Subcontracts India

Subcontracts India, with its extensive and immaculate track record of providing authoritative as well as innovative advice on a wide range of project financing transactions worldwide combined with its global experience and local knowledge, is highly capable of delivering integrated project financing strategies and services its clients require. Since project financing is at the very core of all aspects of project development, in order to survive the close scrutiny that lenders and investors require to approve project financing, all aspects of the project must be aligned in a manner that ensures the end result of the project financing effort is a fully functioning, revenue-generating, and legally permitted project returning sufficient value to the investors. Transacting a project finance deal is not merely a negotiation of financial structuring but rather necessarily involves an analysis of real property rights, construction and development contracts, equipment warranties, concession agreements, off-taker agreements such as power purchase and interconnection agreements, cash management, environmental permissions and clearances, regulatory matters, and, of course, detailed tax analysis. Subcontracts India provides project owners/sponsors/promoters the much needed project financing solutions and support to raise capital for their projects through the developmental and operational stages. For both greenfield as well as brownfield projects, this is a gateway to reach project experts, investors and financiers. We have been at the forefront of several project financing transactions across various sectors of the economy around the globe. Our project support & financing services have benefited projects through their stages of inception through maturity. Startups, shovel-ready projects, green-shoots too have used our services at different stages of their project life-cycle. We have the means as well as the necessary expertise to approach numerous Banks, Investment Bankers, Non Banking Finance Companies (NBFCs), Financial Institutions (FIs), Venture Capitalists (VCs), Private Equity Investors (PE), Ultra High Net Worth Individuals (UHNWIs), Family Businesses, Hedge Funds, Pension Funds, Underwriters, Insurance Providers, etc. with great speed and efficiency. We understand how these fund providers and investors work and what are their main areas  of interest. Targeting the right source is not just important but also crucial for achieving successful financial close. Subcontracts India offers:

  1. Identification of projects with a Cash Flows Generating component and bankability potential;
  2. Support of project development to achieve bankability;
  3. Preparation and structure of transaction by leveraging our consulting, financial and legal expertise; 
  4. Finding the right investor and achieving financial close;
  5. Support to the client through the project execution and construction phases. 

We can be present with our services across the entire project lifecycle:

  1. Strategy and planning: Assisting long-term planning of individual projects or a portfolio by focusing on feasibility, alignment with corporate objectives and governance procedures in order to maximize return on investment.
  2. Financing and procurement: Raising project finance; establishing and managing the procurement process to acquire services, material or equipment to deliver the project, and prioritizing capital allocation between projects.
  3. Project organization, execution and construction: Setting up the project for success and strengthening client capabilities to deliver on time and to budget.
  4. Operations and maintenance: Assessing ongoing lifecycle costs and providing insights around optimizing the performance and value of assets in operation.
  5. Asset recycling, concession maturity & decommissioning: Determining when and how to discontinue investing in an asset, and transaction advisory services for investors in infrastructure assets.

The key reasons for the underdevelopment of project financing lie in insufficient project maturity and inability to develop projects to the level necessary to achieve bankability. Access to finance is one of the main reasons that infrastructure projects are not developing faster and the key stakeholders sometimes do not see a business case for financing. Moreover, lack of know-how and competence of key stakeholders require a complex multidisciplinary approach in order to guarantee project execution.
Projects, however, are funded solely on their own merits. Although we do not make claims of 100% success rate in our pursuit of project finance, with our expertise and experience, our clients enjoy a definite advantage in terms of getting their projects successfully funded. The following are extremely important for achieving successful financial close.


Any project, whether infrastructure, power, real estate, communications, retail, logistics and supply chain, healthcare, hospitality, tourism, education, transport, energy, research & development, information technology, needs a detailed feasibility study prior starting. Without the Feasibility Study Report (FSR), a project would be extremely ill conceived and would never reach its true potential. Conducting a detailed feasibility study (DFS) is one of the key activities within the project initiation phase. It aims to analyze and justify the project in terms of technical feasibility, business viability and cost-effectiveness. The study serves as a way to prove the project’s reasonability and justify the need for launch. Once the study is done, a feasibility study report (FSR) should be developed to summarize the activity and state if the particular project is realistic and practical. The DFS aims to identify, explore, and evaluate a project’s solutions to save time and money.
The Feasibility Study Report (FSR) is a formally documented output of detailed feasibility study (DFS) that summarizes results of the analysis and evaluations conducted to review the proposed solution and investigate project alternatives for the purpose of identifying if the project is really feasible, cost-effective and profitable. It describes and supports the most feasible solution applicable to the project.
The report gives a brief description of the project and some background information. Formally this document is the starting point for running the Pre-Charter Sub-Phase. In practice, it signifies that the sponsor can proceed with deciding on project investment and make necessary assignments to the project manager. It provides legal and technical evidence of the project’s vitality, sustainability and cost-effectiveness. The reporting process allows the senior management to get the necessary information required for making key decisions on budgeting and investment planning.


As the identification and intention for the implementation of the project grow, the depth of the study for the probable project increases. Further analyses of the details relevant to such a project become imperative. The feasibility study report (FSR) contains sufficient detailed information. It is from the study of the pre-feasibility or feasibility study report that approval is made by the project owner / sponsor / investor for the investment on the project or for a request to prepare the DPR.
Preparation of DPR is a costly and challenging process that may extend to long period of strenuous work by experts, and requires reports of specialists from different streams such as market research, engineering (civil, mechanical, metallurgical, electrical, electronics), finance, etc. carefully considered prior the final drafting of the DPR which must minimize technical uncertainties going forward. A good DPR must be based on attested Technology and Design to minimize the risk of failure. Our expert project support team relies on our extensive data and global connections to formulate the most cost effective DPR with attested technology and design. Project location benefits, availability of easily accessible resources, project capacity, etc. are extremely important aspects of any detailed project report and we take full care to make sure these have been assessed accurately while preparing the DPR. Similarly, government policies (both at the state as well as central levels), public attitude towards projects, rehabilitation concerns, etc., must be squarely dealt with since most projects are planned over a long term horizon. The below are included in a DPR we prepare:
  1. Project Summary
  2. Market Report
  3. Technical details with the process involved and the plant layout,
  4. Plant and Machinery and other equipment as required for the project,
  5. Project Schedule
  6. Organization/ Management Structure
  7. Financial details of project costs, source of financing
  8. Cost of Production,
  9. Projected Profit and Loss Account,
  10. Projected Balance Sheet,
  11. Projected Cash Flow Statement,
  12. Interest and Commitment Charges,
  13. Working Capital Requirements
  14. ​Debt Service Coverage


It is important to have the contracts in place for the contractors ready to take on the project construction phase. These can be an assortment of contracts for Engineering, Procurement, and Construction necessary for the project to be production ready or operational. We help formulate contract strategy and then draft the contracts on behalf of our clients keeping in view costs, quality, and legal aspects. 
We also assist our clients enter off-taker agreements such as concessions, power purchase agreements, supply contracts, etc. These off-taker agreements are the backbone of any planned project and are instrumental in securing investor funds for any project.


A vibrant, bankable financial model is the heart of every project. The task of building an abstract representation (a mathematical model designed to represent the performance of any project) of a real world financial situation is a job cut out for the specialists and experts. Applications of a financial model include:

  1. Business valuation, especially discounted cash flow, but including other valuation approaches
  2. Scenario planning and management decision making
  3. Capital budgeting, including cost of capital (i.e. weighted average cost of capital or WACC) calculations
  4. Financial statement analysis / ratio analysis (including of operating- and finance leases, and R&D)
  5. Project finance modeling
  6. Cash flow forecasting and ALM-related
  7. Credit decisioning: Credit analysis and Consumer credit risk;  impairment- and provision-modelling
  8. Working capital- and treasury management
  9. Management accounting: Activity-based costing, Profitability analysis, Cost analysis

The project's finance team can't be agile with a manual, error-prone and fragmented financial planning and analysis (FP&A) process. To ensure real time reaction and financial decision making, we provide the ability to synthesize information from all data sources, uncover trends and deliver insights faster than ever. We help accelerate your FP&A by automating data collection, aggregation and validation. We help align operational tactics with financial plans to understand what's truly going to drive a project and to steer project performance. Our expert project support services team, with its access to cutting edge technology, provides dynamic solution to devise financial models that takes care of every financial aspect of any project. This is a highly technical and analytical work involving financial analysts, economists, accountants, engineers, and legal & taxation experts.​

Check some recurring valuation mistakes related to financial modeling


We have been consistently endeavoring to simplify the process of raising Project Finance​ for the project promoters and owners across the world. While discussing Project Finance, the significance of submitting a concise yet profoundly informative Project Proposal or Business Plan cannot be overestimated. Fund Providers as well as investors want to see a business plan that is short enough to engage investor interest and yet long enough to cover all vital project information. 

We realize that it is not easy to put a winning Business Plan in place unless the Business Plan writer has been thoroughly acquainted with the project right from its inception. There are numerous consultants who would accept any Business Plan compiled by anyone. However, we generally do not. Project Finance is a challenging task and our experts would like to do it in a highly evolved manner so that chances of successful financial closure  is extremely high. We accept a Business Plans compiled by either a competent project management team or a professional financial services provider with history of handling financial modelling for projects. Financial modeling combines accounting, finance, and business metrics to create an abstract representation of a company in Excel and has a wide range of uses, including making business decisions at a company, making investments in a private or public company, pricing securities, or undergoing a corporate transaction such as a merger, acquisition, divestiture, or capital raise. 

We also need a Pitch Deck, the brief presentation, often created using PowerPoint, and used to provide investors/funders with a quick overview of your business plan with visual enhancements such as graphs, charts, and pictures. You will usually use your pitch deck during face-to-face or online meetings with potential investors, customers, partners, and co-founders.


The structuring of project financing is a framework in which ownership structure, project structure, risk structure, and financial structure decisions are made and tied together in the project's legal structure which, in turn, forms a foundation for funding the project on a limited recourse basis. The ownership structure is how the special purpose company/vehicle (SPC/SPV) is organized; that is, as a corporation, unincorporated joint venture, limited liability partnership, etc. Project structure on the other hand refers to the agreements defining responsibilities and transfer of rights and/or ownership of the SPC/SPV such as build, operate, and transfer of ownership (BOT), build, own, operate, and transfer (BOOT), build, lease, and transfer (BLT), etc.
Risk structure is the prioritization and mitigation of risks after the identification, assessment, and allocation process is completed. The project's legal structure is the web of contracts and agreements negotiated to make financing possible. Financial structure refers to the mix of financing used to fund a project, which includes equity, short‐ and long‐term loans, bonds, trade credits, etc. and the cash flows to equity providers and the lenders.
A special purpose vehicle (SPV) project company with no previous business or record is necessary for project financing. The company’s sole activity is carrying out the project by subcontracting most aspects through construction contract and operations contract. Because there is no revenue stream during the construction phase of new-build projects, debt service is possible during the operations phase only. For this reason, parties take significant risks during the construction phase. Sole revenue stream is most likely under an off-take or power purchase agreement. Because there is limited or no recourse to the project’s sponsors, company shareholders are typically liable up to the extent of their shareholdings. The project remains off-balance-sheet for the sponsors and for the government.)


The golden rule of project finance is one of risk mitigation: the deal structure must allocate risks that could affect the project’s cash flow or assets to a creditworthy party with the ability to mitigate that risk. Much of the tension in negotiating a project financing will derive from each participant’s efforts to shift various risks to others while retaining the particular benefits that the participant seeks from the transaction. We assist our clients with arriving at a comprehensive risk management strategy. The core of Project Finance is the analysis of project risks, namely construction risk, operating risk, market risk, regulatory risk, insurance risk, and currency risk. There are risks related to the pre-completion phase such as activity planning risk, technological risk, and construction risk or completion risk. Then there are risks related to the post-completion phase such as supply risk, operating risk, and demand risk.  And then there are risks related to both phases such as interest rate risk, exchange risk, inflation risk, environmental risk, regulatory risk, political risk, country risk, legal risk, and credit risk or counterparty risk. These risks are allocated contractually to the parties best able to manage them. The process of risk management is usually based on the following interrelated steps:

  1. risk identification;
  2. risk analysis;
  3. risk transfer and allocation;
  4. residual risk management;
Essential to structuring a project finance package are the crucial elements of successful identification, analysis, mitigation and allocation of project risks. These risks are related to events that could endanger the project during development, construction and operation.
During the development stage the main risk is rejection by the host government or by the financiers – for reasons including commercial weakness, failure to obtain licenses, permissions and clearance. Sponsors can hedge their risks by obtaining technical assistance grants for project preparation and planning.
During the construction stage the main risk is failure to complete the project with acceptable performance levels and within an acceptable time frame and budget. Sponsors can hedge construction risks by purchasing various forms of insurance and obtaining guarantees from contractors with regard to costs, completion schedule and operational performance.
After construction, the main risk is ongoing operations and performance and include technical failures, availability of funds, market demand, prices, foreign exchange rates or environmental issues. The sponsors can hedge these risks through contractual and guarantee agreements that transfer some of the risk to other parties.


Financing projects through the project finance route offers various benefits such as the opportunity for risk sharing, extending the debt capacity, the release of free cash flows, and maintaining a competitive advantage in a competitive market. Project finance is a useful tool for companies that wish to avoid the issuance of a corporate repayment guarantee, thus preferring to finance the project in an off-balance sheet manner. The project finance route permits the sponsor to extend their debt capacity by enabling the sponsor to finance the project on someone's credit, which could be the purchaser of the project’s outputs. Sponsors can raise funding for the project based simply on the contractual commitments.

Project finance also permits the sponsors to share the project risks with other stakeholders. The basic structure of project finance demands that the sponsors spread the risks through a network of security arrangements, contractual agreements, and other supplemental credit support to other financially capable parties willing to assume the risks. This helps in reducing the risk exposure of the project company.

The project finance route empowers the providers of funds to decide how to manage the free cash flow that is left over after paying the operational and maintenance expenses and other statutory payments. In traditional corporate forms of organization, corporate management decides on how to use the free cash flow — whether to invest in new projects or to pay dividends to the shareholders. Similarly, as the capital is returned to the funding agencies, particularly investors, they can decide for themselves how to reinvest it. As the project company has a finite life and its business is confined to the project only, there are no conflicts of interest between investors and the management of the company, as often happens in the case of traditional corporate forms of organization.

Financing projects through the project finance route may enable the sponsors to maintain the confidentiality of valuable information about the project and maintain a competitive advantage. This is a benefit of raising equity finance for the project (however, this advantage is quite limited when seeking capital market financing (project bonds). Where equity funds are to be raised (or sold at a later time so as to recycle capital) through market routes (for example, Initial Public Offerings [IPOs]), the project-related information needs to be shared with the capital market, which may include competitors of the project company/sponsors. In the project finance route, the sponsors can share the information with a small group of investors and negotiate the price without revealing proprietary information to the general public. And, since the investors will have a financial stake in the project, it is also in their interest to maintain confidentiality.

In spite of these advantages, project finance is quite complex and costly to assemble. The cost of capital arranged through this route is high in comparison with capital arranged through conventional routes. The complexity of project finance deals is due to the need to structure a set of contracts that must be negotiated by all of the parties to the project. This also leads to higher transaction costs on account of the legal expenses involved in designing the project structure, dealing with project-related tax and legal issues, and the preparation of necessary project ownership, loan documentation, and other contracts.


​From a broad perspective and general analysis, the financial viability (or commercial feasibility) of the project is assessed by determining whether the net present value (NPV) is positive. NPV will be positive if the expected present value of the free cash flow is greater than the expected present value of the construction costs. However, in addition to or in lieu of the NPV, lenders will use debt ratios such as the Debt Service Cover Ratio (DSCR) and Life Loan Cover Ratio (LLCR) as the main ratios to measure bankability.

The DSCR measures the protection of each year’s debt service by comparing the free cash flow (more precisely, the cash flow available for debt service – CFADS) to the debt service requirement. The DSCR requires that the cash flow available for debt service is at least a specified ratio (for example, 1.2 times) of the scheduled debt service for the relevant year. The LLCR compares the overall amount of free cash flow projected for the life of the loan, duly discounted with the amount of debt under analysis. The LLCR also reflects the capacity of the SPV to meet the debt obligations over the life of the loan (considering potential re-structuring).

On the basis of the projected cash flows of the SPV, including the debt profile under analysis, lenders and their due diligence advisors will observe the value of such ratios, and accommodate the debt amount so as to meet them, considering the maximum term at which they are ready to lend. Subsequently, they will run sensitivities analysis (including break-even analysis) on the project cash flows to test the resistance of the project to adverse conditions or adverse movements of the free cash flow figures from the base case.

In determining financial viability, and related to the reliability of cash flows and the guarantees offered by the contract (especially termination provisions), the lenders will analyze the risk structure of the contract. This will include determining how achievable the performance standards in "government-pays" projects, or the contractual guarantees in "user-pays" projects, actually are. Lenders will exercise tight control of all cash flows, limiting the ability of the private partner(s) to dispose of them — through “covenants” (for example, no distributions may be made if the actual DSCR of the previous year has not meet a certain threshold). The bank accounts through which cash flows pass will be pledged and held with a bank within the syndicate; this is in addition to other provisions to be adapted in the loan agreement.


Project Finance is one of the key focus areas for Subcontracts India. We have access to several project financing groups and institutions that have institutionalized capabilities to successfully manage the unique and multidimensional process of project finance transactions led by customized project structuring approach.
These groups and institutions have been the lead arrangers and underwriters of a significant amount of project debt over the years. In the Indian project finance domain, they enjoy a leadership position and are acknowledged for their comprehensive domain expertise and knowledge in the infrastructure, manufacturing and mining sectors, having ensured timely financial closure of several big ticket projects.​
Whether you're investing in renewable energy, telecommunications or water supply and waste water treatment – we develop the right solution for sustainably viable, flexibly structured financing to meet the needs of your transaction.
Backed by in-depth expertise you can benefit from our wide network in emerging and developing countries, our comprehensive knowledge of sectors and industries, and our 21 locations across North America, Europe, Asia, Africa, Oceania and Latin America. 

Project Finance Application Form is available against a Letter Of Request for project funding emailed to [email protected]. This needs to duly filled and submitted along with an executive summary or Business Plan of the project seeking funding. Upon satisfactory internal appraisal we will send you our PROJECT FINANCING SERVICES TERMS AND CONDITIONS.  If you confirm acceptance of our terms,  we will draft and send you the Client Agreement which you need to fill, sign and return to us duly notarized by legal authorities.

Our services do not come for free and hence be prepared to pay our service charges when you decide to use them. Also, we are rather choosy about who we serve. We encourage only serious clients who understand what it takes to raise capital for projects. Our seamless services start with our client entering into the Client Agreement with us and depositing the Engagement Fee. You would be further liable to pay a Success Fee (case specific) post successful financial close.

Please note, our analysts evaluate projects individually, so if you have more than one project, you should complete one copy of the form for each project separately. 

If our analysts determine that your project is unlikely to meet our criteria, we will quickly contact you, usually within a week, to inform you of the areas of the Business Plan that need further working.

However, once our analysts determine that your project Business Plan is bankable, we will immediately get in touch with you for further discussions to finalize the project financing strategy. 

Here is the step by step procedure that needs to be followed by a client seeking to raise project finance before a Term Sheet(s) can be issued by our Lender(s)/Investor(s):

  1. The client submits the Project Finance Application Form and shares his Project Feasibility Report (FSR) / Detailed Project Report/ Business Plan and Project Financial Modelling Workbook with us. After first brief appraisal of the project, we send our PROJECT FINANCE SERVICES TERMS AND CONDITIONS (T&C) to the client.
  2. Once the client accepts the T&C, he signs it and returns to us. We then send to the “CLIENT AGREEMENT” draft to be filled, signed, notarized and returned to us.
  3. We then send a copy of the executed copy of the CLIENT AGREEMENT duly countersigned by us.
  4. The client then pays our Engagement Fee of US$35,400.00. 
  5. Once receipt of the above is confirmed, we send the client the detailed evaluation report of the project in about two to three weeks. Depending on the evaluation report, the client might be required to furnish additional information relating to his company and his project(s). If the Business Plan submitted by the client falls short of the industry standard, our team will assist the client by suggesting how to bring it to a standard widely accepted by the lenders/ investors. This assistance, however, is provided at an extra cost to the client and is specific to the project. 
  6. Next will be a Video conferencing with the client to finalize the submissions to actual lenders/investors.
  7. Once lender/ investor firms up, a Term Sheet will be released based on the submission of the Business Plan. Term Sheets are project specific and hence there is no general format.
  8. Upon acceptance of the Term Sheet by the client, a due diligence will be conducted by the lenders at their own costs (Please note, a big loan/investment size cannot be fulfilled by a single lending source alone. There will be multiple lenders/ investors involved and we might undertake a Loan / Equity syndication process at an additional cost to the client)
  9. Upon successful due diligence, the client will enter into the Joint Venture or Loan Agreement(s) with individual lender(s) / Investor(s).
  10. Joint Venture Company formation or Loan disbursal will ensue as per the JV/ Loan Agreements signed between parties.

Important To Note: 
  1. We quickly respond to all inquiries. 
  2. We do not delegate executive time to an inquiry until your project, as expressed in your fully completed Project Finance Application form (available on request), has been thoroughly evaluated by our analysts.
  3. To ensure our executives do not waste time on unrealistic inquiries we do not enter discussions in any form until we have a full understanding of your project's potential and risks. We therefore do not offer meetings, hold telephone discussions or return telephone calls until we have thoroughly evaluated your project.
  4. Please do not send us additional communications during the application phase as it delays the application process.
  5. We do not finance projects valued at less than $5,000,000.00 (United States Dollars five million), we do not finance acquisitions and we do not finance projects in countries mentioned in this Restricted Nations list
  6. All our official communications are in English. We do not offer a translation service.


Financial due diligence requires that, during loan preparation and processing, sufficient analysis is undertaken to enable an informed assessment to be made with respect to project financial viability and long-term sustainability, and that the borrowers’ financial and project management systems are, or will be, sufficiently robust to ensure that funds are used for the purpose intended and that controls will be in place to support monitoring and supervision of the project.
There are Guidelines that provide the framework for financial due diligence, namely completion of a financial management assessment (FMA) of the executing agency (EA) and/or implementing agency (IA), financial evaluation of the project, and assessment of implementation arrangements (from a financial perspective, including disbursement and auditing arrangements).
The methodology note provides specific guidance in four primary aspects of financial due diligence:
  1. financial management assessment,
  2. project cost estimates and financing plan,
  3. financial analysis, and
  4. financial evaluation.
It also provides guidance on assessing disbursement auditing arrangements. This financial due diligence methodology note offers a suggested approach for operationalizing the standard project preparation and loan processing requirements of the Guidelines. the Guidelines, together with the methodology note, should be seen as a reference guide to assist staff in conducting an appropriate degree of financial due diligence during project  preparation and processing, and should guide staff in determining the appropriate level of financial management  safeguards required for a given project and/or EA and/or IA. The advice, directions, and recommendations provided should not be regarded as a substitute for the professional judgment of SUBCON staff.


Effective financial management within the EA and/or IA is a critical success factor for project sustainability, both in the effective use of funds and in the safeguard of assets once created. Irrespective of how well a particular project or program is designed and implemented, if the EA and/or IA does not have the capacity to effectively manage its financial resources, the benefits of the project are unlikely to be sustainable.
The objective of the financial management assessment (FMA) is to ensure that the EA and/or IA has, or will have, sufficiently strong and robust financial management systems and procedures in place to ensure sustainability of project investments and benefits over time.
The FMA is a review of the entity’s systems for financial and management accounting, reporting, auditing, and internal controls. It also involves an assessment of the entity’s disbursement and cash flow management arrangements, and governance and anticorruption measures. The FMA is not an audit; it is a review designed to determine whether or not the entity’s financial management arrangements are sufficient for the purposes of project implementation.


The first step is to determine whether an FMA has recently been completed by any other credible financial institution (Bank, NBFC, VC or PE agencies) , the objective being to avoid duplicating diagnostic work that already exists. If an FMA exists, this should be reviewed and, in particular, any work done to overcome previously identified weaknesses should be checked. The original FMA can then be updated accordingly.
While planning to rely on the work of another lender , SUBCONTRACTS INDIA would thoroughly review the agency’s assessment report to determine whether or not the results of the FMA are reasonable and can be accepted by SUBCONTRACTS INDIA.
If an FMA has never been completed, or if there have been significant on-ground changes which render an existing FMA obsolete, then the following approach to the FMA is recommended:
Review the Economic Sector diagnostic studies specific to the country where the project is located, including the country financial accountability assessment, country procurement assessment report, country governance assessment, and diagnostic study on accounting and auditing.
Early in project preparation, have the borrower/project promoter complete a Financial Management Assessment Questionnaire (FMAQ).
Review responses to the FMAQ, determine what (if any) additional information is required in order to be able to conclude whether or not the financial management arrangements (a) are capable of recording all transactions and balances, (b) support the preparation of regular and reliable financial statements, (c) safeguard the entity’s assets, and (d) are subject to audit.
Review past audit reports and audit management letters to assess what concerns have previously been raised on systems and internal controls.
Form a conclusion with respect to whether or not the financial management arrangements and financial and project accounting systems can be relied upon for the purposes of the project.
If issues and/or weaknesses are identified, determine the most appropriate mitigation measures (e.g., restructuring finance sections, increasing finance staff, filling vacant posts, developing new systems, developing financial reporting, training, etc.).
Determine whether, given the findings, it is necessary to include a project component to strengthen financial management in the EA and/or IA and/or establish or strengthen a project implementation or project management office via either technical assistance or consultant support within the project.


  1. Due Diligence service is rendered by an accredited Due Diligence service provider appointed by the Funding Partner Company. Due Diligence is by far the most important exercise in the funding consideration process.
  2. The charges for the Due Diligence are to be borne by the applicant. These charges are specific for every case and the applicant is given prior notice of this.
  3. It is extremely important that the applicant understands clearly the processes of Due Diligence is to secure a successful transaction and mutual business relationship between the applicant and the Funding Partner Company.
  4. The Funding Partner Companies provide finance to viable projects on precise terms. There are no general terms. Everything is specific to the project under consideration.
  5. Once the Due Diligence is successfully completed, a Funding Offer is officially made from Funding Partner Company to the applicant (Project Owner(s)/ Promoter(s)). The Project Owner(s)/Promoter(s) are issued an Invitation Letter for a table meeting in the Funding Partner Company’s office which can be in any country. Post a personal interview of the project owner(s)/promoter(s) ,the MOU is drafted and signed. Insurance requirements too would be discussed and finalized at this meeting.​


Project Finance

Project finance is the process of financing a specific economic unit that the sponsors create, in which creditors share much of the venture’s business risk and funding is obtained strictly for the project itself. Project finance creates value by reducing the costs of funding, maintaining the sponsors financial flexibility, increasing the leverage ratios, avoiding contamination risk, reducing corporate taxes, improving risk management, and reducing the costs associated with market imperfections. However, project finance transactions are complex undertakings, they have higher costs of borrowing when compared to conventional financing and the negotiation of the financing and operating agreements is time-consuming.
Project Finance as the process of financing ‘a particular economic unit in which a lender is satisfied to look initially to the cash flows and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan’. Thus, the funding does not depend on the reliability and creditworthiness of the sponsors and does not even depend on the value of assets that sponsors make available to financiers.
Definitions of Project Finance emphasize the idea that lenders have no claim to any other assets than the project itself. Therefore, lenders must be completely certain that the project is fully capable of meeting its debt and equity liabilities through its economic merit alone. The success of a Project Financing transaction is highly associated with structuring the financing of a project through as little recourse as possible to the sponsor, while at the same time providing sufficient credit support through guarantees or undertakings of a sponsor or third party so that lenders will be satisfied with the credit risk2. Finally, the allocation of specific project risks to those parties best able to manage them is one of the key comparative advantages of Project Finance.
There are five distinctive features of a Project Financing transaction. First, the debtor is a project company (special purpose vehicle – SPV) that is financially and legally independent from the sponsors, i.e., project companies are standalone entities. Second, financiers have only limited or no recourse to the sponsors – the extent, amount and quality of their involvement is limited. Third, project risks are allocated to those parties that are best able to manage them. Fourth, the cash flow generated by the project must be sufficient to cover operating cash flows and service the debt in terms of interest and debt repayment. Finally, collateral is given by sponsors to financiers as security for cash inflows and assets tied up in managing the project.
Commonly referred as “off-balance-sheet” financing, Project Finance is often used to segregate the credit risk of the project from that of its sponsors so that lenders, investors, and other parties will appraise the project strictly on its own merits. It involves the creation of an entirely new vehicle company, with a limited life, for each new investment project. Project companies are legally independent entities with very concentrated equity ownership and have higher leverage levels.
The core of Project Finance is the analysis of project risks, namely construction risk, operating risk, market risk, regulatory risk, insurance risk, and currency risk. There are risks related to the pre-completion phase such as activity planning risk, technological risk, and construction risk or completion risk. Then there are risks related to the post-completion phase such as supply risk, operating risk, and demand risk.  And then there are risks related to both phases such as interest rate risk, exchange risk, inflation risk, environmental risk, regulatory risk, political risk, country risk, legal risk, and credit risk or counterparty risk. These risks are allocated contractually to the parties best able to manage them. The process of risk management is usually based on the following interrelated steps:
  1. risk identification;
  2. risk analysis;
  3. risk transfer and allocation;
  4. residual risk management;

This process is crucial in Project Financing transactions and they must be identified and allocated to create an efficient incentivizing tool for the parties involved.
Project Management
The phrase “project management” is a simple description of a complex activity. Before you can even plan the project, you must get it approved by stakeholders and sponsors. So, you’re sort of a salesman. Then you must plan it, schedule it, budget it, all within the confines of what has been approved. Next, you need to assemble a team to accomplish those tasks, and you must monitor their progress and report back on it to the project executives. It helps if you can break down these many components into a dozen key project management principles. It helps if you can break down these many components into a few key project management principles.

Key Project Management Principles
1. Success Principle
Even before you manage a project, you must commit yourself to success in that endeavor. Your goal as a project manager is the successful completion of the project.
This isn’t merely about keeping the project on schedule and within budget. Many a project has come in on time and with money to share, but the goal was never fully achieved. That is project failure.

2. Project Manager Principle
Projects are set to fail if they’re not lead by a project manager. The project manager comes up with the plan to achieve the goals of the project, and they manage the team assembled to complete those tasks.
You, as a project manager, are responsible for getting the sponsors on board, communication, risk management, budgeting, scheduling, the whole kit and caboodle.
Therefore, you need to have a skill set that includes technical knowledge, managerial experience, interpersonal skills and so much more. The most important thing to remember is never become complacent, always be learning.

3. Commitment Principle
Are you committed to the project? You better be! But so must every other person involved in the project.
You must have the sponsor and the team on board, too, or else you don’t have a viable project. This commitment is crucial before the project is even planned, let alone executed.
By commitment, we mean an agreement on project goals and objectives, scope, quality and schedule. Once you have these you’re ready to work.

4. Structure Principle
This is the first thing you’ll have to think about when managing a project. The structure will basically stand on three pillars: your project goal, resources and time.
What you must know is the reason for the project, which might seem obvious, but this question defines the project and leads to its structure.
The next step is understanding how long it will take to accomplish that goal, so you’ll need to have a timeline that’s broken up by milestones, marking major phases in the project.
You will also need a Gantt Chart. The Gantt chart offers a spreadsheet to the left and a timeline populated with that data to the right. There, tasks are points in time, beginning with a start data and ending with its deadline. This chart allows you to easily organize your projects and the tasks within them.
Furthering the structure, tasks that are sequentially dependent on one another can be linked to avoid leaving teams idle by delaying work. The larger project can also be broken down by milestones, so the major phases of the project are clearly delineated.

5. Definition Principle
You have a structure, but you must move into the definition phase to fully grasp the project. That’s a principle often passed over at the expense of the project.
It’s easier said than done, however, with many voices offering differing opinions of what the project is. Your job as project manager is to make it clear what the project is about, which can be problematic when there are many stakeholders.
Defining the project is not a one-time event, but something that must be revisited throughout the project. You must make sure that everyone, especially your team, has a clear definition in mind so they can work productively.

6. Transparency Principle
By transparency, we mean that you must report on the progress of the project to your sponsors and stakeholders. You can’t hide anything from them, or at least you do at your own risk, for it’ll inevitably come back to haunt you.
Of course, your sponsors and stakeholders don’t need you to drown them in minutia about the project. They want to see the broad strokes regarding progress, budget and schedule.
Save the details for your team. Yes, you must be transparent with your team. They need reports too, but you want to have those reports customizable to create effective reports that hits the target audience for whom they’re intended.

7. Communication Principle
While reporting to the various participants in the project is key, there must be a primary communication channel between yourself and the project sponsor. This is the only way to ensure that project decisions are properly implemented.
Without having a singular way to disseminate what the sponsor wants to the project manager, you’re not being efficient or effective in administrating the project. Even if there are multiple sponsors, they must speak with one voice or risk sending the project into chaos.
You have the responsibility to set this line of communication in place, finding the right person, with the right skills, experience, authority and commitment in the executive team to facilitate this important task.

8. Progress Principle
To progress in a project, a project must have well-defined roles, policies and procedures in place. That means that everyone must know what they’re responsible for and who they answer to. There needs a delegation of authority for any project to function.
It also means that you must have thought out how you’re going to manage the scope of work, maintain the quality of the project, define its schedule and cost, etc. Without these things being figured out at first, you’re putting the project at risk.

9. Life Cycle Principle
The life cycle of a project are its phases, from planning to initiation, monitoring to closing. Each phase of the project is dependent on planning it and then doing it.
Milestones determine the start and end of these project life cycles. You can think of them as signposts on the drive to reach your project’s destination.

10. Culture Principle
For a project to work, you must have a culture that supports the needs of all those involved. It might sound like mollycoddling—this is work, after all—but you don’t want anything to disrupt the effective productivity of your team.
A supportive work environment means a project team that is going to work better. As project manager, you must understand this dynamic and have it backed by management on all levels. Style is substance in this case, so make sure the management style is suited to the project.

11. Risk Principle
Risk is part of life, and it’s certainly a part of any project. What you must do is, before the project even starts, figure out what are the potential risks inherent in the work ahead. Identifying them is a not an exact science, of course, but you can use historic data and knowledge from you, your team and sponsors to uncover where risk lies. Using a risk register template helps you capture all this information.
It’s not enough to just know that risk might rise at this or that point in a project, you also should put in place a plan in which to resolve the issue before it becomes a problem. That means giving each risk a specific team member who is responsible for watching out for it, identifying it and working towards its resolution.
Naturally, you’re not going to foresee every risk, hopefully you’ll have at least identified the big ones. That’s why you must have an eye out for any irregularities. Have your team trained to be your eyes and ears on the project front. The sooner you identify a risk, whether expected or not, the faster you can resolve it and keep the project on track.

12. Accountability Principle
As you progress through your project, you’re going to need a metric to measure success. This is how you can hold your team and yourself accountable. Therefore, you want to have ways to measure the various aspects of your project and determine if the actual figures reported are in line with the ones you planned.
The great thing about accountability in a project is that it gives you the means to identify those team members who are top performers. They can then be rewarded. Everyone likes acknowledgement. While the underachievers can be given the training or direction they need to get more effective in their performance.

Defining Scope Of The Project

The first and important step of the project management is the scope (goals and objectives) definition. It is a core process of the project planning. The whole work that is necessary for the product manufacturing, is, therefore, defined and detailed described. The project team can comprehend what must be done; the planning effort is optimized, the control method for the project is chosen and the momentum of the project is developed.
The sub-units are structured and the transparency about the objective and temporal overall project is created. As a result the basis is created for the division of the work in the project. The scope definition focuses on the “product” or “work schedules”. The first element is a product-oriented structural plan or the product bill of material. The second one is a development-oriented structural plan. Both plans can run parallel or mutual in some projects and are a combination of two orientations. The scope definition is normally the first step in the project planning process and creates the foundation of the whole panning process. The project planning can probably be unsuccessful, if the process of the scope definition is poorly executed.
The very basics of project management are as follows: a project is a temporary endeavor with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables) that an organization takes to meet unique goals and objectives, typically to bring about beneficial change or add value.
The primary challenge of project management is to achieve all of the project goals and objectives while honoring the pre-defined constraints. The primary constraints are scope, time, quality, and budget. The secondary—and more ambitious—challenge is to optimize the allocation of necessary inputs and integrate them to meet pre-defined objectives.
For a successful project, the following project management principles are necessary assets when charting a path to completion. These principles of project management can be applied to any level or branch of a project that falls under a different area of responsibility in the overall project organization:
  1. Project structure
  2. Definition phase
  3. Clear goals
  4. Transparency about project status
  5. Risk recognition
  6. Managing project disturbances
  7. Responsibility of the project manager
  8. Project success

Project Structure

Project management typically revolves around three parameters – Quality, Resources, and Time. A project structure can usually be successfully created by considering:

a)Project Goal
An answer to the question “What has to be done” is usually a good starting point when setting a project goal. This question leads to the project structure plan. This plan consists of work packages which represent enclosed work units that can be assigned to a personnel resource. These work packages and their special relationships represent the project structure.

b)Project Timeline and Order
A flowchart is a powerful tool to visualize the starting point, the endpoint, and the order of ork packages in a single chart.

c)Project Milestones
Milestones define certain phases of your project and the corresponding costs and results. Milestones represent decisive steps during the project. They are set after a certain number of work packages that belong together. This series of work packages leads to the achievement of a sub-goal.

Definition Phase

The definition phase is where many projects go wrong. This can happen when no clear definition, or when the definition is muddled due to the involvement of too many stakeholders. A successful definition must involve the entire team at every step to facilitate acceptance and commitment to the project.

Clear Goals

The project manager is responsible for the achievement of all project goals. These goals should always be defined using the SMART paradigm (specific, measurable, ambitious, realistic, time-bound). With nebulous goals, a project manager can be faced with a daily grind of keeping everything organized. It will work decidedly to your advantage to clearly define goals before the project begins. 

Transparency About the Project Status

Your flowcharts, structure plan, and milestone plan are useful tools to help you stay on track. As a project manager, you should be able to present a brief report about the status of the project to your principal or stakeholders at each stage of the project. At such meetings, you should be able to give overviews about the costs, the timeline, and the achieved milestones.

Risk Recognition

It’s the duty of the project manager to evaluate risks regularly. You should come into every project with the knowledge that all projects come with a variety of risks. This is normal. Always keep in mind that your project is a unique endeavor with strict goals concerning costs, appointments, and performance. The sooner you identify these risks, the sooner you can address negative developments.

Managing Project Disturbances

It’s not very likely that you have enough personal capacity to identify every single risk that may occur. Instead, work to identify the big risks and develop specific strategies to avoid them. Even if you’re no visionary, you should rely on your skill set, knowledge, and instincts in order to react quickly and productively when something goes wrong.

Responsibility of the Project Manager

The Project Manager develops the Project Plan with the team and manages the team’s performance of project tasks. The Project Manager is also responsible for securing acceptance and approval of deliverables from the Project Sponsor and Stakeholders. The Project Manager is responsible for communication, including status reporting, risk management, and escalation of issues that cannot be resolved in the team—and generally ensuring the project is delivered within budget, on schedule, and within scope. 

Project managers of all projects must possess the following attributes along with the other project-related responsibilities: 
  1. Knowledge of technology in relation to project products
  2. Understanding Management concepts 
  3. Interpersonal skills for clear communications that help get things done 
  4. Ability to see the project as an open system and understand the external-internal interactions

Project Success

Project success is a multi-dimensional construct that can mean different things to different people. It is best expressed at the beginning of a project in terms of key and measurable criteria upon which the relative success or failure of the project may be judged. For example, some generally used success criteria include:

Meeting key project objectives such as the business objectives of the sponsoring organization, owner or user
Eliciting satisfaction with the project management process, i.e., the deliverable is complete, up to standard, is on time and within budget
Reflecting general acceptance and satisfaction with the project’s deliverable on the part of the project’s customer and the majority of the project’s community at some time in the future. 

Structuring Project Finance

The structuring of project financing is a framework in which ownership structure, project structure, risk structure, and financial structure decisions are made and tied together in the project's legal structure which, in turn, forms a foundation for funding the project on a limited recourse basis. The ownership structure is how the special purpose company (SPC) is organized; that is, as a corporation, unincorporated joint venture, limited liability partnership, etc. Project structure on the other hand refers to the agreements defining responsibilities and transfer of rights and/or ownership of the SPC such as build, operate, and transfer of ownership (BOT), build, own, operate, and transfer (BOOT), build, lease, and transfer (BLT), etc.

Risk structure is the prioritization and mitigation of risks after the identification, assessment, and allocation process is completed. The project's legal structure is the web of contracts and agreements negotiated to make financing possible. Financial structure refers to the mix of financing used to fund a project, which includes equity, short‐ and long‐term loans, bonds, trade credits, etc. and the cash flows to equity providers and the lenders.

The Risk Management Process in Project Management

Risk is part of your planning makeup. When you start the planning process for a project, one of the first things you think about is: what can go wrong? It sounds negative, but it’s not. It’s preventative. Because issues will inevitably come up, and you need a mitigation strategy in place to know how to manage risks on your project.
But how do you work towards resolving the unknown? It’s sounds like a philosophical paradox, but it’s not. It’s very practical. There are many ways you can get a glimpse at potential risks, so you can identify and track risks on your project.

What is Risk Management on Projects?

Project risk management is the process of identifying, analyzing and then responding to any risk that arises over the life cycle of a project to help the project remain on track and meet its goal. Risk management isn’t reactive only; it should be part of the planning process to figure out risk that might happen in the project and how to control that risk if it in fact occurs.
A risk is anything that could potentially impact your project’s timeline, performance or budget. Risks are potentialities, and in a project management context, if they become realities, they then become classified as “issues” that must be addressed. So risk management, then, is the process of identifying, categorizing, prioritizing and planning for risks before they become issues.
Risk management can mean different things on different types of projects. On large-scale projects, risk management strategies might include extensive detailed planning for each risk to ensure mitigation strategies are in place if issues arise. For smaller projects, risk management might mean a simple, prioritized list of high, medium and low priority risks.

How to Manage Risk

It’s crucial to start with a clear and precise definition of what your project has been tasked to deliver. In other words, write a very detailed project charter, with your project vision, objectives, scope and deliverables. This way risks can be identified at every stage of the project. Then you’ll want to engage your team early in identifying any and all risks. 
You can’t be afraid to get more than just your team involved to identify and prioritize risks. Many project managers simply email out to their project team and ask their project team members to send them things they think might go wrong on the project, in terms of a risk to the project But what you should do is actually get the entire project team together, some of your clients’ representatives on the project, and perhaps some other vendors who might be integrating with your project. Get them all together and do a risk identification session.
And if you’re not working in an organization with a clear risk management strategy in place, talk openly to your boss or project sponsor about risk. You want them to be aware of what risks are lurking in the shadows of the project. Never keep this information to yourself. Else, you’ll just be avoiding a problem that is sure to come up later.
And with every risk you define, you’ll want to put that in your risk tracking template and begin to prioritize the level of risk. Then create a risk management plan to capture the negative and positive impacts to the project and what actions you will use to deal with them. You’ll want to set up regular meetings to monitor risk while your project is ongoing. It’s also good to keep communication with your team ongoing throughout the project. Transparency is critical so everyone knows what to be on the lookout for during the project itself.
Of course, not all risks are negative. Positive risks can be a boon for your project, and will likely be managed differently than your typical negative risk.
What is Positive Risk? 

Not all risk is created equally. As mentioned, risk can be either positive or negative, though most people assume risks are inherently the latter. Where negative risk implies something unwanted that has the potential to irreparably damage a project, positive risks are opportunities that can affect the project in beneficial ways.
Negative risks are part of your risk management plan, just as positive risk should be, but the difference is in approach. You manage and account for known negative risks to neuter their impact, but positive risks can also be managed to take full advantage of them.
There are many examples of positive risks in projects: you could complete the project early; you could acquire more customers than you accounted for; you could imagine how a delay in shipping might open up a potential window for better marketing opportunities, etc. It’s important to note, though, that these definitions are not etched in stone. Positive risk can quickly turn to negative risk and vice versa, so you must be sure to plan for all eventualities with your team.
How to Respond to Positive Risk

Like everything else on a project, you’re going to want to strategize and have the mechanisms in place to reap the rewards that may be seeded in positive risk. Here are three excellent  tips:

The first thing you’ll want to know is if the risk is something you can exploit. That means figuring out ways to increase the likelihood of that risk occurring.

Next, you may want to share the risk. Sometimes you alone are not equipped to take full advantage of the risk, and by involving others you increase the opportunity of yielding the most positive outcome from the risk.

Finally, there may be nothing to do at all, and that’s exactly what you should do. Nothing. You can apply this to negative risk as well, for not doing something is sometimes the best thing you can do when confronted with a specific risk in the context of your project.

We’ve all been conditioned to think of risks as negative. But risk is a way to safeguard yourself by preparing for the possibility of failure or danger. If you have prepared for risk, understand its potential to both serve and derail your project, then risk can help you widen the aperture and see things that may have beforehand been invisible.
Managing Risk throughout the Organization

Can your organization also improve by adopting risk management into its daily routine? The answer is a resounding, Yes! As a project manager you can help move your organization towards a stronger risk management culture through incorporating organizational learning from your previous projects.
Building a risk management protocol into your organization’s culture by creating a consistent set of standard tools and templates, with training, can reduce overhead over time. That way, each time you start a new project, it won’t be like having to reinvent the wheel. You’ll have a head start and a path already in place to more efficiently and quickly address the specific risks of your individual project.
Things such as your organization’s records and history are an archive of knowledge that can help you learn from that experience when approaching risk in a new project. Also, by adapting the attitudes and values of your organization to become more aware of risk, means your organization can develop a better sense of the nature of uncertainty as a core business issue. With improved governance comes better planning, strategy, policy and decisions.
There are plenty of benefits to be gained from embedding risk management into the day-to-day practices of your organization. These compound one-another to have an increasing effect on the overall health and performance of your organization.
Six Steps in the Risk Management Process

So, how do you handle something as seemingly elusive as project risk management? The same way you do anything when managing a project. You make a risk management plan. It’s all about process.
Process can make the unmanageable manageable. You can take what looks like a disadvantage and turn it into an advantage if you follow these six steps.
Identify the Risk
You can’t resolve a risk if you don’t know what it is. There are many ways to identify risk. As you do go through this step, you’ll want to collect the data in a risk register.
One way is brainstorming or even brainwriting, which is a more structured way to get a group to look at a problem.
As noted earlier, you can tap your resources. That can be your team, colleagues or stakeholders. Find those individuals with relevant experience and set up interviews so you can gather the information you’ll need to both identify and resolve. It doesn’t hurt to speak with that person in your organization who is the glass is always half-empty type. Their doom-and-gloom perspective can be surprisingly helpful to see risks that might not be evident to everyone else.
Look both forward and backwards. That is, imagine the project in progress. Think of the many things that can go wrong. Note them. Do the same with historical data on past projects. Now your list of potential risk has grown.
As you’re identifying risk, you’ll want to make sure you that your risk register isn’t filling up with risks that are really outliers and not risks at all. Make sure the risks are rooted in the cause of a problem. Basically, drill down to the root cause to see if the risk is one that will have the kind of impact on your project that needs identifying.
When trying to minimize risk, it’s good to trust your intuition. This can point you to unlikely scenarios that you just assume couldn’t happen. Remember, don’t be overconfident. Use process to weed out risks from non-risks.

Analyze the Risk
Okay, you’ve got a lot of potential risks listed in your risk register, but what are you going to do with them? The next step is to determine how likely each of those risks are to happen. This information should also go into your risk register.
When you assess project risk you can ultimately and proactively address many impacts, such as avoiding potential litigation, addressing regulatory issues, complying with new legislation, reducing your exposure and minimizing impact.
Analyzing risk is hard. There is never enough information you can gather. Of course, a lot of that data is complex, but most industries have best practices, which can help you with your analysis. You might be surprised to discover that your company already has a framework for this process.
So, how do you analyze risk in your project? Through qualitative and quantitative risk analysis, of course. What does that mean? It means you determine the risk factor by how it impacts your project across a variety of metrics.
Those rules you apply are how the risk influences your activity resources, duration and cost estimates. Another aspect of your project to think about is how the risk is going to impact your schedule and budget. Then there is the project quality and procurements. These points must be considered to understand the full effect of risk on your project.

Prioritize the Risk
Not all risks are created equally. You need to evaluate the risk to know what resources you’re going to assemble towards resolving it when and if it occurs. Some risks are going to be acceptable. You would grind the project to a halt and possibly not even be able to finish it without first prioritizing the risks.
Having a large list of risks can be daunting. But you can manage this by simply categorizing risks as high, medium or low. Now there’s a horizon line and you can see the risk in context. With this perspective, you can begin to plan for how and when you’ll address these risks.
Some risks are going to require immediate attention. These are the risks that can derail your project. Failure isn’t an option. Other risks are important, but perhaps not threatening the success of your project. You can act accordingly.
Then there are those risks that have little to no impact on the overall project’s schedule and budget. Some of these low-priority risks might be important, but not enough to waste time on. They can be somewhat ignored, because sometimes you just should let stuff go.
Assign an Owner to the Risk
All your hard work identifying and evaluating risk is for naught if you don’t assign someone to oversee the risk. In fact, this is something that you should do when listing the risks. Who is the person who is responsible for that risk, identifying it when and if it should occur and then leading the work towards resolving it?
That determination is up to you. There might be a team member who is more skilled or experienced in the risk. Then that person should lead the charge to resolve it. Or it might just be an arbitrary choice. Of course, it’s better to assign the task to the right person, but equally important in making sure that every risk has a person responsible for it.
Think about it. If you don’t give each risk a person tasked with watching out for it, and then dealing with resolving it when and if it should arise, you’re opening yourself up to more risk. It’s one thing to identify risk, but if you don’t manage it then you’re not protecting the project.
Respond to the Risk
Now the rubber hits the road. You’ve found a risk. All that planning you’ve done is going to get implicated. First you need to know if this is a positive or negative risk. Is it something you could exploit for the betterment of the project?
For each major risk identified, you create a plan to mitigate it. You develop a strategy, some preventative or contingency plan. You then act on the risk by how you prioritized it. You have communications with the risk owner and, together, decide on which of the plans you created to implement to resolve the risk.
Monitor the Risk
You can’t just set forces against a risk without tracking the progress of that initiative. That’s where the monitoring comes in. Whoever owns the risk will be responsible for tracking its progress towards resolution. But you will need to stay updated to have an accurate picture of the project’s overall progress to identify and monitor new risks.
You’ll want to set up a series of meetings to manage the risks. Make sure you’ve already decided on the means of communications to do this. It’s best to have various channels dedicated to communication.
You can have face-to-face meetings, but some updates might be best delivered by email or text or through a project management software tool. They might even be able to automate some, keeping the focus on the work and not busywork.
Whatever you choose to do, remember: always be transparent. It’s best if everyone in the project knows what is going on, so they know what to be on the lookout for and help manage the process. ​
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We specialize in project financing in the sectors listed below. However, this list is not an exhaustive one. 

Infrastructure projects such as roads, railways, airports, seaports, bridges, tunnels, power transmission, telecom networks, storage tanks, pipelines, irrigation, warehouses, cold storage, etc. are generally developed in the PPP (Public Private Partnership) model and involves a number of very complex legislation as well as financing challenges. However, these draw a lot of investor interest given the large sizes of such projects. 

Energy projects (both renewable as well as non-renewable) such as solar PV and solar thermal power plants,   wind turbines, waste-to-energy power plants, biomass power plants, hydroelectric power plants, thermal (coal as well as gas fired) power plants, geothermal power plants, nuclear energy power plants as well as other alternative energy projects are among the most favored for project financing. 

Developing low cost public housing is a growing need around societies across the world and governments as well as Financial organizations have come support such projects in increasing numbers. Urbanization upswing can be seen across the emerging nations and an accompanying demand for commercial and office spaces, apartments, luxury villas. 

Tourism has come to be a priority industry across the world due to its sustainable nature and socio-cultural importance. The ability of this industry to generate economic growth and employment is immense. Hotels, Resorts, Restaurant Chains, Speciality Spas, Entertainment Parks, Boutique chains, Private Beaches, Beach Properties, Travel Operations, Tourist Centers, Recreation Facilities provide the infrastructure required for a flourishing Tourism Industry and hence provide a massive need as well as scope for Project Financing. 

Healthcare is a universal and mushrooming industry across the globe. Pharmaceutical research and Manufacturing facilities, Speciality Hospitals, Care Homes, Medical Training Centers, Diagnostic Centers, Pathological Laboratories, Medical Equipment Manufacturing facilities etc.are intrinsic part of a better healthcare environment. Projects supporting development of these facilities require finance and investors find these an attractive destination for the near term as well as long term term  investment horizon.

A growing number of Schools, Colleges, Universities, Vocational and Skill Development Training Centers, Automotive Training Institutes, Research Facilities, etc., are required to educate and train the citizens. This has an ever increasing potential and requires massive financial inputs to build and operate the supporting infrastructure of this sector. Human Development Index is an extremely important part of development and hence good projects are required which in turn fuels the need for project financing in this sector. 

Upstream oil and gas production and operations identify deposits, drill wells, and recover raw materials from underground. They are also often called exploration and production companies. This sector also includes related services such as rig operations, feasibility studies, machinery rental, and extraction of chemical supply. The sector draws large high risk high returns investments.

​Midstream operations link the upstream and downstream entities, and mostly include resource transportation  (by pipeline, rail, barge, oil tanker or truck)  and storage services for resources, such as offshore tanks and reservoirs and gathering systems. Each segment of this sector invites huge investments. This is a less riskier than upstream investment with steadier returns.  

​This sector of the oil and gas industry is represented by refiners of petroleum crude oil and natural gas processors, who bring usable products to end users and consumers. They also engage in the marketing and distribution of crude oil and natural gas products. Companies engaged in the downstream process include oil refineries, petroleum product distributors, petrochemical plants, natural gas distributors, and retail outlets. 

​The petrochemicals industry is competitive, involves significant technological innovation, is capital intensive and operates in a global product market. In terms of production volumes the industry represents approximately 10% of the total petroleum industry. On the basis of product value, however, the petrochemicals industry represents a larger share of the total industry, reflecting the higher value of petrochemical products compared to fuels 

​Fertilizer is a key ingredient in feeding a growing global population, which is expected to surpass 9.5 billion people by 2050. Half of all food grown around the world today, for both people and animals, is made possible through the use of fertilizer. As demand continues to grow, farmers around the world will continue to rely on fertilizer to increase production efficiency to produce more food while optimizing inputs. Growing demand continues drawing investment capital into this industry.

​Manufacturing Industry is by far the largest sector in terms of varieties. Anything that needs mass production fits the bill. Be it cement, steel, consumer electronics, apparel, processed food and beverages, medicines, cosmetics, toiletries, furniture, utensils, packaging, paper, etc. The list is just endless. To support the manufacturing process, large capital is required and this fuels the evergrowing demand for capital investment. Viable projects with good bankability would always find interested investors in this sector.

​​Technical projects have their own unique set of needs and challenges. New technology must be researched, downtime must be kept to a minimum, and the organization must be helped to adapt to the change.  The goal of technology projects is to agree on the one way a process will be performed at all times. Integration between technologies is essential. Integration needs to be planned and tested based on agreed processes and detailed requirements. 

​Increasing support provided by governments and promoters have seen the emergence of sports as a full time career option for many. This has facilitated the need for providing adequate infrastructure to sporting activities. There is big money involved in sports with increasing number of brands associating themselves with sports and fitness. Large scale sports infrastructure has started drawing unprecedented investor interest. We help projects to source required capital to finance them.

​Amusement park features various attractions, such as rides and games, as well as other events for entertainment purposes. A theme park is a type of amusement park that bases its structures and attractions around a central theme, often featuring multiple areas with different themes. These  parks are stationary and built for long-lasting operation. Well presented amusement part projects with a robust ROI draws lot of investor interest.  

​Growing urbanization has entailed the emergence of large consumption hubs and at the same time shrinking land availability for agriculture and farming activities. Newer technologies such as GM crops, Captive Farming, Hydroponics, Aquaponics, Polyhouse or Greenhouse farming, Vertical Farming have emerged to augment the supply requirements of a growing population. Lerge investments are flowing into this sector. 

​Logistics and Supply Chain Management are used interchangeably these days. Logistics is generally seen as a differentiator in terms of the final bottom line of a typical “hard and tangible goods” organization; enabling either a lower cost or providing higher value.  Logistics cover the broad functional areas: network design, transportation and inventory management.  Projects in this sector have seen explosive growth recently and this trend would continue into the foreseeable future. 

​​Broadly speaking, humanitarian projects aim to help people who are suffering the effects of environmental disasters and hardship. These projects will form part of the relief effort, working to mitigate ongoing effects, support the people affected, and put in place long term plans to ensure a brighter future. This means humanitarian projects may vary significantly in their goals, depending on the problem at hand. 



Generally in India, security for project finance is created over the following asset types: immovable property; movable fixed assets; current assets; shares; assignment of rights in project and insurance contracts; and a charge over the project bank accounts. The charge over immovable property is typically created by executing an indenture of mortgage or by undertaking a deposit of title deeds for the property. On the other hand, security over movable assets (both fixed and current) is created by executing a deed of hypothecation. Security over shares is created via a pledge, which requires possession to be transferred by way of deposit of the share certificates, or if the shares are in dematerialized form, by recording the same with the depository of shares. An assignment of rights (such as rent receivables) arising out of project contracts is done via a deed of assignment. The charge over immovable property, movable property and an assignment of rights can be clubbed together under a single indenture.

Lenders typically have security over real property, plant, machinery and equipment. If the land leasehold property, permission may be required from the lessor for the creation of charge. If the security is created via an indenture of mortgage, it is necessary to register the same with the local registrar of companies (RoC). The charge created over movable/immovable properties is also required to be registered with the Central Registry Of Securitization Asset Reconstruction and Security Interest of India (CERSAI)

Security may be taken over receivables without the express consent of the debtors. However, such charge over receivables or other current assets (which is a floating charge) crystallizes into a fixed charge only upon occurrence of an event of default.

Typical project financing security package involves the creation of security over the project specific bank accounts. The procedure to be followed in this case mirrors that of any other movable assets. A notice of such a charge is given to the bank.

Security over shares is a prevalent for of security creation in India. Typically, a pledge agreement is entered into with a power of attorney to enforce the pledge which is also executed by the pledger upfront. If the shares are in certified form, the share certificates are physically deposited along with a share transfer form. If the shares are in dematerialized form, certain forms (indicating the agreement number, closure date of the pledge, quantum of shares pledged, etc.) will be required to be submitted at the relevant share depository.

In India, stamp duty on security documents varies from state to state. In some states, stamp duty is uncapped, whereas in others the liability is capped. Additionally, all indenture of a mortgage must be registered with the local registrar of assurances. In some states, a mortgage created via a deposit of title deeds is also compulsorily registrable; however, in most states such registration is optional (viz., powers of attorney and affidavits) are required to be notarized by a notary public, at a nominal charge.

The time taken to register a mortgage with the local registrar of assurances may vary drastically, depending on the efficiency of the local bureaucracy. Similar to stamp duty, registration fees payable also vary from state to state, as some states have ad velorem charges whereas others have capped limits. Filing/ registration with the RoC and AERSAI are required to be done online and is neither time-consuming nor expensive.

For the creation of security over freehold land, no consents or regulatory approval is required unless it has been reserved for a specific purpose (such as forest land, coastal land) by the government. If the land over which the security is created is leasehold in nature, typically prior consent of the lessor would be required. However, with respect to pipelines (once embedded in the earth), the land over which pipelines for the transport of petroleum, minerals or gas are laid are not transferred to the borrower, who merely acquires the rights of a user over the land. Such right of way may also be assigned to the lenders.


The “trust” structure is recognized and the tights and obligations of the security trustee is typically recorded in a security trustee agreement. Such security trustee agreements grant the trustee the right to sue, on behalf of all the lenders cumulatively, for the enforcement of the security and to apply the proceeds to the claims of all lenders.  A security is trust is recognized in India, so the security trustee can sue for the enforcement of the security and can apply the proceeds to the claims of all lenders. There is also no bar on any lender suing for enforcement independently.


The timelines for enforcing security may depend on the nature of security held by the lender. To illustrate, enforcement of a pledge created over shares, which are in dematerialized form, is relatively simple and does not require a decree of a court of competent jurisdiction. Enforcement of a mortgage may require a decree of the court under the Civil Procedure Code, 1908 or enforcement action under the securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In a scenario where an insolvent company is subject to proceedings under the IBC, a publicly solicited bid process is undertaken wherein bidders are required to submit resolution plans that are required to be inter alia approved by the committee of creditors. In assets in regulated sectors (e.g. airports, telecommunications, roads) the enforcement process is done through a “substitution” of the defaulting company by an entity nominated by the lenders, with the consent of the relevant regulatory authority.

Under Indian law, a foreclosure suit in respect of a mortgage may be filed by a mortgagee to debar the mortgagor of his right to redeem the mortgaged property in the event that the mortgagor is unable to pay the amounts due to the mortgagee. While foreclosure proceedings may be initiated under the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2018, from transferring any immovable property in India, unless permitted by the Reserve Bank Of India (RBI). Additionally, foreclosure suits may only be filed under the Transfer of Property Act, 1882 by a mortgagee by conditional sale or a mortgagee under an anomalous mortgage. However, if the mortgage creation is by way of an English mortgage, foreclosure suits may not be filed.


The IBC is the primary legislation governing insolvency of corporate entities today. The initiation of a corporate insolvency resolution process (CRIP) against the project company (which would ordinarily last at least 180 days, extendable by another 90 days, exclusive of any time spent in litigation). Accordingly, the project lender will be unable to enforce or exercise any rights in respect of its security during this period.

In the event of a successful CIRP, the IBC permits the resolution plan to provide for, inter alia, the  modification and release of pre-existing security interests created by the corporate debtor. In case a successful resolution plan (approved by at least 66% of voting share of committee of creditors and the National Company Law Tribunal (NCLT)) provides for any such modification/release, the project lender will lose its right to enforce its security related rights post approval of the resolution plan.

Under the IBC, “insolvency resolution process costs” and “liquidation costs” are accorded the highest priority. Besides this, the payment of workmen’s dues for the period of 24 months preceding the liquidation commencement date is ranked pari passu with the dues of the second creditors that have relinquished their security interests to the liquidation estate. The IBC also contains protections in favor of creditors against antecedent transactions entered into by the corporate debtor during specified look-back periods (calculated backwards from the insolvency commencement date). Such provisions are equally applicable to transactions relating to security interests created over the assets of the company as well.

Under the IBC, these include transactions that are “preferential” in nature (and pertain to an antecedent liability owed to a creditor, surety or guarantor), those that are “undervalued” (including gifts), those that defraud creditors (which must necessarily pertain to undervalued transactions, which were entered into with the deliberate intention to defraud creditors), and such credit transactions that are “extortionate” in nature.

Further, the Income Tax Act, 1961 provides for transfers or charges to be void against any tax claim where it is created during the pendency of any tax proceeding or outstanding tax demand, without prior permission of the tax department.

While the IBC provides for and governs bankruptcy of individuals, partnership firms, limited liability partnerships and corporate entities in India, the provisions pertaining to bankruptcy of individuals have not yet been made operational. The regime, however, does not extend to the bankruptcy of financial service providers, which continue to be governed under the Companies Act, 2013. The Banking Regulation Act, 1949 governs the winding up of banking companies.

Post the initiation of the CIRP under the terms of the IBC, creditors are prohibited from enforcing their security interests and seizing the assets of a company. However, outside the IBC framework, there are several ways in which a creditor can enforce its security and seize the assets of a project company out of court. To illustrate, a creditor having security by way of an English mortgage has the right to sell such mortgaged property by way of private sale. Similarly, in respect of security by way of pledge, a creditor is entitled to enforce such a pledge without resorting to court proceedings, and to effect the sale of the pledged goods, after having given due notice to the pledgor.

Under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2001, banks, notified financial institutions, asset reconstruction companies, debenture trustees and certain notified NBFCs are conferred with private enforcement rights in respect of their security interests, other than in respect of pledges and liens. However, such rights do no extend to foreign creditors.

There are certain mechanisms that are available to companies to achieve a restructuring of its debts, outside of the formal insolvency regime provided for under the IBC, including the cramdown of its dissenting financial creditors. On February 12, 2018, the RBI had issued a circular titled “Resolution Of Stressed Assets- Revised Framework” (which resulted in an overhaul of all previous restructuring schemes issued by the RBI), under which lenders were obligated (either singly or jointly) to formulate a resolution plan which may provide for the change in ownership or restructuring of the corporate debtor, the moment there is a default in the company’s account. However, the said circular was struck down by the Supreme Court of India on April 2, 2019. The RBI Governor has, on April 4, 2019, issued a statement  stating that the RBI will take necessary steps, including issuance of a revised circular, as may be necessary, for expeditious and effective resolution of stressed assets.

In July 2018, a large majority of Indian banks have also entered into the Inter-Creditor Agreement for Resolution of Stressed Assets as part of Project Sashakt upon recommendations of the Sunil Mehta committee. Under the framework, the lead lender shall be authorized to formulate the resolution plan, which shall be presented to the other lenders for their approval. The decision-making shall be by way of approval of majority lenders, that is, the lenders with 66% share in the aggregate exposure. Once the resolution plan is approved by the majority, it shall be binding on all the lenders that are a party to the inter-creditor agreement.

Under the IBC, upon the initiation of the CIRP against the corporate debtor, it is the resolution professional that takes on the role of the management of the company, and the powers of the board of directors remain suspended during this period. In terms of section 66(2) of the IBC, directors may be held personally liable to make contributions to the assets of the corporate debtor (on an application made by the resolution professional to the NCLT), if such director knew or ought to have known that “there was no reasonable prospect” of avoiding the commencement of the CIRP against the corporate debtor under the terms of the IBC, and did not exercise the due diligence in minimizing the potential loss to the creditors during this period.

Separately under Section 66(1) of the IBC, such persons who are knowingly party to the carrying on of the business of the company during its CIRP or liquidation, in a manner that demonstrates their intent to defraud the creditors of the company, or for any other fraudulent purpose, may be held liable to make contributions to the assets of the corporate debtor (on an application made by the resolution professional to the NCLT).


The foreign ownership of an Indian project company is subject to the Foreign Exchange Management Act, 1999 (FEMA) and the rules and regulations made thereunder. The Maser Direction on Foreign Investment in India read with the Foreign Exchange Management (Transfer or Issue of a Security by a Person Resident Outside India) Regulations, 2017 (FEMA Regulations, 2017) empowers the RBI to prohibit, restrict or regulate the transfer or issue of any security by a person resident outside India. FEMA Regulations, 2017 provides: (i) the limit of foreign investment in each sector in India which cannot be exceeded; and (ii) the entry routes for foreign investment in various sectors, which may be either automatic or with government approval. FEMA Regulations, 2017 also lists out the prohibited activities, which include real estate, agricultural activities, atomic energy and railway operations.

Further, from a tax perspective, where any taxpayer, including a foreign company, acquires any property, i.e. shares or other instruments which are characterized as security, then it must acquire such share or security at a “fair market value” as determined in accordance with a prescribed rule for valuation. If the consideration paid is less than such fair market value, then the difference would be subject to tax in the hands of the foreign investor as “income from other sources” at the rate of 40% (plus applicable surcharge and cess) in hands of a company or 30% (plus applicable surcharge and cess) in case of other investors.

There are several bilateral and multilateral investment treaties entered into by India with various countries in order to promote trade and commerce within the country. India also has comprehensive Double Taxation Avoidance Agreements (DTAA) with 88 countries, out of which 85 are presently in place. The Income Tax Act, 1961, provides for relief for two types of taxpayers. One is for taxpayers who have paid the tax to a country with which India has signed a DTAA, while the other is for taxpeyers who have paid tax to a country with which India has not signed a DTAA. The rates differ from country to country. However, there are no treaties providing explicit protection to a foreign entity from restrictions on exchange control.

The provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 applies in relation to land acquisitions by the government for public purpose and compensation paid thereof. The Indian Constitution also grants the government the right to compulsorily acquire any property for a public purpose, upon payment of compensation. The rights on the projects undertaken through Public Private Partnerships (PPP) are automatically transferred to the concessioning authority at the end of the concession period.


Each infrastructure sector in India has one or more regulators that exercise jurisdiction over the particular sector. For example, the Airports Authority of India (AAI) and the Directorate General of Civil Aviation (DGCA) regulate the airports/aviation sector, while the roads sector is regulated by the National Highway Authority of India (NHAI) or the Ministry of Aviation and Ministry of Road Transport and Highways (MORTH), amongst others. Concession agreements or power purchase agreements, for example, may also be entered into with state-specific utilities/agencies.
Security documents are required to be filed and registered with certain authorities.
The government retains sovereign rights over ownership of natural resources, and the right to use such natural resources shall be subject to the terms of the licenses granted by the government. Land and licenses in respect of natural resources cannot be directly held by a foreign entity; however, it may be held by an Indian entity owned and/or controlled by such foreign entity, subject to the foreign investment thresholds specified by the government.
Royalties are payable for the extraction or export of natural resources, the amount for which will depend on the manner in which such concession was obtained and in accordance with the stipulations set out under the applicable law. Further, income tax is payable on income from extraction or export of natural resources.
Capital account transactions (which alter assets and liabilities), unless specifically permitted by the RBI or under FEMA, are prohibited. Specified routes are available for equity investment, borrowings, etc. Taxes on foreign currency exchange transactions would be levied depending on whether it results in income or deemed income in India. The actual transaction of foreign currency exchange may also be subject to the Goods and Services Tax (GST).
Tax is levied on remittances and repatriation of investment returns, levied by way if Income tax or capital gains tax, depending of the nature of the return. No tax is levied on the shareholder in the Indian project company for distribution of dividends under the law currently in force. However, the Indian company distributing dividend is subject to additional dividend distribution tax at the rate of 20.56% (including applicable surcharge and cess). Capital gains would be taxed as short term or long term depending on the period of holding the asset. Long-term capital gains arising on the sale of shares is generally taxable in the hands of a foreign investor at the rate of 10% (plus applicable surcharge and cess). Short-term capital gains would be taxed at the rate of 40% (plus applicable surcharge and cess). However, a lower rate of 30% is applicable on short term capital gains in the case of a foreign portfolio investor. Further, the short-term capital gains may be taxed at 15% only, if the gains are realized upon sale of the security on the stock exchange and the securities transaction tax paid, as prescribed.
Onshore and offshore foreign currency accounts are no permitted under applicable law, except in limited circumstances, as set out in the Foreign Exchange Management (foreign currency accounts bu a person resident in India) Regulations, 2015. For instance, an Indian project company receiving foreign investment under the foreign direct investment (FDI) route is permitted to open and maintain a foreign currency account with an authorized dealer in India, provided that the Indian project company has impending foreign currency expenditure. In the instance referred to hereinabove, the account is required to be closed immediately after the requirements are completed and is not permitted to be operational for more than six months from the date of the opening of such an account.
In addition to restrictions on declaration of dividend under the financing documents, the Companies Act, 2013 permits declaration of dividend only out of the profits of the Indian company and after maintaining reserves for depreciation. The payment of such dividend will be subject to the taxes mentioned above.
Depending on the nature and size of the project, project developers will be required to seek environmental clearances, approval of the resettlement and rehabilitation plan, consent to establish and operate, forest clearances and wildlife clearances, among others.
Any procurement by project companies may be governed by the terms of the bid documents and the subsequent concession agreements that may be signed by such a project company. That being said, in certain instances, additional taxes or duties may also be levied (for instance- the recently introduced safeguard duty on the import of solar panels from certain countries). 

​​​Finance for a Project in India can be raised by way of

(A)       Share Capital
(B)       Long‑term borrowings
(C)       Short‑term borrowings

Both share capital and long‑term borrowings are used to finance fixed assets plus the margin money required to obtain bank borrowings for working capital. Working capital is financed mainly from bank borrowings and from unsecured loans and deposits. 

Share Capital consists of two broad categories of capital namely equity and preference. Equity shares have a fixed par value and can be issued at par or at a premium on the par value. Shares cannot normally be issued at a discount. However, in exceptional circumstances issue of shares at a discount is permitted provided (a) the shares are of a class already existing, (b) the discount is authorised by the shareholders, and (c) the issue .is sanctioned by the Central Government. Normally the Central Government will not sanction a discount exceeding 10%. 

The corporates are now allowed to raise resources for expansion plans. by issuing equity shares with differential voting rights. The main advantages of such category of shares are :

1.         Equity can be raised without diluting stake of the promoters.
2.         Companies can reduce gearing‑ratios.
3.         The risk of hostile‑takeovers is reduced to a considerable extent.
4.         The passing of yield in the form of high dividends to the investors can be ensured

The following are the general disadvantages

1.         The cost of servicing equity capital will increase.
2.         Poor corporate governance may be encouraged.
3.         If issued at discount, they may raise the equity burden.

Preference shares carry a fixed rate of dividend (which can be cumulative). These shares carry a preferential right to be paid on winding up of the company. Preference shares can be made convertible into equity shares. Issue of preference is not a popular form of capital issue.
The issue of capital by companies is governed by guidelines issued by the Securities and Exchange Board of India (SEBI) and the listing requirements of the stock exchanges.
Apart, from equity, there can also be various forms of pseudo equity. The most common forms are fully or partly convertible debentures and debentures, issued with warrants entitling the holder to subscribe for equity. There can also be an issue of non‑convertible debentures.
Term finance is mainly provided by the various All India Development Banks (IDBI, IFCI, SIDBI, IIBI etc.), specialised financial institutions (RCTC, TDICI, TFCI) and investment institutions (LIC, UTI and GIC). In addition,  term finance is also provided by the State financial corporations, the State industrial development corporations and commercial banks. Debt instruments issued by companies are also subscribed for by mutual funds and financing activities are also done by finance companies. 

General Regulatory Framework:

Depending upon the nature of the project finance undertaken, following legislations may apply:
  1. The Reserve Bank of India Act 1934 and guidelines, notifications issued in connection with the same.
  2. The Banking Regulation Act 1949.

However in following cases, financing availed is governed by their respective legislation:

In case of external commercial borrowings (ECB), Foreign Exchange Management Act 1999 prevails read with the:

  1. Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000.
  2. Foreign Exchange Management (Borrowing or Lending in Rupees) Regulations 2000.

In case of Project funding where equity or quasi-equity instruments are used by non-residents:

  1. Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2000 of the RBI.
  2. The foreign direct investment (FDI) policy issued from time to time by the Department of Industrial Policy and Promotion (DIPP).

Apart from the general regulatory framework, following material laws should also be taken into consideration:

  1. Companies Act 2013-regulates matters related to procedural compliances, registration of charge on company’s assets, conversion of debt into equity and in relation to availing of loans and creation of security by companies.
  2. Indian Contract Act 1872-governs contracts which include security documents .and loan agreements.
  3. Transfer of Property Act 1882-regulates procedure and creation for enforceability of security over immovable property.
  4. Securitizations and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI)- regulate enforceability of security for recovering However these benefits do not prevail to foreign creditor except to that of Asian Development Bank and related International Finance Corporation.
  5. Insolvency and Bankruptcy Code 2016- It covers partnerships, companies, individuals in relation to bankruptcy and insolvency legislations
  6. Code of Civil Procedure 1908 (CPC)-governs procedure for resolving disputes and  civil court proceedings to be used by the creditors for enforcement of security and recovery proceedings.

International Treaties
Apart from above, India has also entered into international treaties that influence cross-border project financing transactions like Free trade, Comprehensive Economic Partnership and Co-operation Agreements, Preferential Trade Agreements etc

Project Financing Participants and Agreements
Sponsor/Developer: The sponsor(s) or developer(s) of a project financing is the party that organizes all of the other parties and typically controls, and makes an equity investment in, the company or other entity that owns the project. If there is more than one sponsor, the sponsors typically will form a corporation or enter into a partnership or other arrangement pursuant to which the sponsors will form a "project company" to own the project and establish their respective rights and responsibilities regarding the project.

Additional Equity Investors: In addition to the sponsor(s), there frequently are additional equity investors in the project company. These additional investors may include one or more of the other project participants.

Construction Contractor: The construction contractor enters into a contract with the project company for the design, engineering, and construction of the project.

Operator:  The project operator enters into a long-term agreement with the project company for the day-to-day operation and maintenance of the project.

Feedstock Supplier: The feedstock supplier(s) enters into a long-term agreement with the project company for the supply of feedstock (i.e., energy, raw materials or other resources) to the project (e.g., for a power plant, the feedstock supplier will supply fuel; for a paper mill, the feedstock supplier will supply wood pulp).

Product Off-taker: The product off taker(s) enters into a long-term agreement with the project company for the purchase of all of the energy, goods or other product produced at the project. Lender: The lender in a project financing is a financial institution or group of financial institutions that provide a loan to the project company to develop and construct the project and that take a security interest in all of the project assets.

Stages in Project Financing

Pre Financing Stage
  1. Project Identification
  2. Risk Identification & minimizing        
  3. Technical and financial feasibility 

Financing Stage

  1. Equity arrangement     
  2. Negotiation and syndication  
  3. Commitments and documentation
  4. Disbursement

Post Financing Stage

  1. Monitoring and review   
  2. Financial Closure / Project Closure  
  3. Repayments & Subsequent monitoring

Preparation of Project Report
A Project Report is essential before a decision for setting-up of any project is taken. The most important thing in any project financing is preparation of Detailed Project Report (DPR) which should be made beautifully for getting the project approved from banks/financial institutions. After preparation of DPR the proposal is moved to the banks/financial institutions for processing of the file. Project Report must include the followings:

Technical Feasibility
All the factors relating to infrastructure needs, technology, availability of machine, material etc. are required to be scrutinized under this head. Broadly speaking the factors that are covered under this aspect include:

1. Availability of basic infrastructure- It includes the land and its location as per present and future needs, lay out and  building plan including finalization of structure, availability of water and power, availability of cheap labour in abundant supply.

2. Licensing/ registration requirements

3. Selection of technology/ technical process- The technical process/technology selected for the project must be readily available either indigenously or necessary arrangements for foreign collaboration must be finalized. Further the selected technology must find a successful application in Indian environment and the management shall be capable of fully absorbing the technology. 

4. Availability of suitable machinery/ raw material/ skilled labour etc- After selection of technical process, the availability of suitable kind of machinery is most important factor which needs to be considered. It should be ensured that the suppliers are capable to supply the plant and machinery timely along with all spare parts 

Managerial Competence
The ultimate success of even well-conceived and viable project may depend on how competently it is managed. The promoters of the project have to provide necessary leadership and their qualification, experience and track record will be closely examined by lending institution. The detail of other projects successfully implemented by the same promoters may provide the necessary confidence of these institutions and help final approval of the project. 

The reputation of the promoters group in the market is also very important factor which the banks/ financial institutions consider while lending to the companies. Also the bank/ financial institutions check the payment history of past loan raised by the companies in which the promoters are directors which shows their willingness of repayment of the loans. CIBIL is a very strong tool in the hand of banks/ financial institutions to verify the payment history and the number of loans raised by the companies from the date of existence.

Commercial Viability
Any project can be commercially viable only if it is able to sell its product at profit. For this purpose it would be necessary to study demand and supply pattern of that particular product to determine its marketability. Various methods such as trend method, regression method for estimation of demand are employed which is than to be matched with the available supply of a particular product.

Financial Viability
Factors to be considered for financial viability:

Cost of project: A realistic assessment of cost of project is necessary to determine the source for its availability and to properly evaluate the financial viability of the projects. For this purpose, the various items of cost may be sub-divided as many sub-heads as possible so that all factor are taken into consideration for arriving at the total cost. 
Cost includes the following:

a. Land Cost- Acquisition of project land, registry charges, and charges for other clearance.

b. Site Development Cost- to make the project easily accessible it is necessary to build roads, water tank, boundary walls, arranging electricity, levelling the site, demarcation of site, making available the basic amenities etc.

c. Buildings Cost- it includes lay out and building plan along with the structure cost, building the site office, factory sheds, godowns, residential flats for staff etc.

d. Plant and Machinery- cost of plant and machinery, any foreign assistance for installation, salary of technical staff, transportation cost, foreign currency fluctuations (if any), bank commissions, L/C Charges etc.

e. Miscellaneous Fixed Assets

f. Preliminary Expenses- licence required to start commercial production from the local authorities along with other clearances etc.

g. Contingencies- normally 5% extra cost is taken as contingency to avoid any kind of cost over-run at the end of implementation of project.

h. Margin for Working Capital- for running a project it is necessary to fuel it with the working capital. It works like a lubricant for any kind of business. It is financed against receivables and stock. A proper assessment of the same should be done. Banks now generally require that 25% of the total current assets (working capital) shall be the margin to be provided from the long term resources and 75% shall be financed by them.

Means of Finance: After estimation of the cost of the project, the next step will be to find out the source of funds by means of which the project will be financed. The project will be financed by contribution of funds by the promoter himself and also by raising loans from others including term loans from banks and financial institutions.
The means of financing will include:

1. Issue of share capital including ordinary/preference shares.
2. Issue of secured debentures.
3. Secured long-term and medium-term loans (including the loans for which the application is being put up to term lending institutions).
4. Unsecured loans and deposits from promoters, directors etc.
5. Deferred payments.
6. Capital subsidy from Central/State Government.

Security Coverage and Promoters Contribution: In today scenario and being to play safe, the bankers wants that at least the promoters should contribute 40% of the total project cost. The long term sources of funds are utilized for acquisition of land, procuring the fixed assets and construction of building etc. But for day to day expenses, payment of staff salary, purchasing the stocks etc. the project require short term loan or working capital loans. Hence the financing for a project is the mix of both long term and short term loans.  In project funding the bank has charge on the land, building, any super structure thereof and hypothecation of stocks & receivables and all the current assets relating to project. It is considered as primary security but the bankers may ask for collaterals also in addition to the primary security.

Profitability Analysis: After determine the cost of the project and means of financing, the viability of the project will depend on its capacity to earn profits to service the debts and capital. To undertake the profitability analysis, it will be necessary to draw estimates of the cost of production and working results. These estimates are made for a period which should at least cover the moratorium and repayment periods.  Generally in case of project loans repayment begins after 2-3 years, the time gap between the disbursement of loan and repayment of first installment is called moratorium period. Further repayment should start in that quarter or month when it is assured that the project will have sufficient cash profit to service the same in that particular quarter or month. Also, the moratorium and repayment period is decided while submitting the proposal to the banks hence while selecting these periods’ accurate calculations should be done.

Projected Balance Sheet, Profit and Loss Account and Projected Cash Flow: The projected financials of the project is prepared for the entire tenure as estimated above.

Break-Even Point: Estimations of working results pre-suppose a definite level of production and sales and all calculations are based on that level. The minimum level of production and sales at which the unit will run on “no profit no loss” is known as break-even point and the first goal of any project would be to reach that level. The break-even point can be expressed in terms of volume of production or as a percentage of plant capacity utilization. Break-even in terms of volume of production = Total Fixed Cost/ Contribution per unit

Debt Service Coverage Ratio (DSCR): Debt Service Coverage Ratio is calculated to find out the capacity of the project servicing its debt i.e. in repayment of the term loan borrowings and interest. The DSCR is worked out in the following manner: D.S.C.R = (PAT + Depreciation + Interest on Long Term Borrowings) / (Repayments of Term Borrowings during the year + Interest on long-term borrowings) The higher D.S.C.R. would impart intrinsic strength to the project to repay its term borrowings and interest as per the schedule even if some of the projections are not fully realized. Normally a minimum D.S.C.R. of 2:1 is insisted upon by the term lending institutions and repayment is fixed on that basis.   

Sensitivity Analysis: While evaluating profitability projections, the sensitivity analysis may be carried in relation to changes in the sale price and raw material costs, i.e. sale price may reduce by 5% to 10% and raw material costs may be increased by 5% to 10% and the impact of these changes on DSCR shall be analyzed. If the new DSCR, so calculated after changes, still proves that the project is viable, the financial institution may go ahead in funding the project.

Internal Rate of Return: This is an indicator of earning capacity of the project and a higher IRR indicates better prospects for the project. The present investment in the cash flow which is assumed to be negative cash flow and the return (cash inflow) are assumed to be positive cash flows. Normally bankers want that internal rate of return should be at least 18% because it depicts the strength of the project and its earning and repayment capacity at the same time. Better the IRR better rating to the project.

Environmental, Political and Economic Viability 
The performance of the project is also influenced by the external factors also such as existing government policies regarding particular sector, easiness in getting the licence to operate in a particular region or state, effects of the project on the environment, tax exemptions for particular region etc. Hence while compiling the project report it is important to study the industry scenario, government policies etc and these should be covered in the project report.

Project Appraisal
Project Appraisal is a process of detailed examination of several aspects of a given project before recommending the same. The lending institution has to ensure that the investment on the proposed project will generate sufficient returns on the investments made and that loan amount disbursed for the implementation of the project will be recovered along with interest within a reasonable period of time. The various aspects of Project appraisal are:

1. Technical Appraisal
2. Commercial Appraisal or Market Appraisal (Demand of the product, supply of the product, distribution channels, pricing of the product and government policies.
3. Economic Appraisal
4. Management Appraisal (assessing the willingness of the borrower to repay the loan)
5. Financial Appraisal

Methods of the Project Financing
There are three methods in Project Financing:

1. Cost Share Financing or Low interest loan financing.
2. Debts Financing.
3. Equity Financing.

Sources for Financing Fixed Assets
The type of funds required for acquiring fixed assets have to be of longer duration and these would normally comprise of borrowed funds and own funds. There are several types of long term loans and credit facilities available which a company may utilize to acquire the desired fixed assets. These are briefly explained as under:

1. Term Loan :-
(a) Rupee loan- Rupee loan is available from financial institutions and banks for setting up new projects as, well as for expansion, modernisation or rehabilitation of existing units. The rupee term loan can be utilised for incurring expenditure in rupees for purchase of land, building, plant and machinery, electric fittings, etc. The duration of such loan varies from 5 to 10 years including a moratorium of up to a period of 3 years. Projects costing up to Rs. 500 lakhs are eligible for refinance from all India financial institutions and are financed by the State level financial institutions in participation with commercial banks. Projects with a cost of over Rs. 500 lakhs are considered for financing by all India financial institutions. They entertain applications for foreign currency loan assistance for smaller amounts also irrespective of whether the machinery to be financed is being procured by way of balancing equipment, modernisation or as a composite part of a new project. For the convenience of entrepreneurs, the financial institutions have devised a standard application form. All projects whether in the nature of new, expansion, diversification, modernisation or rehabilitation with a capital cost upto 5 crores can be financed by the financial institution either on its own or in participation with State level financial institutions and banks.

(b) Foreign Currency term loan- Assistance in the nature of foreign currency loan is available for incurring foreign currency expenditure towards import of plant and machinery, for payment of remuneration and expenses in foreign currency to foreign technicians for obtaining technical knowhow. Foreign currency loans are sanctioned by term lending institutions and commercial banks under the various lines of credits already procured by them from the international markets. The liability of the borrower under the foreign currency loan remains in the foreign currency in which the borrowing has been made. The currency allocation is made by the lending financial institution on the basis of the available lines of credit and the time duration within which the entire line of credit has to be, fully utilised.

2. Deferred Payment Guarantee (DPG)
Assistance in the nature of Deferred Payment Guarantee is available for purchase of indigenous as well as imported plant and, machinery. Under this scheme guarantee is given by concerned bank/financial institutions about repayment of the principal along with interest and deferred instalments. This is a very important type of assistance particularly useful for existing profit‑making companies who can acquire additional plant and machinery without much loss of time. Even the banks and financial institutions grant assistance under Deferred Payment Guarantee more easily than term loan as there is no immediate outflow of cash.

3. Soft loan
This is available under special scheme operated through all-India financial institutions. Under this scheme assistance is granted for modernization and rehabilitation of industrial units. The loans are extended at a lower rate of interest and assistance is also provided in respect of promoters’ contribution, debt-equity ratio, repayment period as well as initial moratorium.

4. Supplier's Line of Credit
Under this scheme non-revolving line of credit is extended to the seller to be utilized within a stipulated period. Assistance is provided to manufacturers for promoting sale of their industrial equipment on deferred payment basis. While on the other hand this credit facility can be availed of by actual users for purchase of plant/equipment for replacement or modernization schemes only.

5. Buyer’s Credit
Under a buyer's credit arrangement, a specific long-term loan is granted by a designated lending agency in the exporter's country to the buyer in the import, country against a guarantee by an acceptable bank or financial institution. The supplier receives payment for the exports on his delivering to the lending agency the requisite documents specified in the loan agreement and the relative commercial contract. The lending agency realizes the payment from the buy (importer) in installments as and when they fall due. Ordinarily, the supplier of his obligation reckons the period credit as the duration from the date of completion.

6. Debentures
Long - term funds can also be raised through debenture with the objective of financing new undertakings, expansion, diversification and also for augmenting the long-term resources of the company for working capital requirements.  Debenture holders are long term creditors of the company. As a secured instrument, it is a promise to pay interest and repay principal at stipulated times. In the contrast to equity capital which is a variable income (dividend/ security, the debenture / notes are fixed income (interest) security).

7. Leasing
Leasing is a general contract between the owner and user of the assets over a specified period of time. The asset is purchased initially by the lessor (leasing company) and thereafter leased to the user (lessee company) which pays a specified rent at periodical intervals. The ownership of the asset lies with the lessor while the lessee only acquires possession and right to use the assets subject to the agreement. Thus, leasing is an alternative to the purchase of an asset out of own or borrowed funds. Moreover, lease finance can be arranged much faster as compared to term loans from financial institutions.

8. Public Deposits 
Deposits from public is a valuable source of finance particularly for well-established large companies with a huge capital base. As the amount of deposits that can he accepted by a company is restricted to 25 per cent of the paid up share capital and free reserves, smaller companies find this source less attractive. Moreover, the period of deposits is restricted to a maximum of 3 years at a time. Consequently, this source can provide finance only for short to medium term, which could be more useful for meeting working capital requirements. In other words, public deposits as a source of finance cannot be utilized for project financing or for buying capital goods unless the payback period is very short or the company uses it as a means of bridge finance to be replaced by a regular term loan. Before accepting deposits a company has to comply with the requirements of section 58A of the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975 that lay down the various conditions applicable in this regard.

9. Own Fund:
a. Equity: Promoters of a project have to involve themselves in the financing of the project by providing adequate equity base. From the bankers/financial institutions' point of view the level of equity proposed by the promoters is an important indicator about the seriousness and capacity of the promoters.
Moreover, the amount of equity that ought to be subscribed by the promoters will also depend upon the debt: equity norms, stock exchange regulations and the level of investment, which will be adequate to ensure control of the company.
The total equity amount may be either contributed by the promoters themselves or they may partly raise the equity from the public. So far as the promoters stake in the equity is concerned, it may be raised from the directors, their relatives and friends. Equity may also be raised from associate companies in the group who have surplus funds available with them. Besides, equity participation may be obtained from State financial corporation/industrial development corporations.
Another important source for equity could be the foreign collaborations. Of course, the participation of foreign collaborators will depend upon the terms of collaboration agreement and the investment would be subject to approval from Government and Reserve Bank of India. Normally, the Government has been granting approvals for equity investment by foreign collaborators as per the prevailing policy. The equity participation by foreign collaborators may be by way of direct payment in foreign currency or supply of technical knowhow/ plant and machinery.
Amongst the various participants in the equity, the most important group would be the general investing public. The existence of giant corporations would impossible but for the investment by small shareholders. In fact, it would be no exaggeration to say that the real foundation of the corporate sector are the small shareholders who contribute the bulk of equity funds. The equity capital raised from the public will depend upon several factors viz. prevailing market conditions, investors' psychology, promoters track record, nature of industry, government policy, listing requirements, etc. The promoters will have to undertake an exercise to ascertain the maximum amount that may have to be raised by way of equity from the public after asking into account the investment in equity by the promoters, their associates and from various sources mentioned earlier. Besides, some equity may also be possible through private placement. Hence, only the remaining gap will have to filled by making an issue to the public.

b. Preference share: Though preference shares constitute an independent source of finance, unfortunately, over the years preference shares have lost the ground to equity and as a result today preference shares enjoy limited patronage. Due to fixed dividend, no voting rights except under certain circumstances and lack of participation in the profitability of the company, fewer shareholders are interested to invest moneys in preference shares. However, section of the investors who prefer low risk, fixed-income securities do invest in preference shares. Nevertheless, as a source of finance it is of limited import and much reliance cannot be placed on it.

c. Retained earnings: Plough back of profits or generated surplus constitutes one of the major sources of finance. However, this source is available only to existing successful companies with good internal generation. The quantum and availability of retained earnings depends upon several factors including the market conditions, dividend distribution policy of the company, profitability, Government policy, etc. Hence, retained earnings as a source plays an important role in expansion, diversification or modernization of an existing successful company. There are several companies who believe in financing growth through internal generation as this enables them to further consolidate their financial position. In fact, retained earnings play a much greater role in the financing of working capital requirements.

d. Unsecured Loans: If there is some shortfall in the mean-of-finance, the promoters/ directors can mobilize funds from their friends, relatives and well-wishers. Such loans are always unsecured i.e., the lenders cannot have any charge over the assets of the company. Banks and financial institutions stipulate the following conditions if unsecured loan is to form part of the means-of-finance.
- The promoters shall not repay the unsecured loan till the term loan persists.
- Interest if any payable on unsecured loan shall be paid only after meeting the term loan repayment committees.
-The rate of interest payable on unsecured loan shall not be higher than the rate of interest applicable for term loans. Normally unsecured loan component is expected not to exceed 50% of the equity capital.
10. Bridge Loans: 
This is a temporary loan meant for tying up the capital cost of the project. The necessity for bridge finance arises in situations where finance from particular source is being delayed. However, the availability of finance from that source is certain.

11. Seed Capital: 
In consonance with the Government policy which encourages a new class of entrepreneurs and also intends wider dispersal of ownership and control of manufacturing units, a special scheme to supplement the resource & of an entrepreneur has been introduced by the Government. Assistance under this scheme is available in the nature of seed capital which is normally given by way of long term interest free loan. Seed capital assistance is provided to small as well as medium scale units promoted by eligible entrepreneurs.

12. Government subsidies: Subsidies extended by the Central as well as State Government form a very important type of funds available to a company for implementing its project. Subsidies may be available in the nature of outright cash grant or long - term interest free loan. In fact, while finalising the mean of finance, Government subsidy forms an important source having a vital bearing on the implementation of many a project.

The key to any project finance is to use a right mix of debt and equity. Further, there should be a right mix of foreign currency and rupee loans. It is also essential that there should be flexibility in respect of switching from foreign currency to rupee loan and vice versa. There are a number of issues highlighted herein above which need to be considered for the purpose of financing of the project. Besides, it is important that due care is taken in drafting the documents concerning the financing of the project.  The companies should adopt the project financing structures so that the objective of shareholder’s wealth maximization can be achieved. As the world is heading towards a global integrated market and the failure of governments as well as the demand for private capital in infrastructure assets is increasing, project finance will continue to play an important role in both developed and developing markets.

Compliance with Different Laws & Regulations
In this context it would be pertinent to note that while initiating the process for making a public issue of equity /preference shares, the promoters will have to comply with the requirements of different laws and regulations including Securities Contracts (Regulation) Act, 1956, Companies Act, 1956 and SEBI guide-lines etc., and various rules, administrative guidelines, circulars, notifications and clarifications issued there under by the concerned authorities from time to time.