PROJECT APPRAISAL

a) Proposal : Sanction of Term Loan of Rs. 100.00 Crs (Tenor 9 y) to XYZ LTd., on Consortium mode
of Financing
b) Project / Purpose : To set up a 0.3 MTPA Iron ore Pellet Plant at Champadihi
Village in the district of Keonjhar. The total project cost is estimated at Rs
152.77 cr. Details of cost is given below.

Parameters
Land & Land Development Cost

Cost
6.43

Building & Other Civil work

36.86

Plant & Machineries

67.37

Miscellaneous Fixed Assets

4.20

Provision For Contingencies (@5% of item 2, 3 & 4)

5.42

Erection & Commissioning

4.72

Consultancy Charges

1.28

Pre-Operative Expenses including Interest During Construction

Margin For Working Capital

20.79
5.70

TOTAL

152.77

The project will be implemented on Turnkey basis by EICS Technology Pvt. Ltd. of Kolkata.
Details on the Turn key provider and the terms of Contract are furnished at item no. h.10
below.
c) Key Project Parameters:
crores
Project cost
Debt - TL
Internal accrual
Unsecured Loan(quasi equity)
Equity
DE Ratio
Tenor of the loan
Gross Av DSCR
Min Security Margin
Promoters contribution

Rs. in
152.77
100.00
2.22
50.55
1.90:1.00
9y
2.21
27.67%
52.77

LC Sub limit with debt (Capex)

Bank guarantee

30.00

Our share in debt

25%
Our share in LC
25%
Our share in BG
Derivative limit
Our share in total exposure
25%
Details of sponsor, having major Stake in the SPV
a) Name
NA
b) Equity stake
NA
c) Credit enhancement mechanism
NA
d) Pre-sanction Visit : Pre-sanction visit to the plant site was undertaken by the Credit Analyst on
12.09.12 and again on 06.02.2013. The progress of work is as under :

- The site has been bounded by brick walls with concrete pillars.
- The foundation work of all the buildings are complete
- Total expenditure incurred in the project till date is Rs. 14.51 cr .
e) Details of TEV Study : We have obtained a TEV Study on the Project from R Singh & Associates
Pvt. Ltd., empanelled with our Bank and they have opined that the project is technically feasible and
commercially viable. They have also stated that the project cost is realistic and the project can be
implemented smoothly. Their recommendations are furnished in Annexure to this Memorandum.
However, we furnish below some of the basic parameters of the Study and our assumptions
Parameters
1

TEV Study

Our

Reason for adverse variance

60% in 1 yr

Assumption
60% in 1st yr

only
Ours is on a conservative

70% in 2nd yr.

70% in 2nd yr.

estimate

75% in 3rd yr

80% thereafter

st

Capacity utilisation

80% in 4th yr.

2
3

85% thereafter
Sale price per MT
7400/Raw material consumption per 1.08

7400/1.08

4
5

MT (iron ore fines)

Fuel Oil (ltrs per MT)
4.67
Raw material price (iron ore 2500/-

5.00
2500/-

fines)
Power Consumption per MT

80 units

Marginally on the higher side

70 units

because
7
8

Power Tariff (per unit)

Implementation period

5.00
18 months

5.30
36 months

of

the

power

fluctuation
As per rate in Odisha
Based on actual time taken
by the existing plants
ranges from 30 to 36 months

Project cost
(differs on the following)
i)

Interest

i)

9.72

i) 20.07

during construction (IDC)

ii)

Pre-op
expenses

i)

o/a

longer

implementation period
ii) 1.92

ii) 0.72

ii) estimated @ Rs. 2.00

lac per month for 36

months
iii) 5.12
iii)
10
11

iii) 5.42

Contingency

DE
DSCR

iii) @ 5% on civil / P&M

costs

2.00 : 1.00
2.38

1.90 : 1.00
2.21

Marginally low o/a lower

capacity utilization assumed

f) Cost of Project, Means of finance and Key Project Parameters:

Cost
Means of Finance
Land & Site Development
6.43
Promoter Others
Building
36.86 A. Equity:
(a)
(b)
P&M
67.37
Other assets
4.20
i) Equity Shares & Share premium
50.55
Prel. and Pre-op. exp
20.79
including IDC
iii) Internal Accrual
2.22
Contingencies
5.42 Total equity contribution
52.77
Erection & Commissioning
4.72 B. Debt
Consultancy Charges
1.28 i) RTL
100.00
(ii) Others, if any- Unsecured loan
WC Margin
5.70 Total Debt (i+ii+iii) (B)
100.00
Total
152.7
Total (A+B)
152.77
7

Total
(c=a+b)
50.55
2.22
52.77
100.00
100.00
152.77

Debt: Equity: (B/A) - 1:90 : 1

Promoters contribution: a/A% - 34.54% of equity for the Project
g) Remarks on Cost of Project (CoP) & Means of Finance ( MoF)
g.1) The cost of the Project is considered acceptable on following considerations :
- TEV study has stated that the project cost estimate is considered reasonable and without
much risk of under financing OR over financing.
- Further, on comparison of the cost with similar units, we find the cost reasonable and
acceptable.
UNIT
Capacity
Year of
Cost
Cost per Metric
setting up
Tonne
A
12 lac TPA
2009
337.51
2812/B
12 lac TPA
2010
358.32
2986/C
6 lac TPA
2010
243.07
4051/XYZ Ltd.
3 lac TPA
2013
126.28
4209/Project cost is excluding Margin Money for Working Capital and Interest during construction (IDC)
g.2) The project is proposed to be funded from Promoters contribution and the term loans from the
bank, in the ratio 1.90 : 1. The proposed means of finance for the project will be as under :
I. Equity
i)

MD

24.25

ii)

Director 1

5.20

50.55

iii)

Director 2

10.00

iv)

Group company 1 4.10

v)
Group company 2 - 7.00
II. Cash Accrual of XYZ Ltd. from its existing activity (Hotel)

2.22

(The company is debt free and till completion of the project it will have internal accrual as follows)
2011-12 0.31 (already invested in the project)
2012-13 0.37 (already invested in the Project)
2013-14 0.43
2014-15 0.53
2015-16 0.58
Total
2.22
Term Loan From Bank
Total Project Cost

100.00
152.77

g.3) Details of Investment in the Project, till date. (Rs. 14.51 cr.)
A.

B.

C.

D.

E.

Capital Work-in-progress
Land & Land Devlopment:
Land Cost
Land Filling
Road Work
Bridge
Plant & Machinery:
Weigh Bridge
Project Consultancy Charges
Bricks Machine
Pump Set
Advance to EICS
Office Equipments:
Computer
Furniture
Electrical:
M/s. Alliance Power (Elec. Contractor)
NESCO Connection Charges
NESCO Supervision Charges
Transformer
Panel Board
Electrical Inspection Fees
Solar Light
Infrastructure:
R.C.C. Boundary Work
R.C.C. Office Building
2 nos of Bore Wells
Sand Stock at Site

Amount (Rs)

Amount (Rs)
32894986.27

878874.00
28819371.50
2668101.72
528639.05
48253159.00
1410158.00
20544901.00
1283600.00
14500.00
25000000.00
624680.00
587650.00
37030.00
5521036.00
2012739.00
98367.00
18385.00
1666169.00
1559376.00
14000.00
152000.00
51628153.29
33640072.58
8534080.71
500000.00
5250000.00

Chips Stock at Site

Metal Stock at Site
Soil Testing
F.

Earth Moving Equipments (JCB):

G.

Preoperative Expenses
Grand Total(A+B+C+D+E+F)

279000.00
65000.00
3360000.00
1872787.00
4325896.00
145120697.56

g.4) Cost of Civil Construction : It includes the following

Heads
Specifications
1 Boundary Wall (10 height)
950 m long
2 Approach Road to the Site
2 km.
3 Internal Roads with Drain
1500 m long of 5 m width
4 Administrative Building (4980 sft)
3 storied building of 1660 sft each with interior
works for Office purpose and with Lift
5 Canteen Building
5000 sft
6 Stores Building
20000 sft
7 Weigh Bridge
500 sft
8 Security Barrack
10000 sft
9 Staff Qtrs.
10000 sft (2 storied building of 5000 sft each)
10 Officers Hostel
13000 sft (4 storied building of 3250 sft each)
11 Dispensary
5000 sft
12 Rainwater Harvesting Pond
(29 x 15 x 7)
13 Fabrication & Erection of Structural Structural steel for Support structure &
Buildings
Technological structure 3000 Ton X @
Rs.72,400 (Steel Rs.54,000, Fabrication &
Erection Rs.18,400)
14 Sundry Items
Total
g.5) Equipment Details: The company intends to procure the major equipments as follows :
Major Plant & Machineries
Proposed suppliers
1 Raw material Handling system
2 The Pelletisation Process plant
on Turn key Basis
3 In-plant dedusting system
by
EICS
Technology Pvt. Ltd.
4 Electrical & Power distribution system
5 Pump House & Allied Systems
6 Compressed Air systems
7 Fire Fighting Systems

Cost
0.76
2.00
1.20
1.00
0.60
1.80
0.06
1.00
1.05
1.56
0.63
0.85
21.72

2.63
36.86
Rs in cr.

67.37

h)

LOCATION :

1.

Location: The Project is located in Champadihi village, Kotolposi, Joda in Keonjhar district of
Odisha. The site is well connected with road and there are two railway sidings nearby. One is
Parjanpur which is 7 km from plant site & the other is Nayagarh in Keonjhar which is 4 km
away from the plant site. The project site is only 12 KM from NH-215. (from Panikoili to
Rajamunda via Keonjhar, Joda , Koida etc., the iron ore mineral belt)

2.

Land: The proposed project will be located on the land measuring Ac.8.40 dec which the
Company has purchased from the private land owners. The land area is sufficient for the
purpose including the consideration for the green belt.

i)

Production Factors / Technical Aspects:

I. The Technology : Presently, there are two technologies for pelletisation, i.e.,
- Travel Grate-Rotary Kiln Annular Cooler technology (suitable for lower capacity usually up to 2
m tpa and
- Long Straight Moving Grate Technology (suitable for capacity above 2 m tpa)
The company proposes to use the Travel Grate Technology for its production process .
A grate-kiln-cooler system consists of three major components: a grate (e.g. traveling grate), a
kiln (e.g. a rotary kiln) and a cooler (e.g. an annular cooler). The green balls, fed uniformly onto
the grate, pass sequentially through the steps of drying and preheating. The preheating step
hardens them to a strength great enough to endure the tumbling and heating that occur in the
subsequent kiln step. The pellets, after being fired at an elevated temperature inside the kiln,
are cooled in the following step to produce fired pellets.
The basic concept for designing a system including a grate kiln and cooler consists in allocating
the thermal transfer, occurring at temperatures from ambient to 1300C or higher, to each
process step so as not to cause any mechanical problems. The grate is partitioned into drying
zones and preheating zones. In these zones, heat exchanges at relatively low temperatures
occur for drying and preheating the green balls. Forced convection is applied to the heating for
high thermal efficiency. The source of the heat for drying and preheating the pellets is not only
the kiln off gas, but also recoup gas from the cooler, an arrangement that gives the plant as a
whole high thermal efficiency.
A kiln with a relatively short length is connected with the grate at its inlet and with the cooler at
its outlet. The kiln is lined with refractory materials for firing the preheated pellets discharged
from the grate. The firing is conducted at an elevated temperature, and radiation heating is
applied to fire the pellets efficiently and homogenously. The kiln is placed at a slight incline to
the discharge and rotates at a low revolution. The pellets tumble inside the rotating kilns to be
fired at a predetermined temperature and are subsequently transferred to the cooler. The
tumbling action ensures the homogenous heating of all the pellets inside the kiln and
consistently yields high quality.
An annular-shaped, horizontally rotating cooler decreases the temperature of the fired pellets to
a level suitable for subsequent transportation. This step employs the forced convection of air
blow for cooling. A part of the hot gas collected from the cooler is used as secondary air for fuel

combustion in the kiln. The hot gas is also used for the process steps of drying and preheating
the green balls, making the entire system thermally efficient.
A grate-kiln-cooler system has the following features: The system produces homogenous products, since the pellets are subject to tumbling action
during the firing in the kiln.
Each of the steps of preheating, firing and cooling can be controlled either in conjunction with
the others, or independently from the others, as needed. This enables heating the hot gas
and pellets in the pattern most suitable for each process step and makes the process
versatile with regard to variations in raw material quality and the production rate.
The ease of temperature control enables the homogenous production of self-fluxed pellets,
whose production requires strict temperature control.
Low fuel and power consumption can be achieved.
The grate, kiln and cooler of the system are independently designed and constructed
according to their respective thermal loads. This reduces the frequency of replacing parts
such as the refractory material and grate-plate, and consequently improves the running time
of the plant.
Some of the plants running successfully using this technology are :
Plant
A
B
C
D
E

Location
Keonjhar, Odisha
-doHospet, Karnataka
Koppal, Karnataka
Jamshedpur

Capacity (MTPA)
1.20
0.60
2.40
1.20
1.20

II. The Process :

A pellet plant consists of two main parts: the material preparation area where the raw material
entering the plant is processed to produce wet, so-called green pellets and the induration
section where the green pellets are hardened to impart the physical and metallurgical
properties required by the end-users of the pellets.
Low grade Iron Ore fines is converted to high grade Iron Ore of specific grade and sized in
Beneficiation Plant. The high grade iron ore of specific size and grade is termed as Iron Ore
concentrate. In this process of Pelletizing the major processes include Mixing of Iron ore
concentrate with various additives viz binder, flux etc. in a mixer. In this process all the raw
materials i.e. Iron Ore Concentrate with 8-9% moisture is taken in requisite proportion with the
additives like Bentonite, Limestone & coke in some set amount taken together & mixed in the
vertical mixer of suitable capacity which can mix the material both in macro & micro ways with
excellent mixing result with reliability and high working rate. These mix material is transferred to
the mix material bins above the Pelletizing Discs from where they are fed to the Pelletizing

discs through Weigh Feeder in a limited amount for Balling which will prepare the Green Ball.
These Green Balls will be conveyed through special conveying equipment for screening &
distribution to the roller distributor where oversize & undersize will be screened & only the
qualified size Green Balls shall be transferred to the Traveling Grate Machine . The green balls
are moved through various furnace zones for completion of drying and preheating process for
production of preheated pellets. In this moving machine the green balls are dried and
preheated up to a temp of 1000C. This high temperature is maintained by creating heat in the
traveling grate machine by recuperating heat from Annular Cooler. Further to this, the heat is
supplemented by Oil fired burners mounted on the traveling grate machine by combustion of
fuel (heavy fuel oil / light fuel oil / gas) in designed quantity. Dried and preheated pellets are
transferred to rotary kiln for firing the pellets up to firing temperature of 1300-1350C,
established as per test work. A big capacity single coal gas / oil fired burner imparts heat
energy to the pellets to reach to firing temperature in the kiln. The fired pellets are then
discharged to annular cooler for cooling. The firing temperature heat is recuperated efficiently
through hot circulation in various zones of traveling grate machine. Cold air is pumped to the
Annular Cooler where the cold air carries the heat from fired Pellets thereby cooling the Pellets
and impart heat in the various zones of the furnace where the drying and preheating of Green
Balls are carried out. After imparting of heat in various zones of furnace for various processes,
the hot gas at much lesser temperature of 150C is passed through Dedusting system where
the heavier dust particle are trapped and taken back to grinding section of the plant to be
reused for production of Concentrate. The clean gas is sent out through a big fan to the stack
to atmosphere. The cooled fired Pellets are collected in a surge bin at the end of the Annular
Cooler and subsequently discharged to conveyor system to be transported to open stockpile
through a mechanized stacker at the far end of the plant.
j)

Lenders Independent engineer/ Insurance consultant/ Legal Consultant : We propose

to engage the services of Chartered Engineer for estimation of work done during
implementation period. The engineer will submit his report on quarterly basis .

k)

Marketing & Selling Arrangements:

I. The countrys iron ore requirement is going to increase substantially (almost 340 MTPA by
2020) in line with domestic steel production requirement outlined in National Steel Policy.
Limited reserves of high grade iron ore poses a great challenge in long term
sustainability of Indian iron & steel industry. In order to ensure optimum use of existing iron
ore resources with special emphasis on conservation of high grade ores, there is a pressing
need to utilize existing low grade iron ores including slimes and dump fines which are

stockpiled in millions of tons in different mine heads. The solution lies in beneficiation which
will not only help in utilization of hitherto wasted low grade ores/ slimes by upgrading its iron
(Fe) value, but also mitigate environmental hazard, arising out of large stockpiling of
slimes/rejects. So the demand for Iron Pellets will always be there and the pelletisation plant
will not face any market constraint.
II. Today, DRI Manufacturers are facing acute scarcity on the availability of lump ore. There are
some DRI plants in India using Iron ore pellets as feedstock. The pellets, an intermediate
saleable product, which can be stored for long periods and can be transported over long
distances without deterioration in properties, are found to be best suited for Sponge Iron Plant
operation. The cost of the iron bearing materials and the reductant is expected to be lower
while using pellets as compared to that for lump ore. This, coupled with increased productivity
of sponge iron plant strongly advocates the use of pellets for sponge iron manufacture.
III. Use of pellets in DRI plant results in overall improvements in its performance due to the
following benefits: The rotary kiln productivity can increase by 20% without any changes in the design.
Specific consumption of coal will come down by 10%
Campaign life will increase by 50%
As there will be no accretion and no fused lump formation, the refractory repairing cost will be
reduced by 50%.
Metallization will be better compared to lump ore.
There will be much less generation of fines compared to lump ore uses.
Maintenance and electricity cost will come down by 50%, as there will be no need for crushing
and screening of iron ore lumps.
There are no losses of handling iron ore, as pellets will not break during transportation or
handling.
There will be better working environment.
IV. Also there is a huge potential in the blast furnace area where pellets up to 30% can be used
along with use of sinter.
V. Moreover, export duty on iron ore fines and lumps has been increased to 30 percent from
the existing 20 percent w.e.f. December 2011 thereby discouraging iron ore exports. Also there
is no export duty on iron ore pellets. To give a boost to the pellet industry, the import duty on
plant and machinery for iron ore beneficiation plants and pellet plants has been reduced by 5%
i.e. from 7.5% to 2.5%.

VI. From the foregoing it is seen that there are a lot of incentives to set up new pellet plants.
l)
Utilities:
a) Raw material :.
The annual requirements of iron ore fines for the pellet plant is 324,000 tpa. XYZ Ltd. has gone for
agreements with the following four parties for procurement of iron ore fines for the pellet plant.
Kamaljeet Singh Ahluwalia
Ramesh Prasad Sao
Mesco Steel
Kalinga Mining Corporation
Kamaljeet Singh Ahluwalia has confirmed that they will be supplying iron ore fines of grade Fe 63%
(1).
TEV report considers that the requirement of iron ore fines for the pellet plant can be met In line with
agreements with the above parties for the supply of iron ore fines.
Bentonite, coal and limestone are required comparatively less and easily available in Odisha and
Rajasthan. The report states that there should be no difficulty in their procurement.
b) Power The requirement of power for the proposed pellet plant is about 3.6 MW. The
power will be drawn from the nearby 33 KV line which is passing about 5.00 KM away
from the site, by LILO arrangement. For that the company has already approached
OPTCL and NESCO authorities. Further the company will have the DG sets to meet the
emergency power requirement.
c) Water For the project the water requirement is about 15 CuM / Hr. For the purpose, the company
has already dug two bore wells of length 185 feet and 215 feet from which the flow of water is about
10,000 Ltrs / Hr & 15,000 Ltrs / Hr respectively. This will be sufficient for the present requirement.
More over, river Baitarani passes adjacent to the plant site. The company has already applied to
the authorities for usage of river water if required.
d) Manpower The manpower estimates have been based on production technologies proposed, type
of requirement envisaged, level of mechanization and automation, the layout of the plant, the
number of operating shifts for the various plant units, etc. Both Skilled & Unskilled workers are
locally available. Other professional employees are also available in the state as well as in the
neighboring states
e) Logistics The plant site is well connected by road. There are two railway siding nearby. One is
Parjanpur which is 7Km from plant site & the other is Nayagarh in Keonjhar which is 4 km away
from the plant site.

m)
Approvals and Clearances :
Particulars
Approving

Status

Authority
For setting up of Pellet Govt
of IPICOL (the nodal agency of Govt. of Odisha) has given
Plant

Odisha

clearance on dt.07.03.2011 vide their letter No. SJ/ SLWCA217(2)/5210 after the approval of the project in 37 th SLSWCA

Power connection

NESCO

meeting held on 04.02.2011.

The Company has approached NESCO for the power
connection for the plant which will be available before
commissioning. (assurance received from NESCO) However,
the construction power of 95 KW is already in place to the site

Clearance from the Gram Gram

(provided by NESCO)
Already Received

Panchayat for establishing Panchayat

the unit
NOC from pollution control OPCB

The Company has got the clearance from the State Pollution

board

Control Board of Odisha to establish this Pellet Plant vide their

letter No.11303/ Ind-II-NOC-5311.

n)

Implementation Schedule:
Particulars

Date of Commencement

a)
b)
c)

Expected date of
completion
October, 2015

Acquisition of Land
Acquired
Development of Land
Completed
Civil Works for Factory Building
January,2013
Machinery Administrative Building
d)
Plant & Machinery
Sept, 2013
Feb,2015
e)
Arrangement for power
Under process with DISCOM
February, 2016
f)
Arrangement for water
Completed
g)
Erection of equipment
March,2014
Dec,2015
h)
Trial Runs
March, 2016
i)
Commercial Production
April,2016
The implementation will be on Turn key basis by EICS Technology Pvt. Ltd. The salient features of
the Vendor and Turn key Agreement are as follows :
I.

The Vendor (EICS)

EICS is in existence since 1997 and headquartered at Bilaspur with Corporate Office in Kolkata

It takes up projects relating to Beneficiation, Pelletisation, Sintering and Tunnel Kiln

So far it has executed 150 projects and 25 projects are under execution at present

Its client in Pellet plant includes

i)

Ardent Steels, Keonjhar, Odisha (commissioned)

ii)

Arya Iron & Steels, Keonjhar, Odisha (commissioned)

iii)

MSP Steels Ltd., Raigarh (commissioned)

iv)

MSP Steels, Jharsuguda (commissioned)

v)

Jaimata International, Kolhapur (under execution)

vi)

Vikash Metals, Purulia (under execution)

II.

The Turn Key Agreement : (Agreement is dated 01.10.2012)

EICS Obligation :
i)
Technology design and Engineering for the project including plant layout and drawings
ii)

Implementation schedule and review thereof

iii)

Arrange for supply and erection of the equipments.

iv)

Submit monthly progress report to the Company

v) Period of execution will be 18 months from 1 st concrete work at site (Concrete work has
started from January, 2013) We have considered it at 36 months on a realistic basis
Clients Obligation :
i)
Provide land, infrastructure access roads, water and power
ii)

Obtain all Govt. approvals and license required for the project

iii)

Provide for taxes and duties

iv)

Provide project office, pantry and labour hutments

Payment Terms (Procurement) :

i)
30% of total Order value as Advance along with Agreement
ii)

50% of total Order value against proforma invoice before dispatch of document

iii)

10% of total order value before equipment reaching at site

iv)

5% of total order value before Cold trial

v)

Balance 5% of total order value after successful commissioning

Payment Terms (Services) :

i)
30% of total Order value as along with Order
ii)

65% of total Order value will be paid prorate every month till end of project

iii)

Balance 5% of total order value after successful commissioning

o)
Commercial viability:
Year
Net sales
OP

2017
122.99
30.59

2018
154.58
50.39

2019
176.87
62.56

2020
178.91
65.86

2021
179.11
67.33

2022
179.31
75.39

PBT
PAT
Cash Accruals
PBDIT

14.81
10.22
28.31
48.76

36.34
24.72
40.42
66.17

DSCR
Particulars
Capacity Utilisation
Sales
Net Profit
Cash Accrual
Interest - TL
TOTAL

2017
60%
122.99
10.22
28.31
13.31
41.62

2018
70%
154.59
24.72
40.42
11.59
52.01

2019
80%
176.88
34.63
48.25
9.01
57.27

2020
80%
178.91
38.56
50.41
6.44
56.85

2021
80%
179.11
41.27
51.57
3.86
55.43

2022
80%
179.31
48.48
57.44
1.29
58.73

6.00
13.31
19.31
2.16
2.21
4.72

18.80
11.59
30.39
1.71

18.80
9.01
27.81
2.06

18.80
6.44
25.24
2.25

18.80
3.86
22.66
2.45

18.80
1.29
20.09
2.92

2.15

2.57

2.68

2.74

3.06

TL Repayments
Interest
TOTAL REPAYMENT
Gross DSCR
Ave.Gross DSCR
Net DSCR

Existing
Proposed

51.09
34.63
48.25
76.28

56.97
38.56
50.41
77.80

61.03
41.27
51.57
77.74

71.73
48.48
57.44
84.53
TOTAL
991.79
197.89
276.40
45.50
321.90
0.00
100.00
45.50
145.50

Comments on DSCR (in brief) : The Average Gross DSCR at 2.21 indicates a comfortable position
for meeting maturing long-term repayment obligation by the Company.
p)

Disbursement Schedule :
SBI
Allahabad
(25%)
Ba
nk
(2
0
%)
Qr. ending Jun 13
7.15
5.73
Qr. ending Sep 13
0.05
0.05
Qr. ending Dec 13
0.05
0.05
Qr. ending Mar 14
0.05
0.05
Qr. ending Jun 14
0.05
0.05
Qr. ending Sep 14
0.05
0.05
Qr. ending Dec 14
0.05
0.05
Qr. ending Mar 15
11.50
9.20
Qr. ending Jun 15
2.35
1.88
Qr. ending Sep 15
0.05
0.05
Qr. ending Dec 15
0.05
0.05
Qr. ending Mar 16
2.28
1.82
Qr. ending Jun 16
1.25
1.00
Total
25.00
20.00
q)

Central Bank of
India (20%)

IOB
(20%)

(in cr.)
Union Bank of
Total
India
(15%)

5.73
0.05
0.05
0.05
0.05
0.05
0.05
9.20
1.88
0.05
0.05
1.82
1.00
20.00

5.73
0.05
0.05
0.05
0.05
0.05
0.05
9.20
1.88
0.05
0.05
1.82
1.00
20.00

4.30
0.03
0.03
0.03
0.03
0.03
0.03
6.91
1.40
0.03
0.03
1.38
0.75
15.00

28.64
0.23
0.23
0.23
0.23
0.23
0.23
46.01
9.39
0.23
0.23
9.12
5.00
100.00

Repayment Schedule :
In 23 quarterly installments, commencing from quarter ending Sep, 2016,
- First 3 installments of Rs.2.00 cr each
- Next 20 installments of Rs.4.70 cr each.
Interest to be paid as and when due. However, interest moratorium will be up to commencement
of commercial production OR till March, 2016, whichever is earlier.

r)
Security Margin
As on 31.03.
2014
2015
2016
2017
WDV of Fixed Assets 45.96 117.21 143.05 129.96
TL O/S
29.33 76.03 95.00 94.00
Margin available
16.63 41.18 48.05 35.96
%ge of margin
36.18 35.13 33.59 27.67
Average Margin ( % )
Minimum Security Margin: 27.67%

2018
2019
114.26 100.63
75.20 56.40
39.06 44.23
34.19 43.95
49.38

2020
88.79
37.60
51.19
57.65

2021
78.49
18.80
59.69
76.05

2022
69.53
0.00
69.53
100.00

Comments on security margin : (Mitigations in case of low levels of minimum security margin or
DSCR): The average security margin of 49.38% with minimum of 27.67% is considered acceptable.

s)
Break-even analysis :
Year Ending
Installed Capacity p.a. (in lac MT)
Production p.a. (in MT)
Capacity utilisation
A. Sales(after stock adjustment)
B. Variable Cost - Raw materials
Consumables
Total (B)
C. Contribution
D. Fixed Cost- Power & Fuel
Wages & Salaries
Repairs and maintenance
Depreciation
Sales/Adm expenses
Intt on TL/CC
Total (D)
E. Oprating Profit (C-D)
BE Sales
BE Sales (Cash)
BE as% of sales
BE % at installed capacity
Cash BE at installed capacity

2017
3.00
1.79
60%
125.14
52.09
6.27
58.36
66.79
11.66
1.57
3.34
18.09
1.53
15.86
52.04
14.74
97.51
63.62
78%
47%
30%

2018
3.00
2.09
70%
154.82
60.78
7.31
68.09
86.73
13.61
1.65
3.49
15.69
1.91
14.14
50.49
36.24
90.13
62.11
58%
41%
28%

2019
3.00
2.39
80%
177.11
69.45
8.36
77.81
99.30
15.55
1.73
3.64
13.63
2.18
11.56
48.29
51.01
86.13
61.82
49%
39%
28%

2020
3.00
2.39
80%
178.87
69.48
8.36
77.84
101.03
15.56
1.82
3.74
11.84
2.22
8.99
44.17
56.86
78.20
57.24
44%
35%
25%

2021
3.00
2.39
80%
179.08
69.52
8.36
77.87
101.21
15.58
1.91
3.83
10.30
2.24
6.41
40.28
60.93
71.27
53.05
40%
32%
24%

2022
3.00
2.39
80%
186.06
69.55
8.36
77.91
108.15
15.60
2.01
3.94
8.96
2.26
3.84
36.60
71.55
62.97
47.56
34%
27%
20%

Average
3.00
2.24
0.75
166.85
65.14
7.84
72.98
93.87
14.59
1.78
3.66
13.09
2.06
10.13
45.31
48.55
81.04
57.57
50%
37%
0.26

22%
42%
51%
56%
60%
66%
0.50
Margin of safety
Comments: The Project has an average BE point of 50% of its sales and 37% of installed capacity.
The position is considered satisfactory.

t)

Sensitivity Analysis :
Adverse fluctuation by
59.00%
46.00%
26.00%
in
in Sale
in Sale
VC
volume
Price

Adverse fluctuation by
60.00%
47.00%
27.00%
in
in Sale
in Sale
VC
volume
Price

2.00
166.85
72.98
93.87
45.31
48.55

2.00
166.85
116.04
50.81
45.31
5.50

1.00
90.10
39.41
50.69
45.31
5.38

2.00
123.47
72.98
50.49
45.31
5.17

2.00
166.85
116.77
50.08
45.31
4.77

1.00
88.43
38.68
49.75
45.31
4.44

2.00
121.80
72.98
48.82
45.31
3.51

48.55
15.78
32.77
13.09
4.52
50.38
16.67
4.52
21.19
2.38

5.50
1.79
3.71
13.09
4.52
21.32
16.67
4.52
21.19
1.01

5.38
1.75
3.63
13.09
4.52
21.24
16.67
4.52
21.19
1.00

5.17
1.68
3.49
13.09
4.52
21.10
16.67
4.52
21.19
1.00

4.77
1.55
3.22
13.09
4.52
20.83
16.67
4.52
21.19
0.98

4.44
1.44
2.99
13.09
4.52
20.60
16.67
4.52
21.19
0.97

3.51
1.14
2.37
13.09
4.52
19.97
16.67
4.52
21.19
0.94

Avg. yr.
level
1.Sale volume
(lac MT)
2.Sale Amount
3.Variable Cost
4.Contribution (2-3)
5. Fixed Cost
6. Operating Profit
Impact on DSCR
Operating Profit
Less Tax @32.45%
PAT
Add Depreciation
Add Intt on TL
Cash Accrual
TL repayment
Intt. On TL
Total repayment
Gross DSCR

Comments: The Projects resilience is high in all the factors, i.e., it will be able to withstand adverse
impacts stemming from uncertainties up to 59% in variable cost, 46% in sales volume and 26% in sale
price. The position is considered satisfactory.
u) Overall viability and acceptability of the proposal : The project is commercially viable. Cash
accrual is estimated to be adequate to service the long-term repayment obligations. The break-even
level and resilience of the company to adverse variation in selling price/ sale volume/ variable cost
are acceptable. We, therefore, recommend for sanction of term loan of Rs. 100.00 cr. to the company.

Annexure
TEV Study - Recommendations
(by R Singh & Associates Pvt. Ltd. RSA)
Raw material availability - The major raw material required for the pellet plant is iron ore fines. These
are readily available in the region from nearby mines. Although XYZ Ltd. does not have its own
captive iron ore mines, it has obtained comfort letters from different iron ore mine owners namely KJS
Ahluwalia, RP Sao, Mesco Steel, Kalinga Mining for supply of this raw material. The requirement of
other raw materials required for pellet making i.e. bentonite, limestone etc is minimal and can be
sourced from open market easily. Against an estimated annual iron-ore production of 208-million tons
in India, consumption by the domestic steel industry was about 45% of lumps and sinter against a
global average of domestic iron-ore consumption of between 15% and 20%, with most fines exported
since these could not be directly used for iron making in the absence of sufficient capacities for
agglomeration through beneficiation and pelletisation. RSA feels there should be no difficulty in the
procurement of required raw materials.
Competency of the Promoter - The promoter presently is involved in iron ore trading and has a
license for the same. As such the field is not new and over the years sufficient experience has been
acquired which is expected to be brought forth while implementing this pellet plant. The
entrepreneurial streak of promoter can be seen from his track record in setting up and running
following companies
E Ltd.
F Ltd.
G Ltd.
H Ltd.
I Ltd.
Marketability - No difficulty is foreseen in marketability of pellets to be produced from the plant.
Infrastructure - Considering the locational advantages of the selected project site as well as the
overall land, power and water availability, the site is considered suitable for proposed pellet plant.
Technology to be used - Currently there are two main technologies prevalent for pellet making, i.e. i)
Straight Grate Technology normally recommended for larger capacities and ii) Grate Kiln Technology
mostly used for smaller capacities. The Chinese technology under consideration is same as the Grate
Kiln technology and quite well established. The Indian government has invited Chinese resource and
steel companies to set up iron-ore pelletisation units in order to take advantage of the recently
announced fiscal incentives to add value to the mineral. A memorandum of understanding has been
signed between the Chinese Iron and Steel Association and the Steel Authority of India Limited
(SAIL) to facilitate and promote the setting-up of pelletisation plants in India by Chinese steel

producers. Chinese steel companies could take advantage of zero duty on the export of iron-ore
pellets from India by setting up pelletisation assets in the country, instead of importing iron-ore fines
which has an incidence of 30% export tax. India, with 25-billion tons of iron-ore reserves, would
continue to be an exporting country, but investments by Chinese steel companies in pelletisation
plants would be a win-win situation since the latter would secure raw materials at lower prices and at
the same time ensure greater domestic value addition to the mineral. China imports about 80-million
tons a year of iron-ore from India. In March 2012, the government announced a reduction of import
duty on plant and machinery for beneficiation and pelletisation, to 2.5%, from 7.5%,
The specifications - The specifications in the offers are not detailed. These offers have been
received against letters from XYZ Ltd. for 0.3 m tpa pellet plant. The offers need certain clarifications
and subsequently to be evaluated technically to bring at par. Some salient points/deficiencies noticed
in the specifications given in the offers are given below for ready reference
-

Belt conveyor for carrying filter discharge needs careful selection as it has to carry full load of filter
discharge in a shorter time and it idles for the rest of the time.

For undersize roller screen, roller numbers given is 48. It needs to be checked properly

For rotary kiln, the range of RPM, given is wider and needs a re-look

For annular cooler, zone distribution and exhaust temperature considered for each zone need to
be indicated

However, there is no risk foreseen as of now. The required equipment specifications will need to be
suitably finalized at the time of firming up the orders on prospective suppliers
(The company has discussed these issues with its Turn key provider for necessary modification)
Layout - RSA has reviewed the plant layout and acquired land area appears to be adequate for the
proposed 0.3 m tpa pellet plant complex. Space for future installation to be planned and earmarked.
Environment
-

It will be ensured that the total area of the green belt is minimum 33% of the total plant area, as
per the statutory norms. (at present, proposed green belt is Ac. 2.20 dec and the plant area is Ac.
4.50 dec, i.e., forming 33% of the plant area)

Rain water harvesting may be adopted in the plant. (proposed in the project)

Manpower
As per RSA the total manpower of 93 is considered adequate; 67 for pellet plant and 26 for producer
gas plant.
Project Implementation Schedule
-

EPC (Turn key) mode of project implementation is considered acceptable

The total project implementation time frame of 18 months appears achievable. We have
considered it at 36 months on a realistic basis.

 Approvals / Clearances
The client to ensure that the required balance approvals and clearances as applicable are obtained in
time. (as on date, all approvals for the project are in place except power connection which is under
process with DISCOM. However, it has received the approval for power connection for
implementation of the project)
Project cost estimates
The project cost estimate indicated in this report is considered reasonable and without much risk of
under financing OR over financing.
Owners engineer
-

For a successful EPC mode of project execution, it is recommended to engage a suitable

consultant to take care of the functions of Owners engineer as well as project management. ( the
company has engaged the services of Project & Engineering Consultancy of Keonjhar for
supervision of the work. Brief details of the Consultant are furnished below.
The Firm is led by Er. S K Khatoi who has vast engineering experience of 32 years. He is a
graduate Mechanical Engineer from NIT, Rourkela, M. Tech from IIT, Kharagpur & pursuing his Ph
D. in IIT Kharagpur on composite Pellet & its Reduction in different Process. He started his career
in Mecon as Design Engineer, then also worked for IOCL in Design Section. He is one of the
Founder father of first Commercial Sponge Iron Plant in India, that is Orissa Sponge Iron & Steel
Plant, Keonjhar, Odisha. Under his direct supervision number of DRI Plants, Mini Steel Plants,
Power Plants, Iron Ore Crushing, Sizing, Beneficiation & Pelletisation Plant were designed &
Erected. He is a recognized Valuer & Loss Asseser also. He has successfully implemented
various iron & steel projects mostly in Odisha, Jharkhand and Chhatisgarh and pellet projects of
Rathi Steel & Power Ltd. and Sree Metaliks Ltd. in Keonjhar.

Additional pellet plant capacity

-

India needs to create an additional 50 m tpa of iron ore pelletisation capacity, up from the current
levels of about 20 m tpa, to meet the targeted 180 m tpa of domestic steel production by year
2019 with sustainable iron ore mining, according to a report prepared by the Indian Bureau of
Mines (IBM).

According to Indias new National Steel Policy, with all future steel capacity coming through pellet
plants and coal based DRI units, the requirement of pellets would be very high. IBM has assumed
that if the entire capacity expansion by ISPs uses a minimum of 15% pellets for their blast
furnaces, the projected pellet requirement would be an additional 25 m tpa.

In addition, if all new coal based DRI units use 50% of their requirement of raw materials in pellet
form, as replacement for high grade lumps, the demand for pellets would be another additional 25
m tpa. The report has been submitted to Indias ministry of steel as a background paper for
proposed fiscal incentives for miners and steel producers to set up new iron ore pelletisation

capacities in the country. In this regard, IBM has recommended setting up of pelletisation
capacities by all ISPs, mandatory total beneficiation of ore below 45% Fe content and increased
usage of pellets by DRI units and gradual discontinuation of use of lumps by these units.
Prevailing prices
In the techno financial model purchase prices of various raw materials as well sale price of the
product i.e. pellet have been considered based on prevailing market conditions.
XXXXXXXXXXXXXXXXXXXX