Feasibility Study [Compatibility Mode]
Transcript of Feasibility Study [Compatibility Mode]
Feasibility ReportFeasibility ReportFeasibility ReportFeasibility Report
1
Project : CharacteristicsProject : Characteristics
Singleness of Purpose
Target date
A definite life cycle
Pre determined & fixed resources
Complex interdependencies
2
B d C t i f P j tB d C t i f P j tBroad Categories of ProjectBroad Categories of Project
Manufacturing ProjectsInfrastructure ProjectsService Sector ProjectsjDevelopmental Projects
3
Phase of Project Phase of Project Cycle/Development PhaseCycle/Development PhaseCycle/Development PhaseCycle/Development Phase
PrePre--investmentinvestment InvestmentInvestment Operating PhaseOperating Phase
IdentificationIdentification Negotiation/Negotiation/ CommissioningCommissioning(Opportunity Study)(Opportunity Study) ConstraintConstraint StartStart--upup
PrePre selectionselection EnggEngg DesignDesign ReplacementReplacementPrePre--selectionselection EnggEngg. Design. Design ReplacementReplacement(Pre(Pre--feasibility Study)feasibility Study) RehabilitationsRehabilitations
PreparationPreparation ConstructionConstruction Expansion/Expansion/(F ibilit St d )(F ibilit St d ) i tii ti(Feasibility Study)(Feasibility Study) innovationinnovationSupport StudiesSupport Studies PrePre--prodnprodn..
marketingmarketingAppraisalAppraisalpppp(Appraisal Report)(Appraisal Report)
4
Project Feasibility & Project Feasibility & Management StagesManagement Stagesg gg g
[1] Identification of Project[2] Pre-Feasibility Report[2] Pre-Feasibility Report [3] Feasibility Report
Project Appraisal…Project Appraisal[4] Project Finance Tie up
[5] Project Implementation[6] Consolidation[6] Co so dat o[7] Expansion and Modernization
5
Some phases may overlap
The pre-investment phase is the most important because the success or failureimportant because the success or failure of a project depends on its findings and interpretation
Cost of such study should not act as hindrance
6
Pre-feasibility Study : Objectives
To determine whether…All possible project alternatives of a Project have been examinedjProject concept justifies a detailed analysis by a feasibility studyanalysis by a feasibility studyAny specific aspect to be covered in f ibilit t dfeasibility studySpecific investor / target group
7
f SPre-feasibility Study (cont.)
It is an intermediate stageDifference is in degree of detailsCan be skipped if there is better ppclarity
8
Project Report / Feasibility Report: Project Report / Feasibility Report: In estment Decisions B In estorsIn estment Decisions B In estorsInvestment Decisions By InvestorsInvestment Decisions By Investors
Feasibility Reports (DPR TEFR etc )Feasibility Reports (DPR, TEFR, etc.) traditionally are prepared by investors (their consultants)consultants)These are basically proposals to the funding agencies, outside investors, etc.g
Studies/analyses the project from investor’s
point of viewpoint of viewSeeks finances, incentives, etc.Al t d B k bl R t
9
Also termed Bankable Reports
Project Report for Soliciting Funds Project Report for Soliciting Funds
Should be as per the requirement of the concernedShould be as per the requirement of the concerned funding agencyIt should be such which is acceptable by other funding
i l ith ll hagencies also with small changes
Important to know
the desired coverage & norms by the funding agencies’ in
general
R l ti i t f th t f th P j t R tRelative importance of these aspects of the Project Report
How to get the data & prepare report based on the same
10
Main Components :Business Plan / Feasibility StudyBusiness Plan / Feasibility Study
I. IntroductionII. Promoters Background & Past
PerformancePerformanceIII. Market AssessmentIV. Technical Feasibility Analysis
C t f P j t & M f FiV. Cost of Project & Means of FinanceVI. Financial Viability AnalysisVII. Key Elements & Concluding ObservationsVII. Key Elements & Concluding Observations
11
Al t i l dAlso to include...
Project at a glance
Annexures
Support DocumentsSupport DocumentsExecutive Summary
12
M k t F ibilitM k t F ibilitMarket FeasibilityMarket Feasibility
Marketing is the Key Component for Success of an EnterpriseStudy of “Market” / “Marketing” is toStudy of Market / Marketing is to understand
The CustomersThe Competitors The Environment
Market Feasibility / Assessment is a Systematic Approach
13
Market FeasibilityMarket Feasibility (Contd.)(Contd.)
AdvantagesAdvantages
Provides preliminary inputs for marketing strategy and Programme formulations
14
Market FeasibilityMarket Feasibility (Contd.)(Contd.)
FOCUSFOCUS
Focuses on gross market demand -present and futureHighlights gap : between expected demand and supply (quantum &demand and supply (quantum & Characteristics) for a given productGap could be positive or negative
15
Market FeasibilityMarket Feasibility (Contd.)(Contd.)
Market Feasibility Through:
Desk Based StudyField WorkUse of Research and Analytical Techniques
16
Market FeasibilityMarket Feasibility (C )(C )Market FeasibilityMarket Feasibility (Contd.)(Contd.)
Approaches to Information Collection
Talk : To Customers, Traders, competitors
Observe: Competitors and traders in actionObserve: Competitors and traders in action
Talk : To knowledgeable people
Refer : To published information
Surf : The Net
17
Key Steps in Market and Demand Key Steps in Market and Demand A l iA l iAnalysisAnalysis
18
Market FeasibilityMarket Feasibility (Contd )(Contd )Market FeasibilityMarket Feasibility (Contd.)(Contd.)
Major Information Gathering MethodsMajor Information Gathering Methods
Secondary Source ResearchPrimary Data CollectionPrimary Data Collection
Test Marketing
19
TECHNICAL FEASIBILITYTECHNICAL FEASIBILITY
Is it feasible to Execute/ Manufacture
The Product(s)The Service
Components/Factors which have to be considered
Significance of each of these components
20
Technical Feasibilityo Product Mix
CapacityEquipments & accessories :
RequirementSpecifications/AvailabilityC ti A l iComparative Analysis
Consumables/MaterialsT h i l t / it t h i lTechnical arrangements/site technical details/technical know-howInfrastr ct re and UtilitiesInfrastructure and UtilitiesManpower/ResourcesLocation
21
LocationCompliance to Statutory & project Specific Norms
TECHNICAL FEASIBILITY (Contd )TECHNICAL FEASIBILITY (Contd )TECHNICAL FEASIBILITY (Contd.)TECHNICAL FEASIBILITY (Contd.)
Infrastructure & Utilities
PowerPowerFuelWaterEnvironment ProtectionSafety Measures
22
TECHNICAL FEASIBILITY (Contd.)TECHNICAL FEASIBILITY (Contd.)
The Technical FeasibilityThe Technical Feasibility Analysis helps in deciding:g
Output levels (Quantity)Quality / Nature of OutputCostPricing
23
Fi i l Vi bilitFinancial Viability
24
Fi i l Vi bilitFinancial Viability
Cost of Project
Means of Finance
Financial Returns
25
Cost of Projectj
Main componentsMain componentsi. Land & its developmentii Buildingii. Buildingiii. Plant and Machineriesiv. Technologyv Other Assetsv. Other Assetsvi. P&P
Expenses(eg;IPO’s,Marketing,Advertising)g)
vii. Contingenciesviii. Working Capital Margin
26
Cost of ProjectCost of ProjectDescription Cost ( In Cr.
Rs. )Remarks
Land Cost 2.5 Additional Land boughtLand Cost 2.5 Additional Land bought
Building and Civil Works 115 All Subcontracting costs included
Technical Knowhow Fees ( Consultant Fees)
10 Includes Costs for Architects, Structural Designer and otherAgencies
AMC Clearance Fees 0.5
Pre-Operative Expenses 31.5 Electricity bills, In-house Engineer y gSalaries, Interest Costs, Insurance
Marketing Expenses 0 5 Print Media Advertising
27
Marketing Expenses 0.5 Print-Media Advertising
Total 160 Crores
Sources of FinanceSources of Finance
Debt
Equity
28
M f FiM f FiMeans of FinanceMeans of FinanceDescription Amount of Capital (In Remarksp p (
Crores Rs.)
Internal Sources 42 Developers Internal accruals
Bank Loans 75 Loan from SBI
Private Financing 18 3-4 Private Investors
Initial Payments from Sales 25 Flat Units Advance ypayments Received
Total 160 Crores
29
Financial Returns Analysis
Projected profitability statementC h F d Fl t t tCash-cum-Fund Flow statementProjected Balance sheet
Working Capital statementWorking Capital statementBreak-even pointRatiosSensitivity Analysis
Relating to the kind of industry/projectConsidering a few assumptions
30
The Final ChapterThe Final Chapterpp
Key Elements
Conclusions &Conclusions & Recommendations
31
DocumentsDocumentsDocumentsDocumentsTo support key Assumptions & Parameters
Financial Tie-ups & ResourcesCost of Fixed Assets & VariablesInstalled Capacity basisM k t Ti Cl i & P i iMarket Tie-up Claims & Pricing
Investment done so farRequired Clearances & RegistrationsRequired Clearances & RegistrationsImplementation Schedule
32
Common Errors in Feasibility Report Preparation
Report Format and coverageIgnoring Aspects of promoters b k d t fbackground, past performance, macro factorsM k t F ibilit R l i i lMarket Feasibility : Relying excessively on secondary sourcesTechnical Feasibility : Machine capacityTechnical Feasibility : Machine capacity, utilities and importance of technology
33
ContdContd...
Project cost : an underestimate orProject cost : an underestimate or overestimateSelecting the Locations: Some temptationsg pSelling Price : unfounded optimizingCash flow in initial years: Poor detaily
Initial years, promoters are expected to pay from their own resourcesinstitutions may pay directly to machinery suppliers and reduce flexibility.
34
Some Tips on Report Writingp p g(Informal !!)
n Write less! i e write to the pointn Write less! - i.e. write to the pointn Prepare schedule of chaptersn Prepare all tables charts projections etcn Prepare all tables, charts, projections, etc.n Note down important points for each of the chaptern Write in the form of points observationsn Write in the form of points, observationsn Provide as much hard data as possiblen Give/indicate sources of such statisticsn Give/indicate sources of such statisticsn Give basis for computations, projections
35