ENTREPRENEURIAL

DEVELOPMENT
PARVESH AGHI

 Unit I
What is Business & Definition of Entrepreneur /
Choosing the right line of Business Statutory
Requirements & Clearances.
Unit II
Requirements of Financial Institutions and
Commercial / Banks Working Capital
Management Guidelines for Technical Feasibility
of a Project Proposal.
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 Unit III
Parameters for Financial viability of a Project
Proposal.
Unit IV
Incentives & Opportunities provided by
Government and its Agencies.

 Unit V
Better Projects through SWOT analysis,
Sensitivity Analysis, Contingency,
Planning, Markets Research etc., Project Report
Preparation & Filling of Application
with financial Institution / Bank.

UNIT 1
1. What is Business
2. Definition of Entrepreneur
3. Choosing the right line of Business
4. Statutory Requirements & Clearances

DEFINITION OF 'BUSINESS'

DEFINITION OF 'BUSINESS'

Definition of Entrepreneur

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Steps involved in the entrepreneurial process

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 Identifying and evaluating the opportunity:

Refers the second stage of the entrepreneurial
process. In this process, the entrepreneur
recognizes potential opportunities.
Sometimes, the set mechanisms, such as
entrepreneurship development training programs
and government policies to promote
entrepreneurs, help potential entrepreneurs in
identifying the opportunities.

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 The entrepreneurs keep on scanning the

environment to gather useful information for
identifying opportunity in the form of a potential
product or service
Further, they evaluate and screen the identified
opportunity. The evaluation of the identified
opportunity helps entrepreneurs in assessing
whether the opportunity is realistic and the
returns of the opportunity are as per the
resources required.
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 Developing a business plan:

Involves developing a successful business plan
to exploit the identified opportunity. Developing a
business plan involves setting goals, standards,
methods, and techniques of achieving those set
goals. A well drafted business plan serves as a
road map to the entrepreneur to guide and
monitor his/her activities towards the set goals.

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 Determining the required resources: Involves

determining the resources required to meet the
identified opportunity. In this step, the
entrepreneur assesses the available resources
and the resources that are essential to convert
the identified opportunity into a reality. The
entrepreneur needs to be careful while
determining the amount and quality of resources
required as insufficient or inappropriate resources
can hamper the success of the opportunity

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 Next, he/she needs to acquire the resources

required in a timely manner, while focusing on
right quality and quantity.

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 Converting the idea to an enterprise: Refers to

the most important step of the entrepreneurial
process in which the entrepreneur develops
his/her own enterprise to execute the identified
opportunity. In this step, the entrepreneur brings
the set business plan into practice. He/she
arranges the resources that are identified in the
previous step. Moreover, he/she takes into
consideration all internal and external
environmental forces, while developing the
enterprise.
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 Managing and growing the enterprise: Refers

to the final stage of the entrepreneurial process.
Once the resources are acquired, the
entrepreneur uses them efficiently to carry out the
business plan successfully. He/she also strives to
identify and examine operational problems, and
solve them. Apart from this, the entrepreneur
needs to implement an effective control system to
identify and resolve problem areas on time. The
growth of the enterprise depends on the selection
of an appropriate target market.
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 The entrepreneur needs to take into account the

four Ps, product, price, promotion, and place of
marketing, for the growth and development of the
enterprise.

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Entrepreneurship
Entrepreneurship is the act of being an
entrepreneur, who starts any economic activity
for being self-employed.
Entrepreneurship
is the process of the
entrepreneur. It is an attempt to create value
through recognition of business opportunity. It is
basically communicative and management
functions to mobilize financial and material
resources.
The entrepreneurial activity is governed by
varying
combination
of
socio-economic,
psychological, cultural and other factors:
Caste/religion, Family background, Level of
education, Level of perception, Occupational
background, Migratory character, Entry into
entrepreneurship,
Nature
of
enterprise,
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Investment
and Ambition/moderation.

Who is a Entrepreneur............

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Entrepreneurship development

Entrepreneurial Characteristics
Being an entrepreneur requires specific characteristics and skills
that are often achieved through education, hard work, and planning.
Risk Taker
Businesses face risk. Entrepreneurs minimize risk through
research, planning, and skill development.
Perceptive
Entrepreneurs view problems as opportunities and challenges.
Curious
Entrepreneurs like to know how things work. They take the time
and initiative to pursue the unknown.
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Entrepreneurial Characteristics
Imaginative
Entrepreneurs are creative. They imagine solutions to problems that
encourage them to create new products and generate ideas.
Persistent
True entrepreneurs face bureaucracy, make mistakes, receive criticism,
and deal with money, family, or stress problems. But they still stick to
their dreams of seeing the venture succeed.
Goal-setting
Entrepreneurs are motivated by the excitement of staring a new
business. Once achieved, they seek out new goals or ventures to try.
Hardworking
Entrepreneurs need a great deal of energy to see a venture start and
succeed. Yet they are not deterred by the long hours to achieve their
goal.
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Entrepreneurial Characteristics
Self-confident
Entrepreneurs believe in themselves. Their self-confidence takes care
of any doubts they may have.
Flexible
Entrepreneurs must be flexible in order to adapt to changing trends,
markets, technologies, rules, and economic environments.
Independent
An entrepreneurs desire for control and the ability to make decisions
often makes it difficult for them to work in a controlled environment.

End

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Need for entrepreneurship

Increases national production

Balanced area development

Dispersal of economic power

Reinvestment of profit for the welfare of the area of profit

generation

Development is a function of motivation and human resource

Entrepreneurial awareness
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Setting Up A New Venture in India

For setting up a company formally in India, one is
required to fulfill a slew of formalities. As per an
estimate, one would require more than a month
to complete all the filework and office work. For
foreign firms, it is mandatory to obtain
government approval for incorporating in India or
forming a joint venture in India. Certain
restrictions apply in some sectors. One is advised
to seek proper legal advice before setting up a
formal business in India.

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 For setting up a new venture in India, a number

of approvals/clearances are required from
different authorities such as Pollution Control
Board, Chief Inspector of Factories, Electricity
Board, Municipal Corporations, etc. Though the
government has reduced the legal formalities for
starting a business in recent years, a good
number of legal requirements are still up there.

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Approvals/Clearances Required

Department to be Approached and

Consulted

Incorporation of Company

Registrar of Companies

Registration/*IEM/ Industrial license

*Industrial Entrepreneurs Memorandum

DIC for SSI/SIA for large and medium

industries (District Industries Center) (Secretariat for Industrial
Assistance)

Allotment of land

State DI/SIDC/Infrastructure Corporation

/SSIDC

Permission for land use

(in case industry is located outside an
industrial area)

a. State DI
b. Dept. of Town and Country Planning
Local authority / Distt. Collector

NOC and consent under Water and Air

Pollution Control Acts

State Pollution Control Board

Approval of construction activity and

building plan

a. Town and country planning

b. Municipal and local authorities
c. Chief Inspector of Factories d. Pollution
Control Board e. Electricity Board

Sanction of Power

State Electricity Board

All industrial undertakings exempt from the requirements of industrial licensing, including existing units undertaking substantial expansion, are required to file information in the
prescribed form for (IEM), i.e. Form IEM, with the Secretariat of Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP), Government of India, and
obtain an acknowledgement. No further approval is required.

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Use and storage of explosives

Chief Controller of Explosives

Use and storage of explosives

Chief Controller of Explosives

Boiler Inspection Certificate

Chief Inspector of Boilers

Finance

i. SFC/SIDC for term loans ii. For loans

higher than Rs. 15 Million, all India
financial institutions like IDBI, ICICI, IFCI
etc.

Registration under States Sales Tax Act,

and Central and State Excise Act

i. Sales Tax Department ii. Central and

State Excise Depts.

Other Registrations and Clearances

Extraction of Minerals

State Director of Mines and Geology

ISI Certificate

Regional Office of the Bureau of Indian

Standards (BIS)

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Quality Marking Certificate

Quality Marking Center of the State

Government

Weights and Measures

Inspector of Weights and Measures

Code Number for Export and

Import

Regional Office of Director General

of Foreign Trade.

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 The Government's liberalization and economic

reforms program aims at rapid and substantial
economic growth which is integrated with global
economy in a harmonized manner. The industrial
policy reforms have reduced the industrial
licensing requirements, removed restrictions on
investment and expansion and facilitated easy
access to foreign technology and foreign direct
investment.

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 All industrial undertakings exempt from the

requirements of industrial licensing, including
existing units undertaking substantial expansion,
are required to file information in the prescribed
form for (IEM), i.e. Form IEM, with the
Secretariat of Industrial Assistance (SIA),
Department of Industrial Policy and Promotion
(DIPP), Government of India, and obtain an
acknowledgement. No further approval is
required.

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Options for Raising Funds

Options for Raising Funds

Fund Raising Options
Debt

Equity

Hybrid

From Banks & FIs

IPO

Various forms of
Convertibles and
Preference shares

FPO

In India

Public issue of
Bonds/Debentures

Rights Issue
Pref. Issue

Outside India

ECB

ADR/GDR

*Foreign Currency Exchangeable Bond

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FCCB & FCEB*

FINANCE

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Project Finance
Project Finance is one of the key focus areas for
ICICI Bank. The Project Finance Group has
institutionalized capabilities to successfully
manage the unique and multidimensional process
of project finance transactions led by customized
project structuring approach.
The group has been the sole lead arranger and
underwriter of a significant amount of project debt
over the years.

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 In the Indian project finance domain, the group

enjoys a leadership position and is acknowledged
for its comprehensive domain expertise and
knowledge in the infrastructure, manufacturing
and mining sectors, having ensured timely
financial closure of several big ticket projects.
A brief overview of the major sectors covered by
the group is given below:

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 Power: ICICI Bank is the first Indian bank to

finance large hydro-power projects and has been
the lead arranger towards funding of a number of
thermal power plants being set-up by large
infrastructure developers.
Roads: The Infrastructure sector is a priority for
the Bank. The group has ensured the Bank's
participation as lead arranger for a number of
road projects and has financed the first project for
modernizing state border check posts.
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 Ports / Airports: ICICI Bank has provided

assistance to a number of container & liquid port
terminals. The Bank has been credited for being
a lead arranger for the first private sector
greenfield international airport.
Manufacturing & Mining: The funding
requirements of large brown field expansions and
green field projects in the manufacturing sector
viz. Steel, Aluminium, Cement, Auto, and Hotels
have been arranged by the group.
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 In the mining sector, Bank has provided financial

assistance to several large conglomerates for
overseas mine acquisitions and has funded capex
requirements of local miners.
Oil & Gas: ICICI Bank is credited with being a lead
arranger for one of the largest refineries in the
country and has financed the first oil securitization
deal in the country. Additionally, funding of gas
pipeline projects remains a key area for bank.

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 The project finance team of ICICI Bank has also

played a key role in assisting the Government of
India in formulating policies relating to various
segments of the infrastructure sector. This helps
ICICI Bank to provide optimum solutions to its
clients with an appropriate decision support for
strategic measures in future.
Service offerings

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 PFG provide a wide range of services including

the following:
Rupee term loans
Foreign currency term loans
External Commercial Borrowings
Export Credit Agency backed long term debt
Lines of credit from different multilateral
institutions
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 Non fund based facilities like Letter of Credit,

Bank Guarantee, Suppliers Credit, Buyers Credit
etc.
Subordinated debt and mezzanine financing

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 DEFINITION OF 'MEZZANINE FINANCING'

A hybrid of debt and equity financing that is typically
used to finance the expansion of existing companies.
Mezzanine financing is basically debt capital that
gives the lender the rights to convert to an ownership
or equity interest in the company if the loan is not paid
back in time and in full. It is generally subordinated to
debt provided by senior lenders such as banks and
venture capital companies.

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 Since mezzanine financing is usually provided to

the borrower very quickly with little due diligence
on the part of the lender and little or no collateral
on the part of the borrower, this type of financing
is aggressively priced with the lender seeking a
return in the 20-30% range.

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 Mezzanine financing is advantageous because it

is treated like equity on a company's balance
sheet and may make it easier to obtain standard
bank financing. To attract mezzanine financing, a
company usually must demonstrate a track
record in the industry with an established
reputation and product, a history of profitability
and a viable expansion plan for the business (e.g.
expansions, acquisitions, IPO).

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 In finance, subordinated debt (also known as subordinated loan, subordinated

bond, subordinated debenture or junior debt) is debt which ranks after other debts
if a company falls into liquidation or bankruptcy.
Such debt is referred to as 'subordinate', because the debt providers (the lenders)
have subordinate status in relationship to the normal debt.
Subordinated debt has a lower priority than other bonds of the issuer in case
of liquidation during bankruptcy, and ranks below: the liquidator, government tax
authorities andsenior debt holders in the hierarchy of creditors.
Because subordinated debts are repayable after other debts have been paid, they
are more risky for the lender of the money. The debts may be secured or unsecured.
Subordinated loans typically have a lower credit rating, and, therefore, a
higher yield than senior debt.
A typical example for this would be when a promoter of a company invests money in
the form of debt rather than in the form of stock. In the case of liquidation (e.g. the
company winds up its affairs and dissolves), the promoter would be paid just before
stockholders assuming there are assets to distribute after all other liabilities and
debts have been paid.

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Project Appraisal
Before undertaking any activity every
entrepreneur has to first make a project report
whether his project is self-financed or is being
financed by a bank or a financial institution.
This needs to be a detailed analysis. It has to be
a very scientific research oriented endeavor. It is
suggested that one must take the help of an
expert in this. It is not only our suggestion but it is
our recommendation.

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 Project report must be made with an objective that

the appraisal of the project and its financing
becomes easy and smooth.
Project appraisal is the assessment of the
project by the concerned appraising authority
in terms of its technical, economic, financial
and social viability. Every lending financial
institution before lending any assistance in the
form of finance would like to make an objective
assessment of the various propositions of the
project.
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 And only when it is completely satisfied of the

fact that the project is economically viable and
socially acceptable, it will lend finance to the
project.

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Industry and Market Analysis

The project appraisal report should highlight the
detailed industry and market analysis. It must
indicate the strength of the products being
manufactured by the company. What kind of
technology the company is implementing? What
is the industry position? Is it a growing and sun
rising industry? Are the products and technology
being adopted is competitive? Is the technology
being adopted is a green technology and
is upgradeable? Is there a scope for further
growth?
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 Are there growth opportunities available? Is the

project scalable and are there scalable opportunities
in the future? Is the project economically and
commercially sustainable for a longer period of
time? Is there a proper allocation of resources?
What is the status on demand and supply analysis?
What about the identification of the target market
and choice of the marketing strategy? Is there a
technical analysis of selection of the appropriate
technology and acquisition of technology? What is
the process of procurement of raw materials?

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 What is the process of manufacturing and value

addition? Is there a design and layout of the facilities of
the project site? What is the choice of location of the
project? What about the environmental appraisal of the
project? The project must give the details of the
financial projection on: (a) The cost of the project, (b)
The means of finance, (c) Estimation of working capital,
(d) Profitability projections and estimations, (e) Balance
Sheet projections, (f) Projection of sources and uses of
funds,

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 (g) Social Cost Benefit Analysis. What is the

outlook of the business for at least 20 years from
now?
Finance Objective The objective of the course is
to ideas Detailed An Overview of Project Finance:
Introduction to project finance and overview of
the project finance market, A of a Proper
Allocation of Resources, Process of Resource
Allocation at the Corporate Level, Process of
Resource Market And Demand Analysis:
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 Identification of the Target market, choice of the

Market Strategy, Projection Models. Technical
Analysis: Selection of Appropriate Technology,
Acquisition of Technology, Process of Procurement
of Materials, Choice of a Good Location for the
Project, Design of the Layout of the Facilities at the
Project Site. Financial projections: The Cost of the
Project, The Means of Finance, Estimation of
Working Capital, Profitability Estimations, Balance
Sheet Projections, Projections of Sources and
Uses of Funds. . :
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 The Rationale for SCBA, Different Approaches to

SCBA, methodology of SCBA Structuring
Budgeting Valuing Projects: Appraising a Project
by Discounting and Non Discounting Criteria,
Appraising Projects with Special Features, FCF
Approach, ERR Approach, Real Options Issues
in valuing long term Project Managing Financing
Projects: Syndication, Islamic Finance, Leverage
Leases, Various debt instruments and innovative
Risk Analysis in Capital Investment Decisions:
What is Risk,
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 Types of Risk, Measurement of Risk, Method

Multiple the Detailed Cases Faculty An A
Allocation Market Technical Analysis Financial
projections Environmental Social Structuring
Projects Valuing Projects Project Negotiation
Managing Project Risks Financing Projects Risk
Multiple Detailed Project Reports

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