TEV/ LIE

Techno Economic Viability (TEV) Study

What is TEV Study ?
An entrepreneur/ industrialist desirous of setting up of his own industry has to perform multifarious activities in a logical sequence.
Setting up may be new or an addition to the existing unit.
He has to arrange finance for setting up of new industry or addition to existing unit.
He has to obtain finance from the Bank / FIs. or from the market.
Before obtaining finance from the Bank, the Bankers will conduct TEV study.
Setting up of unit involves the following :
 
  • Selection of a product
  • Market Study
  • Preparation of Project Feasibility Study
  • Technical Appraisal
  • Economic Appraisal
  • Preparation of Project Report
  • Selection / Location and Acquisition of Land
  • Registration formalities.
  • Construction of factory building
  • Financial Appraisal
  • Assistance of Financial Requirement
  • Order for Plant and Machinery
  • Apply for power connection
  • Installation of Plant and Machinery and trial run.
  • Arrangement for raw-materials and manpower
  • Marketing of products
  • Sales Realisation
  • Selection/ Location and Acquisition of land
Is TEV Study is mandatory for the Banks ?
On the basis of policy of the Bank, the TEV Study limit has been fixed by the Bankers.
TEV study is normally conducted for the loans for Rs.50.00 lacs and above, as insisted by majority of Banks.
TEV study is mandatory for the loans above Rs.10.00 crores.
Why TEV Study Report is required for the Bank / Lender ?
When proposal of loan is received from the customer/ borrower, the Branch Manager will have to appraise the project to know whether the project is technically and financially feasible and viable?
If the Bank lends the money, whether there will be regular repayment of loan out of the internal generation of funds?
Whether adequate securities are available against Bank’s exposure and what will be the FMV?
What is the position of financials of the Company ?
WHAT IS THE ROLE OF YPCVL?
To collect the necessary information/ documents from the customer/ Bank.
To study the projections given in the project report,
To visit the site to verify the land, building, machinery etc as per the projections.
Submit the report on financials and technical aspects of the unit to the Bank with concluding remarks.

LENDERS INDEPENDENT ENGINEER (LIE)

Who is Lender's Engineer (LIE) ?
After TEV study, the next step is appointment of LIE.
The LIE can be an individual for a small project and a group of engineers or a venture management firm for bigger projects.
They will act as representative of the lender/ banker and get involved with the construction project from the very inception and look after the interests of the lender.
The LIE will visit the site on periodical intervals (once in quarter) till completion of the project or any other short interval (say monthly) given by the lender.
What is the Role of LE ?
Before Funds are released to the borrower, the Bankers need a report or certificate to release the fund to the borrower on a phased manner -
The Banker will issue a letter of indent to act as LIE
Study of the project report, TEV Study submitted by the borrower to the Bank.
Land acquisition.
Obtain necessary plans, sanctions for construction of factory plant.
Environment and forest clearance.
Availability of all statutory clearance for the project.
Check facts and figures in the feasibility report with viable database and market research.
Availability of electricity, water, labour, raw material, access roads, railways and communication facilities.
Climatic and geological factors.
Construction of building and procurement of plant and machinery.
Whether local people have any objection for the project.
Obtain a certificate from the Chartered Accountant about source and application of funds as on the date of visit.
Obtain a Certificate from the Architect for the construction of building and percentage of completion of the building.
Obtain a schedule of completion of project.
Completion time and construction programme.
Review of finance by LIE
Total requirement of funds for successful completion of project, taking into consideration other escalation factor.
Availability of funds with the construction agency.
Mode of funds for the entire project.
Mode of schedule of payments.
Plan of utilization of funds.
After release of funds by lender and during execution of the project
Frequent visits to site of work to ensure:
Adherence to the construction programme.
Judicious utilization of funds.
Procurement of equipment and raw materials.
Judicious deployment of plant, machinery and equipment.
Monitoring implementation of environment norms.
Assessment of likely risks and suggest measures to mitigate them including providing suitable assistance for transfer of risk to insurance agencies.
Quality assurance and quality control.
Whether payments of sub-contractors, suppliers, staff, workers and other agencies are being made as per schedule.
Liaison between lender and borrower.
Monetary returns to the lender as per schedule

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