Aspects of Project Appraisal

PROJECT MANAGEMENT

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Types of Finance

• Prime Conduits of Finance • Working Capital• Trade Finance - LTR , LIM, IBP, EBP, • Term Loan • Project Loan

• Other Conduits of Finance Lease Finance, House Building, Short Term Loan, Non-

Funded Finance, etc

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Managerial Aspect• Sincerity• Honesty• Integrity• Educational Background• Experience of the Borrower• Succession and • Team Work/ Ability of the Management to

Run the Project Efficiently.

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Case -1 : Sufi Mohammed Mizanur RahmanEstablished in 1970s

Attributes Status Sincerity Tax File Honesty Simple life style and no extravagancy

Integrity To fill up the vacuum of entrepreneur after liberation

Educational Background HSC in 1965 and Graduating in Banking Diploma

Experience of the Borrower Bankers , Traders , Manufacturers and A variety of Business (18 Units in its Groups )

Succession ---

Team Work/ Ability of the management to run the project efficiently.

Motto/ Slogans ( Service Above Self )

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JMI Group ,Md. Abdul RazzaqEstablishment Year : 1999

Sincerity Serving Society Honesty Simple life style and no extravagancyIntegrity Giving due importance to perseverance and value

of time/To fill up the vacuum in the medical and allied Fields (Syrings, Vaccine . Hollow Block ,etc)

Educational Background Abdur Razzaque , M.A. in Economics from the University of Chittagong

Experience of the Borrower Twelve (12) years working experience at Japan in a Disposable Syringe Factory/ Technical know-how, practical experience in machine installation, process flow, etc.

Succession --- Team Work/ Ability of the management to run the project efficiently.

Innovative Products at Affordable Costs

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Organizational Aspect

• Sole Proprietorship or • Partnership, • Private limited, • Public Limited Company/ Listed

With Stock Exchanges .

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Organizational Structure Private Limited Company + Public Limited

Company + Listed with DSE

• PHP Glass = Public Limited Company/ Listed • JMI Syringes and Medical Services Ltd = Public

Limited Company / Listed .

Technical Aspect• Location of the Business (Rice Bran)• Land and Building (Valuation, Responsible

Person)• Machineries Equipment (Name , Brand ,

Origin and Number , Local, Imported • Power, Fuel, Water, Materials, etc.

Technical Aspects

• Training • Spare Parts + Machines• Capacity (Product wise )• Building Code• Labor Intensive and Capital Intensive • Generator • Solar System • Availability of Raw materials (Origin- local+

Imported)

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Marketing Aspect• Aggregate Demand of Proposed Product / Service in

the Future• Possible Market Share of the Project Under Appraisal . • Business Outlook + Industry Growth + Entry and Exit

Barrier • Projected Sales Volume• Scope of Market Expansion• Cross Border Risk • Dominant Player/ Possible Threat of Competition

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Financial Aspect : Working Capital

• Assessment of Working Capital Finance • Utilization Limit • Credit Risk Grading Score sheet

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Assessment of Working Capital Finance

• Raw Materials (Imported +Local )• Working in Process • Finished Goods • Stores and Spares • Receivables • Cash • (Sundry Credits )

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Utilization Limit

Norm : 60 % and Above is expected

Formula : Average Debit Summation/ Average Credit Summation * 100

Limit

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Credit Risk Grading Score sheet

• Financial Risk • Business Risk• Management Risk • Security Risk• Relationship Risk • Environmental, Social and Governance

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Term Loan / Project Loan

• Cost of the Project and Means of Financing • Ratio Analysis • Capital Budgeting• Break Even Point • CRGS

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Cost of the Project and Means of Financing

• Cost of the Project : Local Currency and Foreign Currency (Appraisal, Page -3 )

• Means of Financing : Equity and Debt ( LC and FC) (Loan and Equity )

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Ratio Analysis (Appraisal –Page -2)

• Current Ratio• Quick Ratio• Profitability Ratio• Leverage / Debt Equity Ratio• Fixed Asset Coverage Ratio• Coverage Ratio• Debt Service Coverage Ratio

Capital Budgeting (Page -2 ) Techniques Decision Making

Process Pay Back Period Less is better Net Present Value PositiveInternal Rate of Return (IRR) More than Cost of

Capital Modified Internal Rate of Return (MIRR)

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Economic Rate of Return Do Important Issues : Cash Flow , Cost of Capital and Capacity

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Sensitivity Analysis

• Assuming Sales will be decreased by 5%• Assuming production Costs Will be increased

by 5%.

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Break Even Point (Page -2)

• BEP-Sales • Margin of Safety • BEP-Assumed Capacity

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Economic Aspect (Page 21 )

• Contribution to GDP, • Creation of Employment,• Foreign Currency Savings/ Earnings • Capital Investment • Indirect Benefit of the Society

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Thanks