Eastern Gourmet Private Limited (EGPL)

PROJECT APPRAISAL

a) Proposal : Sanction of Term Loan of Rs. 100.00 Crs (Tenor 9 y) to XYZ LTd., on Consortium mode of Financingb) Project / Purpose : To set up a 0.3 MTPA Iron ore Pellet Plant at Champadihi Village in the district of Keonjhar. The total project cost is estimated at Rs 152.77 cr. Details of cost is given below.

ParametersCost

1Land & Land Development Cost6.43

2Building & Other Civil work36.86

3Plant & Machineries67.37

4Miscellaneous Fixed Assets4.20

5Provision For Contingencies (@5% of item 2, 3 & 4)5.42

6Erection & Commissioning4.72

7Consultancy Charges1.28

8Pre-Operative Expenses including Interest During Construction20.79

9Margin For Working Capital5.70

TOTAL152.77

The project will be implemented on Turnkey basis by EICS Technology Pvt. Ltd. of Kolkata. Details on the Turn key provider and the terms of Contract are furnished at item no. h.10 below.

c) Key Project Parameters: Rs. in crores

Project cost152.77LC Sub limit with debt (Capex)30.00

Debt - TL100.00Bank guarantee

Internal accrual2.22

Unsecured Loan(quasi equity)-

Equity50.55Our share in debt25%

DE Ratio1.90:1.00Our share in LC25%

Tenor of the loan9 y Our share in BG-

Gross Av DSCR2.21Derivative limit-

Min Security Margin27.67%Our share in total exposure25%

Promoters contribution52.77Details of sponsor, having major Stake in the SPV

a) NameNA

b) Equity stakeNA

c) Credit enhancement mechanismNA

d) Pre-sanction Visit : Pre-sanction visit to the plant site was undertaken by the Credit Analyst on 12.09.12 and again on 06.02.2013. The progress of work is as under :

- The site has been bounded by brick walls with concrete pillars.

- The foundation work of all the buildings are complete

- Total expenditure incurred in the project till date is Rs. 14.51 cr.

e) Details of TEV Study: We have obtained a TEV Study on the Project from R Singh & Associates Pvt. Ltd., empanelled with our Bank and they have opined that the project is technically feasible and commercially viable. They have also stated that the project cost is realistic and the project can be implemented smoothly. Their recommendations are furnished in Annexure to this Memorandum. However, we furnish below some of the basic parameters of the Study and our assumptions

ParametersTEV StudyOur AssumptionReason for adverse variance only

1Capacity utilisation60% in 1st yr

70% in 2nd yr.

75% in 3rd yr

80% in 4th yr.

85% thereafter60% in 1st yr

70% in 2nd yr.

80% thereafterOurs is on a conservative estimate

2Sale price per MT7400/-7400/--

3Raw material consumption per MT (iron ore fines)1.081.08-

4Fuel Oil (ltrs per MT)4.675.00-

5Raw material price (iron ore fines)2500/-2500/--

6Power Consumption per MT70 units80 unitsMarginally on the higher side because of the power fluctuation

7Power Tariff (per unit)5.005.30 As per rate in Odisha

8Implementation period18 months36 monthsBased on actual time taken by the existing plants ranges from 30 to 36 months

9Project cost

(differs on the following)

i) Interest during construction (IDC)ii) Pre-op expenses

iii) Contingency

i) 9.72

ii) 1.92

iii) 5.12i) 20.07

ii) 0.72

iii) 5.42i) o/a longer implementation period

ii) estimated @ Rs. 2.00 lac per month for 36 months

iii) @ 5% on civil / P&M costs

10DE2.00 : 1.001.90 : 1.00-

11DSCR2.382.21Marginally low o/a lower capacity utilization assumed

f) Cost of Project, Means of finance and Key Project Parameters:

CostMeans of Finance

Land & Site Development6.43

A. Equity:Promoter (a)Others (b)Total (c=a+b)

Building36.86

P & M67.37

Other assets4.20i) Equity Shares & Share premium50.5550.55

Prel. and Pre-op. exp including IDC20.79

iii) Internal Accrual2.222.22

Contingencies5.42Total equity contribution 52.7752.77

Erection & Commissioning4.72B. Debt

Consultancy Charges1.28i) RTL100.00100.00

(ii) Others, if any- Unsecured loan

WC Margin5.70Total Debt (i+ii+iii) (B) 100.00 100.00

Total152.77Total (A+B)152.77152.77

Debt: Equity: (B/A) - 1:90 : 1

Promoters contribution: a/A% - 34.54% of equity for the Project

g) Remarks on Cost of Project (CoP) & Means of Finance ( MoF)

g.1) The cost of the Project is considered acceptable on following considerations :

- TEV study has stated that the project cost estimate is considered reasonable and without much risk of under financing OR over financing.

- Further, on comparison of the cost with similar units, we find the cost reasonable and acceptable.

UNITCapacityYear of setting upCostCost per Metric Tonne

A12 lac TPA2009337.512812/-

B12 lac TPA2010358.322986/-

C6 lac TPA2010243.074051/-

XYZ Ltd.3 lac TPA2013126.284209/-

Project cost is excluding Margin Money for Working Capital and Interest during construction (IDC)

g.2) The project is proposed to be funded from Promoters contribution and the term loans from the bank, in the ratio 1.90 : 1. The proposed means of finance for the project will be as under :

I. Equity

i) MD 24.25

ii) Director 1 5.20

iii) Director 2 10.00

iv) Group company 1 4.10

v) Group company 2 - 7.0050.55

II. Cash Accrual of XYZ Ltd. from its existing activity (Hotel)

(The company is debt free and till completion of the project it will have internal accrual as follows)

2011-12 0.31 (already invested in the project)

2012-13 0.37 (already invested in the Project)

2013-14 0.43

2014-15 0.53

2015-16 0.58

Total 2.222.22

Term Loan From Bank100.00

Total Project Cost152.77

g.3) Details of Investment in the Project, till date. (Rs. 14.51 cr.)

Capital Work-in-progressAmount (Rs)Amount (Rs)

A.Land & Land Devlopment:32894986.27

Land Cost878874.00

Land Filling28819371.50

Road Work2668101.72

Bridge528639.05

B.Plant & Machinery:48253159.00

Weigh Bridge1410158.00

Project Consultancy Charges20544901.00

Bricks Machine1283600.00

Pump Set14500.00

Advance to EICS25000000.00

C.Office Equipments:624680.00

Computer587650.00

Furniture37030.00

D.Electrical:5521036.00

M/s. Alliance Power (Elec. Contractor)2012739.00

NESCO Connection Charges98367.00

NESCO Supervision Charges18385.00

Transformer1666169.00

Panel Board1559376.00

Electrical Inspection Fees14000.00

Solar Light152000.00

E.Infrastructure:51628153.29

R.C.C. Boundary Work33640072.58

R.C.C. Office Building8534080.71

2 nos of Bore Wells500000.00

Sand Stock at Site5250000.00

Chips Stock at Site279000.00

Metal Stock at Site65000.00

Soil Testing3360000.00

F.Earth Moving Equipments (JCB):1872787.00

G.Preoperative Expenses4325896.00

Grand Total(A+B+C+D+E+F)145120697.56

g.4) Cost of Civil Construction : It includes the following

HeadsSpecificationsCost

1Boundary Wall (10 height)950 m long0.76

2Approach Road to the Site2 km.2.00

3Internal Roads with Drain1500 m long of 5 m width1.20

4Administrative Building (4980 sft)3 storied building of 1660 sft each with interior works for Office purpose and with Lift1.00

5Canteen Building5000 sft0.60

6Stores Building20000 sft1.80

7Weigh Bridge 500 sft0.06

8Security Barrack10000 sft1.00

9Staff Qtrs.10000 sft (2 storied building of 5000 sft each)1.05

10Officers Hostel13000 sft (4 storied building of 3250 sft each)1.56

11Dispensary5000 sft0.63

12Rainwater Harvesting Pond(29 x 15 x 7)0.85

13Fabrication & Erection of Structural BuildingsStructural steel for Support structure & Technological structure 3000 Ton X @ Rs.72,400 (Steel Rs.54,000, Fabrication & Erection Rs.18,400)21.72

14Sundry Items2.63

Total36.86

g.5) Equipment Details: The company intends to procure the major equipments as follows :

Major Plant & MachineriesProposed suppliersRs in cr.

1Raw material Handling systemon Turn key Basis

by EICS Technology Pvt. Ltd.67.37

2The Pelletisation Process plant

3In-plant dedusting system

4Electrical & Power distribution system

5 Pump House & Allied Systems

6Compressed Air systems

7Fire Fighting Systems

h) LOCATION : 1.Location: The Project is located in Champadihi village, Kotolposi, Joda in Keonjhar district of Odisha. The site is well connected with road and there are two railway sidings nearby. One is Parjanpur which is 7 km from plant site & the other is Nayagarh in Keonjhar which is 4 km away from the plant site. The project site is only 12 KM from NH-215. (from Panikoili to Rajamunda via Keonjhar, Joda , Koida etc., the iron ore mineral belt)

2.Land: The proposed project will be located on the land measuring Ac.8.40 dec which the Company has purchased from the private land owners. The land area is sufficient for the purpose including the consideration for the green belt.

i)Production Factors / Technical Aspects:

I. The Technology : Presently, there are two technologies for pelletisation, i.e.,

- Travel Grate-Rotary Kiln Annular Cooler technology (suitable for lower capacity usually up to 2 m tpa and

- Long Straight Moving Grate Technology (suitable for capacity above 2 m tpa)

The company proposes to use the Travel Grate Technology for its production process.

A grate-kiln-cooler system consists of three major components: a grate (e.g. traveling grate), a kiln (e.g. a rotary kiln) and a cooler (e.g. an annular cooler). The green balls, fed uniformly onto the grate, pass sequentially through the steps of drying and preheating. The preheating step hardens them to a strength great enough to endure the tumbling and heating that occur in the subsequent kiln step. The pellets, after being fired at an elevated temperature inside the kiln, are cooled in the following step to produce fired pellets.

The basic concept for designing a system including a grate kiln and cooler consists in allocating the thermal transfer, occurring at temperatures from ambient to 1300C or higher, to each process step so as not to cause any mechanical problems. The grate is partitioned into drying zones and preheating zones. In these zones, heat exchanges at relatively low temperatures occur for drying and preheating the green balls. Forced convection is applied to the heating for high thermal efficiency. The source of the heat for drying and preheating the pellets is not only the kiln off gas, but also recoup gas from the cooler, an arrangement that gives the plant as a whole high thermal efficiency.

A kiln with a relatively short length is connected with the grate at its inlet and with the cooler at its outlet. The kiln is lined with refractory materials for firing the preheated pellets discharged from the grate. The firing is conducted at an elevated temperature, and radiation heating is applied to fire the pellets efficiently and homogenously. The kiln is placed at a slight incline to the discharge and rotates at a low revolution. The pellets tumble inside the rotating kilns to be fired at a predetermined temperature and are subsequently transferred to the cooler. The tumbling action ensures the homogenous heating of all the pellets inside the kiln and consistently yields high quality.

An annular-shaped, horizontally rotating cooler decreases the temperature of the fired pellets to a level suitable for subsequent transportation. This step employs the forced convection of air blow for cooling. A part of the hot gas collected from the cooler is used as secondary air for fuel combustion in the kiln. The hot gas is also used for the process steps of drying and preheating the green balls, making the entire system thermally efficient.

A grate-kiln-cooler system has the following features:-

The system produces homogenous products, since the pellets are subject to tumbling action during the firing in the kiln.

Each of the steps of preheating, firing and cooling can be controlled either in conjunction with the others, or independently from the others, as needed. This enables heating the hot gas and pellets in the pattern most suitable for each process step and makes the process versatile with regard to variations in raw material quality and the production rate.

The ease of temperature control enables the homogenous production of self-fluxed pellets,

whose production requires strict temperature control.

Low fuel and power consumption can be achieved.

The grate, kiln and cooler of the system are independently designed and constructed according to their respective thermal loads. This reduces the frequency of replacing parts such as the refractory material and grate-plate, and consequently improves the running time of the plant.

Some of the plants running successfully using this technology are :

PlantLocationCapacity (MTPA)

AKeonjhar, Odisha1.20

B-do-0.60

CHospet, Karnataka2.40

DKoppal, Karnataka1.20

EJamshedpur1.20

II. The Process :

A pellet plant consists of two main parts: the material preparation area where the raw material entering the plant is processed to produce wet, so-called green pellets and the induration section where the green pellets are hardened to impart the physical and metallurgical properties required by the end-users of the pellets.

Low grade Iron Ore fines is converted to high grade Iron Ore of specific grade and sized in Beneficiation Plant. The high grade iron ore of specific size and grade is termed as Iron Ore concentrate. In this process of Pelletizing the major processes include Mixing of Iron ore concentrate with various additives viz binder, flux etc. in a mixer. In this process all the raw materials i.e. Iron Ore Concentrate with 8-9% moisture is taken in requisite proportion with the additives like Bentonite, Limestone & coke in some set amount taken together & mixed in the vertical mixer of suitable capacity which can mix the material both in macro & micro ways with excellent mixing result with reliability and high working rate. These mix material is transferred to the mix material bins above the Pelletizing Discs from where they are fed to the Pelletizing discs through Weigh Feeder in a limited amount for Balling which will prepare the Green Ball. These Green Balls will be conveyed through special conveying equipment for screening & distribution to the roller distributor where oversize & undersize will be screened & only the qualified size Green Balls shall be transferred to the Traveling Grate Machine. The green balls are moved through various furnace zones for completion of drying and preheating process for production of preheated pellets. In this moving machine the green balls are dried and preheated up to a temp of 1000C. This high temperature is maintained by creating heat in the traveling grate machine by recuperating heat from Annular Cooler. Further to this, the heat is supplemented by Oil fired burners mounted on the traveling grate machine by combustion of fuel (heavy fuel oil / light fuel oil / gas) in designed quantity. Dried and preheated pellets are transferred to rotary kiln for firing the pellets up to firing temperature of 1300-1350C, established as per test work. A big capacity single coal gas / oil fired burner imparts heat energy to the pellets to reach to firing temperature in the kiln. The fired pellets are then discharged to annular cooler for cooling. The firing temperature heat is recuperated efficiently through hot circulation in various zones of traveling grate machine. Cold air is pumped to the Annular Cooler where the cold air carries the heat from fired Pellets thereby cooling the Pellets and impart heat in the various zones of the furnace where the drying and preheating of Green Balls are carried out. After imparting of heat in various zones of furnace for various processes, the hot gas at much lesser temperature of 150C is passed through Dedusting system where the heavier dust particle are trapped and taken back to grinding section of the plant to be reused for production of Concentrate. The clean gas is sent out through a big fan to the stack to atmosphere. The cooled fired Pellets are collected in a surge bin at the end of the Annular Cooler and subsequently discharged to conveyor system to be transported to open stockpile through a mechanized stacker at the far end of the plant.

j)Lenders Independent engineer/ Insurance consultant/ Legal Consultant : We propose to engage the services of Chartered Engineer for estimation of work done during implementation period. The engineer will submit his report on quarterly basis.

k)Marketing & Selling Arrangements:

I. The countrys iron ore requirement is going to increase substantially (almost 340 MTPA by 2020) in line with domestic steel production requirement outlined in National Steel Policy. Limited reserves of high grade iron ore poses a great challenge in long term sustainability of Indian iron & steel industry. In order to ensure optimum use of existing iron ore resources with special emphasis on conservation of high grade ores, there is a pressing need to utilize existing low grade iron ores including slimes and dump fines which are stockpiled in millions of tons in different mine heads. The solution lies in beneficiation which will not only help in utilization of hitherto wasted low grade ores/ slimes by upgrading its iron (Fe) value, but also mitigate environmental hazard, arising out of large stockpiling of slimes/rejects. So the demand for Iron Pellets will always be there and the pelletisation plant will not face any market constraint.

II. Today, DRI Manufacturers are facing acute scarcity on the availability of lump ore. There are some DRI plants in India using Iron ore pellets as feedstock. The pellets, an intermediate saleable product, which can be stored for long periods and can be transported over long distances without deterioration in properties, are found to be best suited for Sponge Iron Plant operation. The cost of the iron bearing materials and the reductant is expected to be lower while using pellets as compared to that for lump ore. This, coupled with increased productivity of sponge iron plant strongly advocates the use of pellets for sponge iron manufacture.

III. Use of pellets in DRI plant results in overall improvements in its performance due to the following benefits:-

The rotary kiln productivity can increase by 20% without any changes in the design.

Specific consumption of coal will come down by 10%

Campaign life will increase by 50%

As there will be no accretion and no fused lump formation, the refractory repairing cost will be reduced by 50%.

Metallization will be better compared to lump ore.

There will be much less generation of fines compared to lump ore uses.

Maintenance and electricity cost will come down by 50%, as there will be no need for crushing and screening of iron ore lumps.

There are no losses of handling iron ore, as pellets will not break during transportation or handling.

There will be better working environment.

IV. Also there is a huge potential in the blast furnace area where pellets up to 30% can be used along with use of sinter.

V. Moreover, export duty on iron ore fines and lumps has been increased to 30 percent from the existing 20 percent w.e.f. December 2011 thereby discouraging iron ore exports. Also there is no export duty on iron ore pellets. To give a boost to the pellet industry, the import duty on plant and machinery for iron ore beneficiation plants and pellet plants has been reduced by 5% i.e. from 7.5% to 2.5%.

VI. From the foregoing it is seen that there are a lot of incentives to set up new pellet plants.

l)

Utilities:

a) Raw material :.

The annual requirements of iron ore fines for the pellet plant is 324,000 tpa. XYZ Ltd. has gone for agreements with the following four parties for procurement of iron ore fines for the pellet plant.

Kamaljeet Singh Ahluwalia

Ramesh Prasad Sao

Mesco Steel

Kalinga Mining Corporation

Kamaljeet Singh Ahluwalia has confirmed that they will be supplying iron ore fines of grade Fe 63% (1).

TEV report considers that the requirement of iron ore fines for the pellet plant can be met In line with agreements with the above parties for the supply of iron ore fines.

Bentonite, coal and limestone are required comparatively less and easily available in Odisha and Rajasthan. The report states that there should be no difficulty in their procurement.

b) Power The requirement of power for the proposed pellet plant is about 3.6 MW. The power will be drawn from the nearby 33 KV line which is passing about 5.00 KM away from the site, by LILO arrangement. For that the company has already approached OPTCL and NESCO authorities. Further the company will have the DG sets to meet the emergency power requirement.

c) Water For the project the water requirement is about 15 CuM / Hr. For the purpose, the company has already dug two bore wells of length 185 feet and 215 feet from which the flow of water is about 10,000 Ltrs / Hr & 15,000 Ltrs / Hr respectively. This will be sufficient for the present requirement.

More over, river Baitarani passes adjacent to the plant site. The company has already applied to the authorities for usage of river water if required.

d) Manpower The manpower estimates have been based on production technologies proposed, type of requirement envisaged, level of mechanization and automation, the layout of the plant, the number of operating shifts for the various plant units, etc. Both Skilled & Unskilled workers are locally available. Other professional employees are also available in the state as well as in the neighboring states

e) Logistics The plant site is well connected by road. There are two railway siding nearby. One is Parjanpur which is 7Km from plant site & the other is Nayagarh in Keonjhar which is 4 km away from the plant site.

m)

Approvals and Clearances :

ParticularsApproving AuthorityStatus

For setting up of Pellet PlantGovt of OdishaIPICOL (the nodal agency of Govt. of Odisha) has given clearance on dt.07.03.2011 vide their letter No. SJ/ SLWCA-217(2)/5210 after the approval of the project in 37th SLSWCA meeting held on 04.02.2011.

Power connectionNESCOThe Company has approached NESCO for the power connection for the plant which will be available before commissioning. (assurance received from NESCO) However, the construction power of 95 KW is already in place to the site (provided by NESCO)

Clearance from the Gram Panchayat for establishing the unitGram PanchayatAlready Received

NOC from pollution control boardOPCBThe Company has got the clearance from the State Pollution Control Board of Odisha to establish this Pellet Plant vide their letter No.11303/ Ind-II-NOC-5311.

n)Implementation Schedule:

ParticularsDate of Commencement

Expected date of completion

a)Acquisition of LandAcquired-

b)Development of LandCompleted-

c)Civil Works for Factory Building Machinery Administrative BuildingJanuary,2013October, 2015

d)Plant & MachinerySept, 2013Feb,2015

e)Arrangement for power Under process with DISCOMFebruary, 2016

f)Arrangement for waterCompleted

g)Erection of equipmentMarch,2014Dec,2015

h)Trial RunsMarch, 2016

i)Commercial ProductionApril,2016

The implementation will be on Turn key basis by EICS Technology Pvt. Ltd. The salient features of the Vendor and Turn key Agreement are as follows :

I. The Vendor (EICS)

EICS is in existence since 1997 and headquartered at Bilaspur with Corporate Office in Kolkata

It takes up projects relating to Beneficiation, Pelletisation, Sintering and Tunnel Kiln

So far it has executed 150 projects and 25 projects are under execution at present

Its client in Pellet plant includes

i) Ardent Steels, Keonjhar, Odisha (commissioned)

ii) Arya Iron & Steels, Keonjhar, Odisha (commissioned)

iii) MSP Steels Ltd., Raigarh (commissioned)

iv) MSP Steels, Jharsuguda (commissioned)

v) Jaimata International, Kolhapur (under execution)

vi) Vikash Metals, Purulia (under execution)

II. The Turn Key Agreement : (Agreement is dated 01.10.2012)

EICS Obligation :

i) Technology design and Engineering for the project including plant layout and drawings

ii) Implementation schedule and review thereof

iii) Arrange for supply and erection of the equipments.

iv) Submit monthly progress report to the Company

v) Period of execution will be 18 months from 1st concrete work at site (Concrete work has started from January, 2013) We have considered it at 36 months on a realistic basis

Clients Obligation :

i) Provide land, infrastructure access roads, water and power

ii) Obtain all Govt. approvals and license required for the project

iii) Provide for taxes and duties

iv) Provide project office, pantry and labour hutments

Payment Terms (Procurement) :

i) 30% of total Order value as Advance along with Agreement

ii) 50% of total Order value against proforma invoice before dispatch of document

iii) 10% of total order value before equipment reaching at site

iv) 5% of total order value before Cold trial

v) Balance 5% of total order value after successful commissioning

Payment Terms (Services) :

i) 30% of total Order value as along with Order

ii) 65% of total Order value will be paid prorate every month till end of project

iii) Balance 5% of total order value after successful commissioning

o) Commercial viability:

Year201720182019202020212022

Net sales122.99154.58176.87178.91179.11179.31

OP30.5950.3962.5665.8667.3375.39

PBT14.8136.3451.0956.9761.0371.73

PAT10.2224.7234.6338.5641.2748.48

Cash Accruals28.3140.4248.2550.4151.5757.44

PBDIT48.7666.1776.2877.8077.7484.53

DSCR

Particulars201720182019202020212022TOTAL

Capacity Utilisation60%70%80%80%80%80%

Sales122.99154.59176.88178.91179.11179.31991.79

Net Profit10.2224.7234.6338.5641.2748.48197.89

Cash Accrual28.3140.4248.2550.4151.5757.44276.40

Interest - TL13.3111.599.016.443.861.2945.50

TOTAL 41.6252.0157.2756.8555.4358.73321.90

TL RepaymentsExisting0.00

Proposed6.0018.8018.8018.8018.8018.80100.00

Interest13.3111.599.016.443.861.2945.50

TOTAL REPAYMENT 19.31 30.39 27.81 25.24 22.66 20.09 145.50

Gross DSCR 2.16 1.71 2.06 2.25 2.45 2.92

Ave.Gross DSCR2.21

Net DSCR 4.72 2.15 2.57 2.68 2.74 3.06

Comments on DSCR (in brief) : The Average Gross DSCR at 2.21 indicates a comfortable position for meeting maturing long-term repayment obligation by the Company.

p)Disbursement Schedule : (in cr.)

SBI

(25%)Allahabad Bank (20%)Central Bank of India (20%)IOB

(20%)Union Bank of India (15%)Total

Qr. ending Jun 137.155.735.735.734.3028.64

Qr. ending Sep 130.050.050.050.050.030.23

Qr. ending Dec 130.050.050.050.050.030.23

Qr. ending Mar 140.050.050.050.050.030.23

Qr. ending Jun 140.050.050.050.050.030.23

Qr. ending Sep 140.050.050.050.050.030.23

Qr. ending Dec 140.050.050.050.050.030.23

Qr. ending Mar 1511.509.209.209.206.9146.01

Qr. ending Jun 152.351.881.881.881.409.39

Qr. ending Sep 150.050.050.050.050.030.23

Qr. ending Dec 150.050.050.050.050.030.23

Qr. ending Mar 162.281.821.821.821.389.12

Qr. ending Jun 161.251.001.001.000.755.00

Total25.0020.0020.0020.0015.00100.00

q) Repayment Schedule :

In 23 quarterly installments, commencing from quarter ending Sep, 2016,

First 3 installments of Rs.2.00 cr each

Next 20 installments of Rs.4.70 cr each.

Interest to be paid as and when due. However, interest moratorium will be up to commencement of commercial production OR till March, 2016, whichever is earlier.r) Security Margin

As on 31.03.201420152016201720182019202020212022

WDV of Fixed Assets45.96117.21143.05129.96114.26100.6388.7978.4969.53

TL O/S29.3376.0395.0094.0075.2056.4037.6018.800.00

Margin available16.6341.1848.0535.9639.0644.2351.1959.6969.53

%ge of margin36.1835.1333.5927.6734.1943.9557.6576.05100.00

Average Margin ( % )49.38

Minimum Security Margin: 27.67%

Comments on security margin: (Mitigations in case of low levels of minimum security margin or DSCR): The average security margin of 49.38% with minimum of 27.67% is considered acceptable.

s)

Break-even analysis :

Year Ending201720182019202020212022Average

Installed Capacity p.a. (in lac MT)3.00 3.00 3.00 3.00 3.00 3.00 3.00

Production p.a. (in MT)1.79 2.09 2.39 2.39 2.39 2.39 2.24

Capacity utilisation60%70%80%80%80%80%0.75

A. Sales(after stock adjustment)125.14154.82177.11178.87179.08186.06166.85

B. Variable Cost - Raw materials 52.0960.7869.4569.4869.5269.5565.14

Consumables6.277.318.368.368.368.367.84

Total (B)58.3668.0977.8177.8477.8777.9172.98

C. Contribution66.7986.7399.30101.03101.21108.1593.87

D. Fixed Cost- Power & Fuel11.6613.6115.5515.5615.5815.6014.59

Wages & Salaries1.571.651.731.821.912.011.78

Repairs and maintenance3.343.493.643.743.833.943.66

Depreciation18.0915.6913.6311.8410.308.9613.09

Sales/Adm expenses1.531.912.182.222.242.262.06

Intt on TL/CC15.8614.1411.568.996.413.8410.13

Total (D)52.0450.4948.2944.1740.2836.6045.31

E. Oprating Profit (C-D)14.7436.2451.0156.8660.9371.5548.55

BE Sales97.5190.1386.1378.2071.2762.9781.04

BE Sales (Cash)63.6262.1161.8257.2453.0547.5657.57

BE as% of sales78%58%49%44%40%34%50%

BE % at installed capacity47%41%39%35%32%27%37%

Cash BE at installed capacity30%28%28%25%24%20%0.26

Margin of safety22%42%51%56%60%66%0.50

Comments: The Project has an average BE point of 50% of its sales and 37% of installed capacity. The position is considered satisfactory.

t)

Sensitivity Analysis :

Adverse fluctuation by Adverse fluctuation by

Avg. yr. 59.00%46.00%26.00%60.00%47.00%27.00%

levelinin Salein Sale inin Salein Sale

VCvolumePriceVCvolumePrice

1.Sale volume(lac MT)2.002.001.002.002.001.002.00

2.Sale Amount166.85166.8590.10123.47166.8588.43121.80

3.Variable Cost72.98116.0439.4172.98116.7738.6872.98

4.Contribution (2-3)93.8750.8150.6950.4950.0849.7548.82

5. Fixed Cost45.3145.3145.3145.3145.3145.3145.31

6. Operating Profit48.555.505.385.174.774.443.51

Impact on DSCR

Operating Profit48.555.505.385.174.774.443.51

Less Tax @32.45%15.781.791.751.681.551.441.14

PAT32.773.713.633.493.222.992.37

Add Depreciation13.0913.0913.0913.0913.0913.0913.09

Add Intt on TL4.524.524.524.524.524.524.52

Cash Accrual50.3821.3221.2421.1020.8320.6019.97

TL repayment16.6716.6716.6716.6716.6716.6716.67

Intt. On TL4.524.524.524.524.524.524.52

Total repayment21.1921.1921.1921.1921.1921.1921.19

Gross DSCR2.381.011.001.000.980.970.94

Comments: The Projects resilience is high in all the factors, i.e., it will be able to withstand adverse impacts stemming from uncertainties up to 59% in variable cost, 46% in sales volume and 26% in sale price. The position is considered satisfactory.

u) Overall viability and acceptability of the proposal : The project is commercially viable. Cash accrual is estimated to be adequate to service the long-term repayment obligations. The break-even level and resilience of the company to adverse variation in selling price/ sale volume/ variable cost are acceptable. We, therefore, recommend for sanction of term loan of Rs. 100.00 cr. to the company.

Annexure

TEV Study - Recommendations

(by R Singh & Associates Pvt. Ltd. RSA)

Raw material availability - The major raw material required for the pellet plant is iron ore fines. These are readily available in the region from nearby mines. Although XYZ Ltd. does not have its own captive iron ore mines, it has obtained comfort letters from different iron ore mine owners namely KJS Ahluwalia, RP Sao, Mesco Steel, Kalinga Mining for supply of this raw material. The requirement of other raw materials required for pellet making i.e. bentonite, limestone etc is minimal and can be sourced from open market easily. Against an estimated annual iron-ore production of 208-million tons in India, consumption by the domestic steel industry was about 45% of lumps and sinter against a global average of domestic iron-ore consumption of between 15% and 20%, with most fines exported since these could not be directly used for iron making in the absence of sufficient capacities for agglomeration through beneficiation and pelletisation. RSA feels there should be no difficulty in the procurement of required raw materials.

Competency of the Promoter - The promoter presently is involved in iron ore trading and has a license for the same. As such the field is not new and over the years sufficient experience has been acquired which is expected to be brought forth while implementing this pellet plant. The entrepreneurial streak of promoter can be seen from his track record in setting up and running following companies

E Ltd. F Ltd.

G Ltd. H Ltd.

I Ltd.

Marketability - No difficulty is foreseen in marketability of pellets to be produced from the plant.

Infrastructure - Considering the locational advantages of the selected project site as well as the overall land, power and water availability, the site is considered suitable for proposed pellet plant.

Technology to be used - Currently there are two main technologies prevalent for pellet making, i.e. i) Straight Grate Technology normally recommended for larger capacities and ii) Grate Kiln Technology mostly used for smaller capacities. The Chinese technology under consideration is same as the Grate Kiln technology and quite well established. The Indian government has invited Chinese resource and steel companies to set up iron-ore pelletisation units in order to take advantage of the recently announced fiscal incentives to add value to the mineral. A memorandum of understanding has been signed between the Chinese Iron and Steel Association and the Steel Authority of India Limited (SAIL) to facilitate and promote the setting-up of pelletisation plants in India by Chinese steel producers. Chinese steel companies could take advantage of zero duty on the export of iron-ore pellets from India by setting up pelletisation assets in the country, instead of importing iron-ore fines which has an incidence of 30% export tax. India, with 25-billion tons of iron-ore reserves, would continue to be an exporting country, but investments by Chinese steel companies in pelletisation plants would be a win-win situation since the latter would secure raw materials at lower prices and at the same time ensure greater domestic value addition to the mineral. China imports about 80-million tons a year of iron-ore from India. In March 2012, the government announced a reduction of import duty on plant and machinery for beneficiation and pelletisation, to 2.5%, from 7.5%,

The specifications - The specifications in the offers are not detailed. These offers have been received against letters from XYZ Ltd. for 0.3 m tpa pellet plant. The offers need certain clarifications and subsequently to be evaluated technically to bring at par. Some salient points/deficiencies noticed in the specifications given in the offers are given below for ready reference

Belt conveyor for carrying filter discharge needs careful selection as it has to carry full load of filter discharge in a shorter time and it idles for the rest of the time.

For undersize roller screen, roller numbers given is 48. It needs to be checked properly

For rotary kiln, the range of RPM, given is wider and needs a re-look

For annular cooler, zone distribution and exhaust temperature considered for each zone need to be indicated

However, there is no risk foreseen as of now. The required equipment specifications will need to be suitably finalized at the time of firming up the orders on prospective suppliers

(The company has discussed these issues with its Turn key provider for necessary modification)

Layout - RSA has reviewed the plant layout and acquired land area appears to be adequate for the proposed 0.3 m tpa pellet plant complex. Space for future installation to be planned and earmarked.

Environment

It will be ensured that the total area of the green belt is minimum 33% of the total plant area, as per the statutory norms. (at present, proposed green belt is Ac. 2.20 dec and the plant area is Ac. 4.50 dec, i.e., forming 33% of the plant area)

Rain water harvesting may be adopted in the plant. (proposed in the project)

Manpower

As per RSA the total manpower of 93 is considered adequate; 67 for pellet plant and 26 for producer gas plant.

Project Implementation Schedule

EPC (Turn key) mode of project implementation is considered acceptable

The total project implementation time frame of 18 months appears achievable. We have considered it at 36 months on a realistic basis.

Approvals / Clearances

The client to ensure that the required balance approvals and clearances as applicable are obtained in time. (as on date, all approvals for the project are in place except power connection which is under process with DISCOM. However, it has received the approval for power connection for implementation of the project)

Project cost estimates

The project cost estimate indicated in this report is considered reasonable and without much risk of under financing OR over financing.

Owners engineer

For a successful EPC mode of project execution, it is recommended to engage a suitable consultant to take care of the functions of Owners engineer as well as project management. (the company has engaged the services of Project & Engineering Consultancy of Keonjhar for supervision of the work. Brief details of the Consultant are furnished below.

The Firm is led by Er. S K Khatoi who has vast engineering experience of 32 years. He is a graduate Mechanical Engineer from NIT, Rourkela, M. Tech from IIT, Kharagpur & pursuing his Ph D. in IIT Kharagpur on composite Pellet & its Reduction in different Process. He started his career in Mecon as Design Engineer, then also worked for IOCL in Design Section. He is one of the Founder father of first Commercial Sponge Iron Plant in India, that is Orissa Sponge Iron & Steel Plant, Keonjhar, Odisha. Under his direct supervision number of DRI Plants, Mini Steel Plants, Power Plants, Iron Ore Crushing, Sizing, Beneficiation & Pelletisation Plant were designed & Erected. He is a recognized Valuer & Loss Asseser also. He has successfully implemented various iron & steel projects mostly in Odisha, Jharkhand and Chhatisgarh and pellet projects of Rathi Steel & Power Ltd. and Sree Metaliks Ltd. in Keonjhar.

Additional pellet plant capacity

India needs to create an additional 50 m tpa of iron ore pelletisation capacity, up from the current levels of about 20 m tpa, to meet the targeted 180 m tpa of domestic steel production by year 2019 with sustainable iron ore mining, according to a report prepared by the Indian Bureau of Mines (IBM).

According to Indias new National Steel Policy, with all future steel capacity coming through pellet plants and coal based DRI units, the requirement of pellets would be very high. IBM has assumed that if the entire capacity expansion by ISPs uses a minimum of 15% pellets for their blast furnaces, the projected pellet requirement would be an additional 25 m tpa.

In addition, if all new coal based DRI units use 50% of their requirement of raw materials in pellet form, as replacement for high grade lumps, the demand for pellets would be another additional 25 m tpa. The report has been submitted to Indias ministry of steel as a background paper for proposed fiscal incentives for miners and steel producers to set up new iron ore pelletisation capacities in the country. In this regard, IBM has recommended setting up of pelletisation capacities by all ISPs, mandatory total beneficiation of ore below 45% Fe content and increased usage of pellets by DRI units and gradual discontinuation of use of lumps by these units.

Prevailing prices

In the techno financial model purchase prices of various raw materials as well sale price of the product i.e. pellet have been considered based on prevailing market conditions.

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