TEV/ LIE
Techno Economic Viability (TEV) Study
| What is TEV Study ? | ||
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An
entrepreneur/ industrialist desirous of setting up of his own industry has to perform multifarious activities in a logical sequence. |
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Setting
up may be new or an addition to the existing unit. |
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He
has to arrange finance for setting up of new industry or addition to existing
unit. |
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He has to obtain finance from the Bank / FIs. or from the market. | |
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Before obtaining finance from the Bank, the Bankers will conduct TEV study. | |
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Setting up of unit involves the following : | |
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| 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. | ||
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TEV study is normally conducted for the loans for Rs.50.00 lacs and above, as insisted by majority of Banks. | |
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TEV study is mandatory for the loans above Rs.10.00 crores. | |
| Why TEV Study Report is required for the Bank / Lender ? | ||
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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? |
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If the Bank lends the money, whether there
will be regular repayment of loan out of the internal generation of funds? |
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Whether adequate securities are available against Bank’s exposure and what will be the FMV? |
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What is the position of financials of the Company ? | |
| WHAT IS THE ROLE OF YPCVL? | ||
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To collect the necessary information/ documents from the customer/ Bank. | |
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To study the projections given in the project report, | |
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To visit the site to verify the land, building, machinery etc as per the projections. | |
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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) ? | |
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After TEV study, the next step
is appointment of LIE. |
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The LIE can be an individual for a small project and a group of engineers or a venture management firm for bigger projects. |
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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. |
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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 - | |
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The Banker will issue a letter of indent to act as LIE |
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Study of the project report, TEV Study submitted by the borrower to the Bank. |
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Land acquisition. |
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Obtain necessary plans, sanctions
for construction of factory plant. |
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Environment and forest clearance. |
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Availability of all statutory
clearance for the project. |
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Check facts and figures in
the feasibility report with viable database and market research. |
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Availability of electricity,
water, labour, raw material, access roads, railways and communication
facilities. |
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Climatic and geological factors. |
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Construction of building and
procurement of plant and machinery. |
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Whether local people have any
objection for the project. |
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Obtain a certificate from the
Chartered Accountant about source and application of funds as
on the date of visit. |
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Obtain a Certificate from the
Architect for the construction of building and percentage of
completion of the building. |
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Obtain a schedule of completion
of project. |
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Completion time and construction programme. |
| Review of finance by LIE | |
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Total requirement of funds
for successful completion of project, taking into consideration
other escalation factor. |
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Availability of funds with
the construction agency. |
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Mode of funds for the entire
project. |
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Mode of schedule of payments. |
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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: | |
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Adherence to the construction programme. |
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Judicious utilization of funds. |
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Procurement of equipment and raw materials. |
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Judicious deployment of plant, machinery and equipment. |
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Monitoring implementation of environment norms. |
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Assessment of likely risks and suggest measures to mitigate them including providing suitable assistance for transfer of risk to insurance agencies. |
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Quality assurance and quality control. |
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Whether payments of sub-contractors, suppliers, staff, workers and other agencies are being made as per schedule. |
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Liaison between lender and borrower. |
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Monetary returns to the lender as per schedule |