The era of nineties has created a new breed of entrepreneurs whose quest for finance is unending. The lending institutions, on the other hand, have become choosy due to, among other reasons, mounting Non-performing Assets (NPAs). All this has led to increased pressure on the availability of finance to the entrepreneurs. In this setting, careful consideration of Project Appraisal and Financing holds the key to survival.

1. PROJECT APPRAISAL
AND
FINANCING
Dr. AMBRISH
GUPTA

3. Chapter Opener: TANISHQ: A Sparkling Journey

7. INTRODUCTION
PROJECT
FEATURES OF PROJECT
 Capital Investment (A Certain Fixed Cost)
1. A New Project by a First Generation Entrepreneur
2. Expansion of an Existing Project
3. Diversification
3.1 Allied/Concentric diversification
3.2 Backward/Vertical integration
3.3 Forward/Horizontal integration
3.4 Conglomerate diversification
3.5 Replacement and modernization
3.6 Creation of utilities for captive use
3.7 Mergers and acquisitions
PROJECT FUNDAMENTALS

8.  Implications of Capital Investment
1. Substantial Financial Outlays
2. Irreversible Long-Term Decision
3. Strategic Decision
4. Behavioral Issues
 Economic Activity (Definite Objective)
 Execution over a Fixed Period
 Benefits spread over a Long Term Period and Subject to Uncertainties
Hence a capital investment proposal entails:
1. Sacrifice of substantial resources by the entrepreneur in the present with long term commitment,
2. In the expectation of benefits in future
3. Which has lots of uncertainties, and therefore
4. High risk is an integral part of the proposal, as noted earlier.
IDENTIFICATION OF A PROJECT
 Own Intuition and Observations

9.  Systematic Approach to Generating Ideas: Opportunity Studies
1. Liaison and discussions with professionals and institutions
2. Project identification by and readymade project reports from technical consultancy organizations
3. Keeping track of the environment of business and industry
 Economy opened-up
 Government’s priorities
 Sunrise industries of the day
 Changing life-styles
 Local peculiarities
 Requirement for ancillaries
 Corporate needs
 Industries doing well and vice-versa
 Small scale sector
 Fiscal incentives under sections of Income Tax act
 Incentives from states
 Incentives from central government

10. 4. A financial newspaper as a resource base
5. Websites on business opportunities
6. Availability of existing units from the financial institutions
 Appraisal of Individual/Corporate Strengths and Weaknesses
1. Individual Traits to be Analyzed
1. Vision and Imagination: The ability to think ahead of times. For example, promoters of e-commerce businesses cited earlier.
2. Risk bearing willingness and capacity
3. Leadership, decisiveness, endurance, perseverance, man management skills
4. Financial acumen and marketing orientation
5. Willingness to listen to professionals and act on their advice
6. Aptitude for and ability to create relations in the corridors of power
2. Corporate SWOT Analysis
In addition, if already into business then carry out an objective corporate SWOT analysis:
1. Individual traits of the promoter.
2. Competency of top management and other senior functionaries
3. Financial soundness, capital market image, faith and confidence of shareholders, other investors and lending institutions and banks
4. Loyalty of employees, customers and suppliers
5. Production efficiencies
6. Marketing and distribution network, brand equity, market share, etc.
7. Research and development capabilities, efforts and innovations
8. Project management skills
Now relate the above analysis with Tanishq case.

12.  Short Listing of Ideas
 Pre-Feasibility/Investment Studies of the Project Ideas Shortlisted
 Identification of Your Dream Project

13. THE PROJECT CYCLE
 Project Identification
 Project Formulation and Analysis
1. Promoters
2. Management
3. Marketing viability
4. Technical feasibility
5. Financial viability
 Appraisal and Funding by a Lending Institution
 Project Management
1. Overall project planning, that is, identifying all key activities to be accomplished within the set time and mile stones to be achieved
by the pre-determined dates.
2. Project scheduling, that is, preparation of activity wise and resource wise schedules.
3. Actual project execution and construction of facilities.
4. Project monitoring and control that is, reviewing the progress against set standards of cost and time.
5. Training of technical personnel, and
6. Trial runs and commissioning of the project.

14.  Over Run/Bailout Financing
 Project’s Post-Completion Performance Evaluation
1. Comparison of actual and projected financial results.
2. Embarking upon corrective action plan in case of negative deviations.
3. Embarking upon rehabilitation plan if the project goes sick, and
4. If into continuous losses or underperformance then to think ahead and carry out a discontinuance analysis.
PROJECT APPRAISALAND FINANCING

16. 40 TIPS FOR BUDDING ENTREPRENEURS
1. Keep the idea simple enough to draw on a napkin.
2. A legend is an asset.
3. Hire a good lawyer.
4. Raise more money than you think you need. Now double it.
5. Crazy is no liability.
6. Find executives who look like they walked off the set of “the expendables”.
7. Target the overcharged and the underserved.
8. Be the good guy.
9. Two strikes is one hit away from a home run.
10. Recognize your luck.

17. 11. Lack of money makes you frugal.
12. Gains talk equity.
13. Promote from within.
14. If the Zeitgeist works for you, use it.
15. Invent your own culture and put a top person in charge of it.
16. A culture has its own language.
17. The legal part is never over.
18. Have a recognizable home.
19. A crisis can contain the germ of a big idea.
20. Simplicity has value.
21. It doesn’t hurt to look like a toy.
22. Remember your chief mission.
23. Instead of whining, give a lollipop.
24. It helps to have an extroverted leader.
25. Get into fund advertising wars.
26. Take your business, not yourself, seriously.
27. See your business as a cause.
28. Put the worker first.
29. Sweat the small stuff, but try not to lawyer it.
30. Beware of imitators, but take them as a compliment.

18. 31. The web isn’t cool, it’s a tool.
32. Set and renew noble expectations.
33. Increasing size should make you a force for good.
34. Get green.
35. It’s about customer service, not “scalability”.
36. Listen to advice, then celebrate it.
37. Pick your peaks and stick to them.
38. Manage permanence.
39. Never rest on your laurels or you will get a thorn in your, um, butt.
40. It’s OK to be Unprofitable For a Year:
Just be sure to be profitable for at least the next 39.
OVER TO THE NEXT CHAPTER

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