF FUNDS IN RESPECT OF
EXPENDITURE ALREADY INCURRED
Amoun Rate Other
t (in of terms
thousa intere and
nds of st condition
rupees) payab s of loans
le / deposits
etc.
1. Share - equity
- preference
4. Loans/Deposits from
promoters, directors,
friends, etc.
5. Public deposit
86
FORM XI
ESTIMATES OF COST OF PRODUCTION
(The statement should be prepared for 5 years)
(In thousands of rupees)
Year ending
19... 19... 19... 19... 19...
Raw materials, chemicals, components
and consumable stores
1.
2.
3.
4.
5.
6.
(a) Total material cost
Utilities
Power
Water
Fuel
(b) Total utilities
Labour and plant overheads
Wages
Factory supervision salaries
Bonus
Provident fund
(c) Total labour
Repairs and maintenance
Light
Rent and taxes on factory assets
Insurance on factory assets
Miscellaneous factory expenses
Contingencies
(d) Total factory overhead
(e) Estimate of cost of manufacture (a+b+c+d)
Note : Indicate the basis for
(a) wastage for raw materials, and
(b) rejection rate for finished products
87
FORM XII
ESTIMATES OF WORKING RESULTS
(The statement should be prepared for a period of 5 years)
(In thousands of rupees)
Year ending
19... 19... 19... 19... 19...
Miscellaneous
(b) Total administrative, expenses
(c) Total sales expenses
(d) Royalty and non-how payable
(e) Total cost of production (a+b+c+d)
(f) Expected sales (As per statement in
Form XII-A
88
19.. 19... 19... 19... 19...
91
FORM XII-B
CALCULATION OF WAGES AND SALARIES AT
MAXIMUM PRODUCTION
Number Average Total
Monthly Annua
Salary l
Salary
1. Factory wages and salaries
(a) Workers
Skilled workers
Semi-skilled workers
Unskilled workers
Casual workers
_________________________________
Total _________________________________
(b) Factory supervision
Category Salary Number Average Total
Scale monthly annual
salary salary
_________________________________
Total _________________________________
Sources of Funds
1. Share issue
2. Profit before taxation with
interest added back
3. Depreciation provision
for the year
4. Development rebate
reserve
5. Increase in secured
medium and long-term
borrowings for the projects
6. Other medium/long-term
loans
7. Increase in unsecured
loans and deposits
8. Increase in bank
borrowings for working capital
9. Increase in liabilities for
deferred payment (including
interest) to machinery suppliers)
10. Sale of fixed assets
11. Sale of investments
12. Other income (indicate
details)
_______
Total (A) _______
4. Decrease in secured
medium and long-term borrowings
... all-India Institutions
... SFCS
... Banks
8. Increase in investments in
other companies
94
Project Feasibility Study
Introduction
Market Feasibility
97
Demand Estimation
Projection of demand is the most important step in a
project feasibility study, Salient points related to
demand estimation are briefly enumerated below:
The end-user profile
Supply Estimation
Unlike demand, supply estimation is more difficult.
Past trends of supply of goods can be studied and
further extrapolated. Projections so made, need to be
adjusted with the help of additional information
like the projects undertaken in the economy, import
possibility as governed by imports policy, import tariff
and international prices. Information regarding the entry
barrier is also useful. A long gestation period and a high
capital to labour ratio in an industry may create a
natural entry barrier. The government licensing policy,
the availability of required inputs like materials and
skilled labour also cause entry barrier. Product category
where entry barrier is high is unlikely to see sudden
100
spur in supply, offering more comfortable position to
existing players.
Table-1
Demand Supply Gap Calculation for Five years
Technical Feasibility
Financial Feasibility
104
The financial feasibility check involves a detailed
financial analysis. The financial analysis includes quite
a few assumptions, workings and calculations. Some
are briefly described below:
PAT+Depreciation+interest
DSCR = ---------------------------------- (eq.2)
Interest+principal sum repayment
Solution
108
Note : Tax assumption is simplified, and tax shield on I
interest is not adjusted.
Risk Assessment
109
There are many methods of risk analysis and
risk management. However, at the stage of the project
feasibility study, two main methods are applied ; (a)
break even point, and (b) sensitivity analysis.
Fixed Cost
BEP (Unit) =------------------------
Contribution per unit
80,00,000
= ------------------------- =20,000 units
400
Economic Viability
The terms 'economic viability' and 'financial viability' |
are not different for companies. However, from the
national angle and from the view-point of the economy
as a whole, economic feasibility and financial feasibility
are not considered to be the same. Cost and benefits to
the nation due to the proposed project are considered in
the economic feasibility test. Tax revenue, generation of
employment, savings of foreign exchange and such
other factors, differentiate economic viability from
financial viability. government and government
agencies calculate the economic indicator .of a project
before permitting the project to finance it.
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Types of patterns: Patterns can be divided into four
groups; namely, horizontal patterns, seasonal patterns,
cyclical patterns and trend patterns. Figures 1.a to l.d
give a pictorial presentation of these patterns.
S=TxCxIxR (eq. 5)
Q2-Q1 I1+I2
Ei = ------- x ------ (eq-6)
I2-I1 Q1Q2
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