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Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06

Rs $ £. Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06. Dr Rajesh Khajuria, Director TEAMPro Ltd, London TEAM Projects & Consultants, Vadodara. Rs $ £. A Warm Welcome to all of You!. CII Organisers and Members SME Owners and Managers Chief Guests Speakers.

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Key Aspects of Project Appraisal for SME Financing CII FINcon 02.09.06

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  1. Rs $ £ Key Aspects of Project Appraisal for SME FinancingCII FINcon 02.09.06 Dr Rajesh Khajuria, Director TEAMPro Ltd, London TEAM Projects & Consultants, Vadodara

  2. Rs $ £ A Warm Welcome to all of You! • CII Organisers and Members • SME Owners and Managers • Chief Guests • Speakers Dr R Khajuria @ TEAM

  3. Presentation Plan • Indian SME Overview. • Project Appraisal Methods. • Project Appraisal: Key Aspects. • Case Study @ Asahi Songwon Colors Ltd with Korean Technology for TL, WCL and Public Issue. • Questions? Rs $ £ Dr R Khajuria @ TEAM

  4. Indian SME Overview Rs $ £ Part I

  5. Welcome to Indian SMEs! • 95% of Industrial Units are SMEs • 40% of Value Added in Manufacturing Sector • 35% of National Exports • 7,500 Products Manufactured • Employs 20 million people • But, contribute only 7% of GDP ? • 40% of Bank Finances to Priority Sector • SMEs and Agriculture Rs $ £ Dr R Khajuria @ TEAM

  6. Welcome to 3.5m Indian SMEs! Rs $ £ Dr R Khajuria @ TEAM

  7. SMEs achieve Rs 8000 billion Sales Rs $ £ Dr R Khajuria @ TEAM

  8. SMEs have Rs 1000 billion Investment Rs $ £ Dr R Khajuria @ TEAM

  9. SMEs Export Rs 800 billion G & S Rs $ £ Dr R Khajuria @ TEAM

  10. SMEs provide 20 million Employment Rs $ £ Dr R Khajuria @ TEAM

  11. The World depends on SMEs • UK: 98% of all Businesses are SMEs • Japan: 99% are SMEs • USA: 96% are SMEs • Africa’s 29 nations: 99.5% are SMEs • The world depends on SMEs • India depends on SMEs for economic success of its 1 billion people Rs $ £ Dr R Khajuria @ TEAM

  12. Project Appraisal Methods Rs $ £ Part II

  13. Project Appraisal Methods • Today we discuss… • Bank Appraisal for Loans. • Appraisal for Public Issue of Equity. • Other Methods: • FI Appraisal for Loans • World Bank Project Appraisal • UNIDO, Social Project Appraisal Rs $ £ Dr R Khajuria @ TEAM

  14. Project Appraisal : Key Aspects Rs $ £ Part III

  15. Project Appraisal: Key Aspects • The Objectives • The Project • Methodology of Appraisal • Corporate Analysis • The Promoters Team • Marketability Assessment • Technical Feasibility • Economic Viability & Financial Structuring • Environmental Impact Assessment • Conclusion & Recommendation Rs $ £ Dr R Khajuria @ TEAM

  16. Case Study @ Asahi Songwon Colors Ltd Rs $ £ Part IV

  17. The Objectives @ Case Study • Asahi Songwon Colors Ltd, Ahmedabad (Padra Plant) • Phase I: 2005 – Operating. • Phase II & III: Expansion proposed with Term Loan, Working Capital Loan and Public Issue. • Total Investment Rs 71 Crore. • State Bank of India referred the Project Appraisal assignment to TEAM. Rs $ £ Dr R Khajuria @ TEAM

  18. Methodology of Appraisal • Project Report of the company as a base. • Site visit to the Factory. • Market & Competition Analysis. • Discussions with the Bankers and Co.’s top executives on all aspects. • Raising 35 Queries. • Balance Sheet Analysis. • Independent & unbiased Appraisal & Judgement • Confidential Report with Specific Conclusions and Recommendations. Rs $ £ Dr R Khajuria @ TEAM

  19. The Project @ Colors • Asahi Songwon Colors Ltd has already invested Rs 25 Crore in a new Medium Scale Plant at Padra (Baroda) to manufacture basic Colors for export and domestic markets. • Collaboration with Songwon Colors Ltd, Korea (taken over by Clariant of Europe). • Colors are used in all walks of life: Textiles to everything we see, touch and feel. Rs $ £ Dr R Khajuria @ TEAM

  20. Vision • Songwon, Korea: • ‘Better Colour for A More BeautifulLife’. • Asahi, India: • “To be a global leader in its field of Pigments by supplying quality and environment friendly products to MNCsworldwide.” • Can you analyse both Visions? Rs $ £ Dr R Khajuria @ TEAM

  21. Corporate Analysis • Past Performance • Corporate Emergence • Promoters Team – Most Important • SWOT Analysis Rs $ £ Dr R Khajuria @ TEAM

  22. The Promoters Team • Highly qualified and experienced with up to 15 years experience in the same line. • MBA (USA), Technologists, CA. • Exporting, Profit-making existing business. • Demonstrated Performance in Manufacturing, Management and Export. • Politically well-known, but not spared by State Bank of India from Project Appraisal! Rs $ £ Dr R Khajuria @ TEAM

  23. Marketability Assessment • Product & Applications • Demand assessment based on end-user method • Global Consumption estimates • Competition and Supply Assessment • Export – Import Data analysis • International and domestic prices • Demand-Supply Gap and Customers • Scope for the Company to tap the ‘Gap’ Rs $ £ Dr R Khajuria @ TEAM

  24. Technical Feasibility • Capacity Assessment & Projected Utilisation • Manufacturing Process • Land & Building Requirements • Plant & Machinery & Layout proposed • Inputs: Raw Materials, Power, Fuel, Water, sources, quantities, prices, suppliers Rs $ £ Dr R Khajuria @ TEAM

  25. Technical Feasibility • Technology source and cost • Manpower Requirements & Costs • Pollution Control Measures • ISO Certification: 9000 / 14000 Rs $ £ Dr R Khajuria @ TEAM

  26. Economic Viability • Project Cost • Appraisal resulted in Additionof Rs 6 Crore to original estimate of Project Cost – Rs 71.5 Crore to Rs 77.55 Crore • Rise in Equipment costs and increased Working Capital, detectedfrom TEAM’s ‘Appraisal process’ • Hell lot of efforts to convince the Company about raising Sources of Finance by Rs 6 Crore! Rs $ £ Dr R Khajuria @ TEAM

  27. Sources: Financial Re-structuring Rs Crore • Term Loan SBI (FCNR/Rs) 13.82 • Equity Share Capital 43.84 • Unsecured Loan 07.98 • Reserves & Surplus 11.25 • Deferred Tax Liability 00.66 • TOTAL Sources of Finance 77.55 • Add: Working Capital Loan 24.00 Rs $ £ Dr R Khajuria @ TEAM

  28. Environmental Impact Assessment • Water pollution quantity • Treatment methods and equipments • Disposal to ETP Channel as per GPCB Rules • Membership of ETP Channel • Sources of Fresh Water • Ministry of Environment & Forest’s clearance needed for large Projects Rs $ £ Dr R Khajuria @ TEAM

  29. Conclusion & Recommendation • The project is assessed by TEAM at the behest of State Bank of India. • The Project is Technically Feasible and Economically Viable. • SBI may grant Term Loan and Working Capital Loan recommended. • The Appraisal may be ‘quoted’ in Prospectus for SEBI permission for Public Issue. Rs $ £ Dr R Khajuria @ TEAM

  30. Learning Today • Proven Appraisal Process. Reliability. • Based on PhD Research of Dr Rajesh Khajuria • Independent & Unbiased Appraisal. • Appointment by a Bank or Financial Institute. • Consultant’s Track Record. Credibility. • TEAM has 95% Success rate and 99% Recovery of Loans recommended for 200 Projects in 23 years (1983-2006). • Quick Turnaround. • Ethics for Long Term Success. Rs $ £ Dr R Khajuria @ TEAM

  31. Rs $ £ Questions? Dr Rajesh Khajuria, Director TEAMPro Limited www.TeamPro.org dr.khajuria@gmail.com M: 94260 75402 Data and Image Courtesy: SSI Annual Report 2003, Ministry of Small Scale Industries, Government of India Dr R Khajuria @ TEAM

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