Course

Name: Project Finance Course Code: 17JBS306

Number of credits: 4 Number of Hours: 40

Learning Outcomes:
a) Design, develop, structure and execute project finance transactions.
b) To develop critical thinking in finding financial solutions.
c) To identify, allocate, and mitigate the main project risks.
d) Ability to establish links among the heterogeneous project financing deal in an
autonomous and independent way.

Module 1: Introduction and Overview 5 Hours
Learning Outcomes: At the end of this module, student will be able to:
1a) Estimate cost of the project.
1b) Identify fixed and working capital requirements in a project.
Evolution of project finance – Project types - Need for Project finance - Drivers deciding
quantum of project finance – Critical steps in project. Estimating cost of project – Fixed and
working capital investment in the project*.

Module 2: Source of Project Finance 5 Hours
Learning Outcomes: At the end of this module, student will be able to:
2a) Analyse the best alternative from the available sources of funds.
2b) List down the features of various sources of project finance.
Funding Sources – Long and short term sources, mezzanine finance, equity, quasi-equity,
debts - Local financing - External commercial borrowing - Export Credit Agencies and
Development Banks - - Multilateral development finance institutions - Private equity funds *.

Module 3: Project Feasibility Analysis 7.5 Hours
Learning Outcomes: At the end of this module, student will be able to
Evaluate the feasibility of a project.
Background - Net Present Value, Tax shield on interest, Tax shield on depreciation- Project
IRR and equity IRR.

Module 4: Financial Projections 7.5 Hours
Learning Outcomes: At the end of this module, student will be able to:
4a) Calculate ratios to know the loan servicing capability.
4b) Analyze Balance Sheet, profit and Loss A/c and funds flow statement.
Projected profit and loss, Balance sheet and funds flow, Loan servicing Capability – Interest
coverage ratio, Debt Service Coverage ratio, Sensitivity analysis, Building scenarios.

Module 5: Project Financing Risks 5 Hours
Learning Outcomes: At the end of this module, student will be able to:
5a) Identify the risks in project finance.
5b) Explain the ways of mitigating risks in project finance.
Construction risk, operational risk, supply risk, off-take risk, repayment risk*, political risk ,
currency risk, authorization risk, dispute resolution risk.

Module 6: Financing of Working Capital 10 Hours
Learning Outcomes: At the end of this module, student will be able to:
6a) Calculate MPBF.
6b) Explain fund based and non-fund based lending.
6c) Analyze and identify the best alternatives from fund based and non-fund based working
capital.

Maximum Permissible Bank Finance (MPBF) - Methods of lending associated with MPBF -
Current ratio/treatment of current liabilities - Working capital – types - Fund based / non fund
based - Fund based and non-fund based* -analysis of alternatives - Margins in non -fund
based limits / negotiation - Fund based interest rates- health code parameters, credit rating
– Drawing power,– Stock statement - Net working capital - Securitization Working capital /
term loan/primary security/collateral - Sanction Letter.

(* These topics are categorized as ‘Self-learning’ topics and are subjected to testing)

Text Book:
Prasanna Chandra (2014). Projects: Planning, Analysis, Selection, Financing, Implementation,
and Review. 8th edition, McGraw Hill Education.
S Gatti Project Finance in Theory and Practice. 2nd edition, Elsevier.

Reference Books
Richard A Brealey, Stewart C Myers, Franklin Allen, Pitabas Mohanty (2012). Principles Of
Corporate Finance. 10th edition,Tata Mcgraw Hill Education.
Brighman, Eugene F, Ehrhardt, Michael C. Financial Management: Text and Cases. South-
Western Cengage Learning.
Projects : Planning, Analysis, Selection, Financing, Implementation and Review. 7th edition,
Tata McGraw - Hill Education.