SOURCES OF LONG TERM

FINANCE
 Choosing a Source of Finance
 Level of Risk – A risky enterprise will find it
harder to raise capital, although venture capital
may be available. May have to rely on personal
sources.
 Views of the owners – May be reluctant to lose
control of a firm, especially a family firm and
thus reject shares and venture capital. However,
some may welcome the advice a venture
capitalist can give.
 Need for long term Finance
 Long term vs. short term(working capital)
funds requirements
 For modernisation, expansion,
diversification; huge quantities reqd.,
irreversible decision
 Asset-liability mismatch, interest rate risk,
liquidity risk, if LT reqts.met by ST funds
 Equity Capital
 Authorised, Issued, Subscribed and Paid up
capital
 Par/face value, Issue Price, Book value and
Market Value
 Rights of equity shareholders
-Right to Income :PAT less preferred dividends
-Right to Control: voting rights
-Pre-emptive Right: for additional issues, rights
issue in the same proportion
-Right in liquidation: residual claim over assets
 Pros and cons of equity Capital
Advantages Disadvantages
 Dilution of control of existing
 No fixed maturity, no owners
obligation to redeem  High Cost: rate of return
expected by equityholders
 No compulsion to pay higher than debtholders
 Dividends are not tax
dividends deductible: hence cost is
higher
 Provides leverage  Issue costs higher:
capacity underwriting, brokerage, other
issue expenses
 Dividends tax exempt  Higher servicing costs: hold
for investors AGMs, post annual reports etc.
 Internal Accruals
Consists of retained earnings and depreciation charges

Pros Cons
 Readily available, no  Quantum very limited
talking to outsiders  High Opportunity costs:
 Effectively additional dividends forgone by
equity capital, however equity holders
no issue costs of loss due  Requires careful attention
to underpricing to NPV of projects
 No dilution of control
 No expansion in equity
base, hence no dilution of
EPS, BV per share etc.
 Preference Capital
 Is a hybrid form of financing, payment after debt but before equity
 Equity features:

-out of distributable profits

-not an obligatory payment
-dividends not tax deductible
 Debt features:

-dividend rate is fixed

-capital is redeemable
-normally no right to vote
 Can have other features like cumulative, convertible,
participating…..
 Preference Capital
Pros Cons
 No obligation to pay dividend,  Expensive source since
no bankruptcy or legal action dividends not tax deductible
for non payment  Though no legal
 Financial distress of consequences, liability to pay
redemption obligation not very dividends stands, can spoil
high company’s image
 Part of net worth, hence  Can acquire voting rights in
increases its creditworthiness/ some cases
leverage capacity  Have claim prior to equity
 No dilution of control holders
 No pledging of assets required
 Term Loans
 Provided by FIs/banks
 Can be in domestic/foreign currency, liability on FC loans
translated to rupees for payment
 Are typically secured against fixed assets/ hypothecation
of movable properties, prime security/ collateral security
 Definite obligations on interest and principal repayment;
interest paid periodically; based on credit risk and
pegged to a floor rate
 Carry restrictive covenants for future financial and
operational decisions of the company, its management,
future fund raising, projects, periodic reports called for
 Term Loans
Pros Cons
 Interest on debt is tax  Entails fixed obligation for
deductible interest and principal, non
 Does not result in dilution of payment can even lead to
control bankruptcy/ legal action
 Do not partake in value  Debt contracts impose
created by the firm restrictions on firm’s financial
 Issue costs of debt is lower and operational flexibility
 Interest cost is normally fixed,
 Increases financial leverage,
protection against high excess raises cost of equity to
unexpected inflation the firm
 Has a disciplining effect on
 If inflation rate dips, cost of
debt higher than expected
management
 Debentures
 Like promissory notes, are instruments for raising LT debt
 More flexible compared to term loans as they offer variety of choices as
regards maturity, interest rate, security, repayment and other special
features
 Interest rate can be fixed/floating/deep discount
 Convertibility : Can be FCDs, NCDs, PCDs
 Warrants : Can have warrants attached, detachable or non detachable,
detachable traded separately
 Option : Can be with call or put option
 Redemption: Bullet payment or redeemed in instalments
 Security: Secured or unsecured
 Credit rating: Need to have a credit rating by a credit rating agency
 Trustee: Need to appoint a trustee to ensure fulfilment of contractual
obligations by company
 DRR: Company needs to create a DRR if maturity more than 18 months
 Other forms of Finance
 Leasing: asset leased out in lieu of lease rentals, title not
transferred, only economic use of assets given; can be financial
lease or operating (service) lease
 Hire Purchase: ownership transferred to the buyer after all the
installments paid up
 Securitisation: assets involving financial claims pooled and financial
instruments created, thus creating cash out of receivables
 Government Subsidies: central and state govts offer cash subsidies
to units in backward areas, classified in three categories
 Sales tax deferments and exemptions: payment deferred for a fixed
period, like interest free loan; or exemptions given for certain no. of
years
 Suppliers credit: available from suppliers of machinery, other fixed
assets, terms devised to defer payment, or pay in installments over
a period of time
 Leasing vs. Hire Purchase
Leasing Hire-Purchase
 Ownership not transferred to lessee  Ownership transferred to hirer on
 Depreciation benefit to lessor payment of all instalments
 Depreciation shield available to hirer
 Magnitude of funds high, for big ticket  Maybe for smaller value capital goods
items  Some down payment reqd
 No margin money/down payment
required  Maintenance cost borne by hirer
 Maintenance of asset by lessor in
operating lease  Hirer allowed depreciation claim and
 Tax benefits of depreciation taken by finance charge for taxation; seller may
lessor; lessee gets tax shield on lease claim interest on amount borrowed to
rentals acquire asset
 Considered off balance sheet mode of  Asset figures in balance sheet on
financing, as no asset or liability complete of purchase
figures in balance sheet
 Raising Long Term Finance
 Initial Public Offer (IPO)
 Secondary Public offer
 Rights Issue
 Bought out deals
 Euro Issues
 Private Placement
 Preferential allotment
 Venture Capital/ Private Equity transactions
 Obtaining a term loan
 Initial Public Offer
Pros Cons
 Access to larger amount of funds
 Further growth limited companies
 Pricing may have to be
not using this route attractive to lure
 Listing: provides exit route to investors
promoters; ensures marketability  Loss of flexibility
of existing shares
 Encash on value created in the  Higher accountability
firm
 Recognition in market
 More disclosure
 Stock prices provide useful
requirements to be met
indicators to management  Visibility in market
Sometimes stipulated by private
Cost of making a public


investors in the company
issue quite high
 Steps in an IPO
 Approval of BOD
 Shareholders’ approval
 Appointment of lead manager(s)
 Due diligence by LM
 Appointment of intermediaries like registrars, printers, bankers, advertisers
 Prepare draft prospectus
 Filing with SEBI
 Listing applications filed alongwith draft prospectus
 Agreement with registrars and depositories
 Appoint underwriters (if reqd.)
 Make changes in draft prospectus as per SEBI observations, SE suggestions
 File prospectus with ROC
 Issue marketing exercise commences
 Application forms dispatched
 Issue opened
 Basis of allotment finalised
 Allotments made, refunds posted, shares listed on SEs
 Other aspects of a public issue
 Eligibility criteria defined: net worth, track record of
profitability, issue in same year; secondary issues have
no such restrictions
 Book Building process: process of tendering quantities at
prices within a band
 Issue expenses: underwriting, brokerage commissions,
fees to managers to the issue, registrars, printers,
advertisers, listing fees, stamp duty
 Issue pricing: free pricing, disclose basis for issue price
 Public issue of debt: appointment of debenture trustee,
creation of DRR, credit rating reqd., security to be
created
 Rights Issue
• Issue of capital to existing shareholders
• Offer made on a pro rata basis

• Offer document called Letter of Offer

• Option given to apply for additional shares

• Rights renunciation: are tradeable, may be sold off in the market

• Value of a share after rights:

(NP0+S)/(N+1); N=no. of existing shares required for rights; P0

=cum rights MP per share; S= subscription price of rights issue
• Value of a right= (P0 –S)/(N+1)

• Comparison with Public issue: with familiar investors, hence

likely to be more successful; less floatation costs since no
underwriting; but lower pricing to benefit shareholders
 Private Placement
 Sale of securities directly to wholesale investors like FIs, banks,
MFs, FIIs,PE funds etc.
 Called private placement in equity/equity related instruments, in
unlisted companies and in all cases of debt
 Called preferential allotment in case of unlisted companies for
equity/equity related instruments
 Different from reservations made for such QIBs out of a public issue
 Subject to SEBI regulations on pricing, lock in period, open offer to
be made to public
 QIB placement guidelines recently issued by SEBI for compliance
and disclosures
 Private Placement
Pros Cons
 Less expensive mode  Does not qualify for listing in
 Lesser SEBI and other an unlisted company
regulations  Restrictive covenants may be
 Easier to market the issue to a imposed by the investors
few investors  May call for management
 Entry of wholesale financially participation
sophisticated investors in  Issue pricing more tight
company’s profile
 May use this route until IPO
decision taken
 Less administrative
maintenance
 Venture Capital/Private Equity
 Equity finance to potentially high growth companies
 Reasonably long to medium term commitment
 Hands on management approach, active participation in management
 Considered value add investor
 VC: primarily high risk high return investment esp. in technology oriented/ knowledge
intensive businesses with long development cycles, greenfield ventures
 Can be in unlisted or listed (PIPES) Companies
 Exit route to be defined at the time of investment
 Restrictive clauses on promoters’ holding sell off and other financial/operational
issues
 Detailed memorandum/business plan on company, its financials to be prepared
 Shareholders agreement to be signed by both parties
 Valuation of Company key issue
 Leads to dilution of control by existing promoters
 Obtaining a Term Loan
 Submission of loan application: a project report containing complete
details of the project given to the FI/Bank
 Initial processing of loan application: prepare flash report to decide if
project worth an appraisal or not
 Project Appraisal: Detailed appraisal done to decide if project taken or
not, in terms of market, technical, financial, managerial appraisal
 Issue of Letter of Sanction: to the borrower containing amount
sanctioned and terms and conditions thereto
 Acceptance of terms and conditions by the borrowing unit: thru a
board meeting and conveyed to the FI/Bank
 Execution of loan agreement: signed by both parties
 Disbursement of loan: in tranches based on progress of the project, tie
up of means of finance
 Creation of security: formalities to be completed within a timeframe
 Monitoring: at implementation and operational stage thru periodic
progress reports, site visits etc.
 Types of Term Assistance
-DPG
 Deferred Payment Guarantee (DPG) is a
contract to pay to the supplier the price of
machinery, supplied by him on deferred
terms, in agreed instalments with stipulated
interest on the respective due dates in case of
default in payment thereof by the buyer.
 A DPG is, in many respects, a substitute for a
Term Loan and, as far as the buyer of P&M is
concerned, it serves the same purposes as a
Term Loan.

 Types of Term Assistance
- Bills Discounting
 Under a contract for sale of machinery on
deferred payment basis, the balance
remaining to be paid after the initial down –
payment represents the deferred receivables
of the seller.
 Thus, the funds of the seller get blocked for
unduly long periods and the seller requires
finance against such deferred receivables to
replenish his Working Capital.
 Types of Term Assistance
- Bills Discounting
 To facilitate availment of finance against the
deferred receivables, the seller usually draws
a series of usance bills with graded maturities
to coincide with the due dates of payment of
the relative instalments (including applicable
interest).
 The usance bills drawn by the seller will be
accepted by the buyer before they are
discounted by the seller’s banker.
 Types of Term Assistance
- Underwriting of Shares
 The necessity for underwriting arrangement
arises only in the case of a Public Limited
Company resorting to raise through the capital
issue market, a part of the Share Capital for
part-financing a project.
 Underwriting is a contract whereby a person
agrees, in consideration, to take up a
specified number of shares or debentures or
amount of debenture stock to be offered to
the public, in the event of the public not
subscribing for them.
 Types of Term Assistance
- Underwriting of Shares
 Underwriting as a business will come under the scope
of ‘Investment Banking’ as distinct from ‘Commercial
Banking’.
 In view of this, therefore, a high degree of selectivity
should continue to be exercised in undertaking
underwriting business.
 However, the business stemmed not so much from
the point of view of earnings on the investment as
from the consideration that no viable project
enjoying national priority should suffer for want of
underwriting support.
 Project Appraisal Memorandum
P R O J E C T A P P R A IS A L M E M O R A N D U M

1. PRO PO SA L
N a t u r e o f p r o p o s a l;
P u r p o s e : N e w p r o j e c t , e x p a n s io n , m o d e r n i s a t i o n , d iv e r s if ic a t i o n o r f o r a n y o t h e r a p p r o v e d p u r p o s e

2 . B R IE F H IS T O R Y
B r i e f a c c o u n t o f c o r p o r a t e h i s t o r y ; M A & A A ; R e g d . a d d r e s s ; P r e s e n t o r g a n i s a t i o n a l s e t u p w i t h B o D ; Q u a l if ic a t i o n s , e x p e r i e n c e a n d b a c k g r o u n d ;
L i n e o f a c t iv i t i e s , F in a n c i a l p o s it io n , e t c . , o f A s s o c ia t e C o n c e r n s ; O v e r a ll s t r u c t u r e o f in t e r - c o r p o r a t e i n v e s t m e n t s

3. PA ST PERFO RM A N CE
S u m m a r y o f C o m p a n y 's p a s t p e r f o r m a n c e in t e r m s o f l ic e n s e d / i n s t a ll e d / o p e r a t i n g c a p a c it i e s , s a le s , o p e r a t in g p r o f it a n d N e t P r o f i t f o r
t h e p a s t 3 y e a r s ; C a p a c i t y u t i li s a t i o n ; S a l e s & p r o f i t a b i li t y ; D iv i d e n d p o li c y ; C a p i t a l e x p e n d it u r e p r o g r a m m e s i m p l e m e n t e d b y t h e C o m p a n y
d u r in g t h e p a s t 3 y e a r s a n d h o w t h e y w e r e f i n a n c e d ; C o m p a n y 's m a n a g e m e n t - la b o u r r e l a t i o n s

4 . P R E S E N T F IN A N C IA L P O S IT IO N
C o m p a n y 's a u d i t e d B a la n c e S h e e t s & P / L A c c o u n t s f o r t h e p a s t 3 y e a r s w it h a n a l y s is ; C o m p a n y 's C a p it a l s t r u c t u r e ; S u m m a r is e c o n c lu s io n s
o f f in a n c i a l a n a ly s is ; M e t h o d o f d e p r e c i a t i o n ; R e v a l u a t io n o f F / A ; R e c o r d o f m a j o r d e f a u l t s ; P o s i t i o n o f C o m p a n y 's t a x a s s e s s m e n t ; C o n t in g e n t
L i a b il it ie s ; P e n d i n g s u it s ; Q u a l i f i c a t i o n s / A d v e r s e r e m a r k s b y a u d i t o r s
 Project Appraisal Memorandum
P R O J E C T A P P R A IS A L M E M O R A N D U M

5. PRO JECT
( a ) D e s c r ip t io n o f t h e p r o j e c t ( M o d e r n is a t io n , e x p a n s io n , d iv e r s if ic a t io n o r a n e w v e n t u r e ) ; S t a n d in g , e x p e r ie n c e a n d r e lia b ilit y o f
o u t s id e a g e n c y w h o p r e p a r e d t h e P r o j e c t R e p o r t ; ( b ) C o lla b o r a t io n A r r a n g e m e n t ( T e c h n ic a l o r F in a n c ia l) ; ( c ) T e c h n ic a l F e a s ib ilit y c o v e r in g
s u it a b ilit y o f t e c h n o lo g y , s iz e & lo c a t io n o f p la n t , t e c h n ic a l a r r a n g e m e n t s & m f g . p r o c e s s ( d ) F in a n c ia l F e a s ib ilit y c o v e r in g C o s t o f P r o j e c t & M e a n s o f F in a n c e

6 . P R O J E C T I M P L E M E N T A T IO N S C H E D U L E
W it h r e f e r e n c e t o B a r C h a r t o r P E R T / C P M C h a r t a n d in t h e lig h t o f a c t u a l im p le m e n t a t io n ; M a in s t a g e s in t h e p r o j e c t im p le m e n t a t io n a n d w h e t h e r t h e t im e
s c h e d u le f o r c o n s t r u c t io n , e r e c t io n / in s t a lla t io n o f P & M , s t a r t - u p / t r ia l r u n , c o m m e n c e m e n t o f c o m m e r c ia l p r o d u c t io n is r e a s o n a b le & a c c e p t a b le

7 . P R O D U C T IO N F A C T O R S
( a ) M f g . P r o c e s s - B a s is o f s e le c t io n & j u s t if ic a t io n ; ( b ) R a w M a t e r ia ls - Im p o r t e d / I n d ig e n o u s , N a m e s o f m a in s u p p lie r s , P a t t e r n o f u n it p r ic e s & f lu c t u a t io n ;
( c ) U t ilit ie s & E s s e n t ia l S e r v ic e s - R e q u ir e m e n t s o f p o w e r , f u e l, w a t e r , t r a n s p o r t , r a ilw a y s id in g w it h c o m m e n t s o n a d e q u a c y o f a r r a n g e m e n t s , t r e a t m e n t
a n d d is p o s a l o f e f f lu e n t s ; ( d ) O p e r a t in g O r g a n is a t io n - E x p e r ie n c e a n d e x p e r t is e o f M a n a g e r ia l / T e c h n ic a l p e r s o n n e l, o t h e r s t a f f r e q u ir e d

8 . W O R K IN G C A P IT A L R E Q U I R E M E N T S
A s s e s s m e n t o f t o t a l W C r e q u ir e m e n t s a t t h e p e a k le v e l ( G C A ) d u r in g t h e f ir s t y e a r o f o p e r a t io n s a f t e r c o m m e n c e m e n t o f c o m m e r c ia l p r o d u c t io n ;
s h a r in g o f b u s in e s s a m o n g m e m b e r b a n k s ; f in a n c in g o f a d d it io n a l W C r e q u ir m e n t s in c a s e o f e x is t in g c o m p a n ie s
 Project Appraisal Memorandum
P R O J E C T A P P R A IS A L M E M O R A N D U M

9 . M A R K E T IN G
( a ) S a le s p r o s p e c t s a n d u n d e r ly in g a s s u m p t io n s , d e m a n d p r o j e c t io n s o n t h e b a s is o f p a s t c o n s u m p t io n , t o t a l s u p p ly p o s it io n , g e n e r a l c o n d it io n o f in d u s t r y
( b ) S e llin g P r ic e - T r e n d t o s e e w h e t h e r s t a b le , G o v t . p r ic e c o n t r o ls , q u o t a s y s t e m s , e t c . ; ( c ) P r o p s e c t s f o r e x p o r t s - E x p o r t o b lig a t io n s ;
( d ) M a r k e t in g O r g a n is a t io n - A d e q u a c y , D is t r ib u t o r s / S e llin g A g e n t s , T e r m s o f a r r a n g e m e n t , r e m u n e r a t io n , c o m p e t e n c e , A s s o . C o n c e r n s - S ip h o n in g o f p r o f it s

1 0 . C O M M E R C IA L V IA B IL IT Y - C o P & P R O F IT A B IL IT Y
( A ) S a le s V o lu m e / V a lu e - ( a ) V o lu m e ; ( b ) N o . o f w o r k in g d a y s ; ( c ) C a p a c it y u t ilis a t io n ; ( d ) V a lu e ( B ) C o P - ( a ) M a t ls . c o n s u m e d ; ( b ) U t ilit ie s ( P W & F ) ; ( c ) W a g e s & S a la r ie s
( d ) F a c t o r y O v e r h e a d s ; ( e ) D e p r e c ia t io n - S L M / W D V - C o n s is t e n c y ; ( f ) S e llin g E x p . ; ( g ) F in a n c ia l E x p . ; ( h ) A d m n . E x p . ; ( i) R o y a lt y & K n o w - h o w ; ( j ) P r e lim in a r y / P r e - o p e r a t iv e
E x p . ; ( k ) T a x a t io n ( C ) P r o f it a b ilit y ( C M A D a t a a n d r a t io s ) ( D ) In t e r - f ir m c o m p a r is o n

1 1 . C O M M E R C IA L V IA B IL IT Y - D S C R & R E P A Y M E N T P R O G R A M M E
( a ) D S C R ( G r o s s ) a n d ( N e t ) [ 'C o r e T e s t ' R a t io ] , M a r g in o f s a f e t y a n d e x t e n t o f r is k c o v e r a g e ; ( b ) B r e a k - E v e n A n a ly s is - F o r f ir s t f u ll y e a r o f p r o d u c t io n a n d
t h e y e a r o f m a x im u m c a p a c it y u t ilis a t io n ; ( c ) C o s t - V o lu m e - P r ic e ( C V P ) o r S e n s t iv it y A n a ly s is - F o r t h e y e a r w it h o p e r a t in g p r o f it n e a r e s t t o t h e a v e r a g e o p e r a t in g p r o f it t o
d e t e r m in e 'S p a n o f R e s ilie n c y ' o f t h e p r o j e c t ; ( d ) R e p a y m e n t P r o g r a m m e b a s e d o n t h e a b o v e f a c t o r s a n d in it ia l m o r a t o r iu m ( s t a r t - u p ) p e r io d

1 2 . F U N D S F L O W A N A L Y S IS
F u n d s F lo w s t o b e d iv id e d in t o L o n g T e r m F u n d s F lo w s a n d S h o r t T e r m F u n d s F lo w s - D if . w o u ld in d ic a t e L o n g T e r m S u r p lu s o r D e f ic it / M o v e m e n t s in C / A & O C L le a d in g t o
in c r e a s e o r d e c r e a s e in W C G ; E s s e n t ia l e x p e n d it u r e o n F / A , r e p a y m e n t o b lig a t io n s , t a x e s a n d d iv id e n d s a r e f u lly p r o v id e d f o r ; C a s h g e n e r a t io n w o u ld b e a d e q u a t e t o m e e t
a ll c o m m it m e n t s d u r in g t h e e n t ir e r e p a y m e n t p e r io d .
 Project Appraisal Memorandum
P R O J E C T A P P R A IS A L M E M O R A N D U M

13. PRO JECTED BA LA N CE SH EETS

( a ) P r o j e c t e d B / S c o v e r in g t h e e n t ir e p e r io d o f r e p a y m e n t t o b e s c r u t in is e d ; ( b ) C o P , M o F , P r o f it a b ilit y e s t im a t e s , F u n d s F lo w p r o j e c t io n s a n d p r o j e c t e d B / S a r e a ll in t e r - r e la t e d
( c ) P r o j e c t e d B / S t o b e s c r u t in is e d a n a ly t ic a lly w it h r e f e r e n c e t o a ll o t h e r r e la t e d e s s e n t ia l d a t a t o e n s u r e t h a t a ll t h e p r o j e c t io n s , m a d e r e a lis t ic a lly a n d a c c u r a t e ly ,
h a v e b e e n w o v e n in t o w e ll c o - o r d in a t e d f in a n c ia l s t a t e m e n t s .

1 4 . S E C U R IT Y & M A R G IN A N D R A T E O F IN T E R E S T
( a ) C o m p le t e d e t a ils o f s e c u r it y t o b e o f f e r e d f o r t h e T e r m L o a n ; ( b ) D e t a ile d O p in io n R e p o r t o n g u a r a n t o r s ; ( c ) S e c u r it y M a r g in C o v e r a g e R a t io ; ( d ) W h e t h e r s e c u r it y o f f e r e d
a n d t h e m a r g in a v a ila b le a r e a d e q u a t e a n d s a t is f a c t o r y ( e ) C r e d it R a t in g t o b e d o n e a n d in t e r e s t r a t e ( P r ic in g ) t o b e in lin e w it h t h is r a t in g , u n le s s m a r k e t f o r c e s d e m a n d
o t h e r w is e

1 5 . S P E C IA L T E R M S & C O N D IT IO N S
( a ) R ig h t o f e x a m in a t io n o f b o r r o w e r 's b o o k s ; ( b ) R e s t r ic t io n w it h r e g a r d t o c h a n g e in C a p it a l S t r u c t u r e ; ( c ) R e s t r ic t io n w it h r e g a r d t o ( i) R e p a y m e n t o f d e p o s it s f r o m F & R
w it h o u t t h e p e r m is s io n o f t h e B a n k ( ii) R a t e o f in t e r e s t p a y a b le o n s u c h d e p o s it s t o b e lo w e r t h a n t h e r a t e o f in t e r e s t c h a r g e d b y t h e B a n k ; ( d ) R e s t r ic t io n w it h r e g a r d t o
t r a n s f e r o f c o n t r o llin g in t e r e s t in t h e C o . o r d r a s t ic c h a n g e in t h e C o m p a n y 's m a n a g e m e n t s e t - u p w it h o u t B a n k 's p r io r p e r m is s io n ; ( e ) O t h e r s t a n d a r d T & C .

1 6 . E C O N O M IC S O F U N D E R W R IT IN G
In c a s e o f c o m p o s it e p r o p o s a l, ( a ) U n d e r w r it in g t ie - u p ; ( b ) C a p it a l M a r k e t t r e n d s ; ( c ) M a r k e t r e s p o n s e t o t h e p r o p o s e d p u b lic is s u e ; ( d ) L o c k - u p o f f u n d s ;
( e ) C o m p a r a t iv e E a r n in g s A n a ly s is - U n d e r w r it in g C o m m is s io n , D iv id e n d s , C a p it a l G a in s a f t e r T a x ; ( f ) C o m p a r is o n o f t o t a l e a r n in g s t h u s a r r iv e d a t w it h t o t a l e a r n in g s t h a t
w o u ld a c c r u e t o t h e B a n k if t h e a m o u n t ( V a lu e o f s h a r e s d e v o lv in g ) is le n t b y w a y o f T e r m L o a n s f o r t h e s a m e p e r io d
 Project Appraisal Memorandum
P R O J E C T A P P R A IS A L M E M O R A N D U M

17. CO N SEN TS FRO M G O VERN M EN T AN D O TH ERS

T h e s e w ill r e la t e , in t e r a lia , t o ( a ) In d u s t r ia l L ic e n c e ; ( b ) A p p r o v a l f o r c o lla b o r a t io n a g r e e m e n t a n d t e c h n ic a l k n o w - h o w a r r a n g e m e n t ; ( c ) C le a r a n c e f o r im p o r t o f P & M ;
( d ) A p p r o v a l f o r m a k in g p a y m e n t s f o r im p o r t e d P & M o n d e f e r r e d t e r m s a n d s p e c if ic c le a r a n c e f o r t a x e x e m p t io n o n in t e r e s t ; ( e ) C o n s e n t f r o m C o n t r o lle r o f C a p it a l Is s u e s
( f ) V a r io u s a p p r o v a ls / N o O b j e c t io n C e r t if ic a t e s f r o m C G / S G / L o c a l A u t h o r it ie s , e t c . ( g ) P r e s e n t p o s it io n

1 8 . G R O U P C O M P A N IE S
( a ) B r ie f r e s u m e o f G r o u p C o m p a n ie s in d ic a t in g t h e e x t e n t t o w h ic h t h e y a r e d e p e n d e n t o n t h e p a r e n t c o m p a n y / o t h e r c o m p a n ie s in t h e G r o u p ; ( b ) C o m p a n y 's lia b ilit y in
r e s p e c t o f p a r t ly p a id s h a r e s in s u b s id ia r y c o m p a n ie s

1 9 . M A N A G E R IA L C O M P E T E N C Y
( a ) C o m p a n y 's m a n a g e m e n t s e t - u p ; ( b ) C o m p o s it io n o f t h e B o D ; ( c ) C E O in c h a r g e o f d a y - t o - d a y a f f a ir s o f t h e C o m p a n y ; ( d ) Q u a lit y o f t h e C o m p a n y 's m a n a g e m e n t
a n d t h e le v e l o f m a n a g e r ia l e x p e r t is e b u ilt - u p w it h in t h e G r o u p ; ( e ) W h e t h e r a ll d e p a r t m e n t s a r e w e ll s e r v e d b y p r o f e s s io n a ls

2 0 . O T H E R S A N D R E C O M M E N D A T IO N S
( a ) V e r if y R B I's L is t o f D e f a u lt e r s / W ilf u l D e f a u lt e r s / S u it F ile d A c c o u n t s ; ( b ) V e r if y E C G C 's S p e c if ic A p p r o v a l L is t ; ( c ) In d ic a t e t h e IR R f o r t h e p r o j e c t a n d c o m m e n t s o n
c o m p a r is o n w it h t h e IR R s f o r s im ila r p r o j e c t s in t h e s a m e in d u s t r y ; ( d ) In d ic a t e t h e im p o r t a n c e o f t h e p r o j e c t in t e r m s o f n a t io n a l p r io r it y a n d im p a c t t h e r e o n ; ( e ) D e t a il t h e
v a lu e o f t h e C o m p a n y / G r o u p 's c o n n e c t io n s t o t h e B a n k ; ( f ) W h e t h e r , a ll c o n s id e r e d , t h e p r o p o s a l is a f a ir b a n k in g r is k ; ( g ) R e c o m m e n d a t io n s f o r s a n c t io n o f T e r m L o a n .
THANK YOU