report on project appraisal

5/22/2018 Report on Project appraisal

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1.INTRODUCTION1.1.IMPORTANCE OF THE STUDYThe object and, therefore, the importance of a project appraisal is making an analysis to see

whether the project is viable. It is vital to know whether a project is technically feasible andwhether it is going to be an economic liability or not.

A project appraisal is an important part of any project and should be taken seriously because

a lot rests on it. The effects of a project appraisal are long reaching and have very definite

long term effects because of the capital investment that is always required in any project.

Once a decision has been made to go ahead with a project, it is irreversible. Even if, through

some catastrophic event, the project has to come to an unpredicted halt, the investment has

been made so all could be lost. These high expenditures can be critical, not just for that

particular project but for the health and survival of the entire business.

Making an effective project appraisal is no easy task because there are can often be

unforeseen circumstances (though a good project manager should be able to cover as many

eventualities as possible). It is also not easy to measure all costs and the potential benefits

of a project. This high degree of uncertainty could undermine the confidence of a project

so it is vital that the appraisal is as thorough as it possibly can be.

It is also important when it comes to a project appraisal to be realistic about the amount of

capital that is going to be tied up, and the length of time that the project is going to take. If

this is not done, it is possible that the business may suffer real hardship because it was

unprepared for the financial constraints placed upon it.

1.2.OBJECTIVE OF THE STUDYEvery work has some specific objective. The main objective of this report is dividing in

two categories:-

Broad Objective

Specific Objective

Firstly to identify the overall scenario of the project appraisal and management at IDBI. Secondly to develop an analysis on the process of project appraisal, analysis of the

projects & its success trend.

1.3.LIMITATION OF THE STUDYThe following limitations are apparent in collecting data and prepare the report-

Time is the first limitation, because the given time is not sufficient to prepare an

assignment covering all the fact to develop a thriving critical analysis on project

appraisal & management.

Another limitation of this report is the lacking information.


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2 BANKING INDUSTRY IN INDIAThe story of Indian coinage itself is very vast and fascinating, and also throw stremendous light

on the various aspects of life during different periods. The Rig Veda speaks only gold, silver

copper and bronze and the later Vedic texts also mention tin, lead, iron and silver. Recentlyiron coins were found in very early levels at Attranji Kheri (U.P.) and Pandu Rajar Dhibi

(Bengal). A money economy existed in India since the days of Buddha.

In ancient India during the Maurya dynasty (321 to 185 BC), an instrument called adesha was

in use, which was an order on a banker desiring him to pay the money of the note to a third

person, which corresponds to the definition of a bill of exchange as we understand it today.

During the Buddhist period, there was considerable use of these instruments. Merchants in

large towns gave letters of credit to one another.

Trade guilds acted as bankers, both receiving deposits and issuing loans. The larger temples

served as bankers and in the south the village communities economically advanced loans to

peasants. There were many professional bankers and moneylenders like the sethi, the word

literally means chief. It has survived in the North India as seth. Small purchases were

regularly paid for in cowry shells (varataka), which remained the chief currency of the poor in

many parts of India. Indigenous banking grew up in the form of rural money lending with

certain individuals using their private funds for this purpose. The scriptures singled out the

vaishyas as the principal bankers. The earliest form of Indian Bill of Exchange was called

Hundi. Exports and import were regulated by barter system.

Kautilyas Arthasastra mentions about a currency known as panas and even fines paid to courts

were made by panas. E. B. Havell in his work: The History of Aryas Rule in India says that

Muhammad Tughlaq issued copper coin as counters and by an imperial decree made them passat the value of gold and silver. The people paid their tribute in copper instead of gold, and they

bought all the necessaries and luxuries they desired in the same coin.

However, the Sultans tokens were not accepted in counties in which his decree did not run.

Soon the whole external trade of Hindustan come to a standstill. When as last the copper tankas

had become more worthless than clods, the Sultan in a rage repealed his edict and proclaimed

that the treasury would exchange gold coin for his copper ones. As a result of this thousands

of men from various quarters who possessed thousands of these copper coins bought them to

the treasury and received in exchange gold tankas. The origin of the word "rupee" is found in

theSanskrit rpya "shaped; stamped, impressed; coin" and also from the Sanskrit word "rupa"meaning silver. The standardisation of currency unit as Rupee in largely due to Sher Shah in

1542.

The English traders that came to India in the 17th century could not make much use of the

indigenous bankers, owing to their ignorance of the language as well the inexperience

indigenous people of the European trade. Therefore, the English Agency Houses in Calcutta

and Bombay began to conduct banking business, besides their commercial business, based on

unlimited liability. The Europeans with aptitude of commercial pursuit, who resigned from

civil and military services, organized these agency houses.

A type of business organization recognizable as managing agency took form in a period from

1834 to 1847. The primary concern of these agency houses was trade, but they branched out

into banking as aside line to facilitate the operations of their main business. The English agency


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houses, that began to serve as bankers to the East India Company had no capital of their own,

and depended on deposits for their funds. They financed movements of crops, issued paper

money and established joint stock banks. Earliest of these was Hindusthan Bank, established

by one of the agency houses in Calcutta in 1770.

Banking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;

both are now defunct. The oldest bank in existence in India is the State Bank of India, which

originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank

of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay

and the Bank of Madras, all three of which were established under charters from the British

East India Company. For many years the Presidency banks acted as quasi-central banks, as did

their successors. The three banks merged in 1921 to form the Imperial Bank of India, which,

upon India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a

consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and

still functioning today, is the oldest Joint Stock bank in India.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself

in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade

of the British Empire, and so became a banking centre.

The next was the Punjab National Bank, established in Lahore in 1895, which has survived to

the present and is now one of the largest banks in India. The presidency banks dominated

banking in India but there were also some exchange banks and a number of Indian joint stockbanks. All these banks operated in different segments of the economy. The exchange banks,

mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks

were generally undercapitalized and lacked the experience and maturity to compete with the

presidency and exchange banks.

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi

movement. The Swadeshi movement inspired local businessmen and political figures to found

banks of and for the Indian community. A number of banks established then have survived to

the present such asBank of India,Corporation Bank, Indian Bank,Bank of Baroda,Canara

Bank andCentral Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks inDakshina

Kannada andUdupi district which were unified earlier and known by the name South Canara(

South Kanara ) district. Four nationalised banks started in this district and also a leading private

sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

During theFirst World War (19141918) through the end of theSecond World War (1939

1945), and two years thereafter until the independence of India were challenging for Indian

banking. The years of the First World War were turbulent, and it took its toll with banks simply

collapsing despite the Indian economy gaining indirect boost due to war-related economic
http://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Bank_of_India


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activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following

table:

YearsNumber of banks

that failed

Authorised Capital

( Lakhs)

Paid-up Capital

( Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Table No. 1

2.1POST-INDEPENDENCEThepartition of India in 1947 adversely impacted the economies ofPunjab andWest Bengal,

paralysing banking activities for months. India'sindependence marked the end of a regime of

theLaissez-faire for the Indian banking. TheGovernment of India initiated measures to play

an active role in the economic life of the nation, and the Industrial Policy Resolution adopted

by the government in 1948 envisaged amixed economy.This resulted into greater involvementof the state in different segments of the economy including banking and finance. The major

steps to regulate banking included:

The Reserve Bank of India, India's central banking authority, was established in April1935, but was nationalised on 1 January 1949 under the terms of the Reserve Bank of India

(Transfer to Public Ownership) Act, 1948 (RBI, 2005b).[6]

In 1949, the Banking Regulation Act was enacted which empowered theReserve Bank ofIndia (RBI) "to regulate, control, and inspect the banks in India".

The Banking Regulation Act also provided that no new bank or branch of an existing bankcould be opened without a license from the RBI, and no two banks could have commondirectors.

2.2NATIONALIZATION PROCESSNationalization of banks in India was an important phenomenon. Despite the provisions,

control and regulations of Reserve Bank of India, banks in India except the State Bank of India

or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian

banking industry had become an important tool to facilitate the development of the Indian

economy. At the same time, it had emerged as a large employer, and a debate had ensued about

the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India,

expressed the intention of the Government of India in the annual conference of the All India
http://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-6http://en.wikipedia.org/wiki/Banking_in_India#cite_note-6http://en.wikipedia.org/wiki/Banking_in_India#cite_note-6http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-6http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/Partition_of_India


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Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The meeting

received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance and

nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969.

Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies(Acquisition and Transfer of

Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated

reason for the nationalization was to give the government more control of credit delivery. With

the second dose of nationalization, the Government of India controlled around 91% of the

banking business of India. Later on, in the year 1993, the government merged New Bank of

India with Punjab National Bank. It was the only merger between nationalized banks and

resulted in the reduction of the number of nationalized banks from 20 to 19. Currently there

are 27 nationalized commercial banks.

2.3LIBERALIZATIONIn the early 1990s, the then government embarked on a policy of liberalization, licensing a

small number of private banks. These came to be known asNew Generation tech-savvy banks,

and included Global Trust Bank (the first of such new generation banks to be set up), which

later amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis

Bank),ICICI Bank andHDFC Bank.This move, along with the rapid growth in theeconomy

of India, revitalised the banking sector in India, which has seen rapid growth with strong

contribution from all the three sectors of banks, namely, government banks, private banks and

foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in the norms

for foreign direct investment, where all foreign investors in banks may be given voting rights

which could exceed the present cap of 10% at present. It has gone up to 74% with some

restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used

to the 464 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The new wave

ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this

led to the retail boom in India. People demanded more from their banks and received more.
http://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Economic_liberalisation_in_India


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MAJOR PLAYERS:-

The major players in the public sector according to market capitalization are

(As on 18THJUNE, 2014)

NAME Last Price % Chg52 wk

High

52 wk

Low

Market Cap

(Rs. cr)

SBI 2,638.15 -0.61 2,833.85 1,452.90 196,957.18

Bank of Baroda 858.05 -2.05 1,009.00 429.25 36,954.41

PNB 977.20 -0.33 1,068.00 402.20 35,381.47

Bank of India 290.75 -3.10 356.75 126.95 23,081.48

Canara Bank 441.30 -2.30 498.00 189.90 20,355.35

IDBI Bank 105.15 -2.32 116.50 52.30 16,865.42

Union Bank 230.85 -2.47 259.60 97.10 14,550.62

Central Bank 77.90 -1.70 88.85 43.05 10,519.92

UCO Bank 102.40 -2.98 115.75 46.00 10,390.62

Syndicate Bank 159.20 -1.49 177.85 61.05 9,943.39

IOB 79.80 -3.51 89.90 37.15 9,858.08

Oriental Bank 315.90 -3.56 377.30 121.40 9,472.22

Indian Bank 177.05 0.91 198.90 60.50 8,230.14

Allahabad Bank 133.20 -4.28 148.45 64.90 7,254.20

Corporation Bk 400.00 0.16 417.50 220.10 6,701.68

Andhra Bank 97.35 -2.99 110.00 47.30 5,739.90

Vijaya Bank 53.35 -2.91 58.80 33.40 4,583.40

Dena Bank 84.05 -0.65 94.40 41.85 4,520.35

Bank of Mah 47.85 -2.05 58.00 29.10 4,015.07

State B Bikaner 546.40 -0.66 595.90 281.90 3,824.80

State Bk Travan 611.00 0.02 650.00 364.50 3,620.39

State Bk Mysore 565.00 -0.49 604.80 368.00 2,712.76

United Bank 45.70 -1.40 55.15 23.40 2,535.20

Punjab & Sind 72.20 -1.57 83.90 36.75 1,987.55

UTI - Gold 2530.17 0.00 3050.00 2375.00 351.24

Table No. 2

Sources:http://www.moneycontrol.com/stocks/top-companies-in-india/total-assets-bse/banks-

public-sector.html
http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankindia/SBIhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofbaroda/BOBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabnationalbank/PNB05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofindia/BOIhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/canarabank/CB06http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/idbibank/IDB05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/unionbankindia/UBI01http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/centralbankindia/CBO01http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/ucobank/UCOhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/syndicatebank/SB9http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/indianoverseasbank/IOBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/orientalbankcommerce/OBChttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/indianbank/IB04http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/allahabadbank/AB15http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/corporationbank/CBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/andhrabank/AB14http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/vijayabank/VB03http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/denabank/DBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankmaharashtra/BM05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankbikanerjaipur/SBB02http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebanktravancore/SBThttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankmysore/SBMhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/unitedbankindia/UBOhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabsindbank/PSBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabsindbank/PSBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/unitedbankindia/UBOhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankmysore/SBMhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebanktravancore/SBThttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankbikanerjaipur/SBB02http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankmaharashtra/BM05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/denabank/DBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/vijayabank/VB03http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/andhrabank/AB14http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/corporationbank/CBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/allahabadbank/AB15http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/indianbank/IB04http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/orientalbankcommerce/OBChttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/indianoverseasbank/IOBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/syndicatebank/SB9http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/ucobank/UCOhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/centralbankindia/CBO01http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/unionbankindia/UBI01http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/idbibank/IDB05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/canarabank/CB06http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofindia/BOIhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabnationalbank/PNB05http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofbaroda/BOBhttp://www.moneycontrol.com/india/stockpricequote/bankspublicsector/statebankindia/SBI


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The major players in the Private Sector along with Foreign Banks according to market

Capitalization is

(As on 18THJUNE, 2014)

NAME Last Price % Chg 52 wkHigh

52 wkLow

Market Cap(Rs. cr)

HDFC Bank 834.00 -1.47 856.00 528.00 200,801.87

ICICI Bank 1,420.40 -1.98 1,590.35 758.80 164,237.73

Axis Bank 1,847.20 0.42 1,990.00 764.00 87,050.22

Kotak Mahindra 960.00 2.19 960.00 588.00 73,964.85

IndusInd Bank 541.30 -2.04 585.00 318.00 28,499.22

Yes Bank 543.00 -1.60 588.00 216.10 22,518.77ING Vysya Bank 635.20 -0.51 723.15 405.50 12,050.88

Federal Bank 126.35 1.00 130.00 44.25 10,806.90

JK Bank 1,599.85 -2.02 1,995.00 995.00 7,755.72

Karur Vysya 458.05 -1.80 501.00 297.65 4,914.28

City Union Bank 73.70 0.48 78.95 37.95 4,007.79

South Ind Bk 28.25 0.71 30.05 18.95 3,802.60

Karnataka Bank 133.75 -2.23 150.75 69.10 2,520.07DCB Bank 75.45 4.00 77.90 38.05 1,889.80

Stan Chart IDR 121.50 -0.08 133.00 108.00 1,458.00

Lakshmi Vilas 103.00 -1.53 109.20 57.50 1,004.88

Dhanlaxmi Bank 53.20 -4.23 61.00 24.20 669.97

Table No. 3

Sources:http://www.moneycontrol.com/stocks/top-companies-in-india/total-assets-bse/banks-

private-sector.html
http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/hdfcbank/HDF01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/icicibank/ICI02http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/axisbank/AB16http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/kotakmahindrabank/KMBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/indusindbank/IIBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/yesbank/YBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/ingvysyabank/INGhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/federalbank/FBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/jammukashmirbank/JKBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/karurvysyabank/KVBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/cityunionbank/CUBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/southindianbank/SIBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/karnatakabank/KB04http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/developmentcreditbank/DCB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/standardcharteredplc/SCB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/lakshmivilasbank/LVBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/dhanlaxmibank/DB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/dhanlaxmibank/DB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/lakshmivilasbank/LVBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/standardcharteredplc/SCB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/developmentcreditbank/DCB01http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/karnatakabank/KB04http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/southindianbank/SIBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/cityunionbank/CUBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/karurvysyabank/KVBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/jammukashmirbank/JKBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/federalbank/FBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/ingvysyabank/INGhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/yesbank/YBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/indusindbank/IIBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/kotakmahindrabank/KMBhttp://www.moneycontrol.com/india/stockpricequote/banksprivatesector/axisbank/AB16http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/icicibank/ICI02http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/hdfcbank/HDF01


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IDBI RANKING AND PROFIT UNDER DIFFERENT HEADS

RANK CRITERIA NET PROFIT (Rs. Cr)

6 MARKET CAPITALIZATION 16921.56

6 NET SALES 26597.51

12 NET PROFIT 1121.40

5 TOTAL ASSETS 295005.31

5 0THER INCOME 171.08

14 EMPLOYEE COST 5.61

6 PBDIT 21810.61

6 INTEREST 20576.04

5 TAX 619.73

19 EPS 6.99

5 INVESTMENT 103733.50

7 CASH/BANK 16817.91

6 DEBT 295919.92

6 CONTIGENT LIABILITIES 196540.68

Table No. 4

Sources:http://www.moneycontrol.com/stocks/top-companies-in-india/banks-private-

sector.html


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Return on Assets and Return on Equity of SCBsBank Group-wise

(Per cent)

Sr.no. Bank group/year Return on Assets Return on Equity

2011- 12 2012- 13 2011- 12 2012- 13

1 Public sector banks 0.88 0.78 15.33 13.24

1.1 Nationalised banks 0.88 0.74 15.05 12.34

1.2 SBI Group 0.89 0.88 16.00 15.29

2 Private sector banks 1.53 1.63 15.25 16.46

2.1 Old private sector banks 1.20 1.26 15.18 16.22

2.2 New private sector banks 1.63 1.74 15.27 16.51

3 Foreign banks 1.76 1.94 10.79 11.52

All SCBs 1.08 1.03 14.60 13.84

Table No. 5

Notes:

1. Return on Assets = Net profit/Average total assets.2. Return on Equity = Net profit/Average total equity.3. * Nationalised banks include IDBI Bank Ltd.

Source: RBI


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3 COMPANY PROFILE3.1HISTORYThe Industrial Development Bank of India (IDBI) was established in 1964 under an Act of

Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 1976, the ownership

of IDBI was transferred to the Government of India and it was made the principal financial

institution for coordinating the activities of institutions engaged in financing, promoting and

developing industry in India. IDBI provided financial assistance, both in rupee and foreign

currencies, for green-field projects as also for expansion, modernization and diversification

purposes. In the wake of financial sector reforms unveiled by the government since 1992, IDBI

also provided indirect financial assistance by way of refinancing of loans extended by State-

level financial institutions and banks and by way of rediscounting of bills of exchange arising

out of sale of indigenous machinery on deferred payment terms.

After the public issue of IDBI in July 1995, the Government shareholding in the Bank came

down from 100% to 75%. IDBI played a pioneering role, particularly in the pre-reform era

(196491), in catalyzing broad based industrial development in India in keeping with its

Government-ordained development banking charter. Some of the institutions built with the

support of IDBI are the Securities and Exchange Board of India (SEBI), National Stock

Exchange of India (NSE), the National Securities Depository Limited (NSDL), the Stock

Holding Corporation of India Limited (SHCIL), theCredit Analysis & Research Ltd,theExim

Bank (India), the Small Industries Development Bank of India (SIDBI) and

theEntrepreneurship Development Institute of India.

Industrial Development Bank of India (IDBI Bank) is today one of Indias largest commercialBanks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex

Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of

industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a

DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array

of services that contributed towards balanced geographical spread of industries, development

of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep

and vibrant capital market.

On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial

Development Bank of India Limited) to undertake the entire gamut of Banking activities whilecontinuing to play its secular DFI role. Post the mergers of the erstwhile the bank with its parent

company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent

merger of the erstwhile United Western Bank with IDBI Bank on October 3, 2006, the tech-

savvy, new generation Bank with majority Government shareholding today touches the lives

of millions of Indians through an array of corporate, retail, SME and Agri products and

services.

As on March 31, 2011, the Bank had a network of 598 centers, 833 Branches and 1455 ATMs.

Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a

highly competent and dedicated workforce and a state-of-the-art information technology
http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/Stock_Holding_Corporation_of_India_Limitedhttp://en.wikipedia.org/wiki/Stock_Holding_Corporation_of_India_Limitedhttp://en.wikipedia.org/w/index.php?title=Credit_Analysis_%26_Research_Ltd&action=edit&redlink=1http://en.wikipedia.org/wiki/Exim_Bank_(India)http://en.wikipedia.org/wiki/Exim_Bank_(India)http://en.wikipedia.org/wiki/Small_Industries_Development_Bank_of_Indiahttp://en.wikipedia.org/wiki/Entrepreneurship_Development_Institute_of_Indiahttp://en.wikipedia.org/wiki/Entrepreneurship_Development_Institute_of_Indiahttp://en.wikipedia.org/wiki/Small_Industries_Development_Bank_of_Indiahttp://en.wikipedia.org/wiki/Exim_Bank_(India)http://en.wikipedia.org/wiki/Exim_Bank_(India)http://en.wikipedia.org/w/index.php?title=Credit_Analysis_%26_Research_Ltd&action=edit&redlink=1http://en.wikipedia.org/wiki/Stock_Holding_Corporation_of_India_Limitedhttp://en.wikipedia.org/wiki/Stock_Holding_Corporation_of_India_Limitedhttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India


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platform, to structure and deliver personalized and innovative Banking services and customized

financial solutions to its clients across various delivery channels.

3.2VISIONTo be the most preferred and trusted bank enhancing value for all stakeholders.

3.3MISSIONo Delighting customers with our excellent service and comprehensive suite of best-in-class

financial solutions

o Touching more people's lives with our expanding retail footprint while maintaining ourexcellence on corporate and infrastructure financing

o Continuing to act in an ethical, transparent and responsible manner, becoming the rolemodel for corporate governance

o Deploying world class technology, systems and processes to improve business efficiencyand exceed customers expectations

o Encouraging a positive, dynamic and performance-driven work culture to nurtureemployees grow them and build a passionate and committed work force

o Expanding our global presenceo Relentlessly striving to become a greener bank.3.4MERGERSIndustrial Development Bank of India Limited

In response to the felt need and on commercial prudence, it was decided to transform IDBI into

a Bank. For the purpose, Industrial Development bank (transfer of undertaking and Repeal)

Act, 2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act,

1964. In terms of the provisions of the Repeal Act, a new company under the name of Industrial

Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under

the Companies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI was

transferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004.

In terms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in

addition to its earlier role of a Financial Institution.

Merger of IDBI Bank Ltd. With IDBI Ltd.

Towards achieving the faster inorganic growth of the bank Ltd., a wholly owned subsidiary of

IDBI Ltd, was amalgamated with IDBI Ltd. In terms of the provisions of Section 44A of the

Banking Regulation Act, 1949 providing for voluntary amalgamation of two banking

companies. The merger became effective from April 02, 2005.

Merger of United Western Bank with IDBI Ltd.

The United Western Bank Ltd. (UWB), a Satara based private sector bank was placed under

moratorium by RBI. Upon IDBI Ltd. Showing interest to take over the said bank towards its

further inorganic growth, RBI and Govt. of India amalgamated UWB with IDBI Ltd. In terms

of the provisions of Section 45 of the Banking Regulation Act, 1949. The merger came into

effect on October 03, 2006.


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Change of name of IDBI Ltd. toIDBI Bank Ltd.

In order that the name of the Bank truly reflects the functions it is carrying on, the name of the

Bank was changed to IDBI Bank Limited and the new name became effective from 07 May,

2008 upon issue of the Fresh Certificate of Incorporation by Registrar of Companies,

Maharashtra. The Bank has been accordingly functioning in its present name of IDBI BankLtd.

3.5BANKS PROFILEIDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank

has essayed a key nation-building role, first as the apex Development Financial Institution

(DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-

service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched

its canvas beyond mere project financing to cover an array of services that contributed towards

balanced geographical spread of industries, development of identified backward areas,

emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On

October 1, 2004, the erstwhile IDBI Bank converted into a Banking company (as Industrial

Development Bank of India Limited) to undertake the entire gamut of Banking activities while

continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its

parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the

subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3,

2006, the tech-savvy, new generation Bank with majority Government shareholding today

touches the lives of millions of Indians through an array of corporate, retail, SME and Agri

products and services.

Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, ahighly competent and dedicated workforce and a state-of-the-art information technology

platform, to structure and deliver personalised and innovative Banking services and customised

financial solutions to its clients across various delivery channels.

As on March 31, 2013 IDBI Bank has a balance sheet of Rs. 3,22,769 crore and business size

(deposits plus advances) of Rs 4,23,423 crore. As an Universal Bank, IDBI Bank, besides its

core banking and project finance domain, has an established presence in associated financial

sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going

forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice'

and 'the most valued financial conglomerate', besides generating wealth and value to all its

stakeholders.


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3.6ORGANISATIONAL STRUCTURE

Fig No. 1

KEY EXECUTIVES

S.No Name Designation

1 M S Raghavan Chairman

3 M S Raghavan Managing Director

2 Pawan Agrawal Company Secretary

4 Snehlata Shrivastava Non-Executive Director5 BK Batra Deputy Managing Director

6 Melwyn Rego Deputy Managing Director

7 Subhash Tuli Independent Director

8 P S Shenoy Independent Director

9 S Ravi Independent Director

10 Ninad Karpe Independent Director

11 Pankaj Vats Independent Director

Table No. 6

IDBI BANK LTD

CORPORATE BANKING

LARGE CORPORATE GROUP (LCG)

MID CORPORATE GROUP (MCG)

INFRASTRUCTURE CORPORATE GROUP(ICG)

RETAIL BANKING

PERSONAL BANKING

MSME

AGRI BUSINESS GROUP


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3.7PRODUCTS & SERVICES1. Deposits: Different types of deposits areo Savings Accounto Flexi Current Accounto Flexi Depositso Capital Gains Account2. Loans:Different types of loan services available areo Home Loano Home Loan Interest Savero Loan against Propertyo Loan against Property - Overdrafto Loan against PropertyInterest Savero Loan for commercial Property Purchaseo Loan for Rent Receivableso Education Loano Personal Loano Auto Loan Loans Against Securitieso Reverse Mortgage Loano Corporate Loan3. Cards:Different types of cards & their services available areo Revision Debit Card Loyalty Pointso Cash at POS facility on Debit Cardso Online Payment through Debit Cardso Being ME Debit Cardo International Debit cum ATM cardo

Gold Debit cum ATM cardo IDBI Bank Cash cardo IDBI Bank Gift Cardo Kids Debit Cardo Platinum Cardo World/Global Currency Cardo Womens Debit Cardo Debit Card Offerso Magic Card4. 24 Hours Banking:o Phone Bankingo Mobile Bankingo Account Alerto Internet Bankingo Mobile Payment Service5. Corporate Banking:Corporate Banking products includeo Project Appraisalo Debt Syndicationo Advisory Serviceso Environmental Serviceso Secured and Structured Product Serviceso Film Financing Schemeo Carbon Credit


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o Cash Management Serviceso Trade Financeo Tax Payments6. Investment Advisory:Service includeso Mutual Fundo Life Insuranceo General Insuranceo New Pension Scheme7. SME Finance8. Agri Business9. Lockers10.Foreign Currency Products11.Treasury12.NRI Services

3.8CUSTOMERSFollowing table consists of a partial list of customers of IDBI Bank

Infrastructure FinancingDebt Syndication and

Advisory ServicesSecuritization

Bharti Shipyard Ltd. Videocon Industries Shriram City Union Finance

Suzlon Energy Ltd. Pipavav Shipyard Standard Chartered Bank

GMR Power Corporation

Pvt. LtdXL Telecom and Energy Tata Motors Finance Ltd.

KMC Construction Ltd. JSW Cement Muthoot Fincorp Ltd.

Table No. 7

3.9COMPETITORSFollowing table gives a partial list of competitors of IDBI Bank Ltd.

Public Sector Bank Private Sector Bank Foreign Bank

SBI HDFC Bank ABN AmroPNB ICICI Bank BNP Paribas

Bank OF Baroda Axis Bank Deutsche Bank

Canara Bank Kotak Mahindra Bank Citibank

Bank of India Federal Bank HSBC

Union Bank of India Yes Bank Standard Chartered Bank

Table No. 8


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3.10 BASIC FINANCIAL ANALYSISRatio Analysis:

Ratios Mar12 Mar13 Mar14

Liquidity Ratio

Current Ratio CA/CL .02 0.03 0.03

Quick Ratio QA/CL 27.11 24.82 23.11

Profitability Ratio

ROA PAT/Assets 137.47 159.33 147.38

Return on Net Worth (%) PAT/Net Worth 11.56 8.86 4.74

Profit Margin PAT/Sales 7.99 6.65 3.79

Solvency Ratios

Debt Ratio Debt/Equity 13.5872

Equity Multiplier Total Assets/ Total Equity 14.9701

Activity Ratios

Debtors Turnover Sales/ Avg Debtors 0.0961

Total Asset turnover Sales/Total Assets 0.09 0.08 0.08

Market Value Ratios

P/E Ratio Price per Share/EPS 5.48

Market to Book Ratio MV per Share/ BV per Share 0.65

Table No. 9


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4.PROJECT APPRAISALS4.1 INTRODUCTION OF PROJECTA Project is defined as a collection of linked activities, carried out in an organized manner with

a clearly defined start point and finish point, to achieve some specific results that satisfy theneeds of an organization as derived from the current business plans.

Creativity and idea generation are not the exclusive territory of the management. It is the people

who do the day-to-day operational work and often have the best ideas to improve organizational

performance. Continuous improvement is not an initiative or campaign but should be part of

everyday work and a way of life for everyone, seeking always to find better ways to do the job

to make organization more effective and more efficient. Sometimes good ideas that come from

continuous improvement activity in one part of the organization may have benefits to other

functions.

4.1.1 THE DYNAMIC LIFECYCLE OF A PROJECT:There are four phases of Project Lifecycle:

1. Definition: The start of the project once needs have been clearly identified and theproject can be defined with the agreement of those people with an interest in the

outcomes.

2. Planning:The process of planning the project to derive a realistic schedule taking intoaccount the constraints imposed on the project.

3. Execution: Launching the project work ensuring everyone understand the plan isalways up to date with changes that occur.

4. Closure:Preparing your customer for acceptance and handover to ensure the projecthas delivered the agreed outcomes, any follow-on activities are identified and assigned

and the project evaluation process is completed.


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REDIFINE

REPLAN

Fig: The four Phases and the dynamic action cycle

4.1.2

PHASES OF PROJECT:Project Identification

Project Selection

Preparation of Project Report

Appraisal of Project

Sanction of Financial

Documentation & Disbursement

Supervision & Follow up

Recovery of Loan Sanction

PHASE

1

PHASE

4PHASE

3

CONCEPTION & DEFINITION

PLANNING

&SCHEDULING

HAND-OVER&CLOSURE

EXECUTING THE PROJECT WORK

DEFINEOBJECT

IVES

COMMUNIC

ATE

THE

MONITOR

PROGR

ESS

PLAN THE

WORK

REVIEW &

EVALU

ATE

MONITOR

PROGR

ESS

PROBLEMPROBLEM

PHASE

2


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4.1.3 PROJECTS COMING TO BANKS FOR FINANCING:1 NEW PROJECTS For setting up new units.

2 EXPANSION PROJECTS For increasing the capacity of existing units.

3DIVERSIFICATION OF

PROJECTS

For manufacturing new products by existing

units.

4BACKWARD INTEGRATION

PROJECTS

For manufacturing certain products which are

being used as raw materials by the existing

unit.

5FORWARD INTEGRATION

PROJECTS

For manufacturing certain products which

require the products of existing unit as raw

materials.

6 MODERNISATION PROJECTS

It can be any one or more than one of the

following objects

a) Changing obsolete machinery.b) Enlarging the product mix/product

range to meet changing requirements of

the market.

c) Reducing the manufacturing cost or forimproving the quality of the product.

d) Changing the requirement of rawmaterial.

7REHABILITATION

PROGRAMME

For reviving sick units and making them viable

to complete with normal/health units.


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4.2 PROJECT APPRAISALProject appraisal is the structured process of assessing the viability of a project or proposal. It

involves calculating the feasibility of the project before committing resources to it. It is a tool

that companys use for choosing the best project that would help them to attain their goal.

Project appraisal often involves making comparison between various options and this done by

making use of any decision technique or economic appraisal technique.

Project appraisal is a tool which is also used by companies to review the projects completed by

it. This is done to know the effect of each project on the company. This means that the project

appraisal is done to know, how much the company has invested on the project and in return

how much it is gaining from it.

The process of project appraisal consists of five steps and they areinitial assessment, defining

problem and long-list, consulting and short-list, developing options, and comparing and

selecting project. The process of appraisal generally starts from the initial phase of the project.

If the appraisal process starts from an early stage, then the company will be in a better position

to decide how capital should be spend in the project and also it will help them to make the

decision of not spending too much or stopping a project that is not economically viable.

Project appraisal is the process of assessing and questioning proposals before resources are

committed. It is an essential tool for effective action in community renewal. Its a means by

which partnerships can choose the best projects to help them achieve what they want for their

community.

But appraisal has been a source of confusion and difficulty for projects in the past. Audits of

the operation of Single Project Budget schemes have highlighted concerns about the design

and operation of project appraisal systems, including:

Mechanistic, inflexible systems A lack of independence and objectivity A lack of clear definition of the stages of appraisal and of responsibility for these stages A lack of documentary evidence after carrying out the appraisalIts no surprise that audits or inspections arent impressed with the quality of appraisals, and

are specifically found with problems like;

Individual appraisals which do not cover the necessary information or provide only asuperficial analysis of the project

Particular problems in dealing with risks, options and value for money Appraisals which are considered too onerous/burdensome for smaller projects Rushed appraisalsProject appraisal is a requirement before funding of programs is done. But tackling problems

like those outlined above is about more than getting the systems right on paper. Experience in

projects emphasizes the importance of developing an appraisal culture which involves

developing the right system for local circumstances and ensuring that everyone involved

recognizes the value of project appraisal and has the knowledge and skills necessary to play

their part in it.


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Project appraisal helps project initiators and designers to;

Be consistent and objective in choosing projects Make sure their program benefits all sections of the community, including those fromethnic groups who have been left out in the past

Provide documentation to meet financial and audit requirements and to explaindecisions to local people.Appraisal justif ies spending money on a project.

Appraisal asks fundamental questions about whether funding is required and whether a project

offers good value for money. It can give confidence that public money is being put to good

use, and help identify other funding to support a project. Getting it right may help a community

make its resources go further in meeting local need

Appraisal is an important decision making tool.

Appraisal involves the comprehensive analysis of a wide range of data, judgments and

assumptions, all of which need adequate evidence. This helps ensure that projects selected forfunding:

o Will help a partnership achieve its objectives for its areao Are deliverableo Involve local people and take proper account of the needs of people from ethnic minorities

and other minority groups

o Are sustainableo Have sensible ways of managing risk.Appraisal lays the foundations for delivery.

Appraisal helps ensure that projects will be properly managed, by ensuring appropriatefinancial and monitoring systems are in place, that there are contingency plans to deal with

risks and setting milestones against which progress can be judged.

Getting the system right .

The process of project development, appraisal and delivery is complex and partnerships need

systems, which suit local circumstances and organization. Good appraisal systems should

ensure that:

o Project application, appraisal and approval functions are separate. All the necessaryinformation is gathered for appraisal, often as part of project development in which projects

will need support.o Race/tribal equality and other equality issues are given proper consideration.o Those involved in appraisal have appropriate information and training and make

appropriate use of technical and other expertise.

o There are realistic allowances for time involved in project development and appraisal.o Decisions are within a implementers powers.o There are appropriate arrangements for very small projects.o There are appropriate arrangements for dealing with novel, contentious or particularly risky

projects.


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4.2.1 ROLE OF PROJECT APPRAISAL:Project appraisal helps a partnerships management to: -

Be consistent and objective in choosing projects Make sure its program benefits all sections of the community, including those from

ethnic groups who have been left out in the past

Provide documentation to meet financial and audit requirements and to explaindecisions to local people.

Appraisal justifies spending money on a project

Appraisal asks fundamental questions about whether funding is required and whether a

project offers good value for money. It can give confidence that public money is being

put to good use, and help identify other funding to support a project. Getting it right may

help a partnership make its resources go further in meeting local need.

Appraisal is an important decision making toolAppraisal involves the comprehensive analysis of a wide range of data, judgments and

assumptions, all of which need adequate evidence. This helps ensure that projects

selected for funding:

Will help a partnership achieve its objectives for its area

Are deliverable

Involve local people and take proper account of the needs of people from ethnic

minorities and other minority groups

Are sustainable

Have sensible ways of managing risk.

Appraisal lays the foundations for delivery

Appraisal helps ensure that projects will be properly managed, by ensuring appropriate

financial and monitoring systems are in place, that there are contingency plans to deal

with risks and setting milestones against which progress can be judged.

4.2.2 METHODOLOGY OF PROJECT APPRAISAL:Appraisal involves a careful checking of the basic data, assumptions and methodology used

in project preparation, an in-depth review of the work plan, cost estimates and proposed

financing, an assessment of the projects organizational and management aspects, and

finally the viability of project.

It is mandatory for the Project Authorities to undertake project appraisal or at least give

details of financial, economic and social benefits and suitably. These projects are examined

in the Planning and Development Division from the technical,

institutional/organizational/managerial, financial and economic point of view depending

on nature of the project. On the basis of such an assessment, a judgment is reached as to

whether the project is technically sound, financially justified and viable from the point of

view of the economy as a whole.

In the Planning and Development Division, there is a division of labor in the appraisal ofprojects prepared by the concerned Executing Agencies. The concerned Technical Section


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in consultation with other technical sections i.e.; Physical Planning & Housing, Manpower,

Governance and Environment sections undertake the technical appraisal, wherever

necessary. This covers engineering, commercial, organizational and managerial aspects,

while the Economic Appraisal Section carries out the pre-sanction appraisal of the

development projects from the financial and economic points of view. Economic appraisalof a project is concerned with the desirability of carrying out the project from the standpoint

of its contribution to the development of the national economy. Whereas financial analysis

deals with only costs and returns to project participants, economic analysis deals with costs

and returns to society as a whole. The rationale behind the project appraisal is to provide

the decision-makers with financial and economic yardsticks for the selection/rejection of

projects from among competing alternative proposals for investment.

Necessary to Conduct Project Management Appraisal (PMA): -

A project management appraisal should be viewed as a useful, constructive and necessary

diagnostic tool available for augmenting the capability of the sponsoring organization'sproject management team.

It can be used to provide information ranging from an informal enquiry to an extensive

analysis of the effectiveness of every aspect of the project management process. In the latter

context it can be conducted to ferret out common failings of many project management

arrangements. Some of these common failings include:

Management on the project may be unable to see the forest for the trees.

Decisions may be being unduly biased by contractual commitments already in existence,

rather than being made in the best interests of the final project results

Decisions may be similarly biased unduly by corporate policy

Short term political expediency may be overwhelming (Crisis management)

Key individuals on the project may be under the influence of some form of illegal pressure

Management on the project may simply be naive, inexperienced, lack sufficient training in

project management skills, or otherwise ill prepared for the difficult tasks at hand

Use of Project Management Appraisal (PMA): -

Identify the strengths of current practices in a project management organization, or on an

existing project

Establish how various groups within the organization perceive the organization's

effectiveness in managing projects

Examine the effectiveness of project communication and documentation, and clarify the

relationships between project scope, quality, time and cost

Identify barriers to better performance, or critical skills needed by project managers or their

supporting teams to increase their effectiveness


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Identify sooner specific aspects which require improvement and hence speed the

achievement of results

Provide for an exchange of ideas, information, problems, solutions and strategies with

project team members, and thus develop a plan of action for carrying out improvements

Help to create a supportive environment focusing on project success, and the professional

growth of project team members

Thus, by conducting a PMA in a timely and favorable manner, potential difficulties can be

identified and brought out into the open for appropriate corrective action. Better still,

potential problems may be circumvented altogether, if the concept and timing of a PMA is

built into the project plan from the outset.

4.2.3 STRUCTURAL APPROACH AND TYPICAL ISSUES OFPROJECT MANAGEMENT APPRAISAL:

Modern project management is generally considered to be encompassed by the integration

of eight functional areas. These include the four core or constraint functions of scope,

quality, time and cost, and four integrative and interactive functions of risk, human

resources, contract/procurement and information/communications management.

Each function tends to require a separate skill set, so that on a larger project, or in the larger

project management organization, responsibilities naturally tend to be grouped accordingly

for their proper conduct. Consequently, the investigative format of a project management

appraisal also more readily follows these functional descriptions.

The sequence in which these functions are listed above is significant because of their

dynamic relationship. The sequence parallels both the progressive flow of information as

well as the flow of work through the project management process. The information flow

represents what is managed, while the process flow reflects how it is managed. Since

projects should be planned moving progressively down the list, projects in the planning

phases might well have the first four functional areas examined first. For projects in the

implementation phases, on the other hand, the latter four functions might be given priority,

and in the reverse order.

The content of the questions to be raised will also be highly dependent upon the particular

phase of the project in which the PMA is being conducted, and therefore should be

structured accordingly.

For example, the content of technological questions under a Project Management Appraisal

(PMA) conducted early in the implementation phase of a construction project would focus

on the availability and adequacy of information to carry out detailed design efficiently, or

to commence construction activities productively. Similarly, technological issues to be

raised just prior to commissioning would likely cover quality assurance records, validation

of equipment and system check-off, dry-runs and so on.


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The following discussion is intended to give an indication of the issues that might be looked

at, both in terms of the function under consideration, and the phase that the particular

project has reached.

4.2.4 PROJECT MANAGEMENT CORE FUNCTIONS:As noted earlier, the first four functions: scope, quality, time and cost, are generally

considered to be the basic functions of project management. From the sponsor's point of

view, these four functions embody the project's basic management objectives, while for

those providing services to the project, i.e. designer construction, they constitute

constraints. They therefore represent a set of core parameters which are used to control the

project.

Scope and Quality

If specific technological aspects of the project such as engineering, manufacturing or

constructability, are to be reviewed, such an investigation must clearly be conducted bythose thoroughly conversant with the project's technology. In addition, most projects today

have some degree of recognizable environmental, social or safety impacts. If these have

not already been analyzed and arrangements made for monitoring and mitigation, then

persons with corresponding knowledge and experience must undertake such review.

Even so, certain general management questions can be formulated with regard to the

technical scope and quality of the project. In the case of quality: has the project's executive

given priority to building the required quality standards into the project planning and

execution process right from the outset? Is this standard consistent with production,

operation, maintenance, safety and social acceptability expectations, so that the facility willperform economically during its life time? Indeed will the facility last for its required life

time? Have the members of the project team been selected on the basis of their

qualifications for their respective roles, and likewise will similar considerations be given

to those providing detailed design and/or construction services during project execution?

Are meeting the end-user's requirements seen as being at least as important as, if not more

important than, meeting cost and schedule targets, and will a post project review include a

critique of the project's quality attainment?

Schedule and Cost

Similarly, specific questions can be posed regarding schedule and cost. For example: Do

project plan include a milestone schedule indicating major pieces of work to be

accomplished, and who will be responsible for each?

Are project schedule time estimates and logic developed using input from members of the

project team, in order to build in commitment? Are they prepared using a structured

breakdown consistent with the work breakdown structure, such that cost and schedule can

be correlated?

Are project schedules allowing sufficient time to get the work done right the first time, and

without causing overruns? And when changes are made during project implementation, are

corresponding changes made to the schedule to accommodate these changes?


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The cost situation should be similarly examined, and the direct impacts on the cost situation

of any changes in the schedule also recognized. Thus typical cost questions should include:

Is the estimate realistic, including both direct and indirect costs of all required resources,

or have any changes taken place since, in terms of the project's parameters or the external

environment, which might require its reevaluation?Project Management Integrative Functions

As indicated earlier, the issues under scope, quality, time and cost only really question the

status of the project's relatively static objectives. If the answers are found to be

unsatisfactory, then it will be necessary to examine the means to influence them within the

remaining time left for the project to run.

The next set of questions therefore investigate the supporting integrative and more dynamic

functions of project management, which consist of the management of risk, human

resources, contract/procurement and information/communication management.

Each of these functions influences the success of the project through the performance of

people. They involve as much art as science, and, suitably managed can affect the course

of the project and consequent outcome. Unlike scope, quality, time and cost, which deal

with project outputs and deliverables, these four functions impact the activities, i.e. the

work involved in achieving those outputs and deliverables. Often, these areas of review

provide a much more illuminating area of investigation.

Project Risk

Questions under this heading should include: Has the project planning included a program

or study of risk identification and analysis with recommendations for mitigate actions?

Does the project's management effectively anticipate potential obstacles at each stage in a

way that avoids future hindrance?

Have adequate contingency planning and allowances been incorporated into the project

parameters to provide for major risk factors which may adversely affect project success?

Human Resources

Questions which address the issues of people and their motivations are frequently the most

significant, since essentially projects and the degree of their success are achieved through

the project's human resource element. Therefore, this area of the PMA may be quite

intensive.

For example: Does the project team enjoy the active and visible support of the project's

sponsor, and is the focus consistently on the project's stated objectives?

Has the sponsor assigned the leadership of the project the necessary level of authority for

it to execute its responsibilities, and is it held accountable accordingly? Is this process

visible and effective?

Are people resources available when needed? And do they have the required levels of

technical skills, or if not, are they encouraged or provided with suitable training? Are they

rewarded for exceptional effort?


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Is conflict handled and used constructively, in order to sustain a highly motivated team?

Will the final project evaluation include a critique of the project team's collective

performance?

Contract/Procurement

The manner in which the project is to be facilitated or procured is an issue which should be

dealt with very early in the project planning phase, since it will have a significant effect on

the way in which the project parameters are expressed. For instance, construction which is

to be accelerated, or "fast-tracked", should require a shorter schedule but will carry

significantly higher risks. Conversely, the more time taken to improve the definition of the

project's scope, the lower should be the project risks. In each case, the form of contracting

must be tailored to suit.

Information/Communications

Information is best viewed as the data upon which the project is configured and upon whichdecisions are based, while communication is the oil and grease which keeps the whole

project progressing smoothly. Questions in this area might therefore include: Does the

project sponsor keep the project manager informed on matters affecting the project, and in

turn does the project manager keep the members of his team similarly informed? Are

project team members free to voice their opinions and concerns for the project? In other

words, is information flowing satisfactorily through the organizational structure, and in

doing so, is its quality and integrity maintained?

Similarly, are the necessary mechanisms in place to inform those who are outside of the

project organization, and inform them according to their respective interests? For example,an external stakeholders' public relations program could be very necessary where the

construction and completion of the project is politically sensitive, since adverse reaction

could have a damaging effect on the ultimate success of the project.

4.2.5 APPRAISING A PROJECTKey issues in appraising projects include the following.

Need, targeting and objectivesThe starting point for appraisal: applicants should provide a detailed description of the

project, identifying the local need it aims to meet. Appraisal helps show if the project

is the right response, and highlight what the project is supposed to do and for whom.

Context and connectionsAppraisal should help show that a project is consistent with the objectives of the

relevant funding program and with the aims of the local partnership. Are there links

between the project and other local programs and projectsdoes it add something, or

compete?

ConsultationLocal consultation may help determine priorities and secure community consent and

ownership. More targeted consultation, with potential project users, may help ensure


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that project plans are viable. A key question in appraisal will be whether there has been

appropriate consultation and how it has shaped the project

OptionsOptions analysis is concerned with establishing whether there are different ways of

achieving objectives. This is a particularly complex part of project appraisal, and onewhere guidance varies. It is vital though to review different ways of meeting local need

and key objectives.

InputsIts important to ensure that all the necessary people and resources are in place to deliver

the project. This may mean thinking about funding from various sources and other

inputs, such as volunteer help or premises. Appraisal should include the examination

of appropriately detailed budgets.

Outputs and outcomesDetailed consideration must be given in appraisal to what a project does and achieves:

its outputs and more importantly its longer-term outcomes. Benefits to neighborhoods

and their residents are reflected in the improved quality of life outcomes (jobs, better

housing, safety, health and so on), and appraisals consider if these are realistic. But

projects also produce outputs, and we need a more realistic view of output forecasts

than in the past.

Value for moneyThis is one of the key criteria against which projects are appraised. A major concern

for government, it is also important for local partnerships and it may be necessary totake local factors, which may affect costs, into account.

ImplementationAppraisal will need to scrutinize the practical plans for delivering the project, asking

whether staffing will be adequate, the timetable for the work is a realistic one and if the

organization delivering the project seems capable of doing so.

Risk and uncertaintyYou cant avoid riskbut you need to make sure you identify risk (is there a risk and

if so what is it?), estimate the scale of risk (if there is a risk, is it a big one?) and evaluate

the risk (how much does the risk matter to the project.) There should also be

contingency plans in place to minimize the risk of project failure or of a major gap

between whats promised and whats delivered.

Forward strategiesThe appraisal of forward strategies can be particularly difficult, given inevitable

uncertainties about how projects will develop. But is never too soon to start thinking

about whether a project should have a fixed life span or, if it is to continue beyond a

period of regeneration funding, what support it will need to do so. This is often thought

about in terms of other funding but, with an increasing emphasis on mainstream

services in neighborhood renewal, appraisal should also consider mainstream links and

implications from the first.


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SustainabilityIn regeneration, sustainability has often been talked about simply in terms of whether a

project can be sustained once regeneration funding stops but sustainability has a wider

meaning and, under this heading, appraisal should include an assessment of a projects

environmental, social and economic impact, its positive and negative effects.While appraisal will focus detailed attention on each of these areas, none of them can

be considered in isolation. Some of them must be clearly linked for example, a

realistic assessment of outputs may be essential to a calculation of value for money. No

project will score highly against all these tests and considerations. The final judgment

must depend on a balanced consideration of all these important factors.

4.2.6 CHECKLIST FOR PROJECT APPRAISALWhether you are involved in a partnership with an appraisal system in place, or starting to

design one from scratch, these questions are worth asking.

Are appraisals systematic and disciplined with a clear sequence of activities andoperating rules?

Is there an independent assessment of the project by someone who has not beeninvolved with the development of the project?

Does the appraisal process culminate in clear recommendations that informapproval (or rejection) of the project?

Is the approval stage clearly separate? Is the appraisal process well documented, with key documents signed, showing

ownership and agreement, and allowing the appraisal documentation to act as a

basis for future management, monitoring and evaluation? Does the appraisal system comply with any relevant government guidance Are the right people involved at various stages of the process and, if necessary, how

can you widen involvement?

4.2.7 TYPES OF PROJECT APPRAISAL:I. MANAGEMENT APPRAISAL:Here the capacity and commitment of the owners and core promoters along with the top

management is judged.

o Ability to plan clearly and set realistic goals and objectives.o Ability to organize projects.o Ability to recruit the right kind of people.o Ability to negotiate with different kinds of people under different conditions.o Problem solving ability.o Communication and human relations skills.o Financial strength.o Perception of market opportunities.

II. TECHNICAL APPRAISAL:It is the study of manufacturing process, technical arrangements, size of the plant, product

mix, selection and procurement of plant & machine, plant layout, schedule of project


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implementation and location of project with reference to availability of various inputs

required for production.

VARIOUS POINTS TO BE EXAMINED UNDER TECHNI CAL APPRAISAL CAN

BE SUMMARIZED AS UNDER:-

1. MANUFACTURING PROCESS / TECHNOLOGY:-Selection of process depends on quality of the product required, its end use, availability of

particular raw material and cost of the process. A process should not be implemented

unless it is tested in required & available condition. It is necessary to study the backup

condition in case of failure.

2. Arrangement of TechnicalKnow-how:-It may be ensured that satisfactory arrangements have been made to obtain necessary

technological know-how required for the proposed manufacturing process. The technical

know-how can be procured from the following sources:-

a) Foreign Collaboratorsb) Consultancy Organizationsc) Machinery suppliersd) Promoters knowledge and experiencee) Recruitment of suitable technical personnel3. Size of the plant:-Size of the plant or its capacity can be expressed in one of the following terms

i. With respect to output : Pulp and paper, Cement, Mini-Steel.(Quantity of finished product) Plant etc

ii. With respect to input : Sugar mill, Cotton-seed expeller unit,(Quantity of main raw material) Solvent extraction plant etc.

iii. With respect to number of machines : Power Loom, Spinning mill, Textilemill, etc.

4. Product Mix/ Product Range:-According to market conditions product mix/product range should be decided as it will

help to grow sales. The product should be modified with the changing trends happening

in the environment and it should be eco-friendly as it will help to build brand image.

5. Selection of Plant & Machinery:-The selection of plant & machinery should be in such a way that all the process should

give more or less same output otherwise there will be more wastage or total output will be

less than desired output thus we wont be able to reduce the cost of final output.

Example:

Stages I II III IV

Raw Material

Capacity90 80 60 80

Here all the Stages are capable of producing 80 output except III Stage so it is better to

increase the output of Stage III to 80 so that we can have a final output of 80.


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6. Procurement of Plant & Machinery:-The act of obtaining or buying goods & services.

The process includes preparation and processing of a demand as well as the

endreceipt andapproval ofpayment.It often involves

i.

Purchaseplanning,ii. standards determination,iii. specifications development,iv. supplier research and selection,v. value analysis,

vi. financing,vii. price negotiation,

viii. making the purchase,ix. supply contract administration,x. inventory control and stores and

xi. Disposals and other related functions.The process of procurement is often part of acompany's strategybecause theability to

purchase certainmaterials will determine ifoperations will continue. Abusiness will not

be able to survive if it's price of procurement is more than the profit it makes

on selling the actual product. Before sending Engineer to test the equipment while

importing second hand machine you should pass the loan from the bank otherwise the cost

of sending him will go waste if the loan is not passed. The best time to send an Engineer

should be after sanction but before the disbursement of loan. For uninterrupted production,

arrangements for repairs & spare parts should be made.

7. Plant Layout:-a) Line Layout: Machines required for series of operation are arranged in sequence in

which they are used.

b) Functional Layout: Various machines are grouped together according to the operationthey perform. It is also called as Process Layout.

c) Group Layout: Machines are grouped to produce a part or family of parts also calledas Product Layout.

8. Location of Project:-i. Land: It should be easily accessible by road, railway & airport.

ii. Raw Material: if bulky difficult to transport, quality likely to deteriorate intransportation, raw material should be near the source.Imported Raw Material are

those which are imported from some other place whereas Indigenous Raw Material

are the ones which are occurring naturally in a particular place.

iii. Market: The market should be in boom when the product is out for sale.iv. Labor: Labor are the most important factor of any firm. The firm has to decide

whether to recruit from local or outside. If they hire from local they need to give

training to make them efficient or if they are hiring skilled labor than housing

facilities should be provided.

v. Utilities: the various facilities should be provided like Power, water, fuel etc.
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vi. Effluent Disposal: Waste from sump pit pumped to a drainage system. The outflowof disposal should be in such a way that it should be not harmful to anyone and

mostly eco-friendly.

vii. Transport Facilities: It should be well connected to roads, railways and airways. Ifthe company is not connected to highways than the road should be constructed. Thedecision to buy or hire vehicle should be made depend on the transport conditions.

viii. Location of Industries: The location of the industries should be either in backwardareas, Growth Centres, Small Enterprise Financial centers etc.

ix. Schedule of Project Implementation: CPM & PERTIII. MARKET APPRAISAL:Many Entrepreneurs dont have an idea about the market of particular product. There is

high possibility that the future cannot be in favor of product and the bank could be in

trouble if the firm is not able to pay back.

Hence the Bank asks the firm information about the market under five headings

1. Demand:Product, Uses, the consumers, actual consumption, likely consumption infuture & export prospects

2. Supply: Production Capacity, Actual Production, Capacity Utilization, Imports &likely future capacity.

3. Distribution: Channels of distribution involved, cost of distribution & mode oftransport.

4. Pricing:Domestic & International price trends, control on prices, duties & taxes.5. External Forces: Government Policies regarding industrialization, export, imports,

foreign collaboration plan outlay.

TECHNIQUES FOR DEMAND FORECASTING USED BY TERM LENDING

INSTITUTES TO CHECK

1. Import Substitution:2. Past Trend Methods:3. End Use Methods:4. Correlation & Regression:Dependence of Supply & Demand5. Export Market:CHECK LIST FOR VERIFICATION OF VARIOUS ASPECTS OF

MARKETING

1. Market Structure in respect of Consumer Goods2. Market Structure in respect of Industrial Goods3. Dept of Competition4. Pricing Policy5. Life Cycle of the Product6. Brand Name of Product7. Packaging & Transportation8. Salesman: Personal Selling. Salesman need advertising support, Drawings, Marketing,

Data, Technical Expertise, audiovisual aids, demonstration, offers of installments


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CIGARATE,TOOTHPASTE

9. Advertising & Sales Promotion: Techniques should be decided in view of the size offirm, competition in market, distribution channels & other relevant matters

10.Distribution Channels

Fig. Distribution Channels

IV. FINANCIAL APPRAISAL:It is an evaluation of profitability and financial strength of any business concern. This is

the process of making an in-depth study of the financial and operative data contained in

the profit and loss account and balance sheet. The important aspec

report on project appraisal

Documents

effective project appraisal

process of project appraisal

thatparticular project

good project manager

main objective

thriving critical analysis

given time

length of time