5674 2363 115 1835-66-3 Management & Technical Appraisal 2003format

7/31/2019 5674 2363 115 1835-66-3 Management & Technical Appraisal 2003format

1/19

Session- 3

Shyam Ji Mehrotra1

Management & Technical appraisal

July 21, 2012


2/19

(Seven Cs of Management

appraisal)

Shyam Ji Mehrotra2

Management is key to success of an enterprise Character & Integrity

Capability to organize resources

Capacity to arrange finance

Creditworthiness & KYC compliance

Competence to manage

Credit Rating

Collateral & Covenants

Majority of defaults occurs due to managerial inefficiency

July 21, 2012


3/19

Credit Ratings

July 21, 2012Shyam Ji Mehrotra3

CRA like CARE, CRISIL, FITCH, ICRA,ONICRA,SAMERA conducting creditrating for SME and large industries

75% of credit rating fee subject tomaximum of Rs. 25000 to Rs. 40,000 isreimbursed to Small and Micro unitsway of grants.

Banks have developed system ofinternal credit rating of borrowers incompliance of BASEL II norms.


4/19

Management structure

Shyam Ji Mehrotra4

Suitability and adequacy of management

structure

Individual

Proprietorship Partnership

Hindu Undivided family

Limited Liability Partnership (LLP)

Joint stock companies Others- society, trust etc.

Whether technically and professionally qualified

Reputation in the market and experienceJuly 21, 2012


5/19

Borrowing capacity

Shyam Ji Mehrotra5

Capacity to borrowExamine memorandum and article of association or

charter of the borrower to satisfy capacity to borrowand borrowing limit

Resolution of the board or Shareholders meetingsfor borrowing

Resolution for charging securities

July 21, 2012


6/19

Borrowing capacity

Shyam Ji Mehrotra6

Due diligence- past payment historyDefaulters list of RBI

Caution list of ECGC

Credit report of reputed companies like Dun &

Bradstreet, CIBIL etc.

Credit report from other banks/financial institutions

Market intelligence

July 21, 2012


7/19

Borrowing capacity

KYC ComplianceTo confirm identity of the borrower/borrowers

through identity proof such as pass port, PAN card,

voters card, Aadhar card etc.

To confirm address through telephone bill,electricity bill, pass port etc.



8/19

Borrowing capacity

Credit worthinessProject finance has no operating history

Credit worthiness is dependent upon debt servicing

capacity ( expected future cash flows) &

inherent value of assets ( collateral)Credit history of sponsors of the project and pledge

of third party assets, if any

Amount of equity project sponsors have at risk



9/19

MANGEMENT APPRAISAL-

SUMMARY Quality of management

Honesty and integrity

Competence Broad based

Involvement in project

Financial resources

Initiative Intelligence

Self confidence

Patience

Drive and energy

Past track record

Experience Forms of organization

Setup of the organization

July 21, 20129 Shyam Ji Mehrotra


10/19

SESSION 3

TECHNICAL APPRAISAL

10 shyam Ji Mehrotra July 21, 2012


11/19

TECHNICAL APPRAISAL Purpose

Technically feasible in terms of size, location, plant

capacity,

Ease of absorptionAvailability of technical manpower

Technical know how at reasonable costAll inputs are available ( indigenously or imported) timely

and adequately- raw material, power, stores & spares

Ecological balance and environmental concern are

addressed

---------

Examined by experts but financial analyst is

expected to raise key questions based onex erience, common sense and ure lo ic11 shyam Ji Mehrotra July 21, 2012


12/19

TECHNICAL KNOW HOW

shyam Ji Mehrotra12

Foreign collaborators, Consultancy organizations

Nature of support by collaborators in design,

selection, procurement, erection, maintenance

of project

Performance guarantee

Price- royalty, licensing fee , one time or regular

Upgradation of technology- automatic or against

fee Turn key projects

Restrictions if any by technology providers non

compete clause

Recruitment of suitable technical persons July 21, 2012


13/19

Material input, skill and utilities

Check list

shyam Ji Mehrotra13

Defining the material required and setting upsupply chainMineral products, agricultural products, marine products,

imported raw materialdirect ownership, lease or purchaseagreements

Vendors, suppliers including overseas Input constraints and alternatives

Typical uncertainties like proven, probable or possiblereserves of natural resources

Availability Locally available

Dependent on foreign suppliers

Dependent on few suppliers

Dependent on vagaries of nature

Price agreements Forward contracts

July 21, 2012


14/19

Material input ,skill and utilities

Check list

Defining the status of utilities , totalrequirements and gap if anyPower

StreamWater

Fuel

Skills

Locally available Trained manpower

July 21, 201214 shyam Ji Mehrotra


15/19

Product mix- check list

shyam Ji Mehrotra15

Product planning- based on target demand

Nature of target customers (garment

manufacturing wide range of sizes and quality)

Flexibility to change mix and additional

investment

Packaging

Profit margin and BEP analysis

July 21, 2012


16/19

Plant capacity- check list

shyam Ji Mehrotra16

Also referred as production capacity Defined in terms of installed capacity, technical

condition of the plant, down time and holidays,shift change etc.

Minimum economic size Input constraints

Demand constraints

Investment cost economies of scale

Government policies

Limitation imposed by financial and managerialcapacity of management

July 21, 2012


17/19

Location and site- check list

shyam Ji Mehrotra17

Land acquisition supported by state government,farmers agitations

Proximity to raw material, utilities etc.

Proximity to market

Transportation and other infrastructure facilities Labour situation

Government policies and incentives-Growth centers,Notitified back ward area etc.

Environmental issues and effluent disposal saychemical , plastic, tanneries industries are located insea area or rivers

Proximity to ancillary units

Climatic conditionsJuly 21, 2012


18/19

Machines and equipments- check list

shyam Ji Mehrotra18

Estimate likely level of production

Define machine and other operations

Calculate the machine hours required in each

operations

Select machine and equipments required for each

functions depending upon technological

sophistication and opinion of consultant re. Vendor, capacity , technology, delivery schedule, payment

terms, performance guarantee etc.

Make inventory of spare and tools to meet need

of original machine and also wear and tear.

July 21, 2012


19/19

Risk Mitigation

Assessment & mitigation of managerial andtechnical risks

Completion risk- time and cost over run

Technological risk

Raw material supply risk

Managerial risk

Default risk

Marketing risk

..

July 21, 2012shyam Ji Mehrotra19

5674 2363 115 1835-66-3 Management & Technical Appraisal 2003format

Documents

Transcript of 5674 2363 115 1835-66-3 Management & Technical Appraisal 2003format