"ReportOnChallenges in Infrastructure ProjectFinancingGroup 14Ketan Gyanchandani (20141028)Mohit Jaiswal(20141036)Shivang Parmar(20141067)Suchi Yadav(20141068)Sudarshan Gupta(20141069)Master of Business Administration (Term-3)SCHOOL OF PETROLEUM MANAGEMENTPANDIT DEENDAYAL PETROLEUM UNIVERSITYGANDHINAGAR Abstract:The first part of our study mainly captures the proponents of ProjectFinancing. Before dwelling into the practical understanding, we havestudied the types of project financing, components of project financingand the prominent misconceptions related to Project financing. We havebeen able to identify what are the situations wherein project financingis used, what are the benefits of project financing and how projectfinancing is prevalent in Infrastructure Projects. The second part deals with the implementation of project financing andits understanding. We have tried to understand this through a CaseStudy of Railway Infrastructure marvel – Delhi Metro (DMRC). We havekept our scope of this case to the extent that we are able get a suitableunderstanding, how funds were raised for the DMRC project. . Theproject management of DMRC is not the scope of our study, but wehave captured only a glimpse of it in order to relate it to ProjectFinancing. How the DMRC project was funded, its operations, cost,future cash flow estimation study, what challenges were encounteredduring the financing of DMRC project and other relevant aspects havebeen studied. The data that we have collected is from secondarysources, which includes the gist of Cost-Benefit Analysis of the DMRCproject.The last part entailing discusses the Conclusion and Future Prospectsof Project Financing.2 Introduction:“Everything comes at a price”. Macroeconomists explain financing andpersonal finance as study which concentrates on personal economicconditions of an individual, how he/she behaves and alter his/herneeds when prices fluctuate and what are the impacts on theirspending patterns. What gets interesting is that a normal consumer,without any formal knowledge of Finance, manages to balance betweenhis/her needs with whatever money he/she has. This gets into thepurview of Personal Financing. This can be further extended into thedomain of small projects that a consumer normally takes up such astaking up a housing loan, vehicle loans, investing in LIC, healthinsurances etc. To procure money for such projects, consumer needs toearn money or take a loan. In short, a consumer goes into phases offinancing a project, i.e., Assessment, Goal Setting,Creating a Plan,Execution and Monitoring.Corporate Financing is not so different from Personal Financing whenit comes to the underlying concept. It is only a matter of scale thatdiffers. An organization has to earn revenues for its daily operationsand other needs. This is termed as Equity. Similarly, whenorganizations undergo projects, they need money to finance it. The waythey procure the money and utilize it for its projects, gets really criticalbecause the scale of loan or debt is on a very high side when comparedto a personal loan. These financing situations require the same steps –Financial Assessment, Goal Setting, Designing a Plan, Execution andMonitoring. The corporate estimate cash flows for the project they haveinvested in order to get a fair view of what is going to be their incomeand margin on it.But when the big fishes in the industry such as big privateorganizations, Government organizations, and Government itself,undergo projects, these projects have a gigantic scale and thus requirea hefty amount for their inception. Now, these projects are quitedifferent from the normal projects that organizations undertake and3 hence they are financed in a different fashion. Here comes the conceptof Project Financing. Until recently, Project Financing was consideredto be a part of corporate financing only. But due to the large scalabilityof certain projects, the financing of such projects was considered to beof different nature. Few differences between corporate financing andProject financing are:- The discipline of Project Financing is quite stronger than that ofcorporate financing.- On one hand, corporate financing usually takes less time toattract money, on the other hand, project financing takessubstantial amount of time to hoard money. - Project Financing covers the financing of long term projects suchas infrastructure projects, industrial projects, public servicesprojects etc. This attracts money from equity investors, sponsorsand lenders. Whereas, corporate financing covers the financing ofrelatively short term and small scale projects.Banks and other financial institutes that invest in such high endprojects have a special entity or domain which specializes in ProjectFinancing. In India, SBI CAPS, IDFC, TATA Capitals and IL&FS Ltd aresome of the players who specialize in Project Financing.What exactly is Project Financing?As defined by the International Project Finance Association (IPFA)“Project Financing is financing of a long-term infrastructure,industrial projects and public services based upon a non-recourseor limited recourse financial structure where project debt andequity used to finance the project are paid back from the cash flowgenerated by the project. ”The above stated definition requires a detailed look into the keyterminologies like long term, non-recourse, cash flow etc. whichraises few questions like-4 "