VCE Summer Internship Program 2021: Smart Task Submission Format

VCE Summer Internship Program 2021
Smart Task Submission Format
Intern’s Details
Name Velagandula Divyaleela
Email-ID velaganduladivyaleela@gmail.com
Smart Task No. Smart Task 3
Project Topic Project Finance- Modelling and Analysis
Smart Task (Solution)
Task Q1: How a new venture is assessed to qualify as project finance. What are the factors that
needed to be considered?
Task Q1 Solution:
In order to qualify for project funding, new ventures are evaluated on a variety of variables.
Because lenders always want to put their money into a business that will pay them back.
To qualify for project funding, new initiatives are evaluated in the following ways. These are
the most significant variables to consider while evaluating a new business endeavour.
1. Calibre of business principle-The fundamental sources of fuel for business endeavours

are principles. Their vision, energy, and willingness to put out the work are the
components that create or ruin ventures.
2. Business environment risks-Lenders ensure that your loan does not appear to be
excessively risky. A lender may be unduly cautious due to the impending removal of a
tariff barrier, a polluting practise, or the fact that your firm is located in a vulnerable
area of the economy. In addition, the Company should have enough insurance coverage
that is tailored to the nature of its operations.
3. Project credibility-Lenders and investors are willing to put money into your project
because they believe it will pay off. They'll make sure your proposal is feasible and based
on verified facts.
4. Company’s ability to pay and financial structure-You must demonstrate that the
business can satisfy all of its financial obligations. As a result, the financial structure of
the organisation should have a healthy balance of assets and loans.
5. Principal’s financial history-In the viewpoint of lenders, the future is mainly
predicated on the past. They will very certainly do a credit check on the business
proprietors to discover if they have successfully met previous financial obligations.
6. Security-Debt financing is often backed by corporate assets, which may be adequate to
ST Solution Page 1 https://techvardhan.com

cover lenders' risks.

500 Words (Max.)
Task Q2: Explain in detail the revenue model for Solar PV Project, Residential Building,
Manufacturing Unit and other PPP projects.
Task Q2 Solution:
The revenue model describes how a company produces money. The following is a revenue
model for a solar PV project, a residential building, a manufacturing unit, and other PPP
projects:
A. Revenue model for solar PV project is as follows-
Basically, there are two types of models in this-
1. CAPEX-
 Cost of plant is bearded by client/end users.
 Maintenance of system is in client scope after AMC period under STC (Standard test
conditions).
 No overhead expenses for EPC (engineering, procurement and construction).
 No capital loss risk for EPC.
2. OPEX/RESCO/PPA-
 Cost of plant is bearded by third party.
 Revenue depends on PPA rate (Solar Power Purchase Agreement is a agreement where
developer arranges for the design, permitting, financing and installation of a solar
energy system on a customer’s property at little to no cost) and probably would be
constant over a period.
 Maintenance of system is in scope of third party for total duration of PPA.
B. Revenue model for residential building-
Residential buildings are those that earn or have the potential to produce money. It
focuses on commercial real estate that is acquired and then rented out to individuals or
businesses, as opposed to residential real estate that is owner-occupied and not rented
out to others, such as single-family houses.
Individuals or businesses, referred to as tenants, pay rent to property owners in order to

utilise their premises. This rent provides money to the owner, who uses a portion of it to
cover expenditures such as utilities, property taxes, and insurance. In certain
circumstances, tenants are also responsible for part of these costs. A key definition of
residential financial modelling is as follows:
You assess a property from the standpoint of an equity investor (owner) or a debt

investor (lender) in the property and assess whether or not the equity or debt investor
should invest based on risks and possible rewards in residential building financial
modelling.
C. Revenue model for manufacturing units and other PPP projects-
Revenue is created in a manufacturing unit by selling finished items. The Manufacturing

Revenue Model is a framework for properly forecasting a manufacturing company's
financial statements over the following ten years. The model calculates the company's
operational assumptions per tonne using a thorough breakdown. After that, the model
employs financial ratio analysis as well as a DCF valuation methodology. An acquisition
analysis including sources and uses of money, as well as an investor IRR analysis based
on dividend and exit valuation assumptions, are also included in the model.
The government and/or fees (tariffs) levied to consumers of the service provide funding
for the PPP project. In some projects, the private sector provider also pays the
government or another designated authority concession fees in exchange for using the
government's projects. For example, the concession fee is based on the use of the service
or net income, giving the government a vested interest in the project's success. The
government's interests are equivalent to those of an equity investor in such instances.
500 Words (Max.)
Task Q3: What should be the additional points that needed to be included in a financial model, if
the financing bank is from abroad and the debt is in US$ but revenue is in INR.
Task Q3 Solution:
If the financing bank is from another country and the debt is in UD$ but the revenue is in INR,
the following extra considerations should be included in the financial model: 1. The financial
model should incorporate a fundamental assumption of currency conversion.
2. In order for the finflow sheet to be consistent, the currency exchange rate (USD/INR) must
be included in the financial model.
3. The service tax and transaction fees for the project's funding must be paid.

500 Words (Max.)

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VCE Summer Internship Program 2021

Smart Task Submission Format

Smart Task No. Smart Task 3

Project Topic Project Finance- Modelling and Analysis

Smart Task (Solution)

1. Calibre of business principle-The fundamental sources of fuel for business endeavours

ST Solution Page 1 https://techvardhan.com

cover lenders' risks.

Individuals or businesses, referred to as tenants, pay rent to property owners in order to

ST Solution Page 2 https://techvardhan.com

Revenue is created in a manufacturing unit by selling finished items. The Manufacturing

ST Solution Page 3 https://techvardhan.com

500 Words (Max.)

ST Solution Page 4 https://techvardhan.com

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