THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA - NORTHERN INDIA REGIONAL COUNCIL NIRC

2. Content� Project Finance - Defined Options of Project Finance Debt Equity Case Studies Independent Power Producer Cement Manufacturer 2

3. Project Finance� Project Finance : 3

4. Options for Project Finance� Debt 4

5. Debt� Term loan - RTL Long tenure Rupee Loan to fund the Capital Expenditure of the project Issues: Availability of funds Sectoral caps Time frames for Project appraisal Technical Feasibility & Commercial Viability Managerial Competency � credit assessment Lack of communications b/w HO Vs Branch Expectation of high returns Fixed Vs Floating Interest rates Liked to Project risk + Credit worthiness of promoters Security Higher margins Require additional collateral Recourse Vs Non recourse financing Personal Guarantee & Assets of Promoters 5

6. Debt� Term Loan - FCL Long tenure Foreign currency loan Reduce the cost of capital Similar to Rupee Term Loan By pass the ECB norms No restriction on End use Issues: Availability of funds with Domestic Lenders Currency Risk High hedging cost Interest Rate Linked to LIBOR 6

7. Debt� ECB Foreign Currency Project Loan Majorly to fund imported capital expenditure Now also use to fund domestic capital expenditure to reduce cost of funds Take - out financing allowed since 22nd July 2010 Issues: Availability of long tenure of fund Foreign Lenders Vs Domestic Lenders Loan Amount � ticket size Policy & regulatory issues Currency Risk High hedging cost Black Box approach (hedgers) Preferred Sector to fund End use restriction Automatic Route Approval Route 7

8. Debt� Corporate Bond Structured Product Credit product convert into treasury product Put / Call options Long tenure project requirements dovetailed to short tenure products Issues: Less deep than equity market Few investors Banks failed to invest � lower than AA rating � not forming the part of SLR Liquidity mainly in Govt. Securities Coupon Rate Linked to Credit Rating Tenure Security 8

9. Debt� Lease / Structured Finance 9

10. Equity� Commitment from the sponsor to the project Sources of Equity Promoter�s own capital Venture Capital/Private Equity Public issue of equity 10

11. Stages: Equity� 11

12. Equity� Issues: Venture Capital Lack of True Venture Capital availability Risk Taking Vs Security & Assurance of returns Tenure Exits 12

13. Independent Power Producer Equity � �Critical Success Factor� for Growth Case Studies� 13

14. Case Studies� 14 Cement manufacturer