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Project Finance
Project Loan is provided to corporate borrowers for the purpose of capital expenditure including setting up of new/ additional manufacturing facilities, construction etc. Project loan is also available to acquire the fixed assets like land & building, plant & machinery etc.
Project Loan is offered for:
Mid / Large corporates having turnover more than Rs.500 Crores or Projects outlay of Rs.500 Crores OR minimum exposure ( Funded + Non Funded) of Rs.25 Crores
Companies (including SPV's) executing various infrastructure projects in sectors such as power- hydel / thermal / solar, roads, highways, bridges, ports, dams, airports, rail system, water supply, irrigation, sanitation and sewerage system, telecommunication, housing, industrial park or any other public facility of a similar nature, construction relating to project involving agro processing, supply of agricultural inputs, preservation and storage of processed agro products, educational institutions and hospitals as may be notified by RBI from time to time ,Commercial Real estate projects like Hotels, residential / commercial complexes, setting up new plant / manufacturing facilities etc.
2. Equity Financing: In the case of equity financing, funding is obtained against the exchange of ownership in the project in the form of equity. In many projects, the funding is a mix of debt and equity.
5. Sponsorships: Many corporations offer sponsorships to projects in exchange for advertisement, marketing or brand visibility. This creates a win-win situation for both the sponsors and the project owners.
Types of Project Financing
1.Debt Financing: Here, the project loan for new business is obtained in the form of debt from banks and financial institutions, repayable along with interest.
3. Grants: Many a time, certain projects obtain grants from the government, foundations or even corporations if they meet the eligibility criteria.
4. Crowdfunding: Many crowdfunding platforms allow funding of projects. You can apply on any of the crowdfunding platforms and list your project. You will be able to receive contributions from a large number of individuals who are interested in your project.
6. Venture Capital: You can also obtain funding from professional and seasoned investing firms i.e., venture capital firms. These firms finance such projects in the form of equity or project loan for new business, or a combination of both.
7. Angel Investors: Angel investors are usually high-net-worth individuals or entrepreneurs with successful ventures. They actively participate in different projects and startups and therefore, are a good source of funding for your startup. Like venture capital funding, angel investors also provide funding against debt or equity.
8.Our Purchase: Order Funding solutions help SMEs and startup companies who may be having a difficult time filling large orders. Purchase order funding for small business is a perfect solution for resolving cash flow problems and getting your outstanding orders filled. Our financing solutions will help you procure the necessary raw materials, supplies or manpower to deliver an outstanding product or service to your clients whilst you continue to grow your customer base.
Project Finance Sponsors and Stakeholders
Project finance involves sponsors who initiate and equity-fund the projects, alongside diverse stakeholders who provide project loan for new business, guarantees, and regulatory oversight. Let’s take a detailed look at both categories of financers:
1. Sponsors (Equity Providers)Sponsors are the main promoters of a project who invest their own money in the project. Their contribution to the project cost is taken as equity investment. Although they bear the highest risk, they also have the chance of earning higher returns, if the project performs well.
Sponsors can be private companies, infrastructure developers, or industrial groups with relevant industry expertise. They are responsible for project development, obtaining necessary approvals, forming the SPV, and ensuring project execution.
2. Lenders and Other Stakeholders (Debt Providers)
This category includes commercial banks, financial institutions, multilateral agencies, non-banking financial companies (NBFCs), and bond investors. Lenders provide project financing through term loans that are largely secured against project assets and future cash flows.
Project Finance
Government grants and schemes can help improve financial viability and reduce risks for large infrastructure projects. Here’s how:
Viability Gap Funding (VGF)
VGF is a grant provided by governments to support Public-Private Partnership (PPP) projects that are economically justified but not financially feasible. The funding bridges the gap between the project cost and expected returns.
For social sector projects, the scheme offers funding of up to 60% of the total project cost. And for pilot or demonstration projects in health and education, the funding increases to 80%.
Sector-Specific Subsidies
Government also provides targeted subsidies to priority sectors to accelerate project development and reduce overall project cost. These sectors include renewable energy, transportation, social infrastructure, and agriculture and Rural development.
Frequently asked questions
What is the meaning of project finance?
Project finance is a funding method for large infrastructure projects where lenders mostly rely on the project's future cash flows for repayment, rather than the sponsors' creditworthiness or assets.
What are the main types of project financing available in India?
Project financing available in India include debt financing, equity financing, grants, crowdfunding, sponsorships, and finances from venture capitalist and angle investors.
How does project finance differ from traditional corporate financing?
Project finance uses the project's own cash flows for repayment through a separate legal entity (SPV), while corporate finance relies on the company's entire balance sheet and creditworthiness for repayment.
What industries commonly use project finance in India?
Industries like energy, transportation, infrastructure (roads, ports, airports), real estate, and power generation use project finance in India.
What role do government grants play in project finance?
Government grants improve project viability by providing capital subsidies, viability gap funding, and risk mitigation support to projects that can be economically justified but nor financially viable.
Can I Contact for more details ?
Yes, +91 9711162302 and Email ID : divasfinancialservices@gmail.com