Feasibility ReportFeasibility ReportFeasibility ReportFeasibility Report

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Project : CharacteristicsProject : Characteristics

Singleness of Purpose

Target date

A definite life cycle

Pre determined & fixed resources

Complex interdependencies

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B d C t i f P j tB d C t i f P j tBroad Categories of ProjectBroad Categories of Project

Manufacturing ProjectsInfrastructure ProjectsService Sector ProjectsjDevelopmental Projects

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Phase of Project Phase of Project Cycle/Development PhaseCycle/Development PhaseCycle/Development PhaseCycle/Development Phase

PrePre--investmentinvestment InvestmentInvestment Operating PhaseOperating Phase

IdentificationIdentification Negotiation/Negotiation/ CommissioningCommissioning(Opportunity Study)(Opportunity Study) ConstraintConstraint StartStart--upup

PrePre selectionselection EnggEngg DesignDesign ReplacementReplacementPrePre--selectionselection EnggEngg. Design. Design ReplacementReplacement(Pre(Pre--feasibility Study)feasibility Study) RehabilitationsRehabilitations

PreparationPreparation ConstructionConstruction Expansion/Expansion/(F ibilit St d )(F ibilit St d ) i tii ti(Feasibility Study)(Feasibility Study) innovationinnovationSupport StudiesSupport Studies PrePre--prodnprodn..

marketingmarketingAppraisalAppraisalpppp(Appraisal Report)(Appraisal Report)

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Project Feasibility & Project Feasibility & Management StagesManagement Stagesg gg g

[1] Identification of Project[2] Pre-Feasibility Report[2] Pre-Feasibility Report [3] Feasibility Report

Project Appraisal…Project Appraisal[4] Project Finance Tie up

[5] Project Implementation[6] Consolidation[6] Co so dat o[7] Expansion and Modernization

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Some phases may overlap

The pre-investment phase is the most important because the success or failureimportant because the success or failure of a project depends on its findings and interpretation

Cost of such study should not act as hindrance

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Pre-feasibility Study : Objectives

To determine whether…All possible project alternatives of a Project have been examinedjProject concept justifies a detailed analysis by a feasibility studyanalysis by a feasibility studyAny specific aspect to be covered in f ibilit t dfeasibility studySpecific investor / target group

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f SPre-feasibility Study (cont.)

It is an intermediate stageDifference is in degree of detailsCan be skipped if there is better ppclarity

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Project Report / Feasibility Report: Project Report / Feasibility Report: In estment Decisions B In estorsIn estment Decisions B In estorsInvestment Decisions By InvestorsInvestment Decisions By Investors

Feasibility Reports (DPR TEFR etc )Feasibility Reports (DPR, TEFR, etc.) traditionally are prepared by investors (their consultants)consultants)These are basically proposals to the funding agencies, outside investors, etc.g

Studies/analyses the project from investor’s

point of viewpoint of viewSeeks finances, incentives, etc.Al t d B k bl R t

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Also termed Bankable Reports

Project Report for Soliciting Funds Project Report for Soliciting Funds

Should be as per the requirement of the concernedShould be as per the requirement of the concerned funding agencyIt should be such which is acceptable by other funding

i l ith ll hagencies also with small changes

Important to know

the desired coverage & norms by the funding agencies’ in

general

R l ti i t f th t f th P j t R tRelative importance of these aspects of the Project Report

How to get the data & prepare report based on the same

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Main Components :Business Plan / Feasibility StudyBusiness Plan / Feasibility Study

I. IntroductionII. Promoters Background & Past

PerformancePerformanceIII. Market AssessmentIV. Technical Feasibility Analysis

C t f P j t & M f FiV. Cost of Project & Means of FinanceVI. Financial Viability AnalysisVII. Key Elements & Concluding ObservationsVII. Key Elements & Concluding Observations

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Al t i l dAlso to include...

Project at a glance

Annexures

Support DocumentsSupport DocumentsExecutive Summary

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M k t F ibilitM k t F ibilitMarket FeasibilityMarket Feasibility

Marketing is the Key Component for Success of an EnterpriseStudy of “Market” / “Marketing” is toStudy of Market / Marketing is to understand

The CustomersThe Competitors The Environment

Market Feasibility / Assessment is a Systematic Approach

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Market FeasibilityMarket Feasibility (Contd.)(Contd.)

AdvantagesAdvantages

Provides preliminary inputs for marketing strategy and Programme formulations

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Market FeasibilityMarket Feasibility (Contd.)(Contd.)

FOCUSFOCUS

Focuses on gross market demand -present and futureHighlights gap : between expected demand and supply (quantum &demand and supply (quantum & Characteristics) for a given productGap could be positive or negative

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Market FeasibilityMarket Feasibility (Contd.)(Contd.)

Market Feasibility Through:

Desk Based StudyField WorkUse of Research and Analytical Techniques

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Market FeasibilityMarket Feasibility (C )(C )Market FeasibilityMarket Feasibility (Contd.)(Contd.)

Approaches to Information Collection

Talk : To Customers, Traders, competitors

Observe: Competitors and traders in actionObserve: Competitors and traders in action

Talk : To knowledgeable people

Refer : To published information

Surf : The Net

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Key Steps in Market and Demand Key Steps in Market and Demand A l iA l iAnalysisAnalysis

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Market FeasibilityMarket Feasibility (Contd )(Contd )Market FeasibilityMarket Feasibility (Contd.)(Contd.)

Major Information Gathering MethodsMajor Information Gathering Methods

Secondary Source ResearchPrimary Data CollectionPrimary Data Collection

Test Marketing

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TECHNICAL FEASIBILITYTECHNICAL FEASIBILITY

Is it feasible to Execute/ Manufacture

The Product(s)The Service

Components/Factors which have to be considered

Significance of each of these components

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Technical Feasibilityo Product Mix

CapacityEquipments & accessories :

RequirementSpecifications/AvailabilityC ti A l iComparative Analysis

Consumables/MaterialsT h i l t / it t h i lTechnical arrangements/site technical details/technical know-howInfrastr ct re and UtilitiesInfrastructure and UtilitiesManpower/ResourcesLocation

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LocationCompliance to Statutory & project Specific Norms

TECHNICAL FEASIBILITY (Contd )TECHNICAL FEASIBILITY (Contd )TECHNICAL FEASIBILITY (Contd.)TECHNICAL FEASIBILITY (Contd.)

Infrastructure & Utilities

PowerPowerFuelWaterEnvironment ProtectionSafety Measures

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TECHNICAL FEASIBILITY (Contd.)TECHNICAL FEASIBILITY (Contd.)

The Technical FeasibilityThe Technical Feasibility Analysis helps in deciding:g

Output levels (Quantity)Quality / Nature of OutputCostPricing

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Fi i l Vi bilitFinancial Viability

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Fi i l Vi bilitFinancial Viability

Cost of Project

Means of Finance

Financial Returns

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Cost of Projectj

Main componentsMain componentsi. Land & its developmentii Buildingii. Buildingiii. Plant and Machineriesiv. Technologyv Other Assetsv. Other Assetsvi. P&P

Expenses(eg;IPO’s,Marketing,Advertising)g)

vii. Contingenciesviii. Working Capital Margin

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Cost of ProjectCost of ProjectDescription Cost ( In Cr.

Rs. )Remarks

Land Cost 2.5 Additional Land boughtLand Cost 2.5 Additional Land bought

Building and Civil Works 115 All Subcontracting costs included

Technical Knowhow Fees ( Consultant Fees)

10 Includes Costs for Architects, Structural Designer and otherAgencies

AMC Clearance Fees 0.5

Pre-Operative Expenses 31.5 Electricity bills, In-house Engineer y gSalaries, Interest Costs, Insurance

Marketing Expenses 0 5 Print Media Advertising

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Marketing Expenses 0.5 Print-Media Advertising

Total 160 Crores

Sources of FinanceSources of Finance

Debt

Equity

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M f FiM f FiMeans of FinanceMeans of FinanceDescription Amount of Capital (In Remarksp p (

Crores Rs.)

Internal Sources 42 Developers Internal accruals

Bank Loans 75 Loan from SBI

Private Financing 18 3-4 Private Investors

Initial Payments from Sales 25 Flat Units Advance ypayments Received

Total 160 Crores

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Financial Returns Analysis

Projected profitability statementC h F d Fl t t tCash-cum-Fund Flow statementProjected Balance sheet

Working Capital statementWorking Capital statementBreak-even pointRatiosSensitivity Analysis

Relating to the kind of industry/projectConsidering a few assumptions

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The Final ChapterThe Final Chapterpp

Key Elements

Conclusions &Conclusions & Recommendations

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DocumentsDocumentsDocumentsDocumentsTo support key Assumptions & Parameters

Financial Tie-ups & ResourcesCost of Fixed Assets & VariablesInstalled Capacity basisM k t Ti Cl i & P i iMarket Tie-up Claims & Pricing

Investment done so farRequired Clearances & RegistrationsRequired Clearances & RegistrationsImplementation Schedule

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Common Errors in Feasibility Report Preparation

Report Format and coverageIgnoring Aspects of promoters b k d t fbackground, past performance, macro factorsM k t F ibilit R l i i lMarket Feasibility : Relying excessively on secondary sourcesTechnical Feasibility : Machine capacityTechnical Feasibility : Machine capacity, utilities and importance of technology

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ContdContd...

Project cost : an underestimate orProject cost : an underestimate or overestimateSelecting the Locations: Some temptationsg pSelling Price : unfounded optimizingCash flow in initial years: Poor detaily

Initial years, promoters are expected to pay from their own resourcesinstitutions may pay directly to machinery suppliers and reduce flexibility.

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Some Tips on Report Writingp p g(Informal !!)

n Write less! i e write to the pointn Write less! - i.e. write to the pointn Prepare schedule of chaptersn Prepare all tables charts projections etcn Prepare all tables, charts, projections, etc.n Note down important points for each of the chaptern Write in the form of points observationsn Write in the form of points, observationsn Provide as much hard data as possiblen Give/indicate sources of such statisticsn Give/indicate sources of such statisticsn Give basis for computations, projections

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