The document discusses project financing and sources of finance for projects and businesses. It defines project financing as financing for a specific project, such as infrastructure projects, that is repaid from the cash flow of that project. It then discusses various internal and external sources of finance for businesses and projects, including retained profits, bank loans, venture capital, bonds, and other sources. It also provides an overview of ICICI Bank and its project financing group that provides funding for infrastructure and manufacturing projects.

2. External.

4. Non-ownership capital

6. Preference shares

8. Registered debentures – are not easily transferable and legal

9. Procedures have to be followed in case of a transfer.

10. Convertible debentures – can be converted to stock at the end of the debenture repayment date.

12. Operating lease.

13. Finance Lease – this is where the lessee’s monthly payments add up to at least 90% of the total value of the asset. Operating Lease – this lease does not run for the full life of the asset and the lessee is not liable for the full value of the asset.

15. Non-recourse factoring.

16. Recourse factoring – In this type of factoring the client company is liable for bad debts.

17. Non-recourse factoring – is where the factor takes responsibility for the payment of the debtors. The client company is not liable if debtors do not pay back. Non-recourse factoring is usually more expensive because of the high risks experienced by the factor.

18. Invoice discountingIn invoice discounting the client company send out a copy of the invoice to the invoice discounting firm. The client then receives a portion of the invoice value. In contrast to factoring, the client company collects the money from its debtors. Once the payment is received it is deposited in a bank account controlled by the invoice discounter. The invoice discounter will then pay the remainder of the invoice less any charges to the client.<br />Financial Institution in Project Financing<br />2124075495300 <br />IDFC Projects is a wholly owned subsidiary of Infrastructure Development Finance Company Limited (IDFC). IDFC is India’s leading financial institution at the forefront of developing infrastructure through its presence across financing, advisory, investment banking, development and asset management functions related to the sector.<br />IDFC Projects Ltd. (IP) is the development arm of IDFC, with the mandate to develop, finance, execute and manage infrastructure projects in the country.<br />Despite growing interest and participation by different stakeholders in infrastructure projects, a huge shortfall of delivery capacities continues to exist in the public as well as private sector in India. There is a large unmet demand for new technologies, for creation of assets without cost or time overruns and for their efficient management and maintenance. A pipeline of greenfield projects, together with a growing number of operating assets, present significant opportunities for infrastructure developers, contractors and operators to work in public private partnerships with governments. <br />IDFC Projects seeks to participate in these evolving opportunities. It is currently considering projects of national importance across infrastructure sectors including power generation and transmission, surface transport, special economic zones, water treatment and distribution systems and infrastructure corridors.<br />In the course of its activities, IDFC Projects builds upon its parent's core strengths of government sponsorship, project financing and asset management to create a strong value proposition in the conceptualization, development and implementation of infrastructure projects.<br />IDFC Projects seeks to fulfill its mandate in active collaboration with the Central and State Governments as well as with the private sector from India and abroad<br />Sectors<br />Infrastructure development across sectors<br />To sustain 9% GDP growth in India, investment in infrastructure is expected to increase from 4.6% of GDP in 2006-7 to around 9% of GDP over the period 2007-12. The 11th plan envisages an investment of USD 500 billion during this period, of which 23% is expected to come from the private sector.<br />Transport<br />-3810055880IDFC has successfully financed several pioneering road projects such as the Jaipur - Kishangarh Expressway and has a total exposure of Rs. 7,922 crore in the sector.<br />IDFC has been actively involved as a financier for almost all the ports on the west coast and for Container Forwarding Stations (CFS) in India.<br />Power<br />1905012065Over the last decade IDFC has financed power projects aggregating to about 10000 MW. IDFC has also financed transmission projects like the Tala project of Powerlinks.<br />Urban<br />19050117475IDFC has a rich financing experience in commercial and industrial infrastructure, primarily in IT parks, SEZs, commercial property and hotels, which now account for over 9.8% of IDFC's exposure.<br />IDFC has been actively involved in several roles in the water sector. The roles range from being a co-developer to providing long term project financing.<br />Water<br />IDFC has been actively involved in several roles in the water sector. The roles range from being a co-developer to providing long term project financing. Some of the key transactions of IDFC in the water sector include the Dewas Water Supply Project, the Haldia Water Treatment Plant Project and the Chennai Desalination Plant Project.<br />IDFC has also been a member of an Expert Committee of the Planning Commission to review issues on ownership of ground water.<br />IDFC Projects completes the IDFC portfolio by participating as a developer in water sector projects. Currently, IDFC Projects is evaluating opportunities for provision of common water supply facilities in industrial clusters. We are also evaluating other opportunities in this sector including setting up water treatment and supply facilities on Build, Operate and Transfer (BOT) basis.<br />centertop<br />ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended March 31, 2010. The Bank has a network of 2,528 branches and 5,808 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. <br />ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).<br />Project Finance Group<br />ICICI Bank Project Finance Group (PFG) has developed comprehensive domain expertise and knowledge in the infrastructure & manufacturing sector, having ensured timely financial closure of several big ticket projects. PFG has unmatched capabilities of discovering, creating and structuring project finance transactions. <br />Group structure<br />PFG is the “One Stop Shop” fulfilling the funding requirements of Greenfield & Brownfield projects in infrastructure & manufacturing sector. It comprises of three sub-groups as follows: <br />Infrastructure Finance Group (IFG): IFG caters to the funding requirement in the infrastructure sector like Power, Telecom, Roads, Ports, Airports, Railways and Urban infrastructure. <br />Manufacturing Projects group (MPG): MPG caters to the funding requirement in the manufacturing sector like Oil & Gas, Steel, Aluminum, Cement, Auto, and Mining<br />Infrastructure Equity Group (IEG): IEG is engaged in providing equity support to projects in various established as well as upcoming sectors. <br /> The project finance team of ICICI Bank has developed substantial insight in the dynamics and trends in the infrastructure sector, having assisted the Government of India in formulating policies relating to various segments of the infrastructure sector. The unique insight and understanding thus derived from the exercise has not only enabled ICICI Bank to provide optimum solutions to its clients, but has also provided ICICI Bank with an appropriate decision support for strategic measures, going forward.<br />Service Offerings <br />PFG provide a wide range of services including the following: <br />Rupee term loans <br />Foreign currency term loans <br />External Commercial Borrowings <br />Subordinated debt and mezzanine financing <br />Export Credit Agency backed funding <br />Non fund based facilities like Letter of Credit, Bank Guarantee, Supplier’s Credit, Buyer’s Credit etc. <br />Equity funding<br />4057650-276225AHEB Investment GroupWe are a financing and financial services group with continuous expansion into new markets. We arrange global access to capital and professional assistance in obtaining loans for medium and large organisations as well as industrial and commercial development projects.The key to our success, and our clients' success, is our ability to help secure hard-to-obtain loans from the world's major banks. We do so by reducing risks to those lenders by arranging collateral to cover the value of our clients' projects.To date, our record of successful global financing completions continues to expand, from power plants and petroleum production projects, hotel and resort developments, to airline acquisitions and corporate aircraft financing.One of AHEB Investment Group key assets is the strength of its relationships with many of the world's leading financial institutions and regional banks.During the year of 2007, AHEB Investment Group expanded its banking contact in Europe, and to Asia and the Middle East. Our global project financing activities increased dramatically as did the quality of our relationships with our existing prime banking partners. In 2007, we anticipate a further broadening our international banking relationships to provide our clients with even greater access to regionally-based industrial and commercial project financing sources.With the current strong demand for alternate sources of large project and start-up financing, AHEB Investment Group continues to widen its range of financing services and program options in lockstep with our banking contacts.AHEB Investment Group works with a number of partners that promote trade and investment, and offer development and funding program that can help your project.The financing programs typically include loans, equity investments, and guarantees. These agencies will enhance the credibility of your project with other lenders and equity investors, but also will increase the viability and protection of your project.AHEB Investment Group and Investors Member of AHEB Investment Group provide securitized funding and/or leveraged investment opportunities for third party project funding in a mutually agreed upon Structured finance platform for the benefited of all the parties. AHEB and Investors Member of AHEB establish the Credit and Asset backed funding Pool (“Asset Pool”). This Asset Pool is to be established for the purpose of effecting the aforesaid Structured Finance using special purpose vehicles (SPV’s). These SPV’s will issue debt or credit instruments in the capitalizing and/or securitizing of one or more dedicated accounts (the quot;
Accountsquot;
) with sufficient credit, funds or collateral to secure and facilitate the asset backed security issuance. This issuance of negotiable, investment grade (rated “AA” or better by Standard & Poor’s or an equivalent rating organization) asset backed securities is targeted for resale to institutional investors; AHEB Investment Group will fund these loans or credit facilities secured by above described guarantee instruments and to manage these accounts for addition yield and to reduce default risk. AHEB Investment Group will enter into downstream funding Agreements with credit worthy project sponsors and issue debt or credit instruments to financial institutions as determined by AHEB Investment Group and its institutional investors, to generate project funding from these assets, credit guarantees or collateral (ii.) for the immediate leveraging and management of the proceeds there from by AHEB Investment Group as Exclusive Asset Manager, and (iii.) for the sharing, to the extent provided hereunder, of such leveraged Funds. In consideration of this Asset Pool and mutual covenants included, INVESTOR and AHEB Investment Group they will provide the following services in connection with the INVESTOR and shall combine the asset management and investment management models developed by AHEB Investment Group. As exclusive Asset Manager for the Asset Pool, AHEB Investment Group will also manage and invest such account(s), together with other available assets and income streams, for profit and for the purposes hereof, through the date of repayment of all indebtedness arranged by the special purpose entity by AHEB Investment Group or the maturity of the underlying guarantee instruments. Any and all new debt or investment allocated for Asset Pool and/or any approved structured finance related entity that receives any financial benefit of such funds, is also to be managed, in trust nevertheless, by AHEB Investment Group for the mutual benefit and profit for the Parties<br />3762375-95250STATE BANK OF INDIA<br />Plans new arm for infrastructure finance<br />The State Bank of India (SBI) is planning to set up an infrastructure finance subsidiary to support construction or roads, power plants and airports. A subsidiary will help it overcome limitations that it encounters in funding infrastructure projects within the bank.<br />SBI will be able to raise long-term funds through the subsidiary, which will also not have to adhere to the norms of setting some portion of deposits as reserves that a bank is statutorily required to.<br />OP Bhatt last month said the bank does not have long-term funding resources and that the banking system under strain due to lack long-term funding opportunities and non-performing assets. Overall exposure to the infrastructure is also limited, as banks cannot raise long-term funds.The biggest hurdle for SBI providing a greater support to infrastructure projects is non-availability of long-term funding. The government has for long not granted the demand from banks to allow them to issue tax-free infrastructure bon-ds for mobilising long-term funds. As a bank, it has limited access to long-term sources of funds and the subsidiary will help the bank get over this handicap.<br />A detailed questionnaire on the bank’s plans for an infrastructure subsidiary was sent to the SBI managing director and group executive (associates and subsidiaries), R Sridharan, but there was no response, despite several reminders.<br />“As a bank there are a number of bottlenecks to fund infrastructure projects due asset-liability mismatches. Banks generally tap short-term funds, which cannot be used to finance long-term projects. We want to overcome these bottlenecks by having a subsidiary dedicated to infrastructure financing,” said an SBI official in the know of the happenings, but did not want to be identified.<br />Project finance for SBI had 70 proposals in pipe-line with SBI’s share of debt being Rs 30,883 crore and syndication mandates of Rs 28,665 crore. Compare this to the infrastructure finance requirement, which is close to $500 billion over the past five years. The major contributor is power sector. The total advance of the bank at the end of the third quarter was Rs 607,154 crore, 15 per cent growth from Rs 509,573 crore.<br />Whenever there are growth opportunities, SBI has been quick to set up subsidiaries. The merchant banking was once a division of the bank it got hived off into a subsidiary named SBI Capital markets when the business grew in size. SBI Cap focuses on infrastructure project advisory and syndication mandates particularly in sectors such as urban infrastructure and power and expected to boost the prospects for the infrastructure subsidiary.<br />This will be the second initiative from SBI to finance infrastructure outside the bank’s books. Last year in April, SBI and Australia-based Macquire Group along with International finance Corporation, an arm of the World Bank, launched an infrastructure fund for equity participation in projects.<br />“Raising funds on the balance sheet of the subsidiary may be advantageous rather than exposing the balance sheet of the bank. If funds have to be raised through the bank’s balance sheet, then SBI will have to issue bonds which would be limited, not enough to fund the huge requirement,” said the SBI official.<br />L&T Infrastructure Finance Company Limited<br />L&T Infrastructure Finance Company Limited (LT Infra) is a wholly owned subsidiary of Larsen & Toubro Limited. LT Infra is a Non Banking Financial Company (NBFC) registered under Reserve Bank of India (RBI) Act 1934. The company has commenced operations in January 2007. It leverages L&T’s expertise in the infrastructure sector to offer turnkey financial solutions.<br />About L&T Group: Larsen & Toubro Limited (L&T) is a Technology, Engineering, Construction and Manufacturing Company. It is one of the largest and most respected companies in India's private sector.<br />Larsen & Toubro Infrastructure Finance was set up as a 100% subsidiary of L&T with an initial capital of Rs. 500 crore (USD 125 million). It commenced its business in January 2007 upon obtaining Non-Banking Financial Company (NBFC) license from the Reserve Bank of India (RBI).<br />As of March 31, 2008, L&T Infrastructure Finance has approved financing of more than one billion USD to select projects in the infrastructure sector.<br />Project Finance<br />37147511430<br />The Project Finance Group (PFG) is responsible for business development, project appraisal and client relationship management in infrastructure lending. The project finance segment of our Company provides customized debt financing products to infrastructure projects and their sponsor companies. PFG provides efficient transaction processing and management capabilities and acts as a single point of contact for our customers’ entire project financing requirements. <br />In order to provide our customers with an optimal capital structure for the customized solutions that we offer, we typically make use of the following types of products:<br />Term loans <br />Debentures <br />Securitized debt <br />Subordinated debt <br />Convertible debentures <br />Preference shares<br />Our Company has provided financial products and services encompassing various infrastructure sectors, including power, roads, telecommunications, oil and gas, ports, urban infrastructure, water and sanitation, rail container and logistics operations, agricultural infrastructure, industrial parks, SEZs, etc.<br />Risk Management <br />As part of the appraisal process undertaken by the PFG, a risk analysis for the projects is carried out by the Risk Management department. Based on the risk analysis, PFG designs/recommends the appropriate risk mitigation structures to enhance the viability. After the project feasibility is established by PFG, the proposal is put forward for approval.<br />Project Development <br />The project development group has been set up as a distinct group to explore business opportunities in infrastructure projects, particularly energy and transportation sectors. The objective of the group is to identify and work on projects where LT Infra can participate in development of infrastructure projects as co-developer by taking equity/equity linked positions in the Developer Company.<br />GUIDELINES<br />Guidelines followed by IFC bank<br /> INTERNATIONAL FINANCE CORPORATION (IFC) BANK <br />To be eligible for IFC funding, a project must meet a number of criteria. The project must: <br />Be located in a developing country* that is a member of IFC; <br />Be in the private sector; <br />Be technically sound; <br />Have good prospects of being profitable; <br />Benefit the local economy; and <br />Be environmentally and socially sound, satisfying IFC environmental and social standards as well as those of the host country. <br />25 percent maximum: IFC's share of project cost <br />Investment size: $1 million to $100 million in standard projects <br />IFC does not lend directly to micro, small, and medium enterprises or individual entrepreneurs, but many of our investment clients are financial intermediaries that on-lend to smaller businesses. <br />Investment Proposals <br />A company or entrepreneur seeking to establish a new venture or expand an existing enterprise can approach IFC directly by submitting an investment proposal. An investment proposal should include the following preliminary information<br /> 1. Brief description of project.<br /> 2. Sponsorship, management & technical assistance: <br />History and business of sponsors, including financial information. <br />Proposed management arrangements and names and curricula vitae of managers. <br />Description of technical arrangements and other external assistance (management, production, marketing, finance, etc.). <br />3. Market & sales: <br />Basic market orientation: local, national, regional, or export. <br />Projected production volumes, unit prices, sales objectives, and market share of proposed venture. <br />Potential users of products and distribution channels to be used. <br />Present sources of supply for products. <br />Future competition and possibility that market may be satisfied by substitute products. <br />Tariff protection or import restrictions affecting products. <br />Critical factors that determine market potential. <br />4. Technical feasibility, manpower, raw material resources & environment: <br />Brief description of manufacturing process. <br />Comments on special technical complexities and need for know-how and special skills. <br />Possible suppliers of equipment. <br />Availability of manpower and of infrastructure facilities (transport and communications, power, water, etc.). <br />Breakdown of projected operating costs by major categories of expenditures. <br />Source, cost, and quality of raw material supply and relations with support industries. <br />Import restrictions on required raw materials. <br />Proposed plant location in relation to suppliers, markets, infrastructure, and manpower. <br />Proposed plant size in comparison with other known plants. <br />Potential environmental issues and how these issues are addressed. <br />5. Investment requirements, project financing & returns: <br />Estimate of total project cost, broken down into land, construction, installed equipment, and working capital, indicating foreign exchange component. <br />Proposed financial structure of venture, indicating expected sources and terms of equity and debt financing. <br />Type of IFC financing (loan, equity, quasi-equity, a combination of financial products, etc.) and amount. <br />Projected financial statement, information on profitability, and return on investment. <br />Critical factors determining profitability. <br />6. Government support & regulations: <br />Project in context of government economic development and investment program. <br />Specific government incentives and support available to project. <br />Expected contribution of project to economic development. <br />Outline of government regulations on exchange controls and conditions of capital entry and repatriation. <br />7. Timetable envisaged for project preparation & completion.<br /> <br />IFC Project Cycle <br />After this initial contact and a preliminary review, IFC may proceed by requesting a detailed feasibility study or business plan to determine whether or not to appraise the project. IFC's project/investment cycle illustrates the stages a business idea goes through as it becomes an IFC-financed project. <br />Stages of the Project Cycle <br />Application for IFC Financing <br />There is no standard application form for IFC financing. A company or entrepreneur, foreign or domestic, seeking to establish a new venture or expand an existing enterprise can approach IFC directly. This is best done by reading how to apply for financing and by submitting an investment proposal. After these initial contacts and a preliminary review, IFC may proceed by requesting a detailed feasibility study or business plan to determine whether or not to appraise the project. <br />Project Appraisal <br />Typically, an appraisal team consists of an investment officer with financial expertise and knowledge of the country in which the project is located, an engineer with the relevant technical expertise, and an environmental specialist. The team is responsible for evaluating the technical, financial, economic and environmental aspects of the project. This process entails visits to the proposed site of the project and extensive discussions with the project sponsors. <br />After returning to headquarters, the team submits its recommendations to senior management of the relevant IFC department. If financing of the project is approved at the department level, IFC's legal department, with assistance from outside counsel as appropriate, drafts appropriate documents. Outstanding issues are negotiated with the company and other involved parties such as governments or financial institutions<br /> Public Notification Before the proposed investment is submitted to the IFC Board for review, the public is notified of the main elements of the project. Environmental review documents are also made available to the public.<br /> Board Review and Approval The project is submitted to IFC's Board of Directors, which reviews the proposed investment.<br /> Resource Mobilization IFC seeks to mobilize additional finance by encouraging other institutions to make investments in the project. <br />Legal Commitment If the investment is approved by the Board, and if stipulations from earlier negotiations are fulfilled, IFC and the company will sign the deal, making a legal commitment. <br />Disbursement of Funds Funds are disbursed under the terms of the legal commitment signed by all parties.<br /> Project Supervision Once funds have been disbursed, IFC monitors its investments closely. It consults periodically with management, and it sends field missions to visit the enterprise. It also requires quarterly progress reports together with information on factors that might materially affect the enterprise in which it has invested, including annual financial statements audited by independent public accountants.<br /> Closing When an investment is repaid in full, or when IFC exits an investment by selling its equity stake, IFC closes its books on the project.<br />